PRELIMINARY BUDGET PRESENTATION CITY COUNCIL WORK SESSION TONY PUENTE - DIRECTOR OF FINANCE JUNE 12, 2018
OBJECTIVE Present overview of budget structure and budget process Focus on General Fund Utility Funds previously discussed on May 22 nd , June 4 th and June 5 th • All other funds to be discussed during August 2 nd Budget Work Session • Present preliminary estimates for FY 2018-19 Budget Over 65 and Disabled Tax Limitation (Freeze) Discuss Homestead Exemption Debt by Fund and Bond Program Authorization Receive Feedback and Direction from City Council: Budget Themes/Priorities • Homestead Exemption • 2 Any Other Direction •
BUDGET OVERVIEW City is required by state law to annually adopt a budget and set a property tax rate by September 30 (City’s fiscal year is October 1 st to September 30 th ) Tax rate requires City Council vote of 60% (5 or more), budget is a simple majority vote (4 or more) If a tax rate is not adopted by a 60% vote, the lower of the prior year tax rate or calculated • effective tax rate becomes the tax rate (Texas Tax Code Section 26.05) If a budget is not adopted by a simple majority, the budget as submitted by the City Manager shall • be deemed to have been finally adopted by the City Council (City Charter Section 8.05) Adopted budget covers all operating and capital expenditures 3
BUDGET CALENDAR Budget Planning Jan.-Feb. Departmental Budget Adoption Budgets Sep. Mar.-May City Council Budget City Manager’s Deliberations Proposed Budget 4 Aug.-Sep. Jun.-Jul.
BUDGET PROCESS Finance Department develops baseline budgets for each department. Baseline budgets exclude one-time funding from the prior year. • Baseline budgets are “scrubbed” on a line item basis and adjusted downward based on historical trends. Departments must • submit formal funding request for line item increases. Beginning this fiscal year, select line items were “zeroed out” and Departments had to submit requests for reinstatement of • funding. These line items were: Outside Contract Services, Licenses, Dues & Publications, and Consultant Fees. Budget initiatives: Various management studies engaged for Planning, Building Inspections, Solid Waste and Electric. • Eliminated contingencies in budgets. • Simplified fund balances by reducing unnecessary reserves (i.e., Customer Service and Drainage). • 5
BUDGET PROCESS CONTINUED… Other initiatives: Quarterly reviews with Department Directors. • Various management studies engaged for Planning, Building Inspections, Police, Solid Waste and Electric. • Monthly review of capital programs to re-prioritize projects and maximize available funding. • Lean/Process Improvements throughout organizations to improve efficiency, eliminate duplication and streamline processes. • Beginning in FY 2016- 17, City Management has been “right sizing” the organization to better serve the community. Eliminated 10.35 FTEs in the General Fund totaling $1.16 million. • Utilized approximately $810,000 in savings to add 5 patrol officers and 1 crime analyst in the Police Department. • Eliminated 10.5 FTES in other City funds totaling $1.17 million. • 6
CITY FUNDS Major Operating Funds – General, Debt Service, Electric, Water, Wastewater/Drainage, Solid Waste and Airport Internal Service Funds – Technology Services, Materials Management, Fleet, Risk Retention, Health Insurance, Engineering Services and Customer Service Capital Funds – General Government, Electric, Water, Wastewater/Drainage, Solid Waste and Airport Special Revenue Funds – Recreation, Street Improvement, Tourist and Convention, Police Confiscation, Traffic Safety, Economic Development Investment, Downtown Reinvestment, Parks Gas Well, Roadway Impact Fee, Tree Mitigation, Public Education Government, McKenna Trust, Parkland Dedication Trust, Parkland Development Trust, Downtown TIRZ, Westpark TIRZ, Donation (Police, Fire, Animal Control and Library), and Grants 7
FY 2017-18 BUDGET BY FUND - $1,140,747,079 General Fund , $119,687,991 Capital Budget - Available , General Debt $364,102,000 Service Fund, $85,790,964 Electric Fund, $180,903,753 Capital Budget - Water Fund, New Funding, $47,809,321 $154,333,000 Wastewater Fund, Grants , $3,769,218 $34,023,041 Other Funds, Solid Waste Fund, 8 $14,191,476 Street Improvement $38,528,086 Internal Service Fund, $13,961,195 Funds, $83,647,034
FY 2017-18 GENERAL FUND REVENUES - $119,720,372 Fines and Fees Other 2.1% 3.3% Service Fees 6.9% Ad Valorem Taxes 37.6% Return on Investment 6.7% Cost of Service 6.7% Franchise Fees 4.2% Licenses and 9 Permits 2.3% Sales Taxes 30.2%
