CITY COUNCIL AGENDA ITEM
ACTION REQUESTED:
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Annual Budget Workshop #3: 2026 Annual Operating Budget & Capital Improvement Program Overview
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DEPARTMENT: Finance Department
SUBMITTED BY: Raymond Munch, Director or Finance
BOARD/COMMISSION REVIEW:
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BACKGROUND:
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 undergo 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 2026 proposed budget is being presented to the City Council and the community through a series of three workshops. The first and second took place on Sept. 29 and Oct. 28, respectively, with the final workshop being held on Nov. 10. Budget workshops establish the groundwork for the formal budget adoption process.
Following the workshops, the City Council will hold a public hearing and be asked to approve the annual budget on Dec. 2. Adoption of the annual budget is followed by a public hearing and the adoption of the annual property tax levy on Dec. 16. To comply with state statutes, the budget and tax levy must be adopted before January 1, 2026.
DISCUSSION:
The third budget workshop will provide a fund-by-fund overview of the entire budget as well as the opportunity for Council to provide further direction to staff on various issues that have been brought up throughout the budget development process. The 2026 City of Naperville budget is recommended at $685.13 million, an overall increase of 6.8% from the amended 2025 budget of $641.15 million.
The total budget includes $663.30 million in expenditures, an overall increase of 6.5%, and an additional $21.83 million in transfers between budget funds. Rising personnel costs and increased investment in capital assets are the primary drivers behind the increase in expenditures.
The 2026 budget is 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 will follow recommended 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 moderating revenue growth trends, declining legacy revenue streams, property tax stability, known asset maintenance and replacement needs, historical department spending, employee compensation and insurance costs, and the overall economic environment.
In light of the above, the 2026 proposed budget, which is structurally balanced, includes no new personnel and limited additional requests. The result of these efforts is reflected in a budget that focuses on the City’s core services and programs and a capital improvement program that continues to make significant investments in the City’s infrastructure.
The presentation slides, along with the 2026 budget message and proposed revenue and expenses summary, are attached to the agenda for review before the workshop.
The proposed 2026 Annual Operating Budget and Capital Improvement Program, which includes the full budget and summaries, can be found on the City’s Annual Budget and Audit Report webpage and through the following link:
www.naperville.il.us/globalassets/media/finance-documents/budget-audit-reports/2026-proposed-budget.pdf <http://www.naperville.il.us/globalassets/media/finance-documents/budget-audit-reports/2026-proposed-budget.pdf>
FISCAL IMPACT:
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