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HomeMy WebLinkAbout8.1 Motion to Establish the Village of Mount Prospect Economic Emergency FundMr�GauC �'d'+rt;�iect Item Cover Page Subject Motion to Establish the Village of Mount Prospecl Economic Emergency Fund Meeting May 16, 2023 - REGULAR MEETING OF THE MOUNT PROSPECT VILLAGE BOARD - Fiscal Impact Dollar Amount Budget Source Category NEW BUSINESS Type Action Item Information The Village faces certain unforeseen emergencies from time to time and it may involve natural disasters/manmade disasters, economic downturns, unexpected expenses, loss of major revenue sources and so forth. The Village has a five-step contingency plan to address these emergencies, as described below: 1. Eliminate or defer capital projects/purchases. 2. Reduce funding (lease payments) of computer and vehicle replacement programs. 3. Institute a freeze or reduction in commodity, contractual service, and supply accounts, where possible. 4. Review the catalog of programs and services provided by the Village. 5. Review of staffing levels. The first three steps are deployed during a short-term contingency, while all five steps are explored in a long-term contingency. When the Village has to implement long-term contingency planning, the Village may need anywhere from three to six months to finalize and implement. The Village may need dedicated fund balance while conducting the planning and implementation exercises. The Village does not have a separate emergency fund and the Village General Fund serves as an operating fund as well as an emergency fund when needed. Staff recommends the Village have a separate emergency fund as it provides: Budgeting Flexibility_: An emergency fund can provide budgeting flexibility, allowing local governments to address unexpected expenses without having to cut other programs or services. This can help avoid a budget crisis and ensure that essential services are not disrupted. 1 Credit Rating: An emergency fund can improve the credit rating of local governments, making it easier and cheaper to borrow money when needed. A good credit rating can also attract businesses and investors to the area, which can boost the local economy. The Village is currently in a good financial position and can afford to start an Economic Emergency Fund. Staff recommends having two months worth of operating cash balance in the fund, which equates to $13.0 million. The Village has seen an excellent growth in its General Fund revenues and have seen a surplus of $13.6 million for the year 2022. Some of these surpluses will be deployed towards various abatements and projects in FY 2023 and 2024, the Village can afford to deploy $6.5 million (one months' worth of operating cash) towards the Economic Emergency Fund. The above item was shared with the Finance Commission during the Finance Commission's regular meeting of March 23, 2023. The Finance Commission voted to support the creation of a Economic Emergency Fund using General Fund surplus from fiscal year 2022. This item was also presented at 2023 First Quarter Budget Review on April 25, 2023 with the Village Board and the Finance Commission. The Village Board indicated they are supportive of establishing an Economic Emergency Fund. This action item formally establishes the Economic Emergency Fund. The Economic Emergency Fund can be deployed subject to following guidelines: Economic Emergency Fund Balance can be used for: 1. Responding to natural disasters or emergencies: Natural disasters such as floods or tornadoes can inflict significant damage on a community. An economic emergency fund can be used to provide immediate relief and support for disaster response efforts, including evacuation, temporary shelters, emergency repairs, and recovery initiatives. 2. Responding to manmade disasters or emergencies: Train derailment, major accidents, terrorist attacks, pandemics like COVID-19 can also inflict significant damage on a community. An economic emergency can be used to provide immediate relief and support for disaster response efforts, including evacuation, temporary shelters, emergency repairs, medical supplies, and other recovery initiatives to protect the Village's financial interests and properties. 3. Mitigating revenue shortfalls: During times of economic downturn or unexpected events, local governments may experience a decline in revenue from taxes, fees, and other sources. An economic emergency fund can help bridge these revenue gaps and ensure essential services can continue without interruption. 4. Pension and Debt Service Levy Abatement: It is always our efforts to reduce the burden of direct property tax on residents and businesses. To do so, the Village Administration proposed various abatements from time to time, subject to availability of other revenue sources and fund balance levels. In an appropriate environment and for a suitable reason, the Village Board may consider using the Economic Emergency Fund to abate pension and debt service levies. 2 5. Supporting economic development initiatives: Local governments often prioritize economic development projects to stimulate growth, attract businesses, and create job opportunities. An economic emergency fund can be used to provide financial assistance, grants, or incentives to businesses, entrepreneurs, or organizations involved in economic development activities. 6. Investing in an emergency infrastructure improvement: When our critical infrastructure fails without a notice and it may require significant investments right away, an economic emergency fund can be utilized to finance critical infrastructure improvements that restore or enhance public safety, transportation efficiency, or environmental sustainability. 7. Stabilizing public finances: When faced with unexpected financial challenges or budget deficits, local governments can use economic emergency funds to stabilize their finances. These funds can help prevent the need for drastic measures such as layoffs, service cuts, or tax increases, allowing governments to maintain essential services while they work towards long-term fiscal sustainability. 8. Any other suitable use that seems fit by the Village Board. When the Village needs to deploy any of the funds in an emergency described above, the following is the guidelines. 1. In case of an emergency of a nature described in i) or ii) above, the Village Manager may be required to act promptly using the emergency powers provided by the Village Code. The Village Manager should follow the protocols required by the Village Code and present the necessary expenses for ratification to the Village Board within 14 days. The expenses may or may not require use of the Economic Emergency Fund. 2. In any other case or situation, staff should propose a case to the Finance Commission for an appropriate use of the Economic Fund. With the recommendation (for or against the proposed use) from the Finance Commission, the staff should present the case to the Village Board. Subject to the Board approval only, the funds can be appropriated and used for the given reason. Alternatives 1. Village Board approve the creation of the Village Economic Emergency Fund. 2. Action at the discretion of the Village Board. Staff Recommendation Village Board approve the creation of the Village Economic Emergency Fund. ATTACHMENTS: KI