HomeMy WebLinkAboutSSAP012715Administration
Chris Clayton, City
Manager
Deanna Casey, City
Recorder
Community
Development
Tom Humphrey,
Director
Finance
Bev Adams Director
WORK SESSIONS ARE INTENDED FOR DISCUSSION. NO ACTION WILL BETAKEN
Human Resources ON THE AGENDA ITEMS AND NO DECISIONS WILL BE MADE. NOORAL OR
Barb Robson, Director WRITTEN TESTIMONY WILL BE HEARD OR RECEIVED FROM THE PUBLIC.
Parks and Public
Works
Matt Samitore,
Director
Jennifer Boardman,
Manager
Police
Kris Allison Chief
CITY OF CENTRAL POINT
Central Point
Study Session
City Hall
541-664-3321
January 27, 2015
City Council
Mayor
Hank Williams
I. REG ULAR MEETING CALLED TO ORDER -6:00 P. M.
Ward I
Bruce Dingier
11. DISCUSSION ITEMS
Ward 11
Michael Quilty
A. Long Term Financial Plan
Ward III
Brandon Thueson
Ward W
III. ADJOURNMENT
Allen Broderick
At Large
Rick Samuelson
Vacant
Administration
Chris Clayton, City
Manager
Deanna Casey, City
Recorder
Community
Development
Tom Humphrey,
Director
Finance
Bev Adams Director
WORK SESSIONS ARE INTENDED FOR DISCUSSION. NO ACTION WILL BETAKEN
Human Resources ON THE AGENDA ITEMS AND NO DECISIONS WILL BE MADE. NOORAL OR
Barb Robson, Director WRITTEN TESTIMONY WILL BE HEARD OR RECEIVED FROM THE PUBLIC.
Parks and Public
Works
Matt Samitore,
Director
Jennifer Boardman,
Manager
Police
Kris Allison Chief
A
CENTRAL
POINT
City of Central Point
Long Term Financial Plan
DRAFT
January 2015
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January 26, 2015
Bev Adams, Finance Director
Citv of Central Point
140 South Third Street
Central Point, Oregon 97502
Subject: Draft Long Term Financial Plan
Dear Ms. Adams:
Attached is our draft report on the results of our Long Term Financial Plan. Please review the draft, and
once you, the other project tear members, and the elected officials have completed the review, we can set a
time to discuss any changes or clarifications that are needed. We want to thank you and all the City staff for
their assistance and participation in helping us gather information for the study. If you have any questions,
please feel free to contact me at (425) 867-1802 extension 228.
Sincerely,
Peter Moy
Principal
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TABLE OF CONTENTS
CHAPTER I: INTRODUCTION.......................................................................................................... 1
City Background 1
The FY 2015 Budge} .
CHAPTER III: HISTORICAL FINANCIAL TRENDS..........................................................................
14
Observations
18
CHAPTER IV: LONG TERM FINANCIAL FORECASTS..................................................................
19
City Financial Challenges
19
Key Assumptions
19
The Baseline Scenario
20
Fee and Rate Increase Scenario
22
Economic Growth Scenario
23
Property Tax Rate Increase Scenario
24
Conclusions and Recommendations
25
APPENDIX A: NACSLB BEST BUDGETING PRACTICES SELF-ASSESSMENT
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CHAPTER I: INTRODUCTION
Although the City of Central Point has successfully navigated the recent recession by utilizing a variety
of tools and techniques common to short-term reduced revenue situations, the City believes that it can be
less reactive and more strategic in its financial planning. To help it improve decision making and be more
strategic, the City initiated a process to develop a long range financial model and plan that will help it be
more strategic, resilient, and sustainable. To assist the City with this effort, it engaged FCS GROUP to
help create a financial modeling tool for the City's major activities that includes five major City funds:
General Fund, Street Fund, Building Fund, Water Fund, and Stormwater Fund.
As part of developing the financial model and plan, FCS GROUP'S approach included the following:
• Meeting with City management to discuss the financial model elements and plan,
• Interviewing each department head about the department's future program and financial issues,
• Identifying best financial practices,
• Reviewing preliminary forecast results with the City Manager and Finance Director,
• Providing a financial forecasting model, training, and model documentation, and
• Making presentations to City management and the City Council.
We want to acknowledge the staff assistance and support from City department managers, especially
the City's Finance Director Bev Adams. This financial forecast and plan identifies best practices, the
City's use of such practices, General Fund trends, and different forecast scenarios.
CITY BACKGROUND
The City of Central Point was incorporated in 1889 and currently includes an area of 3.52 square
miles and has a population of over 17,000. The City is located in the northwest part of Jackson
County and borders Medford, the largest city in the county. According to the City, the City's physical
development has been relatively slow and has for many years retained a rural community
atmosphere. However, a building boom in Southern Oregon significantly altered the landscape of the
community with housing and commercial projects creating population growth and impacting the need
for services that accompany growth. The national economic recession resulted in no significant
growth in either population or residential and commercial projects. The regional economic base is
tied to agricultural tourism healthcare transportation, and manufacturing.
The City provides a range of services including police protection, construction and maintenance of
the City's streets, storm drains, water facilities, building inspection, planning, economic
development, parks, and recreation. The City operates under a council-manager form of government,
and the City Council consists of a mayor and six council members. The mayor serves as the
ceremonial head of the City, a voting member of the Council, and the presiding officer of the
meetings. An organizational chart of the City's government is shown in Exhibit 1.
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Exhibit 1
City
Organizational Chart
vo�
The FY 2015 Budget
The basis for the financial forecasts is the FY 2015 budget, and different scenarios have been created
based on this budget. In FY 2015, the five funds analyzed as part of this financial plan represent 73%
of the City's financial resources and support almost all the services provided by the City. Other City
funds include the debt service fund revenues, reserve fund, the HTCTF fund, capital improvements
fund revenues, and internal services fund revenues. Exhibits 2 through 6 show a summary of the
adopted FY 2015 budgets for the five funds included in this plan. It should be noted that all of the FY
2015 budgets show that expenditures exceed revenues and fund balances are being used to
compensate for the gap.
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Exhibit 2
General Fund
Revenue Category
Budget
Taxes*
56,239,942
Licenses & Fees
59,500
Intergovernmental
497,100
Charges for Service
994,500
Fines & Forfeitures
105,000
Interest
32,500
Miscellaneous
137,000
Use of Fund Balance*
419,158
Total Revenues*
58,484,700
*Rm- -d Esl—tc
Expenditure Category
Budget
Administration
5701,100
City Enhancement
198,500
Technical Services
548,400
Mayor & Council
61,250
Finance
775,600
Parks*
793,350
Recreation
522,740
Planning
403,850
Police*
4,180,910
Interdepartmental
95,000
Transfers
44,000
Contingency
160,000
Total Expenditures*
$8,484,700
*Revised Esli—ue
Exhibit 3
Building
Revenue Category
Budget
Permit Fees
$144,500
Interest Income
1,500
Use of Fund Balance
29,600
Total Building Fund Revenues
5175,600
Expenditure Category
Budget
Personnel Services
5156,300
Total Materials & Services
16,300
Contingency
3,000
Total Building Fund Requirements
$175,600
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Exhibit 4
Street Fund
Revenue Category
Budget
Taxes
$240,000
Intergovernmental
990,000
Charges for Services
550,000
Interest Income
11,000
Miscellaneous
5,000
Use of Fund Balance
329,200
Total Street Revenues
$2,125,200
Expenditure Category
Budget
Personnel Services
$406,700
Materials & Services
1,078,500
Capital Projects
255,000
Transfers Out
32,000
Street SDC Capital Projects
253,000
Contingency
100,000
Total Street Fund Requirements
$2,125,200
Exhibit 5
Water Fund
Revenue Category
Budget
Total Charges for Service
2,885,500
Interest Income
6,000
Miscellaneous Revenue
10,000
Use of Fund Balance
297,800
Total Water Revenues
3,199,300
Expenditure Category
Budget
Personnel Services
$664,900
Materials & Services
1,770,800
Capital Projects
210,000
Debt Service
392,600
Water Operations 'Capital
Projects
3,038,300
Water SDC Capital Projects
16,000
Contingency
145,000
Total Water Fund Requirements
$3,199,300
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Exhibit 6
Stormwater Fund
Revenue Category
Budget
Total Charges for Services
$841,150
Interest Income
4,000
Use of Fund Balance
49,500
Total Stormwater Revenues
$894,650
Expenditure Category
Budget
Stormwater Operations
Personnel Services
$239,550
Materials & Services
404,100
Capital Projects
62,000
Debt Service
9,000
Stormwater Quality
Materials & Services
62,000
Capital Projects
50,000
Stormwater SDC Capital
Projects
25,000
Contingency
43,000
Total Stormwater Requirements
$894,650
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CHAPTER II: BEST PRACTICES
As part of this financial plan, best practices for local government financial planning and budgeting
were identified to find opportunities for enhancing and adding to the City's long range financial
health and policy framework. As resources become more limited and demands for continuing quality
City services remain constant or increasing, the City might need to take steps to improve its budget
policy framework, process, and the information needed to make budget and financial decisions for
the long term, especially for the General Fund.
