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TRANSCRIPT
PRELIMINARY BUDGET PRESENTATION
CITY COUNCIL WORK SESSIONTONY PUENTE - DIRECTOR OF FINANCE JUNE 12, 2018
OBJECTIVE
Present overview of budget structure and budget process
Focus on General Fund
• Utility Funds previously discussed on May 22nd, June 4th and June 5th
• All other funds to be discussed during August 2nd Budget Work Session
Present preliminary estimates for FY 2018-19 Budget
Over 65 and Disabled Tax Limitation (Freeze)
Discuss Homestead Exemption
Debt by Fund and Bond Program Authorization
Receive Feedback and Direction from City Council:
• Budget Themes/Priorities
• Homestead Exemption
• Any Other Direction2
BUDGET OVERVIEW
City is required by state law to annually adopt a budget and set a property tax rate by September 30
(City’s fiscal year is October 1st to September 30th)
Tax rate requires City Council vote of 60% (5 or more), budget is a simple majority vote (4 or more)
• If a tax rate is not adopted by a 60% vote, the lower of the prior year tax rate or calculated
effective tax rate becomes the tax rate (Texas Tax Code Section 26.05)
• If a budget is not adopted by a simple majority, the budget as submitted by the City Manager shall
be deemed to have been finally adopted by the City Council (City Charter Section 8.05)
Adopted budget covers all operating and capital expenditures
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BUDGET CALENDAR
Budget Planning
Jan.-Feb.
Departmental Budgets
Mar.-May
City Manager’s Proposed Budget
Jun.-Jul.
City Council Budget Deliberations
Aug.-Sep.
Budget Adoption
Sep.
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BUDGET PROCESS
Finance Department develops baseline budgets for each department.
• Baseline budgets exclude one-time funding from the prior year.
• Baseline budgets are “scrubbed” on a line item basis and adjusted downward based on historical trends. Departments must
submit formal funding request for line item increases.
• Beginning this fiscal year, select line items were “zeroed out” and Departments had to submit requests for reinstatement of
funding. These line items were: Outside Contract Services, Licenses, Dues & Publications, and Consultant Fees.
Budget initiatives:
• Various management studies engaged for Planning, Building Inspections, Solid Waste and Electric.
• Eliminated contingencies in budgets.
• Simplified fund balances by reducing unnecessary reserves (i.e., Customer Service and Drainage).
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BUDGET PROCESS CONTINUED…
Other initiatives:
• Quarterly reviews with Department Directors.
• Various management studies engaged for Planning, Building Inspections, Police, Solid Waste and Electric.
• Monthly review of capital programs to re-prioritize projects and maximize available funding.
• Lean/Process Improvements throughout organizations to improve efficiency, eliminate duplication and streamline processes.
Beginning in FY 2016-17, City Management has been “right sizing” the organization to better serve the
community.
• Eliminated 10.35 FTEs in the General Fund totaling $1.16 million.
• Utilized approximately $810,000 in savings to add 5 patrol officers and 1 crime analyst in the Police Department.
• Eliminated 10.5 FTES in other City funds totaling $1.17 million.
