HomeMy WebLinkAbout4.2 Discussion - Village Vehicle Sticker ProgramMr�GauC �'d'+rt;�iect
Item Cover Page
Subject Discussion - Village Vehicle Sticker Program
Meeting September 13, 2022 - COMMITTEE OF THE WHOLE -
Fiscal Impact
Dollar Amount
Budget Source
Category DISCUSSION ITEMS
Type Discussion Item
Information
The Vehicle Sticker Program supports the funding of street resurfacing and
maintenance of Village owned roads. Residents and businesses with vehicles
purchase a sticker annually and attach it to the lower passenger side of the front
windshield by May 1. Standard prices are (2022 year): passenger vehicle - $45;
motorcycle and motorbike tags - $30; and trucks with B plates are $68. There is
an additional price schedule for trucks based on individual weight, and the Village
also offers discounts to seniors. This program is perceived by some, both the
issuing department and the purchaser, as burdensome due to the time and effort
it takes to issue and obtain the sticker. Over time the Finance Department has
made improvements to the program, like changing the glue on sticker to make it
easier to remove from windshields and implementing the option to purchase
stickers online without an added fee. The Village Board, Finance Commission and
staff has reviewed eliminating the Vehicle Sticker Program multiple times in the
past. However, due to the exceptionally strong financial position of the Village
today, and the fact that more surrounding communities have eliminated their
Vehicle Sticker Programs, staff is confident now is the time to consider suspension
of the Vehicle Sticker Program.
•
It's important to consider the financial impact the suspension of vehicle stickers
would have on the overall budget; to begin, it's noteworthy how Village revenues
have exceeded estimates for the 2022 and 2021 years.
The Village has experienced significant growth in its intergovernmental revenues.
1
The Village generated $8.7 million surplus during the year 2021. The 2022
projection is also very promising and the Village General Fund is expected to have
a surplus of $8.0 million or more. The Village has seen a phenomenal growth in its
income tax revenues. The 2022 adopted budget for income tax revenue was $6.3
million. The Village collected $6.3 million between January and July. The YTD
collection for income tax is $6.7 million and with a conservative projection, the
Village is set to collect $8.3 million in income tax revenues for the year 2022, a
surplus of $2.0 million or 32.4 percent.
During the year 2021, the Village has seen a growth of 34 percent in its state
sales tax revenue. In 2021, the Village collected $29.3 million in state sales tax
against the budgeted amount of $23.0 million. Staff wanted to confirm if the
growth in the sales tax amount is sustainable in the future. Thus far, the year
2022 state sales tax collection has shown similar promising amounts. During the
first six months, the Village collected $15.2 million in state sales tax. In the
trailing 12 months, the Village collected state sales tax totaling $30.8 million. With
a very conservative projection for the remainder of the year, the Village is set to
collect a minimum of $28.9 million in state sales tax.
There are similar stories with a few other revenue line items, including home -rule
sales tax projecting a surplus of $850,000 and personal property replacement tax
with a surplus of $504,000. After a careful study of current revenue sources and
Village programs, staff proposed following surplus reallocation.
Surplus Reallocation
Amounts
Transfer Out to Street Construction Fund
$500,000
Transfer Out to Flood Control
$500,000
Construction Fund
Transfer Out to Flood Control
$500,000
Construction Fund
Transfer Out to Capital Improvement
$500,000
Fund
Transfer Out to Pension Stabilization
$750,000
Fund (2022 Levy Payable in 2023)
Transfer Out to Debt Service Fund
$1,450,000
Total
$4,150,000
All the above transfers were presented to the Finance Commission and they
support the above General Fund surplus reallocation. The last two items on the list
have a direct impact on the Village Property Tax levy and will allow the Village to
have a modest to low property tax increase for next year.
2
Suspension of Vehicle Sticker Program - Overview
Besides the above allocations, staff is proposing to reallocate $1.4 million from the
current state sales tax to the Street Construction Fund and suspend the current
Vehicle Sticker Program.
