Budget Committee: Use $10 million from NU stadium fees for police and firefighter pensions

Evanston Finance and Budget Committee members support using $10 million from NU Stadium permit fees to go into general fund reserves, which could help keep public safety pensions on track for 100 percent funding. Credit: Bob Seidenberg

Nearly $10 million in one-time permit revenue from Northwestern University’s new stadium project should go into the general fund, members of the city’s Finance and Budget Committee recommended Tuesday.

The money could then be used for expected contribution increases to the city’s police and fire department pension funds.

Last year, the committee recommended the city achieve 100% pension funding by 2040 after years of persistent underfunding.

In fiscal year 2023, the city’s total contributions to police and fire pensions totaled about $25.5 million, more than double that of several neighboring municipalities, according to benchmarking data from city financial analyst Michael Van Dorpe.

Des Plaines ranked second on the list with $16.3 million, and Oak Park contributed just over $14 million to both funds in 2023.

Earlier in Tuesday’s meeting, Jason Franken, the city’s actuarial consultant for police and fire pensions, told committee members that contributions to the police pension fund would need to be $2.5 million higher this year if the 100 percent funding path is used. For fire pensions, the figure is around $1.5 million, he estimated.

He said several factors were responsible for the increase, with the “biggest blow” being the pay raise the city gave employees in 2023.

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“It is difficult to afford the 20 percent salary increase (on the police side), so there is an increase in the contribution obligation,” he said, attending the meeting via a computer link.

The committee’s recommendation at the meeting contradicted the financial officials’ view that revenue from stadium permits should be used to meet the city’s capital needs.

Committee member David Livingston, who chaired the committee when a 100% funding path was recommended in 2023, opened the discussion by recommending keeping the funds in the General Fund’s excess reserves to give officials more time before required pension payments would result in a property tax increase.

“I really want us to deliver pensions the way we envision them,” he told committee members, “and the longer we delay structural changes in taxes to stay on that path (of pension funding), the better it is, in my opinion.”

If officials conclude in three years that the budget is balanced and there is a sustained surplus of funds, the funds could be used to meet capital needs, he said.

However, he currently sees “no other way to finance the additional pension payments planned for the next few years,” he said.

Supporters speak out

Other committee members also supported this step.

Committee and Council member Devon Reid (8th District) attended the meeting remotely and said, “It was exciting to hear other members say we need to use this to make sure we don’t raise property taxes this year.”

Committee member Leslie McMillan said she agreed with Livingston that “this is exactly the direction we should be going.”

However, she asked staff: “I have a question about why this was not budgeted for (in 2024). We knew these fees were going to come in and they made it look like we were in deficit.”

Officials had discussed references to stadiums in connection with the approval of the 2024 budget in November last year, budget manager Clayton Black responded.

The budget was passed at essentially the same time, even though the stadium was still under threat of a lawsuit and other issues remained unresolved, he said.

Hitesh Desai, the city’s chief financial officer and treasurer (at podium), and Clayton Black, the city’s budget manager (seated), presented options for $10 million in stadium permit revenue. “This is permit revenue, so it’s just a one-time event,” Desai reminded committee members. Credit: Bob Seidenberg

Revenue from the permits totals about $11 million, Hitesh Desai, the city’s chief financial officer and treasurer, said in a memo to the committee.

Given the scope of the project, some of the funds will be needed to cover additional inspection and plan review costs, he said.

In addition, part of the funds will be needed to offset any loss of tax revenue on match days during the construction of the new stadium, he noted.

“With the planned construction of the temporary, lower capacity stadium, the lost sports, liquor and hotel taxes will likely be minimized,” he wrote. “Currently, the city estimates these amounts to be approximately $1 million, leaving approximately $10 million to be allocated by the City Council.”

“When the City Council adopted the fiscal year 2024 budget, the expected permit fee revenues and related expenses were not included in General Fund revenues, nor was there a decision or expenditure budget for the use of these one-time revenues,” he noted.

High costs lie ahead

The city faces enormous costs in many ways, including moving government operations from the city’s longtime headquarters at 2100 Ridge Avenue to a downtown office building at 909 Davis Street.

Desai also wrote that there are cost considerations regarding the renovation of the current civic center, should that happen, as well as plans for the police and fire headquarters and the service center, he noted.

“The potential cost of all proposed options could be in the range of $120 million to $150 million, and construction would take place over the next five to seven years,” Desai wrote.

Given these needs, one option for these funds would be to establish a “building replacement fund,” he suggested, “as part of the 2025 budget, earmarked for renovation or replacement of the Civic Center, Police and Fire Headquarters, or Service Center. Alternatively, the City Council could direct staff to use the one-time permit revenue for the General CIP (Capital Improvement Plan), thereby reducing the need for General Obligation (GO) bonds in 2025. The City Council could also identify additional areas in which the permit revenue can be invested, such as additional funds for park investments.”

Committee and Council member Jonathan Nieuwsma (4th District) said it makes sense to put the money into the General Fund.

Still, he said, the needs expressed by employees “are all legitimate reasons and they will cost us significant amounts of money in the coming years.”

“I want us to better fund our parks in the future,” he added, “and we all know that our need for capital improvements is far greater than the money we have.”

The Committee members did not vote on this question; it was only put up for discussion.

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