INTEGRITY INNOVATION ACCOUNTABILITY COMMITMENT TO EXCELLENCE TEAMWORK

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1 TRANSMITTAL LETTER INTEGRITY INNOVATION ACCOUNTABILITY COMMITMENT TO EXCELLENCE TEAMWORK The Transmittal Letter is written to the City Council by the City Manager and provides a highlevel preview of the City Manager s proposed budget. It contains information including the proposed tax rate and proposed fund summaries as well as overviews of the departmental business plans. The letter helps tie together the core elements which make up the proposed budget and illustrates how those elements further the City s goals found within the strategic management system. 11

2 Budget Goals August 15, 2014 Honorable Mayor and Members of City Council 1400 Main Street, Suite 270 Southlake, Texas Dear Mayor and Members of the City Council: In accordance with the Texas Local Government Code and the Charter of the City of Southlake, the proposed annual budget for the fiscal year beginning October 1, 2014 and ending September 30, 2015, is submitted for your consideration. The budget, as filed with the City Secretary, presents in summary form the revenues and expenditures for each of the funds. The budget will be discussed with City Council in a series of work sessions and will be presented formally at public hearings in September. The FY 2015 Proposed Budget is structurally balanced and supports sound fiscal and operational policies. It is a strategic budget that aligns financial and employee resources with the City of Southlake s strategy. It provides for Figure 1: City of Southlake Strategy Map 12

3 Budget Goals investments in safety, mobility, infrastructure, high performance management, and continued quality development. It also recognizes that partnerships and volunteerism are important to excellent service delivery. Economic Indicators Interest Rates GDP Growth Fuel Costs Labor & Employment Wages Unemployment Health care costs Budget Goals The FY 2015 Proposed Budget has been developed with a clear set of goals. These goals were identified to ensure that the FY 2015 Proposed Budget meets today s needs and positions the City of Southlake for a positive financial future. Housing & Commercial Growth Building Permits Home Values Top Taxpayer Meetings Consumer Spending Retail Sales Projections The first goal was to develop a financial plan to Figure 2: Economic information used for City financial projections support the City s strategic priorities and ensure high quality service delivery. City Council has set a very clear vision supported by a set of priorities, known as strategic focus areas. These high level priorities define the business of the City. It is important that resource allocation be aligned with these priorities and that departmental business plans are structured to ensure that critical business outcomes are achieved. Figure 1 is the City of Southlake Strategy Map, which details Council s focus areas, objectives, critical business outcomes and values. To learn more about the City s Strategic Management System, see the Strategic Direction section of the budget document. It is also essential to build a budget around sound financial principles. To this end, economic analysis, multi-year planning and strong policies have been part of the process. Figure 2 shows the approach used to gather local economic information for projecting budgeted revenues. The data gathered from these sources are shocked to develop best, medium and worstcase financial scenarios for stronger current budget decisions. We recognize that today s decisions impact tomorrow s budgets. The focus has also been to develop a spending plan that is attentive to tax rate management. Using a target budgeting method we have minimized incremental increases and highlighted new initiatives for evaluation. The operational impact of capital projects is identified and evaluated. The budget meets the goal of structural balance and reserves are at optimum levels. The operational impacts of projects and programs have been identified and incorporated into the budget and a multi-year analysis has been completed to confirm the sustainability of the budget over time. All of this helps us achieve a set of pre-determined financial benchmarks with this budget. Trends that depict the long-term financial health of the City are reviewed and are used to determine if budget decisions positively or negatively impact the City s financial position. One of the goals for the budget is to anticipate trends and make deliberate decisions in order to reach financial and service goals. These trends are graphed and provided as part of this budget s support materials (see City Profile section) to provide a deeper understanding of the City s overall financial condition. DID YOU KNOW? The FY 2015 Proposed Budget is structurally balanced - meaning that reserves have not been used to balance the operating budget. 13

4 City of Southlake Organizational Chart Service Delivery Excellence Southlake Citizens Mayor and City Council City Manager City Attorney City Secretary Municipal Judge Assistant City Manager Assistant City Manager Community Services Fire Services City Manager s Office Information Technology Police Services Human Resources Finance Planning & Development Public Works Economic Development & Tourism Figure 3: City of Southlake s organizational structure 14

5 Service Delivery Excellence Service Delivery Excellence The City is committed to providing Southlake taxpayers with high quality, high value public service. The objectives planned with this budget will be carried out through the traditional departments as well as through self-directed employee work teams. Figure 3 is the City of Southlake s traditional organizational chart, showing the departments and reporting structures. Each Department Director is responsible for the day-to-day operations of their respective work units and for achieving planned outcomes identified in their departmental business plans. Strategy execution is a fundamental part of day-to-day operations within the City of Southlake. The Executive Team regularly reviews progress toward meeting performance targets, including assessments of key accountability indicators (performance measures) and success in addressing Council-identified critical business outcomes. Each department has its own Strategy Map built around the department s core services and has a performance scorecard that provides a way to assess the quality of the work being performed. FY 2015 Budget Accomplishments Structural Balance Steady Tax Rate Taxpayer Relief Strong Net Revenues Optimum Fund Balances Cash Funding for Capital Projects Limited Expenditure Growth Multiyear Sustainability Competitive Compensation and Benefits No Service Level Reductions Service Enhancement - Community Recreation Center Attention is given to what needs to be done, but performance management is also about how things are done. In Southlake, the City s core values define the expectation and clarify the focus. These shared values are Integrity, Innovation, Accountability, Commitment to Excellence, and Teamwork. Financial Information and Fund Summaries The City s budget is comprised of several funds to account for the revenues and expenditures that support the City s operations. Some funds are supported by tax revenues, while others are supported by fees that cover the cost of the service. Certain funds are restricted in their use, while others provide more flexibility. This letter has been organized to describe each fund and highlight key aspects of the budget for each. 15

6 Financial Information & Fund Summaries - General Fund General Fund The General Fund is the City s principle operating fund, which is supported by property tax, sales tax, fees and other revenues that may be used for a variety of purposes. This fund accounts for core City functions such as police, fire, engineering, planning, finance and administrative operations. Desired Range Tax rate. The FY 2015 Proposed Budget incorporates a tax rate of $0.462 per $100 valuation, which holds the tax rate steady for the twelfth consecutive fiscal year. For the coming fiscal year, a 10% homestead exemption is proposed to complement the Figure 4: Long-term Debt as a Percentage of Assessed Valuation current over-65 exemption [$75,000] and disabled exemption [$75,000], as well as the over-65 tax freeze. The proposed exemption is an increase from the 3% exemption adopted in the FY 2014 Budget. Taxpayer Relief Options 10% Homestead Exemption $75,000 Over-65 Exemption Over-65 Tax Freeze $75,000 Disabled Exemption The 10% homestead exemption included in the budget will provide a $52,000 reduction in taxable value for an average-valued home in Southlake. In other words, the property owner of an average-valued home will see the equivalent of a tax rate reduction of more than $0.045 per $100 valuation with the exemption applied, than he or she would receive if no exemption were offered. The tax rate of $0.462 is split between General Fund operations and debt service. This allocation for FY 2015 is $0.342 for general operations and $0.12 for debt service. Since 2002, long-term debt as a percentage of assessed valuation has been reduced from 3.29% to 1.12%. This has been accomplished, in part, by using cash for certain capital projects rather than financing them through bonds. Figure 4 shows trend information for Southlake s debt as a percent of assessed valuation. The City has used many tools to reduce its debt service requirements. Examples include debt refunding when appropriate and shortening the amortization schedule for certain issuances. Debt management strategies have resulted in a debt profile that shows 75% of the City s current property tax supported debt will be paid off within ten years. 16 Fiscal Year Value Taxable Value Comparison FY FY 2015 % Increase Prior Year New Construction New Construction as % of Total 2014 $5,626,431, % $73,447, % 2015 $5,958,098, % $203,861, % Figure 5: This chart compares taxable property values for FY 2014 with those for FY 2015.

