Mayor & Commission Meetings

FY25 GENERAL FUND BUDGET UPDATE (AKA…BUDGET ”BIG ROCKS”) (MARCH 19, 2024) INTRODUCTION The purpose of this Budget Update is to inform the Mayor and Commission of major expenditure or revenue challenges, changes or other issues (aka “Big Rocks”) potentially impacting the upcoming budget. Budget Timeline: Jan 20, 2024 Jan 26, 2024 Mar 19, 2024 M&C Retreat Apr 30, 2024 May of 2024 Mar 1, 2022 Fall of 2023 Manager FY25 Budget Jun 4, 2024 Jan 2024 Discussed Mayor submits Commission M&C adopts Dept/Offices provided FY25 Budget Status Update Budget Review Budget Budget Requests Recommended Strategic Plan begin working Budget Guidelines provided to and Public Adoption Submitted FY25 Budget to for FY23-FY25 on FY25 Budgets Guidelines memo & M&C (aka Big Comment (scheduled) Commission memo to M&C Strategic Plan Rocks) At this stage in the budget development process, departments and offices have submitted operating and capital requests, preliminary estimates for pay and benefit costs have been developed and preliminary estimates for revenues have been generated. The Manager provided a Budget Guidelines memo in January to update the M&C. The Manager met and reviewed budget requests with department directors and the Manager, Mayor and Mayor Pro Tem met and reviewed budget requests with constitutional / elected department heads. The Mayor & Commission approved Strategic Plan for FY23-FY25 will help guide decision making throughout the budget process. Next steps: The Manager will work with the Mayor to finalize the Mayor’s Recommended Budget, which must be submitted to the Commission and released to the public no later than the end of April. The Commission will review the budget in May and adopt a final budget in June. 2 BUDGET DEVELOPMENT GUIDELINES: Overall, a budget is an expression of priorities. The following priorities are important to support both current and future service delivery models: 1. Employee recruitment and retention 2. Current services 3. Infrastructure and life cycle needs 4. State and/or Federal mandates 5. ACCGov’s Strategic Plan, and 6. Initiatives consistent with the Mayor and Commission’s priorities. STRATEGIC PLAN (FY23-FY25): The approved Strategic Plan should also help to guide decision making as the budget is developed. The following three strategies are specifically important for budget development: Goal Area 3: Organizational Improvement Strategy A. – Develop strategies to recruit, reward, and retain high performing employees, both internally and externally, including individuals coming out of the justice system. Goal Area 3: Organizational Improvement Strategy C. - Improve programs, processes, policies and communication external and internal, assess how resources are allocated to meet existing and future needs for better service delivery and what we deliver. Goal Area 6: Built and Natural Infrastructure Strategy C. – Provide adequate funding for maintenance of existing and newly constructed infrastructure. 3 Expenditures (General Fund costs only) Pay: Unified Plan (~$1.5M) – recommended market increase of 4% for current employees (no increase for performance pay is planned for FY25). A pay table increase of 3% is also planned to improve recruitment by increasing pay for new hires. Public Safety Step Plan (~$2.4M) – recommended increase of 4% to the step plan pay table for all public safety employees. This amount includes $711,000 to fund step increases for eligible employees. Similar to past years, FY25 compensation budgets continue the practice of budgeting for some anticipated vacancy savings, but less so than in past years. This is due to a gradual decline in position vacancies (see Turnover Rate chart on next page). Based on these trends, a ~$3.0M increase in the budget is needed prior to factoring in any pay increases to fund current and anticipated filled positions. As noted this time last year, when turnover, retirements and vacancies decline and begin to stabilize, pay budgets will raise. Overtime: Current overtime expenditures are on pace to meet and likely exceed the FY24 departmental budgets for overtime, including the overtime/vacancy contingency amounts. The FY25 budget anticipates additional funding of $1.0M for overtime that will need to be included in departmental budgets next year. Compensation/Classification Study (Unified Pay Plan): In February 2024, M&C approved the initiation of a compensation and classification study for positions in the Unified Pay Plan. Results from this study are anticipated in late 2024 or early 2025, with any budget impacts to be addressed at that time. (NOTE: A worksession is scheduled on April 9th, 2024 for Human Resources to present additional information related to pay for FY25.) 