GENERAL FUND Revenues

Transcription

1 GENERAL FUND Revenues The General Fund is used to account for general purpose revenues, which are used to fund general governmental services, excluding utilities. Following are descriptions of the City's major revenue sources accompanied by historical tables and graphs.

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3 Revenue Summary There are four major revenues that comprise 79% of the General Fund budget: property tax, sales tax, business and utility taxes, and license and permit fees. The table below breaks down General Fund revenues by category for Following that is a graph depicting the percentage of each revenue source relative to the total amount budgeted in each year of the biennium Description Actual Forecast Budget Budget RESOURCES Budgeted Beginning Fund Balance $ 752,231 $ 795,271 $ - $ - Property Tax 9,820,771 10,064,568 10,163,579 10,367,735 Sales Tax 2,574,993 2,518,000 2,594,000 2,698,000 Business & Utility Taxes 3,415,597 3,366,000 3,510,000 3,684,000 State Shared Revenues 730, , , ,650 Utility Overhead 808, , , ,683 EMS Revenues 714, ,091 1,067, ,641 Licenses and Permits 1,609,719 1,544,225 1,826,120 1,852,120 General Government 441, , , ,250 Recreation Programs 1,237,584 1,197,590 1,350,997 1,414,281 District Court Fines 390, , , ,000 Interest 82,549 28,850 29,375 39,550 Interfund Transfers In 180, , , ,038 Total Budgeted Resources $ 22,758,933 $ 23,212,420 $ 22,775,124 $ 23,414,948 Not Budgeted Beginning Fund Balance (Reserved) 3,059,553 2,264,282 2,264,282 2,264,282 TOTAL RESOURCES $ 25,818,486 $ 25,476,702 $ 25,039,406 $ 25,679,230 City of Mercer Island Budget E-3

4 2011 General Fund Revenues Licenses and Permits 8% Recreation Programs 6% General Government 2% District Court Fines 2% Interfund Transfers In 1% EMS Revenues 5% Property Tax 45% Utility Overhead 3% State Shared Revenues 2% Business & Utility Taxes 15% Sales Tax 11% 2012 General Fund Revenues Licenses and Permits 8% Recreation Programs 6% General Government 2% District Court Fines 2% Interfund Transfers In 2% EMS Revenues 4% Utility Overhead 3% Property Tax 44% State Shared Revenues 2% Business & Utility Taxes 16% Sales Tax 11% E-4 City of Mercer Island Budget

5 Property Tax Property tax plays an essential role in financing the general government operations of the City of Mercer Island, accounting for almost 45% of total General Fund budgeted resources in In 2011, Mercer Island property owners will pay a total of $10,163,579 in property taxes to support general government operations in the General Fund. There are two types of property tax collected by the City: regular levy and voter approved levy. The regular levy portion may be used for any purpose that the City deems appropriate. In Mercer Island, as in most cities, the property tax levy primarily supports the General Fund, which is where most of the City s general government operations are budgeted and accounted for. Voter approved levies are for specific purposes, such as funding new park capital improvements and/or park operations and maintenance, and may not be used for any purpose other than what the voters approved. For information about the voter approved taxes levied by the City, see the Property Tax policy in Section C (Budget Policies). Each November, as required by Washington State law, the City Council sets the property tax levy for the coming year. Up until November 1997, this levy was restricted to a maximum of 106 percent of the previous year's levy plus the amount associated with new construction (i.e. additions to the property tax rolls). However, in 1997, the Washington State Legislature passed Referendum 47 on to the voters of the state who in turn approved it by a 60% majority. This referendum set a limit on property tax increases of the lesser of 106% or the rate of inflation, whichever was less. In 2001, Initiative 747 passed in the State which further changed the property tax law. Initiative 747 limits the property tax levy to a maximum of 101% of the previous year s levy, or the rate of inflation, whichever is less. Since the rate of inflation is normally above 1%, the effective limit on the property tax levy increase will normally be 1%. The initiative also allows higher property tax increases if approved by the voters, a provision that was already in the statutes. Beginning in 1995, before the state law was changed, the Council decided to begin ramping down the property tax increases by 0.5% per year, with the goal of eventually matching the inflation rate. The Council reached that goal in Below is a table and chart of the General Fund property tax receipts since 1993, including the budgeted tax amounts for 2011 and Year Amount % Change Year Amount % Change 1993 $ 4,701, $ 7,776, % ,083, % ,416, % ,344, % ,518, % ,824, % ,925, % ,065, % ,305, % ,500, % ,418, % ,849, % ,820, % ,158, % ,064, % ,397, % ,163, % ,602, % ,367, % City of Mercer Island Budget E-5

