5 Year Strategic Plan + 5 Year Budget Plan = ?

The Strategic Plan and the Budget Plan give a somewhat muddled snapshot of what taxpayers can expect in the near future. It isn’t pretty.

I need a picture of a bigger pile of money…

5 Year Strategic Plan v 2008

5 Year Strategic Plan v 2007

5 Year Budget Plan

When you read through both SP’s, they are basically a template with much the same information on both. That’s probably good; radical changes of direction or goals generally have negative connotations.

Top and High Priority items have changed and shuffled a bit, and the Village Civic Center has moved to the top of the list for Highest Priorities. There’s also now a 63rd Street Corridor Plan as a High Priority. The 75th Street Corridor Plan has fallen off the list.

There is also now, listed as a major project for this coming year, a SCADA System: that’s a new one. SCADA normally stands for Supervisory Control And Data Acquisition. It remains to be seen what this will entail, or if it’s part or all of the new software package the village has been migrating to over the last few years, or if it’s part of the 700mHz interoperable radio system.

When residents input their thoughts last year and this year, the rough consensus was:

  • Keep our taxes low.
  • Keep on stormwater.
  • Find a grocery store for downtown.

Good luck on #3. Rents DT have outstripped what grocers will pay right now. There was also support for a public pool on several group responses, as well as tighter development controls relating to stormwater, and better protection of trees, both public and private.

Where’s the cash crunch?

The 5 Year Budget Plan has the bad news for taxpayers.

As reported here a couple months ago, our sales tax receipts (the largest revenue contributor) have been dropping this year. Bolingbrook and Lombard’s have increased. Both built/renovated significant retail centers. DG landlords have done little if any upgrading to retail capabilities. Old and maybe tired is being overtaken by fresh and new. No surprises there.

The Village’s Management Team (Village Manager’s Office and Department Directors) identified ten areas that may impact our future financial condition:

  • Infrastructure
  • Personnel Expenses
  • Retail Sector Performance
  • Risk Management Fund
  • Transportation Fund
  • Post-Employment Benefits
  • Maintenance of the Urban Forest
  • Village Fleet
  • Electricity Costs
  • Interoperable Radio Systems

In an unusually self-aware section, the report delves into village employee costs and paints a bluntly realistic picture of the situation (emphasis mine):

The Village currently employs approximately 375 full-time equivalent employees. Personnel expenses include salaries, overtime, pensions, medical insurance and government-mandated expenses. These costs are increasing annually at approximately 3.5 percent. This rate of increase exceeds the growth rate of most of the Village’s revenue sources.
Personnel expenses account for approximately 70 percent of General Fund expenditures. Salary related expenses increase annually due to general market conditions and the Village’s salary obligations included in the Village’s two collective bargaining agreements.

Year Total Personnel Expenses

FY05 $ 30,201,222
FY06 $ 31,089,242
FY06 stub $ 22,958,152
FY07 $ 33,490,481
FY08 budget $ 33,038,614
FY08 est. $ 33,800,000
FY09 $ 34,983,000
FY10 $ 36,207,405
FY11 $ 37,474,664
FY12 $ 38,786,277
FY13 $ 40,143,797

The shuttle buses receive similarly blunt treatment. Having ignored proper accounting and funding for several years, and amassing a $1.8 million accounting deficit (along with a couple auditor warnings that it could not continue), the buses continue to look like a red line on the budget. Even with new cheaper to run buses, even with a dedicated one cent gas tax, the deficit will stay large and be the responsibility of the general budget, giving more credence (and ammo) to a growing chorus who have asked the village to cease independent operation of the commuter shuttle, and turn the responsibility over, somehow, to PACE.

GASB45 will also bite the village’s fiscal requirements in the behind. Current Budget Director Judy Buttney brought this up as a budget impacting issue recently. I had brought it up at an October 2006 Coffee with the Council, and was assured by then VM Pavlicek that OPEB (other post employment benefit) provisions were already being addressed by the village and that my concerns were understandable but not valid. Turns out she was wrong and my concerns were valid, and now shared by Buttney. Another fiscal liability without a corresponding source to pay for it (emphasis are mine):

Though GASB 45 requires reporting of OPEB expense and liability, it does not require the Village to fund the liability. In the long run, however, if the liability is funded at the current pay-as-you-go levels, the Village will have an ever increasing balance sheet liability. This could indicate a lack of fiscal soundness, which could affect future bond ratings.

The Village hired an actuary to calculate the GASB 45 expense and unfunded liability. Per the actuarial calculation, the annual expense for the Village is $3.0 million. The Unfunded Liability is $30.0 million.

So DG has an actual annual expense that starts at $3 million this year and grows larger each year. We currently pay in $250,000. Starting with a clean sheet in 2008, at this rate DG will amass $20 million in unfunded liabilities within 5 years, which will directly and negatively impact our debt rating, making our costs of borrowing higher. this is a big problem.

