CITY COUNCIL AGENDA ITEM
ACTION REQUESTED:
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Conduct the public hearing for the 2025 Annual Budget (Item 1 of 2)
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DEPARTMENT: Finance Department
SUBMITTED BY: Raymond Munch, Finance Director
BOARD/COMMISSION REVIEW:
The Financial Advisory Board reviewed the proposed 2025 Annual Budget at its October 23, 2024, 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 2025 was published for review by the City Council and the public on October 11, 2024. Per state statute, a public hearing on the proposed 2025 Annual Budget will be held at the December 3, 2024, 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 other 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 proposed 2025 budget was recommended at $641.88 million, an overall increase of 3.3% from the amended 2024 budget of $621.24 million. That recommendation was supported by $619.48 million in estimated revenues, an increase of 4.4% from 2025. While the General Fund leverages existing revenue streams and tax rates, the Electric and Water Utilities recommended rate increases to support expansion of capital investment. The proposed property tax levy will result in a lower property tax rate.
The 2025 budget was developed amidst a series of financial considerations expected to materialize to some degree in 2025 and 2026 and impact the City’s budget moving forward. These include slowing exponential pandemic revenue growth, better-defined capital asset management and long-term replacement needs in the Electric and Water Utilities, the State of Illinois’ grocery tax elimination in 2026, an ongoing compensation and classification study, and the overall global economic environment.
The City Council evaluated the proposed budget through a series of three workshops that took place on Sept. 24, Oct. 22, and Nov. 12. This year, the process began with two foundational workshops providing information about the Capital Improvement Program and context around service delivery and resource needs. During these two workshops, staff presented highlights of the recommended budget, including proposed improvements to existing service levels and major CIP projects. The discussion around service levels also included the need to identify long-term funding sources for any service enhancements in light of the financial considerations on the horizon, including the loss of state grocery tax revenue.
Following these presentations, staff provided an overview of the proposed 2025 budget at the third workshop. It summarized how the proposed budget achieves service level and capital reinvestment goals while maintaining a strong financial position.
Final Budget Recommendation
The final budget recommendation was revised based on the refined rate study recommendations in the Water Utilities and other discussions, which resulted in a decrease of $732,198 from the proposed budget published in October. The 2025 Annual Budget is now recommended at $641.15 million, a 3.2% increase from the 2024 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.
Water Utility Rates
Staff revised the Water Utilities budget based on revised rates in the final rate study recommendation. Both revenues and expenses were revised. Water rate revenue decreased by 4%, or $1.66 million, down from the 18% presented at the workshops. This percentage is based on a 12% rate increase. Expenses decreased by $1.23 million for the projected purchased water costs from the DuPage Water Commission based on the final analysis of purchased water assumptions.
Library Capital Expenses
Staff increased the Library’s capital expenses budget by $500,000. The library included the amount in their original submission for building upgrades. While the amount was included in the Library’s capital improvement program, the dollars were inadvertently excluded from the initial budget proposal. Funding for this expense is included in the Library Capital Reserve Fund and supported by the existing reserve balance. There is no impact on the Library’s tax levy request.
|
Budget Modification |
Fund Impact |
Account Type |
Increase / (Decrease) |
|
Updated Water Rate Revenue |
Water Utilities |
Revenue |
(1,659,100) |
|
Reduced Purchased Water |
Water Utilities |
Expense |
(1,232,188) |
|
Increased Library Capital |
Library Capital Reserve |
Expense |
500,000 |
The City continues to leverage its financial strengths to provide high-quality services and investments in our infrastructure. Those are reflected in the final budget recommendations, which staff is confident positions the City to support the community with consideration for improvements where possible.
Following the adoption of the budget, the City Council will be asked to approve the property tax levies that support the 2025 budget at its December 17, 2024 meeting.
FISCAL IMPACT:
Staff recommends City Council adopt the 2025 Annual Budget totaling $641,148,599.