2011-07-18 - Village Board Committee of the Whole - Agenda Packet Meeting of the Village of Buffalo Grove Fifty Raupp Blvd
Buffalo Grove, IL 60089-2100
Board of Trustees Phone:847-459-2500
Committee of the Whole
July 18, 2011 at 6:30 PM
1. Welcome
2. Discussion
A. FY 2010 Audit Internal Control Review [GO TO]
B. FY 2010 Fund Balance Report [GO TO]
C. Five Year Operating Projections- Corporate Fund [GO TO]
D. Water/Sewer Fund Status- Rate Discussion [GO TO]
E. Centralized Purchasing Program [GO TO]
F. Voluntary Separation Incentive Status Update [GO TO]
G. Tier II Wage Program [GO TO]
H. Health Plan Status Update [GO TO]
3. Adjournment
a
FY 2010 Audit Internal Control Review 2-A
Overview
Attached are two reports compiled by the village's independent auditors,Wolf&Company LLP. The first
report, dated June 15, 2011, is the SAS 114 Board Communications letter. The intent of the letter is to make
the board aware of any significant audit findings. Reviewed within the context of significant audit findings
are issues related to (1)the qualitative aspects of accounting practices (2) difficulties encountered in
performing the audit(3)corrected or uncorrected misstatements (4) disagreements with management(5)
management representations (6)management consultations with other independent accounts and(6) other
audit findings or issues.
The qualitative aspects of accounting practices relates to the accounting principles used by the village and
the timely and correct implementation of any new standards. As part of the review, accounting decisions
are evaluated against authoritative standards. No issues were noted. All staff accounting estimates were
sound and relevant disclosures were judged to be consistent and clear.
No difficulties with staff were reported at the conclusion of the audit.
There were no corrected or uncorrected mistakes that were material, either individually or in the
aggregate, to the financial statements.
Staff did not consult with other independent accountants in preparing the financial statements.
The purpose of the SAS 114 Board Communications letter is to report, on a macro level, whether the
results of the village's accounting practices produce an accurate representation of the financial condition
of the village.
On a micro level, at the conclusion of each audit,the auditor generates a Report on Internal Controls after
reviewing and testing internal village policies and procedures. Any recommendations for improvement
are labeled within the report as either a material weaknesses or a significant deficiency. A material
weakness is a deficiency, or combination of deficiencies,that results in more than a remote likelihood that
a material misstatement of the Village's financial statements will not be prevented or detected and
corrected on a timely basis. No material weaknesses were found.
A significant deficiency is less severe than a material weakness, but must be disclosed nonetheless. All
deficiencies are reported as significant deficiencies.
There were five recommendations for improvement provided within the report.
The first comment notes that all cash disbursement checks, regardless of value, are signed with a
signature stamp. Compliance with this suggestion would require the Village Manager or Village
President to sign all checks issued over a threshold amount. As a less cumbersome alternative, we have
included the ability to create reports for a Positive Pay banking program in our request for proposal for
new financial software. Positive Pay is an automated fraud detection tool that matches the account
number, check number and dollar amount of each check presented for payment against a list of checks
previously authorized and issued by the Village. All three components of the check must match exactly or
it will not pay.
The third comment recommended that the Finance Committee establish a policy for conducting formal
fraud risk assessments. Staff will research and bring forth a recommendation.
The fourth comment relates to payroll. The auditors noted that the double-entry of timesheet data lends
itself to data entry errors. This is a current limitation of our payroll/financial software not interfacing with
Lotus Notes. Timesheets are prepared in Lotus Notes, printed, and keyed into our financial software
(IDC). The hours reported on timesheets in Lotus Notes are then reconciled to the Hours Entry report
generated by IDC. Looking forward,the Timesheet Database will be capable of exporting hours entered
and we have included the ability to import timesheet hours from an outside source in the financial
software RFP.
Also noted was a segregation of duty comment addressing the ability of the payroll clerk to process the
payroll and print checks. Due to the reduced staffing levels in the Finance Department we are attempting
to use redundant controls to mitigate this control weakness. The check register is reviewed by the
Finance Director prior to checks being printed and no checks can be printed without authorization. The
majority, approximately 80%, of payroll checks are printed void as they are directed deposited into
employee bank accounts. We are also exploring ways of enhancing paycheck delivery through on-line
technology with the new software vendors.
The fifth recommendation is regarding cash receipts. The auditors noted that cash collected at the Police
Department for DUI tows is not immediately forwarded to finance for processing. There are times when
staffing is low and funds stay locked in the safe at the Police Department. The funds are secure the entire
time. We will address this issue and designate alternate employees for delivery.
The final recommendation is to look at either upgrading or replacing our current software. The current
platform we use is significantly out of date. Many of its limitations include the ability to export data,
create custom reports, and lack of formal training. Staff is currently developing a request for proposal for
new financial software which will be presented to the Board on July 26, 2011.
Attachments
SAS 114 Board Communications Letter.pdf
Report on Internal Controls.pdf
Trustee Liason
Trustee Berman
Staff Contact
Scott D Anderson, Finance &GS
MondaY, July 18 2011 Discussion Item . 2 A
Wolf&Company LLP Nv4r
Certifir,d hiblrc A Wolf Financial Group Member
June 15,2011
To the Board of Trustees
Village of Buffalo Grove, Illinois
We have audited the financial statements of the governmental activities, the business-type activities, each
major fund, and the aggregate remaining fund information of the Village of Buffalo Grove, Illinois, for the
year ended December 31, 2010. Professional standards require that we provide you with information about our
responsibilities under generally accepted auditing standards, as well as certain information related to the
planned scope and timing of our audit. We have communicated such information in our letter to you dated
December 12, 2010. Professional standards also require that we communicate to you the following
information related to our audit.
Significant Audit Findings
Qualitative Aspects of Accounting Practices
Management is responsible for the selection and use of appropriate accounting policies. The significant
accounting policies used by the Village of Buffalo Grove, Illinois are described in Note 1 to the financial
statements. No new accounting policies were adopted and the application of existing policies was not changed
during 2010. We noted no transactions entered into by the governmental unit during the year for which there
is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the
financial statements in the proper period.
Accounting estimates are an integral part of the financial statements prepared by management and are based on
management's knowledge and experience about past and current events and assumptions about future events.
Certain accounting estimates are particularly sensitive because of their significance to the financial statements
and because of the possibility that future events affecting them may differ significantly from those expected.
There were no particularly sensitive estimates affecting the financial statements.
The disclosures in the financial statements are neutral, consistent, and clear. Certain financial statement
disclosures are particularly sensitive because of their significance to financial statement users. There were no
particularly sensitive disclosures affecting the financial statements.
Difficulties Encountered in Performing the Audit
We encountered no significant difficulties in dealing with management in performing and completing our audit.
Corrected and Uncorrected Misstatements
Professional standards require us to accumulate all known and likely misstatements identified during the audit,
other than those that are trivial, and communicate them to the appropriate level of management. One
uncorrected misstatement was noted during the audit. Current year payroll expense and the related adjustment
to compensated absences for accrued vacation were understated by $39,290. Management has corrected the
remaining known and likely misstatements. In addition, none of the misstatements detected as a result of audit
PKF1901 S. Meyers Road, Suite 500 + Oakbrook Terrace, Illinois 60181-5209
A PKF International Member Firm 630.545.4500 main 1 650.574.7818 fa. ► vv .wolfcpa.com
procedures and corrected or uncorrected by management were material, either individually or in the aggregate,
to the financial statements taken as a whole.
Disagreements with Management
For purposes of this letter, professional standards define a disagreement with management as a financial
accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant
to the financial statements or the auditor's report. We are pleased to report that no such disagreements arose
during the course of our audit.
Management Representations
We have requested certain representations from management that are included in the management
representation letter dated June 15,2011.
Management Consultations with Other Independent Accountants
In some cases, management may decide to consult with other accountants about auditing and accounting
matters, similar to obtaining a"second opinion" on certain situations. If a consultation involves application of
an accounting principle to the governmental unit's financial statements or a determination of the type of
auditor's opinion that may be expressed on those statements, our professional standards require the consulting
accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge,there
were no such consultations with other accountants.
Other Audit Findings or Issues
We generally discuss a variety of matters, including the application of accounting principles and auditing
standards, with management each year prior to retention as the governmental unit's auditors. However, these
discussions occurred in the normal course of our professional relationship and our responses were not a
condition to our retention.
This information is intended solely for the use of The Board of Trustees and management of the Village of
Buffalo Grove, Illinois and is not intended to be and should not be used by anyone other than these specified
parties.
Very truly yours,
J' C ��
Village of Buffalo Grove,
Illinois
_ Report on Internal Controls
For the Year Ended
December 31, 2010
Wolf & Company LLP
Certified Public Accountants
_ Wolf&Company LLP Nivr
C crli%r<r)Pullrr f3ccurrieiu rL A WbIF Financial Group Member
The Honorable Village President
Members of the Board of Trustees
Village of Buffalo Grove, Illinois
In planning and performing our audit of the financial statements of the governmental activities, the
business-type activities, each major fund, and the aggregate remaining fund information of Village of Buffalo
Grove, Illinois (the Village) as of and for the year ended December 31, 2010, in accordance with auditing
standards generally accepted in the United States of America,we considered the Village's internal control over
financial reporting (internal control) as a basis for designing our auditing procedures for the purpose of
expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the
effectiveness of the Village's internal control. Accordingly, we do not express an opinion on the effectiveness
of the Village's internal control.
Our consideration of internal control was for the limited purpose described in the preceding paragraph and was
not designed to identify all deficiencies in internal control that might be significant deficiencies or material
weaknesses and, therefore, there can be no assurance that all such deficiencies have been identified. However,
as discussed below, we identified certain deficiencies in internal control that we consider to be significant
deficiencies.
A deficiency in internal control exists when the design or operation of a control does not allow management or
— employees, in the normal course of performing their assigned functions, to prevent, or detect and correct
misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies in
internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial
statements will not be prevented, or detected and corrected on a timely basis. We did not identify any
deficiencies in internal control that we consider to be material weaknesses.
A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe
than a material weakness,yet important enough to merit attention by those charged with governance.
The comments that accompany this letter summarize the control deficiencies identified during the audit and
suggestions regarding those matters. This letter does not affect our report dated June 15, 2011, on the financial
statements of the Village of Buffalo Grove.
This communication and the accompanying comments and recommendations are intended solely for the
information and use of the Village President, Board of Trustees, and management and are not intended to be
nor should be used by anyone other than these specified parties.
LL14
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Oakbrook Terrace, Illinois
June 15,2011
PKF1901 S. Meyers Road, Suite 500 1 Oakbrook Terrace, Illinois 60181-5209
A PKF International Member Firm 630.545.4500 main 1 630.574.7818 fati A •n ww.wolfcpa.com
_ PRIOR YEAR COMMENTS
SIGNIFICANT DEFICIENCIES
Cash Disbursements
Comment:
During our review of cash disbursement policies and procedures, we noted that all checks are machine signed
with dual signatures prior to the warrant being approved by the Board of Trustees. We also noted that the
same individual sets up vendors, enters invoices, prints checks, and feeds the checks through the check signing
machine(changed to signature stamp in 2010).
Recommendation:
We recommend that checks not be machine signed until after the warrant is approved and that all checks over a
_ specified dollar amount require a live signature of a Trustee. We also recommend the Village segregate the
responsibilities for setting up vendors, entering invoices, and processing checks through the check-signing
machine to multiple individuals to enhance segregation of duties.
Current Status:
Recommendation partially implemented. The individual responsible for printing checks no longer stamps the
signatures on the checks; this is done by the payroll clerk. Recommendation regarding the second signature to
be live is repeated. Alternatively, the Village should consider participation in the Positive Pay program at its
bank and have someone not involved in the cash disbursement responsibilities review and upload the file to the
bank.
Journal Entry Review
Comment.-
During our audit, we noted that general journal entries are not reviewed or approved by management prior to
posting to the general ledger. This resulted in various entries being posted to the wrong accounts or switching
the debits and credits.
Recommendation:
We recommend that the Finance Director and Assistant Finance Director review the entries which the other
prepares in order to confirm that entries are posted to the correct accounts and that the appropriate accounts are
debited and credited.
Current Status:
Recommendation has been implemented.
