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Other Officials in Attendance
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James T. Hayner, Village Administrator; Patrick Muetz, Assistant to Administrator; David Ziegler, Community Development Director/Village Engineer; Tina Smigielski, Finance Director; Christine Palmieri, Director of Human Resources; Chris Velkover, Information Systems Director; Tom Rigwood, Director of Public Works; Fred Friedl, Fire Chief, John Kavanagh, Fire Captain
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Executive Overview
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Mr. Hayner said that this Budget Hearing would be an overview of the Fiscal Year 2009-2010 Proposed Budget. (The Budget is available for inspection at the Village Hall and is also posted on the Village website.) Mr. Hayner gave a PowerPoint presentation and then took questions. Presentation summarized as follows:
The current budget reflects the commitment to allocating resources in a responsible fashion. Village management’s primary fiscal goal is to preserve the highest possible municipal services while keeping taxes and charges at a minimum.
FY 2009/2010 Highlights:
- No new taxes or fees.
- Village management is proposing to decrease the number of employees.
- Capital improvements include resurfacing 2.7 miles of streets, the Village’s local share of the Route 132/41 interchange reconstruction project, potential of acquiring additional floodplain properties, and the replacement and repair of a select amount of Village snowplows.
Mission Statement:
- Engage our constituents in on going dialogue
- Preserve the Village’s financial well being and traditions
- Advance our services to keep Gurnee safe and welcoming.
Village Background and Economic Development:
- The Village’s population has grown exponentially, nearly 1500%, since 1960.
- The Village is nearing build-out capacity, with a current population estimated at 31,170
- The Village’s Equalized Assessed Valuation reached $1.3 billion with the 2007 tax year. This represents an 8.2% increase over the 2006 tax year, and a 2,242% increase since 1977. EAV is not only used to calculate property tax bills, it is also used as an indicator of a community’s economic growth and stability.
- The Village has not levied a corporate tax levy since 2000.
- The industrial and commercial growth has been relatively flat over the past five-years, with the majority of growth taking place in the residential category.
- From fiscal year 04/05 thru 06/07, large commercial projects such as Six Flags Hurricane Harbor, Center Point Business Park, and Key Lime Cove Water Resort accounted for spikes in development.
- Overall new construction value decreased 62% from fiscal year 06/07 to fiscal year 07/08.
- Gurnee’s annual average unemployment rate has closely followed the national average trend over the past decade.
Budget Process:
- Bottom-up process, meaning the Departments are responsible for preparing their budget requests, which are then reviewed by the Administrator before being presented to the Village Board.
- The Finance Director provides “not-to-exceed” targets to the Departments. This year they were directed to bring budgets in flat or lower than the prior year.
- The Departments are directed to prioritize their funding requests to maintain the highest level of services while putting the least possible burden on the Village’s residents.
- Once management has prepared a proposed budget, it is published and hearings are held.
Revenue Summary:
- The Village is projecting a total of $45.1 million in revenues for fiscal year 2009/2010, including inter-fund transfers.
- The funds receiving the largest revenues are the general fund, for $32 million, and the combined utility funds, for $6 million.
- Taxes make up the largest portion of the Village’s revenue sources, estimated at $22.6 million for the upcoming fiscal year, a 7% decrease compared to the 08/09 budget.
- Charges for services are mostly made up of water and sewer sales in the utility fund and are expected to follow the regional trend of lower usage volume for the upcoming year.
- Intergovernmental revenue includes the Village’s share of state income tax and personal property replacement tax. While we expect flat or declining growth in shared taxes, an overall increase is expected due to one-time Lake County reimbursements relative to large-scale road projects completed in prior years.
- Contributions reflect the General Fund transfer of fund balance to the Bond Fund, Police Pension Fund, and Fire Pension Fund to cover debt service and employer pension obligations.
- Interest income is expected to decline significantly due to historically low interest rates.
- Transfers, licenses, and fines are all expected to decrease slightly compared to the prior year due to economic factors.
- The Village is projecting a 6% decrease versus last year’s budget for General Fund revenues.
Expenditure Summary:
- The Village is projecting a total of $45.4 million in expenditures for fiscal year 2009/2010, including inter-fund transfers. This is an overall reduction of 9% compared to the prior year.
- The funds accounting for the largest expenditures are the general fund, for $32 million, and the combined utility funds, for $7 million.
- The Capital and Motor Fuel Tax Fund account for the non-water / sewer large-scale capital projects.
- The Bond and Special Service Area funds account for the repayment of long-term debt, while the Pension funds are established for the single-employer Police and Fire retirement benefits.
- Costs associated with personnel, including wages, benefits and training account for 59% of overall expenditures in the 2010 budget.
- The majority of employees are covered by union contracts which drive the budgeting process related to compensation increases as well as fringe benefits.
- The Village has three separate pension programs for full-time employees. The Illinois Municipal Retirement Pension Plan, or IMRF, covers civilian personnel. IMRF had substantial losses during 2008, estimated at -27%. While the calendar year employer contribution rate for 2009 was already at established at 10.36% of wages, it is assumed that the rates may double on January 1, 2010 to account for these market losses leading to a weighted average employer contribution rate of 15%. Lump sum employer contributions are made to the Police and Fire pension funds. These contributions will be $1 million for police, an 8.8% increase, and $895 thousand for fire, an 11% increase. This equates to approximately 22% of salary for fire employees and 20% for police employees.
