As such, the focus of this Executive Summary and the following budget workbook will be on FY 2012, with only cursory analysis of FY 2013.

Transcription

1 OVERVIEW FY 2012 is the first year of the City s. In the past, the City produced a two-year or Biennial Budget that reflected the continuation of key goals and objectives outlined in the City s Strategic Plan and the outcomes of several initiatives. Both years in the budget were balanced with revenues equaling expenditures. In the case of Enterprise Funds, budgets were balanced through the third component of retained earnings, similar to private sector accounting practices. Because of the complexity of forecasting in these complicated economic times, this budget proposal differs from prior years in that FY 2012 was the predominant focus of analysis and planning. FY 2013 was treated with broad revenue and expenditure assumptions, but an in-depth forecasting model was not utilized, and as such, that fiscal year is currently not fully balanced. This does not create a problem within the City, because by statute the City Council may formally adopt only the first year, or FY 2012, of a Biennial Budget. This approach will, though, require a much more robust update of the FY 2013 budget, to be completed later in FY As such, the focus of this Executive Summary and the following budget workbook will be on FY 2012, with only cursory analysis of FY KEY ECONOMIC ASSUMPTIONS The was based on the general assumption that the Boise area overall would continue to show slow but steady recovery from the global economic downturn. There have been no dramatic changes in the economic environment to modify this expectation. In February of 2011, the City Council hosted its second Economic Summit featuring presentations by several local economic experts to gain a deeper understanding of the economic issues affecting the City. This information enabled the City Council to assess changes in property values and employment along with the associated impact on City resources. The key economic factors affecting the City resources are as follows: Unemployment Anticipated to remain above 8% for both FY 2011 and FY Sales Tax Anticipated to remain flat. Property Valuations Assessed values were anticipated to decline 4%, on average. Development/Construction Anticipated 15-year recovery period. Also, there is a strong correlation between development/construction activity and unemployment. Budget Overview I-9

2 CITYWIDE & GENERAL FUND REVENUE AND EXPENDITURE SUMMARY Table 1.1 Adopted Actual Budget Budget CITYWIDE FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 Revenues 290,907, ,490, ,067, ,673, ,730,274 Expenditures 294,935, ,646, ,649, ,689, ,147,023 Retained Earning Inc/(Dec) (4,027,791) 5,844,035 (10,582,453) (26,015,734) (21,416,749) Net Fund Balance Adopted Actual Budget Budget GENERAL FUND FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 Revenues 156,140, ,096, ,196, ,873, ,200,346 Expenditures 157,622, ,969, ,196, ,873, ,212,841 Retained Earning Inc/(Dec) (1,481,957) 7,127,380 (0) 0 (1,012,495) Net Fund Balance Because of the direct implications to taxpayers, the Executive Summary focuses on the citywide budget with an emphasis on the General Fund. Table 1.1 depicts the overall revenues and expenditures for the city as a whole and for the General Fund specifically. The City s proposed citywide revenues for FY 2012 amount to $304,673,596, and citywide expenditures total $330,689,331. The City anticipates the use of $26,015,734 in retained earnings during FY Revenues and expenditures tend to fluctuate more dramatically from year to year from a citywide perspective largely due to capital projects and their respective funding sources. A closer review of citywide revenues and expenditures by major category is briefly covered in the following pages. The City s proposed FY 2012 General Fund budget is $168,873,797. This is a $2.3 million (1.4%) decrease from the FY 2011 Adopted Budget. Approximately $1 million of this decrease is related to a contracted service reduction provided to and paid by North Ada Country Fire and Rescue District, and $1.3 million largely due to an accounting change related to internal services. And, like the citywide review, a brief analysis of the major revenue and expenditure categories of the General Fund is provided in the Executive Summary. Budget Overview I-10

3 The citywide budget is comprised of twenty-four different funds grouped into one of three primary types. These primary fund types are: Tax Funds The City s main tax funds are the General Fund, which provides general governmental services, such as police, fire, parks and recreation, and library services, to the citizens, and the Capital Fund, which is used to account for capital improvements for those general governmental services. Enterprise Funds These are business-like funds supported by user fees and other non-tax revenue source. The City s main enterprise funds are Airport, Sewer, and Solid Waste. Other Funds The City has several other funds that largely track internal services, such as Risk Management, Worker s Compensation, and Fleet Services, and administration of trust funds, the largest of which is the city sponsored Heath Trust Fund. Additionally, the City budgets contingent appropriation in the Boise City Trust Fund. Contingent appropriations are needed under Idaho law to provide budgetary authority for multi-year projects. This rollforward process, also known as the encumbrance and rebudget process, is guided by policies set by the Mayor and City Council. Revenues from prior fiscal years are used to fund these items. Contingent appropriations are excluded from this Executive Summary since they do not represent current year financial information. Budget Overview I-11

