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

from the Community Redevelopment Agency, Utilities, and Sanitation Funds have been based on the Maximus study, adjusted for inflation as resources have allowed each year. Interfund transfers developed from the Cost Allocation Plan account for the reimbursement of business activities provided to the other funds. In addition to interfund transfers, certain expenses have traditionally been split ( Le. budgeted) across funds and this practice was taken into consideration when the Maximus study was conducted. Split expenses account for the allocation of costs that are not directly related to services provided by Enterprise Funds, though are nonetheless attributable in part to those funds. Examples include property and casualty insurance, attorneys, employee morale, special events, and reports/ newsletters. Additionally, new programs and services not in place at the time of the Maximus study have been split across funds via personnel, operating, or non- departmental accounts, depending on the nature of the expense. Examples include CRA police officers, code enforcement activities, and the employee wellness program. According to the Governmental Accounting Standards Soard ( GASS), there are two major categories of interfund transfers: City of Fort Walton Beach, FL 12- Ci~ Manager' s Budget Message Residual Equity Transfer - a non- recurring or non- routine transfer that may include contribution of capital or a residual balance from one fund to another. transfers to a Operating Transfer - any other transfer between funds. Examples include annual fund, transfers from the general fund, or transfers capital projects or debt service operating subsidy from an enterprise fund that serve as a resource for general fund expenditures. . The guidance is silent on the amount of or calculation of the transfer. The Government Finance Officers Association defines interfund transfers as flows of assets without include a equivalent flows of assets in return and without a requirement for repayment." Examples and the remittance of portion of an enterprise fund' s general fund' s annual subsidy of an enterprise fund a book" is silent the amount of calculation of the transfer. surplus to the general fund. The "blue on or The Florida State Statutes address municipal budgeting, but do not prescribe how interfund transfers should be calculated. The City of Fort Walton Beach has traditionally not performed interfund transfers as from other funds to the General Fund have been an additional resource for the General Fund. Transfers based on those funds' share of business activities and benefit from specific programs and proportionate services. All payments have been strictly for reimbursement purposes and have not included a portion of the Enterprise Funds' net income as a subsidy. the As there is no best practice or standard, interfund transfer policies vary among municipalities across state. Fort Walton Beach' s historical practice of interfund transfers based on a Cost Allocation performing other Plan to account for the reimbursement of business activities, combined with splitting certain across funds is not uncommon and is reasonable based on what municipalities around the expenses state are doing. To simplify the budget, improve programmatic budgeting, and enhance budget usability 2007- 08. for staff and citizens, the practice of splitting expenses across funds will be eliminated for FY than usual to- year budgetary increase as a Consequently, departmental budgets show a higher year- result of moving expenses previously split across departments, divisions, or funds wholly into the department responsible for the activity or expense. For instance, the Human Resources department now shows the full cost of the labor attorney and cafeteria plan administration, whereas this expense was previously split across funds in non- accounts. Interfund transfer amounts will be increased departmental to reflect the proportionate share of personnel, operating, and non- departmental expense previously split. Staff believes this change will facilitate the ability to determine the total cost of services and activities and result in greater efficiency in processing purchase orders and accounts payable. This budgetary change will flow through to the accounting system, thereby streamlining accounting operations and ultimately improving fiscal transparency. Fund $ 40K In addition 'to its contribution to the General Fund, the Sanitation Fund reimburses the Utilities to offset its proportionate share of customer service division expenses. The Golf Fund does not reimburse the full cost of FY 2006- 07 FY 2007- 08 services received - a $ 400K value based on the Transfers to General Fund 2, 100, 000 3, 212, 310 Maximus study adjusted for inflation. Along with Fund continuing to absorb adopting a five- year rate plan in April 2006, City Council endorsed the General a large portion of the Golf Fund' s cost allocation expenses for the next three years ( after which time the issue will be reevaluated) in order to permit the Golf Fund to retain all revenues for operational use and to replenish net assets. Pension Contributions The City is required to maintain its three pension plans in a fiscally sound manner: Investment earnings and employee/ employer contributions comprise the plans' income. General employees and police officers contribute 5% of wages and fire personnel contribute 6. 6% of wages into their respective plans. The s actuaries estimate investment earnings at 8% annually for each plan and estimate annual City' salary increases as follows: General 5.4%, Police 7. 5%, and Fire 6. 5%. The. City' s annual funding contribution is based on these actuarily determined es'timates and must be adjusted in future :years to is make up for any changes from these estimates. For budgeting purposes only, the City' s contribution calculated as a percentage of payroll. This percentage is computed as the annual required contribution in amount (ARC) provided by the actuary divided by payroll. The large increase in the City' s contributions FY 2007 was attributable to factors such as: lower than anticipated investment earnings ( smoothed over a in FY 2006); five- year period); more plan participants due to the early- out retirement program ( last offered City of Fort Walton Beach, FL 13- Ciq.Manager' s Budget Message additional fire personnel ( six new personnel added in FY 2006); and higher than actuarially estimated I,' ,.' wages since FY 2004 ( 22. 09% actual increase vs. 16. 2% actuary estimate for general employees, \ I 37. 90% actual increase vs. 22. 50% actuary estimate for police officers, and 38. 64% actual increase vs. 19. 50% actuary estimate for firefighters). Although the City contribution is budgeted as a percentage of payroll, actual contributions are based on the dollar value of the annual required contribution. Budqeted Contribution as % of Pavroll 2002- 03 2003- 04 2004- 05 2005- 06 2006- 07 ' 2007- 08 General Employees Plan 6. 0% 7. 0% 6. 8% 8. 385% 14. 9% 14. 726% Police Officers Plan 8. 0% 9. 0% 12. 6% 7. 945% 12. 8% 11.495% Firefighters Plan 8. 0% 6. 5% 5. 9% 6. 950% 10. 9% 10. 800% As discussed at the June 12, 2007 City Council meeting, the actuary recommends transitioning to a " one- year payment delay" methodology in determining the City' s General Employee pension contribution requirements for FY 2007- 08. This is a standard method used by many cities to compute their pension contribution requirements before the budget is passed each year, and is already used for the Police Officers and Firefighters pension plans. In order to transition to this method, the 2006 actuarial valuation results will be used twice, once for FY 2006-07 and again for FY 2007- 08. However, the normal cost is adjusted by the expected increase in employee payroll from FY 2007 to FY 2008. 2007- 08 2006- 07 $ Variance % Variance General Employees Plan 1, 283, 295 $ 1, 231, 003 $ 52, 292. 4. 2%. Police Officers Plan 306, 805 $ 334, 952 <$ 28, 147> < 8.4%> Firefighters Plan 197, 218 $ 169. 381 $ 27. 837. 16.4%. Total City Contribution 1, 787, 318 $ 1, 735, 336 $ 51, 982. 2. 9%. Golf Club Revenues During FY 2003- 04 City Council adopted a Golf Club Business Operations Plan and formed a Golf Club Advisory Committee to address the long- term financial outlook of Golf Club operations. Key components of the business operations plan are to ensure