The document summarizes the 2014-2015 annual operating budget for Naperville, Illinois. It discusses how the city has been impacted by the economic recession but has improved its budget since 2008-2009. The budget was developed by the Finance Department to meet the fiscal needs of the city government. Key points of the budget include a decline in property values and taxes, issues with funding the electric utility, and a $9 million reduction due to pension contributions. The largest sources of general fund revenue are sales tax, property tax, and state income tax.

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Local Budget Report: Naperville, Illinois
Naperville, a suburb within Chicago, IL, with 141,853 residents is bisected in the DuPage
and Will counties within the State of Illinois (Naperville.il.us). The Naperville, Illinois Annual
Operating Budget (Fiscal Year 2014-2015), has further explained how the great recession has
slightly impacted the city of Naperville’s budget, but the government of Naperville, Illinois has
consistently improved since the 2008-2009 recession.
The 2014-2015 Naperville, IL Annual Operating Budget was developed to meet the fiscal
needs of the government of Naperville, Illinois. The budget was designed by the Finance
Department; mostly by Karen DeAngelis (Director of Finance).
As discussed in the transmittal letter (economic outlook section) within the 2014-2015
Naperville, IL Annual Operating Budget, Mayor A. George Pradel explained with the mere
budget about various factors currently affecting the city’s budget for the 2014-2015 fiscal year.
First, the usage of property tax has “delayed the impact of the economic decline,” especially
affecting the Naperville, IL’s EAV (Equalized Assessed Value) which “fell by a total of 17.7%
over the last four years.” In regards to the property tax affecting economic hardship within the
government of the Naperville, IL “like the rest of the country, home values have declined due to
recession” (“2015 Annual Operating Budget”). Figuratively speaking, property taxes have
decreased by $7 million dollars in the fiscal year 2014 budget as well as the “general corporate
property tax revenue is reduced by $2.8 million” (“2015 Annual Operating Budget”).
Shockingly, the EVA can encounter a possible decrease of “2% again the following year before
it stabilizes” (“2015 Annual Operating Budget”). The main reason for the city of Naperville’s
EAV decline is due to the constant rate of the property tax has to be “reduced by the same
percentage as the EAV decline” (“2015 Annual Operating Budget”). In a positive light, the city

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of Naperville, IL can achieve a successful real estate market since “the rebounding real estate
sales market provides confidence in the underlying recovery of both the housing and commercial
property markets” (“2015 Annual Operating Budget”).
Another issue facing the city of Naperville, IL is the electric utility. In the fiscal year
2015, the electric utility is “lower than prior years” and is currently facing a limitation of staff
recommendations for the purpose of fund borrowing “for the capital projects over the next 5
years” (“2015 Annual Operating Budget”). In addition, in May 2013, “a 2% rate increase” was
granted but the rate increase did not financially “cover current operating expenses;” thus, the
electric utility has generated a negative aspect in the fiscal year 2014. Naperville, IL residents
can encounter possible high electricity bills or will not be able to receive electricity if the city of
Naperville can’t be able to financially support the electric utility in the current budget, hence
financial changes has to be met. Also, it is extremely important to reminder that if the electric
utility budget is not met, then the residents of Naperville can encounter heating problems
(especially during the winter months).
Third, within the fiscal year 2015 budget proposal indicated a financial instability in
which a $9 million financial reduction due to the “absence of the one-time $6 million pension
contribution from FY14” which was initially caused by “underlying operating cost increases
including salary and benefit, pension contributions, and vehicle replacement costs” (“2015
Annual Operating Budget”). This occurrence can present a wide array of problems (including
layoffs, termination of jobs, quitting/leaving job, and etc.) for the city of Naperville, hence the
city has to ensure an effective budget is met, before these problems can potentially occur.
In a historical context, the city of Naperville is still considered a “thriving, suburban
community” but “remained a small rural-based town from 1831-1864” (Naperville History).

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Originally consisting of “steel and glass centers built for commerce and technology-based
industries, meandering neighborhoods, and a vibrant downtown shopping district” but before the
city of Naperville can be classified as a ‘city,’ the building of the Naperville railroad in the late
1800’s as well as “the relocation of North Western (referred to as North Central) College in the
late 1800’s, but Naperville “grew and matured as a town” (Naperville History). Initially
discovered by Joseph Naper along with a small group of eager families began to tap into the
city’s potential growth, by building the “original 80 acres surveyed, platted, and registered by
Joseph Naper with the State of Illinois in 1842” to soon becoming a “collection of
neighborhoods with a population of more than 140,000” (Naperville History).
Figure 1: General Fund Revenue by Source, FY 2014-2015
29%
15%
11%
3%
General Fund Revenues by Source, FY 2014-2015
Sales Tax
General Property Tax
State Income Tax
Real Estate Transfer Tax