4  Turnover Rate (26 Pay Period Rolling, FT only) All Employees (All Separations) All Employees 30% Pay Study COVID Step Plan FY23 Pay FY24 Pay Implementation Shutdowns Implementation Increases Increases 25% 20% 15% 10% 5% 0% Jan 16 Jan 17 Jan 18 Jan 19 Jan 20 Jan 21 Jan 22 Jan 23 Jan 24 Expenditures (General Fund costs only) Benefits: Increases for ongoing annual General Fund costs include: Employee Healthcare ~$628k increase, Retiree Health (Other Post Employment Benefits or OPEB) ~$50k increase, Pension Fund ~$730k increase and Worker’s Compensation ~$133k increase. Employee Healthcare: As noted at the March 14th worksession on benefits, it is proposed to hold constant employee contributions for health insurance – addressing the biggest concern employees have with ACCGov health insurance. The plan is to continue to hold constant employee contributions until ACCGov brings the employer cost share of health insurance premiums from the current 71% to 75%. So, over time, more of the share of health care cost increases will be borne by ACCGov rather than the employee. Pension: The Pension Fund actuaries estimate the annual required contribution (ARC) to be $12.2M in FY24 and $13.1M in FY25 (across all funds, not just General Fund). The FY24 budget included contributions of $11.6M, with a use of ~$600k from the pension fund credit balance. The FY25 budget plans contributions of $12.6M with use of ~500k from the pension fund credit balance (note: at the end of FY23, there is a credit balance of ~$5.6M). 6 Expenditures (General Fund costs only) (continued) Addressing Deferred Capital Maintenance and Replacements: For a number of years, facility maintenance needs and vehicle/equipment replacement needs have been deferred or delayed or otherwise gone unfunded. Many of these projects were either not included or underfunded in the most recent TSPLOST and SPLOST programs. In addition, prices for supplies, equipment and services to maintain, repair and replace facilities, infrastructure and equipment have continued to raise significantly over the last year. Beginning in FY23 and again in FY24, the M&C approved targeted, one-time uses of fund balance to address backlogs in vehicle/equipment replacements and deferred facility maintenance. These one-time contributions, along with planned annual increases are helping to reduce the back logs and deferrals (see charts on next two pages). The FY25 budget proposes continuing this strategy of using one-time funds to address deferred capital needs and as well as increasing annual contributions to keep pace with current needs (and avoiding falling behind again). (Note: based on FY25 projections, and maintaining the two month operating reserve, there is approximately $11.6M of General Fund balance available for appropriation.) Capital Budget: Departments and Offices requested over $29.8M for capital projects in FY25 – most of these requests are to maintain, repair or replace existing facilities and equipment. For FY25, ~$10.1M for capital funding is proposed. (The FY24 approved capital budget was $13.9M.). Currently, $3.2M of available fund balance would be used for capital, along with $7.0M of current revenues, to fund the $10.1M of estimated capital. 7  Deferred Maintenance History: Facilities Life Cycle Program $2,250,000 $1,750,000 $1,250,000 $750,000 $250,000 -$250,000 Deferred FY17 Deferred FY18 Deferred FY19 Deferred FY21 Deferred Fy22 Deferred FY23 FY24 Expenditures (General Fund costs only) (continued) Fleet Replacement Funding: Currently, the Fleet Replacement Program has an estimated replacement backlog of ~ $10.2M. The current contribution to the Fund is projected to be $3.8M in FY25 (up $592k across all funds from FY24), but below the annual amount of $4.8M over a 10-year period, as projected by Fleet Management. The recent investments in the Fleet Fund are making progress against the backlog, despite cost escalation. If the M&C approve the fire apparatus purchase at the April 2, 2024 meeting, the backlog will be reduced further. ARPA for Budget Balancing (~$900k less) - Based on the approved ARPA funding allocations, $343k of the American Rescue Plan dollars will be utilized in FY25 as revenue replacement for “provision of government services”. This is a reduction of roughly $900k compared to the FY24 budgeted amount ($1,243k). FY25 is the final year of planned ARPA funds to help balance the General Fund budget. (Note: the General Fund expenditure budget will be reduced by $343k and those expenditures will be shifted to the ARPA Fund in FY25.) 9  Fleet Replacement Backlog FY24 Update $16,000,000 $14,000,000 $12,000,000 $10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 $0 Backlog FY23 FY24 FY25 FY26 FY27 FY28 FY29 FY30 FY31 FY32 Projected FY22 Projected FY24 10 Expenditures (General Fund costs only) (continued) Major Operational Increases and Maintaining Current Services: • Annual maintenance for enterprise software systems: $200k increase in Information Technology to cover annual increases in various software systems. • Fleet Replacement: $503k increase to annual contribution based on current replacement cycles and estimated current cost for vehicle replacements. This increase continues a multi-year plan to address the annual deficit in funding. • Vehicle Liability: $277k increase contribution to the Self funded General Liability Fund to maintain