CML s 92 nd Annual Conference June 17 20, 2014 Breckenridge, Colorado Preconference Session: Municipal Finance & Budgeting for Elected Officials June 17, 2014 2:30-4:30pm Presenter: Jeff Hansen Finance Director City of Golden Ø Keep you awake Today s Objectives Ø Make this interactive Ø Ask Questions!!! Ø Hopefully you learn something Ø Either from me or each other 1
Outline Ø Finance Ø Basics of Governmental Accounting Ø Budget Ø Budget Basics Ø Typical Budget Process Ø Budget Oversight Ø Other types of Budget Processes Basics of Governmental Accounting Ø Not-for-profit perspective Ø Accountable to citizens/bondholders Ø Rule Making/Oversight Ø GAAP Ø GASB Ø GFOA Ø State Statutes Ø City Charter/Municipal Code Fund - Defined A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. Some funds are required to be established by State law and bond covenants, however, the Council/Board may establish other funds to help control and manage spendable resources for particular purposes (i.e. Recreation Center Fund). All of the municipality s funds can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds. 2
Basics of Governmental Accounting Ø Fund Accounting Ø Separate Checkbooks Ø Fee/Cost of Service Relationships Ø Fund Types Ø Governmental Ø General, Special Revenue, Capital Projects, Permanent Ø Proprietary Ø Enterprise, Internal Service Ø Fiduciary Ø Trust, Agency, Pension City of Golden Fund Structure Ø General Fund Ø Primary Revenues Ø Sales & Use Tax, Property Tax Ø Primary Functions Ø Public Safety (Police, Fire) Ø Public Works (Streets) Ø Parks & Rec (Outdoor Rec, Parks, Forestry, RV Park, Bldg Maintenance) Ø General Administration (Council, Manager, Clerk, Communications, Finance, HR, Court, Planning, Economic Development) City of Golden Fund Structure Ø Special Revenue Funds Ø Conservation Trust Fund Ø Lottery Funds Ø Development/Improvement of Parks, Open Space, Trails Ø GDGID Fund Ø Dedicated Property Tax Ø Purchase, construction and improvements of parking lots/garages 3
City of Golden Fund Structure Ø Capital Projects Funds Ø Sales & Use Tax Fund Ø Dedicated Sales & Use Tax (1%) Ø Infrastructure, Facilities, Capital Equip Ø Curb, Gutter, Sidewalks Ø Traffic Calming, Major Street Projects, Bridges Ø Public Art Program Ø Fire Trucks, Police & Fire Equipment Ø Community Center Equipment/Capital Improvements Ø Capital Related Debt Service City of Golden Fund Structure Ø Capital Projects Funds (cont.) Ø Capital Programs Fund Ø State Highway Users Tax, Fund Transfers Ø Used for Street Improvements Ø Open Space Fund Ø County Open Space Tax Ø Open Space Purchases, Trail Development City of Golden Fund Structure Ø Enterprise Funds Ø Water Fund Ø Environmental Quality, Treatment, Maintenance, Water Rights, Storage, Capital, Debt Service Ø Wastewater Fund Ø Environmental Quality, Maintenance, Treatment, Capital Ø Drainage Fund Ø Maintenance, Capital, Debt Service 4
City of Golden Fund Structure Ø Enterprise Funds (cont.) Ø Community Center Fund Ø Splash Aquatic Park Fund Ø Fossil Trace Golf Course Fund Ø Cemetery Operations Fund Ø Rooney Rd Sports Complex Fund City of Golden Fund Structure Ø Internal Service Funds Ø Fleet Management Fund Ø Information Technology Fund Ø Insurance Fund Ø Medical Benefit Fund Ø Workers Comp & Unemployment Ins Fund Ø Fiduciary Funds Ø Volunteer FF 457 Ø Permanent Fund Ø Cemetery Perpetual Care Fund 5
Budget Basics Balanced Budget: Sources of Funds = Uses of Funds Sources: Beginning Projected Reserves plus Budgeted Revenues Uses: Budgeted Expenditures plus Ending Projected Reserves Ø Reserve Philosophy Budget Basics Ø Policy on Ending Reserves Ø How much Ø Course of action if over/under Ø Varies by Entity and Fund/Fund Type Budget Basics Ø Legal Level of Control Ø Fund, Department, or Line Item Ø Dictates amount of Council involvement 6
