Minutes of the Budget Hearing of the Gurnee Village Board - March 4, 2013

 

MINUTES OF BUDGET HEARING #1

OF THE GURNEE VILLAGE BOARD

 

GURNEE VILLAGE HALL

MARCH 4, 2013

 

Call to Order

In Mayor Kovarik’s absence, Village Administrator Mr. Muetz called the meeting to order at 6:31 p.m.

 

Other Officials in Attendance

Patrick Muetz, Village Administrator; David Ziegler, Assistant Village Administrator/Community Development Director; Scott Drabicki, Village Engineer; Erik Jensen, Management Analyst; Diane Lembesis, Finance Director; Christine Palmieri, Director of Human Resources; Chris Velkover, Information Systems Director; Tom Rigwood, Director of Public Works; Fred Friedl, Fire Chief

 

Roll Call

PRESENT:       6- Garner, Balmes, Morris, Schwarz, Ross, Park

ABSENT:         0-  None

 

 Mr. Muetz asked the Board for a recommendation for a President Pro-tem to lead the meeting. 

It was moved by Trustee Ross, seconded by Trustee Schwarz to have Trustee Balmes lead the meeting.

Roll call,

AYE:                5- Garner, Morris, Schwarz, Ross, Park

NAY:                0- None

ABSENT:          0- None

Motion Carried.

 

Executive Overview

 

 

Mr. Muetz said that this Budget Hearing would be an overview of the Fiscal Year 2013-2014 Proposed Budget.  He stated the Budget is available for inspection at the Village Hall and is also posted on the Village website.  Mr. Muetz gave a PowerPoint presentation and then took questions.  Presentation summarized as follows:

  Introduction

  • Fiscal Year 13/14 budget reflects the allocation of resources to allow staff to execute essential programs and services.
  • Our primary financial goal is to provide the highest possible level of service while keeping taxes and charges to a minimum.

  FY 13/14 Budget Highlights

  • Balanced Budget*
  • No new taxes / no increase in tax rates.
  • Enhancements to Public Safety.
  • Strategic investments in Capital Infrastructure.
  • Increased General Fund cash reserve by $875,000.

Organizational Chart

The Village President, Village Clerk and six-member Board of Trustees are elected for overlapping four-year terms.

The Board appoints the Village Treasurer, Village Administrator and other key department heads.

The Village Administrator oversees day-to-day operations of the Village.

The services we the Village provides are divided among five major areas, including Administration, Community Development, Police, Fire and Public Works.

Village’s Mission

  • Engage our residents, business, and visitors in an ongoing dialogue about their ideas, needs, and concerns.
  • Preserve our neighborhoods, open spaces, financial well-being, and community traditions, in line with our values.
  • Advance our services in response to community needs, encourage responsible development, and continuously foster a safe and welcoming environment.

 Total Revenues by Fund

The Village is projecting a total of $53.5 million in revenues for fiscal year 13/14.

The funds receiving the largest revenues are the General Fund at $35.8 million and the Utility Operating Fund at $8.3 million.

The Bond Fund and a large portion of the Police and Fire Pension Funds receive their revenues as inter-fund transfers from the General Fund.

Total Revenues by Category

  • Taxes comprise 46.7% of budgeted revenues.  Taxes consist of sales, amusement, hotel, resort, food & beverage, use, telecommunications, road & bridge, cable, alarm and foreign fire insurance taxes. 
  • Charges for Services account for 20.2% of budgeted revenues.  In the Utility fund, “Charges for Services” primarily consist of water and sewer sales.  In the General fund, “Charges for Services” primarily consist of ambulance rescue fees, tower/antenna leases, and the reimbursement received for the school resource officers.
  • Intergovernmental Revenues comprise 12.6% of budgeted revenues. This category is found mostly in the General Fund and consists of the Village’s portion of State income taxes, personal property replacement taxes and payments from the Warren-Waukegan Fire Protection District.
  • Contributions are 5.9% of budgeted revenues.  The major component of this category is the Village and employee contributions to the Police and Fire Pension Funds.
  • Other Income (or Transfers & Proceeds) is 5.7% of budgeted revenues.  Transfers are the method the Village uses to move money between funds.  For example, the General and Utility Funds transfer money to the Bond Fund to pay for debt service.  Proceeds consist of insurance settlements and may include bond proceeds in the year when debt is issued.
  • Investment Income is 3.8%. Investment Income is generated from investing the Village’s idle cash balances in securities that allow for the highest return possible without sacrificing safety.  This revenue is mainly located in the Police and Fire Pension Funds.
  • Fines are 3.5% of budgeted revenues. Fines and Forfeitures are generated through items such as parking fines, traffic tickets, alarm fines, liquor license violations and red light camera violations.  
  • Licenses & Permits account for 1.6% of budgeted revenues.  The three major components of licenses and permits are building permits, business licenses and liquor licenses.

