overview of municipal budgeting - masc€¦ · overview of municipal budgeting mcti september 16,...

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Overview Of Municipal Budgeting

MCTISeptember 16, 2015

Presented by: Steven Gibson, OMB DirectorCity of Rock Hill

State law requires municipalities to adopt balanced budgets.Article X, Section 7(b) - S.C. Constitution.

No expenditures may be permitted unless authorized by thebudget ordinance or by Council via a subsequent resolution.Article X, Section 8 - S.C. Constitution.

However, local codes may provide discretion for moving fundsamong line items during the fiscal year to achieve the goals ofthe budget.

Annual Budget - Legal Requirements

Responsible for the overall fiscal management of the localgovernment unless specifically delegated elsewhere by law.Section 5-7-160.

Must develop and maintain budget enforcement standards.

Approves borrowing and other financing options, includingfinancing capital improvements.

Fiscal Management: Council’s Responsibilities

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Ultimately responsible for establishment and utilization offinancial reporting systems and standards.

Establishes policies for the investment and management of cashassets

Selects / approves CPA or independent public accountant toperform annual independent audit

Fiscal Management: Council’s Responsibilities

Responsibility for budget preparation varies among the formsof government:

Form of Government Responsible Party

Council-Manager Manager

Mayor-Council Mayor

Council Council’s discretion

Who Prepares The Budget?

The most important step to a successful budget is to agree upfront on the process.

All cities and towns basically have the same budget process.

The complexity and formality of the budget process tends tovary based on size.

And smaller communities naturally have fewer people involvedin the process.

However, regardless, cities must have a plan.

Establishing The Budget Process

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There are four stages of the budget cycle:

o Preparation

o Adoption

o Implementation

o Review

The Budget Cycle

Preparation

Strategic Planning Process

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“You mean we clean only clean sewers?”

- Wayne Tanda, former director of streets and traffic

City of San Jose

Results that Matter: Improving Communities by EngagingCitizens, Measuring ...By Paul D. Epstein

Rock Hill Strategic Planning

Quality Services– Efficient and effective service

delivery

– Competitive rates

Quality Places– Business parks and other

community venues

– Transformative projects

Quality Community– Transparency

– Public engagement

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www.cityofrockhill.com/transparency

(or direct link to document below)

http://issuu.com/cityofrockhill/docs/finalstratplanfy16-18-web?e=6088170/13721400

City of Rock Hill Strategic Plan

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Strategic Planning Link to Budget Process

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• Plan stays current throughsemi-annual reporting

• Budget Development andExecution are in concertwith the details of the plan

Examples:

Police Response Time

Road Maintenance Initiative

No Property Tax Increase

Utility Rate Increase Effective July 1, 2015• 1% water rate increase to cover water system capital improvements

• 1% wastewater rate increase to cover wastewater system capitalimprovements

• 5% electric rate increase (4.5% purchased power and .5% for electricoperations)

OVERVIEW OF FY2016 BUDGET

Special Projects i.e. General Obligation Bonds issued to build a fire station

Cost to Serve Models

Utility System Expansions

PAYgo

Bonded Projects

(consider Equipment Lease Purchase as financing alternative)

Consideration for Rate Increases

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Sanitation Cost to Serve

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Sanitation Cost to Serve

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Sanitation Summary ofRevenues & Expenses

*Projected

$0

$1,000,000

$2,000,000

$3,000,000

$4,000,000

$5,000,000

$6,000,000

$7,000,000

$8,000,000

$9,000,000

$10,000,000

FY2015* FY2016* FY2017* FY2018* FY2019* FY2020* FY2021* FY2022* FY2023* FY2024*

Revenues

Expenditures

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Utility Sources and Uses

Show impact to average residential customer

• No Property Tax Increase Proposed

• No Stormwater Rate Increase Proposed

• No Sanitation Rate Increase Proposed

• Utility Rate Increases proposed, effectiveJuly 1, 2015

• 1% water rate increase to cover watersystem capital improvements

• 1% wastewater rate increase to coverwastewater system capitalimprovements

• 5% electric rate increase (4.5% tocover purchased power and .5% forelectric operations)

