CITY COUNCIL AGENDA ITEM
ACTION REQUESTED:
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Receive the 2025 Mid-Year Financial Report
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DEPARTMENT: Finance Department
SUBMITTED BY: Raymond Munch, Director of Finance
BOARD/COMMISSION REVIEW:
N/A
BACKGROUND:
The Finance Department monitors revenues and expenditures throughout the year to identify trends that impact the annual budget and Capital Improvement Program (CIP). Regular financial reporting informs the City Council and the public on important issues related to the City's finances, including discussions around short- and long-term financial strategies.
This Mid-Year Report focuses on budget performance through the first six months of 2025 and will discuss the preparation of the 2026 annual budget.
The PowerPoint presentation will be made available with the Agenda Q&A that is posted prior to the meeting.
DISCUSSION:
Through June, budget performance aligns with expectations across most funds. Due to the budget's size and complexity, revenues and expenditures are summarized according to three major fund categories: Maintenance and Operating, Capital and Debt Service, and Special Funds.
Staff measures year-to-date revenues and expenditures against three milestones: the full-year budget, a monthly projection based on three years of historical data, and the prior year’s year-to-date actual. These three measures allow for the budget to be analyzed against a single point in time (last year) and current expectations.
Revenues
Revenue through June across all funds totaled $314.41 million. This is an 18.1% increase over the same period in 2024, and 15.9% higher than the current year projection of $271.22 million primarily related to the $45 million bond issuance that occurred in June to fund various capital projects, including capacity and process improvements at the Springbrook Water Reclamation Center, the public safety radio system, as well as the replacement of electric infrastructure.
While most major revenue streams remain consistent with projections, some revenues are performing below expectations. These revenues include the Food and Beverage Tax, the Local Gasoline Tax, and the Local Use Tax. The following sections will discuss these variances.
Revenue by Fund Category ($ in millions)
|
|
2025 Budget |
YTD Actual |
% of Total Budget |
YTD Projection |
% of YTD Projection |
2024 YTD Actual |
Variance to 2024 (%) |
|
Maintenance & Operating |
$497.61 |
$249.22 |
50.1% |
$218.48 |
114.1% |
$201.92 |
23.4% |
|
Capital & Debt Service |
$78.80 |
$44.11 |
56.0% |
$31.23 |
141.2% |
$22.53 |
98.2% |
|
Special Funds |
$41.37 |
$21.08 |
51.0% |
$21.50 |
98.0% |
$21.26 |
-0.9% |
Below is a summary of major revenues and their performance against the current year-to-date projection and the same period last year.
State Shared Revenues ($ in millions)
|
|
2025 Budget |
YTD Actual |
Variance to YTD Projection (%) |
Variance to 2024 YTD (%) |
|
Sales Tax |
$54.36 |
$26.57 |
1.6% |
13.1% |
|
Income Tax |
$26.43 |
$15.32 |
3.1% |
8.4% |
|
Motor Fuel Tax |
$7.06 |
$3.60 |
48.5% |
3.5% |
|
Local Use Tax |
$3.87 |
$1.61 |
-21.7% |
-45.6% |
• Sales and Income Tax revenues that support the City’s General Fund continue to be higher than expected and show strong growth year-over-year, an indication that the state and local economy remain strong. Sales Tax is 13.1% higher than last year due to legislative changes positively impacting the allocation of out-of-state sales. Most of this growth was assumed in the budget.
• Motor Fuel Tax (MFT) aligns with projections and shows modest growth over the prior year largely due to the inflationary increase in the Transportation Renewal Fund portion of MFT.
• Local Use Tax has significantly declined in recent months due to legislation included in the state’s 2026 Budget, which requires certain out-of-state retailers with a connection or presence in Illinois to remit sales tax rather than use tax. This is a negative offset to the sales tax increase noted above.
• The Illinois Municipal League estimates that use tax will continue to significantly decline and advises municipalities to monitor the State’s Sales Tax and Home Rule Sales Tax revenues as those should increase, reflecting the legislative changeover from use tax to sales tax.
Local Tax Revenues ($ in millions)
|
|
2025 Budget |
YTD Actual |
Variance to YTD Projection (%) |
Variance to 2024 YTD (%) |
|
Hotel/Motel Tax |
$3.90 |
$1.76 |
10.2% |
12.6% |
|
Food & Beverage Tax |
$8.02 |
$3.66 |
-7.5% |
-3.0% |
|
Real Estate Transfer Tax |
$4.62 |
$2.16 |
1.0% |
12.9% |
|
Home Rule Sales Tax |
$21.31 |
$11.14 |
9.4% |
14.7% |
|
Local Gas Tax |
$2.46 |
$1.17 |
-4.9% |
-4.3% |
• Hotel/Motel Tax revenue is higher than projections, partially due to two 2024 payments received in 2025 that totaled over $200,000.
