Long Term Finncil Plnning Overview of New Pltform City of Knss City, Missouri 2013 2018 Long term finncil plnning combines finncil forecsting with finncil strtegizing to identify future chllenges nd opportunities Good finncil plnning does not simply project the sttus quo x number of yers into the future Finncil plnning stimultes discussion bout the long term impct of decisions mde tody nd how the city cn position itself now to deliver stble level of essentil services. Government Finnce Officers Assocition, Finncing the Future
In June 2012, the Finnce Deprtment ws tsked to develop pltform for long-term finncil plnning (LTFP) within 90 dys, to complement the City s next budget cycle. The LTFP tem in chrge of pln development, led by Director of Finnce, Rndll Lndes, is: Deputy Director of Finnce, Wnd Gunter City Controller, Eric Clevenger City Tresurer, Tmmy Queen Development Finnce Mnger, Dn Bgunu Assistnt Budget Officer, Mrk Thom-Perry Mnger of Administrtion nd Anlysis, Ceml Umut Gungor Ktherine Crttr, Cookinghm-Noll Fellow Nick Hwkins, Cookinghm-Noll Fellow Consultnt Julie Crmichel provided overll project mngement nd, relying upon dt provided by the LTFP tem, developed the Finncil Trends Monitoring System, Five-Yer Strtegic Fiscl Plnning Model, nd this report.
COMPONENTS OF LONG-TERM FINANCIAL PLANNING (LTFP) In June 2012, the Finnce Deprtment ws tsked to develop pltform for long-term finncil plnning (LTFP) within 90 dys, to complement the City s next budget cycle. The blueprint for this decision-mking model involves: Trust: restoring the community s trust in City government Trnsprency: reveling the complex decision-mking processes nd strtegies required to deliver City services Responsiveness: building pln tht considers the community s diverse needs nd priorities Sustinbility: mintining the long-term finncil helth of the City while investing in the City s core service res. The City s long-term finncil plnning will begin to link the following distinct ctivities tht currently exist in some form within the City, but re now only loosely connected: City Council: Priorities nd Gol-Setting, Citizen Enggement nd Surveys City Mnger: Annul Budget nd Performnce Mesurement Finnce Deprtment: Annul Finncil Reports, Finncil Policies, Forecst Public Works: Five-Yer Cpitl Improvements Pln, Infrstructure Condition City Plnning: Demogrphic nd Economic Sttistics, Mpping Deprtments: Business Plns The two ctivities tht serve to connect ll of these efforts, trends nlysis nd strtegic fiscl plnning model, hve not been updted since 2007. With new enhnced versions of both, the City is positioned to begin trnsforming its budget process from n exercise in blncing revenues nd expenditures one yer t time, to tool tht will be strtegic in nture, encompssing multi-yer finncil nd operting pln tht lloctes resources on the bsis of identified gols. Exhibit 1 is dpted from the Government Finnce Officers Assocition publiction Finncing the Future. It lists the mjor components of LTFP nd the plnning process tht stisfies ech, dpted to reflect the City s three phses: Anlysis, Decision, nd Execution. This report, the Finncil Trends Monitoring System, the Strtegic Fiscl Plnning Model, nd the recent citizen survey complete the Anlysis Phse nd provide potentil strtegy options for the Decision Phse. Adopted strtegies in the Decision Phse will led to Execution of the pln within the budget nd other deprtmentl processes tht provide regulr monitoring of the pln. 2012 Long-Term Finncil Pln Report 1 P g e
EXHIBIT 1 LTFP Component Strtegic Plnning Forecsting Cpitl Improvement Plnning Business Plnning (Deprtments) Budgeting Visioning - defines the purpose nd relted objectives of the gency x ANALYSIS PHASE Stkeholder surveys - ssesses strengths nd weknesses, demnd for services x x Fiscl environment nlysis: ten yer trends x Five-Yer Strtegic Fiscl Plnning Model x x DECISION PHASE Fiscl nd opertionl strtegies, policy development x x x x x Service demnd plnning x x x x x Service prioritiztion - objectives nd resource vilbility x x x x x Resource lloction x x x EXECUTION PHASE Alignment - ligns ctivities of subunits to undertke the orgniztion's strtegic objectives Mngement plnning - detiled ction plnning to chieve orgniztionl objectives Performnce monitoring - ssesses progress under ction plns x x x x x x x x x 2012 Long-Term Finncil Pln Report 2 P g e
