Libertyville, Vernon Hills cutting costs, bracing for big drop in revenue
Two Lake County communities that rely heavily on sales taxes to operate say they are in decent shape for now but are preparing for big hits in coming months.
Libertyville and Vernon Hills have identified millions of dollars in upcoming projects and other expenses to defer or cut, and anticipate needing reserves to help offset lost revenue.
Both communities say they have ample cash reserves to allow operations to continue without having to make drastic changes immediately. That's mainly because revenues from the state, including sales taxes, are in arrears, meaning the money was collected before the bottom dropped out.
With that, officials in both towns recognize the future economic picture will be a moving target and need constant evaluation and adjustment.
When business does resume, it likely won't be in the same manner, making decisions even more complicated, officials say.
"My concern is you're going to have half the seating in every restaurant," Libertyville Mayor Terry Weppler said Tuesday during a meeting of the village board's finance committee.
Vernon Hills estimates a decline of 14%, or roughly $3.5 million, in the revenue included in the 2020-21 budget, which was approved Tuesday and takes effect May 1.
The village is among the perennial leaders in Lake County for sales tax receipts. But with activity at much of its 3.9 million square feet of retail space - including the 1.3 million-square-foot Hawthorn Mall - idled or greatly diminished, the village is in a tight spot.
"We're probably going to need to be looking at $5 million" in lost revenue, Trustee Jim Schultz said.
"I think it's going to be worse than $3.5 million," Trustee Craig Takaoka agreed.
"Things are not going to be the same. Even when places open you're not going to get as many people going out. That's just the reality of it all," Takaoka said.
In Libertyville, a spot check of key revenue producers showed car dealers down 40% to 50% and restaurants at 20% to 30% of normal sales, Finance Director Nick Mostardo reported.
An analysis of cash flow for the next 90 days shows the village will draw down about $1.1 million in cash reserves at a time when it normally would be adding about $1.5 million - a swing of $2.6 million.
Like other communities, Libertyville and Vernon Hills were rocked during the Great Recession of 2008-09 and officials say they are better prepared to deal with a financially arduous time.
In Vernon Hills, 26 full-time jobs have been eliminated and not reinstated. Many functions such as the finance and IT departments have been outsourced to reduce reliance on full-time staff but maintain the same or better level of service, according to Village Manager Mark Fleischhauer.
For the near term, six full-time and one part-time vacancy won't be filled and $1.9 million in budgeted expenses to eliminate or defer have been identified, he said.
Libertyville has substantially upped its reserves in recent years to nearly $22 million in highly liquid funds. Mostardo recommended and the committee agreed to defer $3.38 million in capital projects and institute a hiring freeze. Village officials will be asked to consider other measures as well if economic conditions don't show a trend of improving within 90 days, he said.
"I think we're prepared" for the near term, said Libertyville Trustee Rich Moras, finance committee chair. "The question is how long will this last, which no one really knows."