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Home My WebLink AboutCOUNCIL - AGENDA ITEM - 08/26/2014 - STATUS OF THE CITY MANAGER'S 2015-2016 RECOMMENDEDDATE: STAFF: August 26, 2014 Lawrence Pollack, Budget & Performance Measurement Manager Darin Atteberry, City Manager Mike Beckstead, Chief Financial Officer WORK SESSION ITEM City Council SUBJECT FOR DISCUSSION Status of the City Manager’s 2015-2016 Recommended Budget. EXECUTIVE SUMMARY The purpose of this item is to review the assumptions included in the 2015-16 City Manager's Recommended Budget which will be delivered to City Council and available to the public on August 29, 2014. This work session will review the economic assumptions that are being incorporated into the City Manager’s 2015-2016 Recommended Budget and provide an overview of the major themes based on the work to date. Staff will outline the remaining key steps and discuss the City Council process regarding adoption of the City of Fort Collins 2015- 2016 Biennial Budget. Discussion of the Recommended Budget will take place during three work sessions and two public hearings in September and October. GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED Staff will present an update on the Budget process and address any questions or issues that arise from the conversation with City Council. 1. What questions or concerns does City Council have about the budget assumptions which are being included in the Recommended Budget? 2. What questions does City Council have regarding the proposed schedule for discussion of the Recommended Budget? BACKGROUND / DISCUSSION Budgeting for Outcomes (BFO) Process Improvements The 2015-2016 Budget process, called Budgeting for Outcomes (BFO) began with the completion of the City Strategic Plan in March. The strategic plan replaced the Request for Results and Outcome maps previously completed by the BFO Teams. Offers needed to align with one or more strategic objectives across Outcomes. This was one of a number of process improvements made to BFO since the last budget process in 2012 for the 2013-2014 Budget. Other improvements included:  Significant outreach to get citizen feedback on the budget requests (Offers) being considered. In addition to on-line feedback through fcgov.com City staff took a mobile roadshow to over 20 different community events and organization. The intent was to reach a broad range of the citizenry across multiple demographics.  Increased citizen participation on BFO Teams to 2 per team. Ideally, citizens would volunteer for two budget cycles so that in their second term, they could be a mentor to new citizen team members. Feedback from the teams indicates the success of having two citizens per team.  BFO Teams used the strategic objectives from the City Strategic Plan and performance measures tied to the Offers in their evaluations of the Offers and their recommendations as to which ones should be funded. August 26, 2014 Page 2  Offers for ongoing programs and services were aligned with the City’s financial software system. Although this did make for a slightly smaller number of larger sized Offers, it more importantly allowed for the first time a year-over- year comparison of how Ongoing Offers were changing and the drivers of those changes. This change allowed for more financial rigor in the process than ever before. The City Manager’s Recommended Budget is in the process of being finalized and published. It will reflect a balance of ongoing programs and services with enhancements that directly address the strategic objectives in the City Strategic Plan. The City Manager’s 2015-2016 Recommended Budget will be delivered to City Council and be available to the public on August 29, 2014. Budget Assumptions The City of Fort Collins economy is performing better than many municipalities and the City organization is in a good financial position with healthy fund balances. Most revenue streams are flat to showing only modest growth, but sales and use tax has been up steadily throughout 2014 above our original revenue forecasts. This bodes well for the General Fund, the three dedicated quarter cent programs, as well as the Keep Fort Collins Great fund. Development-related revenue continues to be strong this year, but investment earnings continue to be much less than historical averages due to the national interest rate environment. City staff is monitoring all revenue sources carefully and will utilize the most current information available to set 2015-2016 projected revenues. Additionally, the Utilities Funds proposed rate changes will be discussed during the Council’s budget review process. The City Manager’s Recommended Budget is being developed on these key assumptions:  Focus on City Council and community priorities as reflected in the 2014 City Strategic Plan  Maintain