2014 BUDGET EXECUTIVE SUMMARY

Transcription

1 2014 BUDGET EXECUTIVE SUMMARY The Village of Streamwood s 2014 Operating and Capital Improvements Budget represents the culmination of efforts by the Village President, Board of Trustees, and staff to present a blueprint for the future that meets our goal of providing a balanced budget with existing revenue sources while continuing to provide excellent services to our residents. The Budget document is presented in a format consistent with the 2013 Budget that received the Award for Distinguished Budget Presentation from the Government Finance Officers Association (GFOA) of the United States and Canada. We believe the document clearly communicates the Village s financial plans and provides an operations guide for all departments. Our guiding principle, as stated in our Mission Statement and Principles of Operation, is to provide quality, cost-effective municipal services to our residents. The Village President, Board of Trustees and senior staff held a series of workshops in 2013 to establish Goals and Objectives for the future of the Village. In summary: 1. Develop a balanced budget, thoughtfully applying any surplus to improve reserve requirements, address infrastructure and staffing needs, and relieve homeowner tax and service rates. 2. Develop a plan to add key staff positions to enhance Village services while minimizing the impact on overall costs. 3. Fund road repairs at a minimum level of $2.5M and ERF and FERF at policy levels. 4. Continue to provide appropriate training opportunities to improve the effectiveness and leadership skills of the workforce. 5. Accelerate the pace of economic development and improve the aesthetic appearance of older Commercial properties. 6. Review and modify existing Village ordinances to address continuing problems with distressed properties, rental units, and multiple living arrangements. 7. Implement a sustainable service delivery plan for reopening Fire Station #1 that manages costs and reduces overall response times. 8. Develop a new Five Year Plan for water and sewers, incorporating new regulatory requirements and costs related to the relocation of the JAWA water main on I-90. Village of Streamwood Budget Executive Summary

2 9. Continue to fund critical technology upgrades while developing a multi-year strategy to reduce risk and dependency on paper records. 10. Incorporate standards, benchmarks and a Pay for Performance Plan into each department s succession plan to assure appropriate Bench strength BUDGET OVERVIEW The Village of Streamwood enters 2014 with an optimistic outlook. As the economy struggled for the past five years, the practice of holding the line on expenditures while introducing new and enhanced revenues has resulted in maintenance of solid fund balances. Headcount, as well as the purchase of commodities and contractual services, remains closely scrutinized. Equipment replacements and facility improvements include only those projects that are deemed essential to current and future operations. The Village has always been determined to have sufficient rainy day funds on hand to provide a cushion to make it through difficult economic times. While these reserves had been stretched over the past several years, fund balance and reserve policies are met as we enter Overall revenues for 2014 are budgeted at $50,613,000; expenditures are budgeted at $49,282,645. Major highlights of the 2014 Budget are identified below: 1. Revenues - A key part of the proposed financial plan is maintaining a revenue structure that is both sound and diversified. Revenue diversification is an essential concept that the Village has successfully utilized: the Village Board has recognized that in order to maintain a broad, reliable revenue base, a multifaceted approach must be taken. Property taxes are being levied at the same amount as last year s extension, and in fact will go down slightly because of reduced debt service obligations. Due to the 2012 implementation of a locallyadministered Food & Beverage tax as well as increased ambulance service fees, as in 2013 no new revenue sources are necessary for Following are highlights of the more material 2014 budgeted revenues: State Per Capita Revenues For the past number of years, the increased unemployment rate negatively impacted income tax payments. $92 per capita was received in 2008 (for a total of $3.7 million), when this revenue source was at a peak. Receipts from the last few years indicate that a statewide recovery is in process. According to estimates received from the Illinois Municipal League, for 2014 we are estimating receipt of $99 per capita, or $3.95 million. Property Taxes For the 2013 levy (to be paid by taxpayers in 2014), the Village of Streamwood Budget Executive Summary

