Economic Development in the Recession

THE ILLINOIS MUNICIPAL review MAGAZINE ___________________________________________________________________ JUNE 2001 In This Issue From The Editor's Desk Municipal Price Index, 2000 Annual Conference Update Take It To The Bank Economic Development In The Recession Creativity and Collaboration Lead to Successful Home Improvement Program in Park Forest Municipalities Barred From Encouraging Internet Service Options For Consumers Guidelines Established For Local Records Act Changes Illinois Fire Accreditation Managers Sales Tax Rate Changes In 2000, Lowest In 10 Years Legal Q&A - Regulating Toy Vehicles New & Noteworthy Despite Crisis In California, Electricity Deregulation Is Working Elsewhere Main Street Communities Recognized Throughout The State 2001-2002 Nominations Committee From The EDITOR’S DESK... Evanston has become the first city in Illinois, and possibly, the United States, to offer vehicle owners the opportunity to contest parking citations online. Vehicle owners can plead their cases from the comfort of their own homes and during their spare time. Alleged parking "violators" can find the link to an online form to contest their parking citations under "Services" on the new City of Evanston home page, www.cityofevanston.org. The form requires the completion of personal information and features a field at the bottom of the page where vehicle owners can state their cases or request in-person hearings. The Hearings Division will email back to vehicle owners, often within a week, a written judgment to their contest, saving them the time, anxiety and travel costs of appearing in-person. For more information on the online process, call 847/448-8163. • • • • • The Village of Niles has established a Web site to promote advo- cating the cause of sales tax simplification and the issues of tax fairness in e-commerce. The site contains information on e-commerce tax policy myths, the impact on Illinois and links support- ing e-fairness. Visit the site at www.netsalestax.net. • • • • • A new drinking water and wastewater handbook for local governments is now available on the Internet. "Drinking Water and Wastewater Handbook for Local Officials," produced by the Maryland Center for Environmental Training, is designed to help elected and administrative officials understand the various legal and technical requirements for the treatment, storage and distribu- tion of drinking water and the collection, treatment and discharge of wastewater. For more information, go to the following: www.lgean.org/html/whatsnew.cfm?id=165. • • • • • June 22 is National Small Cities "Investing in Communities" Day. Sponsored by the Small Cities Council of the National League of Cities, the day draws attention to the important partnership between federal government and our country's small cities and vil- lages. Municipal Price Index, 2000 are improved with the delivery of new products and, without ques- tion, the index may count some of these product improvements as By NORMAN WALZER and LORI SUTTON price increases. The same issue arises with the MPI since municipalities now Comparing trends in municipal revenues and expenditures is deliver services using computer equipment, better telecommuni- part of an effective management approach used by many munici- cations, and improved techniques. Thus, the fact that municipal pal officials. Undertaking these comparisons requires information expenditures have not kept pace with inflation does not necessar- on how the prices of goods and services purchased by cities to pro- ily mean that services have decreased, especially for services vide public services have changed. Otherwise, during periods of where telecommunications and/or computers are major compo- even modest inflation, per capita increases in revenues or spend- nents of the delivery system. ing levels may seem like a growth in services when they reflect The Illinois Municipal Price Index shows that, in 2000, it cost only price increases. Trends in municipal expenditures and rev- $194.60 to purchase what $100.00 would have bought in 1982, a enues were described in recent issues of this Review and the price 94.6 percent increase in prices overall. While it is tempting to index presented in this article was used to show the changes in compare changes in the MPI with the CPI, such a comparison is constant dollars. not meaningful because the two indices were constructed to reflect Recognizing the need for information on price changes, the price changes for two entirely different collections of goods and Illinois Municipal League has supported the compilation of a price services. The CPI includes housing, food, travel, entertainment index for the types of goods and services purchased by Illinois and related items while the MPI includes wages/salaries of public municipal officials. That index has been continuously updated employees, vehicles, contracts for services and other purchases. since 1970 and, to our knowledge, represents the only continuous Since municipalities spend a majority of their budgets on index strictly for municipal purchases during this period. This services, it is more reasonable to compare the MPI with the serv- article updates the Illinois Municipal Price Index (MPI) for 2000. ices portion of the CPI. In fact, this comparison shows that the price increases associated with services in the private sector (CPI) Municipal Price Index Construction increased much more (205.6) than the MPI overall (194.6). The construction of the Municipal Price Index is relatively However, the MPI also includes some expenditures for non-labor straightforward. Price increases for an appropriate set of purchas- items so this is not a direct comparison of the wage increases in es is required first. It is important that these categories of purchas- the private sector and municipalities. es are relatively homogeneous so that the price increase informa- Nevertheless, the comparison does show the substantial dif- tion is meaningful for each group of purchases. ference in price increases for commodities (153.8) and services The price increases for the MPI are obtained from several (205.6) in the private sector. The relatively high proportion of sources including the detailed Producer Price Index and the municipal spending for services means that increases in personnel Consumer Price Index (CPI). Thus, the price increases for gaso- costs have a substantial impact on municipal budgets and, to the line, food away from home and/or other items are used to measure extent that departments vary in the proportion of budget devoted price changes for items purchased by Illinois cities. While these to personal services, the effects of wage increases on each depart- price changes are not specific to Illinois, they are the best informa- ment are different. tion available at the level of detail needed for this project. Since the index is an average for cities in Illinois, it is likely that nation- Departmental Price Indices al figures are reasonably appropriate. Price indices for 9 municipal departments have been com- The largest expenditures by municipalities are for personal piled (Table 2). Understanding the impact of these price increas- services. Information on wage and salary increases in the Illinois es on the entire city involves two considerations. First, the size of municipalities included in the MPI is obtained from an annual sur- the increases obviously determines the impact on that specific vey. The wage and salary data are collected by position so that department. Second, the size of the department within the overall separate price indices can be calculated for each municipal depart- city budget is equally important in determining the impact. ment. No estimate of the costs of employee benefits has been Smaller price increases in a large budget may have more impact included in these calculations because of the difficulty of estimat- than larger price increases in departments that represent relatively ing the cost changes for the various benefit categories. small portions of the overall municipal expenditure or revenue For the price index to meaningfully reflect price increases for package. purchases by Illinois municipalities, it is important that the price In understanding the size of the index, it is important to rec- increases be weighted by the relative importance of each expendi- ognize the base from which the index is constructed. For instance, ture category within the overall municipal expenditures. To wage increases in departments with employees with relatively low accomplish this weighting process, expenditures by the municipal- salaries, compared with other municipal employees, will appear as ities for various categories of goods and services based on an ear- higher percentage gains than in departments where municipal lier survey are included. employees were paid more at the start of the period. To some extent, this may be true with libraries that report relatively high Aggregate Municipal Price Index price increases. However, the costs of educational and audio-visu- A price index compares what a relatively constant package al materials have increased substantially during this period. In any (market basket) of goods and services would cost in two time peri- case, libraries are relatively small proportions of the overall city ods. Thus, for an average family and/or group of individuals, the budget and the impact of these price increases on the overall budg- CPI shows that it would have cost $178.30 in 2000 to purchase a et is not large. group of items that would have cost $100.00 in 1982 (Table 1). The price increases for health departments are also above the The implication is that unless the family had $178.30 to spend in average for other municipal departments. Some of these services 2000 for these items it had fewer resources available than in the are contracted with private agencies but, even when provided with previous period. In any price index comparison, however, the city personnel, municipal governments must be competitive with market basket of goods and services may have changed, especial- wages, salaries and/or benefits in the private sector to attract and ly during the current technology revolution.

Load more