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Minutes - 09/10/2001 - Committee of the WholeMINUTES OF THE SEPTEMBER 10, 2001 COMMITTEE OF THE WHOLE MEETING OF THE PRESIDENT AND BOARD OF TRUSTEES OF THE VILLAGE OF OAK BROOK APPROVED AS WRITTEN BY VILLAGE BOARD ON SEPTEMBER 25, 2001. CALL TO ORDER: The Committee of the Whole Meeting of the Village Board of Trustees was called to order by President Bushy in the Samuel E. Dean Board Room of the Village Commons at 7:35 p.m. She introduced Carol Harty, the new Deputy Village Clerk. The Deputy Village Clerk called the roll with the following persons PRESENT: President Karen M. Bushy, Trustees Adam Butler, George T. Caleel, Susan Korin, Elaine Miologos and Alfred P. Savino. ABSENT: Trustee John W. Craig IN ATTENDANCE: Stephen B. Veitch, Village Manager; Michael A. Crotty, Assistant Village Manager; Dale L. Durfey, Jr., Village Engineer; Debra J. Jarvis, Fire Chief; Robert L. Kallien, Jr., Director of Community Development; Bruce F. Kapff, Director of Information Services & Purchasing; Darrell J. Langlois, Finance Director; Ruth A. Martin, Library Director; Michael J. Meranda, Director of Public Works; Allen W. Pisarek, Police Chief, Bonnie Sartore, Bath & Tennis Club Manager; Trey VanDyke, Golf Club Manager; Police Lt. Sue Srch; Fire Captain Rob Cronholm; and Laurie Adams, CEO & President, Oak Brook Area Association of Commerce & Industry. 2. REVIEW OF DRAFT OF 2002 -2006 FIVE -YEAR FINANCIAL PLAN President Bushy introduced the evening indicating the purposes of this informal type of meeting were to focus on one subject and discuss informally material that had been prepared. She added that participation was welcomed from anyone in the audience, but in order to keep the discussion orderly the trustees would have first opportunity to ask questions or offer their comments when a section was presented. Before moving on to another section she would take questions and comments from the audience. President Bushy thanked Manager Veitch, Finance Director Langlois and their staff for the amount of work involved in the preparation of the Five -Year Plan. She added that the Five -Year Plan served as a road map to ensure that government functioned in a smooth, reasonable and even way. She reminded that this was not the budget, but it served as the framework to put that document together. President Bushy reported that usually the board liaison to the Finance Department led the discussion, but found as she arrived this evening Trustee Craig was not able to attend the meeting and asked Manager Veitch to lead the discussion. SPECIAL COMMITTEE -OF- THE -WHOLE Minutes Page 1 of 12 September 10, 2001 Manager Veitch indicated that staff was pleased to present the draft 2002 -2006 Five - Year Financial Plan for the Village of Oak Brook. The Five -Year Financial Plan combines projections of anticipated revenues with estimates of the resources necessary to meet anticipated needs, in terms of both operating and capital expenditures, to produce a long -range picture of the financial condition of the Village. It was an extremely useful tool for the Village Board and Staff in the budgeting process and in assessing the future impact of current decisions. He described the materials available to the audience, particularly the comparison of the tax burden for residents. He also emphasized that the Five -Year Plan was not an "authorization to spend ". He noted that two years ago, the 2000 -2004 edition of the Five -Year Financial Plan introduced a significant change in Village financial policy with respect to the utility tax. It reflected the establishment of a telecommunications tax, in lieu of the telephone utility tax, in order to help support the operating and capital needs of the General Corporate Fund over the planning period. Most significant among these needs were increased public safety (Police and Fire) staffing and completion of the Municipal Complex Project, the bulk of which benefits public safety services. The telephone utility tax was repealed leaving only the electric and gas utility taxes to fund the Infrastructure Fund. The 2001 -2005 edition of the Plan continued that course but also responded to new challenges. The costs of the Municipal Complex Project and extensive road and drainage work in the Timber Trails neighborhood were updated. That Plan also had to respond to significant increases in the cost of employee benefits, specifically health insurance and pensions, which had been experienced during 1999 and 2000. As a result, the 2001 -2005 Five -Year Financial Plan reflected a one percent increase in the telecommunications tax in 2002. Very late in 2000 the Village became fully aware of the nature and extent of the decline in sales tax revenue that had been experienced in 2000 and has continued into 2001 (following six years of essentially flat revenues). This has increased the challenges faced by the Village in development of the 2002 -2006 Five -Year Financial Plan. Manager Veitch explained that the draft Plan for 2002 -2006 offers two