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CITY FUNDS
Major Operating Funds – General, Debt Service, Electric, Water, Wastewater/Drainage, Solid Waste
and Airport
Internal Service Funds – Technology Services, Materials Management, Fleet, Risk Retention, Health
Insurance, Engineering Services and Customer Service
Capital Funds – General Government, Electric, Water, Wastewater/Drainage, Solid Waste and Airport
Special Revenue Funds – Recreation, Street Improvement, Tourist and Convention, Police Confiscation,
Traffic Safety, Economic Development Investment, Downtown Reinvestment, Parks Gas Well, Roadway
Impact Fee, Tree Mitigation, Public Education Government, McKenna Trust, Parkland Dedication Trust,
Parkland Development Trust, Downtown TIRZ, Westpark TIRZ, Donation (Police, Fire, Animal Control
and Library), and Grants
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FY 2017-18 BUDGET BY FUND - $1,140,747,079
General Fund , $119,687,991
General Debt Service Fund,
$85,790,964
Electric Fund, $180,903,753
Water Fund, $47,809,321
Wastewater Fund, $34,023,041
Solid Waste Fund, $38,528,086 Internal Service
Funds, $83,647,034
Street Improvement Fund, $13,961,195
Other Funds, $14,191,476
Grants , $3,769,218
Capital Budget -New Funding,
$154,333,000
Capital Budget -Available ,
$364,102,000
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FY 2017-18 GENERAL FUND REVENUES - $119,720,372
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Other 2.1% Fines and Fees3.3%
Service Fees 6.9%
Return on Investment 6.7%
Cost of Service6.7%
Franchise Fees4.2%
Sales Taxes 30.2%
Licenses and Permits 2.3%
Ad Valorem Taxes37.6%
FY 2017-18 GENERAL FUND EXPENDITURES BY
CATEGORY - $119,687,991
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Personal Services70.7%
Materials & Supplies2.6%
Maintenance & Repair2.6%
Insurance 1.0%
Miscellaneous 1.2%
Utilities 2.5%
Fuel and Maintenance1.5%
380 Agreements 2.8%
Operations 6.4%
Cost of Service 7.5%Fixed Assets 1.2%
FY 2017-18 GENERAL FUND EXPENDITURES BY
DEPARTMENT - $119,687,991
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Libraries 5.1%
Parks and Recreation11.2%
Fire/Community Improvement 25.3%
Police/Animal Services28.3%
Economic Development 1.0%
380 Agreements 2.7%
Planning/ Community Development/
Inspections 6.3%
Municipal Court/Judge1.5%
Traffic/Transportation/Street Lighting 2.9%
Finance/Internal Audit/ HR 4.2%
Legal and CMO 4.3%Facilities Management
3.6%Other 3.6%
SALES TAX RATES - COMPARISON
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City
Regular
Rate
Property
Tax Relief
Eco/Ind
Dev Sec 4A
Eco/Ind
Dev Sec 4B
Street
Maintenance
Sport/Comm
Venue
Crime
Control
Fire
Control Transit
Total Local
Rate
Denton 1.00% 0.50% 0.50% 2.00%
Lewisville 1.00% 0.25% 0.125% 0.125% 0.50% 2.00%
Flower Mound 1.00% 0.25% 0.25% 0.25% 0.25% 2.00%
Grapevine 1.00% 0.50% 0.50% 2.00%
Dallas 1.00% 1.00% 2.00%
Fort Worth 1.00% 0.50% 0.50% 2.00%
Grand Prairie 1.00% 0.25% 0.50% 0.25% 2.00%
Irving 1.00% 1.00% 2.00%
Arlington 1.00% 0.25% 0.50% 1.75%
McKinney 1.00% 0.50% 0.50% 2.00%
Allen 1.00% 0.50% 0.50% 2.00%
Plano 1.00% 1.00% 2.00%
BUDGETARY THEMES/PRIORITIES
Focus on cost containment and organizational efficiency
Proposed budget set at the effective property tax rate
• Provide options that may require increasing the tax rate above the effective tax rate.
Enhance street maintenance and inspection capacity
Expanded Public Safety response capacity
Maintain competitive compensation plan
Debt financing options for certain capital projects:
• Radio System Replacement
• Fire Station #8 Design
• Service Center Remodel
• Residential Street Reconstructions13
GENERAL FUND
Neighborhood Services
• Building Inspections, Community Improvement Services, Libraries, Parks and Recreation, Planning, Gas Well Review,
Community Development
Public Safety
• Fire, Police, Animal Services, Municipal Court and Judge
Transportation
• Traffic Operations and Transportation
Administrative and Community Services
• City Manager’s Office, City Council, Economic Development, Facilities Management, Finance, Human Resources, Internal
Audit, Legal Administration and Public Affairs/Communication
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GENERAL FUND PROJECTION ASSUMPTIONS
Assessed Value Increases
• FY 2018/19 – 10.0% (assumes new value is 3% of total value)
• FY 2019/20 and beyond – Assumes effective tax rate each year plus new value.