3 Village intends to request $10.2 million in property taxes. This levy request is the same amount as the property taxes extended by the County for the 2012 levy, with two exceptions: Public Safety pension cost increases (estimated at $249,000) will be absorbed by the General Fund this year; and a Debt Service cost decrease of $89,472 is included in the 2013 property tax levy; the result is a net decrease of 0.9% from the 2012 levy. The proposed 2013 tax rate is expected to be $ Of particular note is the fact that the property tax rate now exceeds the Village s stated Revenue Policy goal of a rate no higher than $1.25 per $100 of Equalized Assessed Valuation (EAV). In order to maintain the property tax structure over the past several years, the tax rate has risen in order to compensate for declining property values. The Village Board is aware of this breach of policy, and remains steadfast in its commitment to a goal of $1.25. Sales Taxes Sales taxes have remained a strong source of revenue for the Village, due to the reliability of our value-oriented retailers. Our highest sales tax producing businesses (Target, Walmart, Sam s Club and Jewel/Osco) typically perform well in a down economy. The 2014 Budget anticipates that the regular 1% sales tax will generate $3.9 million while the home rule sales tax will generate $2.5 million. Both of these revenue projections are up from the 2013 Budget. Additionally, in 2012 the Village enacted a 2% tax on alcoholic beverages and prepared food. This revenue source, already in place at an equal or higher amount in most of our surrounding communities, is generating approximately $1 million per year in revenue. Utility Taxes The Village currently imposes consumption-based taxes on natural gas, electricity and telecommunications. The combined revenue from these sources is expected to be $2.1 million in 2014, relatively flat when compare to recent years, as consumers continue to invest in cost-and energy-efficient utility devices. Water and Sewer Fees The Water & Sewer Fund has hit some difficult times over the past several years. Consumers have instituted conservation measures in an effort to keep their costs down. (You will notice, however, that overall water usage is up: a large produce washing and processing facility has moved its operations into Streamwood.) Lake Michigan water costs have risen dramatically since the City of Chicago began implementing 15% annual rate hikes in will be the fifth consecutive year of rate increases passed along to consumers; rates charged in 2014 were set by Village ordinance in A menace on this horizon is the City of Chicago s implementation of a per-gallon Water Surcharge along with its continued threats to further increase water fees. The Village is addressing this concern through our membership in the Northwest Suburban Municipal Joint Action Water Agency. Village of Streamwood Budget Executive Summary

4 Pension Fund Investment Returns Actuarial assumptions use 6.5% as the expected rate of return factor. The Police and Fire Pension Fund investment yields for 2012 (the date of the last actuarial study) were in excess of 10%, a reflection of the overall current economy. 2. General Fund Equity Position The General Fund s unreserved/unassigned fund balance position was $9.1 million at the end of Because of this favorable position, the Village Board decided to institute a series of transfers to various funds from the General Fund, scheduled to take place in late 2013: $515,000 to the Capital Replacement Fund for future capital projects $400,000 to the Water & Sewer Fund for system repairs $115,000 to the Street Improvement Fund for storm sewer lining $119,750 to the Police Pension Fund to supplement Property Tax $128,250 to the Fire Pension Fund to supplement Property Tax $320,369 to the Equipment Replacement Fund for future vehicle purchases $1,091,139 to the Facilities and Major Equipment Replacement Fund for future capital purchases including finance software, a document imaging system, and improvements to Fire Station 1 and the Village Hall Staff estimates that the General Fund s Unassigned Fund Balance at December 31, 2013 will decrease to $7.5 million as a result of normal operations coupled with these transfers. This level is in compliance with the 25% minimum financial management policy limit s General Fund Unassigned Fund Balance is projected to remain essentially flat. 3. Street Improvement Program For the past two decades, the Village Board has shown its commitment towards maintaining our roadway infrastructure through the street improvement program. Historically, $2.0 to $2.5 million in annual funding was provided for this purpose. (However, during 2011 and 2012, it became necessary for the Street Improvement Fund to make contributions to the General Fund to support its operations.) Effective with the 2013 Budget funding for local street repairs, reconstruction, resurfacing and engineering was restored to its historic level. Additionally, $1 million in State of Illinois grant revenue was allocated to the Village s Motor Fuel Tax Fund; this amount was immediately transferred to the Street Improvement Fund. In 2014, a reoccurring revenue source has been reallocated from the General Fund to the Street Improvement Fund: cable television franchise fees, projected at $490,000 annually, will boost Street Improvement revenues to $2.8 million for the year. 4. Personnel The Village had 199 authorized full-time positions in The 2014 Budget includes funding for 183 positions. Recent Voluntary Reduction in Force programs have allowed the Village to more effectively realign personnel without severely impacting the level of services that our taxpayers have come to expect. Realignments have included the elimination of assistant department head positions and replacement of retiring full-time employees with part-time employees. Village of Streamwood Budget Executive Summary