General Fund Revenues

Staff is projecting FY 13/14 General Fund revenues to be $1.1 million greater than the previous fiscal year.  The biggest increases are in the Tax, Intergovernmental, Charges for Services and Fines Categories.

 Revenue Categories Budgeted to Increase:

  • Tax revenues are projected to increase 2% or $490 thousand – Sales Tax accounts for the majority of this increase.
  • Intergovernmental revenues are projected to increase 7% or $392 thousand – Income Tax is majority of this.
  • Charges for Service are projected to increase 11% or $225 thousand, which is a result of the 2 new SROs and transfer rental income from the Utility Fund to the General Fund; and
  • Fines and Forfeitures are projected to increase 7% or $122 thousand, mainly due to the Washington Street red light camera approach.

 Revenue Categories Budgeted to Decrease:

  • License & Permit revenue - due to a lack of “known” building permit projects.
  • Interest income due to low interest rates.
  • Contributions and sale of fixed assets.

 Taxes account for 70% of General Fund revenues.  This includes sales tax, amusement tax, hotel tax, telecommunications tax and food & beverage tax. 

 Village’s sales tax receipts are a combination of the 1% state rate and an additional 0.5% home rule sales tax.  

Sales Tax

  • Since FY 10/11, Sales Tax revenue has been slowly increasing as the economy continues to improve. 
  • The FY 12/13 forecast is $16.25 million, and the FY 13/14 budget is $16.58 million. 
  • The FY 13/14 budget is $325 thousand or 2% more than the FY 12/13 forecast. 
  • Sales Tax revenue has been up every month this fiscal year compared to FY 12/13.  Right now the Village is $471k ahead of where it was last year.  We should have the December payment in the next week or so.

 Amusement Tax

  • The Village imposes a 3% tax on net amusement receipts. Although amusement taxes generated by Six Flags are by far the largest component of this category, there are also amusement taxes generated by the movie theatre, ice rink and other miscellaneous entities.
  • FY 13/14 revenue is budgeted at $2.026 million, which is $93 thousand higher than the FY 12/13 budget but 5% lower than the FY 12/13 forecasted year end estimate.
  • Six Flags had a great year with the weather cooperating and the new “X-Flight” rollercoaster being unveiled.  We believe the FY 13/14 budget is conservative.

 Hotel/Resort Tax

  • The Village has a 5% hotel tax and a 2% resort tax at Keylime Cove. 
  • We have 11 hotels that this tax applies to.  Per a contractual agreement, the entire resort tax is rebated back to Key Lime Cove.  This was a 20 year agreement that expires in 2028 or at $22 million, whatever is reached first.
  • The FY 13/14 projection for Hotel/Resort tax is $1.527 million. 
  • This consists of $1.275 million of hotel taxes and $252 thousand for resort taxes. 
  • The FY 13/14 budget is the same as FY 12/13 forecast.  The FY 13/14 budget for hotel tax revenue is the same as the FY 12/13 budget.  We lowered resort tax revenue by $23,500 based on historic trends. 

Food & Beverage Tax

  • The Food and Beverage tax is 1%.  This is a tax on food and alcoholic beverages prepared for immediate consumption, as well as packaged liquor.
  • FY 13/14 budgeted revenue is $1.692 million.
  • This is 4% greater than FY 12/13 budget and 1% or $17 thousand more than FY 12/13 forecast.  Eleven new restaurants opened in the Village in FY 12/13.

 Income Tax

  • FY 13/14 projected income tax receipts are $2.79 million. Income tax receipts are distributed by the State based on population. Municipalities receive 1/10 of income tax receipts.
  • $2.79 million equates to $89.25 per capita and is 2% more than the FY 12/13 forecast. 
  • For accounting purposes, Income taxes are not recorded under the “Tax” category, but under the “Intergovernmental” category.

 Telecommunications Tax

  • Staff projects $1.3 million in receipts in FY 13/14.  Telecommunications tax receipts are trending downward because many consumers are eliminating land lines in favor of cell phones and Internet providers.  The FY 13/14 budget is $100 thousand less than the FY 12/13 budget.

Total Expenditures by Fund

The Village is projecting $55.97 million in expenditures for FY 13/14, including inter-fund transfers.  This is a decrease of 5%, or $2.99 million, compared to the prior fiscal year. 

This is a result of the Mall Redevelopment Fund expenditures being decreased as the project moves forward.  The 911 Fund also decreased $200,000 as the Mobile Data Computer replacement project nears completion.  Finally, the Motor Fuel Tax Fund was decreased $80,000.

The two funds with the highest expenditures are the General Fund at $34.9 million and the Utility Operating Fund at $7.3 million.  Together, these two funds account for 76% of the total budget.