TREND ANALYSIS The first step in the process is developing The Finncil Trend Monitoring System (FTMS) ptterned fter the Interntionl City/County Mngement Assocition s (ICMA) Evluting Finncil Condition: A Hndbook for Locl Government. Finncil indictors in the report hve been identified by ICMA, credit rting gencies, nd other governmentl professionl ssocitions s the fctors most relevnt in determining the finncil condition of locl governments. The FTMS lso includes relevnt mesures from the Government Finnce Officers Assocition s (GFOA) long-term finncil plnning model, which recommends fiscl environment nlysis tht exmines ctegories of sufficiency, flexibility, vitlity, equity, demnd nd politicl environment. This first nnul report, creted within compressed time frme, will be expnded in future updtes to include other indictors, some of which re listed in Appendix A. The Finncil Trends Monitoring System cn be used by mngers nd policymkers to better understnd the forces tht ffect finncil condition, identify existing nd emerging finncil problems, develop ctions to remedy these problems, nd provide dtbse tht cn be used to mke future projections for effective budgeting, cpitl plnning, nd generl policy mking. The informtion on trends will help demonstrte to citizens tht the government is wre of nd in control of its finnces. Ten-yer trends in economic indictors, operting position, revenues, expenditures, longterm libilities, cpitl plnt mintennce, nd service levels re compred to popultion, infltion, other similr entities, or benchmrks. The trend nlysis concludes with fiscl nd opertionl strtegies which my recommend policy development, revenue reform, or productivity improvements. The nlysis will identify res of strengths (the city s finncil discipline evidenced by subsequent yers of incresing fund blnce) s well s potentil res for review (incresing unfunded libilities). The trends report will often bust commonly held myths, nd just s often provide the empiricl support for new policy directions. A trends report lso provides vluble informtion for Strtegic Fiscl Plnning Model including fctors tht impct growth, resonble growth rte ssumptions, nd criticl vlues. The formt for nlysis of ech indictor is: 1. Grphicl presenttion of the indictor s trend 2. Formul for computing nd interpreting the indictor 3. Anlysis of the 10-yer trend 4. Fiscl nd opertionl strtegies which my recommend policy development, revenue reform, or productivity improvements. 2012 Long-Term Finncil Pln Report 3 P g e
By using 10 yers of dt, trend nlysis nswers severl questions: 1. How fst is n indictor chnging nd in which direction? 2. How does one trend compre to nother nd is there correltion? 3. How do our trends compre to locl or regionl trends? 4. How cn we effectively use the results for plnning, budgeting nd policy mking? The LTFP tem collected dt for 48 indictors. Eight economic nd demogrphic indictors tht mke up this first yer s Environmentl Scn re not ssigned rting, but the nlysis of ech contributes to contextul understnding of fctors tht impct revenues nd expenditures. Environmentl Scn indictors exmine popultion levels nd composition, popultion density, per cpit income nd household income, poverty levels, employment, property vlues, building permits, nd crime rte. The remining 40 indictors were given the following rtings: Positive: The trend is positive nd the indictor meets ny policy or performnce mesures set by the City. Wtch: The trend is uncertin. The indictor should be wtched crefully becuse it my move in direction tht could hve negtive impct on the City s finncil helth. Negtive: The trend is negtive. The indictor does not meet policy or performnce mesures set by the City. Corrective ction should be considered. The results of the nlysis re: 11 Positive Trends 12 Wtch Trends 17 Negtive Trends Exhibit 2 lists the 40 rted indictors orgnized by rting. 2012 Long-Term Finncil Pln Report 4 P g e
EXHIBIT 2 Positive 11 Revenue Indictors 5 Revenue Pie Grph 1 Sles Tx Revenue Estimtion Error 1 Property Tx Per Cpit 1 Frnchise Fees Per Cpit 1 Intergovernmentl s Percent of Totl Revenue 1 Expenditure Indictors 2 Generl Fund Expenditure Estimtion Error 1 Slries & Benefits s Percent of Op Exp's 1 Service Level Indictors 4 Administrtive Overhed 1 Fire Per Cpit 1 Overll Streetlight Condition Index 1 Prklnd Squre Footge Per Cpit 1 Wtch 12 Operting Position Indictors 1 Liquidity 1 Revenue Indictors 6 Operting Revenue Per Cpit 1 Tx Redirections 1 Generl Fund Revenue Estimtion Error 1 Sles Tx Per Cpit 1 Tourism & Leisure Per Cpit 1 Service Chrges s Percent of Totl Revenue 1 Expenditure Indictors 2 Personnel costs per FTE 1 Cpitl s Percent of Totl Exp's 1 Service Level Indictors 3 