While other municipalities are facing dire financial outlooks due to a decrease in revenues related to the COVID-19 pandemic, River Forest officials are breathing a sigh of relief after being informed that the village is in a “really good” financial position.
Village Administrator Eric Palm told officials at the Oct. 12 virtual village board meeting that a projected decrease of $418,357 in revenues and an unexpected increase in pension obligations of $377,144 have been offset by a projected decrease in expenditures of $501,089, due primarily to $374,857 in salary/benefit reductions and $500,329 from deferral of replacement of capital equipment and related postponement of a transfer from the capital equipment replacement fund.
“The good news is we’re in a better position today than when we presented the budget,” he said.
When making that presentation in April, Palm cautioned officials that the document they were adopting for the 2020-21 fiscal year did not take into consideration the expected decrease in revenues related to the COVID-19 pandemic but accurately predicted, “We won’t have to make draconian cuts like other municipalities.”
As in the original budget, reserve funds will be used to cover deficits. However, Palm noted that the amount of reserve funds required has decreased by $82,732 with the new projections. Without the pension increase, the budget would actually be balanced, he added.
Calling it a “significant and unbelievable feat,” Village President Cathy Adduci credited village boards past and present for “setting sound fiscal policies.” She also thanked village staff members for their efforts.
“What this shows is almost a miracle,” Adduci said, noting the struggles of other municipalities including Chicago and Oak Park.
The projected total tax revenue decrease of $388,107 and projected total fines and fees decrease of $207,692 were partially offset by an estimated $160,692 in reimbursement grants for COVID-19 related expenses.
The village has applied for grants from the Federal Emergency Management Agency (FEMA) and Cook County. The FEMA grant is estimated to be $60,000 and the Cook County grant, part of $51 million through the federal Coronavirus Aid, Relief and Economic Security Act, is expected to be $100,942.
Although most tax categories show projected decreases, use tax revenue is projected to increase $44,688. Palm explained that the use tax is collected on online purchases, which have increased during the pandemic.
Projected decreases in other tax categories include $145,268 in sales tax, $184,052 in non-home rule sales tax, $39,480 in state income tax and $63,995 in restaurant tax.
The projected fines and fees decrease is caused by decreases in revenue from parking fees and police tickets. Decreases are projected for daily Metra parking revenue, $48,794; permit parking revenue, $89,787; and police ticket revenue, $69,111.
In addition to daily and permit parking fees being suspended through April and May, parking revenue projections are down, based on the assumption that parking permits are not being purchased because people are not using mass transportation or are still working from home.
Police ticket revenues are down because no additional fees or penalties were assessed during the stay-at-home order and adjudication hearings were postponed. Tickets issued for parking violations were also suspended at that time.
Not filling the vacant deputy police chief position and freezing cost-of-living (COLA) salary increases contributed to the projected decrease in salary/benefit expenditures. The projected decrease includes a 2 percent COLA increase for non-union employees effective Nov. 1. In recommending the increase, Palm noted that non-union staff members have worked “incredibly hard these past six months.”
Palm said the unexpected increase in pension obligations was due to changes in the assumptions to the mortality tables. However, Palm noted that higher returns are expected under changes from the pension consolidated law.
He said investment data shows that individual pension funds typically earned lower returns than larger statewide funds, such as the Illinois Municipal Retirement Fund. Invested together, these funds are estimated to earn as much as $1 million more per day in returns and generate an additional $820 million to $2.5 billion over the first five years and as much as $12.7 billion over the next 20 years, he said.
“As those investment returns are realized, we will start to see improvements to our unfunded liability as a result,” he added.
The revenue outlook could be brighter as revenue starts to come in from the village’s share of the state cannabis tax, as noted by Trustee Bob O’Connell, and the 3 cents per gallon local gasoline tax that took effect July 1, as noted by Trustee Katie Brennan.
Finance Director Rosie McAdams explained that $3,000 in cannabis tax revenue had been received so far and the local gasoline tax revenue has “just started coming in.”