6 Property Tax Revenues: ,000,000 10,000,000 8,000,000 6,000,000 4,000,000 2,000,000 - Sales Tax Until 2000, sales tax revenue was made up of two components regular sales tax and "sales tax equalization". Combined, these revenues accounted for about 16% of the 1999 General Fund budget. In 1999, however, an initiative changed the law and the City no longer receives sales tax equalization (see discussion below). Sales tax revenue is estimated to be almost 12% of total budgeted resources in Sales and Use Tax: Cities and towns are authorized under 1970 state law to levy a sales and use tax of one-half cent per dollar. In 1982, the State authorized an additional half-cent sales and use tax for cities and towns. Mercer Island levies the full amount allowed. Sales Tax Equalization: The law that provided for "Sales Tax Equalization" went into effect in The purpose of sales tax equalization was to provide a means for guaranteeing a minimum amount of sales tax to each city and town in Washington. That allowed cities with little commercial activity to receive, through a combination of the sales tax it "earns" and equalization, at least 70 percent of the statewide average per capita sales tax. The amount of sales tax equalization each city received was computed on their prior year's sales tax receipts. In 1999, however, Initiative 695 was passed by the voters which eliminated the Motor Vehicle Excise Tax, which was the source of funds for the distribution of sales tax equalization dollars. The effect of the initiative was to bring Mercer Island s total sales tax receipts back to the same level that they had been in This change resulted in a loss of about $1,000,000 in revenue per year. As illustrated in the chart that follows, the City s sales tax, even with equalization, was very uneven and fairly unpredictable. Because of the uncertainty of equalization and the economy during the mid-1990 s, the City has historically used a very conservative figure for predicting sales tax during each biennial E-6 City of Mercer Island Budget

7 budget. This conservative approach helped the City weather the demise of the sales tax equalization revenue. As was done for , the sales tax revenue budgeted in is primarily based on the current and projected development activity levels in the City, taking into account building permits that have been issued to date as well as those that are expected to be issued by mid In addition, any new retail square footage in the Town Center is incorporated into the projection. Construction-related sales tax makes up anywhere from one-third to one-half of the City s total sales tax receipts, depending on the level of development activity on the Island, which is why so much attention is paid to development activity in the sales tax forecast. In 2009, sales tax revenue was down 30.1%, or almost $1.11 million, compared to However, total sales tax revenue in 2008 included $455,000 in unexpected receipts from two non-classified businesses. Factoring out these extraordinary receipts, actual revenue was down 20.2 percent, or almost $654,000, in Of particular note, the construction sector was down 35.0% in 2009 after hitting an all time high in 2007 and leveling off in Looking at the first half of 2010, sales tax revenue was down 4.9%, or about $64,000, compared to the same period in The overall decrease of 4.9% can be primarily attributed to the construction sector, which was down 14.1% relative to the same period in As a result, this sector has declined from 50.3% of the City s total sales tax receipts as of December 31, 2008 to 36.6% as of June 30, Based on what s currently in the Development Services Group s (DSG) pipeline, significant improvement in development activity is currently underway for single family residential projects, but no improvement is expected for commercial/multi-family projects until the first quarter of Overall, development activity is expected to be flat in relative to Helping counteract the decline in construction-related sales tax is the enactment of the Streamlined Sales Tax measure by the state legislature in 2007, which took effect on July 1, As a result, destination-based sales tax revenues not only from Washington state businesses but also from participating mail order and internet based businesses began flowing to the City in September In 2010, it is estimated that the City will receive about $185,000 from this revenue source. Following is a table and chart containing actual sales tax receipts for and projected receipts for , broken down into regular sales tax and equalization components. Year Sales Tax Equalization Total % Change Year Sales Tax Equalization Total % Change ,350, ,437 2,147, ,685,252-2,685,252-14% ,254, ,135 2,219,980 3% ,565,501-2,565,501-4% ,352,936 1,107,887 2,460,823 11% ,643,672-2,643,672 3% ,321, ,634 2,190,216-11% ,627,513-2,627,513-1% ,506, ,245 2,472,824 13% ,949,552-3,949,552 50% ,570, ,194 2,466,986 0% ,683,977-3,675,000-7% ,845, ,395 2,813,556 14% ,574,993-2,574,993-30% ,890, ,178 3,048,588 8% ,518,000-2,518,000-2% ,356,551-4,356,551 43% ,594,000-2,594,000 3% ,128,841-3,128,841-28% ,698,000-2,698,000 4% City of Mercer Island Budget E-7