7 Financial Information & Fund Summaries - General Fund Taxable value. Figure 5 shows the change in taxable value from FY 2014 and documents the impact of new construction on the values (for FY 2015). (Note that the value shown in the table is net of the incremental taxable value assigned to Tax Increment Reinvestment Zone #1. For FY 2015, TIRZ #1 taxable value is $347,428,074.) Figure 6 demonstrates the growth of Southlake s property values over time. The difference between assessed value and taxable value is Figure 6: Comparison of property values since FY 2010 (assessed and taxable) primarily due to exemptions, such as homestead, disabled, over-65 exemption and over-65 tax freeze. State law requires a taxing unit to calculate two rates after receiving its certified appraisal roll -- the effective tax rate and the rollback tax rate. The effective tax rate is the rate that will generate the same amount of property tax dollars as the previous year, excluding new construction and annexations, when the two years are compared. The rollback tax rate is the highest tax rate the taxing unit can set before taxpayers can start tax rollback procedures. Depending on the tax rate that is ultimately chosen by the City and its relationship to the effective tax rate, there are requirements that must be followed to comply with State truth-in-taxation laws. These requirements protect the public s right-to-know concerning tax rate decisions. Figure 7 compares the tax rate, effective tax rate, and rollback rates for FY 2014 and FY As shown in the chart, the calculated effective tax rate is lower for FY 2015 than the proposed tax rate. The rollback tax rate, however, exceeds the proposed tax rate for FY This means the proposed tax rate is less than the cap that the State establishes for rollback procedures. Revenue highlights. The proposed FY 2015 Annual Budget projects $39,054,568 in General Fund revenues, which is an increase of $2,461,865 or 6.7% from the FY 2014 Adopted Budget. The largest single revenue source in the proposed budget is the ad valorem (property) tax. The proposed budget will provide $19,561,715 in ad valorem tax dollars for the General Fund operations budget, an estimated increase of $673,389 (3.6%) from the FY 2014 Adopted Fiscal Year Tax Rate Comparison Tax Rate Effective Tax Rate Rollback Rate 2014 $0.462 $ $ $0.462 $ $ Figure 7: Comparison of tax rate, effective tax rate, and rollback rate. 17

8 Financial Information & Fund Summaries - General Fund Budget. A portion of this increase is attributable to increased value and new construction added value of $203,861,702. The second largest projected General Fund revenue source in the FY 2015 Proposed Budget is the municipal sales tax. The proposed budget forecasts revenue from this line item to increase 16.5% when compared to last year s adopted budget. Sales tax is performing very well due to continued development of the City s retail sector, as shown on the chart (Figure 8). The City expects to collect $12,022,000 in the General Fund for FY Figure 8: Sales Tax Collection Trend The other major revenue sources for the General Fund are franchise fees [$2,736,404] from the private utility companies operating in the City and municipal fines [$1,115,000]. FY 2015 fine revenue is expected to decrease 8.2% compared to the FY 2014 Adopted Budget due to the redeployment of a portion of the traffic officers time from enforcement activity (citations) to traffic management initiatives. Another large revenue source in the proposed General Fund budget is derived from the municipal permits and fees charged for various development activities, such as fees for zoning, platting and building permits. The proposed budget projects revenues of $1,482,300 from this source in FY This represents an increase of $120,000 or 8.8% over the projection included in the FY 2014 Adopted Budget. The City is estimating that 135 single family residential building permits will be FRANCHISE TAXES 7.0% PERMITS / FEES CHARGES FOR SERVICES 3.8% 3.2% FINES 2.9% MISCELLANEOUS 2.1% INTEREST INCOME 0.2% * Amended **Proposed issued during FY 2015, which is comparable to FY 2014 projections. Revenue from commercial permits is expected to remain relatively flat. GENERAL FUND SALES TAX 30.8% Figure 9: General Fund Revenue by Source AD VALOREM TAX 50.1% Charges for services are estimated at $1,252,150, which is an increase from the FY 2014 Adopted Budget of 0.3%. This category of revenue includes interlocal contributions from the Cities of Grapevine, Colleyville and Keller for the joint Teen Court program [$110,250]. 18

9 Financial Information & Fund Summaries - General Fund Miscellaneous income is projected at $815,000, an increase of $5,000 or 0.6% above last year s adopted budget. The proposed budget also reflects $70,000 in interest earnings. As previously mentioned, total General Fund revenue projected for FY 2015 represents a 6.7% increase [$2,461,865] from the FY 2014 Adopted Budget, recognizing the 10% homestead exemption for this fiscal year. Figure 9 shows the distribution of General Fund revenue sources. The General Fund also recognizes $1,585,529 in revenue that will be transferred in from the Utility Fund, Storm Water Utility Fund, Hotel Occupancy Tax Fund, Southlake Parks Development Corporation and Crime Control and Prevention District to cover indirect costs that have been borne by the General Fund. (This revenue is recognized below the line, meaning it is not shown as a revenue line item. However, these funds are available for operating expenses.) The transfers will provide for total available revenue of $40,640,097, an increase of $2,566,279 or 6.7% over the FY 2014 Adopted Budget. Expenditure highlights. The General Fund accounts for all expenditure activity not specifically accounted for in other funds, such as operational expenses associated with public safety, engineering, planning, and finance administration. General Fund Expenditure Highlights Highlight Item Expenditure Service Enhancement: Community Recreation Center Personnel Three staff members (Events & Hospitality Manager, Sales Specialist and Special Events Coordinator), facility marketing and operations Pay adjustment Health insurance Public Works Supervisor - Facilities (total compensation and equipment) $218, % base pay adjustment, 1.5% merit 4.1% rate increase $109,545 The following describes expenditure highlights for this fund. Service Enhancement: Community Recreation Center. For many years the City s master plan has included a recommendation to build a recreation center, but questions about what would be included, where it would be located, and how it would be funded were not resolved until recently. Construction on Phase I of the planned facility, which will be located at Bicentennial Park, will begin this fall. A proposal to fund Phase 2 will go to Southlake s voters in May If approved, the facility will provide for multi-generational recreation and cultural needs, drawing patrons from Southlake and surrounding cities. Phase I of the center is scheduled to be completed in September 2015 and will include a senior activity center, a 300 person event hall with a catering kitchen, multipurpose meeting rooms and an outdoor amphitheater. It is anticipated that it will generate interest from groups and individuals who want to host weddings, private parties, conferences, corporate meetings and other special events. The General Fund budget includes $218,649 for initial personnel and other needs to ensure that the facility is ready to operate and facilities are booked upon opening. The proposed expenses include: 19

