Village of Northbrook Committee of the Whole Oct. 11.
Here are the minutes provided by the committee:
1. ROLL CALL
| Attendee Name | Title | Status | Arrived |
| Kathryn Ciesla | Village President | Present | |
| Bob Israel | Trustee | Present | |
| Muriel Collison | Trustee | Present | |
| Heather Ross | Trustee | Present | |
| Johannah Hebl | Trustee | Present | |
| Dan Pepoon | Trustee | Present | |
| Joy Ebhomielen | Trustee | Present |
A. Board of Trustees - Committee of the Whole - Sep 13, 2022 6:00 PM
| RESULT: ACCEPTED [6 TO 0]
MOVER: Bob Israel, Trustee SECONDER: Dan Pepoon, Trustee AYES: Israel, Collison, Ross, Hebl, Pepoon, Ebhomielen ABSTAIN: Ciesla |
None
4. DISCUSSION TOPICS
A. Presentation of Annual Comprehensive Financial Report and Management Letter for Fiscal Year Ended April 30, 2022
Chief Financial Officer Iwona Petryszak began by stating that FY 2021/22 ended with an adjusted surplus of approximately $3.9 million. Revenues as compared to original budget were approximately 20% higher; expenses compared to original budget were approximately 5% less. Equity transfers of approximately $5.5 million include $4,750,000 to the new Facility Fund. Approximately $400,000 was
Village of Northbrook, Illinois Page 1 Updated 10/18/2022 6:20 PM
Minutes Board of Trustees October 11, 2022
transferred to Pensions. $310,000 was transferred to the Parking Fund and $80,000 to the Sewer Fund. Fund balance as a percentage of revenues is 43.8 % and fund balance above the 40% targeted policy after the transfers is approximately $2 million.
A historical summary of revenues and expenses for the last five years shows revenues as compared to last fiscal year are approximately $12.5 million higher. $4.3 million is from sales tax. Bond proceeds and ARPA Funds are a little over $4.3 million. Income and replacement tax is about $1.6 million higher as compared to prior year.
Sales tax continues to be a major revenue source for the General Fund at 29% and the second revenue source is property tax at 17%.
Budget to actual sales tax receipts for the last fiscal year exceeded budgeted amounts. This is largely due to internet sales tax, cannabis sales, inflation and conservative budgeting after COVID. Manager Pavlicek stated that the numbers were developed in early 2021 and that the budget was conservative due to COVID.
A slide showed historical sales tax by the different business types. Categories were developed internally. A slide showed sales tax for the various shopping areas within the village. The Board was supportive of the two new sales tax charts.
Expenses as compared to the amended budget are about 5% lower. Expenditures by class show the highest variance are for salaries and capital. General Fund expenditures by the different departments show that Public Safety is 65% of the General Fund expenses.
A slide showed User fee based funds in comparison to expenses. The Parking fund looks good but it is due to the transfer from the General Fund of $300,000. Sewer/Stormwater fund expenses exceeded revenues. Both funds need to be looked at more closely. Overtime compared to the prior year is 4.5% higher. Trustee Israel asked if it is related to staffing shortage. Public Works total overtime was down due to fewer storms. Fire and Police were up due to vacancies.
President Ciesla asked Mr. Amen if he found any discrepancies in the audit. He stated that if an abnormality was found, it would be investigated. He stated the Village audit was normal. B. Initial Discussion Regarding Water and Sanitary Sewer Rate Study
Deputy Public Works Director Matt Morrison stated tonight’s meeting would focus on the Utilities Rate Study with the Village consultant, New Gen Strategies & Solutions. Mr. Morrison introduced Eric Callocchia, representing New Gen Strategies & Solutions. Mr. Morrison provided background for when utility rates were last increased. He stated that staff was asking the Board to consider the following policy areas as part of the development of the utility rate study: 1) Capital funding; 2) Fund reserve policy; 3) Rate structure. Staff will come back at a later date with a new draft rate study, but that these important policy areas will affect the utility rate study. Mr. Callocchia stated that the primary goal is financial sustainability for the long term. Northbrook is a regional water supplier, supplying water to the Village of Riverwoods and the Missionbrook Sanitary District. Users are using less water each year. The methodology used in developing the rate analysis is broken down into four stages of revenue requirements: 1) Costs revenue requirement; 2) Cost of service; 3) Financial plan; 4) Utilities pricing. Mr. Callocchia believes that the system should be financially self-sufficient with no subsidies from other users. The model goal is for ten years but the rate window will look at a five year period. He stated that expenses drive the needed revenues.
Mr. Morrison stated that Water and Sewer Funds are Enterprise Funds and are technically to be self-sustaining. Northbrook sewer bills are on the low side. Mr. Callocchia profiled what typical customers pay for water in other jurisdictions on a consumption basis.
There are approximately 15,000 water accounts in the Village. Northbrook water billing accounts for 80% of the usage. Mission Brook and the Village of Riverwoods account for the remainder. We only provide water to Mission Brook and the Village of Riverwoods. Growth in the customer base is not assumed for this study.
