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Home My WebLink About4.1 Discuss proposed budget amendments for the fiscal year 2022 and other items.Mr�GauC �'d'+rt;�iect Item Cover Page Subject Budget Amendments for the Fiscal Year 2022 and Ot'rer IteTrs Meeting May 10, 2022 - COMMITTEE OF THE WHOLE - Fiscal Impact Dollar Amount Budget Source Category DISCUSSION ITEMS Type Discussion Item Information As mentioned in the Joint Workshop held with the Village Board and Finance Commission on April 26th, staff is opening discussions on several items mentioned at the Joint Meeting. These items include reallocation of the home -rule sales tax, proposed increase to the Street Resurfacing Program budget, the addition of a Community Relations officer within the Police Department, and a reallocation of funds to the Pension Stabilization Fund. Finance staff will be in attendance to answer questions about the proposed discussion items. Staff is proposing the following amendments to the adopted 2022 budget: 1) Reallocation of the home -rule sales tax: Home -rule units of local government are authorized to impose a home -rule sales tax and certain non -home rule units of local government are authorized to impose a non -home rule sales tax to be collected by the Illinois Department of Revenue. Both taxes are imposed on the same general merchandise base as the state sales tax, excluding titled or registered tangible personal property (such as vehicles, watercraft, aircraft, trailers, and mobile homes), and qualifying food, drugs and medical appliances. The Village of Mount Prospect is a home -rule unit of local government. The Village adopted an ordinance in 1991, enacting the home -rule sales tax at 1%. The State of Illinois collects the home -rule sales tax on behalf of the Village and remits the same after deducting the admin fee of 1.5%. Normally, there is a three month lag between the actual sales and tax payments by the 1 State (for administration and processing reasons). The following data was obtained from the Illinois Department of Revenue's website and shows the composition of the Village's home -rule sales tax for the year 2021. The amounts represent gross sales and sales tax (before the administrative fees deduction by the Department of Revenue). Category General Merchandise Food Drinking and Eating Places Apparel Furniture & H.H. & Radio Lumber, Bldg, Hardware Automotive & Filling Stations Drugs & Misc. Retail Agriculture & All Others Manufacturers Total Home Rule Sales 68,838,359 31,146,768 94,680,579 21,949,700 19,383,229 11412181423 11910581833 11615701745 73,389,454 19,734,079 $ 678,9701:169 HR Sales Tax 6881384 311,468 946,806 219,497 193,832 1,142,184 1,190,588 1,165,707 733,895 197,341 $ 6,789,702 The Village has adopted a policy to allocate the home -rule sales tax as below. a) 1/4 = Street Construction Projects The Street construction projects are funded using 25% of the home -rule sales tax collected, municipal motor fuel tax, state motor fuel tax, and vehicle sticker fees. Recently, the Village has also received a $3.6 million grant from the Rebuild Illinois program (over three years). The below revenue sources have allowed the Village to run a successful street resurfacing program and has allowed the Village to improve streets with a 20 -year replacement cycle. Revenue Source Home rule sales tax Municipal Motor Fuel Tax State Motor Fuel Tax Vehicle Sticker Fees Total Revenues Total Collected 6,000,000 650,000 2,100,000 1,400,000 Allocated for Street Construction 1,500,000 650,000 1,500,000 1,400,000 5,050,000 b) 1/4 = Flood Control Construction Projects The flood control project fund allows the Village to execute high -impact flood control and storm sewer projects. Recently, the Village executed two large flood control projects at the Burning Bush Trails and Aspen Trails Park. Both of these 2 projects were made possible from the Metropolitan Water Reclamation District (MWRD) grants and the General Fund Reserves. Twenty-five percent of the collected home -rule sales tax totals approximately $1.5 million. Of this amount, $950,000 is tied up in debt service payments. The remaining amount is used for annual maintenance and a few storm sewer/drainage programs. The current funding levels do not support any major meaningful projects and it is not recommended to keep using General Fund reserves. In the last two fiscal years, the Village used $7.0 million from the General Fund reserves for the flood control projects. c) 1/4 = Capital Project Fund The fund supports various small and midsize capital projects including building improvements, technological improvements (other than computers), and other projects that do not have a dedicated funding source. The Village normally executes capital projects totaling $2.3 million each year, while the funding requirements are higher. The Village uses $1.5 million from the home -rule