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HomeMy WebLinkAboutPackets - Council Packets (1052)Council Meeting Regular Session April 17, 2019 1 Town Council Meeting Announcements 2 Upcoming Meetings 3 4 5 FY 2019/20 Town Manager’s Recommended Budget April 17, 2019 6 Overview Budget timeline Budget snapshot Strategic Leadership Plan focus areas Budget highlights 7 FY 19/20 Budget Timeline MARCH 1 Department budget requests due to Finance JANUARY One-on-one meetings with Councilmembers to outline budget priorities Following same timeline as in previous years 8 Budget Snapshot FY 2019/20 Town Manager’s Recommended Budget Recommended Budget total = $110,329,185 $32.6 million, or 23%, decrease from FY 18/19 Budgeting only a portion of Town’s spendable reserves Operating budget $107.5 million ($1 million decrease from FY 18/19) General Fund $1.8 million planned use of excess reserves for one-time expenditures; ending fund balance $13.6 million (28% of expenditures; policy is 25%) 9 Economic Vitality Recreation and Culture Public Safety Roads, Water and Town Assets Land Use Efficient and Effective Government Town Finances Town Council’s Strategic Leadership Plan focus areas guided the development of the FY 2019/20 Recommended Budget Strategic Leadership Plan Budget Focus Areas 10 Key Budget Factors Growth projections 300 single family residential (SFR) permits forecasted Decrease in commercial development activity Sales tax revenues roughly flat Decrease of 7% for license & permit revenues in the General Fund Increase of 7% for State shared revenues in the General Fund Capital Funding Transfer of $1.35 million from General Fund to the Capital Fund $1.1 million for FY 2019/20 projects $250,000 for future projects $12 million for La Cholla widening ($10.3 million RTA funds, $1.7 million roadway impact fees) $3 million bond capacity for Community Center and golf course improvements (total $6 million over two fiscal years) $2.3 million bond capacity in Water Utility for various capital projects $2.1 million grant capacity in Stormwater Utility for Catalina Ridge wash repair 11 Town Operations – General Fund Collapse of Community Center Fund into General Fund Community Center and golf course divisions reflected in same manner as other Parks and Recreation divisions Shift of certain Highway Fund expenditures to the General Fund to streamline the tracking of HURF (gas tax) revenues Continue to meet General Fund’s 25% reserve policy requirement with these expansions $500,000 payment towards the Town’s Public Safety Pension Retirement System unfunded liability $750,000 savings from expiration of sales tax agreement with Oro Valley Marketplace; remaining $250,000 allocated to Capital Fund 12 Major Capital Investments General Fund Naranja Park playground and infrastructure - $1.35 million ($400K parks and recreation impact fees) JDK Park restroom and ramada - $200,000 ($100,000 grant funds) Other recreation improvements - $140,000 (Steam Pump Ranch landscaping, tennis court improvements) Police facility improvements - $311,000 PW/CED front desk enhancements - $375,000 Technology improvements - $211,000 Non-General Fund La Cholla widening - $12 million La Cañada and Moore roundabout - $1 million Completion of Police evidence facility - $650,000 (rollover) Community Center and golf course improvements - $3 million ($6 million total over two fiscal years) Water Utility improvements - $7.6 million Stormwater Utility Catalina Ridge wash repair - $2.1 million Pavement preservation $1,450,000 13 Compensation and Benefits Town salary ranges adjusted 4% based on analysis of comparable communities Step increases and 2.5% - 3% merits (25% reduction from FY 18/19) 5% medical insurance premium increase (Town and employees) 30% dental insurance premium increase (Town and employees) Start of three-year transition towards increased employee coverage of dependent costs for medical and dental (from 20%/80% to 25%/75%) One new full time position – Town Attorney Two new cost neutral, part-time positions 19-hour Court clerk funded with a dedicated court fee 30-hour facility attendant at the Community Center, offset with reduction in 19-hour staffing 14 Sales Tax by Category Financial Overview This slide depicts the budget categories I just covered and how much of the budget each of those categories comprises. You can see that the investments in personnel, O&M and capital are roughly each 1/3 of the budget, while debt service is about 7% and the biggest change from the current year, as mentioned, is the portion of reserves budgeted at 5%. In the current year budget, the reserves comprises approximately 29% of the total. 