PRELIMINARY BUDGET PRESENTATION CITY COUNCIL WORK SESSION TONY - - PowerPoint PPT Presentation

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 22nd, June 4th and June 5th
• All other funds to be discussed during August 2nd 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
• Any Other Direction

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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 1st to September 30th)

 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

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BUDGET CALENDAR

Budget Planning Jan.-Feb. Departmental Budgets Mar.-May City Manager’s Proposed Budget Jun.-Jul. City Council Budget Deliberations Aug.-Sep. Budget Adoption Sep.

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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).

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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.

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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

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FY 2017-18 BUDGET BY FUND - $1,140,747,079

General Fund , $119,687,991 General Debt Service Fund, $85,790,964 Electric Fund, $180,903,753 Water Fund, $47,809,321 Wastewater Fund, $34,023,041 Solid Waste Fund, $38,528,086 Internal Service Funds, $83,647,034 Street Improvement Fund, $13,961,195 Other Funds, $14,191,476 Grants , $3,769,218 Capital Budget - New Funding, $154,333,000 Capital Budget - Available , $364,102,000

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FY 2017-18 GENERAL FUND REVENUES - $119,720,372

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Other 2.1% Fines and Fees 3.3% Service Fees 6.9% Return on Investment 6.7% Cost of Service 6.7% Franchise Fees 4.2% Sales Taxes 30.2% Licenses and Permits 2.3% Ad Valorem Taxes 37.6%

FY 2017-18 GENERAL FUND EXPENDITURES BY CATEGORY - $119,687,991

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Personal Services 70.7% Materials & Supplies 2.6% Maintenance & Repair 2.6% Insurance 1.0% Miscellaneous 1.2% Utilities 2.5% Fuel and Maintenance 1.5% 380 Agreements 2.8% Operations 6.4% Cost of Service 7.5%

Fixed Assets 1.2%

FY 2017-18 GENERAL FUND EXPENDITURES BY DEPARTMENT - $119,687,991

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Libraries 5.1% Parks and Recreation 11.2% Fire/Community Improvement 25.3% Police/Animal Services 28.3% Economic Development 1.0% 380 Agreements 2.7% Planning/ Community Development/ Inspections 6.3% Municipal Court/Judge 1.5% Traffic/Transportation/Street Lighting 2.9% Finance/Internal Audit/ HR 4.2% Legal and CMO 4.3% Facilities Management 3.6% Other 3.6%

SALES TAX RATES - COMPARISON

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City Regular Rate Property Tax Relief Eco/Ind Dev Sec 4A Eco/Ind Dev Sec 4B Street Maintenance Sport/Comm Venue Crime Control Fire Control Transit Total Local 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%

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
• Residential Street Reconstructions

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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

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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 2nd 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

(based on 10 year plan to transfer all franchise fees to street improvement)

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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 cities have a homestead exemption and those range from 0.5%;$5,000 ($1M) to 20%;$10,000 ($50K)

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HOMESTEAD EXEMPTION

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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 Frisco Y – 7.5% or $5,000 $80,000/$80,000 N $0.446600

