In the end, it took about an hour for elected officials in North Riverside to settle on the best way, for now, to bridge a roughly $2.4 million deficit in its proposed 2020-21 fiscal year budget.
But they avoided the subject for about nine and a half frustrating hours over two nights before arriving there, with trustees picking at small-dollar line items and debating operational issues such as the police department staffing schedule.
To eliminate the shortfall, trustees directed Village Administrator Sue Scarpiniti to eliminate almost all capital expenditures from the 2020-21 budget, deferring the purchase of three police vehicles and two cardiac monitors sought by the fire department and put off projects to upgrade the village’s website and village hall’s telephone system.
This year’s road improvement project was deferred in exchange for a project that will bring sidewalks to a part of the village’s south side that has never had them. North Riverside will also defer its next phase of replacing the Cermak Road water main, instead focusing water/sewer dollars toward a $1.3 million project to repaint and maintain the water standpipe on 26th Street.
Trustees also agreed to fund police and fire pensions at a level somewhat lower than the full actuarial amount, but still within state requirements, a savings of about $336,000.
The rest of the budget deficit – about $1.2 million – will be covered by tapping the general operating fund’s cash reserve, which at the start of the fiscal year on May 1 stood at about $5.5 million.
“If there’s going to be a blip on the radar, this is the year,” said Mayor Hubert Hermanek Jr. in a phone interview following the two-night budget workshop on June 29-30. “That’s why you have a reserve, because you don’t know what’s going to happen.”
Scarpiniti and village department heads were working on the 2020-21 budget when the COVID-19 pandemic struck, forcing revenue assumptions to be reconsidered without really knowing what the impact was going to be and for how long.
Officials really don’t know the impact on revenues like sales taxes and the village’s restaurant/bar taxes, because they won’t receive those numbers from April until later this month and won’t receive May’s receipts until August.
“We’re going to adopt a budget based on a worst-case scenario using $1.2 million out of reserves,” Scarpiniti said, adding that the budget doesn’t factor in any assistance the village might receive for COVID-19 relief from federal, state or county sources or business-interruption insurance payments the village might receive as a result of the civil unrest in late May/early June.
Scarpiniti said elected officials will meet again in late August or early September, when they will have more solid figures about COVID-19-related impacts to revenues, and then reconvene quarterly to discuss the budget and make amendments based on the new information.
She also recommended that elected officials confront the single largest budget line item that traditionally accounts for annual operating budget deficits that need to be bridged – police and fire pensions.
“Now, let’s address the elephant in the room, which is the police and fire pension fund contribution,” Scarpiniti told trustees five hours into the second night of the budget workshop on June 30.
Historically, going back many years, trustees have avoided the ever-growing pension obligations, instead using them for many years as a way to balance budgets by either underfunding pensions or not contributing any money to the funds at all.
For 2020-21, trustees decided to contribute roughly $3.3 million to its fire and police pension funds. That’s about $215,000 more than the village contributed last year.
Scarpiniti had given trustees three options: Contribute the full actuarial amount, which was more than $3.6 million; contribute the statutory minimum allowed by the state, which was about $3.17 million; or what she termed a “transitional” amount of $3.3 million, which would allow the village to catch up to the full actuarial contribution over four years.
Initially, all trustees except for H. Bob Demopoulos, said they wanted to fund pensions at the full actuarial amount. Demopoulos suggested the statutory minimum due to the extraordinary circumstances caused by the pandemic.
But trustees, except for Demopoulos, came around to the transitional amount after Scarpiniti said the village could decide later in the fiscal year to contribute more should economic circumstances allow it. Demopoulos still favored funding at the statutory minimum.
In recent years, the village has used proceeds it receives from red-light camera fines to fund pensions, but with the pension obligation growing and with red-light camera revenues in jeopardy on several fronts, Scarpiniti urged trustees to find a solution.
One avenue open to the village is to impose a property tax for police and fire pensions, something allowed by law, but an option that requires voters to approve via referendum. Scarpiniti recommended that trustees go to voters and find out whether they would go for such a tax.
“This is a discussion we have every single year at budget time,” Scarpiniti, who has served as the village’s finance director since 2001 and was elevated to administrator earlier this year, told trustees. “These pension funds for police and fire take up almost $3.5 million of the village’s total operating budget. That is the deficit we’re talking about pretty much every year. …
“The board has to look for a long-term solution, and politically you’ve always taken what I’m going to tell you is the easy way out … and you’ve used the pension funds to balance your budgets at the expense of the pension funds historically.”
While trustees seemed skeptical that such a referendum would pass, Trustee Joseph Mengoni and Demopoulos suggested perhaps asking voters to make North Riverside a home rule community, which would give village government greater taxing powers.
“I think it would not be irresponsible for us to at least discuss the possibility of these referendum questions, because the situation we have in our budget is not just a one-time COVID situation,” Scarpiniti said. “Unfortunately, the board has never wanted to take that discussion on.”
Even without the impact of COVID-19 factored in, Scarpiniti was projecting about $1 million less in revenues, much of that in the form of lower red-light camera fines. Earlier this year the Illinois comptroller announced that her office would no longer collect those fines using its Local Debt Recovery Program.
Scarpiniti said that decision shaved off about $300,000 in revenue for fiscal year 2019-20 and will reduce collections in 2020-21 by about $700,000.
“I think we’re going to see continued pressure on that revenue stream,” Scarpiniti said.
But, there was no talk of removing the cameras, which are unpopular to motorists, because of the revenue they produce.
“Without that money, I don’t know what this village would do, because red-light camera money makes up almost $1.5 million of our total revenue. … You could say that funds one of your pension funds right there, in and of itself.”