The Basics of Developing & Reading a Municipal Budget June 4, Pat Walker Pat Walker Consulting LLC

Transcription

1 The Basics of Developing & Reading a Municipal Budget June 4, 2015 Pat Walker Pat Walker Consulting LLC

2 Agenda Introductions/Overview Development of Budget Process How to read a budget What it means at the end of the day. Questions/Discussions

3 Purpose of Budgeting To meet organizations strategic goals Process to determine what & how services will be delivered to citizens How the services will be financed Pursue politically chosen goals

4 Purpose of Budgeting Internal Control mechanism for planning and controlling operations One of the most important activities undertaken by governments Revenues MUST = Expenditures Bottom line, you can add revenues, reduce expenditures or a combination of both!

5 Purpose of Budgeting Simplistic Version On what basis shall it be decided to allocate X dollars to activity A versus activity B? Not as easy as it sounds

6 Roles in Budgeting

7 Roles in Budgeting Citizens Elected Officials Public Employees

8 Citizens: Roles in Budgeting Voice heard as to priorities/service levels and cost of providing desired priorities/service levels Elected Officials: Set Policy Guidelines, Establish Priorities, Communicate Position to Constituents, Resolve Conflicts

9 Roles in Budgeting Public Employees: Department Staff - Develop Program Objectives, Identify Service Levels, Prepare Budget Requests Executive Management - Prepare a Recommended, Balanced Budget, Incorporate Elected Priorities, Assess Service Levels

10 Never Ending Cycle Preparation Audit Adoption Evaluation Implementation

11 Budget Process Project out your revenues Expenses-One time versus on-going Fund balances

12 Preparation of Budget Revenue Forecasting Producing a balanced budget Phantom deficit reductions that will catch up with you Unrealistic revenue projections One-time versus on-going Ducking the decision

13 The following slides are from the League s Budget & Finance Manual & are the statutory dates required. These are for reference after the presentation.

14 Budget Steps Action Deadline Earliest Date 1. Compile pertinent budget information. None None 2. Distribute budget instructions, information and work sheets to department heads. (A general meeting with department heads could be held at this time if desired.) 3. Complete compilation of the forthcoming fiscal year's revenue estimates including debt service requirements, etc. 4. Submit departmental budget estimates to appropriate reviewing official or office. Review of departmental budgets and revenue estimates by appropriate reviewing official or office. (An individual hearing with each department head may be held in conjunction with the review step.) 5. Make approved changes and prepare summary of tentative budget. None None None None None None None None 6. Begin preparation of proposed budget. None None 7. Receive from the county assessor certified property values necessary to calculate the property tax levy limit and the final levy limit worksheet. (A.R.S ) 8. Notify the Property Tax Oversight Commission as to agreement or disagreement with the property tax levy limit. (A.R.S ) On or before February 10 of the tax year. Within 10 days of receiving information in no. 7 (above). None None

15 Budget Steps 9. Make the property values provided by the county assessor available for public inspection. (A.R.S ) On or before February 15 of the tax year. None 10. Deliver proposed budget to city council for review. None None 11. Post notice on the city/town website that council will consider an increase in the property tax rate on the date of the budget hearing. (A.R.S ) 12. Submit information on involuntary tort judgments and appropriate documentation to the Property Tax Oversight Commission for consideration. (A.A.C ) May 2 or 60 days before budget hearing. July 1 None None 13. MUST Adopt tentative budget. (A.R.S )*** July 21 None 14. Publish a summary of the tentative budget once a week for two consecutive weeks. Also include time and place of budget hearing and a statement indicating that the proposed budget may be examined at city/town library and city/town hall. (A.R.S ) Depends upon newspaper publishing date. None 15. Publish first Truth in Taxation notice (Exhibit H) in a paper of general circulation in the city or town and issue a press release with the same information as the published notice.* (A.R.S ) 16. Publish second Truth in Taxation notice in a paper of general circulation in the city or town.** (A.R.S ) July 21 July 15 July 28 July Post entire tentative budget on website and keep it posted for at least 60 months. (A.R.S ) July 30 None