options for addressing the Village's needs in the near term while maintaining a 6 -month reserve in the General Corporate Fund and continuing to pursue a longer -term solution through implementation of a local option sales tax. Both options require adjustment of the telecommunications tax by 2 percent immediately to 5 percent (4 percent plus the 1 percent temporary tax in lieu of the infrastructure maintenance fee). The first option (Option A) forces elimination of approximately 40 percent of new personnel scheduled. The second option (Option B) restores those cuts through elimination of the General Corporate Fund contribution to the Equipment Replacement Fund and returns to the prior policy of funding capital equipment replacement primarily with utility tax revenues. SPECIAL COMMITTEE -OF- THE -WHOLE Minutes Page 2 of 12 September 10, 2001 C� This change in turn requires an increase in the utility tax applicable to natural gas service from 3 percent to 4 percent and an equivalent adjustment to the schedule of electric excise tax rates. He noted that these options are similar conceptually, but are considerably more favorable than the options laid out by Finance Director Langlois in his June 27, 2001 memorandum on Financial Alternatives. The difference is accounted for by positive variances in the Infrastructure Fund that enable that fund to absorb a substantial portion of infrastructure maintenance expenses currently borne by the General Corporate Fund and additional support of the annual street paving program by the Motor Fuel Tax Fund. Through these steps, Option A permits funding of 60 percent of scheduled new personnel (rather than none) and Option B permits funding of all scheduled personnel (rather than only the Library positions and 50 percent of scheduled Police and Fire positions). Manager Veitch described basic assumptions embodied in the Plan indicating general inflation of 2.5% per year, personnel inflation 2.5% above the general rate, interest earnings from 4 -7 'z% based on type and length of investment. With respect to sales tax it is based on annual growth in the office sector of 0 %, which has declined substantially and an annual growth in same store sector of 31/2% which obviously assumes some recovery in the retail store economy. Manager Veitch suggested that the discussion of the Corporate Fund, the Infrastructure Fund and the Equipment Replacement Fund be combined because they all reflect an Option A and an Option B and they relate to one another. He commented that the Water Fund does reflect an increase in the water rate from $2.35 which has held four years longer than anticipated increasing to $2.60 for 2002 and $2.85 for 2004. He added that in a previous Five -Year Plan a rate of $3.10 was projected for 1998. He emphasized that the Village was successful in holding off the timing and size of water rate increases. CORPORATE FUND DISCUSSION: Revenue: Manager Veitch noted that there would be about a 9% decrease in the base for state - shared revenues based on the 2000 census, which indicated that Oak Brook's population was down although the State's population was up. He acknowledged that although staff was looking for errors, the enrollment downtrend of School District 53 was probably reflective of what was happening in our population. He added that in addition the grant funding available to help fund the Municipal Complex Project was down from $1.5 million to $750,000 because less funds were available and there had been a change in rules and procedures for accessing grants through the Illinois FIRST program. SPECIAL COMMITTEE -OF- THE -WHOLE Minutes c, Page 3 of 12 September 10, 2001 Operating_ Manager Veitch commented that personnel changes included are the same as those included in the previous Plan, but had been postponed. He reiterated the changes that were related to the Infrastructure Fund. He commented that the Library personnel considerations were based on the benchmark adopted by the Board. Consideration of lowering the target would limit the number of hours of operation of the Library. He reported that in the Police Department the Plan reflected three additional police officers to be added in May, 2002 and one additional officer each year thereafter. He reminded the Board of an analysis that indicated justification of from 7 to I1 new officers. Fire Department personnel reflected the addition of three contract firefighter /paramedics in 2002 and another three in 2004. He added that the department requested six additional personnel over two years, not over three as recommended in the Plan. He pointed out that even with those additions, the Oak Brook Fire Department would be nowhere near the staffing suggested by NFPA Standard 1710. Manager Veitch noted that the Corporate Fund had significant obligations beyond just operations including contributions to the police and fire pension funds in lieu of property taxes; vehicle replacement charges; an annual transfer to the Sports Core Fund which was designed to cover the cost of general maintenance