City Council

EXHIBIT "A" FY23 Budget Workshop June 28, 2022 Overview Comments by: Sam A. Listi City Manager 1 Overview Comments • Today is the second session on the FY ‘23 Annual Operating Budget, following meetings with Department Heads and Council tour in May. • Strategic Plan Update is under development in-house with a Council discussion scheduled in August. • Budget uncertainties from COVID-19 appear to have dissipated, replaced in FY ‘23 with positive signs from strong growth and development. • Inflation is an emerging and significant factor, and it will remain so over the next 18 months. • Most revenue sources for FY ‘23 appear to be growing. • Personnel costs are increasing over $1 million due to the implementation of the compensation study 2 2 1  Overview Comments • Revenue projections for property taxes reflect an 18% increase in value based on a voter-approval tax rate that may be less than $0.60 (preliminary). • Projections for sales tax reflect a 10% increase over the year-end estimate for FY ‘22. • ARPA funding, an important source of funds for city revenue replacement, will be used to implement the compensation study and address other local priorities. • Various grants/federal earmarks for PD equipment are also meaningful in leveraging local resources and reducing local expenditures 3 3 Overview Comments • Other key objectives included in the proposed budget: – Three new positions have been added to the City’s proposed budget across all funds, and a COPS grant may fund an additional police officer • Deputy Court Clerk • Information Technology Analyst • Regional Director of Law Enforcement-Peer Support (hired during FY ‘22) • Director of Parks & Recreation position reclassified into a Recreation Superintendent position – Proposed street maintenance funding increases from $650,000 to $1,000,000 in FY ’23. – Contributions into the various capital equipment replacement funds will continue, although contribution amounts have increased 4 4 2  FY23 Budget Workshop June 28, 2022 Presented by: Michael Rodgers, CPA Director of Finance 5 Preliminary Budget Comparison All Funds FY 2022 Annual Budget FY 2023 Annual Budget Revenue Revenue Before Transfers $35,793,370 Before Transfers $41,280,110 Transfers Between Funds 589,910 Transfers Between Funds 2,469,470 Total Resources 36,383,280 Total Resources 43,749,580 Expenditures Expenditures Before Transfers 28,534,750 Before Transfers 31,966,440 Transfers Between Funds 5,645,890 Transfers Between Funds 9,329,820 Total Expenditures 34,180,640 Total Expenditures 41,296,260 Resources Over/(Under) Resources Over/(Under) Expenditures $ 2,202,640 Expenditures $ 2,453,320 6 6 3  Funds To Be Discussed Today • General Fund • Debt Service Fund • Information Technology Fund • Building Maintenance Fund • Hotel / Motel Tax Fund • TIRZ Fund • BEDC Fund 7 7 General Fund Year-End Forecast for FY 2022 FY 2022 FY 2022 Adopted Year-End Budget Estimate Revenue $ 17,470,200 $ 18,248,683 Expenditures (17,470,200) (17,489,648) Incr/(Decr) to Reserve $ - $ 759,035 8 8 4  Forecast for FY 2022 • Sales tax revenue and permitting fees surpass budget by $640,000 and $320,000, respectively • Property tax revenue may finish the year $203,000 short of budget • Total expenditures are expected to fall in line with budget 9 9 General Fund FY23 Statement of Fund Balance Projected Spendable Balance, Sept 30, 2022 $ 6,213,119 35.5% Increases/(Decreases) to Fund Balance: FY23 Revenue 21,198,970 FY23 Expenditures (20,666,570) Net Increase/(Decrease) to Fund Balance 532,400 Spendable Fund Balance, Sept 30, 2023 $ 6,745,519 32.6% The City has adopted a fund balance policy with the goal of achieving and maintaining fund balance equal to 30% of budgeted expenditures. At no time, shall fund balance fall below 25% of budgeted expenditures. 