Last week, the Illinois legislature failed to complete pension reform by not passing any legislation regarding public safety (local police and fire) pensions. There was legislation drafted and considered by the Senate, but it was not called for a vote due to opposition from municipalities. Now, you may be asking, “Why would municipalities OPPOSE pension reform that is supposed to save taxpayers money?” Let me explain.

The proposed legislation establishes a 2-tier pension program for police and fire employees. The changes in pension benefits are logical and St. Charles supported them, In fact, St. Charles and other cities, villages, and towns support all provisions of the reform bill, except one. That provision has to do with an enforcement mechanism that was ill-conceived and could have an extremely detrimental impact on city services.

This enforcement language would go into effect 1/1/15, if no other statutory alternative is enacted. It would apply if employers (cities and towns) fail to make the required pension contribution, as determined by the Illinois Department of Insurance, within 90 days of the date due and would allow the State Comptroller to deduct amounts from state funds (sales tax, income tax, telecommunications tax, etc.). Further, it would allows action in circuit court if state funds are not available.

Municipalities oppose this language for 3 main reasons:

1. We do not believe that the Department of Insurance calculations are always fair and reasonable. St. Charles typically uses its own actuary to determine the pension payments required. This has served us well for many years.

2. By allowing this type of “garnishment,” the legislation asserts that pension payments take precedence over ALL OTHER CITY SERVICES AND PROGRAMS. We simply cannot agree with this. It does not allow for extenuating circumstances or other factors to be considered. Quite frankly, the legislation determines that pension payments must be made without regard for any other obligations of the City.

3. The enforcement language was not included in the prior pension reform legislation and the public safety unions are gaining something that others do not.

In summary, the public safety unions were able to secure something that would assure that pension payments could be given precedence over all other local government expenditures. Municipalities were not prepared to agree to that. The Pension Fairness Coalition issued a statement regarding the issue – PFIC Statement HB 5873 FINAL. This letter from Ed Paesel also helps to explain.

Recent communication with state legislators regarding this matter have been promising and there is a strong belief that the matter will be taken up again in the near future. I hope that is true.

In the meantime, I encourage local residents to contact their legislators and tell them that public safety pension reform should be enacted.

Frequently, I get asked, “ Why can’t St. Charles get X to come to town?”

X might be a high-end steak house or an upscale apparel retailer or a big box that specializes in hunting/fishing/camping products.  Local residents see some of these stores opening in other nearby suburban areas and ask themselves, ”Why not St. Charles?”  

We all want the best in retail opportunities for the community and while there are many circumstances that impact retailer decision-making (the state of the economy being the most important), the answer to the question in most cases has to do with the amount of total purchasing power of the market area.

St. Charles is widely known as an affluent community with relatively high household incomes. This is an advantage for us. But, retailers don’t just look at household income. They also want to know how many households there are within a given distance or “drive time.” In short, wealthy consumers are good, but having more of them is better.

Here is some of the text from a response that St. Charles received from a retailer that analyzed our market (the details have been removed to protect the highly confidential and proprietary nature of the information related to this company’s market criteria):

To determine St. Charles’ relative strength in terms of actual buying power, the City’s Economic Development Department has conducted some comparative analyses between St. Charles and 6 other major commercial centers in the Chicagoland suburban area:

1. Yorktown Mall (Lombard),
2. Oak Brook Shopping Center,
3. The Arboretum (South Barrington),
4. Downtown Naperville,
5. Old Orchard (Skokie), and
6. Woodfield Mall (Schaumburg)

The analysis is predicated on market reach, as determined by fixed drive times – a frequent variable in retail location decisions. When considering median household income for persons residing within a 15-minute drive time, St. Charles (measured from the center of downtown) compares favorably to all 6 markets studied.  In short, St. Charles is an attractive location from this perspective.

However, a market’s median household income data represents only a part of the equation in determining its household buying power. That equation must also consider the total number of households (or customers) within the defined market.  When looking at these same markets, at 10, 15, and 20-minute drive times, in ALL cases, the St. Charles market buying power is vastly exceeded by the comparative commercial centers. By way of example, within a 15-minute drive time, the comparison centers range from 1.7 (The Arboretum) to 4.6 (Oakbrook) times the buying power of the St. Charles market.

The graph above portrays the above-described comparison between household buying power for the aforesaid market areas (excluding expenditures for transportation and housing).  The greater the reach, typically, the larger the delta between St. Charles and each of the other 6 markets.  Again, this is a function of surrounding land use patterns and the low concentration of residences. 

We love our natural areas and open space in Kane County. It makes for lower traffic volumes, greater recreational opportunities, and a more attractive place to live. However, it also removes land from the “market” and provides fewer opportunities for development. Other land uses, such as the DuPage Airport, golf courses, mega-churches, and large-lot residential development also impact the buying power of St. Charles.

Let me be clear – I am not saying that the wrong choices have been made with regards to land-use decisions. I am only saying that we must consider the impact of these decisions on the ability to attract commercial development (quality and quantity).

Additionally, current trends in housing starts, and the real estate market in general, do not bode well for any dramatic change in circumstances or a resulting increase in our local market buying power. 

