While Riverside officials haven’t yet broached the subject of how to fund operational costs in the future, trustees came to a consensus June 6 on a funding source for capital costs beginning in 2015.

Starting in 2015 – when members of the current village board may or may not still be in office – capital expenditures will be funded by either rolling over a $2 million bond issue that will be maturing in 2014 or asking residents to approve a tax levy increase that would equal the impact of that $2 million bond issue.

In other words, trustees would like to implement what would amount to a tax-neutral strategy for funding such capital needs as sidewalks, facilities improvements, telephone systems and the like.

Just which option a future board might choose remains an open question, but the decision did not address the way the village should fund ongoing vehicle replacement, paying for unfunded capital needs prior to 2015 or bolstering the village’s general operating fund, which remains under pressure in the face of stagnant revenues.

The village’s Capital Improvement Plan, adopted with the 2011 budget last December, outlines a number a capital projects funded through 2015 – from sidewalk replacement to recreation equipment.

The plan also lists a number of projects that are unfunded but inevitable – including computer software and hardware upgrades (totaling $325,000) and improvements to the downtown train station ($1.4 million). In 10 years, the village will have to replace a fire truck, a future expense that could cost upwards of $1 million.

In addition, Riverside replaces police vehicles and ambulances on a rotational basis. In the past the board has set aside money in the budget annually for those expenses. However, in 2011 the board voted to not make a planned $253,000 contribution from the general operating fund to the vehicle replacement fund. Still, vehicles will have to be replaced prior to 2015.

How should the board plan for those costs? Should or should not the board earmark general operating dollars for capital projects in each year’s budget?

Village Manager Peter Scalera and Finance Director Kevin Wachtel say they’re looking from direction from the board in the form of a policy so they can begin formulating the 2012 budget.

Should there be a commitment to fund certain capital expenses – such as replacing squad cars and computer software – or not?

Trustees are split on just how strongly they want to commit to such a policy.

Some, like Jean Sussman and Ben Sells, say that without committing to such a policy, there’s no point in budgeting.

“I think we have to acknowledge that these are true costs,” said Sussman.

During a discussion of how to fund vehicle replacement, for example, Sussman and Wachtel said it makes sense to keep funding it out of general operating dollars because operation and maintenance of those vehicles is an ongoing annual cost. They aren’t one-time, long-term capital expenditures such as roads or a new roof for the train station.

Others, particularly board finance chairman Lonnie Sacchi say that there’s no point in committing to a funding policy that can’t be met.

“I know a real good reason why we shouldn’t do it,” said Sacchi. “We don’t have the money to do it.”

Instead of a set rotation schedule for vehicles, Sacchi would prefer to revisit the contribution amount annually based on factors such as the maintenance record of vehicles versus their trade-in value. He would also like to know about different payment options, such as leasing.

Sacchi has been consistent since his election two years ago of wanting to make decisions on capital expenditures as they come up. Sells, meanwhile, has been a proponent of budgeting for and honoring the budget regarding capital costs.

His view is that there is no true cost savings by deferring capital expenditures. It simply delays the inevitable, he said.

“I’d say that this question of should we budget a contribution to the capital projects fund I would say the answer to that question should be yes,” Sells said. “But I don’t hear a consensus on that. What I hear is that we’re going to continue to do that year by year, that we’re going to look at projects when they come up and then decide given the circumstances whether in any given year we have [the money].”

The exchange June 6 was typical of the kinds of discussions over budget policy the board has had since 2009, when the board majority of Sacchi, James Reynolds, Mark Shevitz and President Michael Gorman were elected.

Sells and Sussman have pushed an agenda of what they consider sound budget policy, while the majority has tended to react to events as they unfold. Elected on an anti-tax platform, the majority rearranged the budgetary funds, like eliminating the working cash fund, to give themselves more flexibility in allocating general operating dollars.

They have avoided talk of a general tax increase for operations and have used general operating reserves to fund operating budget deficits. While there has been broad agreement to do that, the two sides have disagreed on setting aside general reserves for capital budgeting, because, from a budgetary standpoint, it diminishes the pool of operating dollars that can be spent on day-to-day operations.

Projections show that the operating reserve will steadily decrease in a few years if cuts aren’t made in services. The board has been reluctant to make those cuts, although it has frozen salaries and deferred capital and pension spending.

The consensus on Monday for a possible tax levy increase to fund capital projects beginning in 2015 was the first such public agreement about any kind of general tax increase.

But faced with the prospect of ongoing capital expenditures with no source of funds other than general operating reserves, the board majority let the minority provide a touchy solution.

After hearing Sussman state that the majority wanted to avoid setting policies and guidelines because predicting revenues and expenditures were always going to be inexact, Reynolds demanded to know what Sussman would do about it.

“We’ve stated the problem over and over again,” Reynolds said. “What are your solutions to this problem? Bring something to the table; tell us what you think.”

Sussman responded by saying that the board ought to start dipping into the general fund to fund capital projects over the next couple of years.

“We cannot stop investing in capital in this village and wait until 2015,” Sussman said.

When Sussman turned the question around, Reynolds stated that the board needed to deal with budgets on an annual basis.

“We have to look at what our current revenues are and try to budget whatever we can,” Reynolds said. “How do we give them the guidelines to do the budget? I think we tell them that we’re between a rock and a hard place and come up with your best solution for what you think we should do.

“It boils down to this: Do you want a tax increase or another funding source?”