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Home My WebLink About5.1 2027 Annual Budget WorkshopMORA r Item Cover Page Subject 2027 Annual Budget Workshop Meeting October 13, 2026 - MEETING OF THE MOUNT PROSPECT COMMITTEE OF THE WHOLE Fiscal Impact Dollar Amount Budget Source Category DISCUSSION ITEMS Type Budget Item Information The 2027 budget was presented to the Finance Commission on October 1. The 2027 budget began with the Village's Community Investment Plan presentation in August. The October 13 workshop will focus on the operating budget and other non -operating items. The first reading of the ordinance approving the levy, abatement, and budget will occur on October 20. The Finance Commission has recommended approval of the proposed budget, the levy and the abatements unanimously. The public hearing for the budget and levy will be held on November 4. The final approval of the budget, levy, and abatement ordinances is also expected on November 4. Discussion The proposed 2027 Operating Budget and Community Investment Plan totals $196.9 million, a decrease of $12.2 million, or 5.8%, from the amended 2026 Budget. The reduction primarily reflects the unusually high level of capital investment planned for 2026, when capital expenditures totaled $65.1 million, compared with $37.8 million proposed for 2027. Despite the overall reduction, the 2027 Budget continues to fully support core municipal operations, public safety, infrastructure, and other strategic priorities. The Village also continues its commitment to limiting the property tax burden on residents and businesses. Rather than relying on property tax increases to fund recurring operating and capital needs, the Village continues to emphasize economic development and growth in sales tax revenues. The sustained strength of sales tax revenues is a key feature of the 2027 financial plan and is discussed in greater detail below. Major highlights of the proposed 2027 Budget include: • The proposed property tax levy decreases by 1.8%, resulting in the Village's lowest levy in eleven years. • The 2027 Budget continues the municipal grocery tax effective January 1, 2026, which replaced the former sales tax on qualifying grocery purchases. Collections are significantly exceeding the initial $929,000 estimate, with current trends indicating approximately $2.6 million annually, as reflected in the 2027 Budget. These funds are restricted to pay -down public safety pension liabilities. • The Budget includes approximately $8.3 million in property tax abatements, including support for public safety pensions, debt service, and fire protection. For the first time, the Village has eliminated the debt service levy. • State -shared sales tax revenue is projected at $49.1 million in 2027, while income tax revenue is projected at approximately $10.3 million. Home -rule sales tax revenue is projected at approximately $9.0 million. • Water utility charges are proposed to increase by 7.0%, sewer charges by 5.75%, and refuse charges by 3.5%. • The Budget adds two patrol officers, increasing authorized sworn Police Department staffing to 94 and allowing the Village to restore a fully staffed Traffic Unit. The Budget also adds 2.5 FTEs in the Human Services Department. An Associate Planner and a Plan Examiner are added to the Community & Economic Development Department. • Funding public safety pensions remains a strategic priority. The Village will contribute an additional $5.0 million in 2027, above the actuarially determined contribution, in support of its plan to achieve 100% funding by 2040. The Budget provides $100,,000 for the Human Services Department's pilot transportation subsidy program. • The 2027 General Fund budget is balanced, with both revenues and expenditures totaling approximately $97.5 million. The General Fund also supports planned abatements, capital investments, and other strategic priorities. Revenue Budget The 2027 revenue budget totals $192.9 million, an increase of $5.5 million, or 3.0%, over the 2026 Budget. The increase reflects continued strength in several State -shared revenues, together with planned bond proceeds for the Village Resource Center. i g v V Other Fi1nancing Sources 15,0896 s '7,1.5,300 i The proposed 2026 property tax levy, payable in 2027, is $17.9 million, a reduction of $327,,794, or 1.80/o, from the 2025 levy. Without approximately $8.3 million in planned abatements, the levy would have increased substantially. With the proposed abatements, the 2026 levy will be the lowest in eleven years. This marks the fourth consecutive year in which the Village has either reduced the levy or held it flat. The 2023 levy, payable in 2024, was reduced by 4.8%, followed by a 6.3% reduction in 2024, no increase in 2025, and the proposed 1.8% reduction for 