2
PRIOR YEAR COMMENTS
SIGNIFICANT DEFICIENCIES
Fraud Risk Assessment
Comment:
During our audit, we noted that the Finance Committee does not have a policy for conducting formal fraud risk
assessments on an annual basis.
Recommendation:
We recommend the Finance Committee adopt a policy for conducting formal fraud risk assessments on an
annual basis.
Current Status:
Recommendation has not been implemented and is repeated.
3
PRIOR YEAR COMMENTS
CONTROL DEFICIENCIES
Payroll
Comment:
During our review of payroll policies and procedures, we noted that hours are manually entered from
department reports into the payroll system which leaves room for human error. We also noted that the payroll
clerk both prepares the payroll and prints the payroll checks making it possible for a change to be made to the
payroll after it has been approved.
Recommendation:
We recommend the Village consider integrating the departmental timekeeping reports with the payroll system
so the information does not have to be manually entered. We also recommend someone other than the payroll
clerk print the payroll checks.
Current Status:
Recommendation has not been implemented and is repeated.
Cash Receipts
Comment:
During our review of cash receipt policies and procedures, we noted that all departments do not bring the funds
collected to the Finance Department on a daily basis resulting in funds not being deposited timely.
Recommendation:
We recommend the Village establish a policy whereby all departments are required to remit collections to the
Finance Department on a daily basis.
— Current Status:
- Recommendation has not been implemented and is repeated. It was noted by the Finance Director that
collections are being remitted more often but not yet daily by all departments.
— 4
PRIOR YEAR COMMENTS
CONTROL DEFICIENCIES
Financial Accounting Software
Comment:
During our audit, we noted that the Village's current accounting software does not have some of the
functionality which would be beneficial to the Finance Department such as the ability to export data into Excel
_ for easier reporting and to obtain detailed information after the fiscal year has ended, which results in the
Village being required to maintain paper copies of monthly reports.
Recommendation:
We recommend the Village invest in updating the current accounting software or acquiring a new software
package which would enable the Village to become more efficient.
Current Status:
Recommendation has not been implemented and is repeated, it was noted by the Finance Director that the
Village is in the process of evaluating new software packages and hopes to have a new package in place by
December 31,2011.
5
OTHER COMMENT
GASB Statement No. 54
_ Comment:
The Village will be required to implement GASB Statement No. 54 in 2011. This Statement was issued to
enhance the usefulness of fund balance information by providing clearer fund balance classifications and by
clarifying the existing fund type definitions. This Statement establishes fund balance classifications that
comprise a hierarchy based primarily on the extent to which a government is bound to observe constraints
imposed on the use of the resources reported in governmental funds.
As part of the implementation, the Village will need to consider revising its fund balance policy and will need
to review its existing fund type classifications. Specifically, the Retiree Health Savings Fund will most likely
need to become a component of the General Fund since it does not currently have a specific restricted or
committed revenue stream. Additionally, the Parking Lot Fund and the two Golf Course Funds will need to be
evaluated. We will be available for consultation as the Village works on adopting the new standard.
6
a
FY 2010 Fund Balance Report 2-B
Overview
Following is the annual update of the fund balance status report. The review incorporates the fiscal activities
ending December 31,2010. As of January 1, 2011 the unreserved/undesignated fund balance is equal to
32.68%of the 2011 budget.
Attachments
Fund Balance Policy Annual Review 2010.pdf
Trustee Liason
Trustee Berman
Staff Contact
Scott D Anderson, Finance &GS
MondaY, July 18 2011 Discussion Item . 2 B
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TO: Dane C. Bragg
FROM: Katie J. Skibbe
DATE: July 13, 2011
SUBJECT: Corporate Fund Fund Balance Policy Review-FY 2010
Annually, the Village's Fund Balance Policy and Practice is reviewed at the conclusion of the
independent audit for the relevant fiscal period. This review incorporates the fiscal activities ending
December 31, 2010 and fund balance totals as stated in the audited Comprehensive Annual Financial
Report.
Based on staff recommendation and Village Board concurrence, the stop threshold for
unreserved/undesignated fund balance was adjusted, in FY 2009, to 25% of the subsequent year's
budget (down from 35%). This decision was based on the current economic environment and the
vision of the future financial landscape of the next five to ten years.
The Village policy tenets are:
Policy #1 - Cash and investment reserves are to be maintained at a level equal to 25% of the
operational budget beginning as of January I of any fiscal period.
Net cash and investments on January 1, 2011 totaled $6.3 million to support the approved Corporate
Fund budget for FY 2011 of $29.3 million (less public safety pension transfers). The balance
available is $1 million below the policy minimum of$7.3 million.
For purposes of this review, we have traditionally made the vehicle replacement and computer
replacement reserves unavailable for operational spending. Staff would like to discuss revisiting the
fund balance policy in the fall to address this issue in conjunction with changes that will be required
through GASB 54.
Policy #2 - Unreserved/Undesignated Fund Balance will equal, at a minimum, 25% of the
subsequent year's Corporate Fund Budget.
As of January 1, 2011 the Unreserved/Undesignated Fund Balance was $9.6 million. That balance
exceeded the Policy minimum of $7.3 million by $2.2 million, again based on a Budget of $29.3
million.
Notice: The Policy requires notice to the Finance Committee should the Balance drop below 50% of
the subsequent year's Corporate Fund budget. Please note that at the present time, the balance now
stands at 32.68%
The analysis supporting this memo is based on a review of the audited FY 2010 cash and investments
and Unreserved/Undesignated Fund Balance measured against the final FY 2011 Budget.
While identified uses of Fund Balance have been proposed that have pushed the trend below 50%
(notice) and by the end of fiscal year 2011 (32.68%) such uses will be disclosed and approved by the
Board. Draws for operational (recurring) purposes will be only to cover extraordinary circumstances
or to bridge a revenue gap to be resolved by either implementing a new,recurring source of revenue or
to permit staff the time to plan an orderly reduction in expenditure levels. Ultimately, draws should be
Page 1 of 2
directed toward capital improvements, tax abatement or for employer pension funding shortfall that
may be disclosed as a result of actuarial calculation.
In support of this information, the final FY 2010 analysis is attached as well as an historic look at
Corporate Fund Fund Balance that includes benchmark against budget along with draws in support of
Policy parameters.
Page 2 of 2
a
Five Year Operating Projections - Corporate Fund 2-C
Overview
Attached is the Village of Buffalo Grove Five Year Financial Forecast
Attachments
Five Year Financial Forecast 2012-2016.pdf
Trustee Liason
Trustee Berman
Staff Contact
Scott D Anderson, Finance &GS
MondaY, July 18 2011 Discussion Item . 2 C
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VILAGE OF BUFFALO GROVE
FIVE YEAR FINANCIAL FORECAST
FISCAL YEARS 2012-2016
The goal of the Five-Year Financial Forecast is to assess the Village's ability over the next five years
to continue current service levels based on projected growth, preserve our long-term fiscal health,
cease the draw on balance reserves, and resume reserve funding for capital equipment and facility
improvements.
It is important to stress that this forecast is not a budget It doesn't dictate expenditure decisions
rather it identifies the need to prioritize allocations of Village resources. As a governmental entity,
changes in strategy that involve service delivery are slow and methodical. The forecast provides a
picture of the Village's fiscal health based on numerous assumptions over the next five years to
provide adequate time to `steer the ship'. The Five-Year Financial Forecast is a planning tool and
should be considered fluid in its construction. As new significant data or trends emerge, the
document will be revised and minimum on an annual basis. This document should be viewed in
conjunction with the Annual Village Budget in order to make specific policy and spending
recommendations.
This is the first year for this report. Until December 2007, the Village experienced two decades of
prodigious growth. Property values increased 224%, the population nearly doubled, and the sharp
increase in property values created pockets of wealth. The reinvestment of those dollars benefitted
the Village in many ways including the collection of sales taxes, permitting fees for home
improvements, and real estate transfer taxes collected on property sales. During December 2007,
the national economy officially entered a recession, which has been labeled as the worst since The
Great Depression of 1929.
The Village has been managing the recession progressively over the last four years. Fiscal years
2008 and 2009 relied heavily upon prior years' accumulated fund balance reserves. Those reserves
were established during the peak growth years as a result of conservative spending by both the
members of the current and past Village Boards. FY 2010 began a transition from tactical budget
strategies and short term spending adjustments to a more strategic progress of addressing systemic
costs focusing on sustainability of services.
1
Financial Focus
The Corporate Fund is the operating fund which pays for the core services provided by the Village
including public safety (police & fire), public works, building & zoning, and administration. All the
major discretionary revenues such as property taxes, sales tax, income taxes, telecommunications,
and utility use taxes, are accounted for within the Corporate Fund. The forecast reflects final figures
for fiscal year 2010. For purposes of the analysis, forecasted numbers are built off of the 2010
actual revenue/expenditures and adjusted if necessary for FY 2011.
The Corporate fund is the primary focus of the forecast. In future years it will be expanded to
include the Water and Sewer Fund and various other funds which are key components that play
into the Village's long term financial viability.
Overview of Fiscal Year 2010&2011
The impact of the recession, although declared officially over in June 2009, continues to exert fiscal
pressure on the Village. Steps to address the strain on the operating budget included:
• Wage freeze of all non-represented employees (2010) resulting in$.7 million in reductions
• Eliminated or deferred$3.9 million in capital improvements
• Reduced transfers to capital reserve funds by$.6 million
• Maintained vacant positions upon employee separations
• Made significant reductions to most spending accounts
• Instituted a Natural Gas and Electricity Use Tax generating approximately$2.4 million
Staff was able to present a balanced budget in FY 2011 amidst a continued turbulent economy. The
following strategies were taken in preparation of the 2011 Budget:
• Eliminated or deferred$2 million in capital improvements
• Reduced transfers to capital reserve funds by$.6 million
• Created a Voluntary Separation Initiative (VSI) to incent retirement and reduce employee
counts through attrition
• Construction of a Tier II compensation plan to lower entry level salaries across all pay
grades.
The Village will continue to face many financial challenges for the remainder of FY2011 and for the
next several years including:
2
1. Impact of the real estate market. Impact of high inventory levels, foreclosures, and
short sales continue to depress market values. The next wave is the `shadow house
inventory' or those owners waiting for some positive news to enter the market.
2. State of Illinois budget crisis. The delay in income tax distributions to the Village.
The State of Illinois has proposed a 30% reduction in the distribution of income
taxes to local governments. The Village would lose an estimated $.9 million in
revenue.
3. Health Care Reform Bill. The future financial impact of the new Bill and increasing
health care costs
4. Commercial/Retail Development. The economy's impact on both existing sales tax
generators as well as development or redevelopment of Dundee and Milwaukee
Road corridors.
5. 2010 Census. The impact on per capita funding (income, local use, or motor fuel
taxes) due to the decline in population. In 2010, the US Census Bureau conducted
the decennial census, which includes the US population count and statistic data
report. As a result, the Village of Buffalo Grove's population decreased by 3.9% to
41,496. The effect is that the Village's State-shared revenues will decrease by a
corresponding percentage.
6. Infrastructure.The deferral of capital spending and the funding impacts upon roads,
sidewalks and bike paths,water system, and Village facilities.
Corporate Fund Reserves
The Corporate Fund Fund Balance Reserve Policy sets forth a minimum reserve level of 25% of the
subsequent year's Budget(less pension transfers). That policy was amended in FY 2009, from 35%,
to reflect both the state of the economy and a policy stance that perhaps 35% is not a reasonable or
warranted target in the `New Economy'. Reserves are important in order to mitigate the negative
impact on revenues from economic fluctuations,to withstand unfunded mandates,to temper lags in
payables from the State of Illinois and to fund unforeseen expenditure requirements.
