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HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 08/31/2021 - CITY MANAGER’S 2022 RECOMMENDED BUDGETDATE: STAFF: August 31, 2021 Kelly DiMartino, Interim City Manager Travis Storin, Chief Finance Officer Lawrence Pollack, Budget Director WORK SESSION ITEM City Council SUBJECT FOR DISCUSSION City Manager’s 2022 Recommended Budget. EXECUTIVE SUMMARY The purpose of this item is to review the economic, revenue and expense assumptions included in the 2022 City Manager's Recommended Budget, which will be delivered to Council and available to the public on September 1, 2021. This work session will also provide an overview of the major 2022 budget themes, public feedback opportunities and the schedule of Council budget meetings and Public Hearings during Sept ember through November. GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED 1. What questions or concerns does Council have about the budget assumptions which are being included in the Recommended Budget? 2. What questions does Council have regarding the proposed schedule for discussion of the Recommended Budget? BACKGROUND / DISCUSSION Budgeting for Outcomes (BFO) Process Status The 2021 budget process would typically have been a ‘revision year’, which is where the second year of the City’s two-year, or biennial, budget would be revised. However, the City’s budgeting process was significantly impacted by the global pandemic. It was determined that modifications would need to be made to the processes for both 2020 and 2021, due to the significant unknowns about impacts to our community. In response, Council approved Ordinance No. 067 to suspend the City Code to allow the adoption of a one -year budget and temporarily revise the City’s budgeting process. (Attachment 1) For 2022, the primary impact of these modifications is that , Council will again adopt a one -year budget instead of the traditional two-year (biennial) budget. Thereafter, the City will return to a two-year budget. Unlike in the modified process last year, the BFO Teams of City s taff members were successfully invoked this year, and that added significant value to the process and the decisions made by the executive team. Also, public engagement for the 2022 Recommended Budget resumed as it normally did prior to the pandemic. Initi al feedback received in May and June helped inform the decisions for the recommended budget, and the remaining inputs through September will be shared with Council as final decisions are being made for the adopted 2022 Budget. Key components of our budgeting process continued this cycle, including budget requests based on the programs and services provided to the community, a key aspect of Budgeting for Outcomes. These budget requests specify direct linkage to at least one strategic objective in the City’s adopted 2020 Strategic Plan, as well as performance measures directly related to the proposed program or service. These three integrated components of program/service level offers, linkage to strategic objectives, and inclusion of performance metrics are an important part of the City’s ongoing organizational performance management process and executive review. Another important modification this year was to also focus on the newly elected Council’s adopted priorities. These were included in the executive conversations and several offers to support those priorities were created August 31, 2021 Page 2 and recommended for funding. The City Manager’s Recommended Budget will still be published before the first Monday in September, as required by City Charter. It is currently targete d to be delivered to Councilmembers on September 1 and be available to the public thereafter. The traditional Council process will then continue with two public hearings and three work sessions scheduled prior to First Reading. Budget Assumptions Although the economy has been recovering well throughout 2021, there are still many unknowns about the pandemic, especially with the Delta Variant and its impact to our community. Each month brings new data about how the economy is recovering, and staff is monitoring that data closely. Over the past decade of moderate growth, the City has also prudently built healthy fund balances (also referred to as ‘reserves’). Reserves above City policy minimums are often intended for larger capital purchases or other one - time expenses and are typically used in that manner. They are also, however, critically important in times like now, to bridge revenue gaps while maintaining services to the residents and businesses of our community. Although to a much lesser extent than in the 2021 Budget, the 2022 Recommended Budget does include reserves for funding of ongoing expenses at a higher level than