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HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 06/13/2017 - CITY REVENUE/CONTINGENCY PLANNING AND REMAINING 20DATE: STAFF: June 13, 2017 Mike Beckstead, Chief Financial Officer WORK SESSION ITEM City Council SUBJECT FOR DISCUSSION City Revenue/Contingency Planning and Remaining 2017 Reappropriation Items. EXECUTIVE SUMMARY The purpose of this work session is to convey the City’s budget contingency plan for sales tax softening and guidance on the remaining 2017 Reappropriation Items. Sales Tax results through May 2017 indicate a shortfall from budget. When use tax is included, the short fall to the General Fund is about $493k through May 2017. Other revenue line items are equal to or slightly ahead of budget in the General Fund except for timing on a few line items which are anticipated to end the year on budget. As a result of a potential revenue shortfall if the rest of the year’s sales tax growth remains soft, the City Manager and Executive Leadership Team have been developing a Contingency Plan Framework for adjusting the City budget, in the event there is a revenue shortfall. Staff will review macro-economic indicators, year-to-date revenue and expenditures and a framework for budget adjustments if revenue continues to underperform vs. budget. Staff will also review the remaining 2016 reappropriation items for Council consideration. GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED 1. Is City Council supportive of the contingency framework? 2. Is City Council supportive of staff bringing the remaining 2017 reappropriation items forward for City Council consideration? BACKGROUND / DISCUSSION Macro-economic indicators are mostly strong, aside from softening national GDP and local development project submittals received through May. Growth in local building permits is up YTD through May, although less than YTD through April (as previously presented to the Council Finance Committee). Sales tax is the most significant revenue stream in the General Fund and Keep Fort Collins Great Fund, and is critical in supporting the programs and services funded by the City’s three other voter approved quarter cent tax initiatives. Sales tax growth is up over 2016 in most Colorado Front Range cities; with one exception, Q1 sales tax is growing between 3.5% and 7.1%. In Fort Collins, 2017 sales tax through May is relatively flat compared to 2016. Factoring out a large sales tax audit payment in Q1 2016 and a required remittance of sales tax above the base for the mall indicates underlying moderate 2017 sales tax growth of 3.0% for the year through May. This growth is still below budget by approximately $2.0M. While use tax is down year over year, it is approximately $1.2M over budget resulting in a net shortfall to budget of $0.8M through May. When the 2017-18 Budget was being created, $4.4M was set aside in the General Fund as a preventative measure if sales tax would come in under budget in 2017. Conceptually, this set aside would allow staff time to systematically align 2017 and 2018 expenses with actual sales tax revenue and associated forecast revisions. General Fund reserve balances are healthy with 2016 year end unassigned and available fund balance of $5.0M beyond the $4.4M set aside. Due to sales tax being under budget year to date, it is financially prudent to have a contingency plan that would be implemented upon specified and agreed upon trigger points. The contingency plan being presented is a June 13, 2017 Page 2 framework of the actions that would occur based on future sales tax performance. If sales tax performance remains under budget, specific reductions to programs and other budget line items would be brought back to the Council Finance Committee and then the full City Council. Also for discussion is the remaining 2017 items for which staff is requesting Council consideration for reappropriation. In May, Council approved the reappropriation items brought forward in the ordinance. That ordinance contained the majority, but not all the original requests. The remaining items have been further vetted and remain as priorities to be considered for reappropriation. In the vetting process, several items were excluded from consideration due to not being able to complete the work within fiscal year 2017 due to the timing of the second ordinance. All the items included in the remaining 2017 reappropriation request are considered organizational priorities and could be completed in 2017. ATTACHMENTS 1. Remaining 2017 Reappropriation Requests (PDF) 2. Powerpoint presentation (PDF) Description of Remaining 2017 Reappropriation Requests 1. Fund Dept: PDT Request Name: Neighborhood Renewal Project Fund Source: General Fund Amount: $59,328 Description: These funds were