Balance Sheet – Governmental Funds 31

VILLAGE OF BUFFALO GROVE, ILLINOIS

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

Proprietary Funds

The Village of Buffalo Grove’s proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail.

The Village reports that both the Water and Sewer Fund and the Arboretum Golf Course as major proprietary funds. The Water and Sewer Fund accounts for all operating expenses of the municipal water system. Water is purchased wholesale from the City of Evanston through the Northwest Water Commission of which the Village is one of four members. Sanitary sewer service is provided by the Lake County Public Works Department for those property owners in Lake County. The Village acts as a billing partner to reduce administrative costs. The Metropolitan Water Reclamation District of Greater Chicago handles all the sanitary sewer treatment for Cook County residents and recovers its expenses through a property tax levy.

The water and sewer utility experienced net operating income before interest and transfers of $4.4 million for FY 2020, an increase of $3.0 million (26.1 percent) from the prior fiscal year. A rate increase of 11% percent was applied to all water and sewer usage as well as a new fixed facility fee assessed for single family homes and town homes effective January 1, 2020. Sewer operations accounted for 35.7 percent, or $4.2 million of the total Water and Sewer operational expenditures. Water operations accounted for $1.8 million (15.5 percent) and capital outlay for both systems totaling $3.9 million (33.8 percent). The purchase of water accounted for 14.9 percent, or $1.7 million. Sanitary sewer fees collected on behalf of Lake County Public Works was $3.3 million for FY 2020. These two pass-through expenses account for 41.7 percent of the total operating expense of the fund.

Non-operating revenue (expense) decreased $5,782 due to investment income.

The unrestricted net position of the Water and Sewer Fund at the end of the current fiscal year was $15.6 million and of that amount $8.4 million is the Village’s equity interest in the Northwest Water Commission. The installment note to pay down the water meter replacement project is $5.6 million, or 65.2 percent, of total liabilities in the water and sewer enterprise. The note is paid off by the increased margin of water metering accuracy.

The Village of Buffalo Grove owns and operates two municipal golf courses. The Village also reported the Arboretum Golf Course Fund as a major proprietary fund. This fund accounts for all operations of the Arboretum Golf Course. The course reported a year end unrestricted net position balance of $0.9 million. Total revenues were up $268,000 from 2019. The Buffalo Grove Golf Course generated $1.2 million in operating revenue while incurring $1.0 million in operating expenses. A total of 58,297 paid rounds were played between the two courses in 2020.

General Fund Budgetary Highlights

The budget is formally presented to the Village Board in November and approved in December in conjunction with the tax levy request. As the Village operates under the Budget Officer Act, a public hearing, for public comment is conducted, before the budget is adopted. The budget document sets the legal spending ceiling for each fund and serves as the day-to-day management tool to ensure fiscal accountability.