The Capital Funds (Capital Improvement & Mall Redevelopment) represent 11% of the budget, followed by the Special Revenue Funds composing 5% (Special Revenue includes MFT), Fiduciary and Debt Service funds each representing 4% of the budget, and lastly the other proprietary funds composing 2% of the budget.

The bulk of operations can be found in the General Fund and that the FY 13/14 proposed budget places a heavy emphasis on capital improvements.

Total Expenditures by Category

When viewed from a categorical perspective:

  • Salaries & Wages account for 38% of expenditures across all Village Funds. 
  • Benefits represent 16% of the budget.  This is mainly pension obligations, medical and dental insurance and workers comp insurance.

 The Village has two separate medical insurance programs for employees.

  • Local 150 employees receive health insurance coverage through their union membership.  The Village pays the premium cost.
  •  The rest of the Village’s full-time employees participate in the Village’s self-insurance program. The self-funded plan is expected to have a 5% increase on the date of renewal (January 1, 2014, this equates to an annualized increase of 1.7%).  Dental rates are budgeted to increase 3% on the renewal date (January 1, 2014, this equates to an annualized increase of 1%).

The Village has three separate pension programs for full-time employees.

  • IMRF covers civilian personnel. The 2013 IMRF employer contribution rate increased .55 from the 2012 rate.  The 2013 rate is 12.47% compared to 11.92% in 2012. 
  • Lump sum employer contributions are made to the Police and Fire pension funds annually each December. The Village funds these contributions from operating revenue in lieu of a property tax levy.

Other/Transfers accounts for 11% of the budget.  This is mainly our debt service payments, mall redevelopment agreement expenses and tax sharing agreements.

Capital includes infrastructure and equipment replacement and accounts for 10% of the total expenditures.

Commodities represent 8.5% of the budget and include tangible items purchased in connection to our services including water purchased for resale to utility customers from the Central Lake County Joint Action Water Agency (74% of the cost), the materials used in snow and ice control and office supplies among others.

Repairs and Maintenance include vehicles, technology, and infrastructure maintenance.  This category accounts for 8.3% of total expenditures.

Contractual expenditures are 3.8% of the budget and include professional services and outsourced functions.

The remaining categories total 4.1% of the budget.

General Fund Expenditures

The FY 13/14 General Fund Budget is projected to increase 1.1%, or $383,000, over FY 12/13.

Salaries and Benefits represent 77% of General Fund Expenses.  Three-quarters of Village employees are covered by one of five collective bargaining agreements.  Four of five contracts were renegotiated in FY 12/13.  We were able to work in selected cost saving measures, such as the elimination of longevity benefits and lower starting pay for newly hired employees into the contracts. 

Notable increases to General Fund FY 13/14 expenses include:

  • Salary adjustments based on union contracts (CPI & Market adjustment).  Range from 1.52% for Police to 3.47% for Communications.
  • $85,000 for contractual help to assist the Information Systems Division,
  •  $45,000 for Camiros, Inc. to work on the Zoning Ordinance update,
  • $44,000 for required promotional and eligibility testing for the Police and Fire Departments,
  • $62,000 Repairs and Maintenance – aging fleet, Police building
  • $1,197,350 for principal and interest for Series 2011.

 Notable decreases to General Fund FY 13/14 expenses include:

  • Reduced salary and benefits for new employees.
  • $20,000 by discontinuing NIPSTA membership.  Staff will continue to evaluate all memberships to professional organizations and subscriptions.
  • $79,000 legal fees.  The Police Department wants to bring more cases to the Administrative Hearing process rather than sending them to traffic court.  Also able to reduce labor attorney fees.
  • $25,000 fuel costs.
  • $91,800 Ice Control Costs – due to technology and calibration improvements that have increased efficiency, combined with a mild winter that has resulted in surplus of material on hand.
  • $1,5000,000 – Gurnee Mills Mall Sales Tax Rebate – no longer applicable
  • Vehicle reduction.  We continually assess the size of the municipal fleet.  In FY 12/13, one vehicle was eliminated (IS Mobile) and in FY 13/14, two vehicles will be eliminated (one unmarked squad and one skid steer). Reducing the number of vehicles helps reduce maintenance, fuel and liability expenses.

General Fund Expenditures

When we compare FY 13/14 to FY 12/13, the highest increasing categories are:

  • Personnel Expense – 7% (due to $44,000 police and fire eligibility and  promotional testing)
  • Repairs & Maintenance – 5% (due to the aging fleet & equipment and Police increasing building maintenance budget)
  • Salaries & Wages – 4% (includes 2 new hires, promotions of 2 officers to Police Sgt. and general salary adjustments)
  • Employee Benefits – 2% (employee insurance coverage including workers compensation, as well as Pension obligations)
  • Contractual Services – 2%  (IS temporary employment)
  • The Professional Services, Insurance, Commodities, Utilities and Capital categories have decreased compared to FY 12/13.

