AGENDA #1
MEMORANDUM
TO: W. Calvin Horton, Town Manager
FROM: Kay Johnson, Finance Director
SUBJECT: Preliminary Budget Overview and Key Issues for 2006-07
DATE: March 8, 2006
This memorandum and the following reports are intended to present key issues identified at this stage of the budget development and to provide a preliminary view of the base budget for 2006-07 to aid in consideration of those issues. This document is not a recommended budget. The recommended budget will be presented to the Council on April 24, 2006.
BACKGROUND
An initial budget overview for 2006-07 was presented to the Town Council at the retreat on January 12, 2006. The same overview was included in the materials for the first Budget Forum held on January 25, 2006. advisory boards and commissions made presentations to the Council at the Budget Work Session on March, 1, 2006. (This preliminary report does not include the presentations made by Advisory Boards and Commissions.)
A more formal Budget Status Report will be presented to the Council at the time of the next budget Public Forum on March 22, 2006. The Manager’s Recommended Budget is scheduled to be presented on April 24, 2006, with a Budget Public Hearing Scheduled for May 10, 2006. Consideration of adoption of the budget is scheduled for June 26, 2006.
DISCUSSION
Attached are preliminary cost estimates for 2006-07 for the General Fund and the Transportation Fund (Attachments 1 and 2), including a base budget and possible additions for the Council’s consideration. The base budget requires no tax increase from the current combined rate of 52.2 cents per $100 assessed value for either the General Fund or the Transportation Fund.
General Fund
Base Budget
Our preliminary estimate of the base budget for the General Fund totals about $45,500,000 and requires no adjustment to the current tax rate of 47.4 cents per $100 assessed value. The estimate of available revenues for the General Fund remains at about $47 million, including the normal use of $800,000 in funds carried forward from 2005-06. As discussed in the January 12, 2006 memorandum of “Budget Issues and Preliminary Estimates for 2006-07 Budget” (Attachment 3), changes in accounting and reporting regulations caused fund balance to increase by almost $2 million at the end of 2004-05. The Council could reasonably consider using the $2 million for one-time capital improvements projects or other one-time costs. Fund balance could remain at about 13.5 percent of the budget. The use of the additional $2 million in fund balance would bring total funds available to $49 million.
The current estimate of base budget personnel costs is $29,734,000. (This is an increase of $298,000 over the previous estimate, because we inadvertently omitted a number of vacant positions in the earlier working paper. We apologize for this error.) The current estimate is based on salaries and medical insurance coverage as of January 1, 2006. Additional base budget personnel costs include an estimated 11 percent increase in medical insurance cost totaling $342,000.
Preliminary base budget operating costs total about $10,200,000 and include the following:
Other preliminary cost estimates in the base budget include debt service on bonds ($2.7 million) and on the Town Operations Center ($2.2 million); capital equipment for information technology ($68,000) and for public works ($38,500). The preliminary base budget also includes $283,000 for capital improvement projects currently under contract.
Potential Additions
Program changes have been presented on the attached chart as Priority Additions to the Base and Other Additions to the Base. The recommendations reflect our current understanding of the Council’s and Manager’s priorities. We have prepared working papers on most of the items included in Priority Additions to the Base. The exceptions include the following items:
Priority Additions to the Base include the following:
Personnel
Operations
The total cost for the capital improvements program as scheduled in the Town’s 15-year plan is $1.7 million. Of that amount, $283,000 is included in the base budget for projects currently under contract. Cable tower rental fees received in the Capital improvements Fund total $60,000, leaving $1,357,000 as the required transfer amount to fund the priority additions to the base budget for capital improvements.
The total preliminary base budget for the General Fund with priority additions is about $49,525,000. Funding sources to cover these costs include estimated revenues of $46,220,000, regular carryforward of $800,000 and a one-time use of fund balance of $2 million. Additional costs could be funded from a combination of additional revenues or cost decreases.
Other additions to the base budget total $403,000. Because of funding constraints, we have not included these items as priority additions to the base. Other additions include the following:
SUMMARY
The preliminary base budget totals $45,500,000. The base budget can be funded with currently available revenues of $46.2 million. Priority additions to the preliminary base budget total $4,085,200 and can be funded with available revenues, the usual budget carry forward of $800,000, and a one-time use of fund balance of $2 million, leaving a shortage of $565,200. A combination of increased revenues or decreased costs could eliminate the difference.
Transportation Fund
Base Budget
The current preliminary base budget for the Transportation Fund totals $13,334,000. The base budget estimate includes the use of $195,000 in fund balance and would require no adjustment to the current tax rate of 4.8 cents per $100 assessed value. Excluding the required budget increase of $433,000 for fuel costs, the preliminary base budget shows a 4 percent increase over the original 2005-06 budget. The fuel cost increase is the result of the estimated increase in the cost of kerosene from $1.80 per gallon to $2.50 per gallon ($283,000); the increased cost of gasoline from $1.60 per gallon to $2.20 per gallon ($30,000); and the increase in costs because of the move to the new Town Operations Center ($120,000).
The current base budget estimates includes some adjustments to the preliminary report as presented to Council on January 12, 2006. The total base budget personnel costs increased $33,000 since the estimate in January. The previous estimate was based on aggregated salary calculations. The current estimate is based on actual salaries and medical coverage as of January 1, 2006.
Operating costs include:
Potential Additions
Potential additions to the base budget include:
The Transportation budget including potential additions to the base totals $13,928,000. By previous agreement, Transit partners would pay the full cost of the first year of requested new service. As a result, the cost to the Town of the additions would include only the Town’s portion of the cost of the potential employee pay adjustments, or $132,000.
Other Major Funds
Other major funds include Public Housing, Stormwater, and Parking Funds. Beginning in 2006-07, the federal government will begin funding Public Housing on a calendar year basis. We will only have six months of subsidy information as we prepare the budget for Public Housing. We expect the Stormwater budget to remain about the same as in the current year at $1.6 million. The Parking Funds budgets would be affected by the Downtown Initiative. We will bring more information on each of these budgets in the Status Report on March 22, 2006.
ATTACHMENTS