sales tax and the remaining amount is funded from the General Fund (as transfers). d) 1/4 = General Fund (Part of the operating revenues) The remaining amount of the home -rule sales tax is allocated to the General Fund. All other revenue sources, including home -rule sales tax, have allowed the Village to collect $60.0 million each year and have supported the General Fund expenditures including Personnel, Benefits, Contractual Services, Supplies, and also inter -fund transfers. There is no established one to one relationship between home -rule sales tax collected and the expenditure line items. The Village has recently seen great growth in its intergovernmental revenues. The Village is still trying to confirm long-term reliability for the 34% growth in the State Sales Tax revenues. However, at the same time, staff has confidence in the State Use Tax, Income Tax, and Personal Property Replacement Tax which has increased from $8.5 million to $10.2 million (all three combined). The income tax and use tax are distributed as a per capita item. From 2011 to 2021, the Village received 0.42% of the total state allocation for Income tax and use tax. Currently, since the population of the Village has increased from 54,167 to 56,852, the Village started getting 0.44% of the state income tax and use tax allocations. A simple proportionate increase due to an increase in population will provide an additional income of $446,639 for the year 2022 (The amount is 0.02% of $2.2 billion in statewide allocation). If it is assumed that the Village will get the same amount in income tax and use tax for the rest of the year, the Village is set to collect $7.9 million in income tax and $2.1 million in use tax. At this time, staff concludes that the state income tax and use tax are reliable at their current levels. KI Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total Jan Feb Mar Apr May Jun Jul Aug Sep Oct LGDF - State Income Tax FY 2018 FY 2019 411,622 449,416 595,821 540,684 299,534 325,561 459,947 522,920 742,904 1,087,748 343,194 339,700 464,032 508,012 340,629 3641159 3321441 3221298 516,674 575,040 3721124 375,302 308,439 354,644 5,187,361 5,765,484 Nov - Dec State Use Tax FY 2018 137,043 173,336 103,179 106,108 128,142 111,838 121,951 130,605 126,696 120,493 284,529 FY 2019 161,883 195,756 113,556 130,818 148,717 140,763 141,371 143,718 147,750 141,552 332,603 FY 2020 495,702 510,709 379,763 557,777 546,114 338,269 537,157 734,409 416,126 602,587 407,173 360,484 5,886,270 FY 2020 163,074 223,760 154,943 134,648 171,281 181,325 201,657 203,586 205,865 196,032 FY 2021 574,325 607,191 418,473 667,251 911,473 799,724 717,425 402,845 425,427 773,100 443,184 435,072 7,175,489 FY 2021 228,354 322,236 157,987 140,873 180,096 163,626 150,607 171,655 159,859 168,743 359,901 Total 1,543,922 1,798,489 2,254,976 2,203,936 FY 2022 774,621 965,881 418,654 894,395 3,053,551 FY 2022 204,009 258,591 171,491 634,091 It is a practice adopted by many municipal governments to reserve home -rule sales tax for capital projects only. The Village did not have the luxury to do so in the past. However, the Village has enough revenue source in the General Fund to be in the position of reserving the home -rule sales tax to its capital project funds as proposed below: With the proposed new allocation, all three funds will receive additional revenues ranging from $500,000 to $750,000. The street resurfacing program budget for the year 2022 was set at $5.1 million. The most recent bid results came in at 4 $5,575,499. The labor market, inflation, supply chain issues and many other factors have impacted the bid results. The added revenue source will allow the Street Resurfacing Program to run without any budgetary constraints and issues. The 2022 budget includes a transfer of $750,000 to the Capital Project Fund and $1,000,000 to the Flood Control Project Fund. With the added revenue source for the Capital Improvement Fund and the Flood Control Fund, the Village may reduce or eliminate the amount of annual transfer that occurs from the General Fund. 2) The Street Resurfacing Program is funded from the Street Improvement Construction Fund and the Motor Fuel Tax Fund. The total budget includes $1,872,000 from the Street improvement Fund and $2,990,000 from the Motor Fuel Tax Fund. The overall street resurfacing bids have come in at $5,575,499 against the total budget of $5.1 million. The labor market, inflation, supply chain issues and many other factors have impacted the bid results. At this time, staff is requesting to increase the Street Improvement Construction budget by $475,499. 