Fort Walton Beach Council agenda — 04-08-06 Special — reading text

2006 2002 patrol officers. General employees received a Budget 3. 25% adjustment this year. In addition to these on their anniversary date, public safety cost of living increases, upon satisfactory performance evaluation personnel ( police and fire) are eligible for a 3_5% increase and general employees are eligible for a 3% increase. The City has three pension plans: General Employees, Police Officers, and Firefighters. Employees are 8 of 28 FY 2006- 07 Budget Policy Workshop contributions to the plans are based required to contribution 5% of earnings to the appropriate plan. City are based on investment Actuarial evaluations on the performance of the pension plans' investments. have not achieved the expected return due to poor earnings of 8% annually. In recent years, investments its contributions to bridge the to increase market conditions. Consequently, the City has been required from FY 2001 to FY 2005. gap - a 150% or $ 618K increase of General Fund Ooerations & Maintenance - Comprising 28. 5% of total expenses and 16. 3% materials and supplies, repair and maintenance, utilities and fuel, expenses, this category includes insurance, and other charges. This expense Fixed Cost Increases is mainly impacted by program and service category 1. 4 delivery levels and fixed costs such as utilities, fuel 1. 2 oil, insurance, concrete, and steel over which the 1. 0 City has little control. 0, 8 o Over the past five years, fuel and oil expense has 0.6 increased 69.4%, utilities expense has increased 0.4 95.2%, and insurance has increased 52. 1 %. These 0. 2 to continue due to upward trends are anticipated 0. 0 prices, which affect both fuel and rising petroleum 2001 2002 2003 2004 2005 utility expenses and translate to higher prices for III FuellOil III Insurance II Utilities building materials such as steel and concrete. of $ 500 or more and a useful life greater Caoital Outlav - Includes vehicles and equipment with a cost total and 1. 8% of General Fund expenses, these funds are than two years. Equal to 1. 8% of expenses The average age of the City' s fleet is 8. 5 limited to replacing essential, ageing vehicles and equipment. 500, 000 annually. years. This category averages $ with a cost of $ 25, 000 or Caoitallmorovements - Includes physical assets, constructed or purchased, This category comprises 6. 6% of total expenses and 3. 0% more and a useful life greater than ten years. of General Fund expenses. The FY 2005. 06 Budgeted Capital Improvements proposed five. year Capital Improvements Program 3.0 identifies over $ 18 million in future needs. Although 2,5 the City has begun to address a number of these 2.0 issues by developing annual maintenance programs o e. g. sidewalks, medians, streets, water and sewer 1. 5 lines, water tanks and wells), many other projects 1. 0 get deferred due to limited staff and fiscal resources. 0. 5 Parks, streets, water and sewer, CRA, and golf comprise the bulk of capital improvement projects. 0.0 is the main 2002 2003 2004 2005 2006 Deferring capital improvement projects reason the budget for this category remains relatively stable. total budget and include inter. fund transfers for Transfers - These expenses make up 8. 6% of the City' s cost allocation purposes and accounting requirements. s total budget. These are funds earmarked Continaencies - These expenses comprise 1. 1 % of the City' for unanticipated expenses or emergencies. 9 of 28 FY 2006. 07 Budget Policy Workshop POLICY DECISIONS The following policy issues are critical to development of the Fiscal Year 2006- 07 operational budget and capital improvements program. The decision of City Council on these issues will assist staff in developing a budget that meets Council' s programmatic objectives within available fiscal resources. 10 of 28 FY 2006-07 Budget Policy Workshop AD VALOREM TAXES ( MILLAGE RATE) STRATEGIC PLAN GOAL - Policv Decision Should the millage rate be maintained at 4. 9700 mills in preparation of the FY 2006- 07 budget? Backaround 1. Ad valorem taxes comprise 25% of General Fund revenues. 2. The current 4. 97 millage rate has been maintained for the past 13 years. 3. Exemptions result in approximately $ 555, 100 less revenue in the General Fund. Seventy- two percent of residential parcels are homesteaded and four percent claim the additional senior exemption adopted by the City in 1999. 4. During the August 2005 Budget Workshop, Council expressed a desire to reduce the millage rate in the FY 2006-07 year to provide some relief to residents from increasing property values. 5. At the January 2006 Strategic Planning Session, Council consensus was to have Staff present low, medium, and high revenue and expense scenarios for the General Fund. As an alternative to reducing the millage rate, it was suggested funds received in excess of the roll- back rate be earmarked as reserved for hurricane expenses. Discussion 1. Compared to 10 Florida municipalities of similar size and service levels, Fort Walton Beach has the fifth lowest millage rate and the fourth lowest per capita ad valorem taxes. 2. Certain fixed costs beyond the City' s control have increased in recent years. a. Fuel - per gallon cost doubled from October 2003 to March 2006 - from $ 1. 2515 to 2.4585 for gasoline and from $ 0. 9360 to $2. 1235 for diesel. b. Utilities - annual cost doubled from FY 2001 to FY 2005 - from $ 613K to $ 1196K. c. Property Insurance - annual cost increased 50% from FY 2001 to FY 2005 - from $ 228K to $ 347K. d. Pension Contributions - annual contribution increased 150% from FY 2001 to FY 2005 - from $ 418K to $ 1 036K. 3. Maintaining the millage rate and increases in property values enabled the City to expand certain General Fund programs in FY 2005- 06: advanced life support ( rapid response vehicle and six months funding of six new EMT's/ Paramedics), take- home police vehicle policy ( expanded to non- shared for patrol), and parks and recreation ( acquisition of the softball complex/ fairgrounds). Policv 1m Dact 1. 72% of single family residential parcels are homesteaded. 2. Sample Property Taxes assuming a home assessed at $ 175, 000 with homestead ($ 200, 000 home with $ 25, 000 homestead exemption and 3% cap on appreciation): Desired 2005 City 2006 City $ Service Millage Rate Taxes Taxes Incr/( Decr) Level Diminished 4. 3323 (roll- back) $ 869. 75 $ 780. 90 ($ 88.85) Maintained 4. 6485 (roll- back adj. $ 869. 75 $ 837. 89 ($ 31. 86) Enhanced 4. 9700 ( no change) $ 869. 75 $ 895. 84 $ 26. 09 3. Reducing General Fund revenues translates to increased reliance on fund balance to bridge the gap with rising expenses to maintain current service levels. 11 of 28 FY 2006. 07 Budget Policy Workshop 4. Assuming 15% appreciation in the tax base for the January 2006 assessment and inclusion of all the policy issues ( General Fund only) brought forth for Council consideration: Desired General $ Use of Incr/(Decr) Service Millage Rate Fund OverFY Undesignated Level Revenue Fund Balance 05- 06 Diminished 4. 3323 (roll- back) $ 4,442, 412 $ 0$ 2, 155, 996 Maintained 4. 6485 (roll- back $ 4, 769, 271 $ 326, 859 $ 1, 829, 137 Enhanced 4. 9700 ( no change) $ 5, 099, 125 $ 656, 713 $ 1,499, 283 5. The cost of pension contributions, fuel and utilities, and continuing ALS exceed the increase in ad valorem proceeds from maintaining the millage rate: Addt'I Funds in