Essential services: government finance leaders step up in the pandemic

While many businesses across the globe closed their doors at the start of the COVID-19 pandemic, government finance executives scrambled to maintain delivery of critical services.

Justin VanVooren, CPA, director of finance for the Village of Montgomery, Ill., led the charge to prevent service disruptions and protect the municipality’s finances:

• Vital public services such as water service and police needed to continue during the lockdown in the village on the fringe of the western suburbs of Chicago.

• Billing needed to continue even though the two finance employees who handle that work couldn’t come to the office and didn’t have computers at home.

• Sales tax revenues, a vital financial resource for the village, seemed sure to plummet with businesses closed.

• Customer service calls needed to be transferred to the homes of employees working remotely.

To devise strategies to help the government maintain services, VanVooren participated in daily calls with senior staff and legal and engineering consultants. The police force and public works employees were separated into two shifts in hopes of slowing the transmission of the virus if an individual in one group or another fell ill. Health and safety protocols were established, and for those who could work from home, IT accommodations were secured.

“As a government, you can’t shut down,” VanVooren said. “There may be other businesses that could shut down or did shut down. But we were serving our residents, and we still have to [serve them]. We still had to do everything we normally do, just in a different way.”

And with much of the village shut down, there was concern that sales taxes — the municipality’s primary source of income — would drop dramatically.

Meanwhile, the village’s fiscal year end is April 30, so VanVooren spent much time early in the pandemic figuring out how to get the necessary documents to the municipality’s financial statement auditors even though he couldn’t be in the office.

“There were times when it was just overwhelming,” VanVooren said.

In overcoming those challenges, VanVooren became one of the many government finance professionals who demonstrated how they help their communities during this difficult time.

The steps he took to keep the village operating smoothly and on sound financial footing while helping residents included:

• Identifying items that could be quickly cut from the budget. Some of the almost $4 million in cuts was easy; training expenditures were slashed because the pandemic would prevent travel for training. Other cuts, such as leaving unfilled positions open for a while, were more difficult.

• Assistance to residents and local businesses. Despite cuts in some areas, the village helped residents and small businesses in this time of financial need. The village paid up to $100 toward the water bills of residents in need of assistance, totaling $148,728. In addition, 38 small businesses received grants of $5,000 each from the village to pay for certain expenditures, totaling $190,000. The water payments came out of the main operating fund of the village, and the grants came out of the Montgomery Development Fund, typically used for low-interest loans to village businesses. However, the village provided the money as grants with no repayment required.

• Spending on IT. The entire government spent much more than it had budgeted on IT services as it scrambled to provide office staff with the ability to work from home.

• Using federal and state relief funds. Montgomery was granted $950,000 by the state of Illinois through the Coronavirus Aid, Relief, and Economic Security (CARES) Act Coronavirus Relief Fund to assist in paying for police personnel. The village also received more than $1.3 million through the Coronavirus State and Local Fiscal Recovery Funds program in the American Rescue Plan Act (ARPA) and will receive an additional $1.3 million in the summer of 2022. Part of this funding will go toward replacement of an aging water main that has had several breaks in recent years. This money may also be used to purchase an integrated enterprise resource planning software program to help the village to operate more efficiently.

• Planning for a sales tax shortage. The village expected to lose about $800,000 of the $4.5 million it had planned to receive in calendar year 2020. Fortunately, the village only lost about half of what was expected.

• Replacing losses with remote retailer funds. A state law that took effect at the start of 2021 provided tax revenue that replaced and surpassed prior sales tax losses and was a pleasant surprise for municipal authorities. The law requires remote retailers to collect a locally imposed retailers’ occupation tax for the jurisdictions where their products are delivered.

VanVooren, who manages four people on his finance staff, had to do all of it amid the challenging circumstances that would sound familiar to people everywhere who made a rapid shift to working from home. The challenges, however, have shifted as the pandemic has continued. Montgomery’s government hasn’t been insulated from the historically high inflation and supply chain problems that have gripped the country.

A seven-year $250 million project with two neighboring communities to change water sources is proving more costly than anticipated. The communities need to obtain water from Lake Michigan before their current wells run dry. The village anticipated rate increases of 5.5% per year through fiscal year 2032 and 2% per year thereafter, but that’s based on costs estimated before the current high-inflation environment. Now the rate hikes may need to increase.

Montgomery’s difficulties also have included:

• Rising construction costs on a new public works facility: The village issued $15 million in bonds in June 2021 to pay for the project, but materials still haven’t arrived, and the bids came in $3 million over budget.

• A backup in the supply chain: A lack of availability of equipment has the village behind schedule in replacing its water meters, police squad cars and public works equipment. The village has been waiting for more than a year for a replacement for one of its public works trucks, which has increased in price by $19,000 over that time.

• Employee compensation: Although turnover has been low, as a small municipality Montgomery struggles to compete with larger Chicago suburbs that can offer higher salaries.

• Skyrocketing fuel costs: The rise has been largely driven by the war in Ukraine.

As they did with the challenges they faced earlier in the pandemic, VanVooren and his team have adjusted. They worked with their architect, construction manager and civil engineer to make cuts to the public works construction project, but it’s still $1.4 million over budget and at least a year behind schedule. They have added a 2.5% cost-of-living raise to the budget for fiscal year 2023. And they factored substantial fuel price increases into the fiscal year 2023 budget, although it still wasn’t enough.

They budgeted for an 11% increase in fuel prices from the prior year, even though they have traditionally budgeted for increases of just 3% to 4%. Unfortunately, the 11% rise accounted for an increase from $3.50 per gallon to $3.90 per gallon. In early June, gas prices in the village had spiked to more than $5.50 per gallon. “We didn’t count on gas prices of $5 per gallon or more,” VanVooren said.

Nonetheless, VanVooren believes the situation isn’t as bad as he’d anticipated when the pandemic began and he hadn’t known what to expect. The sales tax numbers didn’t fall as much as expected, the federal and state aid was helpful and the remote retailerfunds were more significant than he’d anticipated.

Through it all, he and his finance team persevered in service of the community.

“Everybody adapted, he said, “and we were able to continue on.”