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Revised budget back in red again

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Village Council’s recent decision to finish downtown streetscape improvements in 2016 has tipped the general fund budget back into the red by roughly a quarter of a million dollars. Budget figures presented at Council’s latest round of budget talks, on Nov. 2, revise the earlier forecasts of a surplus in the 2016 general fund, which represents the majority of the Village’s operating budget outside of its enterprise funds.

Instead, the latest 2016 budget projects revenues of $3,070,962 and expenditures (including transfers out of the general fund to other Village funds) of $3,306,665, putting the general fund $235,703 in the red. Though the revised budget dips into general fund reserves, the reserve balance remains $400,000 over recommended minimums.
The general fund budget was in the red in 2013 and 2014, and will likely end 2015 with a deficit. The previously presented 2016 budget figures had broken out of that pattern owing to larger-than-forecast revenues in 2015 (particularly from income tax) and more conservative spending, according to Assistant Village Manager/Finance Director Melissa Vanzant.

But the costs associated with finishing streetscape improvements in 2016, now budgeted at $368,000 ($218,000 for the streets portion and $150,000 for electric), have resulted in another deficit budget. Previous versions of the budget assumed the Village would proceed with the next phase of streetscape in 2016; the latest budget reflects the cost of completing the project.

Several Council members spoke in strong support of finishing streetscape improvements next year.

“It’s a pretty important project,” said Council Vice President Lori Askeland, who also made a distinction between this budget and previous years’.

The Village is “strategically investing [its] reserves,” rather than dipping into fund balances to cover operating expenses, as some past budgets have done, Askeland said.

President Karen Wintrow echoed this view. There’s “nothing frivolous” in the 2016 budget, she said.

“We have been in the past looking at going into the red for general fund operating expenses. We’re out of that now,” she contended.

Two areas of work remain to be done on the streetscape project, Village Manager Patti Bates said by phone last week. On the west side of Xenia Avenue from Corry to Limestone streets, the Village will be replacing sidewalks, curbs and gutters, as well as installing new light poles and street trees. Infrastructure under the sidewalks that needs to be fixed or replaced will also be addressed at that time, she said. On the east side of Xenia Avenue, only the area of sidewalk in front of the Speedway remains to be done. (The Mills Park Hotel has taken care of the stretch of sidewalk along its front to Limestone Street.) The Village plans to bid the project out on Jan. 1, 2016, with the hope of beginning when the weather breaks in the spring, Bates said.

The streetscape project began under Bates’ predecessor Laura Curliss in 2012. Initial plans to repair downtown sidewalks evolved into a decision to tackle a more comprehensive streetscape redesign on both sides of Xenia Avenue from Corry to Limestone streets. Because of the widened scope and considerable community comment, previous Councils decided to unroll the work in phases. The current Council’s determination to finish the project effectively rolls phases three and four into a single final phase, Bates explained.

During the Nov. 2 meeting, Council member Brian Housh argued that the Village would save on costs by completing phases three and four together. Bates clarified by phone that the Village would save by paying a one-time mobilization fee for the work and by benefiting from lower per unit materials cost. She said it was hard to estimate the amount of savings.

The larger scope of streetscape spending in 2016 is also pushing the 2016 electric fund, already significantly in the red, further into deficit spending. The latest figures project a 2016 electric fund deficit of $944,217, approximately $185,000 more than the previous iteration. Streetscape and other smaller capital expenditures are responsible for that increase.

But the majority of the projected deficit stems from the decision to allocate $500,000 from the electric fund into the electric capital improvement fund, a sort of “rainy day” account for future capital and debt service needs. In the past, that fund and other capital funds have gone unused, Vanzant said.

The allocation reflects an effort to make a clearer distinction between operating and capital expenses, she said, not just in the electric fund, but across the board.
“We’re separating the cost to operate from the cost to make improvements,” which should help future Councils make smarter spending decisions, she said.

Despite the deficit, the electric fund’s reserves, at $1,703,315, are still expected to be comfortably over the minimum fund balance of $1,160,863 by the end of 2016.
The water fund also moved into the red during this round of budget revisions. The previously presented budget had been modestly in the black, but is now showing a deficit of $40,870. That change reflects an appropriation in 2016 of slightly more than half of the $450,000 the Village spent on consultant fees for the new water plant, said Vanzant this week. “We’ll get that money back via our loan, but we have to front it,” she said.

The water fund’s reserves, at $192,073, are projected to be below the minimum reserve balance of $316,739 by the end of 2016. Vanzant said she was comfortable with that dip, given that it will be offset by loans for the new water treatment plant in coming years.

“I don’t find it concerning at this point,” she said.

She added that the Village was keeping a “better eye” on reserves. “We want to make strategic use of taxpayer money and not have exorbitant reserves.” This budget reflects that approach, Vanzant said.

No other major changes to the previously presented budget were highlighted during Council’s Nov. 2 talks.

Wintrow praised the ease of this year’s budget process.

“It’s the most painless budget I’ve ever participated in,” she said.

Now that three rounds of budget talks are completed, Council will hear the first reading of the 2016 budget ordinance at its Nov. 16 meeting.

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