The Government Finance Officers Association (GFOA) and the National Advisory Council on State
and Local Budgeting are primary organizations that have identified best practices for improving
governmental finance and budgeting. The GFOA's mission is to enhance and promote the
professional management of governments for the public benefit by identifying and developing
financial policies and practices and by promoting them through education, training, and leadership.
The National Advisory Council has recommended budget practices that provide a framework for
improving local government budgeting.
GFOA recommends that all governments regularly engage in long term financial planning, and
GFOA identified the following planning elements and essential steps for long term financial
planning.
• Long term financial planning combines financial forecasting with strategizing. It is a highly
collaborative process that considers future scenarios and helps governments navigate challenges.
Long term financial planning works best as part of an overall plan.
• Long term financial planning is the process of aligning financial capacity with long term service
objectives. Financial planning uses forecasts to provide insight into future financial capacity so
that strategies can be developed to achieve long term sustainability in light of the government's
service objectives and financial challenges.
• Many governments have a comprehensive long term planning process because it stimulates
discussion and engenders a long range perspective for decision makers. It can be used as a tool to
prevent financial challenges, stimulate long term and strategic thinking, develop consensus on
long term financial directions, and communicate with internal and external stakeholders.
• Time horizon — A plan should look at least 5 to 10 years into the future. Governments may elect
to extend their planning horizon further if conditions warrant or out.
• Scope - A plan should consider all appropriated funds, but especially those funds that are used to
account for the issues of concern to elected officials in the community.
• Frequency - Governments should update long term planning activities as needed in order to
provide direction to the budget process, though not every element of the long range plan must be
repeated.
• Content - A plan should include an analysis of the financial environment, revenue and
expenditure forecast, debt position and affordability analysis, strategies for achieving and
maintaining financial balance, and plan monitoring mechanisms such as scorecard or key
indicators of financial help.
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• Visibility - The public and elected officials should be able to easily learn about long -tern
financial prospects of the government and strategies for financial balance. Hence governments
should devise an effective means for communicating this information through either separate plan
documents or by integrating it with existing communication devices.
GFOA also recommends that all governmental entities use some form of strategic planning to
provide a long-term perspective for service delivery and budgeting thereby establishing links
between authorized spending and broad organizational goals. The City adopted a strategic plan,
Forward, Fair City Vision 2020, in 2007. GFOA noted that an important complement to the strategic
planning process is the preparation of a long term financial plan, ideally prepared concurrently with
the strategic plan. For the best practices, this chapter's focus is on budgeting practices, financial
policies, capital planning, and performance measures.
BEST BUDGETING PRACTICES
The Government Finance Officers Association and seven other state and local government
associations created the National Advisory Council on State and Local Budgeting (NACSLB) in
1995. The Council's charge was to develop a set of recommended practices in the area of state and
local budgeting. The NACSLB developed a comprehensive set of processes and procedures in 1997
that define an acceptable budget process. The recommended practices advocate a goal -driven
approach to budgeting that spans the planning, development, adoption, and execution phases of the
budget. The GFOA continues to support these practices and has issued several other long range
planning practices. According to the NACSLB, a good overall budget process does the following:
• Incorporates a long term perspective,
• Establishes linkages to broad organizational goals,
• Focuses budget decisions on results and outcomes,
• Involves and promotes effective communication with stakeholders, and
• Provides incentives to government management and employees.
The NACSLB`s overall framework consists of four principles and twelve budgetary elements.
Within each element, specific budget practices are identified and recommended, and overall there are
more than 50 budget practices identified. The following shows just the principles and budgetary
elements.
Principle A. Establish broad goals to guide government decision making.
• Element 1 - Assess community needs, priorities, challenges and opportunities,
• Element 2 - Identify opportunities and challenges for government services, capital assets, and
management, and
• Element 3 - Develop and disseminate broad goals.
Principle B. Develop approaches to achieve goals.
• Element 4 - Adopt financial policies,
• Element 5 - Develop programmatic, operating, and capital policies and plans,
• Element 6 - Develop programs and services that are consistent with policies and plans, and
• Element 7 - Develop management strategies.
Principle C. Develop a budget consistent with approaches to achieve goals.
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• Element 8 - Develop a process for preparing and adopting a budget,
• Element 9 - Develop and evaluate financial options, and
• Element 10 - Make choices necessary to adopt a budget.
Principle D. Evaluate performance and make adjustments.
• Element 11 - Monitor, measure, and evaluate performance, and
• Element 12 - Make adjustments as needed.
Based on a self-assessment of all the above practices, the City could make improvements to its
budget policies, process, and document by refining some of its current practices and by instituting
new practices with regard to its financial policies (see the Financial Policies section). Appendix A
includes the City's self-assessment. There are three areas that may be important to the City in the
near future:
• Adopting financial policies,
• Capital planning, and
• Monitoring, measuring and evaluating performance.
Besides the NACSLB's best practices for budgeting, the Government Finance Officers Association
has a Distinguished Budget Presentation Awards program to recognize governmental agencies that
utilize their budget documents as an effective communication tool to meet the needs of their
constituents, media, and policymakers. The program is designed to encourage and assist state and
local governments to prepare budget documents of the very highest quality that reflect both the
guidelines established by the National Advisory Council on State and Local Budgeting and the
GFOA's best practices on budgeting and to recognize individual governments that succeed in
achieving that goal. The program has 31 evaluation criteria that measure the information in and
presentation of the document according to four key area~: policy document, financial plan, operations
guide, and communications device. The goal of these criteria is to define standards for a budget that
presents comprehensive financial information to the public in simple, non-technical language. The
City currently shows in its budget its GFOA Financial Reporting Award, which is associated with its
Comprehensive Annual Financial Report and not its budget.
The GFOA criteria present a multi-year, quantifiable, and goal -oriented budget structure. According
to the criteria, information should not be limited to the upcoming budget period, but should also
reflect on past and current performance to provide adequate context to the reader. Descriptions of
objectives, issues, initiatives, and program alterations should, when possible, be quantified to identify
impacts to the budget presented. Goals for departments, divisions, programs, and activities should be
expressed as both quantified short -tern plans and long -tern objectives, and they should be linked to
overall City goals. Performance measures illustrating both workload demands and goal achievement
should be included where possible and applicable.
As a policy document, GFOA believes that the budget should describe the priorities and issues that
drive the direction for the coining year. Overall goals for the City should be referenced throughout
departmental plans to demonstrate consistent execution of stated objectives in all departments,
divisions, programs, and activities provided. Goals should be both short and long-term plans, with
short -tern goals that have quantifiable objectives.
To fulfill GFOA's criteria as a financial plan, the budget must describe key financial data in
understandable, summary level formats, covering all funds. Computing budget projections to past
and current periods is inundated in nearly all criteria. The document must strike a balance between
maintaining a "budget in brief' format and providing enough information to be complete without
dwelling on technical detail.
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The operations guide aspect of budgeting requires the City to clearly describe and quantify
performance for departments, divisions, programs, and activities. Budget figures, objectives, budget
issues and changes, and performance measures should be provided for the major services of each
department and/or division. Information at the program or activity levels should relate not only to
department goals but also to Citywide objectives defined within the budget document.
Finally, the budget, as a communications device, should be presented in a manner designed to speak
to a public audience interested in the management of the City. The document should strive for a
clean, simple layout and professional look. Information should be readily available and easy to find.
Most importantly, it should focus on the needs of the intended audience and speak to their
requirements, excluding technical detail but providing complete, consistent information.