3) Community Relations Officer: The Village of Mount Prospect has 83 sworn police officers. Back in 2006, the Village had 92 sworn police officers. A new Community Relations Officer will allow the Village to strengthen the bonds between the community and the Police Department. The position will handle various community outreach programs, social media management, community policing, citizen's police academy and will also support various Village sponsored events and programming. The total anticipated cost of a Community Relations Officer is $176,831. The Village is also facing various challenges including cybercrimes. The Village has done great with its existing resources and has successfully resolved a few cases in recent times. However, staff is of the opinion that there is a need to increase the footprint because of transient crimes. The recent census also added 2,685 more people to the Village's territory. In addition, the newly annexed territory has increased the call volume for the Police Department. Due to all the highlighted facts, staff is requesting two additional police officers. The newly added police officers will also help the Village in saving some of the overtime costs. The staff is diligently working to see if the Village may qualify for the Community Oriented Policing Services (COPS Grant) Competitive Hiring Program. The grant may cover $125,000 per approved officer (paid over three years). The requested additional headcount will cost the Village $353,662, annually. At this time, staff is requesting the Village Board's approval to initiate the grant application process. 4) As discussed at the First Quarter Review, staff is requesting to reallocate $750,000 from the current sales tax budget to initiate the Pension Stabilization Fund. This amount will be earmarked for the Pension Levy Abatements and will be 5 deployed toward the 2022 pension levy, payable in 2023. The Village needs to have these funds on hand and earmarked in order to abate the pension levies in November 2022 (while approving the levy). This will enable another zero percent increase to the property tax levy. The above items will also be discussed with the Finance Commission and the staff will present the Final Budget Amendments at the Village Board Meeting in June 2022. Alternatives 1. Discuss proposed budget amendments for the fiscal year 2022 and other items. 2. Action at the discretion of the Village Board. Staff Recommendation Discuss proposed budget amendments for the fiscal year 2022 and other items. ATTACHMENTS: Budget Amendments - May 06 2022.pdf 11 Village of Mount Prospect Mount Prospect, Illinois INTEROFFICE MEMORANDUM TO: MICHAEL CASSADY — VILLAGE MANAGER, NELLIE BECKNER — ASST. VILLAGE MANAGER FROM: AMIT THAKKAR - DIRECTOR OF FINANCE DATE: APRIL 8, 2022 SUBJECT: BUDGET AMENDMENTS AND FUND BALANCE POLICY The staff is proposing the following amendments to the adopted 2022 budget: a) Reallocation of the home -rule sales tax: The home rule units of local government are authorized to impose a home rule sales tax and certain non -home rule units of local government are authorized to impose a non - home rule sales tax to be collected by the Department. Both taxes are imposed on the same general merchandise base as the state sales tax, excluding titled or registered tangible personal property (such as vehicles, watercraft, aircraft, trailers, and mobile homes), and qualifying food, drugs and medical appliances. The Village of Mount Prospect is a home rule unit of local government. The Village adopted an ordinance in 1991, enacting the home rule sales tax at 1%. The State of Illinois collects the home rule sales tax on behalf of the Village and remits the same after deducting the admin fee of 1.5%. Normally, there is a three month lag between the actual sales and tax payments by the State (for administration and processing reasons). $8,0070 $7,00707 $6,000 s........ $5,000 $4,000 $3,000 $2„000 $1..,000 II Nome I umulle Saes ..I..ax (Ilin Thousands) $6,689 $5,421 $5,469 $5,553 $5,365 $5,455 $5,429 $5,334,,,„ IIIIIIIINIUM 9 4 Inl m f:Y 2014.f:Y 2.01.5 f:Y 201.6 If Y 2017 If Y 201..8 f Y 2Q:.19 f Y 2020 f:Y 2121.. $8,000 $7,000 r� $6,000 $5,000 s........ $4„000 $3,000 $2„000 $1,.000 IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII General fund IVtMIN)1DJN f IGaod Control IIIIIIIIIIIIIIIIIIIII11115 Street C011S.1'b.rcti01'1 CaI:7!�tal Irnprovennent Fand , Fotal 1 7 The following data was obtained from the Illinois Department of Revenue's website and shows the composition of the Village's home rule sales tax for the year 2021. The amounts represent gross sales and sales tax (before the administrative fees deduction by the Department of Revenue). General Merchandise 68,838,3 5 5 688, 3,84 food 31,146,768, 311,468 Drinking and Eating (Places 94,680,575 9,46,806, Apparel 21,945,700 215,497 Furniture & H.H. & Radio 15,383,229 153,832 Lumber, Bid W Hardware 114,218µ423 1,142,184 Autornotlive & Filling Stations 119,,058,833 1,,19,,588 Drugs & M' isc. RReta Ii1 116,570,,745 1,,16.5,707 Ag,;hicullture & AIIII otthers 73,389,454 733,5;55 Manufacturers 15,734,,075 197,,541 The Village has adopted a policy to allocate the home rule sales