Minutes - 12/06/2004 - Board of Trustees2.
3
MINUTES OF THE DECEMBER 6, 2004 SPECIAL MEETING
— BUDGET WORKSHOP OF THE PRESIDENT AND BOARD
OF TRUSTEES OF THE VILLAGE OF OAK BROOK
APPROVED AS WRITTEN ON JANUARY 17, 2005.
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 6:10
p.m. The Pledge of Allegiance was given.
ROLL CALL:
Village Clerk Linda Gonnella called the roll with the following persons
PRESENT: President Kevin M. Quinlan, Trustees Stelios Aktipis, George T. Caleel,
John W. Craig, Susan Chase Korn, Trustee Asif Yusuf and Elaine
Zannis.
ABSENT. None.
IN ATTENDANCE: Richard B. Boehm, Village Manager; John M. Carpino, Acting
Police Chief, Robert R. Cronholm, Fire Chief; 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; Margaret G.
Klinkow, Library Director; Michael J. Meranda, Public Works
Director; Nelson Patras, Interim Bath & Tennis Club Manager and Trey
VanDyke, Golf Club Manager
President Quinlan commented that this was an informal meeting to discuss the
proposed 2005 Budget. The intent of the meeting is to address serious concerns or
questions on policy or strategy. There are assumptions in the budget that are going to
guide staff recommendations in the future for final Board of approval.
2005 BUDGET WORKSHOP:
A. DISCUSSION OF 2005 BUDGET AND 2005 -2009 FIVE -YEAR FINANCIAL
PLAN
Village Manager indicated that staff has been working on the 2005 annual Budget for
several months and sought direction from the Board of Trustees prior to finalizing a
draft budget. The Board of Trustees met on November 8, 2004 as a Committee -of-
the -Whole to discuss budget priorities. Based on the results of that Committee-of-the -
Whole meeting, a consensus of priority was reached and the final draft Budget was
prepared. The FY05 Budget includes restoring the General Fund operating reserve to
VILLAGE OF OAK BROOK Minutes Page 1 of 8 December 6, 2003
the six month level in eighteen months; catching up on capital items deferred the last
3. several years including HVAC screening at the Village Hall and Library and partially
re- instating the Equipment Replacement funding. This was done to facilitate a
reduction of the 1/2 of 1% of the utility tax on natural gas and electric service. This
budget includes a reduction in the staffing level of 1/4 FTE (full -time equivalent) with
no new programs or major areas of expenditures.
In keeping with the Village's past practices, staff has drafted the Village Board's
policy ordinance on Finance, Taxation and Budget, which provides both long and
short range guidance to the budget process through the fundamental policies. The
policy ordinance directs the Village to:
• Operate the Village without a general real estate tax.
• Accumulate cash reserves in advance of major capital projects (utilizing longer
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 text 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 - support basis.
• Annual review the need for and uses of the utility tax on natural gas and
electric service.
The 2005 Budget is consistent with many 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). 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 26, 2004.
Over the last several years there have been many issues that have resulted in financial
pressure on the General Corporate Fund. Declining sales tax revenues, lower
telecommunications taxes, significant reductions in interest earnings due to
historically low rates, rapidly increasing pension and employee benefit costs and
unfavorable legislation are some of the more material items in recent years. These
factors resulted in the Village Board placing a referendum question on the March,
2004 ballot for the implementation of a non -home rule sales tax of 0.25 %. With the
successful passage of the referendum, the Village will receive approximately $2 4
million annually in additional sales tax collections.
Since State statutes restrict the use of this new tax to infrastructure - related
expenditures, the existing program structure has been significantly restructured in
VILLAGE OF OAK BROOK Minutes Page 2 of 8 December 6, 2003
order to comply with the statutory requirements. Specifically, most Public Works and
Engineering Department programs have been moved and renumbered in order to shift
3. the funding of these programs to the Infrastructure Fund.
In summary, the total budget for operating and capital expenditures (excluding non -
operating and interfund activities) is $31,100,700, an increase of $1,277,490 or 4.11%
from the comparable figure in the 2004 Budget.