sufficient funds to cover increasing costs for vehicle liability. • Sheriff/Jail – Inmate Medical services contract: $153k increase for annual contract escalation of 3% ($129k) and estimated medical costs above contract cap of 500 inmates per day ($24k). • Electricity for Streetlights: $100k increase in utilities to fund current level of streetlights. • Operating cost increases to maintain current service levels: $378k - includes Police ($114k), Fire ($96k), Animal Services ($67k), Corrections ($56k) and Elections ($45k). Other Major Operating Additions and Additional Positions: • Facilities Rehabilitation Crew - Central Services: $241k adds one facility maintenance supervisor and incorporates three correctional diversion center participants to handle facility painting and general maintenance (reducing life- cycle capital costs for contracted out painting services). • Firefighters/EMT’s for Ladder Trucks: $163k adds three fulltime positions to increase staffing on the three ladder trucks to national standards. This is the second year of a three year phase-in process. 11 Expenditures (General Fund costs only) (continued) Other Major Operating Additions: • EMA Coordinator – Fire Department: $92k provides a dedicated staff person to assist with the oversight, planning, organization and administration of ACCGov’s Emergency Management Program. • Expand Youth Cadet Program – Police: $91K provides funding to increase part time hours (from 450 to 950) for up to 10 youth cadets to encourage youth engagement and community outreach. • Digital Evidence Management System: $82K (split between District Attorney - $55k and Solicitor - $27k) - to streamline and integrate databases for criminal cases used by the police, prosecutors and the defense. • Grants & Community Impact Coordinator – Sustainability Office: $79k (9 months) to pursue and manage grants and funding opportunities in pursuit of M&C sustainability goals, including the 2035 (ACCGov) / 2050 (Community) 100% Clean and Renewable Energy Commitments. • Tax Appraiser III – Tax Assessors Office: $73k additional position needed to maintain compliance with state tax digest requirements in light of significant workload and tax digest growth over the last five years (recommended by latest audit by Operational Analysis). • Traffic Engineering Technician – Public Works: $59k to assist in completing and maintaining the current volume of traffic studies needed and requested. • Collection Route Supervisor – Solid Waste: $56k to shift this position to the General Fund to align it with the General Fund services it supervises (Leaf and Limb, Litter Collection and Recycling Roll-Off collections). • Municipal Court Clerk: $56k to address continuing back log in processing online payments which have delayed payouts to the General Fund and other agencies. • Assistant Manager - Manager’s Office: $53k (3 months) will provide for a third Assistant Manager position to better distribute spans of control and provide managerial support across all departments and offices. 12 Expenditure (General Fund costs only) (continued) SPLOST facilities operating impacts - $64k: Support to operate and maintain SPLOST funded additions (Costa Building). Other Items: As briefly discussed at the January M&C retreat, this budget plans for some reorganization of General Fund support functions overseen by the Manager. Budget staff from the Finance Department will join with staff in the Geospatial Information Office (GIO) combining strategic planning, data and budget into a single new department. Also, the following offices under the Manager’s Office are transitioning to separate departments: Public Information, Organizational Development, Sustainability and Inclusion. Finally, insurance verification for contracts will move from Human Resources/Safety & Risk to Finance to help streamline the contracting process. There is not enough funding to address all requests and positions submitted by Departments/Elected Constitutional Offices for FY25. These initial requests totaled the following: • Department and Elected/Constitutional Offices submitted Operating Budget requests that total $6.8M above the current budget to maintain existing service levels. • In addition, Department and Elected/Constitutional Offices submitted Operating Budget requests that total $12.4M, adding 57 fulltime positions (65 across all funds) for new initiatives, additional positions and S/TSPLOST impacts. • As noted earlier, Department and Elected/Constitutional Offices submitted General Fund Capital Budget requests that total over $29.8M for FY25 projects. 