15 Year-over-Year Budget Comparison Financial Overview (Continued) 16 Budget by Category Financial Overview (Continued) 17 Budget by Fund Financial Overview (Continued) 18 Financial Overview (Continued) Capital Improvement Program (CIP) Total CIP projects = $32.5M Town-wide 19 Awards and Accolades Government Finance Officers Association (GFOA) Distinguished Budget Presentation Award – 11th consecutive year GFOA Certificate of Achievement for Excellence in Financial Reporting – 25th consecutive year GFOA Popular Annual Financial Reporting (PAFR) Award – 6th consecutive year 20 21 Five-Year Forecast General Fund and Highway Fund April 17, 2019 22 Forecast Overview Required per adopted financial policies Presenting the forecast earlier this year – at the front end of the budget process Snapshot based upon current known information Serves as foundation for future budgets Sources: University of Arizona, AZ Dept. of Revenue, Joint Legislative Budget Committee, State Finance Advisory Committee, AZ Dept. of Transportation, as well as the knowledge, expertise and professional judgment by Town management and staff Pleased to present the 5-year financial forecast this evening – specifically focusing on the General and Highway Funds. Our adopted financial policies require the preparation of this forecast, and we’re presenting it in conjunction with the budget process so that you can see how budget decisions for next fiscal year impact the future years’ financial picture. Also, since Town does not adopt a multi-year budget, a key benefit of forecast is our ability to use it as a foundation or baseline target for future year budgets. The forecast presented this evening reflects _______________________________. It is a snapshot of how the future may look based on the current set of assumptions that I will cover over the next few slides. The forecast assumptions were compiled by referencing several sources of data, including the AZ Dept of Revenue, the Joint Legislative Budget Committee, State Finance Advisory Committee and AZ Dept. of Transportation. 23 General Fund Revenues Local sales tax forecast includes 1% – 5% growth per year for retail, restaurant, bed tax and utility categories Construction sales tax forecast Stable single family residential (SFR) construction into FY 19/20, decrease in FY 20/21, rebound in FY 21/22, gradual decline and effect of build-out into FY 24/25 Conservative commercial forecast 1% – 7% growth per year in state shared revenues Assumes development and recreation fee increases 225 – 350 SFR permits per year Commercial permit revenues at $220K - $380K per year Management contract revenues from Troon held flat Assumes economic downturn in late FY 19/20 through FY 20/21 No annexations included Start off with the General Fund - Overall, the General Fund remains stable over the 5-year horizon. Discuss the various assumptions 24 General Fund Expenditures Step increases included each year; merit increases of 2.5% - 3% for FY 19/20 and 2% each year thereafter Steady pension rates per actuarial forecasts Health insurance premiums assume gradual transition towards increased employee coverage of dependent costs No capacity added for new FTEs Downward pressure on operating costs with low to moderate inflation $500,000 annual payment towards public safety pension unfunded liability Utilizing vehicle reserve/set-aside balances for replacements Continued funding of facility repair and maintenance program Forecast includes significant commitment to capital investment Assumes status quo for contracted golf operations Includes debt service for $6M Community Center/golf course bond issuance The expenditure projections reflect the continued commitment to providing fair employee compensation with merit increases of 3% per year and step increases for sworn police personnel. Also included are public safety pension contributions averaging around 35% each year consistent with recent actuarial assumptions, as well as 5% health insurance premium increases annually. Limited capacity has been included to add roughly two staff positions, if needed, in the early years, with no staff increases for the outer years, and operations & maintenance costs are projected to remain steady with low to moderate inflation, and the forecast includes continued funding of our fleet replacement program with our set aside reserves that have been accumulated for this purpose. The transfer of General Funds to subsidize the Highway Fund reaches $1.2M by FY 20/21 without the County property tax for roadway maintenance. Finally, the forecast reflects significant commitment to capital investment and infrastructure maintenance needs and planning for the future. 