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HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 08/11/2020 - 2021 BUDGET PROCESSDATE: STAFF: August 11, 2020 Travis Storin, Interim Chief Finance Officer Darin Atteberry, City Manager Lawrence Pollack, Budget Director WORK SESSION ITEM City Council SUBJECT FOR DISCUSSION Status of the City Manager’s 2021 Recommended Budget and a high-level Performance Measures and Results Review. EXECUTIVE SUMMARY The purpose of this item is to review the economic, revenue and expense assumptions included in the 2021 City Manager's Recommended Budget, which will be delivered to Council and available to the public on September 1, 2020. This work session will also provide an overview of the major 2021 budget themes, public feedback opportunities and the schedule of Council budget meetings and Public Hearings during September through November. GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED 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 Status The 2020 Budget process, called Budgeting for Outcomes (BFO), would have traditionally began with the completion of the City’s 2020 Strategic Plan in April. However, the budgeting process was significantly impacted by the global pandemic. It was determined that modifications would need to be made to the process for 2020, due to the significant unknowns about impacts to our community. In response, Council approved Ordinance No. 067 to suspend the City Code to allow the adoption of a one-year budget and temporarily revise the City’s budgeting process (Attachment 1). There are three primary aspects of these modifications. First, for 2021, Council will adopt a one-year budget instead of the traditional two-year (biennial) budget. This practice will continue for the City’s 2022 budget. Thereafter, the City will return to a two-year budget. Second, the budgeting process would be more tactical, not utilizing the BFO Teams who play such an important role in the BFO process through evaluation of budget requests (Offers) and generation of Offer rankings. Third, public outreach to, and requested feedback from, the community would be delayed, as was the entire budgeting process, to allow for staff to address immediate 2020 public health and fiscal concerns. That outreach has begun and will be discussed during the work session. Key components of our budgeting process remain, including budget requests based on the programs and services provided to the community, a key aspect of Budgeting for Outcomes. Budget requests will still specify direct linkage to at least one strategic objective in the City’s adopted strategic plan, as well as include performance measures directly related to the proposed program/service. These three related components of program/service, strategic objective and measures are an important part of the City’s ongoing organizational performance management process and executive review. August 11, 2020 Page 2 Also, the City Manager’s Recommended Budget will still be published before the first Monday in September, as required by City Charter. It is currently targeted to be delivered to Councilmembers on September 1 and be available to the public thereafter. The traditional Council process will then continue with two public hearings and three work sessions currently scheduled, prior to First Reading. 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 modifications to help address forecasted financial impacts from the pandemic, while also directly addressing Council priorities and the strategic objectives in the City’s 2020 Strategic Plan. Budget Assumptions There are many unknowns about the current pandemic and its impact to the community. Each month brings new data about how the economy is recovering, but no trends have emerged to give high confidence in the City’s revenue forecasts. This was the rationale for going to a one-year budget for the next two years. In collaboration with Colorado State University, the City has modeled revenue forecasts and continues to adjust them as more data is known. Currently, our local economy is being significantly impacted, but not nearly to the extent as other parts of the country. Over the past decade of moderate growth, the City has also prudently built healthy fund balances (aka reserves). Reserves above City policy minimums are often intended for larger capital purchases or other one-time expenses and are typically used in that manner. They are also, however, critically important in times like now to bridge revenue gaps, while maintaining services to the residents and businesses of our community. City staff monitors all revenue sources carefully and utilized the most current information available to set 2021 projected revenues. It is entirely possible that these forecasts will be changed depending on the continuing pandemic’s impact on our economy. This includes the unknown impacts of the 2020/21 school year being remote learning during at least the first quarter. Flexibility and responsiveness will be important as more data is available. The City Manager’s Recommended Budget is being developed on these key assumptions: • Focus on Council and community priorities reflected in the Council’s Priorities Dashboard and the City’s adopted 2020 Strategic Plan, as well as new areas of focus based on the pandemic. • Maintain existing operations, programs and services while seeking ways to do so safely and more efficiently. • Following an estimated 2020 decline of 