Following months of virtual-only meetings with COVID-19 mitigation in mind, the Flossmoor Village Board got back to a combination of in-person and virtual meeting attendance on March 1. And its first order of business was a lengthy discussion about the village’s preliminary budget for fiscal year 2022.
Village Manager Bridget Wachtel led the discussion, which focused on the general fund, as well as Flossmoor’s water and sewer fund. She started with the latter, saying it has had a big impact on the village’s general fund in recent years. Her presentation noted it has been “trending away from recent healthier status.”
“The health of the water and sewer fund continues to be an ongoing concern for us,” she said.
Wachtel said the Vollmer Reservoir rehabilitation and water main replacement have had positive impacts. But after the village’s bill-to-purchase ratio increased from an “all-time low” of 59% to 83% in 2018, it has fallen back to 75% in calendar year 2020, she said. Her report called that performance “alarming.”
“We don’t think it’s on the supply side,” she added. “We think it’s probably on the meter side of the equation.”
Flossmoor has budgeted for water meter replacement for a couple of years but has deferred that work for “a few reasons,” Wachtel explained. She said the water main replacement needs to remain a priority for Flossmoor, but she suggested it not be re-budgeted in FY22 because of an impending water supply transition.
The total cost of water meter replacement is expected to be $1.7 million, with $1.4 million coming from the general fund and $300,000 from the water and sewer fund as it had previously been budgeted. The water and sewer fund cannot be self-sustaining without an accumulated fund balance to support capital improvements, which it has struggled to do, according to Wachtel’s report.
When it comes to the general fund, Wachtel said the preliminary Fiscal Year 2022 (FY22) budget is an improvement over FY21. The budget year begins May 1, 2021 and continues through April 30, 2022.
Total revenue for FY22 is projected at $12.01 million, while total expenditures are projected at $12.50 million for a net general fund loss of $497,083. That compares to $2.57 million budgeted as a deficit in FY21 — though projections are now $628,578 in the black following changes made in the face of the pandemic.
“We’re doing far better than what we had budgeted,” Wachtel said.
Budgeted operating expenses are less in FY22 compared with the FY21 budget, and additional revenue is expected across several accounts in FY22. The preliminary budget for FY22 expects $11.04 million in operating revenue and $11.10 million in operating expenditures for a net operating deficit of $63,770. Wachtel called the budget “nearly flat from an operating perspective.” She also emphasized that it is Flossmoor’s strategy to cover some deficits through the village’s fund balance.
“We fund all of our capital improvements though our save-and-spend philosophy, so we’re paying all of our capital improvements through cash,” Wachtel said of the budget. “It is absolutely balanced on an annual basis.”
Revenues greater in FY22 than FY21 are expected to come from property tax, sales tax, state income tax, electrical aggregation, Class 8 make whole payments, vacant property registration, ambulance fees and cell tower lease payments. But personal property replacement tax, vehicle stickers, building permits and interest income revenues are expected to be less in FY22 than FY21, according to Wachtel’s presentation.
Wachtel noted that the Equalized Assessed Valuation has been tough on Flossmoor tax revenues. While it rebounded for the village in 2016 and 2017, it decreased in 2018 and 2019. The 2021 and 2022 budgets are being supported by levels the same as in 2012. And a reassessment could jeopardize commercial development EAV, she said.
“We still have not fully rebounded up to the greatest EAV we have seen really up until the Great Recession,” Wachtel said.
An increase in sales tax has helped Flossmoor maintain services. Pre-Meijer, the Village was averaging roughly $250,000 in sales tax annually, but since fiscal year 2018 that has increased to $947,000 in the fiscal year 2021 projection. With another $471,000 in non-home rule sales tax, Flossmoor is expecting $1.41 million from sales taxes this year.
But Wachtel said there has not been corresponding growth on the village’s fund balance. That additional tax revenue has instead helped absorb increased costs and fluctuations with other revenue sources.
On the expenditures side of things, COVID expenses, information technology software expenses and engineering professional services are expected to be greater in FY22 than in FY21. But expenditures expected to be lower than FY21 include general fund contributions to street resurfacing because of the referendum program, capital equipment fund contributions, IRMA contributions, health insurance and fire department professional services, according to Wachtel.
Personnel and fixed costs represent 93% of the budget, with little fluctuation on that ratio from year to year. Wachtel said they are going to have serious conversations going forward about how to reduce spending, because cutting commodities will not be enough. The board might have to consider cutting services, she said.
“There’s only so far you can go with doing more for less,” she said. “Some time, you’re going to have to do less with less.”
The village’s preliminary budget does not consider salary adjustments or carryovers, according to Wachtel. Additional discussions on the budget are planned for March 15, April 5 and April 19. The budget is expected to be adopted in April.
The full preliminary budget document can be viewed here.
Rating remains stable
Mayor Paul Braun announced at the end of the meeting that Standard & Poor's, one of the country’s two main credit rating agencies, recently upheld Flossmoor’s AA+ rating. That is the second-highest rating the agency issues, and it denotes a strong capacity to meet financial obligations, according to S&P.
That is particularly important to Flossmoor at this time, as the village is preparing for a $10 million bond sale this month that was approved by referendum in November. Those ratings are taken into consideration at the time of the sale.
“That was very good news,” Braun said.