tax as below. a) '/4 = Street Construction Projects Street construction projects are funded using 25% of the home rule sales tax collected, municipal motor fuel tax, state motor fuel tax, and vehicle sticker fees. Recently, we have also received a $3.6 million grant from the Rebuild Illinois program (over three years). floc ted for Street Revenue Source, Total Collected Construction Home rune sales tax 6,000,000 1,,500,,0 I unlidipal Motor IFuel Tax 650,000 650,000 State Motor IFuel Tax 2,,100,000 1,500,000 Vehicle tlJck.er Dees 1,,400,000 1,,400,,000 Tot l Reveooa 9ource 5,,050,p000 The above revenue sources have allowed the Village to run a successful street resurfacing program and has allowed the Village to improve streets with a 20 -year replacement cycle. b) '/4 = Flood Control Construction Projects The flood control project fund allows the Village to execute high -impact flood control and storm sewer projects. Recently, the Village executed two large flood control projects at 2 0 the Burning Bush Trails and Aspen Trails Park. Both of these projects were made possible from the Metropolitan Water Reclamation District (MWRD) grants and the General Fund Reserves. Twenty-five percent of the collected home rule sales tax totals approximately $1.5 million. Of this amount, $950,000 is tied up in debt service payments. The remaining amount is used for annual maintenance and a few storm sewer/drainage programs. The current funding levels do not support any major meaningful projects and it is not recommended to keep using General Fund reserves. In the last two fiscal years, the Village used $7.0 million from the General Fund reserves for the flood control projects. c) '/4 = Capital Project Fund The fund supports various small and midsize capital projects including building improvements, technological improvements (other than computers), and other projects that do not have a dedicated funding source. The Village normally executes capital projects totaling $2.3 million each year, while the funding requirements are higher. The Village uses $1.5 million from the home rule sales tax and the remaining amount is funded from the General Fund (as transfers). d) '/4 = General Fund (Part of the operating revenues) The remaining amount of the home rule sales tax is allocated to the General Fund. All other revenue sources, including home rule sales tax, have allowed the Village to collect $60.0 million each year and have supported the General Fund expenditures including Personnel, Benefits, Contractual Services, Supplies, and also interfund transfers. There is no established one to one relationship between home rule sales tax collected and the expenditure line items. The Village has recently seen great growth in its intergovernmental revenues. The Village is still trying to gain its confidence for the 34% growth in the State Sales Tax revenues. However, at the same time, staff has confidence in the State Use Tax, Income Tax, and Personal Property Replacement Tax which has increased from $8.5 million to $10.2 million. The income tax and use tax are distributed as a per capita item. From 2011 to 2021, the Village received 0.42% of the total state allocation for Income tax and use tax. Currently, since the population of the Village has increased from 54,167 to 56,852, the Village started getting 0.44% of the state income tax and use tax allocations. A simple proportionate increase due to an increase in population will provide an additional income of $446,639 for the year 2022 (The amount is 0.02% of $2.2 billion in statewide allocation). If we assume that the Village will get the same amount in income tax and use tax for the rest of the year, the Village is set to collect $7.9 million in income tax and $2.1 million in use tax. At this time, we conclude that the state income tax and use tax are reliable at their current levels. 3 0 1,543,922 1,798, 48,9 2,254,976 2,203,936 6,34,,091 It is a practice adopted by many municipal governments that reserves the home rule sales tax for capital projects only. The Village did not have the luxury to do so in the past. However, the Village has enough revenue source in the General Fund and the Village is in the position of reserving the home rule sales tax to its capital project funds as proposed below: M 10 �FY 2018, FY 2019 FY 2020 FY 2021 FY 2,022 Jan 411,622 445,416, 495,702 574,325 774,621 �Deb 595,821 540,684 510,7Cd 6,07,191 9,65,881 Mar 299,.53 4 325,561 379,763 418,473 418,654 Apr 459,947 522,920 55 7,777 6,67,, 251 994,395 May 742,9,04 1,087,749 546,114 911,473 Jun 343,194 339,700 33'3,,26'9 799,724 Jul 464,032 508,012 537,157 717,425 Aug, 340,629 364,159 734,409 402,845 Sep 332,441 322,298 416,126, 425,427 0 Ct 516,674 575,040 6,02,587 773,100 �Dov 372,124 375,302 407,173 443,184 Dec 308,439 354,644 36,0,484 435,072 5,187,361 5,755,484 5,9,8,6,270 7,175,499 3,05 3,55 1 1,543,922 1,798, 48,9 2,254,976 