Village of Glencoe Board of Trustees met Oct. 16.
Here is the minutes provided by the board:
I. CALL TO ORDER AND ROLL CALL
The Finance Committee of the Board of Trustees meeting was called to order by Trustee Thomas at 6:02 p.m. on the 16th Day of October, 2018 in the Village Hall Conference Room.
The following were present:
Jonathan Vree, Chairman
Barbara Miller, Trustee
Dale Thomas, Trustee
Also present were:
Lawrence Levin, Village President
Greg Turner, Trustee
Philip Kiraly, Village Manager
Nikki Larson, Finance Director
Denise Joseph, Assistant to the Finance Director
David Mau, Public Works Director
Cary Lewandowski, Public Safety Director
Sharon Tanner, Assistant Village Manager
Megan Meyer, Assistant to the Village Manager
Jordan Lester, Management Analyst/Deputy Village Clerk
Adam Hall, Management Analyst
II. PUBLIC COMMENT
There were no comments from the public.
II. PUBLIC COMMENT
There were no comments from the public.
III. CONSIDERATION OF THE MINUTES
Trustee Vree moved, seconded by Trustee Miller to approve the minutes of the September 20, 2018 Finance Committee meeting. Said motion passed with a unanimous voice vote.
IV. REVIEW OF MONTHLY FINANCIAL REPORTS
Finance Director Larson began the discussion of the Monthly Treasurer’s Report for September by noting that the Village is 58% through the fiscal year and that the Finance Department has no concerns regarding performance of revenues or expenditures across all
funds. She added that revenues are ahead of prior year-to-date, but this is mostly due to timing of payments to the Village. Trustee Vree inquired as to the decrease in prior year-to- date performance for Other Revenues, which Assistant to the Finance Director Joseph responded is due to the loss of revenue from co-locators (cell tower), the sale of fuel to Glencoe Park District and District 35 and various zoning fees.
Relating to General Fund expenditures, Trustee Miller asked where funds for service fees for dispatch were previously located, which Director Larson responded that they were previously reflected in the E911 Fund.
Relating to the Glencoe Golf Club Monthly Financial Report, Trustee Thomas noted that the Glencoe Golf Club net operating income was only approximately $13,000 below the prior fiscal year despite unfavorable weather.
V. MONTHLY REVIEW OF COMMUNITY IMPROVEMENT PROGRAM: FISCAL YEAR 2019 SCHEDULE
Village Manager Kiraly explained that multiple Community Improvement Program (CIP) items would be before the Village Board this month for consideration including two Public Safety vehicle replacements, storm sewer outfall construction and the commuter parking lot light replacement. He noted that a contract for the purchase of the lighting itself was approved in September, whereas the contract coming to the Village Board in October is for the installation. Relating to the storm sewer outfall project, Village Manager Kiraly shared that due to favorable pricing the Village was able to put resources toward three major projects.
VI. CONSIDERATION OF LONG RANGE FINANCIAL FORECAST
Director Larson began the presentation of the draft Financial Forecast, for Fiscal Year 2020 through Calendar Year 2023, by providing an overview of the major considerations incorporated into the forecast including the Village’s prioritization of infrastructure improvements, an adjustment for future State budget impacts, future debt financing infrastructure needs and an emphasis on designing fee structures around actual costs.
Director Larson explained the forecast for the General Fund, which had been updated to reflect that expenditures are projected to outpace revenues by Fiscal Year 2022. Notable increases in the revenue forecast include the following: property tax is projected to rise by approximately $630,000, or about 2.1% in line with the Consumer Price Index (CPI); sewer fees are anticipated to increase by 5-7% to support capital improvements in Fiscal Year 2020; the Garbage General Collection Service (GCSF) fee has been adjusted to assist in covering the costs of administering the Garbage collection program. Relating to garbage fees, Village Manager Kiraly explained that as per the Village’s contract with Lakeshore Recycling Systems (LRS), LRS is allowed to increase fees on an annual basis, and at the same time the Village may adjust their GCSF. Director Larson added staff will also be bringing forward recommended changes to the fee and fine schedule, pending recommendations included in the forthcoming Building Permit Fee Analysis. These recommendations are anticipated to result in corresponding increases in projected building permit revenue.
Continuing with revenue projections, she added that telecommunications tax, personal property replacement tax (PPRT), and E911 surcharges are declining. The E911 revenues are not anticipated to continue long into the future as emergency dispatch centers become more efficient, which will likely result in reduced State assistance. She reported that sales taxes, income taxes, parking and alarm fees are relatively stable. Director Laron noted that the largest unknowns for revenue relate to PPRT, sales tax and income tax which could all be impacted by the State budget.
