W. Dundee looking at utility tax to bolster sagging revenue

A utility tax could hit West Dundee residents and businesses come January, as the village looks for ways to fill a projected budget shortfall based on weak revenue numbers from the first half of the fiscal year.

Despite substantial cuts to the village's 2009-2010 spending plan, the village faces a $365,500 budget gap as revenues slides persisted in the first six months. The village budgeted for about $8.2 million in general fund revenues, but is now looking at about $7.6 million after numbers from the midway mark come in under projections. The village slashed $227,467 in additional expenses from an already frugal budget, reducing the deficit from almost $600,000, Village Manager Joe Cavallaro said.

The village board earlier this week mulled the utility tax and additional expense reductions and fund transfers to make up for the losses.

The utility tax discussion comes a year after West Dundee voters rejected a real estate transfer tax, which village leaders estimated would have provided more than $200,000 in annual revenue.

If the modifications are not made, village staffers warned board members, the village's cash on hand could drop to $430,000, which the staff described as an "unacceptable level given the village's range of functions and possibilities for major unanticipated expenses." The village typically maintains a balance of about $2 million mark, or three months of operating expenses.

"Further reducing expenses is unrealistic," Village Manager Joe Cavallaro said. "It's difficult when we are already working with a bare bones budget."

If implemented, a 5 percent utility tax on both natural gas and electric bills would cost the average homeowner about $125 per year, Cavallaro said. The tax would generate annual revenues of about $400,000.

The tax would produce about $100,000 in the remainder of this fiscal year.

"This is the fairest thing we could do," Trustee Julie Voss said Wednesday. "It doesn't only fall on residents. It is shared by the businesses as well."

A large portion of the shortfall is due to sales tax revenues that continue to slip annually. Village officials budgeted for about $2.5 million in sales tax revenues this year.

However, figures from the first six months of the fiscal year that began in May shows the village has collected less than $1.196 million in sales tax revenue, about $54,000 less than budgeted for the first six months. Finance Director David Danielson now projects the village will receive about $2.215 million - $285,000 short of what was planned.

"I have never seen a revenue situation so unpredictable," said Danielson, who noted that the village's sales tax revenues have lost about $1 million in the last five years. "They are unprecedented times. We keep hoping that we are at the bottom, that the village will be able to climb out. But the bottom isn't evident yet."

Revenue from the state income tax is also lower than expected. The village had budgeted for $92 per capita, but the state reduced the amount to $77, adding another $114,000 to the village's deficit.

Other significant revenue shortfalls include development revenue, court fines and the hotel/motel tax.

In addition to the utility tax, Cavallaro said, the village board will consider another $150,000 in spending cuts, including staff reductions, layoffs and modifications to benefit levels. Another $150,000 will also be transferred from the Motor Fuel Tax Fund to the general fund.

"It should be emphasized that these proposed solutions will only serve as a patch for this current fiscal year," Cavallaro and Danielson wrote in a memo to the board. "The upcoming budget process will be even more challenging if the economic situation does not significantly improve."

The village board will consider ordinances related to revenue options at its meeting at 7:30 p.m. Monday, Dec. 7 at village hall, 102 S. Second St.

Fiscal year 2009-10 Revenues Expenses Budgeted $8,226,700 $8,223,715 6-month actual $4,542,669 $4,130,400 12-month projected $7,633,700 $7,996,248 Difference ($593,000) $227, 467 Anticipated shortfall $365,533 Sales Tax Revenue Cash on hand Prior yearsSales Tax RevenueCash on Hand 2005 $3, 273,261 2005 $2,160,644 2006 $3,013,389 $2,289,280 2007 $3,029,822 $1,684,373 2008 $2,920,526 $1,163,069 2009 $2,539,923 $795,434 2010 (Projected) $2,215,000 Source: Village of West Dundee?