Administration & Finance Committee

Approved MINUTES OF A MEETING OF THE ADMINISTRATION & FINANCE COMMITTEE VILLAGE OF NORTHBROOK COOK COUNTY, ILLINOIS March 03, 2012 Trustee Scolaro called the meeting to order in the Terrace Room of the Village Hall at 9:00AM. On roll call, present were: Trustees Scolaro and Trustee Karagianis; a quorum was present. Also present: Trustees Buehler, Heller, Israel and President Frum. Absent: Trustee Ciesla. Call to Order Hear from the Audience There was no response to Trustee Scolaro’s invitation for comments from the audience regarding any matter not on the agenda for this meeting. Discussion – FY 11/12 Third Quarter Financial Reports Director of Finance Jeff Rowitz provided a PowerPoint that reviewed the third quarter financial reports. He first summarized expenditures by department. Director Rowitz stated revenues are estimated to be $500,000 over what was budgeted and expenditures were expected to be over budget by $115,000, resulting in a year end deficit of $599,315. Trustee Scolaro questioned the deficit. In response Director Rowitz stated the deficit was planned and the reserves are still $1.7M above the 40% Fund Balance policy. Director Rowitz then reviewed revenue and expense projections. He explained the projections are holding. February sales tax receipts were $11,006 above what was budgeted and he noted how sales taxes have exceeded expectations throughout the year. Trustee Scolaro questioned when the March tax receipts figures would be available. Director Rowitz stated they are expected next week. Director Rowitz then reviewed the monthly fiscal year sales tax receipts, noting the figures are ahead of 08/09, 09/10, and 10/11. Director Rowitz provided a chart illustrating sales tax by standard industrial code as was requested by Trustee Scolaro. He stated it shows tax receipts by food category are up and merchandise is still down, but getting better. In addition, he noted how well automotive and filling stations are doing. Director Rowitz presented the debt schedule with current bond issues. He pointed out that the debt service stays flat until fiscal year 22/23 when there is a significant reduction due to retirement of the infrastructure bonds. Director of Economic Development, David Schoon presented a chart showing Northbrook’s office vacancy rate compared to the region. Director Schoon then displayed a chart illustrating the vacancy rate of industrial space compared to the region, which showed Northbrook as median. Administration and Finance Committee – Budget Workshop March 15, 2011 Page 2 of 5 Director Schoon explained some landlords are leasing spaces at a discounted price in order to fill them. He then presented the overall vacancy rate for all of the Northbrook shopping centers. He stated Northbrook continues to see spaces being leased; e.g. Willow Festival has a new art gallery and the “Northbrook Garage” site will soon include a pizza parlor. Trustee Buehler questioned if the statistics include those spaces that are presently being leased, but are vacant, e.g. the old Walgreens site. Director Schoon clarified that the prior Walgreens site is considered vacant. They discussed how to reflect such anomalies in the statistics. Director Schoon reviewed Northbrook’s unemployment rate and compared it to Cook County’s. He then reviewed the local hotel tax revenue by calendar quarter. He stated Northbrook is up $100,000 since 2007, but pointed out Northbrook has increased the number of hotel rooms since then. Director Schoon reviewed single family detached residences – average sales price. He stated there has been a 30% decrease since 2008; however there was only a 5% decrease last year. Director Schoon stated this is a common trend in the area and noted these are quarterly sales. Director Schoon reviewed foreclosure trends - noting the activity is actually going up. The total trend was upward. Director Schoon next reviewed major building permit applications. He explained major building permits decreased slightly. Construction value was about the same. He pointed out these numbers are about 1/6th compared to past years. Director Schoon stated single family additions and major remodeling permit applications are also down from past years; however commercial, office and Industrial are up. Trustee Heller questioned why total year to date revenues are 8.8% under budget. Director Rowitz explained this figure is mainly a result of timing differences, and the water sales are down. Trustee Heller questioned the Police Pension. Director Rowitz stated that the investment income for the pension funds is dependent on the market valuations as of the reporting date. Through the third quarter, returns have been less than budgeted, but hopefully on April 30th that will come back up with the way the market is moving. Director Rowitz explained that both Police and Fire pension funds have advisors for their investments, which are reviewed on a quarterly basis. Trustee Karagianis questioned where the overtime stands year to date? Director Rowitz stated the reports are included in the agenda materials. Trustee Karagianis stated the overtime figures jumped out in the budget – they were