10 10 5  Status of General Fund Reserves FY16 to FY23 $8,000,000 $7,000,000 $6,000,000 $5,000,000 $4,000,000 $3,000,000 $2,000,000 $1,000,000 $0 2016 2017 2018 2019 2020 2021 2022 2023 Unassigned Reserve Balance Minimum Reserve Requirement 11 11 Budget to Budget Comparison by Revenue Category General Fund FY22 FY22 FY23 Budget Revenue Category Budget Estimate Budget Inc / (Dec) Property Tax $ 7,291,740 $ 7,088,128 $ 7,954,220 $ 662,480 Sales Tax 4,917,660 5,558,031 6,113,840 1,196,180 Franchise & Other Tax 1,265,300 1,253,198 1,255,780 (9,520) Permit Fees 293,720 614,519 474,840 181,120 Court Fines & Fees 303,070 274,871 276,290 (26,780) Charges for Service 2,662,540 2,681,643 2,823,560 161,020 Miscellaneous 146,260 199,183 122,940 (23,320) Transfers 589,910 579,110 2,177,500 1,587,590 Total Revenue $17,470,200 $18,248,683 $21,198,970 $3,728,770 12 12 6  FY23 General Fund Revenue Revenue Category Amount Property Tax $ 7,954,220 Property tax, Sales Tax 6,113,840 38% Franchise & Other Tax 1,255,780 Permit Fees 474,840 Court Fines & Fees 276,290 Charges for Service 2,823,560 Sales tax, 29% Miscellaneous 122,940 Property tax Sales tax Franchise tax Transfers 2,177,500 Permit fees Court fines Service charges Total Revenue $21,198,970 Miscellaneous Transfers 13 13 FY23 Property Tax Revenue • Preliminary adjusted taxable value increases over 18% to $1,825,298,271 – Estimated TIRZ growth rate is 27% – Estimated non-TIRZ growth rate is 15% • Preliminary budget includes O&M revenue from a voter-approval rate of $0.5956 • Preliminary tax levy for city purposes (O&M plus debt service) would grow by $746,000, and the levy dedicated to the TIRZ would increase by $305,000 14 14 7  Property Tax History FY16 to FY23 FY O&M TIRZ Debt $12,000,000 $11,000,000 2016 $4,613,688 $ 670,769 $1,090,922 $10,000,000 2017 4,816,716 728,658 1,074,343 $9,000,000 $8,000,000 2018 5,212,685 806,821 990,961 $7,000,000 2019 5,568,951 901,067 934,987 $6,000,000 $5,000,000 2020 6,214,755 1,155,204 964,758 $4,000,000 2021 6,395,900 1,421,889 1,218,672 $3,000,000 2022Projected 7,088,128 1,566,770 1,060,831 2023Budget 7,954,220 1,871,930 1,209,933 O&M TIRZ Debt 15 15 Sales Tax History FY16 to FY23 $6,500,000 FY Revenue $6,000,000 2016 $3,155,659 $5,500,000 2017 3,276,982 $5,000,000 2018 3,510,104 $4,500,000 2019 3,573,712 $4,000,000 2020 4,085,122 $3,500,000 2021 4,896,247 $3,000,000 $2,500,000 2022Projected 5,558,031 $2,000,000 2023Budget 6,113,840 2016 2017 2018 2019 2020 2021 2022 2023 16 16 8  Sales Tax History Rolling Twelve Months of Sales Tax Receipts for City and BEDC $8,500,000 $8,000,000 $7,500,000 $7,000,000 $6,500,000 $6,000,000 $5,500,000 $5,000,000 Mar‐19 Apr‐19 May‐19 Jun‐19 Jul‐19 Aug‐19 Sep‐19 Oct‐19 Nov‐19 Dec‐19 Jan‐20 Feb‐20 Mar‐20 Apr‐20 May‐20 Jun‐20 Jul‐20 Aug‐20 Sep‐20 Oct‐20 Nov‐20 Dec‐20 Jan‐21 Feb‐21 Mar‐21 Apr‐21 May‐21 Jun‐21 Jul‐21 Aug‐21 Sep‐21 Oct‐21 Nov‐21 Dec‐21 Jan‐22 Feb‐22 Mar‐22 17 17 Sales Tax History by Category Sales Tax by Category Over Time $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $‐ Jan 2020 Mar 2020 May 2020 Jul 2020 Sep 2020 Nov 2020 Jan 2021 Mar 2021 May 2021 Jul 2021 Sep 2021 Nov 2021 Jan 2021 Mar 2022 Construction Entertainment Gas & Auto Restaurants Retail Utilities 18 18 9  FY23 Other General Fund Revenue • Transfers into the General Fund grow by $1,587,000 to account for the use of ARPA funds ($900,000) and personnel cost allocations ($700,000) • Refuse collection and contract fees increase by $127,000 due to the rising customer count 19 19 FY23 General Fund Expenditures by Function General Govt, 12% Function FY23 Budget Culture & General government $ 2,542,770 Rec, 11% Public safety 10,282,670 Streets 2,280,110 Planning 890,010 Streets, Culture & recreation 2,328,440 11% Public Solid waste 1,862,240 Safety, 50% Maintenance services 480,330 General Govt Public Safety Streets Total $ 20,666,570 Planning Culture & Rec Solid Waste Maintenance 