Vernon Hills sales drop could spell trouble

If the economy is recovering, it hasn't been showing up at the turnstiles in Vernon Hills, a perennial sales tax leader in Lake County.

Revised estimates for the current budget show revenues that fund day-to-day expenses $1.1 million below forecasts of just six months ago. That puts the general fund $879,000 in the red, rather than $241,000 in the black as originally estimated.

"One of the questions for the (village) board is, 'How do we want to adjust to these lower numbers?'" said Finance Director Larry Nakrin.

Nakrin will outline the situation for the village board Tuesday during its regular meeting beginning at 7 p.m. at village hall, 290 Evergreen Drive.

Sales tax projections have been dropped by $384,000 as the economic recovery isn't materializing as rapidly as originally thought.

"A lot of it is still projection but it doesn't look like there's any reason to be hopeful we'll have a stronger Christmas shopping season," than last year, he said Monday. December 2008 was the weakest for sales tax for that month in 10 years.

"We certainly have more (store) vacancies than last year," he added.

Sales tax is just one source of money that has fallen short.

Updated state income tax projections also could mean $360,000 less than expected for Vernon Hills.

Also, the village's electric utility tax is being adjusted to $145,000 less than budgeted because of an unusually cool summer.

Nakrin expects the telecommunications tax to generate $106,000 less than expected and the hotel/motel tax to be off by $130,000. Both have gone from a mode of rapid growth to rapid decline, he said.

"We're having to rethink this year and certainly it affects next year," Nakrin said of the revenue shortfalls.

Nakrin said the village has a year of operating funds in reserve and maintains high fund balances knowing the volatility of sales tax revenues.

"We are seeing that volatility extending to other revenues as well during this economic event," Nakrin wrote in a summary. "The uncertainty regarding how quickly and how fully our revenues recover affects the extent to which we should use those balances."

What the revised revenue projections mean for next year is hard to determine, he added. Concern about the 2010-11 budget, which begins May 1, will be compounded because the village won't have the benefit of a projected $1 million land sale.

The board is expected to discuss the situation in detail in November.