Moving to the General Fund expenditure forecast, Director Larson explained that in the short term, the Village is experiencing some upward pressure on salaries because of collective bargaining agreements. In the long term, however, the Village expects to see a shift from salary costs to contractual costs as services and programs are outsourced and outside consultants are used more regularly.
Director Larson added that pension costs related to the Police Pension Fund are projected to increase by approximately 5% a year. She stated that this could be impacted in the future if the State’s fully funded mandate is repealed or modified. Additionally, Director Larson stated that the Village will be replacing its actuary, who may base their calculation of required contributions on different actuarial assumptions; although the Village’s current assumptions currently incorporate a conservative interest rate.
In discussing the General Fund reserve, Director Larson noted that given the projections in the report, the fund balance for Calendar Year 2023 may total approximately $330,000. Village Manager Kiraly added that the Finance Committee and Village Board will be asked to consider financial policies surrounding fund balance, specifically relating to minimum fund balance, the appropriate use of fund balance—potentially extending the allowable use of the fund balance beyond one-time capital expenses (as has been past practice).
Trustee Vree asked for a summary of revenue sources that the Village has control over revenue as a non-home rule community, also asking what could the Village change now. Village Manager Kiraly responded that the Village continues to adjust fees and fines, and that the item with the most significant potential impact is building permit fees. Staff, he added, are also considering what revenues could exist that do not exist today such as a Places of Eating Tax. Director Larson noted that staff will be mindful of diversifying sources of revenue to alleviate impact on residents while completing this analysis.
Trustee Vree asked if the Village has the ability to go to a referendum for a bond that would offset costs of depreciating assets, such as rolling stock. Village Manager Kiraly responded that the Village does have some ability to borrow for rolling stock, but it would likely not be through a referendum and rather could utilize the Village’s non-referendum bond authority. He added thatusing this resource does come with risks. Director Larson further explained the Village’s options for bond issuance.
Director Larson then moved into the forecast for the Water Fund. She stated that the forecast projects volumetric water rates to increase 9% in Fiscal Year 2020, based on the comprehensive water rate study that was completed last year. Based on the 10-Year
Community Improvement Program (CIP), it is recommended that the Village continue with rates recommended in the water rate study to help fund future infrastructure improvements to the water system.
Director Larson then explained the Water Fund expenditure forecast. She stated that the 10- Year CIP includes $9.7 million in water main infrastructure improvements; $5 million in calendar year 2023 for an elevated water tank; and $4.5 million in production system and critical plant improvements. She stated that these improvements are proposed to be funded through $14.6 million in projected water revenue bonds with remaining infrastructure to be funded through accumulated fund balance. Trustee Miller asked if this only included the distribution system. Village Manager Kiraly responded yes, it includes water mains and other infrastructure, but critical improvements to maintain continued operations of the Water Treatment Plant would also be included.
Trustee Vree asked if there was a two year window to expend funds generated from bond issuances. Director Larson explained that there is a three year window allowance to expend bond proceeds, however, the longer the Village waits to spend proceeds, the more likely it would need to accommodate expenses related to arbitrage. She explained that arbitrage would generally require the Village to pay taxes on any interest earned on the proceeds that exceeded the interest rate that the Village was paying on the related debt. She stated that the Village is experiencing elevated levels of inflation which means that this may become a likely scenario.
Village Manager Kiraly explained that the Village has been fortunate with its outstanding bond issues, and has experienced a benefit from low interest rates obtained on the 2015 referendum bonds. Since these bonds were issued at a lower rate, the Village was able to afford to complete additional infrastructure projects. He further explained that the magnitude of projects included in the 10-Year CIP is very large, and that staff is continuing to evaluate the scale of projects that could actually be completed with limited staffing and resources. He also explained that we did not yet have clear direction on long term future of the Water Treatment Plant and what the true cost would be to upgrade the facility. He also stated that there will be various options and opportunities explored, including a potential partnership with the Village of Winnetka. Any major capital projects for the Water Fund in relation to the water production system will likely be in a 20 year window, however, there is a $50,000 placeholder in the Fiscal Year 2020 budget to complete a feasibility study to assist in determining the best options for water production in the future.
Village Manager Kiraly explained that the Water Fund improvements are proposed to be funded with Water Fund Revenue Bonds, but there are other projects in the financial forecast that will be proposed through referendum, such as funding required to renovate the Golf Clubhouse. He stated that there is an agreement with Cook County to maintain the Golf Clubhouse on their land, and the agreement allows the Village to extend the agreement term if debt is issued to maintain the property within the first seven years of the agreement. If approved, it is anticipated that the Golf Clubhouse improvements would be funded through a combination of General Obligation Bonds, revenue bonds (generated by receipts of the Club) and fundraising.