16 Budget Steps 18. Hold public hearing on budget and property tax levy (can be combined with truth in taxation hearing). 19. Convene special meeting to adopt final proposed budget. (A.R.S )*** 20. Mail a copy of the truth in taxation notice, a statement of its publication or mailing and the result of the council s vote to the Property Tax Oversight Commission. (A.R.S ) Property Tax Oversight Commission 1600 W. Monroe Phoenix, AZ August 4 August 4 August 7 None None None 21. Adopt property tax levy. (A.R.S ) August 18 None 22. Forward certified copy of tax levy ordinance to county. (The tax levy must be adopted by the board of supervisors on or before the third Monday in August - A.R.S A.) ** None * Only necessary if the proposed property tax levy, excluding amounts attributable to new construction, is greater than the amount levied by a city or town in the previous year. In lieu of publishing the notice, a city or town may mail the notice to all registered voters at least 10 days but not more than 20 days before the hearing. ** This must occur on or before the day on which the board of supervisors levies the county tax. Check with your county board of supervisors as to their deadline for receiving your levy. Dates may change to confirm to their schedule. *** Entire tentative and final budgets (Auditor General Forms) must be posted on website within 7 business days of adoption and remain on the website for 60 months.

17 Funds General Fund Special Revenue Funds Capital Projects Enterprise Funds

18 General Fund Revenues to be used for any municipal purpose Contains most departments in the City/Town

19 Special Revenue Funds Revenues collected for specific purpose and are restricted in their use Highway User Revenue Fund (HURF)

20 Capital Budgets (CIP) Multi-year and of considerable value Bonds Pay as you go Special Project Reserve

21 Enterprise Funds Like a business, needs to be self supporting Revenues cover cost of providing service User based versus tax based revenues Enterprise Funds: Utilities (Water & Sewer) Ambulance Sanitation

22 Revenues

23 Revenues Local revenues Sales tax Franchise taxes Licenses, permits & fees Fines Property taxes

24 Local Sales Taxes Major Revenue Categories: Retail Construction Utilities Rental Services

25 Franchise Taxes Permission for utilities to use City/Town s right away for underground lines Must be approved by vote of the people Usually based on % of gross sales Cannot exceed 25 years

26 Property Taxes Primary tax rate can be used for any municipal purpose Secondary rate can only be used for payment of debt service (principal and interest) on bonds approved by voters 60 day notice required if property tax rate increases (not the levy)

27 Truth in Taxation Levy versus rate! Bottom line, if current AV goes up, truth in taxation may be required Citizen perspective: If you had a house that was valued at $100K last year and it is valued at $110K this year and the rate stays the same, your levy is going up!

28 Truth in Taxation Notice published twice a week. 1 st publication at least 14 days but not more than 20 days before public hearing 2 nd publication at least 7 days but not more than 10 days before public hearing Hearing must be held at least 14 days before the adoption of the levy

29 Truth in Taxation Hearings for Truth in Taxation, levy and final budget can be combined Truth in Taxation hearing MUST be held before the adoption of final budget Publication cannot be published in classified or legal sections Notice must be ¼ of page in size and surrounded by a border of 1/8 inch

30 Truth in Taxation Headline must read Truth in Taxation Hearing-Notification of Tax Increase at 18 point type If you have truth in taxation, you MUST adopt tentative budget BEFORE statutory deadline of July 15 AGAIN, if rate remains the same, but AV increases above new construction, you must do truth in taxation notice procedures

31 State Shared Revenues State Sales tax Income tax Auto Lieu Highway User Revenue

32 Other Finance Sources Bonds General Obligation Bonds Revenue Bonds Highway User Revenue Bonds Special Improvement District Bonds Municipal Property Corporation Bonds Water Infrastructure Financing Authority (WIFA)

33 Expenditures

34 Expenditures

35 Expenditure Limitation State Expenditure limitation Alternative? Home Rule Permanent Base Adjustment One time override