10 Financial Information & Fund Summaries - General Fund Events and Hospitality Manager: The proposed Events and Hospitality Manager will oversee functions in the facility and provide oversight to all community special events hosted by the City of Southlake. Funding in the amount of $76,608 has been included based on a January 2015 start date for this position. Sales Specialist: The proposed Sales Specialist will promote and sell the various event and meeting spaces at the Community Recreation Center. This position would also participate in trade shows and exhibitions that tailor to clientele looking for meeting and event space. Funding in the amount of $46,217 has been included for this position with proposed hire date for this position is January Special Events Coordinator: The proposed Special Events Coordinator will plan, organize and execute City sponsored events held at the Community Recreation Center and around Southlake (Town Square, parks system, etc.). The proposed budget includes $25,824 in funding and anticipates a June start date for the Special Events Coordinator. Branding/Website Development/Marketing: The proposed budget also includes $70,000 in startup costs related to branding, website development and marketing initiatives. These funds will help ensure that the facility is marketed well and has events and other activities booked upon opening in late The initial funding for the operation of the Community Recreation Center supports the Council s focus area of Quality Development, and the strategic corporate objective of Provide attractive and unique spaces for the enjoyment of personal interests. This project also advances the Southlake 2030 Parks, Recreation, Open Space and Community Facilities Master Plan recommendation related to the development of a recreation center. Personnel. The City of Southlake is a service organization, and as such, the majority of its expenses are related to labor costs. For FY 2015, over 67% of planned expenses are personnel related. An explanation of some of these costs is provided below. Compensation and classification. City Council adopted a new compensation system on August 6, 2013, replacing the previous system which was implemented in FY The new system supports the City s strategic approach, provides for a financially sustainable model, and ensures a fair and predictable method of career progression and compensation for City employees. The adopted compensation system establishes the labor market, defines the market position, establishes the pay structure and defines how employees will move through the pay ranges. With the system, the City Council adopted a market competitive compensation pay strategy which strives to pay at the 60 th percentile. This means on average, the City endeavors to pay better than 60% of the designated labor market. The system also moves away from a tenure-based, step pay system and phases in pay-forperformance over the next several years. For FY 2015, the proposal contained within the budget is to provide City employees with an across-the-board base pay adjustment of 1.5% and a merit adjustment of 1.5%, for a total potential pay increase of 3%. We have surveyed other DID YOU KNOW? The proposed budget for FY 2015 incorporates a 10% homestead exemption, more than tripling the exemption adopted in FY This is the eqivalent of a 4.5 cent tax rate reduction for an averagevalued home. 20

11 Financial Information & Fund Summaries - General Fund cities in our market along with private sector data and have determined that many organizations plan to provide employee pay increases in the 3% range. Since this is the first year in which we are providing pay increases based upon performance, we are comfortable with providing a portion of the pay increase as a base pay adjustment. Benefits. The summaries below describe the major benefits and our approach to providing them in FY DID YOU KNOW? There are no service reductions in the FY 2015 Proposed Budget. In fact, the budget includes funding to open Phase 1 of the Community Recreation Center, an important service enhancement. Texas Municipal Retirement System (TMRS). TMRS is a statewide agent multiple-employer public employee retirement system created by law in 1947 to provide retirement, disability, and death benefits to employees of participating cities. As a hybrid, defined benefit plan, TMRS members contribute at a designed rate toward their own retirement benefit. At retirement, the member s account balance (including credited interest) and employer matching contributions are used to calculate the member s retirement benefit. As of December 31, 2013, 850 municipalities in Texas have a retirement benefit plan administered by TMRS, including the City of Southlake. TMRS is a well-funded retirement program that continues to adopt changes to ensure members benefits remain secure and sustainable over generations of workers. To that end, in October 2013, TMRS adopted a series of actuarial assumption changes. The retiree mortality table was updated to reflect longer lifespans and the actuarial cost method changed from Projected Unit Credit (PUC) to Entry Age Normal (EAN). With these more conservative assumptions, TMRS predicts cities will experience relatively stable rates and gradually improving funded status over time; however, the assumption changes resulted in a decrease in the funded ratio system-wide. The funded ratio for the whole system decreased from 87.2% to 84.1% and the City s individual funded ratio decreased from 86.6% to 84.5%. It is important to note that this is an accounting change, and under the old assumptions, the City s funded ratio would have increased to 88.8%. For FY 2015, TMRS has increased the City s contribution rate slightly by 0.12%, and therefore, no plan changes are proposed. We will be able to continue to offer all the features previously approved, which is important because TMRS benefits are a significant recruitment and retention tool. Health insurance. The City recently entered into a renewal agreement with United Healthcare for health insurance. Through negotiation by City staff, United Healthcare s proposed rate increase dropped from 10% to 4.1%. No plan modifications were made, with the exception of the adoption of required provisions under the Patient Protection and Affordable Care Act. Providing a competitive health insurance plan is a significant factor in attracting quality candidates and retaining valuable employees. The City has set a target of no more than 30% for our benefits to payroll ratio. With proposed changes to the systems for FY 2015, the benefits are at 27.5% of total compensation. 21

12 Financial Information & Fund Summaries - General Fund Compensation and benefit strategies are tied to the City s strategic corporate objective of Attract, develop and retain a skilled workforce and the critical business outcome to Become an employer of choice. Positions. The FY 2015 proposed General Fund Budget includes costs associated with two staffing initiatives in addition to the staffing needed for the Community Recreation Center. FY 2014 midyear additions. As development activity increased with an improving economy, the need for additional positions to assist with the increased work load became clear. With Council s approval, new positions were added to ensure professional capability for the future. For FY 2015, the proposed budget incorporates a full year of funding for these positions, which include: --Code Enforcement Officer (previously frozen position) --Building Inspector (previously frozen position) --Engineering Assistant --Public Works Business Manager --Fire Inspector --Records Manager --Deputy City Secretary (upgrade) New position. Finally, we are proposing the addition of a Facilities Supervisor. The City now has more than 800,000 square feet of facilities to maintain. Adding a Facilities Supervisor will help oversee the management of the additional square footage and provide the proper field supervision necessary to ensure customer satisfaction while maintaining a safe working environment for City employees, contractors and suppliers. The total cost for this position, including salary, benefits, a work van, and equipment/tools is $109,545. Fund balance. The City of Southlake Fund Balance Policy adopted in 1993 states that the: goal shall be to maintain a fund balance in the General Fund equal to a minimum of 15% of General Fund-budgeted operating expenditures, with the optimum goal of 25%. The proposed budget reflects an undesignated General Fund balance of 25.73% of expenditures, which represents $9,116,849. This ending balance is set aside to provide funding in the event of an unanticipated economic downturn or other emergency. The 25.73% represents the optimum balance as defined by the City s policy. This level is sufficient to ensure a reasonable reserve level to protect the City s budget. We typically set aside excess revenue and unallocated appropriation (above the 25% optimum fund balance) for critical, high-impact projects as a transfer to the Strategic Initiative Fund and will continue this practice in FY This letter contains a section providing details of the FY 2015 Strategic Initiative Fund on page 263. Maintaining a fund balance at the optimum level designated in the City s policy addresses the focus area of High Performance Management and the strategic corporate objective of Achieve fiscal wellness standards. 22

13 Financial Information & Fund Summaries - Debt Service Fund Debt Service Fund The Debt Service Fund accumulates ad valorem tax dollars to pay for the annual portion of property tax supported debt. City debt is derived from bonds issued for capital projects, including public works infrastructure, parks, facilities and other such assets. The debt service tax rate for FY 2015 will be $0.12, the same rate as FY Staff analysis has shown this tax rate to be sufficient for covering existing General Fund debt, as well as for future annual bond programs. DID YOU KNOW? The City will issue no property tax supported debt in FY 2015 and instead will cash fund $6.82 million in needed capital roadway and facilities projects. For FY 2015, revenues are estimated at $6,922,970 with $6,902,970 coming from ad valorem taxes and $20,000 from interest income. Transfers into the fund are budgeted at $7,471,015 from the Tax Increment Finance District Fund, Storm Water Utility District, and Crime Control and Prevention District to pay the debt service for bonds issued on each Districts behalf. Total expenditures are proposed at $15,519,361 for annual principal and interest payments, as well as related administrative costs. The Debt Service Fund will end the current fiscal year with undesignated reserves of $9,233,238. The fund balance allows us to meet our fund balance policy which states that the City of Southlake shall also maintain Reserve Funds for all statutorily required reserve funds to guarantee debt service. The capital projects funded through the City s bond program address the focus areas of Infrastructure and Mobility and the strategic corporate objective of Invest to provide and maintain high quality public assets. 23

