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HomeMy WebLinkAbout1983-165-10/04/1983-ADOPTING THE FINANCIAL AND MANAGEMENT POLICIES RELATING TO THE 1984 FINAL BUDGET RESOLUTION 83- 165 OF THE COUNCIL OF THE CITY OF FORT COLLINS ADOPTING THE FINANCIAL AND MANAGEMENT POLICIES RELATING TO THE 1984 FINAL BUDGET WHEREAS, the City Manager and City Council have reviewed various financial and management policies in conjunction with the annual budget process and five year plan, and WHEREAS, the City of Fort Collins is committed to sound financial planning and direction, and WHEREAS, these policies form the basis for various decisions affecting the 1984 final budget, and WHEREAS, City Council wishes to formally adopt these financial and management policies in conjunction with the adoption of the budget ending fiscal year 1984 NOW, THEREFORE, BE IT RESOLVED BY THE COUNCIL OF THE CITY OF FORT COLLINS that the following financial and management policies be, and the same hereby are, adopted as the basis for the resolution adopting the 1984 Budget for the City of Fort Collins 1 CATEGORIZATION OF CITY SERVICES In 1983, the City Council reviewed and categorized all City services in order to set priorities for allocating available money These categories are Basic or Core Services - these are services that are best performed at the local eve anT are most closely linked to protecting the health and safety of the citizens Legally mandated services or commitments are also included in this category Maintenance of Effort Services - these are services which the City has traditionally prove a or w ich reflect a major capital investment re- quiring an expenditure of funds to maintain Quality of Life - these are activities which are provided for more spe- cializedups and enhance the desirability of Fort Collins as a place to live These categories were applied to City services in the following manner 5e —J Basic or Core Services Debt Payments Fire Light and Power Police Storm Drainage Streets Water and Sewer Maintenance of Effort Services Cemeteries Engineering Facilities General Administrative Services Internal Service Activities Library Park Maintenance Street Lighting Transfort Quality of Life Airport Community Services Golf Lincoln Center Museum Open Space Recreation 2 SALES AND USE TAX DISTRIBUTION SALES AND USE TAX DISTRIBUTION TOTAL It 10 1/40 DISTRIBUTION 1968 1980 1982 PER 1t General Fund 100% 25% --- 125% General City Capital Improvements --- 6% 25% 31% Seven Year Capital Program Operation & Maintenance --- 30% --- 300v Street Debt Service --- 25% --- 25% Transfort --- 10% --- 100 Reserves --- 4% --- 4% TOTAL 100% 100% 25% 225% -2- J The debt service for streets is to pay for the street rehabilitation and new construction program begun in 1980 As the debt service payments decrease, the difference between the debt service and the revenue generated by 1/44 sales and use tax will be allocated as follows 1 Any difference between the debt service and the revenue generated by 1144 sales and use tax up to $250,000 will be allocated to the General Fund 2 Any difference between the debt service and the revenue generated by 1/44 sales and use tax over $250,000 will be allocated to the Capital Projects Fund for general City capital projects 3 WATER AND SEWER UTILITIES Formally adopted financial policies are an important factor in plan- ning the financial operations of the Water and Sewer Utilities Compre- hensive financial policies should include statements concerning o Net Income Requirements e Capital Cost Financing e Reserve Requirements o Rate Requirements Policy statements have been developed for each area listed above and incorporated into the five-year Water and Sewer financial plan NET INCOME The net income of the Water and Sewer Utility shall be at least equal to the annual cost of the following - Principal reductions of outstanding bonds - Loan repayments to Federal or State agencies - Annual operating reserve increases RESERVES The following reserves shall be established and maintained in the appli- cable utility - Operating reserve at least equal to 2`6 of the projected annual operating revenue - Plant Investment Fee reserve equal to the annual fees less annual cost allocated to System Expansions - Capital reserve equal to the amount of bond proceeds available at the end of one fiscal year to be expended in the next fiscal year - Debt reserve equal to the amount required by individual bond ordinance -3- RATE REQUIREMENTS Utility rates shall be set at a level to provide for the net incone requirement in each fiscal year Levelized rate increases are preferred and, when possible, should be achieved through levelized expenditures CAPITAL COST FINANCING Annual capital cost shall be identified as one of three types 1 Normal replacement of the existing system 2 System improvements that benefit the existing and future popula- tion (System Improvements) 3 System expansions that benefit future populations (System Expansion) Normal replacements shall be financed on a Pay-As-You-Go basis from a reserve for depreciation funded from current rates System improvements shall be debt financed over the life of the improvement and the annual de t service shall be funded from current rates System ex ansion shall be funded on a Pay-As-You-Go basis from a combina- tion o ant nvestment Fees and Contributions In Aid of Construction Federal and/or State grants may be utilized to fund portions of or all of capital costs 4 CAPITAL IMPROVEMENT POLICY The development of the Capital Improvement Program has been significantly modified in the 1984 