staff considers ideal. The City Manager’s Recommended Budget was developed on these key assumptions: • Focus on Council and community priorities reflected in Council’s adopted priorities and the City’s adopted 2020 Strategic Plan. • Maintain existing operations, programs, and services, while continuing to ensure this is done in a safe and efficient manner. • Revenue recovery has been very strong to date in 2021, and staff has forecasted modest growth for most revenue sources in 2022 off of that higher-than-expected base in 2021. o For Sales Tax specifically, 2022 is forecasted to increase by 3.0% over the revised 2021 forecast, which has been revised considerably when compared to the original 2021 budget, given the positive 2021 results to-date. The 2022 budget assumes $132.4M, whereas the 2021 budget assumed $112.8M. o For Use Tax, 2022 is forecasted to increase to $19.8M compared to $18 .0M in 2021, and this is based on continued economic activity, building activity, and business investment. • Utility rates are proposed to increase only in the Light and Power Fund, by 2.0%. Aside from purchased power cost increases, this rate increase is to maintain operations and preserve fund balances (i.e., reserves) in preparation for an anticipated debt issuance in 2023. The Water, Wastewater, and Stormwater rates are proposed to hold steady from 2021 to 2022. • After no budgeted increases in 2021, the average salary pool increases for City staff in the 2022 Budget are proposed at 4.0%. Negotiations will occur this fall for any contractual increases in the collective bargaining agreement with the Fraternal Order of Police. • Salary and benefits are budgeted at 97% of total estimated costs to incorporate the impact of personnel vacancy savings throughout the year. The City Manager’s Recommended Budget is built around several key themes: • Making strategic investments to “Future Proof” the City • Asset management • Difficult trade-offs • Recovery-driven investments funded by American Rescue Plan Act (ARPA) • Addressing social vulnerabilities of our community • Budget Equity Team • Preserving a meaningful and market-competitive employee experience August 31, 2021 Page 3 Council Budget Meetings Council has a series of work sessions scheduled in September and October to discuss the proposed 2022 Recommended Budget. Each work session will include staff presentations regarding specific Outcomes, followed by an opportunity for questions and discussion. Key dates for Council discussions and public hearings are as follows: Meeting Date Topic September 14, 2021 Work Session Presentations, Questions and Discussion: • Culture and Recreation • Economic Health • Environmental Health • Transportation and Mobility September 21, 2021 Regular Meeting Budget Public Hearing #1 of 2 September 28, 2021 Work Session Presentations, Questions and Discussion: • Neighborhood Livability and Social Health • Safe Community • High Performing Government October 5, 2021 Regular Meeting Budget Public Hearing #2 of 2 October 12, 2021 Work Session General Discussion - Final Council Direction November 2, 2021 Regular Meeting First Reading of the 2022 Budget and the 2022 Appropriation Ordinance November 16, 2021 Regular Meeting Second Reading of the 2022 Budget and the 2022 Appropriation Ordinance ATTACHMENTS 1. Ordinance No. 067, 2020 w/ Agenda Item Summary (PDF) 2. Powerpoint Presentation (PDF) Agenda Item 7 Item # 7 Page 1 AGENDA ITEM SUMMARY May 5, 2020 City Council STAFF Darin Atteberry, City Manager Lawrence Pollack, Budget Director Travis Storin, Interim Chief Finance Officer John Duval, Legal SUBJECT First Reading of Ordinance No. 067, 2020 Suspending for Fiscal Years 2021 and 2022 the Biennial Budget Term Required by City Code Section 8-1 and Approving the Temporary Revision of the City’s Budgeting Process for the 2021 and 2022 Budgets. EXECUTIVE SUMMARY This item is coming to Council because it meets the following Priority: (2) Emergency-related items that are not as urgent but need Council consideration. The purpose of this item is to acknowledge modifications to the City's biennial budgeting process due to the current unknowns of the depth and duration of the COVID-19 Pandemic and impacts to the local economy and City revenue streams. STAFF RECOMMENDATION Staff recommends adoption of the Ordinance on First Reading. BACKGROUND / DISCUSSION City Charter Article V, Section 2 provides that the City Manager shall file with the City Clerk on or before the first Monday in September preceding each budget term the proposed budget for that ensuing budget term. The City’s budget term was set in City Code Section 8-1 as being two fiscal years, the next of which is for the fiscal years 2021 and 2022 (2021-22 Budget Term). The COVID-19 global pandemic