and administration of the property, reimbursement for some community events costs and to cover debt service on the tennis dome (which only has one more year to go). He added that in Option B the vehicle replacement charges are funded directly to the utility tax which frees Corporate Fund monies to fund the previously scheduled personnel initiatives. Capital Improvement: On the capital improvement side, the Plan reflects completion of the Library in 2002 and the completion of the Municipal Complex in 2003. The Library costs are based on a total General Corporate Fund Project budget of S4.2 million. He added that there were also funds projected for the construction and relocation of Polo Road and other Library systems. An overall construction estimate for the Library was about $5.5 million, with about $4.36 available from the General Corporate and Infrastructure Fund, leaving about $1.25 million to be raised by the Oak Brook Library Foundation. These figures exclude technology and moving expenses. The Municipal Complex Project is estimated at about $9.2 million and the current estimates are just under S9 million so there was some flexibility built into that number. Manager Veitch added that there were some other costs associated that are not within those numbers such as technology and equipping the new communications center. SPECIAL COMMITTEE -OF- THE -WHOLE Minutes Page 4 of 12 September 10, 2001 L.� He commented that they were not included in the cost projections of the projects because they would have been made anyway, with or without the new construction. Manager Veitch concluded his overview indicating that an essential long -term need was gaining the statutory authority and ultimately voter approval for a local option sales tax. He reported that the number talked about was one - quarter percent because it provided an amount of money consistent with the Village's needs but did not raise the overall sales tax rate to an noncompetitive level. He stated that information had been provided which indicated evidence of what total rates are in other places. He emphasized that long term, this was where the Village's financial future lies because of what is happening in the business to business part of our sales tax base as a result of electronic commerce. INFRASTRUCTURE FUND: Manager Veitch specified that Option A would be picking up the equipment replacement transfers, Option B would not. He stated that the rest of the Fund is basically what has been there in the past, roadway maintenance, drainage improvements, and the program safety pathway projects. He noted several public works items such as the street marker project, the forestry program and beautification of right -of -way. UIPMENT REPLACEMENT FUND: Manager Veitch again commented that in Option A this Fund's revenues are derived from charge backs and in Option B its revenues are derived entirely from the utility tax. The expenditures are the same in both options based on the replacement schedules for vehicles. He reminded the Board that during a budget period, if it was deemed appropriate specific purchases were, on occasion, deferred. Trustee Caleel asked what the six month operating budget reserve was and where did the 3.5% sales tax increase come from considering the fact that revenues are actually coming down. Manager Veitch responded that the reserve varied based on the budget but ranged from approximately $7.5 million to $9.1 million over the Five -Year Plan. Manager Veitch responded that the reduction was based on the office sector, and the 3.5% was based on a turn around in retail store activity. He added, that though it may be somewhat optimistic, it was not unreasonable to think that the 0% office sector estimate was somewhat conservative. Trustee Savino asked what the average would be of both types of revenues. Manager Veitch and Finance Director Langlois responded that 2% was reasonable. It was added that an analysis had been done on various scenarios, and over the Five -Year Plan it came to approximately $200,000, which was not considered to be an insurmountable figure. SPECIAL COMMITTEE -OF- THE -WHOLE Minutes Page 5 of 12 September 10, 2001 Z�� Trustee Caleel expressed his opinion that the increase in the utility tax should be held back to keep as a contingency. He would consider Option A for personnel and he expressed concern about the optimistic 3.5% sales tax increase projection. He expressed prudence should be followed for staffing. He also asked why the projections for comparison of tax burden were to communities much larger than Oak Brook. President Bushy suggested that it was important to remember that although the commercial population did not live here that the Village had to have staff and equipment to service all of them. Manager Veitch offered that many of those communities chosen for comparison had populations between our permanent and transient numbers. He added that suggested staffing for police in communities that fit into that category were 51 sworn officers. The Village currently had 41. Trustee