The Town of Normal is in a strong fiscal position, but some indicators raise concerns that future budgeting will become a challenge. That's according to the annual financial trends report released this week.
The town has continued strong growth in property values, but slackening sales tax revenue continues.
Normal has had six straight years of growth in general fund cash balances, including an increase of 9.2% in 2024.
"We've improved in some areas in regard to our enterprise funds meaning our water fund and our sewer fund. We've also improved with our employee benefits area in terms of how those are funded," said City Manager Pam Reece.
Most indicators are positive, but the report notes a 6% drop in airport traffic last year and an uptick in the unemployment rate compared to last year. Town Finance Director Andrew Huhn said the passenger declines at the Central Illinois Regional Airport came out of a nationwide staffing shortage. The shortage and a desire to keep ticket prices higher have prompted airlines to reduce the number of seats they offer. This hits medium and small airports harder than ones in large cities.
The unemployment rate has also risen in the twin cities compared to last year. Andrew Huhn said that flows from national policy decisions not local factors.
"Which was to be expected. As the Fed is trying to reverse the inflationary concerns, and they have largely done that recently over the last couple years, in order to have inflation go down you have to have unemployment unfortunately go up," said Huhn.
The number of building permits in Normal rose 5% last year. Huhn said that is a positive, though he cautions while remodels continue new housing construction is not as strong because of increases in the cost to build. Huhn says much of the growth the last two years has been in a catchall other permits category.
"The lions share of both those numbers is solar arrays where people are adding solar to their homes. So, we are up but we're still seeing obviously a dropoff in single family which should correct itself as interest rates start to come down and inflation gets a little more moderate," said Huhn.
Housing price increases do benefit the town though. The town saw a massive 20% rise in property values in 2023. The increase in equalized assessed value was $197 million. Residential and industrial property values rose by about the same amount. Commercial land values rose a lesser amount. Huhn said the estimated increases this year are even bigger at $207 million.
"Got kind of the same story. We are seeing a lot of upward pressure on prices for houses. Residential prices have gone up. That's increased the overall assessed value of all the community housing. Again, we're having more buildout at Rivian in industry so we're seeing an increase in assessed value there and then commercial is also seeing an increase," said Huhn.
The projected $207 million increase in EAV for Normal breaks down to $102 million in residential, $58.4 million industrial, and $46 million in commercial property value.
The average price of a new home 10 years ago was just under $300,000. Last year it was $419,000. Existing homes sold for an average price of $161,000 a decade ago. It's north of $255,000 now.
The town gets about 6% of its revenue from property taxes and is far more dependent on state and local sales and income tax money. Coming out of the pandemic sales taxes roared ahead by 22%. That slowed to 7%, 5%, and 3% in the succeeding years.
"Those particular revenue streams, specifically sales tax and income tax, have leveled off a bit. That is something that we had predicted and projected," said Reece.
And there are warning signs ahead.
"Actually, state is a little bit below last year, year to date. So, we have some word-of-mouth concerns about revenue re-forecasting for this fiscal year and the out years. It's a bit of a problem right now that we're seeing that we're trying to manage and understand fully," said Huhn.
He said state income tax revenue sharing for the town is staying fairly strong through the 2024-25 fiscal year.
Utility taxes continue a years-long slide as residents move away from landline phones and cable TV to cell phones and streaming services. Gas and electric tax revenue fluctuates depending on the weather.
Huhn said food and beverage taxes are doing OK. They started flattening in the budget year that ended in March and that continues for 2024-25. Huhn said the town will probably rework those estimates in the out years of the five-year budget forecast. Reece said the data from the financial trends report will help shape the next budget now under development.
"We're going to be cautious. We're going to make sure we are prepared to tighten our belt if we have to," said Reece.
The town has had a couple years of financial flexibility that Huhn said it used to pay down debt, pay for pensions and more road work. Reece said those options may become more difficult to accomplish.
"We've invested a lot in our capital projects in recent years and I would like to be in a position for that all to continue. We've got time to make more evaluation before we put our budget together," said Reece.
Huhn said revenues may recover sooner rather than later.
"We're hopeful there will be some rebound. I'm thinking that the revenue we're seeing now that is giving us some pause as to where we are at is a result of consumer spending decreasing due to inflationary fears. Those fears are starting to mitigate now. So, we're hopeful that we'll return to a more robust revenue picture. Again, we're not going to count on that as part of the budget process," said Huhn.
Huhn said the slowing revenue and rising costs are problematic though solvable for the next budget year.
Meanwhile, underlying fundamentals of town finances remain solid. The workforce is in its third year of growth. The property tax rate for the town is 10% of the total property tax for the community, lower than at any time in the last decade. In comparison the Unit 5 school district has about 62% of the total property tax bill.
Comparing property tax rates to other communities shows Bloomington's rate is slightly lower than Normal but Springfield, Champaign, Peoria, Galesburg, Decatur, and Urbana are all higher.
And the town continues to pay down debt. In the last nine years the town has shed more than $21 million in total outstanding bond debt. It now owes about $67 million.
Last year the town paid $14.1 million in principal and interest payments, a planned larger than average payment to retire one set of bonds. This year Normal will make a $6 million debt payment.
Overlapping debt is a fairly arcane term. It is not only the debt service of the town, about 10% of the budget, it includes the debt of other taxing bodies in the community. As a percentage of total property value, you'd expect overlapping debt to have fallen over the last few years when the community saw big jumps in assessed value. It has. But the trend is now at least a decade old, which includes a lot of years when there wasn't much property value growth in the Twin Cities. Last year communitywide public debt was under 12% of EAV. In 2024 it's down to a little over 9%.
In considering the town debt alone, it's a much lower share of EAV -- just 5.71% in 2024, down from more than 7% the previous year.