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Feb
28
2024
Village Council

Village Council broaches budget shortfall

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On Sunday, Dec. 4, members of Village Council received a memo from Village Manager Josué Salmerón, indicating the Village’s budget was forecasting a deficit of $3,011,720. The memo left Council with two options: cut spending or increase revenues.

At their regular meeting on Monday, Dec. 5, Council members discussed their options in an hour-long first reading of an emergency budget ordinance.

Council members Marianne MacQueen and Gavin DeVore Leonard began with comments about the extreme picture painted in Salmerón’s memo, with MacQueen suggesting Council schedule an additional work session to discuss the new information. According to DeVore Leonard, Council was aware of some deficit spending, but was blindsided by the new numbers — triple the amount discussed in Council’s budget meeting on Nov. 21. See pages 1 and 9 for coverage on Council’s previous budget sessions.

“We just worked to address a significant deficit,” DeVore Leonard said. “We had talked about a 1.2 million dollar deficit and worked it down to a few hundred thousand dollars.”

Salmerón said the deficit Council members addressed at the Nov. 21 meeting was a deficit in the general fund. The new numbers included in Salmerón’s Dec. 4 memo reflect deficits in three additional funds: the special revenues fund, the capital fund and the enterprise fund.

“We reallocated funds to bring the general fund deficit down to the $300,000 range,” Salmerón said. “We looked at cash reserves we had in the special revenues fund to make up the difference for the general fund deficit.”

Focusing on the capital improvements fund, which is projected to have a $496,999 deficit, Salmerón said the funds are placed there in anticipation for projects in 2023, including a $438,000 sewer relining project and progress toward a state mandate that all galvanized and lead pipes be replaced by 2024.

“I’m not concerned about the amount of money we’re spending in the capital improvement fund because we have been putting that money aside,” Salmerón said. “Where there is some heartburn for me is the enterprise funds.”

Referencing a presentation by Courtney & Associates at the Nov. 21 meeting, Salmerón said his immediate concern was the need to increase utility rates to cover costs.

“We have a shortfall on the operations side,” Salmerón said.

The recommendation from Courtney & Associates was to increase utility rates at an incremental pace, with a total increase of 6% for the electric rates, 41% for water and 24% for sewer.

Salmerón recommended the rate increases be phased in and include a 2% increase to adjust for inflation, resulting in a 13% increase for electric, 42% for water and 26% for sewer by 2027. In 2023, customers would see a 5% increase in electric costs, a 10% increase for water, and a 6% increase for sewer.

Salmerón said there has been an ongoing conversation about deficits and spending down cash balances. Council discussed these cash balances in July when the Village presented its tax budget to Greene County.

Asked about the discrepancies between the numbers in July and the current numbers, Salmerón said the current numbers include expenses that imagined a fully staffed public works department in addition to wage increases and additional personnel for the police department.

The additional personnel in public works would allow the Village to save money — $150,000 per Salmerón’s estimations — spent on outsourcing projects due to staffing limitations. The police department budget increase — $25,000 for wages and pensions — would decrease burnout, ensure the Village is offering competitive wages and help with staff retention, according to Salmerón.

“This enterprise fund incorporates those recommendations — the creation of new positions and wage enhancements for those positions,” Salmerón said.

Salmerón identified other options to generate revenues, including selling renewable energy credits, or RECs, and raising the reciprocal tax, meaning villagers working in other municipalities would pay additional taxes to Yellow Springs.

Council member Kevin Stokes said he hoped that Council would consider selling RECs in the future.

“If we just set aside our philosophical concerns about selling RECs, that’s a source of revenue that would lessen some of the pain we are feeling now,” Stokes said.

Council member Carmen Brown said she would like to see all REC sales go to the public works department to ensure improvements were being made.

Stokes asked about the possibility of an additional work session prior to the second reading of the budget ordinance on Dec. 19. Salmerón said he was open to an additional meeting, or to meeting with Council members in smaller groups.

“For next year, I would like that we go line item by line item,” Salmerón said, acknowledging the need for a straightforward budgeting process. “It means we cover everything.”

In response to the information shared about possible revenue streams, DeVore Leonard asked Salmerón how aggressively Council should pursue additional revenue.

“What happens if we do nothing,” DeVore Leonard asked. “You’re saying the only way to make this budget work is to pass a reciprocal tax [in 2023]?”

“We can absorb a $300,000 [general fund] deficit in 2023,” Salmerón said.

Finance Director Amy Kemper said the Village could “live off their savings” for one more year, but then Council would either need to cut spending or increase revenues.

“If you lose your job, you can live off your savings for one year, but you can’t do it for five years,” Kemper said. That’s where we are right now. There’s a lot of room for improvement.”

Council President Brian Housh said that the Council needed to focus on the task at hand — passin g the budget — although he appreciated Salmerón’s memo.

“We need a reality check,” Housh said.

Council members decided to add a work session prior to the Dec. 19 meeting. Housh said he was fine with an added meeting but would appreciate it if Council members were clear with their requests and talked to the village manager and finance director to address individual questions and concerns.

“I love it being discussed in public, but we need to give some direction on what we need,” Housh said.

Council will hear a second reading of the 2023 budget ordinance at its Dec. 19 meeting.

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