has caused significant turmoil to economies around the globe and is expected to create significant revenue shortfalls for local governments throughout the nation, the depth and duration of which are not currently known. Thus, the City Manager is recommending that Council suspend for the 2021-22 budget term, by the adoption of this Ordinance, the biennial budget term requirement in Code Section 8-1 in order to allow for a one-year budget term for both 2021 and 2022, but to return to the biennial budget term required by Code Section 8-1 beginning with fiscal years 2023 and 2024. The City Manager is also planning to forego using the BFO process for the 2021 and 2022 budget terms and in its place to use a revised budgeting process better suited to addressing the economic uncertainties that now exist because of the pandemic. This revised budget process will still include prioritizing the community’s needs as established by Council in its recent adoption of the City’s 2020 Strategic Plan. This will be done in a way that will strive to support and retain the City’s workforce, provide clear and frequent communications to Council and the community concerning the process, and that will use a variety of budget-balancing strategies, such as ATTACHMENT 1 COPY Agenda Item 7 Item # 7 Page 2 adjustment to service levels, use of reserves, and the optimal deployment of funds received from the state and federal governments due to the Pandemic. COPY COPY COPY COPY 2021 Budget Preview Au gust 31, 2021 ATTACHMENT 2 2Agenda •Process for the 2022 Recommended Budget •Budget Assumptions •Budget Themes and Insights 3The Designed Two-year Process Mar Apr May Ju n Ju l Aug Sep Oct Nov Budge t Time Line &Proce ss Strategic Plan Finalized Budget Proposals Developed / BFO Teams Evaluate & Rank City Manager & Executive Team Evals & Modifies Council Discussion / Public Hearings / Budget Ad option Strategic Objectives become the basis for ranking Budget Proposals (Offers) Staff develops Offers to achieve Strategic Objectives BFO Teams evaluate and rank Offers Executive Team input to align with Strategic Plan and Council Priorities City Manager ’s Recommended Budget presented to City Council on September 1 We Are Here Finalize Budget and adopt by the end of November The BFO Teams were invoked again for the 2022 Budget and public engagement started in May, unlike last year ’s one-year budget 4CityCouncil’s Budget Discussions Work Session 1.Culture & Recreation 2.Economic Health 3.Environmental Health 4.Tr ansportation & Mobility Work Session •Budget Assumptions and themes August September October November 31st 14th Work Session •General Discussion and final guidance 28th 2nd •1st Reading 16th •2nd Reading 12th 21st 5th •Budget Public Hearings 1 and 2 Work Session 5. Neighborhood Livability & Social Health 6.Safe Community 7.High Performing Government 5 2022 Budget Assumptions 6Citywide Revenue ($M) The BFO Teams were invoked again for the 2022 Budget and public engagement started in May, unlike last year ’s one-year budget 7General Fund Ongoing Revenue •Sales and Use Tax: 5% decline in 2020; Now projecting 13% increase 2021 and 3% increase in 2022 •Property Ta x: 11 % in 2020; 3% in 2021; 6% increase in 2022 •68% goes to PFA •PILOTs and other revenues relatively flat Year Ongoi ng General Fund + KF CG Re ve nue s $ C hange vs prior ye ar % Change vs pri or ye ar 2019 170,444,224 7,049,314 4.3% 2020 175,987,224 5,543,000 3.3% 2021 167,183,063 (8,804,161)-5.0% 2022 187,033,830 19,850,767 11.9% 8Use of new funding ($M) 38.7 0.0 8.9 3.2 5.7 4.1 4.7 12.1 0.0 10.0 20.0 30.0 40.0 2022 "New" Revenue - Citywide Sustainably fund ongoing expenses Lifted Hiring Freeze Recommended pay increases ARPA-funded enhancement offers Partially restore 2021 reductions 2022 Enhancements 2022 Funding Status Approximately $21M in overall enhancement offers included in Recommended 2022 Budget 9UtilityRate Assumptions Utility Rate Changes: Actual Actual Budget Utility 2020 2021 2022 L&P 5.0%3.0%2.0% Water 0.0%0.0%0.0% Wastewater 0.0%0.0%0.0% Storm Water 2.0%0.0%0.0% •Electric rate increases due to anticipated increased power supply costs from Platte River Power Authority (PRPA) 10Historical Budgeted Use of Reserves Fund 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 General Fund $4.0 $4.9 $6.2 $6.2 $6.2 $5.1 $3.4 $4.0 $8.4 $5.3 Capi tal Expans ion 2.3 0.1 6.6 1.1 - - - 1.4 3.5 0.1 KFCG 2.6 0.9 2.7 2.8 5.2 4.8 1.7 1.5 3.1 2.0 Neighborhood Park land 0.8 1.1 - - 0.8 1.2 1.4 - - 2.9 Natural A reas 0.4 - 0.2 - 0.6 1.3 0.3 - 0.3 1.1 Tr ans it 0.1 0.1 0.5 0.6 0.4 0.4 0.1 - 1.5 - Tr ans port at ion Cap Ex - - - - 0.9 1.1 5.4 0.2 1.1 - Tr ans port at ion 0.6 0.2 1.3 0.5 1.4 2.8 2.2 2.6 1.5 0.8 L&P 6.3 7.1 6.1 8.2 9.5 4.5 0.3 - 1.6 - Water 3.2 4.6 - 7.4 1.1 1.0 - - 