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June 14, 2023

The Honorable Eric Smith Members of the Village Board Citizens of the Village of Buffalo Grove

The Annual Comprehensive Financial Report of the Village of Buffalo Grove for the year ended December 31, 2022, is submitted herewith. This report represents a comprehensive picture of the Village’s financial activities during Fiscal Year 2022 and the financial condition of its various funds at December 31, 2022. State law requires that all general-purpose local governments publish within six months of the close of each fiscal year a complete set of financial statements presented in conformity with generally accepted accounting principles (GAAP) and audit in accordance with generally accepted auditing standards by a firm of licensed certified public accountants.

Management assumes full responsibility for the completeness and reliability of all information presented in the report based upon a comprehensive internal control framework. Because the cost of internal controls should not outweigh their benefits, the Village’s comprehensive framework of internal controls has been designed to provide reasonable rather than absolute assurance that the financial statements will be free from material misstatement.

Lauterbach & Amen, Independent Certified Public Accountants, have issued an unmodified (clean) opinion on the Village’s financial statements for the fiscal year ended December 31, 2022. The independent auditors’ report is presented at the front of the financial section of this report.

GAAP requires that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of a Management’s Discussion and Analysis (MD&A). The letter of transmittal is designated to complement the MD&A and should be read in conjunction with it. The Village of Buffalo Grove’s MD&A can be found immediately following the report of the independent auditors.

Profile of the Village of Buffalo Grove

The Village of Buffalo Grove was incorporated March 7, 1958, and is located approximately 29 miles northwest of the downtown of the City of Chicago. The Village resides in both Cook and Lake Counties and spans 9.2 square miles and based on the 2020 U.S. Census, serves a population of 43,212. The Village of Buffalo Grove is empowered to levy a property tax on real property located within its boundaries. It is also empowered by state statute to extend its corporate limits by annexation, which it has done from time to time.

The Village became a home rule unit by referendum on July 1, 1980, giving it additional powers to tax and regulate in ways not specifically granted, or prohibited, by the Illinois Constitution. As a home rule entity, the Village has no tax rate or debt limits, nor is it required to conduct a referendum to authorize the issuance of debt or to increase property taxes.

The Village operates under a Council/Manager form of government. Policy making and legislative authority are vested with the Village Board, which consists of a President and a six-member Board of Trustees. The Village Board is responsible for passing ordinances and resolutions, adopting the annual budget, appointing committees, and hiring the Village’s Manager and Attorney. The Village Manager is responsible for carrying out the policies, ordinances, and resolutions of the Village Board, developing and presenting an annual budget, overseeing the day-to-day operations of the Village, and appointing department directors.

The Village provides a full range of services including police and fire protection, construction and maintenance of streets and infrastructure, planning and zoning, water and sewer utilities, and general administrative services. The Village also operates two golf courses and a municipal commuter parking lot. To provide these services there were 212 full-time and 38 part-time/seasonal positions in the Fiscal Year 2022 annual budget.

Budgetary Control and Accounting Systems

The annual budget serves as the foundation for the Village’s financial planning and as a management spending control document. All departments of the Village of Buffalo Grove are required to submit budget requests by a specified date each year. These requests serve as the starting point for budget development. The proposed budget is presented to the Village Board in November and adopted by ordinance in December concurrently with the property tax levy.

Legal spending thresholds are established through the annual budget under the budget officer method. The Village Board is required to hold a public hearing on the budget document and must adopt a final budget no later than December 31st of each year. The budget is prepared by fund, department, and program. Department directors may make transfers of budget allocations within a department. Transfers of budget allocations between funds, however, require the approval of the Village Board. All budget adjustments must be approved by the Village Board to amend the legal spending thresholds.

The accounts of the Village are organized on the basis of funds, each of which is considered a separate and distinct accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund equity, revenues, and expenditures. Revenues are allocated to and accounted for in individual funds based upon the purpose for which they are to be expended and the means by which spending activities are controlled. The accounting records for general governmental operations are maintained on the modified accrual basis, with revenues being recorded when available and measurable and expenditures being recorded when the material or services are received, and the liability is incurred. Accounting records for the Village’s enterprise funds, internal service funds, agency funds and pension trust funds are maintained on the accrual basis of accounting.

Factors Affecting Financial Condition

Local Economy

The Village is primarily residential, with supporting commercial activity and limited industrial and manufacturing activity. There are approximately 720 licensed businesses operating in the Village. The majority of residents are employed in management, professional, sales and office occupations. The Village’s unemployment statistics have consistently been lower than the national and state averages, with an unemployment rate at the end of the year at 3.1 percent besting the state by 1.5 percent.

External economic factors at the national and state level continue to impact the Village’s revenue profile and, subsequently its ability to manage operating and capital resources.

• Property tax collections totaled $17,037,557 which is a slight increase over the previous year’s total of $16,970,657, or 0.4 percent.

• Water and Sewer collections decreased from $16,326,679 in 2021 to $16,119,322 in 2022; a total decrease of 1.3 percent.

• Sales taxes, both state shared and home rule, generated $18,309,654 in 2022, an increase of 14.3 percent.

The Village equalized assessed valuation decreased by $72.2 million or 4.0 percent to $1.71 billion for the 2021 levy year. The Lake County portion of the Village’s equalized assessed value decreased by 3.0 percent and Cook County portion decreased by 7.7 percent.

