Overview Of Municipal Budgeting

Transcription

1 Overview Of Municipal Budgeting MCTI September 16, 2015 Presented by: Steven Gibson, OMB Director City of Rock Hill Annual Budget - Legal Requirements State law requires municipalities to adopt balanced budgets. Article X, Section 7(b) - S.C. Constitution. No expenditures may be permitted unless authorized by the budget ordinance or by Council via a subsequent resolution. Article X, Section 8 - S.C. Constitution. However, local codes may provide discretion for moving funds among line items during the fiscal year to achieve the goals of the budget. Fiscal Management: Council s Responsibilities Responsible for the overall fiscal management of the local government unless specifically delegated elsewhere by law. Section Must develop and maintain budget enforcement standards. Approves borrowing and other financing options, including financing capital improvements. 1

2 Fiscal Management: Council s Responsibilities Ultimately responsible for establishment and utilization of financial reporting systems and standards. Establishes policies for the investment and management of cash assets Selects / approves CPA or independent public accountant to perform annual independent audit Who Prepares The Budget? Responsibility for budget preparation varies among the forms of government: Form of Government Council-Manager Mayor-Council Council Responsible Party Manager Mayor Council s discretion Establishing The Budget Process The most important step to a successful budget is to agree up front on the process. All cities and towns basically have the same budget process. The complexity and formality of the budget process tends to vary based on size. And smaller communities naturally have fewer people involved in the process. However, regardless, cities must have a plan. 2

3 The Budget Cycle There are four stages of the budget cycle: o Preparation o Adoption o Implementation o Review Preparation Strategic Planning Process 3

4 You mean we clean only clean sewers? - Wayne Tanda, former director of streets and traffic City of San Jose Results that Matter: Improving Communities by Engaging Citizens, Measuring... By Paul D. Epstein Rock Hill Strategic Planning Quality Services Efficient and effective service delivery Competitive rates Quality Places Business parks and other community venues Transformative projects Quality Community Transparency Public engagement 11 City of Rock Hill Strategic Plan (or direct link to document below) web?e= /

5 Strategic Planning Link to Budget Process Plan stays current through semi-annual reporting Budget Development and Execution are in concert with the details of the plan Examples: Police Response Time Road Maintenance Initiative 13 OVERVIEW OF FY2016 BUDGET No Property Tax Increase Utility Rate Increase Effective July 1, % water rate increase to cover water system capital improvements 1% wastewater rate increase to cover wastewater system capital improvements 5% electric rate increase (4.5% purchased power and.5% for electric operations) Consideration for Rate Increases Special Projects i.e. General Obligation Bonds issued to build a fire station Cost to Serve Models Utility System Expansions PAYgo Bonded Projects (consider Equipment Lease Purchase as financing alternative) 5

6 Sanitation Cost to Serve 16 Sanitation Cost to Serve 17 Sanitation Summary of Revenues & Expenses $10,000,000 $9,000,000 $8,000,000 $7,000,000 $6,000,000 $5,000,000 $4,000,000 $3,000,000 $2,000,000 Revenues Expenditures $1,000,000 $0 FY2015* FY2016* FY2017* FY2018* FY2019* FY2020* FY2021* FY2022* FY2023* FY2024* *Projected 18 6

7 Utility Sources and Uses 19 Show impact to average residential customer No Property Tax Increase Proposed No Stormwater Rate Increase Proposed No Sanitation Rate Increase Proposed Utility Rate Increases proposed, effective July 1, % water rate increase to cover water systemcapital improvements 1% wastewater rate increase to cover wastewater system capital improvements 5% electric rate increase (4.5% to cover purchased power and.5% for electric operations) Average Residential Customer Impact Operating Impact of Capital Projects Be able to quantify operating impact of non-routine capital projects Revenue impact Expenditure impact Helps improve long range financial planning 7