existing operations and seek ways to deliver desired services more efficiently  Moderate Sales and Use tax revenue growth o General revenue economic growth is assumed to be 3.0% and 2.5% in 2015 and 2016, respectively o Use Tax: The forecast includes a base of $14.5M which is flat year-over-year and which is available to fund ongoing programs and services. However, in 2016 this base drops to $12.6M without the renewal of the two ¼ cent sales and use taxes for Street Maintenance and Building on Basics (BOB). o Use Tax is forecasted above the base at $3.0M and $2.5M in 2015 and 2016, respectively. However, due to the volatility of this revenue stream, the additional Use Tax above the base is restricted to one-time expenditures.  Unanticipated 2014 Sales Tax revenue above forecast of $2.7M increases the base for 2015 upon which economic growth is forecasted. Unanticipated 2014 Use Tax revenue above forecast of $6.7M is included in the 2015-2016 budget for one-time expenditures  Unanticipated underspend in the North College Improvement project, as well as impact from the opening of the mall, is also included in the overall revenue forecast  Utility rate increases of 1.9% for Light & Power and 3.0% for Wastewater are included in both 2015 and 2016  Wage adjustments assume an overall 2.0% increase each year, which is below initial market data for the Front Range. Benefit cost inflation is forecasted at 11.5% and 3.7% in 2015 and 2016, respectively includes the financial impact from national health care reform (the Affordable Care Act). There are no changes planned for pension contributions  There are a number of significant cost increases over 2014 which are included in Attachment 1. Key Themes in the City Manager’s Recommended Budget The City’s Fiscal Condition is Healthy:  Fund balances are healthy with strong Sales & Use tax growth generating additional unanticipated revenue August 26, 2014 Page 3  Reserves were used prudently for planned expenditures like the Southeast Community Park and Old Town Square renovations KFCG - Fully budgeted consistent with ballot language  Street Repair and Maintenance: Street repaving, College Avenue concrete work, and the City Bridge Program  Other Transportation: Transit services like MAX, Traffic operations, FC Bikes, Safe Routes to School, pedestrian sidewalk improvements  Police: Ongoing operations and staffing including additions for daytime specialized units)  Fire: PFA emergency services  Parks and Recreation: Ongoing programs, service and equipment, ADA playground compliance, Recreation scholarship program, Northside skate park lighting  Other Community Priorities: Affordable housing, homeless initiatives, downtown landscaping and maintenance, Northern Integrated Supply Project (NISP) analysis, municipal energy efficiency fund, Poudre River restorations Maintain High Quality Service & Stewardship of City Assets  Asset management, utility project managers, and utility capital projects  Police daytime officers, alcohol & marijuana enforcement, and police training facility design  Capital projects  Epic pool bulkheads and Lincoln Center asbestos removal Neighborhood & Community Vitality  Affordable Housing funding, Social Sustainability staff, and Low Income Rebate Program  Lincoln neighborhood projects and neighborhood revitalization  Emerald Ash Borer pre-infestation  Alley maintenance  Broadband Strategic Plan Environmental & Poudre River Restoration  Poudre River restoration, instream water resource specialist, and NISP analysis  Integrated Recycling Facility (IRF)  Green Built Environmental Coordinator  Climate Adaptation Planning and Air Quality Program support Transit & Mobility  Transfort expanded hours and routes for full year including MAX, Access-a-Cab program, CSU funded expanded student services  Pedestrian sidewalks  FC Bikes and Bike Library  Bicycle and Pedestrian Safety Town Sense of Place  Southeast Community Park  Old Town Square renovations and Linden Street design  Paved recreational trail development  Partnership for a new downtown plan August 26, 2014 Page 4 Infrastructure  Mulberry bridge urban design and landscaping improvements  Vine and Lemay intersection improvements, Arthur Ditch master plan  Street projects Improved Internal Systems and Leveraging Resources  Safety Director & Occupational Health Professional  Business licensing software  IT infrastructure & HR Technology  Volunteer coordinator & Special Events coordinator  Not-for-Profit organizational structure for community gardens  Lead 1.0 - staff training and development  Appropriate Staff - Full Time Equivalent (FTE) additions City Council Budget Meetings The City Council has a series of work sessions scheduled in September and October to discuss the proposed 2015-2016 budget. Each work session will include staff presentations