Getting to the Numbers
By Village Manager Phil Kiraly
As I explained in my Manager’s Blogs (Part 1 and Part 2) back in January, the Village is currently in a 10-month (March 1 – December 31, 2020) “stub year” budget as we transition to a calendar year fiscal year that will begin on January 1, 2021.
That means that the current spending plan that went into effect in March was upended almost immediately as we faced the COVID-19 pandemic. What was planned as an ambitious year of new projects and strategic initiatives became one that focused on keeping the community healthy, and our organization operational and present for our residents and businesses.
I’ve talked in the past about the efforts we quickly undertook to adapt the Village to counter the impacts of the pandemic and likewise, the spending reductions that the Village Board imposed in early May. Over $2.4 million was removed from the budget, with early projections contemplating as much as $2 million in lost revenue during the course of the year. As the year has progressed, I’m grateful that many of our early projections have not come to pass, and revenue losses are now projected to be closer to $650,000 by the time we close out the calendar year and stub year on December 31.
Some of our most significant revenue streams (sales taxes, construction permits, even parking permit fees) have fallen in aggregate by more than 9% since March. Others, such as water revenue and use taxes have outperformed pre-COVID projections. With the cuts that were made, we are confident that we will end the current year in a strong financial position and that this approach will better prepare the Village for any additional changes that may occur later this year. For example, we’ve not filled four full-time positions, deferred vehicle and equipment replacements, strategically scaled back operational costs and reduced overtime. Undoubtedly, the Village’s long history of prudent fiscal policy tied with quick action by the Village Board and staff this year helped stem the tide of budget issues as the pandemic began and continued to impact our community.
With this as our current backdrop, the planning for the Village’s next budget is now well underway. The Fiscal Year 2021 budget (January 1 – December 31, 2021) will be presented to the Village Board in mid-October. In a more typical year, we’d heavily rely upon our robust financial planning tools to guide us in developing our upcoming budget. This year, while we’ve developed our financial forecast (a five-year projection tool), we also must consider that the economic impacts of the COVID-19 pandemic are far from predictable and their duration is unknown. We must also consider how changes to our budget may impact our community. We understand the pandemic has affected households and businesses in unexpected ways. So, we’ll be focused on how to keep our share of your property tax bill low (under 15% as it has been for many years), limit new costs for services and remaining thoughtful when evaluating the way Village services are provided. I expect this budget will be a cautious one that focuses on prioritizing expenditures against an erratic revenue picture.
With all of this in mind, there are several other priorities driving this budget. For example, I’ve talked in the past about State-mandated costs (such as required pension contributions, which are expected to increase 18% next year) over which the Village has very little control. As a service organization, appropriate levels of staffing must be provided to ensure service needs are met and investments in operations (like training and equipment) can be accomplished. Also, the need for continued investment in our critical infrastructure continues and will require considered ways forward to complete meaningful improvements to our roads, sidewalks, sewer systems and water systems without over-taxing our community. Fortunately, our AAA rating (just reaffirmed by S&P) is helping us keep borrowing costs low to finance larger projects over the next ten years and beyond.I encourage you to follow along with our budget process in the coming months and share ideas, thoughts, questions or comments.