March 23, 2006

By Robert Mihalek

Village Council on Monday approved the first of two votes needed to adopt the 2006 Village budget, in which expenses are projected to outpace revenue by a total of $964,089.

At its meeting March 20, Council voted 4–0 to approve the first reading of the 2006 appropriations ordinance. Council president Jocelyn Hardman was absent.

Council will hold a second reading and public hearing on the budget at its next meeting, on April 3.

During a presentation, Village Manager Eric Swansen said the 2006 budget maintains service levels; makes it a priority for the Village to maintain infrastructure “that we have come to expect everyday”; and increase staffing in the planning office in response to the number of development projects and inquiries the Village is handling.

However, four of the Village’s main funds are projected to incur deficits because expenses, including capital items, are expected to be greater than revenue.

The deficits include $362,108 in electric, $92,196 in sewer, $145,291 in water and $368,348 in the general fund.

The budget includes a total of $1.6 million in capital projects, although the Village has received grant money to pay for portions of projects.

Several Council members expressed concern with the Village practicing deficit spending.

Council member Bruce Rickenbach said he was disturbed that the Village is “forced to dip into our meager reserves” to pay for capital improvement projects. He said this situation needs to be addressed in the 2007 budget.

Rickenbach also said that there’s “very little fat in the budget” and “very little opportunity” to reduce expenses, staff or services.

Swansen described the general fund as the community’s “biggest challenge.”

By the end of 2006, the general fund is projected to have $114,080 in reserves, or 4.59 percent of the fund’s expenses, except for capital costs. The fund’s year-end balance is projected to decline $366,848, or 76 percent, from its position at the beginning of 2006.

Swansen called the fund’s year-end balance “dangerously low.”

The general fund’s revenue is expected initially to be greater than daily expenses, by $705,709.

But after transferring over $1 million to other Village funds and spending $59,678 in capital costs, the general fund is projected to reach a deficit, and begin to spend down its reserves.

Swansen’s budget makeup is different from that of his predecessor, Rob Hillard, and he does not put the streets and parks department in the general fund, although money from the general fund subsidizes those two activities. These subsidies, $400,000 to the streets and $367,308 to parks, are considered transfers in the budget.

Without new revenue sources, Swansen said, the Village “won’t be able to fund operations” out of the general fund by next year.

The sewer fund’s revenue will outpace expenses by $23,995. However, additional capital costs, totaling $116,191, will force the fund to use almost half of its reserves.

The sewer fund is projected to end 2006 with a reserve of $112,473, 45 percent, or $92,196, less than its beginning balance for the year. The fund’s year-end reserve is projected to be 14 percent of expenses.

Swansen described the sewer fund’s budget as a “grim story.”

Because of the sewer fund’s low reserves, the Village postponed a project to upgrade the wastewater treatment process, Swansen said.

The electric fund is expected to incur an operating loss of $223,358. With the inclusion of $310,000 in capital costs, the fund will have to use more than a quarter of its reserves. By the end of 2006, the electric fund is expected to have a $1,064,621 balance, which is $380,608 less than what it started the year with. The year-end reserve represents 32 percent of the electric fund’s regular costs.

Revenue in the water fund is expected to be greater than operational costs, by $116,319. But when capital costs are factored in, the water fund will spend more than its projected revenue.

The water fund is expected to end the year with $249,085 in reserve, a decline of $145,290, or 37 percent, from where it started 2006. These reserves represent almost 53 percent of the fund’s yearly operating costs.

Swansen said the Village will not propose increases to utility rates or taxes this year to address the budget shortfalls.

Next year is a different story.

Swansen told the News last Friday that he plans to recommend that Council place on the November 2006 ballot a property tax levy to generate funds for daily operational costs in the Village general fund and to pay capital improvements for the Village utilities, streets and activities in the general fund. (See related article.)

The Village will also reduce costs by cutting overhead, raising fees and offering early retirement to employees, Swansen said.

During Monday’s meeting, Council member Judith Hempfling and Rickenbach expressed concern for the effect the budget could have on Village staff members. “It’s not fair to balance the budget on the backs of our employees,” Rickenbach said.

Hempfling urged the community to become involved in the Village’s budgeting process, calling it “extremely important” that the public understand “what we’re facing” and offer solutions.

Council member Karen Wintrow and Rickenbach also had concerns that the budget did not directly relate to Council’s goals for 2006. Rickenbach said there’s “no straight line” between the goals and the budget, only a “very curvy line.”

Swansen said that Council’s goal to create a prioritized capital projects list “rises to the top” of the Village agenda, and that the goals to address economic development and assist downtown businesses are important in light of the budget.

Contact: rmihalek@ysnews.com