2026. The Village now levies primarily for public safety operations and pensions and, for the first time, has eliminated the debt service levy. The Village's total debt service obligation for 2027 is approximately $7.9 million, all of which can be supported without a property tax levy due to prudent financial management and available resources. The Village continues to actively manage its property tax burden. The proposed 2026 levy, payable in 2027, totals $17.9 million, a 1.8% decrease from the prior year. The broader property tax revenue category also includes approximately $7.8 million in tax increment revenues from two Village Tax Increment Financing Districts and approximately $1.1 million in Special Service Area taxes associated with services provided to unincorporated Elk Grove Township. . % ,2 .,2 i.� w , li OM06 '0,00% 0.00% 01.00% N= MINNOW o% m % 43 % r .3 -00% The Other Taxes category includes locally imposed revenues such as the home -rule sales tax, hotel/motel tax, food and beverage tax, utility taxes, real estate transfer tax, and municipal grocery tax. The category is projected to generate approximately $20.0 million in 2027, an increase of $2.8 million over the 2026 Budget. Municipal grocery tax collections have significantly exceeded the Village's initial estimate. Although the municipal grocery tax became effective January 1, 2026, it generally replaced the former sales tax imposed on qualifying grocery purchases rather than creating a new tax burden. The initial estimate was $929,000; current trends indicate approximately $2.6 million in annual revenue, as reflected in the 2027 Budget. The Village also expects approximately $9.0 million in home -rule sales tax, $2.0 million in food and beverage tax, $2.7 million in utility taxes, and $1.2 million in real estate transfer tax revenue in 2027. Intergovernmental revenues, the Village's largest revenue category, are projected to total $65.4 million in 2027. State -shared sales tax is expected to generate $49.1 million, while income tax distributed through the Local Government Distributive Fund (LGDF) is projected at approximately $10.3 million. The category also includes approximately $1.3 million in one- time grants for critical infrastructure and other capital projects. Compared with the 2026 Budget, sales tax revenue is projected to increase by $9.2 million, or 23.2%. The 2027 Budget recognizes the sustained strength of recent collections while continuing the Village's conservative approach to revenue forecasting. The 2026 General Fund is currently projected to generate an approximately $8.3 million surplus, primarily due to stronger -than -budgeted sales tax revenues. The 2027 sales tax budget is based on trailing 12-month collections. Investment income continues to benefit from the higher interest -rate environment. The Village currently projects approximately $4.5 million of investment income for 2026, compared with the original budget of $3.3 million. Given uncertainty regarding future Federal Reserve policy and market interest rates, the 2027 Budget conservatively assumes $4.5 million of investment income. The 2027 Budget includes $54.1 million in charges for services, approximately $4.1 million, or 8.4%, above the 2026 budgeted amount. Risk Management medical and dental charges are increasing significantly, primarily due to higher health insurance premiums. The 2027 Budget does not increase ambulance billing fees and projects approximately $3.9 million in ambulance revenues. Water and sewer rates are proposed to increase by 7.0% and 5.75%, respectively. The Village is currently updating its utility rate study. However, these increases are necessary to support current operations and planned capital investment in the utility system. Other financing sources primarily consist of planned interfund transfers, as summarized below. r t 1. o Expenditure Budget The proposed 2027 expenditure budget totals $196.9 million, a decrease of $12.2 million, or 5.8%, from the amended 2026 Budget. The decrease primarily reflects the unusually high level of capital investment budgeted in 2026, partially offset by higher operating costs and additional pension contributions in 2027. Operating , P598 X2 � - ,452 ,965 $10,146�007 uw % p�p u1�YNI�;,I,M I((II IIyIIy�Iµ C'o u 1, riv ,,t A� l�y WI IV i 37 , ...,, , 54:i'i ... 