20 20 10  FY23 General Fund Expenditures by Category Expenditure Category Amount Personnel $12,103,550 Services, Supplies 626,310 23% Maintenance 1,400,140 Personnel, Services 4,859,840 59% Other Expenses 208,150 Capital Outlay 145,000 Transfers 1,323,580 Personnel Supplies Maintenance Services Other Costs Capital Outlay Total Expenditures $20,666,570 Transfers 21 21 Budget to Budget Comparison by Expenditure Category General Fund FY22 FY22 FY23 Budget Expenditure Category Budget Estimate Budget Inc / (Dec) Personnel $ 10,487,360 $ 10,375,043 $ 12,103,550 $ 1,616,190 Supplies 535,860 594,953 626,310 90,450 Maintenance 1,015,100 597,220 1,400,140 385,040 Services 4,466,140 4,322,542 4,859,840 393,700 Other Costs 210,650 137,500 208,150 (2,500) Capital Outlay 0 79,300 145,000 145,000 Transfers 755,090 1,383,090 1,323,580 568,490 Totals $ 17,470,200 $ 17,489,648 $20,666,570 $ 3,196,370 22 22 11  General Fund Significant Changes • Personnel costs increase by a total of $1,616,190 – Compensation study implementation increases expenditures by $1,100,000 – A 2% cost of labor adjustment costs $167,000 – Merit increases up to 5% for all non-civil service employees raises costs by $192,000 – Two General Fund positions have been added • Deputy Court Clerk • Regional Director of Law Enforcement Peer Network (FY22) • The Director of Parks & Rec position will be reclassified into a Recreation Superintendent position 23 23 General Fund Significant Changes • The $90,450 increase in supplies is a result of fuel expenditures that are up $45,000 and the replacement of small equipment • Appropriations for the annual street maintenance program increase from $650,000 in FY 2022 to $1,000,000 in FY 2023 • Refuse collection costs increase by $108,000 due to a growing customer base 24 24 12  General Fund Significant Changes • The cost for information technology services increases by $147,000 • Appropriations for legal services have been reclassified from personnel to services • Capital expenditures totaling $145,000 include – $120,000 to replace all windows and install a gazebo at the Harris Center – $25,000 to replace an EKG monitor for the Fire Department 25 25 General Fund Significant Changes • Transfers to other funds increase by $648,490 to $1,403,580 – Transfers into the various equipment replacement funds increase by $327,000 due to a higher contribution requirement – $193,000 is transferred into the Water & Sewer Fund to reflect changes to the payroll allocation – $30,000 is transferred into the capital projects fund to pave the PD South parking lot – $40,000 is transferred for a match to the COPS grant that could add one task force officer 26 26 13  Debt Service Fund FY23 Statement of Fund Balance Projected Spendable Balance, Sept 30, 2022 $ (43,048) Increases/(Decreases) to Fund Balance: FY23 Revenue 1,210,760 FY23 Expenditures (1,196,380) Net Increase/(Decrease) to Fund Balance 14,380 Spendable Fund Balance, Sept 30, 2023 $ (28,668) 27 27 Outstanding Tax-Supported Debt for FY 2023 Outstanding Bond Issuance Description Amount General Obligation Bonds, Series 2003 $ 200,000 General Obligation Bonds, Series 2005 555,000 Certificates of Obligation, Series 2008 571,725 Certificates of Obligation, Series 2015 750,000 G.O. Refunding Bonds, Series 2017 860,000 Certificates of Obligation, Series 2018 2,070,000 G.O. Refunding Bonds, Series 2019 4,395,000 Tax-Supported Debt Outstanding $ 9,401,725 28 28 14  Annual Debt Service Payments on Tax-Supported Debt $1,400,000 $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 $0 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 Interest Principal 29 29 Information Technology Fund FY23 Statement of Fund Balance Projected Spendable Balance, Sept 30, 2022 $ 57,435 Increases/(Decreases) to Fund Balance: FY23 Revenue 1,065,740 FY23 Expenditures (928,020) Net Increase/(Decrease) to