Flossmoor is going to have to find a way to deal with some financial challenges in the coming years, and the idea of enacting a home rule tax to solve them is a nonstarter for the current Village Board.
Those were the key discussion points Tuesday, Jan. 19, during a rescheduled regular meeting of the Flossmoor Village Board, as it outline a five-year financial projection for fiscal years 2021-2026.
The presentation, led by Village Manager Bridget Wachtel, noted Flossmoor can expect operating deficits beginning in fiscal year 2022 and for those annual deficits to expand to $1.2 million by fiscal year 2026. Wachtel’s report noted those numbers are based on a “conservative” approach to budget projections — which assumes no capital improvements — and illustrate “a long-term structural imbalance between revenues and expenditures.”
“These projections aren’t far-fetched,” she said. “We expect something similar moving forward.”
Wachtel said that widening deficit is in part the result of increases in operating expenses, including the restructuring and addition of positions, since fiscal year 2014. Four of those positions, in particular, are related to public safety, she said.
“They come with public safety pensions that have to be funded,” Wachtel explained.
With what she called a “real risk” of more deferred revenues from the State, the projected growth of pensions (estimated to increase 40% over the next five years) versus flat or declining revenues is causing real headaches for the village.
“That certainly is not sustainable,” Wachtel said. “The more that’s put toward pensions the less that can be put toward operations.”
Fiscal year 2020 marked the first full year of non-home rule sales tax revenue for the village, which was expected in the village’s 2018 long-term analysis to reduce the operational deficit to $143,000-$160,000 until fiscal year 2021. As reviewed at the village board’s last meeting of 2020, revenues are higher than expected and expenditures lower than anticipated this fiscal year because of changes made during the COVID-19 pandemic. That means Flossmoor is now expecting to have an operating surplus of $186,665 by the end of the fiscal year.
“Fiscal year 2021 really bought us a year,” Wachtel said. “That’s the good news.”
But Wachtel called that non-home rule sales tax a “stopgap,” albeit a successful one. She said that if the village continues to fully fund programs it will be looking at a deficit by fiscal year 2022 and worse beyond that.
“We anticipated we’d be in a distress position as early as fiscal year ’23,” she said. “What we mean there is we will be below our reserve policy and relying on fund balance below our reserve policy to support operations.”
The five-year projection anticipates an accelerated use of Flossmoor’s fund balance to support operating expenses, potentially leaving the village below its reserve policy by the end of fiscal year 2023.
What to do to solve those financial difficulties is going to be a challenge that will need to be addressed in the short-term by the new board that takes office in May, Wachtel said.
But she added there are only a few additional revenue sources still on the table. One would be enacting a utility tax on water that could bring in roughly $143,000 annually but would be unpopular, she said. The second would be a places-for-eating tax, which would garner roughly $117,000 at 1%. Her report notes the village could update various fees or enact an amusement tax, too. But none would rise to the level of assistance non-home rule provided.
Another option would be looking into service prioritization and modification, Wachtel said. Many of the village’s fixed costs, which account for 90% of the operating budget, are tied to personnel and benefits and related expenditures. Wachtel said Flossmoor will not be able to cut its budget solely through commodities and supplies, and attempting to do so would be “fruitless” according to her report.
“We’re quickly going to be into people and therefore services we can provide,” she said.
She noted the board also could pursue home rule authority through a referendum, which if successful would mean among other things the village is no longer subject to tax caps and could increase the levy as needed, but that would take “a much more detailed discussion going forward.”
It is not a discussion the board seems too interested in having, with Mayor Paul Braun leading the charge in saying he does not think it is something that would work for Flossmoor’s taxpayers. He suggested that energy would be better spent making pensions a major focus, while also approaching the problems regionally with other mayors and the state legislature.
“I would suggest the new board not focus any effort on passing home rule,” he said. “I think it would be a waste of energy.”
Trustees agreed, with Perry Hoag calling home rule “very impractical,” and Brian Driscoll declaring it “dead on arrival.” James Mitros, agreed, noting he does not think giving the board “carte blanche” on taxes is the answer anyone wants.
“There’s no way we’ll ever get a home rule referendum passed here,” Mitros said. “Quite frankly, our taxes are high, and they’re worried they might go higher.”
Trustee Diane Williams added, “We don’t want to tax our citizens out of Flossmoor.”
Homewood attempted a referendum on home rule in 2018, but voters rejected the proposal, with about 70% voting against it.
Mitros said he agreed with the mayor’s approach to focus on pensions.
“Something’s got to give, or else everyone will flee the state of Illinois,” he said.
Economic development also could provide Flossmoor with some of what it needs to help address these challenges, Wachtel said, pointing in particular to property on Vollmer Road. The village has said it is in discussions with a developer but nothing has materialized publicly as of press time.
“We will continue to work diligently to bring something to fruition there,” Wachtel said.
Trustee George Lofton said he thinks the village should be focusing its efforts on a full game plan for economic development. Driscoll agreed, noting that most measures short of economic development successes might put a dent in the deficit but won’t be enough.
“I think our way out is through economic growth,” Driscoll said.
Wachtel said these long-term budget outlooks have been conducted in Flossmoor every two years since 2006.
“This has been a really important financial planning tool for the village,” she said.
Williams added, “Every single one of these meetings is incredibly sobering for us. I also know that we tend to push and come up with solutions along the way.”
Trustee Joni Bradley-Scott said they are going to have to make that push again.
“We’re definitely going to have to be creative coming up with what our next moves are going to be,” she said.