The Village, through cautious and prudent spending plans, was able to build substantial reserves
during the last two decades. Approximately $5.3 million of those reserves were used from 2007 to
2009 allow for the Village to provide uninterrupted high quality services to the community. At the
end of the Fiscal year 2010, the reserve stood at $9,563,654 and represents 32.2% of the annual
budget
3
Forecast Assumptions
The following are growth percentage assumptions used in the development of the financial forecast,
FY 2012 FY 2013 FY 2014 FY 2015 FY 2016
Revenues
Property Tax
Corporate 2.90% 2.90% 2.90% 2.90% 2.90%
Police Pension 3.00% 5.00% 5.00% 5.00% 5.00%
Fire Pension 3.00% 5.00% 5.00% 5.00% 5.00%
Base Sales Tax 1.50% 1.50% 2.00% 2.00% 2.00%
Home Rule Sales Tax 1.50% 1.50% 2.00% 2.00% 2.00%
Prepared Food&Beverage Tax 1.50% 1.50% 2.00% 2.00% 2.00%
Income&Use Tax -2.00% 2.00% 2.00% 2.00% 2.00%
Utility Use Tax 0.00% 0.00% 0.00% 0.00% 0.00%
Telecommunications Tax -5.00% -2.00% 0.00% 0.00% 0.00%
Licensing 0.00% 0.00% 1.00% 1.00% 1.00%
Developer Fees&Permits 1.00% 1.00% 1.00% 2.00% 2.00%
Real Estate Transfer Tax 5.00% 5.00% 5.00% 5.00% 5.00%
Fines and Fees 0.00% 0.00% 0.00% 0.00% 0.00%
Operating Transfers 2.00% 2.00% 2.00% 2.00% 2.00%
All Other Revenues 0.00% 0.00% 0.00% 0.00% 0.00%
Expenditures
Personal Services 2.95% 1.50% 2.00% 2.00% 2.00%
Personal Benefits 4.74% 3.98% 4.63% 4.64% 4.65%
Operating Expenses 3.46% 1.50% 1.50% 1.50% 1.50%
Insurance 8.00% 7.00% 6.00% 5.00% 5.00%
Legal Services 2.00% 2.00% 2.00% 2.00% 2.00%
Commissions&Committees 2.00% 2.00% 2.00% 2.00% 2.00%
Commodities 2.00% 2.00% 2.00% 2.00% 2.00%
Maintenance&Repair
Facilities 10.11% 5.00% 5.00% 5.00% 5.00%
Other 1.50% 1.50% 1.50% 1.50% 1.50%
Vehicles 2.00% 2.00% 2.00% 2.00% 2.00%
Capital Equipment 217% 1.00% 1.00% 1.00% 1.00%
Capital Projects-Facilities 107% 1.00% 1.00% 1.00% 1.00%
Operating Transfers -2.10% -7.08% 2.54% 4.52% 4.49%
All Other Expenses -2.30% 2.00% 2.00% 2.00% 2.00%
This financial forecast does take into consideration that the worse of the recession has passed and
that there are some small signs of recovery. The Survey of Professional Forecasters, as
administered by the Federal Reserve Bank of Philadelphia, conducts a quarterly survey of
macroeconomic forecasts,the following is a summary through the second quarter of 2011:
• Forecasters predict slower real GDP growth over the next four years including 3.0% in
2012, 2.8% in 2013, 3.3%in 2014.
• Forecasters see a brighter picture for the unemployment rate over the next four years with
the rate dropping from 8.7 in 2011 to 7.0 in 2014.
• Long-Term Headline Inflation is expected to be 2.35%through 2015.
4
The impact of the five year growth assumptions produces the following results,
2012 2013 2014 2015 2016
Corporate Fund Revenues Projected Projected Projected Projected Projected
Property Taxes 11,869,191 12,089,953 12,528,006 12,983,191 13,456,227
State Income Taxes 3,725,137 3,799,640 3,875,632 3,953,145 4,032,208
State Sales Tax 4,653,971 4,723,780 4,818,256 4,914,621 5,012,914
Home Rule Sales Tax 2,782,707 2,824,447 2,880,936 2,938,555 2,997,326
Real Estate Transfer Tax 500,000 525,000 551,250 578,813 607,753
Telecommunications Excise Tax 2,170,195 2,126,791 2,126,791 2,126,791 2,126,791
Prepared Food and Beverage Tax 714,272 724,986 739,486 754,275 769,361
Para Mutual Tax 80,000 80,800 81,608 82,424 83,248
Utility Tax-Electric Service 1,604,060 1,604,060 1,604,060 1,604,060 1,604,060
Utility Tax-Natural Gas Therms 920,309 920,309 920,309 920,309 920,309
Business Licenses 133,900 133,900 133,900 133,900 133,900
Liquor Licenses 126,500 126,500 126,500 126,500 126,500
Building Revenue&Fees 730,802 738,110 745,491 760,401 775,609
Intergovernmental Revenue-Local 226,625 229,756 232,960 236,239 239,595
Investment Revenue 207,922 197,218 212,722 251,279 298,745
Fines&Fees-Police&Fire 1,487,700 1,487,700 1,487,700 1,487,700 1,487,700
Operating Transfers 719,100 733,482 748,152 763,115 778,377
All Other Revenue 709,780 723,071 736,627 750,455 764,559
Miscellaneous Revenue 336,846 336,926 335,185 336,477 337,781
Total Revenues 33,699,016 34,126,429 34,885,571 35,702,250 36,552,962
2012 2013 2014 2015 2016
Corporate Fund Expenditures Projected Projected Projected Projected Projected
Personal Services 19,639,810 19,933,822 20,331,718 20,737,573 21,151,544
Personal Benefits 4,056,903 4,223,237 4,420,592 4,627,691 4,845,018
Operating Expenses 949,093 963,300 977,720 992,357 1,007,213
Insurance 442,265 473,224 501,617 526,698 553,033
Legal Services 173,662 175,379 177,114 178,866 180,635
Commissions&Committees 80,479 82,089 83,730 85,405 87,113
Commodities 488,308 498,074 508,036 518,197 528,560
Maintenance&Repairs-Facilities 551,200 578,760 607,698 638,083 669,987
Maintenance&Repairs-Water&
Sewer 5,500 5,775 6,064 6,367 6,685
Maintenance&Repairs-Other 79,303 80,493 81,700 82,926 84,170
Maintenance&Repairs-Vehicles 619,325 631,711 644,345 657,232 670,377
Capital Equipment 616,899 619,068 621,259 623,472 625,706
Capital Projects-Facilities 60,530 61,136 61,747 62,364 62,988
Operating Transfers 5,624,403 5,226,255 5,358,946 5,600,908 5,852,172
All Other Expenses 1,102,160 1,124,203 1,146,687 1,169,621 1,193,014
Total Expenditures 34,489,840 34,676,526 35,528,975 36,507,759 37,518,216
Surplus/(Deficit) (790,824) (550,096) (643,404) (805,509) (965,254)
Unreserved/Undesignated Fund Balance
December 31,2010(audited) 9,563,654
December 31,2011 (estimated) 9,563,654
December 31,2012(estimated) 8,772,830
December 31,2013(estimated) 8,222,733
December 31,2014(estimated) 7,579,329
December 31,2015(estimated) 6,773,820
December 31,2016(estimated) 5,808,566
5
The following chart provides a history of fund balance reserves with the five forecasted years;
FUND BALANCE REVIEW
25,000,000
20,000,000
15,000,000j////� /
10,000,000 011
5,000,000
0
CP C CP CP O O O O � O W W W
_ _
-5,000,000 ...LL LL LL LL LL LL LL LL LL LL.......................p 0.......................0.......................0...................
} } } } } } } } } }
N N N
LL LL LL
LF
Unrestricted Fund Balance Stop Threshold
Reserve Funds above/below Threshold 2 per.M ov.Avg.(Unrestricted Fund Balance)
2 per.M ov.Avg.(Reserve Funds above/below Threshold)
Revenue Review
Approximately 85% of all Corporate Fund revenue is generated from seven revenue sources
including property tax, sales (base and home rule) tax, income & use tax, prepared food and
beverage tax, telecommunications tax, utility (natural gas & electricity) use tax, and real estate
transfer tax.
Almost half of the Village's major revenue sources are elastic. Elastic revenues are those sources
that tend to fluctuate with the economy and provide increasing/(decreasing) revenues
corresponding to the current economic cycle. A balance between elastic and inelastic revenue is
desired as a hedge against market volatility. The Corporate Fund revenues considered to be elastic
include: sales and use taxes, income taxes,telecommunications tax, real estate transfer tax,building
revenue and fees, and investment interest. The property tax is an example of a non-elastic source of
revenue.
The following is a summary of significant Village revenue sources.
• Property Tax
Growth in the corporate property tax levy is tied to the Municipal Cost Index (MCI). The MCI is an
amalgam of several key inflationary indices including the Producer Price Index (PPI), Employment
Cost Index (ECI), and the Consumer Price Index -Urban (CPI-U). The MCI weights the indices
accordingly based on how a typical municipality spends its resources. The Police and Firefighter
6
Pension Funds levies are calculated by an independent actuary. The pension levies are pass-
through revenues that will have a corresponding expenditure.
A continuing concern is growth in the property tax base. Tax year 2010 produced the first drop in
assessed valuation since 1974. Because the Village levies dollars, a uniform change across all
property classifications has no financial impact to tax payers. The concern is the shifting of tax
burden from commercial/industrial properties to residential parcels as commercial/industrial
properties tend to be better represented in the appeal process.
Listed below is a history of equalized assessed valuations since 1968.
VILLAGE OF BUFFALO GROVE ASSESSED AND EQUALIZED VALUATION
2 000 000 000 .............................................................................................................................................................................................................................................................................................................................................................................................................
$1,800,000,000
$1,600,000,000
$1,400,000,000
$1,200,000,000
$1,000,000,000
$800,000,000
$600,000,000
$400,000,000
$200,000,000
$0
00 O N 'IT (O 00 O N � (O 00 O N NT (O 00 O N NT (O 00 O
I- 1 00 00 00 00 00 O O� ) O) O) O) O O O O O
- - - - - - - - - - - - - - - - N N N N N N
• Sales Tax
Inflation sets the growth baseline for both the base (1%) and home rule sales taxes (1%).
Combined, this is the second largest revenue source for the Village. The base sales tax revenue is
directly related to the dollar value of sales made with the Village limits. Home rule sales tax applies
to the same transactions as the base sales tax except in the following transactions, food for human
consumption off the premises where sold (groceries), prescription and non-prescription medicines
and tangible personal property that is titled with an agency of the State of Illinois.
The assumption for the five year analysis is that the retail mix will remain substantially similar to
what is present today. Adjusted for inflation, sales tax revenues are still down 26% from the peak
in the mid 2000s. The assumption for growth for the five years is 1.5%, 1.5%, 2.0%, 2.0%, 2.0%.
7
• Income Tax
As noted early in this report,the impact of the 2010 US Census is going to have a deleterious impact
on revenues. As a result of the census data, the Village is down 1,699 residents. Since income tax is
distributed on a per capita basis the immediate impact for 2011 is about a $150,000 drop in
revenue holding all else constant. The Village's estimated unemployment rate is 8%, Lake County is
10.5%, and the State of Illinois is 10.3%. The forecast does not account for much change during FY
2012 in the level of reported wages and corporate earnings. 2% growth is estimated for the years
2013-2016. What is not factored is the potential for Springfield to pass a reduction in the Local
Government Distributive Fund during the fall veto session that could reduce the Village's per capita
allotment by as much as $900,000. Although the potential is less now than several months ago it is
an issue that merits contemplation as budgets, and the use of fund balance,are considered.
• Prepared Food and Beverage Tax
This tax is levied on the purchase of prepared food for immediate consumption and the sale of
liquor. Similar to sales tax inflationary growth is the central driver of revenue increases with five
year increases projected at 1.5%, 1.5%, 2%, 2%, 2%. Food is typically removed from core inflation
(due to volatility) and noted in the CPI graph depicted below.
Consumer Price Index
Percent change from year ago
8—
Excl.Food)
and Energy
2-.
All Items
0
' 7 BB I 87 C 88 ,1-.89 1 90-[...91 92...E 93 I 94 1 95 I 98 � 97 T 98,1 99 1 00 I 01 .1,.02 ➢ 03'..I 04 1 05..I 06 1 07 I 08 1 09 r 10 I...11...I
Although headline inflation (includes food and energy) typically runs higher than core, staff
believes it still prudent to forecast the lower growth number. At the time of this report, there are
116 restaurants/businesses that are subject to this tax.
• Telecommunications Tax
This tax levied at 6% on all types of telecommunications except for digital subscriber lines (DSL)
purchased, used, or sold by a provider of internet service (effective July 1, 2008). The exemption of
DSL service has made a significant impact on collections. Combined with the economic decisions to
8
consolidate, or eliminate, additional phone lines revenue is down 15% from the peak in 2007. VOIP
is subject to this taxation. It is projected that revenue will drop 5% in 2012, drop 2% in 2013 and
level out the remaining three years.