Budget by Resolution -483-86, dated May 3, 1983 Council stated its intention "to develop and implement a program for soliciting citizen involvement and participation in formulating a Capital Improvements Program and the funding therefor" This was accomplished with the adoption of Resolution #83-94, dated June 7 , 1983, creating a Citizen's Advisory Committee on Project RECAP (RE-evaluation of CApital Projects) Council directed the Citizen' s Advisory Committee on Project RECAP to make recommendations not only on the capital improvement needs of the community, but also on potential methods of financing those improvements Accordingly, the development of the Capital Improvement Program was seg- regated into two components 1) those staff-recommended projects for which specific funding sources had already been identified, i e the "Utilities" portion of the Capital Projects Fund (Sewer Projects, Storm Drainage Basin Improvements and Water Projects) as well as the Parkland Projects (Both Utilities and Parkland have specifically dedicated revenue sources) , and -4- 2) those staff-recommended projects for which funding sources had not been identified, i e General City Capital Projects This latter category was the subject of Project RECAP Utilizing Project RECAP's recommendations as a base, staff added some projects and deleted others and developed a program for 1984 General City Capital Projects With the incorporation of General City Capital Projects into the 1984 Budget, the City of Fort Collins will continue to operate under its existing Capital Improvement Policy 1 The City will make all capital improvements in accordance with the adopted Capital Improvement Program and the Capital Project Management Control System 2 The City will identify estimated costs and funding sources for each capital project requested before it is submitted to City Council 3 The City will use intergovernmental assistance to finance only those capital improvements that are consistent with the Capital Improvement Plan and City priorities and whose operating and maintenance costs have been included in the operating budget forecasts The 1984 Budget continues to follow the capital financing policy adopted with the 1983 Budget During the development of the 1983 Budget, an overall strategy was developed to give direction on how capital projects should be financed based upon the different types of capital improvements These projects (excluding Water and Sewer) were categorized as Replacement - capital expenditures relating to normal replacement of worn or obsolete capital plant • Expansion - capital expenditures relating to the construction of new or expanded facilities necessitated by growth Unusual - capital expenditures for improvement that enhance the quality of life in Fort Collins and are consistent with the City' s goals, but cannot be categorized as essential for the provision of basic services or maintenance of life The overall policy developed to finance capital improvements (excluding Water and Sewer) addresses these three categories REPLACEMENT In general , capital expenditures relating to the normal replacement of morn or obsolete capital plant will be financed by reserving an amount -5- of annual working capital provided from depreciation These projects will be financed on a pay-as-you-go basis with debt financing considered where appropriate The formula for computing the amount of reserves for capital replacement will be integrated with the current Capital Reserve Policy and Debt Financing Policy In those funds in which depreciation is not accounted for, a method for calculating the annual depreciation of replaceable assets will be developed in order to reserve an amount of annual working capital for replacement EXPANSION The present policy concerning capital plant expansion relates to new growth and will continue in effect This policy directs that these capital expend- itures be financed primarily by new development in the form of development fees, plant investment fees, and contributions-in-aid-of-construction These projects will be financed primarily on a pay-as-you-go basis but when the City' s share of the new improvements can be determined to benefit the overall population in the future, debt financing may be appropriate This policy will be integrated with the City' s present Capital Reserves and Debt Financing Policies UNUSUAL The policy relating to unusual capital expenditures directs the City to look to the ultimate beneficiary of each capital improvement in order to determine the source of funding As projects are identified, they will be funneled through a decision process in order to 0 determine whether projects are acceptable from the point of view of municipal goal achievements or cost benefit analysis 0 evaluate each capital projects' relevant cash flow in order to determine if a project is financially viable 0 prioritize capital improvements based upon these findings 5 RESERVE POLICY Formally adopted reserve policies are an important factor in maintaining the City of Fort Collins in good fiscal health There are three primary types of reserves 0 Operating Reserves 0 Capital Reserves 0 Debt Reserves -6- The degree of need for these reserves differs based upon the type of fund or operation involved However, one policy statement for each type of reserve can be uniformly applied to all funds OPERATING RESERVES There are two types of operating reserves 1 An appropriated contingency which provides for unexpected or unanticipated expenditures during the years This is the amount of contingency budget, normally stated as part