14 Financial Information & Fund Summaries - Utility Fund Utility Fund The Utility Fund, also known as the Water and Sewer Enterprise Fund, is used to account for the acquisition, operation and maintenance of Southlake s municipal water and sewer utility, supported primarily by user charges to utility customers. The fund accounts for operational costs as well as debt service for utility system improvement bonds. The intent of this fund is for the direct beneficiaries to pay for all costs of the fund including debt service through fees levied for the services provided. Utility Fund dollars are not used to pay for general operations of the City. Revenue Highlights. The Utility Fund revenues are projected at $23,966,900 for an increase of $628,025. This is a 2.7% increase when compared with the FY 2014 Adopted Budget. Expenditure Highlights. Personnel. The Utility Fund includes funding for the employees needed to manage and operate the City s utility system. This fund will cover its portion of employee pay adjustments and the increases in benefit costs as described in the General Fund portion of this letter. No new employees are proposed to be funded through the Utility Fund in FY Utility Fund Expenditure Highlights Highlight Item Expenditure Personnel Equipment Technology Pay adjustment Health insurance SCADA radio upgrade for waste water lift stations and other locations Sewer easement machine Lift station pump replacement (3) Backhoe tractor replacement Pavement breaker hammer E-bills implementation SCADA server software and hardware upgrades 1.5% base pay adjustment, 1.5% merit 4.1% rate increase $87,130 $47,000 $44,100 $115,000 $17,500 $6,300 $78,000 Other highlights. Southlake s purchase of drinking water from the City of Ft. Worth is the single largest expense in the Utility Fund. For FY 2015, the City s purchase costs are expected to increase 11.1%. This is in addition to the 22.6% increase that was included in the FY 2014 Adopted Utility Fund Budget. Both years, the increases are primarily due to the cost of raw water from the Tarrant Regional Water District (the District). Population growth and the three-year drought have caused the District to pump more water from eastern reservoirs driving up the cost of water delivery for all the customers in Tarrant county. Funding has also been requested for equipment and facility improvements. Highlights of supplemental requests for the Utility Fund are shown in the table at right and are specifically related to providing water, sewer and/or garbage service. Total expenditures in the Utility Fund are proposed at $23,013,325, a 0.3% decrease from the FY 2014 Adopted Budget. Indirect charge/transfers. We have budgeted a transfer of $960,676 from the Utility Fund to the General Fund to cover indirect expenses and for payment of a franchise fee. 24

15 Financial Information & Fund Summaries - Vehicle Replacement Fund balance. The FY 2015 Proposed Utility Fund budget provides 141 days of working capital or equivalent to a 38% fund balance. This exceeds the City s fund balance policy for the Utility Fund, which states that the goal shall be to maintain a fund balance of 60 days of working capital in the Utility Fund with the optimum goal of 90 days of working capital. The initiatives proposed in the FY 2015 Utility Fund Budget address the focus areas of Infrastructure and Performance Management & Service Delivery as well as the strategic corporate objectives of invest to provide and maintain hihg-quality public assets and optimize the use of technology. Vehicle Replacement Fund The Vehicle Replacement Fund accounts for the resources needed to manage the purchase of vehicles for the City s fleet. The establishment and funding of the vehicle replacement program was designed to even out expenses for the City s fleet from year to year, and provides a logical method for purchasing and retiring vehicles. A five-year purchase plan has been developed to detail future capital investment needs. Vehicle Replacement Fund Expenditure Highlights Highlight Item Expenditure Equipment Fleet replacement per schedule $587,000 Revenue highlights. For FY 2015, we are planning a transfer from the General Fund to the Vehicle Replacement Fund of $400,000. Expenditure highlights. Expenditures are estimated at $587,000 to replace aging vehicles coming off-line. Fund balance. The projected ending fund balance is approximately $2,982,905, which provides adequate reserves for the program. The FY 2015 Proposed Vehicle Replacement Fund Budget addresses the focus area Performance Management & Service Delivery as well as the strategic corporate objectives of adhere to financial management principles and budget. 25

16 Financial Information & Fund Summaries - SPDC Southlake Parks Development Corporation Fund The Southlake Parks Development Corporation (SPDC), a citizen-approved non-profit development corporation established to develop and operate park and recreational facilities, uses a.5% sales tax for all uses permitted by State law. The Operating Fund is used to finance, develop and operate park and recreation facilities, while the Debt Service Fund is used to account for the accumulation of financial resources for payment of long-term principal and interest costs for SPDC-approved improvements. The uses of this fund are restricted to those allowed by law and approved by the Board of Directors. While the SPDC budget can and should be used to support operational costs associated with the improvements funded, these funds may not be used to support the general operations of the City. A five-year Capital Improvements Program (CIP) has been established to support the implementation of the City s Southlake 2030 Parks, Recreation, Open Space and Community Facilities Master Plan. CIP priorities are established as a joint effort between the Park and Recreation Board, Southlake Parks Development Corporation Board of Directors and City Council. These groups have also worked jointly to develop the operating budget for FY Recognizing that developed park acreage has almost doubled since 2008, and that the Southlake 2030 Parks, Recreation, Open Space and Community Facilities Master Plan shows an 85% increase in total park acreage over that identified in the 2025 plan, the Council worked with the SPDC Board of Directors and Parks and Recreation Board to begin transitioning certain operating costs out of the General Fund and into the SPDC Operating Fund. SPDC Fund Expenditure Highlights Highlight Item Expenditure Personnel Operations Capital Pay adjustment Health insurance Joint use facilities fees Internal park signage plan development / installation Contract services - landscape maintenance Contract services - landscape replacement program 1.5% base pay adjustment, 1.5% merit 4.1% rate increase $85,000 $80,000 $400,000 $50,000 Mower $75,000 Bicentennial Park parking lot restriping $10,000 Revenue highlights. The SPDC Operating Fund is projected to receive $6,592,000 in sales tax revenue, $153,816 in rental income, and $7,500 in interest earnings Storage building for chemicals $55,000 for total projected FY 2015 revenue of $6,753,316. This represents a projected 16.1% increase over the FY 2014 Adopted Budget. Expenditure highlights. Total expenditures for the Operating Fund are proposed at $979,258. This is a 33.6% increase over the FY 2014 Adopted Budget. The Southlake Parks Development Corporation Board of Directors, in partnership with the Southlake Parks and Recreation Board, approved the proposed operating budget at the August 12, 2014 joint meeting. 26

17 Financial Information & Fund Summaries - SPDC The proposed FY 2015 budget includes $682,600 for operations, continuing the move of selected expenses from the General Fund to SPDC. This represents about 14.3% of the current park maintenance costs. It is anticipated that over time additional costs will be transitioned to SPDC. However, it will be critical to balance this approach with master plan implementation, capital costs, and fund balance levels. Below are highlights of proposed expenses for the fund: DID YOU KNOW? Since its inception in 1994, the SPDC Fund has collected over $55 million for park projects such as North Park, the Bicentennial Park improvements and the acquisition and development of Bob Jones Park. Personnel. SPDC funds all of the salary and benefits for the City s Construction Manager. All compensation and benefit adjustments previously mentioned will apply for this employee. Operations. Highlighted expenses are shown below: o Joint use of facility costs $ 85,000 o Park sign plan/installation $ 80,000 o Contract landscape maintenance $ 400,000 o Landscape replacement program $ 50,000 Capital. Highlights include: o Ground master mower $ 75,000 o Bicentennial parking lot striping $ 10,000 o Safety storage building $ 55,000 Indirect charge/transfers. A transfer of $270,133 to the General Fund is planned for indirect charges. We are also planning to transfer $2,884,289 to debt service and $1,000,000 to the CIP. Fund balance. The proposed ending fund balance for the SPDC Operating Fund will be $8,971,598. The Southlake Parks Development Corporation is also responsible for paying principal and interest on outstanding debt. For FY 2015, the SPDC Debt Service Fund will cover total expenditures of $2,885,789 for this purpose. Please see page 337 of this document to review the FY Capital Improvements Program including the Southlake Parks Development Corporation plan. Initiatives funded through the Southlake Parks Development Corporation address the focus area of Infrastructure and the strategic corporate objective of Provide attractive and unique spaces for enjoyment of personal interests. 27

