Village of Glencoe Finance Committee met October 19.
Here is the minutes provided by the Committee:
I. Call To Order And Roll Call
The Finance Committee of the Board of Trustees meeting was called to order by Trustee Vree at 5:34 p.m. on the 19th Day of October, 2017 in the Village Hall Conference Room.
The following were present:
Jonathan Vree, Chairman
Dale Thomas, Trustee
Barbara Miller, Trustee
Also present were:
Lawrence Levin, Village President
Philip Kiraly, Village Manager
David Clark, Finance Director
David Mau, Public Works Director
Cary Lewandowski, Public Safety Director
Sharon Tanner, Assistant Village Manager
Denise Joseph, Assistant to the Finance Director
Megan Hoffman, Management Analyst
Adam Hall, Management Analyst
Jordan Lester, Management Analyst/Deputy Village Clerk
II. Consideration Of The Minutes
Trustee Vree moved, seconded by Trustee Thomas to approve the minutes of the September 19, 2017 Finance Committee meeting. Said motion passed with a unanimous voice vote.
III. Public Comment
There were no comments from the public.
IV. Review Of Monthly Treasurer’s Report
Before moving into the discussion of the Monthly Treasurer’s Report, Trustee Vree suggested that Village may consider being less conservative with our budgeting. He added that the monthly reports make the Village look like we are outperforming the budget, but when looking at the Long Range Financial Report, the Village is currently projected to have a multimillion dollar deficit by Fiscal Year 2023. Finance Director Clark responded that should the Village begin budgeting tighter, being less conservative with both revenues and expenditures, the Village Board may need to amend the budget mid-year.
Moving to the Monthly Treasurer’s Report for September, Director Clark explained that the revenues are currently $544,350 over prior year-to-date, mostly as a result of property taxes and building permits. Speaking to expenditures, Director Clark added that due to overtime in the Water Fund related to the repair of the Water Plant Intake Pipe, the Water Fund expenditures are approximately $160,000 greater than the year-to- date five-year average and that it is unknown if the fund balance will come in above the minimum by the end of the fiscal year. He noted that capital expenditures are currently trending approximately $250,000 less than the year-to-date five-year average, but that this is due to the timing of purchases. Manager Kiraly clarified that these expenditures will come back into alignment with the budget as projects are completed in coming months.
Trustee Thomas then moved the discussion toward the potential repercussions of a property tax freeze being adopted by the State of Illinois. He noted that while we are below the historical debt level, the Village needs to consider sources of revenue such as increased fees, pursuing home rule status or speeding up the pace of downtown development, and that the Village should be careful of capital expenditures, funding projects through debt issuance only if really needed. Director Clark responded that a two-year property tax freeze is incorporated into the five-year projection. He added that over the past 10 years, the Village has historically brought in more in revenue than what has been expended, but that the rate of growth of expenditures will soon outpace revenues. Manager Kiraly explained that as the Village projects finances, there are certain knowns such as personnel costs and cost of living adjustments, and certain unknowns such as property tax revenues. He added that as the Village develops the Fiscal Year 2019 budget, the intent is to narrow the end-of-year gap between revenues and expenditures that has existed historically.
V. Review Of Fiscal Year 2018 Community Improvement Program Schedule
Manager Kiraly shared that a number of capital projects will be on the Village Board Agenda in October for consideration, including firing range improvements, two Public Safety vehicle replacements and a street sweeper. Trustee Vree asked that next year, the quarterly capital schedule better highlight the moving of projects from one quarter to another. He also asked if the Village is considering a move from our current fiscal year to a calendar year, to which Manager Kiraly noted the switch is being considered as part of implementing the new enterprise resource planning (ERP) software.
VI. Review Of Audit Services Agreement With Lauterbach & Amen, Llp For Fiscal Year 2018-2022
Director Clark explained that Fiscal Year 2017 was the last year of a five-year contract with the Village’s current auditor, Lauterbach & Amen, LLP. He noted that staff recommends continuing our relationship with Lauterbach & Amen and that we are bringing a new contract, partnering with the Park District and Glencoe Public Library, for Fiscal Years 2018-2022 to the Village Board for consideration at the October meeting. Director Clark asked if the committee desired to switch partners within Lauterbach & Amen, however, the committee supported continuing with Mr. Ron Amen.
VII. Discussion Of The Long Range Financial Forecast Through Fiscal Year 2023
Director Clark began discussion of the Long Range Financial Forecast by reminding the committee that this forecast is an annual update, and the current version incorporates the assumptions discussed at the September Finance Committee meeting. He added that the forecast reflects five-years of operating budgets for all funds, noting that the E911 and Garbage Funds will not continue beyond the current fiscal year. He also shared that the appendix includes a SWOT (strengths, weaknesses, opportunities, threats) analysis.