FINANCIAL POLICIES
One of the initial steps in a long term financial plan is to adopt financial policies that establish the
framework for the City's overall approach to its financial practices and management. For the past
several years, the City has developed financial policies as part of its budget process, and these
financial policies have provided the foundation for the City's budget decisions and related financial
practices.
As part of the annual budget process, the City's department heads, the Mayor, and City Council
adopt budget goals and policies in January and based on these policies and priorities, the various City
department directors prepare their budgets. Once the budget is prepared by the end of April, the
budget is then submitted to the City's Budget Committee for review, modification, and
recommendation. The Budget Committee consists of the Mayor, City Council members, and seven
citizens. The City includes its financial management policies with the budget.
The City's FY 2015 budget. the financial policies provided guidance on thefollowing broad categories
• Cash Management,
• Accounting,
• Operating Budgetary policy, and
• Fund Structure and Fund Balance.
From an overall policy framework, the City's policies generally address many of those identified by
the Government Finance Officers Association. In 2002, GFOA recommended developing financial
policies that it considered fundamental to the budget process. These fundamental policies include
financial planning, revenue, and expenditure policies. For financial planning policies, GFOA
recommended that, at aminimum, such policies should address defining balanced operating budgets
and disclosing when a balanced budget is not planned or will not occur. Another key element is
having long range planning policies that support a financial planning process that assesses the long
tern financial implications of current and proposed operating and capital budgets, budget policies,
cash management and investment policies, programs, and assumptions. The third financial planning
policy area is an asset inventory that inventories and assesses the condition of all major capital
assets.
For revenue policies, GFOA policy recommendations seek to provide stability and to avoid potential
service disruptions caused by revenue shortfalls. At a minimum GFOA recommends that
jurisdictions should (I) encourage revenue diversification to handle fluctuations in individual
revenue sources, (2) identify the manner in which fees and charges are set and the extent to which
they cover the cost of service provided, (3) discourage the use of one-time revenues for ongoing
expenditures, and (4) address the collection and use of major revenue sources that a jurisdiction
considers unpredictable.
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For expenditure policies, GFOA recommended that jurisdictions adopt policies that (I) specify the
appropriate uses for debt and identifies the maximum amount of debt and debt service that should be
outstanding at any time, (2) establish a prudent level of financial resources to protect against the need
to reduce service levels or raise taxes and fees due to temporary revenue shortfalls or unpredicted
one-time expenditures, and (3) compare actual expenditures to budget periodically and take action to
bring the budget into balance, when necessary.
The City has recognized the importance of adopting financial policies and has for the most part
developed financial policies recommended as part of the NACSLB`s budget practices. Under the
"adopt financial policies" element there are several types of policies recommended by the NACSLB.
The financial policies include the following:
• stabilization funds,
• fees and charges,
• debt issuance and management,
• debt level and capacity,
• use of one-time revenues,
• use of unpredictable revenues,
• balancing the operating budget,
• revenue diversification, and
• contingency planning.
Of the above types of policies, the City has not yet developed policies regarding stabilization funds,
use of one-time revenues, use of unpredictable revenues, and revenue diversity. The City's debt
management policies could also be supplemented. There are two recommended practices for
establishing debt policies. The first practice is to adopt policies that guide the issuance and
management of debt. The types of policies should include the proposes for which debt may be
issued, the matching of the useful life of an asset with the maturity of the debt, limitations on the
amount of outstanding debt, types of permissible debt, structural features, including payment of debt
service and any limitations resulting from legal provisions or financial constraints, refunding of debt,
and investment of bond proceeds.
The second practice is to adopt a policy on the maximum amount of debt and debt service that should
be outstanding at any one-time. These policies should provide for different policies for general
obligation debt, debt supported by government enterprises, and other types of debt such as special
assessment bonds, short-term debt, variable rate debt, and leases.
Examples of the NACSLB's practices are provided on the GFOA's website. For example, a debt
management policy established limits on the amounts of unlimited tax general obligation debt and
limited tax general obligation debt. The policy was to have no more than .75% of the City's taxable
assessed valuation as unlimited tax general obligation debt. For the limited tax general obligation
debt, the total limit is 1% of the city's taxable assessed valuation, and annual debt service cannot be
greater than 10% of the annual General Fund revenues.
CAPITAL PLANNING
Besides general budgeting best practices, capital planning is also an important area to address and
was mentioned by several City departments as a key future issue. There are two GFOA best
practices that apply to the City: capital planning policies and coordinating economic development
and capital planning.
GFOA believes that policies designed to guide capital planning help assure that a juri sdicti on's
unique needs are fully considered in the capital planning process and that effective policies can also
help a government assure the sustainability of its infrastructure by establishing a process for
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addressing maintenance, replacement, and proper fixed asset accounting over the full life of capital
assets. According to GFOA, capital planning policies should provide, at a minimum the following:
• A description of how an organizations will approach capital planning,
• A clear definition of what constitutes a capital improvement project,
• Establishment of a capital improvement program review committee,
• A description of the role of the public and external stakeholders in the process,
• Identification of how decisions will be made in the process including a structured process for
prioritizing need and allocating limited resources,
• A requirement that the planning process includes an assessment of the government's fiscal
capacity so the capital plan is based on what can be realistically funded rather than being simply
a wish list,
• A procedure for accumulating necessary capital reserves for both new and replacement
purchases,
• A policy linking funding strategies with useful life of the asset including when debt can be
issued,
• A requirement that a multi-year capital improvement plan be developed and that it include long
term financing considerations and strategies,
• A process for funding to ensure that capital project funding is consistent with legal requirements,
• A requirement that the plan include significant capital maintenance projects, and
• Provisions for monitoring and oversight of the CIP program, including reporting requirements
and how to handle changes and amendments to the plan.
As pan of the City's strategic plan, there are several areas where capital planning is critical to
implementing several goals in the plan concerning downtown revitalization and beautification,
managing growth and infrastructure, recreation, and transportation elements. GFOA identified best
practices concerning economic development and capital planning and include the following elements:
• Alignment with the organization's goals and objectives,
• Timing of economic development and capital planning projects,
• Value public infrastructure as an economic development strategy,
• Opportunities for having developers fund capital assets,
• Impact of development on existing assets and ongoing maintenance,
• Use of economic development tools to fund capital projects (e.g. redevelopment districts),
• Debt resulting from either economic development or the capital improvement program,
• Administrative aspects of economic development agreements, and Coordinating economic
development strategies with other initiatives (e.g. master plans, the City's comprehensive plan,
long term financial plan).
The NACSLB's best practices for capital planning include the following.
• Adopt policies and plans for capital asset acquisition, maintenance, replacement, and retirement,
• Develop a capital improvement plan that identifies its priorities and time frame for undertaking
capital projects and provides a financing plan for those projects. The plan, including both capital
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and operating costs should project at least five years into the future and should be fully integrated
into the overall financial plan, and
• Monitor, measure, and evaluate capital program implementation.
PERFORMANCE MEASURES
GFOA recommends that program and service performance measures be developed and used as an
important component of the long term strategic planning and decision making. GFOA encourages all
governments to use performance measures as an integral part of the budget process. GFOA believes
that when used in the long term planning and goal setting process and when linked to an
organization's mission, goals, and objectives, meaningful performance measures assist government
officials and citizens identify financial and program results, evaluate past resource decisions, and
facilitate qualitative improvements in future decisions regarding resource allocation and service
delivery. The NACSLB`s budget practices for performance measures are:
• Develop and utilize performance measures for functions, programs, and/or activities,
• Periodically evaluate the performance of the programs and services it provides, and
• Performance measures, including efficiency and effectiveness measures, should be presented in
basic budget materials, including the operating budget document.
Although the current budget identifies key objectives, performance measures and goals, it is difficult
to determine the level of service provided, the effectiveness of the City's use of resources, and the
demand for services. The measures are more oriented toward processes, tasks, activities, and outputs
rather than service levels. To understand the balance between efficiency and effectiveness, more
quantitative performance and workload measures are necessary to identify and determine the cost and
level of service and to increase accountability. For example, the Police performance measures
involve reduced liability, increased efficiency, and accuracy of records, evidence control, and
timesheets. GFOA recommends the following for performance measures:
• be based on program goals and objectives that tie to a statement of program mission or purpose,
• measure program outcomes,
• provide for resource allocation comparisons over time,
• measure efficiency and effectiveness for continuous improvement,
• be verifiable, understandable, and timely,
• be consistent throughout the strategic plan, budget, accounting and reporting systems and to the
extent practical, be consistent over time,
• be reported internally and externally,
• be monitored and used in managerial decision-making processes,
• be limited to a number and degree of complexity that can provide an efficient and meaningful
way to assess the effectiveness and efficiency of key programs, and
• be designed in such a way to motivate staff at all levels to contribute toward organizational
improvement.