18 Financial Information & Fund Summaries - CCPD Crime Control and Prevention District Fund The 1/2 cent sales tax collection to fund the Crime Control and Prevention District (CCPD) began in April 1998, with the first sales tax check received in June State law provides that a district s life is limited to five years, unless voters continue the district by approval of a referendum. In February 2002, Southlake voters approved the continuation of the CCPD for 15 years, meaning the Fund is due to sunset in 2017 unless reauthorized by the voters. The use of district funds are defined by State law and Southlake voters reviewed general plans for the use of the funds when approving the sales tax. The primary use of the Fund has been for one-time, non-recurring expenses related to public safety facilities. Revenue highlights. For FY 2015, $6,592,000 is anticipated in sales tax collections for the District, along with $500 in interest income for total revenues of $6,592,500. This is a projected increase of 16.6% over the FY 2014 Adopted Budget. Expenditure highlights. Total operating expenditures are proposed at $724,040 for FY Planned expenses for the operating budget were approved for funding by the Crime Control and Prevention District Board of Directors at their August 12, 2014 meeting. Proposed expenditures include ongoing funding of the School Resource Officer (SRO) program. We are also proposing the purchase of a secure server to store digital evidence to ensure we are able to meet the expectations of the Tarrant County District Attorney s Office. CCPD Fund Expenditure Highlights Highlight Item Expenditure Personnel Operations Technology Pay adjustment Health insurance School Resource Officer program 24,000 GB evidence storage secure server DID YOU KNOW? 1.5% base pay adjustment, 1.5% merit 4.1% rate increase $661,490 $18,000 Thanks to CCPD sales tax dollars, 50% of the construction expenses for DPS North were paid with cash. The remainder was funded with 4-year bonds, the last of which will be paid off in Indirect charge/transfers. A transfer of $263,700 to the General Fund is planned for an indirect charge. Also planned is a debt service transfer of $4,017,900. Fund balance. The ending fund balance for the CCPD Operating Fund is projected at $6,311,195. The budget of the Crime Control and Prevention District supports the focus area of Safety & Security and the strategic corporate objective of achieve the highest standards of safety and security. 28

19 Financial Information & Fund Summaries - ED Invesment Economic Development Investment Fund The City s Southlake 2030 Economic Development and Tourism Master Plan includes a recommendation to build an economic development investment fund. We are proposing to continue to implement this recommendation for FY Economic Development Investment Fund Expenditure Highlights Highlight Item Expenditure Economic Development Investment Fund No planned expenditures n/a Revenue highlights. For FY 2015, we are proposing to transfer $150,000 to this fund, as we work to build a balance for future use. Expenditure highlights. We are proposing no expenditures from this fund for FY Staff will be working with Council in the coming months to establish the necessary policies for the use of these funds to ensure support of the City s master plan and prudent investment for growing Southlake s economy. Fund balance. The ending fund balance will be $1,751,000. Southlake 2030 Economic Development and Tourism Master Plan Goal 4.3: Establish an economic development fund. Southlake should establish a fund to use to attract and retain employers, as well as to help retain and expand existing businesses. Initially, the annual allocation to the fund should be at least $150,000 and, ideally, would increase to $250,000 per year once th eprogram is firmly established, leadership is in place, and successes are realized. 29

20 Financial Information & Fund Summaries - TIF Tax Increment Finance District Fund TIF District Expenditure Highlights Tax Increment Reinvestment Zone (TIRZ) #1 or the Tax Increment Finance (TIF) District was created in 1997, with an effective beginning date of January 1, 1998 to encourage quality commercial development in the City. Incremental values subsequent to January 1997 are taxed at the City s tax rate of $.462 per $100 Highlight Transfer Item Debt service Expenditure $3,258,668 of assessed value; however, 100% of the captured ad valorem revenues are utilized within the District, rather than being allocated to the City s overall budget. Overlapping taxing entities, including Tarrant County, Tarrant County College District, Tarrant County Hospital District, and the Carroll Independent School District (CISD) have agreed to participate at varying levels in the TIF District by assigning their ad valorem tax dollars as well. TIF District Fund uses are restricted. Revenues are primarily used for paying the debt for infrastructure improvements in TIRZ #1 and are not available for any operational purposes. The projects funded have been identified in the TIRZ #1 Project & Financing Plan, adopted by the Board of Directors in August Revenue highlights. The incremental value assigned to TIRZ #1 for the 2014 tax year is $347,428,074, which is a 4.8% increase from the valuation for the 2013 tax year. This translates into anticipated revenues for the TIF District Fund of $6,730,476, including interest income. Revenue projections include estimated CISD payments based on a three year average. Expenditure highlights. Total expenditures for FY 2015 are proposed at $3,703,170. attributable to CISD TIRZ #1 projects identified in the project and financing plan. These expenditures are Indirect charge/transfers. A transfer to the Debt Service Fund in the amount of $3,258,668 is budgeted to fund the debt repayment for bonds issued for TIRZ #1 projects. Fund balance. The ending balance for this fund is projected at $4,194,408. The establishment of TIRZ #1 and use of the captured revenues for improvements in the District supports the focus area of Quality Development and the strategic corporate objectives of providing attractive and unique spaces for the enjoyment of personal interests and attract and keep top-tier businesses to drive a dynamic and sustainable economic environment. 30

21 Financial Information & Fund Summaries - Special Revenue Special Revenue Funds The City of Southlake accounts for revenues and expenditures of dedicated or special purpose funding in a number of special revenue funds as described below. Bicentennial Concession. The proposed budget includes this special revenue fund to account for revenues and expenditures dedicated for Bicentennial Park use. These funds were derived from a contract with Coca-Cola, with uses restricted as specified by the contract. The proposed budget reflects no revenues for FY 2015 because the contract has expired. No expenses are budgeted resulting in an ending fund balance of $37,681. Special Revenue Funds Expenditure Highlights Fund Item Expenditure Bicentennial Concession Commercial Vehicle Enforcement Fund Court Security No planned expenditures Personnel - Pay adjustment Personnel - Health insurance Personnel - Pay adjustment n/a 1.5% base pay adjustment, 1.5% merit 4.1% rate increase 1.5% base pay adjustment, 1.5% merit Commercial Vehicle Enforcement Fund. State law requires that fines and forfeitures associated with commercial vehicle enforcement activities be segregated for accounting purposes. Therefore, a new fund was established for FY 2013 as we began implementation of our program. Due to the newness of the program, start-up expenses currently exceed revenue; therefore, the FY 2015 budget includes a transfer in of $40,000 from the General Fund. For FY 2015 we are proposing total revenues of $85,000. Expenses total $124,704. The ending fund balance is projected to be $26,438. Court Security. This proposed budget includes funds from the payment of fines and forfeitures. Use of these funds is restricted for court security items, per State law. The proposed budget anticipates revenues of $35,200. The beginning fund balance is $435,363. Proposed expenditures of $73,638 are planned to enhance the overall safety of the court with the use of security personnel. The projected ending fund balance is $396,925. Court Technology. The proposed budget includes funds from the payment of fines and forfeitures. Uses of these funds are restricted, per State law. The proposed budget anticipates revenues of Court Technology Facility Maintenance Hotel Occupancy Tax Fund Library Donations Personnel - Health insurance Interface with Dallas regional warrant database 4.1% rate increase $13,500 Warrant tracking software $15,000 Computers for court staff, court room and court lobby $6,750 Town Hall maintenance $130,000 Personnel - Pay adjustment Personnel - Health insurance Community event in conjunction with Academy of Country Music Awards 1.5% base pay adjustment, 1.5% merit 4.1% rate increase $60,000 Transfer to CIP $200,000 Special projects Defined by donor 31