Total Effective Tax Rate
• Tax rate set as a rough estimate of effective tax rate of $0.610738 (2.7 cents below current rate of $0.637856)
• Staff reviewing Truth-In-Taxation calculation on effective tax rate and will provide the City Council additional details during the August 2nd Budget Workshop. Tax Year 2018 is the first year impact of the Over 65 & Disabled Tax Limitation (Freeze).
Sales Tax
• FY 2018/19 – 5% above revised estimate for FY 2017/18 ($39.2 million vs $36.2 million)
• FY 2019/20 and beyond – 5% in Year 2; 4% in Year 3; and 3% in Years 4 & 5
Franchise Fees
• All growth in franchise fee revenue and an additional $622,000 transferred annually to the Street Improvement Fund (based on 10 year plan to transfer all franchise fees to street improvement)
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HOMESTEAD EXEMPTION
Currently 0.5% of value or $5,000 whichever is greater
• Homes up to $1 million receive same exemption
Preliminary values as of 5/31/18 reflect:
• 19,046 single family homes with a homestead exemption (64%)
• 29,630 total single family homes in the City
• Exempted value equals $92,300,932 or approximately $588,747 in revenue to City.
Preliminary average home value is $234,351
Denton Central Appraisal District (DCAD) encompasses 42 cities
• 16 cities have a homestead exemption and those range from 0.5%;$5,000 ($1M) to 20%;$10,000 ($50K)16
HOMESTEAD EXEMPTION
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City HS Over 65/DP Freeze 2017 Tax Rate
Carrollton Y – 20% or $5,000 $60,000/$60,000 N $0.599700
The Colony N $10,000/$10,000 N $0.665000
Denton Y – 0.5% or $5,000 $50,000/$50,000 Y $0.637856
Flower Mound N $100,000/$100,000 N $0.439000
Highland Village N $75,000/$75,000 N $0.568020
Lewisville N $60,000/$20,000 Y $0.436086
Roanoke Y – 20% or $10,000 $40,000/$4,500 Y $0.375120
Coppell Y – 5% or $5,000 $75,000/$75,000 N $0.579500
Trophy Club N $35,000/$0 Y $0.451442
Plano Y – 20% or $5,000 $40,000/$40,000 Y $0.468600
Frisco Y – 7.5% or $5,000 $80,000/$80,000 N $0.446600
AVERAGE TAXABLE HOME VALUE COMPARISON
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City/Town
# HS
Residences
Average
Market Value
Average HS
Exemption
Average
Taxable Tax Rate
Taxes Due to
City
Taxes Due on
200k Home
Ft Worth 205,541 174,846$ 41,523$ 133,323$ 0.805000$ 1,073.25$ 1,610.00$
Dallas 217,643 252,509$ 60,532$ 185,074$ 0.780400$ 1,444.32$ 1,560.80$
Garland 58,214 160,467$ 31,099$ 129,368$ 0.704600$ 911.53$ 1,409.20$
Little Elm 6,647 262,990$ 8,746$ 254,244$ 0.657671$ 1,672.09$ 1,315.34$
Arlington 89,050 177,524$ 48,741$ 128,783$ 0.639800$ 823.95$ 1,279.60$
Denton 18,404 226,706$ 12,570$ 214,136$ 0.637856$ 1,365.88$ 1,275.71$
Richardson 19,346 233,023$ 37,672$ 195,351$ 0.625160$ 1,221.26$ 1,250.32$
Carrollton 16,419 276,448$ 63,401$ 213,047$ 0.599700$ 1,277.64$ 1,199.40$
Irving 36,039 210,396$ 45,457$ 164,939$ 0.594100$ 979.90$ 1,188.20$
Coppell 10,848 394,980$ 18,466$ 361,552$ 0.579500$ 2,095.19$ 1,159.00$
Highland Village 4,377 368,676$ 6,353$ 362,323$ 0.568020$ 2,058.07$ 1,136.04$
Corinth 5,163 253,775$ 4,663$ 249,112$ 0.536860$ 1,337.38$ 1,073.72$
Frisco 16,325 452,990$ 39,324$ 413,666$ 0.446600$ 1,847.43$ 893.20$
Flower Mound 17,578 381,743$ 3,270$ 378,473$ 0.439000$ 1,661.50$ 878.00$