Fund Balance 137,720 Spendable Fund Balance, Sept 30, 2023 $ 195,155 30 30 15  Information Technology Fund Expenses by Category Expenditure Category Amount Personnel $ 301,020 Personnel, 32% Supplies 13,170 Maintenance 404,330 Services 88,500 Capital Outlay 121,000 Maintenance, 44% Total Expenditures $ 928,020 Personnel Supplies Maintenance Services Capital Outlay 31 31 Information Technology Fund Significant Changes • Personnel costs increase by $89,940 due to cost of labor adjustments, merit increases, and the addition on one IT Analyst position • Expenses for supplies fall by $124,000 after replacing several computers in FY 2022 • Capital outlay increases of $121,000 includes – $71,000 to replace computers and desk phones – $50,000 for a mobile audio solution and trail cameras 32 32 16  Building Maintenance Fund FY23 Statement of Fund Balance Projected Spendable Balance, Sept 30, 2022 $ 92,787 Increases/(Decreases) to Fund Balance: FY23 Revenue 489,440 FY23 Expenditures (416,870) Net Increase/(Decrease) to Fund Balance 72,570 Spendable Fund Balance, Sept 30, 2023 $ 165,357 33 33 Building Maintenance Fund Expenses by Category Expenditure Category Amount Maintenance 14% Personnel $299,200 Supplies 39,000 Maintenance 60,110 Services 10,180 Transfers 8,380 Personnel 72% Total Expenditures $416,870 Personnel Supplies Maintenance Services Transfers 34 34 17  Building Maintenance Fund Significant Changes • Personnel costs increase by $13,000 due to cost of labor adjustments and merit increases • Building maintenance costs decline by $9,500 after exterior work at Fire Station #2 was completed during FY 2022 35 35 Hotel / Motel Tax Fund FY23 Statement of Fund Balance Projected Spendable Balance, Sept 30, 2022 $ 560,898 Increases/(Decreases) to Fund Balance: FY23 Revenue 288,600 FY23 Expenditures (167,610) Net Increase/(Decrease) to Fund Balance 120,990 Spendable Fund Balance, Sept 30, 2023 $ 681,888 36 36 18  Hotel / Motel Tax Fund Expenditures by Category Expenditure Category Amount Personnel $ 0 Supplies 100 Services 28,170 Other Expenses 104,500 Other Expenses, Transfers 34,840 62% Total Expenditures $167,610 Personnel Supplies Services Other Expenses Transfers 37 37 Hotel/Motel Tax Fund Significant Changes • Tax revenue grows by 10% to $288,100 • Tourism sponsorship increases by $30,000 to promote several events • Visitor Center support remains at $12,500 38 38 19  TIRZ Operating Fund FY23 Statement of Fund Balance Projected Spendable Balance, Sept 30, 2022 $ 951,923 Increases/(Decreases) to Fund Balance: FY23 Revenue 3,029,230 FY23 Expenditures (2,630,640) Net Increase/(Decrease) to Fund Balance 398,590 Spendable Fund Balance, Sept 30, 2023 $ 1,350,513 39 39 Tax Year 2022 Property Values • Preliminary estimates show a 27% increase to captured values within the TIRZ to $314,000,000 • Budgeted contributions are based upon a City tax rate of $0.5956 and County rate of $0.3680 • Property values and tax rates will likely change before budget finalization 40 40 20  Budget to Budget Comparison TIRZ Operating Fund Revenue TIRZ Fund FY22 FY22 FY23 Increase / Revenue Budget Estimate Budget (Decrease) City $1,553,820 $1,566,770 $1,871,930 $ 318,110 County 981,110 915,998 1,156,600 175,490 Interest 4,000 575 700 (3,300) Total $2,538,930 $2,483,343 $3,029,230 $ 490,300 41 41 Budget to Budget Comparison TIRZ Operating Fund Expenditures TIRZ Fund FY22 FY22 FY23 Increase / Expenditures Budget Estimate Budget (Decrease) Services $ 35,000 $ 37,220 $ 10,000 $ ( 25,000) Debt Service 402,710 402,710 265,800 (136,910) Grants 90,000 70,000 120,000 30,000 Transfers 1,682,530 1,682,530 2,234,880 552,350 Total $ 2,210,240 $ 2,192,460 $ 2,630,640 $ 420,400 42 42 21  Outstanding Debt for FY 2023 Outstanding Bond Issuance Description Amount G.O. Refunding Bonds, Series 2019 $ 255,000 Revenue-Supported Debt Outstanding $ 255,000 