City of Lake Forest:

Popular Annual Financial Report

For the Fiscal Year Ended April 30, 2021

What Is a Popular Annual Financial Report (PAFR)?

A Popular Annual Financial Report, or (PAFR), is a document intended to convey the financial results of the City’s operations to those stakeholders of the City that do not necessarily have a background in public finance. The document, among other things, is derived from the City's Comprehensive Annual Financial Report. The PAFR uses graphics and other visuals to augment the financial message and should not be overwhelmingly technical. The PAFR below contains the City's Governmental and Business-Type Activities and does not include the City's component unit, the Lake Forest Public Library.

The City's Comprehensive Annual Financial Report is available by Clicking Here.

Governmental Activities

The Governmental Activities reflect the City’s basic services, including highways and streets, sanitation, culture and recreation, police, fire and general government. Property taxes, sales tax, income taxes and local utility taxes finance the majority of these services.

Revenue Highlights:

For the fiscal year ended April 30, 2021, revenues from governmental activities totaled $61.9 million, increasing $4.9 million compared to FY20. The primary changes occurred in Property Taxes (up $1.8 million), Real Estate Transfer Tax (up $1.4 million) Charges for Services (down $.9 million), Operating Grants and Contributions (down $.4 million), Sales Taxes (down $.3 million), Income Taxes (up $.6 million) Interest Revenue (up $1.9 million) and coronavirus relief funds (up $.5 million). The decrease in Charges for Services was largely due to the cancellation of Recreation programs due to COVID-19. Sales Taxes decrease was due primarily to the pandemic’s effect on business operations. Real Estate Transfer Tax increased due to a record year in home sales. Investment income increased due to return on investments. Property tax revenue continues to be the City’s single largest revenue source, contributing $30.4 million (49%) of governmental activities revenue.

Property tax revenues combined with sales tax, the local utility tax, shared state income tax and real estate transfer tax revenues total $41.9 million and represent 68% of the total governmental activities revenue.

The real estate transfer tax became effective July 5, 2006 with voter approval via referendum. The tax is imposed upon buyers of any residential or commercial real estate at a rate of $4.00 per $1,000 of value. The revenue is used strictly to improve the City’s infrastructure.

The City’s 2020 equalized assessed valuation decreased 2.6% compared to the prior year and totaled $2,396,662,125. Although the City became a home rule municipality in November 2004, the City has historically self-imposed the Illinois Property Tax Extension Limitation Laws (PTELL), otherwise known as the tax cap, to the extent possible. The increase of approximately 6.3% over FY20 in property taxes was generated as a result of the City Council adopting a 4.64% increase in the levy and new growth. The City received $.8 million from the Laurel/Western Redevelopment TIF District, which are not included in the City Council approved tax levy. While the tax cap applicable to this levy was 1.9%, the levies for debt service and capital improvements combined exceeded the tax cap.

Investment income increased by $1.9 million, from $1.7 million to $3.6 million. The City’s strategy for investing did not change but the City benefitted from improved market conditions primarily in the Cemetery Fund.

Expenses Highlights

For the fiscal year ended April 30, 2021, expenses for governmental activities totaled $50.0 million, a decrease of $8.7 million (17.4 %). The decrease is due in large part to pension adjustments and cancellation of Recreation programs due to the pandemic. Increases in personnel costs, which represent nearly 70% of the General Fund operating costs, continue to outpace revenue growth. With high demand for skilled employees in both the public and private sectors in this region, it is important that the City provide competitive compensation levels for our employees. The FY21 expenses included funding for the City’s performance based employee compensation package plus a 2.5% general salary adjustment.

Business-Type Activities

The Business-type Activities reflect private sector type operations (Water and Sewer, Golf) where the fee for service is intended to cover all the costs of operation, including depreciation. Business-Type activities do not receive subsidies from general property taxes.

Revenue Highlights:

Total revenue for the business-type activities increased by $1.3 million (13.7%) primarily due to an increase of charges for services in the Water and Sewerage Fund and Golf Course Fund, offset by a decrease in investment income.

Expenses Highlights

The City’s business-type activity expenses increased by $.4 million (4.0 %) primarily due to increased operating expenses in the Water and Sewerage Fund.

Annual Tax Levy Allocation

Property Tax Revenue accounts for more than (50%) of the City's General Fund revenue. The City is a home-rule municipality and may impose any type of property tax levy without a rate limitation, except where specifically prohibited by State Statute. This rate is imposed equally upon all taxable properties based on the equalized assessed valuation (EAV). The County is required by Statute to collect real estate taxes on behalf of the City. The collection rate for this revenue source is nearly 100%, making it a reliable, stable and predictable revenue source. The graph below demonstrates the allocation of property tax dollars to specific purposes.

Where do my Property Taxes go?

The State of Illinois has more than 6,900 units of local government, the highest by far of any state. You can see a breakdown of the units of government applicable to you on your property tax bill. The graph below shows the allocation of property tax on a typical Lake Forest home. The City receives approximately 22% of the average tax bill.

City Debt Update

Debt Refinancing Saves $1.6 Million

The City strategically uses debt financing for long-term capital needs. As of April 30, 2021, the City had $42.0 million in outstanding long-term obligations scheduled to be paid over the next sixteen (16) years. In August 2021, the City issued $7.6 million in bonds to refinance existing obligations and achieve a lower interest rate. The refinancing resulted in a savings of $1.6 million.

Moody’s Investors Service has assigned a “Aaa” rating on the City’s bond obligations, which is the highest rating possible, signaling confidence in the City’s financial management and increasing the attractiveness of the City’s bonds to investors. This translates into cost savings for Lake Forest taxpayers.

Mayor George Pandaleon noted that Moody’s credit opinion and results of the bond sale “emphasize the high degree of confidence with which external objective parties view the City’s management of its finances. Lake Forest taxpayers can be assured that the City’s approach to funding its public safety pension obligations and its proactive measures to increase fund balance reserves in an effort to insulate the community from potential impact of actions by the State of Illinois are highly regarded in the municipal finance industry.”

Questions may be directed to Finance Director Elizabeth Holleb at [email protected]

** Click Here to view the City's Budget in Brief Story

Pictures provided by local artist Mark McMahon