2.7 5.9 Wastewater 1.5 0.7 - 3.5 1.3 6.8 - - 7.0 0.5 Stormwat er - - 1.4 0.1 1.3 1.1 - - 4.9 - Self Insuranc e 0.6 0.6 0.3 0.3 - - 0.0 0.1 - - Data & Communications 0.5 - 0.3 0.2 1.7 0.2 0.9 0.5 0.5 0.7 Benefits 1.7 1.6 0.2 0.2 - - - 0.6 1.1 3.8 CS A 0.7 0.7 0.4 0.5 - 0.1 0.3 0.2 - 1.6 All Other Funds 4.8 0.8 2.7 1.2 1.7 1.7 2.6 0.9 10.4 2.6 Gra nd Total $30.1 $23.5 $28.8 $32.7 $32.1 $32.1 $18.6 $12.0 $47.6 $27.3 Not e:Th e figures above ex clude the General Employees Ret irement Plan Fund,Broadband Fund,the A meric an Rec overy Plan Act (ARPA) and the Downt own Development Authori ty. 11Cost Assumptions 2022 General Inflation 3.0% Salary Adjustments 4.0% Medical Costs 7.5% Dental Costs 0.0% Retirement 401/457 Contributions No Change GERP Supplemental Contribution $1.1M Budget Staffing of Total Personnel Costs 97% Pressure to Restore 2021 Reductions Requested Sellers to prioritize with other Enhancements 12 2022 Budget Themes and Insights 13Major Themes with 2022 Budget •Making Strategic Investments to “Future Proof” the City •Asset Management •Difficult Trade-offs •Recovery-driven investments funded by American Rescue Plan Act (ARPA) •Addressing Social Vulnerabilities of our Community •Building Equity into the Budget Process •Preserving a Meaningful and Market-Competitive Employee Experience 2022 Budget Engagement 14 Phase Goals Ta ctics Results 1 (Mar –May) •Build awareness of 2022 budget & engagement process •Solicit ideas & feedback about community priorities •Community Survey •Partner Engagement Preview (Mar 3) •OurCity page/content •Engagement Toolkit •Over 800 community survey responses •Connected with approx. 20 partners 2 (Jun –Aug) •Drive OurCity engagement/feedback •Ta rgeted Stakeholder Outreach •Engagement summary to BLT •Social Media •OurCity •Press Release •Direct Email •20K reached on social media •1.9K OurCity page visits (685 informed / 172 engaged) 3 (Sep –Nov) •Share Recommended Budget and solicit feedback •Online community forums •OurCity tools •Work Sessions & Public Hearings •Email/letter collection https://ourcity.fcgov.com/2022budget 15 Brief OurCity Demonstration 16 •3 Virtual Budget Forums will be conducted –Budget Forum #1: September 2, 5:30 –6:30 p.m. Outcomes: Neighborhood Livability & Social Health // Environmental Heath –Budget Forum #2: September 8, 4:00 –5:00 p.m. Outcomes: Safe Community //Tr ansportation & Mobility –Budget Forum #3: September 9, 5:30 –6:30 p.m. Outcomes: Economic Health //Culture and Recreation // High Performing Government •Each forum w ill cover 2 to 3 Outcomes •Will be recorded and posted to ourcity.fcgov.com/2022budget Upcoming Budget Forums 172021 Council Budget Meetings September 14th Work Session •Culture and Recreation •Economic Health •Environmental Health •Tr ansportation & Mobility September 28th Work Session •Neighborhood Livability and Social Health •Safe Community •High Performing Government September 21st Council Meeting •Budget Public Hearing #1 of 2 October 12th Work Session •Budget Public Hearing #2 of 2October 5th Council Meeting •General Discussion –Final Council Direction November 2nd Council Meeting •First Reading November 16th Council Meeting •Second Reading 18 Council Discussion 19 Appendix 20Notable Enhancement Offers •5 new Mental Health Response FTEs in Police Services •Support of Council’s 31 adopted priorities (see next slide) •Wa ter supply acquisitions •Design of major facility construction/upgrades (Municipal Court, Fleet Shop, Civic Center, Southeast Community Center) •Natural Areas restorations •Cybersecurity risk management •Childcare support •Staffing increases in Municipal Court and City Attorney’s Office 21Notable Enhancement Offers –Council Priorities •Analysis of PSD & Transportation Coordination •Local and Regional Air Quality Monitoring •Co-create City Tree Canopy •Homelessness Initiatives Increases •Future 24/7 Shelter Engagement Support •Analysis of implementing 15-minute Neighborhoods •In addition, staff is accelerating “quick wins” into its 2021 plans utilizing existing budget, e.g. Minimum Wage Engagement & Analysis •All 31 priorities’timelines/plans will be reported at 8/31 work session 22Notable Restoration Offers •Restoration of $4.7M of prior year ’s $15M of budget cuts, including: –Tr ansfort pre-pandemic service levels –Weekend hours at recreation and cultural facilities –Parks maintenance budget –Police Services training and operating expenses –Street maintenance program –Humane Society funding 23Challenges Not Addressed in the 2022 Budget •Ongoing funding for Parks, Transit, and Affordable Housing ($14M+) •Critical repairs to Mulberry Pool HVAC and Roof ($3.5M) •Rolland Moore Park Improvements ($4.5M) •Expansion/renovation of Municipal Court ($2.4M) •City Park Train and Pickleball Courts ($5.1M)