8 Sales Tax and Equalization Receipts: Utility Taxes This revenue category comprises almost 16% of total budgeted resources in The City charges a tax on the gross receipts of the public and private utilities doing business on Mercer Island. Cities are limited by state law to charging no more than 6% on electric power, gas, and telephone utilities. Puget Sound Energy, US West (Quest), AT&T, and a variety of small long distance carriers are subject to a 6% tax rate. Two other major utilities, Eastside Disposal and Comcast Cable, are subject to a 7% tax rate. In 2010, the City implemented a water utility tax of 1.7% to offset the fire hydrant/protection costs that had previously been funded by water utility rates. Because Mercer Island has had a low housing growth rate, revenue growth from utility taxes is highly dependent on utility rate increases and weather conditions that affect the use of gas and electric heat. Year Amount % Change Year Amount % Change 1993 $ 1,311, $ 2,266, % ,365, % ,325, % ,440, % ,695, % ,621, % ,891, % ,663, % ,223, % ,687, % ,377, % ,898, % ,415, % ,967, % ,366, % ,337, % ,510, % ,409, % ,684, % E-8 City of Mercer Island Budget

9 Utility Taxes: ,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000, ,000 - Shared Revenues This revenue category consists of both State shared revenues as well as grants and other revenues from King County and the Federal Government. It comprises about 2% of total budgeted resources in Below is a brief description of each of the major components. Liquor Excise Tax and Liquor Profits Liquor sales are taxed at the rate of 15% on the sales price for individuals and 11.4% for Class H licenses. Cities and towns split 28% of the total collected based on population. Additionally, 32% of the tax imposed on wine sales (75 cents per gallon) is allocated to cities and towns. The profits of the Liquor Control Board are divided among the state, counties, and cities (after deducting a fixed amount for alcoholism research). The cities split 40% based on population. Over the years, the per capita amount has declined as more cities have incorporated, thereby reducing the amount received by each city. Marine Patrol Revenue Revenue for marine patrol services provided by Mercer Island is included in this category and comes from two sources. First, the City receives revenue from the cities that contract with the Mercer Island Police Department for marine patrol services. Second, Mercer Island receives a portion of the vessel registration fees collected by the State of Washington and passed on to the City through King County, because it provides marine patrol services. Grants Sources of grant revenue include federal grants, state grants, and local grants. Typically, these monies are one-time funding sources for specific purposes. Actual revenues for and estimated revenues for are displayed in the table and graph that follow. Because there is so much variability in each of these sources, each individual component of shared revenues is reviewed and then forecast individually. City of Mercer Island Budget E-9

10 Year Amount % Change Year Amount % Change 1993 $ 997, , % , % , % , % , % , % , % , % , % , % , % , % , % , % , % , % , % , % , % 1,200,000 Shared Revenues: ,000, , , , ,000 - Licenses, Permits, and Zoning Fees Licenses, permits, and zoning fees represent about 8.0% of total budgeted resources in This revenue category consists of all fees related to development, cable franchises, and business licenses. Development activity, both locally and regionally, has slowed significantly from the record pace that peaked in Relative to the first half of 2009, single family residential development was up 42.4% for the first half of 2010 as measured by the number building permits issued. Also, the total valuation for all building permits (i.e. residential, multi-family, commercial, public, and mixed use) was up 87.5% compared to As noted above in the Sales Tax section, Development Services staff expects development activity overall to remain steady in compared to Finally, cable franchise fees are projected to grow 5-6% annually and business license fees are projected to be flat in Actual revenues for and estimated revenues for are displayed in the table and graph that follow. E-10 City of Mercer Island Budget