Non-Uniform Per Cpit 1 Police Per Cpit 1 Overll Bridge Condition Index 1 Negtive 17 Operting Position Indictors 3 Structurl Blnce 1 Unreserved Operting Fund Blnces 1 Operting Surpluses (Deficits) 1 Revenue Indictors 3 Restricted nd Renewble Revenues 1 Ernings Tx Per Cpit 1 Business License Per Cpit 1 Expenditure Indictors 6 Expenditures Pie Grphs 1 Operting Expenditures Per Cpit 1 Expenditures by Outcome Per Cpit 1 Fringe Benefits s Percent of Personnel Costs 1 Debt Service s Percent of Operting Exp's 1 Outstnding Debt s Percent of Mrket Vlue 1 Long-Term Libilities Indictors 4 Pension Funding Rtio Non-Uniform 1 Pension Funding Rtio Uniform 1 Annul Pension Pyments 1 Other Post-Employment Benefits (OPEB) 1 Service Level Indictors 1 Overll Pvement Condition Index 1 Grnd Totl 40 2012 Long-Term Finncil Pln Report 5 P g e
The results cn be orgnized into vriety of customizble scorecrds to give mngement, policymkers, nd stkeholders vriety of wys to nlyze results. The seprte Finncil Trends Monitoring System Report includes three smple scorecrds. Exhibit 3 shows the results for Core Indictors scorecrd those indictors considered to be the most fundmentl snpshot of finncil condition. Of these, 7 re positive or not rted, 3 re wtch, nd 7 re negtive. EXHIBIT 3 Not Rted 4 Popultion 1 Per Cpit nd Medin Household Income 1 Employment 1 Property Vlue 1 Positive 3 Property Tx Per Cpit 1 Frnchise Fees Per Cpit 1 Slries & Benefits s Percent of Operting Expenditures 1 Wtch 3 Operting Revenue Per Cpit 1 Sles nd Use Tx Per Cpit 1 Cpitl s Percent of Totl Expenditures 1 Negtive 7 Structurl Blnce 1 Unreserved Operting Fund Blnces 1 Ernings Tx Per Cpit 1 Operting Expenditures Per Cpit 1 Fringe Benefits s Percent of Personnel Costs 1 Debt Service s Percent of Operting Expenditures 1 Annul Pension Pyments 1 Grnd Totl 17 2012 Long-Term Finncil Pln Report 6 P g e
The LTFP tem identified over 50 fiscl nd opertionl strtegies, complete listing of which cn be found in Appendix B. The following re considered core strtegies: ones tht either originte from the 16 core indictors or from indictors tht received Negtive rting. These strtegies will be prominent considertions for ssumptions nd scenrios used in the Strtegic Fiscl Plnning Model nd re submitted in drft form for considertion by the City Council. Finncil Stewrdship: Adopt policies nd procedures tht mintin long-term finncil helth. Gol 1 Develop, dopt nd codify the following new finncil policies: Long-term finncil plnning Revenue (s recommended by CCMR) Pension Funding User Fee Gol 2 Adopt pln to chieve structurlly blnced budget, bsed on the following fctors: Current expenditures should equl current revenues An dequte fund blnce is mintined Revenue growth is equl to or greter thn expenditure growth Cpitl mintennce expenditures re not deferred Long-term libilities re ddressed Gol 3 Develop time-specific, funding pln to meet the City s dopted gol of two months worth of expenditures. Gol 4 Adopt funding policy with the gol of reching 100% level of funding for ll sponsored plns. Gol 5 Review City s dopted debt policy with considertion given to modifying debt cpcity provisions in order to specify ceiling for the mount of debt service s percent of operting budget or develop mitigtion strtegy to protect both credit qulity nd mrket ccess. 2012 Long-Term Finncil Pln Report 7 P g e
Revenue Mngement: Identify nd monitor fctors tht influence future revenue growth. Gol 6 Develop pproprite renewl or replcement strtegies for the following txes: Temporry Helth Levy (2014) Fire Sles Tx (2016) Ernings Tx (2016) Gol 7 Implement Citizens Commission on Municipl Revenue recommendtions: Bse recommendtions Business license reform Gol 8 Review ggregte tx redirections (e.g. TIF, STIF, etc.) nd tx btements to determine effect on budget nd return on investment. Service Delivery nd Performnce Mngement: Identify nd monitor fctors tht influence citizen demnd for nd stisfction with City services. Gol 9 Integrte performnce nd productivity mesures within nnul budget to link expenditures to Council priorities, service levels, service delivery efficiencies, citizen demnd, nd customer stisfction. Gol 10 Monitor citizen demnd for services nd survey citizen stisfction. Finncil Mngement: Implement operting nd finncil support systems tht mintin long-term finncil helth. Gol 11 Continue roll-out nd integrtion of long-term finncil pln including: Finncil Trend Monitoring System Strtegic Fiscl Plnning Model Integrtion with, Strtegic Plnning, Budget nd Performnce Mngement Gol 12 Conduct ssessment of the City s finncil policies, prctices, processes, etc. using the CIPFA/GFOA Model. 2012 Long-Term Finncil Pln Report 8 P g e
