Clarendon Hills Village Meeting Home Rule Discussion

1. Clarendon Hills Village Meeting Home Rule Discussion November 2, 2011

2. Why Home Rule? Why now?

3. Bond Rating • AAA Rating given in 2011 • Only 31 municipalities in Illinois have attained a AAA rating from Moody’s, Fitch or S&P.

4. General Fund Expenditure Summary

5. *Not Including POC Firefighters

6. Contracting and Shared Services • Engineering • Building/plumbing/electrical inspections • Plan reviews • Information technology • Various Public Works services • Shared 9-1-1 dispatch • Regional major crimes investigations • Automatic mutual fire aid agreement (Hinsdale) • Library shared services: IT, payroll, tax levy, snow removal, phone • Liability and health insurance pools participation

7. Contracting and Shared Services • Continued exploration of shared service opportunities • Clarendon Hills and Hinsdale have been discussing a shared police services model that would merge the two departments. • Conversations are ongoing • Innovative model would result in costs savings while maintaining service levels • Continued discussion with other units of government on ways to improve efficiency and cost effectiveness

8. Budget Reductions • Budget Reductions = $227,065 in FY 11-12 • Budget Reductions = $1.76 million in FY 08-09 through FY 10 -11 • Total Budget Reductions = $1.98 million; including $1.1 million in cuts, $904,000 in deferrals

9. Budget Reductions • Elimination of out-of-state employee training/benefits, reduction in other training • Establishment of new compensation plan that limits employee increases to changes in market conditions • Reduced infrastructure maintenance, tree trimming, sidewalk replacement and general beautification • Elimination of downtown sidewalk snow removal program • Reduction of downtown planting program, replacement with sponsorship program • Elimination of positions in Community Development, Finance, and Police Departments • Elimination of needed expansion to the Fire Station • Deferral of several capital purchases • Increase in employee insurance co-pays

10. History of General Fund Balance FY2001 – FY2011 Due to the downturn in the economy, excess fund balance over the 40% required was reserved in the General Fund in FY2009 through FY2011, rather than transferred to Capital Projects.

11. History of General FundRevenues and Expenditures

12. Future Concerns • Reduction in revenue sharing from the State • Additional unfunded mandates • Aging infrastructure • Costs out of Village’s control • 21% of the General Fund’s expenditures go toward pension and healthcare premiums

13. Future Concerns Lack of sales tax base Slow down in real estate growth Dependence on property tax

14. General FundBudgeted Revenues

15. General Fund Balance Projections No Additional Revenues

16. General Fund Projections Revenue Assumptions • Taxes increase by 2.5%. • Intergovernmental Revenues (Income Tax, Sales Tax, State Use Tax) increase by 1%. Also includes estimated revenues from Infiniti dealership. • Licenses and Permits increase by 2%. • Services Charges increase by 2%. • Fines and Miscellaneous increase by 3%. • Investment Income equals 2% of prior year fund balance.

17. General Fund ProjectionsExpenditure Assumption • Expenditures increase by 5% annually.

18. Capital Fund Balance Projections No Additional Revenues If additional revenue sources are not obtained, the Village would need to choose between funding operations or capital improvements. Based on the Village’s current ten year capital plan, the Capital Fund balance would be depleted by FY2019.

19. Impact of continued cuts Slowing down of road/capital program implementation Scaling back of new rolled concrete curb installation’s throughout town Further reduction in service levels Slower administrative response times Decreased ability to review operational efficiencies Reduction in community events

20. Home Rule

21. What is Home Rule? Constitution of the State of Illinois: Adopted at special election on December 15, 1970 Article VII, Section 6: Powers of Home Rule Units A County which has a chief executive officer elected by the electors of the county and any municipality which has a population of more than 25,000 are home rule units. Other municipalities may elect by referendum to become home rule units. Except as limited by this Section, a home rule unit may exercise any power and perform any function pertaining to its government and affairs including, but not limited to, the power to regulate for the protection of the public health, safety, morals and welfare; to license; to tax; and to incur debt. Source: http://www.ilga.gov/commission/lrb/conmain.htm

22. Home Rule in Illinois

23. Home Rule in Illinois

24. Uses of Home Rule • Fee recovery • Legal and local control • Business licensure • Intergovernmental agreement flexibility, including additional opportunities for shared services limited for non-home rule communities • Not subject to property tax caps • Impact fees on construction and development • Property acquisition and disposal • Broader powers to promote and control economic development • Ability to eliminate obsolete organizational arrangements