The Village collects around $1.4 million in the vehicle sticker revenues annually by
selling around 35,800 vehicle stickers. While doing so, the Village incurs costs
totaling $112,000. This costs includes $44,672 in allocated Finance Department
wages. However, wages should be ignored for decision making purposes because
Finance staffing would remain unchanged whether the Village has vehicle sticker
program or not. That leaves the Village with $67,347 in actual annual costs to
implement the Vehicle Sticker Program. Over the past few years Vehicle Sticker
revenues have declined due to various reasons, likely related COVID-19. During
2018, the Village collected $1.6 million in vehicle sticker revenues, while the same
is $1.4 million in 2021. So far, the Village has collected $1.25 million in Vehicle
Sticker revenues in 2022 and has spent $85,942 in actual costs. Please see the
attached full analysis as appendix A. Note the Village costs do not include
enforcement activities used to achieve purchase compliance.
Staff also conducted a research and inquired about Vehicle Sticker Programs in
around 74 towns in six counties. Out of 74 towns, 32 towns do not require vehicle
stickers. Many financially successful towns have eliminated vehicle stickers:
Schaumburg, Oak Lawn, Hillside, Des Plaines, Rolling Meadows, Wheeling,
Glenview, Hoffman Estates and most recently Palatine. The remaining towns have
an average sticker price of $44.8. Please see the attached Appendix B for details.
Finance Commission reviewed the Vehicle Sticker Program at their regular
meeting on July 28, 2022. The Commission unanimously (6 Commissioners were
present) rejected the idea of suspending vehicle stickers and sited various reasons
including variable nature of sales tax revenues that may be impacted by various
external factors including legislative actions from multiple level of governmental
agencies, market condition, and/or owner/operator's decision to leave mount
prospect. The Finance Commission further mentioned that during the Great
Recession (2008-2010), the Village had to layoff nearly 10 percent of its staff due
to economic conditions. The Village recently has added staff to improve the quality
of services and Finance Commission is supportive of the same, but the
commission maintains their opinion that the Village should continue this fixed and
stable revenue source. The commission also recommended the vehicle sticker
program should be restructured so that the same amount of revenues can be
collected with a minimum collection costs. The Finance Commission also
recommended to reallocate excess sales tax (if any) to some of the unfunded
Capital Improvement Plan projects on one-time basis. Please see the attached full
recommendation from the Finance Commission herewith (Appendix Q.
KI
While staff acknowledges and shares some of the concerns mentioned by the
Finance Commission, staff recommends suspending the Vehicle Sticker Program
for 2023 due to the following facts and data analysis:
1) The Village has seen a significant revenue growth and staff believes that the
Village can rely on sales tax revenue as a reliable revenue source for the
foreseeable future. Staff's analysis is based on confidential data from the IL
Department of Revenue, information from the business community and trailing 12
months' worth of data, which suggests it is safe to rely on the recently captured
growth in the sales tax revenue.
2) The Village Board and staff seek to minimize the financial burden on residents
and has successfully kept its property tax at modest level by executing a zero -
percent property tax levy increase for multiple years. The Village may not have a
luxury to accommodate a zero -percent property tax levy indefinitely, but the
suspension of the vehicle sticker program will still offer some financial relief to the
majority of residents, as well as any business owners registering commercial
vehicles.
3) The Village has capacity to divert its current state sales taxes to the street
construction program, ensuring this program is fully -funded for future years.
When compared with the current General Fund budget, the vehicle sticker revenue
($1.3 million) equates to 1.8 percent of the annual General Fund budget and 0.8
percent of the total Village revenue budget. The surplus from the state sales tax
alone accounts for $6.0 million, and $1.4 million proposed reallocation accounts
for just 23.3 percent of the state sales tax surplus.
The Village receives around $1.3 million in vehicle sticker revenues, which nets
around $1.2 million after considering hard costs and expenditures. The revenue
collection costs around 7.0 percent.
The Vehicle sticker price is set at $45. This is a fixed cost, meaning residents pay
the same fee regardless of financial status or vehicle situation. If a person owns a
high-end car or a low -value car, the same sticker price applies. It is not a fee
which is applied at a different rate based on residents' economic status and/or
capacity to pay the price. On an average, a household has two cars and pays
$90.00 in vehicle stickers, provided that neither resident qualifies for a senior fee
reduction.
Staff Recommendation
Staff understands the fear of possible a recession and economic downturn;
however, the current growth in the state sales tax and income tax is reliable due
4
to several factors, including:
• non -elastic product segments
• portion of the sales tax as a fixed/semifixed vs. variable revenue
• increase in the Village population per the 2020 Census
• analytics from the available data from ILDOR
These factors suggest that the current time is appropriate to suspend the Vehicle
Sticker program for 2023. Program suspension would be re-evaluated for 2024's
budget; staff is not proposing to eliminate the program at this time. The Village
will have the option to reinitiate the Vehicle Sticker Program should the sales tax
revenue not sustain the current collection level.