Gol 13 Complete tx collection system upgrdes: Ernings, utilities, convention nd tourism, business license, hotel nd cr rentl (2013) Property txes nd specil ssessments (2014) Gol 14 Perform comprehensive totl compenstion review. Gol 15 Design pension benefit structure which fits with vilble budget resources. Gol 16 Develop multi-yer pproch to helth cre funding nd cost continment, which includes n pproprite reserve for risk ssocited with self-funding. Gol 17 Develop pln to mintin City s generl obligtion AA credit rting by cpitlizing on credit strengths nd ddressing weknesses. Gol 18 - Develop pln to ddress other post-employment benefits libility (OPEB) through either pln design chnges, direct funding or both. Gol 19 Develop comprehensive risk mngement pln. Cpitl Plnt: Ensure the dequte nd efficient mintennce of the City s infrstructure. Gol 20 - Develop funding pln(s) to keep ssets (e.g. streets, buildings, bridges, streetlights, etc.) t minimum condition levels (if pplicble, per GASB 34) or bsed on funds vilbility. Gol 21 - Develop funding pln(s) to keep equipment (e.g. rolling stock, technology, office equipment, furnishings, etc.) t prescribed levels or condition. 2012 Long-Term Finncil Pln Report 9 P g e
NEXT STEPS The City hs fced number of finncil chllenges in the recent pst. The FTMS system is not designed to project the future finncil sitution of the City; however, the system will provide n importnt benchmrk for mngement to monitor nd develop strtegies for problem res nd to mintin positive trends. The nlysis conducted s prt of the trends report builds expert knowledge of the orgniztion nd its environment which is vitl to the qulity of the pln. The trend results re then used to inform the inputs nd ssumptions for the Strtegic Fiscl Plnning Model fctors tht impct growth, resonble growth rte ssumptions, nd criticl vlues. 2012 Long-Term Finncil Pln Report 10 P g e
STRATEGIC FISCAL PLANNING MODEL The next step in the Long-Term Finncil Plnning process ws construction of the Five- Yer Strtegic Fiscl Plnning (SFP) Model to chieve the following gols: Understnd vilble funding sources Identify key vribles tht impct revenue Quntify the opportunity costs of funding decisions Assess the likelihood tht services cn be sustined Assess the level t which cpitl investment cn be mde Identify future commitments nd resource demnds The SFP model is finncil pln to illustrte the likely finncil outcomes of prticulr courses of ction or fctors ffecting the environment in which the government opertes. A finncil pln is not forecst of wht is certin to hppen, but rther device to highlight significnt issues or problems tht must be ddressed if gols re to be chieved. The SFP model links operting, debt, nd cpitl decisions in order to identify pproprite strtegies to chieve the City s gols. Decisions re no longer mde in vcuum, but within frmework of ll competing interests nd priorities. The SFP model forecsts both revenue nd expenditures, but in very different wys: 1. Revenues re impcted by myrid of vribles lrgely outside the City s control. Finnce Deprtment stff uses sophisticted modeling to identify those vribles, nd correltion to revenue collections. These revenue models provide rnge of future growth rtes which re then used to estimte the level of funding vilble for current budget delibertions. Growth rtes will now lso inform the SFP model. The question nswered in SFP model relted to Revenues is: Wht is the likely level of resources the City cn expect given certin chnges in economic nd demogrphic vribles? 2. Expenditures re impcted by economic nd demogrphic vribles s well, but levels cn be controlled through mngement decisions. Becuse the City is required to dopt blnced budget ech yer, expenditures re mtched to vilble resources. Now the long-term impcts of those choices cn be evluted in the SFP model. The question nswered in SFP model relted to Expenditures is: Wht chnges in revenues nd/or service levels re required to meet our highest priorities? Current forecsting prctice is to present current expenditures times growth rte (for exmple, ech deprtment cn increse the budget by 5%). Implied in this growth rte re 2012 Long-Term Finncil Pln Report 11 P g e
