Fort Walton Beach Council agenda — 05-17-11 special — reading text

2DII 12 201213 201314 201415 201516 Total Revenues 3946, 016 3, 413, 565 3, 427740 3, 445640 3, 456, 090' Total Expenses 3, 154. 441 3213495 3, 292, 996 3279. 160 3, 181, 538 Revenue ( Shau lq l SUmlus 191, 575 200070 1M742 167, 480 274, 452 GOLFFUNDGOLFFUND PreliminaryPreliminary calculations calculations indicateindicate FYFY 20112011 - - 1212 GolfGolf FundFund revenuesrevenues ofof$ $ 2.2. 1M,1M, aa$$ 103K103K decreasedecrease duedue toto overlyoverly optimisticoptimistic FYFY 20112011 projections.projections. ExpensesExpenses areare estimatedestimated atat$ $ 2.2. 1M,1M, aa decreasedecrease ofof 96K96K duedue toto thethe restructuringrestructuring ofof thethe 19991999 bondbond payoff.payoff. GOLFFUND No Employee Adjustment 201112 201213 2013 -14 201415 201516 Total Revenues 2, 093423 2, 183961 2, 282, 168 2385262 2493490 Total Expanaas 2073, 983 2170, 420 25721493 2,616346 2, 620, 521 Revenue( ShOdf61l) l Surplus 19440 13, 541 290. 325) 231, 081) 127031) Preliminary Preliminary calculationscalculations indicateindicate FYFY 20112011 - - 1212 StermwaterStermwater FundFund revenuesrevenues ofof$ $ 595K,595K, aa$$ 30K30K increaseincrease duedue toto conservativeconservative FYFY 20112011 residentialresidential projections.projections. ExpensesExpenses areare estimatedestimated atat$ $ 552K,552K, aa decreasedecrease ofof$ $ 12K12K mainlymainly duedue toto CIP'CIP' ss andand debt.debt. STORMINATER FUND NoNo EmployeeEmployee Adjustment Adjustment 2011 -12 201213 201314 201415 201516 Tolal Revenues 595221595221 612, 976 633289 654, 826 675578 Total Expenses 552811 604709 604709 623, 69 595, 148 651894 Revenue ( Shunter l Surplus 42, 410 0267 9.9. 625625 59, 678 23. 684 88 ofof 1515 PacketPacket Pg.Pg. 1313  3. 1. a FY 2011 -12 Budget Policy Meeting POLICY DECISION SUPPLEMENTARY INFORMATION General Fund Reserve Level 13 Millage Rate 14 Employee Performance Incentive Program 15 Voluntary Defined Contribution Plan 17 Community Facility Consolidation 18 Surplus Land Sales 19 9 of 15 PeckM Pg. 14  3. 1. a FY 2011 -12 Budget Policy Meeting GENERAL FUND RESERVE LEVEL Background 1. Fund balance ( i. e. reserves) serves as a measure of the financial resources available in the General Fund. There are two types of fund balance: a. Reserved — funds committed for identified purposes or required to be segregated ( e. g. encumbrances, Harvey Trust). b. Unreserved — funds not required to be on hand and with no particular purpose identified. 2. Credit rating agencies monitor fund balance levels and strongly consider unreserved fund balance when 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 2 months ( 17 %) of regular operating revenues or expenditures. 4. A Florida League of Cities revenue expert recommends a fund balance of 25% - 30% of expenses for coastal and barrier island communities. Discussion 1. The purpose of maintaining reserves is to guard against revenue shortfalls or unanticipated expenditures. For coastal communities, reserves allow governments to pay debris removal contractors and continue operations in the aftermath of a natural disaster without borrowing until state and federal reimbursements are received. 2. In May 2008, City Council endorsed maintaining a minimum unreserved fund balance of 30% of total annual expenditures. 3. Given the FY 2010- 11 budget of $ 17, 633, 614, the 30% level requires $ 5, 290, 084 in reserves. 4. As reserves are non- recuaing, any funds in excess of the required reserve amount should be used for one -time expenditures rather than recurring operational expenses. Financial Impact 1. Each 1% decrease in the reserve level would release $ 176K ( based on the FY 2011 budget) for appropriation. 2. Possible uses for excess reserves resulting from a change in the fund balance policy include: vehicle and equipment replacements, street paving, reduction of unfunded pension liability, or one -time employee performance incentives. 3. Given the deficit situation projected in various five -year financial forecasts for the General Fund, it is unlikely that reserves could be rebuilt in the near future. Policy Options 1. Maintain General Fund reserve level at 30% of total annual expenditures. 2. Reduce General Fund reserve level to 25% and appropriate surplus for vehicle and equipment replacements, reduction of unfunded pension liability, debt defeasance, or one -time employee performance incentives. 10 W 15 Packet Pg. 15  F31. FY 2011 -12 Budget Policy Meeting MILLAGE RATE Backeround 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 properly 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 tax revenue as was levied during the prior year — exclusive of CRA 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 2011 - 12 ( i. e. a higher millage rate is required to generate the same amount of tax revenue due to the lower taxable value). Financial Impact I. Services which have a citywide benefit are typically financed with revenues generated from a broad base, such as property and other taxes. 2. Ad valorem property tax revenue comprises approximately 25% of General Fund revenues. Police and fire operations total half the General Fund budget. 3. Assuming a 3% decline in taxable value ( excluding the CRA) and the current millage rate of 4. 5383, staff anticipates a $ 144K decrease in General Fund ad valorem revenue for FY 2011 - 12. Policy Options 1. Maintain current millage rate of 4. 5383. 2. Adopt the millage rate that generates the same amount of ad valorem revenues in FY 2011 - 12 as was generated in FY 2010- 11. 11 of 15 Packet Pg. 16  3. 1. a FY 2011 -12 Budget Policy Meeting EMPLOYEE PERFORMANCE INCENTIVE PROGRAM Background I. 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. During the last two years, employees received vacation time in lieu of monetary adjustments due to fiscal constraints. Discussion 1. Salaries and benefits comprise 74% of the General Fund budget. 2. A lump -sum payment tiered to employee evaluation scores would provide a monetary performance incentive, without a permanent pay increase subject to future wage adjustments and pension contributions. 3. A flat dollar amount rather than a percentage amount has a greater impact for lower paid employees and is more commensurate with a performance incentive program. 4. Full -time Charter Officers, Department Directors, 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. Financial Impact 1. The average increase with the 3% step /merit plan would be $930. 2. A $ 900 maximum lump -sum payment ( grossed up to include 7. 65% FICA taxes so the employee receives the full amount) would cost $ 288K citywide ($ 192K General Fund). 3. Since the payment would be tied to the employee' s evaluation score, the actual cost will be less due to varying evaluation scores. 4. Since this is a one -time performance incentive payment that will not affect future salaries or pension, reserves