of the operating budget 2 Revenue reserve of working capital is established to provide for unforeseen revenue losses If something happens to the economy, there is flexibility without worrying that current expenditures will exceed the total revenue available These reserves are not appropriated as part of the annual budget but are utilized at the end of the fiscal year, if necessary The amount of reserve is based upon potential revenue loss that would most probably occur in a given fund CAPITAL RESERVES (AS APPLIED TO UTILITIES) Capital reserves are established in order to provide for normal replacement of existing capital plant and additional capital improvements financed on a pay-as-you-go basis The amount of the reserve is determined by averaging the dollar value of capital needs as shown in the Capital Improvement Program A second type of capital reserve is an appropriated capital contingency, which provides for the conceptual study and preliminary design of unan- ticipated capital improvements Debt financed capital improvements by definition are financed by the proceeds of bond issues and do not require capital reserves NOTE Because of the incorporation of Project RECAP into the 1984 Budget process, specific guidelines for reserves have not been identified for General City Capital Projects Such guidelines will be developed and presented to Council for adoption at a later time DEBT RESERVES Debt reserves are established to protect bond holders from payment de- faults Adequate debt reserves are essential in maintaining good bond ratings and the marketability of bonds -7- Debt reserves are established by bond ordinance and normally provide for a reserve equal to one-half of the average annual outstanding debt service requirement The reserve policy recommended that has been included in the 1984 budget and five-year plan is as follows The City will establish and maintain OPERATING RESERVES 0 Equal to 2% of the annual operating expenditure budget by fund, to protect against unanticipated expenditures, • Equal to 2% of projected annual operating revenue by fund, for the purpose of protecting against unexpected revenue losses, CAPITAL RESERVES 0 Equal to the annual average of the five year projected additions for the replacement and additions to the existing capital plant, financed on a pay-as-you-go basis, for the purpose of providing for capital improvement needs of the City, 0 Equal to 5% of the amount annually appropriated for capital con- struction, for the purpose of providing for the costs of prelim- inary study and design, and DEBT RESERVES Debt reserves as required by market conditions in concert with each debt issued and established by bond ordinance These policy statements are intended to apply to the various funds of the City , however, it is recognized that various Federal , State, and local laws and regulations, and specific financial policies may supercede this reserve policy 6 DEBT POLICY In 1981 , the City of Fort Collins adopted the following debt financing policy POLICY STATEMENT The City of Fort Collins will use debt financing when it is appropriate It will be judged appropriate only when the following conditions exist 1 When non-continuous capital improvements are desired -8- 2 When it can be determined that future citizens will receive a benefit from the improvement When the City of Fort Collins utilizes long-term debt financing it will ensure that the debt is soundly financed by 1 Conservatively projecting the revenue sources that will be uti- lized to pay the debt 2 Financing the improvement over a period not greater than the useful life of the improvement 3 Determining that the cost benefit of the improvement, including interest cost, is positive Additionally, the City has the following policies in relation to debt financing 1 Total general obligation debt will not exceed 10% of assessed valuation in accordance with the City Charter 2 Where possible, the City uses special assessment, revenue, or other self supporting bonds instead of general obligation bonds 3 Fort Collins maintains good communications with bond rating agencies about its financial condition The 1984 Budget includes debt service payments and reserve requirements for all debt currently outstanding for all proposed debt issues 7 INVESTMENT POLICY In conjunction with the report on the Financial Condition of the City of Fort Collins, 1981 , a number of financial management policies were considered, including Investment Policies With the 1983 Budget, City Council adopted the following Investment Poli- cies, which remain in effect 1 The City will continue to analyze the cash flow of all funds on a regular basis to ensure maximum cash availability 2 In order to obtain the best possible return on all cash invest- ments, the City will continue to pool cash from several different funds for investment purposes 3 Market conditions and investment securities will continue to be analyzed on a daily basis to determine the maximum yield to be obtained -9- 4 The City will continue to invest at least 99% of its idle cash on a continuous basis 5 The City will invest in quality issues and will comply with City Charter and State Statutes regarding investment requirements 8 REVENUE POLICY Generally, the City reviews estimated revenue and fee schedules as part of the budget process Estimated revenue is conservatively projected for five years and updated annually Proposed rate increases are based upon 0 Fee policies applicable to each fund or activity 0 The related cost of the service provided 0 The impact of infla-ion in the provision of services 