AVERAGE TAXABLE HOME VALUE COMPARISON

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City/Town # HS Residences Average Market Value Average HS Exemption Average Taxable Tax Rate Taxes Due to City Taxes Due on 200k Home Ft Worth 205,541 174,846 $ 41,523 $ 133,323 $ 0.805000 $ 1,073.25 $ 1,610.00 $ Dallas 217,643 252,509 $ 60,532 $ 185,074 $ 0.780400 $ 1,444.32 $ 1,560.80 $ Garland 58,214 160,467 $ 31,099 $ 129,368 $ 0.704600 $ 911.53 $ 1,409.20 $ Little Elm 6,647 262,990 $ 8,746 $ 254,244 $ 0.657671 $ 1,672.09 $ 1,315.34 $ Arlington 89,050 177,524 $ 48,741 $ 128,783 $ 0.639800 $ 823.95 $ 1,279.60 $ Denton 18,404 226,706 $ 12,570 $ 214,136 $ 0.637856 $ 1,365.88 $ 1,275.71 $ Richardson 19,346 233,023 $ 37,672 $ 195,351 $ 0.625160 $ 1,221.26 $ 1,250.32 $ Carrollton 16,419 276,448 $ 63,401 $ 213,047 $ 0.599700 $ 1,277.64 $ 1,199.40 $ Irving 36,039 210,396 $ 45,457 $ 164,939 $ 0.594100 $ 979.90 $ 1,188.20 $ Coppell 10,848 394,980 $ 18,466 $ 361,552 $ 0.579500 $ 2,095.19 $ 1,159.00 $ Highland Village 4,377 368,676 $ 6,353 $ 362,323 $ 0.568020 $ 2,058.07 $ 1,136.04 $ Corinth 5,163 253,775 $ 4,663 $ 249,112 $ 0.536860 $ 1,337.38 $ 1,073.72 $ Frisco 16,325 452,990 $ 39,324 $ 413,666 $ 0.446600 $ 1,847.43 $ 893.20 $ Flower Mound 17,578 381,743 $ 3,270 $ 378,473 $ 0.439000 $ 1,661.50 $ 878.00 $ Lewisville 13,124 224,637 $ 3,719 $ 217,318 $ 0.436086 $ 947.69 $ 872.17 $ Roanoke 1,401 291,560 $ 66,148 $ 225,412 $ 0.375120 $ 845.57 $ 750.24 $ Grapevine 11,480 326,527 $ 88,055 $ 238,472 $ 0.289271 $ 689.83 $ 578.54 $

HOMESTEAD EXEMPTION

 July 1st – Council must adopt an ordinance prior to this date in order to make the change effective for

Tax Year 2018 (available meeting dates are June 19th or 26th).

 Exemption percentage may not exceed 20% per the Texas Tax Code, Section 11.13(n).  Council may increase minimum but must be in $5,000 increments (-$588,000 each increment).  $5,000 exemption = $31.89 per year based on current tax rate of $0.637856.

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$5,000 $10,000 $20,000 0.5% $1,000,000 $2,000,000 $4,000,000 1.0% $500,000 $1,000,000 $2,000,000 5.0% $100,000 $200,000 $400,000 7.5% $66,666 $133,333 $266,666 10% $50,000 $100,000 $200,000 20% $25,000 $50,000 $100,000

COMPENSATION & BENEFITS ASSUMPTIONS

 FY 2018/19 has 3% average merit increase and increases for civil service based on meet & confer

agreement

• Preliminary planning level estimate based on market pay comparisons

 Future FY’s have 3% average estimated increase  Health Insurance

• Assumes a 3% increase in City contributions
• Employee contribution rates to be reviewed in coming weeks

 Retirement

• TMRS rate decrease of 17.31% to 17.18%
• Fire Pension rate at 18.50%
• Details on City pensions will be presented to Council in July/August

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FIVE YEAR FINANCIAL FORECAST

 Purpose of Forecast

• Evaluate budgetary decisions for long-term impacts under conservative scenarios
• Ensure financial affordability and sustainability of budgetary decisions

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PRELIMINARY GENERAL FUND FORECAST (PROPERTY TAXES AT EFFECTIVE TAX RATE)

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Amended Current Preliminary Year 2 Year 3 Year 4 Year 5 Budget Estimate Budget Projected Projected Projected Projected 2017-18 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 Beginning Fund Balance 31,770,772 $ 31,770,772 $ 31,582,129 $ 31,903,527 $ 32,250,511 $ 33,053,676 $ 33,440,580 $ Property Tax 44,460,191 $ 44,460,191 $ 45,824,128 $ 47,416,268 $ 49,302,133 $ 51,548,343 $ 54,240,825 $ Sales Tax 36,181,384 $ 39,202,935 $ 41,163,082 $ 43,221,236 $ 44,950,085 $ 46,298,588 $ 47,687,546 $ Other Revenues 39,078,797 $ 39,307,459 $ 40,379,208 $ 40,403,151 $ 40,550,689 $ 40,746,978 $ 40,831,455 $ Total Revenues 119,720,372 $ 122,970,585 $ 127,366,418 $ 131,040,655 $ 134,802,907 $ 138,593,909 $ 142,759,826 $ Base Expenditures 119,687,991 $ 118,273,937 $ 126,295,020 $ 129,193,671 $ 131,749,742 $ 135,207,005 $ 138,495,760 $ New Recurring Expenses