REVENUES
Revenues from the one percent (1 %) share of the Retailers Occupation Tax is
projected to end 2004 at $10,375,000 which is 1.47% over the 2004 Budget amount
and 3.57% over actual collections for 2003. The budget amount for 2005 is
$10,750,000 which is based on a three percent (3 %) growth assumption, new retail
development and some other one -time factors known to have an affect on the 2004
projections.
The Village began receiving the new 0.25% Non -Home Rule Sales Tax in October,
2004 and $550,000 is expected by year end. For 2005, revenue of $2,240,000 is
projected from the new tax. Although receipts from utility taxes are estimated to end
2004 near budget, receipts from telecommunications taxes are expected to be
$278,520 or 9.7% below budget.
OPERATING EXPENDITURES
The total 2005 operating budget is $27,118,870. This is an increase of 5.24 percent
over the comparable figure from the 2004 budget. A full Time Equivalent Personnel
Austerity program includes the total change in full -time equivalent (FTE) staff
positions to a decrease of 0.25.
CAPITAL PROJECTS
Municipal BuildinLws
This includes $167,5250 for screening of the HVAC units at the Library and
Municipal Complex, $50,000 for the beginning of repairs and maintenance of the Old
Butler School building and $55,500 for several projects at Fire Station #2. This is
only a portion of the funding that is needed but it is a beginning of addressing these
deferred capital projects.
Street Improvements
The budget includes $1,337,200 for paving, crack sealing, pavement rejuvenation and
VILLAGE OF OAK BROOK Minutes Page 3 of 8 December 6, 2003
pavement markings.
Water System Improvements
3. The Village will continue to care for its water system in 2005 with $773,500 budgeted
for water main replacements and system improvements.
Safety Pathway System
The 2005 Budget includes a total of $852,000 for various projects critical to the
unification and completion of the Village's Safety Pathway System. This includes a
significant progress on the 31" Street /Route 83 and York Road /Harger Road
connections.
In conclusion, the General Corporate Fund in the long range picture looks very bright.
While the Village is trying to catch up on many of the deferred items, revenues are
projected to continue to outpace expenditures and as of now it appears that by FY
2007 Budget the Village will be in a financial position to fund some of the Village
Board of Trustees other priorities.
Trustee Aktipis asked for a clarification in the Summary portion of the Budget, Page
S -4 showing the projected increase of 8.7% while page S -14 of the Budget shows 9%
increase to the total budget. Finance Director Langlois stated the 8.3% is correct and
that the 9% figure appears to be a mathematical error that he will correct.
Trustee Aktipis stated he had previously discussed the overall budget with Finance
Director Langlois and he had voiced his concern of the 8.3% increase. He felt that it
was excessive since the Village has just recovered from a period of time where the
budget was threatened by decreased revenues. Director Langlois suggested that part
of the problem are the costs that the Village does not have control over such as the fire
and police pensions and those have to be addressed. The actual activities that are
controllable have only increased 5.25 %. He did state to Director Langlois that he felt
that the budget still needs to be addressed in expenditures.
Trustee Zannis noted in page 3 of the Summary, the third paragraph, states "Net of
these interfund activities, the 2005 expenditure budget is $33,940,220 on total
revenues of $33,568,525." She stated she does not support deficit spending and will
not support the budget as presented. Finance Director Langlois explained the General
Fund is in a surplus position. Certain transactions accumulate funds in one year and
the funds are spent the next year. Equipment replacement costs are sometimes
deferred and there would be surpluses in prior years
Trustee Zannis stated that her priority is restoring the six month cash reserve of the
VILLAGE OF OAK BROOK Minutes Page 4 of 8 December 6, 2003
Village of Oak Brook as soon as possible and also the utility tax refund of 1 /2% rather
than I%.
Manager Boehm explained that reserves have been built up for such projects as the
3. MFT Funds will be spent next year rather than last year, the Safety Pathway System
trail improvements will be offset by grant funding and the water main work funding
has been saved over a period of time as well as the golf surcharge funds have been
saved for projects.
Finance Director Langlois explained that on page 7 of the Summary that the total
change in cash is $371,695. The Equipment Replacement funding for next year is
$403,000. Pre - funding is money being saved for equipment replacement in the future.