•:;A FCS GROUP DRAFT
C Iq CI Cenlrol Pc rd Oregcri Lcrig Ter r f ncric cl Plcri
Jcnjcrq, 2015 page 13
CONCLUSIONS AND RECOMMENDATIONS
Compared to policies and practices recommended by the Government Finance Officers Association
and the National Advisory Council on State and Local Budgeting, the City has established a good
policy framework that has helped guide the City through some difficult economic times. The future
challenge for the City is to address its capital needs in a comprehensive manner, to develop the
information needed to refine its operating budget decisions, and to monitor performance. To
complete its policy framework and meet best practices, we recommend the following:
• Refine existing financial policies and develop additional financial policies concerning revenues
as needed according to best practices,
• Establish more specific debt issuance and management policies as well as policies concerning
debt level and capacity,
• Adopt policies and plans for capital asset acquisition, maintenance, replacement, and retirement,
• Develop an overall capital improvement plan that identifies priorities and time frames for
implementing capital projects and provides a financing plan for those projects. The plan,
including both capital and related operating costs, should project at least five years into the future
and should be fully integrated into the overall financial plan,
• Identify cost effective opportunities where performance, efficiency, and effectiveness measures
can be developed and included as part of the basic budget materials and budget document, and
• Improve the budget document, where appropriate with best practices, and consider applying for
the GFOA's budget award in the future.
Return to Agentla
•:;A FCS GROUP DRAFT
C Iq CI Cenlrol Pc ril, Oregcri Lcrig Teri F ncric cl Plcri
Jcnjcrq, 2015 page 14
CHAPTER III: HISTORICAL FINANCIAL TRENDS
To provide a perspective about the City's past financial performance, an analysis of the City's
financial trends was conducted for the City's General Fund by reviewing the past ten fiscal years plus
the FY 2015 budget. The General Fund is the City's largest fund and supports many of the City's
basic services such as police, parks, recreation, planning, and the City's administrative and support
services. Between FY 2005 and FY 2012, the City's annual General Fund revenues exceeded
expenditures except for FY 2006, but since 2012, the City has operated at a deficit in 2012 and 2013
and had a slight surplus in 2014. FY 2015's budget also includes a planned deficit where estimated
revenues are less than the budgeted expenditures. Exhibit 7 shows the trends since FY 2005.
$1=0,000
Se o00 000
S? 111000
%,111000
5s o00 000
Exhibit 7
11 Year History of General Fund Revenues and Expenditures
FY2005 FY2006 FY 2007 FY2009 FY 2009 FY 2010 FY 2011 FY 2012 FY2013 FY 2014 FY2015
ButlRe�
—E,11d i 1-1 —Revenues
With the surpluses before FY 2012, the City increased its fund balance before having to rely on its
General Fund balance to maintain services since FY 2012. According to the City staff, the City has
been working over the years to stabilize the General Fund balance during its budget deliberations.
Compared to the budgeted ending fund balances, the City has, however, managed to increase the
fund balance in several years and achieve higher actual fund balances. As shown in Exhibit 8, the
budgeted ending fund balance has been between about $1.7 million to $2 million, while actual ending
fund balances have been between $2.2 million to $3.3 million.
S;A FG.S GROUP DRAFT
C Iq cl Cenlrcl Po ril, Oregcri
Jcrijory, 2015
Exhibit 8
FY 2005-2015 General Fund Balances
Sa o00'000
$3,500,000
$3,000,000
$2,500,000
$2,000,000
9, 100,000
$1,000000
$Seoeee
LCflg Teri F f1cri, CI PIcri
page 15
50
FY 2005 FY 2006 FY 2007 FY 20H FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015
—A[Wal Entling Pontl Balanre—Butlgeletl Entling F -I Balanre Butlgef
Over the past I I years the following revenue and expenditure trends have occurred:
• Compared to total General Fund revenues in FY 2005, the FY 2015 budgeted revenues are almost
58% higher ($5,0410,771 compared to $7,950,600). Over the past ten years the average annual
growth rate in General Fund revenues was 4.9%, but most of the growth occurred between FY
2005 and 2008 before the economic recession. The average growth during this period was about
13% per year, while from FY 2009 to 2015, the average annual growth rate was about 2% per
year.
• Besides a 9% average revenue growth in taxes between FY 2005 and 2008, charges for services
grew at an average of 42% per year during the sane period. The revenue growth was caused by
large revenue increases from overhead charges to other funds, planning fees, and recreation fees.
Since FY 2008, the fee revenues in these categories started to significantly decrease. The average
annual revenue growth in taxes decreased to about 3%, while the average annual growth in
charges for services averaged -2%. For example, planning fees were about $59,000 in FY 2005,
peaked at $122,300 in FY 2007 and were at $5,500 in FY 2013. Recreation fees were at $168,000
in FY 2005, peaked at $220,600 in FY 2008, and dropped to $63,200 in FY 2013.
• Overall, taxes have represented an average of 74% of all General Fund revenues, while charges
for services averaged about 14%. Intergovernmental revenues averaged 6%. Exhibit 9 shows the
proportion of revenues by category.
•:;A FCS GROUP DRAFT
C Iq cl Ce ,Ird Po ril, Oregcri
Jcrijory, 2015
Exhibit 9
Percentage of General Fund Revenues by Category
LCflg Teri F f1cre CI Plcri
page 16
alts
elts
11-1
FY 200S FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 20 14 FY 20 1S
• Overall, compared to FY 2005 General Fund expenditures are 71% higher in FY 2015
(54,910,950 compared to $8,409,700). The average annual increase in expenditures during the
period was about 6%. About 50% of the increase in total General Fund expenditures has been
related to the Police Department which has also averaged about 49% of the annual General Fund
expenditures. Other areas that have increased compared to FY 2005 involve Technical Services,
Finance, Parks, and Recreation. Technical Services and Finance did not exist in FY 2005 and
were established as separate units in FY 2006. Exhibit 10 shows the percentage of annual
expenditures by service over the past eleven years.
Exhibit 10
Percentage of General Fund Expenditures by Service
110,
��111111111
If 100S Ff 2006 2007 200, Ff 20. 2010 2011 Ff 2012 201, 201, Ff 201S
Bldglt
-:4 FCS GROUP DRAFT
C Iq cl Cenlrcl Po Ill , Oregcri
Jonjorq, 2015
LCng Teri F nCnC cl PICn
page 17
• Most General Fund expenditures are for personnel services, which have averaged about 65% of
annual expenditures during the past I I years. Materials and services have averaged about 31% of
annual expenditures. Exhibit I I shows the percentage of expenditures by category over the past
II years.
Exhibit 11
Percentage of Expenditures by Cost Category
- -
FY2005 FY 2006 FY 2007 FY 2008 FY 2 009 FY 2010 FY 2011 FY 2 012 FY 2013 FY 2014 FY 2 015
• As previously mentioned, the City's General Fund had only one deficit year prior to FY2012, but
since then, it has had two actual years and currently has a budget where expenditures exceeded
revenues. Overall, during the eleven year period, General Fund revenues have increased at an
average of about 5% per year, while General Fund expenditures have increased at an average of
6% per year. However, the City has avoided deficits because it has been reducing its overall
staffing levels for all funds, including the General Fund. Since the FY 2007 peak in staffing, the
City has reduced its staffing level by 15%. Exhibit 12 shows the total City FTEs for the past ten
years.
Exhibit 12
Total FTEs FY 2006-2015
10 00
11 SO
77
8SSO
82 SO
80.
