Council notes general fund surplus decline
- Published: March 11, 2010
Are there ways for the Village to increase revenues and/or decrease costs? Village Council members considered this subject at a special general fund budget workshop on Saturday, March 6. Contributing to the urgency of the discussion was the projected 2010 drop in the fund’s year-end surplus, which was caused by an increase in contracted services and a large unexpected repair project, according to Village Finance Director Sharon Potter.
The March 6 meeting was discussion only. Council will vote on the first reading of the 2010 Village budget at its March 15 meeting, and will hold the final vote at its April 5 meeting.
In recent years, Council has aimed for an end-of-year surplus of 50 percent of the general fund, meaning that if revenues suddenly ceased, the Village could still function for six months. While the Village 2009 budget surplus at $1,804,743 was about 50 percent of the general fund, the projected 2010 surplus of $1,375,765 has declined to 35 percent of the fund.
The general fund is the main operating fund for Village human services and infrastructure, with its main revenue streams the Village income and property taxes, along with small contributions from fees and other sources. The other major Village funds, the utility funds, are largely self-supporting.
While dipping into the general fund surplus is not ideal, the projected 2010 surplus is workable, according to Village Manager Mark Cundiff, in response to a concern from villager Ali Thomas, who stated that the $500,000 drop in the surplus seemed to indicate a lack of frugal management.
“We have capital needs that snuck up on us,” Cundiff said. “I share your concern, but I don’t know where to cut to lessen the amount.”
While the 2009 general fund budget showed a drop in income tax revenues from a loss of jobs at Antioch College and The Antioch Company, that drop had been mainly anticipated and is not a major factor in the surplus decline, according to Potter. The Village had anticipated that its income tax receipts would decline by about $50,000 between 2008 and 2009, although that amount turned out to be closer to a $100,000 drop, according to Cundiff in a later interview. Income tax receipts are anticipated to rise by about $50,000 in the 2010 budget.
However, the reduced surplus was mainly caused by increased expenses, Potter said. The Bryan Center roof needs to be replaced, which is an unexpected 2010 expenditure of about $250,000.
“This building is a great asset to the community, but also a great financial drain,” said Council member Karen Wintrow.
Council members also noted that the 2010 budget shows the Village significantly increasing its contracted services, with an increase of about $179,000, or 40 percent, more than last year.
Part of that increase reflects ongoing litigation, including a suit brought against the Village by Kenneth Struewing, which leads to more hours billed by Village Law Director John Chambers. The 2010 budget also shows more contracted engineering services for Village planning efforts, and can be linked to current work on the Northern Gateway, Safe Routes to Schools and the sidewalk repair program, according to Cundiff in a later interview. He will confer with Village Assistant Planner Ed Amrhein about the specific uses of the consultant fees, and return to Council, Cundiff said.
Ways to hike revenues, cut costs
The Village’s current revenue streams do not adequately tax its citizens, according to longtime Council member Tony Bent, who stated to Council that the Village income tax would more accurately be called a “wage tax” since it taxes wages paid to those who work in the village rather than other sources of income, especially that of seniors.
“The village is becoming older and richer,” Bent said, stating that between his retirement and the 2006 property tax levy, he and his wife, Ruth, “lived in the village for 20 years without paying a nickel. We got 20 years of services at no cost.”
When considering a replacement for the property tax levy, Council should “begin getting some income from retirees. Be sure you’re protecting the income stream of the Village.”
Council will this year consider renewing or replacing the 2006 property tax levy, which provides about 28 percent of the general fund revenues, according to Cundiff this week. In past meetings, several Council members have stated that they favor replacing the levy at a lower rate.
The decline in the Village general fund surplus illustrates the need for local economic development, according to Karen Wintrow.
“To me, this underscores the need to put an emphasis on getting jobs here,” she said. “This would provide both wage taxes and jobs for citizens.”
