City of Oak Forest Committee of the Whole met Nov, 22.
Here are the minutes provided by the committee:
Mayor Kuspa called the Committee of the Whole meeting to order at 6: 32 p.m. with the Pledge of Allegiance and the Roll Call as follows:
Present: Alderman Gray
Alderman McCarthy
Alderman Selman
Alderman Emmett
Alderman Danihel
Alderman Hortsman
Also Present: City Clerk Jack Janozik
City Administrator Tim Kristin
Finance Director Colleen Julian
Treasurer Ericka Vetter
Absent: Alderman Wolf
4. DISCUSSION OF 2022 LEVY CALCULATION
Finance Director Julian began the discussion by stating it is the time of year where we look forward to next fiscal year beginning May 1, 2023 and ending April 30, 2024. We are preparing the general fund budget to determine property tax needs. Treasurer Vetter and I sat with all the department heads and looked at their budgets. I plugged in salaries from the union contracts, our insurance obligations for general liability, workers compensation and health benefits, as well as Capital Improvement Plan that needs to be funded. This is a summary of what I am projecting: new revenues of$ 1, 000,000 to $ 1, 150, 000. Expenses increased$ 1. 7 million. There is a deficit or need to raise property taxes of$ 563, 000 which is 5% of our previous levy. It is important to note the deficit and projected increase is mainly related to pensions. Increase in revenues is sufficient to cover operations except pensions. Full time employees remain at 124. This does not propose any increases to staff Fire and police contributions are going up$ 563, 000 which is directly related to market losses last year. Salary increases are unneglectable. The main reason for the increase is from the union contract but the fact of the matter is a lot of turnover. High salaries retire and are being replaced by entry level positions which cause arelatively flat salary increase. Health insurance is going down $ 46, 000. We have saved a renewal of 3% decline. Our health insurance may have gone up because people have switched to family coverage. Workers compensation renewal for current coverage is $ 279, 000 for a 27% increase. That is a significant increase to our general fund expenses. As you know, we are also going to discuss a self-insured retention option which would ease up the pressure on the tax levy. If we did the self-insured option, we are looking at $ 134, 000 off the levy. Right now, I am using the full boat. Once that decision is made I can adjust the levy accordingly.
We sat with all the departments. Department requests were very modest. I plugged in their increases in pension, salaries and benefits. They are looking at other line ideas that are discretionary. Most of these requests are related to gasoline and maintenance. I feel that our department heads are very cost conscious with tax payer dollars. We feel all these requests are reasonable. Some requests from the police department are mandates from the State for$ 8, 900 for records. Another significant portion of it is gas. The police department has unfunded mandates that have to be addressed.
City Administrator Kristin, Treasurer Vetter and I scrutinized their requests and again felt that they were necessary and reasonable. Our Capital Improvement Plan is the same as last year $ 1. 5 million. Next year the Capital Improvement Plan will consist of hardware, emergency vehicles, and emergency equipment necessary critical to our mission. We feel that these are all reasonable and necessary.
Finance Director Julian has written a few times regarding revenue in weekly briefs and also sent out the final audit from last year. I am very happy that we have a surplus of$3 million that we were not expecting. That was a huge windfall and 100% related to inflation. Significant increase from employment tax from corporations and individuals working and making more money. Very large surplus ending in fiscal 2022. I am projected the same for 2023. It was very difficult to project revenues for this next fiscal year 2024. The IML has not released any numbers related to income tax or local use tax. As far as our sales tax and income tax, these are dollars that have contributed to these large surpluses the last couple of years. They will not sustain, the economy will slow. The numbers for next year are pretty optimistic. I am using fiscal year 2021 sales tax numbers to be conservative. I am using the IML 2023 numbers with a 2. 5% haircut.
Fiscal 2020 revenues are $ 4 million, fiscal 2021 jumped to $4. 5 million, the fiscal year that ended last April was$ 5 million, half way into fiscal 2023 we are looking at$ 5. 3 million. That is because sales taxes are off the chart and income tax, the biggest contributor. Local use and state income tax amounts are estimates from Illinois Municipal League knocked down 2. 5%. Sales tax to fiscal 21 are conservative. Sales tax usually trends up, but I do not believe we will trend up. Both amounts used, $ 2. 3 million and$ 1. 5 million, are the actual numbers from fiscal 21. Levy is based on us getting to the $ 5. 2 million. It might not happen. I call those headwinds. Things get tough and revenue slows. We have some headwinds but the fact is we are looking at a$ 3 million surplus from 22 and probably another surplus from this fiscal year. We have a backdrop to draw from, we have reserves. Definitely hard to project these.
Alderman Selman asked if IML is conservative in their forecast. Director Julian believes they are pretty optimistic with their numbers. If those numbers do not materialized then we have reverses. Everyone is calling for the economy to slow and I expect it will. We just don’ t know how much.
