MANAGEMENT’S DISCUSSION AND ANALYSIS 11

VILLAGE OF BUFFALO GROVE, ILLINOIS

Management’s Discussion and Analysis (Unaudited) December 31, 2020

Village of Buffalo Grove's Changes in Net Position (in Millions)

Governmental Business-Type Activities Activities

Total 2020 2019 2020 2019 2020 2019

Revenues

Program Revenues

Charges for Services Grants / Contributions Operating Capital

General Revenues

Property Taxes

Sales and Use Taxes $ 4.7 4.9 18.2 13.8 22.9 18.7

3.8 1.7 - - 3.8 1.7 2.0 0.2 0.3 0.3 2.3 0.5

17.0 16.3 - - 17.0 16.3 11.6 11.3 - - 11.6 11.3 Income Taxes 4.6 4.5 - - 4.6 4.5 Telecommunications Taxes 0.9 1.3 - - 0.9 1.3 Utility Taxes 2.6 2.8 - - 2.6 2.8 Property Transfer Taxes 1.0 1.0 - - 1.0 1.0 Other General Revenues 2.5 4.9 0.6 0.8 3.1 5.7 Total Revenues 50.7 48.9 19.1 14.9 69.8 63.8

Expenses

General Government

Public Safety

Public Works

Interest

Water

Sewer

Golf

Total Expenses

Change in Net Position

Before Transfers Transfers

Change in Net Position Net Position - Beginning Net Position - Ending 7.2 7.0 - - 7.2 7.0 26.1 30.2 - - 26.1 30.2 7.7 10.2 - - 7.7 10.2 1.2 0.3 - - 1.2 0.3 - - 10.4 9.7 10.4 9.7 - - 0.8 2.8 0.8 2.8 - - 2.6 0.8 2.6 0.8 42.2 47.7 13.8 13.3 56.0 61.0

8.5 1.2 5.3 1.6 13.8 2.8 (1.6) 1.2 1.6 (1.2) - - 6.9 2.4 6.9 0.4 13.8 2.8 12.3 9.9 48.5 48.1 60.8 58.0

19.2 12.3 55.4 48.5 74.6 60.8

VILLAGE OF BUFFALO GROVE, ILLINOIS

Management’s Discussion and Analysis (Unaudited) December 31, 2020

Normal Impacts

Revenues

Economic Condition – which can reflect a declining, stable or growing economic environment and has a substantial impact on property, sales, income, utility tax revenues as well as public spending habits for building permits, elective user fees and volumes of consumption.

Increase/Decrease in the Village Approved Rates – while certain tax rates are set by statute, the Village has significant authority to impose and periodically increase/decrease rates (water, building and licensing fees, ambulance fee, etc.).

Changing patterns in Intergovernmental and Grant Revenue – (both recurring and non-recurring) – certain recurring revenue (state shared revenues) may experience significant changes periodically while non-recurring (one-time) grants are less predictable and often distorting in their impact on year-to-year comparisons.

Market Impact on Investment Income – the Village’s investment portfolio is structured to meet certain liabilities as they become due and the income generated is subject to market conditions that may cause the investment income to fluctuate.

Expenses

Changes in Authorized Personnel – changes in service demand may cause the Village to increase/decrease authorized staffing.

Salary Increase (general wage adjustments and merit) – compensation adjustments to ensure the Village can attract and retain high level employees.

Inflation – while overall inflation appears to be reasonably modest, the Village is a major consumer of certain commodities such as supplies, fuels, and parts. Some functions may experience unusual commodity-specific increases (e.g. fuel, road salt).

Current Year Impacts

Government Activities:

Governmental activities increased the Village’s net position by $6.8 million to $19.1 million. Significant elements contributing to this net change are as follows;

Revenues:

Revenues for the Village’s governmental activities for the year ended December 31, 2020 were $50.7 million an increase of $1.8 million or 3.7 percent. Property taxes continue to be the Village’s largest source of revenue (33.5 percent) at $17.0 million. Included within the property tax revenues are the pension levies for the Police and Firefighter Pension Funds and IMRF/Social Security. The pension levies account for 39.5 percent of the property tax levy. Other taxes and intergovernmental revenue including sales tax, state income tax, utility tax, prepared food and beverage tax, hotel tax, and real estate transfer tax total $20.7 million or 40.8 percent of total governmental activities revenue. Property taxes increased by $0.7 million. There was a 0% increase in the corporate agency tax levy collected in 2020. The corporate levy for 2020, to be collected in 2021, is funding Police and Fire Protection.