Minutes - 06/29/2004 - Intergovernmental Joint Review BoardV� OF Uq�
P
� f
a - A
o
A t1
9 �
y �
FCQUNTV \
Village of
Oak Brook
1 100 Oak Brook Road
Oak Brook. IL. 60>13 -2,55
Niebsite
NN %N �N.oak- brook.urg
Administration
630.9903000
F.a\ 630.990.()ti7 6
Community
De% eloprnent
630.99(13043
Engineering
Department
63u.991)ln l n
i �y 63n.99u39x�
Fire Department
6"0'990."040
F\\ O"0 ,A).":9,
Police Department
0 01 1)1)(), -,?5\
I:A\ 1)1)() 741,4
Public NNorks
Department
Oak Brook
Public Library
ON, Oak Brook koad
Oak Brook. IL 60''-2200
0',0.91)(),_-
I \\ 03091)(),4;09
Oak Brook Sports Core
Bath R Tennis Club
?00 Oak Brook Road
Oak Brook. IL 00i_3 --3600
(,',0.9()0.',0'_0
FA\ 030.990.100?
(,oil' Club
'(100 York Road
Oak Brook, IL 6023; 4602
6"0.990.10"
I: AX 630.990.024,>
December 10, 2003
Village President and Board of Trustees
Village of Oak Brook
President Quinlan and Trustees:
Presented herewith is the Municipal Budget for the Village of Oak Brook for the
calendar year ending December 31, 2004. The 2004 Municipal Budget, as well as
the 2004 -2008 Five -Year Financial Plan and 2004 Program Objectives, were
approved by the Village Board on December 9, 2003. Highlights of the budget are
summarized in this letter of transmittal.
The 2004 Budget continues the methodology, called "results budgeting ". This
methodology combines traditional program budgeting and line item control with a
management by objectives system. Coupled with the Five -Year Financial Plan, this
approach provides the Village with a management system that goes beyond
traditional budgeting to become a directional mechanism for accomplishment of the
results desired by the Village Board and the community. The methodology is
summarized in the Overview and Structure section of the document.
Long range policy guidance for the budget process is drawn from the Mission and
Vision statements, which are reviewed annually and were last formally re- adopted by
the Village Board on July 8, 2003. The linkage between the tenets of the Mission
Statement and operating goals is found in the Program Goals of each Budget
Program. The Mission and Vision statements immediately follow this letter of
transmittal.
Short range policy guidance is provided each year by the Village Board and staff
through the establishment of Program Objectives which are arrayed throughout the
2004 Budget. Statements summarizing each objective are found on the Program
Summary page that accompanies each Program Budget. The complete collection of
Program Objectives, including measures of accomplishment and anticipated
completion date, has been provided under separate cover.
Village President and Board of Trustees
December 10, 2003
Page 2
Ordinance 1999 -FI -S -957, the Village Board's policy ordinance on Finance, Taxation and Budget,
provides both long and short range guidance to the budget process through the fundamental policies
embodied therein. A copy of the policy ordinance is found in the Appendix. The policy ordinance,
as well as other policy decisions of the Village Board, directs us to:
• Operate the Village without a general real estate tax.
• Accumulate cash reserves in advance of major capital projects (utilizing long term debt
very judicially and only in order to meet financial goals and policies of the Board).
• Maintain a cash balance of at least six months operating expenditures in the General
Corporate Fund.
• Annually test the incremental growth in General Corporate Fund operating expenditures
against the incremental growth in revenues, striving to hold expenditure growth within
the limits of new revenues.
• Operate enterprise activities on a self - supporting basis.
• Annually review the need for and uses of the utility tax on natural gas and electric
service.
This 2004 Budget is consistent with most of these fundamental policies. The Budget does not rely
on a real estate tax to fund operations. Cash reserves and operating revenue will be used to fund
capital projects (no new long -term debt). Incremental growth in General Corporate Fund operating
revenues exceeds the incremental growth in operating expenditures (page F -11). Enterprise
activities are budgeted to operate on a self - supporting basis. The needs and uses for the utility tax
were reviewed and the tax extended on October 14, 2003. The only exception to the fundamental
policies is that the December 31, 2004 ending cash position in the General Corporate Fund is
projected at 5.3 months of operating expenditures, which is below the current six month policy.