8 Benchmarking Rates Informs Elected Officials Demonstrates competitiveness Can show impact to the average customer Comparison of Electric Rates Rock Hill Residential Rates Compared to S.C. Cities, PMPA Cities, Regional Cities, & York County Cities 1. Clinton (PMPA) 2. Westminster (PMPA) 3. Columbia (SCE&G) 4. Charleston (SCE&G) 5. N. Charleston (SCE&G) 6. Mt. Pleasant (SCE&G) 7. Newberry (PMPA) 8. Gastonia (Electricities) 9. Rock Hill (PMPA)(14) 10. Monroe (Electricities) 11. Laurens (PMPA) 12. Union (PMPA) 13. Abbeville (PMPA) 14. Easley (PMPA) 15. Anderson (Duke-SC) 16. Greer (PMPA) 17. Florence (Progress) 18. Greenville (Duke-SC) 19. Lancaster (Duke-SC) 20. Sumter (Progress) 21. Fort Mill (Duke-SC) 22. Clover (Duke-SC) 23. Tega Cay (Duke-SC) 24. York (Duke-SC) 25. Spartanburg (Duke-SC) 26. Charlotte (Duke-NC) 27. Gaffney (PMPA) 28. Concord (Electricities) Comparison of Water Rates Rock Hill Residential Rates Compared to S.C. Cities, PMPA Cities, Regional Cities, & York County Cities 1. Clinton 2. Laurens 3. Concord 4. Clover 5. N. Charleston 6. Lancaster 7. Tega Cay 8. Anderson 9. York 10. Abbeville 11. Mt. Pleasant 12. Union 13. Easley 14. Fort Mill 15. Gastonia 16. Spartanburg 17. Westminster 18. Monroe 19. Florence 20. Charleston 21. Newberry 22. Charlotte 23. Rock Hill(24) 24. Columbia 25. Gaffney 26. Greer 27. Sumter 28. Greenville 8

9 Comparison of Wastewater Rates Rock Hill Residential Rates Compared to S.C. Cities, PMPA Cities, Regional Cities, & York County Cities 1. Charleston 2. Greenville 3. Clinton 4. Westminster 5. N. Charleston 6. Charlotte 7. Clover 8. Spartanburg 9. Mt. Pleasant 10. Union 11. Fort Mill 12. Rock Hill(12) 13. Lancaster 14. Laurens 15. Gastonia 16. Concord 17. Florence 18. Abbeville 19. Anderson 20. Greer 21. Tega Cay 22. Easley 23. Monroe 24. York 25. Columbia 26. Newberry 27. Sumter 28. Gaffney Comparison of Electric/Water/WW Rates Rock Hill Residential Rates Compared to S.C. Cities, PMPA Cities, Regional Cities, & York County Cities 1. Clinton 2. Charleston 3. N. Charleston 4. Westminster 5. Mt. Pleasant 6. Laurens 7. Gastonia 8. Union 9. Clover 10. Abbeville 11. Columbia 12. Easley 13. Lancaster 14. Anderson 15. Newberry 16. Tega Cay 17. Rock Hill(18) 18. Monroe 19. Fort Mill 20. Greenville 21. Concord 22. York 23. Spartanburg 24. Florence 25. Charlotte 26. Greer 27. Sumter 28. Gaffney Comparison of City Tax Rates Rock Hill City Tax Rates Compared to S.C. Cities, PMPA Cities, Regional Cities, & York County Cities 1. Lancaster* 2. Monroe 3. Gastonia 4. Anderson 5. Laurens* 6. Concord 7. Clover 8. Gaffney* 9. York 10. Charlotte 11. Sumter* 12. Spartanburg 13. Abbeville* 14. Columbia* 15. Greer 16. Clinton* 17. N. Charleston* 18. Rock Hill(18) 19. Westminster 20. Tega Cay 21. Newberry 22. Fort Mill 23. Greenville 24. Union 25. Charleston* 26. Easley* 27. Florence* 28. Mt. Pleasant* * Local Option Sales Tax 9

