FY 14-15 Budget Presentation 19 May 2014

1. FY 14-15Budget Presentation19 May 2014

2. Mission Statement:To provide value added services in a customer friendly, cost efficient and effective manner resulting in a safe and prosperous community

3. Positive Focus • Honored to work with a progressive, forward thinking and committed Mayor, City Council, Department Directors and dedicated employees

4. Live Within Our Means…. • By law, NC localities must operate within a balanced budget • It is often said: …in tough times, government should tighten its belt and live within its means • When the City tightens its belt, citizens, customers and employees will inevitably feel the squeeze

5. FY15 Budget Development • Staff training in August-October on use of new, comprehensive MSExcel buget development workbooks • Departmental budget development from late October to first of January • Constrained, prioritized departmental budget requests submitted to CM first of January

6. FY15 Budget Development • CM review of budgets with Department Directors in mid-January • Analysis of revenue stream and projections developed in February • Budget balancing during March and April • Work Budget Book prepared April and May

7. The FY15 Budget is… • Seriously Constrained, particularly the General Fund • A No-Frills Budget

8. We’ve been in this mode since 1999 • Henderson continues to endure a protracted period of austerity • The FY15 Budget does not have the elasticity and flexibility normally associated with good budgeting • This problem is particularly acute in the General Fund

9. Total Budget • The Total Budget, adjusted for inter-fund transfers, is: • $37,053,400

10. Total Budget:Fee/Rate/Tax Increases • No Property Tax Increase • No Sanitation Fee Increase • Regional Water Rate Increase = 5% • Water Rate Increase = 5% • Sewer Rate Increase = 3%

11. Monthly Utility Impacts on Residential Customer • Customer using about 5,000 gpm • In City—Water = $0.69 increase • In City—Sewer = $1.65 increase • Out of City Water = $1.24 increase • Out of City Sewer = $3.16 increase

12. Total Budget:Personnel Impacts • No Cost of Living Adjustment • Career Development Continues • Phase 1 of 5-Year Plan to Implement Classification & Pay Plan • Unfreezing Two Positions: • Assistant Finance Director—General Fund • Public Services Director—Water and Sewer funds • Reduction-in-Force of 2 Full-Time & 4 Part-Time Positions • Main Street Director—General Fund • Police Office Assistant—General Fund • Four (4) School Crossing Guards—General Fund • Training for Employee Performance Evaluations for the Supervisory Staff

13. Pay Plan Implementation • On Average, the City’s compensation for employees is 22.67% less than its peers according to a Fall 2013 market survey done by The MAPS Group • $117,000 is provided across the four funds to provide for Phase 1 implementation (5-year plan)

14. Medical Insurance Utilization is Excellent!

15. Medical Insurance10% Rate Reduction!

16. Medical InsuranceKudos! • Kudos to HR Director Cathy Brown and all employees/retirees that have worked hard to keep costs down • Wellness program working well • Kudos to Phil Burnette, City’s Health Plan Administrator, for negotiating this year’s rate reduction and helping us establish the wellness program 3 years ago

17. Individual Funds • Now that we’ve taken a look at the global budget issues, let’s look at the four operating funds: • General Fund (governmental) • Regional Water Fund (enterprise) • Water Fund (enterprise) • Sewer Fund (enterprise)

18. General Fund • Work Horse of all City Budgets • Provides for GENERAL services including • Public Safety: Police, Fire, E-911 • Cultural: Library, Recreation, • Public Health & Welfare: code enforcement, sanitation, Planning/Zoning, transportation • General Administration of City • Archaic revenue structure: Property Tax

19. General Fund Revenues:Primary Revenue Sources • Primary Revenue Sources • Property Tax: 38% • Sales Taxes: 15% • Sanitation Fee: 12% 65% of fund budget

21. Property Tax • 38% of General Fund Budget • One of only two significant major revenue sources that is at the discretion of Council • Tax rate is currently 62 cents • No increase in tax rate is recommended

22. Property Tax Rate Trend

23. Property Tax Basics • Increases in property tax revenues have come primarily from • 1) MPMC converting from non-profit to public; • 2) tax rate increases in FY10 and 14; • 3) Tax and Tag program for motor vehicle registration • 4) Some limited natural growth • Property Tax Collection Rate for FY13 • 93.59%: Overall • 94.30%: All Property Excluding Motor Vehicles • 85.35%: Motor Vehicles

24. Property Tax Revenues

25. Sales Taxes A small decline in FY15 due to loss of State Hold-Harmless payments and a lack-luster economy

26. Undesignated Fund Balance

27. General Fund:Expenditures Trend Analysis Not keeping pace with inflation

28. Trend Analysis Part 2 • FY15 less than FY14 and lower than FY09

29. General Fund Expenditures:Where Does the $ Go? —Part 1

30. Where Does the $ Go? • The community and Council have stated public safety is extremely important. Indeed it is! • One needs to understand how much of the General Fund budget is dedicated to Public Safety vis-à-vis all other services

31. Where Does the $ Go? —Part 2a • Public Safety requires 47% of Fund’s resources

32. Where Does the $ Go? –Part 2b • Current Year Property Tax Does Not Pay for Costs of Public Safety

33. Where Does the $ Go? –Part 2c • Public Safety Personnel Costs require 61% of the Fund’s Personnel Resources

34. Where Does the $ Go? –Part 3a • 26% of General Fund Expenditures are restricted by State Statue, Federal Regulations, Contractual Agreements, Vested Benefits and Inter-Departmental Sales

35. Where Does the $ Go? – Part 3b • When one considers restricted and public safety expenditures which comprise 67% of the total General Fund, any remaining budget balancing would affect all other departments, which comprise only 33% of the Fund’s budget. Across the board cuts just don’t work. Note: E-911 and Asset Forfeiture expenses are reflected in the Restricted Expenditures for the purposes of this pie chart

36. General Fund Expenditures:Gaps • Operating expenses are estimated to the bone—extremely limited flexibility • Streets and storm drainage improvements are terribly under funded • Vehicle and equipment replacement is lagging, particularly in Public Services • Employee compensation is lagging

37. Regional Water Fund:Revenues • 99% of revenues come from the sale of water to the three regional partners: Henderson, 60%, and Warren County and Oxford at 20% each • 5% rate increase to help mitigate revenue losses from reduced consumption and to keep capital reserve contributions at near-projected levels

38. Regional FundRevenue Sources

39. Regional Water Fund:Decreasing Water Sales

40. Regional FundRate Increase Trend

41. Regional FundExpenditure Centers

42. Regional Water FundMajor Initiatives • Obtain Inter-Basin Transfer of Water Permit to 20mgd that will provide for expansion of plant • Physical Expansion of Plant to 20mgdCapital improvements: Chemical Pit and Clearwell Roof • Continuation of rate stabilization/debt service plan

43. Water Fund:Revenues • 97% of revenues come from the sale of water to • 8,800+/- customers • Four governmental customers • Vance County 1A comes on-line this year • Granville County not yet active customer • Operates as an Enterprise Fund

44. Water FundRevenue Centers

45. Water Fund Revenues:Rate Increase • 5% Rate Increase • Each 1% = about • $26,000

46. Water Fund Revenues:Rate Increase Comparison

47. Water FundExpenditure Centers

48. Water Fund:Major Initiatives • Water Meter Replacement Program continues • 2” Line Replacement continues • Rate Stabilization transfers to capital reserve • Re-establish Public Services Director Position

49. Sewer Fund:Revenues • 91%, from sewer user fee • Operates as an enterprise fund

50. Sewer FundRevenues