25. Limits on Home Rule • Article VII does limit certain abilities of home rule municipalities: • Issued debt which is paid by ad valorem property tax receipts may not have a maturity period longer than 40 years • Home rule units have a constitutional debt limit • No home rule unit may define or provide for felonies, or for Class A misdemeanors without specific statutory authority • The General Assembly can also vote to impose additional limits on home rule units of government • Village Board still made up of representatives of the community; still subject to local election • Self imposed limits (optional): • 3/5 majority needed to raise property taxes beyond property tax cap • Additional meeting and notice requirements for new taxes proposed • Requirement to hold an advisory referendum if petitioned by the residents on certain revenue issues

26. Home Rule in Practice • Research shows that home rule municipalities do not have a higher property tax rate on average than non-home rule municipalities. (Banovetz 2002; Banovetz and Kelty 2002; Dye and McGuire 1997; Wood 2011) • Historically, voters in home rule communities want to retain home rule. There have been 29 elections to rescind home rule. Only four have been successful, the last of which was in 1983. There is no evidence of abuse of home rule powers in the four cases in which it was rescinded.

27. Home Rule Research Committee

28. Home Rule Committee Process • Committee was formed in May, all volunteers who stepped forward were put on the committee. • In June, a presentation by Village Staff on Home Rule, and the Village’s financial condition. Committee members identified information they felt they needed to make a decision on the issue. • In July, the information requested by the committee was presented to them. The Committee requested that guest speakers be invited to the next meeting that had experience with and knowledge of home rule. • In August, Mayor David Brummel of Warrenville, IL, and Patrick Lucansky of the law firm Klein, Thorpe, and Jenkins spoke. Village staff also presented additional financial analysis information requested by the Committee at the July 7th meeting. • In September, the committee discussed five motions prepared by Village staff relating to the appropriateness and potential use of Home Rule in Clarendon Hills. The Committee approved the final report document for submittal to the Village Board.

29. Home Rule Committee Findings • The attainment of Home Rule status is appropriate for the Village of Clarendon Hills at this time: 10 yes, 2 No • Home Rule status should be utilized to affect an increase in the Village’s property tax rate beyond the authority allowed Non-Home Rule municipalities: 9 Yes, 3 No • Home Rule status should be utilized to affect increases in other revenues, as determined by the current and future Village Board, to offset increases in property taxes: 11 yes, 1 no • The Village Board should utilize non-financial Home Rule powers as they deem appropriate and necessary: 9 yes, 2 no, 1 abstention • If a Home Rule referendum is attempted and fails, the Village should pursue an increase in property taxes by referendum: 11 yes, 1 abstention

30. Proposed Home Rule Revenue Options Maintain General Fund balance through Sales Tax, Demolition Tax, and other existing revenues Capital Improvements Tax

31. Home Rule Revenue Options Home Rule Sales Tax • Places for Eating Tax (PFE) could be repealed and an overall 1% sales tax could be put into place • This would generate $200,000 a year ($100,000 if PFE Tax were repealed) • Would eliminate local administration of the PFE Tax

32. Home Rule Revenue Options Demolition Tax • Demolition impacts roads and stormwater issues that have a cost for the Village • Lake Forest and Evanston have imposed a $10,000 tax on the demolition of buildings in their community • If the Village imposed a $10,000 tax on residential property, it would generate an additional $120,000 annually based on FY2011 figures

33. General Fund Balance Projections with Home Rule and Other Existing Revenues Beginning in FY2013, Home Rule revenues include a 1% Sales Tax, repeal of the Places for Eating Tax, and a Demolition Tax. In addition, Utility Taxes and Rental/Lease Income are reassigned to the General Fund beginning in FY2017.

34. Capital Improvements Tax • Village’s current road program 50% funded by SSA, 50% funded by Capital Fund • SSA money is received from property owners who live in the impacted area • Property owners on non-Village roads do not pay into SSAs • Costs to set up the 2011 SSAs totaled $95,000 • If a new “Home Rule Capital Improvement Property Tax” were established, it could replace the SSA program, be restricted to fund only capital, and receive funds from all property owners including those who currently do not pay into SSAs

35. Capital Improvements Tax CAPITAL PROJECTS FUND BALANCE PROJECTIONS

36. Capital Improvements TaxImpact on Taxpayer • $690,000 in additional revenues equals a property tax rate of 0.1284 per 100 EAV. • The owner of a $500,000 home would pay an additional $214 annually; a 22% increase in the Village’s portion of the tax bill or just 2.6% of their overall tax bill. • With Home Rule status, the Village could reduce this amount as further cost-cutting measures are identified and economic activity improves.

37. Property Tax Rates per 100 EAV

38. Why not a property tax referendum? • Property tax increase would be 36 percent higher than Home Rule option, in order to adequately fund operations and capital improvements • Less flexibility to respond to changing economic conditions • Eliminates the non-financial Home Rule benefits

39. Property Tax Rates of Surrounding Communities

40. Village Property Tax – 500,000 Home Value2009 Levy * Includes separate fire protection tax, if applicable

41. Questions?