1992-10-12 - Village Board Committee of the Whole - Minutes SUMMARY OF COMMITTEE OF THE WHOLE OF THE PRESIDENT AND BOARD OF TRUSTEES OF
THE VILLAGE OF BUFFALO GROVE, ILLINOIS, HELD MONDAY, OCTOBER 12, 1992 AT THE
`./ HILTON GARDEN INN CONFERENCE ROOM, 900 LAKE COOK RD. , BUFFALO GROVE, IL.
CALL TO ORDER
Trustee Marienthal called the meeting to order at 7:02 P.M. Those present
included Trustees Bruce Kahn, Brian Rubin, Jeff Braiman, John Marienthal,
William Reid and Chuck Hendricks; Village Treasurer Joe Tenerelli; Village
Manager William Balling; Finance Director William Brimm; Assistant Village
Manager Lee Szymborski and Executive Secretary Eileen Marsh. President
Mathias arrived at 7:45 P.M.
FINANCIAL POLICIES WORKSHOP
Village Manager Balling outlined the purpose of tonight's meeting and gave
background on how the topics for this meeting were developed. He stated that
the purpose of the meeting was twofold:
1. To develop a financial policy for use in the 93-94 budget development,
and if the Board is comfortable with this, formalize this policy and have
appended to budget document for use as a planning guide.
2. To integrate relevant financial policies into the Management Plan
developed by the Village Manager.
Village Manager Balling then reviewed the Village's current fiscal and
financial policies.
Budget Development Policies & Methodology (Expenditures)
Village relies on its Long Range Financial Plan to map out a strategy on what
the growth of government will be in Buffalo Grove. This plan brings dollars
back into non-inflation dollars and per capita costs for services in the
Village. Finance Director Brimm explained that this model was developed in
1984-85 after the Village received Home Rule authority to deal with criticism
of "balloon levying" in an attempt to show responsibility in levying taxes.
It was initially oriented toward corporate property tax development, using a
model that could be validated, simply structured and simple to use. Mr.
Brimm then gave a summary of the Long Range Financial Plan since its
inception, and the performance history of Corporate Fund expenditures.
Village Manager Balling then gave a comparison of our costs with those of
other communities in terms of how many citizens we serve per employee in our
overall operations. He stated that we compare very favorably with only
Arlington Heights and Mt. Prospect beating us slightly, but they don't have
Golf Operations and Food Operations, so we have about 20 employees added to
our numbers to cover services not offered in those communities. Some other
communities with high ratios are communities that do not offer Fire Service,
such as Hanover Park, Bartlett, Inverness, Prospect Heights, Roselle and
Vernon Hills. But in communities offering comparable services to Buffalo
Grove, only Mt. Prospect and Arlington Heights show a higher ratio. Another
factor to look at is budget dollars per capita. Again, we do very well when
compared to other communities offering comparable services. We have used
these comparisons in our bond rating presentations, and are considered a good
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index of our financial management.
Trustee Braiman remarked that while the budget per capita is interesting,
further development of revenue sources in the area of retail is important, and
while other towns' budget per capita may be similar to ours, most of it may be
coming from retail sales tax and not driven by real estate taxes. Village
Manager Balling indicated that we are losing sales tax dollars right now to
our neighbors. For a community as large and as wealthy as Buffalo Grove we
are not producing sales taxes at the level we should. While we have grown in
sales taxes, we need to do more. We have a greater dependence on property
taxes and while it is going down, there is still a substantial dependence and
we would like to diversify our tax base to the greatest extent possible.
Village Manager Balling stated that this is the overall framework of planning
that we would like to follow again this year in our budget development, and
bring forward a growth number, with regard to the Corporate Fund, somewhere in
the 4%-5% range.
Village Manager Balling then explained the Central Garage Reserve For Capital
Replacement system. We have over $2.8 million presently in the reserve fund
and this system has worked well for us over the years. The benefits have
been:
1. Taking the trauma out of equipment budgeting
2. Permitting us to present upgrades when appropriate without having an
adverse burden on expenditures.
3. Provides a scheduled maintenance and repair program rather than having
a Fire Dept. mechanic and a Police mechanic, etc. The only exception is
with the small equipment in Golf. The heavy equipment for Golf is
serviced through Central Garage, but with the specialized nature of the
small engines and hydraulics, it is better to rely on the Golf personnel
to handle this area.
Mr. Balling stated that this program has worked well for us in our budget
development and is one that has served the Village well in terms of
stabilizing the recurring type of maintenance and capital costs.
Trustee Marienthal questioned if that $2.8 million could be pared back, could
we try to get an extra year out of our equipment which may give us the ability
to use some of the money for things other than Central Garage.