Lewisville 13,124 224,637$ 3,719$ 217,318$ 0.436086$ 947.69$ 872.17$
Roanoke 1,401 291,560$ 66,148$ 225,412$ 0.375120$ 845.57$ 750.24$
Grapevine 11,480 326,527$ 88,055$ 238,472$ 0.289271$ 689.83$ 578.54$
HOMESTEAD EXEMPTION
July 1st – Council must adopt an ordinance prior to this date in order to make the change effective for
Tax Year 2018 (available meeting dates are June 19th or 26th).
Exemption percentage may not exceed 20% per the Texas Tax Code, Section 11.13(n).
Council may increase minimum but must be in $5,000 increments (-$588,000 each increment).
$5,000 exemption = $31.89 per year based on current tax rate of $0.637856.
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$5,000 $10,000 $20,000
0.5% $1,000,000 $2,000,000 $4,000,000
1.0% $500,000 $1,000,000 $2,000,000
5.0% $100,000 $200,000 $400,000
7.5% $66,666 $133,333 $266,666
10% $50,000 $100,000 $200,000
20% $25,000 $50,000 $100,000
COMPENSATION & BENEFITS ASSUMPTIONS
FY 2018/19 has 3% average merit increase and increases for civil service based on meet & confer
agreement
• Preliminary planning level estimate based on market pay comparisons
Future FY’s have 3% average estimated increase
Health Insurance
• Assumes a 3% increase in City contributions
• Employee contribution rates to be reviewed in coming weeks
Retirement
• TMRS rate decrease of 17.31% to 17.18%
• Fire Pension rate at 18.50%
• Details on City pensions will be presented to Council in July/August 20
FIVE YEAR FINANCIAL FORECAST
Purpose of Forecast
• Evaluate budgetary decisions for long-term impacts under conservative scenarios
• Ensure financial affordability and sustainability of budgetary decisions
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PRELIMINARY GENERAL FUND FORECAST
(PROPERTY TAXES AT EFFECTIVE TAX RATE)
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Amended Current Preliminary Year 2 Year 3 Year 4 Year 5
Budget Estimate Budget Projected Projected Projected Projected
2017-18 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23
Beginning Fund Balance 31,770,772$ 31,770,772$ 31,582,129$ 31,903,527$ 32,250,511$ 33,053,676$ 33,440,580$
Property Tax 44,460,191$ 44,460,191$ 45,824,128$ 47,416,268$ 49,302,133$ 51,548,343$ 54,240,825$
Sales Tax 36,181,384$ 39,202,935$ 41,163,082$ 43,221,236$ 44,950,085$ 46,298,588$ 47,687,546$
Other Revenues 39,078,797$ 39,307,459$ 40,379,208$ 40,403,151$ 40,550,689$ 40,746,978$ 40,831,455$
Total Revenues 119,720,372$ 122,970,585$ 127,366,418$ 131,040,655$ 134,802,907$ 138,593,909$ 142,759,826$
Base Expenditures 119,687,991$ 118,273,937$ 126,295,020$ 129,193,671$ 131,749,742$ 135,207,005$ 138,495,760$
New Recurring Expenses -$ -$ 750,000$ 1,500,000$ 2,250,000$ 3,000,000$ 3,750,000$
New One-Time Expenses 4,885,291$ 4,885,291$ -$ -$ -$ -$ -$
Total Expenditures 124,573,282$ 123,159,228$ 127,045,020$ 130,693,671$ 133,999,742$ 138,207,005$ 142,245,760$
Ending Fund Balance 26,917,862$ 31,582,129$ 31,903,527$ 32,250,511$ 33,053,676$ 33,440,580$ 33,954,646$
Change in Fund Balance (4,852,910)$ (188,643)$ 321,398$ 346,984$ 803,165$ 386,904$ 514,066$
Fund Balance as % of Expend. 21.6% 25.6% 25.1% 24.7% 24.7% 24.2% 23.9%
GENERAL FUND SUPPLEMENTAL REQUESTS
Supplemental Requests are requests for funding of capital and operational expenses.