0 Equitability of comparable fees A Revenue Policy for the City of Fort Collins would include the existing informal policies with the addition of 0 The establishment of a diversified and stable revenue system to shelter the City from short run fluctuations in any one revenue source over the next two years The effect of developing an overall City Revenue Policy has been 0 Adoption of financial policies for the Water and Sewer Funds regarding net income requirements, capital cost financing, reserve requirements, and rate requirements 0 Rate increases for various fees and services provided by the City 9 PARKS AND RECREATION FEES In 1981 , the City Council adopted the following fee policy for Parks and Recreation I The Recreation Division shall recover a minimum of 50% of its total cost in revenue generated through fees and charges 2 Total direct revenue from all Recreation programs shall not fall below a 1000M recovery of total direct costs 3 Categories have been created for the Recreation programs in order to evaluate which programs must cover total or partial expenditures These categories are -10- A Total Support 1 Sports 2 Dance and Fitness B Partial Support 1 Aquatics 2 Outdoor Recreation 3 Arts and Crafts 4 Special Interests C Minimal Support 1 Senior Citizens 2 Special Events 3 Therapeutics 4 Youth Centers 5 Northside Recreation Total revenue from fees and charges shall cover a minimum of 80% of "Total " and "Partial" support program costs The difference between 8000 and 100% will be supported by the General Fund as well as for those programs requiring minimum support 4 Revenue generated from rentals, concessions, and other miscella- neous sources shall be considered an equal priority with class registrations when establishing fees and charges 5 The Recreation Division shall provide designated programs for senior citizens and developmentally disabled persons at 1/2 the established fee and to low-income citizens at 1/3 the established fee 6 The Recreation Division shall charge rental for rooms, pool time, gym, ball field, and special equipment, as specified in written policies 7 An admission fee shall be charged at the Northside Community Center for use of the weight room, locker room, and gym, during drop-in hours 8 Solicitation of funds through donations, fund raising events, non-traditional sources, and various other needs shall be encour- aged by the Parks and Recreation Advisory Board and City Council Funding collected for any special purpose shall be earmarked for that purpose, and the utilization of foundations for the further- ance of this goal shall likewise be encouraged The 1984 Recreation Budget and fees have been developed utilizing the policy as adopted for 1981 -11- 10 PAYMENT-TN-LIEU-OF-TAXES In accordance with the City Charter regarding utility accounts, the City charges an estimate of the amount of property taxes and franchise fees that would be charged to each utility if owned privately Currently, the City levies a payment-in-lieu of taxes (P I L 0 T ) against the Water, Sewer, and Light and Power utilities In 1981 , City Council approved a policy to reduce the rates of contri- bution to the General Fund by each of the utilities in an effort to 0 establish a rate more comparable to the rate that would be charged if privately owned, and 0 provide a more consistent rate for all utilities A five year program to achieve this objective was adopted for 1981 The City Council set the PILOT rates for 1982 to achieve the objec- tives established in 1981 As a result, the PILOT rates for the Water, Sewer, and Light and Power utilities will be 5% of operating revenues per year for each utility This policy reduces the amount of income the General Fund will receive from the 'Rater and Sewer Funds each year This reduction has been incorporated in the General Fund 1984 Budget In conjunction with the 1984 Budget, payments-in-lieu of taxes from the Light and Power Fund will be adjusted by the cost of streetlighting within the City This accounting adjustment will not impact the projected ending fund balance in the General Fund or Light and Power Fund 11 ADMINISTRATIVE CHARGES The General Fund provides services to all funds requiring a formula for the allocation of Administrative Charges The formula approved in 1981 is • Allocation of 50% of the cost based upon the ratio of each fund' s budget (operation, maintenance, and capital ) to the total City budget, and 0 Allocation of 50% of the cost based upon the number of City employ- ees in each fund to the total number of City employees This policy was applied to all funds in 1984 with the exception of those funds which are subsidized by the General Fund 12 ENTERPRISE FUNDS The City currently has six Enterprise Funds They include Cemeteries, Golf, Light and Power, Sewer, Storm Drainage, and Water The Enterprise -12- Fund classification has been used to account for various services for which there exists a significant potential for financing through user charges In many of these funds a subsidy from the General Fund has been necessary to cover operating expenses Historically, services were accounted for in an enterprise fund only if they were financed more than 50% by user charges In the 1984 Budget, all Enterprise Funds, except for Cemeteries, are recovering 100% of their costs in 1984-88 Cemeteries Fund anticipates recovery rates of 53 to 560V in the upcoming five year period There has been a nationwide trend towards the regulation of the demand for governmental services through user fee mechanisms The Fort Collins City Council supports this concept The long