• Utility Use Tax(Natural Gas&Electricity)
Natural gas and electricity charges are based on consumption and will fluctuate with seasonal
demands. There is no flexibility in the revenue (absent Mother Nature). The Village is charging the
highest statutory rate. No growth is projected over the next five years.
• Real Estate Transfer Tax
Real estate transfer tax is collected at the rate of$3 per $1,000 of sales consideration. This revenue
reached a peak in 2005 at$1.3 million. Since 2005, collections have dropped 60% as a result of the
collapse of the housing market. As foreclosed properties cycle through the system and a true
market bottom is reached (hopefully this year), it is expected that some growth will occur (5% per
year over the next five).
The total growth in Corporate Fund revenue over the next five years is estimated to be;
Year Growth
2012 2.44%
2013 1.27%
2014 2.23%
2015 2.34%
2016 2.38%
The average growth in revenue over the five year review period is 2.23%
Expenditure Review
The average increase in expenditures over the next five years is 2.7%. In each of the next five years,
wages and benefits account for nearly 70% of all expenditures. The next largest expenditure
account group is for operating transfers (16%). For FY 2012 the distribution of Corporate Fund
expenditures is,
9
Corporate Fund Expenditures FY 2012 Projected
Capital Equipment
2% Operating Transfers All Other Expenses
16/0 4%
Personal Services
Maintenance&Repairs 56%
Facilities
4%
Commodities
1%
Legal Services
1%
"'IIIIII IIIIIII�II�I
Insurance
1% Operating Expenses Personal Benefits
3% 12%
❑Personal Services M Personal Benefits ❑Operating Expenses
❑Insurance M Legal Services ❑Commodities
M Maintenance&Repairs-Facilities ❑Capital Equipment ■Operating Transfers
❑All Other Expenses
Noted below are some of the more significant expenditures within the Corporate Fund.
• Personal Services
Wages are anticipated to increase by a factor of 1.5% for the first two years and 2.0% the last three
years. The wage forecast anticipates the Corporate wage increase awards plus possible merit
adjustments, where appropriate, offset by lower entry salaries under a new pay grade system (Tier
II). The Tier II pay grade will lower all starting salaries for employees hired after 1/1/2011 by
approximately 10%. This strategy, in conjunction, with a Voluntary Separation Incentive (VSI) will
have the potential to significantly reduce Personal Service Expenditures. The five year forecast will
likely need several iterations to reflect new data as the impact of retirements, the effect of any
service realignments,and any hiring decisions become more evident
• Personal Benefits
The largest single expenditure within Personal Benefits is for group medical and life insurance.
Effective for FY 2012,the Village has committed to 3 years with the Intergovernmental Professional
Benefits Cooperative (IPBC) to help stabilize medical costs through risk pooling and provide for a
mechanism to help establish positive cash flow and rebuild reserves. The forecast calls for 5%
growth each year in premium expenses. Growth attempts to factor for medical inflation, migration
to/from different health plans, stepped increases in employee contributions, and status changes
(single/family) for coverage.
10
• Insurance
Within the Insurance category is the premium paid to the Intergovernmental Risk Management
Pool (IRMA) for Corporate liability and workers' compensation coverage. Continuing with past
practice, the Village has selected a higher deductible ($50,000) to provide a credit against our
annual premium. Prior period reserves have also been used to lower the annual payment. The
forecast assumes growth of 8%, 7%, 6%, 5%, 5%. The higher growth on the front end of the
forecast is to offset a slowing in the amount of reserves available for premium subsidy.
• Commodities
The single largest expenditure within the Commodity account group is for purchase of salt for the
snow and ice control program. The forecast calls for increases of 2% per annum. Staff continues to
seek innovative ways to reduce commodity costs, such as bulk electric procurement, reducing salt
consumption (Geo-Melt trial) and utilizing centralized purchasing to leverage the Village's buying
power.
• Maintenance &Repair-Facilities
Expenditure growth in this account group is estimated to be 5% per year. Included in these
expenditures are costs related to the maintenance and repair of sidewalks and bike paths, street
patching, street lights, building facilities, and parkway trees. The budget set forth for parkway trees
does not adequately address rapid reforestation of EAB infested trees, staff will be presenting
reforestation options for board consideration.
• Capital Equipment
The largest expenditure within Capital Equipment is for the funding of the Reserve for Capital
Replacement. Transfers are made out of the department operating budgets to the reserve to fund
the future acquisition of heavy machinery and vehicles. This approach is taken to smooth out the
peaks and valleys in the budget. The replacement of rolling assets is not linear and there are years
where replacements are as high as $2.2 million and as low as $.4 million. The reserve transfer (up
until the last several years) is fairly consistent. Each asset's useful life is tracked with the goal that
the annual depreciation is funded through the reserve transfer so that at the time equipment must
be replaced it is fully funded.
Over last few years, the economic climate necessitated the suspension of this transfer to help close
or eliminate budgeted deficits in the Corporate Fund. The reserve balance at the end of FY 2010
was $7.9 million. The value of all equipment is $15.3 million representing 52% funding. The
following chart is an estimate of the source and use of funds over the next five years. The scheduled
purchases are due to be replaced but there may be some flexibility is extending the useful lives of
II
select pieces of equipment if the cost of repair cost does not exceed what would be prudent for an
asset nearing the end of its useful life.
Transfer
FY Reserve In Purchase Balance
2010 7,930,045 7,930,045
2011 7,930,045 0.00 (600,000) 7,330,045
2012 7,330,045 400,000 (1,149,400) 6,580,645
2013 6,580,645 400,000 (1,230,000) 5,750,645
2014 5,750,645 400,000 (1,151,000) 4,999,645
2015 4,999,645 400,000 (375,000) 5,024,645
2016 5,024,645 400,000 (490,000) 4,934,645
A copy of the schedule is attached.
• Operating Transfers
Within this account group are transfers to the Debt Service Fund for tax abatements, to Capital
Projects Funds for project funding, the 20% transfer of home rule sales tax to the Motor Fuel Tax
Fund,subsidy transfers to the golf courses,and the Police and Firefighter transfer (pass-through).
There are no Corporate Fund tax abatements programmed for the next five years. There is an
estimated equity transfer to the Golf Enterprise of$250,000 per year. The following transfers have
been made over the last five years,
FY Subsidy Amount
2010 $668,000
2009 0
2008 775,000
2007 205,141
2006 258,601
Nearly $2 million in equity transfers have been made to the golf courses over the last five years.
Perhaps not germane to this report but consideration may have to be given to fold the golf
enterprise into the Corporate Fund. The intent of an Enterprise Fund is to cover its expenditures
primarily with user fees. Given the extent of the subsidy,that is not occurring.
The total growth in Corporate Fund expenditures over the next five years is estimated to be;
Year Growth
2012 2.76%
2013 2 .54%
2014 2.46%
2015 2.75%
2016 2.77%
12
The Five Year Financial Forecast calls for a deficit of$3.76 million over the review period. Given
the state of the economy and the precipitous drop in revenue, this is not unexpected. The intent of
the report is to communicate that there is still significant work to be done on both sides of the
ledger. On the expenditure side, the number one priority is to reduce the percentage of the budget
allocated to wages and benefits. A giant leap was taken with the ratification of the firefighters' most
recent contract as a door was opened to increase employee participation in health care and the
institution of a Tier II pay scale. The Tier II scale combined with a Voluntary Separation Initiative
has created an opportunity to save in wages and will, in some cases, reenergize the workplace.
While efforts will continue to focus on how to deliver the same high level of services at lower unit
costs, staff recognizes that revenues will also need to be reviewed. Staff must ensure that each
revenue is reviewed for adequacy (fees), efficiency (collections), and efficacy (diversified). New
revenue sources should be researched, discussed, and if warranted, presented to the Village Board
for consideration. Opportunities for economic development must be mined and aggressively
pursed.
This report will be used a guide for the development of the FY 2012 Budget and will help shape the
discussion about how Village adapt to the current and future financial landscape.
13
2012 2013 2014 2015 2016
General Fund Revenues Projected Projected Projected Projected Projected
Property Taxes 11,869,191 12,089,953 12,528,006 12,983,191 13,456,227
State Income Taxes 3,725,137 3,799,640 3,875,632 3,953,145 4,032,208
State Sales Tax 4,653,971 4,723,780 4,818,256 4,914,621 5,012,914
Home Rule Sales Tax 2,782,707 2,824,447 2,880,936 2,938,555 2,997,326
Real Estate Transfer Tax 500,000 525,000 551,250 578,813 607,753
Telecommunications Excise Tax 2,170,195 2,126,791 2,126,791 2,126,791 2,126,791
Prepared Food and Beverage Tax 714,272 724,986 739,486 754,275 769,361
Para Mutual Tax 80,000 80,800 81,608 82,424 83,248
Utility Tax-Electric Service 1,604,060 1,604,060 1,604,060 1,604,060 1,604,060
Utility Tax-Natural Gas Therms 920,309 920,309 920,309 920,309 920,309
Business Licenses 133,900 133,900 133,900 133,900 133,900
Liquor Licenses 126,500 126,500 126,500 126,500 126,500
Building Revenue&Fees 730,802 738,110 745,491 760,401 775,609
Intergovernmental Revenue-Local 226,625 229,756 232,960 236,239 239,595
Investment Revenue 207,922 197,218 212,722 251,279 298,745
Fines&Fees-Police&Fire 1,487,700 1,487,700 1,487,700 1,487,700 1,487,700
Operating Transfers 719,100 733,482 748,152 763,115 778,377
All Other Revenue 709,780 723,071 736,627 750,455 764,559
Miscellaneous Revenue 336,846 336,926 335,185 336,477 337,781
Total Revenues 33,699,016 34,126,429 34,885,571 35,702,250 36,552,962
2012 2013 2014 2015 2016
General Fund Expenditures Projected Projected Projected Projected Projected
Personal Services 19,639,810 19,933,822 20,331, 118 20,737,573 21,151,544
Personal Benefits 4,056,903 4,223,237 4,420,592 4,627,691 4,845,018
Operating Expenses 949,093 963,300 977,720 992,357 1,007,213
Insurance 442,265 473,224 501,617 526,698 553,033
Legal Services 173,662 175,379 177,114 178,866 180,635
Commissions&Committees 80,479 82,089 83,730 85,405 87,113
Commodities 488,308 498,074 508,036 518,197 528,560
Maintenance&Repairs-Facilities 551,200 578,760 607,698 638,083 669,987
Maintenance&Repairs-Water&Sewer 5,500 5,775 6,064 6,367 6,685
Maintenance&Repairs-Other 79,303 80,493 81,700 82,926 84,170
Maintenance&Repairs-Vehicles 619,325 631,711 644,345 657,232 670,377
Capital Equipment 616,899 619,068 621,259 623,472 625,706
Capital Projects-Facilities 60,530 61,136 61,747 62,364 62,988
Operating Transfers 5,624,403 5,226,255 5,358,946 5,600,908 5,852,172
All Other Expenses 1,102,160 1,124,203 1,146,687 1,169,621 1,193,014
Total Expenditures 34,489,840 34,676,526 35,528,975 36,507,759 37,518,216
Surplus/(Deficit) (790,824) (550,096) (643,404) (805,509) (965,254)
Unreserved/Undesignated Fund Balance
December 31,2010(audited) 9,563,654
December 31,2011 (estimated) 9,563,654
December 31,2012(estimated) 8,772,830
December 31,2013(estimated) 8,222,733
December 31,2014(estimated) 7,579,329
December 31,2015(estimated) 6,773,820
December 31,2016(estimated) 5,808,566
14
a
Water/Sewer Fund Status - Rate Discussion 2-D
Overview
Attached is the Water and Sewer Fund Analysis and Rate Discussion
Attachments
Water rate 2012-2016.pdf
Trustee Liason
Staff Contact
Scott D Anderson, Finance &GS
Monday, July 18 2011 Discussion Item . 2
1 ul ,ul A C�11F ()Uli
TO: Dane C. Bragg, Village Manager
FROM: Scott D. Anderson, Finance Director
DATE: July 11, 2011
RE: WATER AND SEWER FUND ANALYSIS AND RATE DISCUSSION
For a period of approximately nineteen years, the Village maintained a combined water and sewer
rate of $1.80/1,000 metered gallons of water. This was accomplished with development related fees
and donated system assets combined with water consumption revenue offset by lower operational
expenses and minimal capital spending.