Over the last several years there have been many issues that have been putting financial pressure on
the Village's Budget. Declining sales tax revenues, lower telecommunications taxes, significant
reductions in interest earnings due to historically low rates, and rapidly increasing pension and
employee benefit costs are some of the more material items in recent years. Due to further declines
in some revenue sources as well as continued increases in operating costs (employee salaries,
pensions, and liability insurance are the three most significant), the preparation of the 2004 Budget
was based solely on maintenance of existing service levels, reducing individual line item requests to
the extent possible (including staff training), and preserving existing staffing levels. Although
personnel additions were included in previous budgets and were requested by each of the major
operating departments this year (and supported by staffing studies), no additional staff positions are
included in this Budget.
Village President and Board of Trustees
December 10, 2003
Page 3
Despite these efforts, as well as proposing several revenue enhancements (most significantly
increasing the telecommunications tax to the maximum rate of 6 %), the initial projections for the
General Corporate Fund that were presented at the Budget Workshop indicated that normal
operating expenses would continue to exceed operating revenue for the duration of the Five -Year
Plan. This was before any taking into account any capital expenditures. After considering various
options for addressing this situation, the direction given to staff was as follows:
• The telecommunications tax increase contained in the draft 2004 Budget is to be eliminated.
• The 2004 budget should be balanced in that budgeted expenditures are limited to the amount
of budgeted revenue. This was accomplished by increases in some revenue sources,
significant reductions in individual line items and programs (including staff training, some
community events, elimination of the Village Board contingency, etc.), deferral in hiring
several public safety positions for up to six months, and deferral of most capital items until
2005.
• The Village Board would place a referendum question on the March 16, 2004 ballot for the
implementation of a non -home rule sales tax of 0.25 %. If the referendum is successful, the
Village would receive approximately $2.25 million annually in additional sales tax revenue.
The use of this tax would be restricted to infrastructure and public works projects but would
allow most of the utility tax presently used for this purpose to be used by the General
Corporate Fund for other governmental purposes.
The Financial exhibits that follow have been revised based on the direction given at the Budget
Workshop except that non -home rule sales tax revenue has not been included in the Budget due to
the referendum requirement. Although the 2004 Budget has been balanced, as previously
mentioned the projected ending cash position is approximately $765,000 below the six month cash
reserve requirement. The 2004 -2008 Five -Year Financial Plan projects a further decrease of
approximately $1.3 million in 2005, with further reductions projected in each remaining year of the
Plan. If the sales tax referendum is successful, this will solve most of the budget problems currently
faced. If the referendum fails, permanent reductions in service levels and /or elimination of some
full -time staff positions will likely be required in the 2005 Budget.
In 1999, the Village Board revised its cash reserve policy from a range of four to six months to a
firm six month reserve policy. This was done at a time when operating revenues greatly exceeded
operating expenses and none of the factors that have impacted the Village (primarily the large sales
tax declines) could have been predicted. As we strive to get General Corporate Fund operating
revenues and expenditures in balance, even limiting expenditure growth to unavoidable inflation
(primarily salaries and benefits) will require 50% more in revenues than the growth in expenditures.
While the economy has shown some signs of coming back, it is uncertain whether it will come back
at a rate that will provide enough funds to increase cash reserves in addition to funding increases in
expenditures.
Village President and Board of Trustees
December 10, 2003
Page 4
SUMMARY
The total budget for operating and capital expenditures (excluding non - operating and interfund
activities) is $29,872,580, a decrease of $711,145 or 2.33% from the comparable figure in the 2003
budget (see Page S -4). The primary cause of this positive variance is a reduction in capital
expenditures from the prior year.