for the Renewal of Neighborhoods in a State of Change BFO Enhancement administered by the Social Sustainability Department. The intent of the offer is to focus public investment in older neighborhoods “in order to stabilize them or begin a restoration process.” Explanation of Why Funds Were Not Fully Expended in 2016: Staff planned and implemented a variety of projects from this fund in 2016 which met the goals defined in the original offer. There were additional projects identified to utilize the remaining funds, however, time ran out towards the end of the calendar year and staff was not able to begin the required procurement process needed to utilize the funds. Staff has been working with Purchasing to create an RFP early in 2017 to facilitate a pilot “asset mapping” project in the North College corridor area to design and implement a robust community engagement process and design a strategy document. This will result in a neighborhood vision which will allow immediate action once the funds are re-appropriated. With recent feedback from residents in the Alta Vista neighborhood regarding the proposed sidewalk construction project, staff envisions a portion of these re-appropriated funds will go towards making additional improvements in that neighborhood. 2. Fund Dept: Comm Dev & Neighborhood Svcs Request Name: Development of Transition Standards for Old Town and Downtown Plans Fund Source: General Fund Amount: $30,000 Fund Source: KFCG Amount: $5,000 Description: During the course of both the Old Town Neighborhoods Plan and the Downtown Plan, the community identified several concerns specifically related to architectural design, building height, parking, and other development impacts in the areas of transition between the Downtown and the adjacent Old Town Neighborhoods. The new transition standards created with these funds implement one of the highest priority issues identified in the two Plans. Explanation of Why Funds Were Not Fully Expended in 2016: Funds were not fully expended by December 2016 for the Downtown Plan and Old Town Plan since the Downtown Plan vendor did not accomplish specific goals established, and they experienced scheduling issues with respect to delivering their final product. Staff has determined that focusing on this high ATTACHMENT 1 Page 2 of 3 priority action item, identified in both Plans, would be a fiscally responsible use of the remaining funds and address an issue of community concern. 3. Fund Dept: Environmental Services Request Name: Advanced Waste Stream Optimization Fund Source: General Fund Amount: $118,785 Description: This offer proposed four general tasks to enable the City to become more systematic about managing the community’s waste stream for optimal benefit: 1) Systematically evaluate “waste” materials using Sustainable Materials Management (SMM) framework. 2) Support innovation in Waste-to-Clean-Energy technology. 3) Implement priority recommendations from SMM assessment, with a particular focus on organics, including building regional partnerships/infrastructure. 4) Advance City organization readiness to engage in waste–to-clean energy at DWRF. Explanation of Why Funds Were Not Fully Expended in 2016: The funds that were used supported a broad and diverse number of projects and programs in 2015 and 2016. Several additional strategies that are central to further advancing Sustainable Materials Management were identified but delayed based upon available staff availability and alignment with regional planning efforts. 4. Fund Dept: Parks Request Name: East Park Satellite Shop Fund Source: General Fund Amount: $59,000 Description: Funds will be used to purchase supplies and equipment for the satellite shop that will serve the new east park district and Forestry crew. The shop is located at the Bacon park site next to Bacon Elementary school on Timberline Road. When the permanent facility is constructed on the new East Park site these items will be transferred and used at the new permanent location to be built in 2018 or 2019. Explanation of Why Funds Were Not Fully Expended in 2016: Funds were not spent in 2016 because the existing house that is being repurposed as a satellite shop will not be available until the tenant moves out in spring of 2017. Page 3 of 3 5. Fund Dept: Parks Request Name: Parks Lifecycle Projects Fund Source: General Fund Amount: $93,655 Description: Funds will be used to renovated restroom/storage area at Edora Park and tennis courts at Troutman Park Explanation of Why Funds Were Not Fully Expended in 2016: Funds were not spent at the Edora restroom/storage area because the complexity of the project delayed the bidding process. There were not sufficient funds remaining to replace the tennis courts at Troutman Park. Re-appropriated funds will be added to 2017 funds to complete this project. 