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HomeMy WebLinkAbout5.1 2025 Annual Budget WorkshopM+awn �'xyt�lts�=e Item Cover Page Subject 2025 Annual Budget Workshop Meeting October 8, 2024 - MEETING OF THE MOUNT PROSPECT COMMITTEE OF THE WHOLE Fiscal Impact Dollar Amount Budget Source Category DISCUSSION ITEMS Type Budget Item Information Staff will present the proposed 2025 Annual Budget at this workshop. This budget was presented to the Finance Commission on September 26, 2024. The 2025 budget began with the Village's Community Investment Plan presentation in August 2024. This workshop will focus on the operation budget and other non-operating items. The first reading of the ordinance for the approval of the levy, abatement, and budget will occur on October 15, 2024. The Finance Commission's recommendation on the budget is expected on October 24, 2024. The public hearing for the budget and levy will be held on November 6, 2024. The final approval for all three budget, levy, and abatement ordinances is expected on November 6, 2024. Discussion The proposed 2025 Operating Budget and Community Investments Plan totals $165.4 million, a reduction of $22.7 million or 12.1 percent. This reduction is largely due to a reduction of interfund transfers to fund the Economic Emergency Fund and completion of projects funded by the American Rescue Plan. This spending plan continues to appropriately fund our public safety, support operations, and capital investments, ensuring our organization is positioned to continue a tradition of outstanding municipal services for our residents. Our 2025 plan continues our commitment to reducing the property tax burden for our residents and businesses, as two two non -village, independent, units of local government seek voter approval on key school and recreation enhancements for the community. In lieu of property tax levy increases to fund constant increases in personnel, other operating budget items, and capital, the Village continues to focus on economic development opportunities to enhance sales tax revenues. Revenues The 2025 revenue budget is set at $160.9 million, $4.0 million or 2.4 percent less than the previous year. In the FY 2024 budget, there were several one-time grant revenues, including the American Rescue Plan, Surface Transportation Program Grant (STP), and Congestion Mitigation and Air Quality Grant (CMAQ), among others. These grants will not be repeated in 2025, resulting in a decrease of $2.3 million or 4.1 percent in Intergovernmental Revenues. Inter -fund transfers for 2025 will amount to $7.7 million, a reduction of $13.5 million or 63.6 percent from the $21.3 million transferred in 2024. The 2024 transfers included $6.5 million for the Economic Emergency Fund and $5.3 million for the American Rescue Plan, neither will be required in 2025, leading to a decrease in the inter -fund transfer budget for the year. PropertyTaxes 24,313,627 22,022,359 2,,791,263 12.7% OtherTaxe's 1:5,554,359 14,639,333 365,353 5.9% Rnter overnnienta� Revenue 54,357,954 57,179,236 (2,321,232) -4,11/ Licenses, (Permits & Fees 1,912,000 2,037,000 (125,4 00) -6.1'% Char es For Services 47,34.2,391 42,20505,779 3,936,0531 12.9% Fines & IForfeits 698,599 479,935 137,545 29.2'% investment Illnconie 3,933,700 1,313,245 2,115,455 116.3% OVher Reven L,ie 3,335,599 2,354,944 239,556 3.11% Reimbursements 1,,336,,599 337,,999 749,,593 222.4"C/o Total Reoccurnn Revenues 153,1.94,432 143,664,509 9,529,923 8.6% Other Financing Sources 7,749,433 21,279,333 (13,529,367) -63.6,0/ Total Revenues 1,60,94 ,865 164,94 ,509 (3,999,6144) -2.42% The proposed property tax levy for 2024 (payable in 2025) is $18.2 million, reflecting a reduction of $1.2 million or 6.3 percent from the 2023 level. Without abatements totaling $5.1 million, the property tax levy would have shown a 27.3 percent increase over the 2023 amount. This would have been the highest levy in the last ten years. The total levy in 2015 was $18.3 million. With the proposed abatements, the 2024 levy will be the lowest in the past decade. This will be the second consecutive year that the Village has reduced its property tax levy. The 2023 tax levy was reduced by 4.8 percent. Between the 2023 and 2024 tax levies, the Village has reduced its property tax levy by $2.2 million or 11 percent compared to the 2022 tax levy. With a proposed reduction of 6.3 percent in the Village portion of property taxes, average households will see a decrease of $65 in their annual property tax bill. The "other taxes" category includes various locally imposed taxes such as home -rule sales tax, hotel/motel tax, food & beverage tax, and real estate transfer tax, among others. It is projected to generate a total of $15.6 million in taxes, representing an increase of $863,350 over the 2024 budgeted amount. The largest revenue category, intergovernmental revenues, is expected to total $57.2 million in 2025. Of this amount, state -shared sales tax is projected to be $36.0 million, while income tax (LGDF) is expected to account for $9.5 million. In 2024, intergovernmental revenues included $6.7 million