• $
• $

750,000 $ 1,500,000 $ 2,250,000 $ 3,000,000 $ 3,750,000 $ New One-Time Expenses 4,885,291 $ 4,885,291 $

• $
• $
• $
• $
• $

Total Expenditures 124,573,282 $ 123,159,228 $ 127,045,020 $ 130,693,671 $ 133,999,742 $ 138,207,005 $ 142,245,760 $ Ending Fund Balance 26,917,862 $ 31,582,129 $ 31,903,527 $ 32,250,511 $ 33,053,676 $ 33,440,580 $ 33,954,646 $ Change in Fund Balance (4,852,910) $ (188,643) $ 321,398 $ 346,984 $ 803,165 $ 386,904 $ 514,066 $ Fund Balance as % of Expend. 21.6% 25.6% 25.1% 24.7% 24.7% 24.2% 23.9%

GENERAL FUND SUPPLEMENTAL REQUESTS

 Supplemental Requests are requests for funding of capital and operational expenses.  Currently, the requests total $47,294,648

• Capital - $41,256,000
• Recurring Operational Expenses - $3,467,867
• One-Time Operational Expenses - $2,570,781

 The final detailed list of supplementals based on priority and funding options, will be discussed with

Council in July/August.

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DEBT BY FUND (PRINCIPAL & INTEREST) – 9/30/17

Fund GOs COs Revenue Bonds T

• tal

General Gov’t.1 $151,237,097 $63,840,736

• $215,077,833

Electric2 $56,348,813 $553,567,798 $346,732,250 $956,648,861 Water $71,261,668 $42,408,790

• $113,670,458

Wastewater $18,684,893 $39,239,344

• $57,924,237

Solid Waste $5,145,846 $61,200,448

• $66,346,294

T

• tal

$302,678,317 $760,257,116 $346,732,250 $1,409,667,683

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1Includes General Fund, Water Park, Warehouse and Airport debt. 2City has $16,917,916.67 is bonds that will offset outstanding revenue bonds as capitalized interest. Additionally,

$60.5 million in debt at TMPA not reflected.

3Does not include sale of $29.685 million in debt for General Government in June 2018.

GO BOND AUTHORIZATION

Purpose Date Authorized Amount Authorized Amount Issued FY 2017/18 T

• Issue

Remaining Authorization Streets 11/6/2012 $20,400,000 $20,400,000

• Streets

11/4/2014 $61,710,000 $18,290,000 $15,650,000 $27,770,000 Public Safety 11/4/2014 $16,565,000 $16,565,000

• Drainage

11/4/2014 $8,545,000 $5,255,000 $2,585,000 $705,000 Parks 11/4/2014 $11,355,000 $4,280,000 $1,515,000 $5,560,000 $118,575,000 $64,790,000 $19,750,000 $34,035,000

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Note: Anticipate issuing $19,370,000 in FY 2018/19 and $14,665,000 in FY 2019/20

DEPARTMENTAL PRESENTATIONS

 Presentations to continue through July at each scheduled Council meeting  Areas to be covered:

• Structure and Staffing
• Goals and Accomplishments
• Performance Measures
• Cost Containment
• Process Improvements

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BUDGETARY DATES

 JUNE 23 – Utility Budgets recommendation from PUB  MAY to JULY – Departmental Presentations  JULY 25 – Final Certified

Value

 AUGUST 2 – Budget Workshop & Adoption of Maximum Tax Rate (basis for public hearings)  AUGUST 14 & SEPTEMBER 11 – Public Hearings on Tax Rate & Proposed Budget  SEPTEMBER 18 – Adoption of Tax Roll, Tax Rate and Budget  Budget Transparency - Dedicated budget page on City website

• Budget idea submission form
• Posting all presentations, proposed budget and budgetary agenda items

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RECEIVE FEEDBACK AND DIRECTION

 Budget Themes/Priorities  Homestead Exemption  Any Other Direction

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QUESTIONS