Finance Director Julian reported she calculated the numbers by salaries 2. 5% across the board, some union contracts are expired so I am estimating 2. 5 to be consistent with most ofthe contracts that we settled the past couple years. For more than 12 years, the Department of Insurance regulates how much we contribute to the police and fire pension. Department of Insurance relaxed payment requirements and we decided we were not going to do that. Like a mortgage, an unfunded piece of pension we did not want to lengthen the term so we kept with our repayment terms to keep us on track for payment in full by the year 2030. The City is using a shorter amortization period than Department of Insurance. The City wants to pay 100% of our unfunded pension. DOI requires 90%. I sat in the meetings with the actuaries and they explained their assumptions, bottom line they keep improving mortality tables and people are living longer. We are required to contribute more because we are going to be paying longer. All boils down to the police contribution this year. Our actuary is proposing$ 3 million, fire $ 1. 4 million, total of$4. 4 million. This is a big jump this year related to negative investment returns and projection of living longer and retiring earlier. Compare that to the Department of Insurance, there is a$ 2 million difference. We have kept on this path which we have decided to pay at a more accelerated rate to get this unfunded burden off our backs. At some point if we decide we want to back off of that, we can do that. She is trying to stay on track with paying our pensions down but speaking with the actuaries, with this jump we cannot sustain a 14% increase every year. This is the time of the year where we look at how we are paying down our pension liability and the unfunded piece. We have stayed on track. Does anyone have any thoughts?
Alderman Gray asked if there is an estimated rate of return built into that? The first interest rate – that is the assumption we were supposed to make 7%. The police were negative 8. 5%, dropped our funded piece to 56% funded, we were over 60% funded the year before. The fire lost 7%. We lost over $ 5 million in the two funds.
7% return is that negotiable at all? You are in an environment where 7% has not happened. It is hard mark to hit. As well by statute, the percentage changes and it has to be a fixed income. If we reduce that assumption, it drives up our pension fund more. If we are not making it in the market then we have to contribute those funds. The year before the police fund made 29%. We are hoping that this volatility calms down and we could have a few reasonable years.
Does the fund adjust for market fluctuations, i.e. municipals are yielding quite a bit now. Both police and fire have advisors who are very detailed and are constantly rebalancing and have strategies. I served on the boards. They are very active and trying to beat the mark. I feel they are actively managed. They have a fiduciary responsibility to do the best they can for the fund. Pretty soon that will be all consolidated at the state level. All these funds are managed locally there was a consolidation bill a few years ago.
Alderman Emmett asked when the state takes over, what percentage are we going to get? They will have the pool of money from municipals in the State of Illinois. The county will be separate. There will be separate accounting of what our fund is. We will not paying for the unfunded cities. I have compared our pension fund with other communities and we are doing the best even though we dropped significantly. We have been doing our best to be responsible and address the situation.
Finance Director Julian suggested this year we anticipate the revenues are going to be sufficient to cover the general fund. She did not see a reason to back- off the pension this year. But if we get a point where we have a very high levy and we need to scale back, then we can do that. If we can stay the course, I would stay the course. As you can see, last year was a big jump. We have been aggressively funding the police and fire pension at a higher rate than required. Our contributions are still going up but they said it would be worse if we were not doing an aggressive funding. My suggestion is to leave the general fund, let it pay for itself and with some of these revenues we have collected over the last couple of years and fund the pensions this year that would be 5%. If you do not want to increase taxes this year we can do a zero levy and we can take the money out of reserves. Of course, that is temporary. We have been doing zero levys, 2. 5% last year so this year we are looking at anywhere between 0 and 5%.
In 21 we ended up with $ 6 million. At one point during the great recession our reserves were below a million. And then in 22 we had a big jump at end of April 2022 we had $9. 3 million in the bank. We are supposed to have a deficit this year. I do not think that will happen. I think there will be a surplus and projecting$ 9. 8 in the bank. $ 9. 8 plus $ 400, 000 in working cash equals 10 million in our general fund. 50% of our annual expenditures is double our required policy. So we have got a little cushion. The question would be, do we continue with the pension funding or do we want to raise taxes. If we do a 5% increase that would fund the pension and the general fund would then fund itself. If we wanted to take $ 500, 000 out of the general fund we can do that as well. The bills came out. Our total EAV went down 9%. That was one year after our normal triannual. My guess is that there are so many appeals. This bumps our tax rate up a bit. Our consultants’ assessments reported dropping of the EAV especially in the industrial and residential areas are the problem. We do not want to continue raising taxes when the EAV is not growing. It is not sustainable. I think we are in a position that we do not need to raise taxes or if we do, minimally. We have really been holding the line for the last few years. 2 years ago we did 0%, last year we did 2. 5% and this year we can do anywhere between 0 and 5%.