Average Residential Customer Impact

Be able to quantify operating impact of non-routine capitalprojects

Revenue impactExpenditure impactHelps improve long range financial planning

Operating Impact of Capital Projects

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Benchmarking Rates

Informs Elected Officials

Demonstrates competitiveness

Can show impact to the average customer

Comparison of Electric RatesRock Hill Residential Rates Compared to S.C. Cities,

PMPA Cities, Regional Cities, & York County Cities

1. Clinton (PMPA)2. Westminster (PMPA)3. Columbia (SCE&G)4. Charleston (SCE&G)5. N. Charleston (SCE&G)6. Mt. Pleasant (SCE&G)7. Newberry (PMPA)8. Gastonia (Electricities)9. Rock Hill (PMPA)(14)10. Monroe (Electricities)11. Laurens (PMPA)12. Union (PMPA)13. Abbeville (PMPA)14. Easley (PMPA)15. Anderson (Duke-SC)16. Greer (PMPA)17. Florence (Progress)18. Greenville (Duke-SC)19. Lancaster (Duke-SC)20. Sumter (Progress)21. Fort Mill (Duke-SC)22. Clover (Duke-SC)23. Tega Cay (Duke-SC)24. York (Duke-SC)25. Spartanburg (Duke-SC)26. Charlotte (Duke-NC)27. Gaffney (PMPA)28. Concord (Electricities)

Comparison of Water RatesRock Hill Residential Rates Compared to S.C. Cities,


1. Clinton2. Laurens3. Concord4. Clover5. N. Charleston6. Lancaster7. Tega Cay8. Anderson9. York10. Abbeville11. Mt. Pleasant12. Union13. Easley14. Fort Mill15. Gastonia16. Spartanburg17. Westminster18. Monroe19. Florence20. Charleston21. Newberry22. Charlotte23. Rock Hill(24)24. Columbia25. Gaffney26. Greer27. Sumter28. Greenville

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Comparison of Wastewater RatesRock Hill Residential Rates Compared to S.C. Cities,


1. Charleston2. Greenville3. Clinton4. Westminster5. N. Charleston6. Charlotte7. Clover8. Spartanburg9. Mt. Pleasant10. Union11. Fort Mill12. Rock Hill(12)13. Lancaster14. Laurens15. Gastonia16. Concord17. Florence18. Abbeville19. Anderson20. Greer21. Tega Cay22. Easley23. Monroe24. York25. Columbia26. Newberry27. Sumter28. Gaffney

Comparison of Electric/Water/WW RatesRock Hill Residential Rates Compared to S.C. Cities,


1. Clinton2. Charleston3. N. Charleston4. Westminster5. Mt. Pleasant6. Laurens7. Gastonia8. Union9. Clover10. Abbeville11. Columbia12. Easley13. Lancaster14. Anderson15. Newberry16. Tega Cay17. Rock Hill(18)18. Monroe19. Fort Mill20. Greenville21. Concord22. York23. Spartanburg24. Florence25. Charlotte

26. Greer27. Sumter28. Gaffney

Comparison of City Tax RatesRock Hill City Tax Rates Compared to S.C. Cities,


* Local Option Sales Tax

1. Lancaster*2. Monroe3. Gastonia4. Anderson5. Laurens*6. Concord7. Clover8. Gaffney*9. York10. Charlotte11. Sumter*12. Spartanburg13. Abbeville*14. Columbia*15. Greer16. Clinton*17. N. Charleston*18. Rock Hill(18)19. Westminster20. Tega Cay21. Newberry22. Fort Mill

23. Greenville24. Union25. Charleston*26. Easley*27. Florence*28. Mt. Pleasant*

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Restaurant Comparison

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*10% credit in 2015 business license if paid on or before due date

Structural Balance

Sustainability

http://www.gfoa.org/sites/default/files/BUDGET_ACHIEVING_A_STRUCTURALLY_BALANCED_BUDGET_1.pdf

Structural Balance

GFOA Best Practice on Structural Balance

Use of one-time Revenues

Do not use to fund ongoing expenses

Small Group Exercise:

Examples of non-recurring sources

Examples of non-recurring uses

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General Fund Paving Budget

Projected

Develop the budget calendar

Fiscal years may vary

Cities and towns set their fiscal year by local ordinance

Preliminarily discuss goals, needs and the outlook for thecoming year

Set some parameters for staff to make requests

Preparing The Budget

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Start with Revenues or Expenditures?

