Administration & Finance Committee

APPROVED MINUTES OF A MEETING OF THE ADMINISTRATION & FINANCE COMMITTEE VILLAGE OF NORTHBROOK March 4, 2013 Chairman Scolaro called the meeting to order at 6:30 p.m. in the Terrance Room of the Village Hall. Committee members present were: Trustee Karagianis, Trustee Ciesla and Chairman Scolaro. . Others present: President Frum, Trustee Buehler (entered 6:46 pm), Trustee Heller, and Trustee Israel. Staff present: Village Manager Nahrstadt, Assistant Village Manager Kiraly, Assistant to the Village Manager K. Maltas, Director of Finance J. Rowitz, Assistant Director of Finance B. Garibaldi, Accounting Manager I. Petryszak, Director of Public Works K. Hamill, Assistant Public Works Director M. Morrison, Analyst A. Letson, Fire Chief M. Nolan, Deputy Chief T. Smeltzer, Analyst J. Neton, Police Chief Wernick, Deputy Police Chiefs L. Caruso and S. Dunham, Internal Services Administrator J. Batalden, Director of Development and Planning Services T. Poupard, Assistant Director of Planning D. Schoon, Communications Manager Fayne-de Persio, Assistant Director of Development and Planning Services N. Desario, Human Resource Manager G. Van Dahm, IT Manager R. Kramer, and Village Clerk Ford. Called to Order Hear From the Audience No response from the audience. Discussion – FY 12/13 Third Quarter Financial Report Director of Finance Jeff Rowitz reviewed the third quarter financial reports. He explained that when the Board adopted the 12/13 budget it anticipated a General Fund surplus for the year of $32,605 – now we are currently projecting the General Fund surplus to be $1,367,740. This will provide the village with $2.3 million over and above our 40% reserve policy. Village Manager Nahrstadt pointed out that the Village recently issued a $345,000 building permit to the Senior LifeStyles development. At the time the budget was drafted, the timing of this development was unknown. Director Rowitz reviewed the major revenue resources, building permits, utility tax, state income tax and retail sales tax. He noted he has not received the March retail sales tax yet. The figures only reflect receipts through February. Director Rowitz showed rolling 12 and 18 month sales tax receipts. Trustee Buehler entered at 6:46pm. Director Rowitz then reviewed the expense side, stating we are expecting to end FY 12/13 $714, 130 under budget. This savings is mostly attributed to personnel costs related to keeping vacant positions in both the Police and Fire Departments, open positions in other departments, and the mild winter which thus far has produced a savings in overtime. Village Manager Nahrstadt reminded the members an analyst position was transferred from General Government to the Development and Planning Services Department. . Director Rowitz compared leaving positions vacant and paying overtime versus filling and paying full time positions. The members briefly discussed the costs related to the Emerald Ash Borer (EAB) problem. Assistant Director of Development and Planning Services reviewed with the committee: ADMINISTRATION & FINANCE COMMITTEE MEETING March 4, 2013 Page 2  Northbrook’s Office, Industrial and Retail vacancy rates compared to the rest of the region:  Overall vacancy rate for Northbrook Shopping Centers;  Unemployment rate compared to Cook County, and Chicago Metro Area and State of Illinois  Unemployment Rate by Area Municipalities;  Sales tax revenue by calendar month of actual retail sales – 9% increase over last year;  Hotel revenue per available room (RevPAR);  Single family residences average sales price – generally a decrease overall  Major building permit applications for the calendar year – up 6% over last year,  New single family additions & major remodeling permits – increase 30%  Commercial Office and Industrial construction – down this year. By Fiscal Year:  DPS monthly building permit revenue by fiscal year  Equalized Assed Valuations (EAV) in Dollars - 8% to 10% decrease Village Manager Nahrstadt stated that additional PowerPoint slides for items included in the Manager’s Report were provided in the agenda packet and asked whether the committee had any additional questions. Trustee Scolaro questioned what to do with the surplus. He stated they don’t have to spend it, and he asked the members to keep this in mind as they review the budget. Suggestions were made to use the surplus for stormwater or other planned capital projects, or to abate a portion of the property tax levy.. Trustee Heller cautioned abating the money due to the financial condition of the State of Illinois. He questioned how far behind the state was with their payments to the Village. In response Director Rowitz stated they are consistently behind three to six months on the income tax disbursements. Trustee Heller then questioned what affect the March 1st Sequester may have on the Village. He noted he did not believe the Village received a lot of Federal funding, so he was not a really concerned. . Village Manager Nahrstadt explained there would be a bigger concern if there were a number of residents/companies tied to Federal contracts. Trustee Scolaro discussed the actual percentage in question, noting he did not feel it will have a material effect on the Village. Presentation & Discussion of FY 13/14 Draft Budget Village Manager Nahrstadt noted that staff is projecting a $450,000 surplus and explained that the draft budget includes additional funding to address the EAB, an additional Inspector for the Fire Bureau, and additional contractual resources to assist with the plan reviews and inspections related to the increase in building permits. Director Rowitz then reviewed the FY13/14 draft budget  Projects General Fund surplus of $451,000,  Fund Balance of 44% of revenue.  