The total expenditure budget for 2004 is $36,554,680 on total revenues of $35,085,800, a decrease
in expenditures of $2,279,735 or 5.87 percent from the comparable figure in the 2003 budget. In
accordance with generally accepted accounting principles (GAAP) as they apply to governmental
entities, these amounts include interfund transfers, interfund loans and internal service charges. The
GAAP basis of accounting requires inclusion of these items in order to properly account for activity
in each fund and the cost of each program. However, on a cash basis this has the effect of
overstating both revenues and expenditures since the cash position of the Village is not affected by
these transactions. Net of these interfund activities, the 2004 expenditure budget is $32,425,565 on
total revenues of $30,956,685. A comprehensive presentation of sources and uses of funds is found
on pages S -5 and S -6.
Total unrestricted cash balances (excluding pension funds) are budgeted to decrease approximately
$3,591,015 from the estimated January 1, 2004 balances (see Page S -7). The decrease in cash
balances is due primarily to capital outlays in the Motor Fuel Tax Fund, Infrastructure Fund and
Water Fund as well as the scheduled replacements of vehicles.
REVENUE
Itemized budgeted revenues are found on or following each fund summary in the Analysis of Funds
section of the budget document. Highlights are as follows:
• Revenue from the 1 percent share of the Retailers Occupation Tax (a.k.a. General Sales Tax)
is projected to end 2003 at $10,000,000, which is 1.3% over the 2003 budget amount and
4.5% over the prior year. After experiencing several years of decline this is very good news.
The budget amount for 2004 is $10,225,000, which is based on a 3 percent growth
assumption, new retail development, and some other one -time factors known to have an
effect on the 2004 projections. Historical sales tax revenue trends are depicted in the graph
on Page 5 -10.
• State Income Tax revenues of $540,000, which is 11 percent below the 2003 estimate and
$86,500 or 14 percent below the 2003 budget of $626,500. The decrease in 2004 is
attributable to an increase in the amount of taxes allocated for backlogged and prospective
refunds, which results in less funds expected to be allocated to the Local Government
Distributive Fund. The downturn in the economy in general also has a negative effect on
this and other State shared revenues. The 2004 budget for all State revenues is based on
projections provided by the Illinois Municipal League.
Village President and Board of Trustees
December 10, 2003
Page 5
• Total revenue in the General Corporate Fund from the Telecommunications Tax and utility
tax on electric and natural gas of $3,977,000, an increase of $462,200 from the 2003 budget
amount. For 2004, two additional months of telecommunications tax revenue is expected
since only ten months of revenue was budgeted in 2003 due to a one -time increase of two
months in the lag time of receipts due to the State assuming collection responsibilities of this
tax. As to the utility tax, a one -time increase from 2% to 3% of the total 5% rate in the
amount allocated to the General Corporate Fund is needed for 2004 in order to fund general
governmental operations. The General Corporate Fund share of this tax is scheduled to
revert back to I% beginning in 2005.
• Total fees from licenses and permits of $560,800, approximately 13.4% above the 2003
budget amount of $494,450, and total fees for charges for services of $631,100, an increase
of 14.1% over the 2003 budget amount of $553,000. These increases are due primarily to
significant adjustments to various fees over the last two years.
• Motor Fuel Tax revenues of $251,500, which is unchanged for the 2003 budget amount.
This revenue is derived from the taxes levied by the State of Illinois on gasoline and other
fuels. Approximately 54 percent of the amount deposited to the Local Government
Distributive Fund is distributed to municipalities on a per capita formula.
• Revenue to the Infrastructure Fund from utility taxes of $745,000, which is approximately
37% below the 2003 budget amount. This reduction is due to a proposed one -time
redirection of 1% of the 3% rate normally allocated here to the General Corporate Fund for
2004. Thus, for 2004 the Infrastructure Fund will receive 2% of the 5% total rate.
• There is no revenue to the Equipment Replacement Fund from utility taxes in 2003.
Consistent with prior budgets and five -year financial plans, this is the second and final year
that this Fund's 1% percent share of the 5% rate is re- directed to the General Corporate
Fund. It is expected that the Village will revert to the prior policy beginning in 2005.