Village Manager Balling stated that the last thing we want to do is put away
money in excess of what we need. We did start for all departments an annuity
schedule rather than a straight line method of amortization to give us full
benefit for our investment earnings. However we do want to look at this every
year, and we are committed to putting away the least amount of money we can
get by with. In Police, you must put away about 50% of the value of the
vehicle as we must rotate them every 2 years. We did the 4-year rotation
experiment with Police, but it didn't work. We must make sure we ask for just
enough, but not too much, yet still make sure our costs are covered.
Bill Reid suggested that if the Golf Course is doing its own small equipment
repair and maintenance, which is similar to what the Park District is doing,
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is there an opportunity for a joint agreement with the Park District on these
small hydraulic repairs. Mr. Balling stated that we do already provide some
shared service on their heavy equipment, but is not aware of any such
agreement on the small equipment. Since we have such a good working
relationship with the Park District, this would certainly be worth looking
into.
Finance Director Brimm pointed out that with the Central Garage System, we
have been able to internally finance a lot of our large equipment purchases,
i.e. , we loaned the money to ourselves versus having to borrow it from a bank.
This was true of the $800,000 we spent on the new Quints for the Fire
Department.
Trustee Reid stated that the people in Central Garage are more vehicle
oriented and the small engine hydraulics is a different discipline and
requires a different kind of training, which the Park District has already
invested in for their people, while we have trained our people in vehicle
maintenance. We should be able to work out something to share these skills.
Trustee Braiman asked if the $2.8 million currently in the Central Garage Fund
is more than is necessary at this point, or could some of it be taken out.
Mr. Balling stated that every number in that budget is backed into a specific
piece of equipment scheduled for replacement at a specific point in time.
However, we will continue to pay particular attention to this because we
realize that the number is getting quite big and we want to make sure we keep
it at the proper level for our needs while not letting it go too high.
Mr. Balling then explained the Village's policy with regard to privatization
and intergovernmental agreements in the delivery of basic services as a means
of cost containment. While we are not able to provide every service on a
contract basis, there is not one that isn't looked at on a regular basis.
Public Works probably has the best handle on their unit costs which they use
as a tool in determining what programs can best be handled on a contract
basis. Services like crack sealing and seal coating can be bid out and bought
much cheaper than we can gear up for ourselves. All street maintenance is now
done on a contract basis. This occurs also in Fire & Police, but mostly in
Public Works.
In regard to the intergovernmental agencies, we have attempted to be not only
participants, but hold leadership positions. The nature of intergovernmental
agreements is to involve a compromise of power and authority, and Mr. Balling
feels that effective intergovernmental relations work when we can control and
shape the future of these agencies. We have attempted to do that in IRMA,
IPBC, automatic aid and MABAS programs, Leo McCann in Police areas, myself in
SWANCC and NWC, etc. Mr. Balling feels that his has paid dividends to us in
knowing that we have a handle on these agencies and ensure that our needs are
being addressed economically.
Trustee Braiman questioned the contract amount listed for the D.A.R.E.
Program and whether that is our portion that we are giving to the schools.
Mr. Balling indicated that this is the total amount of the program for this
year and that some of this amount will come back to us on reimbursements. We
will receive about $20,000 back from the three school districts and St.
Mary's.
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Trustee Braiman mentioned a program he had heard of from the Lake County
State's Attorney's office wherein they will give grants for drug related
programs, and suggested that we should look at making a request for some of
these funds to offset our costs for D.A.R.E.
Trustee Marienthal stated that he thought we were involved in a program with
other communities wherein when drug monies were seized they would be allocated
to those participating.
Mr. Balling stated that the Village does receive money and the Police Dept
does have a dedicated fund for those monies.
Mr. Balling then moved on to personnel services and stated that they are the
largest single expenditure in the Corporate Fund and one of the largest in the
Village. The Board has given tremendous support on the Merit Pay Plan and we
feel it has paid dividends to the Village in terms of performance and salary
containment. Assistant Village Manager, Lee Szymborski, then gave an
explanation of the Pay Ranges and how they have compared with the market over
the past few years.
The main features of the Pay Plan are:
1. Provide for an annual market analysis of what other employers are paying
as compared to Village salaries.
2. The adoption of overall policy of paying employees at the mid-point of
comparable communities.
3. There would be a single pay schedule for all employees, full or
part-time.
4. Pay ranges or range between entrance salary level and maximum salary
level would be approximately 35%.
5. This is a Merit Based Pay Plan.
Mr. Szymborski explained how the list of comparable communities is developed.
He stated that we look at the 35 or 40 communities within a 15 mile radius of
Buffalo Grove and use criteria including population, changes in population
from census to census, assessed valuation per capita, sales tax receipts,
total revenue, expenditures per capita, all items related to the town's
ability to pay. Those 10 criteria are weighted and from this we develop our
list of comparable communities. The list is constantly re-evaluated because
of our change in population and rate of growth.
