For the second consecutive year, the village of Brookfield has had to come up with a way to address a cash flow issue, caused in large part this time by a large, late-year debt-service payment.
Whereas the village board in 2018 chose to address the situation by establishing a $2 million line of credit at First National Bank of Brookfield and repay it at 4 percent interest, the village is adopting another strategy this year.
On Dec. 12, the village board met at a special meeting to approve using up to $750,000 in its special cash reserve to help the village solve its temporary cash crunch. Officials will repay that amount, plus 2-percent interest to the reserve fund when the village receives its first installment of property tax revenues in the early 2020.
“The bottom line is that at the end of the year we have significant debt service payments, and we’re cash poor while waiting for the next property tax revenue payment,” said Village Manager Timothy Wiberg. “To bridge that period, we need the money.”
The village board has acted a couple of times in the past decade to solve cash-flow issues via a line of credit at the bank, and staff and elected officials in the past have been loath to dip into the special reserve fund, which was created in 2010 to establish a “rainy day fund” for when funds are needed.
The village’s goal has been to get that fund up to 25 percent of annual operating expenditures, or roughly $4 million.
To date, however, it has only succeeded in creating a cash reserve of $1.7 million, representing about 10 percent of annual expenditures. The last time the village was able to direct operating funds into the special reserve was in 2015.
As a result, including in 2018 when faced with a similar cash crunch, village officials opted for a line of credit rather than using money from the special reserve. In June 2018, Finance Director Doug Collins argued that the fund should only be tapped in extraordinary circumstances.
“My concern is, once you open that door, you might want to do it again and again, because it’s an easy solution to a tough problem,” Cooper said at that time.
The special reserve ordinance passed by the village board back in 2010 anticipated its attractiveness as a quick solution, and trustees included language specifically requiring village board approval to use the funds.
The village’s cash position got dicey as of Dec. 1 when the village made a debt service payment of nearly $3.1 million.
But, this year Cooper argued in a Dec. 9 memo to the village board that the village had ample cash in reserve to bridge what he predicted would be a shortfall of about $590,000 on Dec. 31.
Instead of paying interest to a bank – which could run as much as $18,000 – the reserve fund is essentially loaning the money to the general operating fund, which will repay the special reserve with interest.
“In accordance with the policy, the reserve fund would be reimbursed from the available resources within six months of the first draw down of the funds,” Cooper wrote in his Dec. 9 memo.
Brookfield expects its first installment of property taxes from Cook County to land in February, when repayment of the reserve will begin.
Wiberg said the hope is to eliminate the need to address such cash shortages in the future.