The financial outlook for Riverside in the second half of 2009 is getting worse, not better. Finance Director Kevin Wachtel on July 20 told village trustees that with six months in the books, he’s now projecting an additional $150,000 shortfall between expenditures and revenues in the village’s general operating fund.
In March, Wachtel reported that revenues were lower than expected and at that time said the village’s general fund could expect a shortfall of $387,000. Last week, that number was adjusted to $537,000. And it could get worse as the year goes on.
“It’s tough to tell, because I don’t know how the third quarter is going to come back with revenues,” Wachtel said in a separate interview. “After the first quarter I didn’t expect to come back and say anything about another $150,000.”
In response to the first quarter projections the village board on July 20 eliminated some budgeted fund transfers for vehicle replacement and capital improvements from the general fund in order to cover that shortfall. They also eliminated funding for out-of-state travel for employees going to conferences and voted to fund just a portion of employee pension contributions for 2009.
With the picture getting worse, the village board may also decide to eliminate a special reserve in the general fund that is set aside for debt service. Doing so would move roughly $350,000 back into the undesignated general fund reserve and could be used to help cover additional shortfalls.
Revenues, not expenditures are driving the operating shortfall, Wachtel said.
Expenditures for the first six months of 2009 are down 3.3 percent over the same time period in 2008, according to Wachtel. That reduction in expenses includes higher costs for police and public works overtime experienced in 2009.
But revenues are off in several areas, especially in the village’s share of state income taxes, utility taxes, sales taxes and administrative towing fees. Between those four areas alone, Riverside is expecting to receive $447,000 less than originally budgeted.
The state income tax payments are lower for two reasons, Wachtel said. The first is a result of the overall state economy, while the second is the state’s ability to actually pay up.
“They’ve got to have cash available to distribute,” Wachtel said.
The village’s condition could have been worse, however, if not for a decent 2008, financially.
According to the village’s 2008 financial audit, released in late June, Riverside finished up the year well in the black. By the end of 2008, the village’s general fund reserve actually increased by just over $401,000. The total of the fund balance at the end of 2008 is listed in the audit as nearly $4.2 million. Of that number, the total amount of undesignated cash reserves was about $3.5 million, which was roughly 46 percent of annual expenditures.
Riverside’s policy for the general fund reserve is that it equal no less than 25 percent of annual expenditures.
But with no new sources of revenue, Riverside will have a tough time balancing the general fund in the next several years, according to Wachtel.
If no changes are made to the budget in 2010, Wachtel has projected a general fund deficit of $639,000. The deficits are projected to accelerate in following years to $804,000 in 2011, $951,000 in 2012 and $1.14 million in 2013.
