Minutes - 11/24/2003 - Board of TrusteesMINUTES OF THE NOVEMBER 24, 2003 SPECIAL
MEETING OF THE PRESIDENT AND BOARD OF
TRUSTEES OF THE VILLAGE OF OAK BROOK
APPROVED AS WRITTEN ON DECEMBER 9, 2003.
1. CALL TO ORDER: CALL TO ORDER
The Special Meeting of the Village Board of Trustees was called to order by
President Quinlan in the Samuel E. Dean Board Room of the Butler
Government Center at 6:26 p.m. The Pledge of Allegiance was given.
2. ROLL CALL: ROLL CALL
Village Clerk Linda Gonnella called the roll with the following persons
PRESENT: President Kevin M. Quinlan, Trustees George T. Caleel, John W.
Craig, Susan Chase Korin and Elaine Miologos. Trustee Asif
Yusuf arrived at 6:29 p.m.
ABSENT: Trustee Stelios Aktipis.
IN ATTENDANCE: Richard B. Boehm, Village Manager; Dale L. Durfey, Jr.,
Village Engineer; Bruce F. Kapff, Director of Information
Services & Purchasing; Robert L. Kallien, Jr., Director of
Community Development; Darrell J. Langlois, Finance Director;
Ruth A. Martin, Library Director; Michael J. Meranda, Public
Works Director; Allen W. Pisarek, Police Chief; Bonnie Sartore,
Bath & Tennis Club Manager; Trey VanDyke, Golf Club
Manager; Robert Cronholm, Battalion Chief and James Bodony,
Battalion Chief.
President Quinlan commented that this was an informal meeting to discuss the
proposed 2004 Budget. He asked whether there were petitioners that wished to
speak to the Board. No one responded.
3. 2004 BUDGET WORKSHOP euDGT wKSHP
The 2004 Budget continues the methodology, called "results budgeting ", that
has been used in Oak Brook since 1995. The 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.
3. Long range policy guidance for the budget process is drawn from the Mission
and Vision statements first adopted by the Board in 1995. They are reviewed
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3. annually and were last formally re- adopted by the Village Board on July 8,
2003.
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. The policy
ordinance, as well as other policy decisions of the Village Board, directs staff
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.
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), there is no new personnel in the budget.
Despite these efforts, as well as implementing several revenue enhancements
the 2004 projections for the General Corporate Fund indicate that normal
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3. operating expenses will exceed normal operating revenue by $396,040 in 2004
and total expenses (inclusive of capital) will exceed operating revenues by
$944,990. Staff expects that both of these amounts will end the year to be less
than budgeted since historically all of the budget is not spent. If operating
expenses are under budget by only 2.2% and revenues are as projected, then
operating revenues will exceed operating expenses. As it relates to capital
expenses, the Village Board will have ultimate control as most of these items
require Board approval.
Since the Village will now be at the maximum rates for both utility and
telecommunications taxes, the decision making at this point becomes very
difficult. The following are some options the Village Board could consider:
• Reductions in service levels or elimination of some programs, which
will likely result in the elimination of some full -time positions.
• Pursue implementation of a non -home rule sales tax, which would
require referendum approval. The use of this tax is restricted to
infrastructure projects but would allow some of the utility tax presently
used for infrastructure purposes to be used by the General Corporate
Fund.
• Pursue home -rule status, which would also require referendum
approval. The advantages of being home -rule are numerous, especially
from a revenue perspective. Although this option could theoretically
allow for a real estate tax at some point, there would be a maximum of
at least $11 million in additional sales tax and hotel tax revenue
available annually before that would become an issue. The need for a
real estate tax would be extremely remote.
• Consolidate the Infrastructure Fund and Equipment Replacement Fund
with the General Corporate Fund. This would provide both a one -time
enhancement of cash to improve the General Corporate Fund's cash
reserves and would allow some of the utility tax to be used here. There
are several disadvantages to this option in that road projects would have
to compete with other programs for funding (when this was done in the
past the Village fell substantially behind in this area and it ultimately
became more expensive), "pay as you go" funding for equipment,
especially Fire Department apparatus (the ladder truck is scheduled to
be replaced in 2010 and will likely cost close to $1 million), will prove
difficult, and this option will still not address the long -term problem of
normal operating revenues exceeding operating expenditures.
Unless operating revenues in future years exceed the increases projected
here, this would be more of a "band -aid" approach.
VILLAGE OF OAK BROOK Minutes Page 3 of 11 November 24, 2003
As the Village manages through these difficult times, the Village Board may
wish to consider reverting from a firm six month cash reserve policy to the old
policy of a range from four to six months. Another modification the Board
could consider is basing the reserve policy on modified accrual fund balance as
opposed to cash. The 2004 Budget projects an ending cash position of 4.4
months of operating expenditures. If one takes into account cash reserves in
other unrestricted funds (primarily the Equipment Replacement Fund) that
would be available in a "rainy day" situation, the reserve position would be 6.1
months in 2004. If reserves were calculated based on modified accrual
accounting fund balance (which many other municipalities use), this would add
between two and three additional months to the calculation. The Village may
only use reserves to fund operating expenses for so long and must find a way to
balance revenue and expenses in order to stop this trend from continuing.