.00
72 SO
7000
IS 00
FY 2)06
FY 2007
FY 2)08
FY 2009
FY 2010
FY 2)11
FY 2012
FY 2)1�
PY2014
PY201S
-:4FC.S
GROUP
DRAFT
C Iq CI Cenlrol Pc rd Oregcri Lcrig Terr f ncric cl Plcri
Jcnjcrq, 2015 page 18
OBSERVATIONS
As previously mentioned, the City had an economic growth spurt between 2005 and 2008, but when
the recession occurred and revenues associated with the economic growth were lost, the City
survived by reducing its staffing levels. Because of those reductions and other budget management
strategies, the City was able to generate surpluses between FY 2007 and FY 2012 that has allowed it
to offset deficits in the past few years. Other trends show the following:
• The City is more dependent on property taxes now than during the economic growth period when
charges for services were increasing primarily because of planning fees, overhead charges, and
recreation fees,
• Personnel costs continue to represent the largest expenditure category,
• Funding deficits are becoming more common in recent years even though the national economy
has improved, and
• It appears that after all the staff reductions following the recession, the City might now be at a
point where the staffing levels are at the minimum levels to support the City's desired levels of
service. The current budget, however, still shows an imbalance between revenues and
expenditures, which indicates that a systemic problem might exist.
Return to Agentla
•:;AFC.S GROUP DRAFT
C Iq cl Cenlrcl Po ril, Oregon
Jonjorq, 2015
LCng Teri F nCnC cl PICn
page 19
CHAPTER IV: LONG TERM FINANCIAL
FORECASTS
To help the City understand whether its General, Building, Street, Water, and Stormwater Funds can be
sustainable in the future, long term financial forecasts were developed for the next ten years. As part of
the forecasts, primarily for the General Fund, several different scenarios were forecast to help the City
understand the impacts different strategies might have on the City's financial firture and sustainability.
Although the financial model can be used to forecast many different scenarios, the City identified four
different scenarios. The scenarios include a baseline scenario and three scenarios that modify revenues to
match expenditures. Scenario descriptions are the following:
The Baseline Scenario - No change in property tax rate or fees, includes the 3% Measure 50
assessed value increase, no new expenditures from FY 2015 except for an added police officer and
Parks Master Plan, no utility rate increases except Water's recently adopted increase, and no capital
improvement funding in future years.
Fee and Rate Increase Scenario - No change in property tax rate, includes the 3% Measure 50 assessed
value increase, new public safety and parks fees, Water, Street, and Stormwater rate increases based
on CPI, and includes future capital improvements over the next four years.
Baseline Economic Growth Scenario —Needed increase in assessed value without the Measure 50
limitations to avoid General Fund deficits, Water, Street, and Stormwater rate increases based on
CPI, and includes future capital improvements.
Baseline Property Tax Rate Increase Scenario — An increase in the property tax rate to avoid
General Fund deficits, includes the 3% Measure 50 assessed value increase, Water, Street, and
Stormwater rate increases based on CPI, and includes future capital improvements.
CITY FINANCIAL CHALLENGES
As part of developing this financial plan, the City's management staff was interviewed to discuss
their perspectives about future financial issues and challenges related to their departments. From
those discussions, the following general themes emerged:
• City revenues are not keeping up with inflationary costs,
• The City is facing new or increased costs in areas such as communications and dispatch and
health insurance, and
• Investments in new equipment and City infrastructure are needed, but funding is not available.
KEY ASSUMPTIONS
The scenario forecasts include several basic assumptions that generally apply to all the scenarios.
The following describes the assumptions.
•:;AFC.S GROUP DRAFT
C Iq C I Cenlrol Pc rd Oregcn Lcng Ter r f ncnc cl Plcn
Jcnjcrq, 2015 page 20
• The baseline revenues and expenditures are based on the FY 2015 revised budget where that
property taxes are based on more recent estimates after the budget was adopted.
• Starting fund balances for the FY 2015 budget are based on the actual balances from the audited
financial statements as of June 30, 2014.
• No new or additional costs, services, or staffing are added to any of the scenarios. Where
departments have indicated potential or desired additions, they have been noted in the scenario
discussions.
• All the scenarios include the following annexations, their development, and the timing when they
will start adding to the property tax base: White Hawk (FY 2017), North Village 1 (FY 2018),
North Village 2 (FY 2018), North Village 4 (FY 2016), Beebe Woods (FY 2016), Dairy Queen
(FY 2016), Walgreens (FY 2016), and Cardmoore Annex (FY 2016). Estimated new utility
accounts are added to the base with each annexation. No additional costs to provide services to
these areas have been identified at this time.
• The Consumer Price Index (CPI) increases are based on a 10 -year sample of CPI -U for smaller
western cities from the Bureau of Labor Statistics. All personal services costs increase by the CPI
of 2.17%.
• Benefit increases are based on a 10 -year sample of the BCL (Employment Cost Index) for benefits
from the Bureau of Labor Statistics. All benefit costs increase by the ECI of 4.34%.
• The baseline property tax rate is $4.47 per $1,000 of assessed value. Property tax revenues are
based on the Measure 50 limit (3%) and all other General Fund revenues are assumed to be the
same as estimated for the FY 2015 budget. Interest income for all funds is based on the average
return from the Oregon Short Tenn Fund managed by the State Treasurer's Office.
• Except for property taxes, all other General Fund revenues remain constant over the ten year
period.
• Building Fund revenues increase by the CPI.
• City overhead charges are based on the FY 2015 charges to the Street, Water, and Stormwater
Funds and are increased annually by the percentage increase in the expenditures of the overhead
departments.
• Utility rate revenues are based on the average revenue per account. The recent Water Fund rate
increase is included in the revenues starting FY 2016 as is the cost increase in Medford water
purchases.
• Capital projects for the Street, Water, and Stormwater Funds for the next four years were
provided by Public Works. Capital costs have been inflated by the Engineering News Record
Construction Cost Index. Project funding is based on an assumption that system development
charges will pay for 20% of the Street Fund projects and 15% for the Water and Stormwater Fund
projects.
THE BASELINE SCENARIO
The Baseline Scenario represents a financial future with constrained revenues because there are no
changes in the property tax rate, General Fund fees, and utility rates. At the same time, personnel
costs are increasing at inflationary rates, and there are no capital projects. It is assumed that
annexations help to add additional revenues, but have no currently identified costs. In this scenario,
the forecasts show the following:
•:;A FCS GROUP DRAFT
C Iq CI Cenlrcl Pc nI, Oregcn Lcng Teri f ncnc cl Plcn
Jcn2crq, 2015 page 21
IS Because the General Fund was already budgeted at a deficit for FY 2015, the General Fund
continues to operate at a deficit requiring the use of its fund balance to offset the difference
between revenues and expenditures. As soon as FY 2017, the minimum fund balance will begin
to drop below the 20% of revenues policy level. At the end of the ten year period, the General
Fund will have used all of its fund balance and will have a negative fund balance.
IS Like the General Fund, the Building Fund will also continue to operate at a deficit requiring the
use of its fund balance to offset the difference between revenues and expenditures. This still
occurs even though fee revenues are assumed to increase by the CPI. By FY 2019, the minimum
fund balance will begin to drop below the 25% of revenues policy level, and by FY 2021 all of its
fund balance will be used resulting in a negative fund balance. This assumes that building
activity is not increasing.
IS For the Street and Stonnwater Funds, they can support their operations at the current rates and
will generate a surplus that could be used to support capital improvements.
IS For the Water Fund, the baseline scenario includes the recent rate increase as well as the 5%
increase in Medford water purchase. The fund can support its operations, but with the debt
service for the reservoir, the Water Fund will start operating at a deficit in FY 2023.
Exhibits 13-17 show the revenue and expenditure summaries for the different funds.
Exhibit 13
General Fund Baseline Scenario
Exhibit 14
Building Fund Baseline Scenario
FY MIS MIS
ryMIS -MIS
FY MIS M17
F. MI MIS
FY MISMISrvMIS
MM
sY MM WO
nW21-MSS
FYM --
'Y MM 924
'Ymea-MM
10.5599 S
S
S
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S
151 527 S
154 e`8 S
7811 S
151811 S
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I t ICM S
1ID3 5 S
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S
S
S
S
1]82)1
i".