Currently, the requests total $47,294,648
• Capital - $41,256,000
• Recurring Operational Expenses - $3,467,867
• One-Time Operational Expenses - $2,570,781
The final detailed list of supplementals based on priority and funding options, will be discussed with Council in July/August. 23
DEBT BY FUND (PRINCIPAL & INTEREST) – 9/30/17
Fund GOs COs Revenue Bonds Total
General Gov’t.1 $151,237,097 $63,840,736 - $215,077,833
Electric2 $56,348,813 $553,567,798 $346,732,250 $956,648,861
Water $71,261,668 $42,408,790 - $113,670,458
Wastewater $18,684,893 $39,239,344 - $57,924,237
Solid Waste $5,145,846 $61,200,448 - $66,346,294
Total $302,678,317 $760,257,116 $346,732,250 $1,409,667,683
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1Includes General Fund, Water Park, Warehouse and Airport debt.
2City has $16,917,916.67 is bonds that will offset outstanding revenue bonds as capitalized interest. Additionally,
$60.5 million in debt at TMPA not reflected.
3Does not include sale of $29.685 million in debt for General Government in June 2018.
GO BOND AUTHORIZATION
Purpose
Date
Authorized
Amount
Authorized
Amount
Issued
FY 2017/18
To Issue
Remaining
Authorization
Streets 11/6/2012 $20,400,000 $20,400,000 - -
Streets 11/4/2014 $61,710,000 $18,290,000 $15,650,000 $27,770,000
Public Safety 11/4/2014 $16,565,000 $16,565,000 - -
Drainage 11/4/2014 $8,545,000 $5,255,000 $2,585,000 $705,000
Parks 11/4/2014 $11,355,000 $4,280,000 $1,515,000 $5,560,000
$118,575,000 $64,790,000 $19,750,000 $34,035,000
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Note: Anticipate issuing $19,370,000 in FY 2018/19 and $14,665,000 in FY 2019/20
DEPARTMENTAL PRESENTATIONS
Presentations to continue through July at each scheduled Council meeting
Areas to be covered:
• Structure and Staffing
• Goals and Accomplishments
• Performance Measures
• Cost Containment
• Process Improvements
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BUDGETARY DATES
JUNE 23 – Utility Budgets recommendation from PUB
MAY to JULY – Departmental Presentations
JULY 25 – Final Certified Value
AUGUST 2 – Budget Workshop & Adoption of Maximum Tax Rate (basis for public hearings)
AUGUST 14 & SEPTEMBER 11 – Public Hearings on Tax Rate & Proposed Budget
SEPTEMBER 18 – Adoption of Tax Roll, Tax Rate and Budget
Budget Transparency - Dedicated budget page on City website
• Budget idea submission form
• Posting all presentations, proposed budget and budgetary agenda items 27
RECEIVE FEEDBACK AND DIRECTION
Budget Themes/Priorities
Homestead Exemption
Any Other Direction
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QUESTIONS