2003-02-13 - Finance Committee - Minutes Board or Commission: ❑ Finance committee
Document Type: ❑A e
g nda 0 Minutes
Meeting ate: 02/13/2003
Type of Meeting: ❑ Regular Meeting
The Village's Finance Committee met February 13, 2003 in the Village Hall Lower Level Conference
Room. Those in attendance were: Elliott Hartstein, Jeff Braiman, Jeff Berman, Bruce Kahn and Steve
Trilling. In addition, Joe Tenerelli, Bill Balling, Ghida Neukirch, Scott Anderson,Art Malinowski and Bill
Brimm. The following matters were reviewed:
Review of GASB 34 Financial Reporting:
Representatives from the Village's independent auditor's, McGladrey& Pullen, reviewed the issues
surrounding the implementation of the GASB 34 pronouncements for local government that will go into
effect with the beginning of FY 2003-2004. Most of the changes to be evident within future reporting will
be in content and presentation of the annual financial report along with major changes that will be
required to identify and account for fixed assets. There was discussion on how assets will be identified
and categorized which will require a revision to the Village's capitalization policies. Those in attendance
asked that the Board be kept apprised of progress in developing the fixed asset accounting approach to
GASB 34 as well as to identify if any changes required to be made will have an adverse impact on how
the Village's financial performance and standing is presented. Staff will be working with the auditors in a
consulting role to begin the process as soon as this May 1st. Periodic implementation reports will be
provided to the Village Board.
Review of Proposed Transportation Bond Financing
Staff reviewed the approach toward the financing to provide for the local share of the following projects:
Dundee Road Intersection Lighting
Deerfield Parkway Street Improvement
Illinois Route 22 Street Improvement
Dundee Road Arterial Lighting
ComEd Utility Undergrounding-Adjacent to Arboretum
The Village Board supported borrowing to underground the Route 22 utilities in order to improve the visual
appearance of the Arboretum. All other projects were discussed with most related to the Dundee Road
Arterial. There were concerns raised that the lighting may cause an adverse reaction from residents
along Dundee Road who are accustomed to current lighting levels. It was noted by staff that the
intersection lighting is of highest priority for safety reasons and that while the arterial lighting adds appeal
it is not of the highest priority when evaluated against the other work. Further discussion took place and
Board members in attendance opted to defer this project for the time being until a greater priority can be
established; a quantifiable and measurable benefit will be the ultimate test for this project. The financing
will be reduced by approximately$1 million but with all other terms remaining (general obligation/10
years).
FY 2003-2004 Final Salary Recommendation:
Art Malinowski's recommendation was reviewed,which is based on maintaining market comparability with
similar communities. The proposal called for a 3 1/2 step adjustment over the fiscal period. There was a
concern about the extent of the increase especially in light of economic conditions within the community
as well as regionally. The principals of comparability were discussed, especially based on all past
practices that use comparability as a basis for establishing mid-point wages. It was acknowledged that
certain of the trends being seen run contrary to common sense in light of the broader economic
conditions. However, comparability remains an underlying force in wages and following this trend is
important to the overall goal and objective relative to salary administration and labor management efforts.
The Board members were concerned about the end of year impact on the salary range,which places
employees 4 steps above where they start at the beginning of the period despite only calling wage action
equal to 3 1/2 steps. Staff will review alternatives such as instituting a half-step pay plan or some other
way to properly peg the end of year step where it should be. One issue noted is that regardless of year
end step,the salary recommendation process should be self-correcting from year to year. As an example
is starting 4 steps higher at the beginning of FY 2004-2005 calls for a lower adjustment to meet market,
then that is what is proposed. Each year's wage recommendation needs to stand on its own but affirmed
by verifying mid-point amongst comparable communities using the key positions as the overall benchmark
affirmation.
In closing, the Board remained concerned about the recommendation and staff will need to review certain
matters that will be reported back to the Board prior to the overall budget presentation.
FY 2003-2004 Recommendation on Health Insurance:
The health planning for FY 2003-2004 was reviewed. Although there are some very minor benefit
changes to occur as of July 1, 2003 in order to modify benefits to meet minimal re-marketing standards,
the major change is in cost sharing between the Village as employer and employees. What will be
needed to moderate anticipated increases in overall premium is participation equal to 15% of premium for
those in the PPO with 10% required from those who participate in the HMO. The broad discussion on the
matter of health insurance is that the Village must look at how the delivery of insurance services for health
are to be delivered in the future,that a new approach may be needed but one that will require careful
development and presentation to the employee base. Premium is approaching $3 million on a gross of
contribution or subsidy basis. Some pre-paid insurance reserves are proposed to be applied against the
anticipated premium for the year but they cannot continue for more than 3 years and the trending affirms
that some changes in approach are no longer conceptual but practical in need and commitment.
