Fort Walton Beach Council agenda — 05-15-12 special budget policy — reading text

City Council in August will eliminate the decrease for FY Ou 2013. However, rates may need to be adjusted or expenses reduced in the future if the improving m M economy does not increase play enough to prevent erosion of net assets. Revenues are r predicated on 0% annual fee increases and level play. An average 2% wage adjustment is included in the forecast for fiscal years 2014 through 2017. r Projected LL 2012 - 13 2013 - 14 2014 - 15 2015 -16 2016 - 17 0 0 171, 909) ( 222, 349) ( 275, 006) ( 330, 296) CHANGE IN NET ASSETS ( 122, 626) ( STORMWATER FUND Preliminary calculations indicate the Storunwater Fund will experience increasing net assets, though at a decreasing rate, over the next five years. Revenues are predicated on 0% annual fee increases. An average 2% wage adjustment is included in the forecast for fiscal years 2014 through 2017. P jetted 2013 - 14 2014- 15 2015 - 16 2016 -17 2012 -13 90, 222 77, 715 64, 553 50, 679 CHANGE IN NET ASSETS 102, 123 Detailed financial forecast information begins on page 12. 8 f 17 Packet Pg. 13  3. 1. a FY 2012 -13 Budget Policy Meeting FIRE PROTECTION ASSESSMENT Background 1. As part of the General Fund, the fire department' s operations are supported in large part by ad valorem taxes. Approximately 10% of the parcels within the City are exempt from ad valorem taxes. Residential properties of similar size pay differing amounts for the same level of fire protection service due to the Save Our Homes Amendment. 2. A fire protection assessment would enable the department to continue to provide its current level of fire services, while fairly apportioning the cost between the recipients of fire protection rather than burdening only ad valorem taxpayers in proportion to the taxable value of their property. 3. A fire protection assessment is a non -ad valorem charge levied against property to fund any or all of the costs of fire services, facilities, or programs. An assessment may be levied for fire protection services ( which benefit property), but not for emergency medical services ( which benefit people). The benefits of fire protection services include protecting the value of structures and improvements and lowering the cost of fire insurance through the presence of a professional and comprehensive City fire program. Discussion 1. A tiered fire protection assessment is the fairest apportionment method relative to property size, property type, and fire services demand. The assessment is levied based on equivalent residential unit or non -residential square footage. All property types would be included: residential, commercial, industrial, religious, governmental. 2. A fire protection assessment may be billed separately, included on the utility bill, or included on the tax bill. In order to use the tax bill method of collection, the City must adopt a resolution at a public hearing prior to January I or, if the property appraiser, tax collector, and local government agree, March 1. The property tax bill is the preferred method of collection since the property owner benefits from the service. A fire protection assessment would need to be adopted by City Council prior to January 1, 2013 for inclusion on the 2013 tax bill and the FY 2013 -14 budget. Financial Impact 1. A fire protection assessment provides a stable and predictable revenue stream for one of the city' s core services, without burdening only the ad valorem taxpayers. 2. A dedicated revenue stream for fire protection would enable the City to reduce the millage rate, diversify its revenue base, and promote fiscal sustainability. 3. The amount of the annual fire protection assessment and the millage rate reduction are unknown at this time. However, because the cost of fire protection will be spread over a larger base, most ad valorem residential tax payers will enjoy a net decrease in cost of services. Policy Options 1. Fund all or a portion of the fire protection budget with an annual fire protection assessment, coupled with a decrease in the millage rate. 2. Maintain the current revenue structure and millage rate. 9 or 17 Packet Pg. 14  3. 1. a FY 2012 -13 Budget Policy Meeting MILLAGE RATE Background 1. The millage rate is the tax rate applied to each property owner' s taxable value to generate property taxes or " ad valorem" revenue. 2. The proposed millage rate is set when the preliminary taxable value is received from the Property Appraiser on or before July 1. The proposed rate is noticed on each property owner' s " Truth in Millage" tax bill received in August. While the City can lower the millage rate, it cannot exceed the proposed rate on the TRIM notices without re- notification to all residents. Discussion 1. Tax revenue received by the City is a function of changes in assessed value, as well as changes to the millage rate. 2. The " rolled- back" rate is defined as the millage rate that produces the same amount of ad valorem lax revenue as was levied during the prior year — exclusive of CAA dedicated increment value, new construction, deletions, and boundary changes. Because a decrease in taxable value is likely, the rolled -back rate may be a " rolled- forward" rate for FY 2012 -13 ( i. e. a higher millage rate is required to generate the same amount of tax revenue due to the lower taxable value). Financial Impact 0m 1. Services which have a citywide benefit are typically financed with revenues generated from a broad base, such as property and other taxes. a 2. Ad valorem property tax revenue comprises 24% of General Fund revenues. Police and m fire operations account for 52% of the General Fund budget. m 3. Assuming a 2. 8% decline in taxable value attributable to the General Fund and the G current millage rate of 4. 5383, staff anticipates a $ 77K decrease in General Fund ad valorem revenue for FY 2012 -13. 4. The FY 2012 -13 General Fund budget deficit is currently estimated at $ LIM, the majority of which has been eliminated with savings from the police department restructuring approved by City Council on May 10. The budget presented to City Council in August will close the remaining $ 99K gap for FY 2013. Policy Options 1. Maintain the current millage rate of 4. 5383, and reduce operations to balance the budget. 2. Adopt the millage rate that generates the same amount of ad valorem revenues in FY 2012 - 13 as was generated in FY 2011 - 12 ( i. e. the " roll -back" rate). 10 f17 Packet Pg. 15  3. 1. a FY 2012 - 13 Budget Policy Meeting EMPLOYEE COMPENSATION Background 1. Employees traditionally received a cost of living adjustment on October 1 to ensure wages keep pace with inflation, and a step /merit increase on their anniversary date contingent upon a satisfactory performance evaluation to reward longevity for support staff and performance for professionals and managers. 2. For fiscal years 2010 and 2011, employees received vacation time in lieu of monetary adjustments due to fiscal constraints. In fiscal year 2012, employees had the option to elect vacation hours or a lump sum dollar amount based upon their annual evaluation score. Discussion 1. Salaries and benefits comprise 75% of the General Fund budget. 2. A lump -sum payment tiered to employee evaluation scores provides a monetary performance incentive, without a permanent pay increase subject to future wage adjustments and pension contributions. 3. The November 2011 employee survey revealed a preference for some portion of the lump -sum payment to be guaranteed, rather than entirely based on the evaluation score. 4. Full -time Charter Officers, Department Directors, employees, and union members with a current contract would be eligible. The amount would be prorated for part- time employees based on number of hours worked. 5. For FY 2012, the lump -sum payment is tied to the employee' s evaluation score, with an average incentive pay year -to -date of $618. 47 of a possible $ 900. Of the 99 employees with reviews conducted year -to -date, 7 have elected vacation hours. Financial Impact I. A $ 900 maximum lump -sum payment ( grossed up to include 7. 65% FICA taxes so the employee receives the full amount less federal income taxes) would cost $ 288K citywide 192K General Fund). A one -time lump -sum payment does not affect future salaries or pension, so reserves could be used to fund the initiative. 1 Preliminary budget forecasts estimate a 1% wage adjustment at $ 152K citywide ($ 110K General Fund). Since wage adjustments are recurring and