Housing skid hits Sugar Grove budget

A decline in housing starts has caused a loss of $170,000 in expected revenue for Sugar Grove during the second quarter of the budget year, prompting officials to discuss program cuts and deferred hiring.

While Village President Sean Michels said it was merely a "cash flow problem," at least one trustee suggested going beyond program cuts to look at present staffing to save money.

Officials emphasized that cuts to village services are not on the horizon.

A report by Finance Director Justin VanVooren presented to trustees at Tuesday's board meeting disclosed that as of Oct. 31, only 35 permits for residential homes have been issued this year. This fiscal year's general fund budget of $5.9 million was based on revenue from a projected 229 residential permits, and only 70 permits are now projected based on current figures.

VanVooren said each permit represents a net revenue effect of $2,429 on the general fund. The fiscal year started May 1 and ends April 30, 2008.

A reduction of 70 expected permits was figured into the second quarter budget ending Oct. 31, resulting in a loss of $170,000 in expected revenue.

VanVooren's report suggested making up $4,000 through deferred hiring and $148,000 through program cuts, resulting in an $18,000 deficit.

"Because our general fund budget is almost $6 million, and we have about $2 million in reserves, this deficit can easily be made up," VanVooren told the board.

VanVooren's report recommend slashing funds allocated to builder developer relations, including memberships in professional associations, as well as deferring cosmetic building repairs, cutting out a strategic planning retreat, eliminating lobby services and canceling the employee appreciation dinner.

Deferred hiring has meant that vacancies for a mechanic and an assistant to the village administrator, for example, will not be filled immediately.

"We're not proposing any service cuts, we're not in a deficit mode," Michels told the board. "We just have a cash flow problem."

Trustees expressed concern, however.

"Since we won't even have half of the residential permits we expected, our prospects of the housing market coming back are pretty bleak," said Trustee Kevin Geary.

"Cutting programs is good but we need to look further," Geary added. "Do we need the staff we have? I know we have money in the bank but I'd rather keep it there. We have a glimmer of hope if the housing market picks up, but that's 18 to 24 months away. I think we should run lean and mean."

Village Administrator Brent Eichelberger told the board the village's operating budget is not affected.

"We haven't relied on new growth for our operating budget and we are not in a crisis," he said, adding that the general fund, though affected, was not "in jeopardy."

"We can continue for a long time with a lower level of permits," he added.

Housing permits in Sugar Grove peaked to 365 in fiscal year 2003 and have dropped steadily. There were 178 permits issued in fiscal year 2006 and 149 in fiscal year 2007.

The board will resume discussion on the proposed cuts at 6 p.m. Nov. 20.