4 CITYWIDE SUMMARY BY CATEGORY Table 2.1 Adopted Actual Budget Budget CITYWIDE FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 Revenues Property Tax 97,284, ,753, ,183, ,328, ,383,007 Sales Tax 12,024,515 11,559,870 11,798,555 11,791,068 12,026,889 Licenses/Permits 15,891,980 12,725,446 14,470,211 12,462,082 13,640,773 External User Fees 36,393,238 39,765,820 41,940,406 39,976,464 40,326,094 Internal Fees 92,267,686 93,373, ,061,958 90,731,321 94,355,715 Other Revenue 37,045,014 41,311,765 52,612,166 41,383,956 55,997,796 Total Resources 290,907, ,490, ,067, ,673, ,730,274 Expenditures Personnel Services 128,204, ,294, ,472, ,187, ,345,484 M & O 143,268, ,356, ,010, ,247, ,532,905 Cap./Eq.(incl. minor) 23,462,901 21,994,369 43,166,396 44,254,422 53,268,635 Total Expenditures 294,935, ,646, ,649, ,689, ,147,023 Retained Earning Inc/(Dec) (4,027,791) 5,844,035 (10,582,453) (26,015,734) (21,416,749) Net Fund Balance CITYWIDE RESOURCES Table 2.1 highlights citywide resources by major category. The following is a brief review: Property tax revenue for FY 2012 reflects the Mayor s recommendation to limit the base formula to only 1.5% instead of the historical 3% base increase. This is the first time that the City will not budget the statutory limit. As can be seen, sales tax revenue, which is shared revenue with the State, is projected to remain nearly flat and potentially reach FY 2009 actual amounts nearly four years later during FY License and permit revenue declined sharply after FY 2009, as seen by the $3.2 million (20%) decrease in FY The City s FY 2011 Adopted Budget reflects the optimism of a stronger recovery. The FY 2012 proposed budget is based on the continued slow recovering and lack of contingent growth revenues. Budget Overview I-12

5 External user fees, which largely support the enterprise funds, appear to be relatively flat, with the exception of FY 2011 Adopted Budget. This slight decrease from FY 2011 Adopted Budget to the FY 2012 Proposed Budget is primarily from a projected decline in commercial solid waste services. Internal Fees show the greatest fluctuation when reviewing the actual amounts in FY 2010 to the FY 2011 Adopted Budget and the FY 2012 Proposed Budget. These large fluctuations are the result of significant changes to the City s health care program and services provided to other governmental agencies, such as fire suppression and sewage treatment. Other Revenue, primarily comprised of Airport grant revenues to support capital and equipment requirements, account for the majority of anticipated increases in FY 2011 that are now revised downward for FY Table 2.2 Enterprise Funds 33% Citywide Revenues by Fund Type FY 2012 Budget ($304.7 million) Other Funds 9% Tax Funds 58% Table 2.2 illustrates the overall composition of these three fund types. As can be seen in the table, tax funds account for the majority of citywide revenues at 58% of the total. Enterprise funds account for approximately 33% of total revenues, and all other funds make up the difference at approximately 9%. Table 2.3 Table 2.3 illustrates the breakdown of citywide revenues based on the composition of different revenue types. As can be seen in the table, approximately 48% of all revenue is from user fees or charges. Property tax revenue represents 36% of all revenue sources but is the single largest contributor to citywide revenues. Grants 4% Sales Tax 4% Citywide Revenues by Category FY 2012 Budget ($304.7 million) Property Tax 36% Other 8% Fees/Charges 48% Budget Overview I-13

6 User fees are the primary source for funding enterprise services such as airport, sewer, solid waste hauling, and geothermal heating. The City also charges user fees in the tax supported funds for services like parks and recreation programs. Development fees are charges to builders for plan reviews and building inspections to assure compliance with zoning laws and City construction and safety standards. CITYWIDE EXPENDITURES The City s FY 2012 Proposed Budget includes $288.9 million for operating costs to pay for day-to-day programs and services, and $41.8 million for equipment and capital projects to construct and repair facilities such as parks, government buildings, sewer systems, and airport improvements. Overall, this is nearly a $15 million decrease compared to the FY 2011 Adopted Budget as depicted in Table 2.4. Table Citywide Expenditures ($ Millions) FY 2009 Actual FY 2010 Actual FY 2011 Adopted FY 2012 Budget FY 2013 Budget The City also budgets contingent appropriation to allow the roll-forward of budgets related to multiyear projects and unknown grant awards. However, this contingent appropriation is not reflected in the amounts presented in the Executive Summary. The contingent appropriation budgeted for FY 2010 and FY 2011 was $175 million in anticipation of federal stimulus grant programs and the continuation of large capital projects. The contingent appropriation proposed for FY 2012 and FY 2013 is $125 million based upon a review of the latest reported status of capital projects. Personnel expenditures proposed for FY 2012 are nearly flat compared to the FY 2011 Adopted Budget, with only a $714,000 increase or about 0.5% citywide. This is a function of legislative increases to the State s retirement program, increased labor contractual obligations, position eliminations, and the Mayor s proposed general employee compensation strategy, detailed in the Expenditure Section of the workbook. Budget Overview I-14