6. Fund Dept: Utility Tech. & Cust. Service Request Name: Cyber Security Consulting Services Fund Source: Utility Customer Service & Admin Fund Amount: $40,608 Description: IT App. Services for Utilities is currently working with a 3rd party cyber security consultant to help identify any risks in the computing environment/infrastructure that needs to be mitigated for the Utilities Billing System. This vendor will also be performing a cyber security assessment on the Electric SCADA System. The 3rd party consultant (AESI) will be working with Utilities to recommend a good Cyber Security Governance Framework. We are putting the previously committed funds to good use now having just worked through a cyber security assessment of the Utilities Billing System. We would like to have the remaining $40,608 of the original BFO approved offer reappropriated for work focused on additional Utilities critical systems. Being able to use these funds would help Utilities to stay ahead of on-going risks, and improve the cyber security maturity level of the overall Utilities Service Area. Explanation of Why Funds Were Not Fully Expended in 2016: During the initial BFO year that the Cyber Security funds were approved (2015), the staff member responsible for carrying out the cyber security program for Utilities was seriously injured in a non-work related accident. She missed many months of work initially, and was not able to return to full-time work until September 2016. As a result, we were only able to finalize an RFP and select a vendor in late 2016. In addition, we believe that the current vendor did not understand the full requirements of the project, which required additional negotiation and led to further delay. Having these funds will help us to keep moving in this vitally critical area. 1 Budget Contingency Planning June 13, 2017 Mike Beckstead, CFO ATTACHMENT 2 Macro-Economic Indicators 2 Macro Indicators Mostly Strong – GDP Softening, Project Submittals Down National: • Consumer confidence 16 year high • Small business confidence optimistic • Unemployment - National 4.5% March – lowest since 2007 • Interest rates Historical lows – anticipated increase • Housing sales & prices Strong • Consumer price index 2.4% last 12 months • Q1 2017 GDP .7% - consumer spending down State / Local: • Unemployment - State Q1 2017 is 2.7%, lowest since 1976 • Business licenses Up 5.8% through May 2017 • Building permits issued up 1.8% YTD May over 2016 • Building permit valuations up 16.5% YTD May over 2016 • Development project submittals received down 23.7% YTD May compared to 2016 Sales Tax – 3 Year Rolling Average 3 Slower Growth Over Last 9 Months….Increased Volatility -15.0% -10.0% -5.0% 0.0% 5.0% 10.0% 15.0% 20.0% % Change 3 Yr Average Front Range Comparison May Results 4 Quarter over Quarter Growth QI 2017 • Fort Collins (1.2%) • Fort Collins adjusted for audit & filing 2.6% • Boulder (.5%) • Loveland 5.9% • Longmont 7.1% • Westminster 3.5% • Thornton 4.5% • Arvada 5.3% Fort Collins – May Results with w/out Compared to 2016 mall mall Sales Tax Month 3.1% 3.1% Sales Tax YTD 1.1% 0.6% Sales Tax YTD (w/o Audit) 3.0% 2.6% Use Tax YTD (8.9%) Compared to Budget YTD Sales Tax $(2,015k) Use Tax 1,226k $( 788k) Moderate Growth in May and Adjusted YTD…. Revenue to Budget Short by $788k Moderate Growth in May and Adjusted YTD…. Revenue to Budget Short by $788k General Fund Revenue – YTD May 5 Total General Fund Revenue Slightly Under Budget Budget 2017 Actual 2017 Over/ (Under) Budget Sales & Use Tax $ 34,845 $ 34,352 $ (493) Property Tax 13,858 13,555 (303) PILOTs 3,763 3,861 97 General Govern Fees 3,140 2,538 (602) Other 6,046 7,325 1,279 Subtotal $ 61,652 $ 61,630 $ (21) Unrealied Gains/Losses 0 296 296 Total $ 61,652 $ 61,927 $ 275 General Fund Contingency – Economic Uncertainty 6 General Fund Contingency Intended as a Buffer & Allows Continued Services Without Reduction Until/If a Downturn Occurs $4.4M General Fund Reserves Assigned as Contingency • Buffer for a potential economic downturn • Avoid premature reductions in services without a downturn • Allow time to plan changes to the expense structure • A portion of the set aside can be used in each year • Reduced available funding for enhanced programs and services which could otherwise have been provided to the community General Fund Reserve Balances 7 General Fund Reserve Balance is Healthy • GF Balance increased from $40M to $75M • Minimum fund balance reserves increased from $22M to $33M • 2016 year end unassigned and available fund balance $5M • In addition $4.4M contingency 2017 Revenue Scenarios 8 Macro Indicators and Comparison to Front Range Indicate Slow to Moderate Growth GF KFCG Total GF KFCG Total GF KFCG Total Sales Tax $ (3.6) $ (0.9) (4.5) $ (3.0) $ (0.7) (3.7) $ (1.3) $ (0.4) (1.7) Use Tax 0.8 0.1 0.9 0.8 0.1 0.9 1.5 0.4 1.9 Property Tax - - - - - - - - - PILOTs 0.1 - 0.1 0.1 - 0.1 0.1 - 0.1 General Govt (0.6) - (0.6) (0.6) - (0.6) (0.6) - (0.6) Other 1.3 - 1.3 1.3 - 1.3 1.3 - 1.3 Total 2017 $ (2.0) $ (0.8) $ (2.8) $ (1.4) $ (0.6) $ (2.0) $ 1.0 $ - $ 1.0 Est 2018 - ST Only $ (4.5) $ (3.7) $ (1.7) 1% Growth Slow Growth - 2.6% On Budget Growth Over/(Under) Budget Over/(Under) Budget Over/(Under) Budget Contingency Plan Framework 9 Establish Trigger Points • Monitor revenue monthly (all revenue streams in all funds) • Trigger Point #1: 2 of 3 months of negative sales tax growth • Trigger Point #2: Overall continued slow sales tax growth into July Budget Adjustment Actions – in order of priority to achieve adjustments • Sweep Vacancy & Fuel savings – estimated at $700k thru May in GF & KFCG • Utilize a portion of $4.4M GF set aside each year − Blend between use of set aside and reductions below − Max 1/3 in 2017 and 2/3 in 2018 • Stop Doing List: • Utilize Drilling Platforms to identify programs, consulting, purchased services Monitor to Trigger Points….Develop Specific Stop Doing List Update Council Finance Committee at August Meeting Framework Example 10 If July, revenue shortfall estimated at $2.0M in 2017 and $3.7M in 2018 CM & ELT Have Developed Stop Doing List for Both Professional/Tech & Programs CM & ELT Have Developed Stop Doing List for Both Professional/Tech & Programs Stop Doing Criteria • Drilling Platform priority • Community Safety • Programs status 2017 2018 Revenue Shortfall $ (2.0) $ (3.7) Salary/Fuel Savings Sweep 0.7 Contingency 1.0 2.0 Programs, Consulting, Prof/Tech Reductions 0.3 1.7 Total Savings Initiatives $ 2.0 $ 3.7 11 Remaining 2017 Reappropriation Requests Balance, Continued Priorities – Recommend Funding Macro Indicators, Comparisons, Overall Revenue, Healthy Fund Balance, Continued Priorities – Recommend Funding 11 Note: $375k of items requesting reappropriation have been removed, due to the inability to complete the work in 2017. Fund Department Request Name $ Requested General Fund PDT Neighborhood Renewal Project $59,328 Comm Dev& Neighborhood Svcs Development of Transition Standards for Old Town and Downtown Plans (see KFCG) 30,000 Environmental Services Advanced Waste Stream Optimization 118,785 Parks East Park Satellite Shop 59,000 Parks Parks Lifecycle Projects 93,655 Subtotal: $360,768 Keep Fort Collins Great Fund Comm Dev& Neighborhood Svcs Development of Transition Standards for Old Town and Downtown Plans (see General Fund) $5,000 Utility Customer Service & Admin Fund Utility Tech. & Cust. Service Cyber Security Consulting Services $40,608 Total Postponed Reappropriation Requests: $ 406,376 12 Council Questions • Is Council supportive of the Contingency Plan framework • Is Council supportive of staff bringing forward a 2nd re- appropriation Ordinance 13 Supporting Data Governmental Actuals vs. Budget by Fund YTD May 14 General Fund $1.8M Under Budget, KFCG $4.1M Under Budget Budget 2017 Actual 2017 (Over)/ Under Budget General Fund $62,522 $60,720 $1,802 Keep Fort Collins Great 11,638 7,555 4,083 Natural Areas 7,138 7,362 (224) Cultural Services 1,911 1,531 380 Recreation 2,587 2,447 139 Transportation 9,040 9,073 (33) Golf* 1,400 1,393 7 Self Insurance Fund 2,392 2,240 152 Benefits Fund 11,476 11,191 284 URA - N. College District 2,760 2,599 161 Other Funds 32,492 21,294 11,198 Fund Lapsing Total 145,355 127,404 17,950 Less Transfers & Depreciation (28,328) (22,674) (5,654) TOTAL $117,027 $104,731 $12,296 Governmental YTD Actuals vs. Budget by Expense Category YTD May 15 $12.3M Under Budget April YTD, $1.1M in Personnel Budget 2017 Actual 2017 (Over)/ Under Budget Personnel Costs $39,208 $38,107 $1,101 Purchased Prof & Tech Services 20,064 18,042 2,021 Purchased Property Services 17,076 10,816 6,260 Other Purchased Services 15,180 14,760 420 Supplies 7,224 5,664 1,559 Capital Outlay 7,251 6,533 718 Other 2,435 2,164 271 Debt & Other Uses 8,589 8,644 (55) 117,027 104,731 12,296 Q1 Actuals vs. Budget – GF & KFCG 16 Significant Underspend in Both GF & KFCG… Opportunity for Stop Doing List YTD through May 2017 General Fund Keep Fort Collins Great Budget 2017 Actual 2017 (Over)/ Under Budget Budget 2017 Actual 2017 (Over)/ Under Budget Personnel Costs $23,360 $23,043 $317 $2,708 $2,520 $188 Purchased Prof & Tech Services 13,523 12,889 634 2,362 1,667 695 Purchased Property Services 5,817 3,788 2,028 4,434 1,953 2,481 Other Purchased Services 1,421 1,430 (9) 89 93 (4) Supplies 2,253 1,621 633 588 576 11 Capital Outlay 1,412 1,982 (571) 1,039 388 652 Other 1,897 1,660 237 381 336 45 Debt & Other Uses 5 3 3 38 22 16 49,688 46,416 3,271 11,638 7,555 4,083 Transfers 12,834 14,304 (1,470) TOTAL 62,522 60,720 1,802 11,638 7,555 4,083