Mr. Szymborski then reviewed the history of past pay range adjustments. In
November of each year, we look at the Cook County Salary Survey which is done
in July of that same year and the data reflects fiscal 92 adjustments and
represents the mid-point of the benchmark positions.
Trustee Kahn asked if this took into account the total package, including
insurance, or is it just the dollar compensation. Mr. Szymborski stated that
it was just dollar compensation.
Trustee Marienthal stated that he has a problem with bringing private industry
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into the equation on salary levels. He feels that private industry operates
differently from municipal government. Municipal government gives benefits
that private industry does not, while private industry might pay a little
better. He also questioned the list of comparable municipalities that we
utilize, specifically Highland Park, Morton Grove, Niles, Park Ridge,
Wilmette, and Streamwood which is more than 15 miles from us. Why aren't we
looking at communities that surround us. Why aren't we looking at Vernon
Hills, Arlington Heights, etc. He doesn't feel that we are looking at
comparable communities.
Jeff Braiman stated that he doesn't have a problem with any of the communities
listed, but we might want to be more inclusive and add some of the surrounding
communities to the list.
Mr. Szymborski stated that the most heavily weighted of all the criteria is
population. We look at communities with 50% over and 50% under ours so we
capture a large area in population alone. The same is true in looking at
changes in population, also looking at 50% minus and 50% plus. Also,
concerning EAV, some of the communities immediately surrounding us such as
Arlington Heights which is twice our size, and when we go 50% plus, that would
include a community no larger than maybe Mt. Prospect or DesPlaines. It would
be difficult to look at an Arlington Heights or many of the Lake County
communities like Mundelein, Vernon Hills or Libertyville, because they are
much smaller than we are and we have a hard time making comparability with
Lake County towns, because outside of Waukegan, we're the largest Lake County
town.
Mr. Balling further stated that, by using neighbors, it is almost impossible
not to include Arlington Heights as we do a lot with them. So we have
specifically said this is a comparability issue and when you see the
socio-economic make-up of some of these towns, there are some offsetting
communities. Highland Park is offset by an Addison; a Wilmette may be offset
by a Streamwood. We have nothing in common with most of the Lake County towns
other than proximity, which may be important, but not as important as some of
the negatives that would result if we said we were going to take everyone
within a 7 mile range and include Arlington Heights and others.
Trustee Marienthal asked why we need all of these communities. Mr. Balling
replied that the wider the sample, the more defensible the survey.
Mr. Szymborski stated that Seyfarth Shaw has always been impressed with our
Pay Plan assumptions in that they are much broader than the typical Village
uses, and going into collective bargaining, particularly mediation or
arbitration, they will tell us that one of the biggest things on comparability
is population. If you can make yourself defensible just on population, you
have gone pretty far.
Mr. Balling stated that another issue we face when talking about comparability
is that the employee groups are always interested in getting us off the
mid-point. We adopted mid-point 10 years ago when we adopted the Pay Plan.
We want to be in the mid-ranges with our ranges. Their argument is that
performance justifies the upper quartiles. We have not accepted that argument
primarily because as a matter of policy, we are trying to pay comparable,
across the board based on mid-point and what has helped us with that has been
the performance bonus system. That money, once you get on top of range, tends
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to recycle itself from year to year and has a tremendous balancing effect in
giving people something other people don't get. So it tends to let us justify
the mid-point with this structure of the Pay Plan.
Mr. Szymborski pointed out that the Village has remained within market range
over the years, especially when compared to the other towns which all run on a
step plan.
Mr. Szymborski then addressed Trustee Marienthal's second question regarding
comparing ourselves to private industry. He indicated that we do not compare
ourselves with private industry, that he had mis-spoke, because as Trustee
Marienthal pointed out, there really are no comparable positions in the
private sector. One of the things we have tried to do in the area of
benefits, is to draw a comparison with what is happening in the private sector
but that information is extremely hard to get because they are much more
closed mouth on benefits in the private sector.
Trustee Braiman asked if we could measure how we compare to other towns with
regard to employee turn over, as this would be an indication as to whether we
are in the ballpark as far as salaries are concerned. Mr. Szymborski stated
that in Police and Fire especially, there is very little turn over. Mr.
Balling stated that we don't keep records on this, but it is apparent that we
don't have a high turn over rate in any department. The Board has been
generous on their benefits and salary plan and the employees understand that
and I think their commitment is reflected by their performance and tenure.
Mr. Szymborski stated that another example of that was the fact that we are
starting a new cycle on testing for an eligibility list for
Firefighter/Paramedics. Our entry level salary for Firefighter/Paramedic is
slightly below mid-point, yet that has not been a deterrent to those
candidates wanting to join the department. We have had over 200 people show
interest in this round and part of it is looking at pay and benefits, because
that becomes the whole compensation plan.