Staff understands the Finance Commission's concerns regarding the difficulties
posed by re -initiating the Vehicle Sticker program. With regard to informing the
public, staff understands that, given its re-evaluation in 2024, messaging will
stress that this proposal is a suspension of the sticker, not an elimination.
Messaging is key to having the public understand the potential for the sticker's re-
instatement if necessary in future budgets.
In addition, there are several other options for funding street resurfacing as noted
above. For example, the Village is allowed to levy as much as needed (being a
home rule community) under the line of Streets and Bridges. If the Village later
decides to levy $1.4 million (in lieu of vehicle sticker) in property taxes, it will
increase tax burden by $73.80 per household - still below the average fees paid
per household for vehicle stickers.
In light of the above facts, staff recommends suspending the Vehicle Sticker
Program for 2023.
Alternatives
1. The Village Board and staff to discuss the Village Vehicle Sticker Program and
Village Board to provide direction for 2023.
2. Action at the discretion of the Village Board.
Staff Recommendation
Staff is seeking direction from the Village Board to produce a budget with or
5
without vehicle sticker program. Staff is currently preparing a draft operating
budget for the year 2023
ATTACHMENTS:
Appendix - A - Vehicle Sticker.pdf
Appendix - B - Vehicle Sticker.pdf
Appendix C - Finance Commission Recommendation - Vehicle Stickers.pdf
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Vehicle Sticker Research
Appendix - B
County
Not Required
Required
Grand Total
Not Required
Required
Total Count
Total Avg. Price
Cook
9
34
43
County/Town
Count Avg. Price
Count
Avg. Price
DeKalb
5
5
Cook
9.00
34.00
46.97
_
43.00
45.63
DuPage
5
3
8
Schaumburg
1.00
_
1.00
__
Kane
5
5
Palatine
1.00
1.00
Lake
2
4
6
Oak Lawn
1.00
1.00
Will
6
1
7
Des Plaines
1.00
1.00
Grand Total
32
42
74
Rolling Meadows
1.00
1.00
Glenview
1.00
1.00
Wheeling
1.00
1.00
Hillside
1.00
1.00
Hoffman Estates
1.00
-
-
1.00
-
Deerfield
-
1.00
30.00
1.00
30.00
Palos Heights
1.00
25.00
1.00
25.00
Niles
1.00
50.00
1.00
50.00
Dolton
1.00
40.00
1.00
40.00
Chicago (2)
1.00
151.55
1.00
151.55
Elk Grove
1.00
25.00
1.00
25.00
Melrose Park
1.00
50.00
1.00
50.00
Elmwood Park
1.00
30.00
1.00
30.00
Calumet City
1.00
50.00
1.00
50.00
Evanston
1.00
85.00
1.00
85.00
Prospect Heights
1.00
75.00
1.00
75.00
Forest Park
1.00
35.00
1.00
35.00
Skokie
1.00
40.00
1.00
40.00
Franklin Park
1.00
30.00
1.00
30.00
Arlington Heights
1.00
60.00
1.00
60.00
Bellwood
1.00
25.00
1.00
25.00
Morton Grove
1.00
55.00
1.00
55.00
Harvey
1.00
35.00
1.00
35.00
Oak Forest
1.00
25.00
1.00
25.00
Hickory Hills
1.00
25.00
1.00
25.00
Chicago (1)
1.00
95.42
1.00
95.42
Berwyn
1.00
50.00
1.00
50.00
Park Ridge
1.00
45.D0
1.00
45.00
Winnetka
1.00
40.00
1.00
40.00
River Forest
1.00
45.D0
1.00
45.00
Alsip
1.00
35.00
1.00
35.00
Cicero
1.00
50.00
1.00
50.00
La Grange
1.00
30.00
1.00
30.00
South Holland
1.00
40.00
1.00
40.00
Lansing
1.00
45.00
1.00
45.00
Wilmette
1.00
80.00
1.00
80.00
Matteson
1.00
40.00
1.00
40.00
Maywood
1.00
30.00
1.00
30.00
Homewood
-
1.00
30.00
1.00
30.00
DeKalb5.00
-
5.00
-
Malta _
1.00
1.00
Cortland
1.00
1.00
Sandwich
1.00
1.00
DeKalb
1.00
1.00
Genoa
1.00
-
-
1.00
-
DuPage
5.00
3.00
35.33
_
8.00
35.33
Lombard
1.00
_
1.00
__
Wheaton
1.00
1.00
Naperville
1.00
1.00
Downers Grove
1.00
1.00
Carol Stream
1.00
-
-
1.00
-
Roselle
-
1.00
45.00
1.00
45.00
Elmhurst
1.00
36.00
1.00
36.00
Glen Ellyn
-
1.00
25.00