22 Financial Information & Fund Summaries - Special Revenue $45,100. Proposed expenditures of $35,250 are planned including funding for projects to optimize the use of technology for municipal court. The projected ending fund balance is $388,906. Facility Maintenance Fund. The Strategic Initiative Fund (SIF) provided seed money for this fund, an important element of our budget given the size and complexity of the City s facility infrastructure. For FY 2015 we will continue our practice of transferring SIF money into this fund. In FY 2015, we are proposing a transfer of $600,000 from the SIF. The beginning fund balance is $2,309,168, and we anticipate interest revenue of $4,000. City staff currently manages over 800,000 square feet of facility infrastructure, including the recently-opened DPS North Facility. Much of the smaller daily maintenance efforts of the facilities are absorbed into the various operating budgets as appropriate. However, we recognize that it is important to have a proactive maintenance program that addresses larger scale projects and that prudently plans for the future as the facilities age. This fund was put in place as a way to plan for the future. Ending fund balance is projected at $2,783,168. Special Revenue Funds Expenditure Expenditure Highlights, Highlights Continued Fund Item Expenditure Park Dedication Fees Parks and Recreation Fund Public Art Fund Transfer to CIP $235,000 Special projects $44,000 Public art programs and services 50,500 Sculpture garden $50,000 Recycling Fund No planned expenditures n/a Red Light Camera Reforestation Personnel - Pay adjustment Personnel - Health insurance Pedestrian crossing signal and crosswalk at Watermere Drive 1.5% base pay adjustment, 1.5% merit 4.1% rate increase $20,000 Transfer to CIP $200,000 Street Tree Program $5,000 Tree maintenance $25,000 Hotel Occupancy Tax. The Hotel Occupancy Tax is authorized under the Texas Tax Code, Chapter 351. The City of Southlake adopted Ordinance No. 769 in February 2000, levying a 7% tax on room receipts. The tax on rooms at the Hilton Hotel in Town Square is providing the revenues to the City in this category. The first expenditures from this fund were made in FY Use of these funds is restricted. Planned expenses must be authorized uses under the Texas Tax Code, Chapter 351. For FY 2015, revenues are estimated at $926,565. The operating budget currently includes funding for the Marketing and Tourism Manager, a Sales and Services Coordinator and a portion of the cost of the Economic Development/Tourism Director and administrative support staff costs directly attributable to tourism. Planned project expenditures for FY 2015 include funds to add an event to the City s special event offerings. The 50 th Annual Academy of Country Music Awards will be held at AT&T Stadium in Arlington on Sunday, April 19, We are hoping to capitalize on the tourism this event will bring to North Texas in much the same way that we did when the Superbowl was held in our region. We are proposing to host an event on the preceding Saturday to celebrate country 32

23 Financial Information & Fund Summaries - Special Revenue music and draw visitors to our City. $60,000 has been budgeted for this purpose. This expense will complement our existing event marketing and advertising efforts. Special Revenue Funds Expenditure Highlights Fund Item Expenditure Total planned expenditures for this fund for FY 2015 are $754,462. The indirect transfer to the General Fund is projected at $37,063, along with a transfer of $138,985 to the Public Art Fund. Finally, we are proposing a transfer of $200,000 to the Capital Improvements Program for predevelopment funds for Visitor Information Center implementation. Note that the Southlake 2030 Economic Development and Tourism Master Plan includes recommended actions for developing and operating a Visitor Information Center. The ending fund balance is projected at $1,063,168. This balance will carry forward for future initiatives to promote tourism in the City of Southlake. Storm Water Utility Fund Personnel - Pay adjustment Personnel - Health insurance Inspections contract services 1.5% base pay adjustment; 1.5% merit 4.1% rate increase $20,000 Mechanical street sweeper $166,450 Transfer to CIP $1,235,000 Library Donations. This proposed budget includes funds from donations and uses are restricted for library purposes. The proposed budget anticipates a beginning fund balance of $10,606. Staff is anticipating approximately $8,000 in donations and the expenditures will be for special projects, which are often defined by the donor. Ending fund balance is projected at $10,656. Park Dedication Fees. This special revenue fund accounts for funds from park dedication fees on new development. Use of park dedication fees is restricted to park improvements and primarily used for capital expenses. The proposed budget reflects revenues of $30,000 in fees and $250 in interest earnings for total revenues of $30,250. The proposed budget anticipates a beginning fund balance of $315,512. For FY 2015, no projects are proposed for this fund; however, a transfer of $235,000 to the Capital Improvement Program (CIP) for Chesapeake Park improvements has been proposed. This project complements a drainage project planned for the area in FY The ending fund balance is projected to be $110,762. Parks and Recreation Fund. This fund accounts for resources restricted for use by the Community Services Department. Such funds include event and other sponsorship funds collected through the City s sponsorship program. Planned expenses in this fund are directed toward enhancing City special events, programs, athletic fields and parks for which sponsorships are granted. The funds received through sponsorships assist with offsetting enhanced services offered to the community. The proposed budget reflects revenues of $44,000 in donations and sponsorships and $200 in interest earnings for total revenues of $44,000. The proposed budget anticipates a beginning fund balance of $86,853. Expenses are estimated at $44,000 leaving the fund with a projected fund balance of $86,

24 Financial Information & Fund Summaries - Special Revenue DID YOU KNOW? Per a recommendation in the Public Art Master Plan, a sculpture garden will be constructed using funds allocated in the Public Art Fund. Public Art Fund. The Public Art Fund was established to account for funding that is available for the promotion, creation, and/ or installation of public art throughout the City of Southlake. Funding was first established when the Southlake Stampede program was implemented the proceeds from the sale of the steers were designated for public art. Additional funding is now available from the Hotel Occupancy Tax to support the City s public art program. A master plan has been adopted to guide the City s art program. The Southlake Arts Council serves in an advisory role to the City Council for the use of these funds. The proposed budget shows $300 in interest income based on a beginning fund balance of $446,776. The law providing for the Hotel Occupancy Tax allows up to 15% of the revenues to be used for public art purposes. Because this source of funding comes in the form of a transfer, it is shown below the line. For FY 2015 the transfer is estimated at $138,985. For FY 2015, expenditures are estimated at $100,500. The Public Art Fund will provide the source of support for the City s ongoing relationship with the APEX Arts League, Arts Council Northeast, and the Southlake Arts Council by providing funding for various projects such as public art displays and event support. The budget also includes funding for the proposed sculpture garden concept, originally planned to be initiated in FY (You will note that the FY 2014 budget has been reduced accordingly.) The ending fund balance for the Public Art Fund is estimated at $485,561. Recycling Funds. The City s contract for solid waste services provides for an annual payment to the City of $6,000 for a total projected revenue of $6,030 including interest. Note that the beginning fund balance is $34,677. The proposed budget includes no planned expenditures for FY 2015, leaving the ending fund balance at $40,707. Red Light Camera Fund. In August 2008, the City of Southlake initiated a red light enforcement camera system. This is a traffic safety program in which the City uses a state-of-the-art digital camera and violation detection system installed at intersections for the purpose of decreasing the number of red light runners and reducing serious vehicle collisions. The cameras are located at the following intersections: FM 1709 at Pearson West Bound (installed 2008); FM 1709 at Kimball East Bound (installed 2009); FM 1709 at Carroll East Bound (installed 2009); FM 1709 at Peytonville West Bound (installed 2009); and, FM 1709 at Davis Boulevard (installed 2009). The City of Southlake collects 50% of the gross revenue generated from the violations issued and collected upon as a result of the program. The City is required to remit 50% of the gross revenue to the State, excluding program expenditures. Funds collected by the City of Southlake as a result of violations/citations issued must be used for traffic safety programs. Projected revenue for FY 2015 includes $910,062 in fines and forfeitures, and $200 interest income for total revenue of $910,