5 It is recommended that staff continue the practice of performing a formal position analysis anytime an employee should resign, retire or is terminated for any reason. The Village Manager will take this information, as well as the status of the Village s financial condition, into consideration when making replacement recommendations to the Village Board, mindful of their stated goal to develop a plan to add key staff positions to enhance Village services while minimizing the impact on overall costs. 5. Capital Improvements The Village maintains a comprehensive listing of scheduled capital improvements through the year Funding for these items is supplied by systematic monthly operating transfers as described below in the Capital Project Funds section. Purchases are then made from the Capital Projects accounts. Capital outlay items are initially approved by the Village Board as a part of the Budget process, then specific purchases are approved individually at the time of procurement. The Village has identified a schedule of capital improvements for 2014 that totals almost $8 million and includes: $2.8 million in construction costs for the street improvement program, $1.4 million for water and sewer system improvements, $1.4 million in vehicle and equipment replacements and $2.2 million for facilities and major equipment replacements. Annual operating costs associated with capital purchases/improvements/enhancements are the responsibility of their recipient departments and are embedded in those departments operating budgets. For a comprehensive list of scheduled capital purchases, please see Appendix B. GENERAL FUND The General Fund accounts for all services that are not specifically accounted for in other funds, including police, fire, public works, community development and general administration activities. Total expenditures for 2014 are budgeted at $22,953,229 which is 6.0% higher than the 2013 General Fund Budget of $21,654,453. GENERAL FUND BUDGETED EXPENDITURES Department 2013 Budget 2014 Budget Change % Police 8,850,859 9,179, , % Fire 6,186,095 6,758, , % Public Works 2,679,996 2,985, , % Community Development 1,018,259 1,149, , % Administrative 2,919,244 2,881,271 (37,973) (1.3%) Total General Fund 21,654,453 22,953,229 1,298, % Wages and fringe benefits continue to be the largest General Fund expenditure accounting for approximately 90% of budgeted expenditures. The Village has dictated that commodities and contractual services be reduced to only necessity purchases. Village of Streamwood Budget Executive Summary

6 Items such as out-of-state travel and other discretionary purchases are carefully examined before approval. Operating transfers to the two Capital Project Funds (ERF and FERF), while at reduced levels, are higher than All attempts are being made to hold the line on expenditures while at the same time we continue to look for ways to provide our services more efficiently. However, several departments are experiencing significant budget increases for 2014: Fire Department: Three firefighter/paramedic positions, eliminated in 2009, have been restored; liability and workers compensation insurance has increased by 15% due to poor claims experience; and the department s contributions to ERF and FERF have more than doubled since last year. Public Works Department: The infestation of the Emerald Ash Borer insect has devastated the ash tree population in our area: Professional Services have increased by 43.7% over 2013, and Landscaping Supplies are up by an astounding 426% in an effort to combat this enemy; like the Fire Department, Public Works contributions to ERF and FERF have more than doubled since last year. Community Development Department: The department s contributions to ERF and FERF, like the incidence in previous departments, have more than doubled since last year. SPECIAL REVENUE FUNDS The Motor Fuel Tax Fund (MFT), Community Development Block Grant Fund (CDBG), Wetlands Special Service Area (SSA) Fund and Special Tax Allocation Fund make up the Village's Special Revenue Funds. SPECIAL REVENUE FUNDS BUDGETED EXPENDITURES Fund 2013 Budget 2014 Budget Change % Motor Fuel Tax 1,200,000 1,107,268 (92,732) (7.7%) CDBG 15,000 15, % Wetlands SSA 180, ,327 19, % Special Tax Allocation 460, ,000 (40,000) (8.7%) Total Special Revenue Funds 1,855,218 1,741,595 (113,623) (6.1%) The Village anticipates receiving $23.83 per capita in motor fuel tax allotments during The Village was the recipient of an extra $170,000 annually for the past five years, but that revenue source has been eliminated by the State of Illinois. Revenue received in the MFT Fund is transferred directly to the Street Improvement Fund for repair of local roads. Cook County has changed its programming for the Community Development Block Grant program (CDBG). The final monies received from Cook County for new residential rehabilitation projects have been spent. The Village no longer participates directly in this program, but currently acts as collection agent for liens against CDBG Village of Streamwood Budget Executive Summary

