CITY COUNCIL AGENDA ITEM
ACTION REQUESTED:
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Conduct the public hearing for the 2026 Annual Budget (Item 1 of 2)
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DEPARTMENT: Finance Department
SUBMITTED BY: Raymond Munch, Director of Finance
BOARD/COMMISSION REVIEW:
The Financial Advisory Board reviewed the proposed 2026 Annual Budget at its October 27, 2025, meeting.
BACKGROUND:
The Annual Budget is the City’s financial and operational plan that serves as a guide for the upcoming year and sets the stage for future investments in programs and services. The budget development process brings together input from elected officials, department directors, staff, and the public to shape the City’s goals and objectives for the coming year and beyond.
The City is required to adopt an annual budget before the start of the fiscal year to which the budget applies. The City has adopted the Illinois Municipal Code, 65 ILCS 5/8-2-9.1 through 9.10 (State Budget Law) and incorporated this code into Chapter 9 of Title 1 of the Naperville Municipal Code, which provides the overarching requirements for the City’s budget process.
Accordingly, a tentative Annual Budget for 2026 was published for review by the City Council and the public on October 10, 2025. Per state statute, a public hearing on the tentative 2026 Annual Budget will be held at the December 2, 2025, City Council meeting prior to adoption of the budget ordinance. Once the hearing concludes, the budget may be revised and passed without further public inspection, notice or hearing.
DISCUSSION:
Budget Process & Initial Recommendation
Development of the Annual Operating Budget and Capital Improvement Program (CIP) is critical in establishing the annual financial framework that supports the City’s mission to provide services that ensure a high quality of life and maintain a dynamic business environment while creating an inclusive community that values diversity. The budget development process begins in July and is guided by the policies and priorities established by the City Council.
Each City department develops its operating budget and CIP recommendations based on historical needs and emerging priorities. Those recommendations go through two rounds of review, the first with the Finance Department and the second with the City Manager’s Office. These assessments review operational changes, discuss objectives, and analyze recommendations. In consultation with the Finance Department, the City Manager makes the final recommendation to the City Council through the proposed budget published in mid-October.
The tentative 2026 City of Naperville budget was recommended at $685.13 million, an overall increase of 6.8% from the amended 2025 budget of $641.15 million. Rising personnel costs and increased investment in capital assets are the primary drivers behind the increase in expenditures. The recommendation was supported by $656.07 million in revenues and other financing sources. While the General Fund leverages existing revenue streams and tax rates, the Electric and Water Utilities follow approved rate increases from their rate studies to support expansion of capital investment. The proposed property tax levy is expected to result in a lower property tax rate.
Preparation of the 2026 budget included consideration of both short- and long-term financial trends to help guide departments in compiling their budgets. Short-term items, such as the pending sunset of the State of Illinois’ 1% grocery tax, were addressed in 2025; in this case, a replacement revenue source (1% local grocery tax) was identified to replace the estimated revenue loss.
However, several longer-term trends required Finance staff to request that departments “hold the line” on budget submissions, as they could very well have continued implications beyond the 2026 budget. These include employee compensation and healthcare costs, moderating revenues, and infrastructure maintenance and replacement needs.
The Council evaluated the proposed budget through a series of three workshops on Sept. 29, Oct. 28, and Nov. 10. The process began with two foundational workshops providing information about the Capital Improvement Program and context around the City’s core services and programs. During these two workshops, staff presented highlights of the recommended budget, outlining proposed changes to current service levels along with major CIP projects.
Following these presentations, staff provided an overview of the tentative 2026 budget at the third workshop. The overview summarized how the proposed budget achieves service level and capital reinvestment goals while maintaining a strong financial position. A key element in the discussion on service levels, such as the Police Department’s Mobile Crisis Intervention Team (MCIT) and the Special Events and Community Arts (SECA) Grant Fund program, was the emphasis on finding sustainable, long-term funding to support said changes amid looming financial pressures.
Final Budget Recommendation
The final budget recommendation was revised based on the City Council’s request to include funding for the MCIT and changes to the capital program, which resulted in a net increase of $212,474 from the tentative budget proposed in October. The 2026 Annual Budget is now recommended at $685.34 million, a 6.8% increase from the 2025 amended budget. The final recommendation continues to support existing services, enhances services where financially feasible and certain revenue identification criteria are met, and maintains flexibility as other issues evolve. The revisions are summarized below.
Police Department - MCIT
During the Nov. 18, 2025, City Council meeting, the Council voted in favor of including a Mobile Crisis Intervention Team of six officers in the 2026 Budget. The total cost of the program comes to $1,172,474. The MCIT program will be budgeted as a recurring expenditure in the General Fund, with some initial, one-time expenditures in the Capital Projects Fund. For the General Fund to support the MCIT program, the corporate (City services) portion of the property tax levy will need to increase by 9.0% to $10,079,751. The City’s property tax rate remains lower than in previous years.
Capital Adjustments
Staff decreased the Capital expenses budget for the Fire Department by $400,000, the Department of Public Works by $500,000, and the Library by $60,000. The Fire Department included the amount in their original submission for living quarter renovations and training facility upgrades. The living quarters project was moved to a later year, while training facility upgrades were covered under another item in the budget. The Department of Public Works’ budget was adjusted to remove an amount carried forward from the previous budget year that was no longer needed. Funds in the Library’s budget were shifted between accounts and reduced to align the budget with their planned capital program.
|
Budget Modification |
Fund Impact |
Account Type |
Increase / (Decrease) |
|
MCIT Salary & Benefits |
General Fund |
Expense |
$854,589 |
|
MCIT Equipment |
General Fund |
Expense |
$58,600 |
|
MCIT Training |
General Fund |
Expense |
$18,585 |
|
MCIT K9 |
General Fund |
Expense |
$10,000 |
|
MCIT Vehicles |
Capital Projects Fund |
Expense |
$230,700 |
|
Final Capital Adjustments |
Capital Projects Fund |
Expense |
(960,000) |
Following the adoption of the budget, the City Council will be asked to approve the property tax levies that support the 2026 budget at its Dec. 16, 2025, meeting.
FISCAL IMPACT:
Staff recommends City Council adopt the 2026 Annual Budget totaling $685,342,588