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Home My WebLink AboutCOUNCIL - AGENDA ITEM - 06/28/2022 - PREVIEW OF THE CITY MANAGER'S 2023-24 RECOMMENDEDDATE: STAFF: June 28, 2022 Kelly DiMartino, Interim City Manager Travis Storin, Chief Financial Officer Lawrence Pollack, Budget Director WORK SESSION ITEM City Council SUBJECT FOR DISCUSSION Preview of the City Manager’s 2023-24 Recommended Budget. EXECUTIVE SUMMARY The purpose of this item is to review the revenue and expense assumptions included in the 2023 -24 City Manager's Recommended Budget, which will be delivered to Council and available to the public on September 2, 2022. This work session will also provide an overview of the emerging budget themes in the City’s return to a biennial budget, an ARPA update, and a brief summary of the online budget resources and public engagement tools available. GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED 1. Does Council have any initial feedback or guidance as the Budget Leadership Team begins their work in July? 2. Is there any specific feedback around setting aside ARPA monies for the State/Regional Transformation efforts? 3. Are there any specific inputs or questions to pose to residents through our facilitated community engagement work? BACKGROUND / DISCUSSION Budgeting for Outcomes (BFO) Proce ss Status The 2023-24 Budget is a return to biennial, or every other year, budgeting after two years of annual budgeting due to the pandemic and the associated unknowns about impacts to our community. This year’s process is similar to pre-pandemic efforts including the BFO Teams of City staff members providing their team recommendations to the City’s executive team on which offers should be funded . Likewise, public engagement for the 2023-24 Budget has resumed as it did prior to the pandemic with a focus o n utilization of the City’s online public engagement tool, which includes requested in person opportunities. This is promoted heavily via the City’s social media interactions. Initial feedback received in May and June will help inform the decisions for the City Manager’s Recommended Budget. All input received through September will be shared with Council as final decisions are being made for the adopted 2023-24 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 2022 Strategic Plan, which encompasses the Council’s adopted priorities. Further, performance measures directly related to the proposed program or service are required in each budget request. 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. The City Manager’s Recommended 2023-24 Budget will be published before the first Monday in September, as required by City Charter. It is currently targeted to be delivered to Councilmembers on September 2 and be June 28, 2022 Page 2 available to the public thereafter. The traditional Council process will then continue with two public hearings interspersed between three work sessions scheduled prior to first reading. Budget Meetings The City Manager’s Recommended Budget is targeted for publication on September 2 and the City Council has a series of work sessions scheduled in September and October to discuss that proposal. 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 13, 2022 Work Session Presentations, Questions and Discussion: • Order of Outcomes yet to be determined September 20, 2022 Regular Meeting Budget Public Hearing #1 of 2 September 27, 2022 Work Session Presentations, Questions and Discussion: • Order of Outcomes yet to be determined October 4, 2022 Regular Meeting Budget Public Hearing #2 of 2 October 11, 2022 Work Session General Discussion - Final Council Direction November 1, 2022 Regular Meeting First Reading of the 2023-24 Budget and the 2023 Appropriation Ordinance November 15, 2022 Regular Meeting Second Reading of the 2023-24 Budget and the 2023 Appropriation Ordinance ATTACHMENTS 1. Powerpoint Presentation (PDF) Status of the 2023-24 City Manager's Recommended Budget City Council Work Session – June 28, 2022 ATTACHMENT 1 2Agenda •Process and Timeline •2023-24 Budget Assumptions •Emerging Themes •American Rescue Plan Act (ARPA) •Public Engagement 32023-24 Budget Process and Timeline Timeline of City Council Meetings Sep 2 City Manager's Recommended Budget published Sep 13 Wo rk Session #1 Sep 20 Council Meeting –Public Hearing #1 Sep 27 Wo rk Session #2 Oct 4 Council Meeting –Public Hearing #2 Oct 11 Wo rk Session #3 Nov 1 Council Meeting –First Reading Nov 15 Council Meeting –Second Reading •BFO Teams have completed their work •The team chairpersons and financial leads will transition to the executive team •Executive team deliberates through the