ssumptions for infltion, popultion chnges, nd expecttions for service demnd. An expnded formul breks out these ssumptions: Operting Expenditures = employees per popultion * popultion increse * verge cost (expenditures per employee) * cost increse. Note: When you cncel out numertors nd denomintors, you re left with expenditures times growth rte. This eqution provides plusible story bout the future using the world of tody s strting point. It ssumes tht the rtio of current expenditures per employee is the most efficient level of service delivery tht cn be chieved in the ner future. And it ssumes tht the rtio of employees per popultion is dequte. Given these two truths, the eqution then forecsts the current level of service forwrd for chnges in economic nd demogrphic ssumptions. Scenrios The SFP model genertes lterntive wht if scenrios bsed on vrying ssumptions for popultion, infltion, mndtes, number of employees, slry increses, helth cre costs, cpitl requirements, nd mny more. Although it is common prctice to develop pessimistic, optimistic nd most likely scenrios, plnning is more vluble when scenrios chosen re ll eqully plusible. This llows strtegic decisions to be tested ginst likely outcomes, not likely extremes. And this pproch reinforces the ide of the SFP model s plnning tool, tht when used s such cn produce finncil strtegies tht work under ny scenrio. Scenrios cn highlight weknesses cross vriety of outcomes. Scenrios focus decisions on criticl vlues. And scenrios will not predict wht will hppen, but will provide the flexible thinking required to respond if something hppens. Link to the Budget The SFP model influences budget formultion by identifying finncil prmeters s prt of the strtegy to rech fiscl blnce. The budget is then used to opertionlize the finncil pln by implementing specific finncil strtegies, funding service level preferences, identifying set of spending ssumptions, nd linking operting, cpitl, nd debt plnning efforts. 2012 Long-Term Finncil Pln Report 12 P g e
A successful pln is supported by strong guidnce from elected officils on wht the orgniztion vlues nd believes to be importnt s expressed through officil policy. Smple Scenrio Results SFP model results re summrized by the following seven grphs, benchmrked to City policies: Structurl Blnce Reserves - All Operting Funds s percent of expenditures Reserves - Generl Fund Supported s percent of expenditures Reserves - Specil Revenue Funds Debt Service s percent of expenditures PAYG Cpitl s percent of expenditures Redirections s percent of Tx Revenues Finnce Deprtment stff will use scenrios to inform delibertions for the 2013-2014 Budget. Becuse the SFP model is built to be flexible, stff nticiptes nnul enhncements to this first yer s bsic structure, to ensure mtch between the finncil pln nd evolving service demnds. For purposes of this report, stff identified one scenrio to demonstrte the model structure nd results: Scenrio Description Prks lnd only nd front foot txes nd motor vehicle license fees not collected in 2013. New 1/2 cent sles tx tkes effect in Jnury 2013, first collections occur in fiscl yer 2013-2014. 7.5% of ernings tx is dedicted to street mintennce beginning in fiscl yer 2013-14. New bonds issued for street progrm ($100 million) nd bridge repirs ($25 million), repid with property tx mill levy increse. No employee dditions. 2012 Long-Term Finncil Pln Report 13 P g e
SAMPLE SCENARIO 10-Yer Trends Annul 2013 estimted 2014 2015 2016 2017 2018 Forecst Period Demogrphic Assumptions 2013 estimted popultion 465,000 Popultion growth 0.46% 0.5% 0.5% 0.5% 0.5% 0.5% 2.5% Revenue Assumptions Budget vrince -8% to +7% 2.0% Ernings Tx Rte 1.0% 1.0% 1.0% 1.0% 1.0% Annul Increse 2.4% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% Sles Tx Rte 2.375% 2.875% 2.875% 2.875% 2.875% Annul Increse 1.2% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% Property Tx Mill Levy 1.5875 1.7261 1.7574 1.7540 1.7508 Annul Increse 2.1% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% Utility Frnchise Increse 4.1% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% Expenditure Assumptions Budget vrince -4% to +8% -2.0% Annul employee dditions (FTE's) - - - - - - Generl Government - - - - - - Police - - - - - - Fire - - - - - - Public Infrstructure - - - - - - Neighborhoods nd Helth - - - - - - Difference from employees incresed by popultion (25.0) (50.2) (75.5) (100.9) (126.5) (378.2) Generl Government (3.1) (6.1) (9.2) (12.3) (15.4) (46.1) Police (10.0) (20.1) (30.2) (40.4) (50.7) (151.5) Fire (6.2) (12.5) (18.8) (25.1) (31.5) (94.1) Public Infrstructure (2.2) (4.5) (6.8) (9.1) (11.3) (33.9) Neighborhoods nd Helth (3.5) (7.0) (10.5) (14.1) (17.6) (52.7) Slries increse 3.6% 3.5% 3.5% 3.5% 3.5% 3.5% 3.5% Benefits increse 7.3% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% Operting Costs increse 2.