With hard times easing, Oak Park plans for a financial reserve

Plan expected to enhance village's financial stability

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By Anna Lothson

Staff Reporter

Just a few years ago, Oak Park didn't have any money to bank on if something went wrong. And plenty went wrong as the national economy convulsed.

Now that times are turning a bit in the village and in the nation, the village government is working to establish a policy that keeps Oak Park's financial health in check.

Craig Lesner, the village's chief financial officer, presented a policy recommended by the village board's finance committee that establishes a minimum 10 percent fund balance for the village. Of this amount, it's recommended that 60 percent of that total remains in cash or other liquid assets, according to Lesner's report.

In the case that the fund balance dips below that target, staff shall recommend a budget and operational strategy to bounce back.

Lesner said because fund balances are needed to respond to unexpected emergencies and annual cash flow requirements, that it's an essential guideline. "It's a guiding principal for the finance department," he said at a recent meeting.

Trustee Colette Lueck said the policy is "long overdue," and said it's a good step since the village isn't currently in compliance with the policy it wants to enact.

Lueck said she was surprised when she joined the board four years ago that there was no fund balance or a policy for one. Since then, however, she's been impressed with the changes. "I think we've done the work of turning around the funding models," she said. "It's difficult to know when you've reached that point."

A policy is important to have in place, she said, but not to the point where it dictates decisions more than necessary. She said the policy should have leeway in case a necessary project or emergency pops up that trumps the need for reserves.

She also thinks it's important that when that balance drops below the recommended 10 percent that the issue be brought back to the village board and the finance committee for discussion.

"It's a mechanism for making sure people are paying attention," she said. "To make sure decisions are being made thoughtfully and not just sifting through."

The tricky part of establishing and maintaining a fund balance policy is that while it's important to have one, Lueck said, it can't be so high that the village is collecting too much in taxes from residents in order to maintain a certain amount.

Trustee Bob Tucker, who serves on the finance committee, said the fund balance helps provide a cushion for when hard times hit again. Like a "rainy day" fund a resident may have, he said it's important the village implement a similar model.

"What we've come to learn in recent times is that everything doesn't hum along in life," he said. "Sometimes there are bumps in the road."

Tucker said the village is working toward reaching a more stable amount when it comes to the fund balance, but noted it's always best continue striving for higher numbers.

"Achieving that balance is going to create a very stable environment where we are not necessarily worried about dips and woes in the economy," he said. "Recent history has taught us not everything goes perfect. You have to set money aside."

The issue is expected to be up for a final vote at the June 4 meeting.

Contact:
Email: anna@oakpark.com Twitter: @AnnaLothson

Reader Comments

4 Comments - Add Your Comment

Comment Policy

Unfortunately  

Posted: May 31st, 2012 10:50 AM

@JBM. I know that Barwin and others tried to rein in the spending - PeopleSoft incident to the side. But the infatuation with bricks is something which can only be stopped when they run out of money. Good news - they did run out of money. Bad news - they left OP bankrupt. It seems like Hedges, Salzman, and Tucker understand that this "mind set" is destructive and that building with bricks, when you have no money, is insane!

John Butch Murtagh from Oak Park, Illinois  

Posted: May 30th, 2012 10:22 PM

Hi Unfortunately -- Unfortunately, I see the board funding model as a pre-election peacock walk. We have had a weak CFO for five years who seems to have no idea what fiduciary responsibility is. The board wants to spend so the CFO screws around with the budget and gives it to them. How else can anyone explain using the salt budget to pay for the drawings that are supposed to send millions of dollars to DTOP. I just don't think the village board has the discipline to do a funding model or live by one.

Unfortunately  

Posted: May 30th, 2012 9:12 PM

@JBM. Agreed. Too bad that we don't have more of these type of board members. The VMA has controlled OP for 95% of the past 50 years - why didn't previous VMA boards have the "funding model" that Ms. Lueck states is necessary. I know that "Silly" will blame Milstein, but that isn't true, he was only briefly in the majority. And Milstein didn't propose the lavish brick streets on Marion, etc!

John Butch Murtagh from Oak Park, Illinois  

Posted: May 30th, 2012 7:12 PM

Congratulations to the Trustees Hedges, Salzman, and Tucker for initiating a process via the Board's Finance Committee that mandates an OP Budget Fund Balance. They have been strong resistors to reckless spending as board members. I am not certain why Trustee Lueck was the board's spokesperson on the fund balance article. In her five years on the board, she has never saw a spending motion that she did not embrace with a Yes. The article overlooked the fact that the June 4, meeting to vote on the fund balance is not a new piece of business. The Village Code already address the issue -- 2-6-5 E. Funds for Contingency Purposes: The annual budget may contain money set aside for contingency purposes not to exceed ten percent (10%) of the total budget. (Ord. 1981-0-52, 8-3-81, eff. 8-3-81). In fact, up until about 2005, the village had a fund balance of over a million dollars. Excessive spending, poor economic assumption, particularly the belief that a housing bust was heresy, and bad financial management swallowed the fund balance. Oak Park met its financial Armageddon well before 2008. That just made a bad situation worse. Instead of "puffing up" the board's fiscal responsibility, I would prefer if that it confirm or deny the WJ Comment post to Jack Crowe's column (Is the debt crisis coming to Oak Park?) The poster wrote, "OP is in debt $127 million, plus $30 million TIF debt, plus $94 million in unfunded pension obligations for a total of $251 million. That is over $5,000 per resident.

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