The unassigned fund balance of the General Fund will again exceed the 25 percent threshold of the subsequent year’s budgeted expenditures, less non-operating transfers, which is policy established by the Village Board. At the end of 2022, the Village has a planned decrease in unassigned fund balance of $4.86 million and a corresponding increase in committed fund balance to finance capital improvements at a new public works facility.

* Budget number includes employer pension costs beginning in FY 2013.

Long-Term Financial Planning

The Village compiles a General Fund Five-Year Financial Forecast annually which provides an analysis of future revenue and expenditures. This report is completed in tandem with the start of the annual budget process. Other long-range financial plans include the five-year Capital Improvement Plan, Twenty-Year Water Fund ProForma, and a Twenty-Year Storm Sewer Pro Forma.

The Village assesses its capital needs through the Capital Improvement Plan (CIP) update. This document is a planning tool to identify short- and medium-term capital needs (facilities, infrastructure and roadways) and measure those demands against the Village’s ability to pay. For a project to be incorporated into the CIP, it must involve the creation, improvement, or acquisition of a tangible asset with an original cost of at least $25,000.

The Village is in year three of a five-year Infrastructure Modernization Program that involves managing over $175 million in capital projects. Transportation-related projects represent a large percentage of the improvements at $76 million. Routine maintenance of existing streets accounts for $63 million of those projects. Approximately $32 million and $7.5 million respectively, is allocated to improving and maintaining the water utility and sanitary sewer systems.

The Twenty-Year Water Fund Pro-Forma provides an overview of the Water Fund and adequacy of the current water rate to fund operating expenses and infrastructure improvements as well as generating a reserve to continue with a pay-as-you-go approach to capital budgeting. The Reserve for Capital Replacement Funding Report lists all Village owned vehicles, the service life, and its respective reserve balance.

Major Initiatives

In 2022, the Village of Buffalo Grove issued over 3,100 commercial and residential building permits. These permits represent a total project valuation of $135 million invested into the Buffalo Grove community. In addition to building permit activity, the following major projects occurred in 2022:

A facility remodel was complete at the Arboretum Golf Club, including the offering of indoor year-round golf simulators and private lessons, a newly refurbished and managed full-service dining and entertainment area and a new outdoor patio with fire pits and a large retractable window wall, creating an open air concept between the indoor restaurant seating and the patio.

Work continued on the new Link Crossing Development by K. Hovnanian Homes. This project will have a total of 187 units and include a mix of 68 clustered single-family detached homes and 119 two-story townhomes.

The Ricky Rockets commercial development at 700 E. Lake Cook Road neared completion during the year. This project includes an 8,720 square foot convenience store, fuel center and car wash complex, 8,550 square foot retail center, and a 2,400 square foot quick service restaurant.

Development plans for the long-awaited Town Center Redevelopment, The Clove, were approved and groundbreaking occurred in September. Several structures have been demolished and construction is underway for the grocer, residential buildings and outlots. Remodeling of the existing building north of Old Checker Road is ongoing as well. When complete, the redevelopment will be a new, modern central entertainment and residential district anchored by a national grocery store, retail shops, a park, restaurants and luxury multi-family residential and includes 65,000 square feet of retail space. Project costs are estimated to exceed $150 million.

A two-tenant commercial building project began at 41 S. McHenry Road, which will bring specialized meat and seafood grocer, Wild Fork as well as a 24-hour emergency room for animals, Veterinary Emergency Group (VEG).

The Village purchased the building at 1650 Leider Lane to house its public works and engineering services. The 173,000 square foot facility offers ample space to accommodate operations now and will into the future.

After years of planning and coordination, a new and improved pedestrian crossing made its debut at Buffalo Grove High School across Arlington Heights Road

In 2022, 106 businesses opened, expanded and/or relocated in the Village of Buffalo Grove.

Awards and Acknowledgments

The Government Finance Officers Association (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the Village of Buffalo Grove for its Annual Comprehensive Financial Report for the fiscal year ended December 31, 2021. The Village of Buffalo Grove has received Certificates of Achievement since 1981 To be awarded a Certificate of Achievement, the government published an easily readable and efficiently organized Annual Comprehensive Financial Report. This report satisfies both GAAP and applicable legal requirements.

A Certificate of Achievement is valid for a period of one year only. We believe that our current Annual Comprehensive Financial Report continues to meet the Certificate of Achievement Program’s requirements and we are submitting it to the GFOA to determine its eligibility for another certificate.

In addition, the Village also received the GFOA’s Distinguished Budget Presentation Award for its annual budget document for the fiscal year beginning January 1, 2022. In order to qualify for the Distinguished Budget Presentation Award, the Village’s budget document had to be judged proficient as a policy document, a financial plan, an operations guide, and a communications device.

The preparation of this report would not have been possible without the dedicated services of the entire staff of the Finance Department. Credit also must be given to the Village President and Board of Trustees, and the Village Manager Dane Bragg for their assistance in planning and conducting the fiscal affairs of the Village in a responsible manner.

Respectfully submitted,

Chris Black Director of Finance/Village Treasurer

Financial Section

This section includes:

Independent Auditors’ Report

Management’s Discussion and Analysis

Basic Financial Statements

Required Supplementary Information

Other Supplementary Information

Supplemental Schedule