Budget Message reduction

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1 Budget Message The proposed 2013/14 budget includes a series of structural changes to the City s budget which are meant to provide enhanced City services to residents and businesses, decrease property taxes and provide the ability for property owners to have control over City service cost drivers within their own personal budgets. As the federal government has been hard at work avoiding a free-fall off the proverbial fiscal cliff, the proposed City budget makes similar attempts to control expenditures and prevent unnecessary tax increases. Rather than make temporary decisions that will inevitably kick the can down the road to another fiscal cliff, the proposed budget makes operational efficiencies in services to control costs and make strategic investments in economic development, to encourage tax base growth and job creation. First and foremost, leading this effort is the proposed Refuse and Recycling Program that translates modern efficiencies in collection, disposal and processing of refuse and recycling into decreased costs. Moreover, by not funding the refuse and recycling budget with the tax levy, a Pay-As-You- Throw (PAYT) or refuse user fee based on the volume of refuse disposed of, provides an equitable and fair solution to users to have more control over their own refuse and recycling costs. Results from this proposed refuse change is most notable with the proposed 14.58% reduction in the City tax rate from $10.71 to $9.15. This tax rate reduction is attributed to the removal of the refuse and recycling expenditures out of the General Fund operations now added to a newly created Refuse and Recycling Fund. The Refuse and Recycling Fund will be an enterprise fund similar to Water and Sewer Funds, and supported by revenue generated from a user fee from all users in the program. In addition, due to the modernization of the service in changing to a cart-based automated collection system, tax payers will save approximately $218,000 or 21% from expected costs under the current program. This equates to a $1.2 million savings over the next five years, if the program is adopted. This change further provides users with the wherewithal and ability to decrease future costs of the City-wide program by focusing on recycling and diverting waste out of the municipal waste stream. Unfortunately, while operational efficiencies cut costs, unfunded state mandates, particularly the New York State retirement contributions, continue to add costs. The proposed budget reluctantly includes a $298,000 increase in retirement contributions, marking the first time in City history that retirement costs have exceeded $2 million annually, despite the fact that total staff and wages are less than they were in 2006/07. In addition, the City s own fiscal cliff scenario is equally attributed to the lack of assessed value growth. For the third year in a row the City is realizing little to no increase in taxable assessed value over the prior year. The still-fragile economic recovery has all but diminished any revenue relief from assessed value growth. This is a sign that the City s effort to spur redevelopment of assessed value to adoptive re-uses needs to be a priority. This coupled with continued focus on small business development will not only provide permanent tax base growth but also stable job growth and creation. Bottom line: The City needs to increase revenue by facilitating and harboring tax base redevelopment and job growth, and decrease costs by providing more efficient services. This budget accomplishes both.

2 FY 2013/14 Budget Review The City s Strategic Plan and proposed budget continues the City s strong track record of fiscal responsibility into the future. However, we still need to strengthen the City s fund balance and reserve fund growth, and participate in sensible financial planning to account for future liabilities, financial constraints and objectives. The following are General Fund Revenue changes and highlights: Due to the removal of refuse and recycling collection from the General Fund the proposed property tax levy is $9.15, a 14.58% decrease from the prior year. The proposed budget decreases the amount of revenue transferred to the General Fund from the water fund by $50,000 as planned per the adopted Capital Infrastructure Plan (CIP). The proposed budget makes use of $377,600 from equipment reserves for DPW equipment purchases, $75,000 from the sidewalk reserve and $45,000 from the facility reserve to conduct a space needs assessment of the Police Department facility. The proposed budget eliminates the use of $65,000 from the Retirement Reserve and decreases the use of Healthcare Insurance Reserve by $15,000 needed to soften the blow of drastically increasing healthcare costs provided for both active employees and retirees. As mentioned in last year s budget message the use of Retirement and Healthcare Reserves should only be used to temporary relieve the drastic increases in retirement and healthcare costs, until such time costs begin to level out. This is the first year of systematically withdrawing from the use of the Retirement and Healthcare Reserves. The proposed budget increases sales tax by 4.9%, however due to erratic and unpredictable changes in sales tax and the critical importance it has on General Fund revenues, continued conservative budgeting will be imminently necessary in forecasting realistic revenues. The following are General Fund Expenditure changes and highlights: New York State Retirement Contribution: For the fourth consecutive year a major increase in the proposed budget is the annual New York State retirement contribution. The retirement contribution for 2013/14 is expected to increase another 17% over 2012/13, or $298,108. NYS Retirement contributions will have increased $794, 947 or 63% from 2010 to This marks the first time in history that the City s retirement costs will exceed $2 million. Healthcare Costs: The City s total healthcare insurance cost for employees and retirees has increased $124,000 or 6.5% over the prior year. This marks the first time in history that the City s health insurance costs may exceed $2 million. Workers Compensation Insurance: There is a $21,000, or 8.3% increase in workers compensation contributions due to an increase in premiums from the New York State Insurance Fund.