7 properties paid by past CDBG recipients at the time their house is sold. Any funds received are immediately forwarded to the county. Twenty-nine special service areas have been established to pay the costs of maintaining wetland areas in specifically defined subdivisions. We expect financial activity in twenty-seven of these areas. Weed control, aeration systems, vegetation control and controlled burns are the more substantive projects that are typically undertaken. During the past two years, a significant problem has arisen in several of the special service areas, as well as throughout the rest of the Village the infestation of the Emerald Ash Borer. These insects have necessitated the removal of a large number of the Village s Ash trees, and account for the increase in the various SSAs Budgets. The Special Tax Allocation Fund was created in 2002 to account for developer reimbursements as dictated in the Phoenix Lake Business Park Tax Increment Financing agreement. The developer is being reimbursed up to $1.5 million of its cost to construct the street that runs through the middle of the business park. 70% of each year s incremental property taxes are forwarded to the developer for a fifteen-year period of time. We anticipate that the last payment will be made in Another $1.5 million of the street s construction costs were financed via a transfer from the General Fund. This transfer will be paid back over the next fifteen years with the remaining 30% of the incremental property taxes from the business park. DEBT SERVICE FUND The Village currently has one Debt Service Fund. DEBT SERVICE FUND BUDGETED EXPENDITURES Fund 2013 Budget 2014 Budget Change % Debt Service 1,293,206 1,242,500 (50,706) (3.9%) Total Debt Service Fund 1,293,206 1,242,500 (50,706) (3.9%) The Debt Service Fund pays for principal and interest on general obligation debt. The Village s only outstanding G.O. debt is a $15 million bond issue undertaken in 2005 to finance a new police station and municipal campus infrastructure improvements. During the summer of 2012, when interest rates were at an all-time low, the Village refinanced the outstanding debt. This will result in an ultimate savings of $732,570 over the life of the obligation, scheduled to expire in The principal portion of the 2014 debt service payment is $970,000. CAPITAL PROJECT FUNDS The Village has four Capital Project Funds that are used to accumulate and expend funds for the purchase of capital improvements and equipment. The Funds are financed by systematic transfers from the various operating departments. When an operating Village of Streamwood Budget Executive Summary

8 department needs to make a capital purchase, even if it has been appropriately budgeted, the department must go to the Village Board for the authority to purchase. Please note: annual operating costs associated with capital purchases or improvements are the responsibility of their recipient departments and are embedded in those departments operating budgets. Late in 2013, the Village Board, as a part of its annual Goals and Objectives process, authorized previously unbudgeted transfers to each of the Capital Projects Funds from the General Fund s reserves. Details regarding these transfers are included in the individual funds sections, below. CAPITAL PROJECT FUNDS BUDGETED EXPENDITURES Fund 2013 Budget 2014 Budget Change % Capital Replacement Street Improvement 2,502,500 2,808, , % Equipment Replacement 1,772,500 1,379,200 (393,300) (22.2%) Facilities and Major Equip. Repl. 1,377,200 2,196, , % Total Capital Project Funds 5,652,200 6,383, , % The Capital Replacement Fund serves as a funding mechanism for capital projects that are not included in either the ERF or FERF. The last major project accounted for in this fund was the new police facility that was completed in early Late in 2013, the Village Board allocated a previously unbudgeted $515,000 to the Capital Replacement Fund, for projects to be determined in the future. Since 1991, the Village has been able to provide consistent, long-term funding for one of the Village Board s highest priority projects, the street improvement program. As previously mentioned, the total Street Improvement Fund Budget for 2014 has been set at $2.8 million, significantly higher than 2013 s Budget. The Village Board has decided to direct all cable franchise fees to the Street Improvement Fund in order to increase the amount of street repairs performed each year. The 2014 program will focus around inhouse reconstruction and resurfacing work. Funding is also provided for engineering, crack filling and sidewalk repairs. Late in 2013, the Village Board allocated a previously unbudgeted $115,000 to the Street Improvement Fund for storm sewer lining to be performed in The Equipment Replacement Fund (ERF) provides a framework and funding mechanism for the systematic replacement of all vehicles owned by the Village. The General Fund, Water & Sewer Fund and Golf Fund make annual transfers into the ERF to ensure that adequate funds are available to replace Village vehicles as their useful lives expire. Late in 2013, the Village Board allocated a previously unbudgeted $320,369 to the ERF for mitigate future departmental contributions to the Fund. In 2014, 33 road vehicles and 6 golf vehicles, totaling $1,379,200 are listed for Village of Streamwood Budget Executive Summary