Savino expressed his opinion in favor of Option B because the increase cost to our residents was not substantial, less than $100.00 a year. He added that it enabled us to provide equipment that was up to date. He also felt that staff was responsible and would not spend money just because it was in the budget if it was not needed. He also felt that providing the opportunity to hire the staff that was needed was important. He added that since it has been the policy of the Board to approve each and every staff addition staff on their own did not do it. Manager Veitch added that each time a replacement position became available, it was reviewed to determine if it needed to be filled and, if so, whether the level of classification could be lowered. Trustee Savino also commented that the Village's fire insurance rates were quite low which was in part due to the level of equipment and staffing. He added that insurance rates would go up if staffing levels were compromised. Trustee Caleel emphasized that staffing carried all of the benefits required, he did not want to see the utility tax increase right now. He would prefer to put off full staffing until the Board had a chance to see where the economy was going. Trustee Butler commented that there was concern that the economy was taking a longer time to turn around, but that it might behoove the Board to get a head start by enacting the utility tax now to add a cushion. He added that it could always be reviewed later. He emphasized that it took time to enact the tax and receive its benefits. He agreed with concern about going with the full complement of staffing. Trustee Savino reminded the Board that taxes were approved annually, that the Board had reduced taxes if they were not needed. President Bushy confirmed this and commented that it showed the Board's sensitivity to the level of need and that funds were not spent because they were available. Trustee Caleel expressed a concern about keeping the commercial atmosphere attractive and that raising two taxes at one time could be detrimental. He suggested that there should be a Plan C. SPECIAL COMMITTEE -OF- THE -WHOLE Minutes Page 6 of 12 September 10, 2001 11 President Bushy responded by relaying discussions with developers that revolved around the quality of services, not taxes. She noted that the local tax burden for an office building in a community that levies property tax may be several times that in Oak Brook and she recognized that developers were well aware of that fact. Manager Veitch clarified that Plan A did not hire 60% of the staff required in the first year of the plan, but across the whole plan which diminished the staffing plan considerably. Trustee Korin agreed with Trustee Caleel's suggestion that there should be a Plan C. She commented that revenues from retail sales from January to June were stronger than anyone expected, but they slowed in July. She felt that the truth as to what actual revenues will be would be reflected in the last quarter of this year. She felt that as a safety net, the Board should consider that there would not be an increase in retail sales revenue from 2001 to 2002 based on her conversations with people and consumer confidence. She felt that for the purposes of the Five -Year Plan a 17.5% increase of revenues over the period was too optimistic, she would feel more comfortable with a 10% increase. Trustee Caleel commented that when Manager Veitch explained that although the economy may be slowing down and the demand for product was down, the demand for services was not, he agreed. However, he asked for conservatism, provide for immediate needs and see what happens this next year. President Bushy reminded the Board that the Village was in the second year of deferring staff needs. She added that public service personnel require up to a full year before they are out on the street and that enormous lead -time was required. Trustee Miologos agreed with Trustee Caleel indicating that she felt for the next twelve months we should be very conservative. She agreed that the Village needed to provide fire and police personnel for public safety, but if sales tax revenues were flat or decreased and if there were overruns on the construction projects she had a concern as to how it would be funded. She felt that equipment purchases should be deferred, such as the scheduled fire pumper. Manager Veitch commented that Trustees had suggested deferring the Corporate Fund contribution to the Equipment Fund as a contingency. Trustee Caleel commented on the expected rate of return on investments being high. Finance Director Langlois responded that the 7% rate was in the pension funds and was the actuarial assumed rate, based on a long term. SPECIAL COMMITTEE -OF- THE -WHOLE Minutes Page 7 of 12 September 10, 2001 Trustee Korin agreed that postponing public service personnel hiring was less than ideal, but since the reason they had already been deferred was because of the sales tax revenue it should be continued until there was evidence of an increase in