Trustee Thomas inquired as to what extent the new ERP system will aid in efficiencies and cost benefits, to which Manager Kiraly explained the ERP may lead to some cost savings but that more so, it will allow employees to accomplish similar tasks in less time. He added that the ERP will also help with future forecasting conversations and may allow the Village to move toward project-based budgeting. Trustee Vree asked if the new ERP software is scalable, and if there is an opportunity to share the software with other governmental bodies, such as the Glencoe Park District. Assistant Village Manager Tanner explained that the Village and Park District would have different needs from an ERP, and would therefore employ different modules and Director Clark added that sharing the financial module would be complicated as the Village and Park District have different charts of accounts.
Director Clark then explained that between Fiscal Years 2018-2023, the forecast assumes expenditures will outpace revenues in both the General Fund and Water Fund, which will result in an operating deficit of approximately $1 million by Fiscal Year 2023. Furthermore, he added, the $1 million deficit is not inclusive of needed capital expenditures which are beyond the operating resources of these two funds to support.
Trustee Vree asked if there is anything to suggest that the next five years will be worse than the last five years, to which Director Clark responded that the forecast reflects the impact of a two-year property tax freeze, which appears to be more likely now than in years past. Manager Kiraly explained that the impact of moving the five full-time staff members from the Garbage Fund to the General Fund is somewhat unknown as many Public Works employees will reach retirement eligibility in the next five years. He noted that importance of retaining young talent to ensure the retirements do not cause major service disruptions, but that overall staffing needs will adjust over time. Director Clark added that the Village has more control over expenditures than revenues, but that most expenditures are personnel related. He also explained that there is a balance with service changes, using the transition to a private garbage hauler as an example of something that has upfront cost savings that lessen over time.
Trustee Thomas then moved toward discussing pension costs, stating that the Village cannot count on pension reform. President Levin agreed, noting that there may be a potential to join with surrounding suburbs and invest pension funds collectively, benefitting from a larger growth potential.
Manager Kiraly went on to explain that the forecast includes expenditures on capital projects that were not necessarily included in the past, such as the replacement of overhead lights in the commuter parking lots, which previously have been handled on a case-by-case basis or within the operating budgets. Trustee Vree agreed that all needed capital replacement projects should be incorporated into the 10-Year CIP. Manager Kiraly added that this practice helps the Village to have a more comprehensive understanding of what it would take to fund our capital needs.
Trustee Thomas asked how the Village’s fees compare to similar communities, to which Director Clark noted that the Village falls in the lower-to-middle of the range in fees. Trustee Vree stated that rates should be changed to better account for operating and capital costs, pointing to the $10 million in anticipated capital projects related to the water distribution system (including the relocation of the water tower) in the next five years. Trustee Thomas added that increasing the water rates may also have the effect of lowering consumption rates, positively impacting the environment from a sustainability standpoint. Trustee Vree asked whether the water distribution system should have its own capital program and stated that the Village should limit taking from the General Fund for water projects. Trustee Thomas asked about the suggestion of partnering with another community for water production to avoid relocation of the water tower, to which Public Works Director Mau explained that the water tower is more tied to the distribution system and would have to be maintained for water pressure purposes despite partnering with another community. Manager Kiraly explained that the Water Rate Analysis is being brought to the committee in November.
Moving to funding pensions, Director Clark noted that between Fiscal Year 2019 and Fiscal Year 2023, pension costs are projected to increase from approximately 27% of property tax revenue to over 29%. He added the majority of pension costs are attributable to Police Pension, with the remaining relating to Social Security, Medicare and the Illinois Municipal Retirement Fund (IMRF) obligations.
Director Clark then reviewed some major points of consideration and discussion for the Finance Committee moving forward, including the development of a debt plan which will be brought to the committee in November, the use of limited tax debt, fee scaling, service level evaluation and opportunities for future collaboration, the use of fund balances, potential operational efficiencies and development opportunities.
Manager Kiraly noted that many of the discussion points suggested by Director Clark are already happening, such as certain operational efficiency efforts. He added that the Village is benefiting from a high performing business environment and that we are pursuing ways to foster further development. Additionally, he restated the importance of the Water Rate Analysis to the discussion of reflecting capital costs in the rates charged to residents.
Trustee Thomas noted that the Village’s housing stock is rapidly aging and that it is possible that the Village will benefit more from building permit revenues than surrounding communities, as our housing stock is renovated or rebuilt to suite current trends and buyers tastes for new homes.
Trustee Vree noted that he would like to reopen the discussion of appropriate uses of the IRMA Excess Surplus, to which Manager Kiraly agreed, stating that staff will likely propose a partial spend down in Fiscal Year 2019 on projects that align with the nature of IRMA, such as security enhancements. Trustee Vree stated that he is comfortable with the current funding level and that as long as the Village does not change the funding level, it is honoring its obligation. He added that should there be an economic downturn in the future, the Village could justifiably lower its funding level and still have a cushion.
VIII. Other Items For Discussion
There were no other items discussed.
IX. Adjourn
Trustee Thomas moved, seconded by Trustee Miller to adjourn the meeting at 6:52 p.m. Said motion passed with a unanimous voice vote.
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