Hinsdale officials appear poised to ask voters once again to approve a retail sales tax increase, but even if the referendum succeeds, it will not solve the village’s budget woes.

“A 1 percent sales tax increase would generate somewhere around $1.5 million or less annually, and the gap in our budget is much greater than that,” said Tom Cauley, village president. “A sales tax increase is no silver bullet that will solve our problems by itself. It is going to take a combination of things to get us out of the hole.”

The Village Board received a bleak financial report Monday, Nov. 3, that stated  several factors have led to the village’s projected $4 million annual budget gap, as well as the need to make $70 million in infrastructure improvements throughout the village in the future.

“We were building this problem even before the recession hit,” said Village Trustee Doug Geoga, who gave a report to the board summarizing the state of the village’s financial condition.

The village requires about $24 million to operate annually, and revenues are about $20 million, Geoga said.

“For many years we lived beyond our means,” Geoga said. “How did we get there? A variety of factors, including failing to pay for, or reserve to fund, necessary capital requirements such as streets and other facilities, resulting in huge deferred capital requirements we now face.”

In addition the village has spent down its operating reserves from $5.4 million in 2002 to $2.9 million in 2008.

Reserves are estimated to grow to $3.7 million by the end the current fiscal year.

As of April 2008, the village also had accrued about $20 million in unfunded liabilities to pensions to be paid out to police, fire and village workers, according to the report. Improved market conditions could partially offset some of that liability in the future, the report said.

The question is, how does the village go about reversing the trend?

“Now we have to figure out how to fix it,” Cauley said.

It won’t be easy, beginning with trying to convince voters to approve a sales tax increase after voters rejected the proposition of a 1 percent sales tax increase failures three times since 2006.

In April, voters voted down a sales tax increase by a 5 percent margin, or a 184-vote gap.

“It’s been rejected three times in the past, although more people voted in favor of it this last time, so we think support for a sales tax increase is growing,” Cauley said.

Village officials said they will examine a fourth sales tax referendum in order to get it placed on the February primary ballot.

Village Manager David Cook said the drop dead date for board members to adopt the measure would be Nov. 27 for the February primary election.

Approving placing the referendum on the ballot doesn’t necessarily mean the village will follow through with it in February, Cook said.

“The board can always remove it from the ballot at a later date as long as ballots are not yet printed,” he said.

A larger issue facing the board is funding $70 million in much needed infrastructure improvements during the next 15 to 20 years in addition to committing about $3.3 million annually to regular infrastructure maintenance, officials said.

As the village prepares to begin budget preparations for fiscal year 2010-11, budget planners will continue to look for ways to reduce operational costs.

“We made government much leaner in this past year’s budge, and we have to continue to tighten our belts,” Cauley said. “The trend is government grows more and spends more in good times. We have to find ways to enhance our revenues and keep control over our spending.”

Kevin Kane, chairman of the Finance Commission, said he sees no other alternative other than placing a sales tax increase on the ballot. He added the village’s financial state will not be resolved by a referendum alone.

“It took a long time to get in this hole, and it will take a long time to get out of it. It will take several more years of diligence to be where we want to be,” Kane said. “We aren’t going to solve this overnight.”

At a glance
Village of Hinsdale fund balances by year
YEAR    MONEY    PERCENTAGE OF GENERAL FUND
2009      $3.66M      19 percent
2007      $3.05M      17 percent
2005      $3.92M      25 percent
2003      $4.66M      31 percent