10 Restaurant Comparison Total Annual Business License *10% credit in 2015 business license if paid on or before due date Sustainability Structural Balance _ACHIEVING_A_STRUCTURALLY_BALAN CED_BUDGET_1.pdf Structural Balance GFOA Best Practice on Structural Balance Use of one-time Revenues Do not use to fund ongoing expenses Small Group Exercise: Examples of non-recurring sources Examples of non-recurring uses 10

11 General Fund Paving Budget Projected Preparing The Budget Develop the budget calendar Fiscal years may vary Cities and towns set their fiscal year by local ordinance Preliminarily discuss goals, needs and the outlook for the coming year Set some parameters for staff to make requests 11

12 Preparing The Budget Start with Revenues or Expenditures? Projecting Revenue Understand your monthly patterns What is an Expenditure? o The amount paid for a service rendered, goods received, or an asset purchased There are three main categories of expenditures : o Personnel (Salaries, benefits) o Operating (Office supplies, utilities, contracts) o Capital (computers, vehicles, infrastructure) Projecting Revenue: Preparing The Budget o Historical Trends o Expected changes to revenues New construction Business openings and closings Automobile tax base Investment yields Projected impact of weather on water, sewer and electric sales o Potential new revenue from tax, fee or charge increases o New sources of revenue Preparing The Budget Revenue/Expense Projections Experience Historical Analysis Modeling Tools View Financial Dashboard at cityofrockhill.com/transparency 12

13 Preparing The Budget Estimating Expenditures: o Utilize year to date performance (monthly financial statements) o Audits from previous years o Any known increases, such as Insurance premiums Utility rates Scheduled increases in contracts Forecasts such as the EIA s Short Term Energy Outlook o New activities Preparing The Budget Personnel (largest category): o Detailed list of staff and salaries o Any proposed cost of living adjustments or merit pay increases o Overtime, callback, training and holiday pay o Allowances for vacancies, increases for certifications, etc. o Health insurance employer share o Retirement contributions employer share o Workers Compensation Premiums o Payroll Taxes (Employer share Social Security, Medicare and state) o Unemployment Capital: o Machines, equipment and vehicles o Buildings, parking and recreation facilities o Infrastructure Preparing The Budget Expenditures are classified as capital expenditures based on capitalization thresholds and the asset(s) they are replacing, enhancing or upgrading (when in doubt, ask auditor). They may be funded with recurring or nonrecurring revenue or debt proceeds. Ideally capital expenditures are forecast in a CIP 13

14 Preparing The Budget Operating (Non-personnel): o Office supplies, printing, postage o Tools and small equipment purchases and repairs o Employee training & travel o Safety training and supplies o Gasoline and Diesel o Utilities and telecommunication o General Liability Insurance (Property, Auto, Liability) o Professional & contract services, leases, etc. o Debt service Preparing The Budget Estimating Expenditures: o Utilize year to date performance (monthly financial statements) o Audits from previous years o Any known increases, such as Insurance premiums Utility rates Scheduled increases in contracts Forecasts such as the EIA s Short Term Energy Outlook o New activities Preparing The Budget Projecting Property Tax Revenue: o The initial assessment from the county will be wrong o However, that number will refine o Calculate expected tax revenues after adjusting the initial assessment o New construction may not make the tax rolls o Council sets property tax rate, not county auditor 14

15 Preparing The Budget Calculating Residential Property Taxes: $100,000 Appraised Value x 4% Assessment Ratio $ 4,000 Assessed Value x.090 Tax Rate in Mills $ 360 Tax Due x.098 Collection Rate $ 352 Tax Collected Preparing The Budget Calculating Commercial Property Taxes: $100,000 Appraised Value x 6% Assessment Ratio $ 6,000 Assessed Value x.090 Tax Rate in Mills $ 540 Tax Due x.098 Collection Rate $ 529 Tax Collected Preparing The Budget Property Tax Increases (Section ): o Can increase millage at a rate no greater than the increase in Consumer Price Index (CPI) and population growth last year. o Can override this limitation (cap) by 2/3 vote of council following reasons: Offset a prior year deficit Recover from a disaster Loss of 10%+ of property tax base Comply with a court order Comply with a state or federal regulation or order for the 15