Nei tl�anAeln'yQ�l[� �
122X`7
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181815
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19150.3
195871
2^$ID
231.5
211139
213323
219!35
2192"2
2252]8
Ner ipe ril✓itl bald ice
ee
1737231
19FI]
196561
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'9.9251
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(90.5661
1 "ju, 1.1
497 -
424 1,0
424 000
424 000
424 000
424 1,0
424 000
424 000
424 000
424 01,
424 1,0
'248231
'693861
E-iJ, QlugiJb,10
S
155616 S
126959 S
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'0961 S
F, j
105 01,
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01,
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b7
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Exhibit 14
Building Fund Baseline Scenario
Exhibit 15
Street Fund Baseline Scenario
FY]ma.]ms FY]msaNf FY]NL]N] FY2N].2N8 FY2018.20191Y2019.2MO FY2WN2O11Y2WI.2W2 FY2O2.2O3 FY2=-2 4 FY2W4.2o9
Reven�a
$ 1 818 656
10145 14
101AID18
1151527
1Nb1018 %137
18571811
10TbID9
189ID18
1ObIDZ
Re.awa
S
S
10.5599 S
S
S
I<8 <]] S
S
151 527 S
154 e`8 S
7811 S
151811 S
Nt0 S
I t ICM S
1ID3 5 S
Ihf 3f5 S
S
Ih]]C4 S
S
S
S
S
1]82)1
i".
Nei tl�anAeln'yQ�l[� �
122X`7
12] 133
181815
185599
19150.3
195871
2^$ID
231.5
211139
213323
219!35
2192"2
2252]8
Ner ipe ril✓itl bald ice
ee
1737231
19FI]
196561
P72e81
'27111
'38321
i9t
352551
'2.2891
'9.9251
t42 184)
(90.5661
(927]]1
NQ1 ris
1111 IJ balame
$ 1649372
182,92
155616
126959
966]1
6461
37828
14.92]1
la2]l1)
182961
'248231
'693861
E-iJ, QlugiJb,10
S
155616 S
126959 S
96621 S
646. S
.371 S
14 927] S
142211] S
'0961 S
1124Nu S
11693861 S
12164631
Exhibit 15
Street Fund Baseline Scenario
FY]ma.]ms FY]msaNf FY]NL]N] FY2N].2N8 FY2018.20191Y2019.2MO FY2WN2O11Y2WI.2W2 FY2O2.2O3 FY2=-2 4 FY2W4.2o9
Reven�a
$ 1 818 656
$ 1 819109
$ 1 N5 591
$ 1 SK 964
$ I See 362
$ 1 749169
$ 1654215
$ 1 657277
$ 1 Nb 21
$ 1 89 253
$ 1 8661 b
E.p7enoi Lia
2025 23]
1 .1395
1516773
1532234
1549377
156649
1584353
1 bZS%
1 6220.
1641 421
1662446
Nei tl�anAeln'yQ�l[� �
t'�l (2365441
3V325
.1511
3016.
293.995
.2750
26979
254379
2VVD
A21TW
233414
7eAinninA'� no b7�—'
1737231
153069
1.83.
2157W3
20.59554
2753.539
3036299
3.6151
3.5�/tJ+�17-7j)473i1
4023p3
EIO1n{1'N). balance
$ 1530 657
$ 1649372
$ 2152893
$ 2459554
$ 2753539
$ 3036299
$ 3336151
$ 35.531
$ 3797341
$ 409373
$ 412379
C Iq cl Cenlral Po rll, Oregcrl
Jonborq, 2015
Exhibit 16
Water Fund Baseline Scenario
LCnQ Teri I nCnC cl PICn
page 22
FY 10141015 FY 10151016 FY 10161017 FY 1017-3018 FY 1018.1019 FY 1019.20M FY 20M -20D FY 20D -20M FY 20T6109 FY 1029.10N FY 20N -20N
I., -'e,
$ 28995.
$ 2956597
$ 2x0648
$ 3C17796
$ 3C595K
$ 30 iC 5
$ 1'-9!389
$ 3C996Y
$ 1'-99990
$ 1106126
$ 3ICC C61
-_<_
0543.
2891 5]5
29215T
212465
21843%
181745
351327
3.6s.
dJti2.
3161pW
19873E
e'h',-,"dL'"'e
11548.!
65821
592.8
653.
74,19
666.
46662
12866
(23 29C
1688811
(999>1
n4 le ne bo onaa
1791 ..1
196381
17016.
I76s.
1.6211
1900?5
19670.
2C1C7C
2C259S1
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1 941 7.
me nV lend eo onaa
$ 1 96381
$ 17C16.
$ 176073.
$ 1626211
$ 1900?5
$ 196-73.
$ 2C1C7C
$ 2C25931
$ 2X2646
$ 1941765
$ 1 8417306
Exhibit 17
Stormwater Fund Baseline Scenario
FYM14ID15 FYM15ID16 FYM16ID17 FYM17ID1B FYMM5 19 FYM191010 FY101010'[1 FY10'[1� FYAii1 3 FY10'[310'[0 FY10'[01
Re+e—
$
8415C b
847439
b 655226
b B66.9h
b 879558
$ 88785
b 892419
b 893/5
b 894223
b 8479
b 895285
E'penda'ee
851 w
71uC
724 7t4
734.0
705183
755913
76709
77fl478
790341
.2hIC
815]0!
do pe In hind balance
163:01
132.9
136073
132 .2
134075
131937
1254.
1 15 127
IC38.
92177
79 9.
ud
B a nR fmid balance
&9.5
843T511CA.7
.3
123
1.37.11
15C5C.
I. 90
1742d
5t
1b495.
1941 t.
E, d' �Nfund balance
$
841 $
9]1 090
$ I I X]
$ 123888
$ I?]1113
$ 1 5C5 uCb
16"f6090
$ I b9D
b Ib09p66
$ 19016E3
$ 2.IH8
FEE AND RATE INCREASE SCENARIO
The Fee and Rate Increase Scenario represents a financial future with no change in the property tax
rate, but increases in General Fund revenues because the City will charge S3 more for its parks and
recreation and public safety fees. The City estimates that these fees will annually generate S456,000
in additional General Fund revenue. The Street, Water, and Stormwater Funds also slightly increase
their revenue by increasing their rates by the CPL. At the same time, personnel costs are increasing at
inflationary rates, and capital projects are now included over the next four years for the Street, Water,
and Stormwater Funds. Again annexations are assumed to help add additional revenues without any
currently identified costs. There are no changes to the forecast for the Building Fund in this scenario,
and it is not included. The forecasts for the General Fund and the Street, Water, and Stormwater
Funds show the following:
• In contrast to the Baseline Scenario, the forecast shows that with the additional fee revenue the
General Fund can avoid future deficits and maintain and increase the desired fund balance.
However, any capital improvements as a result of the Parks Master Plan are not included.
• The Street Fund shows positive operating results even with the capital projects, but the costs for
resolving deferred street maintenance at about $250,000 per year are not included. With the
inflationary increase in the rate, there is not enough money to fund the street maintenance costs
in the next four years.
• For the Water Fund, rates are increased by the CPI after FY 2016 and the recent rate increase.
The increases will initially not be enough to support both the anticipated capital projects and the
Fund's existing debt service during the next four years.
• The Stormwater Fund's forecast is similar to the Water Fund where CPI rate increases will
initially not be enough to fund all of its capital projects during the next four years.
Return to Agentla
•:;A FCS GROUP DRAFT
C Iq cl Cenlral Po nl, Oregcri
Jonjorq, 2015
Exhibit 18
General Fund Fee Increase Scenario
LCnQ Teri F nCnC cl PICn
page 23
.2014- 15 F.201-2016 F.201-2017 F.201-2018 F.201.20„ 1. uuvamu 1.2.51.1 1.2.1— ly2 -- 1.2 -z.. 1.2.41 .