Projecting RevenueUnderstand your monthly patterns

What is an Expenditure?

o The amount paid for a service rendered, goods received, or an assetpurchased

There are three main categories of expenditures :

o Personnel (Salaries, benefits)

o Operating (Office supplies, utilities, contracts)

o Capital (computers, vehicles, infrastructure)


Projecting Revenue:

o Historical Trends

o Expected changes to revenues

• New construction

• Business openings and closings

• Automobile tax base

• Investment yields

• Projected impact of weather on water, sewer and electric sales

o Potential new revenue from tax, fee or charge increases

o New sources of revenue


Revenue/Expense Projections

Experience Historical Analysis Modeling Tools

View Financial Dashboard at cityofrockhill.com/transparency


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Estimating Expenditures:

o Utilize year to date performance (monthly financial statements)

o Audits from previous years

o Any known increases, such as

• Insurance premiums

• Utility rates

• Scheduled increases in contracts

• Forecasts such as the EIA’s Short Term Energy Outlook

o New activities


Personnel (largest category):

o Detailed list of staff and salaries

o Any proposed cost of living adjustments or merit pay increases

o Overtime, callback, training and holiday pay

o Allowances for vacancies, increases for certifications, etc.

o Health insurance – employer share

o Retirement contributions – employer share

o Workers’ Compensation Premiums

o Payroll Taxes (Employer share Social Security, Medicare and state)

o Unemployment


Capital:

o Machines, equipment and vehicles

o Buildings, parking and recreation facilities

o Infrastructure

Expenditures are classified as capital expenditures based oncapitalization thresholds and the asset(s) they are replacing,enhancing or upgrading (when in doubt, ask auditor).

They may be funded with recurring or nonrecurring revenue ordebt proceeds.

Ideally capital expenditures are forecast in a CIP


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Operating (Non-personnel):

o Office supplies, printing, postage

o Tools and small equipment purchases and repairs

o Employee training & travel

o Safety training and supplies

o Gasoline and Diesel

o Utilities and telecommunication

o General Liability Insurance (Property, Auto, Liability)

o Professional & contract services, leases, etc.

o Debt service


Estimating Expenditures:

o Utilize year to date performance (monthly financial statements)

o Audits from previous years

o Any known increases, such as

• Insurance premiums

• Utility rates

• Scheduled increases in contracts

• Forecasts such as the EIA’s Short Term Energy Outlook

o New activities


Projecting Property Tax Revenue:

o The initial assessment from the county will be wrong

o However, that number will refine

o Calculate expected tax revenues after adjusting the initial assessment

o New construction may not make the tax rolls

o Council sets property tax rate, not county auditor


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Calculating Residential Property Taxes:

$100,000 Appraised Value

x 4% Assessment Ratio

$ 4,000 Assessed Value

x .090 Tax Rate in Mills

$ 360 Tax Due

x .098 Collection Rate

$ 352 Tax Collected


Calculating Commercial Property Taxes:

$100,000 Appraised Value

x 6% Assessment Ratio

$ 6,000 Assessed Value

x .090 Tax Rate in Mills

$ 540 Tax Due

x .098 Collection Rate

$ 529 Tax Collected


Property Tax Increases (Section 6-1-320):

o Can increase millage at a rate no greater than the increase inConsumer Price Index (CPI) and population growth last year.

o Can override this limitation (cap) by 2/3 vote of council for thefollowing reasons:

• Offset a prior year deficit

• Recover from a disaster

• Loss of 10%+ of property tax base

• Comply with a court order

• Comply with a state or federal regulation or order


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Property Tax Increases (Section 6-1-320):

o This limitation (or cap) does not affect millage that is leviedto pay:

• Bonded indebtedness

• Lease purchase agreements

• Maintain a reserve account


Property Tax In A Reassessment Year:

o Legislative intent - calculation of a millage rate that does notresult in a hidden tax increase or windfall to the localgovernment

o The reassessment formula is designed to establish a“roll back” millage (property tax rate) that yields a revenueneutral figure plus tax revenue from growth (investment thathas occurred within the community since the lastreassessment.