Some analysis was requested and that had to do with what the net impact on wages and health insurance
may be in FY 2003-2004. Basically,what is the net impact to the Village based on wage expansion if
adjusted 3 1/2, 3 and 2 1/2 steps netted down by the additional dollars that will be paid by employees due
to greater health care participation. That reporting will be shared and reviewed internally and then
distributed to the President and Board of Trustees. From that information,the final wage and health
benefit program will be structured as it might apply to staff and the collective bargaining group.
FY 2003-2004 Budget Overview/FY 2002-2003 Initial Performance:
Staff reviewed preliminary budget observations for both FY 2003-2004 and FY 2002-2003. Staff believes
that the budget to be brought forward is responsible and quite conservative in its development. It will
represent a significant drop from the current year due to completion of major capital improvement
projects. Programmed deficits are based on timing of past revenue with current expenditures or reflective
of draws for capital programming or property tax rebate. Water rates and fees will remain the same with
the only service increase within the refuse collection contract. This is a net increase with the rate for
recycling to increase due to a change in program scope offset by a reduction of the Village's commitment
to SWANCC.
One issue discussed relative to FY 2002-2003 was a goal to review performance in April in the hope that
as much as 50% of this year's Reserve for Capital Replacement may be recovered and applied to future
vehicle and equipment replacement. This was agreeable to the Board members in attendance with final
transfer subject to a presentation this April, prior to April 30th.
Bill Balling gave an overview of the ongoing Business Definition project as well as the Synergy Team
efforts. In addition,the concept of the review process that is centered around core value and service
delivery was noted. In addition,the staff review of certain revenue diversification concepts was again
noted and the Committee was advised that this subject would be addressed this coming summer as part
of a Finance Committee agenda.
There was no other business to review.
Addendum to February 14th E-Mail:
1. If wages are adjusted by only 3 steps,the net increase (salary increases granted less recovered
premium) is 1.87%
2. If wages are adjusted by only 2 1/2 steps, the net increase (salary increases granted less recovered
premium) is 1.37%
The assumptions are that pre-salary adjustment wages remain at 15,660,013. 3% of that value is
469,802 with 2 1/2% equal to 391,502. Again as noted,the new recovered health insurance dollars are
176,892 so net new dollars are 292,910 and 214,610, respectively.
Prior E-Mail:
Last evening we were asked to provide a calculation of what the net impact may be on salary growth as a
result of needing to increase the premium contributions sought from employees beginning July 1, 2003 for
PPO and HMO coverage. I believe the following calculation, based on the assumptions, is valid in terms
of the question asked:
FY 2003-2004 Total Personal Services Budget 16,493,043
Less: Longevity Pay 138,000
Less: Special Duty 4,100
Less: Elected Officials Salary 39,000
Less: Salaries-Part Time 566,812
Plus: Full Time Salaries-Golf 463,100
Net Full Time Salaries&Wages 16,208,231
Assumptions: Those personal services accounts not subject to pay range escalation are removed from
net pay. Further, salaries paid to part time employees are credited in that they are not eligible to
participate in the health insurance program.
Approximate pre-range adjustment 15,660,013
salaries and wages
Assumption: The FY 2003-2004 net budget is adjusted by applying a factor of 1.035 to provide a
pre-range adjustment salary base. The assumptions are that all wage adjustments occur on the same
dates, those being May 1st and November 1st as proposed. In reality, this does not always occur since
performance bonus awards do not occur on the same date although factored into the full budget. It is
believed that the pre-range adjustment value is high although be an insignificant amount.
Growth in salaries and wages due to proposed 3.5% range adjustment: 548,218
Additional employee contributions for PPO and HMO: 176,892
Assumption: The value includes all of the proposed contributions from those participating in the HMO
since the rate goes from 0%to 10%. In addition, one-third of the PPO contributions are included in that
the deductions increase from 10%to 15%.
Percentage of salary and wage growth returned in premium: 32.27%
Net salary and wage growth: 371,326
Net salary and wage growth-percent of pre-range 2.37%
adjustment salaries and wages