Riverside’s village board is pushing back against financial projections suggesting that it will be running annual budget deficits approaching $1 million in five years unless revenue rise or expenditures are cut.
On Sept. 15, President Ben Sells called the projections “doomsday assumptions” and suggested that staff take another look at the numbers as they craft a preliminary operating budget for 2017.
“All I know is we’ve seen these kinds of projections, when I was a trustee, that the sky is falling, the sky is falling, the sky is falling,” said Sells, referring to dire predictions made in 2008 and which resulted in a failed property tax referendum and a voter revolt in 2009 against candidates for office aligned with that village board.
“And then every single year since I’ve been a trustee, there’s been [an operating] surplus. So I’m just not willing to instill that kind of fear among staff … on the basis of projections that we know historically have been wrong year after year.”
Riverside Finance Director Marco Salinas said his “conservative” projections were based on a stagnant property tax base, where equalized assessed valuation of property has fallen in recent years and the village’s ability to extend its annual tax levy has been hampered by minimal increases in the consumer price index, on which the tax levy is based.
The consumer price index for the 2016 tax levy, to be collected in 2017, is 0.73 percent, not counting the value of new development in Riverside. For budgeting purposes, Salinas projected an increase of just $33,000 over the 2015 tax levy.
Meanwhile, Salinas has projected expenditures, which are principally wages and benefits for village employees, to increase 3 percent.
Based on those figures, Salinas said it was likely that the preliminary 2017 budget would predict a sizeable operating fund deficit.
Village Manager Jessica Frances asked if village trustees were open to making cuts to “non-essential” line items in the budget, suggesting trimming seasonal employees or cutting money for community events.
She also wanted clarification on how comfortable village board members were with using cash in the village’s operating fund surplus to cover the deficit. But it was clear from staff projections that using the operating surplus to cover annual budget shortfalls was a very short-term solution.
The five-year financial forecast presented by village staff on Sept. 15 projected five straight years of deficit budgets, with the projected operating deficit growing from roughly $261,500 in 2017 to $977,000 in 2021.
But Sells balked at the prospect of staffing and programming cuts and instead wondered if the projections being used by staff were too conservative.
When Sells was a trustee in 2008, staff also predicted enormous future deficits that would jeopardize the village’s ability to deliver services unless revenues increased, which led to the doomed property tax referendum.
In reality, however, the village of Riverside’s operating fund balance increased from $3.8 million in 2008 to $5.5 million in 2015.
“For years we’ve been seeing these kinds of draconian deficits – then we have a surplus,” Sells said. “So, I’d be loath to start doing what you just talked about when we really haven’t seen these projections matching reality.”
Salinas said he would consult with the Riverside Township assessor to try to get more precise estimates for the value of new development and to see what the effect of next year’s triennial reassessment might have on equalized assessed valuation of property in Riverside in future years.
Salinas might also take a second look at the 3-percent annual projected increase in personnel costs. Union contracts call for 2.5 percent salary increases, and it’s often the case that the village has vacant positions in a given year, though those cases are hard to predict.
Village trustees appeared to agree in principle with Sells suggestion that the financial forecast assumptions needed tweaking, but they also appeared wary of the deficit issue.
“Maybe we don’t take an ultra-conservative view of our projections,” said Trustee Doug Pollock. “But you can’t start with a deficit budget as your plan.”