Flossmoor’s forward-looking five-year financial analysis comes with some good news but also some concerns about a budgeted operating deficit that could become a trend.
Village Manager Bridget Wachtel presented Flossmoor’s five-year projections on Monday, Feb. 6, to the village board. The five-year outlooks are put together every two years, and this year’s report projects fiscal years 2023-2028.
“As part of our long-range financial planning, a lot of key decisions have come out of this work … on how to sustain and secure our financial future,” Wachtel said. “It’s been an important look at how our finances are trending and what we can project for the future.”
The village fund balance was “unexpectedly strong” at the end of FY22 at $7.94 million, according to a written report by Finance Director Scott Bordui. But for FY23, the budgeted operating deficit is “large” at $856,598, he wrote.
Five-year projections show the village continuing a deficit for all five years of the analysis, Bordui explained. In FY24, it is expected to be a $511,246 deficit, up to $571,840 in FY28. That could put the village below the line it tries to maintain with its fund balance as policy by FY27.
Bordui wrote that some of the recent struggles of the village’s Water & Sewer Fund have had an impact on the General Fund. The projections assume Water & Sewer will return to making its full transfer amount, but operating deficits could end up being greater than projected if that does not happen, he said.
Cost increases also play a “significant” role in the analysis, according to Bordui. Flossmoor’s operating expenditures were roughly $8.9 million in FY14 but rose to $12.5 million in the FY23 budget. The largest increases are related to personnel and benefits.
Inflation has played a large role, too, with “historically high” numbers recently, per Bordui’s report. The five-year projections assume those numbers will come down a bit, but if inflation stays high the estimates may be understated, he wrote. And the challenges of inflation were compounded by a recent decrease in Equalized Assessed Value in Flossmoor.
“That picture results in essentially the level of our EAV at 2012 and even 2005 levels supporting a 2022 budget,” Wachtel said.
Non-home rule sales tax revenue — generated by a 1% sales tax approved by Flossmoor voters in 2018 — has had a “significant” positive impact on the village’s budget, delaying the timing of the village hitting distressed fund balance levels, per Bordui’s report. In fact, the village once thought that by FY23 it would be facing those distressed levels but is not there yet because of the non-home rule impact, Wachtel said.
“The non-home rule sales tax continues to be a stopgap and an important contribution to sustain our finances and our operations moving forward,” Wachtel said. “That picture really has not changed.”
Wachtel called the report methodology “very conservative” in nature. Bordui added in his report that any attempt at projecting budget line items into the future is “subjective” and becomes more so when the time frame is expanded to five years. But the numbers are based on “educated estimates” that include history, anticipation of future trends and detailed review by all departments, he wrote.
But Bordui called the “structural imbalance” between Flossmoor’s operating revenue and expenditures “not sustainable.” With limited options for new revenue — Wachtel cited roughly 90% of costs as fixed — the village may have to figure out how to reduce expenses.
No decisions were made at the meeting, with the five-year projections presented for discussion only, but Wachtel said it provides a good opportunity to talk about how to address that imbalance. She noted the village is always looking for intergovernmental cooperation, economies of scale and more that can reduce costs without reducing levels of service.
The most significant revenue possibility left to Flossmoor — outside of referendum — would be a Places for Eating tax, which is similar to a food and beverage tax. Wachtel said at least one neighboring community and others in the Chicago area have such taxes.
“I think this is definitely worth investigating,” Mayor Michelle Nelson said.
- The village board voted unanimously to approve an ordinance to borrow more from the Illinois Environmental Protection Agency’s low-interest Water Pollution Control Loan Program for Phase 4 of the Sanitary Sewer Rehabilitation Project. The approval helps cover a $599,000 change order that made the overall project cost higher.
- The village board voted unanimously to approve its consent agenda. With it, the board gave Assistant Village Manager Jonathan Bogue the authority to accept a bid March 2 through broker Northern Illinois Municipal Electric Collaborative to procure electricity for four water pumping stations not covered under the village’s agreement with ComEd.
- The board held a public hearing regarding the proposed establishment of a downtown Tax Increment Financing District. Village officials shared reasoning for the TIF similar to prior discussion. No members of the general public spoke during the hearing. An ordinance to establish the TIF is to be considered at the Feb. 20 village board meeting.
- Nelson read a proclamation declaring February 2023 as Black History Month, encouraging Flossmoor residents to participate in activities throughout the community and schools. A few Flossmoor residents joined her for the proclamation.