FY 2017-18 GENERAL FUND EXPENDITURES BY CATEGORY - $119,687,991 Fixed Assets 1.2% Cost of Service 7.5% Operations 6.4% 380 Agreements 2.8% Fuel and Maintenance 1.5% Utilities 2.5% Miscellaneous 1.2% Insurance 1.0% Maintenance & Repair 2.6% Materials & Supplies 2.6% Personal Services 10 70.7%
FY 2017-18 GENERAL FUND EXPENDITURES BY DEPARTMENT - $119,687,991 Facilities Management Other 3.6% Libraries 5.1% Legal and CMO 4.3% 3.6% Finance/Internal Parks and Recreation Audit/ HR 4.2% 11.2% Traffic/Transportation/Street Lighting 2.9% Municipal Court/Judge 1.5% Planning/ Community Development/ Inspections 6.3% Fire/Community 380 Agreements 2.7% Improvement 25.3% Economic Development 1.0% Police/Animal Services 11 28.3%
SALES TAX RATES - COMPARISON Regular Property Eco/Ind Eco/Ind Street Sport/Comm Crime Fire Total Local City Rate Tax Relief Dev Sec 4A Dev Sec 4B Maintenance Venue Control Control Transit Rate Denton 1.00% 0.50% 0.50% 2.00% Lewisville 1.00% 0.25% 0.125% 0.125% 0.50% 2.00% Flower Mound 1.00% 0.25% 0.25% 0.25% 0.25% 2.00% Grapevine 1.00% 0.50% 0.50% 2.00% Dallas 1.00% 1.00% 2.00% Fort Worth 1.00% 0.50% 0.50% 2.00% Grand Prairie 1.00% 0.25% 0.50% 0.25% 2.00% Irving 1.00% 1.00% 2.00% Arlington 1.00% 0.25% 0.50% 1.75% McKinney 1.00% 0.50% 0.50% 2.00% Allen 1.00% 0.50% 0.50% 2.00% Plano 1.00% 1.00% 2.00% 12
BUDGETARY THEMES/PRIORITIES Focus on cost containment and organizational efficiency Proposed budget set at the effective property tax rate Provide options that may require increasing the tax rate above the effective tax rate. • Enhance street maintenance and inspection capacity Expanded Public Safety response capacity Maintain competitive compensation plan Debt financing options for certain capital projects: Radio System Replacement • Fire Station #8 Design • Service Center Remodel • 13 Residential Street Reconstructions •
GENERAL FUND Neighborhood Services Building Inspections, Community Improvement Services, Libraries, Parks and Recreation, Planning, Gas Well Review, • Community Development Public Safety Fire, Police, Animal Services, Municipal Court and Judge • Transportation Traffic Operations and Transportation • Administrative and Community Services City Manager’s Office, City Council, Economic Development, Facilities Management, Finance, Human Resources, Internal • Audit, Legal Administration and Public Affairs/Communication 14
GENERAL FUND PROJECTION ASSUMPTIONS Assessed Value Increases FY 2018/19 – 10.0% (assumes new value is 3% of total value) • FY 2019/20 and beyond – Assumes effective tax rate each year plus new value. • Total Effective Tax Rate Tax rate set as a rough estimate of effective tax rate of $0.610738 (2.7 cents below current rate of $0.637856) • Staff reviewing Truth-In-Taxation calculation on effective tax rate and will provide the City Council additional details during • the August 2 nd Budget Workshop. Tax Year 2018 is the first year impact of the Over 65 & Disabled Tax Limitation (Freeze). Sales Tax FY 2018/19 – 5% above revised estimate for FY 2017/18 ($39.2 million vs $36.2 million) • FY 2019/20 and beyond – 5% in Year 2; 4% in Year 3; and 3% in Years 4 & 5 • Franchise Fees All growth in franchise fee revenue and an additional $622,000 transferred annually to the Street Improvement Fund • 15 (based on 10 year plan to transfer all franchise fees to street improvement)
HOMESTEAD EXEMPTION Currently 0.5% of value or $5,000 whichever is greater Homes up to $1 million receive same exemption • Preliminary values as of 5/31/18 reflect: 19,046 single family homes with a homestead exemption (64%) • 29,630 total single family homes in the City • Exempted value equals $92,300,932 or approximately $588,747 in revenue to City. • Preliminary average home value is $234,351 Denton Central Appraisal District (DCAD) encompasses 42 cities 16 16 cities have a homestead exemption and those range from 0.5%;$5,000 ($1M) to 20%;$10,000 ($50K) •
HOMESTEAD EXEMPTION City HS Over 65/DP Freeze 2017 Tax Rate Carrollton Y – 20% or $5,000 $60,000/$60,000 N $0.599700 The Colony N $10,000/$10,000 N $0.665000 Denton Y – 0.5% or $5,000 $50,000/$50,000 Y $0.637856 Flower Mound N $100,000/$100,000 N $0.439000 Highland Village N $75,000/$75,000 N $0.568020 Lewisville N $60,000/$20,000 Y $0.436086 Roanoke Y – 20% or $10,000 $40,000/$4,500 Y $0.375120 Coppell Y – 5% or $5,000 $75,000/$75,000 N $0.579500 Trophy Club N $35,000/$0 Y $0.451442 Plano Y – 20% or $5,000 $40,000/$40,000 Y $0.468600 17 Frisco Y – 7.5% or $5,000 $80,000/$80,000 N $0.446600
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