in the American Rescue Plan. This amount is not repeated in 2025 and has resulted in an overall decrease of $2.3 million for the category (after an offset of $4.4 million increase in other line items). The current sales tax amount also includes $875,000 from grocery tax. Recent legislation eliminates this tax on January 1, 2026. Now, the Village has the option to enact a local grocery tax of up to 1 percent. This item will be addressed as part of the 2026 budget discussion in late 2025. The Village's investment income has risen as a result of higher interest rates. The 2024 projection indicates that the investment incomes will reach $5.6 million, compared to the original budget of $1.8 million. The Federal Reserve Bank recently cut interest rates by 50 basis points. More rate reductions are expected in late 2024 and early 2025. In light of the current and future rate reductions, the investment income forecast is lowered from $5.6 million to $3.9 million. The Village is expected to earn above -market investment income because of a few long-term investments that the Village is holding. The Village has the intention and capacity to keep them until their maturities. The 2025 budget includes $47.3 million in various charges for services, $5.1 million or 12.0 percent more than the 2024 budgeted amount. In addition to the existing charges, the 2025 budget introduces two new internal service charges: $1.6 million for the building improvement fund and $783,943 for the technology replacement fund. The 2025 budget also proposes changes to the ambulance billing fee structure to reflect the actual cost of operation per call more accurately. The 2025 budget for ambulance billing fees totals $4.1 million, an increase of $1.1 million or 35.4 percent over the 2024 budget. Ambulance fees were last raised in 2019. Comparable regional communities are charging significantly higher ambulance billing fees. The average ambulance billing fee is above $3,000. The actual cost per call is expected to be around $3,173, and the Village proposes changing fees from $1,500 to $3,000. Water and sewer utility rates are set to increase by 6.75 percent in 2025, as indicated in the water rate study. Expenditures The Budget for 2025 expenditures totals $165.4 million, a decrease of $22.7 million, or 12.1 percent, from the amended 2024 Budget. The decline in spending is mainly attributable to reduced inter -fund transfers from the General Fund. FY 2024 includes $21.3 million in transfers. Of this amount, $6.5 million is transferred from the General Fund to the Economic Emergency Fund, and $5.3 million is budgeted for the American Rescue Plan -funded projects. This was a one-time transfer and is not expected to be repeated on an annual basis. Besides that, the 2024 budget includes carryover projects totaling $13.8 million from 2023. The original 2024 budget included a community investment plan totaling $34.7 million. The 2025 proposed budget includes a community investment plan totaling $33.4 million. Operatin g Budg" et 97,586,144- '91,'975,157 5,610,987 6.1'1' Oo'mmunity Investment IP 33,440,322 50,636„555 (17,196,233) -34.0'�'Ab Debt Service 7,712,124 7,64,5,734 66,390 0.'9'�'Ab Internat Service (Funds 14,181,581 13,392,126 789,455 5.9% 5pe!'cIlat RevenLie Buslines 2,027,500 1,7.50,000 277,500 15.911y171 8peciiiat Peven Lie TIVIF 2,740,000 1,497,600 1,242,400 83.0'1' Interifuncl Transfers 7,749,433 21,279,000 (18,529,567) -68.6'�Ab Total Revenues t 5,437,104 188,17 ,17 (22,739,067) m12.1 , The operating budget is scheduled to increase by $5.6 million, or 6.1 percent, from the 2024 amended budget. This increase is primarily due to higher pension contributions, cost -of -living adjustments for personnel, and inflationary adjustments to contracted services. In the 5 -year Community Investment Plan, CIP spending for 2025 is projected to be $33.4 million, $17.2 million less than the 2024 amended budget. There were unfinished projects totaling $13.8 million carried forward from 2023 to 2024, resulting in higher amounts for the FY 2024 CIP budget. The total FY 2024 debt service payments will amount to $7.7 million. Internal Service Fund expenditures total $14.2 million, an increase of $789,455 compared to the FY 2024 amended budget. The plan includes inter -fund transfer outs totaling $7.8 million for FY 2025, of which $5.1 million will be used to abate debt service and pension property tax levies. A total of $1.7 million will be used to fund various capital projects. This year's inter -fund transfers include an operating transfer of $1.0 million from the Elk Grove Rural Special Service Area Fund to the General Fund. $4.3 million in outstanding principal debt will be repaid during FY 2025, while the total interest payment will be $3.4 million. The Village has not planned any new bond issuance or debt for FY 2025. The next planned bond issuance is expected at the end of 2026. Challenges for the Budget 2025 The Village has recently faced several new challenges, including inflation, possible recession, legislative changes, deficit levels at the State of Illinois, uncertain market