relatively high. Village Manager Nahrstadt stated some of the overtime was planned. He stated the Village is presently down two positions in both Police and Fire and he explained how we are running on overtime. Director Rowitz noted there has been a spike in overtime in Police for special details and task forces; however, these costs are offset by the revenues they provide. Trustee Karagianis questioned the overtime in Public Works. Director Kelly Hamill explained the costs are related to maintenance for different events. Trustee Karagianis stated he feels that some of the overtime Administration and Finance Committee – Budget Workshop March 15, 2011 Page 3 of 5 cost should be addressed differently. Director Hamill explained some of the costs in the first quarter were due to the wind storms and power outages. VM Nahrstadt briefly gave an overview of the previous fiscal year. He noted staff has completely revised the Capital Improvement Plan as well as the Annual Fee Ordinance. That work, in addition to presenting a two year budget format for the first time, provides tools to better plan and monitor fiscal conditions and policies. Staff continues to reduce costs while maintaining basic services, as directed by the Board. VM Nahrstadt noted that in the FY 12/13 Budget there is a small surplus and the General Corporate Fund Balance remains $1.3M above the 40% policy. He discussed the fiscal year 2012/13 draft budget including the storm water utility fund; increasing the telecommunications tax from 1% to 6% and eliminating the E-911 surcharge. VM Nahrstadt explained the surcharge is antiquated as it applies only to land lines though cell phones represent an increasing percentage of our emergency calls for service, and it does not cover our emergency communication expenses. He stated the budget is designed to provide the Board with an option to abate 33% of the General Corporate property tax levy increase that was approved in December. The budget also anticipates holding the corporate portion of next year’s property tax levy flat. Trustee Scolaro acknowledged they have to do something, but noted they are talking about $20M in stormwater. He questioned how Engineering knows if the amounts quoted for the projects are accurate? Trustee Israel stated if the Village had $50M they could spend it on stormwater projects. Trustee Israel explained they tried to come up with a number that is appropriate to address a number of the Village’s problems; however, it may not be a finite number. Trustee Scolaro drew a comparison to the used Toyota the Village purchased, noting it is a good deal, but unlike the used car market, we have no idea if these monies identified are appropriate. Trustee Israel stated the Stormwater Commission and Staff have looked at the numbers and they have a good feel for what was identified. They feel the proposed totals are appropriate. Trustee Heller noted it is not just Trustee Israel, but also Engineer Paul Kendzior, Director of Public Works Kelly Hamill, the Stormwater Management Commission and consultants that agree. Trustee Karagianis stated with these projects there needs to be discipline and fortitude to make sure we are spending appropriately. Trustee Scolaro reminded the Board that Village Manager Nahrstadt has demonstrated an ability to adjust priorities as necessary, and cited the example of putting Director Rowitz in charge of overseeing the last major capital improvement initiative several years ago, which resulted in significant cost savings. VM Nahrstadt provided examples of staff and the Village Board controlling costs and making sound decisions, e.g. working with the Forest Preserve District to assist the Village with flooding issues and with the Park District in intergovernmental agreements to reduce costs. The quarterly budget and economic indicator review, as proposed and implemented by VM Nahrstadt several years ago, has allowed the Board and staff to work hand in hand to understand and adjust to economic conditions. Administration and Finance Committee – Budget Workshop March 15, 2011 Page 4 of 5 Trustee Israel stated there are hosts of stormwater projects deemed as prospective and if we end up saving money on one project, then that will allow the Village to move forward on another project. Trustee Heller noted in passing the Budget we are making the commitment. The Board then discussed the safeguards in place moving forward. VM Nahrstadt reviewed the costs from FY13 to FY19. In regards to the storm water utility fund, he noted each year is allocated funds. VM Nahrstadt reviewed the schedule of planned debt service in the Stormwater Fund. He pointed out that if they look at FY19, they will start to see a projected deficit. VM Nahrstadt noted staff is presently looking at options to reduce the costs of some of the projects such as working with the Park District on joint projects. The group took a break 10:17 – 10:30am. VM Nahrstadt then reviewed the FY 12-13 proposed General Fund, noting it has a small surplus. Village Manager Nahrstadt gave an overview on the history of the E-911 surcharge. He noted it is now stagnant. Staff is suggesting reducing e-911 to $0. VM Nahrstadt then