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Home My WebLink AboutCOUNCIL - AGENDA ITEM - 07/09/2019 - CITY FINANCIAL OVERVIEW AND PLANNING OVERVIEWDATE: STAFF: July 9, 2019 Mike Beckstead, Chief Financial Officer Travis Storin, Accounting Director WORK SESSION ITEM City Council SUBJECT FOR DISCUSSION City Financial Overview and Planning Overview. EXECUTIVE SUMMARY The purpose of this item is to provide an overview of the City’s revenue, expenditure and balance sheet as of year-end 2018. In addition, staff will provide on overview of the City’s Strategic Planning and Budgeting for Outcomes process. GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED This item is informational only. Staff is not seeking direction from Council at this time. BACKGROUND / DISCUSSION Financial Overview The City’s financials can be broken into two parts, Governmental Activities (activities that are supported by taxes and fees) and Enterprise Activities (activities funded by user fees and charges, i.e., Utilities) Total City net revenues were $499M in 2018, up slightly from $498M in 2017, and up significantly from 2009 when the City’s net revenues were $306M. 2018 revenue included $266M of Governmental revenue and $233M of Enterprise revenue. Sales and Use tax revenue accounts for 52% of Governmental revenue. Enterprise revenue is 62% Light and Power with the remainder coming from four other funds - Water, Wastewater, Stormwater and Golf. Governmental expenditures were $274M in 2018. 80% of the City’s Governmental expenditures are associated with Planning Development & Transportation; Community Services, and public safety in Police and Poudre Fire Authority. Personnel costs are the single largest expenditure category followed by Purchased services. Enterprise expenditures share is similar to revenue as each utility can only be supported by the revenues specifically for that fund. The City’s balance sheet is healthy with moderate debt and a strong fund balance position. Debt was at a 30- year low at the end of 2017, increased significantly in 2018 as a result of new borrowings of $142M to support the City’s Broadband implementation. Fund balances grew significantly from 2010 to 2014 and have remained fairly steady at just under $400M since 2014. Planning Process The City utilizes a two-year planning cycle that begins shortly after Council elections during the odd years of the calendar. Council onboarding occurs in the few months after the April election, Strategic Planning begins in the fall and is completed in February and March. The Strategic Plan is updated every two years and designed to provide Strategic Objectives that need to be addressed over the next 3-5 years. The City uses an issues-based strategic planning process where inputs are gathered from the community, Council and City staff that ultimately are used to develop the Strategic Objectives within the Strategic Plan. July 9, 2019 Page 2 The Strategic Plan (SP) is shared with the organization in late March and is utilized to guide the development of budget proposals that will accomplish the Strategic Objectives defined within the Strategic Plan. The City uses a Budgeting for Outcomes (BFO) process and develops a two-year budget during even years covering the next two calendar years. The process can be summarized as: 1. Staff develops budget proposals to achieve the Strategic Objectives within the SP 2. BFO teams comprised of staff and citizens evaluate and rank the proposals. Funding is allocated and the ranking determines what gets funded and what does not get funded. 3. The Executive Team reviews all rankings, staff addresses questions, the budget is finalized to the City Managers Recommended Budget which is shared with Council the first of September. 4. Council conducts two public hearings and three work sessions to review, question, modify, and ultimately adopt the budget by the end of November. ATTACHMENTS 1. Powerpoint presentation (PDF) June 11, 2019 2018 Financial Highlights Mike Beckstead, Chief Financial Officer ATTACHMENT 1 Contents Financial Overview • Revenues • Expenditures • Balance Sheet Planning Process Review • Strategic Planning • Budgeting for Outcomes 2 Tale of Two Cities • Governmental Activities • Activities that do not lend themselves to be funded by User Fees and are wholly or partially supported by taxes • Enterprise Activities • 100% fund by User Fees • Light & Power, Water, Wastewater Storm Drainage and Golf 3 Revenues 4 Revenue City Funds (millions) 5 • Roughly half of our revenue comes from Utilities and half comes from Governmental activity • Utility revenue driven by demand and rate changes • Governmental revenue growth slowed starting in 2015 2018 Governmental Revenue 6 • 3 revenue sources account for 75% • 52% Governmental Revenue from Sales & Use tax • Fees and service charges