As part of the FY 2008 water rate and fee adequacy report, a recommended increase in the combined
rate to $2.40/1,000 gallons was approved. A second rate increase was proposed for FY 2010 to a
combined rate of $3.00/1,000 gallons and remains in effect. As a reminder, the combined rate
includes water and the village's cost of maintaining the sanitary sewer delivery system. The treatment
of sewage is handled by the respective counties. The Metropolitan Water Reclamation District of
Greater Chicago bills Cook County residents through an ad valorem tax. Lake County charges system
users$4/1,000 gallons.
The Village has worked diligently to avoid increasing residents'water rates and only requests a review
of rates when significant trends are noted. The attached worksheet provides some data on the Water
and Sewer Fund.
Breakeven-
Gallons Combined Total Total Surplus/ Gallons To Gallons
Year Metered Rate Revenues* Expenses(l) Deficit Breakeven over or(under)
2000 1,652,687,594 1.80/1,000 $3,361,535 $2,724,674 $636,861 1,298,875,655 353,811,939
2001 1,519,524,100 1.80/1,000 $3,153,426 $3,019,035 $134,391 1,444,862,389 74,661,711
2002 1,548,721,889 1.80/1,000 $3,359,240 $3,045,633 $313,607 1,374,495,895 174,225,994
2003 1,639,669,228 1.80/1,000 $3,418,986 $3,261,767 $157,219 1,552,325,534 87,343,694
2004 1,525,820,556 1.80/1,000 $3,235,032 $3,053,363 $181,669 1,424,893,084 100,927,472
2005 1,487,698,100 1.80/1,000 $3,158,090 $3,216,035 ($57,945) 1,519,889,706 (32,191,606)
2006 1,654,394,428 1.80/1,000 $3,563,992 $3,498,198 $65,794 1,617,842,011 36,552,417
2007 1,455,775,139 1.80/1,000 $3,239,795 $3,671,971 ($432,176) 1,695,872,983 (240,097,844)
2008 1,382,161,575 2.40/1,000 $3,562,299 $4,256,980 ($694,681) 1,671,612,104 (289,450,529)
2009 1,341,732,371 2.40/1,000 $3,322,967 $4,140,881 ($817,914) 1,682,529,663 (340,797,292)
2010 1,283,596,747 3.00/1,000 $4,366,066 $5,022,770 ($656,705) 1,502,498,280 (218,901,533)
2011(2) 1,439,762,667 3.00/1,000 $4,432,098 $8,214,410 ($3,782,312) 2,700,533,334 (1,260,770,667)
(1)less pass through revenues/expenses for the sanitary sewer treatment for Lake County
(2)budget estimate
The first column reflects metered gallons of water. The annual average during the last decade was
1,499,252,884 gallons metered. The last year the average was attained, or surpassed, was FY 2006.
Total Revenues and Total Expenses reflect all fund activity except for revenue received for, and
remitted to, Lake County Public Works for sanitary sewer fees. Until FY 2007, the Total Expenditure
category did not include capitalized costs related to capital improvements for the purpose of rate
development. As the Village has continued a strategy of pay-as-you-go financing (no debt) for capital
improvement it becomes critical the water rate begin to include a component to replenish reserves for
future improvements
The Surplus/(Deficit) column is a the sum of Total Revenues less Total Expenses. The Gallons to
Breakeven represents the amount of water needed to be metered to meet the annual expenses.
Breakeven Gallons over/ (under) is the amount of additional gallons needed to breakeven (denoted in
parentheses) or the amount of gallons metered that surpass expenses (denoted as a positive
number).
Through 2004, the Water and Sewer Fund was able to offset its expenses and generate a surplus that
was left to accumulate in a Retained Earnings account. The Village's policy on Retained Earnings is,
• The balance to be maintained as Undesignated Retained Earnings within the Water and Sewer
Fund shall be equal to an amount necessary to provide sufficient cash flow for operations as
well as providing a reserve accumulation to pay for unanticipated capital replacement and
repair. Asa operational goal, cash and investment reserves will be maintained in an amount
equal to 25% of the water and sewer operational budgets beginning as of January 1 of any
given fiscal period. With this said, the Water and Sewer Fund cash and in vestment guideline
will be:
1. Cash and investment reserves equal to 25% of the operational budget beginning as of
January 1 of any fiscal period. Unreserved Retained Earnings would at least equal
that amount.
The following is a history of cash and investment balances since 2005,
2005 $9,850,217
2006 $9,784,423
2007 $9,601,708
2008 $8,682,550
2009 $6,474,415
2010 $6,200,352
2011 $2,485,005 (estimated)
According to the policy, the Village should have $3,254,951 in cash at the end of FY2011. For policy
review purposes, this year is an extraordinary high budget year with large capital improvements that
originally were intended to be completed in FY 2010 but carried over into the current fiscal year. Over
the last several years there has been significant reinvestment back into the water system including,
• $132,029 Lift Station Repairs (Cambridge on the Lake— in progress)
• $402,125 Lift Station Repairs (Linden Avenue)
• $240,885 Lift Station Repairs (Johnson Drive)
• $123,682 Reservoir #7 Improvements
In FY 2011, the following capital improvements are budgeted,
• $1,800,000 Deep Well construction at Reservoir #7
• $ 980,000 Arlington Heights Water Main Repair
• $ 600,000 Pump House Repairs and Security Improvements
• $ 300,000 Old Treatment Plant Lift Station Replacement
The costs associated with the capital improvements is only one part of the draw on cash reserves.
The second issue is that consumption of water is down significantly. The following chart shows the
extent of the decline in metered water.
Average Monthly Usage - Residential
10,000
9,000
t 8,000
7,000 00
6,000
5,000
4,000
r
3,000
2,000
The chart shows how many gallons of water the average resident consumes per month. Removing
2005 as an outlier (due to drought conditions), a decline started in 2004. At the conclusion of the FY
2010, the average resident consumed 6,140 gallons of water per month. The twenty year system
average is 7,411 gallons per month (17% decline).
The reasons for the decline in usage are likely related to,
• Maturing community—as landscapes mature, the demand for irrigation decreases
• Weather — over the last few years the Village has experienced relatively wet springs and mild
summers. FY 2011 was budgeted for a rebound in consumption predicated on the probability
of a fourth mild watering season. Removing the last two weeks —we are continuing the same
pattern of the last few years.
• Technology &Conservation — low flow toilets, energy efficient appliances, and more diligence
on the part of the homeowner to address and repair leaks.
• Economy— income spent to maintain a green lawn not a priority
Moving forward over the next five years it is imperative that we re-price the combined water rate to
not only cover operating and capital expenses but also begin to rebuild cash balances to levels that
will support future infrastructure investment. The residents of Buffalo Grove were the beneficiaries of
an extremely low water rate for almost two decades. The rate that we need to charge will need to be
more in line with other Northwest Water Commission members who have similar system demands.
Over the next several months, staff will be working on a 20 year fund analysis that will project cash
flow, identify infrastructure needs, and lay out a water rate strategy.
a
Centralized Purchasing Program 2-E
Overview
Buffalo Grove faces increasing demands and decreasing resources. Centralized purchasing
operations - appointing a single agent to serve as liaison between vendors and departments and
adopting written procedures for administrating our purchasing polices will help ensure the efficient
and cost-effective purchase of goods and services for the Village. According to the Illinois
Association of Public Procurement Officials Buffalo Grove could achieve between a 15 and 20
percent cost savings per year through volume buying and improving the Village's bidding and
quotation procedures.
Background
Centralized purchasing is not a new concept in local government. A variety of Chicago
metropolitan communities - both large and small, have centralized purchasing. Examples are the
City of Highland Park, the Village of Glendale Heights, Addison, Niles and Schaumburg.
In Buffalo Grove, purchasing is extremely decentralized. There are no departments with a full-
time "purchasing agent." The majority of purchasing responsibilities lie within each department
and the duties are assigned as needed, however, each department has participated in various
types of purchasing programs:
• Cooperative purchasing - such as the Northwest Municipal Conference. The IT department
participates in the Telecommunications Program (Call One, which provides the village with
services such as POTS Lines; Data Services; ISDN Prime; Network to Network Interface;
Alarm Monitoring, etc.)through the NWMC.
• Municipal partnering program - The Village of Buffalo Grove joined a consortium of
northwest suburban communities in October, 2010 with the intent of achieving better pricing by
aggregating and joint bidding public works contracts. Initiated by a group of village managers
representing multiple municipalities in the region, the Municipal Partnering Group now
includes Buffalo Grove, Arlington Heights, Glencoe, Kenilworth, Winnetka, Lake Bluff, Lake
Forest, North Chicago, Lincolnshire, Glenview, Northbrook, Northfield, Wilmette, Skokie,
Morton Grove, Lincolnwood, Evanston, Highland Park, Vernon Hills and Grayslake. To date,
participation in the Municipal Partnering Program has saved $7,417.77 through the joint
purchasing of sewer lining and crack sealing.
• Intergovernmental purchasing— such as the State of Illinois Central Management Services.
Public Works buys things such as salt, hydrant painting, liquid calcium chloride, crack sealing
and administrative vehicles through the State of Illinois.
• Interdepartmental purchasing—in Buffalo Grove Public Works purchases janitorial services
which are utilized by each department in the Village.
Recommendation
These general purchasing programs are useful, but we need to do more to cut costs, reduce the
number of vendors/suppliers and establish longer term relationships with our vendors/suppliers
to secure better pricing. The recommendation is to develop a centralized Village of Buffalo
Grove purchasing program to maximize savings through quantity purchases, reduce time spent
locating vendors and obtaining prices, and to eliminate individual purchasing efforts on the part
of each separate department.
The concept of a central purchasing authority is to institute and maintain an effective and
economical program for the acquisition of goods and services for the Village. As part of current
central management reorganization within the Finance Department — hiring a full-time,
professional Purchasing Agent would ensure the following core elements are implemented for
the Village:
• Centralized authority of purchasing
• Consolidation of requirement into bulk purchases to obtain quantity price breaks
• Standardization of specifications to assure the quality of goods
• Stimulation of competitive bidding to reduce prices
• Centralized control over supplies in storage
• Elimination of unnecessary paperwork
• Prompt payment of invoices to earn cash discounts
• Avoidance of late payment penalties
• Centralized control over property excess to the Village
Purchasing Agent Position
The proposed job description, as prepared by Art Malinowski, is attached to this memo. It is
important to note that to ensure the smooth operation of a newly created centralized purchasing
program that a few guidelines be considered:
• One individual should be responsible for standardization, centralization, accountability and
openness
• The individual should be versed in the legal aspects of centralized purchasing, such as bidding
requirements and conflict of interest laws
• The purchasing agent should stimulate vendor competition and make quantity purchases
whenever possible
• All purchases should be made following standardized procedures
• Items utilized by the village should be standardized and resupply points established so that
purchases will be made at regular intervals*
*An example of this would be photocopy/fax machine contracts, and office supplies. These are
all common commodities that would benefit from a volume purchase contract if standardized
throughout the Village.
This position is being proposed at a pay grade of 14 with a salary range of $65,111.90 -
$98,563.88 under the Tier II salary pay range.
Expectations
With the creation of a centralized purchasing program and the hiring of a full-time purchasing
agent, the Village Board will have the following basic procurement goals met:
1. Clearly defined Village of Buffalo Grove purchasing procedures - approved through a codified
policy and a published purchasing manual
2. Compliance with the State of Illinois General Statutes in regard to public purchasing,
procurement and disposal
3. Centralized management of the formal bid process, including advertising for bids, notifying
vendors, accepting bid proposals, opening bids, tabulating bids and providing one primary
resource to vendors
4. Assurance that all who wish to do business with the Village are treated impartially and equally
5. Purchase orders will be awarded to the lowest responsible bidder, taking into consideration
quality, performance, technical support, delivery schedule, past performance and other relevant
factors
6. Village departments will be provided the required goods, equipment and services at the time
and place needed and in the proper quantity and quality
7. Promotion of good and effective vendor relations, cultivated by informed and fair buying
practices and strict maintenance of ethical standards
With the concurrence of the Village Board — the Village Manager's office will implement the
following timeline:
August/September: Advertise the position of Purchasing Agent for the Village of Buffalo
Grove. Development of formalized work plan for position/function will occur concurrently
October/November: Screen resumes, interview candidates, make candidate selection
December: Orientation and Departmental Meetings. Review of formalized work plan
January/February: Draft purchasing ordinance/purchasing policy to Village Board for review
February/March: Codification of Village of Buffalo Grove Purchasing Policy
June/July: Six month report on new purchase program
Attachments
2011 Purchasing Agent Position Description.pdf
Trustee Liason
Trustee Berman
Staff Contact
Leisa M Niemotka, Office of Village Manager
Monday, July 18 2011 Discussion Item . 2 E
Position Description
Position Title: Effective Date: (The date this Description goes into effect)
Purchasing Agent 01/01/2012
Department: Finance
Reports to: Supervises: (position name)
Director of Finance and General Services Does Not Supervise Others
Pay Grade: Job Factor Number:
14 500
FLSA Status:
Exempt
Full-Time
Summary of Position: (Provide a brief narrative, one or two sentences, that highlights the primary mission and key responsibilities of
the job).