Mr. Balling closed on the Merit Pay Plan by stating that he is satisfied that
it is meeting all of our objectives. It is working and providing a basis of
variable pay, and we have had enough experience with it that people are
courageous enough to use it properly. We would like to continue with this
same Merit Pay Plan program into the future. We hope it has served the
Board's objectives in terms of making sound pay recommendations that are
defensible and fair. Mr. Szymborski noted that the instruments used to rate
an employee's performance are constantly updated and since the Plan's adoption
10 years ago, employee groups themselves, working with Department Heads,
particularly the line employees who have a behaviorally anchored system, have
updated the review forms three or four times in the last 10 years or so.
Department Heads who work under an M.B.O.-type performance plan, those of
course are re-done every year.
Trustee Braiman then remarked that a year ago the Board had discussed updating
the evaluation form for the Village Manager and was wondering what the status
is of that review. Mr. Balling stated that this system has been in use for
about 8 years and provides a rating of both department performance as well as
other elements such as communications, intergovernmental communications, etc.
f/ The Board also provides an annual goals statement, which is one of the
elements that fits into the management plan for department heads. Mr. Balling
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asked that if the Board wishes to change this system, they should let him know
soon as possible as the process needs to be started by the end of November.
President Mathias requested that Mr. Balling distribute a copy of the present
form to the Board so that they can begin the process of revising the form.
Mr. Balling stated that the two elements he would request be maintained in his
review are the opportunity to sit down with the Board every year and review
his performance, and second, is the goals statement. He also requested that
whatever system is used, that it be somewhat formalized so that it can be
tabulated, and that it does contain a goals section.
Mr. Balling then gave some background on the Village health insurance program,
stating that for the past 6 years we have been members of the
IPBC-Intergovernmental Personnel Benefits Cooperative. He stated that we
anticipate making a recommendation to the Board during the upcoming budget
cycle for some modifications to the health insurance plan. The idea is to
make employees wise health consumers, and to focus on wellness and prevention,
and this will be the framework of our recommendation. Mr. Szymborski then
presented an analysis of comparables and averages in our health insurance
program
Trustee Braiman noted that many of the communities shown on the chart are
paying premiums substantially less than what we are paying. Mr. Szymborski
indicated that one of the difficult things of making a survey of this nature
is to determine exactly what benefits each community is receiving which impact
their premiums. President Mathias asked if ours was a standard insurance
plan, or was it similar to an HMO or PPO plan. Mr. Brimm responded that ours
is a standard indemnity plan, but we do offer an HMO to our employees outside
the IPBC. He stated that there are less than a dozen employees enrolled in
the HMO at this time. President Mathias asked if we had ever looked into a
PPO plan. Mr. Balling indicated that this is one of the elements of our study
and that he anticipates they will be a part of our recommendation. One of the
concerns is that we have employees who live from Antioch to Oswego and to try
to capture a PPO system that addresses that wide geographic area is difficult.
The PPO systems we have looked at do appear to address this concern. There
are several being offered through Arthur Gallagher that we have looked at.
President Mathias then asked if we would give the employees a choice of PPO
plan. Mr. Balling responded that we would adopt one program that would be
sufficiently strong that the employees would be comfortable with. There
would be a disincentive to go outside of the network, but it would still be
offered if an employee would chose to do so.
Trustee Braiman asked how much we spend per year on health insurance premiums.
Mr. Balling responded that the amount was approximately $1.2 million. Trustee
Braiman asked if a recommendation would be made during this budget cycle or if
we would wait for the next budget year to implement such a program. Mr.
Balling answered that we would be making a recommendation during this budget
year so that any cost savings realized would be reflected in the budget.
Trustee Rubin remarked that the survey shows the dependent health care
premiums are covered 90% and 100% by most communities, which is very different
from the private sector where dependent premiums are paid at a much lower
rate. Trustee Rubin asked if you broadened the survey, would the same
percentage be indicated. Mr. Balling stated that we have the information, so
we could make the survey broader. Mr. Szymborski stated that it is standard
for municipalities to pay dependent coverage at this rate. President Mathias
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asked if we know what the dental portion of the premium is. Mr. Brimm
responded that for dental, single coverage is $15/Mo, and dependent is about
$32 or $33/M0, or approximately 10% of the total premium.
Trustee Kahn commented that on the one hand, we are hearing that it is
acceptable for base salaries for municipalities to be lower than private
sector, but typically that is offset with benefits. But on benefits we are
saying that we should bring benefits in line with the private sector since
ours are much higher than those in the private sector. Trustee Braiman stated
that what he is saying is that we have other communities where the cost for
benefits is much less, and the trend in industry is to get away from 100%
benefit payment. Mr. Szymborski stated that another element we must consider
is not only is the plan design different, but also it is prior years
experience in the group which drives the premium costs. Mr. Brimm stated that
our group is one of the largest in the co-op and this must be taken into
consideration as opposed to some towns such as Hoffman Estates where the HMO
penetration is much greater and thus they have fewer employees in the plan.