Village Manager Kiraly stated that there are other significant infrastructure projects to be considered in the future, such as the ultimate location for the Public Works Garage, and whether or not that could be a shared facility with another government. Trustee Vree asked if the Tudor Court project would be included in this process. Village Manager Kiraly responded that this project has been included anecdotally, as additional direction from the Board is needed to determine the scope and corresponding cost of that project. He also indicated that the Village’s Strategic Plan includes a committee to determine a long term plan for the downtown area, which would determine the allowable type and density of development that could be applied to Tudor Court and elsewhere in the downtown district.
Director Larson then explained the forecast for the Motor Fuel Tax Fund. She stated that this revenue is restricted to use on roadway resurfacing and other related improvements. Revenues are projected at $223,260 in Fiscal Year 2020 and operating expenditures are projected at $80,550.
VII. CONSIDERATION OF DRAFT COMMUNITY IMPROVEMENT PROGRAM
Director Larson presented the draft Community Improvement Program (CIP) for Fiscal Year 2020 through Calendar Year 2029. The CIP coordinates with existing policy, recent studies and legislative mandates. Staff has flagged projects that require discussion: such as, Tudor Court, Golf Clubhouse, Water Treatment Plant and the Public Works Garage Facility. Village Manager Kiraly stated a presentation on Tudor Court development options is planned for the December Committee of the Whole. The most expensive design is approximately $1.5 million, which can be scaled back, as necessary. He stated that resources for this project are not currently in the Fiscal Year 2020 Budget for Tudor Court, but the Board may be able to determine a budget amount in December, as well as a funding source.
Trustee Vree asked if we can do a three to five year bond call and decline to exercise the option. Director Larson responded that this would be an option for the Village, but the legislation has changed recently to change the timeframes for advanced financing, so the Village would need to be thoughtful about the timing of a refunding transaction. Director Larson indicated that the total 10-year CIP is estimated at $46.8 million and that some projects are clustered together in anticipation of bond referendums.
Director Larson explained that the CIP financing plan includes bonds that may be issued through a proposed referendum in 2020 and 2024, which may include expenditures for the Golf Clubhouse renovation. Additionally, she stated that the plan includes the issuance of Water Revenue Bonds in 2020 and 2023, which would be fully supported by Water Fund revenue. She stated that the Village also has the ability to issue limited non-referendum debt, which is currently allowable at a level not to exceed $4.8 million.
Trustee Vree asked for the amount of the Village’s total debt limit and how much of the outstanding debt matures this year. Director Larson responded that the Village has the legal authority to issue approximately $75 million in debt. She stated that the Village currently has $19.3 million in debt outstanding, and $17.6 million will be outstanding after the current year. She stated that although there are two referendum issues proposed in the forecast plan, the Village would still have the flexibility to issue debt in various series over time, in lieu of issuing the entire amount of approved bonds at once.
Village Manager Kiraly explained that some infrastructure investments have positioned the Village well, such as storm water. Staff is now focusing more on sidewalks, sanitary sewer and water mains to insure that our current investments prepare us for the future. Trustee Thomas asked if we were to partner with Winnetka in some way for water, what other changes would need to be made. Village Manager Kiraly stated this is why a study is needed this year. Despite what the Village does, system changes will be necessary.
Director Larson stated that the Fiscal Year 2020 CIP includes $2,710,100 in projects. Village Manager Kiraly explained that a few vehicles and pieces of equipment are included in the CIP for next year.
Trustee Vree asked if the sewer charge is on the resident’s current water bill. Village Manager Kiraly stated that is correct and it is based on water consumption. He explained that the CIP also includes year two of the Enterprise Resource Planning System (ERP), Supervisory Control and Data Acquisition System (SCADA) for the Water Treatment Plant and Village Hall Security Upgrades. Assistant Village Manager Tanner said that a study of the Council Chambers Design Upgrade is included in the CIP to have a better understanding of what the extent of the upgrades may include and the corresponding cost.
In conclusion, Director Larson stated that staff will incorporate the committee’s feedback and into the Draft Fiscal Year 2020 Budget that will be presented to the Finance Committee in November.
VIII. OTHER ITEMS FOR DISCUSSION
No other items were discussed.
IX. ADJOURN
Trustee Thomas moved, seconded by Trustee Miller to adjourn the meeting at 8:27 p.m. Said motion passed with a unanimous voice vote.
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