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HomeMy WebLinkAbout09/26/2019 FC Minutes FINANCE COMMISSION It momtPR)SPL MINUTES September 26, 2019 Village Hall 50 S. Emerson, Mount Prospect, IL 60056 3 d Floor Executive Conference Room I. Call to Order Meeting called to order at 7:02 p.m. Members present: Pam Bazan, Yulia Bjekic, Trisha Chokshi, John Kellerhals, and Vince Grochocinski. II. Approval of Minutes a. Commissioner Grochocinski, seconded by Commissioner Chokshi, moved to approve the minutes of the Finance Commission Meeting held on August 22, 2019. Chair Kellerhals called a voice vote. Minutes were approved unanimously. Kellerhals abstained. III. Citizens to be Heard None. IV. CIP Funding Update A. Funding Sources— 2020 to 2024 Finance Director Amit Thakkar stated staff created a new To Be Determined category within the Community Investment Program (CIP) for projects with revenue sources not identified yet. Revenues could be from a grant, transfer or alternative revenue source. The To Be Determined projects are in the CIP, but are not in the five year forecast because they do not have a revenue source. Staff is working to find revenue sources for these projects; however, any project may be deferred to an out year. Finance Director Thakkar stated this information is an update with no Finance Commission action required. Commissioner Comments: • Most CIP projects are supported, except for a few. • The Commission does not review all projects in detail. Some projects require particular technical expertise to review. • The priority ranking per project included in the CIP Projects by Funding Source document is helpful information. Staff provided the following in response to comments from the Finance Commission: • Creating a To Be Determined category provides better tracking of certain projects that are deferred. • There are no projects in 2020 in the To Be Determined category. The plan is to have a Committee of the Whole meeting with the Village Board on funding strategies. Finance Commission Page 1 of 4 09/26/19 • The finance emergency five-step plan is still in place. • The proposed budget document will have the To Be Determined CIP category. • The Rand, Elmhurst and Kensington Road Study: In 2022, $3 million is for construction. B. Street, Capital Improvement, and Flood Control Projects Finance Director Amit Thakkar explained that three CIP funds (Capital Improvement, Street Improvement and Flood Control Construction) project costs are expecting to exceed available funding. He highlighted the transfers from the General Fund to these CIP funds in 2020 to support projects. $400,000 will be transferring to Capital Improvement and $3.4 million will be transferring to Flood Control Construction for the storm water detention improvements tributary to Leeve 37. The next planned General Fund transfer to Flood Control Construction will be a loan. He noted Flood Control Construction funds are generated by a one-quarter percent of home rule sales tax, which after debt service ($900,000) payments there is only about $400,000 remaining for projects. He stated the Village would need a funding strategy for these long-term projects in the near future (creek bank stabilization, detention pond improvements, neighborhood drainage improvements, etc.). Finance Director Thakkar also stated this information is an update with no Finance Commission action required. Staff provided the following in response to comments from the Finance Commission: • Illinois Capital Investment Bill has appropriated $900,000 to extend the commuter train platform (Street Improvement). • The State distributes motor fuel tax revenue to municipalities based on their population. V. Stabilization Funds — Discussion Finance Director Amit Thakkar stated that during CIP presentations staff introduced the concept of stabilization funds. The Village has seen a good amount of growth in sales tax. These stabilization funds would allocate sales tax revenues collected above the budgeted amount to a pension and an economic stabilization funds. The Village is heavily relying on sales tax revenue. If another business would enter competition or operations change with Mount Prospect's large sales tax generators or categories, it could directly affect the Village's revenue projections. He stated the recommended stabilization funds would assist to reduce the burden of relying on this variable revenue source. Sales tax revenues are good for one time projects or allocations. Finance Director Thakkar explained how the Pension Stabilization Fund would work and reviewed revenue transfers to the smooth the recent pension funding increases. Commissioner Comments: • Would rather feel the immediate impact of an economic downturn and sensitivity to fluctuations than have stabilization funds. • Some Commissioners support the