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% Operting Scenrio Generl Fund Supported Inititive 1 - - - - - Inititive 2 - - - - - Specil Revenue Funds Inititive 1 - - - - - Inititive 2 - - - - - New Debt Issues 100,000,000 25,000,000 - - - Generl Fund Supported 100,000,000 25,000,000 - - - Specil Revenue Funds - - - - - PAYG Cpitl Projects 62,018,034 73,655,931 73,252,678 76,075,456 77,756,192 78,187,161 Budgeted projects not in CIP 4,702,187 - - - - - Street Mintennce Utility (MFT Fund) 1,443,370 16,007,912 16,408,110 16,818,312 17,238,770 17,669,739 Rodwys 21,709,852 21,013,706 22,476,887 20,882,136 27,318,003 27,318,003 Bridges 209,005 209,005 209,005 209,005 209,005 209,005 In-District 19,775,000 18,781,000 19,014,310 19,249,953 19,487,953 19,487,953 Buildings 6,325,000 6,325,000 6,325,000 6,325,000 6,325,000 6,325,000 Recretion 5,653,562 4,719,366 4,719,366 4,719,366 4,719,366 4,719,366 Wlkwys 500,000 500,000 500,000 500,000 500,000 500,000 Flood Control 1,700,058 6,099,942 3,600,000 7,371,684 1,958,095 1,958,095 2012 Long-Term Finncil Pln Report 14 P g e
SAMPLE SCENARIO Fiscl Yers Ended 2013-2018 Finncil Pln millions $ $1,100 $1,050 $1,000 $950 $900 Structurl Blnce Revenue Expenditure 25% 20% 15% 10% 15% Reserves - All Operting Funds s percent of expenditures 17% 19% 20% 22% 23% $850 5% $800 2013 2014 2015 2016 2017 2018 0% 2013 2014 2015 2016 2017 2018 18% 16% 14% 12% 10% 8% 6% 4% 2% 11% Reserves - Generl Fund Supported s percent of expenditures 12% 13% 12% 12% 10% City Policy = two months' expenditures millions $200.0 $180.0 $160.0 $140.0 $120.0 $100.0 $80.0 $60.0 $40.0 $20.0 $76.4 Reserves - Specil Revenue Funds $178.0 $154.0 $132.1 $112.9 $93.4 0% 2013 2014 2015 2016 2017 2018 $0.0 2013 2014 2015 2016 2017 2018 18% 16% 14% Debt Service s percent of expenditures 16% 16% 16% 15% 15% 14% 14% 12% PAYG Cpitl s percent of expenditures 12% 10% 8% 6% 4% 2% threshold 10% 8% 6% 4% 2% 0% 2013 2014 2015 2016 2017 2018 0% 2013 2014 2015 2016 2017 2018 Redirections s percent of tx revenues 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% 2013 2014 2015 2016 2017 2018 2012 Long-Term Finncil Pln Report 15 P g e
IMPLEMENTATION For this initil development phse, the LTFP tem ws stffed by employees of the Finnce Deprtment with project mngement provided by n outside consultnt. Long-term, the effort will hve input nd involvement from ll City deprtments, the City Council, citizens nd the business community. The process is built to be flexible nd dynmic, requiring nnul updtes, reviews, nd enhncements tht cn be modified to reflect current priorities. Periodic reports re issued, but the LTFP process is never finl. Exhibit 4 shows n initil drft timeline for ech inititive nd the responsible prties: EXHIBIT 4 Finnce Director Office Accounts Division Finnce All City Mnger/Dept's Myor/City Council 2012 2013 2014 Inititive Project Assigned Jul Aug Sep Oct Nov Dec Jn Feb Mr Apr My Jun Jul Aug Sep Oct Nov Dec Jn 10-Yer Finncil Trends Anlysis 5-Yer Forecst Model, Bsic Budget Preprtion 5-Yer Forecst Model, Enhnced Operting Position Revenue Indictors Expenditure Indictors Service Level Sttistics Environmentl Scn Fiscl Strtegies/Scorecrd GM Revenues by Mjor Type GM Expenditures by Outcome & Ctegory Finncil Rtio Anlysis Council Priorities Deprtment Decision Pckges Performnce Mesures/Outcomes Annul Operting & Cpitl Pln GM Revenues by Mjor Type GM Expenditures by Outcome & Ctegory 5-Yer Cpitl Forecst Decision Pckge Scenrios Link to Performnce Mesures/Outcomes Finncil Rtio Anlysis Key to the success of LTFP is involvement of citizens nd the business community. Public involvement in finncil strtegy development is crucil in order to legitimize the choices mde to chieve structurl blnce, nd ensure those choices reflect stkeholders priorities nd preferences for service levels. Citizens nd the business community re customers of public services, owners by virtue of pying txes nd voting, nd through LTFP, cn be prtners in working to chieve public gols. 2012 Long-Term Finncil Pln Report 16 P g e