1.00
25.00
Kane
5.00
-
-
5.00
-
St. Charles
1.00
1.00
Aurora
1.00
1.00
Yorkville
1.00
1.00
Batavia
1.00
1.00
Geneva
1.00
1.00
in
Vehicle Sticker Research
Appendix - B
County Not Required Required Grand Total
Not Required
Required
Total Count
Total Avg. Price
Lake
2.00
4.00
48.75
_
6.00
48.75
Highwood
1.00
_
1.00
Highland Park
1.00
-
-
1.00
-
Zion
-
1.00
50.00
1.00
50.00
Waukegan
1.00
40.00
1.00
40.00
Park City
1.00
20.00
1.00
20.00
Lake Forest
-
1.00
85.00
1.00
85.00
Will
6.00
1.00
30.00
_
7.00
30.00
Bolingbrook
1.00
_
1.00
Shorewood
1.00
1.00
Romeoville
1.00
1.00
Lockport
1.00
1.00
Mokena
1.00
1.00
New Lenox
1.00
-
1.00
-
Peotone
-
1.00
30.00
1.00
30.00
Grand Total
32.00
42.00
45.90
74.00
44.84
11
Appendix C
From: Trisha Chokshi, Finance Commission — Chair
To: Village Mayor and Board of Trustees
Subject: Vehicle Sticker Program
Date: September 2, 2022
I hereby provide this Memorandum regarding the Finance Commission's Recommendation on the
Village's Vehicle Sticker Program. This Memorandum is intended to summarize discussion from the
Finance Commission meeting held on July 28, 2022 regarding this matter.
a) At the Commission's July 28, 2022 meeting, Director of Finance, Amit Thakkar, provided
Commissioners with an overview of the Village's Vehicle Sticker Program. As we learned during
the presentation, the Vehicle Sticker Program generates approximately $1.4 million in revenue
annually for the Village. This amount is earmarked for the Street Resurfacing Program. The Village
sells around 35,800 stickers annually and in doing so, incurs $112,000 in annual expenses. Of this
amount, $67,347 is hard administrative costs, such as the production of the stickers, payment
collection, and distribution; the remaining $44,672 represents wages for Finance Department
personnel. The latter $44,672 in allocated wages cannot be eliminated. Staff expressed to the
Commission that they have seen a decline in the vehicle sticker revenues in recent years: In 2018,
the Village sold 39,326 stickers, while in 2021, the Village sold 35,820 stickers. During fiscal year
2022, the Village has sold 31,262 stickers to date and collected $1,256,246 in revenues. In doing
so, the Village has incurred $85,943 in costs, which includes $21,488 in allocated Finance
Department personnel wages.
Director Thakkar also presented data from surrounding municipalities in Cook, DuPage, and Lake
Counties, including a breakdown of which municipalities have a vehicle sticker program, the cost
of each vehicle sticker, and how their respective vehicle sticker programs are administered. Based
on Staff's research, the average cost of a vehicle sticker is approximately $41.00 per sticker.
b) Staff proposed suspension of the Vehicle Sticker Program for fiscal year 2023 on the following
grounds:
a. The Village has seen a significant growth in its State Sales Tax revenue, specifically the
State Income Tax and the State Sales Tax. The Village had a $8.7 million surplus for 2021
and is expecting $7.0 million in surplus in 2022.
b. Based on Staff research of existing vehicle sticker programs in surrounding communities,
municipalities who appear to be on sound financial footing have eliminated Vehicle
Sticker and replaced the lost revenue from other governmental revenues. Among these
municipalities are Schaumburg, Naperville, Oak Lawn, Hillside, Des Plaines, Rolling
Meadows, Glenview, and Hoffman Estates. Nevertheless, a majority of towns with
existing vehicle sticker programs have retained their programs with the average cost per
sticker being $44.8.