month of July •Council 2x2’s to orient to budget status in Aug/Sept 4Revenue Assumptions Sales Tax •Strong recovery from COVID-19 is expected to flatten in the next two years •Economic recovery and marketplace/economic nexus sales contribute to Fort Collins continued growth Use Tax •Use tax on building permits on par with previous ye ars •Shifts: increase in car tax, but a decline in return tax Property Tax •Recommendation is based on preliminary 2022 valuations and discussions with the Larimer County Assessor ’s Office •Poudre Fire Authority receives 67% of the city’s portion of property tax via an Inter Governmental Agreement 2023 3.5% Growth + $900k cigarett e tax 2024 2.5% Growth + $900k cigarette tax 2023 $20.0M 2024 $20.0M 2023 1% 2024 13% 2022 $19.8M 2022 28.5M 2022 Revised Forecast $150.3M 2022 Original Budget $134.7M Changes in Needed Utility Rate Increases for 2023-24 5-year Annualized Rate Increase (2017-22) Needed Rate In crease (Dec. 2021) Needed Rate In crease (Ju ne 2022) In crease Over Dec . Fo recast Needed Rate In crease (Dec. 2021) Needed Rate In crease (Ju ne 2022) In crease Over Dec. Fo recast El ectric 2.8%3.0%5.0%2.0%4.1%5.0%0.9% Wat er 1.1%2.0%4.0%2.0%2.0%4.0%2.0% Was tewat er 0.5%2.0%4.0%2.0%2.0%4.0%2.0% Stor mwat er 0.7%2.0%3.0%1.0%2.0%3.0%1.0% 20242023 Primary Drivers of Rate Increases vs. Dec. 2021: •Electric: Increased wholesale energy costs; rising transformer costs •Wa ter: Inflationary impacts to capital plan •Wa stewater: Metered customer revenues have declined in recent years while operating costs increase •Stormwater: Federal Reserve increased rates by 1.25%in first half of 2022; further rate hikes have been signaled. 6Expense Pressures •There is significant inflation being experienced in 2022. Staff is monitoring financial impacts relative to current resourcing levels •The Federal Reserve has already started increasing rates to curb inflation this year •Some commodities, like pavement, are experiencing double digit inflation •Staff is proposing to budget an average of 3.5%inflation in 2023 and 2.5%in 2024, with the assumption that the economy will not stabilize again to targeted inflation of 2%until 2025. •Separately, fuel costs are anticipated to by $1.0M+ higher in 2023 than 2022; significant risk of additional price hikes 7Salary and Benefit Assumptions Salaries & Wages •Current BFO Compensation Assumptions: 3.5% in 2023 and 3.0% in 2024 •Ta lent markets are signaling a need to revisit: •Merit and equity/compression increases of 3.5% -4% •Market/Cost-of-living increases of 2.5% -3% •Revised staff recommendation would total 6% -7% •Staff is including a minimum wage offer to bring all staff to a floor of $15/hr ($575K/yr ) Benefits •Medical Per Employee Per Month (PEPM) Increase:2023 2024 City-Employer 6.5%7.5% City-Employee 8.0%9.0% •Medical costs up 6% / Rx 11% / Combined 7.2% •Dental costs: No change 8Emerging 2023-24 Budget Themes •Bold Decisions and Difficult Tr ade-offs •Investment in new platforms as current technology expires / technological debt •Invest, retain, and develop our current city talent •Maintaining and investing in existing assets •Council priorities, specifically Climate, Environmental Health and Housing •Prioritization of equity and building capacity within DEI •Invest, retain, and develop our current city talent •Enterprise collaboration and efficiency, including adaptation or redeployed service delivery •Sizing the organization appropriately to meet the needs of a growing community •Utilizing the Recovery Plan to support economic recovery, address community vu lnerabilities, and advance resilience 9American Rescue Plan Act (ARPA) Offers •Economic Recovery & Equity & Community Resilience Themes = 82% •Health = 13% •Environmental Resilience = 5%. •Staff recommends not allocating full $15.8M remainder to allow for local match on State programming $15.8M total remaining ARPA f unds 37 Offers 18 FTEs $16.3M 2023 $13M 2024 •All offers previously reviewed for ARPA-eligibility •Separate ARPA B FO Team convened 10State/Regional ARPA Transformational Projects Project Name Lead Agency To tal Cost Unfunded Amount ARPA Category Estimated Match 24/7 Homeless Shelter Denver Rescue Mission $10-20 million TBD Homelessness $2.5-5 million Behavioral Health Services Campus -- Phase 2 Larimer County $40-50 million TBD Behavioral Health $10-12.5 million Heartside Hill (Community Center) CARE Housing, Teaching Tr ee, Habitat for Humanity, ECC, et al $41 million $8.5 million Affordable Housing $2.1 million K-12 Workforce Development Centers School Districts, County EWD $68 million TBD Wo rkforce Development $17 million Innovation Hub at Northern Colorado