MAHOMET — An informal policy by the Village of Mahomet to keep a four-month reserve of funds on hand should be able to continue despite strains on the village budget due to uncertainties and revenue drops related to the fight against the COVID-19 pandemic.
Trustees heard a presentation April 28 from village staffers on the 2020-2021 preliminary budget, and Patrick Brown, village administrator, said they have taken into account leaner financial times related to COVID-19.
“We have completed what we call, of course, the tentative budget, since we don’t actually approve the formal appropriations ordinance until the end of May,” Brown said. “Again, this is tentative.
“We’re kind of at a point where we’re not really expecting to hear a lot (about incoming revenue from Illinois) because nobody knows what’s going to go on with the state; nobody knows what’s going to happen (with the) legislative session. I would like to think that most municipalities are anticipating some type of reduction.”
Robert Kouzmanoff, village financial and human resources official, noted, “A reduction doesn’t necessarily mean we’ll never see that revenue. Part of what we’re estimating is that revenue will actually be realized in the fiscal year following this budget.”
As The Citizen reported previously, village leaders are planning for a significant drop in revenue, and the tentative budget reflects that.
“We took the approach (with an) anticipation that we’re going to see less revenue, whether it comes and catches up with us in the next fiscal year, or where we don’t get it at all,” Brown said. “So this is our approach: 20 percent reduction.”
Still, the four-month reserve is part of the slimmer budget.
“That’s something that we always shoot for,” Brown said. “Historically, we’ve … done this for years. We want four-month operating reserves, meaning what it means to continue our basic services and operations for the community.
“This year, that number for the expense side is $1.472 million. So that estimated ending cash … our target is to make that essentially the same, or higher,” he added. “That way it shows that we have four months’ cash reserve should we be in a position where all of our revenue stops at the same time
“Rest assured, when you approve a budget and appropriations budget at the end of May, that number will be hitting the four-month reserve,” Brown told trustees. “Likewise, if to get there we have to do some slight reductions in some of the line items, we certainly will do that. So we will get to that number.”
Part of the tentative budget includes a “wait-and-see” approach to any hiring, Brown said.
“Everything changed in the middle of March” due to COVID-19, he said. “This budget right now — and again, things can change in the next month — right now it does reflect moving the two part-time positions that have been budgeted for the last few years in transportation to a full-time position. It also includes an additional police officer.
“Both of those positions are funded at six months, so they would not be able to hire anyone for at least … toward the end of the year,” Brown explained. “And everyone should know, too, that what I would consider a hiring freeze is going to be our approach going into the fiscal year. So until we start seeing things (improve), there will be no authorization to hire those positions, and if things go drastically downward in revenue than we’ve projected, then they obviously wouldn’t be hired at all.
“I think you can rest assured that there’s basically a hiring freeze. We’re not going to hire those two positions until we have certainty that the revenue is going to come in that can support those positions,” Brown said. “Likewise, if we do hire them, then we’re seeing positive trends or we’re seeing a stabilized what we can expect revenue-wise from the state, and we would certainly know at that point that we can fund them for next year as well.”
Sean Widener, village president, sought to clarify the term “hiring freeze.”
“We’re not across-the-board hiring freeze; we’re kind of in a wait-and-see mode,” he said.
“I guess you can characterize it as a hiring freeze or a deferred hire,” he said. “I definitely would characterize, from a budget point, it’s a deferred hire. We’re only funding it this year for six months because of the reductions that we’ve placed on revenue projections. Reduction is anticipated only for this year; it’s not anticipated long-term.
“So we have deferred the hiring for six months, but we also are not going to allow the hiring until we know what happens. So look at it either way you want.”
The administrator noted that purchases are separate from hiring.
“The capital purchases, those would still go forward because there is money in those funds already set aside for the police car … obviously our new software (at the administration office) is going forward, and wastewater and water capital equipment …” Brown said.
Like other municipalities in the state, Mahomet will simply have to find out over time what its financial outlook will be in the midst of COVID-19.
“The next month is going to tell us a lot,” Brown said. “So when you get into approving the final budget, you may see one or two of these projects drop off. That may be possible, so don’t be surprised. If they do remain on here, it is likely we will take the approach that we will delay projects, one or two of these projects … until, say, January bidding to be done beginning in the spring and actually carried over into the next fiscal year.
“I think that’s the wise thing to do.”
“What if the state shortfall or what if the state money situation or what we get from the state is worse than our 20 percent reduction? We need a safety net as well, and I know we have four months’ reserve as a safety net, but we need an additional safety net as well,” Brown added.
Widener noted, “Yes, we have uncertainty in front of us, but we are still meeting our internal policies of fund balances, so that’s a good thing.”
Brown added, “Because of the uncertainty, we’re just going to go into this with kind of just some delayed decisions and trying to save as much purchases as we can in every department basically.”
He noted that different funds are treated differently in some cases: For example, water and sewer projects are funded via fees, so there should be no delay in those projects allotted for in the budget, according to Brown.
“Nobody knows what’s going to happen to the state. I just want you to know that we’re preparing the best we can on what’s kind of before us,” he said.