• Revenue from sale of water of $4,279,000, an increase of 11% over the 2003 budget.
Consistent with projections made in prior years, the retail rate for water of $2.60 per 1,000
gallons is recommended to increase to $2.85 effective January 1, 2004. With this increase
the Oak Brook water rate will still be among the lowest of DuPage Water Commission
customers and is well below the long -term break even rate of approximately $3.50.
OPERATING EXPENDITURES
The total 2004 operating budget is $25,629,240. This is an increase of 1.83 percent over the
comparable figure from the 2003 budget (see Page S -4). Significant changes budget to budget are
noted in each Program Summary presentation. The 2004 operating budget does not include any of
the new staff positions that were included in the previous budgets and five -year financial plans due
to continuing revenue issues.
Village President and Board of Trustees
December 10, 2003
Page 6
The total change in full -time equivalent (FTE) staff positions reflected in the 2003 budget is a
decrease of 1.5. A Full Time Equivalent Personnel Summary is included in the Summaries section
(5 -24 and S -25) and further mention of the details is made in this letter and in the relevant Budget
Program Summaries.
Pay grade adjustments have been budgeted for police personnel represented by the Fraternal Order
of Police (FOP) and fire personnel represented by Teamsters Local 714 based their collective
bargaining agreements. For non -union personnel, the 2004 budget for full -time salaries is based on
an average top -of -grade increase of 3.5 percent. 2004 is the year whereby top -of -grade salary
increases will be based on an outside pay study. The results of the study, which are expected to be
received late in the year, will determine actual salary increases for 2004.
The following paragraphs summarize the most significant features of the operating budget of each
department:
Department 1 - Legislative and General Management This department involves a wide variety
of general -scope functions including the operations of the Village Board and the offices of the
Village Clerk, Village Manager and Village Attorney. The Human Resources, Employee Benefits,
Risk Management, General Services, Purchasing, Information Services, Village Communications
Center and Emergency Management budgets are located in this department as well.
The most apparent features of the 2004 budget for these functions are a significant increase in the
cost of liability and worker's compensation insurance premiums through IRMA, increases in
employee benefits (i.e. health insurance), elimination of the Village Board contingency account,
reduction in the cost of labor negotiations due to completion of two collective bargaining
agreements, and outlays in the hotel /motel tax program.
Department 2 - Financial Services This department includes all functions related to the Village's
financial management activities, including the Police and Firefighters' Pension Funds. Increased
outlays are reflected in both pension funds due to projected retirement benefits.
Department 3 - Public Works This department has charge of maintenance of the Village's
physical infrastructure consisting of buildings, streets, pathways, trees and vehicular equipment.
The department also is responsible for operation of the water utility.
The 2004 Budget includes approximately $100,000 in Program 365 (Forestry) for Village
beautification efforts. The Budget also includes funds to address gypsy moth problems as well as
increased mosquito control efforts. There is a significant reduction in the Water Operation Program
due to substantial completion of the system -wide automated meter reading program in 2003. The
budget for the Equipment Replacement Fund is $709,750 and includes several major equipment
items scheduled in 2002 and 2003 but were deferred to 2004. Each purchase will be evaluated
individually before proceeding. The transfer from the Garage Fund to the General Corporate Fund
has been decreased by $200,000 since in 2003 there was a one -time increase in order to return
surplus funds generated over the past several years.
Village President and Board of Trustees
December 10, 2003
Page 7
The 2004 Budget continues the shift in funding of several Streets Division programs from the
General Corporate Fund to the Infrastructure Fund. New for 2004, the Mosquito Control Program
has been shifted here also. These changes assist the General Corporate Fund in meeting its other
obligations and is made possible in part by decreasing needs for major maintenance and
reconstruction expenditures as a result of the aggressive work undertaken over the last decade as
well as the availability of Motor Fuel Tax funds to assist with funding the annual paving program.