conditions, rising pension costs, aging infrastructure, supply -chain issues, labor turnover, and others. Below are descriptions of some of those challenges. a. The current inflation rate is around 2.5 percent (CPI -U) over the last 12 months. However, inflation recently reached a 40 -year high at 9.1 percent. Increased costs of supplies, contractual services, and increased annual personnel costs are creating a burden for the fund and cash balances. These increases can also put more strain on an already stressed property tax system. The Village has enough cash and fund balance to handle the short-term impacts of inflation, but it may need to reconsider long term strategies to manage inflation. b. The Village's finances rely heavily on Intergovernmental Revenues, with a substantial portion coming from the State of Illinois. The state has attempted to reduce the Local Government Distributive Fund (LGDF) Income Tax in the past. If the LGDF is further reduced, it would lead to revenue losses for the Village and could potentially put additional strain on the already burdened property tax system. While the State of Illinois has the ability to fully restore the LGDF to its original 10 percent allocation, it has not yet done so. The State recently eliminated the 1% grocery tax, effective January 1, 2026. The Village currently receives $875,000 in grocery taxes annually. The State has given local municipalities the option to enact a local grocery tax of up to 1 percent. Village Administration is planning to hold workshops in 2025 with the Finance Commission and Village Board to discuss available alternatives for this issue. c. The Village invests in capital assets each year through the Community Investment Plan. Funding from various variable revenue sources and charges for services funds the new investment as well as the replacement of the existing assets. Maintaining aging infrastructures and facilities without the issuance of debt or a grant from the State or Federal Agency is challenging. The Village has recently received significant grants, but it is a challenge to get awards while competing with other grantees. d. There is huge demand for construction materials and vehicles in the market. The Village is dealing with high prices and supply chain issues for capital projects. Many of the recent construction bid results have come in much higher than expected. The Village is struggling to replace its scheduled Police, Fire, and Public Works fleet. Staff hope that several measures taken by the Federal and State Governments will curb inflation and supply chain issues. e. Current interest rates have led to a decrease in real estate transactions. As a result, the Village's revenue from real estate transfer tax is decreasing due to fewer property closings. Although there has been a slight increase in real estate transfer tax collection compared to last year, it is still 33 percent lower than its peak in 2022. The Village is hopeful for a recovery in the real estate market. In the meantime, the additional investment income is helping offset the loss in real estate transfer tax revenues. f. The State of Illinois changed the pension system in 2011 and created TIER II for police, fire, and employees participating in IMRF. Various legislation has recently been filed to increase the benefits under TIER II pensions. Any legislative changes that can increase the benefits under TIER II will increase the annual pension costs and the property tax burden for residents and businesses. The Village's financial position remains very strong despite the challenges mentioned above. Reserve levels have continued to exceed our expectations due to revenue growth and responsible spending. The Village's General Fund is estimated to have a fund balance of $41.9 million, which will be 47 percent of the 2025 annual budget. It's important to note that not all fund balances are in liquid form. Some portion of the fund balance is tied up in accounts receivable and unavailable immediately. Substantial reserves and balanced annual budgets are two factors contributing to the strong bond rating assigned to Village debt. The General Fund reserves remain well above the target set by the Village Board (40%) through 2024. ext -transform: none; widows: 2; word -spacing: Opx;-webkit-text-stroke-width: Opx; white -space: normal; background -color: rgb(255, 255, 255); text -decoration -thickness: initial; text -decoration -style: initial; text -decoration - Revenues - Unaudited 82,613,435 89,886,763 83,654,388 Expenses - Unaudited (78,299,452) ,4,52) (91,662,171) (83,654,388) Net Monthly Surphist(Defi it) 4,313,98 (I,775,408) As %ref General (Fund Budget 48"/u .50% 47% color: initial; text -align: center;"> The 2025 budget can be viewed online by clicking here. The staff will make a detailed presentation on the proposed 2025 Operating Budget at this meeting. Alternatives 1) The staff and the Village Board to discuss the proposed 2025 Annual Budget. 2) Action at the discretion of the Village Board. Staff Recommendation Staff recommends discussion on the proposed 2025 Annual Budget. Attachments None