A $1.6 million deficit is projected at the April 30 close of Forest Park’s fiscal year. While that would represent an enormous increase in the amount of red ink village officials would have to contend with, there is an active debate among those officials as to what the final deficit will turn out to be. The projection comes from the village’s finance director. But the village’s senior administrator said he suspects Forest Park’s financial future isn’t quite so bleak.
Finance Director Judy Kovacs last month presented council members with her forecast for the close of fiscal year 2008, painting a yearend with Forest Park posting a deficit roughly 20 times what was realized last year. Kovacs said her estimate does take into account revenues that are typically received after the close of the fiscal year on April 30, and saying that “it may be” necessary for the village to take a line of credit to pay its bills.
Forest Park’s cash reserves have been significantly depleted by deficit spending in recent years, Kovacs said, and the village has reserves amounting to less than a month’s expenses in the bank.
“We’re paying our bills, but what that represents is money that we’ve taken out of our cash reserves, and our cash reserves are down significantly,” Kovacs said. “We’re talking with the bank about a line of credit because we want to continue paying our bills.”
In taking a more optimistic view, Village Administrator Mike Sturino pointed to Kovacs’ FY07 projection made this time last year. Kovacs had anticipated the books would show a municipal debt of roughly $1.1 million. In actuality, according to Kovacs’ own financial report, Forest Park closed out 2007 just $84,600 in the hole.
“The usefulness of that projection is questionable,” Sturino said.
The village administrator said he does agree with Kovacs’ characterization of the village’s reserve fund, and said he would prefer to have four months’ worth of expenses in savings.
“There is a shortage in liquid assets,” Sturino said. “I have concerns about it.”
Since she took the reins of the finance department in November 2004, Sturino said Kovacs has typically offered very conservative revenue projections while making more aggressive predictions on the expense side. Because of this, said Sturino, there is no reason to be alarmed by a projected $1.6 million deficit.
“I don’t expect the expense side to be as great as what’s written there,” Sturino said referring to Kovacs’ March 10 report to the village council.
With respect to expenses, Kovacs forecast the office of public affairs, which includes the police department, will exceed its budget by more than $230,000. Exacerbating matters is an anticipated shortfall of more than $642,500 in state tax revenues and a $1 million shortfall in “miscellaneous revenues.”
Year over year, Forest Park budgeted to receive an additional $1.1 million in miscellaneous revenues, however, Kovacs is projecting this year’s total will actually fall short of what the village took in last year.
Overall, expenses for the year are projected to exceed what was budgeted by some 13 percent, according to Kovacs’ report, while revenues will surpass expectations by only 5 percent.
“I’m going to not paint a rosy picture … because I’m trying to be realistic,” Kovacs said.
However, Kovacs is quick to point out that a projection offers no absolutes and in light of last year’s swing of more than $1 million between her year-end projection and what actually materialized, she acknowledged her conservative tendencies described by Sturino. Asked whether a financial report in which there’s more than $1 million in wiggle room is useful to council members, Kovacs said, “It is a valid question.”
Commissioner Rory Hoskins oversees the finance department and at a March 24 meeting addressed the looming deficit as a matter of cutting down on various expenses. Specifically, Hoskins said he will advocate that the village not purchase any new vehicles in the coming fiscal year and that council members “hold the line on raises” for municipal employees.
Hoskins said finding new revenues will also be a priority.
“Maybe we’ll start charging for multiple [waste] pickups,” Hoskins said. “That’s been proposed and I might be in favor of that.”
Hoskins also pointed to Kovacs’ 2007 projection as reason not to be overly concerned with the latest financial report.
“They’re just projections,” Hoskins said. “Last year at this time Judy projected a pretty significant loss and it ended up not being nearly as significant.”