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HomeMy WebLinkAbout3. Options for 2014 Property Tax Levy Village of Mount Prospect Mount Prospect, Illinois INTEROFFICE MEMORANDUM TO: MICHAEL E. JANONIS, VILLAGE MANAGER FROM: FINANCE DIRECTOR DATE: NOVEMBER 19, 2014 SUBJECT: OPTIONS FOR 2014 PROPERTY TAX LEVY Included in the proposed budget for 2015 is a projected property tax levy totaling $18,066,360. This levy represents an increase of 4.42% from the prior year. The Village Board asked staff to provide information on what budget impacts there would be if a lower property tax levy increase was considered. At the November 11, 2014 Committee of the Whole, staff provided information to the Board showing how reducing the Corporate portion of the levy would require reductions in the General Fund budget. Based on the proposed levy, each 1.0% reduction equals $171,000. At the conclusion of the Committee of the Whole meeting, staff was directed to develop two options for Board consideration for the 2014 property tax levy. The options requested were for a one-percent and two-percent increase over the prior year. Staff has prepared the two options along with a third which equates to a 2.48% increase. Attached to this memo is a table showing the proposed 2014 levy along with the three options. Option (a) reflects a total levy of $17,730,921, a decrease of 194 basis points from the proposed levy resulting in a 2.48% increase. This option reduces the proposed levy for in excess the two pensions by the amount of the Annual Required Contribution (ARC). The ARC is the statutory minimum that must be contributed to pension plans annually (as determined by an independent actuary). The higher amount included in the proposed levy was intended to prefund the pension plans ahead of statutory requirements. Prefunding also permits for a more level levy from year to year. Option (b) reflects a total levy of $17,647,465, a decrease of 242 basis points from the proposed levy resulting in a 2.00% increase. This option reduces the Corporate portion of the levy, in addition to the lowering of pension contributions to the ARC as proposed in option (a). To backfill revenues lost through the lower Corporate levy, staff is proposing an increase to the projected growth in the state sales tax ($82,000) from 1.0% to 1.7%. Options for 2014 Property Tax Levy November 19, 2014 Page 2 Option (c) reflects a total levy of $17,474,450, a decrease of 342 basis points from the proposed levy resulting in a 1.00% increase. This option further reduces the Corporate portion of the levy by $171,000 to a total of $253,000. In addition, pension contributions would be lowered to the ARC as proposed in option (a). The further reduction of revenues will be made up using surplus reserves above the 25% level projected at January 1, 2015. The 2016 Forecast Budget for the General Fund shows a surplus of $37,191. This assumed no changes to the projected levies in 2014 and 2015. Reducing the 2014 levy to a 1.0% increase, while leaving the percentage increase in the 2015 levy unchanged, will result in a deficit in the General Fund forecast budget of approximately $130,000. Reductions in the current year levy puts pressure on the future year levy assuming regular growth in revenues and expenditures. I will expand on the 2014 levy options and budget impacts into the future in my presentation to the Board on November 25. Please review the information and let me know if you have any questions. David O. Erb Finance Director H:\\ADMN\\Administration\\Budget By Year\\Budget 2015\\Tax Levy Options - 11-25-14.docx Village of Mount Prospect, Illinois Options to Proposed 2014 Property Tax Levy Notes: (a) This option reduces the proposed levy by the amount in excess of the Annual Required Contribution (ARC). The ARC is the statutory minimum that must be contributed to pension plans annually (as determined by an independent actuary). The higher amount included in the proposed levy was intended to prefund the pension plans ahead of the statutory requirements. Prefunding also permits for a more level levy from year to year. (b) This option reduces the Corporate portion of the levy, in addition to the lowering of pension contributions to the ARC as proposed in option (a). To backfill revenues lost through the lower Corporate levy, staff is proposing an increase to the projected growth in the state sales tax ($82,000) from 1.0% to 1.7%. (c) This option further reduces the Corporate portion of the levy by $171,000 to $253,000. In addition, pension contributions would be lowered to the ARC as proposed in option (a). The further reduction of revenues will be made up using surplus reserves above the 25% level projected to be $254,000 at January 1, 2015. (a) (b) (c) Adjusted Adjusted Adjusted Proposed Levy Levy Levy Description 2014 Levy 2.48% 2.00% 1.00% Levy Extension Corporate $ 10,064,897 $ 10,064,897 $ 9,981,441 $ 9,808,426 Bonds 2,290,113 2,290,113 2,290,113 2,290,113 Police Pension 3,101,345 2,882,852 2,882,852 2,882,852 Fire Pension 2,610,005 2,493,059 2,493,059 2,493,059 Total 18.066.360 5 17.730.921 5 17.647.465 5 17.474.450 Percent Change 4.42% 2.48% 2.00% 1.00% Reduction in Levy Corporate $ - $ (83,456) $ (256,471) Bonds - - - Police Pension (218,493) (218,493) (218,493) Fire Pension (116,946) (116,946) (116,946) Total (335.4 5 (418.895) 5(591.910) Impact to Budget Corporate $ - $ (82,000) $ (253,000) Bonds - - - Police Pension (215,000) (215,000) (215,000) Fire Pension (115,000) (115,000) (115,000) Total (330.0 5 (412.0001 8(583.000) Notes: (a) This option reduces the proposed levy by the amount in excess of the Annual Required Contribution (ARC). The ARC is the statutory minimum that must be contributed to pension plans annually (as determined by an independent actuary). The higher amount included in the proposed levy was intended to prefund the pension plans ahead of the statutory requirements. Prefunding also permits for a more level levy from year to year. (b) This option reduces the Corporate portion of the levy, in addition to the lowering of pension contributions to the ARC as proposed in option (a). To backfill revenues lost through the lower Corporate levy, staff is proposing an increase to the projected growth in the state sales tax ($82,000) from 1.0% to 1.7%. (c) This option further reduces the Corporate portion of the levy by $171,000 to $253,000. In addition, pension contributions would be lowered to the ARC as proposed in option (a). The further reduction of revenues will be made up using surplus reserves above the 25% level projected to be $254,000 at January 1, 2015.