The Naperville City Council has agreed to cover Naper Settlement’s $1 million year-end deficit that accumulated during the pandemic.
The historical museum needed the accounting shift from the city’s general fund to balance the settlement’s budget and close out 2021 before the city goes through its annual formal audit. The budget amendment approved by the council this week will increase the city’s 2021 annual budget from $502 million to $503 million.
Councilwoman Theresa Sullivan asked settlement officials what controls are in place to ensure the budget is adhered to in the future and the council doesn’t find itself needing to resolve a huge deficit again.
“Ultimately it’s (the City Council) who’s accountable to make sure that what the budget says and what is spent is actually about where we ended up,” Sullivan said. “I just haven’t heard anyone yet say we should have done anything differently.”
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Rena Tamayo-Calabrese, CEO and president of Naper Settlement, said every penny in property tax revenue the museum receives goes through the same process and function as any other city department. The financials are reviewed by Naperville Heritage Society and the Naperville Settlement Museum Board, and her staff is in constant communication with the city’s finance department, she said.
Tamayo-Calabrese said the situation was not because of mismanagement or staff not paying attention to the numbers.
“As a matter of fact, it is because people have been paying attention and because we have been discussing it for years and we have been looking at what is really truly the best way to move forward,” Tamayo-Calabrese said.
Mayor Steve Chirico said to be fair, the settlement was on budget on the expense side. “Clearly the revenue side was where there was a shortfall,” he said.
Like with the city, Chirico said, there was a conscious decision to preserve staffing and reinvest employees’ time into new technologies and programs to try to bridge the gap of people not visiting the museum in person.
Questions were raised by Councilman Ian Holzhauer on whether federal pandemic relief could and should be applied to cover the settlement’s deficit, since the loss was related to COVID-19.
City Finance Director Rachel Mayer said the council could tap funds provided by the American Rescue Plan Act, but she suggests the city focus the federal money on projects that are more transformative.
The city has money available in the general fund because revenues outpaced expenditures by $10 million, Mayer said.
Naper Settlement got into its predicament, she said, after a decision was made in 2019 to draw down a fund balance the settlement fund was carrying.
When the pandemic hit and the museum campus was forced by the state to close, revenues collected from admissions, programming and rentals dried up.
“In 2018 and 2019, the settlement ran at a positive to about $100,000,” Mayer said. “Things got out of whack right when we made the change to draw down that fund balance.”
The more than $1.14 million the museum had in reserve in 2016 was siphoned away during the pandemic so that by the end of 2020, the settlement had a negative fund balance of $192,000, Mayer said.
Because the museum opted to retain staffing levels during 2021, the deficit grew to nearly $1 million, she said.
The council reacted during its 2022 budget process by raising Naper Settlement’s portion of the property tax levy by 40%, which Mayer said is expected to adequately fund operations moving forward.
The $1 million will get the settlement back on track. “We do believe this is a one off,” Mayer said.