Fort Walton Beach — Fiscal Year 2023-24 Adopted Budget — reading text

improvement projects, and performance measures – look for the icons below 6 City Manager’s Budget Message September 12, 2022 Honorable Mayor, City Council Members, and Citizens: It is my pleasure to submit the FY 2023-24 municipal budget. The City of Fort Walton Beach budget is designed to meet the highest standards of municipal budgeting. This budget continues the City’s commitment of providing high quality services in a cost-controlled manner, developing an assortment of revenues to fund programs and maintaining prudent cash reserves. This year’s budget process emphasizes sound fiscal management and sustainability to achieve the goals established by citizens, City Council, and staff. The FY 2023-24 proposed budget of $56,300,597 is $2.8M, or 4.78%, less than the adopted FY 2022-23 budget; the decrease is primarily due to completion of some Capital Projects, long time staffing retirements, and overall streamlining of operating expenditures. The proposed budget is predicated on the millage rate to 4.6116 mills; as a result, ad valorem revenues will increase by 9.93% citywide as compared to the final 2022 Certification of Taxable Value DR-420. ECONOMIC ENVIRONMENT The unemployment in Okaloosa County is 2.6% as compared to 2.7% a year ago. Unemployment in the State of Florida is 2.7% with the National average at 3.5%. Although this figure is positive, inflation has risen to a 40-year high of 9.2%, negatively impacting our employees and significantly increasing the cost of our day-to-day operations. For example, fuel costs have increased 30% resulting in a year-over-year increase of $192,682 in the proposed budget. State-shared revenues continue to surpass estimates and are forecast to increase 14% year-over- year. These changes show increases in demand for services and consumption of goods. The Communication Services Tax revenues projections have increased from last year by 11.51%. On a brighter note, the Okaloosa County Property Appraiser anticipates a 9.93%, or $187M, increase in taxable assessed property values for the City, as the real estate market continues its recent boom. TOP BUDGET ISSUES Current Year – FY 2023-24 Prior Year – FY 2022-23 CIP’s $3,050,000 CIP’s $5,692,500 Capital Improvements Programs were added Capital Improvements Programs were added throughout the various Funds. throughout the various Funds. Insurance Benefits Insurance Benefits Health insurance premium rates increased 5.75% for Health insurance premium rates remained flat for FY23-24. FY22-23. State-Shared Revenues $482,834 State-Shared Revenues $484,134 Continue to rise and show a 14% increase year-over- Have rebounded and show a healthy 16.33% increase year. year-over-year. City of Fort Walton Beach, FL 7 City Manager’s Budget Message Property Taxes The City’s 2023 gross taxable property value for operating purposes is $2.079 billion, an increase of $193 million, or 10.23%, from the 2022 final gross taxable property value of $1.886 billion. Property taxes primarily fund General Fund operations. However, property taxes paid by certain residents and businesses located in areas targeted for specific improvements to eliminate blight and improve infrastructure are allocated to the Community Redevelopment Agency (CRA) Fund. Staffing and operational cuts were made in FY 2011-12 and FY 2012-13. In FY 2013-14, the City simply did not have room to “do more with less” and raised the millage rate to 5.7697 mills. As property values continue to rise, the City lowered the millage rate to the rolled-back rate of 5.6395 mills in FY 2019-20 and lowered it to 5.3293 mills in FY 2020-21. The millage rate was reduced to 4.9999 in FY 2022-23 and reduced again to the rolled-back rate of 4.6116 for FY 2023-24 proposed budget; One mill equals $144.35 per $1,000 of taxable property value. Wage Adjustments In the proposed FY 2023-24 Budget, there is a 3% Cost of Living Adjustment (COLA) effective on October 1, 2023 and a 2.0% Length of Service Adjustment (effective on the employee’s anniversary date) for all general employees. Sworn Police Department employees will receive the 3% COLA on October 1, 2023 and step increases on their anniversary date based on the current pay grades and step plans. Firefighters employees will receive the 3% COLA on October 1, 2023 and step increases for Fire Bargaining Union Members will be based on the current pay grades and step plans adopted with the newly negotiated Collective Bargaining Agreements. The COLA equates to an increase of $505K and the Length of Service adjustments will equate to an increase of $196K for an overall cost of $701K in the budget. A new Pay Study was approved in June 2023 and was implemented in the FY 2023-24 Budget. Pension Defined Benefit Changes The City is required to maintain its three defined benefit pension plans in a fiscally sound manner. Investment earnings and employee/employer contributions comprise the plans’ income. General City of Fort Walton Beach, FL 8 City Manager’s Budget Message employees and police officers currently contribute 5% of wages while firefighters contribute 8% of wages into their respective plans. The City’s annual contribution, as a percent of payroll, is based on actuarially determined contribution levels except for the General Pension Plan which has switched from a percentage to a fixed dollar amount. The actuary determines City