This highly responsible, administrative position, manages the procurement process for the Village of Buffalo Grove
including but not limited to: public bidding; contract administration; procurement of materials and services; and
fiscal analysis to ensure the efficient use of Village funds. Analyzes and reviews all Village supplier agreements and
awarded contracts to: guarantee supplier compliance, quality performance, value added activities, economies of
scale, efficiency, and adherence to purchasing policy. Researches, recommends and implements strategic
initiatives to reduce costs and improve efficiencies. Complete special projects as assigned by the Village Manager,
Deputy Village Manager and/or Finance Director.
Essential Job Functions: (State the essential duties and responsibilities of the job. Include regular day-to-day duties as well as
duties that occur at irregular intervals but that are recurring and necessary).
(1) Meets with suppliers and contractors to assess applicability to Village needs; publishes supplier bid lists; acts as
primary contact for the Village's internet site for publishing bid and proposal requests; maintains catalog and
commodity files.
(2) Meets with department heads to assess needs for materials and services; acts as resource for procuring said
needs and assists in supplier interface and negotiation.
(3) Oversees the public bidding process: prepares and publishes bid proposals, schedules and conducts bid
openings, prepares bid tabulations, together with department heads makes recommendations for bid award;
implements award documents; ensures all legal requirements are met; and if necessary prepares bid waivers for
the Village Board; if necessary attends Village Board meetings.
(4) Oversees the preparation, distribution, and awarding of Requests for Proposals (RFP) for services, the
execution of contracts for services, and the compliance to contracts.
(5) Oversees the ordering of supplies and materials: i.e. the development and oversight of procedures to
accomplish this including the delegation of responsibilities, the purchasing credit card, and the issuance of
purchase orders.
(6) Audits materials and services for purchase price and quality to ensure proper economies of scale for overall
cost of quality.
(7) Audits suppliers and contractors to ensure true value for the services and materials received, and resolves
discrepancies.
(8) Supports department heads in planning the timely execution of annual or multi-year contracts and prepares
necessary contract documentation.
(8) Coordinates with Technical Services Manager.
(10) Acts as chief naeounoe for State of Illinois Purchasing Contract Agreements and all other joint purchasing
agencies and related government pricing plans.
(11) Forwards Village-wide requirements 1othe State of Illinois for joint bidding purposes
(12) {|naatee' edits and updates the a Village-wide Purchasing Policy and Procedure Manual.
(13) Attends professional development workshops, seminars, and professional meetings to ensure a current
knowledge of legal requirements and innovations in public procurement, contract administration, and insurance
requirements, ae Village budget allows.
(14) Perform other duties aeassigned.
Summary of Essential Job Functions: (This summary will be used m describe the day m day responsibilities or the position, for
use m one's performance evaluation—limited mnv000amoteu).
(1) Purchases all commodities for the day-to-day operations with the Village including vehicular and related
automotive equipment, major capital purchases, construction contracts and miscellaneous office equipment and
supplies.
(2) Interviews vendors, salespeople and department heads relative 1opurchases and contracting for services;
drafts bid specifications and secures sealed bids for the acquisition of goods and services.
(3) Analyzes bids and makes recommendations for acceptance or rejection to the involved department head(s), the
supervisor and the Village Board; processes requisitions, purchase orders, inventory re-order forms and contract
orders for products or services commonly used by multiple departments to secure better pricing; ensures quality of
materials in accordance with specifications.
(4) Performs duties in strict accordance with the Department/division SC)P/eafe1ymanua| and is expected to report
any hazards and observed infractions immediately to the supervisor; may serve on departmental safety committee.
(5) Contacts new vendors and contractors to ascertain their qualifications; maintains library of catalogs, price |ie1e'
specifications and vendor qualifications; researchers current laws, statutes and federal regulations to ensure
compliance.
(6) Notifies departments of impending or current shortages affecting orders; attends purchasing meetings or
seminars as appropriate; also coordinates all purchases involving other local agencies under intergovernmental
agreement.
(7) Ensures compliance with all applicable state and federal procurement regulations, maintains prevailing wage
records for Village projects.
(8) Assists the Director and Assistant Director of Finance and General Services in evaluating the delivery ofinternal
and external services.
(8) Assist with general accounting functions.
(1O) Performs other duties ae assigned orrequired.
Knowledge, Skills and Abilities Required: (List the minimum required education,prior experience, certifications and specialized
areas of knowledge required to adequately perform the essential functions of the job).
For successful performance in this position, the incumbent will need to demonstrate the following:
(1) Strong knowledge of inventory control and purchasing methods and procedures.
(2) Thorough knowledge of supply sources, markets, and pricing trends.
(3) Thorough knowledge of the laws, ordinances, and other requirements governing the purchase of commodities
and services for amunicipality.
(4) Skill in the use ofapersonal computer, including software programs such as Windows, VVond' Excel, etc.
(5) Effective oral and written communication skills.
(6) Ability to maintain strict confidentiality.
(7) Ability to establish and maintain effective working relationships with vendors, consultants, elected and appointed
officials, employees, and the public.
(8) Ability to exercise professional independent judgment in planning own work and recommending solutions.
(8) Ability to use objectivity and impartiality when making difficult decisions and recommendations.
(10) Follows safety policies and procedures.
(11) Reports all unsafe conditions and acts 1osupervisor.
(12) Reports all accidents 10 supervisor immediately
| (13) Follows recognized safe work practices. |
(14) Graduation from an accredited college or university with a Bachelor's degree in an area of Business,
Accounting, Public Administration, a related field or equivalent experience.
(15) Minimum of three (3) years experience in purchasing/inventory control in a private industry or public
management position.
(16) Any equivalent combination of experience and education that provides the required knowledge, skills, and
abilities.
Personal Skills and Competencies: (Identify any behavioral characteristics and attributes that would contribute to superior
performance for this position,i.e. organization, communication, detail-orientation,analytical skills). There should be a pull down of the
competency list for this position on both this document and the performance appraisal.
Name Description
-- Produces work with few errors due to conscientiousness and awareness of
Accuracy and Detail Orientation the importance of accuracy
Pays attention to all details
Is systematic in carrying out job responsibilities
Deals with the public in a matter appropriate to the situation, responds
effectively to public inquires and requests, and promotes a favorable and
Professionalism positive image of the Department and Village
Treats others with respect
Displays strong character and integrity
Expresses one's opinions and feelings in spite of disagreement from
Assertiveness/Confidence others
-- Believes in one's own skills, capabilities and judgment; expresses that
belief
-- Works well with all types of people, both external to the Village and with
Cooperation co-workers
Understands others' point of view when reaching decisions with others
Is willing to help others achieve their objectives
Decisiveness Makes decisions with available information
Knows whether to get additional information before making decisions
Uses effective plans and communications to persuade others or gain
Influence/Persuasion support
-- Plans ones'words and actions in advance to achieve the desired effect
with others
-- Able to organize and schedule people and tasks
Organization Skills -- Develops realistic action plans while being aware of time and resource
constraints
Applies time management principles
Uses a systematic approach in solving problems through analysis of
Problem Solving problem and evaluation of alternative solutions
Is able to get to root cause to solve a problem permanently
Working Conditions/Physical Requirements of the Job: (Indicate what the physical requirements are to complete the
essential functions of the job,i.e.lifting,standing, etc. Also indicate any working conditions that may be out of the ordinary,i.e. travel, hours
of work, exposure to noise, etc.).
The physical demands described here are representative of those that must be met by an employee to successfully
perform the essential functions of the position. Reasonable accommodations may be made to enable individuals
with disabilities to perform the essential functions.
Work is performed mostly in an office environment. Must have the use of sensory skills in order to effectively
communicate and interact with other employees and the public through the use of the telephone and personal
contact as normally defined by the ability to see, read talk, hear, handle or feel objects and controls. Physical
capability to effectively use and operate various items of office related equipment, such as but not limited to a,
personal computer, calculator, copier, and fax machine.
While performing the duties of this position, the employee is regularly required to reach with hands and arms. The
employee frequently is required to sit; stand; walk; and use hands to finger, handle, feel or operate objects, tools, or
controls and talk and hear. The employee is occasionally required to climb or balance; stoop, kneel, crouch, or
crawl.
The employee must frequently lift and/or move up to 10 pounds and occasionally lift and/or move up to 25 pounds.
The above is not intended to be an all-inclusive list of the duties and responsibilities of the job described, nor is it
intended to be an exhaustive list of the skills and abilities required to do the job. Rather, it is intended only to describe
the general nature of the job. Employees may be required to perform duties outside of their normal responsibilities
Ifrom time to time, as needed.
a
Voluntary Separation Incentive Status Update 2-F
Overview
In January 2011, the Village offered the Voluntary Separation Incentive program to all non-
represented employees. The program was structured to provide a severance payment based upon
years of service and was purposefully designed to encourage higher-salaried personnel to retire or
separate from service in order to refill positions at lower wages. Faced with an aging workforce and
increasing personnel expenses as a percentage of total operational costs, this strategy was and is
necessary to weather the current economic downturn that has had a prolonged effect on the
Village's finances.
The timing of this program has been fortuitous as the Village has also been exploring a Tier II
wage structure for new hires. The Tier II pension program now applies to all new hires and the
work to stabilize the Village's health plan has begun in earnest. At this point, 14 employees have
taken advantage of the program. As of this date, an additional five Fire Department employees
have also executed letters of intent to separate in accordance with the recently approved side
letter with the Fire Union, and three- to-four additional Fire employees are expected to take
advantage of the program during the negotiated separation period. Thus, current counts are 19
and could be as high as 23 employees by the end of the year, representing 10 percent of the
Village's total full-time workforce.
Each department has been assessed independently by its respective leadership team and further
evaluated by the village management team for possible cost reductions and efficiencies. The
departments will be reviewed individually in this memorandum to provide perspective on the
possible impacts on Village operations. During the review and assessment process, six factors
were evaluated in managing long-term costs:
1. Can the position be eliminated and the same level of service maintained?
2. Can positions be combined or operations consolidated to reduce overall operational
expenses?
3. Can the position be reduced to part-time or temporary status?
4. How much will be saved by promoting current employees or hiring new employees at a
lower rate of pay?
5. How much will be saved by staggering or delaying promotions or hiring temporarily?
6. How will any position change affect the delivery of services to external and internal
customers?
Throughout the review and assessment process, Village staff has adhered to the core
organizational strategies and goals, striving to maintain (if not improve) service delivery to all
constituencies, aligning service delivery models with the organizational chart and ensuring that
each department has the necessary resources to carry out its role within the broader municipal
governance structure. The results of this analysis are far from complete. Many operational
changes will need to be further evaluated in the ensuing years and it is anticipated that the
organizational dynamics will become more fluid over the next decade as the Village adjusts to a
younger workforce, continued economic and political pressure to maintain services without
additional tax sources and the increased utilization of technology to deliver services.
Police
Within the Police Department, the authorized command structure includes one chief, two deputy
chiefs, three commanders, 11 sergeants and 54 officers, for a total sworn force of 71 (69
positions filled prior to the VSI). With the VSI program, two deputy chiefs, two sergeants and
one part-time secretary have separated from the Department. Since that time, two sergeants have
been promoted to fill the vacated positions and maintain daily force, the two deputy chief
positions remain unfilled as well as the vacated police officer positions (due to promotions). As
proposed, the sworn force would reduce to 67 for the balance of 2011 and into 2012 as follows:
2011 (prior to VS1) 2011/2012 (post-VSI)
Chief of Police 1 1
Deputy Chief 2 1
Commander 3 3
Sergeants 11 10
Officers 53 52
70 67
Key changes to the command structure would include the elimination of one Deputy Chief
position, one Sergeant (Investigations/Youth) position and one part-time Secretary position. In
addition, two police officers would be hired in the Fall of 2011 to replace the vacated positions
and maintain 52 patrol officers. It is anticipated that patrol officers would be increased to 53 as
the budget situation improves.
