Flossmoor’s stellar financial rating was reaffirmed this week as the village refinanced bonds at a considerably lower interest rate, with a savings of $85,000.
Still, village officials warned that Flossmoor is entering a precarious fiscal period and said residents may be asked to approve an increase in the local sales tax rate as early as next spring.
Village board members Monday approved a three-tiered package allowing the refunding of the 2002 bonds, which were used to build the current Flossmoor Public Library building. The interest rate for that bond issue was 4 percent. With the restructuring of the bonds, the interest rate drops to 1.68 percent for the remaining four years before they are paid off.
Scott Bordui, Flossmoor’s finance director, said the village was able to secure such a favorable interest rate because of its strong fiscal status. As part of the restructuring, Flossmoor’s AA+ bond status was reaffirmed by Standard and Poor’s, the national rating agency that uses in-depth analysis to examine financial and management practices of public and private organizations.
In May, the village board directed Bordui and other staff members to proceed with the bond restructuring as a money-saving measure.
Bordui thanked the village board for its continuing commitment to solid financial practices, which Standard & Poor’s cited as major strengths in Flossmoor. The benefits of the bond restructuring, he said, will reach “every house in the village.” Because of the restructuring, the village will levy less in property taxes to pay off the debt.
Kevin McCanna of Speer Financial, the Flossmoor consultant for the bond restructuring, said he is “very pleased with how the village is doing.”
“You kept your AA+ rating, which is very high for a non-home rule community,” McCanna said. “There is just one rating that is higher, AAA, and it goes only to home rule communities.”
Flossmoor’s AA+ rating shows that the village is managing its resources responsibly and setting up the community for a successful future, said Mayor Paul Braun.
“This bond rating represents a tremendous effort on behalf of our staff and board for the benefit of taxpayers,” Braun said. “It directly results in a maximum amount of interest savings available to the taxpayers on this debt and is reflected on your tax bills.”
The village board unanimously approved three steps toward the bond restructuring. The board unanimously approved Speer Financial’s recommendation to award Piper Jaffray a contract for the bond sale. The board also approved the bond ordinance and budget amendments for the 2018 fiscal year.
Following Monday’s approval, the village issued a press release about the bond restructuring and the possibility that long-term financial challenges could lead to a lower bond rating in the future. According to the press release, the village board is considering a referendum in which local voters would be asked to increase the local sales tax. The 1 percent sales tax increase would raise as much as $560,000 a year, much of it from people who shop in Flossmoor but live in other towns, the release states.
Flossmoor residents could be asked to vote for the sales tax increase in the consolidated election next March.
Village board members discussed several options to bring in more revenue during a special meeting Sept. 25. The request for a sales tax increase emerged from that session as the most likely option. Other potential sources of revenue were also discussed, including a utility tax on water, increasing fees at the village commuter parking lots, a hike in vehicle sticker fees and a “license to eat” tax on restaurants and stores that sell takeout food.
According to village projections, a municipal deficit in Flossmoor is expected to climb to $1.5 million in the next three years.
“Still, while the village retains a stable outlook from Standard & Poor’s, the state of the village’s finances pose a threat to a future lowered rating if our financial performance does not sustain itself or deteriorates,” the press release states.
A five-year financial forecast indicates that Flossmoor will be unable to maintain its reserve balance and its existing service levels without additional revenue. The village is faced with rising pension costs, a severe drop in taxable property value and an aging infrastructure in need of repair or replacement.
As a non-home rule community, Flossmoor is the subject to tax caps and limited in its ability to adopt new revenues, the press release states.
“There is still much work to do to keep the village in strong financial condition, as the growth in existing expenses outpaces the growth in the village’s existing revenues.”