CONCLUSION The FTMS nd SFP Model re importnt first steps in breking pttern of successive single-yer fixes, often implemented without long-term view. With these tools, the Finnce Deprtment is now better positioned to work with deprtments in prtnership helping them develop multi-yer plns tht meet service gols, while stying consistent with finncil relities. Future enhncements to these tools will: Include enterprise opertions Link expenditures to service outcomes Expnd deprtment-level business plnning efforts Incorporte service level decision pckges in budget delibertions By linking expenditures to service outcomes, stkeholders re given better understnding of ech progrm s opertions, the vribles tht ffect funding levels, nd the impct of funding decisions on service levels. For instnce, Fleet Mintennce division cn show the verge ge of the fleet given different replcement scenrios, nd the impct on efficiency for both mintennce costs nd time spent out of service. A Street Mintennce division cn highlight the impct of popultion chnges by showing the projected number of street miles, estimted pvement condition rtings, nd impct on future expenditures bsed on cost per mile dt. Prks nd Recretion cn show the impct of dding prklnd or chnging the level of mintennce for existing prklnd using cost dt nd stndrds bsed on set of specific fctors such s visittion rtes, plnt types, nd physicl fetures. Performnce udits cn be used to evlute efficiencies (expenditures per employee). Comprisons to other jurisdictions cn be used to evlute whether worklod (employees per client) is pproprite. Once cceptble levels re determined, n enhnced forecst model tht links expenditure choices to service levels nd performnce stndrds gives policymkers the tool to set priorities, mke choices, nd understnd the opportunity costs of those choices. Insted of cutting $x mount, stkeholders choose service levels: incresing/decresing wit times, number of clients served, mintennce levels. This process lso llows policymkers to choose between different pckges of service levels nd to incorporte those results in model tht integrtes operting, debt, nd cpitl considertions. Deprtmentl nlysis of funding needs, nd the impct on outcomes nd performnce for vrious funding levels will be nlyzed comprehensively, ginst ll other competing considertions. Future enhncements will chnge the converstion from we need to cut X, to choosing service levels tht led to positive trnsformtion. 2012 Long-Term Finncil Pln Report 17 P g e
APPENDIX A: FUTURE ADDITIONS/ENHANCEMENTS TO FTMS Popultion composition (ge, eductionl levels, rce, etc.) Current libilities s percent of net operting revenues Cost recovery of user chrges Uncollected property tx Sles tx bse nlysis Elstic vs. inelstic revenues Use of one time revenues s percent of totl Business licenses fee tied to mesures of business ctivity Tx burden, residentil nd business Debt service pid off in ten yers Debt per cpit Overlpping debt Enterprise funds profits/losses Enterprise funds reserves Enterprise funds operting rtio 2012 Long-Term Finncil Pln Report 18 P g e
APPENDIX B: FISCAL AND OPERATIONAL STRATEGIES (CORE STRATEGIES ARE HIGHLIGHTED) FINANCIAL STEWARDSHIP: Adopt policies nd procedures tht mintin long-term finncil helth. Implement the recommendtions of the Citizens Commission on Municipl Revenue regrding revenue policy doption nd revenue reform. Evlute revenue sources to estimte individul nd business tx burdens. Ensure tht one-time revenues re not used to cover recurring opertions. Estblish policy for the number of yers grnted in the redirection of EATs. Consider policy to cp totl redirections. Implement pln for Ernings Tx renewl (current expirtion is December 2016). Identify revenue replcement strtegy if not renewed. Implement plns to renew the sles txes scheduled to expire within the next five yers: PMT (12/2015), Fire (12/2016) nd Generl Sles dedicted to cpitl improvements (12/2018). Evlute renewl options for the temporry Helth Levy, scheduled to expire in April 2014. Evlute options reltive to property tx levies tht re t or ner the voted mximum. Review other progrms to determine if service chrges should be used for funding. Identify intergovernmentl revenues ssocited with federl nd stte mndtes, nd trck the budgetry impct of unfunded mndtes. When pplying for grnt funding, quntify the totl commitment in mtching funds, dditionl reporting requirements, future mintennce requirements nd overhed costs. Incorporte slry survey to ensure slries re competitive with peers. Evlute the quntity nd qulity of individul fringe benefits. Implement progrms to reduce helth insurnce costs. Implement funding plns nd/or chnges in pln design for indirect benefits, including unfunded pension libilities, compensted bsences, nd other postemployment benefits. Include full funding of long-term libilities in the Strtegic Fiscl Plnning Model. Limit pprovl of new debt to those projects with new revenue source. Monitor debt levels in conformnce with codified debt policy. 2012 Long-Term Finncil Pln Report 19 P g e