term goal of all enterprise accounts is self sufficiency Towards this end, those funds which are not presently self sustaining shall incrementally adjust their rate structures to achieve a positive income position Those operations Nhich cannot achieve a positive income position within a five year timeframe, may be accounted for as subsidized operations and not as Enterprise Funds In the case of the Cemeteries Fund, efforts will be undertaken to improve recovery rates in 1984 and beyond Possible reclassification will be considered during 1984, if needed 13 ENERGY The City recognizes a responsibility in energy management and conservation As a consumer, the City strongly encourages building retrofits, alternate fuels, and changes in operating practices which will save the City money or enable it to benefit from new technologies As the operator of an electric utility and a member of a power generation cooperative, the City is an energy provider City Council is therefore interested in helping its consumer public reduce the energy it uses City Council , recognizing certain responsibilities for leadership and regulation which are inherent in local governments, is willing to shoulder some of the risks which innovation and being first in the field entail Towards these ends, the City Council will look for implementation of the following programs and policies 1 The in-house Energy Aanagement Program will continue to hold a high priority The decentralized approach has worked well and because this strategy promotes more innovation and greater depart- mental involvement, it remains the preferred approach 2 The principal goal of the program is cost savings To this end, $115,000 has been included in the 1984 Budget for energy conser- vation retrofit work in City facilities -13- 3 Whenever possible, and to the extent practical , life cycle costing will be used in developing bid specifications and awarding con- tracts 4 The greatest long-term benefits from energy conservation will result from broad participation by the community To encourage this participation, a commum ty education program will be devel- oped It will address consumer awareness, the impacts of conserva- tion, and other information the community will need to deal with energy issues Like all elements of the Energy Management Program, this segment will be addressed by departments and coordinated through the City Manager' s Office 5 To further encourage energy conservation , City Council will look for ways to utilize community resources for community prob- lems The zero interest loan program is one example 6 City Council recognizes the important role of the private sector in long-term energy conservation and will take steps to be in- volved with the community in a way which encourages energy conser- vation in building design and community layout 7 The alternate fuels program will be contrived and expanded, insuring operating cost savings and a reduction of vulnerability to foreign oil reliance 14 TRANSFORT BACKGROUND The current Transfort System is financed by A contract with CSU • User fees (non-CSU) 0 A General Fund operating subsidy The 1984 Budget includes a continuation of this City' s commitment to the Transfort and Care-A-Van services A General Fund subsidy of $684 thousand is expected to be partially offset by incoming Federal revenues of $348 thousand, resulting in reduced City subsidies of $295 thousand for Trans- fort and $41 thousand for Care-A-Van Since the federal mass transit funding has not been formally approved at this time, the possibility exists that the City' s subsidy may be higher than currently projected An in- creased marketing effort is planned during 1984, with a goal of improving Transfort ridership by 351. and decreasing the needed City subsidy accor- dingly -14- ACTION The City will work towards establishing a Quality Transfort System as soon as is practicable, to be phased in as funds become available Such a system could provide for the following 0 Nine buses serving 85% of the community and all major service areas at reasonable intervals Operation of the system 14 hours per day, 6 days a week Operation of a downtown shuttle Partial funding by fares Working towards the Quality Transfort System, the City designates Transfort to be an essential service to all the community, and will pursue coordina- tion efforts with Care-A-Van and the School District, grant awards, and increased fees through adve-tising and contracts 15 STORM DRAINAGE In accordance with the City' s continuing commitment to provide storm drainage lines and facilities within subdivided and developing areas of the City, the Storm Drainage Utility was established in 1980 for the purpose of paying for the cost of capital construction and for the associated operation and maintenance costs of the Storm Drainage Program A monthly storm drainage utility fee was implemented in 1981 to provide financing for operation and maintenance costs In past years, funding for capital construction and development of basin master plans was provided by the Seven Year Capital Fund With Seven Year Capital monies expended, alternative financing for capital improvements had not been identified In order to address the storm drainage capital needs, the City has devel- oped master plans of storm drainage capital requirements for each basin In an effort to balance storm drainage risk and liability, the Storm Drainage Board has recommended a twenty (20) year storm drainage capital program that relates to the system requirements of each basin This twenty (20) year program provides for the installation