The Village has historically seen a 1-2% yearly decrease in water usage, which aligns with national trends. People are becoming more aware that water is a limited resource.
A slide showed the debt and capital currently in the funds. The current Capital Improvement Plan (CIP) has $22 million for water and $1.9 million for Sanitary Sewer. The $22 million includes production and distribution capital.
Analysis shows that operation and maintenance costs are pretty stable. The Water Fund and Sewer Fund lookout for the next five years with no change in rates found that revenues show that the sewer fund is not as healthy as the water fund five years out. Mr. Callocchia stated that most municipalities do not support their funds. President Ciesla’s concern is that the Village has serious large facilities discussions on the horizon that will have to be bonded.
Mr. Morrison provided an over view of the pros and cons of issuing debt vs. paying for capital through the rate. Mr. Morrison stated that the Village typically has issued debt for assets that have a useful life of longer than 15 years and costs more than $100,000. Mr. Morrison provided examples of each type of funding. He asked if the Board concurred with the current practice as described relating to the funding of capital thresholds. Trustee Israel stated that the Sanitary Sewer Line might be better to be turned over to a Pay as you Go operation. President Ciesla questioned the reasoning. Trustee Israel answered that sewer lining is not a new asset but rehabilitation of an existing asset. President Ciesla asked what the other municipalities are doing. Mr. Callocchia answered that municipalities choose to reduce their long-term expenses by shifting things to Pay as you Go. As you increase your debt financing to several million dollars a year, over time it will increase the proportion of rates that go to debt service and may result in higher rates. Looking forward, President Ciesla wants to keep rates as low as possible to ease the pain, to get our system to be as modern as possible, to borrow the least amount possible and Pay as you Go. Trustee Hebl added that the public does not like water main breaks. She sees the need to raise water rates but also sees a need to catch up with the water mains.
Life cycle analysis of Northbrook’s production and distribution assets shows that Capital Improvement Plan (CIP) meets or exceeds the depreciation life. Mr. Morrison stated that a change will be made to the sanitary sewer line from a bonded approach to a Pay as you Go approach. Trustee Israel stated he believes consensus is that if we are over policy requirements on the Water Fund we should try shifting that to the Pay as you Go. Manager Pavlicek will maintain a fiscal conservative approach but it is often affected by what the economy is doing and will only bond when it is appropriate.
Mr. Morrison stated that there is a minimum fund policy balance for the General Fund and it is a best practice for enterprise funds such as the Water and Sewer Funds to have a fund reserve policy. The Village has a fund balance available in the Water Fund but that is not the case in the Sanitary Sewer Fund
Mr. Callocchia presented two policy models. One billing cycle (90 days, quarterly) of O&M and Pay as you Go. No debt service is included. It is financed by rates. The second model includes 180 days of O&M and one-half of the Pay/Go budget. Mr. Callocchia recommends the 180-day cycle. Mr. Morrison asked for direction on the Fund Reserve Policy. Trustee Israel does not understand the goal of having two complete billing cycles. President Ciesla does not feel a need for having two complete billing cycles out and does not favor option 2.
Manager Pavlicek’s recommendation is that there is a plan for the next 5-10 years to develop a Fund Balance policy for the Water Fund in the face of a capital requirement. Manager Pavlicek wants the Board to look at the Enterprise Fund. Manager Pavlicek will look at different models and report back.
Mr. Morrison reported that the current water rate is $5.88 per 1,000 gallons and sewer is $1.26 per unit. The minimum is 7,000 gallons, no matter how much is used. People pay for what they use. This is volumetric approach to utility billing, but it is subject to the economy and the climate.
Mr. Morrison stated that other approaches rely on a fixed and volume metric basis. This approach would create a fixed portion of the customers’ bills that would guarantee a set amount of revenue needed for the utilities to operate. Generally the fixed fees are based on meter sizes since the system is sized based on the capacity needed to supply even the largest customers. A phased in approach would be used but to ultimately reached 25% of water and sewer revenues to be fixed based on meter size.. Mr. Morrison also stated that the fixed approach would support the sustainability goal of the Village by not encouraging usage due to a minimum amount of water that is billed each cycle. Staff asked for feedback from the Board on the two rate structures.
Trustee Israel asked if rates can be differentiated by different classes of users, residential versus commercial. Staff will come back with a draft report and draft model for the Board with rate structure based on information received from tonight’s meeting. Following the Village Board’s review of the model and report and any input that they have, staff would bring a 3-5 year rate approval in January that would take effect May 1st. Trustee Hebl wants data on how a small user would be affected in relation to a large user.
Trustee Pepoon asked about marketing water to our neighbors. Mr. Morrison
5. REMARKS FOR THE GOOD OF THE ORDER
6. CLOSED SESSION
None
7. ADJOURN
A motion was made by Trustee Hebl and seconded by Trustee Israel to adjourn the COW meeting at 7:30 p.m. The motion passed by unanimous voice vote.
http://northbrookil.iqm2.com/Citizens/FileOpen.aspx?Type=15&ID=1665&Inline=True
Alerts Sign-up