role of financial policies in preparing the budget fall conference... · •unrestricted gf cash
TRANSCRIPT
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Role of Financial Policies in Preparing the Budget
VGFOA Fall Conference
October 25, 2018
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City of Suffolk
• 92,533 residents
• 14% population growth in 10 yrs.
• 430 square miles
• Urban, Suburban, and Rural
• $627.4M Budget
• 1,362 FTEs
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Historical Overview
Mid 2000s
• Rapid growth and development
• Services and amenities enhanced
• Ambitious capital program – Cultural Arts Center
– Hotel Project
– New Schools
• Took over road maintenance from VDOT
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Historical Overview
2006-2008
• Fund Balance stressed
• Unrestricted GF Cash <$1M
• Out of Compliance with Financial Policies
• Bond Ratings lowered Aa3 (Moody’s) AA- (S&P) A+ (Fitch)
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Turn the Ship Around
• Elevate Financial Vision to match the overall vision for the City
• Mayor set a goal of becoming AAA rated community
• Capital Program adjusted to reality
• Instill financial discipline
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Turn the Ship Around
• Finance Committee established to regularly review financial activity, cash management and investment, and policy compliance
• Mayor • Vice Mayor • City Manager • City Attorney • Assessor • Commissioner of the Revenue • Treasurer • Finance Director • Budget Officer
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Turn the Ship Around
• Updated Financial Policies for appropriateness and comparability with AAA rated jurisdictions
• Implemented conservative approach to budgeting
• Restructured budget document in line with GFOA Best Practices in Budgeting
• Integrated Financial Policies into the CIP and Budget processes and documents
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Turn the Ship Around
• Began providing quarterly financial updates to City Council
• Reported financial policy compliance in budget presentations, the budget document, and during the City Council retreat
• Created narrative summaries in the budget document to demonstrate compliance with key financial policies
• Utilized key financial policy indicators as performance measures in the budget document
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Financial Policies
• Framework for overall fiscal planning and management
• Focused on the big picture rather than single issues or needs
• Clear and consistent guidelines that promote long-term financial stability
• Strengthen ability to withstand a financial crisis
• health.
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• Legal authority to spend money
• Identifies priorities and actions to address short and long-term needs and issues
• Enumerates the funding approved to address services, programs, and capital improvements
• Serves as a financial plan, policy document, operation guide, and communication device --- GFOA
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Operating Budget
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Key Financial Policies
• Balanced Budget
• Debt
• Capital Pay-GO
• Asset Maintenance/Replacement
• Fees and Charges
• Revenue Diversification
• Revenue Collection
• Fund Balance
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Key Measures • Capital Pay-Go
Cash Funding equal to 3% of General Fund departmental expenditures excluding GF transfers to other funds.
Cash funding to limit borrowing.
• Debt as Percentage of Assessed Value - 4% or less
Indicator of the City’s ability to repay debt with property taxes.
Ability to meet debt obligations during economic downturn.
• Debt as Percentage of General Gov’t Expenditures - 10% or less
Ability to repay debt without impacting to City services.
Smaller percentage = Less burden on the operating budget.
• Unassigned General Fund Balance
Indicator of financial strength and ability to cope with unexpected financial problems or emergencies.
12% of budgeted Governmental Fund expenditures less GF transfers.
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Update City Council Goals/Objectives
August
CIP Dev. & Adoption Sept./February
Budget Development Nov. - March
Budget Adoption
Rating Agency Visits
Issue Bonds
May
June/July
July/August
Budget Calendar
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Capital Improvements Plan
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Evaluate • Debt Capacity • Capital Pay-Go
Review project requests • Revenue Sources • Expenditures • Operating Impact
Assess Impact • Bond Capacity • Capital Pay-Go • Debt to AV and
General Gov’t Exp. • Operating Costs
Make Adjustments to Address: • Financial Policies • Affordability • Need/Demand
Present and Adopt CIP • CIP Subcommittee • Planning Commission • City Council
Financial Policies - Debt to Assessed Value - Debt to General Gov’t Exp. - Capital Pay-Go
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Previous 5 Year 6-10 Year 10 Year
Funding Subtotal Subtotal Total