of storm drainage improvements in existing and developing areas of the City where a positive cost/benefit ratio exists for each project A basin fee for capital construction has been included to finance these improvements Future and existing developments would contribute to the cost of these facilities based upon the benefits to be derived from the capital construction The basin fee for new and existing developments would depend upon the improvements required in each basin, the intensity of existing and proposed development, and the size of each basin -15- A minimum fee will allow critical storm drainage improvements to begin in undeveloped areas while improvements to existing areas are further reviewed in terms of risk and consensus 16 ART IN PUBLIC PLACES The City of Fort Collins is encouraging the development of the arts as a highly satisfying end in itself, but also to improve the quality of life via creative surroundings in the community Visually a community is sterile until the quality of the environment is enhanced by the addition of visual arts to public buildings, parks, and plazas To this end, City Council and staff have developed a program to provide art in public places for the City of Fort Collins 1 Art in Public Buildings An art acquisitior program for the City' s major public buildings housing employees and for public gathering places was developed in 1982 As appropriate works of art are identified, staff will make the necessary recommendations to Council 2 Art in the Parks The budget for each new park will include $1,000 to $5,000 for active sculptures and passive art as a part of the unique park experience This is to be designed into the new park construction schedule 3 Jury Policy A policy for a Jury of at least three persons with diversified professional arts background will be established to determine commissions and selections of artworks for public places Jurying will assure that the selections will have a universal appeal and relieve any single person of the responsibility of selection for a cross-section of tastes 4 Center for the Study of Contemporary Art The City staff and community will be encouraged to become involved with CSU in the development of the Center for Contemporary Art This should expand the community' s awareness and appreciation of contemporary art 17 PENSIONS The City of Fort Collins contributes to five (5) pension plans, including -16- e Police • Fire • General Employee Retirement • State Pension - Police State Pension - Fire The Police, Fire, and General Employee Retirement Plans are administered by the City of Fort Collins The rate of contribution for the City admini- stered plans is based upon an annual actuarial analysis for the normal cost and unfunded liability of the number of employees participating in each pension plan In 1981 , an actuarial study of the costs and benefits of each plan was completed which recommended • The reduction of the City' s normal contribution rate due to changes made in the actuarial assumptions The amortization of the unfunded liability over a twenty (20) year period in order to provide for soundly financed pension plans • An adjustment to the benefits provided by the General Employee Retirement Plan in order to maintain comparability with benefits provided by other front range communities Based upon City Council action, beginning in 1982, the pension policy is 1 The City will maintain contribution rates at a level sufficient to meet all current normal costs of each pension plan 2 Any unfunded liability incurred by the individual pension funds will be amortized over a period not to exceed twenty (20) years 3 A thrift plan will be added to the general employees retire- ment plan to maintain comparability with benefits provided by other Front Range communities The 1984 rate requirements to continue this policy are GENERAL NORMAL COSTS POLICE FIRE EMPLOYEE THRIFTEPLAN estimate City Contribution 8% 8% 4 385% 3 % Employee Contribution 8% 8% -- 3 % TOTAL 160 16% 4 385% 6 % -17- UNFUNDED LIABILITY POLICE FIRE EMPLOYEE TOTAL City Contribution E 46,000 $125,000 $227,000 $398,000 18 MEDICAL INSURANCE The City of Fort Collins entered into a partially self-funded medical insurance program in October, 1981 This program allowed the City to cut out profit paid to a private carrier, invest available money (at higher rates) , and maintain a better cash flow The initial savings were as high as expected and the program continues to provide a cost effective and very desirable employee fringe benefit The partially self funded insurance program is enhanced by a consortium of cities to collectively bid administrative services, stop-loss insurance for unexpected emergencies, and life and accidental death and dismemberment insurance resulting in lower rates The 1984 Budget continues the partially self-funded medical insurance program for City employees 19 LEASE/PURCHASE The City of Fort Collins has used lease/purchase financing for the provi- sion of new and replacement equipment In 1981 , this policy was extended to the purchase of new and replacement vehicles and rolling stock in order to ensure the timely replacement of vehicles and equipment, ensure that annual vehicle replacement requirements are included in the annual budget Other advantages that lease/purchase financing can offer over the tradi- tional cash method of financing are 1 Decreasing the impact of inflation on the purchase of new and replacement equipment 2 Reducing the initial impact of the cost to user departments by enabling acquisition costs to be spread over the useful life of the