Financing, budgeting, revenue, and taxes.

1. Financing, budgeting, revenue, and taxes. 2012 ISFCA Conference

2. Accounting vs. Finance • Accounting focus • Recording, reporting and assessment of financial transactions. • Collect and present information. • Financial Statements • Finance focus • Strategizing, managing and controlling. • Use collected information to make decisions. • Budgeting, revenue and taxes.

3. Fund Accounting • Grouping of related accounts that are segregated for specific activities. • Some funds are required to be established by State law and by bond covenants. • Common Funds used in government: 1) General Fund (Revenue > taxes. Exp > Daily Ops) 2) Capital Fund (Revenue > taxes. Exp > Capital Projects) 3) Debt Service Fund (Rev > specific taxes. Exp > Specific Capital improvements)

4. Financial Statements Businesses report their activities in four basic financial statements. Each statement serves a specific purpose; all have an interlocking relationship. • The Balance Sheet • The Income Statement • The Cash Flow Statement • The Reconciliation of Net Worth Statement

5. The Balance Sheet • Record of the District’s financial structure. • Shows assets, liabilities, and equity. • Assets = Liabilities + Net Worth • A ‘snap shot’ of the District on the date compiled. • May change drastically day to day. • Dependent on the financial transactions that take place. • Forms an image of the District’s basic financial structure and level of indebtedness . • Does not directly reveal how the District is doing financially.

6. Balance Sheet Accounts ASSETS • Current Assets • Convertible to cash at its fair market value in less than one year. • Cash • Cash on hand in bank accounts and in cash on the premises. • Accounts Receivable • Assets that legally belong to the Business but have yet to be received. Referred to as the accrual of an asset.

7. Prepaid Expenses • Assets that have been paid buy are yet to be used and recorded as an expense on the income statement. • Fixed Assets • Land, buildings, equipment, and vehicles shown at their original cost. • Decrease in value is accounted for by an accumulated depreciation account. • Net Land, Buildings, Equipment, and Vehicles • Value of the land, buildings, equipment, and vehicles account after accumulated depreciation has been deducted from it.

8. LIABILITIES • Current Liabilities • Current liabilities are financial obligations of the District that must be paid off with in one year. • Accounts Payable • Accounts payable is a way for the District to buy on credit creating an account payable. In our case these are trade payables directly related to the operations of the District. • Other Current Liabilities • These are catch all account for other payables that are not trade payables.

9. Short Term Debt • Borrowed money that must be repaid in under a year. • Includes that portion of long term debt maturing in under one year. Long term debt is reduced by the corresponding amount. • Long Term Debt • Long term debt is any amount borrowed due over one year. Long term debt includes all forms of long-term borrowings (including bonds) and is always explained in the notes of audited financial statements.

10. EQUITY • Retained Earnings • A cumulative account. • Profits are retained. Losses are removed. • Fund Balance • Balances the funds. • Total assets - accounts payable -retained earnings - net income. • Net Income • Income after all expenses have been deducted. It is the net profit or the (bottom line). • Flows through to the retained earnings on the balance sheet. • Not all net income is cash!

11. The Income Statement • Also known as the profit and loss statement. • A record of the revenues and expenses over a period of time. (Rev–Exp=Net income/loss) • Not all revenues and expenses are Cash. • Depreciation is an expense under GAAP • Does not always reflect the true cash position of the business. • Cash Accounting vs. Accrual Accounting

12. Income Statement Accounts • Income • Normally consist of tax revenue, contracts, fees, and other sources of income for the business. • Expense • Normally reflect major groups and subgroups of expenses such as Personnel expenses, Department expenses, Facility expenses, and other expenses incurred by the business.

13. Cash Flow Statement • Cash in and out of a business over a period of time. • Reveals the net change in cash for the period. • Shows what resources a business has to meet liabilities coming due. • Fire Districts needs are normally defined by a set budget rather than cash flow statement.

14. Accounting Review • Accounting – collect and present financial information. • Fund Accounting – groups such as General, Capital, and Debt Serv • Financial Statements • Balance Sheets – a snap shot of the District on the date created • Income Statements – p&l, revenues and expenses over time • Cash Flow Statements – cash in & out, cash resources available • Accrual vs. Cash Accounting • Accounting is critical to the District’s ability to adequately strategize fiscal capacity for the future.

15. Finance • Focus is on strategy, management and control of District funds. • Concerned with evaluating revenue sources and creating sound budgets, ensuring adequate cash to meet the District needs now and in the future. • Watches for trends, legal issues, and other challenges that may impact the fiscal health of the District.

