Annual Financial Report: City of Lake Forest, Illinois

The City of Lake Forest, Illinois:

Popular Annual Financial Report

For the Fiscal Year Ended April 30, 2023

The City of Lake Forest was incorporated as a city under a charter granted by the Illinois State Legislature in 1861 and amended in 1869.

Lake Forest is a residential community of 19,367 people and has a land area of 17.18 square miles. It is situated on Lake Michigan, thirty miles north of downtown Chicago in Lake County. In its American Community Survey, 2017-2021 estimates, the U.S. Census Bureau reported the City had a median household income and median home value significantly higher than comparable figures for Lake County and the State of Illinois:

The Popular Annual Financial Report

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 Annual Comprehensive Financial Report (ACFR). 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 Annual Comprehensive 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, 2023, revenues from governmental activities totaled $71.9 million, increasing $5.9 million compared to FY22. The primary changes occurred in Property Taxes (up $1.0 million), Charges for Services (up $.3 million), Grants and Contributions (up $1.1 million), Sales Taxes (up $.5 million), Interest Revenue (up $3.7 million) and Real Estate Transfer Taxes (down $.5 million). Investment income increased due to rising interest rates. Real Estate Transfer Tax decreased due to declining housing market impacted by rising interest rates. Property tax revenue continues to be the City’s single largest revenue source, contributing $33.1 million (46.0%) 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 $46.9 million and represent 65.2% 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 2022 equalized assessed valuation increased 1.8% compared to the prior year and totaled $2,426,166,029. 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 3.1% over FY22 in property taxes was generated as a result of the City Council adopting a 2.5% increase in the levy and new growth. The City received $1.5 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 1.4%, the levies for debt service, Police and Fire Pensions and capital improvements combined exceeded the tax cap.

Investment income increased by $3.7 million, from $-.9 million to $2.8 million. The City’s strategy for investing did not change but the City was impacted by changing market conditions primarily due to increased interest rates.

Expenses Highlights:

For the fiscal year ended April 30, 2023, expenses for governmental activities totaled $62.0 million, an increase of $11.3 million (22.3%). The increase is due in large part to pension adjustments. Increases in personnel costs, which represent nearly 72.5% 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 FY23 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 decreased by $1.2 million (10.5%) primarily due to a decrease of charges for services in the Water and Sewerage Fund offset by increases in the Golf Course Fund and decreases in contributions of $.5 million in the Golf Course Fund.

Expenses Highlights:

The City’s business-type activity expenses increased by $1.1 million (11.4%) primarily due to increased operating expenses and pension adjustments 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.

FY23 Tax Levy Revenue by Purpose

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 23% of the average tax bill. The graph below represents the levied year of 2022, more information can be found on page 145 of our ACFR.

City Debt Update

The City had $44.3 million of general obligation bonds outstanding at April 30, 2023. Of this amount $29.1 million were payable from property taxes and the remainder were self-supporting. The City abates the property tax levies for these debt issues annually.

The City’s per capita debt ratio for all direct and overlapping debt with other governmental units was $4,657 and $3,866 if self-supporting debt is excluded.

The City operated as a home rule community for FY23. The City was granted home rule status via a referendum held on November 2, 2004. Under home rule authority, the City does not have a legal debt limit. For more detailed information on long-term debt activity, see the notes to the financial statements.

As of April 30, 2023, the City’s net pension liability is $68.1 million, an increase of $15.5 million compared to the $52.6 million balance as of April 30, 2022. Additional information regarding the net pension liability can be found in Note to Financial Statements 4. Starting on page 56 of the ACFR

As of April 30, 2023, the City’s OPEB liability is $1.8 million, a decrease of $.3 million compared to the $2.1 million balance as of April 30, 2022. Additional information regarding the OPEB liability can be found in Note to Financial Statements 4. Starting on page 56 of the ACFR.

Another major initiative to note: In February 2023, the City Council approved $16,431,870 for the Deerpath Park Athletic Field Improvement Project. The project to be funded through transfers from General Fund operating surplus, General Obligation Bond (GOB) issue and Parks and Public Land Fund.