The $811,000 is the scheduled replacement of the fleet. Trustee Zannis stated her
benchmark is the six month reserve and that several items could be deferred.
Trustee Korin noted at the last Village Board meeting the Board discussed the cash
reserve and the Board compromised at obtaining the six month reserve over an
eighteen month period of time. Looking at the cash balance of 2005, it increases
$807,000 when the Village needs $1,700,000. Director Langlois explained that
$1,000,000 was being used to partially fund Equipment Replacement and other
projects. Trustee Korin remarked that she did not support this proposal.
Trustee Zannis commented that the Village Board believed there wasn't a physical
way that the Village could operate trying to restore a six month cash reserve within
twelve months so it compromised at eighteen months. But she noted that items could
be deferred in the proposed budget, which would make it possible that the cash
reserve could be restored in twelve months. She suggested deferring the telephone
system upgrades of $190,000 and $200,000 in computer software.
On page F -10, Analysis of the Funds, of the proposed 2005 Budget in which Finance
Director Langlois explained that the net revenues are budgeted to increase $703,205
after subtracting out the transfer from the Infrastructure. The net operating budget
after subtracting out capital, is budgeted to increase $255,705 which is a surplus of
$447,000 in which the General Fund is improved from last year. Staff tried to balance
the cash reserves in the eighteenth month time frame.
Trustee Zannis stated that she prefers a more conservative document. Trustee Craig
remarked that he wished to defer any comments until they review the line items.
Trustee Korin stated in terms of policy that she has some concerns. She noted the lack
of percentage increase and decreases in the far right column, Exhibit S -4, which
Director Langlois indicated it was incorrect. She asked that in the future this be
addressed. Director Langlois stated he will have this corrected for the final
documents.
VILLAGE OF OAK BROOK Minutes Page 5 of 8 December 6, 2003
Trustee Korin noted under Revenue of the Summary, page 4, offered that the utility
and telecommunication tax be separated rather than lumped together. Director
Langlois explained that the General Ledger accounts should match up but he will try
to report that more accurately. He noted it is broken out in the Five Year Plan.
3. Trustee Korin also noted on that page that there is a projected increase of 8.75% from
the telecommunication taxes and utility taxes on electric and natural gas. Finance
Director Langlois explained that the $700,000 is coming from the Infrastructure Fund
to the General Fund minus the decrease in the telecommunication tax. The decrease is
projected forward.
Trustee Korin asked if the utility tax is decreased by V2% what is the estimated
decrease for the 2005 Budget. Director Langlois stated the impact to the budget is
estimated at $95,000 for 2005 and $176,000 per year in 2006 and thereafter.
Trustee Korin noted in the 2005 Budget, S -11, employee benefits there is a 16.3%
increase. She asked if the plan could be restructured. Director Langlois explained
that the stop /loss premiums were significantly increased in July and staff is reviewing
this to determine where improvements could be made.
Hotel /Motel Tax, Trustee Korin asked why there would be such a large increase in
2005. Director Langlois noted timing is a big issue as the 2004 campaign will be
spent but paid in 2005. Under Police Pension, Trustee Korin noted the large 21.8%
increase to the pension fund in the amount of $255,000. Director Langlois explained
that three or four senior members of the Police Department have retired and they now
draw their pensions.
Under Public Works, Finance Director Langlois explained that $1,000,000 is the
transfer of the Infrastructure Fund to the Public Works Department and allocating
$70,000 allocating a portion of the IRMA premium to the Public Works and
Engineering activities.
Under Police Department, Trustee Korin noticed a large increase in expenses of
$545,000. Director Langlois explained the Support Services Lieutenant position in
2004 is budgeted for a half of a year while budgeted for a full year in 2005.
$125,000 is the reinstatement of the Equipment Replacement Fund. He explained that
with a young police force pay projections will increase going through the grades as
some of those pay increases may be up to 7 %. Pension benefits are also included.
Trustee Aktipis stated the Trustees concern is that there is flexibility on the upside of
the budget process where a certain amount of discipline has been removed. Trustee
Caleel suggested $100,000 in Community Events be considered and economize in that
area.