are 14% • Property tax accounts for only 9% Sales Tax with % Change 7 • Sales tax is generated at point of purchase of goods and products • Average growth: • 2000 - 2010 1.7% • 2010 – 2015 5.6% (w/o KFCG) • 2015 - 2018 3.0% • 2019 YTD growth over 2018 1.7% Use Tax with % Change 8 • Use Tax generated from building activity, auto sales and business equipment investment • Significant volatility in use tax • Several large projects drove the spike in 2014-2016 • Current building activity has revenue hovering in the $21M range City Percentage of Net Taxable Sales Declining since 2010 9 Fort Collins Net Taxable Sales • Net Taxable Sales (NTS) reflects the total value of taxable goods and products • Historically the City has accounted for 70% of County NTS • Regional retail growth outside of the City driving decline 2018 Enterprise Fund Revenue 10 • Five Enterprise Funds • Four Utilities and our Golf Fund • Light & Power is by far the largest • Purchased Power is $96M • All Utility revenue comes from rates and charges set by Council Expenditures 11 2018 Governmental Expenditures by Service Area 12 • PDT includes: • Street Maintenance & Traffic • Planning, Code Enforcement • FC Moves • Transit • City capital • Community Services includes • Parks & Recreation • Natural Areas • Cultural Services • Info & Employee Services includes • HR, IT, Communications, Fleet & Facilities 2018 Governmental Expenditures by Category 13 • Personnel costs are largest category • Purchased Services includes • Fire Protection Service (PFA) • Street & Bridge Construction/Repair • Engineering and Design • Vehicle Repairs • Janitorial Services • Software Maintenance & Support • Animal Care Services • Artists, Musicians & Speakers • Debt Service is only 2% of Governmental Expenditures, Council policy limit is 5%. 2018 Enterprise Expenses by Fund 14 • Expenditures by fund very similar to revenue • Expenditures in each utility can only be supported by revenues specifically for that fund 2018 Enterprise Expenses by Type 15 • Purchased Power largest single expense item • Capital purchases and construction vary from year to year, but always significant Balance Sheet 16 Outstanding Debt last 30 years 17 • Lowest outstanding debt in 30 years occurred in 2017 • Per capita debt is lower in 2018 than in 1989 • Broadband was largest ever single borrowing by City • Utilities uses debt financing more than Governmental funds City Fund Balances 18 • Strong fund balance growth 2011- 2014 • Stable & healthy fund balance 2014 – 2018 • Fund balance as a % of expenses peaked in 2014, healthy in 2018 General Fund Balances 19 • Strong fund balance growth 2011- 2014 • Stable & healthy fund balance 2014 – 2018 • Minimum reserves grown from $20.6M in 2011 to $33.0M in 2018 Planning Process 20 Values: - Collaboration - Excellence - Integrity - Outstanding Service - Safety & Well-being - Stewardship Mission: Exceptional service for an exceptional community Vision: To provide world-class municipal services through operational excellence and a culture of innovation City of Fort Collins Leadership System 21 Big Picture 22 2021 2022 BFO Programs & Initiatives 2018 Strategic Plan Provides Guidance to 2019/2020 BFO Programs & Initiative PLANNING ACTIVITY EXECUTION ACTIVITY 2018 Strategic Plan 5 Yr. View BFO 2019/2020 ELECTIONS On Board 2017 2018 2019 2020 2017 Budget 2018 Budget 2019 2020 BFO Programs & Initiatives BFO Programs & Initiatives 2020 Strategic Plan 5 Yr. View BFO 2021/2022 On Board ELECTIONS 2021 2022 Big Picture 23 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Even Years Odd Years I nputs for the Strategic Plan Strategic Planning Process Budgeting for Outcomes Offer Creation BFO Teams Public Engagement BLT Budget Prep Council & Public Hearings Capital Improvement Plan LT Financial Plan Risk Assessment Community Engagement / Citizen Survey Dept. Input Strategic Plan X = Council review of Strategic Plan at 2nd Work Session of the month BFO Off Year Revision Process Strategic Plan Election Council Onboarding X Strategic Objectives - WHAT • Multiple Strategic Objectives (SO) for each KOA • Achieving SO achieve KOA goals Key Outcome Areas • Highest level Strategic Goals • 7 Key Outcome Areas • Used in Strategic Plan, BFO, City Plan, Etc. Linkage – Key Outcome Areas, Strategic Objectives & BFO Initiatives BFO Initiatives - HOW • Multiple BFO Initiatives for each SO • Initiatives designed to achieve SO 24 Issues Based Strategic Planning 25 STRATEGIC WORK & ANALYSIS – ISSUES BASED PROCESS: STRATEGIC PLAN (5 YEAR HORIZON): • Implications, Conclusions, Challenges, Advantages, Priorities • Define Issues to be addressed in Strategic Objectives • Outcomes – highest level focus areas • Strategic Objectives – 6-10 per Outcome, helps achieve the Outcome • Metrics – tied to Strategic Objectives ENVIRONMENTAL SCAN STRATEGIC PLAN