• Food and Beverage Tax revenue is underperforming compared to projections and the prior year. In 2024, late payments from 2021 and 2022 bills totaled over $25,000, which would account for some of this variance. Staff will continue to monitor this revenue source as the year progresses and we head into the busy summer months.
• Real Estate Transfer Tax revenue is performing in line with projections and nearly 13% higher than the prior years. The volume of transfer stamp activity is similar to last year; however, commercial stamps have increased, which are higher value transactions.
• Home Rule Sales Tax is also performing higher than projections and the prior year, partially due to the change in use tax remittance.
• Local Gas Tax is performing lower than projections and the prior year, possibly due to the timing of payments received from several retailers, which should even out over the next few months. Staff will continue to monitor this revenue source.
Service Charges & Other Fees ($ in millions)
|
|
2025 Budget |
YTD Actual |
Variance to YTD Projection (%) |
Variance to 2024 YTD (%) |
|
Electric Charges |
$154.75 |
$72.6 |
-0.7% |
9.4% |
|
Water Charges |
$56.82 |
$24.82 |
0.5.% |
12.9% |
|
Wastewater Charges |
$32.48 |
$15.40 |
-2.8% |
12.5% |
|
Building Permits/Fees |
$1.39 |
$1.13 |
75.3% |
101.0% |
|
Commuter Parking Fees |
$1.10 |
$0.59 |
15.2% |
2.5% |
• Electric and Water Charges are trending slightly lower than projections, but higher than the prior year due to the approved rate increases. The variance to projections may even out after the warmer summer months, when electric and water usage increases.
• Similar to Electric and Water Charges, Wastewater revenues are also lower than projections, but higher than the prior year.
• Two bright spots are Building Permits/Fees and Commuter Parking Fees. Building permits and fees are about 75% higher than expected, as commercial and residential developments continue to exceed estimates. Commuter parking fees are also outperforming as parking demand continues to increase.
Expenditures
Expenditures across all funds total $247.19 million. Total expenditures are 14.0% below current projections and 11.7% higher than the same point last year. Spending in the General Fund is 3.8% below projections and 5.3% higher than 2024. Electric Utility Fund expenditures are 11.0% higher than projected and 17.7% higher than last year. Expenditures in the Water Utility Fund are lower than projected by 36.7% but 56.5% higher than 2024.
Expenditures by Fund Category
|
|
2025 Budget |
YTD Actual |
% of Total Budget |
YTD Projection |
% of YTD Projection |
2024 YTD Actual |
Variance to 2024 |
|
Maintenance & Operating |
$511.30 |
$211.43 |
41.4% |
$229.46 |
92.1% |
$182.61 |
15.8% |
|
Capital & Debt Service |
$85.65 |
$19.37 |
22.6% |
$39.16 |
49.5% |
$10.55 |
83.6% |
|
Special Funds |
$44.70 |
$16.35 |
36.6% |
$18.80 |
86.9% |
$17.80 |
-8.2% |
Below are some key factors tied to expenditure performance.
Personnel Costs ($ in millions)
|
|
2025 Budget |
YTD Actual |
Variance to YTD Projection (%) |
Variance to 2024 YTD (%) |
|
Regular Pay |
$118.44 |
$56.49 |
-3.3% |
5.4% |
|
Overtime Pay |
$11.74 |
$5.48 |
7.7% |
13.4% |
|
Employer Contributions |
$52.63 |
$25.59 |
-4.2% |
3.1% |
|
Insurance Benefits |
$28.28 |
$12.40 |
1.2% |
2.6% |
Regular Pay is 3.3% lower than projected; however, it is 5.4% higher than the previous year due to police and fire union retroactive payments and budgeted wage increases in all other departments.
Overtime Pay is 13.4% higher than the previous year and 7.7% higher than projections. Increases in overtime are mainly seen in public safety related to minimum staffing requirements for the Fire Department, as well as police and fire union contract retroactive payments totaling over $300,000 for overtime.
Employer Contributions are trending below budget, with a 4.2% variance from the year-to-date projections, but with an increase of 3.1% from 2024. This is driven mainly by increased contributions to the police and fire pensions and the timing of those contributions.
Insurance Benefits and claims for healthcare and other related coverages are 2.6% higher than the previous year. Prior major medical claims and pharmaceutical spending have contributed to the overage.
