Budget Discussion Budget Discussion 2/5/18 Agenda CAFR Review - - PDF document

Budget Discussion Budget Discussion

2/5/18

Agenda

• CAFR Review
• Budget Directive
• School Fund Balance
• School Fund Balance
• General Fund Balance and Use of Reserves

Roger Lebreux

Glenys Salas

S ustainable Cycle of Municipal Growth

Population

Strong Infrastructure, Safe Neighborhoods, Great Schools etc Schools, etc

Property Values Best-in-Class City Services Tax Revenue Tax Revenue

S ustainable Cycle of Municipal Growth

Population

Strong Infrastructure, Safe Neighborhoods, Great Schools etc Schools, etc

Property Values Best-in-Class City Services Tax Revenue Tax Revenue

S ustainable Cycle of Municipal Growth

Population

Strong Infrastructure, Safe Neighborhoods, Great Schools etc Schools, etc

Property Values Best-in-Class City Services Tax Revenue Tax Revenue

S ustainable Cycle of Municipal Growth

Population

Strong Infrastructure, Safe Neighborhoods, Great Schools etc Schools, etc

Property Values Best-in-Class City Services Tax Revenue Tax Revenue

S ustainable Cycle of Municipal Growth

Population

Strong Infrastructure, Safe Neighborhoods, Great Schools etc Schools, etc

Property Values Best-in-Class City Services Tax Revenue Tax Revenue

S ustainable Cycle of Municipal Growth

Population Property Values Best-in-Class City Services Tax Revenue Tax Revenue

Potential Breakdown

Population Growth with no Population Growth With No

Population

p Property Value Increase Housing Bust p Property Value Increase Housing Bust

Property Values Best-in-Class City Services Tax Revenue Tax Revenue

Population vs Property Values in S aco

21 2.50 usands Billions

Property Values vs Population Growth

11 16 1.50 2.00 Tho d Value B

Population Growth with no Property Value Increase

1 6 0.50 1.00 Assessed

Property Value Increase

• 4
• 0 50

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Year Year Assessed Value Population

Potential Breakdown & S

• lutions

Population Growth With No Population Growth With No

Population

p Property Value Increase Housing Bust p Property Value Increase Housing Bust

Property Values Best-in-Class City Services Tax Revenue

Solutions:

• Increase Excise Taxes
• Increase Fees

l

Tax Revenue

• Increase Mil Rate

Potential Breakdown

Population Property Values Best-in-Class City Services Tax Revenue

Property Value Increase With No Revenue Increase Tax Cuts State Claw-Backs l f Property Value Increase With No Revenue Increase Tax Cuts State Claw-Backs l f

Tax Revenue

Flat fees Business Incentives Flat fees Business Incentives

Potential Breakdown & S

• lutions

Population Property Values Best-in-Class City Services Tax Revenue

Solutions:

• Increase Mil Rate
• Increase Fees
• Optimize business incentives

Property Value Increase With No Revenue Increase Tax Cuts State Claw-Backs l f Property Value Increase With No Revenue Increase Tax Cuts State Claw-Backs l f

Tax Revenue

p to cover city costs Flat fees Business Incentives Flat fees Business Incentives

Potential Breakdown

Population

Increased Services without population growth Unfunded State Mandates

Property Values Best-in-Class City Services Tax Revenue Tax Revenue

Potential Breakdown & S

• lutions

Population

Increased Services without population growth Unfunded State Mandates

Property Values Best-in-Class City Services Tax Revenue

Solutions:

• Increase Fees
• Increase Mil Rate

Tax Revenue

Lobby Augusta to Reduce Unfunded Mandates + Increase Revenue Sharing

Risky Alternatives to Tax-Based Revenue Growth

Population Property Values Best-in-Class City Services Tax Revenue General Fund Tax Revenue Fund

Risky Alternatives to Tax-Based Revenue Growth

Population Property Values Best-in-Class City Services Tax Revenue Borrow Tax Revenue