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General Fund Revenues
Figure 1 show the percentages of general fund revenues by source (FY 2014-2015). If
you closely examine, you can clearly see the following five largest taxes are: sales tax, general
property tax, state income tax, and real estate transfer tax (“2015 Annual Operating Budget”).
However, the sales tax is the highest general fund revenue, along with general property tax and
state income tax, respectively. Lastly, the remaining general fund revenue, the real estate transfer
tax is the lowest general fund revenue within the city’s budget.
Specifically, the general fund revenues had a difference of variation of growth rates for
the different fund revenues. If you look at Figure 1, you can see that the sales tax revenue is
expected to increase by 3.87% in the 2014-2015 fiscal year. The reason behind the sales tax
growth rate is, in the fiscal year 2013, the sales tax “set a record high” and repeated the same
record, by accumulating “over 32 million” in sales in the fiscal year 2014 (“2015 Annual
Operating Budget”). For the general property tax were expected to decrease by 9.56% in 2015.
The decline in property tax can be attributed to the 2008-2009 recession and a declining real
estate market during the recession greatly affected home-owners (including their home value)
within the city of Naperville. For example, the city’s budget endured a heavy affect towards the
real estate market since it “fell during the general economic recession by an average of 5.1% for
the most recent three years” (“2015 Annual Operating Budget”). The state income tax has
experienced a decrease by 3.30% within the 2015 fiscal year. In a similar fashion to the general
property tax’s decline, the state income tax’s decline was “due to the high state unemployment
rate and the overall weak economy the income tax allocation” unfortunately “declined for the
three year period FY09 to FY11” (“2015 Annual Operating Budget”). In addition, the state
income tax’s budget mainly in 2014 is “slightly below the prior year actual collections” (“2015

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Annual Operating Budget”). Lastly, for the real estate transfer tax also experienced a decrease of
15.53% in 2015. Also, this tax is “directly linked to housing sales” but additionally experienced
a sharp decline, which occurred “significantly over the period FY07 to FY10 with subprime
mortgage defaults, foreclosures, reduction in sales and reduction in sale prices” (“2015 Annual
Operating Budget”).
The city of Naperville accumulates its general fund revenues from sales tax, general
property tax, state income tax, and real estate transfer tax. The equity of the sales tax is
regressive on a socio-economic scale, since the equity has to “distribute effective tax rates across
income groups” (Powerpoint). You have to understand that the city of Naperville is an upper-
middle class/wealthy residential population with a low percentage of lower-middle class
residents, at 4.3% living in poverty (U.S. Census). Basically, lower-middle class residents have a
tendency of spending a considerable (larger) portion of their annual income than upper-
middle/wealthy residents, since they spend a smaller portion of their annual income. For
example, in the table (Effective Tax Rates of Fed. Inc. Tax and Proposed National Sales Taxes),
if a lower-middle individual has an annual income between 5,000 to 10,000, then their national
sales tax is 25.5 but if an upper-middle class/wealthy individual, then their national sales tax is
9.7 (Powerpoint). The equity of general property tax on residential property can be considered
regressive, since some resident’s (lower-middle class and middle class) wealth is accumulated
from the housing sector, in accordance to the U.S. Census, about 75% own their own house (U.S.
Census). But, the upper-middle class have additional access to other financial investments (e.g.
owning a business), than housing. Also, the general property tax on commercial property in the
city of Naperville is progressive. The equity of the state income tax and real estate transfer tax is
likely to be regressive. The sales tax, general property tax, state income tax and real estate

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transfer tax are the only equitable revenues sources in the city of Naperville from an Ability-to-
Pay principle since the residents of the Naperville area are mostly upper-middle class; thus, they
will encounter a higher percentage of taxes due to their income level(s). The utility tax,
telecommunications tax, and hotel/motel tax are the equitable revenues resources from a Benefit
principle since “some revenue is derived from payments by recipients for services rendered or
benefits received” (Lee, Johnson, & Joyce, pg. 137). In addition, those specific revenues greatly
apply to the Benefit principle, since payable taxes coincide with useable services that the city of
Naperville’s residents utilize. Also, a majority of the city of Naperville’s residents consist of
upper-middle class households; thus, are financially stabilized to buy goods and services at the
same time, be able to pay taxes. So, the utility tax, telecommunications tax, and hotel/motel tax
are able to ‘benefit’ to the city of Naperville, since the tax is giving and receiving to support one
another.

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Figure 2: General Fund Expenditures by Department, FY 2014-2015
Budget Allocation Areas
The 2015 Annual Operating Budget shows the general fund expenditures by department
in the 2014-2015 fiscal year. Figure 2 shows the percentages of the general fund expenditures
attributable by department in the 2015. A majority of the general fund expenditures is
attributable to the Police Department, the Fire Department, and the Department of Public Works.
We can see that one (the Fire Department) out of the five departments remained in a stable
condition since this specific department was expected to increase by 1.9% in the 2015 fiscal year.
But, the Police Department, Department of Public Works, the Transportation & Engineering
Department (TED), and the Finance Department did not remain stable in the 2014-2015 fiscal
year. The Police Department’s fund expenditure decreased by 5.14% in 2015, along with the
Department of Public Works, which decreased by 1.69% as well as the Transportation &
Engineering Department (TED) experienced a decrease by 9.72%. Lastly, the Finance
Department indicated a severe decrease of 68.77%. Within the Executive Summary of the city’s
32%
26%
20%
7%
General Fund Expenditures by Department, FY
2014-2015
Police Department
Fire Department
Department of Public Works
Transporation & Engineering
Department (TED)

