Riverside’s village board and staff will begin substantive long-term financial planning this spring in order to head off a future financial crunch. On Jan. 11, village officials gathered to assess the long-term financial picture for the village, which shows a growing gap between Riverside’s revenues and expenditures.
This spring, residents will be asked to give their input on priorities for village services through a survey that will be mailed out randomly to homeowners. Meanwhile, the village board will work as a group with village staff to come up with a menu of options for controlling costs and increasing revenues in the long term.
“We need the board to give us direction on what services are expected by the community, what are their priorities and expectations,” said Finance Director Christy Powell, “so we know what areas to target first.”
According to Village Manager Kathleen Rush, many residents can expect to see surveys in the mail by March or April. Rush’s expectation is to have the survey results available to present to the board by May or June in order for the board to start long-range finance planning sessions.
The survey will be similar to ones the village has sent to residents in the past, although this one will “have more policy-oriented issues” in it, said Rush.
“The 2006, 2007 budgets are really where the board is going to have to make some major decisions,” Rush said. “Where they decide if they are going to raise money by referendum or make critical service cuts.”
In a presentation to the board on Jan. 11, Powell said the difference between the money the village spends versus what it takes in will jump dramatically in the next four years if the village does nothing to reverse that trend.
Powell’s projections showed that the village, if it maintains the status quo, will spend $32,000 more than it receives in 2005. That number will jump to $138,000 in 2006 and to over $620,000 by 2009.
At that rate, the reserve balance the village has amassed in its general fund would be cut almost in half from the $4.2 million expected to be left in the fund at the end of 2005.
Such a scenario would still leave Riverside in relatively decent financial shape, but the ever increasing disparity between expenditures and revenues would put the village at risk financially a few short years after that.
The reason it may take at least four years for Riverside to hit the alarm bell, is that the $4.2 million expected to be in the general fund balance at the end of 2005 represents 61 percent of the village’s total annual expenditures. The $2.4 million projected to be left in the fund by the end of 2009 would be 33 percent of total expenditures, which is well within the range deemed acceptable by the investment firms that hand out prized bond ratings to municipalities.
“We do have very healthy fund balances right now,” Powell said.
One of the short-term options for the village is to spend down the fund reserves until the balance reaches an agreed upon level. According to Rush and Powell, that number seems to be 35 percent of annual expenditures. While that would allow the village to simply keep things as-is until 2009, that’s unlikely to happen.
Even though the village has been able to meet rising expenses by dipping into the fund reserves, it has not been able to add services along the way. According to Powell, Riverside has held the line on spending for resident services for the past five years.
Maintaining the status quo would mean continuing to deplete reserves without any extra services for residents. Realistically, the village would likely cuts some services and raise fees in order to maintain that status quo.
But, Powell warned that while a 60 percent fund balance may seem like a luxury, for a budget as small as Riverside’s it doesn’t amount to that much of a cushion.
“The problem with utilizing the fund balance is that it’s difficult to create,” Powell said. “Once you spend those fund balances, they’re gone. It’s something we like to be cautious about.”
Containing costs, finding revenues
Some suggestions for maintaining the village’s financial health, outlined by Powell at the Jan. 11 meeting, included containing costs in such areas as health insurance and pay increases for village staff.
Currently, the Village of Riverside’s non-union employees pay between 5 and 10 percent for health coverage. The village could recoup some money by raising the level of employee contributions. Pay increases for non-union employees have been around 3.5 percent.
The village board could also decide to decrease funding for capital improvements, although those savings would be offset somewhat by higher annual maintenance costs.
In terms of revenues, the only real avenue for substantial growth is through the referendum process.
“I do think a referendum is a possibility; we’ve talked about it several times,” said Trustee Thomas Shields, who chairs the board finance committee.
Just how a referendum would be approached is open for discussion. The village could seek an increase to the general fund tax rate, or it could target a referendum toward specific cost centers, such as the Police, Fire and Public Works departments.
The village could seek to pass a real estate transfer tax fee, which would bring in hundreds of thousands of dollars per year to the village. Or the village could consider a home rule referendum, which would give it broader power to raise taxes to increase revenues.
“It’s time to get a menu together before we really begin to make choices,” Shields said.