9.1%, Sales Tax is forecasted at 3.2% growth in 2021 • Total Use Tax forecast is $18 million for 2021, down from 2019 actuals of $22.4 million, based on continued economic activity, building activity and business investment. • Utility rate increases are only proposed within Light & Power and are driven by the following: o PRPA pass thru of energy costs. o The need for repair and maintenance of existing capital infrastructure. o Known capital needs that align with adopted utility master plans. • There are no budgeted wage adjustments for City staff in 2021, except for the contractual increases based on the 3-year collective bargaining agreement with the Fraternal Order of Police. • Medical cost inflation is forecasted at 7.0% and dental cost inflation at 4.5% for 2021. • To reduce the traditional year-end underspend and make that money available throughout the year, salary and benefits will continue to be budgeted at 98% of total estimated costs. • The hiring freeze implemented as a cost saving measure due to the pandemic is proposed to continue through fiscal year 2021, until such time that the estimated budgetary savings have been achieved and economic conditions warrant. The City Manager’s Recommended Budget is built around several key themes: • Minimize Impacts to Service Delivery. • Strategic Service Enhancements and Redeploys. • Focus on Council Priorities and Support Equity Advancement. • Capital Project Investments - Current and Future. August 11, 2020 Page 3 • Difficult Trade-offs. • Maintain Focus on our Work Force. The presentation for the work session will be delivered to Councilmembers on Monday August 10. City Council Budget Meetings Council has a series of work sessions scheduled in September and October to discuss the proposed 2021 Recommended Budget. 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 8, 2020 Work Session Presentations, Questions and Discussion: 1. Culture and Recreation 2. Economic Health 3. Environmental Health 4. Transportation and Mobility September 15, 2020 Regular Meeting Budget Public Hearing 1 of 2 September 22, 2020 Work Session Presentation, Questions and Discussion: 5. Neighborhood Livability and Social Health 6. Safe Community 7. High Performing Government October 6, 2020 Regular Meeting Budget Public Hearing 2 of 2 October 13, 2020 Work Session General Discussion - Final Council Direction November 3, 2020 Regular Meeting First Reading of the 2021 Budget and the 2021 Appropriation Ordinance November 17, 2020 Regular Meeting Second Reading of the 2021 Budget and the 2021 Appropriation Ordinance ATTACHMENTS 1. Ordinance No. 067, 2020 w/ Agenda Item Summary (PDF) Agenda Item 7 Item # 7 Page 1 AGENDA ITEM SUMMARY May 5, 2020 City Council STAFF Darin Atteberry, City Manager Lawrence Pollack, Budget Director Travis Storin, Interim Chief Finance Officer John Duval, Legal SUBJECT First Reading of Ordinance No. 067, 2020 Suspending for Fiscal Years 2021 and 2022 the Biennial Budget Term Required by City Code Section 8-1 and Approving the Temporary Revision of the City’s Budgeting Process for the 2021 and 2022 Budgets. EXECUTIVE SUMMARY This item is coming to Council because it meets the following Priority: (2) Emergency-related items that are not as urgent but need Council consideration. The purpose of this item is to acknowledge modifications to the City's biennial budgeting process due to the current unknowns of the depth and duration of the COVID-19 Pandemic and impacts to the local economy and City revenue streams. STAFF RECOMMENDATION Staff recommends adoption of the Ordinance on First Reading. BACKGROUND / DISCUSSION City Charter Article V, Section 2 provides that the City Manager shall file with the City Clerk on or before the first Monday in September preceding each budget term the proposed budget for that ensuing budget term. The City’s budget term was set in City Code Section 8-1 as being two fiscal years, the next of which is for the fiscal years 2021 and 2022 (2021-22 Budget Term). The COVID-19 global pandemic has caused significant turmoil to economies around the globe and is expected to create significant revenue shortfalls for local governments throughout the nation, the depth and duration of which are not currently known. Thus, the City Manager is recommending that Council suspend for the 2021-22 budget term, by the adoption of this Ordinance, the biennial budget term requirement in Code Section 8-1 in order to allow for a one-year budget term for both 2021 and 2022, but to return to the biennial budget term required by Code Section 8-1 beginning with fiscal years 2023 and 2024. The City Manager is also planning to forego using the BFO process for the 2021 and 2022 budget terms and in its place to use a revised budgeting process better suited to addressing the economic uncertainties that now exist because of the pandemic. This revised budget process will still include prioritizing the community’s needs as established by Council in its recent adoption of the City’s 2020 Strategic Plan. This will be done in a way that will strive to support and retain the City’s workforce, provide clear and frequent communications to Council and the community concerning the process, and that will use a variety of budget-balancing strategies, such as ATTACHMENT 1 COPY Agenda Item 7 Item # 7 Page 2 adjustment to service levels, use of reserves, and the optimal deployment of funds received from the state and federal governments due to the Pandemic. COPY COPY COPY COPY