reviewed dispatching costs. He stated it is now $2.5M, which includes 13 employees and Red Center. Presently E-911 surcharge brings in $300,000. Staff is suggesting raising the telecommunication tax from 1% to 6%. He stated the 5% increase puts Northbrook in line with most communities in the area. The increase is also necessary to balance the budget. Typical land line customers will see an increase of $2.25 per month. Typical cell phone users will see an increase of $5.00 per month. President Frum noted that the E-911 tax is on every land line only; it does not include cell phones. VM Nahrstadt stated most of our calls for 911 now are from cell phones. He then reviewed the tax rate survey from February 2012 and showed Northbrook to be midline in comparison. Village Manager Nahrstadt then reviewed municipal property tax rates after the proposed abatement from the 2011 levy, which showed Northbrook to have the third lowest rate of the 27 area communities surveyed. President Frum explained her concern that the Illinois Legislature is seriously moving the costs of teacher pensions back onto the local school districts. It looks like there could potentially be at a 5% increase per district on the local levy. She noted her trip to Springfield next week to discuss the potential loss of funds from State. President Frum stated the Village should be cognizant of the overall property tax burden from all jurisdictions and therefore supported the budget proposals that abate a portion of the current levy and hold flat the corporate levy next year. VM Nahrstadt reviewed two expenditures summary exhibits by department (with and without the storm water fund). He showed expenditure summary of all funds. He noted the projected water fund expenses. Director Rowitz stated this was up significantly due to the Dundee Road main that is planned for replacement. He explained the 21% increase in the parking fund is due to the money budgeted to install electronic collection devices. Trustee Scolaro noted they may want to consider increasing the number of paying devices. Trustee Scolaro stated that the Budget, while not bare bones, allows us to provide basic services. He stated he did not see anything crazy being presented. Administration and Finance Committee – Budget Workshop March 15, 2011 Page 5 of 5 Trustee Karagianis stated VM Nahrstadt has done a nice job keeping head count down. Trustee Scolaro also noted how head count has nicely come down. Trustee Karagianis stated it is the way to do business. Trustee Scolaro stated he does not have a problem with the budget. He explained he spoke to Trustee Ciesla and that the Administration and Finance Committee are in agreement on the expense side. Trustee Scolaro however stated more discussion is needed on the revenue side. He noted his concern on two items. First he wanted to address eliminating the E-911 surcharge. Trustee Scolaro stated he understood why they need to get rid of it. Trustee Karagianis stated it has run its life. Trustee Heller noted the E-911 surcharge was originally approved by referendum and he questioned the legalities associated with eliminating it. Trustee Buehler explained the E-911 surcharge would not be eliminated, but be set to $0. This allows the Village to change the amount in the future if necessary. Trustee Scolaro then discussed the abatement of property tax and the increase of the telecommunication tax. Trustee Heller stated they should talk about the increase of the telecommunications tax first. Trustee Karagianis questioned if they should draw down more on reserves. He stated he felt the sales tax is conservatively projected. Trustee Scolaro stated he felt the sales tax could increase. Director Rowitz stated he estimated that sales tax receipts will increase by 3% next year. VM Nahrstadt noted the increase to the telecommunications tax would not begin until January 1, 2013. The General Corporate Fund budget for next year is balanced, but this is based on collecting the telecommunication tax. President Frum stated that sales tax would have to increase by approximately 10% rather than 3% next year in order to overcome the loss of revenue associated with approving a lesser percentage than that proposed for the telecommunications tax. Trustee Karagianis stated he saw President Frum’s point. Trustee Heller agreed as did the other Trustees present that sales tax receipts would not likely go up that much next year. Trustee Karagianis stated the Village enjoys and wants to maintain a triple a bond rating. Trustee Scolaro asked if the $1.3 million in capital expenses are somewhat offset by bond proceeds? Director Rowitz confirmed that some of the capital items will be funded through the sale of bonds. . Trustee Scolaro moved to recommend approval of the Budget as presented by staff, Trustee Karagianis seconded. On voice vote, all were in favor. President Frum thanked staff, Village Manager Nahrstadt and Director Rowitz for the proposed Budget. She also stated the CIP was phenomenal. Trustee Karagianis agreed. Trustee Karagianis moved, seconded by Trustee Scolaro, to adjourn. On voice vote, all were in favor. Respectfully submitted, /s/ Debra J. Ford Village Clerk