3 Reserve Fund Appropriations: The proposed budget continues to support the City s financial strategy which is to manage level debt service by making annual contributions to the City s equipment, employee benefit accrued liability, retirement, healthcare and facilities reserves funds for future liabilities. However, the proposed budget decreases the total amount contributed by $35,000 or 6.7% due to other financial constraints in the budget, such as rising retirement and healthcare costs. Debt Service & Interest: Debt service expense remained level despite the addition of a municipal lease which purchased a sewer vacuum truck in 2012/13. This municipal lease accounts for $7,000 in debt service and interest expense. Public Works: $377,600 of reserve funds will be used to purchase a wheel loader, single axel dump truck and two (2) one-ton dump trucks. These purchases are being completely funded with reserve funds. Police: The Police Department budget increased significantly due to contract settlements in 2012, retirement and healthcare costs. In total the Police Department budget increased $383,382, or 10.9%. In addition, it is recommended that the City conduct a space needs assessment to review the current condition of the Police Station and potential cost of improvements; it is proposed to use $45,000 from the facility reserve to cover the cost of the space needs assessment. Fire: The Fire Department budget has increased due to retirement and healthcare costs. In addition, overtime has increased by $45,000 due to the forecasted possibility of having 6 or more vacancies for half of the fiscal year. Personnel Costs: The proposed budget eliminates three police lieutenant positions caused by retirements. These retirements presented an opportunity to restructure the department to provide more police officers on the streets and better supervision. The restructuring involves replacing the lieutenant positions with two (2) new police officer positions, a sergeant and one Deputy Chief position. The Deputy Chief will oversee the road patrol. This restructuring within the Police Dept. will save the City $10,000. CSEA employees shall receive a 2.0% wage increase, per their collective bargaining agreement and it is proposed that management receive a 1.5% wage increase. The City is still negotiating the Police, Fire and AFSCME contracts. Also, City Council pay will increase $14,100.

4 Refuse & Recycling As mentioned above, the proposed cart-based refuse and recycling program will save the City over $1.2 million over the next five years. If adopted the proposed user fees are based on a three-year rate model and are expected to remain stable for the next three years (FY 2016/17). 35-gallon (single family) 64-gallon (single family) 96-gallon (single family) Two 64-gallon Two 96-gallon Three 96-gallon Four 96-gallon Five 96-gallon (five family only) $169 per year $177 per year $198 per year $213 per year $239 per year $279 per year $319 per year $359 per year Also, senior citizens that qualify for the Senior Citizen Tax Exemption pursuant to Chapter 166, Article III of the Batavia Municipal Code shall have the option to pay a reduced refuse fee per service choice: 35, 64 or 96-gallon (single family) $100 per year Two 64 or 96-gallon (double family) $150 per year Three 96-gallon (triple family) $200 per year The proposed program is expected to reduce costs, provide greater equity, enhance neighborhood aesthetics and increase waste reduction and recycling. Water & Sewer In 2010 the City Council adopted a multi-year Capital Infrastructure Plan (CIP) to address the City s aging infrastructure along with a Water and Sewer Rate Study to stabilize rates and fund future improvements. After reviewing the current year s performance, the proposed water and sewer rates are consistent with the adopted CIP. For 2013/14 the proposed water rate is $4.53 per 1,000 gallons - a 2% rate adjustment that equates to a $.09 increase over 2012/13. In addition, the proposed capital improvement fee is $10 per year ($2.50 per quarter or $.83 per month) to fund future water capital projects. This is $.50 per quarter increase over 2012/13. The total annual increase on the residential user is approximately $9.20 for the year or $.76 per month. Conversely in the sewer fund, it is recommended that there be no adjustment in the sewer rate. Consistent with the City s CIP, it is recommended the City replace approximately 1,500 linear feet of sewer line on Tracy Avenue /Hart Street from North Street to Bank Street. This project also includes sidewalk replacement, hydrant replacement and road restoration. The project should be competitively bid in early spring 2013 with construction to be completed by the end of the year. It is also recommended that the City re-apply for CDBG funds to replace a water main on Vine Street. In all, the combined impact of the recommended capital projects and water rate adjustment equals approximately a $.76 per month increase on the average residential water/sewer bill.

5 Conclusion The City has been prudent in lowering wage costs over the course of seven years and decreasing the size of the City work force. In addition, the City s diligent and successful efforts to lower refuse and recycling costs has unfortunately been thwarted by state mandates, such as retirement contributions, which lessens the opportunities for taxpayers to save money. Regardless, the City will continue to battle these uncontrollable expenses and not lose sight of important services such as sidewalk repairs, equipment replacements, infrastructure improvements, community and economic development initiatives and youth services. The proposed 2013/14 City of Batavia budget includes a general fund appropriation of $15,294,665. The proposed budget recommends a tax rate decrease from $10.71 to $9.15, or a 14.58% decrease from 2012/13. This translates into a tax levy decrease of $811,204. As such, the proposed tax levy is compliant with the tax cap not requiring the City Council to adopt a local law to override the tax cap legislation. Special thanks are in order to the City staff and department heads, especially Lisa Neary and Jodie Freese, for all the hard work and time they have contributed in preparing the budget, Strategic Plan and Business Plan. It is only through the teamwork and collaborative efforts of staff that services to the residents will continue to be provided as effectively and efficiently as possible. Thank you.