Exhibit 19
Street Fund Rate Increase Scenario
014-2015 FY 2015 -2016 FY 2016 -2017 FY 2017 -201 & FY 2019-201 ? FY 201 ?-SM0 FY SMO -202 I FY 202 1 SM2 FY SM2-SMI FY 2023-2024 FY 2024-2025
1- l—,
818 656
1 829 255
1 847 143
1 866 334
1 886 553
' 1 934
343
1 922
8 11
1 939
426
5w
5w
5w
5w
5w
5w
5w
5w
5w
5w
1 W
OW
OW
OW
OW
OW
OW
OW
OW
OW
OW
1
nsge1ne
os �11
192
A
inn
2'4vI
,—rdo—
$
$ 1 498 41 2
$ 1 3 4 79
$ 1 216 343
$ S
$ 1 476 473
$ 1 863 474
$
$
$ 3 269 1 21 $
3819 4�6
goo...
a
843 15 a
a
a
v2
137 OW
135 ow
135 ow
135 ow
135 ow
135 ow
135 ow
135 ow
135 ow
135 ow
135 ow
ow
ow
ow
ow
ow
ow
ow
ow
ow
ow
ow
ow
ow
ow
ow
ow
o
ow
ow
ow
Exhibit 19
Street Fund Rate Increase Scenario
014-2015 FY 2015 -2016 FY 2016 -2017 FY 2017 -201 & FY 2019-201 ? FY 201 ?-SM0 FY SMO -202 I FY 202 1 SM2 FY SM2-SMI FY 2023-2024 FY 2024-2025
1- l—,
818 656
1 829 255
1 847 143
1 866 334
1 886 553
' 1 934
343
1 922
8 11
1 939
426
1 956 352
1 973 594
1 991
157
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os �11
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a
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1 41 157 a
1 7. 375$
2033858
Exhibit 20
Water Fund Rate Increase Scenario
Exhibit 21
Stormwater Fund Rate Increase Scenario
-
$
s3 963 724$3347343$3.
845 150 a
.s3.28319
3 a
$ 3_..9
$ 3..2 23
$ 3,..
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$ S
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3819 4�6
Exhibit 21
Stormwater Fund Rate Increase Scenario
-
a
845 150 a
2 a
3 a
920 041 a
951 90' a
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147 e$
1.028 520$
1.051 410$
1.. 3$
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2033858
ECONOMIC GROWTH SCENARIO
In working with City management, an economic growth scenario was developed to help the City
understand what type of growth is necessary to help the City make its General Fund sustainable.
Because the City's major General Fund revenue source is property tax, economic growth must
translate into higher assessed value growth for the City to benefit. Such economic growth might
generate additional revenues from other sources, but it can also result in demand for more or
-0,FC.S GROUP DRAFT
C Iq CI Cenlrcl Pc ril, Oregcri Lcrig Teri F ncric cl Plcri
Jcnjcrq, 2015 page 24
improved public services. One aspect of City growth that has already been accounted for in the
previous forecasts is annexation. The Baseline Scenario already includes eight annexations that add
small increases to the City's assessed value and property tax revenues, but do not have any currently
identified costs.
Because the Baseline Scenario begins with a budget where expenditures exceed revenues, the initial
growth must be higher to compensate for the deficit and the impacts of inflation. Using the Baseline
Scenario without Measure 50 increases (3%), Exhibit 22 shows the needed percentage increases in
the City's assessed value to make the City's General Fund sustainable. Exhibit 23 shows the forecast
based on percentage changes in the assessed value needed to avoid deficits.
Exhibit 22
Percentage Assessed Value Growth Needed for a Balanced Budget
Exhibit 23
Baseline Economic Growth Scenario
FY
2015-16
FY
2016-17
FY
2017-18
FY
2018-19
FY
2019-20
FY
2020-21
FY
2021-22
FY
2022-23
FY
2023-24
FY
2024-25
..
10.26%
2.63%
I 2.17%
2.19%
2.42%
I 3.19%
2B5%
2.99%
380%
381%
Exhibit 23
Baseline Economic Growth Scenario
PROPERTY TAX RATE INCREASE SCENARIO
An alternative to economic growth and an increase in the General Fund fees is to increase the properly tax
levy rate. The properly tax rate is currently $4.47 per $1,000 in assessed value, and according to the City,
the maximum rate is 55.28. Like the Economic Growth Scenario, the financial model calculates the
property tax rate needed to balance the budget if there are deficits. Based on the Baseline Scenario,
Exhibit 24 shows what the properly tax rate needs to be for the City to have a sustainable General Fund if
property tax is the only revenue source to increase. As shown in the Exhibit 24, the FY 2016 rate is the
highest rate because it must compensate for the current budget year's deficit, but as the annexations occur,
the rate needed is lower, and by FY 2020 the rate needed is stabilized. It should also be noted that the
Measure 50 increase is included as part of the assessed value increase. Exhibit 25 shows the General
Fund summary based on this scenario.
S;A FC.S GROUP DRAFT
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PROPERTY TAX RATE INCREASE SCENARIO
An alternative to economic growth and an increase in the General Fund fees is to increase the properly tax
levy rate. The properly tax rate is currently $4.47 per $1,000 in assessed value, and according to the City,
the maximum rate is 55.28. Like the Economic Growth Scenario, the financial model calculates the
property tax rate needed to balance the budget if there are deficits. Based on the Baseline Scenario,
Exhibit 24 shows what the properly tax rate needs to be for the City to have a sustainable General Fund if
property tax is the only revenue source to increase. As shown in the Exhibit 24, the FY 2016 rate is the
highest rate because it must compensate for the current budget year's deficit, but as the annexations occur,
the rate needed is lower, and by FY 2020 the rate needed is stabilized. It should also be noted that the
Measure 50 increase is included as part of the assessed value increase. Exhibit 25 shows the General
Fund summary based on this scenario.
S;A FC.S GROUP DRAFT
C Iq cl Cenlral Po rd Oregcri
Joriorq, 2015
Exhibit 24
Baseline Property Tax Rate Increases
LCnQ Teri F nCnC cl PICn
page 25
FY
2015-16
FY
2016-17
FY
2017-18
FY
2018-19
FY
2019-20
FY
2020-21
FY
2021-22
FY
2022-23
FY
2023-24
FY
2024-25
$4.78
$4.76
$4.72
$4.68
$4.65
$4.66
$4.65
$4.65
$4.65
$4.65
Exhibit 25
Baseline Property Tax Rate Increase Scenario
CONCLUSIONS AND RECOMMENDATIONS
As identified in the previous chapter, the current budget situation appeals to have a systemic imbalance
between the revenues and expenditures needed to provide the services. The forecasts show that the
Baseline Scenario for the five funds is generally not sustainable over the next ten years except for the
Street Fund. However, the Baseline Scenario also assumes that there will be few or no capital projects and
infrastructure investments. The Fee and Rate Increase Scenario shows that the General Fund and Street
Fund remain sustainable without any new or additional capital costs. The Building Fund is not sustainable
unless building activity begins to increase. The Water and Street Funds are not sustainable in the near
future with the currently identified capital program.
The Economic Growth Scenario shows that a large increase in this coming year needs to occur to help
offset the initial gap between FY 2015's revenues and expenditures. Subsequent growth in future years is
more modest and closer to the allowed Measure 50 growth. The Property Tax Rate Increase Scenario is
faced with the same challenge as the Economic Growth Scenario where a large increase must occur in FY
2015 and more stable rates are needed in the future.
Overall, the different scenarios show that for the General Fund some action must be taken for it to be
sustainable over the next ten years. Given the region's current economy, it is unlikely that econonic
growth can resolve the deficits in the near term. Consequently, fee increases or a property tax rate
increase seem to be the most viable options for achieving sustainability unless the City determines that it
should be providing lower levels of service in the future.
For the Street, Water, and Stormwater Funds, inflationary rate increases will support the operational costs
and some capital projects. To accomplish the capital improvement programs for these funds as provided
for this plan, additional rate increases beyond inflation are needed, especially in the near future. For these
S;A FC.S GROUP DRAFT
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CONCLUSIONS AND RECOMMENDATIONS
As identified in the previous chapter, the current budget situation appeals to have a systemic imbalance
between the revenues and expenditures needed to provide the services. The forecasts show that the
Baseline Scenario for the five funds is generally not sustainable over the next ten years except for the
Street Fund. However, the Baseline Scenario also assumes that there will be few or no capital projects and
infrastructure investments. The Fee and Rate Increase Scenario shows that the General Fund and Street
Fund remain sustainable without any new or additional capital costs. The Building Fund is not sustainable
unless building activity begins to increase. The Water and Street Funds are not sustainable in the near
future with the currently identified capital program.
The Economic Growth Scenario shows that a large increase in this coming year needs to occur to help
offset the initial gap between FY 2015's revenues and expenditures. Subsequent growth in future years is
more modest and closer to the allowed Measure 50 growth. The Property Tax Rate Increase Scenario is
faced with the same challenge as the Economic Growth Scenario where a large increase must occur in FY
2015 and more stable rates are needed in the future.
Overall, the different scenarios show that for the General Fund some action must be taken for it to be
sustainable over the next ten years. Given the region's current economy, it is unlikely that econonic
growth can resolve the deficits in the near term. Consequently, fee increases or a property tax rate
increase seem to be the most viable options for achieving sustainability unless the City determines that it
should be providing lower levels of service in the future.