regarding specific Outcomes, followed by an opportunity for questions and discussion. Key dates for City Council discussions and public hearings are as follows: Meeting Date Topic August 26, 2014 Work Session General Budget Overview September 9, 2014 Work Session Presentations, Questions and Discussion: 1. Community & Neighborhood Livability 2. Economic Health 3. Environmental Health 4. Safe Community September 23, 2014 Adjourned Meeting and Work Session Budget Public Hearing #1 Presentation, Questions and Discussion: 1. Culture and Recreation 2. High Performing Government 3. Transportation October 7, 2014 Regular Meeting Budget Public Hearing #2 October 14, 2014 Work Session General Discussion - Final Direction October 21, 2014 City Council Meeting First Reading of Appropriations Ordinance November 18, 2014 City Council Meeting Second Reading of Appropriations Ordinance August 26, 2014 Page 5 ATTACHMENTS 1. Powerpoint presentation (PDF) 1 Council Work Session 2015-2016 City Manager’s Recommended Budget Overview August 26, 2014 ATTACHMENT 1 2 The Process Mar Apr May Jun Jul Aug Sep Oct Nov Budget Time Line & Process Strategic Plan Finalized Budget Proposal Developed BFO Teams Evaluate & Rank City Manager & Ex Team Evaluates & Modifies Council Discussion Public Hearings Budget Adoption • Strategic Objectives become the basis for Ranking Budget Proposals • Staff develops Budget Proposal to achieve Strategic Objectives • BFO Teams (staff & citizens) rank proposals • Executive Team input to align with Strategic Plan, Council Work Plan & City Priorities • City Manager Recommended Budget Presented to Council August 29th We Are Here • Finalize Budget • Adopted by the end of November 3 Budget Overview Budget Process Improvements Include: • City Strategic Plan basis for evaluating offers vs. Purchasing Strategies • Improved Citizen Engagement – 2 citizens per team, enhanced outreach • BFO teams used metrics to evaluate offers – empowered to assess & prioritize • Modified Offers to On-Going and Enhancements – Reduced offer total from 550 to 430, created larger offers for On-Going – On-going offers allowed year to year cost comparison by Budget Lead Team • Significant reduction in BFO team staff hours Requested Innovative Ideas Consistent with Strategic Plan Challenging Choices – Significant Cost Issues and Funding Priorities Recommended Budget: • Reflects community priorities • Continues high level of service expected by the community 4 Cost of Government Slight Downward Trend in the Price of Government 5 Sales Tax Rate Comparison Total Fort Collins Sales Tax Rate in the Bottom Third 6 Electric Cost Comparison Fort Collins Electric Rates Very Competitive Colorado Utilities with more than 7500 residential meters Source: Colorado Association of Municipal Utilities, January 2014 data San Isabel San Luis Valley San Miguel Black Hills Sangre De Cristo Gunnison Co Tri County Empire EA Mountain View La Plata Mountain Parks Delta-Montrose Grand Valley Intermountain United Power Poudre Valley REA Estes Park Colorado Springs Holy Cross Xcel Energy Fountain Yampa Valley Fort Collins - Summer Longmont Fort Collins - Non Summer Loveland $- $20 $40 $60 $80 $100 $120 $140 Residential ElectricCost Comparison 700 kWh per Month 7 Total Revenue Reduced Use Tax in 2015….Without ¼ Cents in 2016 8 Sales & Use Tax Revenue Decline in Use tax in 2015 Keeps Revenue Flat… 2016 Reflects Without and With Two Expiring ¼ Cent Tax Rates 2016B excludes two ¼ cents 9 Funding Opportunities Included in Budget Unanticipated Revenue Included in Budget Fund Balances reviewed with Council Finance June 2014 • All healthy at year end 2013 and forecast healthy year end 2014 • General Fund balance increased from $55.2M in 2012 to $60.7M in 2013 ($ millions) On-Going One-Time On-Going One-Time Funding Opportunities Included: 2014 Sales Tax Above Budget 2.7 2014 Use Tax Above Budget 6.7 North College Improvement Underspend 2.9 2016 Mall Sales Tax - Base & Dedicated 2.0 Mall Use Tax Paid in 2014 & 2015 2.5 Total Opportunities Included $ 2.7 $ 12.1 $ 2.0 $ - 2015 2016 10 Budget Themes City Fiscal Condition is Healthy: • Appropriate fund balances, strong sales & use tax growth KFCG: • Fulfilling commitments to voters with KFCG revenues Strategic Plan: • Recommended Budget has strong linkages to the Strategic Plan Maintain High Quality Service & Stewardship of City Assets • Police Daytime Officers (3 FTE) & Alcohol and marijuana enforcement (2 FTE) • Police Training Facility Design • Asset management & Streets projects • Epic pool bulkheads, Lincoln Center asbestos removal 11 Budget Investment in Priority Areas Neighborhood & Community Vitality • Additional affordable housing funding, Low Income Rebate Program • Lincoln Neighborhood Projects • Neighborhood Revitalization, Alley Maintenance • Broadband Strategic