13 Expenditure Summary FY24 Orig. FY25 Change from FY24 (General Fund only) Budget Forecast Amount Percent Comments Compensation 77,786,278 85,036,745 7,250,467 9.3% Includes 4% pay inc., less in vacancy savings and overtime inc. Pension Contribution 10,853,177 11,583,177 730,000 6.7% Based on current actuarial estimates. Employee Health 11,526,520 11,404,320 (122,200) -1.1% FY24 Included $750k one time contribution. Retiree Health (OPEB) 8,512,200 7,809,650 (702,550) -8.3% FY24 Included $750k one time contribution. All Other Benefits 9,132,040 9,173,946 41,906 0.5% Operating & Indirect 40,960,445 43,905,084 2,944,639 7.2% Increases to maintain current services. Debt Service 1,317,622 1,314,022 (3,600) -0.3% Other Agencies 7,288,316 7,295,414 7,098 0.1% Operating Contingency 1,200,000 1,200,000 0 0.0% Transfers to Other Funds 2,849,966 1,474,966 (1,375,000) -48.2% Transfers to Capital 15,932,500 10,100,000 (5,832,500) -36.6% Transfers to Transit 500,000 0 (500,000) -- Budget Additions 1,452,342 1,452,342 -- New/expanded Initiatives, additional positions, SPLOST impacts. ARPA (budget balancing) (1,247,555) (347,555) 900,000 -- Total Expenditures 186,611,509 191,402,111 4,790,602 2.6% 14 Revenues (General Fund only) Property Taxes: Property taxes are the largest revenue source accounting for roughly 50% of all General Fund revenues. Currently, the Finance department estimates the net growth in taxable property values to be approximately 8% for FY25. (Note: tax digest estimates will not be completed by the Tax Assessors Office until the end of April, so this estimate may change). Based on the current millage rate or tax rate of 12.45 mills ($12.45 per $1,000 taxable or assessed value), property tax revenues for FY25 are estimated to generate ~$94.9M or $6.4M more than the FY24 Budget. (Note: based on this estimated digest, each 0.10 mill change equals ~$703,000 and each 0.25 mill equals ~$1,757,500.) Sales Taxes: The one penny Local Option Sales Tax (LOST) revenue makes up roughly 20% of all General Fund revenues. Over the last twelve months ending in January, LOST revenue was approximately $36.4M. For FY25, revenue is currently estimated to be $37.4M which is $3.7M more than the FY24 Budget. 15 Revenue (General Fund only) (continued) Other Taxes: Revenues for all other taxes account for roughly 15% of all General Fund revenues. Overall, other tax revenues are estimated to grow roughly 5% based on current business trends and tax rates, generating ~$26.5M in FY25, a $1.0M increase over the FY24 Budget. The two largest taxes in this group, the Insurance Premium Tax and Franchise Taxes, are estimated to generate $11.7M and $8.4M, respectively. Other taxes in this group include, excise taxes on alcohol and the occupation tax (aka business licenses). All Other Revenues: All other General Fund revenues are estimated to be ~$27.0M, roughly $900k more than the FY24 Budget. Charges for Services are estimated to be ~$14.8M, Fines and Forfeitures ~$1.7M, Intergovernmental ~$1.4M, Licenses & Permits ~$900k and Other revenues ~$3.3M (which includes an estimated $2.5M in interest earnings). The total also includes $4.7M of Transfers In from other funds. Most all of this Transfer In amount is to cover the associated Pension and OPEB cost for positions in other funds. 16 Revenue (General Fund only) (continued) Use of Fund Balance: At the end of FY23, after deducting for FY24 budgeted uses and an operating reserve based on FY25 estimated expenses and transfers out, there is ~$11.6M of available fund balance in the General Fund. The FY24 Budget planned the use of ~$12.8M of available fund balance. Fund balance is appropriate to cover one time expenditures, but not recommended for ongoing or reoccurring expenditures. When funding reoccurring or ongoing expenditures, non-reoccurring revenues should be avoided. As discussed in the expenditure section, it is recommended that available fund balance budgeted in FY25 should be used to cover deferred facility and equipment maintenance/replacement needs, stabilize other General Fund supported funds or other capital projects either not funded or underfunded in the most recent TSPLOST and SPLOST programs. The FY25 Budget anticipates using $5.6M of fund balance - $2.4M for Operating (compared to $4.3M in FY24) and $3.2M for Capital (compared to $8.5M in FY24). It is recommended that the remainder of the available fund balance ($6.0M) be added to the General Fund operating reserve balance. 17 Revenue Summary FY24 Orig. FY25 Change from FY24 (General Fund only) Budget Forecast Amount Percent Comments Based on current 12.45 millage rate and preliminary information Property Taxes 88,501,650 94,941,650 6,440,000 7.3% from Tax Assessors Office (Finance Estimate). Sales Tax 33,731,000 37,400,000 3,669,000 10.9% Assumes 3% annual growth (above 2023 calendar year actual). Other Taxes 25,458,000 26,502,000 1,044,000 4.1% Increase mainly from Insurance Premium Tax growth Licenses & Permits 916,000 928,500 12,500 1.4% Intergovernmental 1,314,360 1,394,950 80,590 6.1% Charges/Fees 13,507,671 14,835,819 1,328,148 9.8% Increase based on current revenue trends Fines 1,620,000 1,676,011 56,011 3.5% Other Revenues & Transfers In 8,729,603 8,123,506 (606,097) -6.9% Subtotal 173,778,284 185,802,436 12,024,152 6.9% Revenues before use of Fund Balance Plans the use of $2.4M for Operating Budget and $3.2M for Capital Use of Prior Year Fund Balance 12,833,225 5,600,000 (7,233,225) -56.4% Budget Total Revenue $186,611,509 $191,402,436 $4,790,927 2.6% 18