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Home My WebLink AboutCOUNCIL - AGENDA ITEM - 03/27/2018 - 2019/2020 BUDGETING FOR OUTCOMES (BFO) CONSIDERATIDATE: STAFF: March 27, 2018 Lawrence Pollack, Budget Director Mike Beckstead, Chief Financial Officer Carol Webb, Water Resources/Treatmnt Opns Mgr Teresa Roche, Chief Human Resources Officer Greg Yeager, Police Deputy Chief WORK SESSION ITEM City Council SUBJECT FOR DISCUSSION 2019/2020 Budgeting for Outcomes (BFO) Consideration Items. EXECUTIVE SUMMARY The purpose of this item is to inform and seek input from Council on several items that will be significant to the upcoming BFO process. Topics to be discussed include: 1. Police staffing process 2. Compensation and Benefits 3. Process improvements to capital cost estimates 4. Potential infrastructure financing projects GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED Staff is seeking to: • Review significant factors and inputs to the 2019/20 BFO Process • Understand Council thinking and guidance prior to engaging in budget discussion • Share high-level process improvements to capital cost estimate BACKGROUND / DISCUSSION 1. Police Staffing In June of 2016, the City Council generally accepted a staffing methodology presented by Fort Collins Police Services (FCPS). The projection for future staffing was 123 additional officers over a 12-20 year period (6- 10/year) leading up to a City build-out and top population of 255,200. The model provides 30 minutes of Reactive Time and 30 minutes of Proactive Time per Patrol officer, per hour. In 2017, City Staff and the Futures Committee updated the Police Priority 1 (emergency call) response time target to arrival within 5 minutes and 30 seconds. Current FCPS staffing is preventing the Agency from meeting either target. Staff will work to align methodology assumptions with current planning estimates for population at build out and the date build out is expected to occur. Staff will also incorporate outcome goals for both Reactive & Proactive time and the new Police Priority 1 response time target to develop staffing targets to be utilized within the 2019/20 BFO process. Staff anticipates offers in two groups, one that keeps staffing aligned with population growth and one that support improvement in achieving outcome target. FCPS has a recruitment, hiring, and training plan to incorporate additional police officers into its workforce. The hiring and training of sworn officers requires a 12-18 month process. Staffing plans will include other Agency personnel to include Community Service Officers, Dispatchers, and support personnel that must be March 27, 2018 Page 2 added in the same time frame. Due to the hiring and training timeline, updating the staffing methodology and supporting new positions now will allow FCPS to recruit, hire, and train the best personnel in time to meet community needs. 2. Compensation and Benefits Total Compensation costs make up 25% of the City’s operating budget and as such, careful and thoughtful attention is paid on how to attract, retain and reward our workforce within a sustainable financial model. Staff will provide a high-level overview of the compensation forecast methodology used to determine the merit increase budget and share preliminary assumptions for 2019-2020. Additionally, information will be shared on 2016- 2017 benefits costs, the status of our benefit fund reserve balance, how we define market for our health care plans and where the City is compared to market. 2019-2020 considerations and preliminary assumptions will be reviewed. A deeper dive is scheduled for the May Council Finance Committee. 3. Improvements to Capital Project Cost Estimates Utilities Capital Project Cost Estimates Estimating budgets for Capital Projects is critical to City’s budget process. These budgets need to be accurate for: 1) transparency on what the project will cost and 2) appropriating sufficient funds to deliver the project. There are a variety of factors that influence a Capital Project budget offer such as: level of design, permitting, construction cost escalations, ROW, and contingency. The level of understanding of these factors can greatly improve the accuracy of the budget. Staff is considering some improvements to better inform the budget process for certain Capital Projects. Capital Projects are generally identified during the master planning process. The master plans evaluate current and future needs and recommend capital projects to address those needs. Conceptual level costs are identified with limited design and high contingencies. Projects are incorporated into capital