Bryan Langley, Director of Finance, stated that the overview and purpose of this item was to review the adopted FY 2009-10 long-term financial plan, discuss possible changes to assumptions for the long-term financial forecast, review the preliminary FY 2010-11 five year financial forecast, discuss strategies to resolve budget issues, review the preliminary GO debt service fund forecast and next steps needed.
FY 2009-10 Long Term Plan – Langley presented information on the FY 2009-10 assumptions and FY 2009-10 adopted general fund five year forecast. He provided a summary of adopted assumptions for appraised value growth, sales tax growth, compensation, health insurance, tax rate/$100 and future bond sales.
Potential Changes to Assumptions – Langley reviewed the current fund balance, the sales tax, and appraised values. The fund balance was approximately $948K more than previously forecasted. It was expected to remain above the target level over the short term. Information on the FY 2008-09 monthly changes in sales tax was presented. The sales tax budget of $21.475 million for FY 2009-10 now appeared unattainable. The revised estimate for FY 2009-10 was $19.443 million. This would severely affect multiple years in the financial plan.
Appraised Values - Preliminary Appraisal District information indicated most properties would not increase in value. Commercial properties were expected to decline by 10%. Combined with lower new construction values, overall property values were forecasted to fall by 1.6% in FY 2010-11. Future appraised value growth estimates needed to be revised due to moderate recovery estimates. Those figures would be 2% for 2011-12, 3% for 2010-13 and 4% each year thereafter.
Preliminary FY 2010-11 Forecasts – Langley presented information on cost reductions for FY 2009-10, Efficiency Team recommendations, preliminary FY 2010-11 forecasts, gas well fund recommendations, and other considerations.
FY 2009-10 Cost Reductions – the FY 2009-10 adopted budget projected a $3.9 million decline in fund balance. Due to economic slowdown, staff had implemented a number of initiatives to reduce costs including a hiring/reclassification freeze, suspension of non-essential travel, and implementing some Efficiency Team recommendations before the end of the fiscal year. Due to revenue declines, the fund balance decline was still anticipated to approach $3.5 million by year end.
Efficiency Team – the FY 2009-10 adopted long term plan contemplated the need for expenditure reductions in the future years. To realize these savings, an efficiency team was created to identify potential savings and efficiencies across the city. The goal was to identify at least $500,000 in annual savings for the General Fund but initiatives were organizational wide in nature. One recommendation was to implement a cell phone stipend program in lieu of city provided phones and reduce number of cell phones. A second recommendation was to delay the purchase of PCs/reduce the cost for future purchases. The elimination of payroll check/ direct deposit printing and distribution services was another recommendation. Incorporation of the recycling collection process into the existing janitorial services contract was also proposed. Other recommendations included the elimination of funding for mowing of the rail trail; renegotiate copier contract lease rates; and recognize anticipated savings from the installation of more energy efficient windows in City Hall. Total General Fund savings were estimated to be over $539K and approximately $697K for the entire city annually. The Efficiency Team suggested approximately 45 potential topics which were divided into Phase I and Phase II categories for consideration. Phase II projects would be evaluated over the next several months and could include use of equipment pools/reduce the number of vehicles, management of printing costs, full cost recovery fee analysis, and reduction in work week/closure of facilities.
Council Member Mulroy suggested that Council look at their budget and expenditures and lower those also.
Gas Well Funds - Council discussed the use of gas well funds in a December 15th work session. Due to revised General Fund financial projects, staff was recommending that the Airport Gas well funds be transferred to the General Fund which represented repayment of GF subsidy; the $500K property and sales tax transfer to the Non-Airport gas well fund be discontinued; and the Non-Airport gas well fund balance be used to pay potential General Fund one-time costs.
Council Member Watts requested that Legal provide a memo on what restrictions were on that money and why.
Other considerations included the recent annexations were not specifically included in the current forecast, the long term financial plan did not address the lack of funding for infrastructure and a long term strategy needed to be developed to eliminate annual deficits and provide additional resources.
Future strategies for the General Fund revenue and expenditure components and possible strategies were discussed. Due to the composition of expenditures, significant reductions could not be made without affecting personnel and/or service delivery. Revenues that could be directly increased by the City Council were limited primarily to property taxes and user fees. Efficiency improvements and minor adjustments to spending would not be sufficient to correct structural funding imbalances in the General Fund. Langley reviewed a number of other possible considerations for reductions in expenditures.
GO Debt Service Fund- Langley reviewed the updated long term forecast and assumptions and the planned future bond sales and potential issues. No tax rate increase for GO debt service fund was recommended. The lower property tax growth assumptions had significant impact on debt service capacity and the appraisal growth assumptions mirrored those in the General Fund. Staff was recommending issuing $7.M in GO and $4.5 in CO bonds in the spring of 2010. Debt for the public safety training facility was scheduled to be sold in FY 2011-12 but the feasibility would depend on appraised valued. The future size and timing of GO bond elections would be dependent on economic factors. An additional $10 - $15 million in debt may be needed for local match on TxDOT projects.
Next steps – Langley reviewed the budget calendar for next several months and the processes that would be included in those months.