7 M&O expenditures show the most significant change between FY 2010 actual costs and the FY 2012 Proposed Budget. The primary cause of this fluctuation was the separation of union members from the City s Heath Trust to a union-sponsored health trust in FY 2011, and changes to many of the City s service programs due to the economic environment and revenue shortfalls. Capital/Equipment expenditure increase and decrease depending on the projects and the funding sources available to support them. Apart from the Airport grant-related capital projects, there is approximately $7 million in proposed capital projects including phosphorus removal and ultra violet (UV) disinfection in the Sewer Fund, and the next two phases of the City Hall code compliance project. The proposed projects will be funded from current revenues to be received during FY 2012 and retained earnings or reserves. Details of the proposed capital projects and the proposed equipment strategy can be found in the Capital/Equipment Section. GENERAL FUND SUMMARY Table 3.1 Adopted Actual Budget Budget GENERAL FUND FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 Revenues Property Tax 97,284, ,753, ,183, ,328, ,383,007 Sales Tax 12,024,515 11,559,870 11,798,555 11,791,068 12,026,889 Development Fees 4,285,326 3,900,387 4,420,702 4,328,245 4,467,681 External User Fees 10,820,342 14,077,430 15,545,816 14,190,566 14,543,885 Other Revenue 31,725,936 33,805,014 33,248,197 30,235,213 30,778,884 Total Resources 156,140, ,096, ,196, ,873, ,200,346 Expenditures Personnel Services 107,510, ,171, ,736, ,333, ,436,141 M & O 46,110,010 40,541,227 49,733,439 46,301,516 48,011,978 Cap./Eq.(incl. minor) 4,002,764 4,256,385 4,726,669 5,238,427 5,764,722 Total Expenditures 157,622, ,969, ,196, ,873, ,212,841 Retained Earning Inc/(Dec) (1,481,957) 7,127,380 (0) 0 (1,012,495) Net Fund Balance Budget Overview I-15

8 GENERAL FUND RESOURCES Total General Fund Revenues amount to $168,873,797 for the FY 2012 Proposed Budget. The budgeted revenues are based on the following: Proposed 1.5% increase in property taxes. Flat sales tax revenue. Lower interest revenues attributed to lower interest rates. Moderated liquor tax projections. Reduced development revenues resulting from the soft construction environment. Reduced internal charges resulting from a change in the accounting methodology and internal service cost containment. Table 3.2 General Fund Revenues by Category FY 2012 Budget ($168.9 million) Sales Tax 7% Liquor Taxes 2% Franchise Fees 3% Fines & Forfitures 2% Other 3% External User Fees 8% Property Taxes 64% Internal Fees 8% Development Fees, Licenses & Permits 3% Table 3.2 displays the proportionate shares of the proposed FY 2012 revenue budget. As can be seen in the table, Property Taxes account for 64% of the General Fund budget. This is the highest reliance on Property Tax revenue that the City has experienced in years. Historically, Property Taxes account for approximately 58% to 61% of the total general fund revenue. This reliance is expected to continue into the foreseeable future, based on the prolonged economic recovery anticipated by the City. Budget Overview I-16