Typical Budget Process Ø Council Goals/Priorities Ø Revenue Projections Ø Operating Budget Ø Capital Planning & Budget Ø Council Review Ø Public Input (throughout the process) Ø Adoption Council Goals/Priorities Council Goals/Priorities Best and most important time for Council involvement and input Ø General goals/direction Ø Specific projects Ø Community needs 7
Revenue Projections Ø Needs to be a separate, independent part of the process Ø Initial draft early in the process Ø Adjust only if justified based on current year trends or proposed fee increase Ø DO NOT ARTIFICIALLY INCREASE REVENUE PROJECTIONS TO BALANCE THE BUDGET!!!!!!!!!! Revenue Projections Ø Current Year Projections Ø Budget Year Projections Ø Trends Ø Assumptions Ø Inflation Ø Rate/Fee increases? Ø One Time Revenues Ø Revenue Manual SALES TAX REVENUE Distribution: General Fund 66.7% Sales and Use Tax Capital Improvement (SUT) Fund 33.3% Source: Collection: Visitors, residents and employees in Golden. In 1979, the citizens of Golden voted to install a 2% sales and use tax. In 1991, the citizens voted to increase the sales and use tax rate to 3%, with the extra 1% to be earmarked for capital improvements. Sales tax is charged on certain services and all retail purchases including food. As a home rule city, Golden collects and administers its own sales and use tax. Businesses remit tax to Golden on a monthly, quarterly or annual basis. Taxes collected are due to the City by the 20th of the month following collection. The City has established a lockbox for the efficient and secure deposit of sales and use tax monies. Returns are mailed directly to the bank, eliminating processing float. The City utilizes a number of enforcement procedures to collect from delinquent accounts including taxpayer education, delinquency notices, personal phone contact and visits, audits, summons to municipal court and seizures. Five Year Trend: 15,000,000 10,000,000 5,000,000 General SUT Year Fund Fund Total 2008 7,240,442 3,677,791 10,918,233 2009 6,766,876 3,389,235 10,156,111 2010 7,106,720 3,552,527 10,659,247 2011 7,235,703 3,616,842 10,852,545 2012 7,600,000 3,800,000 11,400,000 0 2008 2009 2010 2011 2012 Sales tax revenues have slowly rebounded from the economic recession that started late in 2008 and impacted the City more significantly in 2009. Limited new housing starts have impacted the amount of big ticket retail sales and deliveries since 2008. In 2012, revenues above budget by 8.83% through September sales. The City has not experienced major store closings or new openings in 2011 or 2012. Forecast: 2013 $11,685,000 2014 $11,977,125 Rationale: As concerns about the speed and extent of an economic recovery persist, sales tax revenues are projected to increase slowly and gradually, 2012 notwithstanding. Forecast anticipates a 2.5% growth in Sales Tax for both 2013 and 2014, allowing for population increases, inflation, and some new commercial activity filling new store fronts in the downtown. 8
Operating Budget Ø Current Year Projected Spending Ø Subsequent Year Requests Ø Additional Staff Ø New/Different Programs Ø Justifications GENERAL FUND FINANCE & ADMINISTRATIVE SERVICES Account Description Actual 2012 Actual 2013 Original Budget 2014 Actual Jan- Apr 2014 01-3031 SALARIES & BENEFITS Salaries, Full- Time 40100 692,200 $ 622,940 $ 683,700 $ $ 193,821 281 40110 Overtime 2,872 2,335 1,200 40150 Employee Assistance 508 519 500 188 40170 Social Security - FICA 51,703 42,034 50,600 14,428 40180 Health Insurance 75,056 66,393 73,300 18,769 40190 Worker's Comp 900 900 900 300 40200 Retirement 33,986 31,612 34,200 10,053 40210 401(a) Match 