16 Preparing The Budget Property Tax Increases (Section ): o This limitation (or cap) does not affect millage that is levied to pay: Bonded indebtedness Lease purchase agreements Maintain a reserve account Preparing The Budget Property Tax In A Reassessment Year: o Legislative intent - calculation of a millage rate that does not result in a hidden tax increase or windfall to the local government o The reassessment formula is designed to establish a roll back millage (property tax rate) that yields a revenue neutral figure plus tax revenue from growth (investment that has occurred within the community since the last reassessment. Preparing The Budget Projecting Other Revenue Sources: o Local Option Sales Tax o Business License o Local Hospitality Tax o Local Accommodations Tax o Fines and Forfeitures o Fees (Sanitation, Public Works, etc) o Charges (water, sewer, electric, etc.) 16

17 Local Hospitality Tax (see.xls) Novant Health BMX Supercross Track Novant Health BMX Supercross Track Upcoming Events Sept 25-26, 2015 UCI BMX Supercross World Cup 200 cyclists Apr 22-24, 2016 USA BMX Carolina Nationals 1000 cyclists Sept 24-25, 2016 UCI BMX Supercross World Cup 200 cyclists July 26-30, 2017 UCI BMX World Championships 3,300 cyclists 51 17

18 BMX Video 52 UCI BMX World Championships Economic Impact of Sports Tourism in Rock Hill Economic Impact Created by Sports Tourism $25.0 $20.0 $18.2 $20.5 Economic Impact projected for the 2017 BMX World Championship $15.2 $14.8 $17.4 $13 million Millions $15.0 $10.9 Economic Impact $10.0 $8.4 $8.5 $9.6 $6.1 $5.0 $

19 Preparing The Budget Projecting Other Revenue Sources: o Local Option Sales Tax o Business License o Local Hospitality Tax o Local Accommodations Tax o Fines and Forfeitures o Fees (Sanitation, Public Works, etc) o Charges (water, sewer, electric, etc.) Preparing The Budget Imposing a new fee (Section ): o Must provide notice of the new fee and hold a public hearing prior to final adoption of the fee that allows for public comment o If fee generates 5% or more of prior year budget total, funds from fee must be segregated o Must disclose if the fee is going to fund a service that was previously funded by property taxes 19

20 Help out our Elected Officials! o Line items or initiatives? o Give them talking points o See Budget at a Glance o Small Group Exercise: Brainstorm/Discuss additional tools that you have seen work in helping Elected Officials understand or communicate budget information 20

21 Adoption Adopting The Budget Annual budget must be adopted by ordinance with the necessary number of readings as required by local code. Section Budget ordinance sets/provides: o Property Tax (Millage) Rate o Appropriation Levels o Procedure for Amendment o Debt Proceeds and Debt Service o Short-term Borrowing 21

22 Adopting The Budget A public hearing must be held before adopting the budget. Section May be held in conjunction with first or second reading of the budget ordinance, or at an isolated date/time. Public notice of the hearing must be published in a newspaper of general circulation. Notice must be given at least 15 days before the public hearing. 22

23 Adopting The Budget The public hearing notice must contain: o Name of the local government o Date, time and location of the hearing o Total operating revenues and expenditures in current fiscal year budget o Projected operating revenues and expenditures of next year s budget o The percentage change o Millage for the current fiscal year o Estimated millage in dollars as necessary for next year s budget Discussion Of the methods discussed today, which can you use in your agency? Which ones would not work? Why? In addition to the methods discussed today, what would you add as an overview to Municipal Budgeting? 23

24 Material Resources Government Finance Officers Association (GFOA) International City-County Management Association (ICMA) Municipal Association of South Carolina 24