11 Year Amount % Change Year Amount % Change 1993 $ 324, ,263, % , % ,420, % , % ,098, % , % ,034, % , % ,249, % , % ,844, % ,068, % ,609, % ,183, % ,544, % ,382, % ,826, % ,193, % ,852, % License, Permit & Zoning Fees: ,500,000 2,000,000 1,500,000 1,000, ,000 - Utility Overhead Charges Utility overhead charges make up about 3% of total budgeted resources in These charges include administrative support costs, building maintenance costs (for the Maintenance Center and City Hall), and liability and property insurance costs which are initially paid for by the General Fund. They are accounted for as interfund charges by the General Fund to the each of the City s utility funds (water, sewer, and storm water). The administrative support component of the charges encompasses a specified percentage of the City Manager s Office, the City Attorney s Office, the Finance Department, the Human Resources Department, and the City Council s budget. Additional information regarding these interfund charges is provided in the Utility Overhead Charges policy in Section C (Budget Policies). Prior to 1995, staff project engineering time was included in the utility overhead charge rather City of Mercer Island Budget E-11

12 than charged directly to the capital projects of each utility, which is what happens currently. From 1995 to 2008, the charges have remained relatively flat. For the biennium, the model was updated and some allocation methods were changed, resulting in a19.2% decrease in the charge from 2010 to Actual interfund charges for are displayed in the table and graph that follow. Year Amount % Change Year Amount % Change 1993 $ 926, $ 682,727 6% , % , % , % , % , % , % , % , % , % , % , % , % , % , % , % , % , % , % Water & Sewer Utility Overhead Charges: ,000, , , , , , , , , ,000 - E-12 City of Mercer Island Budget

13 All Other Revenues General Fund All the remaining revenue categories comprise about 15% of the total budgeted resources in Following is a brief description of the remaining revenue categories. Interfund Transfers In This category includes amounts transferred in from other funds in support of General Fund operating expenditures. Emergency Medical Service (EMS) Revenues Beginning in 1990, the City began receiving a portion of the 25 cent property tax levy that was voted on by the citizens for 911 emergency service. At that time, the City reduced its EMS fee so that Mercer Islander taxpayers would pay roughly the same as they did before the new law. In 1996, when the City decided to add 4 new firefighters because of the high volume of aid calls, the fee was increased to help pay for that enhanced level of service. Recreation Programs This category includes the fees that are charged for recreation programs offered by the City as well as fees charged at the Community Center. The fee structure now in place recovers about 45% of the cost of those programs. See the Parks & Recreation Financing policy in Section C (Budget Policies) for more information. Ambulance Transport Fee Beginning February 2011, the Fire Department will begin charging a fee for transporting patients requiring non-emergency, basic life support, to hospitals. The fee will be used to support ongoing General Fund services. Interest The money of the City is pooled for investment purposes and allocated to various funds per the Investment Earnings policy in Section C (Budget Policies). Beginning Fund Balance This consists of several reserves (revenue stabilization, emergency, and LEOFF I long-term care), surplus revenues and expenditure savings from a prior year, and dedicated funding for one-time costs and expenditure carryovers. For , there is no budgeted beginning fund balance, reflecting the expectation there will be no General Fund surplus in 2010 available for funding expenditures. City of Mercer Island Budget E-13

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15 GENERAL FUND Expenditures The General Fund is the general operating fund of the City and encompasses the following major activities, excluding utilities: fire and police services, street and park maintenance, development services, court services, recreation services, legal services, financial services, and general administration. In this section the expenditures are shown by major functional category.