contribution requirements using estimated future earnings of members of the plan, as well as other assumptions on investment returns, retirement age, and, among others, expected mortality. Minimum benefits for both the Police and Fire Defined Benefit Plans are mandated by Chapters 175 & 185 of the Florida Statutes. The Police and Fire Plans both meet or exceed these minimum benefit levels. The City’s contribution to the General Employees defined benefit plan is budgeted at $319K, which is a decrease of $11K over the prior year. This plan was closed to new entrants in January 2010. The City’s contribution to the Police Officers plan is budgeted at $1.7M and the contribution to the Firefighters plan is budgeted at $1.5M, which is a combined increase of $515K. Health Insurance Benefits In 2010, the Federal Government passed the Patient Protection and Affordable Care Act. The Act, which mandates, among other things, that employers offer specific medical insurance for any employee working more than thirty (30) hours per week, has had a negative impact on the cost of providing such insurance. The City contributes 100% of the premium for employee coverage in its Standard Insurance Plan and 75% of the employee coverage for those who elect the Premium Insurance Plan. For employees hired before October 1, 2008, the City contributes 75% of all dependent coverage. Employees hired after this date receive a 50% contribution from the City for all dependent coverage. The City insurance coverage in FY 2023-24 contains a 5.75% increase in premiums. Fleet Replacement The City’s Fleet Replacement Program (FRP) is a planning and budgeting tool that identifies the replacement of vehicles with a value greater than $10,000 and a useful life of eight years or more. The replacement criteria provides a mechanism for the systematic evaluation of vehicle utilization and repair/maintenance costs and serves as a guide for efficient and effective replacement. Police patrol vehicles are replaced on an 8-year cycle and the remainder of the fleet on a 10–12- year cycle. Each year as part of the budget process, the fleet is evaluated based on established replacement criteria and a ten-year schedule of replacements is developed depending on a projection of available fiscal resources and the evaluation scoring. Vehicle replacements are funded objectively based on established criteria and funding resources. To maximize the useful life of vehicles and meet service delivery levels, vehicles may be transferred between departments prior to disposal. Prior to replacing a vehicle, an analysis is performed to determine if a less expensive mechanism would meet employee needs at a reduced operating expense to the City or if the vehicle should be removed from the fleet without replacement. OTHER ASSUMPTIONS & CHANGES REVENUES (reference Table of Contents for detail location) 1. Revenues are estimated at conservative levels to guard against unanticipated economic shifts, legislative changes, or collection levels. General government revenues are largely budgeted City of Fort Walton Beach, FL 9 City Manager’s Budget Message based on historical collection and growth levels. Ad Valorem and State shared revenues are budgeted based on external estimates received from their respective authorities. Enterprise revenues are based on historical usage and/or number of customers. A five-year utility rate study, which includes water & sewer, sanitation, and stormwater has been completed. The study determines the required rates to generate sufficient revenue to sustain renewal and replacement reserves and account for debt service requirements and will be updated on an annual basis to account for real-time revenues, expenses, and changes within the enterprise systems. The proposed FY 2023-24 Budget implements Year Four (4) of the five-year rate study, which was adopted by City Council on August 11, 2020. The Fire Services Assessment, which was implemented in January 2020, has been removed starting October 1, 2023. The State of Florida’s revenue projections for FY 2023-24 are significantly higher than FY 2022- 23 and are a result of the early reopening of the State and continued recovery from the COVID-19 Pandemic. 2. Use of Reserves – Appropriations from fund balance (governmental funds) or net assets (enterprise funds) are budgeted as follows: a. General Fund – $3.4M from unassigned Fund Balance. b. Utilities Fund – $1.5M from unassigned Fund Balance to complete the Water Meter Replacement CIP. c. Stormwater Fund - $68K from unassigned Fund Balance. 3. Grants – The City was awarded various State & Federal grants for FY 2022-23 as follows: a. Martisa Road Stormwater Improvements - $287.5K State grant through FDEP (100% City Match Required) b. Local Transportation Project FWB Coral Creek Nature Trail - $300,000 State grant through FDOT (50% City Match Required, will be adopted via resolution when the contract arrives) c. Driving Under the Influence Enforcement - $25,000 State grant through FDOT d. Breaching Equipment & Ballistics Shields - $5,024 State grant through FDLE e. Diver Down - $15,000 State grant through FDLE f. Port Security Grant Boat Cover - $57,921 Federal grant through FEMA (25% City Match) EXPENSES (reference Table of Contents for detail location) 1. Wages have been adjusted as previously discussed. 2. Benefits have been adjusted as follows: a. Medical insurance – health insurance premiums increased 5.75%.