The 6,300 citizens of Round Lake Park, a working class village near the Wisconsin border in far northern Lake County, have been affected by the recent economic slump just like everyone else in Illinois. They've watched jobs evaporate at nearby Baxter International and Motorola. They've seen fuel prices and health care costs go up. Some have put off needed repairs on their homes until finances look better.
No surprise, their town is in the same fix. About 99 percent residential with historically scarce business development, Round Lake Park has been tightening its budgets for the past several years. It has combined its police department with nearby Hainesville's to save money, and it has frozen wages of the village staff. But now, because it doesn't have the $14 million required to upgrade its sanitary sewer system, the village is facing a potential environmental lawsuit by the state that could cost more than twice the village's entire annual budget.
In a rotten economy, this is the sort of thing that can drive a small town mayor to distraction. "We're so used to stretching dollars, we just stretch them a little further," says Mayor Ila Bauer, a retired teacher who used to preside over high school business education classes. But the possibility of a big lawsuit is something altogether different, Bauer says. "I really don't know what we'd do. I absolutely don't know."
If it's any consolation to Mayor Bauer, Round Lake Park isn't alone in its economic struggle. Municipalities of all sizes across Illinois are facing tough choices — and small towns are getting hit especially hard. The reasons are many: Those that aren't diversified economically get socked when a big employer shuts down. They have a smaller tax base, and their political leaders, loathe to raise taxes, find it hard to increase local revenue. And the state and federal dollars they receive have remained stagnant at best when inflation is considered.
"Very small municipalities just don't have the options that larger municipalities do," says Rebecca Hendrick, an associate professor at the University of Illinois at Chicago who studies the fiscal condition
of Chicago's suburbs.
Preliminary results from a survey by the Illinois Municipal League confirm the fiscal stress and belt-tightening going on in small — and even larger — municipalities. Earlier this year, the league
surveyed 441 of its members with populations of 2,500 and higher and received 267 responses. The data was still being tabulated in mid-October, but Joe Schatteman, research and information services coordinator, says about 85 percent of the towns reported having to take some measures to keep their most recent fiscal year budget in the black, either making cutbacks or finding additional revenue. Some held off buying a new police car, others postponed capital improvements or laid off city workers. Some chose to increase local sales taxes or utility taxes.
"They know that the economy was — or still is, depending on whom you talk to — not doing well," says Schatteman, who continues to analyze the data. "It almost seemed like it was really across the board."
Norman Walzer, an economics professor at Western Illinois University and director of the Illinois Institute for Rural Affairs, has been looking at these issues in downstate communities for the past three decades. He's seen many small towns boom as people working in larger areas trade a slightly longer commute for a cheaper home on a big piece of land.
The down side, however, is that when companies in those larger towns lay off workers, the small towns where they live can face real trouble.
Take Mitsubishi Motors, for example, which recently laid off 1,200 people at its plant in Normal. "Those are people who probably came in from an hour or more near Bloomington," Walzer says. The same goes for the small towns around Galesburg, where Maytag Corp. is laying off 1,000 people as it moves its refrigerator production to Mexico, and for the little towns around Sterling, where North-western Steel and Wire has closed down.
Last month, Walzer analyzed how much money municipalities across Illinois get from the state and federal governments, based on the most recent U.S. Census of Governments data, and the results are mixed. The data showed that state revenues to municipalities increased in dollar amounts from 1992 to 2002. But upon examination of a period that included a recession, 1997 to 2002, the spending power of those funds, after adjusting for inflation, shows an actual drop of 1.7 percent, from an average of $211.05 per person in 1997 to $207.41 per person in 2002. Per capita federal funding for municipalities, after inflation was considered, rose by 12.5 percent during the period from 1992 to 1997 — the economic boom years — but fell by 8 percent during 1997 to 2002, from an average of $35.96 to $33.09. Meanwhile, property tax receipts were down 7 percent on average between 1997 and 2002 when adjusted for inflation.
"During this last 10 years, in fact, the revenues available to the cities probably have been stagnant at best," Walzer says.
Medium-size towns have a better chance of rallying during a bad economic climate. In contrast, small towns can quickly see the businesses they do have evaporate. They may have only a part-time village staff that can't lasso the grant money and technical assistance they need to survive. "When you get a negative downturn or a negative spiral, it's really hard to reverse that," Walzer says. "One of the real difficulties with the really small towns is you don't have any staff."
The city of Knoxville, just southeast of Galesburg and about 38 miles northwest of Peoria, got hit by a huge punch this fall when Maytag began its latest layoffs of 1,000 workers on the heels of 600 jobs lost two years ago. The town of 3,100, with an estimated 1,575 people in its workforce, lost 99 Maytag jobs, or about 6.3 percent of its working population. And Butler Manufacturing, a Galesburg company that makes prefabricated metal buildings, has announced it will close its operations next year, putting more Knoxville residents out of work. That is on top of the generally poor economy nationwide and Knoxville's recent capital project to get water from Galesburg, for which it will be paying off nearly $400,000 in loans for the next 20 years.