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17 Budget Analysis A summary analysis follows comparing the 2010 Approved Budget to the Final Budget, broken down by year, with Other Significant Changes, Service Enhancements, and Service Reductions separately identified for 2011 and Budget Analysis General Fund 2011 Analysis Budget % Change Approved Budget 24,980,070 Plus 2011 General Inflationary Increases - 0.0% Plus (Less) 2011 Other Significant Changes: Prior year one-time costs & carryovers (679,811) Salary and Benefit savings (relative to 2010 budget) (336,550) Salary Savings (no COLA in 2011) (115,236) Jail costs (119,015) Reduce annual technology CIP funding (100,000) NORCOM fees (59,293) Travel and training (39,199) Marine patrol program (39,174) Move Town Center utility costs to Beautification Fund (34,000) Advertising & postage (32,691) Other non-service level reductions (20,336) Telephone costs (25,025) Reduce annual YFS subsidy (25,000) Police and Fire overtime 96,954 Subtotal (1,528,376) -6.1% 2011 Base Budget 23,451, % Plus 2011 Service Enhancements: Total one-time costs 108,559 Total ongoing costs 63,100 Subtotal 171,659 Less 2011 Service Reductions: Total one-time savings (130,352) Total ongoing savings (717,877) 0.0% Subtotal (848,229) 2011 Final Budget 22,775, % City of Mercer Island Budget E-17

18 2012 Analysis Budget % Change Final Budget 22,775,124 Plus 2012 General Inflationary Increases 683, % Plus (Less) 2012 Other Significant Changes: Prior year one-time costs (service packages with costs in 2011 only) (23,624) Subtotal (23,624) -0.1% 2012 Base Budget 23,434, % Plus 2012 Service Enhancements: Total one-time costs (20,000) Total ongoing costs - Subtotal (20,000) Less 2012 Service Reductions: 0.0% Total ongoing savings - Subtotal Final Budget 23,414, % Expenditure Summary Presented in the table below are expenditures by category for , followed by two pie charts depicting the percentage of each category relative to total budgeted expenditures in 2011 and Description Actual Forecast Budget Budget USES Budgeted Salaries 12,087,058 12,964,794 12,133,311 12,330,624 Benefits 3,738,774 4,240,247 3,938,176 4,304,292 Supplies 629, , , ,956 Contractual Services 1,514,103 1,861,919 1,515,834 1,482,613 Equipment Rental 1,201,535 1,215,805 1,219,958 1,220,658 Utilities & Insurance 1,162,392 1,236,430 1,307,113 1,398,767 Other Services and Charges 656, , , ,005 Intergovernmental 669, , , ,096 Interfund Transfers 1,098,743 1,036, , ,937 Total Budgeted Expenditures $ 22,758,933 $ 24,980,069 $ 22,775,124 $ 23,414,948 Not Budgeted Budget Cuts and Expenditure Savings (1,767,649) Ending Fund Balance 3,059,553 2,264,282 2,264,282 2,264,282 TOTAL USES $ 25,818,486 $ 25,476,702 $ 25,039,406 $ 25,679,230 E-18 City of Mercer Island Budget

19 2011 General Fund Expenditures Other Services and Charges 2% Intergovernmental 4% Interfund Transfers 3% Utilities & Insurance 6% Equipment Rental 5% Contractual Services 7% Salaries 53% Supplies 3% Benefits 17% 2012 General Fund Expenditures Other Services and Charges 2% Utilities & Insurance 6% Intergovernmental 4% Interfund Transfers 3% Equipment Rental 5% Contractual Services 6% Salaries 53% Supplies 3% Benefits 18% City of Mercer Island Budget E-19