equipment 3 Safeguarding the opportunity to use cash assets to earn higher interest than the interest cost of lease/purchasing Finally , it should be noted that the City is able to discontinue the equipment leases at its discretion so that future City Councils will have the option to continue or discontinue the policy of lease/pur- chasing City equipment -18- 20 PRIVATE CONTRIBUTIONS In reviewing the Quality of Life Services, such as Recreation, Lincoln Center, and the Library, it was determined that the City should make a greater effort in securing private contributions for these ongoing programs and services Quality of life programs represent an "extra" that we have been able to provide in Fort Collins in the past and may not be able to provide at the same level without additional support in the future During 1981 , the Friends of the Library implemented a fund drive to purchase an electronic sensing device to protect against the loss of library materials and the Lincoln Center has actively solicited contribu- tions for the purchase of equipment to increase the utilization of the facility Contributions such as these reflect the community's willingness to support the quality of life services provided by the City without Jeopardizing other basic and maintenance of effort activities (In the 1984 Budget, the Library has been reclassified from Quality of Life to Maintenance of Effort Service, but funding sources other than City contributions will continue to be sought ) 21 REVENUE SHARING In order to avoid dependency upon federal funds that may not continue for basic or core service areas, the City currently utilizes Revenue Sharing monies only for one-time and/or capital costs The exception to this policy is the use of Revenue Sharing funds for social service programs on an on-going basis h e , private, non-profit agency contributions, Property Tax and Utility Rebate Programs, and the Volunteer Program) The 1984 Revenue Sharing Program provides for the following expenditures GENERAL CITY CAPITAL PROJECTS S 570,000 Library Books $ 115,749 Energy Program 115,700 Computer/Capital Equipment 208,551 Development of Air Quality Monitoring Program 100 000 GENERAL FUND S 540,000 Contribution to Community Service Agencies $ 143,825 Volunteer Program 18,718 Utility Charge and Property Tax Rebate for 137,457 Senior Citizens Public Housing Local Financing 100,000 COMMUNITY SERVICES 8 PUBLIC HOUSING S 400,000 CITY EQUIPMENT BUILDING DEBT PAYMENT $ 45,000 TOTAL $1 ,555,000 -19- 22 REBATE PROGRAMS The City recognizes that certain segments of the population, specifically handicapped and senior citizens on fixed incomes, are unable to keep pace with increasing taxes and utility costs The City has, therefore, estab- lished Property Tax and Utility Charge Rebate Programs to provide finan- cial assistance to those applicants who qualify under established guide- lines (e g , income, residential , disability certification, etc ) Income guidelines are adjusted periodically in accordance with State income levels established for such programs The City will continue to maintain these programs and will adjust income guidelines and rebate amounts as necessary 23 CULTURAL SERVICES & FACILITIES FEE POLICY Background The Cultural Services and Facilities Fund shall budget to recover a minimum of 4000 of its total cost in revenue generated through fees and charges This shall be accomplished through implementing the following policy 1 Total revenue from fees and charges shall cover a minimum of 55% of Lincoln Center Operation and Maintenance and Performing and Visual Arts Programming budgets This includes revenues generated at the Lincoln Center from rentals, equipment, concessions and other miscellaneous sources and all total direct revenues from the Performing and Visual Arts Programming The difference between 550. and 100% will be funded by a transfer from the General Fund 2 The Cultural Services and Facilities Administration and the Museum and Historic Landmarks budgets provide minimal financial support and will be funded by a transfer from General Fund 3 A rental fee for Avery House shall be reviewed annually and charged on rooms not used by Poudre Landmarks 4 Major capital improvements and renovations will be financed through sources other than Cultural Services and Facilities Fund 5 Solicitation of funds through donations, fund-raising events, and non-traditional sources shall be encouraged by the City Staff, Lincoln Center League, the Cultural Resources Board and the City Council Funding collected for any special purpose shall be earmarked for that purpose, and these funds will be processed through the Fort Collins Foundation -20- ACTION The 1984 Cultural Services and Facilities Budget and fees have been de- veloped utilizing this policy 24 PERFORMANCE PAY PLAN Background The City' s goal as an employer is to attract and keep quality employees To help accomplish this goal , the City has established a performance pay plan based on the upper third pay philosophy The upper third pay philos- ophy says that after a survey is made of other organizations in the rel- evant labor market, the pay for Fort Collins' employees will rank in the upper third of those organizations surveyed The performance pay philosophy has been maintained for five general reasons 1 To attract quality employees 2 To retain quality employees 3 To operate the City with fewer employees than comparable ,juris- dictions 4 To provide an incentive and a reward for productivity 5 To recognize cost savings generated by productive employees The maintenance of the upper third