Fort Walton Beach Council agenda — 05-15-2007 special agenda - budget policy — reading text

Budget Hearings held in September. The increase in property taxes was not used to fund increased operational costs such as fuel, utilities, concrete, or property & casualty Insurance ( which increased 60% or $ 258K in FY 2007, with building and contents coverage quadrupling from $ 96K to $ 380K). The City applies for local, state, and federal grants to offset the cost of capital projects. In recent years, the City has been awarded $ 397K ( 50% funding) for projects such as Landing Phase II improvements, Urban Forestry tree planting, Lewis Turner roadside beautification, and the City Hall Athletic Complex. The police and fire departments have been successful in obtaining $ 211 K in operational grants for full or partial funding of EMS equipment, fire prevention program supplies, street crimes supplies, bulletproof vests, in- car video systems, and drug task force activities. The consensus of City Council on the following issues will assist staff in developing a FY 2007 -08 budget that meets Council's programmatic objectives within available fiscal resources. 13 of 36 FY 2007- 08 Budget Policy Workshop PROGRAM AND SERVICE LEVELS STRATEGIC PLAN GOAL - High Quality Services: Outsourcing, Consolidation, Process Changes, Partnerships Policv Decision Does current funding match City Council priorities for General Fund programs and services? Backqround 1. Ad Valorem taxes comprise $ 5, 054, 805 or 25% of General Fund revenues. Based on current proposals being evaluated by the Legislature, this revenue source could decrease as much as 1. 9M or 37% if the millage rate is rolled back to the FY 2000- 01 level and the homestead exemption is doubled, which would equate to a 10% General Fund revenue loss. The outcome of property tax reform will not be known until the end of the Special Session June 12- 22. 2. Communications Services Tax revenue comprises $ 2, 335, 000 or 11 % of General Fund revenues. ft*' The FY 2007- 08 amount will be closer to $ 1, 510, 000 as a result of corrected monthly vendor filings according to the Department of Revenue, a decrease of $825K or 35%. The General Fund impact is a 4% revenue loss. Discussion 1. General Fund functional areas are currently funded as follows in 2006- 07: Debt RJblic Works 4% 17% Culture 5% Parks & Recreation 9% 2. The following page details services and programs funded in the General Fund. Policv Impact 1. Staff anticipates preparing a FY 2007-08 General Fund budget that is between $ 1.4M or 7% and 2. 3M 11 % less than the FY 2006- 07 General Fund budget of $ 19, 617,698 or as a result of reduced Ad Valorem and Communications Services Tax revenues. Recommendation Advise staff if current funding allocation matches City Council's priorities for General Fund programs and services. 14 of 36 FY 2007- 08 Budget Policy Workshop 2006- 07 General Fund Functional Areas Patrol Operations Fire Suppression Traffic Enforcement Fire Inspections Communications/ Dispatch Emergency Medical Services - ALS/ BLS Records Management Community Fire Prevention Programs Administration Emergency Management Community Policing Citizens Emergency Response Team Street Crimes Crime Scene Emergency Management Investigations Tactical Response Gang Suppression Citizens Police Academy Municipal Tennis Center Adult Sports Leagues Recreation Center Programs Recreation Center Maintenance Special Events Parks & Athletic Field Maintenance Museum Education Programs Adult Library Programs Heritage Park General Library Services ( books & audio/visual) Review Development Site Plans, Drawings, Plats Sidewalk Maintenance & Installation Prepare Survey/ Design for Infrastructure Projects Storm Drain Maintenance & Installation Vehicle & Equipment Repair/ Maintenance Curb and Gutter Maintenance & Installation Facility Maintenance Right- of-Way Maintenance Traffic Control Devices & Markings Right- of-Way Planting & Beautification Cemetery Operation to Building Permiting & Inspections Long- Range Planning ( LDC, Camp Plan) Code Enforcement Development Review City Council Agenda Preparation & Implementation Fixed Assets, Cash Recon Council & Board Meeting Minutes Fixed Assets Management Policy & Strategic Plan Development & Implementation Pension Administration Annual Budget Development & Reporting Employee Wellness & Morale Annual Audit Preparating & Financial Monitoring Bids, Requests for Proposal Records Management, Laserfische & Destruction Material & Supply Acquisition, Inventory Management Employee Recruitment & Training Network, Hardware, & Software Maintenance & Support Risk Management Internet & Intranet Accounts Payable, Payroll Special Events Debt Service 15 of 36 FY 2007- 08 Budget Policy Workshop GENERAL FUND RESERVE LEVEL STRATEGIC PLAN GOAL- Economic Health/ Financial Viability: Options for Revising Reserve Policy Policv Decision Should the unreserved- undesignated portion of General Fund reserves be maintained at 30%? Backqround 1. Fund balance serves as a measure of the financial resources available in the General Fund. There are several types of fund balance: a. Reserved -- that portion of fund balance earmarked for certain types of future expenditures e. g. encumbrances, debt service). b. Unreserved- Designated - that portion of fund balance for which tentative plans have been made for its use ( e. g. special project carryover, disaster relief). c. Unreserved- Undesignated - that portion of fund balance available for appropriation or future spending. 2. Credit rating anencies monitor fund balance levels and consider unreserved fund balance when IIII!~ determining a local government's creditworthiness. 3. The Government Finance Officer' s Association ( GFOA) recommends, at minimum, an unreserved fund balance in the General Fund of no less than 5% - 15% of regular General Fund operating revenues or of no less than 1 - 2 months of regular General Fund operating expenditures. However, the actual unreserved level should be based on the jurisdiction' s specific circumstances e. g. coastal, volatile revenues). 4. A Florida League of Cities revenues expert recommends a fund balance of 25% - 30% for coastal II' and barrier island communities. 5. The City' s auditors, O' Sullivan Creel, recommended an undesignated General Fund reserve level of 4 months of operating expenses in their March 2007 presentation of the CAFR. Discussion 1. A policy governing the level of unreserved fund balance should consider a variety of factors: a. Predictability of Revenues 25% O"r revenues are Ad Valorem taxes, which provide a stable, predictable revenue stream; however, the Legislature is considering drastically reducing this revenue source. 16% of revenues are franchise fees and utility taxes, with fees set in 10- 15 year agreements. 13% of revenues are state- shared revenues ( municipal revenue sharing, % cent sales tax), based on population but varying based on economic conditions. 11 % of revenues are Communications Services Tax, which will decline 35% next year due to a correction in the distribution formula. b. Volatility of Expenditures General Fund expenditures are generally not volatile, though certain operating expenditures may exceed estimates ( e. g. fuel, utilities, overtime). Hurricanes are unpredictable. Hurricane Ivan caused $ 5M in expenses, and the first reimbUl:sement check was not received until 4 months later. The City is still awaiting final reimbursement in the amount of $ 125K nearly three years later. c. Availability of Resources in Other Funds The Utilities Fund and Sanitation Fund currently contribute $ 1. 9M and $ 1. 1 M, respectively, to fund their portion of the City' s cost allocation plan and offset General Fund expenses. 16 of 36 FY 2007- 08 Budget Policy Workshop d. Potential Drain of Other Funds The General Fund continues to subsidize the Golf Fund approximately $ 350K annually by absorbing a large portion of the Golf Fund' s cost allocation expenses as approved by City Council during adoption of the rate study in April 2006. e. Liquidity The City' s reserves are invested either at the State Board of Administration or in 12- month certificates of deposit at local financial institutions, both of which are highly liquid. f. Designations The unreserved- undesignated fund