20 Salaries and Benefits The largest expenditure categories are salaries and benefits, which together comprise almost 71% of the Budget. Annual salary increases are driven by annual cost of living and step increases bargained by the City s unions, which cover about 65% of all City employees. Included in the salary category are permanent full-time and part-time employees, contract employees, and casual labor used by the Maintenance and Parks & Recreation Departments. General Fund salaries and benefits are budgeted at a total cost of $16.1 million in 2011 and $16.6 million in The $1.1 million reduction in salaries and benefits in 2011 relative to 2010 is directly related to service level reductions in 2011, to one-time service enhancements that lapse at the end of 2010 and which aren t re-budgeted in 2011, and to salary savings resulting from a reduced or no COLA (cost of living adjustment) in 2010 and no COLA in The $563,429 budgeted increase in salaries and benefits in 2012 is wholly attributable to an estimated COLA of % (depending on the bargaining unit), annual step increases included in the City s labor contracts, a significant increase in the PERS (Public Employee Retirement System) contribution rate required of public employers, and a 10% projected increase in medical insurance premiums. See the Long Term Compensation policy in Section C (Budget Policies) for more information. Salary and Benefit Costs: ,000,000 18,000,000 16,000,000 14,000,000 12,000,000 10,000,000 8,000,000 6,000,000 Benefits 4,000,000 Salaries 2,000, Supplies The supplies category includes most office, operating, and maintenance items that employees need to fulfill their job responsibilities. Common examples include paper, printer and copier toner, cleaning supplies, fuel and oil, sand, gravel and fertilizer. As a percentage of total budgeted expenditures this category has consistently hovered around 3.0%. This trend continues in the Budget. Utilities The utilities category includes all the major utility costs water, sewer, storm water, electricity and gas. Also included is the cost of dumping waste (e.g. from excavations and cleaning of ditches). For 2011, the following utility rate increases are expected: 9.5% for water, 9.3% for sewer, 3.3% for stormwater, 2% for electricity and 2% for gas. Given these significant rate increases, the City continues to promote conservation efforts by all departments. E-20 City of Mercer Island Budget

21 Insurance General Fund The City buys all liability and property insurance through the Washington Cities Insurance Authority (WCIA). WCIA is mostly self insured for liability purposes and has been building a cash reserve from the member cities over the past 10 years to help keep premium costs down and to provide a higher amount of liability coverage. Liability insurance premiums are based on a combination of number of worker hours and the City s actual liability claims over the past 5 years. 2,500,000 Supplies, Utilities, and Insurance Costs: ,000,000 1,500,000 1,000,000 Insurance Utilities Supplies 500, Contractual Services This category includes all the individuals and firms with which the city contracts for services. Included are the following: consultants, landscaping services, janitorial services, outside legal services, and recreational class instructors. Below is a graph of contracted services expenditures for the period ,500,000 Contractual Services: ,000,000 1,500,000 1,000, , City of Mercer Island Budget E-21

22 Equipment Rental This category includes "rental and replacement charges" assessed to each department by the Equipment Rental Fund for the City s vehicle fleet and by the Computer Equipment Fund for the City s computers. Replacement cost, useful life, salvage value, and department needs are assessed biennially when the rates are established. For the biennium, these internal charges are being kept flat overall relative to the biennium. See the Reserves Equipment Replacement policy in Section C (Budget Policies) for more information. Equipment Rental: ,400,000 1,200,000 1,000, , , , , Other Services and Charges This category consists of a variety of miscellaneous payments, including advertising, printing, travel, communications, postage, subscriptions, tuition and registrations, election costs, copying, and miscellaneous charges. Intergovernmental This category includes charges for services from other governmental agencies. Examples include mandatory contributions to the King County Alcoholism program and Puget Sound Clean Air Agency and voluntary payments in support of regional associations. Expenditures in this category have typically been quite modest with small increases from year to year. Interfund Transfers Interfund transfers consist of two types: 1) transfers to fund ongoing costs/programs; and 2) transfers to fund significant one-time operating or capital costs. Transfers for ongoing costs/programs are ultimately funded by the general revenues of the City. Transfers for one-time operating or capital costs are funded by the General Fund s prior year s surplus, which is generated by excess revenues over what was budgeted and expenditure savings. The disposition of the prior year s surplus is usually finalized by the Council in June. There are two long standing, ongoing annual transfers budgeted again in , though they have been reduced due to the projected revenue shortfalls: 1) a $150,000 transfer to the Technology & E-22 City of Mercer Island Budget

23 Equipment Fund to support the City s technology projects and to fund the purchase of larger pieces of equipment that are outside the scope of departmental budgets (reduced from $250,000); and 2) a $320,000 transfer to the Youth & Family Services Fund to help support ongoing program costs (reduced from $465,000). See the YFS Financing policy in Section C (Budget Policies) for more information. City of Mercer Island Budget E-23

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