Detailed 2-year revenue and expense projections for the General Fund  Total Capital projects $16,164,970  Stormwater projects – $1.69M  Street maintenance – $4.5M ADMINISTRATION & FINANCE COMMITTEE MEETING March 4, 2013 Page 3  Water distribution system improvements – $3 M  Water main replacement – $2.16M Trustee Karagianis stated he felt the surplus should go to infrastructure. Trustee Scolaro noted that the Village implemented a storm water utility fee last year to fund the projects in the Storm Water Master Plan. We anticipated the fee would provide funding for the first 6 or 7 years of the Plan. He stated that transferring a portion of the surplus to the Storm Water Fund would further stabilize the rate and possibly allow us to repay our financial obligations early. Trustee Ciesla suggested using the surplus towards environmental impacts, sustainability. She explained how the City of Evanston pays for Wi-Fi for their residents and she suggested doing the same. Trustee Ciesla also suggested changing out the Village’s lighting - to, take advantage of the surplus to make changes that would have a big impact. She also suggested giving the surplus back to the residents so they could then spend it in Northbrook, or lowering taxes. President Frum expressed her concerns with rebating the funds, noting the Village will need to look at how to cover costs down the line. She discussed problems that could arise from rebating the funds and stated she felt it made more sense put the funds into capital projects. President Frum stated she would rather keep taxes flat in the future than have large spikes in the tax levy. The committee members discussed. Trustee Israel noted the Village’s water mains are presently on a 126 year replacement cycle. Trustee Ciesla asked the members what they would do with the surplus. In response Trustee Karagianis stated he would use the surplus towards storm water and sewers. He stated he realized this decision is not sexy; however the infrastructure has been put off for years. He stated he felt that giving back any surplus is political. Trustee Karagianis stated he was not in favor of putting the surplus funds in the operating budget. He felt it should be put in capital. Trustee Karagianis pointed out the Village has a good problem - we are in good shape. The question is what to do with it. Trustee Scolaro discussed the 40% reserve policy. Village Manager Nahrstadt stated he would not suggest reducing the 40% in reserves - the bond markets have come to rely on the Village meeting the 40%. He explained that even if the funds were to be left in the General Fund, the Board could discuss further during the Capital Improvement Plan (CIP) review. Trustee Scolaro stated this is a high class problem; however it is still a problem. Our constituents will want to be sure the funds are used in the most responsible manner. Director Rowitz reviewed the FY 13/14 anticipated bond proceeds ($14,140,600) and broke down the funding sources for debt service which included property tax levy, water usage charges, sanitary sewer usage charges, storm water usage charges, and state motor fuel taxes. Director Rowitz then reviewed the Schedule of General Obligation Debt: Debt service fund; water fund; storm water fund; total principal all funds; total interest all funds; total principal and interest – all funds. He then provided a summary by department and category for the General Corporate Fund Trustee Scolaro asked Director Rowitz to explain the reason for an increase in Contractual Services. Director Rowitz explained the main increases were related to contractual plan review and building inspections, and EAB. Director Rowitz then reviewed the Expenditure Summary by Department, noting that the projected surplus for FY 13/14 was $400,000. He stated that projected fund balance at 4/30/14 would be $1.4 million above the 40% reserve policy. Trustee Scolaro reviewed briefly, and asked if anyone has questions. ADMINISTRATION & FINANCE COMMITTEE MEETING March 4, 2013 Page 4 The committee discussed the vehicles that will need to be purchased, dump truck, front-end loader, utility truck, and replacement of a bobcat. Trustee Scolaro noted a decision still needs to be made on what to do with the surplus and then questioned if everyone was in agreement with increasing the head count to add the recommended Inspector for the Fire Prevention Bureau. Trustees Karagianis and Heller stated they felt the increase in head count was justified. Trustee Heller then questioned whether additional staff should be hired rather than using contractual assistance. Village Manager Nahrstadt explained the advantages of using contractual employees to assist with increased workloads which are not expected to be maintained long term. He noted that in addition to the savings in pension and benefit costs, we are not in the position of having to lay people off when activity returns to customary levels. Trustee Buehler expressed his concern with fatigue with the constant overtime personnel have to do. Trustee Heller stated he felt contractually filling positions is a philosophical change for the Village Employees answer to the management and contractual employees don’t. Village Manager Nahrstadt noted that in 2009 staff had to lay off a number of people and he does not want to do that again. He stated that a new employee should have some sense that the job they are hired for is a lasting job. Trustee Heller stated the other side is the employee is trained by you and they are more under your control. Trustee Scolaro agreed with Village Manager Nahrstadt’s philosophy noting we should start out slow and suggested reviewing the philosophy again next year. Trustee Buehler discussed his opinion of when contractual does and doesn’t work. He explained staff has to use it appropriately and he felt thus far they have done a good job. Trustee Buehler agreed we need to move forward cautiously. Trustee Scolaro stated he felt the big question is what to do with the excess surplus. He stated he would like to schedule an Administration and Finance Committee meeting to further discuss and have the Committee make a recommendation to the Board. A meeting was scheduled for April 23rd at 6:30. Adjourn The meeting Ciesla , Karagianis, was adjourned at 7:50p.m. Respectfully submitted, /s/ Debra J. Ford Village Clerk.