Purchased Services ($ in millions)
|
|
2025 Budget |
YTD Actual |
Variance to YTD Projection (%) |
Variance to 2024 YTD (%) |
|
Operational Services |
$11.77 |
$4.23 |
3.6% |
5.7% |
|
Architect & Engineering Services |
$10.55 |
$2.29 |
-29.6% |
16.0% |
|
Software & Hardware Maintenance |
$9.08 |
$4.78 |
-1.6% |
3.3% |
Operational Services total $4.23 million, an increase of 5.7% over the previous year. Increases were attributable to increases for contract tree trimming in the Electric Utility and streetlight maintenance in Public Works.
Architect and Engineering Services are still trending below budget but have increased compared to last year. Design work continues to progress on capital projects, including fire station renovations, the Riverwalk South Exit project, Eagle Street Gateway as well as several projects at Springbrook Water Reclamation.
Software and Hardware Maintenance is 1.6% below projections and has increased by 3.3% compared to last year due to increases in the Police Department related to Tyler Technologies and Oracle license and support in the Electric Utility.
Purchased Items ($ in millions)
|
|
2025 Budget |
YTD Actual |
Variance to YTD Projection (%) |
Variance to 2024 YTD (%) |
|
Operating Supplies |
$7.54 |
$9.07 |
192.1% |
221.7% |
|
Purchased Electric |
$101.76 |
$51.47 |
11.4% |
5.2% |
|
Purchased Water |
$33.33 |
$12.23 |
-8.5% |
6.9% |
Purchased Electric costs are trending higher than expected. This is 11.4% higher than projected and represents an increase of 5.2% from 2024. This is primarily due to higher energy sales resulting from hot weather early in the year.
Purchased Water costs increased 6.9% from the previous year as the cost to purchase water from the DuPage Water Commission has increased, as has the volume of water sold.
Overall spending for operating supplies has increased by 221.7% compared to last year related to electric equipment purchases from Wesco and Okonite. The Electric Utility has received several large equipment orders that had multi-year lead times and unpredictable delivery schedules. Some of these materials will be reclassified into capital project expenses as they are placed in service.
Capital Projects ($ in millions)
|
|
2025 Budget |
YTD Actual |
Variance to YTD Projection (%) |
Variance to 2024 YTD (%) |
|
Infrastructure |
$125.51 |
$21.34 |
-58.2% |
37.7% |
|
Vehicles & Equipment |
$9.65 |
$1.71 |
-90.1% |
-39.7% |
|
Building Improvements |
$10.80 |
$1.31 |
-59.0% |
-48.9% |
|
Technology |
$22.51 |
$9.95 |
138.7% |
1081.0% |
|
Land |
$0.80 |
- |
- |
- |
Capital projects are progressing well this year. Notably, the previously delayed Washington Street Bridge replacement is nearing completion. Total expenditures for capital outlay are 57.8% higher than last year, although they continue to trend well under budget. Technology has seen significant investments in projects such as the Land Mobile Radio Network, along with PC replacements and security camera upgrades, contributing to its large YTD variance. Staff will provide more detail on projects that will carry over to 2026 in the upcoming budget workshops.
2025 Budget Transfers
During the 2025 Budget Workshops, City Council approved additions to the Budget that would be contingent on the outcome of police and fire contract negotiations, as well as the Grocery Tax discussion. The financial impact of the approved police and fire union contracts totaled about $2.2M for 2025. As a result, staff has redirected funding from other General Fund expenses to offset the increase to police and fire budgets. Those budget transfers include the MCIT Salary, Benefits and Equipment, IT supplies, and operational services in Public Works, as discussed at the 2025 Budget Workshops. The budget transfers are reflected in the Mid-Year Financial Report.
2026 Budget Development
During the 2026 Budget Kick-off meeting, the Finance Department’s direction was that departments’ non-personnel budget submittals should remain flat due to the projected imbalance in the General Fund revenues and expenditures. Preliminary estimates indicate a deficit of nearly $2.5M due to increasing personnel costs related to police and fire contracts, as well as the results from the compensation and classification study. Finance has also directed staff to compare their actual spending with their budget requests to correct any budget vs. actual variances from the prior year. This all assumes the replacement of the Grocery Tax.
The proposed 2026 Annual Budget and Capital Improvement Program will be available in mid-October. The information included in the proposed budget will be presented to the City Council and the community through a series of workshops tentatively scheduled for Tuesday, Sept. 23, Tuesday, Oct. 28 and Monday, Nov. 10. City Council input is essential throughout the budget process. City Council members are encouraged to engage staff early in the budget process on topics of interest for the 2026 budget.
Summary
At the mid-point of the year, revenues and expenditures across most major operating funds are trending in line with budget projections. Staff will continue to monitor the variances mentioned with Use Tax and Sales Tax, as well as local taxes, including the Gas Tax and Food and Beverage Tax.
FISCAL IMPACT:
N/A