"We really haven't felt that much yet [from the Maytag closing]. I don't know what's down the road," says Mayor Phil Myers, who served as an alderman beginning in 1993 before becoming mayor three years ago. Starting in the boom years of the early 1990s, Knoxville added a McDonald's, a Hardees, a gas station and a motel and generated a good bit of tax money. But the Maytag news stings. "It'll hurt our tax base, absolutely. We're still in the black, but we're going to have to tighten up a bit."
Despite the economic climate, Myers is upbeat about Knoxville's future. In some other towns, especially those with a long history of economic troubles, a few years of recession can knock them down. Like a person suffering psychological depression, an economic depression renders these towns unable to get up and turn themselves around.
The Illinois Institute for Rural Affairs, together with the state's Department of Commerce and Economic Opportunity, has offered help with small business and community development for a sliding-scale fee to nearly 90 non-metro communities, mainly towns with fewer than 25,000 residents but many with less than 10,000. The institute's MAPPING program for nonmetropolitan groups brings together political, business and community leaders in an effort to determine a long-term vision and create local solutions.
Often it works. Other times it doesn't. One community Walzer declined to name was once a prosperous town with a foundry and access to a coal mine. Its economy in decline, the town tried to do a MAPPING project. But no one wanted to work on it, and the idea ultimately died. The importance of strong local leadership and a common vision for the town shouldn't be underestimated, says Nancy Richman, who runs the program. "Communities that do well over time have somebody who's championing the cause," she says — and it's not just the political leaders but the business people, educators, clergy and activist citizens. "You have to have a sense of urgency. Change doesn't happen without a sense of urgency."
Some towns see their industrial base die but reinvent themselves as a bedroom community. "They go through stages," Walzer says. "What we have to do is catch them early enough in the cycle that we can help them ramp back up again."
The same forces hitting municipalities downstate are hurting some Chicago suburbs, too, even though they aren't being brought to their knees by one factory closing. Some suburbs, through a combination of low property values, population declines and management problems, started out poor before the recession and have seen their situation worsen, says Hendrick, who teaches public administration at the University of Illinois at Chicago.
Her research shows that up to 70 Chicago suburbs would face serious threats to their ability to provide basic public services if state-shared revenues, such as the income tax, the local use tax, the motor fuel tax and grants, were cut. Another 86 suburban communities would face difficult or painful choices. In 10 percent of Chicago's suburbs, state-shared revenues account for 30 percent or more of total revenues. If they're not home rule communities, these towns have fewer ways to raise revenue. And the smaller they are, the less likely they'll be able to do things such as cutting personnel to balance their books. "Those communities at the bottom of the baseline lists, they're so far in the hole. There's, in many cases, a history of poor management, poor politics. All of that has conspired against them," Hendrick says.
Other towns are trying to be proactive. Abingdon, a city of 3,600 people south of Galesburg that is losing 132 jobs from Maytag, has a fund balance, and its long-term debt is nearly paid off. Its $2 million operating budget contains very little "glitz," says Mayor Michael Brackett, who works as a computer programmer at Carl Sandburg College in Galesburg, where, coincidentally, many former Maytag workers are taking classes to find a new career. "We've been frugal over the years," Brackett says. "We're not doing great, but we're not doing bad." And Brackett is looking to the future. He recently attended a seminar on wind turbine systems and got a grant to study its feasibility in Abingdon. "When the state cuts back money and the economy is not that good and you can't raise taxes and Maytag closes down, you almost have to think outside the box and find alternate sources of revenue."
A little farther south, in the picturesque hamlet of Havana — population 3,500 — just east of the Illinois River about midway between Springfield and Peoria, city leaders saw a similar need to do something more. In 1996, Havana joined with Western Illinois' Institute for Rural Affairs and undertook a MAPPING process that produced four key areas of development: a 125-acre "shovel-ready" business park; a downtown facade project that included structural rehabilitation and beautification with brick streets and decorative streetlights; a program to retain and expand local small businesses; and a tourism effort to take advantage of nearby natural lands and the Illinois River.
A huge part of that was getting the whole community involved, says Terry Svob, Havana's economic development coordinator. "No one person can make these things happen if the community isn't behind them," Svob says. "I think the best is yet to come. I think we've laid the groundwork for things that are going to bear fruit for some time."
Meanwhile, in Round Lake Park, the threat of a state lawsuit hasn't stopped Mayor Bauer and other village leaders from trying to firm up their economic future. This fall, the village hopes to break ground on a large townhouse development for people 55 and older that will include retail shops. A new 9,200-square-foot retail center also is in the works. In addition, a new lumber yard is moving into town, and officials are planning on revitalizing the Main Street area, says Matt McCleary, economic development director.
"I know that we're definitely very strapped for dollars these days," says McCleary, who's looking forward to the tax dollars these new projects will bring. "The village will be infinitesimally better off and have a little bit of breathing room."
Stephanie Zimmermann is a reporter for the Chicago Sun-Times.
Illinois Issues, November 2004