The FY 13/14 Proposed Budget is 3.2%, or $1.085 million, higher than FY 10/11 Actual.  Put another way, General Fund expenses have increased an average of 1% per year over the past three years. 

FY 13/14 Expenditures – Capital & Special Revenue Funds

Capital Funds

  • Capital Fund - $2.885 Million
  • Mall Redevelopment - $2.535 Million

Special Revenue Funds

  • Motor Fuel Tax Fund - $1.785 Million
  • Emergency 911 - $439 Thousand
  • Impact - $550 Thousand

FY 13/14 Expenditures –Proprietary & Fiduciary Funds

Proprietary Funds

  • Utility & Utility Capital - $8.145 Million
  • Golf - $100 Thousand

Fiduciary Funds

  • Police Pension - $1.253 Million
  • Fire Pension - $805 Thousand
  • SSA #2 - $42 Thousand

Personnel

The Village’s budgeted full-time equivalents are proposed at 209.70 for the 13/14 fiscal year, an increase of 1.95 compared to the current fiscal year. Since FY 08/09, headcount has been reduced by 8% or 17.05 FTE from 226.75.

The 1.95 increase comes from the following changes:

  1.  Addition of 2 School Resource Officers.
  1.  Addition of .20 FTE for a Community Development Dept. Summer Intern
  1.  Reduction of .25 FTE in the Fire Department Intern

70% of Personnel are dedicated to Public Safety, 16% to Public Works, 8% to Community Development and 6% to Administration.

Debt Service

Next year, the Village will pay $2,491,363 in debt service. 

Next year’s payment is allocated as follows:

  •  $414 thousand for Series 2012 (Public Works Building),
  •  $838 thousand for Series 2009 (Police Facility)
  •  $1.197 million for Series 2011 (Macy’s) and
  •  $41 thousand for SSA#2 (Sewer service for Hickory Haven).  SSA #2 is a pass-through item.

FY 13/14 is the first year we will pay back the principal on Series 2011; this bond issue took the place of the sales tax rebate agreement. 

Interest payments for Series 2004, now Series 2012, were reduced by $36 thousand due to the refinancing last year.

Assuming no new debt is issued, we will be debt free by December 31, 2022. 

Total bonded debt is $15 million plus $265 thousand for the Special Service area.

Per the Village’s Debt Policy, we are able to have annual debt service up to 8.625% of EAV.  Our ratio of Debt to EAV is 1.20% as of April 30, 2012.

 The Village’s bond rating is evidence of financial health. Series 2012 was rate AA+ by Standard & Poor’s. 

Projected Fund Balance

As a result of our General Fund Balance Policy, the Village must maintain an unreserved balance of approximately $12.85 million. The projected May 1, 2013 General Fund balance of $22.9 million is 62% of FY 13/14 expenditures.

The Village’s cash position is expected to decrease by $2.4 million in FY 13/14. Excluding police and fire pension funds, the combined fund balance for Village funds are projected at $41.5 million at April 30, 2014. 

This is the result of a purposeful spend-down of unrestricted fund balance in the Emergency 911, Motor Fuel Tax, Impact, Capital, Mall Redevelopment, and Golf Funds. 

  • The largest contributor to the spend down is the Capital Fund – In the Capital Fund we will spend $2.2 million in reserves to complete needed infrastructure improvements and equipment purchases.  Projected April 30, 2014 Capital Fund balance is $1.9 million of which $1.3 million is assigned to the Cemetery Road project. 
  •  E911 - $37,350 for Computer Aided Dispatch (CAD) enhancements, $47,500 for a rehab of the land mobile radio equipment, and $20,000 to replace the mobile data equipment
  • MFT – $1 million for Street Resurfacing and $740 thousand re-budget of the Cemetery Road widening project.
  • Impact – The Village will transfer $550 thousand from the Impact Fund to the Capital Fund; $225 thousand will be to purchase an ambulance, $275 thousand for detention improvements, and $50 thousand for sidewalk repair.
  • Mall Redevelopment - $2.5 million from bond proceeds
  • Golf – The Village will use Golf Fund reserves for non-payroll related expenses.

Questions:

Trustee Ross asked if revenue has been adjusted for the Holiday Inn  coming back online.

Mr. Muetz said it is currently flat compared to FY 12/13, but that staff would take another look.

Trustee Balmes asked if the Village is assured of the Income Tax money.

Ms. Lembesis said the State has got better but they are still four months behind.

It was moved by Trustee Park, seconded by Trustee Garner to adjourn the meeting.

Voice Vote:      ALL AYE:         Motion Carried.

 

Adjournment

Trustee Balmes adjourned the meeting at 7:13 p.m.

 

 

 

Andrew Harris,

Village Clerk

 

 

 

 

 

 

 

 

 

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