improvement plans and prioritized based on levels of service. Individual projects are then identified to be carried forward as a budget offer in the Budgeting for Outcomes process. Currently, budget offers include funds for design and construction. The budget amount is usually based on the conceptual level cost estimate from the master plan. This process can lead to challenges for the project such as: identifying design and permitting constraints after appropriation which may require additional funds to complete the project. Also, the design and permitting process can take up to 12-18 months leading to a time lag from when funds are appropriated to when construction costs are incurred. An improvement to the Capital Project budgeting process is to appropriate design and construction funds in sequential budget cycles. The process would allow the design to begin ahead of appropriating funds for construction. The project team can then identify project constraints and develop a more informed construction budget and schedule for the next budget cycle leading to greater accuracy and transparency. Other Capital Project Cost Estimate Improvements Additional review and verification of costs associated with facility construction, remodeling, large IT systems projects and programs that require significant CPIO and/or HR resources will also be incorporated into the BFO process. In summary: (1) Staff initiating a project will work with the appropriate support organization to review and verify assumptions and cost estimates as part of the offer development (2) After the first round of offer submittal, the budget office will pull any offers per above and share with the appropriate support organization to ensure all have been reviewed. March 27, 2018 Page 3 4. Potential infrastructure financing projects Several projects are currently in discussion with Council that will requires external borrowing to complete. The projects include: (1) I-25/Prospect Interchange - estimated at $17.1M with financing needed April 2019. With the I25 expansion, an opportunity to upgrade a failing intersection with shared funding from Colorado Department of Transportation (CDOT), property owners, Timnath and the City was identified. Council has approved an intergovernmental agreement with CDOT outlining the City’s commitments to fund this project. (2) Police Training Facility - estimated at $8.5M. This project is being worked jointly with Loveland. Council has previously approved $0.8M for design work with an understanding that staff will return to Council with final scope and costs seeking a decision to move forward or not. Total costs are estimated at $18.5M and the scope will include indoor firing range, classrooms, high speed driving track and skid pad. The project will be reviewed with Council at the August 28 Work Session. A decision to proceed would need funding in early 2019. (3) Vine/Lemay Grade Separated Crossing - estimated at $10.0M. Timing on funding of this project is flexible. This project will be reviewed at Council Finance Committee on March 19. A high-level overview of each project is provided in the presentation as well as a summarization of debt service requirements if all three projects were selected. ATTACHMENTS 1. Powerpoint presentation (PDF) 1 2019/20 BFO Considerations March 27, 2018 ATTACHMENT 1 Agenda 2 • Introduction • Police Staffing Process • Compensation & Benefits • Improvements to Capital Cost Estimate • Potential Infrastructure Projects ATTACHMENT 1 Introduction 3 Objectives: 1. Review significant factors and inputs to the 2019/20 BFO Process 2. Understand Council thinking & guidance prior to engaging in budget discussion 3. Share high level process improvements to capital cost estimate Note: a detailed review of budget assumptions is schedule for the May Council Finance Committee meeting and will also be included in the August 14th Budget Review work session ATTACHMENT 1 Police Staffing 4 ATTACHMENT 1 Currently Budgeted Police Staffing Status 5 FCPS was authorized new personnel in the 2017-2018 budget: •(9) Officers •(1) Detective • (1) Dispatcher • (2) Police Services Technicians • (1) Property and Evidence Technician All have been hired. Civilians working at full capacity, but some officers remain in various training phases: • (8) officers at police academy • (7) officers in mini-academy & field training • (5) of these officers will fill existing attrition spots ATTACHMENT 1 6 Police Hiring & Training Timelines Recruitment and Hiring • FCPS diversified hiring practices and increased hiring incentives in 2017 • Resulted in 6-year record of police officer applicants (333) • Hiring and training takes 12 to 18 months • Hiring process: 24 weeks (approx.) • Training: • 22 week academy for non-certified officers • 9 week mini-academy at FCPS for all new officers • 15 week field training program for all new officers • Steady increases in authorized strength can meet City growth demands ATTACHMENT 1 Police Staffing Needs 7 Growth Personnel: • Align staff requirements to Community build-out population and date of build-out • Utilize 30/30 methodology to model staffing requirements Meet Outcome Targets: • To achieve desired service levels Outcome Targets Drive Staffing: • 5 minute 30 second response time to Priority 1 calls • Patrol officer 30/30 time split • 50% reactive • 50% proactive ATTACHMENT 1 Police Staffing Council Discussion 8 Council Questions & Discussion on Police Staffing ATTACHMENT 1 Compensation & Benefits 9 ATTACHMENT 1 10 Total Compensation = 25% of City Operating Budget • 2018 Budget Allocation and Pay Increases • Budget for 2018 = 2.5% of projected base salaries • Average Pay Increase: 2.42% • 2018 Medical Employer Premium per Employee Per Year (PEPY) = $11,364 Total Compensation 2018 Highlights ATTACHMENT 1 Compensation Forecast Methodology 11 Quantitative Analysis • Review economic factors • Review actual salary to market data Qualitative Analysis • Outreach to peer cities to gather salary budget data Indexes and Source Data Analyzed • Employers Council (EC) • Consumer Price Index (CPI) – Local and National • Real GDP Growth Rate • Employment Cost Index (ECI) Salaries and Wages • Fort Collins Unemployment Rate ATTACHMENT 1 12 2015 2016 2017 2018 National1 3.0% 3.0% 3.0% 3.1% Colorado2 3.0% 3.0% 3.0% 3.2% Colorado Peer Cities 2.8% 3.0% 3.0% 3.5% City of Fort Collins 2.0% 2.0% 2.5% 2.5% 1 Source: WorldatWork Salary Budget Surveys 2 Source: Employers Council Average Salary & Range Projections Surveys 2015 – 2018 Salary Budget Comparison 2019 – 2020 Preliminary Assumptions: 3.0% – 3.5% Based on forecasted economic indicators and concern regarding competitive position relative to peers ATTACHMENT 1 13 2016 - 2017 Medical & Rx Summary • 2016 Total Plan Costs: $21.9M; Per Employee Per Month: $1,076 • 2017 Total Plan Costs: $21.0M; Per Employee Per Month: $1,006 • 6.5% Decrease due to: • Membership • Large Claimants Reduced • Rx Savings ~$700K - $1M • Increase in Generic Utilization • Overall Good Year • Benefits’ Fund Balance above Policy Minimum ATTACHMENT 1 What Does ‘Market’ Mean? 14 Public v. Private Health Plans Premiums Budget Plan Design •HMO • PPO •POS • HDHP Employer Employee Industry Population Location Full or Self Insured Revenue v. Expense ATTACHMENT 1 15 Are We Market Competitive? Fort Collins Plan Design Premium Single (13%) Premium Spouse (29%) Premium Children (29%) Premium Family (29%) Cost/ Claim Share Consumer Choice Public + In Market - 6% - 5% - 4% In Market - Private + + 8% - 12% + 5% + 4% + 4% In Market - ATTACHMENT 1 16 2019 – 2020 Proposed Budget Medical – Increase Employer Cost • 2019: 2.5% • 2020: 5% Dental – Increase Employer Cost • 2019: No increase • 2020: 3% Increase to City Budget: • 2019: $650K • 2020: $1.2M Assumes 3.5% Annual Enrollment ATTACHMENT 1 17 2019 – 2020 Considerations CBU Commitments • Total Compensation Committee • RFP for pre-65 Retiree Heath Coverage Model High Deductible Health Plan w/ Health Savings Account • Align with Total Rewards Philosophy – Choice • Model with UMR PPO Plan Affordable Health Premium • Premium subsidy for low income employees <$40K ATTACHMENT 1 Compensation & Benefits Council Discussion 18 Feedback from Council • Questions regarding our compensation methodology? • Initial comments to preliminary assumptions for 2018-2019 merit increase budget? • Questions about the definition of market for benefits? • Initial comments about the potential benefit options for 2019-2020? ATTACHMENT 1 Improvements to Capital Cost Estimates 19 ATTACHMENT 1 Capital Project Budgets 20 • Construction cost • Design cost • Construction services • Permitting & ROW • Project management • Contingency ATTACHMENT 1 Capital Project Budgets 21 • Cost Verification (estimate) • Escalation (when it will be built) • Contingencies (address what we don’t know) • Level of Design (the more complete, the less risk) ATTACHMENT 1 Current Capital Project Budgets MASTER PLANS Project ID Conceptual Costs CAPITAL IMPROVEMENT PLAN Prioritization Levels of Service BUDGET OFFER Design Construction 22 ATTACHMENT 1 ADVANTAGES • Total budget appropriated • Shorter duration between design and construction CHALLENGES • Based on limited design • Permitting unknowns • Ties up capital during design