Alderman Emmett questioned the mandate from the State of Illinois. We have to pass it on. We are a small piece of the tax bill, we tighten our belt here but we cannot control the other 15 taxing bodies.
Alderman Danihel reported her tax bill is $ 7, 700. If we do a 5% increase, we are looking at about $ 385. Director Julian asked Alderman Daniehl to take the $ 7, 700 and take 15% of that which is $ 1, 155 and then 5% of that which is $ 57. 75. That is what we are looking to increase on a $ 7, 700 tax bill. We are one of multiple taxing bodies. When we decide what we want to do, I will put it down into those terms. I probably use a tax bill in the median average of$ 7, 000.
As far as the levy, I will be back in about 3 weeks. If anyone has any questions or wants to meet with us let us know. I will finalize the calculation, file it with the County and this is what we are raising or we remain at the status quo.
Mayor Kuspa asked Director Julian if she wanted to ask the Alderman present what direction they are looking.
Treasurer Vetter reported she is recommending to use the extra cushion and not raise
Alderman Danihel recommended maybe a 3%
Alderman Hortsman preferred to use the cushion and go with the 0%
Alderman Selman recommended scaling back contribution to fire and police department pensions, increase the property taxes nominally and use some of the reserves. If we need an increase of$563, 000 why don’ t we use 1/ 3 of that from each ofthose resources. Alderman McCarthy recommended a 2. 5% with the difference to make more affordable for everyone.
Alderman Gray liked Alderman Selman’ s way of thinking and was going to suggest lightning up on the pension contribution. We do more than the average which is great and lowering the levy. Is 0% sustainable for the long term? Director Julian stated we would be looking at a shock one day if it was not done incrementally. Alderman Gray suggested 2 to 2. 5%
Alderman Hortsman reminded everyone that there is eventually going to be a water bill coming, infrastructure. As we think about this, this is going to be something that has be bonded. Because of the way the economy is going, some of these TIF districts are not as firm as they used to be.
City Clerk Janozik stated that the only concerning thing is the slow down in the economy and taking a lot of money out of the reserve. I think we just have to be cognizant of the money that we have in reserve. We may need that money when the economy does slow down and it really hits the tax payer pocket book. When the economy slows down we have to make sure we have enough money so we do not over burden the taxpayer.
Alderman Emmett suggested 2. 5%
Mayor Kuspa stated without raising levy is not sustainable. I agree with Alderman Gray, 2 – 2. 5% is feasible and realistic. That will not jeopardize our reserves.
Finance Director Julian discussed the end of fiscal year 22 results. At this time I always like to point out where we are with TIF. If there are problems in the TIF, we cover it. I am happy to say that years ago we had some TIFs that were not doing well. This year we did see the fund balances decrease but mainly because of some land that was purchased to flip and had a tax rebate that we recorded in accordance with the RDA that was required for accounting purposes. We have not paid that rebate until I know that all appeals are final. We do have an agreement with Eagle Gun Club to refund their property taxes. I am not doing it until I confirm they are done with appeals. To be conservative on final statements, I recorded the expense but the money has not been released. We owe money in all the TIFs combined, $ 708, 000, for property located in TIF 6 which is the old Ace and the church in TIF 4. At one point it was over $ 3. 4 million. We have made significant improvement in our TIF funds. TIF 1 is in good shape, TIF 3 always has been struggling a bit, TIF 7 can assist TIF 3 because they are next to each other. We do not have to pay for TIF 3′ s bills. TIF 4 shows a negative balance in the event we rebate those taxes. TIF 5 negative balance relates to the property acquisition that will flip relatively soon. TIF 6 is old Ace. Once we have a few things settled, I feel that our TIFs are on solid ground and self-sustaining.
I will be passing the levy by the end of December so we are having this discussion now to have some feedback and direction. I will come back with the levy ordinances in 3 weeks.
Tim Kristin would like to comment that Finance Director Colleen Julian has done a great job as usual and put in a lot of time and effort. Thank you for your work.
5. EXECUTIVE SESSION
No executive session.
6. CITIZENS PARTICIPATION
None.
7. OLD BUSINESS
None.
8. NEW BUSINESS
None.
9. ADJOURNMENT
Alderman Danihel made the motion to adjourn.
Alderman Emmett seconded.
Roll Call vote was taken as follows:
Ayes: Alderman Danihel
Alderman Gray
Alderman McCarthy
Alderman Selman
Alderman Emmett
Alderman Hortsman
Nays
Abstain
Absent: Alderman Wolf
The motion to adjourn was carried 6/ 6. The Committee of the Whole meeting ended at 7: 23 p.m.
http://www.oak-forest.org/AgendaCenter/ViewFile/Minutes/_11222022-1612