- Workers compensation coverage is provided through the Municipal insurance Cooperative Agency pool, also known as “MICA” in combination with property, auto, and liability coverage. As renewal rates for May 1st are unknown, a 10% increase was assumed for budgeting purposes. Of the $1.3 million premium paid to MICA, 69% of that premium relates to Workers Compensation coverage.
- The General Fund accounts for the majority of the Village’s operations. The Departmental presentations next week will provide much more detail of the budget plan on a cost center level.
- The 09/10 budget proposal is 6%, or $1.9 million, lower than the 08/09 budget for a total of $32 million.
- Costs associated with personnel make-up 76% of the General Fund budget.
- In order to bring the General Fund budget in line with reduced revenues, reductions were made in personnel. In addition, non-essential programs were also cut.
- Professional Services, down 32%, Contractual spending, down 13%, and Capital, down 62%. The cost of fuel and street lighting are expected to increase the utility expenditures by 7%. The 21% jump in Commodities is almost entirely contributed to the increases resources dedicated to the Village's snow and ice removal plan. Repairs & Maintenance will be increased by 3% compared to the prior year due to reduced spending on Capital.
- The Village’s budgeted full-time equivalents are proposed at 212 for the 2010 fiscal year, down 14 ¾ positions. This is an overall decrease of 5% since the 2007 fiscal year, and a 6.5% decrease from the current fiscal year.
- The proposal includes the following changes: Eliminating the unfilled administrative intern position in Administration;
eliminating a vacant Building Inspector position, the full-time Code Enforcement Officer position that will be vacant due to a pending retirement, and changing one General Office Secretary position currently in Community Development to a floating position shared Village-wide; the Assistant Village Engineer position that will be vacant due to a pending promotion will be cut; In Police, three vacant police officer position will be cut and we are proposing swapping out one half-time vacant clerical support position for a half-time Communications Operation position; In Fire vacant firefighter positions will be cut, along with one Fire Inspector position, and one clerical support position in the Fire Department; two vacant Maintenance Worker positions are proposed to be cut in Public Works; off set by the addition of a Fleet Manager position, and the elimination of the Utility and Street Supervisor positions that will be vacated due to restructuring of the reporting structure.
Cash Reserve and Bond Rating:
- The Village’s policy calls for 35% of subsequent years’ expenditures, or the ability to pay about 3 months worth of expenditures from excess cash. Management anticipates having over $17 million on hand at the end of the current fiscal year, well in excess of our policy requirement of $12 million.
- The Village has no plans to issue new debt as part of the upcoming budget.
- Per the Village’s Debt Policy, we are able to have annual debt service up to 8.625% of EAV. Our current ratio is 0.77%.
- Not including the Police and Fire Pension Funds, the revenues and expenditures, including intern fund transfers, proposed for the 2010 fiscal year are projected to decrease the Village’s fund balance by $3 million, from $30 million to $27 million by fiscal year end.
- Most of the decline in fund balance is related to 911, Motor Fuel Tax, Capital, and Utility Surplus spending on capital projects without the need to issue bonds.
- Particular concern is the deficit in the Utility Operating fund. The Village’s water supplier is expected to increase water rates. As the Village has not increased the water rates it charges customers for several years, the current Utility Operating budget has a deficit of $700 thousand. Estimates show that the combined utility funds will have an overall decrease of unrestricted fund balance in excess of $1 million, not accounting for depreciation, by the end of the 2010 fiscal year.
Questions:
Regarding salt usage, Trustee Ohanian asked how much less salt we used in the last year, even though we paid more. Mr. Hayner stated we are significantly down to about 35-40% per incident and have cut back on the overall volume of salt ordered.
Regarding the rise in unemployment rate, Trustee Ohanian asked if we are taking that into account with the income tax revenue projections. Mr. Hayner stated the state numbers were taken into account when preparing the budget.
Regarding the water rate, Trustee Ohanian asked if the water rates would be raised at the completion of the water meter upgrade. Mr. Hayner stated “yes”, it is anticipated a rate increase will be presented to the Board. A rate increase was not accounted for in the budget. The rate increase would go a long way in addressing the deficit in that particular fund.
Regarding debt service, Trustee Ohanian asked if the lowering of rates could allow us to negotiate downward on any of our bond issues. Tina Smigielski, Finance Director, responded stating that outstanding bonds have already been refunded and you can only refund once without realizing IRS penalties.
Regarding debt service, Trustee Jacobs asked if we’d see any benefit to restructuring debt in the current fiscal year. Mr. Hayner responded stating our debt is reviewed every four months with our bond counsel and financial advisor. Currently, the answer is “no”, but we continue to monitor.
It was moved by Trustee Jacobs, seconded by Trustee Balmes to adjourn the meeting.
Voice Vote: ALL AYE: Motion Carried.
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