25 Financial Information & Fund Summaries - Special Revenue For FY 2015, we are proposing the use of these funds for crosswalk infrastructure at Watermere Drive, which directly address the City s Safety and Security Focus Area. Also included is a proposed transfer of $200,000 to the Capital Improvements Program to fund the City s portion of the construction of a traffic signal at South Kimball Avenue and Continental Boulevard which is being constructed in partnership with an adjacent development. The beginning fund balance for the Red Light Camera Fund is $434,392. Ending fund balance for FY 2015 is projected at $407,734. Reforestation. The proposed budget includes the special revenue fund to account for revenues and expenditures dedicated for reforestation. These funds are derived from assessments related to the tree preservation ordinance and policies. The proposed budget reflects permits/fees of $5,000 and interest income of $150 for total revenue of $5,150. It anticipates a beginning fund balance of $44,494 and expenditures budgeted at $30,000 for FY Per our normal practice, we have budgeted funds for the street tree program and tree maintenance [$30,000]. The activities supported by the Reforestation Fund support the Council s desire for quality development by ensuring that the natural environment is protected and preserved, where possible, or at a minimum replaced. The ending fund balance is projected at $19,644. Storm Water Utility Fund. On October 17, 2006, the City Council established a Storm Water Utility System. This utility requires a monthly fee for all of Southlake s developed properties. These fees provide a funding source for maintenance, repair, and construction of public storm water facilities, and can only be spent for these purposes. The monthly storm water fee is the same for all residential dwelling units. Residential properties are charged $8 per month for each dwelling unit that is on the property. Fees for non-residential properties are calculated individually in proportion to each property s storm water runoff potential. For FY 2015, total revenues for this fund are projected at $1,348,950 including $1,500 in interest earnings. This is an increase of 4.9% when compared to the FY 2014 Adopted Budget. Planned expenditures for FY 2015 total $619,616, including $114,927 in personnel expenses and $338,239 in operational costs. These costs include a storm water engineer (funded first in FY 2009), contract engineering services (surveying, etc.), contract labor for drainage projects, and materials all budgeted to ensure that we are able to adequately manage and respond to identified public drainage issues. We are also proposing to purchase a mechanical street sweeper for FY The purchase will allow us to bring this function in-house for better performance. The cost of the sweeper is estimated at $166,450. A transfer to the Debt Service Fund of $194,447 is planned. Other transfers include $53,958 to the General Fund for indirect charges, and a $1,235,000 transfer to the Capital Improvements Program for drainage projects, for total transfers equal to $1,483,405. The ending fund balance is projected at $1,651,308. The expenses are necessary to improve and maintain public drainage ways throughout the City. The budgets of the City s special revenue funds support the focus areas of Safety & Security, Mobility, Infrastructure, Quality Development, Partnerships & Volunteerism, and Performance Management & Service Delivery as well as numerous strategic corporate objectives and critical business outcomes. 35

26 Financial Information & Fund Summaries - SIF Strategic Initiative Fund At the end of each fiscal year, excess revenue and unspent appropriation becomes a part of the City s fund balance, or reserves. This year s budget proposes $9,116,847 of current projected revenues will remain in the General Fund undesignated fund balance. This will provide for reserves of 25.73% of operating expenses to be used for unanticipated or emergency needs. This is the level deemed optimum under the City s fund balance policy. When reserves exceed the optimum level, the excess is transferred to the Strategic Initiative Fund (SIF). Using excess reserves in this way provides cash funding for needed projects without requiring the City to borrow money for them. Further, this approach ensures that reserves are not used to balance the City s operating budget. Use of these funds is limited to one-time, non-recurring expenses. Implemented in 2006, the SIF has been used for infrastructure maintenance (City facility repairs and renovations), the Urban Design Study, Southlake 2030 plan development, technology needs, and capital projects such as roads and sidewalks. We have also been able to purchase needed public safety equipment such as fire ladder trucks, an ambulance, and a portion of the outdoor warning system. This fund has been a valuable tool for funding high impact projects. Figure 10 shows the uses of the SIF since its inception. Strategic Initiative Fund Expenditure Highlights Highlight Item Expenditure Infrastructure Maintenance Community Enhancement Capital Acquisition Transfer to Facility Maintenance Fund Town Square Public Space enhancement projects Pedestrian Crossing Alternative Study Community Recreation Center Election Materials Wayfinding Signage $600,000 $350,000 $48,000 $20,000 $100,000 CIP Transfer $6,820,000 Pierce Quantum Fire Engine $700,000 For FY 2015, we are proposing a transfer from the General Fund of $4,400,000. The beginning SIF fund balance is $7,816,274. For FY 2015, the following projects are proposed in each of the categories: Infrastructure Maintenance Funding. With current assets exceeding 800,000 square feet, a preventative maintenance and repair program is critical for proper facility management. Recall that City Council previously funded a facilities manager in FY 2007 to oversee the program. For FY 2015, we are proposing that $600,000 be transferred from the SIF to the Facility Maintenance Fund. The purpose of this fund is to build capacity for future maintenance projects as we will have many needs to address as our facilities age. See page 323 for details related to the Facility Maintenance Fund. This is a proactive initiative designed to build a reserve for the future maintenance of our facility investments. 36

27 Financial Information & Fund Summaries - SIF Community Enhancement Funding. This category of funding is set aside as a way to provide pay-as-you-go funding for initiatives which will enhance the quality of life or aesthetics of Southlake. For FY 2015, community enhancement projects include: Town Square Enhancement Projects * $350,000 Community Recreation Center Election Materials $ 20,000 Wayfinding/Event Signage $100,000 Pedestrian Crossing Alternative Study $ 48,000 *public spaces The Town Square Enhancement Program will primarily be focused on landscape and hardscape improvements for the environment, including Grand Avenue sidewalk rehabilitation, streetscape enhancements (Phase 2), banner replacements, and replacement of infected roses around Rustin Pond. Capital Acquisition Funding. The SIF is often used to provide cash funding for capital equipment or projects. For FY 2015 we are proposing to transfer $6,820,000 from the SIF to the Capital Improvements Program for the purpose of building infrastructure. This cash funding will eliminate the need for the City to issue bonds for General Fund CIP projects in FY This portion of the SIF also includes funds to purchase a Pierce Quantum Fire Engine [$700,000] to replace a 2001 engine that currently requires significant maintenance due to the age and condition of the existing unit. The 2001 engine will be retired from service. Technology. No funds are requested from the SIF for technology purchases. Figure 10: Strategic Initiative Fund Expenditures by Type, FY

28 Financial Information & Fund Summaries - SIF The total proposed expenditures for the Strategic Initiative Fund for FY 2015 are $1,218,000. Transfers to the CIP and Facility Maintenance Fund total $7,420,000. This leaves $3,586,274 or 29.4% of the available funds unallocated. Figure 11 shows SIF funds by type for FY Figure 11: Strategic Initiative Fund Expenses by Category, FY 2015 DID YOU KNOW? The Strategic Initiative Fund has transferred almost $29 million to the CIP since 2006, allowing the City to avoid borrowing money to fund numerous capital projects. 38