In addition, the Department has outsourced its social work function to Omni Behavioral Services
upon the departure of the Social Worker. This change reduced expenses associated with social
work by $40,000 an annual basis.
The following table illustrates the proposed savings derived from the planned organizational
changes:
FY 2011 FY 2012
Position Reductions
Deputy Chief $129,161 $160,058
Secretary (PT) $21,908 $39,683
Delayed Hiring
Police Officer(Jun-Dec 11) $61,820
Vacant Positions
Deputy Chief $87,520
Police Officer(1) $76,873
Sergeant $75,241 $124,837
Reclassifications $8,625 $11,500
Outsourcing $40,000 $40,000
VSI Incentive Payments ($127,650)
Promotions ($8,562) ($19,847)
New Hires ($45,000) ($150,000)
Total Savings $424,275 $452,951
Total Cost ($181,212) ($169,847)
Net Savings $243,063 $283,104
As a result of the separation of four sworn personnel in Police, it is imperative that department
leadership address several key challenges for the department: leadership transition, staffing
levels, the use of technology to improve efficiency and the evaluation of program offerings for
efficiency/continuity with the Village's mission.
Should the 2012 budget process not permit adequate funds for the proposed plan, promotions of
one deputy chief, one commander, two sergeants and the hiring of two police offers will be
delayed to meet budget.
Fire
Within the Fire Department, the authorized command structure includes one chief, two deputy
chiefs, five battalion chiefs, nine lieutenants and 45 firefighter paramedics, for a total sworn
force of 62. In addition, the Fire Prevention Bureau includes one Deputy Fire Marshal, one Fire
Inspector and one Fire Inspector/Public Education Officer. With the VSI program, one deputy
chief, two Battalion chiefs, the department secretary, the Fire Prevention secretary, and the Fire
Inspector/Public Education Officer have separated from the Department. Since that time, one
deputy chief, one battalion chief and one lieutenant have been promoted to fill the vacated
positions and maintain daily force. As proposed, the sworn force would remain at 62 for the
balance of 2011 and would eventually reduce to 61 in 2012. In addition, the Fire Prevention
Bureau will be incorporated into the Building & Zoning function, reducing one full-time
Secretary position and the Fire Inspector/PEO position will be filled as a part-time position.
Since the adoption of the Side Letter Agreement with the Fire Union on July 11, four firefighters
and one lieutenant have also submitted their letters of intent to separate.
2011 (prior to VS1) 2011/2012 (post-VSI)
Fire Chief 1 1
Deputy Chief 2 2*
Battalion Chief 5 5
Lieutenant 9 9
Firefighter/Paramedic 45 45
62 62
*The second D/C will be reduced to one after the next D/C retirement.
Key changes to the command structure would include the elimination of one Deputy Chief
position upon the next retirement. As manning requirements for individual stations and
apparatus drive most of the required manpower hours within the Department, two strategies will
be employed to manage long-term employee costs:
1. Delaying promotions and new hires to create temporary savings;
2. Hiring new employees under the Tier II wage program to reduce salary expenses.
The following table illustrates the proposed savings derived from the planned organizational
changes:
FY 2011 FY 2012
Position Reductions
Deputy Chief $10,227*
Secretary $73,768 $73,768
Fire Inspector/PEO $47,984 $47,984
Delayed Hiring
Firefighter/Paramedic(Tier II) $179,466 $51,276
Vacant Positions
Reclassifications
Outsourcing
VSI Incentive Payments ($131,128) ($61,362)
Promotions ($19,060)
Total Savings $301,218 $183,255
Total Cost ($150,188) ($61,362)
Net Savings $151,030 $121,893
*December only,reflecting November separation,$145,000 savings in 2013.
Key challenges for the Fire Department will be the attraction of talented individuals to serve as
new firefighter/paramedics, training new employees and leadership continuity in operations.
Also, some adjustment will be necessary as the Fire Prevention Bureau relocates to Village Hall.
The Fire Department will be looking to partner with Long Grove on various activities in an effort
to further reduce costs, there is no estimate of this savings at this time.
Finance
The Finance Department consists of one director, one assistant director, three Clerk III positions,
two Clerk II positions and one part-time Clerk II position. Two employees have separated under
the VSI program, the Clerk III (Payroll) and the part-time Clerk II. It is proposed to reorganize
the Finance & General Services Department to provide for a centralized purchasing program and
to utilize temporary assistance with the payroll function, at least until the new payroll system is
up and running. The following table shows the proposed restructured budget for Finance and
General Services.
FY 2011 FY 2012
Position Reductions
Clerk III $35,583 $61,000
Clerk II (PT) $20,250 $27,000
Delayed Hiring $5,083
Purchasing Agent ($23,333) ($70,000)
VSI Incentive Payments ($16,000)
Temporary Payroll Clerk ($14,583) ($35,000)*
Total Savings $55,833 $87,000
Total Cost ($53,916) ($105,000)
Net Savings $1,917 ($18,000)
*This figure may vary considerably as the new payroll system is implemented and a purchasing agent is hired.
Conclusion
While the Village has previously offered early retirement packages, this year's offering was the
first that applied to all employees regardless of years of service. The Village expects to have
encouraged ten percent of its workforce to separate from service through the program and
reducing personnel expenditures an estimated $800,000 in over two fiscal years. Staff considers
this to be a very successful result. Continued operational retuning and reorganization is
anticipated as the Village continues to evolve in the new economy.
Many of the savings illustrated in the charts represent a snapshot of the long term savings
afforded to the Village by offering this program. Staff recommends offering this program in
2012 as means to continue in reorganization and right-sizing efforts.
Attachments
2011 Purchasing Agent Position Description.pdf
Trustee Liason
Staff Contact
Dane C Bragg, Office of Village Manager
Monday, July 18 2011 Discussion Item . 2 F
a
Tier II Wage Program 2-G
Overview
Attached please find a document containing the current Tier I salary structure that became effective
for all current, non-represented, Village of Buffalo Grove employees on January 1, 2011, as well as
the newly approved Tier I salary structure for members of the Fire bargaining group, which became
effective on December 31, 2011.
The attached document also contains a draft of the proposed Tier II salary ranges for all Village
positions. Recall that a component of the recently approved Side Letter of Agreement with the
Fire Union includes a Tier II salary schedule for all members of the bargaining unit hired after
July 11, 2011. The Village now seeks to implement a similar salary structure Village-wide and
effective immediately.
The Tier II salary structure increases the actual salary range or the range between minimum and
maximum by approximately 17 percent by lowering the starting salary approximately 10 percent
and maintaining the Tier I maximum salary for each position. Because Tier I and Tier II will
share the same maximum salary, top performers, no matter when hired, will continue to be
rewarded for superior performance.
The implementation of the proposed Tier II salary ranges for all employees hired by the Village
from this point forward will have a direct and immediate effect, of a positive nature, upon the
Village and its ongoing efforts to control salary costs. Furthermore, when the Tier II salary
structure is coupled with the recent Voluntary Separation Incentive program and the new Tier II
Police, Fire and Illinois Municipal Retirement Fund pension systems, which became effective on
January 1, 2011, the cost savings will continue to grow, both on a short and long term basis.
Staff looks forward to the implementation of this new program which will present an immediate
fiscal savings to the Village.
Attachments
Tier II Pay Ranges 07-14-11.pdf
Trustee Liason
Staff Contact
Arthur Malinowski, Office of Village Manager
Monday, July 18 2011 Discussion Item . 2 G
2011 PAY RANGES
VILLAGE OF BUFFALO GROVE
APPROVED SALARY RANGES
Effective:January 1,2011
Ranges Reflect a 2.0%General Wage Increase Awarded on January 1,2011
Revised by AAM on February 7,2011 TIER I TIER II
Revised by AAM on February 14,2011 SALARY APPROVED APPROVED APPROVED APPROVED
Revised by AAM on July 13,2011 PAY PLAN STEPS RANGE RANGE RANGE RANGE
GRADE MIN/MAX MINIMUM MAXIMUM MINIMUM MAXIMUM
OOXX CLERICAL/SECRETARIAL
0010 Clerk 1 1 171/233 40,162.72 54,716.48 36,146.45 54,716.48
0012 Clerk 11 2 178/240 41,589.60 56,661.28 37,430.64 56,661.28
0013 Clerk 111 4 203/265 47,112.00 64,184.64 42,400.80 64,184.64
0030 Secretary 4 203/265 47,112.00 64,184.64 42,400.80 64,184.64
0025 Permit Coordinator 5 211/273 49,029.76 66,799.20 44,126.78 66,799.20
0035 Executive Secretary 8 235/297 55,265.60 75,291.84 49,739.04 75,291.84
10XX PLANNING
1010 Associate Planner 11 260/322 62,603.84 85,290.40 56,343.46 85,290.40
1020 Village Planner 17 315/377 82,363.84 112,209.76 74,127.46 112,209.76
11XX GOLF OPERATIONS
1100 Golf Course Cashier --- 5/67 17,548.96 23,909.60 15,794.06 23,909.60
1105 Assistant Golf Professional 7 227/289 53,102.40 72,346.56 47,792.16 72,346.56
1107 Head Golf Professional 8 235/297 55,265.60 75,291.84 49,739.04 75,291.84
1110 Assistant Director of Golf Operations 10 254/316 60,758.88 82,775.68 54,682.99 82,775.68
1120 Director of Golf Operations 22 350/412 98,072.00 133,610.88 88,264.80 133,610.88
12XX ENGINEERING
1210 Engineering Aide --- 42/104 21,103.68 28,753.92 18,993.31 28,753.92
1211 Engineering Technician 10 254/316 60,758.88 82,775.68 54,682.99 82,775.68
1220 Civil Engineer 1 13 274/336 67,132.00 91,457.60 60,418.80 91,457.60
1221 Civil Engineer 11 15 294/356 74,172.80 101,052.64 66,755.52 101,052.64
1231 Village Engineer 22 350/412 98,072.00 133,610.88 88,264.80 133,610.88
13XX ADMINISTRATIVE
1301 Assistant to the Village Manager 12 272/334 66,466.40 90,548.64 59,819.76 90,548.64
1305 Assistant Finance Director 17 315/377 82,363.84 112,209.76 74,127.46 112,209.76
1310 Director of Human Resources 20 345/407 95,657.12 130,320.32 86,091.41 130,320.32
1320 Director of Finance&General Services 25 373/435 109,992.48 149,851.52 98,993.23 149,851.52
1325 Deputy Village Manager 25 373/435 109,992.48 149,851.52 98,993.23 149,851.52
1330 Director of Public Works 25 373/435 109,992.48 149,851.52 98,993.23 149,851.52
14XX INFORMATION TECHNOLOGY
1407 IT Assistant 11 260/322 62,603.84 85,290.40 56,343.46 85,290.40
1410 IT Programmer/Analyst 14 289/351 72,346.56 98,562.88 65,111.90 98,562.88
1415 Director of Information Technology 20 345/407 95,657.12 130,320.32 86,091.41 130,320.32
20XX AUTOMOTIVE&EQUIPMENT MAINTENANCE
2005 Fleet Maintenance Shop Assistant --- 105/162 28,897.44 38,400.96 26,007.70 38,400.96
2010 Mechanic 1 7 227/289 53,102.40 72,346.56 47,792.16 72,346.56
2020 Mechanic 11* 8 235/297 55,265.60 75,291.84 49,739.04 75,291.84
2025 Mechanic 111 11 260/322 62,603.84 85,290.40 56,343.46 85,290.40
2030 Fleet Manager* 15 294/356 74,172.80 101,052.64 66,755.52 101,052.64
21XX GENERAL SERVICES&TRADES
2110 Laborer --- 5/67 17,548.96 23,909.60 15,794.06 23,909.60
