Multi-Year Budget Planning. Stott Mason & Michael Hurlocker Prince William County

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1 Multi-Year Budget Planning Stott Mason & Michael Hurlocker Prince William County October, 2016

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3 Limited View With One-Year Budget How comfortable would you be driving your car with this level of limited visibility?

4 Multi-Year Budgeting Can Help Plan for Issues You Might Not Expect 4 Multi-Year Budgeting, October, 2012

5 Single Year Budget vs. 5-Year Budget Plan V I S I B I L I T Y

6 Prince William County Part of the National Capital Region Full Service Local Government Total Budget of $2.85B ~4,500 FTE Employees Eight-Member Elected Board of County Supervisors County Executive Form of Government 6

7 Prince William County Population 438,692 53% total growth since 2000 Diverse community Households with children - 42% 88,217 school children (Sept 15) 10 Year Growth = 26.02% Median HH income = $98,514 AAA from all 3 Rating agencies GFOA CAFR/Budget Award Years 7

8 What is a multi-year budget plan? Planning tool that allows a locality to focus But, more than focused on the cost Key question what should we do and why? Prioritization of scarce resources over a longer period of time than annual budget processes Strategic reasons Financial reasons 8

9 How Do We Make A Five-Year Plan? Links to other County planning documents 2030 Future Report longest horizon Strategic Plan (4 yr) Comprehensive Plan (10 yr) County-School Revenue Sharing Agreement Principles of Sound Financial Management Annual Real Estate Assessment 5-year General County Revenue Forecast County budget development process 6-year Capital Improvement Program 9

10 Revenue Forecasting Revenue Forecast is the foundation of multi-year planning Revenue Forecasting Components Develop a Tax Policy Maintain Knowledge of National, State and Local Trends Communicate with Knowledgeable Partners Create a Model for Developing Projections Monitor Trends and Revenue Drivers 10

11 Identify The Revenue Sources Real Estate, Personal Property and Sale Tax comprise over 88% of Prince William County Revenue 11

12 Become Knowledgeable Develop a process to understand economic trends: Local, State, and National data Define variables that impact data Engage partners to become more knowledgeable 12

13 Internal & External Partners Outside: State Economists Association of Realtors Federal Reserve Bank of Richmond Local Builders Industry Association Commercial Real Estate Brokers Auto Industry Retail Industry Inside: Finance & Budget Staff Schools Development Services, Planning & Public Works Economic Development 13

14 Revenue Drivers Feed the Revenue Model Output Component Revenue Estimate Input Drivers (the variables) 14

15 Revenue Categories & Related Drivers Real Estate Change in value of existing properties (equalization) for Residential, Commercial & Agricultural New value added through construction (growth) new residential units constructed & value of new units Personal Property Tax Average value of vehicles located in County Additional vehicles entering the County Sales Tax Trends Population growth or contraction 15

16 Easy & Hard Forecasting Easy Data is On Trend tends to stay until there is a reason to deviate Ask why is the tending metric doing what it s doing? Ask will anything change to affect this trend? Hard Deviation from trend and/or rapidly changing metrics play havoc, like: Forecast for Transient Occupancy (hotel room tax) after 9/11 Forecast auto sales after credit collapse Forecast retail sales after area sniper homicides 16

17 General Revenue Forecast 17

18 Budgeting Is More Than Spending Money Where do my tax dollars go? Schools $2, % Public Safety $ % Community Development $ % Human Services $ % General Government $ % Transportation $ % Other $ % Note: Total may not add to average tax bill due to rounding. Debt Service and CIP investment distributed to each functional area. 18

19 Visualizing the Difference 19

20 Capital Expense / Operating Expense Trap in Single Year Budgeting 20

21 Understanding What Can Be Afforded Multi-Year Planning Provides Visibility Transparency Plan revenue (tax bills) and expenditures 5 years in advance Families, businesses and agencies have more predictability Accountability Plan for both infrastructure and operating costs Flexibility Can adjust to changing circumstances Demonstrated during Great Recession Discipline Always start with savings Add only what can be afforded for at least 5 years 21

22 Five Year Plan Strategic Reasons Translates vision into reality creates a map to achievement Implements BOCS & Community Strategic Goals and priorities Supports economic development activities Implements Comprehensive Plan levels of service Roads Police per capital Fire & Rescue service response Libraries and Parks Allows for the planning of initiatives over many years Capital projects and operational support Staffing plans 22

23 Five Year Plan Financial Reasons County Code Requirement Principles of Sound Financial Management Directive by the BOCS for a balanced Five Year Plan County/School revenue sharing agreement Provides Schools with visibility to plan forward Initiatives in any one budget year must be afforded for five years Avoids use of one-time money to fund ongoing costs 23

24 Rating Agencies Reward Multi- Year Budgeting 24

25 Planning for Capital Investments Five year budgets: Allow for planning and funding of new infrastructure to support population growth and strategic goals Allow for planning and funding of new technology that promote efficiency and effectiveness Require planning and funding of operating support for infrastructure and technology Require planning and funding of debt service payments Require use of multiple funding sources Require use of cash to capital for smaller, one-time projects 25

26 Five Year Plan Summary Average Tax Bills increase by 1.8% Implement BOCS directives on new infrastructure Road Improvements Technology Improvement Plan Schools Construction Support operating costs of new infrastructure and maintain safe communities Police and fire staffing plans Operating costs for new capital projects Maintain policy of competitive compensation 26

27 Balancing Community Needs with Willingness to Pay 27

28 Multi-Year (5-yr) Budget Plan 28

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