Municipalities aren't immune from the woes of a topsy-turvy economy. The Village of Oak Park is getting hit hard by slumps in the retail and housing market, which will likely lead to cuts at village hall.
"You're going to have some hard questions to face here," Village Manager Tom Barwin said to trustees Monday. "We may be ending some programs or commitments with partner agencies."
Oak Park's Chief Financial Officer Craig Lesner presented a mid-year progress report to the board Monday. Through June, village tax revenues are more than $1.3 million behind what the village originally budgeted for this year.
The real estate transfer tax, paid when people sell their homes, was $816,000 less than the village expected. Revenues from licenses and permit fees at village hall were $182,000 less than predicted, also indicative of a slumping housing market. Officials anticipate the market won't come back around until 2010.
The projections were based on trends and collections in previous years, Lesner said. Trustee Ray Johnson said spring is often the strongest season for the housing market, which could mean the numbers will continue to fall short of expectations. However, Lesner said seasonal trends don't always repeat themselves.
"This could be worse," Johnson said, later adding, "We may need to start looking at significant changes as soon as right now."
Sales tax revenues were about $85,000 less than the village budgeted, possibly because of shoppers cutting corners and spending less.
Oak Park has also collected $450,000 less than expected in income taxes, which is a state tax based on population. Lesner could not say for certain what caused the dip but believes it won't come back to the village's original estimate.
The trend isn't exclusive to Oak Park. Lesner pointed out that Berwyn has discussed laying off 15 employees, and the City of Chicago is also earning far less in real estate transfer taxes than expected.
To make up for the shortfall, Lesner and Barwin will come back to the village board in September with "at least" $1 million in cuts. The village already sliced about $3 million in costs as part of its 2008 budget process late last year. Because of that, Lesner said, there isn't a lot of fat to cut and personnel will likely take the hit. Oak Park already has about 15 positions vacant and has virtually frozen hiring.
"There's not a lot here," Lesner said. "We're an organization of people, and that's probably where we're going to see a lot of the costs come from. It's a painful process."
About 80 percent of village hall's budget goes to personnel costs, Lesner said. Whatever cuts are made in September will likely be part of a "long process," he added. Barwin said 2009 will likely be a "difficult budget year."
"We've been very conservative in trying to control our personnel costs," Barwin said. "But this next year we may need to look at additional reductions, unfortunately."
The village board and staff made cuts to personnel and services last year, attempting to restore a positive fund balance for the village's general fund. However, the sagging tax revenues have undone much of that work, Barwin said, creating a "new chapter."
Trustee Colette Lueck said the board needs to see how cuts will affect the village, outside of just the cost savings.
Overall, the village is expecting to end 2008 with a $200,000 deficit and a general fund balance of negative $3.06 million, caused partly by debt on building parking garages. The board plans to take August off and ramp up the 2009 budget process in September.
Trustee Jan Pate encouraged citizens to get involved in the upcoming budget process, "So they aren't thinking we're just making these decisions on a whim."
CONTACT: mstempniak@wjinc.com