43 43 Façade Grants • $95,350 of grants have been approved: – Arusha Coffee Company 126 N East St $11,500 – Jo Mapel 108 W Central Ave $20,000 – Woodhouse Day Spa 110 N Main St $20,000 – Dean Winkler 207 E Central Ave $20,000 – Mary Garza 104 S Pearl St $ 5,400 – Be-You-Tiful Salon 108 N Main St $ 3,850 – Roman Esparza 206 E Central Ave $ 4,800 – Dominca Garza 122 N Pearl St $ 9,800 • FY 2023 budget includes an additional $24,650 for potential grants that may be awarded during the year 44 44 22  Transfers • Transfers to the TIRZ Capital Projects Fund will set aside funding for the following projects: – Connell Street $1,200,000 – Southwest Parkway 750,000 – Library Renovation 250,000 • Transfers to the General Fund will pay for a portion of the Retail Development Coordinator position 45 45 BEDC Operating Fund FY23 Statement of Fund Balance Projected Spendable Balance, Sept 30, 2022 $ 6,821,222 Increases/(Decreases) to Fund Balance: FY23 Revenue 3,114,250 FY23 Expenditures (1,937,580) Net Increase/(Decrease) to Fund Balance 1,176,670 Spendable Fund Balance, Sept 30, 2023 $ 7,997,892 46 46 23  Budget to Budget Comparison BEDC Operating Fund Revenue BEDC Fund FY22 FY22 FY23 Increase / Revenue Budget Estimate Budget (Decrease) Sales Tax $2,418,500 $2,778,599 $3,056,460 $637,960 Rental Income 27,600 27,600 27,600 0 Miscellaneous 9,230 14,844 30,190 20,960 Total $2,455,330 $2,821,043 $3,114,250 $658,920 47 47 Budget to Budget Comparison BEDC Operating Fund Expenditures BEDC Fund FY22 FY22 FY23 Increase / Expenditures Budget Estimate Budget (Decrease) Personnel $ 218,600 $ 233,858 $ 275,910 $ 57,310 Supplies 5,080 2,050 5,170 90 Maintenance 76,190 35,600 86,740 10,550 Services 185,390 154,110 219,760 34,370 Capital Outlay 50,000 0 50,000 0 Transfers 150,000 150,000 1,300,000 1,150,000 Total $ 685,260 $ 575,618 $1,937,580 $1,252,320 48 48 24  BEDC Fund Significant Changes • Sales tax revenue grows 10% over the FY 2022 estimate to $3,056,460 • Miscellaneous income rises as the Chamber of Commerce reimburses a portion of the Administrative Assistant salary • Personnel costs increase by $57,310 due cost of labor adjustments, merit increases, and the conversion of a part- time Administrative Assistant position into a full-time position • Transfers to capital projects will provide $1,300,000 for S Pearl / E Avenue J street reconstruction 49 49 In Summary • A growing property tax base provides sufficient resources to sustain current service levels • Sales tax revenue continues to rise • General Fund budget includes – Two additional FTE positions plus the city match for one additional police officer position that could be funded with a COPS grant – Compensation study implementation – Cost of labor adjustment of 2% for all employees – Merit adjustments up to 5% for non-civil service employees 50 50 25  In Summary • Annual street maintenance funding reaches $1,000,000 • Contributions into the various equipment replacement funds increase to cover future needs • Debt service remains stable at $1.2 million • The Information Technology Fund will add one position • Hotel/Motel Tax Fund revenue grows 10% • The TIRZ Fund and BEDC Fund set aside funding for major capital projects 51 51 Upcoming Budget Calendar Meeting Date Budget Item to be Presented July 12 -Discuss the 2023-2027 Capital Improvements Program July 26 -Presentation of fee schedule changes -Present the FY23 Proposed Annual Budget to City Council -Call date for public hearing on the proposed budget August 9 -Propose a property tax rate -Call date for public hearing on the property tax rate -Present the Strategic Plan -Hold public hearings on budget and property tax rate September 6 -Receive public input on the Strategic Plan (Special) -Adopt fee schedule September 13 -Adopt Strategic Plan, FY23 Annual Budget, and tax rate 52 52 26  Questions/Comments? 53 53 27