18,546 16,515 18,600 5,294 40220 Life, AD&D, LTD 5,309 5,517 8,400 2,235 40240 Vantage Care 3,296 5,103 3,300 7,294 40270 Employee Allowances 1,441 890 1,400 280 40290 Dental Insurance 2,963 2,632 4,000 739 40310 Unemployment Comp 3,600 3,696 3,600 1,200 Projected Actual 2014 Proposed Budget 2015 Proposed Budget 2016 Subtotal - Salaries & Benefits 892,380 801,086 883,700 254,882 - - - SUPPLIES & SERVICES 50700 Repairs & Maintenance - - 500-51900 Office Supplies 5,688 5,683 7,000 927 53100 Cash Over/Short - Bad Debt 197 283 - (5) 60400 Professional Services 170,551 197,024 175,000 55,123 60700 Training & Travel 8,956 15,373 10,000 6,020 61900 Senior Tax Refunds 59,050 61,558 62,000 53,000 62200 Dues & Subscriptions 3,074 2,664 3,010 385 63400 Postage 17,747 18,456 19,500 6,530 63700 Telephone 130 125 100 26 64300 Rentals & Leases 5,717 4,901 5,350 1,782 64500 IT Lease 109,312 109,044 105,660 35,200 64600 Printing/Advertising 9,123 10,364 10,000 1,454 Subtotal - Supplies & Services 389,545 425,475 398,120 160,442 - - - CAPITAL 90150 Office Furniture/Equipment 1,140 933 - - TOTAL $ 1,283,065 $ 1,227,494 $ 1,281,820 $ 415,324 $ - $ - $ - Capital Budget Ø Should have a 5-year Capital Improvement Plan (CIP) at minimum Ø Need for future fee increases or debt issuances? Ø Identify impact on operating expenses 9
CITY OF GOLDEN CONSERVATION TRUST SPECIAL REVENUE FUND CAPITAL PROGRAMS (LOTTERY) 5/2/2014 TEN YEAR CAPITAL IMPROVEMENT PLAN 2013-2022 ORIGINAL TOTAL ACTUAL ACTUAL BUDGET Projected Proposed 2013 DESCRIPTION 2011 2012 2013 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 TO 2022 REVENUES: 06-0000-34150 Colorado State Lottery 159,875 188,003 169,680 180,000 182,000 183,820 185,658 187,515 189,390 191,284 193,197 195,129 197,080 1,885,072 06-0000-34204 Grants/Donations 5,825 - - - - - - - - - - - - - 06-0000-36110 Interest 1,031 1,028 1,121 1,400 1,000 442 7,963 10,376 10,281 12,966 13,157 16,143 16,650 90,376 TOTAL REVENUES 166,731 189,031 170,801 181,400 183,000 184,262 193,621 197,890 199,671 204,250 206,354 211,272 213,730 1,975,448 EXPENDITURES: 06-9011-92001 White Water Course Repair and Maintenance - - 50,000-50,000 25,000 40,000-40,000-40,000-40,000 235,000 White Ash Mine Basketball Court Improvements - - - - 70,000 - - - - - - - - 70,000 06-9011-90300 Park Development/Improvements/Playground Upgrades 44,153 74,444 100,000 100,000 130,000-100,000 100,000 100,000 100,000 100,000 100,000 100,000 930,000 06-9011-90310 Trees 28,521 20,837 10,000 10,000 10,000 - - - - - - - - 20,000 06-9011-94102 Splash Repairs, Replacements and Maintenance 25,000 25,320 115,245 8,692 127,000 - - 100,000 - - - - 100,000 335,692 06-9011-94160 Community Center Replacement and Maintenance - - 138,000 80,000 20,000 - - - - 100,000-100,000-300,000 TOTAL 97,674 120,601 413,245 198,692 407,000 25,000 140,000 200,000 140,000 200,000 140,000 200,000 240,000 1,890,692 (Use)/Accumulation of Surplus Funds 69,057 68,430 (242,444) (17,292) (224,000) 159,262 53,621 (2,110) 59,671 4,250 66,354 11,272 (26,270) ENDING FUND BALANCE 190,546 258,976 7,302 241,684 17,684 176,946 230,567 228,457 288,128 292,377 358,731 370,002 343,732 2010 Grants and Donations include: Joint Venture Grant from Jeffco ($32,868). 2011 $5,825 from Jeffco for resurfacing splash pad at Splash. Council Review Ø Reviews at various stages in the process Ø Revenues, Rate & Fee increases, CIP, Operating Exp Ø Draft Budget should already be balanced Ø Staff s final recommendation Ø Discussions at Council Study Sessions Ø Any changes at this point still need to balance Public Input Ø Formal Public Hearings Ø Schedule at each major stage of the process Ø Don t expect much input Ø Informal Ø Boards and Commissions Ø One on one with Councilors 10