REVENUE FORECASTING: Identify nd monitor fctors tht influence future revenue growth. Monitor demogrphic, economic, sttutory, regultory nd other relevnt fctors tht impct revenue collections including CPI, GRDP, employment trends by mjor sector, popultion totls nd composition, personl income growth, wether ptterns, verge hotel/motel room rte, verge occupncy rte, csino mrket shre, future convention bookings nd events, CPI for hotel nd food, nd business ctivity. Conduct n nlysis of individul txes nd test models for forecsting. Monitor the sles tx bse composition nd ctivity of mjor industries. Monitor lrge stte refunds nd settlements of sles txes. Conduct n nnul nlysis of sles nd use txes, detiling the historicl chnge in ech, s well s the tx bse chnge for importnt sectors. Conduct n nnul nlysis to trck chnges in ssessed vlue by type (rel or personl) nd by clss (residentil or commercil), s well s the brekdown of the growth between ressessment nd new construction. Monitor Federl nd Stte regultory chnges in the gs, electric nd telecommunictions industries to identify threts to future collections. Monitor number of ctive businesses. SERVICE DELIVERY AND PERFORMANCE MANAGEMENT: Identify nd monitor fctors tht influence citizen demnd for nd stisfction with City services. Integrte performnce nd productivity mesures within nnul budget to link expenditures to Council priorities, service levels, service delivery efficiencies, citizen demnd, nd customer stisfction. Evlute individul service res to determine if pttern reflects chnges in efficiency or citizen demnd. Monitor citizen demnd for services nd survey citizen stisfction. Monitor chnge, composition (i.e. ge nd eduction levels), nd loction of the City's popultion to determine the cost of serving residents nd the revenues contributed through txes. Estimte future costs of new development. Evlute full rnge of service delivery options including public, privte, public/privte, etc. Develop service delivery stndrds nd incentives to ensure the highest level of productivity. 2012 Long-Term Finncil Pln Report 20 P g e
Evlute optiml levels of overhed support, nd ensure dministrtive support stff is fctored in forecst ssumptions for direct service employee dditions nd subtrctions. Implement recommendtions of the 2012 Internl Service Funds survey. Evlute options for utomtic id greements with surrounding Fire deprtments for mnpower nd equipment. Forecst the full cost of prklnd mintennce for both existing nd proposed prklnd cquisitions. FINANCIAL MANAGEMENT: Implement operting nd finncil support systems tht mintin long-term finncil helth. Annully updte the Finncil Trends Report. Continue to integrte the Strtegic Fiscl Plnning Model with the budget to show the five-yer impct of current finncil policies, service delivery levels, nd Council priorities. Utilize the model to prioritize nd implement City gols while complying with the finncil policies. Continue to conduct monthly csh flow nlyses to ensure prudent nd optiml investment mix. Continue to trck nd publicly report tx incentive project results ginst originl benchmrks. Trck ggregte redirection dt ginst the City s budget nd s percent of totl revenue. Incorporte redirections in Strtegic Fiscl Plnning Model. Conduct nnul review of user chrges. Produce periodic report which mesures cost recovery, nd mount nd source of ny subsidy for ech fee-supported ctivity. Adopt forml user fee policy. CAPITAL PLANT: Ensure the dequte nd efficient mintennce of the City s infrstructure. Identify infrstructure mintennce requirements to mintin cceptble condition rtings. Develop detiled budget informtion to trck new cpitl nd mintennce expenditures per unit, by sset type; including the impct on the long-term operting budget. 2012 Long-Term Finncil Pln Report 21 P g e
Develop sset "performnce mesures" by surveying txpyer stisfction of street condition, prks, bridges, etc. Implement cpitl plnning effort which includes policies nd criteri reflecting community priorities. Continue to rte the condition of every street nd increse funding plns for street mintennce nd rehbilittion in the nnul CIP. Continue to rte the condition of every bridge nd mintin funding plns for bridge mintennce nd rehbilittion in the nnul CIP. Continue to rte the condition of every street light nd mintin funding plns for mintennce nd replcement in the nnul CIP. 2012 Long-Term Finncil Pln Report 22 P g e