9 replacement. Sufficient reserves exist to finance these vehicle replacements. The Facilities and Major Equipment Replacement Fund (FERF) provides a framework and funding mechanism for the eventual replacement of large non-vehicular items and improvements to municipal facilities that cost in excess of $10,000 per item. Operating transfers from the General, Water & Sewer and Golf Funds are also the primary funding sources for FERF. Late in 2013, the Village Board allocated a previously unbudgeted $1,091,139 to the FERF for future capital purchases including finance software, a document imaging system, and improvements to Fire Station 1 and the Village Hall, as well as to mitigate future departmental contributions to the Fund. In 2014, 10 projects totaling $2,196,500 are identified for purchase and repair/improvement. Sufficient reserves exist to fund these anticipated projects. ENTERPRISE FUNDS The Village's two Enterprise Funds are the Water & Sewer Fund and Golf Fund. ENTERPRISE FUNDS BUDGETED EXPENDITURES Fund 2013 Budget 2014 Budget Change % Water & Sewer 11,045,438 12,503,015 1,457, % Golf 369, ,106 7, % Total Enterprise Funds 11,414,533 12,879,121 1,464, % As previously discussed, water and sewer rates are proposed to increase by 7.5% over 2013 s rates in The Village has been diligent in holding the line on rate increases over the last two decades. Tap on fees from new residential and commercial development helped shore up cash reserves in the past. Since the Village is now close to full build-out, we will not be able to rely on these one-time revenues in the future. Economic pressures are impacting the Water & Sewer Fund as well since water purchase costs from the City of Chicago have risen at annual clips of 15% for the past several years. The 2014 Budget for the Water & Sewer Fund reflects two significant items: 1) A one-time transfer of $400,000 from the General Fund s reserves in late 2013 (earmarked for repairs and upgrades to the water main and sanitary sewer infrastructure), budgeted for expenditure in 2014; 2) a significant increase in water usage began in 2013, as a major fresh produce processor moved its operations into Streamwood last spring. Streamwood Oaks Golf Club continues to experience significant challenges as a result of an overbuilt golf industry. Links Management, an independent management firm, has done an excellent job of maintaining the grounds and running the clubhouse operations for the past sixteen years. In an effort to meet rising costs, the Village Board granted Links a rate increase in 2012, its first increase since TRUST AND AGENCY FUNDS The Village will again have two Trust and Agency Funds in They are the Police Pension Fund and Fire Pension Fund. A summary of budgeted expenses is as follows: Village of Streamwood Budget Executive Summary

10 TRUST & AGENCY FUNDS BUDGETED EXPENDITURES Fund 2013 Budget 2014 Budget Change % Police Pension 2,071,165 2,327, , % Fire Pension 1,477,946 1,755, , % Total Trust Funds 3,549,111 4,082, , % Our retired police and fire pensioners receive 3% annual cost-of-living increases as directed by Illinois state statutes. That increase, as well as new retirees added to the roster each year, accounts for the increase in the pension funds budgets each year. A significant source of concern is the number of work related disability pensions that have increased these budgets significantly: the Village currently has five former firefighters receiving Public Safety Employee Benefit Act (PSEBA) benefits. That number is expected to increase in 2014 and beyond. CAPITAL SPENDING AND THE EFFECT ON DEBT FINANCING As previously discussed, Village staff is required to maintain a comprehensive schedule of capital improvements and additions anticipated for the next twelve years. At Budget time each year, the Village Board reviews a three-year operating and capital improvements plan that sets the legally authorized spending limit for the upcoming fiscal year and anticipated spending levels for the next two concurrent years. Additionally, capital fund balances are reviewed for compliance with the Village s long-standing fund balance policy (50% of total current year replacement balance at a minimum). The Village prefers a pay-as-you-go strategy wherever possible to fund capital projects. The Village's projections for 2014 assume that all capital projects will be funded with cash on hand. Additional operating and maintenance costs associated with any of our capital expenditures are taken into account each year when crafting this multi-year budget document. As discussed previously, annual operating costs associated with capital purchases or improvements are the responsibility of their recipient departments and are embedded in those departments operating budgets. With the use of the Equipment Replacement Fund (ERF), the systematic replacement of all vehicles will allow operating maintenance account budgets to be less volatile in future years. The Facilities and Major Equipment Replacement Fund (FERF) also provides a tool for the Village to use in replacing all other major capital assets. The Capital Replacement Fund is the third tool that accumulates monies for major capital projects that are not included in the ERF or FERF. In addition, the Street Improvement Fund provides funding to keep the Village s street infrastructure in top-notch shape. CONCLUSION The Village of Streamwood has provided quality, cost-effective services to our residents Village of Streamwood Budget Executive Summary

11 since the Village was incorporated in We are confident that the 2014 Budget provides a financial plan that continues this commitment to those we serve. Village of Streamwood Budget Executive Summary