Risky Alternatives to Tax-Based Revenue Growth

Population Property Values Best-in-Class City Services Tax Revenue Tax Revenue

Worst Case S cenario

Population Property Values Best-in-Class City Services Tax Revenue Tax Revenue

History of Property Taxes

25.00

Mil Rate

15.00 20.00 10.00 5.00

• 2008

2009 2010 2011 2012 2013 2014 2015 2016 2017

History of Property Taxes

25.00

Mil Rate

15.00 20.00 10.00 5.00

• 2008

2009 2010 2011 2012 2013 2014 2015 2016 2017

History of Property Taxes

25.00

Mil Rate

15.00 20.00 10.00 5.00

• 2008

2009 2010 2011 2012 2013 2014 2015 2016 2017

History of Property Taxes

25.00

Mil Rate

15.00 20.00 10.00 5.00

• 2008

2009 2010 2011 2012 2013 2014 2015 2016 2017

History of Property Taxes

25.00

Mil Rate

15.00 20.00 10.00 5.00

• 2008

2009 2010 2011 2012 2013 2014 2015 2016 2017

Current S tate of the City

Population

Strained City Services

Property Values Best-in-Class City Services Tax Revenue

Unfunded State Mandates for Schools

Tax Revenue

Issues to Be Addressed

Population

Strained City Services

Property Values Best-in-Class City Services Tax Revenue

Unfunded State Mandates for Schools

Tax Revenue

Alternatives for the City Council Budget Directive

M t C iti l Invest For Growth Meet Critical Needs Maintenance of Effort

Maintenance of Effort – 3.8% Growth

• Maintain Current Level of Services
• Cover State Mandated $0.32 increase

to Mil Rate

• $0.38 total Increase to Mil Rate
• Additional increases funded by
• Natural growth in property values

g p p y

• Re-instated Downtown Development

District

• Forecasted gains in local and state

g revenue

• Risk: Critical needs facing the city

remain unaddressed

Causes of Mil Rate Increase $0.38 $0.38

$19.38 $19.76 School Cost Increases, $0.06

$

State Mandated Tax Increase, $0.32 Current Maintenance of Current Maintenance of Effort

How Does the Mil Rate Compare?

$30.00

Mil Rate

$15 00 $20.00 $25.00 $5.00 $10.00 $15.00 $0.00

Meet Critical Needs – 7.2% Growth

• Meet critical needs & restore city

services to full capacity

• $1.54 Increase in Mil Rate
• Other funding sources
• Eliminate excise rebates
• Adjust City Hall fees to reflect

j y inflation costs

• Adjust dumping fees so transfer

station is self-sustaining

• Bring compliance inspections in-

house

How Does the Mil Rate Compare?

$30.00

Mil Rate

$15 00 $20.00 $25.00 $5.00 $10.00 $15.00 $0.00

Invest for Growth – 14.0% Growth

• Major investment for the future
• $2.89 Increase in Mil Rate
• Other Funding Sources
• Watercraft Excise Adjustment
• Downtown Parking fees
• TIF Revenue from major new

j development projects + Critical Needs Funding Items

• Kick-off the Mayor’s vision for

y Saco:

$3 Billion Value | 25K Citizens $3 Billion Value | 25K Citizens $3 Billion Value | 25K Citizens $3 Billion Value | 25K Citizens

How Does the Mil Rate Compare?

$ $30.00

Mil Rate

$15.00 $20.00 $25.00 $5.00 $10.00 $ 5 $0.00

S ummary of S cenarios By Organization

Marginal Incr Incr % Total Increase Incr % Total Prop Mil Inc % Maintenance of Effort Revenue ‐$1,185,375.43 2.3% ‐$1,185,375.43 2.3%‐$53,710,619.42 $19.76 2.0% Maintenance of Effort Expense $2,006,092.70 3.8% $2,006,092.70 3.8% $54,531,336.69 +$0.38 School Maintenance of Effort Expense $1,408,807.34 5.9% $1,408,807.34 5.9% $25,470,569.34 City Maintenance of Effort Expense $597,285.36 2.1% $597,285.36 2.1% $29,060,767.35 Critical Needs Revenue ‐$126,000.00 0.2% ‐$1,311,375.43 2.5%‐$53,836,619.42 $20.92 8.0% Critical Needs Expense $1 794 729 88 3 4% $3 800 822 57 7 2% $56 326 066 56 +$1 54 Critical Needs Expense $1,794,729.88 3.4% $3,800,822.57 7.2% $56,326,066.56 +$1.54 School Critical Needs Expense $1,176,938.12 4.9% $2,585,745.45 10.7% $26,647,507.45 City Critical Needs Expense $617,791.76 2.2% $1,215,077.12 4.3% $29,678,559.11 Invest for Growth Revenue ‐$3,179,799.14 6.1% ‐$4,491,174.57 8.6%‐$57,016,418.56 $22.27 14.9% Invest for Growth Expense $3,571,811.00 6.8% $7,372,633.57 14.0% $59,897,877.56 +$2.89 School Invest for Growth Expense $831,360.00 3.5% $3,417,105.45 14.2% $27,478,867.45 City Invest for Growth Expense $2 740 451 00 9 6% $3 955 528 12 13 9% $32 419 010 11 City Invest for Growth Expense $2,740,451.00 9.6% $3,955,528.12 13.9% $32,419,010.11

