Oak Lawn passes bud­get with no tax in­crease

Vil­lage still faces pen­sion fund­ing chal­lenges

Daily Southtown (Sunday) - - NEWS - By Zak Koeske [email protected] Twit­[email protected]

For the sixth con­sec­u­tive year, Oak Lawn has ap­proved a bud­get that low­ers prop­erty taxes, of­fi­cials said.

The Vil­lage Board on Tues­day ap­proved a $58.6 mil­lion bud­get that in­cludes no lay­offs and slightly re­duces the tax levy by about $65,000.

“The Vil­lage Board has con­sis­tently and pas­sion­ately said, ‘We’re not go­ing to raise more taxes thanwe have to,’ ” vil­lage man­ager Larry Deet­jen said in an in­ter­view prior to the bud­get’s pas­sage.

“The No. 1 rea­son for peo­ple mov­ing from Oak Lawn has to do with tax bur­den. So we would be ir­re­spon­si­ble to in­crease the tax bur­den.”

In­stead of rais­ing taxes to pay for its hefty un- funded pen­sion obli­ga­tions, the vil­lage has opted in­stead to cut back on ex­pen­di­tures and seek new rev­enue streams.

In the com­ing year, new fines for false fire alarms, a rene­go­ti­ated EMS billing con­tract, an in­crease in the EMS trans­port mileage fee and a stor­age fa­cil­ity tax should af­ford the vil­lage ad­di­tional funds, of­fi­cials said.

Oak Lawn also an­tic­i­pates re­de­vel­op­ment projects at 111th Street and Cicero Av­enue, 95th Street and Pu­laski Road and 52nd Av­enue near 96th Street to start gen­er­at­ing ad­di­tional prop­erty and sales tax rev­enues next year when new busi­nesses and an out­pa­tient med­i­cal fa­cil­ity open their doors.

De­spite the vil­lage’s at­tempts to spur eco­nomic devel­op­ment and limit spend­ing in re­cent years, pub­lic safety pen­sion costs con­tinue to pose a prob­lem for Oak Lawn, like many com­mu­ni­ties across the state.

“We’ve done a fine dance of cut­ting where we can, in­no­vat­ing where we can, find­ing new ways to save,” Mayor San­dra Bury said dur­ing bud­get ne­go­ti­a­tions. “But … our tax­pay­ers are not bot­tom­less piggy banks.”

She said that de­spite at­tract­ing and sup­port­ing a va­ri­ety of new com­mer­cial devel­op­ments in Oak Lawn over the past sev­eral years, the ad­di­tional rev­enues alone are in­suf­fi­cient to off­set sky­rock­et­ing pen­sion costs.

The vil­lage’s pub­lic safety pen­sion costs were the driv­ing force be­hind Moody’s de­ci­sion in Oc­to­ber to drop Oak Lawn’s bond rat­ing to Baa3 — one level above junk sta­tus — and give it a “neg­a­tive out­look” for the fu­ture.

“The neg­a­tive out­look re­flects our ex­pec­ta­tions that although vil­lage ac­tions to in­crease pen­sion fund­ing will slow the rate at which un­funded li­a­bil­i­ties are grow­ing, plan sta­tus will con­tinue toworsen and po­ten­tially strain the vil­lage’s bud­get over the next sev­eral years,” Moody’s wrote in its rat­ings re­port.

In re­cent years, the vil­lage has paid more into its pub­lic safety pen­sion funds as part of a pol­icy of re­tir­ing debt and redi­rect­ing money pre­vi­ously al­lo­cated for debt to bet­ter fund pen­sions.

Over the past eight years, the pro­por­tion of Oak Lawn’s to­tal ex­pen­di­tures de­voted to pen­sions has more than dou­bled, go­ing from just un­der 6 per­cent of ex­pen­di­tures in 2011 to more than 16 per­cent in the bud­get ap­proved thisweek.

The 2019 bud­get al­lo­cates about $9.5 mil­lion to fund pen­sions — ap­prox­i­mately $700,000 more than last year and more than $7 mil­lion more than the vil­lage’s con­tri­bu­tion in 2011, when of­fi­cials be­gan to ramp up fund­ing for pen­sions.

The goal is to fund pub­lic safety pen­sions at 90 per­cent by 2040, as is re­quired by state law. Vil­lage fi­nance di­rec­tor Brian Hani­gan said the plan has been work­ing and cred­its it for chip­ping away at un­funded pen­sion li­a­bil­i­ties, which he said have “de­creased sub­stan­tially” un­der the pol­icy.

Moody’s, how­ever, cal­cu­lates pen­sion obli­ga­tions dif­fer­ently than the vil­lage. As a re­sult, the credit rat­ings agency as­serts that Oak Lawn’s un­funded li­a­bil­i­ties are still grow­ing, de­spite the vil­lage’s best ef­forts to con­trol them, and has a less san­guine take on Oak Lawn’s fi­nan­cial con­di­tion.

“The vil­lage’s fis­cal 2017 con­tri­bu­tion fell far be­low the amount nec­es­sary to ar­rest growth in un­funded li­a­bil­i­ties,” the rat­ings agency wrote of Oak Lawn in its Oct. 11 credit opin­ion.

“Across its three plans, the dif­fer­ence be­tween the vil­lage’s ac­tual con­tri­bu­tions and the amount nec­es­sary to tread water was equiv­a­lent to very sub­stan­tial 8% of op­er­at­ing rev­enue in fis­cal 2017,” the re­port con­tin­ued. “The vil­lage’s ex­pected fis­cal 2018 con­tri­bu­tion also falls $2.6 mil­lion short of the pay­ment re­quired by state statu­tory for­mula.”

Oak Lawn’s fail­ure to meet the state’s pen­sion fund­ing for­mula — Hani­gan cal­cu­lates the short­fall at only $1.1 mil­lion, but ac­knowl­edges the gap ex­ists — means that its po­lice and fire pen­sion boards could the­o­ret­i­cally ask the Illi­nois Comp­trol­ler to in­ter­cept state tax rev­enues, as oc­curred ear­lier this year in Har­vey.

But Hani­gan said he’d re­ceived as­sur­ances from the po­lice and fire pen­sion boards that nei­ther would re­quest such a di­ver­sion of rev­enues at this time.

“The bot­tom line is both pen­sion funds have the in­ter­cept let­ter as one of their op­tions, but nei­ther has cho­sen to ex­er­cise it,” he said. “It’s just ad­vi­sory, but they’ve been ad­vised by their lawyers that if the vil­lage stays on its fund­ing pol­icy, there’s no rea­son to ex­er­cise the in­ter­cept let­ter.”

Hani­gan said that, de­spite Moody’s re­cent down­grade, he be­lieved the vil­lage would reach its de­sired pen­sion fund­ing goals if it con­tin­ued to stay the course with its plan.

“I’m not say­ing we don’t want a good credit rat­ing,” he said, “but we’re still in­vest­ment grade.”

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.