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budget report, the following departments: Police Department, Fire Department, Department of
Public Works, TED, and the Finance Department was not identified.
Major Capital Projects
The Capital Improvement Project (CIP) details the major capital project expenditures
“planned over the next five years,” including a “listing of potential projects for the next fifteen
years” (“2015 Annual Operating Budget”). Currently, the city of Naperville’s capital
improvement projects budget is $54 million dollars (“2015 Annual Operating Budget”). Just
recently, in the year of 2013, the Marriott Hotel became a success to the city of Naperville, which
in turn, “increased hotel taxes” (“2015 Annual Operating Budget”). In addition, the city has
decided to utilize “underlying improvement in the business area” as well as an “increased
permits and license revenue reflecting increased development activity in the city” (“2015 Annual
Operating Budget”). In the near future, precisely 2016 and beyond, the city of Naperville is
utilizing a “new construction home sales activity” phase which is designed to increase the
property tax. In the upcoming year of 2016, a series of construction projects (mostly,” buildings,
renovations, and road work”) are planned for the city of Naperville (Baker, 2016). Specifically,
the Naperville Public Library and Naperville Park District are the newest building construction
projects slated for completion in 2016 (Baker, 2016). In addition, the Frontier Sports Complex,
“one of the key capital projects in 2016,” the Knoch Park Central Maintenance Facility,
Huntington Estates Park, Old Sawmill Park, and Walnut Ridge Park are slated for renovation
purposes in 2016 (Baker, 2016). For roadwork construction projects, Route 59 and Interstate 88
has been completed, but the city is planning a “beautification phase in 2016, which will include
sidewalks, bike trails, and landscaping” (Baker, 2016). Additionally, the South Washington Street
Bridget (South of Ring Road) is “slated to start in June” for the purpose of road widening in

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order to improve for “pedestrian and bicycle safety” (Baker, 2016). Bob Kozurek (Deputy City
Engineer) informed the Chicago Tribune about the road work projects for the city as noted in the
text, “we will have a full plate of road maintenance and micro-surfacing in the summer” (Baker,
2016).
Further Questions
It would be extremely interesting to learn about how the Naperville budget compares to
those of other cities in the Illinois regions in terms of their revenues, expenditures, and major
capital projects. Regarding the general fund revenues, it is important to note that the 2014-2015
Naperville budget shows potential fault lines. For example, general property tax revenue was
projected to decrease by 9.56% in 2014-2015 due to the ripple effect of the 2008-2009 recession
on assessed property value. Is the city of Naperville effectively prepared to handle an economic
downturn that may occur, which would lead to another drop in real estate value? Also, how is the
current city’s budget going to be effectively handling the recent Illinois financial budget crisis?
Will this financial budget crisis severely affect the city of Naperville’s real estate to the point
where current Naperville residents have to relocate? If so, does the city of Naperville have a plan
of action? As for the general fund expenditures, if you glance at the figure 2 (general fund
expenditures by department, FY 2014-2015), you can see the following departments: Police
Department, Department of Public Works, the Transportation & Engineering Department, and
Finance Department have indicated sharp decreases for their general fund expenditures in 2015.
But, why is that? Does the city of Naperville feel as if these particular departments are not
important to fund? Lastly, pertaining to major capital projects for the city of Naperville, since the
current major capital project expenditures’ budget is $54 million, with newly planned
construction projects in tow, is the city going to be financially stabilized these major capital

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projects? Also, how will the city be able to effectively handle the major capital projects currently
in tow for the future? Will the city provide an official document to the general public (mainly the
residents of Naperville) explaining how the city (in relation to the current Illinois financial
budget crisis) will be able to handle any future major capital projects?

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References
Baker, Suzanne. 2016 preview: Construction projects ramping up in Naperville. Chicago
Tribune. 1 Jan 2016. Web. http://www.chicagotribune.com/suburbs/naperville-
sun/news/ct-nvs-naperville-look-ahead-st-0103-20160101-story.html
Lee Jr., Robert D., Johnson, Ronald W., Joyce, Phillip G. Public Budgeting Systems. 2013. New
York, NY: Jones & Bartlett Publishers.
Naperville. City of Naperville, Illinois. 2015 Annual Operated Budget. Naperville:, 2015. Web.
https://www.naperville.il.us/emplibrary/FY15AOBadopted.pdf
Naperville. Naperville Demographics. City of Naperville, Illinois. 2011. Naperville:, 2011. Web.
http://www.naperville.il.us/demographics.aspx
Naperville. History of Naperville. City of Naperville, Illinois. 2015. Naperville:, 2015. Web.
http://www.naperville.il.us/emplibrary/chapterb_history.pdf
United States Census Bureau. Quickfacts of Naperville, Illinois. 2015. U.S.A. Web.
http://www.census.gov/quickfacts/table/PST045215/1751622