Three Budget Directives for Fiscal Y ear 2019

Budget Directives Summary

$54.5M $56.3M $59.9M

+$0.38 +$1.54 +$2.89

Mil Rate Chg Mil Rate Chg Mil Rate Chg Maintenance of Effort Meet Critical Needs Invest for Growth

Jason DiDonato

Glenys Salas & Kevin Sutherland

S ustainable Cycle of Municipal Growth

Population

Strong Infrastructure, Safe Neighborhoods, Excellent Schools etc Schools, etc

Property Values Best-in-Class City Services Tax Revenue Tax Revenue

RS U Withdrawal Was an Invest for Growth Decision

Population

Thornton Academ y & RSU Withdrawal

Property Values Best-in-Class City Services Tax Revenue Tax Revenue

RS U Withdrawal Needed Funding from Tax Revenue

Population

Thornton Academ y & RSU Withdrawal

Property Values Best-in-Class City Services Tax Revenue

Increase to the Mil Rate was needed

Tax Revenue

Mil Rate Needed for RS U Withdrawal vs Actual

21.00

Mil Rate

3 Year Lost Revenue: $2.8 million

19.00 20.00

$2.8 million

17.00 18.00 15.00 16.00 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 Actual Tax Rate Needed Rate

Recommended One-Time S

• lution

Population

Thornton Academ y & RSU Withdrawal

Property Values Best-in-Class City Services Tax Revenue General Fund Tax Revenue Fund

S aco’s Unassigned Fund Balance Policy

• § 15-25 - The City's unassigned fund balance represents those

funds held in reserve to cover unexpected expenditure needs and funds held in reserve to cover unexpected expenditure needs and emergencies, revenue shortfalls and seasonal cash flow variations. The City Council has determined that maintenance of an adequate f d b l i ti l t th fi i l h lth d it f th fund balance is essential to the financial health and security of the City of Saco.

S aco’s Unassigned Fund Balance Policy

• § 15-26 - It is the policy objective of the City that the audited

unassigned fund balance should be a maximum of 10% of the unassigned fund balance should be a maximum of 10% of the following year’s general fund budget as adopted by the Saco City

• Council. The minimum unassigned fund balance should be set at

th’ b d t d dit 8 % f th l

• ne month’s budgeted expenditures or 8.33% of the annual

budget.

S aco’s Unassigned Fund Balance Policy

• § 15-28 - Any surplus in the unassigned fund balance identified in

the City's audited financial statements that exceeds the 10% maximum target shall be made available for Council

• appropriation. In making said allocation of funds, the City Council

shall give priority to the following activities:

• A. Economic development projects, such as industrial park land

acquisition, establishment of economic development loan fund programs or the development of infrastructure improvements associated with industrial park priorities. l f l h ll

• B. Replacement of aging capital equipment that carries unusually

high costs and has a utility life of eight years or more.

• C. Specifically targeted infrastructure projects or other capital

di i d b h Ci expenditures required by the City.

10%

• f adopted FY 2018
• $51,905,974 (Adopted FY2018)
• $5,190,597 (10% of adopted budget)

10%

• f adopted FY 2018
• $51,905,974 (Adopted FY2018)
• $5,190,597 (10% of adopted budget)

10%

• f adopted FY 2018
• $51,905,974 (Adopted FY2018)
• $5,190,597 (10% of adopted budget)

Any amount identified in the Fund Balance Report in the CAFR above this number is, by § 15‐28 a determination of the City Council.

• Where does the Unassigned Fund Balance

Amount Show up?

• CAFR - Page 80 in the PDF (labeled 73 in

the hard copy document) the hard copy document)

10%

• f adopted FY 2018
• $51,905,974 (Adopted FY2018)
• $5,190,597 (10% of adopted budget)

Any amount identified in the Fund Balance Report in the CAFR above this number is, by § 15‐28 a determination of the City Council.