Trustee Braiman stated that he doesn't think anyone is saying that we should
do what private industry is doing, whereby all dependent care would be covered
by the individual and a portion of the individual premium would be covered by
the individual.
Trustee Kahn stated that we need to temper the fact that we need to look at
salary, which is somewhat lower than private sector, and you are looking at
benefits as offsetting that. They are different things. You are not
comparing apples and apples when you compare salary and benefit packages from
the private sector to the public sector. Trustee Reid stated that he thinks
the employees recognize this and if we do start looking at any trimming of
benefits, we can expect a demand for more pay to compensate for it. Because
whether it is a benefit or salary, it is the bottom line that they must live
with at home and if you start playing with either side of that equation, they
are going to be asking to be made whole.
Mr. Balling stated that he knows that cost is a concern of the Board and it is
a concern of staff as well. He would like to recommend to the Board that we
pursue cost containment through plan design rather than through premium
participation. This is a very sensitive area and he thinks we can demonstrate
through plan design that we can market a program based on wellness and based
on health cost avoidance, and using the money wisely, possibly integrating a
Section 125 plan in some fashion to show a greater savings to the employee. I
think we can achieve results looking at plan design and come back with a
recommendation that will give you some real numbers to look at that will make
sense and that will be salable to the work force and meet the test of equity
and fairness in their eyes. Everyone recognizes that there are drastic
changes in the health industry in terms of cost, and also there is a very real
question if there will be a major national restructuring of the health plan
and there is no sense in gutting ourselves a year or two in advance of when
that is going to happen. Our health care is a program that we conspicuously
market to the employees and we are in the process right now of putting
together a Total Benefits Worksheet for each employee to give them the whole
pension cost, uniform cost, health insurance cost, salary and everything and
it is a mind boggler when an employee looks at those numbers and can sit back
and say that this is a pretty good place to be.
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Trustee Marienthal asked if we could get the information from other
communities as to what they spend on each employee and what that benefit plan
is. Mr. Balling stated that he could get copies of the benefits plans, but
knows that these are the premiums as we just called on them last week. We
will certainly look at this, but you can tell from looking at these that some
of them don't have a lot to do with good plan design. Trustee Kahn remarked
that another issue that may be driving those up is catastrophic incidences
which would drive up the cost of an individual plan.
Mr. Brimm stated that one of the benefits of pooling is that the rates are
driven by experience, and one year we may have a high increase, but the next
year we may have only a 2% or 3% premium increase.
Trustee Marienthal asked what the percentage was of single coverage versus
family coverage. Mr. Balling stated that it was 3/4 family to 1/4 single.
Trustee Braiman stated that a cafeteria plan could cut that down as some
employees may be covered by a spouse and that could be eliminated.
Mr. Balling then explained the methodology in determining manpower adequacy.
Each department makes recommendations regarding manpower and staffing. PW,
Police and Fire have adopted formalized multi-year plans. In addition, the
Fire Department uses minimum manning so we know we have a floor on the manning
we need per station, and we have adopted that as a matter of policy. For
three years, the Police Department has used a dedicated to un-dedicated time
ratio which means how much time an officer has on the beat when he is not
processing an arrest. They shoot for 2 units of patrol time to 1 unit of
arrest and processing time, and we do watch that on a monthly basis. PW uses
time analysis which is important as it relates to snow plowing operations,
forestry and grounds maintenance. The smaller departments do not use these
long range plans because personnel recommendations are made for unique
circumstances. We don't see the need to go through the exercise of master
planning for smaller departments because of their limited size. We have had a
reduction in staffing in a couple of areas. Even after adding the new fire
company, we still compare favorably to other towns in our staffing ratios.
Mr. Balling stated that he does not anticipate a lot in employee expansion
this year, and if it occurs, it will likely be in the Police area.
Mr. Balling stated that we present a balanced budget each year, relying on
Fund Balance only within prescribed guidelines and it is our commitment to the
Village to do that on an annual basis.
Mr. Balling then called for a 5 minute recess.
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The meeting reconvened at 9:04 P.M.
�./ Taxes, Fees and Other Revenues
Mr. Balling stated that the Truth In Taxation public hearing is right in front
of us; the Tax Levy shortly behind it and the abatement ordinances shortly
thereafter. The same Long Range Financial Plan that we use in preparation of
the budget is used in preparation of the tax levy, and that will reflect about
a 4.71% increase in the Corporate Levies, levy versus extension, which doesn't
necessarily mean a 4.71% tax increase because the assessment base is growing,
especially due to the reassessment in Wheeling Township.