Although below the six month policy, by many other standards the reserves are
still adequate in the near term.
SUMMARY
The total budget for operating and capital expenditures (excluding non -
operating and interfund activities) is $30,751,390, an increase of $167,665, or
0.55 %.
The total expenditure budget for 2004 is $37,433,490 on total revenues of
$34,951,100, a decrease in expenditures of $1,400,925 or 3.6 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
$33,304,375 on total revenues of $30,821,985.
Total unrestricted cash balances (excluding pension funds) are budgeted to
decrease approximately $4,604,525 from the estimated January 1, 2004
balances. The decrease in cash balances is due primarily to capital outlays in
the Infrastructure Fund and Water Fund, scheduled replacements of vehicles,
and operating and capital outlay costs in the General Corporate Fund.
REVENUE
• Revenue from the 1 percent share of the Retailers Occupation Tax
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3. (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.
• 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.
• Total revenue in the General Corporate Fund from the
Telecommunications Tax and utility tax on electric and natural gas of
$3,985,000. It is recommended that the tax rate for the
telecommunications tax be increased from the current 5% to the
maximum rate allowed by law of 6% effective July 1, 2004 (the next
date allowed by Statute). In 2004, additional receipts due to the
increased rate will start to be received in October, 2004. Also for 2004,
two additional months of revenue is expected since in 2003 only ten
months of revenue was received due to a one -time increase of two
months in the lag time of receipts due to the State assuming collection
responsibilities. A one -time increase from 2% to 3% in the amount of
utility tax 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 1% beginning in
2005.
• Total fees from licenses and permits of $540,800, approximately 10%
above the 2003 Budget amount of $494,450, and total fees for charges
for services of $618,600, an increase of 12% 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.
VILLAGE OF OAK BROOK Minutes Page 5 of 11 November 24, 2003
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 $26,343,550. This is an increase of 4.67
percent over the comparable figure from the 2003 Budget.
The total change in full -time equivalent (FTE) staff positions reflected in the
2003 Budget is a decrease of 0.5.
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.
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.
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3. 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), 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.
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.
Department 5 - Library The Library budget in total is projected to increase
3.3% from 2003. Staffing is budgeted to remain at its 2003 levels.
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Department 6 - Police The 2004 Budget includes a 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 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. There are no other substantial changes from
2003.
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
The 2004 Budget for capital projects is $4,407,840, a decrease of $1,008,340 or
18.7% from the comparable figure in the 2003 Budget.
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.
Program 421 (Municipal Building Improvements) includes $30,000 for the
beginning of repairs and maintenance of the old Butler School building. The
replacement of the roof at the Public Works building, which was included in the
2003 Budget at a cost of $228,000, has been deferred to 2005 due to the current
revenue situation.
VILLAGE OF OAK BROOK Minutes Page 8 of 11 November 24, 2003
3. 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. 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
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3. 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.
Trustee Caleel expressed concern that from his viewpoint it appeared that 2004
projections for expenditures are based on the 2003 Budget figures with an
additional amount added. He added that the Board has asked that budget
projections be based on previous year actual expenditures. Trustee Miologos
concurred. Finance Director Langlois responded Trustee Caleel expressed
concern that from his viewpoint it appeared that 2004 projections for
expenditures are based on this that upcoming budget expenditures are based on
actual expenditures, but that because the budget process begins long before year
end actual expenditures are established it can be a daunting task. He went on to
explain the scenario used for projecting budget figures based on spending.
Concern was expressed by the Board with the budget projecting a deficit.
Finance Director Langlois explained the problems with receiving the
Telecommunications Tax revenues from the State of Illinois since they began
collecting those taxes recently.
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Page 10 of 11 November 24, 2003
3. Trustee Korin and Miologos indicated that they were not in concurrence with
the increase to the Telecommunications Tax on which the budget was based.
The Board concurred that alternative revenue sources need to be explored,
expenses need to be capped and a need to study future needs. Discussion
ensued relative to an increase in Sales Tax.
The Board concurred not to increase the Telecommunications Tax but rather to
place a referendum question on the March Primary ballot for a Sales Tax
increase of one - quarter percent and that the Department Directors should be
challenged to reduce their budgets by 6 %.
Discussion ensued relative to the format of the budget. President Quinlan and
Trustee Miologos will work together to offer suggestions for reformatting the
budget.
Trustee Craig provided history related to the property now referred to as the
Sports Core and the commitment made when the referendum was passed. He
offered information about a proposal being considered with great potential for
increased revenues.
Mr. William Kenny, 13 Glenoble Court, spoke to the Board related to a
proposal to hire a management firm to oversee management of the Sports Core.
He expressed his concern for this type of operation.
Mr. Gerald McInerney, 27 Bluegrass Court, commented on Board members
issues related to understanding the budget. He stated that there are classes
offered explaining the budgeting process.
4. ADJOURNMENT:
Motion by Trustee Caleel, seconded by Trustee Korin, to adjourn the meeting
at 7:50 p.m. VOICE VOTE: Motion carried.
ATTEST:
—C /;'. �_e I - / //__1 2 � - -
Linda K. Gonnella, CMC
Village Clerk
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