philosophy can be Jeopardized by a slow economy The City shall implement plans to accomodate the upper third pay philosophy through sound financing mechanisms ACTION Every effort will be made to provide the economic adjustment necessary for the upper third by January of each year If this is not financially feasible, as much as can be provided (given the priority demands on avail- able resources) will be given in January In April , Council will review the costs of the "upper third" pay plan and ways to fund it based on savings generated and any increased revenue growth At that time, Council will implement all or as much of the upper third as can be soundly financed 25 OPEN SPACE AND TRAILS - ACQUISITION AND DEVELOPMENT A subcommittee of three Councilmembers has been established to develop a formal City policy dealing with the acquisition and development of Open Space and Trails For the purposes of the 1984 Budget, it has been assumed that this use would be the most appropriate for the utilization of funds received from the Colorado State Lottery -21- 26 TAX REFORM PROGRAM The basic financial philosophy of the City of Fort Collins calls for a soundly financed and balanced budget, with a goal of improved equity in the revenue-producing mechanisms available to the City With these fundamental ideas in mind, a two year Tax Reform Program is recommended This program will increase the property tax for one year until sub- stitute revenues are received from new revenue sources, and then will be cut back, new revenue sources will spread the tax load burden more equitably, nuisance taxes will be eliminated, new revenues will be earmarked for specific purposes The General Fund' s two main revenue sources at present are Property and Sales Taxes, which account for almost three-quarters of total additions to the General Fund in the 1984 Budget The Colorado Legislature' s passage of Constitutional Amendment #1 in 1983 has caused changes in assessed valua- tions used in property tax computations, and assessed values for the City are expected to drop off slightly in 1984 requiring an increase in the City' s mill levy simply to compensate for this drop in revenue base The 1984 Budget provides for an increase from 10 7 to 13 5 mills in Property Tax The growth of 2 8 mills consists of 1 27 mills to partially compen- sate for the reassessment ,lust described and to maintain existing service levels for the Poudre Fire Authority, 1 1 milts to cover operation and maintenance costs for park improvements funded by the 1981 Parks Bond Issue, and 0 926 mills to cover increased Parks Debt Service costs In order to comply with a 13 5 mill levy limitation as directed by Council , a reduction of 0 496 mills is reflected for general operation and maintenance costs Other General Fund revenues will need to be applied to compensate for the mill levy reduction An increase in the City sales tax rate was considered, but no increase in the rate is included in our projections In an effort to ease the Ci ty' s increasing reliance on property tax as a revenue source and to expand and equalize the tax base, a number of actions are proposed in our two year Tax Reform Program As the reforms are imple- mented, our plan is to reduce the property tax mill levy below the 1984 level of 1 mil s But we need t e increase in property taxes tor 1964 as a transition to the reforms Other potential revenue generating mechanisms, and modifications to present sources which will be examined during our 1984-85 Tax Reform Program are 0 Entertainment Tax - would be levied on the consumers of all forms of entertainment offered within the City for profit Proceeds would be specifically earmarked for use before imple- mentation 0 Hotel /Motel Room Tax - will be examined and potentially implemented during 1984 This would be a tax on discretionary expenditures, which could generate revenues in excess of -22- r $100,000 annually, to be paid primarily by visitors to Fort Collins Proceeds of such a tax would be specifically earmarked for use before implementation 0 Real Estate Transfer Tax - has been identified as a potential revenue source for the years 1985 and beyond which would generate increasing revenues as the home building and sales activities revitalize in the City 0 Business Occupation Tax - will be considered This would be a fee levied annually on all businesses in the City based on the number of employees and would be assessed in conjunction with the collection of local economic data which would enable better long range planning activity to be undertaken by the City 0 Elimination of Various Licensing Requirements - with the identification of potential new revenue generating mechanisms, it will be possible to eliminate the licensing of certain business activities, with a reduction in the number of "nui- sance" licenses and a concentration on simplification of the licensing process While this list is not intended to represent all of the potential modifica- tions which will be examined during the upcoming Tax Reform Program, it is illustrative of the City' s intention to broaden and diversify its tax base By determining whom such taxes impact the most, a better mechanism for eliminating the regressive nature of certain taxes can be developed By increasing the total revenues generated, without adversely impacting our citizens, additional funds could be allocated to our City' s growing need for more expenditures in its Capital Improvement Program Passed and adopted at a regular meeting of the City Council held this 4th day of October, 1983 ftw� fr7 r yo ATTEST City Clerk -23-