VILLAGE OF OAK BROOK Minutes Page 6 of 8 December 6, 2003
Trustee Zannis suggested that the Board is financial conservative and wants that trend
to continue. Director Langlois stated staff would consider deferring some of the
capital projects to 2006. The sale of Westchester Park will be deferred to a later time
and not included in the budget.
3. Trustee Korin asked Interim Bath & Tennis Club Manager Patras if enough funding
had been placed in the Sports Core budget for infrastructure needs of the pool.
Manager Boehm explained that some improvements have been budgeted and are
included in the Five Year Plan. President Quinlan this will be discussed further at the
Board's January meeting.
Trustee Caleel asked that all Departments review their budgets to determine where
reductions could be made. Manager Boehm explained that all line items have been
reviewed and already reduced but staff will follow the Board's direction.
Trustee Yusuf remarked that the utility tax should not be reduced when staff is trying
to cut the budget. If in the future the Board may be able to consider reducing the
utility tax, then consider free garbage pickup as the Village is giving money back to
the residents. He recommended that the telephone system is an investment not an
expense, as it has a seven year payback, and should remain in the budget and not be
delayed.
Trustee Aktipis noted Budget Item 551, page S -11, Information Services, is almost
$530,000. Information Services Director Kapff explained that this includes the
telephone system of $146,000, fiber optics $15,000 and maintenance of computers
$93,000. Some necessary items include the Fire Department's EMS communication
software of $15,000 that is required by hospitals and Police Department Livescan
system maintenance which expires in 2005 and is necessary for booking arrests in the
amount of $42,000.
Trustee Craig noted that several years ago he and Trustee Caleel asked for an
accounting of all the Village's cell phones. Director Kapff indicated that he will
update that information for the Village Board. The Village's consultant reviewed this
and savings were made from the consultant's recommendations.
Trustee Zannis suggested delaying the telephone system one more year as the Board's
obligation is the ordinance and its priority is a fiscal responsibility to the Village.
President Quinlan indicated that a consensus of the Board of Trustees requires
$1,000,000 is budgeted from other funds to the cash reserve fund and all other budget
items must be pared down with a cost savings of $200,000. He asked that Finance
Director Langlois prepare the 2005 Municipal Budget with the utility tax reduction
VILLAGE OF OAK BROOK Minutes Page 7 of 8 December 6, 2003
and with the utility tax remaining as it is now. The $100,000 for the Legal
Contingency Fund also be removed. Trustee Korin stated she is not in favor of this
being removed without viewing what the Attorney has proposed.
Trustee Caleel asked that the budget be reduced by 2% from each Department.
Finance Director Langlois explained that this would be very difficult in his department
as payroll would not be touched in the reduction of his budget.
3. President Quinlan noted that payroll is our biggest expense. He noted that the Support
Services Lieutenant position would not be filled by January 1, 2005. Director
Langlois stated that staff could pro -rate some of the positions for balancing the
budget.
It was a consensus of the Village Board that $1,000,000 be transferred to the General
Fund cash reserve and $371,000 be balanced. Finance Director Langlois asked the
Board of Trustees how to propose the Legal Department budget. President Quinlan
stated the final proposal will have to be submitted from the Village Attorney and make
an assumption based on that proposal.
Trustee Caleel asked for a one year contract with the Village Attorney of a figure
similar to what the Village of Oak Brook is accustomed to plus an inflationary
adjustment for the same services provided as listed in the Village Code of Oak Brook.
He indicated when a legal opinion is to be asked for by a Village Board member that it
be by a majority opinion
President Quinlan asked that the 2005 Municipal Budget include the $90,000 utility
tax and without the tax and then decide on what projects are to be included in the
budget as recommended by staff.
4. ADJOURNMENT:
Motion by Trustee Craig, seconded by Trustee Caleel, to adjourn the meeting at 7:57
p.m. VOICE VOTE: Motion carried.
ATTEST:
s /Linda K. Gonnella
Linda K. Gonnella, CMC
Village Clerk
VILLAGE OF OAK BROOK Minutes Page 8 of 8 December 6, 2003