Mr. Brimm then described the Truth in Taxation notice and how it is put
together. He stated that we are proposing a tax request under Truth-In-
Taxation of almost $4.7 million versus an extension of $4.3 million. That is
an increase of 8.66%. Moving to the pension levies, we have had some relief
in the IMRF where some of the actuarial assumptions have been changed
following some of the guidelines of the Police & Fire Pension, getting a
little more aggressive with investment returns which have been passed back to
the member communities, showing a reduced levy requirement for 1992. The
major increases are with the Police and Fire pensions. These funds reflect
several changes. First, we have officers that are approaching retirement age,
and have one who has retired, and we note that once you start getting payouts
rather than collections, those assumptions start to increase. Fire is a levy
that has increased dramatically for two reasons: first, we have undergone
significant levels of hiring over the last two years and second, there is an
adjustment in the levy this year of approximately $46,000 that has been
requested by the Fire Pension Board over and above what was recommended by
Hewitt & Assoc. and that is to deal with a timing lapse in the methodology.
Fire & Police pension levies are based on values provided through 4/30/91, and
in fiscal year 91-92, we hired 15 employees and those values are not reflected
in the actuarial assumptions and will not be reflected until we prepare the
tax levy for calendar year 1993. The Fire Pension Board was concerned that we
were underfunded by a year because of all of the employees that were hired and
the recommendation was to catch up on that one year and have the spike occur
in the 1992 tax levy.
Mr. Brimm then reviewed the history of growth in the tax levy since 1980 which
shows just over 7% compounded growth since 1980 for Corporate levies, and 13%,
9% and 26% increases in the three pension levies, but overall just a little
over 8% total change. We have not met the Truth-in-Taxation targets in total,
except in three out of the 11 years analyzed, but generally have been pretty
close and without the drag of the pension and social security obligations,
would probably have come very close to meeting the targets. We are under on
the corporate levy for 1992, where the threshold is 5% and we are at 4.7%. So
on the non-mandated areas where we have control we have been able to come very
close to legislative targets.
Mr. Balling asked if based on these numbers, we are now predicting a
reduced rate for the Village. Mr. Brimm stated that, based on preliminary
gross rates by village and by county before abatements, we are starting
lower than we started last year in terms of what our gross rates were. With
these numbers and the reduced debt service obligations, it is conceivable we
could have another rate decrease. Mr. Balling stated that it is a good
measure of tax management and growth management that the stable part of the
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community that we can measure has experienced tax reduction, and even with an
increase, is still very low over a 7 year period.
Trustee Reid stated that we must remember that regardless of what has gone
before, there was still an increase last year and the concern over that
increase will be compounded by the realization of the quadrennial
reassessment, so there will be a lot more awareness because of current
history. While the numbers are very true, that is not what people will be
looking at. Mr. Balling stated that between now and abatement time, we will
attempt to make that as clear as we possibly can.
Trustee Hendricks asked if we have any idea as to what the reassessment will
be in percentage. Mr. Brimm stated that for tax base development, using
about 8% growth in Wheeling Township, and about 6.50% in Lake County, it
should have the effect of driving down the tax rate. The levy we propose will
be $9,800,000.00 as compared to last year's levy of $9,100,000.00, as of now,
we are up $700,000 before abatement and I think we will see some significant,
aggressive tax abatements this year that you didn't see last year because we
have some favorable investment returns, two of our debt service issues have
been fully defeased with the money in the bank, and initial forecasting
indicates that we will abate in excess of 60% of gross dollars we'll be coming
with the tax levy for in the debt service.
Trustee Braiman asked if we are successful in reducing the spending for
health insurance, would this savings be put into the Fund Balance. Mr.
Balling stated that if we saved that much on health insurance you could bank
it and use it to stabilize premiums over the next 3 or 4 years.
Mr. Balling stated that Tax Equity is another issue we want to make sure
people understand. We will look at the re-apportionment study and the benefits
we have had from that study to balance taxes between Cook and Lake County, and
to analyze tax impact as accurately as we can, a county by county analysis
will be conducted in the future. There will be variations in the rates and we
didn't have to deal with that when rates were going down. But now that rates
are stabilizing and starting to go up, that is a factor. We must fully
explain this making sure it is fully understood.
Mr. Balling stated that we continue to try to diversify our Corporate Fund
revenues which has had the effect of driving down our dependence on
property taxes. It has limited some of our options such as cable TV fees; we
use a lot of that as revenue diversification. Some of it goes into cable
programming. Ambulance fees are another source of revenue, although they are
very slow to come in. It is important that we continue to use some of the
miscellaneous fees as much as we can to diversify our tax base, and hopefully
growth in sales taxes will help us as well in that area.
He continued that eliminating user impact fees would be difficult because we
spend a lot of time talking about tax reduction. We would like to make a
recommendation via the Finance Committee, to eliminate the vehicle licenses.
Vehicle licenses cost about half of what they generate in revenue to collect.
We would like to do away with the vehicle licenses and substitute the money
that we are collecting to real estate taxes. We are not ready to make a
recommendation tonight, but we are doing a detailed report on this subject.