While St. Charles compares favorably with other suburban retail markets in terms of household affluence, we lag in terms of total buying power due to a greatly reduced number of households/consumers. This serves as one of the primary reasons that some retailers will not consider the Tri-Cities area. It also serves as one of the primary challenges that St. Charles faces in attempting to attract some high-end retailers and restaurants to our community.

While more residences in the market area would increase our purchasing power, many other criteria are, and should be, considered as part of the decision-making process.

On Wednesday, the General Assembly approved significant pension reform for most state and local government employees. It’s been reported that it took the legislature less than 12 hours to complete the entire process. Governor Quinn is expected to signed the bill into law.

The legislation includes reduced benefits, a higher retirement age, lower cost-of-living adjustments, sets a maximum salary on which pensions are based, and prevents some individuals from collecting two pensions. According to the Commission on Government Forecasting and Accountability, the reforms will reduce the state’s pension liability by $119 billion by 2045. No estimates have been formulated for savings to local governments. Doug Whitley, President of the Illinois Chamber of Commerce, called the action “the biggest thing that I’ve seen around here in years.”

The legislation does not change benefits for current employees because it is believed that this could be subject to legal challenge. It is claimed that pensions for current employees cannot be reduced without violating the state constitution, so that was left out. The changes will only apply to newly hired government employees.

In addition, the new law does nothing to reform local police and fire pensions. This was disappointing for municipalities and the Pension Fairness Coalition. The coalition issued the following PFIC Statement on Pension Reform Legislation.

Just as important is that current and future legislators and governors use this to change their behavior and stand up to those individuals and organizations who routinely visit Springfield and request pension enhancements or “sweeteners.” If that doesn’t change, it’s just a matter of time before all the progress made this week is completely erased. 

It is my hope that the legislation approved this week can serve as a basis for public safety pension reform, which is urgently needed.

As we approach the start of the baseball season, I recall the great movie “Field of Dreams” where Ray Kinsella was encouraged to “go the distance.” The General Assembly and Governor Quinn need to do the same and finish pension reform.

It is being reported that Governor Quinn’s proposed budget will call for a 30% reduction in income tax revenue for the City of St. Charles. If this is implemented, the City of St. Charles stands to lose approximately $800,000 in revenue.

Under the current formula, 10% of income tax revenue collected by the State of Illinois is deposited into the Local Government Distributive Fund or LGDF. That revenue is then distributed to cities, towns, and villages on a per capita (population) basis.  Under the current 10% formula, St. Charles receives approximately $3 million annually. It represents one of the largest sources of revenue for the City.

Under the revised formula, the $3 million would be reduced by 30% or $800,000. To give you a frame of reference, the City’s General Fund – the fund through which most City departments, including police, fire, and public works, are funded – totals approximately $40 million. The $800,000 reduction represents approximately 2% of the General Fund.

If this budget is implemented, the City will have serious decisions to make regarding programs and services. Unless additional revenue is obtained, there is little doubt that reductions will need to be made.

Please contact Governor Quinn and tell him that cities and villages are already sharing “the pain” and that the State of Illinois should not reduce shared income tax revenue.

The City of St. Charles recently presented the results of the 2009 Priorities Survey, a survey of residents on their opinions of St. Charles. 

The results showed the following: 

• residents feel St. Charles is valued as a place to live,
• communication with residents is viewed positively,
• opinions of community appearance have improved, and
• views regarding downtown St. Charles have improved. 

In fact, 97 percent of respondents rated St. Charles as a “good” or “excellent” place to live. This represents the highest rating received for this question since the inception of the survey in 1996. I believe this demonstrates that even though the City has been required to reduce some expenses, we’ve continued to meet the expectations of the community. 

St. Charles as a place to live

Also, I believe the survey has accurately reflected what the majority of residents understand – that the city has been doing its best to try to maintain services in the face of some very tough financial restraints.  

I invite all residents to read the survey results. 

Thank you to all residents who participated in the survey and, more importantly, thank you for your positive feedback on the services that the City provides.

The City of St. Charles is joining other cities and counties across the State of Illinois in calling for local government pension reform.

The cost of providing public safety pensions in Illinois is rapidly increasing. The Illinois Commission on Governmental Forecasting and Accountability has recently published a thorough analysis of the financial health of select municipal pension funds. For the new fiscal year beginning May 1, 2010, the City of St. Charles estimates that funds needed for pension funding will be $4.3 million, an increase of over 13% from the prior year.

In Illinois, the State of Illinois establishes benefits for the City’s pension programs, but the City of St. Charles is tasked with meeting the obligations. In other words, Springfield places the order, but St. Charles picks up the tab.

Even in the face of significant financial conditions, the legislature continues to consider enhanced pension benefits.

Without a more fair public safety pension system, Illinois municipalities will either cut the level of public safety and other essential services or increase taxes.

There needs to be fair and equitable changes to public safety pension systems. Working with all stakeholders, the goal is to develop a long term solution to the pension crisis that protects Illinois taxpayers and secures sustainable retirement benefits for our public safety employees.  As a result, the St. Charles City Council has endorsed the Pension Fairness Platform.

On March 3, 2010, the launch of the Coalition at the State Capitol garnered positive media coverage across the state.

To locate your legislators and let them know about how you feel about this issue, click here.