36 Types of Budget Processes

37 Budget Processes Performance Based Program Zero Based Modified Zero-Based (Target) Incremental Expenditure Control Based (ECB) Line Item

38 Preparation of Requests Council s vision and goals Fiscal picture for next year (Revenue Projections/Expenditure estimates) Instructions/rules to follow in preparation Budget justification Cost Estimations

39 Review of Requests Central Budget office "rules of thumb Policy Rationale Program changes Trend analysis Does it follow executive policy

40 Capital Budgets

41 Capital Budgets (CIP) Multi-year and of considerable value Operating Impact of CIP Finance by pay as you go, grants, or borrowing

42 Capital Budgets Major Revenue Sources Bonds Impact Fees Grants Current Revenues

43 Budgeting in Arizona Keeping it Legal

44 Budgeting in Arizona Must adopt a balanced budget Tentative budget must be adopted by third Monday in July No requirement for final budget unless City/Town has property tax Property Tax must be adopted by 3 rd Monday in August but 14 days after final budget adoption Various restrictions on funds HURF, Impact Fees

45 Budgeting in Arizona Tentative budget is required to be itemized per Auditor General Forms Published once a week for two consecutive weeks Notice of hearing date for final budget Both tentative and final must be published on City/Town website 7 business days after adoption Must remain posted for 60 months (five years)

46 Publication Requirements Cities/Towns must establish and maintain an official internet website Posted no more than 7 days after estimates of revenues and expenditures are given to governing body A.R.S & 17103: Requires adoption of expenditure estimates (tentative budget) Posting of tentative and final budgets for 60 months

47 AZ Auditor General Forms

48 Auditor General Forms Will Bring up examples here minute Break!

49 How to Read Your Budget

50 Distinguished Budget Presentation Award (A Best Practice Guide) The Government Finance Officers Association (GFOA) established the Distinguished Budget Presentation Awards Program in 1984 to encourage and assist state and local governments to prepare budget documents of the very highest quality that reflect both the guidelines established by the National Advisory Council on State and Local Budgeting and the GFOA s best practices on budgeting and then to recognize individual governments that succeed in achieving that goal.

51 Policy Document Distinguished Budget Presentation Award Financial Plan Operations Guide Communication Device

52 Policy Document The document shall include a budget message that articulates priorities and issues for the upcoming year. The message should describe significant changes in priorities from the current year and explain the factors that led to those changes.

53 Policy Document The document should include a coherent statement of entitywide long-term financial policies.

54 Policy Document The document shall describe the process for preparing, reviewing, and adopting the budget for the coming fiscal year. It also should describe the procedures for amending the budget after adoption.

55 The document shall present a summary of major revenues and expenditures, as well as other financing sources and uses, to provide an overview of the total resources budgeted by the organization. Financial Plan

56 The document must include summaries of revenues and other financing sources, and of expenditures and other financing uses for the prior year actual, the current year budget and/or estimated current year actual, and the proposed budget year. Financial Plan

57 Financial Plan The document shall include projected changes in fund balances, as defined by the entity in the document, for appropriated governmental funds included in the budget presentation.

58 Financial Plan The document shall describe major revenue sources, explain the underlying assumptions for the revenue estimates, and discuss significant revenue trends.

59 The document should include budgeted capital expenditures, whether authorized in the operating budget or in a separate capital budget. Financial Plan

60 The document shall include financial data on current debt obligations, describe the relationship between current debt levels and legal debt limits, and explain the effects of existing debt levels on current operations. Financial Plan

61 Operations Guide The document shall include an organization chart(s) for the entire entity.

62 Operations Guide A schedule or summary table of personnel or position counts for prior, current, and budgeted years shall be provided.

63 Operations Guide The document shall describe activities, services, or functions carried out by organizational units.

64 Communications Device A document shall include a table of contents that makes it easier to locate information in the document.

65 Resources Government Finance Officers Association AZ Auditor General Office AZ League of Cities & Towns-Budget and Finance Manual Pat Walker Consulting

66 Questions?