Despite the fact we already pay for all parkway plantings, the Plan opens up the possibility of additional charges for parkway trees. If this happens, and the EAB comes through and kills off about 4,120 parkway trees, the village, instead of simply budgeting and replacing trees, may ask individual property owners to pony up maybe 50% of the cost of the new trees. Gypsy moths have the same potential for damaging and killing trees, although not as species specific or as overall lethal, we are no longer able to qualify for state paid spraying, and will have to foot any spraying ourselves.

Energy costs are also rising. The Village pays approximately $200,000 annually for electricity for street lights. ComEd is changing from a flat per light rate, and It is likely the rate change will cause this amount to double, as Lombard recently experienced. The village contract with ComEd runs through 2054.

Where’s the cash going to come from?

This pie chart shows where our revenues come from.

Only Aurora and Schaumburg have a higher HRST component, but even a 1/4% increase kicks up another $2.3 million in HRST revenues. Consider it a given that the Home Rule Sales Tax component will go up at least once in the next five years.

Our EAV has gone up every year without fail, generating a proportionate increase in real estate tax receipt dollars. That 5% annual increase will not be enough. Staff is pointing out again how low our tax rate is compared to our neighbors. Nevermind that our neighbors get reamed on their real estate taxes, there will be intense pressure to raise our rates incrementally to raise RE tax receipts at a rate faster than straight up 5% EAV growth.

The Natural Gas Tax rate is currently 1.5%. The state allows a maximum of 5%. Raising the NG Tax Rate to the maximum might raise an additional $1 million in tax revenues each year.

Our Gasoline Tax rate is already the highest in the area, but 1.5 cents of the 2.5 cents we tax each gallon is for Fairview Avenue debt service, and after 2014, could be applied elsewhere as long a s council votes to keep the tax and move the revenues to the general fund, or to another specific fund. That’s about $240,000 a year.

Our Electricity Tax rate is currently 3%, but is allowed by state to go as high as 5%. Each 1% rate increase would generate about $660,000 dollars.

Our Hotel Tax rate is currently 4.5%, but is allowed to go as high as 5%. That would generate about $110,000 a year.

Other revenue sources we currently don’t assess:

  • Real Estate Transfer Tax. It could be as high as $5 per $1,000 sales price, meaning that $1 million home gets a $5,000 welcome to DG tax on the sale. 5% would raise about $920,000 a year in revenue.
  • Stormwater Utility. They’ve been talking about this since they decided to fix flooding problems. There’s no clear idea of the costs and revenue projections for a Stormwater Utility Tax.
  • Vehicle Stickers. Everyone else does it, ranging from $12 to $48 dollars annually on top of what the state charges. 2 vehicles per household at $30 a pop would generate over $1.13 million a year.
  • Food and Beverage Tax. Currently many communities levy a 1-3% tax on served food and beverage. A 2% tax would generate $3 million a year presently.
  • Service Surcharges. Maybe on traffic tickets to start, but there’s nothing that says the village can’t put a surcharge on almost any service they provide the populace, creating a potentially huge loophole in maximum tax rates.
  • Sponsorships. Staff is currently researching the feasibility of implementing a sponsorship program in the Village.
  • Expanded use of TIF Districts. Make more of them and make them bigger, and capture the increment for village use exclusively.

This information is off the DRAFT only of the 5 Year Budget Plan, but it looks like a thorough document in need of little further research, except maybe Stormwater Utility and Surcharges.

There’s a lot to be concerned about here, because there’s little serious talk about reducing costs of goods, services and personnel across the board, just increasing revenues. So increasing revenues available to the village for spending is receiving the attention, but reducing costs so far are the red headed step child of the process.

In order for the village to survive and prosper, revenues will have to be enhanced and costs will have to be contained. More on this as it develops.

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Posted in budget. 4 Comments »

4 Responses to “5 Year Strategic Plan + 5 Year Budget Plan = ?”

  1. Andrew J Says:

    From the points where it was mentioned it looks like the SCADA system is likely to be for managing the village’s water distribution and sewerage systems. In this context it will probably allow monitoring and control of levels, pressures, pumps, valves, temperatures and other related process variables from locations remote from the equipment, reducing the number and length of times that staff have to be on site and saving the cost of travel and overtime.

  2. markthoman Says:

    Thanks Andrew J. That one stumped me.

    BTW, before anyone pipes in: TIF districts are bad. They act as a lever to force our other taxes higher, and they rarely do what they are intended to do. Our CBD TIF may break even, but only due to the creative accounting of having TIF debt repayed by general funds. Look it up on the budgets, it’s a fact.

    The main reasons the Ogden TIF hasn’t similarly gone south is DG can’t get any developments rolling of significant size, and Dave Fieldman is responsible for writing pay-as-you-go RDA’s that minimize any adverse impact.

  3. Anonymous Says:

    They talk about not leaving vehicles idling endlessly. Oooo, that’ll save a couple bucks. When it’s time to make do with less, our government answers the call with gimme more more more.

  4. Brian Mast Says:

    Andrew J is right about SCADA in general. Another nice thing it can enhance is emergency response to equipment failures, leaks, overflows, that kind of stuff.

    I think they are great! But I also design them for a living…

    Brian


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