• $6,840,715

$1 650 118

H

• $1,650,118

However…

• Where does the Unassigned Fund Balance

Amount Show up?

• CAFR - Page 80 in the PDF (labeled 73 in

the hard copy document) the hard copy document)

10%

• f adopted FY 2018
• $51,905,974 (Adopted FY2018)
• $5,190,597 (10% of adopted budget)

Any amount identified in the Fund Balance Report in the CAFR above this number is, by § 15‐28 a determination of the City Council.

• $6,840,715

$1 650 118

H

• $1,650,118
• ($1,603,903)
• 46,215

However…

4 , 5

Why is this important? Why is this important?

Th d th it id th t h ld b dd d

• There are needs on the city side that should be addressed.
• We are beginning discussions about borrowing for the approved

We are beginning discussions about borrowing for the approved bonds, however the School debt will have a negative effect on our bond rate without having a plan in action to address it.

How do we resolve this? How do we resolve this?

Finding savings from the School through rem ainder of the year year

• (1,603,903)
• 116,000 – already paid to TA

ik l i i d

• 170,000 – Likely savings in TA student count
• 350,000 – additional state subsidy (in reserve)
• 120,000 – purchase of chrome books

120,000 purchase of chrome books

• (1,087,903)

How do we resolve this? How do we resolve this?

Allocating General Fund Reserves

• $1 650 118

$1,650,118

• (759,975) – Reduce School Fund Balance
• (503,562) – SMS Boiler (net state revenue)
• (67,525) – Unit 91 expenses in FY18 (to date)
• (60,000) – Unit 91 projected expenses for remainder of FY18
• $259 056
• $259,056
• (190,600) – Planned use of reserves in FY18
• $68,456

With these adj ustments With these adj ustments

• Assuming:

▫ no other fund balance adjustments to the close of the year ▫ Close of books has a $0 difference in budget to actual

• $68 456 remaining General Fund above 10%
• $68,456 remaining General Fund above 10%
• (327,928) School Fund Balance as of June 30th, 2018

Other areas to consider funding for remainder of g FY18:

• Associate City Planner for succession planning

P t ti P ll S i li t t i ll

• Part-time Payroll Specialist or outsourcing payroll
• Overtime in Fire Department
• Retrofit some of City Hall/annex to accommodate current needs

Retrofit some of City Hall/annex to accommodate current needs and future staffing levels

• Winter operation impact on overtime/material for Public Works

L d hi t i i t iti f di t d d ti

• Leadership training opportunities for directors and deputies
• Executive Assistant for City Administrator
• Other smaller departmental pressures due to turnover

Other smaller departmental pressures due to turnover

Recommendation from City Administration

• Given the current state of the City/School, I would recommend a One-time

dip below the 10%, but still above the 8.33% (as required by code).

• This would come with a strong commitment from my office to monitor

expenditures through the remainder of the year to hopefully further replenish

• ur reserves.
• ur reserves.
• As part of the City Administrator’s FY19 Recommended Budget, no use of
• ne-time
• ne time.
• City Administration has strong commitment to working toward a 16.67%

(two months) threshold (goal for FY20) (two months) threshold (goal for FY20).

Recommendation from City Administration

• A One-tim e dip below the 10 %, but still above the 8 .33%

(equivalent to 8 66k) as required by code: Pay off the School Debt $327 928

• Pay off the School Debt

$327,928

• Hire an Associate Planner (salary and benefits)

$25,387

• Cover the part-time payroll specialist or outsource

$11,667 p p y p , 7

• Increase the Fire department overtime line

$50,000

• Retrofit spaces and move some departments to annex

$75,000 I th PW ti d t i l t li $ 0 000

• Increase the PW overtime and material account lines

$50,000

• Staff development and training opportunities

$31,000

• Executive Assistant to the City Administrator

$22,667 y $ , 7

• Other smaller expenses out of line with budget

$41,000 $634,649

With these adj ustments With these adj ustments

• Assuming:

▫ Council approves recommendation from Administrator ▫ Close of books has a $0 difference in budget to actual

• As of June 30th 2018:
• As of June 30 , 2018:
• $4,624,404

General Fund Balance

• $0

School Fund Balance

Fund Balance

• $4,624,404

Total Fund Balance

• 54 531 337 MOE Budget for FY19

Fund Balance would Equal 8 48%

• 54,531,337 MOE Budget for FY19

Equal 8.48%