c. To support its recommendation to eliminate the Vehicle Sticker Program, Staff has
proposed the reallocation of Home -Rule Sales Tax from the General Fund to three capital
12
Appendix C
project funds. The reallocation from the General Fund, totaling $1.5 million, will be shared
between the Street Construction Fund, Flood Control Construction Fund, and Capital
Improvement Fund. As a result of this reallocation, each Capital Project Fund will get an
additional $500,000 in revenues.
d. Staff has further proposed $1.4 million from the State Sales Tax revenues be allocated to
the Street Construction Fund. The reallocation of State Sales Tax will allow the Village to
suspend the Vehicle Sticker Program.
e. Staff's proposal is not to eliminate the Vehicle Sticker Program, but to suspend it on a trial
basis. If the Village does not continue to see State Sales Tax revenue generation at current
levels in future years, the Village has the option to revive the Program.
c) Members of the Finance Commission and staff discussed the Vehicle Sticker Program and Staff's
proposal to suspend the Program at length. The following is the Recommendation of the Finance
Commission, along with its reasoning.
a. The Finance Commission unanimously rejected Staff's proposal to suspend the Vehicle
Sticker Program. There could arguably be various positions on this issue, not just
temporary suspension. Mindful of those varying results, the Commission clarified in its
Motion that it was not in favor of suspending, eliminating, or reducing the fee amounts
for the Vehicle Sticker Program.
b. The Finance Commission recognizes that the Village is experiencing healthy cash and fund
balances and that sales tax revenues are growing. However, sales tax revenues are a
variable revenue source, and based on the limited information that can be disclosed to
Commission Members (rightfully so), it appears sales tax revenues are concentrated in a
specific sector. Although Staff has expressed confidence in the sustainability of these base
sales tax revenue amounts, we feel they are subject to various external factors that could
have an adverse impact, including legislative actions at multiple levels of government,
regulatory changes, market conditions, or an owner/operator's decision to leave Mount
Prospect for a neighboring community.
c. The Commission recognizes that the cost to administer the Vehicle Sticker Program is 7%,
which, according to Staff, makes it the Village's most costly revenue source. Nevertheless,
the net gain in revenue is in excess of one million dollars, which is not an insignificant
amount.
d. During the Great Recession in 2008 through 2010, the Village made the incredibly difficult
decision to layoff nearly 10 percent of its staff due to economic conditions. In recent
months, the Village has approved additions to staff to improve its quality of services,
which the Finance Commission has supported. However, there are widespread concerns
of a looming recession and inflation continues to present one of the biggest challenges to
the Village's fiscal position. Given this broader economic uncertainty, the Commission
does not believe the Village should rid itself of a fixed, stable revenue source. This revenue
source is crucial for the Street Resurfacing Program, a program Staff has already noted
has experienced higher than anticipated costs given the impacts of inflation and cost and
availability of raw materials.
e. Rather than suspend or eliminate an existing revenue source, the Commission would like
to see the Village improve or restructure the program so as to address the Program's
administrative costs, thereby improving the cost -benefit assessment. As evident from
13
Appendix C
Staff's initial research, there are alternative means to administer this program without
incurring the costs associated with employee wages, sticker production, and sticker
distribution. For example, the City of Evanston has implemented a sticker -less program
and imposes a tire tax in lieu of issuing actual stickers by utilizing their Police
Department's license plate reading software. The Commission supports further
evaluation of these programs and exploring alternative methods that could help our
existing Program run efficiently.
f. The Village also has long list of unfunded Capital Improvement Projects. The Village could
reallocate excess sales tax funding (if any) to unfunded capital project items on a one-
time basis in any given year upon Staff recommendation and Board approval. This
measure would allow the Village to achieve its objective of supporting capital
improvement projects while maintaining a fixed revenue source in the Vehicle Sticker
Program for ongoing and reoccurring expenses.
g. While the Finance Commission is cognizant that a suspension of the Program could be
seen as a relief -measure for Village residents, it is for that same reason that we believe it
may be nearly impossible to bring the Vehicle Sticker Program back once it has been
suspended.
h. The Motion to concur with Staff's recommendation to suspend the Vehicle Sticker
Program for fiscal year 2023 was unanimously denied by the Finance Commission. It is the
recommendation of the Finance Commission to not eliminate or suspend the Vehicle
Sticker Program (6 Commissioners were present). We further recommend that Staff re-
evaluate neighboring programs or explore alternative methods to implement the
program in a way that lowers its administrative costs and improves efficiency.
14