BLOOMINGTON -- Digging the city's way out of its financial mess could be a little more painful than expected because of a loss in state money and the prospect of a property tax increase, but the City Council also learned Monday that refinancing two bonds may help close its $5 million deficit.
No decisions were made at Monday's council work session. Instead, Mayor Steve Stockton encouraged council members to review the financial data presented in preparation for the council's Sept. 18-19 retreat.
Money expected from the state income tax during for the first three months of Bloomington's current fiscal year is about 20 percent less than was previously estimated, said City Manager David Hales. If the trend continues, Hales said, the city's $77 million budget will be $2 million out of balance at the end of the year on April 30.
"It has dropped and it has dropped heavy," Hales said.
He added that every city is experiencing cuts in their share of state income tax revenue.
Hales told the council that he and city staff would be looking at where they can make cuts to offset the projected loss in revenue. Hales did not specify where the cuts will come from, but added that they "have nine months to turn it around."
The council also learned the city will have to hold a truth-in-taxation hearing because the city's property tax levy will have to increase more than 5 percent. The city needs to levy more money to pay for the police and fire pensions as well as the city's Illinois Municipal Retirement Fund.
The city receives about $17.2 million in property taxes, including about $7.46 million for the city's retirement and pension funds.
The council will set its tax levy in December. The total tax rate is about 99 cents per $100 of equalized assessed valuation. That rate has not changed in more than five years.
Another question for the city is whether to refinance two bonds. The final payments for the bonds issued in 1996 and 2001 total $5.7 million and come due in the next two years.
The city's bonding agent, Mesirow Financial, estimated that by refinancing those final payments the city could put $2.6 million in cash into its accounts, which are currently $5 million in the red.
What the city would pay in the long run in additional interest costs has not been set because the interest rate has not been determined. However, Hales said refinancing would help with the city's cash flow problems.
Hales said bonds for resurfacing the city's streets in 2010 could be included in the bond restructuring plan. This year the city borrowed $1 million from its water fund to repave some of its streets.
The refinancing plan also would show credit rating agencies that the city is taking its financial problems seriously and is working on an aggressive plan to get out of debt, he added.
The city has a total of $77 million in bonds.