16. Revenue • Property Taxes • Primary source of income for most Fire Districts. • Covered by Idaho Code Title 31 Chap 14 • Roles and Players • Taxing District: • Notify County Clerk of budget hearing date and location (deadline April 30th) • Set budget (Internal, L2, etc…) • Certify budget to County Commissioners (L2, L2 Worksheet, Fund Tracker) 63-802A. NOTICE OF BUDGET HEARING Not later than April 30 of each year, each taxing district shall set and notify the county clerk of the date and location set for the budget hearing of the district. If no budget hearing is required by law, the county clerk shall be so notified. Beginning in 2003, a taxing district that fails to comply with subsection (1) of this section shall be prohibited from including in its budget any budget increase otherwise permitted by either subsection (1)(a) or (1)(e) of section 63-802, Idaho Code.

17. County: County Clerk: 1. Provides value & tax information to Taxing Districts 2. Provides information to County Commissioners 3. Provides information to State Tax Commission County Commissioners: 1. Make levy 2. Approve property tax portion of budget 3. Submit levy & approved budget to State Tax Commission State Tax Commission 1. Review and approve levy and property tax portion of budget 2. Determine operating property values • Preliminary values in July • Board of Equalization finalizes by 4th Monday in August. • Final values in September 3. Provide technical support & assistance.

18. What do we levy? Districts levy from two funds normally: M&O – Ongoing annually Bond – If approved by super majority of voters. Levys are collected on: Net taxable market value= total value of property within the boundaries of a taxing district, less all exemptions. Examples: Real Estate & Operating Property

19. Computing the Maximum non-exempt property tax budget Part A:The 3% Cap vs. Maximum Levy Rate? • Limited to a 3% increase over the highest non-exempt property tax budget for the previous three years plus new growth and annexations. (Section 63-802) • No increase is allowed if a taxing district is at its maximum levy rate. Fire Districts are allowed a maximum of .24% (Section 31-1423) 2010-2011 Example Budget 2010 non-exempt budget: $ 6,010,414 Maximum increase percent: X 3% Maximum increase allowed in 2011 $ 180,312

20. Part B: New Construction • New construction (non-URD) values are supplied by the County • Preliminary numbers are in July - Final numbers in August • Does not include any new construction in Urban Renewal Districts • Total value is multiplied by the previous years levy rate & added to the L-2 worksheet 2010-2011 Example Budget Value of new Construction: $ 55,12,834 2010 non-exempt levy rate: X0.001860255 New Construction budget increase: $ 102,523

21. URBAL RENEWAL: Idaho Code Title 50 Chapter 20 • Effective 1/1/2007 new construction roll value within the URDs are not reported to taxing districts for use in budget increases. • Existing increment value as of 12/31/2006 will be tracked. • When the URD terminates all of the increment value, less the 12/31/2006 increment value, will be made available for use in budget increases.

22. KCFR has eight (8) active URDs with a increment value of $344,499,515 or $687,602 in tax revenue. • NLFD has one (1) active URD with an increment value of $67,693,376 or $89,034 in tax revenue. • In tax year 2011, $11,200,084 was diverted from 18 different taxing entities, and will flow to four urban renewal agencies instead. Totals by urban renewal agency are: • Hayden Urban Renewal Agency:$558,628 • Lake City Development Corporation:$5,655,488 • Post Falls Urban Renewal Agency:$4,791,335 • Spirit Lake Urban Renewal Agency:$194,63

23. Urban Renewal and Taxing Districts • URA’s bring new construction and growth/require more services • Revenues from URDs are given to the URA to reimburse developers for certain costs. • Taxable increment value is not included in Taxing Districts calculations until the URD is closed. • Districts must tax for required expenses. • Urban Renewal and Tax Payers • URD’s affect all tax payers both inside and outside of the URD.

25. Part C:Annexations • Annexation values are supplied by the County • Preliminary numbers are in July - Final numbers in August • Total value is multiplied by the previous years levy rate & added to the L-2 worksheet 2010-2011 Budget Example 2011 Value of 2010 Annexations: $ 1,298,724 2010 non-exempt levy rate: X 0.001860255 2011 Annexations budget increase: $ 2,416

26. Part D: Foregone Amounts • If available. • Supplied by the County. • Board of Commissioners makes the decision to take or leave for future years. Part E:Property Tax Replacements • Are added back to total non-exempt property taxes to compute the 3% & future foregone amounts • Are subtracted out from property taxes before computing levies. • Include Ag Replacement money, recovered homeowners exemptions, and recapture taxes.

27. Other Sources of Revenue Fees and Contracts • Contract for services: EMS Staffing, fire protection contracts, etc… • Fees for services: Burn permits, inspections, plan reviews, etc… Impact Fees • Per Idaho Code Title 67 Chapter 82 • May be used to fund Capital Projects attributable to growth. • Must be adopted through Ordinance – Fire Districts lack that authority. • Must work through Cities and/or Counties to adopt the fee. • The laws requirements are severely restrictive and require significant oversight.

28. Finance Review • Finance – strategize, manage and control revenues and expenses. • Revenues – property taxes and requirements. • How we levy- • Property values, new construction, annexations, forgone & property tax replacements. • Urban Renewal affects • Other sources of Revenue.

29. Questions? • Final Thoughts…