There is a lot of money lost in collection, there is resident anxiety in terms
of late fees, etc. Trustee Braiman asked if the vehicle licenses were
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eliminated, would residents have to get a sticker from the County. Mr.
Balling responded that at this time, we don't think you need anything on your
car. The licenses are no longer needed by Police for identification and now
they are just a revenue raiser. Mr. Brimm stated that this is the least
efficient revenue raiser. There is no money generated from the industrial
users and much of the traffic in our commercial and industrial areas is from
out of the Village. Mr. Balling stated that there are some down sides to
making this part of the real estate tax such as taxing non-drivers and senior
citizens who purchase stickers for $1.00. These are serious issues that will
need to be addressed, but we will plan to present the analysis to the Finance
Committee for their review.
Trustee Reid stated that you will have the perception of paying this fee in
property taxes instead of making the user pay, even though many users are
not paying as they live out of town. Trustee Marienthal stated that you will
also be penalizing those with higher assessed valuation in their homes. Mr.
Balling stated that you hope that the homes with higher assessed valuation
would have 2 cars and that would balance it out, but you don't know that for
sure. Mr. Brimm stated that we have heard from residents that many would
like to have it on their taxes because then they get Uncle Sam to pay a
portion of the charge. Trustee Reid stated that we are going to have to deal
with the public perception of this move.
Trustee Hendricks asked if there could be the potential for no visible tax
increase as a result of this. Mr. Brimm stated that if a person is now paying
$45.00 for two stickers, he doesn't think they will see a $45.00 increase in
their tax bill because that $45.00 includes overhead expenses which will now
be saved. Mr. Balling stated that what we would like to do is have a written
report and analysis for the Finance Committee this fall, with a draft on a
public relations program identifying the worst inequities and see how we can
manage those and weigh them against the benefits. We may also consider
offering a decal to people who wish to display one on their car, which would
be an added expense.
Trustee Reid raised the question of a Home Rule Liquor Tax. Mr. Balling
stated that Bill Raysa is looking into that, but he does not have a
recommendation on that at this time. The tax would be on package liquor and
Arlington Heights presently has such a tax.
Trustee Braiman brought up the previous discussion on raising the liquor
license fee. Mr. Brimm stated that that study is in progress and is running
concurrent with our review of the Municipal Code, but our sample indicates
that our fees are very close to those of other towns and there would be just
minor adjustments which would not raise a tremendous amount of money.
Mr. Balling stated that there is good news in water rates and fees and it
appears we will again be able to drive that fee down into the range of $8.80
or $8.90. Mr. Brimm stated that the Board should be aware that as of November
1, 1993, there may be a major rate increase from Lake County Public Works to
pay for the Pekara Treatment Plant, which would be their first rate increase
in 7 years. This will show up on the Lake County Sewer portion of the water
bills.
Trustee Marienthal asked how the figures for the Transfer Tax looked for
this year. Mr. Brimm indicated that for the first 5 months of the fiscal year,
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we had achieved almost 70% of budget realized. However, he felt that we
would start to see a significant drop off in home sales as we go into the
winter. He thinks we will be ahead of budget, but since we haven't gone
through a complete cycle, it is difficult to predict.
Capital Improvement & Capital Finance Issues
Mr. Balling then asked Lee Szymborski to bring us up to date on the CIP for
93-94. Mr. Szymborski stated that the effort the Board put in on the CIP
has paid dividends. Some of the items included in the 93-94 plan have been
accelerated, i.e. , Village Hall renovation and the Fire Dept. Admin, but we
will again present to the Board an plan 1 year in advance and again look for
the Board's approval on the most immediate year, that being FY 94. This will
be before the Board prior to budget hearings. Mr. Szymborski noted that the
Village approval and adoption of the CIP paid dividends in our rating
presentations to both Moody's and S&P. One of the comments the rating
analysts both made was that it was not only good to see that we took their
advice, but took it to the extent of the detail provided in the CIP. One
analyst made note of the fact that not only is it nice to predict the projects
you plan to do, but it was nice to see how Buffalo Grove plans to pay for
these projects.
Mr. Balling then discussed the recent bond rating presentations. Two years
ago we went to Moody's and Standard & Poors for ratings, received good
ratings, took their advice in many regards and implemented many changes and
revisions accordingly. Moody's did reconfirm our A-1 rating, Standard &
Poors confirmed our AA-, but gave us a stable outlook and an assurance that
they would review in 12 months. Standard & Poors indicated to us that it was
not our actions that caused us not to be increased, but we are inter-related
with the State revenue. The State has been a non-payer of bills this year and
they have just downgraded the State of Illinois paper. They don't feel the
environment is present in the State for an upgrade. There was no measurable
defect, in fact they were complimentary of our whole presentation. Moody's
was equally impressed with our presentation, but Moody's has faulted us for
having too high a debt ratio in our general obligation bonding. The only
reason we have high debt ratios is that they include our Special Service
Districts and the T.I.F. District in the analysis, which is technically a
revenue bond. We argued, and provided documentation to the contrary, but
Moody's still maintains that we have technical tax exposure on those issues.
