Paying off a significant portion of its parking fund debt and implementing long-term financial planning are two key components which show Oak Park’s fiscal outlook remains on a positive trend, an independent auditor told the village’s finance committee last Monday.
Daniel Berg, the auditor, said the village should be commended for its progress, but reminded the group of areas needing improvement to avoid potential future financial pitfalls.
“Some of the good news is good,” Berg said. “Some of the news is not so good.”
Craig Lesner, the village’s chief financial officer, joined the village around the same time the reality of Oak Park’s debt problems and recession-driven revenue declines took hold. Chief among the debt issues has been the parking fund.
In 2007 the long-term debt obligation owed to the general fund from the parking fund was roughly $10.6 million. The debt from that fund stemmed from a revenue gap that occurred when the village’s newly built parking structures didn’t have the parking demand and financial return anticipated, pushing the balance deep into the red.
By 2012 the parking fund debt dipped to around $2.2 million, a number anticipated to be paid off by 2019. The parking fund is now one of the areas that have been flagged to be regularly reviewed to ensure the payment schedule is maintained.
“The village has implemented a complete, system-wide analysis of parking and is working diligently to increase revenues and reduce costs,” Lesner wrote in a transmittal letter summarizing the village’s audit report. “More importantly, this review process continues as a regular part of operations management.”
Berg said Oak Park’s previous $10 million parking shortfall was “really in danger to cause financial hardship to the village.” Now, however, he reported the village appeared to be in good shape to make a positive step forward.
Long-term financial planning was another element Lesner highlighted as an improvement, mainly because of the five-year capital improvement plan that has been implemented to address major capital and infrastructure improvements. He stressed the village works primarily on a “pay-as-you-go” funding strategy for maintenance and replacement of assets and has only issued debt for major, new projects.
The village was also commended for receiving the Government Finance Officers Association Distinguished Budget Presentation Award for the first time for its 2013 budget planning. The management report on the village’s finances also highlighted some positive revenue increases.
For example, revenues for governmental activities totaled around $69.2 million, which was a $2.7 million increase from 2011. Property taxes attributed much of this as they generated 48.4 percent of the village’s revenue stream ($33.5 million). Utility fees, sales tax, state income tax and real estate transfer taxes increased $1.2 million from the 2011 fiscal year.
Expenses continued to decrease in 2012, a measure Village President Anan Abu-Taleb said must continue if the village wants to preserve its financial health. In 2012, Oak Park’s expenses dropped by $4.1 million from the previous year. This decrease, however, is mostly because of the TIF district payment made in 2011 as part of a settlement with the school districts.
Abu-Taleb focused on the lack of fiscal responsibility during his campaign; this theme continued Monday evening when he reminded his fellow trustees each financial decision must be made with purpose.
“I urge each of us to think of things we can and cannot do and what we should do,” he told the group.” Monitoring funds and keeping departments accountable is key, Abu-Taleb stressed. “We need to be mindful of these balances. … We need to be diligent and get more fiscally responsible.”
Trustee Ray Johnson pointed out that the village is already at an all-time low staffing level, has kept its AA Bond rating and continues to deliver key services that residents expect. “Expenses have dropped,” Johnson reiterated.
In terms of the village’s general fund, management reported the fund balance increased more than $700,000. Village staff vowed last year to work with the village board and the finance committee to increase the village’s cash reserve, which started with the 2013 budget process. The village board officially adopted a fund balance policy last year to strive to keep on hand a balance of 10 to 20 percent of general fund expenses.
Overall, in terms of the village’s audit, Berg reported a “clean” bill of health, noting a few cautionary areas for the village to watch for. Berg said even the village’s budget planning has improved and was about a month ahead of schedule.
“Staff did a much better job than prior years getting ready for the audit and being responsive to our questions,” Berg said. This allowed more time to go through documents, and with less stress, he reported. He also said no disagreements were found between his report and village management’s reporting.
While Berg doesn’t always review the audit in detail with finance committee, it’s Oak Park’s policy to do so to allow more time for discussion. After any additional changes are discussed, Berg signs the document and it is prepared for the full village board.