5 J. d V 0Il Ir YAW $2 1, 241,8 ). -4 ' ,t / Internal, IA d... 17,226, $ 5 ,199 9I YI 2P '"65 W N , 4'4b II ' e s s,District'Spi,i, Rev , 5, r 1 V L 2 g 0 990 a a7 � u 38 2% Special even'9,* I 7 o6 ,83, I0 IWI I $5 X wl u: 0 J, ' JI N�I d r. 9- , , 1 The 2027 Budget maintains a structurally balanced General Fund, with recurring General Fund revenues sufficient to support recurring expenditures. On an all -funds basis, total budgeted expenditures of $196.9 million exceed budgeted revenues of $193.3 million by approximately $3.6 million. This difference primarily reflects planned use of accumulated fund balance for previously authorized capital investments in the Prospect &Main TIF District and Water and Sewer Fund and does not represent an operating imbalance. The 2027 operating budget totals $114.6 million, an increase of $10.1 million, or 9.7%, from the amended 2026 Budget. The increase primarily reflects the Village's additional $5.0 million public safety pension contribution, higher actuarially determined pension costs, increased health insurance premiums, added staffing for the Police, Community Development and Human Services, contractual and cost -of -living wage adjustments, inflationary increases in contractual services, and higher internal -service charges. Within the Five -Year Community Investment Plan, 2027 capital spending is projected at $37.8 million, a decrease of $27.3 million, or 42.0%, from the amended 2026 Budget. The 2026 plan includes an unusually high level of grant -funded and other major capital projects that are not expected to recur annually; the 2027 program therefore represents a more typical annual level of community investment. Total debt service payments for FY 2027 are projected at approximately $7.9 million. Internal Service Fund expenditures total $17.2 million, an increase of $2.0 million from the amended 2026 Budget. Health insurance costs are increasing substantially, with broader industry trends reporting increases of approximately 30% to 45%; the Village's increase is approximately 20%. Although this increase is higher than historical norms, it remains below broader industry trends. The plan also includes $8.9 million in interfund transfers for FY 2027, of which approximately $5.2 million will support debt service and pension levy abatements. An additional $2.6 million will support various capital projects, and approximately $1.1 million will be transferred from the Elk Grove Rural Special Service Area Fund to the General Fund for operations. During FY 2027, approximately $4.8 million of outstanding principal will be repaid, along with $3.1 million in interest. The Village also plans approximately $12.0 million in new bond proceeds to support construction of the Village Resource Center and street construction projects. The timing of these issuances remains subject to project schedules and may occur in late 2026; for planning purposes, the proposed 2027 Budget currently includes the bond proceeds. In addition to the 2027 operating budget, the Five -Year Community Investment Plan provides a long-term roadmap for approximately $185.8 million in capital investment, including $37.8 million planned for FY 2027. Over the five-year period, approximately $87.3 million is allocated to street improvement and construction, $58.4 million to water and sewer replacement, $16.8 million to building improvements, and $11.1 million to vehicle replacement. Additional projects are detailed in the Community Investment Plan section of the budget document, with FY 2027 representing the immediate implementation year. The Village is currently updating its utility rate study; the existing plan was last revised in FY 2023. The 2027 Budget includes a combined water and sewer rate increase of approximately 6.75% to support an expanded water and sewer main replacement program. The prior 2017 rate study had projected an 8.0% increase for FY 2027. Following subsequent evaluation, the current plan calls for a 7.0% increase in water service charges and a 5.75% increase in sewer charges for FY 2027. The Budget also includes a 3.5% increase in refuse rates. General Fund General Fund operating expenditures are budgeted at approximately $88.1 million for 2027, an increase of $9.2 million from the amended 2026 Budget of $78.9 million. The increase primarily reflects the additional public safety pension contribution, two new police officers, 3.5 additional FTEs in the Human Services Department, higher health insurance and general liability costs, contractual wage and benefit increases under approved collective bargaining agreements, and cost -of -living adjustments for nonunion employees. The General Fund is projected to end FY 2027 with a fund balance of approximately $63.8 million, representing approximately 63% of the General Fund budget. Reven�ues $, 9'2985t9,23 $ 1102,799,446 $ 917532552 Expen6ftures7%224,128) $ (931,95516,52) $ (97,532,552) The full budget can be accessed by clicking here - https://village-mt---prospect-il- cleardoc.cleargov.com/27506/1145898/d Alternatives 1. Staff and the Village Board discuss the 2027 Annual Budget. 2. Action at the discretion of the Village Board. Staff Recommendation Staff recommends discussion on the 2027 Annual Budget. Attachments None