Mount Prospect grapples with rising pension costs

Mount Prospect ended 2015 with a $4.4 million surplus but may have to use nearly half of it to fund the community's growing police and fire pension obligations, the village's finance director told a joint meeting of the village board and finance commission this week.

Finance Director David Erb said the surplus is due to factors such as growing sales taxes revenues and unanticipated income and real estate transfer taxes. The village ended the year with $50.4 million in revenues and $46 million in expenditures, he said.

However, Erb suggests the village use almost half the surplus - about $2.1 million - along with property tax increases to pay for added pension costs caused by adjustments to the expected life span of retired police and firefighters.

"People are living longer, and because of that, the liabilities increase," he said.

Tax hikes would be in the range of 4 percent to 4.5 percent, Erb said, up from initial projections of 3.27 percent.

In recent years, the village's assumption was that the yearly increase in pension costs would be 7 percent for both police and firefighters. The increase recommended by actuaries using new mortality tables, which Erb called "quite shocking," is 19.1 percent for police and 23.8 percent for firefighters.

"These are really sobering numbers, particularly so because they're totally independent of anything that we do," Mayor Arlene Juracek said. "The actuarial tables changed for a good reason, but why did they change this year? Perhaps it's a good thing they changed this year, when we do have the surplus."

Erb pointed out that the village has been funding pensions at a higher level than required by the state.

"I'm not a fan of any increases in taxes any more than anyone else is, but I am very proud of the way the village has honored its obligations to the people who work for us," Finance Commission Member John Kellerhals said.