Public Utilities Revenue Bonds 5,335,000 11,050,000 8,800,000 4,300,000 6,800,000 36,285,000 98,900,000 135,185,000
Transfer from Public Utilities Fund 7,500,000 6,275,000 5,195,000 5,700,000 5,405,000 30,075,000 25,385,000 55,460,000
PUBLIC UTILITIES FUND 12,835,000 17,325,000 13,995,000 10,000,000 12,205,000 66,360,000 124,285,000 190,645,000
General Obligation Bonds - - - 2,175,000 - 2,175,000 12,325,000 14,500,000
FLEET FUND - - - 2,175,000 - 2,175,000 12,325,000 14,500,000
State Transportation Funds - - 200,000 400,000 400,000 1,000,000 1,000,000 2,000,000
State/Federal Grant Funds 750,000 - - - - 750,000 - 750,000
Transfer from Stormwater Fund 1,020,000 400,000 600,000 800,000 1,020,000 3,840,000 3,875,000 7,715,000
Transfer from Cemetery Fund 250,000 - - - - 250,000 - 250,000
General Obligation Bonds - - - - - - - -
STORMWATER FUND 2,020,000 400,000 800,000 1,200,000 1,420,000 5,840,000 4,875,000 10,715,000
RT. 17 Taxing District Fund 1,000,000 - - - - 1,000,000 - 1,000,000
RT 17 TAXING DISTRICT 1,000,000 - - - - 1,000,000 - 1,000,000
State Transportation Funds 5,000,000 5,000,000 5,000,000 6,000,000 6,000,000 27,000,000 53,000,000 80,000,000
State/Federal Grant Funds 23,005,314 11,170,000 8,214,000 623,000 3,456,000 46,468,314 42,250,000 88,718,314
Cash Proffers - - - - - - 1,137,365 1,137,365
Transfer from Rt. 17 Taxing District Fund 200,000 - - - - 200,000 - 200,000
Transfer from General Fund 4,552,475 4,749,810 4,521,384 4,886,609 4,854,965 23,565,243 30,934,870 54,500,113
General Obligation Bonds 18,226,886 16,914,324 24,040,674 24,850,848 28,941,241 112,973,973 343,151,919 456,125,892
GENERAL GOV'T. FUND 50,984,675 37,834,134 41,776,058 36,360,457 43,252,206 210,207,530 470,474,154 680,681,684
TOTAL ALL FUNDS: 66,839,675 55,559,134 56,571,058 49,735,457 56,877,206 285,582,530 611,959,154 897,541,684
GO Debt Capacity per Financial Advisor: 30,000,000 30,000,000 30,000,000 30,000,000 30,000,000
GO Debt Capacity (Shortfall): 11,773,114 13,085,676 5,959,326 5,149,152 1,058,759
FUNDING SOURCES
2018-2019 2019-2020 2020-2021 2021-2022 2022-2023
Capital Improvements Plan
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UTILITY FUND - OPERATIONS: - - - - -
ANTICIPATED DEBT SERVICE: - 266,750 552,500 440,000 215,000
UTILITY FUND - CAPITAL CASH: 4,200,000 (1,225,000) (1,080,000) 505,000 (295,000)
PUBLIC UTILITIES FUND 4,200,000 (958,250) (527,500) 945,000 (80,000)
STORMWATER FUND: - - - - -
GENERAL FUND - OPERATIONS: - 30,000 5,000 350,000 4,521,612
ANTICIPATED DEBT SERVICE: - 911,344 845,716 1,202,034 1,242,542
GENERAL FUND - CAPITAL CASH: 2,467,338 197,335 (228,426) 365,225 (31,644)
GENERAL GOV'T. FUND 2,467,338 1,138,679 622,290 1,917,259 5,732,511
General Fund Real Estate Tax Rate Impact: 2.750 1.269 0.694 2.137 6.389
2018-2019 2019-2020 2020-2021 2021-2022 2022-2023Annual Operating Impact
Capital Improvements Plan
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Operating & Capital Budget Development
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Prepare Draft Budget
Run Policy Calculations • Capital Pay-Go • Debt to AV • Debt to General Gov’t • Fund Balance
Make Adjustments to Draft Budget
Present Budget Public Meetings Budget Adoption
Evaluate Results
Plan for next Fiscal Year
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FY 19 Budget Highlights
Compliance with Financial Policies
Policy
Requirement
FY 18
Budget
FY 19
Projected
Capital Pay Go 3.0% 3.1% 3.0%
Debt as Percentage of Assessed Value 4.0% 2.1% 2.2%
Debt as Percentage of General Gov't Exp. 10.0% 8.8% 8.3%
Unassigned Fund Balance 12.0% 16.1% 17.0%
Policy Goal 12% $42.5M FY 18 Proj. Fund Balance $60.1M FY 19 Gen. Govt. Exp. $354.3M
17.0%
12%
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Results
• Complying with Financial Policies
• GF Fund Balance increased $11.4M to $60M
• Cash Position at All-Time High
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Results
Continued to make strategic capital investments
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Results
• Increased General Fund cash for capital projects
• AAA Bond Rating
– Standard & Poor’s (2014)
– Fitch (2015)
• $28.7M in debt savings from refundings
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• Enhanced awareness of elected officials
• Improved long-range perspective of financial decisions
• Provides credibility and confidence which can be touted to citizens
• Unintended Consequences – Heightened focus on minor changes
– Can become overcautious
– Debate over how much is too much fund balance
– Increased appeal to tap into reserves for recurring expenditures
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Results
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Conclusion
• Adherence to Financial Policies is CRITICAL to the long-term financial health
• Incorporating financial policies into the Budget development process is a good financial management practice
• Measuring Results and Reporting Compliance enhance accountability to Governing Body, Citizens, and Bond Rating Agencies
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