29 Financial Information & Fund Summaries - CIP Capital Improvements Program (CIP) The proposed FY 2015 to FY 2019 Capital Improvements Program (CIP) is also submitted for City Council s consideration. The CIP establishes a five year funding schedule for the purchase, construction or replacement of physical assets of the City. Capital improvements typically have a useful life of over ten years and a value greater than $10,000. The first year (FY 2015) of the CIP is called the Capital Budget, and is appropriated in the same manner as the annual operating budget. Funds for projects are appropriated on an annual basis. Projects approved for subsequent years (FY 2016 through FY 2019) are approved for planning purposes only and do not receive expenditure authority until they are part of the Capital Budget. The CIP Technical Committee, which is comprised of the Assistant City Managers and Department Directors, began the process of evaluating CIP project requests in April of 2014 to allow adequate time for the CIP to be developed in conjunction with the annual budget. By reviewing the CIP in conjunction with the budget, City Council will be able to evaluate capital needs as part of overall budget considerations. FY 2015 Capital Budget Fund FY 2015 Capital Budget General Fund $6,820,000 Utility Fund $3,400,000 Water Impact Fee $550,000 Sanitary Sewer Impact Fee $350,000 Storm Water Utility System Fund $1,235,000 Red Light Camera Fund $200,000 Hotel Occupancy Tax Fund $200,000 Park Dedication Fee Fund $235,000 Southlake Parks Development Corporation $1,000,000 TOTAL: $13,990,000 The review of CIP projects by the CIP Technical Committee involved the following process. First, the CIP request forms are distributed to the appropriate departments. The request forms are subsequently completed by the responsible departments and submitted to the CIP Technical Committee who then begins the process of evaluating the various CIP project requests. The CIP Technical Committee s role includes: 1. Reviewing the CIP project requests for accuracy. 2. Determining if projects can be consolidated in order to reduce project costs. 3. Scoring each CIP project request based on a standardized form. 39

30 Financial Information & Fund Summaries - CIP Figure 12: Capital Improvements Program (CIP) Development and Approval Process Once scored, the CIP project was ranked in the appropriate funding category (i.e., General Fund, Utility Fund, Storm Water Utility Fund, Impact Fee Funds, Red Light Camera Fund, Hotel Occupancy Tax Fund, Park Dedication Fee Fund, or the SPDC Fund) based on the score received. The resulting ranked project list was then reviewed by the CIP Technical Committee to ensure that there were no obvious flaws in the ranking system. The CIP Technical Committee then reviewed the dollar amount available in each of the fund categories for each of the next five fiscal years and recommended projects to be funded in FY 2015 and the other four future years, FY 2016 to FY Recommended projects were then reviewed by the City Manager s Office. The CIP process is illustrated graphically as Figure 12. The FY 2014 Capital Budget included projects totaling approximately $16.83 million from all funding sources, including a variety of roadway, water, sewer, trail, park, and storm water projects. A status report of our progress on these projects can be found on the City s website at /cityconstruction. As you will see, these projects are in various stages of planning, design, right of way acquisition, and/or funding. Our work on many of these projects will continue into FY For FY 2015, we have developed a new capital budget that we are proposing for funding which totals $13.99 million (all funds). A detailed listing of projects, with prior year funding, future funding requirements and a project description is included in this document on page 337. Note that individual project information sheets are also provided. These sheets indicate when the project has multiple sources of funding and the associated operating costs. DID YOU KNOW? The City is using cash to fund the General Fund portion of the Capital Budget which means that the City will issue no General Fund debt in FY

31 Financial Information & Fund Summaries - CIP General Fund projects for FY 2015 include: FY 2015 Capital Budget - General Fund Project Amount Community Recreation Center Phase 2 $2,000,000 Community Recreation Center Phase 1 Public Art $120,000 FM1938 Phase II $ 500,000 North White Chapel Boulevard (Emerald to Highland) $ 850,000 Street Rehabilitation - Tarrant County $ 150,000 Pavement Management Application (PMA) $ 800,000 Zena Rucker Road at South Carroll Avenue $ 200,000 FM1709 at Southlake Marketplace $ 600,000 Municipal Service Center Improvements $ 700,000 N White Chapel Boulevard Widening from SH114 to north property line of Carillon $ 250,000 North White Chapel Boulevard Widening from the north property line of Carillon to Dove/White Chapel Roundabout $ 350,000 Kirkwood Boulevard Widening (Stockton Drive to Tyler Street) $ 300,000 Utility Fund projects for FY 2015 include: FY 2015 Capital Budget - Utility Fund Project Amount Ft. Worth 48-inch Water Main Participation $2,000, inch water line along Union Church and Pearson Lane $ 700, inch water line along East Dove $ 50,000 Municipal Service Center Improvements $ 250, inch Sewer Line along North White Chapel Boulevard $ 400,000 The capital budgets for many of the special CIP funds, such as impact fee funds, provide supplemental funding for General Fund or Utility Fund projects. 41

32 Financial Information & Fund Summaries - CIP The Storm Water Utility Fund capital budget includes funding for: FY 2015 Capital Budget - Storm Water Utility Fund Project Amount Drainage Improvements along North Carroll $ 200,000 Emerald Estates Drainage Improvements $ 75,000 Chesapeake Place Drainage Improvements $ 100,000 Dove Creek at Dove Creek Trail Drainage Improvements $ 110,000 Kirkwood at White Chapel Drainage Improvements $ 750,000 The Red Light Camera Fund portion of the Capital Budget includes $200,000 in funding for the construction of a traffic signal at South Kimball Avenue and Continental Boulevard. Additionally, we have included $200,000 in funding from the Hotel Occupancy Tax Fund to establish a project fund for the future construction of a visitor s information center, as recommended in the Southlake 2030 Economic Development and Tourism Master Plan. Finally, the Southlake Parks Development Corporation (SPDC) and Park Dedication Fee Fund capital budgets will be primarily allocated to the implementation of the Southlake 2030 Parks, Recreation, Open Space and Community Facilities Master Plan projects. The Park Dedication Fee Fund includes $235,000 in funding for improvements to Chesapeake Park and the SPDC Capital Budget includes: FY 2015 Capital Budget - Southlake Parks Development Corporation Project Amount Bicentennial Park Phase II $380,000 Bicentennial Park Phase III $385,000 Bob Jones Park Road Improvements $235,000 Figure 13 shows how the FY 2015 Capital Budget is allocated by type. The five year plan does not address all identified projects. There are approximately $120 million in needed projects that are shown as unfunded in this CIP, most of which are projects identified in the Southlake 2030 Parks, Recreation, Open Space and Community Facilities Master Plan. The CIP supports the City of Southlake s strategy because projects included for FY 2015 through FY 2019 provide travel convenience within the city and region, and provide attractive and unique spaces for enjoyment of personal interests. The CIP is also an investment of city dollars to provide and maintain high quality public assets. 42

33 Summary FACILITIES 23% WATER 26% PARKS 9% STORM WATER 9% SEWER 3% ROADS 30% Figure 13: FY 2015 Capital Improvements Program - Allocation by Project Type Summary The FY 2015 Proposed Budget has been developed with the City s strategic goals in mind and implements many of the Tier 1 recommendations of Southlake It provides for high quality service delivery for ongoing programs and services, and expands services with the construction of Phase I of the Community Recreation Center. The staff is looking forward to beginning the new fiscal year with its new opportunities. Respectfully submitted, Shana K. Yelverton City Manager 43

34 Summary 44