Oak Park Village Manager Cara Pavlicek sounded the alarm on the village’s financial outlook May 18, warning that the pandemic-induced economic downturn is “significant.”
She informed elected officials at the virtual village board meeting that the $13.9 million general fund balance at the start of the fiscal year would be gone by the middle of 2021 if action is not taken.
Pavlicek said “now is the time” to address the downturn during the presentation she made with Steven Drazner, chief financial officer/treasurer.
Elected officials are expected to discuss the matter further at a June 1 meeting and consider an amended fiscal year 2020 budget at the June 15 meeting.
“There are many moving parts which we do not control,” Pavlicek said. “In this unprecedented time, uncertainty is unavoidable and projections likely will be wrong. However, the difficult policy decisions recommended will be based upon the best information we have available.”
Drazner agreed, noting there are “too many variables.”
He said he anticipates a shortfall of $10 million in revenue by the end of the fiscal year “assuming everything stays the same.” Projecting further, he said the revenue shortfall would be an additional $5 million by the middle of the next fiscal year.
Pavlicek said village officials can begin by reducing materials or contractual costs; reducing spending; and finding new resources. She said reductions could come by reviewing contractor costs and renegotiating where possible; eliminating lower value or no-use programs; and rethinking subsidies “as painful as this may be.”
Pavlicek also said spending reductions could come by reducing capital asset investments; deferring some purchases; re-examining maintenance and replacement standards; and refinancing debt.
She said village staff members started the process of reducing spending by asking department heads to recommend where their budgets could be cut, which resulted in proposed reductions totaling $17 million, which would be 10 percent of the budget.
Deferring capital projects led to the deepest cuts, $7.9 million in the capital main fund and $3.2 million in the capital projects fund. Water/sewer fund cuts totaled $3.9 million. Also proposed were cuts of $1.5 million in the parking fund and $1.3 million in the general fund.
Trustee Arti Walker-Peddakotla questioned “lower-value programs,” asking how staff members would determine how one program has a lower value than another.
Pavlicek used the village’s school crossing guards as an example of a lower-value program, explaining that funds budgeted for the program have not been spent over the past two months because schools are not in session. However, she said she would provide a more formal metric for determining program values prior to June 1.
In response to a question from Walker-Peddakotla, Pavlicek said village officials feel they cannot count on federal assistance to cover the shortfall, noting things “change day to day.”
Suggestions for possible new resources include monetizing assets; implementing new or revised fees where appropriate; and borrowing for capital projects rather than depleting cash. “We’re also seeking whatever state and federal assistance we can find,” Pavlicek said.
Admitting she wanted to “dive in,” Trustee Simone Boutet stressed the “need to go fast,” even suggesting the village board hold a special meeting May 26. “I feel a sense of urgency,” she said.
Trustee Deno Andrews cautioned against moving too fast, questioning whether staff members would have additional details needed by May 26.
In response to requests by Boutet and Trustee Susan Buchanan about which programs might be cut and a request by Boutet for a revised organization chart, Drazner said he would bring more detail to the June 1 meeting.
“The cuts are logical and practical,” Trustee James Taglia said, noting the village is “fortunate” to have a fund balance.
“None of this is easy,” Trustee Dan Moroney said. “Hard decisions have to be made.”
“I know it’s taken a lot of work to get to this point,” Mayor Anan Abu-Taleb said. “There’s more work ahead.”