2,203,936 6,34,,091 It is a practice adopted by many municipal governments that reserves the home rule sales tax for capital projects only. The Village did not have the luxury to do so in the past. However, the Village has enough revenue source in the General Fund and the Village is in the position of reserving the home rule sales tax to its capital project funds as proposed below: M 10 �FY 2019, FY 2015 FY 2020 FY 2021 FY 2022 Jan 137,043 161,883 163,074 228,354 204,009 �deb 173,336, 195,756, 223,760 322,236, 258,591 Mar 103,179 113,556, 1,54,943 1,57,997 171,491 Apr 1,06" 108, 130,818, 134,648, 140,873 May 128,142 148,,717 171,281 18"O"096, Jun 111,3,38, 140,763 191,325 163,626, Jul 121,951 141,371 201, 65 7 1,50, 6u07 Aug, 130,605 143,718, 203,58,6 171,655 Sep 126,696, 147,750 205,965 1,59,959 0 Ct 120,433 141,552 196,032 158,743 �Nov - Dec 284,5 29 332,603 418,807 359,901 1,543,922 1,798, 48,9 2,254,976 2,203,936 6,34,,091 It is a practice adopted by many municipal governments that reserves the home rule sales tax for capital projects only. The Village did not have the luxury to do so in the past. However, the Village has enough revenue source in the General Fund and the Village is in the position of reserving the home rule sales tax to its capital project funds as proposed below: M 10 General Fund Street Construction Fund Flood Control Construction Fund Capital Improvement Fund 25% 1,500,000 25% 1,500,000 25% 1,500,000 25% 1,500,000 . X M 33.33% 2,000,000 33.33% 2,000,000 33.33% 2,000,000 MUM With the proposed new allocation, all three funds will receive additional revenues ranging from $500,000 to $750,000. The street resurfacing program budget for the year 2022 was set at $5.1 million. The most recent bid results came in at $5,575,499. The labor market, inflation, supply chain issues and many other factors have impacted the bid results. The added revenue source will allow the Street Resurfacing Program to run without any budgetary constraints and issues. The 2022 budget includes a transfer of $750,000 to the Capital Project Fund and $1,000,000 to the Flood Control Project Fund. With the added revenue source for the Capital Improvement Fund and the Flood Control Fund, the Village may reduce or eliminate the amount of annual transfer that occurs from the General Fund. b) The Street Resurfacing Program is funded from the Street Improvement Construction Fund and the Motor Fuel Tax Fund. The total budget includes $1,872,000 from the Street improvement Fund and $2,990,000 from the Motor Fuel Tax Fund. The overall street resurfacing bids have come in at $5,575,499 against the total budget of $5.1 million. The labor market, inflation, supply chain issues and many other factors have impacted the bid results. At this time, staff is requesting to increase the Street Improvement Construction budget by $475,499. c) Community Relations Officer: The Village of Mount Prospect has 83 sworn police officers. Back in 2006, the Village had 92 sworn police officers. A new Community Relations Officer will allow the Village to strengthen the bonds between the community and the Police Department. The position will handle various community outreach programs, social media management, community policing, citizen's police academy and will also support various Village sponsored events and programming. The total anticipated cost of a Community Relations Officer is $176,831. The Village is also facing various challenges including cybercrimes. The Village has done great with its existing resources and has successfully resolved a few cases in recent times. However, staff is of the opinion that there is a need to increase the footprint because of transient crimes. The recent census also added 2,685 more people to the Village's territory. In addition, the newly annexed territory has increased the call volume for the Police Department. Due to all the highlighted facts, staff is requesting two additional police officers. The newly added police 5 11 officers will also help the Village in saving some of the overtime costs. The staff is diligently working to see if the Village may qualify for the Cops grant. The grant may cover $125,000 per approved officer (paid over three years). The requested additional headcount will cost the Village $353,662, annually. At this time, staff is requesting the Village Board's approval to initiate the grant application process. d) As discussed at the First Quarter Review, staff is requesting to reallocate $750,000 from the current sales tax budget to initiate the Pension Stabilization Fund. This amount will be earmarked for the Pension Levy Abatements and will be deployed toward the 2022 pension levy, payable in 2023. The Village needs to have these funds on hand and earmarked in order to abate the pension levies in November 2022 (while approving the levy). Thank you. Respectfully Submitted, Amit Thakkar Director of Finance 0 12