Projecting Other Revenue Sources:

o Local Option Sales Tax

o Business License

o Local Hospitality Tax

o Local Accommodations Tax

o Fines and Forfeitures

o Fees (Sanitation, Public Works, etc)

o Charges (water, sewer, electric, etc.)


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(see .xls)

Local Hospitality Tax

Novant Health BMX Supercross Track

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Novant Health BMX Supercross TrackUpcoming Events

• Sept 25-26, 2015 UCI BMX Supercross World Cup 200 cyclists

• Apr 22-24, 2016 USA BMX Carolina Nationals 1000 cyclists

• Sept 24-25, 2016 UCI BMX Supercross World Cup 200 cyclists

• July 26-30, 2017 UCI BMX World Championships 3,300 cyclists

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BMX Video

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UCI BMX World Championships

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2013

2014

2015

2016

2017

Economic Impact of Sports Tourism in Rock Hill

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$0.0

$5.0

$10.0

$15.0

$20.0

$25.0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Mil

lio

ns

Economic Impact Created by Sports Tourism

Economic Impact

$8.4

$10.9

$6.1

$8.5

$9.6

$15.2

$20.5

$18.2

$17.4

$14.8

Economic Impactprojected for the2017 BMX WorldChampionship –

$13 million

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Projecting Other Revenue Sources:

o Local Option Sales Tax

o Business License

o Local Hospitality Tax

o Local Accommodations Tax

o Fines and Forfeitures

o Fees (Sanitation, Public Works, etc)

o Charges (water, sewer, electric, etc.)


Imposing a new fee (Section 6-1-330):

o Must provide notice of the new fee and hold a public hearing prior tofinal adoption of the fee that allows for public comment

o If fee generates 5% or more of prior year budget total, funds from feemust be segregated

o Must disclose if the fee is going to fund a service that was previouslyfunded by property taxes


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o Line items or initiatives?

o Give them talking pointso See Budget at a Glance

o Small Group Exercise:Brainstorm/Discuss additional tools that you have seen work in helpingElected Officials understand or communicate budget information

Help out our Elected Officials!

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Adoption

Annual budget must be adopted by ordinance with the necessarynumber of readings as required by local code. Section 5-7-260.

Budget ordinance sets/provides:

o Property Tax (Millage) Rate

o Appropriation Levels

o Procedure for Amendment

o Debt Proceeds and Debt Service

o Short-term Borrowing

Adopting The Budget

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A public hearing must be held before adopting the budget.Section 6-1-80.

May be held in conjunction with first or second reading of thebudget ordinance, or at an isolated date/time.

Public notice of the hearing must be published in a newspaper ofgeneral circulation.

Notice must be given at least 15 days before the public hearing.

Adopting The Budget

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The public hearing notice must contain:

o Name of the local government

o Date, time and location of the hearing

o Total operating revenues and expenditures in current fiscal year budget

o Projected operating revenues and expenditures of next year’s budget

o The percentage change

o Millage for the current fiscal year

o Estimated millage in dollars as necessary for next year’s budget

Adopting The Budget

Of the methods discussed today, which can you use in youragency?

Which ones would not work? Why?

In addition to the methods discussed today, what would youadd as an overview to Municipal Budgeting?

Discussion

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Government Finance Officers Association (GFOA)www.gfoa.org

International City-County Management Association (ICMA)www.icma.org

Municipal Association of South Carolinawww.masc.sc

Material Resources

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