HomeMy WebLinkAbout2g. Other State Impacts on the Village Budget
Mount Prospect
Village of Mount Prospect
Mount Prospect, Illinois
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INTEROFFICE MEMORANDUM
TO: MICHAEL E. JANONIS, VILLAGE MANAGER
FROM: FINANCE DIRECTOR
DATE: APRIL 23,2010
SUBJECT: OTHER STATE IMPACTS TO THE VILLAGE BUDGET
The dismal fiscal condition of the State of Illinois has been felt by the Village in a number of
areas. In addition to having to address the revenue shortfalls that accompanied the
economic slowdown, we have had to deal with delays in the receipt of certain taxes as well.
Also being considered is a change in the local distributive share of income tax that will
further lower the amount received by the Village. The impacts mentioned above are
magnified by this period of shrinking revenues. Below are a few examples of what has
been occurring at the state level and how they impact Village finances.
Delays in receipts are being seen with our income taxes, ambulance fees and
reimbursements for training and other miscellaneous items. The largest impact is occurring
with income taxes. The income tax has typically maintained a one-month lag from when
they are received by the state and when they are distributed to the municipality.
Throughout 2009, the State was in arrears in their payments by as much as four months.
Most recently, the Village did not receive its December 2009 allotment until April 201 O. The
impact to cash flows can be at times significant. A four month lag for income tax allotments
can amount to as much as $1.7 million. This requires the Village to utilize reserves to
bridge the gap until the funds are received. General Fund reserves are lowest during the
months between the first and second installment of property taxes. Combined with a delay
in property taxes, which is anticipated this fall, reserves could fall to the point where we look
to reserves in other funds to support general village operations.
In addition to putting a strain on the Village's cash flow, there are also opportunity costs of
not having the funds in our account for interest earnings. At current market rates, the cost
is slight (roughly $5,000-$10,000), but as rates edge upward, the amount of lost revenue
will go up as well. During 2007 and 2008 when short-term rates were ranging from 3-5%,
the Village generated on average $300,000 in investment income for the General Fund
alone to support operations. This revenue provided significant relief to the taxpayer by not
having to rely entirely on a property tax increase to support operations.
Other State Impacts to the Village Budget
April 23, 2010
Page 2 of 2
Another potential impact that is being considered in Springfield is the reduction in the per
capita amount for income taxes from the current $77 to a proposed $54. A total of $1.3
million in revenue would be lost to the General Fund due to this change and would require
significant cuts in 2011 beyond what is already needed to balance the budget.
In spite of what has transpired over the past 18 months, the Village's underlying financial
condition remains solid. Sufficient reserves are on hand to carry us through in the short-
term. As we move through 2010, we will regularly monitor these impacts and be prepared
to respond accordingly.
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David O. Erb
Finance Director
DOE/
1:\Budget 2010\Quarterly and Mid-Year Review\State Impacts.doc