2120 Maintenance Worker 1 4 203/265 47,112.00 64,184.64 42,400.80 64,184.64
2121 Maintenance Worker 11* 6 218/280 50,772.80 69,170.40 45,695.52 69,170.40
2122 Maintenance Worker 11(Crew Leader)* 8 235/297 55,265.60 75,291.84 49,739.04 75,291.84
2123 Maintenance Worker III* 8 235/297 55,265.60 75,291.84 49,739.04 75,291.84
2130 Water Customer Worker 1 4 203/265 47,112.00 64,184.64 42,400.80 64,184.64
2131 Water Customer Worker 11* 6 218/280 50,772.80 69,170.40 45,695.52 69,170.40
2132 Water Customer Worker 11(Crew Leader)* 8 235/297 55,265.60 75,291.84 49,739.04 75,291.84
2133 Water Customer Worker III* 8 235/297 55,265.60 75,291.84 49,739.04 75,291.84
2140 Building Maintenance Worker 1 4 203/265 47,112.00 64,184.64 42,400.80 64,184.64
2145 Building Maintenance Worker 11(Crew Leader)* 8 235/297 55,265.60 75,291.84 49,739.04 75,291.84
2142 Building Maintenance Worker III* 8 235/297 55,265.60 75,291.84 49,739.04 75,291.84
2143 Building Maintenance Supervisor 14 289/351 72,346.56 98,562.88 65,111.90 98,562.88
2150 Street Maintenance Supervisor 14 289/351 72,346.56 98,562.88 65,111.90 98,562.88
2155 Forestry&Grounds Supervisor 14 289/351 72,346.56 98,562.88 65,111.90 98,562.88
2157 Utility Field Supervisor 14 289/351 72,346.56 98,562.88 65,111.90 98,562.88
2135 Technical Services Manager* 15 294/356 74,172.80 101,052.64 66,755.52 101,052.64
2160 Superintendent of Water Operations* 17 315/377 82,363.84 112,209.76 74,127.46 112,209.76
2170 Deputy Director of Public Works 22 350/412 98,072.00 133,610.88 88,264.80 133,610.88
2171 Operations Manager of Streets,Drainage&Sewers* 15 294/356 74,172.80 101,052.64 66,755.52 101,052.64
22XX GOLF COURSE MAINTENANCE
2201 Golf Course Attendant --- 5/67 17,548.96 23,909.60 15,794.06 23,909.60
2205 Staff Horticulturist 4 203/265 47,112.00 64,184.64 42,400.80 64,184.64
2210 Golf Course Maintenance Worker 1 4 203/265 47,112.00 64,184.64 42,400.80 64,184.64
2212 Golf Course Maintenance Worker 111 5 211/273 49,029.76 66,799.20 44,126.78 66,799.20
2215 Golf Course Supervisor 9 245/307 58,092.32 79,141.92 52,283.09 79,141.92
2222 Golf Course Superintendent* 15 294/356 74,172.80 101,052.64 66,755.52 101,052.64
31XX INSPECTION&CODE ENFORCEMENT
3101 Health Inspector 11 260/322 62,603.84 85,290.40 56,343.46 85,290.40
3120 Electrical&Mechanical Inspector 11 260/322 62,603.84 85,290.40 56,343.46 85,290.40
3123 Building Inspector 11 260/322 62,603.84 85,290.40 56,343.46 85,290.40
3125 Plumbing Inspector 11 260/322 62,603.84 85,290.40 56,343.46 85,290.40
3127 Property Maintenance Inspector 11 260/322 62,603.84 85,290.40 56,343.46 85,290.40
3133 Plan Reviewer 14 289/351 72,346.56 98,562.88 65,111.90 98,562.88
3140 Health Officer 17 315/377 82,363.84 112,209.76 74,127.46 112,209.76
2011 PAY RANGES
VILLAGE OF BUFFALO GROVE
APPROVED SALARY RANGES
Effective:January 1,2011
Ranges Reflect a 2.0%General Wage Increase Awarded on January 1,2011
Revised by AAM on February 7,2011 TIER I TIER II
Revised by AAM on February 14,2011 SALARY APPROVED APPROVED APPROVED APPROVED
Revised by AAM on July 13,2011 PAY PLAN STEPS RANGE RANGE RANGE RANGE
GRADE MIN/MAX MINIMUM MAXIMUM MINIMUM MAXIMUM
3150 Deputy Building Commissioner 17 315/377 82,363.84 112,209.76 74,127.46 112,209.76
3160 Building Commissioner 23 362/424 104,120.64 141,851.84 93,708.58 141,851.84
32XX POLICE
3201 School Crossing Guard --- 50/112 21,962.72 29,924.96 19,766.45 29,924.96
3210 Desk Officer 1 2 178/240 41,589.60 56,661.28 37,430.64 56,661.28
3215 Desk Officer 11 2 178/240 41,589.60 56,661.28 37,430.64 56,661.28
3220 Community Service Officer 1 4 203/265 47,112.00 64,184.64 42,400.80 64,184.64
3221 Community Service Officer 11 5 211/273 49,029.76 66,799.20 44,126.78 66,799.20
3222 Evidence Custodian 5 211/273 49,029.76 66,799.20 44,126.78 66,799.20
3224 Court Supervisor --- 257/319 61,674.08 84,023.68 55,506.67 84,023.68
3225 Records Supervisor 11 260/322 62,603.84 85,290.40 56,343.46 85,290.40
3226 Technical Services Specialist --- 260/322 62,603.84 85,290.40 56,343.46 85,290.40
3227 Crime Prevention/Community Relations Specialist --- 260/322 62,603.84 85,290.40 56,343.46 85,290.40
3228 Police Social Worker 10 254/316 60,758.88 82,775.68 54,682.99 82,775.68
3229 Research/Planning Assistant 11 260/322 62,603.84 85,290.40 56,343.46 85,290.40
3230 Police Patrol Officer 11 260/322 62,603.84 85,290.40 56,343.46 85,290.40
3231 Police Sergeant 14 289/351 72,346.56 98,562.88 65,111.90 98,562.88
3232 Police Commander 17 315/377 82,363.84 112,209.76 74,127.46 112,209.76
3233 Deputy Chief 20 345/407 95,657.12 130,320.32 86,091.41 130,320.32
3240 Police Chief 25 373/435 109,992.48 149,851.52 98,993.23 149,851.52
33XX FIRE&EMERGENCY MEDICAL
3310 Fire Inspector 11 260/322 62,603.84 85,290.40 56,343.46 85,290.40
3311 Firefighter/Paramedic(Effective:December 31,2010) --- 244/322 57,803.20 85,290.40 52,314.08 85,290.40
3312 Fire Lieutenant/EMT(Effective:December 31,2010) --- 275/353 67,468.96 99,550.88 61,368.32 99,550.88
3313 Fire Lieutenant/Paramedic(Effective:December 31,2010) --- 271/349 66,135.68 97,585.28 62,603.84 97,585.28
3314 Deputy Fire Marshal 17 315/377 82,363.84 112,209.76 74,127.46 112,209.76
3316 Battalion Chief 17 315/377 82,363.84 112,209.76 74,127.46 112,209.76
3318 Deputy Fire Chief 20 345/407 95,657.12 130,320.32 86,091.41 130,320.32
3320 Fire Chief 25 373/435 109,992.48 149,851.52 98,993.23 149,851.52
`Pay Range Currently Under Review.
a
Health Plan Status Update 2-H
Overview
On June 20, 2011, the Village Board authorized staff to enter into an agreement with the
Intergovernmental Personnel Benefit Cooperative (IPBC)Pool to provide Village employees with
their health, dental, and life insurance coverage for the period of January 1, 2012 to July 1, 2014.
As a follow-up to action taken by the Board on June 20, 2011, staff continues to discuss plan
structure scenarios, various plan offerings, the ancillary services offered by the Pool, as well as
anticipated premium numbers.
To this end, for discussion proposes, attached please find both a draft document containing the
Village's anticipated January 1, 2012 plan structures and the best rate information available via
the Pools underwriter. Because the program is still 6 months from its effective date, the actual
premium rates are subject to change as the Village's 2011 claims continue to mature. Additional
pricing information will be made available upon receipt.
Staff looks forward to discussing this matter with you.
Attachments
Buffalo Grove IPBC Quote 7-13-11.pdf
Village of Buffalo Grove 07-13-11.pdf
Trustee Liason
Staff Contact
Arthur Malinowski, Office of Village Manager
Monday, July 18 2011 Discussion Item . 2 H
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The Who"s Who of Your Village of Buffalo Grove's Benefit Plans
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• III';) u.� w lu" PP III';) u.iwllw III;I) III;I) is the claims • Illw"flll...11" w is the administrator of dental benefits for you and
administrator for the Village of Buffalo Grove's HMO/PPO your family. MetLife offers you both telephonic and web
medical plans. BCBS determines if you and your dependents access to your personal information to assist you in managing
are eligible for benefits and processes your claims. your dental benefits.
♦ Contact BCBS for questions concerning eligibility, plan ♦"'1" Illell4plllhou°plc:A MetLife Customer Service Representative can
benefits, or status of claim payments. HMO Illinois be reached at 800-942-0854 between 5 a.m. and 10 p.m.
Customer Service Representatives can be reached at CST Monday through Friday. Here you can verify eligibility
800-892-2803 between 8:30 a.m. and 7:00 p.m., CST, status, review plan benefits, check on the status of a claim,
Monday through Friday. PPO Customer Representatives can get claim forms, and order a customized directory.
be reached at 800-458-6024.
♦ � rlk.�lll Employees can access MyBenefits at
♦ BCBS's Website is both user-friendly and informative. The www.metlife.com/mybenefits. This website offers you the
site allows you to seek answers about BCBS and available ability to view claims status and eligibility information,view
HMO/PPO doctors and hospitals, and to link to vendor sites. a summary of your dental benefits, as well as locate a
Their web address is www.bcbsil.com. dentist in your area.
• IIII'.)lu,i II Il�mline(���','Cbiin °flhirot,i lh ��������)Ihi,,�� ^� gyros IIII��.)k.,ie • III°Ie^Hllolnc�v °"tarn aird is your life insurance carrier for your
wdll offers convenient online tools and personalized Basic p III�III sic employer-paid and Supplemental employee-paid life
telephone services that help support, inform and motivate insurance benefits. Reliance Standard Customer Service
individuals in their wellness efforts. All employees, spouses, Representatives can be reached at 800-351-7500 between
and dependents covered under the Village of Buffalo Grove's 8:00 a.m. and 4:00 p.m. CST Monday through Friday.
BCBS medical plans can participate at no charge to you.
• IIMed(:o is your prescription benefit manager for the Village
♦ Employees can learn about their health status and potential of Buffalo Grove's prescription drug programs. Retail and mail
health risk by completing the confidential Health Risk services on the medical programs are administered through
Assessment online by logging in to the secure Blue Access Medco Health.
for Members web site at www.bcbsil.com.
♦ Medco customer service representatives can be reached at
♦ Programs available through IIII'iilloe Caii,"e Coinnecbon are: 800-711-0917 24 hours a day, 7 days a week. Contact
Personal Health Manager, Blue Points(a program that Medco for questions regarding drug orders, account
rewards you for engaging in healthy activities), Special information, and to refill prescriptions.
Beginnings(maternity program offering expectant mothers ♦ Or you can visit Medco online at www.medco.com to order
support and education), Blue Care Advisors and Case prescription refills, check order status, locate participating
Management.
retail pharmacies, find ways to save money on your
♦ Employees can connect with a Blue Care Connection medications through generics and mail order, and ask a
Personal Health Manager at www.bcbsil.com. Here you and pharmacist questions 24/7.
your dependents can take advantage of these online
resources regardless of your health status or fitness level.
♦ Employees can also access a IIII'iilloe Cali,"e Cou°necCon
registered nurse on their 24/7 Nurseline at 800-299-0274.
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Deductible
Individual $50
Family $150
Waived for Type I Yes
Annual Maximum $2,000
Ortho Lifetime Maximum $1,000
Type I
Preventive Services
Exams, Cleanings,X-rays, Fluoride Treatment, 100%
Sealants
Type II
Basic Services
Amalgam fillings, oral surgery, periodontics, 80%
endodontics
Type III
Major Services*
Cast restorations (inlays, onlays, crowns) partial/
full dentures, repair of fixed partial dentures, 60%
bridgework, stainless steel crowns, denture reline/
repair, recementation of crowns, inlays, onlays,
bridges
Type IV
Orthodontics 50%
For dependent children under the age of 19.
*Major services have a 12-month waiting period for new hires after their initial effective date.
Note: The comparisons are outlines of the Benefit Schedules. This exhibit in no way replaces the plan document of coverage,which
outlines all the plan provisions and legally governs the operation of the plans.
rr'
Gallagher Benefit Services, Inc.