Plan Environmental & Poudre River Restoration • Poudre River Restoration, • In stream Water Resource Specialist, NISP analysis • Integrated Recycling Facility & Green Built Environmental Coordinator • Climate Adaptation Planning & Air Quality Program support, Transit & Mobility • Transit expanded hours and routes for full year & Improved Dial a Ride program, • New CSU funded student Transit services • Pedestrian sidewalks & College Avenue concrete work • Railroad Switching Operations Study 12 Budget Investment in Priority Areas Sense of Place • Linden Design • Southeast Community Park • Old Town Square Renovation • Partnership for a New Downtown Plan Update Infrastructure • Mulberry bridge • Vine & Lemay intersection design • Arthur Ditch master plan • Utility projects & project managers Improved Internal Systems & Leveraging Resources • Safety Director & Occupational Health Professional • Business licensing software, IT infrastructure & HR Technology • Volunteer coordinator & Special Events coordinator • Lead 1.0 – Staff training and development 13 2014 Council Budget Meetings September 9th Work Session • Community & Neighborhood Livability • Economic Health • Environmental Health • Safe Community September 23rd Work Session • Culture and Recreation • High Performing Government • Transportation September 23rd Council Meeting • Budget Public Hearing October 7th Council Meeting • Budget Public Hearing October 14th Work Session • General Discussion – Final Direction October 21th Council Meeting • First Reading November 18th Council Meeting • Second Reading 14 Back-Up 15 Use Tax Use Tax is Volatile Year to Year 16 General Fund - Fund Balance General Fund Reserves Healthy 17 Example: On-Going Budget Comparison Budget 2014 Budget 2015 % • Labor & Benefits $2,816 $2,969 5.4% Non-Labor 498 505 1.4% Subtotal 3,314 3,474 4.8% Rebates 227 265 16.8% Total $3,541 $3,740 5.6% Rebate 2013 Budget 217 Rebate 2013 Actual 253 • $ 36 • % 16.3% * All Amounts in Thousands Financial Services Rebate Detail Budget 2014 % Inc. (Dec.) Budget 2015 % Inc. (Dec.) Budget 2016 % Inc. (Dec.) 3,397,994 -6.3% 3,474,411 2.2% 3,550,215 2.2% 227,300 4.5% 265,404 16.8% 270,296 1.8% Total Original Budget $3,625,294 -5.7% $3,739,815 3.2% $3,820,511 2.2% Sales Tax Software (HPG) KFCG - Green Purchasing (1 FTE) (83,820) Ongoing Budget $3,541,474 2.4% $3,739,815 5.6% $3,820,511 2.2% General Fund - Ongoing $3,541,474 2.4% $3,739,815 5.6% $3,820,511 2.2% 0.0% 0.0% 0.0% Total Funding Sources $3,457,611 $3,541,474 2.4% $3,739,815 5.6% $3,820,511 2.2% $3,457,611 $3,457,611 $3,845,639 Less One-time Enhancements Funding Sources (300,000) (88,028) Community & Neigh. Liveability (Rebates 14.1) 217,450 Offer 13.1 & 14.1 Finance - Budget Comparison Ongoing Budget Comparison Budget 2013 Original Budget by Outcome High Performing Government(13.1) 3,628,189 Change in Rebate Policy Increased Costs 18 Revenue Assumptions Assumed Moderate Growth in 2015 & 2016…. Additional Mall Revenue Included in 2016 2016 ¼ Cent Revenue Not Included in Budget ($ millions) 2013 Actual 2014 Forecast 2015 Budget 2016 Budget Sales Tax Prior Year $ 92.8 $ 96.6 $ 99.8 3% & 2.5% Economic Growth 2015/2016 3.8 3.0 2.5 Additional Marijana Tax Revenue - 0.2 Mall Base & Dedicate Tax - - 2.0 Total Sales Tax Revenue $ 92.8 $ 96.6 $ 99.8 $ 104.3 Year over Year Change 4.1% 3.3% 4.5% Less: Expiring 1/4 Cents (12.6) Sales Tax Revenue $ 99.8 $ 91.7 Use Tax Use Tax (On-Going) $ 14.5 $ 14.5 $ 14.5 14.5 Use Tax (On-Going w/o 1/4 Cents) $ 12.6 Use Tax (One-Time) 3.9 6.7 3.0 2.5 Mall Use Tax (One-Time) 1.2 1.3 19 Utility Rate Assumptions Actual Actual Budget Budget Utility Rates: 2013 2014 2015 2016 L&P * 4.3% 2.0% 1.9% 1.9% Water ** 4.0% 4.0% 0.0% 0.0% Waste Water *** 0.0% 3.0% 3.0% 3.0% Storm Water 0.0% 0.0% 0.0% 0.0% 2013 includes 3.83% PRPA & 0.50% Solar Program, 2014 1.5% PRPA & 0.50% Solar Program, 2015-16 PRPA only 2013 includes 4% Fire Mitigation, 2014 includes 1% Fire Mitigation, 3% Capital Improvements 2014-16 Capital Improvements L&P Driven by PRPA Pass Through Waste Water Driven by Capital Improvements * ** *** 20 Cost Assumptions Budget Budget 2015 2016 General Inflation 2.0% 2.0% Compensation 2.0% 2.0% Benefits Cost 11.5% 3.7% Pension Contributions No Change GERP Supplemental Contribution $1.1M $1.1M Moderate Inflation….Compensation Tied to Market…. Benefit Costs Increased Significantly in 2013 & 2014…. Wellness Clinic Should Reduce Benefit Cost Increase by 2016 21 Significant Cost Increases Over 2014 Total $ Salary Costs $ 2.0 Health Care Reform 0.9 Benefits Cost 1.4 PFA Contribution per IGA 1.5 IT Equipment Replacement & Lease 2.0 Transit Service Annualize (excluding $.7M CSU funded) 1.7 General Fund Impact from Cons Trust Fund to Trails .7 Total $10.2 Planned & Unplanned Expenditures Create Challenging Environment ($ millions)