Council members considered a variety of ways to cut costs, including using in-house services rather than contractors, when possible. Rick Walkey suggested trying to pay down the Village’s bond on the Bryan Community Center, since the interest on the bond runs between 5 and 6 percent, he said, and the Village could save those interest costs. Cundiff said he would check into the feasibility of doing so.
Council should keep in mind that the two largest expenditures in the general fund are for the streets and the police departments, according to Council President Judith Hempfling, who suggested that ways to trim costs in both departments should be considered. For instance, she said, the Village could set a target amount each year for street maintenance, with a goal of “doing as good as upkeep as possible within our priorities.”
Question of priorities
“We could spend millions on streets,” Hempfling said, stating that, “I feel streets shouldn’t be a higher priority than green space.”
The 2010 budget projects $405,000 to be spent on streets this year, which includes repairing catch basins and maintaining the pavement management system. The 2010 budget identifies $50,000 to be allocated to the greenbelt fund.
With that allocation, the greenbelt fund will have a balance of about $97,000. Last year, Council allocated $100,000 to the greenbelt fund, bringing the total to $237,000, although $191,000 was recently contributed to the conservation of two farm properties, including the first officially preserved land in the Jacoby greenbelt, which the Village has for decades considered a priority for preservation.
However, an optimal amount in the greenbelt fund would be $250,000, according to Tecumseh Land Trust Director Krista Magaw at the meeting. With that amount, TLT could leverage $1 million for green space preservation, since the municipal share of conservation easements is about 20 percent, with the federal government kicking in 50 percent, and the landowners donating the balance.
About 1,900 acres of unprotected land, at an estimated value of $3.8 million, remains in the Jacoby greenbelt, according to Magaw. While that amount seems too high for the Village to tackle, it’s important to remember that the Village share would be around 20 percent, which would likely be spread over the next 10 to 15 years, according to Magaw. All in all, the Village share of protecting the entire Jacoby greenbelt would be about $800,000, given the federal leverage, she said.
“There’s never been a better federal matching program than this,” she said. “It feels do-able when you realize the Village takes responsibility for only 20 percent.”
Magaw repeated her earlier suggestion to Council that they should earmark a consistent annual amount for the greenbelt fund, so that TLT leaders and Jacoby farmers could better plan for the easements. Currently, the Miami Township Trustees earmark up to $103,000 yearly for green space preservation, funded out of estate taxes, and the Village could use the same revenue source, according to Magaw, who noted that Village estate taxes have been approximately $250,000 per year in recent years.
Council members expressed some disagreement on the purpose of Jacoby greenbelt preservation, with Wintrow saying that, “If it’s just to stop growth, it’s the wrong use of funds.”
Rather, Wintrow said, greenbelt preservation should allow “some level of growth close to current boundaries,” in exchange for protection of significant farmland.
If the Village and the Township agree on where new development would be allowed, development rights could be traded between the entities, according to Magaw, who said that, “the hardest thing is the agreement over what you want to develop.”
Such a discussion could take place after the current visioning effort is finished, she said.
Council members disagreed over a proposed street project aimed at improving stormwater drainage on Winter Street, where neighbors have for years lobbied the Village to repair drainage problems that they say were caused by previous Village street work.
The project is estimated to cost about $150,000.
However, there is a need for drainage improvements village-wide, according to Hempfling.
“Before we spend that much money for a specific need, we need to look holistically at the system,” she said. Walkey agreed, stating that the “piecemeal approach is not cost effective,” and that the “sqeaky wheel approach doesn’t work.”
However, Wintrow disagreed, stating that, “I don’t mind the squeaky wheel,” and that neighbors had documented the problem over a period of years.
One of those neighbors, Paul Abendroth, who owns a rental property on the street, stated that, “If you take this out of the budget now, it will never get done.” He urged Council to leave the money for the project in the budget.
Council voted 4–1 to leave the money in the budget until there is more time for discussion, at which point the project may or may not be pursued. Walkey voted against leaving the project in the budget.