We have a tax exposure, but only as it relates to the 37 or 40 acres that are
in the Special Service Districts. Until we are able to turn Moody's around on
that issue, we will look like we have higher than average debt ratios. If we
do turn them on that, we'll be substantially lower than average in our debt
ratios, and we think it is as plain as black and white. Moody's has been very
conservative on this. They have also commented on the State's economic
condition and the general uncertainty of the revenue and budget condition in
Illinois. One recommendation we do want to make is that we proceed with
extreme caution in terms of any future public/private participations. I would
never say to the Board that we made a mistake on the Special Service Districts
because there was some landmark planning and economic development there that
will last us for decades and if Moody's misinterpreting an element of our
design is a price we pay for that, it is a price well spent because the
advantages of this complex where we sit tonight, and Riverwalk and the others
far out weigh the penalty. In fact our bonds sold at AA rating. The market
accepted us for what we are.
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We should proceed with caution on future public financings, and I don't want
�.� to say we should never do them again, because on certain sites it may make
sense for us to do so, but it is a yellow flag and we must proceed with care.
Fund Balance Issues
Mr. Balling then reviewed the Fund Balance Policy. We have reserved the
right to use our fund balance for one time investment capital purposes. We
rely on it to pay a short fall in the IMRF pensions as a tax avoidance issue,
we would like to strive for a bottom line of 25% in the funds. In the
Corporate Fund right now we are at about 37%, so we are in good shape and
with those guidelines, we think we have a good plan. The Finance Committee
worked pretty hard with us last year when we developed the plan. We did
include this in our rating book and it was very significant in the overall
ratings, especially with Standard & Poors who were very surprised that a
community had a Fund Balance Policy that not only was articulated but accepted
by the Finance Committee and Corporate Authorities. Mr. Balling stated that
we do have legal limitations on our funds in that we can do some transfers in
terms of borrowing but funds must remain integral to themselves and there are
serious limitations on the use of our Water Fund, etc., so there are a lot of
mechanics of fund accounting and fund balance control, all of which we are
employing.
Trustee Reid asked if we have authority to maintain a working cash fund.
Mr. Brimm responded that we do have such authority, but we no longer
maintain one as there was no need for it.
Fiscal 93-94 Suggested Fiscal Policies Plan
Mr. Balling outlined the suggested new fiscal policies which he felt were
relevant on the expense side, revenue side, capital issues and fund balance
issues. They are as follows:
Under Expenditure Guidelines:
I. The Village should maintain a viable, cost effective health benefits plan
with minimal impact on employees.
J. The Village health insurance program should be restructured to focus on
wellness, prevention and making employees and dependents wise health
consumers.
K. The Village should pursue an annual public release of financial
information to the community in addition to our Annual Financial Report.
Under Taxes, Fees and Other Revenue Policies
H. The Village should continue to rely on Village Average Tax Impact
Analysis in tax levy preparation, but should project and evaluate tax
rate growth on a county by county basis.
I. The Village should permanently rely on a Home Rule Sales Tax as a
diversified element of our Corporate Fund Operating Revenue structure.
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J. The Village should abandon its vehicle license fees in lieu of property
taxes to eliminate the high cost of collection of the vehicle license fee.
K. The Village should maintain its Development Impact Fee standards with
regard to Fire Impact and Road Impact Fees.
Under Capital Improvement & Capital Finance Issues
F. If made permanent, the Supplemental State Income Tax should be
considered as an Operational Corporate Fund revenue source and
transfer the Real Estate Transfer Tax to the Capital Projects Fund.
Trustee Reid stated that as far as he is concerned, we needn't even discuss
this, the answer should be no. If the State makes it permanent, they can make
it un-permanent. He doesn't think that this money can be considered as a
reliable source of income and if we put it into Capital Projects where we have
the flexibility of delay if we have to. If we go into Corporate Fund
Operating Expenses, we don't have a choice and we can end up like many of the
communities that took this money and built it into their budget then came up
short. He feels it would be very poor planning to depend on that State money,
regardless of what the State legislature says about it. Mr Balling agreed and
stated that this point would be removed.
Under Fund Balance Issues:
D. The Village should establish a policy for inter-fund borrowing standards
and levels.
E. The Village should consider a T.I.F. restructuring plan to meet the
changing conditions of the district and State legislation, without
adverse impact on local taxing districts.
There being no further comments, the meeting was declared adjourned at 9:45
P.M.
/(jg:
1274-12til'L—
EIL N MARSH, Recording Secretary
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