Naperville’s midyear budget report shows the city’s economy continues to thrive in the post-COVID world with sales tax revenue up about 4%, but the stagnant housing market is resulting in a real estate transfer tax decline.
Ray Munch, the city’s deputy finance director, said Naperville’s economic outlook continues to be strong and he is seeing signs that inflation is improving.
“That said, we’ve seen some weakness in very specific revenues. But those are balanced out by other overperforming areas,” Munch said.
Consumer-driven revenues continued to increase, with sales tax income of $22.6 million up 4.4% compared to the same last year. Gas tax brought in $3.4 million, up 17.6%, and the city’s hotel/motel tax was $1.49 million, up 19% thanks to a resurging interest in post-COVID travel, he said.
However, real estate transfers are down 40% and building permits have declined 32% due to low property sales, high interest rates and fewer new homes built, Munch said.
“The weak real estate market is not unique to Naperville with high mortgage rates resulting in a weak supply and demand nationwide,” he said. “Locally we’ve seen impacts most notably in commercial sales, with far fewer sales than in years past.”
Some of the decline was expected, and revenue projections were lowered in those categories in the city’s 2023 budget.
“However, we’re still about 20% below those reduced expectations,” Munch said.
Revenue in the city’s three main budget categories — maintenance and operating, capital, and debt service and special funds — were ahead of expenses so far this year. Revenue stood at $236.1 million or 5.3% lower than projected in comparison to $207.6 in expenses, standing at 17.5% below expected.
The review of the city’s current economic picture coincides with the start of the 2024 budgeting process. The first of four budget workshops will be held in August, with the city council expected approve the new spending plan in December.
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