revenues. Trustee Savino reiterated that the increase in the utility tax would pay for the increased staff. Manager Veitch confirmed that this was true based on the utility tax releasing monies in the Corporate Fund and was the difference between Option A and Option B. Trustee Korin suggested taking a year off of equipment purchases. Discussion ensued related to the equipment scheduled for the Fire Department for 2002. Fire Chief Jarvis indicated that it was an ambulance and a pumper. She explained that the schedule of replacement allowed the department to have newer front line vehicles and bumped the oldest to reserve status. The Board discussed options of deciding where to place available funds, bike path projects and the possibility of delaying unfunded projects. The Board's discussion also included offsetting not enacting the utility tax by deferring equipment replacement or expecting an increase in sales tax revenues amounting to 8 or 9 %. Trustee Savino did not agree with deferring equipment replacement because it would contribute to obsolescence. The Board addressed the timing of receipt of revenues to determine a trend and the fact that about a third of the Village's revenue was earned in the last quarter of the year. Trustee Miologos suggested projecting flat revenues and no budget for additional staff until a trend was established. Trustees Caleel and Savino did not agree with absolutely no staff changes. Discussion ensued related to Library staffing. Library Director Martin explained the levels that the Board had established and indicated that currently the Library was short six staff members. She also commented that she could not open the newly constructed Library without additional staff. Staffing levels determine the amount of hours that the Library could be open. Our citizen surveys indicated comments from the public of the hours that they require. Trustee Caleel suggested basing revenues on a 0% increase in sales tax revenues for the first year and 2.5% for the years thereafter, making an accommodation for minimal personnel for police, fire and the Library. Manager Veitch and Finance Director Langlois responded that those figures would cause significant changes in expenditures, much below the 60% level of hiring. Trustee Butler asked whether a gradual escalation, starting at a little higher level, would make a difference. Finance Director Langlois responded that it would be difficult. SPECIAL COMMITTEE -OF- THE -WHOLE Minutes Page 8 of 12 September 10, 2001 He added that generally when a reduction on the revenue side appeared, there was a corresponding reduction on the expense side. He commented that in all of the years he had worked at the Village the budget was under budget every year. Trustee Caleel asked what percent of expenses were generally used. Finance Director Langlois responded that as projections were improved, expenses were approximately 90% of budget. He added that this did not include capital expenditures. Comment was made to the effect that if sales tax revenues were decreasing, the day to day average population would also be decreasing. President Bushy responded that companies may have reduced a few employees when they experienced a large decrease in sales which affected our revenue, but that the majority of their employees still needed services. She added that one of the largest corporate customers bore virtually no tax burden and the Village still had to provide them with services. She emphasized that the additional burden on a $750,000 property only amounted to approximately $69 a year, not an onerous burden. Trustee Korin commented that the corporate customer would bear the burden. Trustee Savino responded that they could not go anyplace cheaper. Trustee Butler commented that the corporate customer was the largest burden on our infrastructure and services. He understood the concern about reevaluating sales tax figures, but that revenues needed to increase. He added that the increase in the utility tax was a way to protect us and there was the opportunity to reduce the tax at any time that it was felt unnecessary. He felt that it was a very small amount, the Village would still be competitive and it would provide a shield against a bad economy and is a prudent measure. Trustee Korin commented that her concern was more related to the sales tax revenue projections. Finance Director Langlois expressed that other variances would affect those numbers both in increased revenues from other sources and decreased expenses for various reasons. President Bushy confirmed this and relayed several examples. She emphasized that this Five -Year Plan was a road map and not a line by line itemization. Manager Veitch made an observation that for a business entity not involved in an activity that generated sales tax, the only contribution made to the cost of the services the Village provides was through the telecommunication tax and the utility tax. He commented that although these businesses may not enjoy an increase in their telecommunication taxes, they recognize