Airport Airport, County ED, Chambers, school districts, colleges $78 million $38 million Wo rkforce Development $9.5 million Yo uth Shelter and Permanent Supportive Housing School Districts, County HEH, Fort Collins, Loveland $25 million TBD Homelessness $6.25 million Multicultural Business and Entreprenuer Center (MBEC) City of Fort Collins and Chamber TBD TBD Wo rkforce Development TBD North Fort Collins Community Hub City of Fort Collins $25 -$30 million TBD All $6.25-7.5 million Bills have passed the State Assembly, anticipating final applications due in Nov/Dec; Staff has previously heard Council support for 24/7 Shelter, Heartside Hill, and K-12 Workforce Center 11Public Engagement Phase Goals Ta ctics 1 (Apr -May) •Build awareness of budget & engagement process •Solicit ideas & feedback about community priorities •Community Survey (780+ responses) •OurCity page / content •Engagement Toolkit 2 (Jun –Au g) •Conduct resident input sessions through the Center for Public Delibration (CPD) •Drive OurCity engagement/feedback •Engagement summary to BLT •Social Media •OurCity •Press Release •Local Media (Coloradoan Article) 3 (Sep –Nov) •Continue resident input sessions •Share Recommended Budget and solicit feedback •OurCity tools •CPD events and paid engagement •Work Sessions & Public Hearings •Email/letter collection 12Public Engagement –Online Resources •City’s Budget site: www.fcgov.com/budget •City’s Public Engagement site: https://ourcity.fcgov.com/ 13Budget Resources Av ailable on fcgov.com 1) BFO timeline and dates 2) Link to the OurCity Budget Public Engagement site 3) Resources to review and analyze budget requests Fcgov.com/budget -Site broken into 3 sections 14Budget Resources Av ailable on fcgov.com Adopted 2022 Strategic Plan –Every offer should support the plan Excel file listing all Offers -Can be filtered in many ways, including by department -Contains links directly to the Offer Narrative by Outcome reports Offer Narrative Reports by Outcome -Budget requests sorted numerically (searchable) -Includes specific alignment with adopted strategic plan -Links to view published metrics / performance data and analysis -Summary financials follow each narrative Map of Capital Projects requests being considered 3) Resources to review and analyze budget requests: Excel file with all performance metrics (measures) included in offers -Searchable by Offer #, Offer Name or key words in metric name -Contains links to view published data/charts and analysis 15OurCity -Online Public Engagement •‘OurCity” is the name of the City’s online public engagement website •On this website (ourcity.fcgov.com) click on ‘View Project’in the 2023-24 Budget box •Ty pes of Engagement Activities: q 1 minute:* Follow the City of Fort Collins on your favorite social media apps * Watch one of our Budget overview videos to learn more about the process q 5 minutes:* Click the “Ideas” tab to share what’s most important to you * Watch one of our short Budget overview videos to learn more about the process q 10 minutes:* Click the “Survey” tab to share what areas you think the City should prioritize and leave free-form comments and suggestions * Watch the other videos in either Spanish or English q 20+ minutes:* Have a conversation with your organization, friends or neighbors using the Budget Engagement Toolkit in the Document Library for materials you can use * Email aresseguie@fcgov.com to invite City staff to meet with your group to discuss whatever aspects of the budget you'd like * Staff are available to meet in person or via Zoom 16 Guidance requested from Council: -Does Council have any initial feedback or guidance as the Budget Leadership Team begins their work in July? -Is there any specific feedback around setting aside ARPA monies fo r the State/Regional Tra nsfo rmation efforts? -Are there any specific inputs or questions to pose to residents through our facilitated community engagement work? 17 Back-up Slides 18Sales Tax History Fort Collins Sales Ta x has recovered and surpassed pre-pandemic levels 19Use Tax History Use Tax is volatile and difficult to forecast, driven largely by development and business investment 20PropertyTax History After being flat since 2008, Property Ta x has grown significantly in the past years Distribution of ARPA F unds to Date $0.3 $1.9 $1.9 $0.1 $1.2 $1.1 $3.5 $0.1 $1.9 $2.1 $0 $1 $2 $3 $4 $5 $6 $7 $8 Health Equity & Community Economic Recovery Environmental ResilienceMillions Ord. 079, 2022 Approved ST Needs 2022 Budget 2022 Mid-Cycle NOTE: Administrative costs spread throughout each recovery theme. Council can opt to change proposed allocation $1.6M $4.9M $7.5M $0.1M