Ø Interim Reports Budget Oversight Ø At least quarterly Ø Review revenues and expenditures Ø Compare to budget Ø Compare to prior year CITY OF GOLDEN Revenues and Expenditures Budget to Actual - 1st Quarter 2014 Cash Basis, Interim & Unaudited Diff. Current % Change Prior Year Prior YTD Current Year Current YTD % of to Prior Current Budget Actual Budget Actual Budget Actual to Prior Description WASTEWATER FUND REVENUES: 1,928,090 147,502 Wastewater Charges 2,200,000 199,625 9% 52,123 35% 120,000 0 Wastewater Development Fees 150,000 104,448 70% 104,448 #DIV/0! 9,000 2,705 Miscellaneous 9,000 2,315 26% (390) -14% 46,319 329 Interest 16,200 1,173 7% 844 257% 2,103,409 150,536 Total Wastewater Fund Revenues 2,375,200 307,561 13% 157,025 104% WASTEWATER FUND EXPENSES: OPERATIONS: 280,930 62,232 Environmental Quality 274,759 61,041 22% (1,191) -2% 875,261 103,410 Wastewater Administration 908,189 126,759 14% 23,349 23% 458,247 85,490 Collection & Maintenance 475,856 78,769 17% (6,721) -8% 1,614,438 251,132 Total Wastewater Operations Expenses 1,658,804 266,569 16% 15,437 6% CAPITAL: 439,898 5,090 Utility Line Replacement 461,893 8,019 2% 2,929 58% 439,898 5,090 Total Wastewater Capital Expenses 461,893 8,019 2% 2,929 58% 2,054,336 256,222 Total Wastewater Fund Expenses 2,120,697 274,588 13% 18,366 7% Budget Oversight Ø Budget Sub-Committees Ø Councilors Ø Citizen group Ø Combination Ø Budget Amendments Ø Why? Ø When? 11
Budget Amendments Budget Amendments (Take 2) Types of Budget Processes Ø Annual vs Biennial Ø Zero Based Ø Incremental Ø Priority Driven Ø Outcome Based 12
Annual vs Biennial Budgets Ø Annual Entire process every year Ø Time consuming and labor intensive Ø Biennial majority of process every other year Ø Adopt budget for both years Ø Likelihood of formal budget amendments in year 2 Ø Adopt budget for current year only Ø Year 2 adjustments for significant changes Zero Base Budgeting Ø Start from scratch each year Ø Justify your entire existence Ø Pros includes prepared alternative levels of service/funding Ø Cons labor intensive and time consuming process, information overload, not amenable to fixed mandates, encourages dog & pony shows who wins/loses? Incremental Budgeting Ø Start with prior year budget Ø Allowance for $ or % increases without justification Ø Add new staff, capital and/or programs as funds allow 13
Incremental Budgeting Ø Pros efficient use of time, not labor intensive, easy to calculate new budget, avoid conflict/competition between departments Ø Cons allocates budget where it may not be needed, takes budget away from other areas of need, doesn t always work well with changing Council goals/priorities, may promote use it or lose it mentality Priority Driven Budgeting Ø Focus on programs and services, not departments Ø Public Process Ø Community priorities Ø Competitive process Priority Driven Budgeting Ø Prioritize Services Police Public Works Patrol Snow Plowing Traffic Enforcement Street Sweeping School Resource Traffic/Street Signs SWAT Street Maintenance Drug Task Force Street Lights 14
Priority Driven Budgeting Ø Pros Effective in flat/declining revenues, true cost of doing business, transparency, accountability Ø Cons Mandates may not be community priorities, subsequent years, changing priorities, uncertainty in workforce, support services Outcome Based Budgeting Ø Desired Outcomes identified Ø Costs provided to achieve outcomes Ø Pros allows for private sector to bid on certain outcomes, works well with sufficient revenues Ø Cons line item detail not provided, costs could be inflated So, what s the best method of budgeting??? 15
Jeff Hansen Finance Director City of Golden Questions??? 303-384-8020 jhansen@cityofgolden.net 16