and permitting phase • Potential for additional appropriations needed 23 Current Capital Project Budgets ATTACHMENT 1 Improved Capital Project Budgets 24 MASTER PLANS Project ID Conceptual Costs CAPITAL IMPROVEMENT PLAN Prioritization Levels of Service BUDGET OFFER Design FUTURE BUDGET OFFER Construction ATTACHMENT 1 Improved Capital Project Budgets ADVANTAGES • Higher level design means fewer unknowns • More informed budgets/ schedules • Construction costs incurred within appropriation year CHALLENGES • Longer duration between design and construction • Spans multiple budget cycles • Shifting priorities 25 ATTACHMENT 1 Improvements to Capital Cost Estimates 26 Improvements to Other Large Project Estimates • Facility / vertical construction… Facilities • New space, equipment or vehicles… Facilities & Fleet • IT equipment, software, outside vendor support, web design… IT • Training programs, internal / external outreach and education… CPIO/HR Prior to offer submittal, seller will work with support organization in developing offer costs, timelines and details After first round inputs, budget will pull all offers related to above and share with support organizations to ensure input and review has occurred ATTACHMENT 1 Capital Cost Estimates Council Discussion 27 Council Questions & Discussion on Capital Cost Estimate Improvements ATTACHMENT 1 Infrastructure Projects 28 ATTACHMENT 1 Potential Infrastructure Projects 29 Several infrastructure projects are under discussion that will required debt service in 2019/2020 if approved • I25/Prospect Interchange – approximately $17M • Police Training Facility – approximately $8.5M • Vine/Lemay grade separated crossing $10M ATTACHMENT 1 30 • January 2018 IGA with CDOT commits City to $19 million project • Structuring, collateral, and project options presented to Finance Committee 10/2017 • Finance via Certificates of Participation (COPs) • $1.3 million new debt service from General Fund • Coincides with maturity of existing debt, freeing $433K • Total Cost $31M • Includes $7M for Urban Design • CDOT $12M - 50% of base design • City/Property Owners/Timnath $19M • FC = $8.25M • Property Owners = $8.25M • Timnath = $2.5M • Current Estimate - Borrow $17.1M • $19M less ROW & TCEF contribution Project Costs Financing Infrastructure Projects I25/Prospect Interchange ATTACHMENT 1 Training Facility Features and Capital Cost $18.5M concept facility includes: • 50 yard, 20 lane indoor Pistol Range • 100 yard, 10 lane indoor Rifle Range • 3 classrooms • Office Space • Driving Skid Pad • 1 mile Driving pursuit/speed track • Room to add on/grow in future ATTACHMENT 1 • Facility is jointly owned and operated and costs split 50/50 • Loveland will lead on contracts – Fort Collins reimburses • First IGA & Appropriation focused on design - $1.6M • Second IGA & Appropriation will focus on governance, operations & construction - $16.9M 50% Share Fort Collins $ 9,259 Loveland 9,259 Total $ 18,519 Anticipated Capital Need ($000's) • FC Financing for Construction - $8.5M Project Details Financing Infrastructure Projects Police Training Facility ATTACHMENT 1 33 • Increasing Congestion and Delay (Train Switching and Vehicle Traffic) • Historic Neighborhood Livability: Pedestrian Safety, Air Quality, and Connectivity Issues • Reduce Traffic Along Ninth Street Infrastructure Projects Vine/Lemay Crossing ATTACHMENT 1 34 1. “Pay as We Go” Option – (Save up and Build the Project in the Future) 2. Debt Financing Option – Similar to Police Training 3. Debt Financing Option – Proposed Tolling System Total Project Cost $22M* BFO Offers (already appropriated in the 15/16 and 17/18 budgets) $ 2.0M Transportation Capital Expansion Fee (TCEF) Contribution $ 10.0M** Additional Funding Needed $10M * Denotes 2017 Dollars (Will Inflate yearly with Material Cost Escalation starting in late 2018) ** $10.0M (TCEF) includes $1.4M of Phase 1 Construction Infrastructure Financing Vine/Lemay Crossing ATTACHMENT 1 Cumulative Debt Potential 35 Debt Srvc Capacity freed in 2019 ($.4) Capacity needed with I25/Prospect* 1.3 Less Timnath share (.2) Capacity needed with Training Facility .7 Capacity needed with Vine/Lemay .8 Capacity freed with Police HQ Refinance - Capacity needed for all potential projects $2.2 Options to Explore • Longer maturities • Partial cash funding from Reserves • Interest Rates • Assumptions • New 20 year financing for each Project • 4.5% interest rate ($ million’s) Capacity needed for I25 & Police Training only $1.4 ATTACHMENT 1 Infrastructure Projects Council Discussion 36 Council Questions & Discussion on Infrastructure Projects & Financing ATTACHMENT 1