Monday, February 16, 2015

ACT Initiative Savings Being Taken at Face Value

The news has been covering the 116.4 million savings DuPage County has declared since implementing the ACT Initiative in 2012.  The Appointed Agency total savings projection is 50 million (Appointed Agencies are those in which the chairman appoints members to board and/or commissions). This includes 1.9 million in annual operating expenses from the Lisle-Woodridge Fire District. DuPage County is taking these savings at face value, something I have challenged.

In 2012, Crowe Horwath was hired by DuPage County Board to conduct an assessment of the LWFD.  Recommendations from the report included the following:

Develop a Financial Plan

Develop a Capital Plan 

Increase Transparency and Accountability

The report stresses the following:

"The Lisle-Woodridge Fire Protection District is considered a stable organization that is showing indications of decline if it does not act soon to develop plans to ensure its sustainability, to establish fund balance reserve policies and to develop a formal capital plan. The District must also address pension and OPEB funding issues to manage these costs to ensure they do not escalate out of control."

To my knowledge there is no financial plan.

In June of 2014, Moody's (The purpose of Moody's ratings is to provide investors with a simple system of gradation by which future relative creditworthiness of securities may be gauged.) downgraded the LWFD rating, two years after the Crowe Horwath report stated the LWFD needed to "act soon."

"The Aa3 issuer rating reflects a recent trend of underfunding annual pension payments, highlighting the financial risk stemming from the district's elevated pension liabilities and statutory requirements that require the district to fully fund its employer contributions. Additionally, the rating incorporates the district's sizeable tax base located in Du Page County (Aaa) in the Chicago (Baa1 negative) metro area; sizable operating reserves and healthy cash balances; and manageable debt profile with a minimal direct debt burden and no expectation to issue additional debt in the foreseeable future. The A1 rating on the GOLT Notes is notched once off the district's issuer rating and reflects the inherently weaker security, which does not benefit from a dedicated property tax levy."

Although the LWFD (Lisle-Woodridge Fire District) is asserting 1.9 million in annual savings from operating expenses, that does not include the massive unfunded pension liability. Employee benefits including pension contributions should be included in the operating expenses.  Are there actual savings in operations or has the pension obligation been moved to another line item in the budget?

Despite having a new board appointed after the Crowe Horwath report,  the new board has voted to increase the tax levy and budget expenditures in 2012, 2013 and 2014. 

The financial stability of the LWFD has not improved. The lack of a financial plan as recommended by the Crowe Horwath report, the Moody's downgrade, the increase in the property tax levy, and budget expenditures does not bode well for the LWFD. 

"What are the net savings to the taxpayer?". This is a question I have posed to DuPage County.

ACT Initiative Projected Savings

LWFD Property Tax Levies and Collections

LWFD Expenditure Summary by Fund FY 2013-2015

You can find Crowe Horwath Assessment here.

You can find Moody's Rating here.

1 comment:

  1. Now a "4 Alarm" Financial Fire.