9 The second largest revenue category is External User Fees followed closely by Internal User Fees. This is a dramatic shift away from prior budgets, as Sales Tax revenue was typically the second largest revenue source. The decline in Sales Tax revenue over the past few years, coupled with significant growth in External User Fees from contracted services provided by the City to other governmental agencies, has resulted in this shift. External User Fees have increased primarily because of fire service contracts between the Boise City Fire Department and North Ada County Fire and Rescue ( NACFR ) initiated during FY Internal User Fees also outpaced Sales Tax revenue, even though Internal User Fees have remained relatively flat over the last few years. GENERAL FUND EXPENDITURES Total General Fund expenditures amount to $168,873,797 for the FY 2012 Proposed Budget. This is a $2.3 million decrease, or about 1.4%, from the FY 2011 Adopted Budget. This is a combination of personnel cost increases related largely to negotiated labor contracts, the exclusion of several small contingencies funded from related sources, such as for Police s bandit program and Park s heritage fund program, elimination of the budget for the marginal increase in the cash flow reserve, reduction in service contracts to other governmental agencies, and overall departmental reductions in numerous operational accounts. Table General Fund Expenditures ($ Millions) FY 2009 Actual FY 2010 Actual FY 2011 Adopted FY 2012 Budget FY 2013 Budget Table 3.3 illustrates total General Fund expenditures for two years of actual data (FY 2009 and FY 2010), the FY 2011 Adopted Budget, and the FY 2012 and FY 2013 proposed Budgets. As can be seen in the table, expenditures in FY 2009 and FY 2010 were relatively flat due to the City s costcontainment efforts. As with the citywide review, the FY 2011 Adopted Budget reflects a time when the City projected a more optimistic economic situation than what is actually being experienced. The FY 2012 Proposed Budget is based on a slow economic recovery that is anticipated to take several years. Budget Overview I-17

10 Table 3.4 General Fund Expenditures by Category FY 2012 Budget ($168.9 million) Personnel 69% Equipment & Capital 2% Maintenance & Operations 29% Table 3.4 illustrates the proportionate share of General Fund expenditures based on three primary categories: Personnel, M&O, and Capital/Equipment. As, shown, Personnel costs are the largest cost category and account for more than 69% of all expenditures. This is on the higher end of the range, which has generally been 60% to 71% of total expenditures, and averaged around 66%. Table 3.5 and the following table (Table 3.6) illustrate the proportionate share of the General Fund budget attributable to each department. As can be seen in these tables, the Police and Fire departments account for more than half of all General Fund expenditures. The Parks & Recreation Department along with contracts for services such as ValleyRide Transit in the Intergovernmental department make up the next largest components of budget expenditures. General Fund Expenditures by Department FY 2012 Budget ($168.9 million) Arts and History 0% Public Works 3% Police 28% Planning and Development 5% Parks and Recreation 11% Mayor and Council 1% Table 3.5 Contracts 4% Library 5% Legal 3% Finance and Administration 3% Fire 25% Human Resources 1% Information Technology 4% Intergovernmental 7% Budget Overview I-18

11 Table 3.6 General Fund Expenditures by Department FY 2012 Budget 50,000,000 40,000,000 30,000,000 20,000,000 10,000,000 0 Police Fire Parks and Recreation Intergovernmental Library PDS Contracts Information Technology Finance and Administration Public Works Legal Mayor and Council Human Resources Arts and History CITYWIDE RETAINED EARNINGS AND RESERVES Total proposed use of retained earnings and/or reserves is $26.0 million (excluding contingent appropriations). Retained earnings are primarily used to support capital projects in the Capital, Enterprise, and Other Funds. The General Fund is balanced and does not use reserves for day-to-day operations. However, the City does maintain a cash flow reserve for the General Fund to meet cash flow requirements and unforeseen emergencies. As of the end of FY 2010, the reserve equated to about 7% of base revenues. The proposed budget includes the use of reserves for City Hall code improvements. The reserve will remain at a minimum of 5% of base revenues funded from end-of-year monies The Capital Fund receives funding from impact fees, donations, and one-time monies from prior years that are retained for future capital projects. For FY 2012, $11.6 million of these reserves are planned to be used for projects. The Airport and Sewer funds plan to use reserves over the next two years to execute their Capital Improvement Plans, which include major capital projects such as runway rehab, a parking garage expansion, and compliance capital projects involving phosphorous treatment. The City charges specific capital fees (such as sewer connection fees, passenger facility fees, or customer facility fees) or receives capital grants (such as federal aviation grants) that are restricted for capital expenditures. Budget Overview I-19

12 Most of the City s trust or trust-like funds Health Insurance, Risk Management, Debt Service (used to account for annual debt service payments as well as certain employee benefits), and Deferred Compensation reflect an increase in retained earnings. These retained earnings are used to fund the necessary liabilities, or reserves, of those funds, such as the health trust reserve. CONCLUSION The Mayor s FY 2012 proposed budget is fiscally responsible a key objective of the process while at the same time meets service demands and creates financial flexibility for further weakened economic conditions. Key revenue sources and major cost categories were reviewed and updated to reflect changes in the economic conditions, legislative actions, and City operating changes. These changes are also reflected in the Long Term Financial Projection. The Mayor and EMT reviewed all modifications to ensure that they were aligned with the overall Strategic Plan and prioritized accordingly. The Mayor s FY 2012 Budget provides the City with an economically viable plan without exceeding projected funding resources. Budget Overview I-20