that they get good services for a small contribution. Trustee Miologos commented that even if the utility tax was enacted, she would not support hiring any additional staff during the next twelve months until the Board had a better idea of what the next year would bring. SPECIAL COMMITTEE -OF- THE -WHOLE Minutes Page 9 of 12 September 10, 2001 Discussion revolved around the problems with deferring staff because of the training lead -time. Manager Veitch reminded the Board that as a non -home rule community, the Village does not have the authority to set entry -level qualifications that would diminish the training lead -time. It was added that these staff additions had already been deferred a year. President Bushy recessed the meeting at 9:30 p.m. and reconvened at 9:45 p.m. Trustee Savino suggested reconfiguring sales tax assumptions at a 2% initial level, use Option B but postpone hiring until July when there was a better estimate of revenues. The Board would review any additional staff and the Library should be staffed minimally prior to July. Trustee Caleel suggested configuring the budget assumptions at a flat rate for 2002 and whatever was needed beyond that, Option A at 50% with Village Board review of additional hires and public safety hires delayed until June and Library staffing at the minimum. Manager Veitch specified that Trustee Savino's suggestions would be classified as B.1 and Trustee Caleel's suggestions would be classified as A.1, since they relate to each of those Options. He set forth that the figures would be put together for their review. Laurie Adams of the Oak Brook Area Association of Commerce and Industry asked for clarification of the 1% IMF versus the 1% telecommunication tax. Manager Veitch responded that financially they were the same. She asked whether a 2% increase in the telecommunications tax could be gradual. Manager Veitch responded that 1 % was needed to stand still and that the 2% was needed to move forward. Manager Veitch went on to describe the remainder of the funds. Hotel /Motel Tax He reported that there were a couple of new features to this Fund, the most significant of which was the fact that there was now the ability to transfer a modest amount to the General Corporate Fund for reimbursement of administrative services rendered to the Hotel, Convention and Visitors Committee. Trustee Caleel questioned the fact that the Village was restricted to a 1% tax. Manager Veitch responded that the statutory maximum was 5% and many of the neighboring communities were at that rate. He added that the Village was restricted as to how these revenues could be used. MFT Manager Veitch said that the MFT fund reflected a continuation of the current program to offset infrastructure expenses. SPECIAL COMMITTEE -OF- THE -WHOLE Minutes Page 10 of 12 September 10, 2001 C;� Water Manager Veitch advised that there was a rate adjustment included. He also noted there was another significant change in that the Village would have to find another way to read water meters. NICOR was no longer going to provide that service. He offered that the increased cost would be approximately $35,000. He shared that other communities were making large capital investments for equipment that would read meters through radio signals. He added that it had not been considered economically feasible for a system the size of Oak Brook's to invest in the technology. President Bushy added that another reason it was not pursued was that the technology at that time used telephone lines and that was determined to be undesirable. Manager Veitch estimated the cost to be about 5100 per customer. Public Works Director Meranda reported that it was a staff objective for next year to review this area again. Sports Core Fund Manager Veitch explained that the Fund was divided into three segments: Sports Core Operations, the Golf Surcharge Account and the Capital Improvement Account. Discussion ensued related to the Westchester property, the sale thereof and the estimates of the revenues to be gained. Additional discussion revolved around gaining membership and revenue projections for the Sports Core. Trustee Butler and Trustee Caleel did not agree with the credit to returning members to compensate for the reconstruction. f- Insurance Manager Veitch indicated that this was somewhat self - explanatory. Gara,e Manager Veitch indicated that this was also self - explanatory. Pension Funds Manager Veitch explained that this was dictated by state statute and was regulated. Long Ranee Financial Issues Manager Veitch emphasized those long -term goals needed to include a local option sales tax but that it was dependent on Springfield. SPECIAL COMMITTEE -OF- THE -WHOLE Minutes Page 11 of 12 September 10, 2001 3. ADJOURNMENT: Motion by Trustee Caleel, seconded by Trustee Miologos, to adjourn the Special Committee -of -the -Whole Meeting at 10:37 p.m. VOICE VOTE: Motion carried. ATTEST: Linda K. fjonnella, CMC Village Clerk COW 091001.Rev 3 SPECIAL COMMITTEE -OF- THE -WHOLE Minutes Page 12 of 12 September 10, 2001