Department 4 - Engineering This budget covers all operations of the Engineering Department and
the office of the Village Engineer. The program budgets for the majority of the Village's capital
improvement programs are found in this section as well. The highlights of the capital programs are
discussed elsewhere in this transmittal letter.
Department 5 - Library The Library budget in total is projected to decrease 2.6% from 2003.
Staffing is budgeted to remain at its 2003 levels.
Department 6 - Police The 2004 budget includes reallocation of two budgeted positions from the
Police Investigations Program to the Police Field Services Program in order to staff a full time
traffic enforcement unit. Consistent with past practice, the budget also includes two years of salary
increases for bargaining unit personnel since salary increases were not included in the 2003 budget.
The replacement of the vacant Support Services Lieutenant position has been deferred until
approximately July 1, 2004. The Equipment Replacement Program budget related to the Police
Department includes funds for the replacement of light bars on all marked police vehicle units.
Department 7 - Fire The costs associated with salary increases as well as increased pension costs
due to several years of unfavorable market conditions are included in the 2004 Budget. The
replacement of a vacant Battalion Chief position has been deferred until at least April, 2004.
Although a full -time Fire Prevention Bureau Director position was included in the 2002 and 2003
budgets, this position remains unfilled and has not been included for 2004 due to current budget
issues.
_Department 8 - Sports Core The 2003 Budget projects more favorable operating results due to
budgeted increases in numbers of events, larger events, and price increases. Also included is
reduced debt service expenditures due to the refinancing of the Bath & Tennis Clubhouse
installment contract. Program 844 (Golf Surcharge) includes $125,000 for substantial
improvements to the bridge area at Hole 9 and to the practice facility.
Department 9 - Community Development The 2004 budget for the Community Development
Department contains no substantial changes from 2003.
CAPITAL PROJECTS
"Capital Projects" expenditures are a subset of capital expenditures (account series 9000). Capital
proj ects are budgeted in several programs so -named and located in Department 4 (Engineering and
Capital Projects) and Department 8 (Sports Core). Other capital outlays are found in the 9000
accounts in the operating program budgets. A complete listing of all 9000 account budgeted
expenditures, by fund and program, is found in the Summaries section.
Village President and Board of Trustees
December 10, 2003
Page 8
The 2004 budget for capital projects is $4,243,340, a decrease of $1,172,840 or 21.7% from the
comparable figure in the 2003 budget. The following is a brief discussion of the highlights of the
capital program, organized by project type.
Municipal Buildings The final expenditures related to the Municipal Complex Project are
expected to occur in 2003. The project, involving a 32,700 square foot addition to Village Hall in
order to house a new fire station, office space for several Village departments, and substantial
renovation of the Police Department, is expected to cost just under $10.1 million when completed.
Most projects included in Program 421 (Municipal Building Improvements) in the draft 2004
Budget have been deferred to 2005 and later years due to the current budget situation. This includes
the replacement of the roof at the Public Works building, which was originally included in the 2003
budget at a cost of $228,000. A listing of those building projects that remain for 2004 can be found
on page 4 -6.
Street Improvements The budget includes $1,475,000 for paving, microsurfacing, crack sealing,
pavement rejuvenation and pavement markings.
Water System Improvements The Village will continue to care for its water system in 2004 with
$1,236,300 budgeted for water main replacements and system improvements (program 451).
Safety Pathway System The 2004 budget includes a total of $1,038,000 for various projects
critical to the unification and completion of the Village's Safety Pathway System. Highlights
include significant progress on the 315 Street /Route 83 and York Road /Harger Road connections.
These major projects are recipients of significant grant funding.
PROPERTY TAX POLICY
Sections 7 and 8 of Ordinance 1999 -FI -S -957 state that it is the policy of the Village Board that the
general operations of the Village continue to be financed without the imposition of a general tax on
real property and that the Board will consider imposition of such a tax only to meet financial
obligations that have been approved by the voters at referendum. In the history of the Village, the
only property tax ever levied was for debt service. The most recent financial planning process does
not project a need to levy a property tax.
