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Letter from Finance Director to Residents

Information on Replacement Levy, Issue 33

Operating Cost Reductions and Increases

Current Financial Situation

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Letter from Finance Director to Residents

October, 2008

VOTER INFORMATION ON PROPOSED VILLAGE TAX LEVY (ISSUE 33)

Dear Chagrin Falls Resident:

On November 4th , Village voters will be asked to vote on a 5.5 mill, five-year General Fund Levy, which would become effective January 1, 2010. This levy would REPLACE a 2004 5.5 mill tax which expires at the end of 2009.

The proposed levy will increase taxes about 3.2% because the millage will be applied against current property values, rather than the 1994 values used to calculate the existing levy. The increase for the owner of a $200,000 home would be less than $145 per year. It would be the first increase in property taxes for the General Fund in 15 years.

The 5.5 mills will generate a total of $998,000 or approximately 22% of the Village’s General Fund budget. The following are examples of essential services funded by your property taxes:
• Police & Fire Protection
• Street Maintenance
• Rubbish Pick-up
• Ambulance Service
• Snow Removal
• Parks Maintenance
The Village receives less than 12% of the property taxes you pay each year. The remaining 88% is divided among Chagrin Falls Schools, Cuyahoga County, and Chagrin Falls Township. The Village has operated its General Fund on 5.5 voted mills since 1984.

If you are interested in obtaining further information on this levy, please call Dave Bloom, Finance Director, at the Village Hall (247-5050). Additional detail is also available on the Village’s website: www.chagrin-falls.org.
Mayor: Thomas G. Brick
Council: Steven Patton
James Watterson
Janis Evans
Janna Lutz
Dwight Milko
Richard Subel
Robert Williams

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INFORMATION ON REPLACEMENT LEVY, ISSUE 33

1. Why is a General Fund tax increase needed? A 5 year estimate of revenues and expenses indicates an average $400,000/ year shortfall.

a.) Revenue expected to be flat or down.
b.) Expense inflation.

2. Steps being taken to address shortfall:

a.) Continue governmental efficiency improvements and staff reduction.
b.) No employee added for 5 years.
c.) Encourage sensible redevelopment such as Windsor, West Orange and IVEX.

3. Amount of property tax increase:

a.) Tax increase on a home valued at $200,000 would be $145/year.
b.) 3.2% increase in total property taxes, e.g. tax on a home valued at $200,000 would increase from $4,530 to $4,675.
c.) Expected to produce an additional $400,000/year in revenue.

4. Context of General Fund taxes:

a.) Village only receives 12% of property taxes.

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Summary of Operating Cost Reductions and  Increasess 

OPERATING COST REDUCTIONS:
• Upgraded to VOIP phone system to reduce the number of leased phone lines. ($30,000)
• Reduced Finance Department by one employee by outsourcing payroll and ambulance billing and reallocation of the work load. ($40,000)
• Adjusted all fees charged by the Village for inflation and increased ambulance and burial charges. ($10,000)
• Extended the service life of vehicles slated for replacement on a case by case basis.
• Postponed hiring to replace two service department employees lost through attrition in 2005 and 2007. ($108.000)
• Installed LED lights in all traffic signals. ($6,000)
• Switched to recycled water at the WWTP sludge press. ($52,000)
• Reduction in the total number of employees.

OPERATING COST INCREASES:
• Inflation of about 50% since the last operating levy replacement.
• Ambulance contract up 16% or about $40,000.
• Solid waste contract up 10% or about $40,000.

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 Current Financial Situation

I. Current Financial Situation:
Overall: At the moment, the Village finances are sound. We have good services, we’re maintaining our infrastructure and we have positive (though diminishing) cash balances. Unfortunately, annual expenses have begun to exceed annual revenues. The forecast of decreasing revenue streams, combined with the inflation of the costs of providing the expected level of services and infrastructure repair, necessitates a careful review of both revenues and expenses to maintain the level of municipal services the Village currently provides. The Village’s operating levy helps to pay for police, fire, ambulance service, parks maintenance, rubbish pick-up, street lighting and snow removal.

The majority of your real estate taxes go to support our excellent schools. The Village portion of the total real estate tax bill is about 12%.

II. General Fund:
II.I. Average annual shortfall for the General Fund in the last 5 years has been $100,000/year. The 2008 Budgeted shortfall is projected to be $230,000. The 2008-2013 projected shortfall is a total of $1,640,000.
II.II. Actions Being Taken to Address Shortfalls:
II.II.I. Continue governmental efficiency improvements and staff reduction.
II.II.II. Encourage sensible redevelopment such as Windsor, West Orange & IVEX to put less productive property to better uses, which enhances the local economy.
II.II.III. Support a healthy Commercial District to maintain income tax revenues.

III. Proposed Partial Solution to Anticipated Shortfall:
III.I. Continue with current shortfall reduction actions and add an inflation adjustment to our operating levy, the first in 15 years, which would yield a $400,000/year revenue increase for the General Fund.
III.II. The tax increase from the replacement operating levy would be less than $145 per year for the owner of a home valued at $200,000 or 3.2% of the total real estate tax bill.
IV. The Difference Between a Renewal Operating Levy & a Replacement Operating Levy:
All operating levies last for 5 years and provide a fixed revenue amount based on the real estate valuations at the time the levy is passed. If, after 5 years, the levy is “ renewed” the revenues collected remain roughly the same dollar amount that were collected when the levy was passed. If, after 5 years, the levy is “replaced” the millage is applied to current (increased) valuation of real estate, which provides additional tax revenue.

The proposals to replace the original levy will restore the millage to its’ effective level 15 years ago, compensating for the inflation which has occurred since then. When the original levy was adopted, the cost of a gallon of gas was about $1.50 and the cost of a ton of salt was $20.00. Gasoline is now in excess of $3.50 per gallon, and some communities are getting salt bids in excess of $60 per ton. Other expenses of government have experienced similar increases in the past 15 years.

V. Capital Improvement Fund:
This fund is separate from the General Fund and is funded principally by inheritance taxes. The 2008 Capital Improvement Projects are budgeted for a shortfall of $520,000 and the 2008 to 2012 Capital Improvement budget for approved projects shows a $2,616,990 shortfall. Capital Improvement estimates for our proposed projects shows a $3,160,500 shortfall. These shortfalls are due primarily to a $1,000,000/year decrease in inheritance taxes from our prior 10 year average inheritance tax receipts. The replacement levy, if passed, should eliminate the General Fund shortfall and hopefully reduce some of the Capital Fund shortfall. This will ensure that needed capital improvement projects can be funded in a timely fashion, maintaining the high quality which the Village has experienced.

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