stabilization fund concept and would like to know more about the proposed economic stabilization fund. • The stabilization fund is not creating a new revenue source. • Entertain a review requirement for how stabilization funds would be maintained. Finance Commission Page 2 of 4 09/26/19 Staff provided the following in response to comments from the Finance Commission: • Pension funding is an actuarial function, which depends on many factors: investment values, interest component on unfunded liability, new salary, new hires, and retiree pensions increase by three percent. • If the Village has a $20 million sale tax revenue budgeted, but actual receipts are $22 million, then the extra $2 million enters into stabilization funds. These funds are restricted to subsidizing the property tax levy. • The stabilization funds would have no minimum fund balance. There would be a maximum balance limit. • The Village does not have a separate rainy day fund. • Creating a stabilization fund is a fiscally responsible approach; a pension stabilization fund will help control property tax levy increases. • The General Fund may be used for any item, but funds in a Pension Stabilization Fund could only used for pension funds. • The first transfer trigger is when the sales tax collection is above 102% of the annual budget. • It is possible to restrict transfers to a specific sales tax category. • Stabilizations funds will show we are fiscally responsible which contributes to maintaining a favorable bond rating. • The stabilization funds would have its own charter and would be earmarked for specific uses. • The Village can take excess sales tax to offset property tax without a stabilization fund, but by creating a stabilization fund the Village is making a commitment. Staff recommends the stabilization fund approach and bond rating agencies prefer this approach. • In theory, property tax subsidies may be funded with General Fund transfers; however, the General Fund always feels pressure for transfers. • The Village is not carrying too much in reserves. The Village maintained an AA+stable rating, because of the projected 30%+ fund balance. Standard and Poors wants the Village to have greater reserves than per Village policy. • There are many municipalities that have this kind of stabilization funding. • If there were a market correction, then money would not go into these stabilization funds anyway. • Recreational cannabis sales tax would enter the General Fund. Excise tax will come on its own, and will be a part of General Fund with a requirement to be deployed to law enforcement services. VI. Property Tax Levy Finance Director Amit Thakkar presented the draft preliminary property tax levy. He noted that if the property tax levy for the police pension was not subsidized then the rate would come out as 4%. The planned subsidy of$438,000 comes from the General Fund. Staff provided the following in response to comments from the Finance Commission: • Police and Fire Pension Fund levy go to pensions and Police and Fire Protection levy goes to operations and department costs. • The Village used to have a corporate levy and it changed to police and fire protection only. • The police and fire protection levies make up about 20% for police and 30% for fire operation costs. Finance Commission Page 3 of 4 09/26/19 • The levy was never only debt and pensions. • The police and fire protection levies can change to zero amounts, but then we would need to find another revenue source. • Not funding debt, pensions or police and fire services is not an option. • The fire protection levy increased based on anticipation of added costs. • Police protection levy decreased as a function of reducing the property tax levy rate to 2% and maintaining the proportion that the property tax reserved is for police and fire protection. • Staff is doing nothing different from the prior property tax levies, since we had to reduce the fire and police protection levies in the past. The budget would need an additional $381,740 to make up for a zero percent property tax levy. • The 2% Provision Loss and Costs is because the Village only receives 98% of the levy. The Village receives what the county collects and not everyone pays their property taxes. • The Village made no annexations in 2019. • The Village levies a dollar amount and not a rate like other taxing bodies. There is not a change in Village revenue due to property assessments. VII. New Business None. VIII. Any Other Business None. IX. Chairman's Report None. X. Finance Director's Report None. XI. Next Meeting: October 10, 2019, 6:00 PM (Operating Budget Meeting) XII. Adjournment: Motion made by Commissioner Bjekic seconded by Commissioner Grochocinski. The meeting adjourned at 9:14 pm. Alexander Bertolucci Management Analyst Finance Commission Page 4 of 4 09/26/19