25 General Fund Forecast Here is the chart of the General Fund depicting the 5-year forecast trends with the blue line representing Revenues ranging from $39M to about $41M, and the red line representing Expenditures and Planned Capital Investments very closely following the revenue trend line through the end of the 5 years. Just as a reminder, the spike you see in expenditures in FY 18/19 reflects the transfer of one-time funds from the General Fund to the Capital Fund for current and future capital needs. The fund balance still remains stable and above our 25% policy threshold through FY 21/22, ranging from $11 – 12M, and then dips to about $9.6M in the 5th year. It important to remember, however, that the forecasted data in the outer years is obviously more difficult to predict… and with the job growth that is happening in our region that will likely continue over this timeframe, it’s quite possible that we could continue seeing sustained residential growth, assuming we have available land to develop, either within our existing boundaries or through annexations. 26 Highway Fund Revenues Slight decrease for highway user (HURF) tax in FY 20/21 for downturn risk; projections per AZ Dept of Transportation thereafter (growth averages 3% per year) HURF forecast assumes preservation of State public safety fee, which reduced amount swept from HURF to fund Department of Public Safety operations Reimbursement from Regional Transportation Authority for contract administration of La Cholla project ends after FY 19/20 (subject to project timeline; corresponds with personnel reduction for temporary staff) Moving on to the Highway Fund. Highway Fund revenues are primarily comprised of State shared highway gas taxes. The forecast assumes 3-4% growth in HURF gas taxes as projected by the AZ Dept of Transportation. Also included are reimbursements from PAG and the RTA for our staff who perform construction administration and inspection primarily for La Cholla Blvd. widening Road permits fees are held steady at about $60,000 per year. And finally, while our numbers assume exclusion of the County property tax for roads, should the County continue to approve this tax, the GF subsidy transfer would drop by about $600K 27 Highway Fund Expenditures Personnel budget increases consistent with General Fund Reduction in FY 20/21 corresponds to completion of La Cholla project Low to moderate inflation and downward pressure on operating costs, consistent with General Fund Utilizing vehicle reserve/set-aside balances for replacements Pavement preservation funding of roughly $1.4 to $1.5 million per year maintains current overall condition index (OCI) rating Fund balance ranges from $41K - $678K Expenditures in the Hwy Fund reflect similar assumptions as those included in the General Fund relating to personnel and O&M costs. We will be able to utilize the vehicle reserves for replacing vehicles in this fund. Funds for pavement preservation are included at about $1.4M per year to maintain our overall condition index rating. Finally, the fund balance ranges from $153K - $287K in the scenario without the County tax revenue. 28 Highway Fund Forecast Here is the Hwy Fund chart WITHOUT the County tax revenue showing expenditures and planned capital investments with the red line, and revenues shown with the blue line. In this scenario, the General Fund transfer to subsidize Highway Fund operations ranges from $550K - $1.2 M, and the fund balance remains positive throughout the 5 years. 29 Questions? 30 31 Fiscal Year 2018/2019 Financial Update Through February 2019 April 17, 2019 32 General Fund 33 General Fund Highlights Local sales taxes trending over budget by $264K State-shared revenues trending on budget Revenues estimated to end year under budget by $64K Expenditures estimated to end year under budget by $1.9M OV Marketplace tax rebates ended 12/31/18, savings of $260K No subsidy transfer to Highway Fund Year-end fund balance estimated at $15.4M 34 Highway Fund 35 Highway Fund Highlights HURF gas tax revenues trending over budget by $328K Revenues estimated to end year under budget by $279K No subsidy transfer from General Fund Expenditures estimated to end year under budget by $264K Year-end fund balance estimated at $428K 36 Community Center Fund 37 Community Center Fund Highlights Total fund revenues estimated to end year under budget by $139K Total fund expenditures estimated to end year under budget by $369K Year-end fund balance estimated at $248K 38 QUESTIONS? 39 40