DRIVEN BY CITIZEN, COUNCIL AND STAFF INPUT & PRIORITIES Citizen Input & Priorities • Citizen Survey • Focus Groups/Outreach • Boards & Commissions • Citizen Priorities Council Input & Priorities • Community Concerns • Retreat Priorities Organizational Priorities • City Plan & Master Plans • Economics & Financials • Emerging Trends / Issues • Infrastructure Issues • Workforce trends • Metrics Strategic Plan Sample 26 v 26 This must be from the 2014 SP. Can you pull this from the 2016 SP?? If so, pull the whole thing including sentence on NLSH & community dashboard metrics fcgov.com/strategicplan Budgeting For Outcome - BFO 27 • Strategic Objectives become the basis for Budget Proposals Mar Apr May Jun Jul Aug Sep Oct Nov Budget Time Line & Process Strategic Plan Finalized Budget Proposals Developed BFO Teams Evaluate & Rank City Manager & Exec Team Evaluates & Modifies Council Discussion Public Hearings Budget Adoption • Staff develops Budget Proposals to achieve Strategic Objectives • BFO Teams (staff & citizens) rank proposals based on achievement of Strategic Objectives • Executive Team input to align with Strategic Plan, Council Work Plan & City Priorities • Staff addresses questions raised by Executive Team • Finalize Budget • Adopted by the end of November BFO – Sample Drilling Platform 28 28 29 * 2018 includes $112M in capital budget for Broadband ** This includes the GIDs, URA and DDA which are appropriated in separate ordinances Amended 2018 * 2019 % Change 2020 % Change Operating $605.6 $601.7 -0.7% $609.2 1.2% Debt 21.9 18.1 -17.3% 14.9 -17.5% Capital 170.3 35.0 -79.4% 27.4 -21.6% Total City Appropriations** $797.9 $654.8 -17.9% $651.6 -0.5% Less Internal Service Funds ($79.2) ($81.0) 2.3% ($85.6) 5.6% Transfers to Other Funds (66.0) (57.9) -12.2% (51.5) -11.1% GIDs (0.5) (0.2) -67.0% (0.2) 0.0% URAs (4.5) (5.9) 29.5% (6.0) 1.5% DDA (12.5) (14.5) 16.0% (14.5) 0.0% Total ($162.7) ($159.5) -2.0% ($157.7) -1.1% Net City Budget $635.2 $495.3 -22.0% $493.9 -0.3% TOTAL BUDGET (in millions) 2019 / 2020 Budget Summary 30 Questions and Clarification 31 Back up slides Financial Entities and Legal Entities In City Audited Financial Statements Not in City Financial Statements City - General Fund, Governmental Funds, Utilities, Golf, Internal Service Funds Poudre Fire Authority (1) General Improvement District #1 (1) Poudre River Public Library District (1) General Improvement District #15 (1) Housing Catalyst Fort Collins Urban Renewal Authority (1) Northern Front Range Metropolitan Planning Org. Fort Collins Downtown Development Authority (1) Northern Colorado Regional Airport (50%) 32 (1) Accounting, payroll, banking, investing, accounts payable, purchasing, etc. performed all or in part by City Finance 33 • Mark-to-market impacts year end numbers during years of with changing interest rates • Investment policy does not allow stocks, derivatives, real estate, etc. Investments allowed are: • Government Agencies such as Fannie Mae, Federal Farm Credit Bureau • Highly rated corporate bonds • Pension Fund results are not reflected here. Separate investment policy from City Earnings on Cash and Investments 34 35 Strategic Plan vs. BFO Strategic Plan – 5 Year View Updated prior to BFO Mission, Vision, Values Outcomes: • Highest level Key Focus Areas • Broad aim to direct efforts • Broad statement Community impact Strategic Objectives (SO): • Something to attain or accomplish • Achievement helps realize Outcome • Ideally – specific & measurable Performance Measures • Metrics tied to each Strategic Objective • Track progress achieving Objective Strategic Plan – 5 Year View Updated prior to BFO Mission, Vision, Values Outcomes: • Highest level Key Focus Areas • Broad aim to direct efforts • Broad statement Community impact Strategic Objectives (SO): • Something to attain or accomplish • Achievement helps realize Outcome • Ideally – specific & measurable Performance Measures • Metrics tied to each Strategic Objective • Track progress achieving Objective BFO – 2 year Budget Cycle Initiatives Tied to Strategic Objectives • Tactics & actions to achieve SO • Initiatives may support multiple SO Core Services: • On-going core services • Each core service includes tactics & actions to achieve SO Enhancements: • New Services & initiatives to achieve SO Linkage & Metrics • Describes how Initiative achieves SO • Metrics tied to each Strategic Objectives BFO – 2 year Budget Cycle Initiatives Tied to Strategic Objectives • Tactics & actions to achieve SO • Initiatives may support multiple SO Core Services: • On-going core services • Each core service includes tactics & actions to achieve SO Enhancements: • New Services & initiatives to achieve SO Linkage & Metrics • Describes how Initiative achieves SO • Metrics tied to each Strategic Objectives 36 What we Need to Do How we Get it Done