Fort Walton Beach Ordinance — 1740 Adopt Budget FY07-08 — reading text

unreserved level should be based on the jurisdiction' s specific circumstances ( e. g. coastal community, volatile revenue stream). A Florida League of Cities revenues expert recommends a fund balance of 25% - 30% for coastal and barrier island communities. The City' s auditors, O' Sullivan Creel, recommend an undesignated General Fund reserve level of 4 months of operating expenses. General Fund Reserves Analysis Actual Estimate Benchmark Reserve levels: FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 GFOA - 15% of operating revenues min.; 35. 5% 35. 9% 33.8% 28. 9% 47.6% 48. 2% 43.7% should be higher if coastal community Target $ 2,427,403 $ 2, 222, 545 Variance between Estimate & Target $ 5,375,446 $ 4, 245,278 GFOA - 1- 2 mo. operating expenses min.; 199. 0% 194.3% 187.4% 165.8% 218. 8% 256. 3% 204. 0% should be higher if coastal community Target: $ 3, 044,992 $ 3, 169, 875 Variance between Estimate & Target: $ 4, 757,858 $ 3,297,948 FLOC - revenue expert recommends 25%- 33. 2% 32.4% 31. 2% 27. 6% 36. 5% 42. 7% 34. 0% 30% of expenses for coastal community Target: $ 5,480,985 $ 5.705, 775 Variance between Estimate & Target: $ 2, 321, 864 $ 762, 048 Auditors - 4 mo. operating expenses 99. 5% 97.2% 93. 7% 82. 9% 109. 4% 128. 1% 102. 0% Target: $ 6, 089,983 $ 6,339, 750 Variance between Estimate & Target: $ 1, 712,866 $ 128, 073 UnreservedlUndesignated Fund Balance 4,971, 126 4, 980, 107 5, 279,922 5.415, 597 8, 105, 314 7,802, 849 6,467, 823 NOTE: The City has not been notified of the final CST repayment amount. Appropriations of $714, 368 in FY 2008 & FY 2009 and $238,123 in FY 2010 are estimated based on the Apr12OD7 notification of $1, 666, 859 in overpayment during a 28-month period. The City' s General Fund undesignated fund balance exceeds each of the three benchmark levels. At the May 2007 BUdget Policy Meeting, City Council indicated that the current reserve level is necessary in the event of a catastrophic event. The City ' is fiscally sound as reported by our independent auditors. However, minimal revenue growth and escalating expenditures for maintaining current service levels could erode reserve stability. Enterprise Funds - The City considers a minimum reserve of six months of operating revenue to be prudent for pr9prietary funds. FY 2007-08 Six Months of Fun d Projected Unrestricted % Over/( Under) Operating Revenue Operating Revenue Net Assets on 09/ 30/ 08 Minimum Utilities 6, 987,500 3, 493, 750 000 5,468, 62% Sanitation 3,448, 570 1, 724,285 1, 398, 486 19%> Golf 2,435, 000 1, 217, 500 289, 820> 123%> City of Fort Walton Beach, FL 33- Budget Overview The Utilities Fund continues to meet the minimum reserve level. The Sanitation Fund, for the first time, willdip below the minimum level as a result of years of increasing expenses outpacing revenues. r Garbage rates are scheduled to increase 3% effective October 1 for the first time in over ten years. Annual adjustments, similar to the multi- year rate plan in the Utilities Fund, will likely be necessary to ensure revenues continue to cover expenses. The Golf Fund has not yet achieved the minimum reserve level for a variety of reasons including course renovations, clubhouse construction, the recessionary economy, and hurricane damage. In order to rebuild the net assets of the Golf Fund, City Council has implemented a multi- year rate plan, forgiven advances in the amount of $ 272, 810 from the General and Sanitation Funds, and eliminated the transfer to the General Fund based on the Cost Allocation Plan. Insurance - The City offers health insurance through Blue Cross/ Blue Shield and is self- insured for dental. The City's annual expense is budgeted based on projected premium increases and usage levels. At the end of the year, if the amount budgeted exceeds the actual expense, the balance shall be reserved for future years in which the City may experience higher than anticipated expenses as a result of health insurance premium increases or dental plan usage and be required to contribute more than budgeted. Pension - The City has three defined benefit pension plans which must remain fiscally sound. General employees and police officers contribute 5% of pay and fire personnel contribute 6. 6% of pay to their respective plans. The City' s annual contribution is budgeted based on an independent actuarial analysis. At the end of the year, if the amount budgeted exceeds the amount of the City' s required contribution, the balance shall be reserved for future years in which the plans may experience poor investment earnings and City will be required to contribute more than budgeted. Workers Compensation - The City is insured through the Florida Municipal Insurance Trust ( FMIT) for workers compensation. The City' s annual expense is budgeted based on projected salaries and workers compensation rates. At the end of the year, if the amount budgeted exceeds the FMIT audit amount, the balance shall be reserved for future years in which the City may experience higher than anticipated rate increases and be required to contribute more than budgeted. 1 Renewal & Replacement - Per the requirements of the 2005 Utility Revenue Bond issuance, the lesser of 250K or 5% of gross revenues is necessary to ensure budgeted expenses do not exceed 95% of gross revenues. The City budgets renewal and replacement expense in the Utilities Fund equal to $ 250, 000 to meet this bond requirement and budgets renewal and replacement revenue in the Utilities Fund equal to 352,227 for replacement of 2" and larger water meters and a sewer vacuum truck. Renewal and replacement revenue of $ 353, 950 is budgeted in the Sanitation Fund to fund the replacement of aging front loader, knuckleboom, and container trucks. Investments Investment Philosophv - Funds shall be invested in a manner that will ensure the safety of principal while meeting daily cash flow needs. Optimization of investment income shall be secondary to the requirements of safety and liquidity. Investment Policv Statement - The following policy statements govern the City' s investment of funds in excess of those required to meet current expenses, excluding pension funds: The City' s Investment Policy, adopted by City Council,' authorizes investments in accordance with Florida State Statute 218.415. The primary investment objectives, in order of importance, are: safety of principal, liquidity, and investment income. Cash balances from all funds are consolidated to maximize investment earnings. Investment income is allocated to each fund based on the fund' s respective participation and in accordance with generally accepted accounting principals. The investment portfolio shall be structured, to the extent possible, to match investment maturities with known cash needs and anticipated cash flow requirements. Investments will be diversified, to the extent practicable, to control the risk of loss resulting from over- concentration of assets in a specific maturity, issuer, instrument, dealer, or institution. City of Fort Walton Beach, FL 34-  Budget Overview The Finance Director is responsible for the operation of the investment program. The Finance Director or designee of the Finance Director and/ or City Manager is authorized to invest surplus public funds of the City in accordance with the adopted Investment Policy. Debt h; suance Debt Limit - The State of Florida does not place a legal limit of debt on municipalities. However, general debt is obligation debts greater than one year