DEBT ADMINISTRATION
The Village's legal general obligation debt limit is 8.625 percent of equalized assessed valuation
(EAV), or $111,590,582 based on January 1, 2002 EAV of $1,293,803,854. General obligation
bonds have been issued only once in the history of the Village. Bonds were authorized and issued in
1977 for the acquisition and improvement of the Oak Brook Sports Core. The final payment on
those bonds was made in 1994.
Revenue bond debt has been utilized on two occasions. Water revenue bonds were issued in 1973
and again in 1976. The first issue was to finance acquisition of the Oak Brook Utility Company.
Village President and Board of Trustees
December 10, 2003
Page 9
The second was to finance improvements to the water system acquired through the first bond issue.
As of May 1, 1996, when the last payment was made on the Series 1973 bonds, the Village has no
long term bonded debt outstanding.
During 1999, the Village issued installment contract certificates in the amount of $820,000 to
finance the construction of a new irrigation system for the Golf Club at the Oak Brook Sports Core.
Late in 2000, the Village issued installment contract certificates in the aggregate amount of $1.8
million to fund the expansion and renovation of the Bath & Tennis Clubhouse. Early in 2001, the
Village issued $4 million in similar instruments in order to finance approximately 40% percent of
the Municipal Complex Project.
Installment contract certificates are general obligations of the Village but are not secured by a
pledge of property taxes. With respect to the 1999 and 2000 series certificates, the Village intends to
use Sports Core revenues to pay the annual debt service. With respect to the 2001 series certificates,
the Village intends to use General Corporate Fund revenues to pay the annual debt service.
BUDGET ADMINISTRATION
The budget is adopted each year by the Village Board by means of a Budget Ordinance. Pursuant to
Ordinance 1999 -FI -S -957, budgetary control is established at the category (i.e., object account
series) level. The Finance Director (Budget Officer) may authorize transfers of budgeted funds
between account categories within a single budget program with the approval of the Village
Manager. Transfers of budgeted funds from one budget program to another, any increase in the total
appropriation within any fund, or any expenditure from any budgeted contingency amount is subject
to the approval of the Village Board.
Once the Budget is adopted, budgeted revenues and expenditures are allocated to each month based
on anticipated timing. Monthly variance analysis compares actual results to budget and the Village
Manager, Finance Director and Department Heads review the status of the budget on a regular basis.
This enables management to identify and respond to trends and events in a timely manner.
The Summaries section of the budget document contains a series of tabular summaries of the 2004
Municipal Budget. Beginning with the overall summary, various exhibits present the budget by
fund, program and category. There is also an itemized presentation of budgeted capital
expenditures. The Analysis of Funds section contains individual fund summaries, which are
presented opposite the appropriate Five -Year Financial Plan summary page and are accompanied by
revenue schedules and schedules of expenditures from each fund, presented by program and
category.
Details on each program budget follow the Analysis of Funds section and proceed in organization
structure order. Each Program Summary identifies the ongoing Program Goal and Program
Performance Measure, and summarizes the 2004 Program Objectives and highlights of the Program
Budget.
Village President and Board of Trustees
December 10, 2003
Page 10
The preparation of the annual budget is an enormous undertaking, participated in by virtually the
entire Village staff. The process gets its overall direction from the President and Board of Trustees
through its Mission and Vision statements and financial policy ordinance. Village departments
develop goals and objectives for each program and the initial financial budget is based on that
guidance. Finally, special thanks also go to Alice Filinovich, Rose Kane, Denise Williamsen, and
Joyce Resh for their assistance in producing this document.
In conclusion, the 2004 Municipal Budget has presented many challenges due to declining revenues
and increases in normal operating expenditures. If the referendum campaign is successful, the
imposition of a non -home rule sales tax of 0.25% will go a long way towards solving the Village's
budget situation. This revenue enhancement will enable the Village's government to continue to
serve the needs of the Oak Brook community while maintaining a sound financial condition for the
foreseeable future.
Respectfully submitted,
r,e� l l�
Richard B. Boehm
Village Manager
V`
Darrell J. anglois
Finance Director /Village Treasurer