For the Street, Water, and Stormwater Funds, inflationary rate increases will support the operational costs
and some capital projects. To accomplish the capital improvement programs for these funds as provided
for this plan, additional rate increases beyond inflation are needed, especially in the near future. For these
S;A FC.S GROUP DRAFT
C Iq CI CeOrd Pc rd Oregcri Lcrig Tear f ncric cI PIcri
Jcnjcrq, 2015 page 26
three funds, capital investments are critical because the City's infrastructure are long term investments
that benefit not just the City's current population, but also future generations. Delays in maintenance and
repairs can result in higher future repair and replacement costs. In addition, the City should also consider
how such improvements will assist the City in its economic development efforts and how projects can be
coordinated and funded with the Urban Renewal Plan.
Based on these scenarios and the best practices, the following actions are recommended to achieve a more
sustainable financial future.
• Because the City has a strategic plan, the City should assess the City's progress in implementing
the plan and then determine whether the current budget reflects the City's desired progress and
strategies. At that time, the City should determine if the long term financial plan reflects the
strategic plan initiatives and needs to be revised.
• At a mintimum, the City should take action to increase its General Fund revenues if the City
wants to keep the current service levels and have a sustainable budget over time. To help
diversify the City's General Fund revenues, the City should consider implementing a
combination of fee increases as well as increasing its property tax rate. This combination
provides some stability and equity in helping provide funding for all services that benefit the
overall community and in charging for specific services. Every $.10 in the property tax rate
generates $107,800, and every $1 in either a parks or public safety fee generates $76,000.
• The City might want to consider increasing building fees to help initially offset the Building
Fund's deficits and determine whether building activity will be sufficient in future years. Another
alternative is to partially subsidize the Fund's activities with General Fund and include an
amount in the fee and rate increases for that purpose.
• For the Street, Water, and Stormwater Funds, the City should consider increasing rates,
reviewing the timing of the capital projects, identifying any additional costs such as the deferred
street maintenance costs, and incorporating these items in the next rate study for each fund. The
capital projects should be incorporated as part of the City's overall Capital Improvement Plan
and process as previously identified in the best practices recommendations.
• The City should update the long term financial analyses and scenarios every three to five years as
pan of its financial planning process.
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•:;A FG.S GROUP DRAFT
C Iq cl Cenlyd Po nl, Oregcn
Jonjorq, 2015
LCnQ Teri F nCnC CI PICn
Appendix A
APPENDIX A: NACSLB BEST BUDGETING
PRACTICES SELF-ASSESSMENT
S;A FG.S GROUP DRAFT
C'q of Ce,, rel Po r, Oregon
Jcn,crq, 2015
Summary of City Self -Assessment on NACSLB Best Budgeting Practices
Long Term rncnccl Plcn
Principle l
Establish Broad Coals to Guide Government Decision Making
City Status
Notes
Element 1
Assess Community Needs, Priorities, Challenges, and Opportunities
Yes
Financial policy in place, addresses
scone of the practices listed below, not
all of them.
1.1
Identify stakeholder concerns, needs, and priorities
Yes
City's strategic plan
1.2
Evaluate community condition, external factors, opportunities, and challenges
Yes
Ongoing and annually in b
Element 2
ldentili, Opportunities and Challenges (or Government Sem ices, Capital Assets,
and Management
Yes
2.1
Assess services and programs, and identify issues, opportunities, and challenges
Yes
Mgt staff during annual budgeting
process
2.2
Assess capital assets, and identify issues, opportunities, and challenges
Yes
2.3
Assess governmental management system~, and identify issues, opportunities,
and challenges
Yes
Element 3
Develop and Disseminate Broad Goals
3.1
Identify broad goals
Yes
Council's annual goal
3.2
Disseminate goals and review with stakeholders
Principle 2
Develop Approaches to Achieve Coals
City Status
Notes
Element 4
Adopt Financial Policies
Yes
Financial policy in place, addresses
scone of the practices listed below, not
all of them.
4.1
Develop policy on stabilization funds
4.2
Develop policy on fees and charges
Yes
4.3
Develop policy on debt issuance and management
Yes
4.3a
Develop policy on debt level and capacity
Yes
4.4
Develop policy on use of one-time revenues
S;AFC.S GROUP DRAFT
Ci y of Cermet Poirr, Oregon
Jcn,cry, 2015
Long Term "inencicl Plen
4.4a
Evaluate the use of unpredictable revenues
City Status
Notes
4.5
Develop policy on balancing the operating budget
Yes
4.6
Develop policy on revenue diversification
Yes
4.7
Develop policy on contingency planning
Yes
Element 5
Der elop Programmatic, Operating and Capital Policies and Plans
5.1
Prepare policies and plans to guide the design of programs and services
5.2
Prepare policies and plans for capital asset acquisition, maintenance,
replacement, and retirement
Yes
City's CIP plan
Element 6
Der elop Programs and Sen ices that are Consistent with Policies and Plans
6.1
Develop programs and evaluate delivery mechanisms
Yes
6.2
Develop options for meeting capital needs and evaluate acquisition alternatives
Yes
Water rate plan addresses this for that
utilitv
6.3
Identity functions, programs, and/or activities of organizational units
Yes
6.4
Develop performance measures
Yes
6.4a
Develop performance benchmarks
Yes
Element 7
Der elop Management Strategies
Practices
7.1
Develop strategies to facilitate attainment of program and financial goals
Yes
7.2
Develop mechanisms for budgetary compliance
Yes
7.3
Develop the type, presentation, and time period of the budget
Yes
Principle 3
Develop a Budget Consistent with Approaches to Achieve Coals
City Status
Notes
Element 8
Der elop a Process (or Preparing and Adapting a [Budget
8.1
Develop a budget calendar
Yes
S;AFC.S GROUP DRAFT
Ci y of Cerrrcl Poirr, Oregon
Jcn,cry, 2015
Long Term-ricncicl Plcn
8.2
Develop budget guidelines and instruction
Yes
Notes
8.3
Develop mechanisms for coordinating budget preparation and review
Yes
8.4
Develop procedures to facilitate budget review, discussion, modification, and
adoption
Yes
8.5
Identify opportunities for stakeholder input
Yes
Element 9
Develop and Ei aluate Financia[ Options
Yes
9.1
Conduct long-range financial planting
In process
9.2
Prepare revenue projections
Yes
9.2a
Analyze major revenues
Yes
9.2b
Evaluate the effect of changes to revenue source rates and bases
Yes
9.2c
Analyze tax and fee exemptions
Yes
9.2d
Achieve consensus on a revenue forecast
Yes
S;A FG.S GROUP DRAFT
City Status
Notes
Element 10
Make Choices Necessary to Adapt a Budget
10.1
Prepare and present a recommended budget
Yes
10. la
Describe key policies, plans and goals
Yes
10. lb
Identify key issues
Yes
10. le
Provide a financial overview
Yes
10. Id
Provide a guide to operations (budget documents should include information
that provides the reader with a guide to programs and org structure to provide
those programs)
'?
10. le
Explain the budgetary basis of accounting
Yes
10.1 f
Prepare a budget summary
Yes
10.1 g
Present the budget in a clear, easy-to-use format
Yes
S;A FG.S GROUP DRAFT
Ci y of Cermet Poir, Oregon
Jcn,cry, 2015
10.2 Adopt the budget Yes
Long Term "inencicl Plen
Principle 4
Evaluate Performance and Make Adjustments
City Status
Notes
Element 11
Mannar, Measure, and Evaluate Perlarmance
11.1
Monitor, measure, and evaluate program performance
Yes
11. In
Monitor, measure, and evaluate stakeholder satisfaction
Yes
Occasional citizen survey's done
11.2
Monitor, measure, and evaluate budgetary performance
Yes
11.3
Monitor, measure, and evaluate financial condition
Yes
11.4
Monitor, measure, and evaluate external factors
Yes
11.5
Monitor, measure, and evaluate capital program implementation
Yes
Element 12
Make Adjustments as Needed
12.1
Adjust the budget
Yes
12.2
Adjust policies, plans, program~, and management strategies
Yes
12.3
Adjust broad goals, if appropriate
Yes
:;pFC.S GROUP
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DRAFT