Mar 20, 2018 - Mass Transit expenditures greater than plan due to a software maintenance agreement increase, unplanned b
Mayor and Council Retreat March 20, 2018 City Manager – Michael J. Ortega, P.E. Assistant City Managers – Albert Elias, AICP & Joyce K. Garland, CPA
1
General Fund Update FY 2017/18 • 2nd Quarter Projection • FY 2018/19 Preliminary Budget
Changes From FY 2017/18 Financial Plan • Revenues changes:
• Sales and Use Tax revenues are up 2.8% which offsets other revenue decreases; total increase to recurring revenues $2.9M from plan • Fines and Forfeitures continue to drop due to less charges filed • Charges for Services declining mainly in ambulance fees due to less transports than anticipated; a reduction from plan of $3.9M • Mass Transit full passenger revenues down $0.9M from plan
• Expenditures increased:
• Fire and Police overtime is projected to be greater than budgeted by $2.3M • Mass Transit expenditures greater than plan due to a software maintenance agreement increase, unplanned building improvements, and overtime due to shortage of drivers
3
Changes From FY 2017/18 Financial Plan (continued)
• Service change reductions which will not occur: • • • • •
Jail board reductions $1.0M City/Court consolidation $1.0M Police and Sheriff Departments partnerships $0.5M Positions moved to Water Department $0.8M Partial savings from Business Services $1.7M; full savings will occur in FY 2018/19
• Unplanned one-time expenditures:
• Prior year payment to Arts Foundation $0.2M • Development and Annexation Agreements which includes Job Incentives $1.9M
4
June 30, 2018 General Fund Projection Total General Fund Projection ($ millions)
subtotal
Budget FY 2017/18 522.8 -522.5 0.3
Q2 Projection 525.7 -523.7 2.0
Variance 2.9 -1.2 1.7
subtotal
10.0 -21.2 -11.2
4.0 -28.9 -24.9
-6.0 -7.7 -13.7
Net Change
-10.9
-22.9
-12.0
Fund Balance Increases/Decreases: (Use)/Increase to Restricted Funding and set aside of remaining proceeds for EPC Use of Assigned Fund Balance Net Change to Unrestricted Fund Balance Total net change to fund balance
-0.5 -10.7 0.3 -10.9
3.4 -24.0 -2.3 -22.9
Description Recurring Revenues Recurring Expenditures
One-Time Revenues One-Time Expenditures
The Q2 one-time expenditures projection includes $15.6M for the PSPRS refunds and Interest payments and proposed wage increase
5
General Fund Expenditures Total General Fund One-Time Expenditures ($ millions) Expenditure Types Budgeted One-Time: Permitting System ERP Upgrade Employee Distributions Route Enhancements Elections Energy Performance Contract Improvements New Vehicles - Fire New Vehicles - Police Prior year payment to Arts Foundation Development & Annexation Agreements Other Special One-time: Public safety pension payment Total General Fund One-Time Expenditures
FY 2016/17 CCF 1.7 1.8 2.6 0.8 0.8 2.1 1.1
18.8 29.7
Q2 Projection
Budget Carryforward to FY 2018/19 1.7
1.8 2.6 0.8 0.8 1.0 2.3 1.1 0.2 1.9 0.9 15.5 28.9
3.0
4.7
6
General Fund Revenues Total General Fund Revenues ($ millions) Recurring Revenues Taxes State Shared Revenues Fines & Forfeitures Charges for Services Other Operating Revenues Transfer In Total Recurring Revenues One-Time Revenues Parks Irrigation Sale of Property Proceeds of Debt (EPC) Total One-Time Revenues
FY 2016/17 263.5 135.8 9.0 41.9 42.3 10.2 502.6
0.5 0.5
Budget FY 2017/18 267.0 141.0 10.5 63.3 38.8 2.1 522.8
3.5 2.5 4.0 10.0
Q2 Projection 274.5 140.2 9.0 60.1 39.7 2.1 525.7
Variance 7.5 -0.8 -1.5 -3.3 0.8 2.9
Percent Change 2.8% -0.6% -13.9% -5.1% 2.1% 0.0% 0.5%
4.0 4.0
The Parks irrigation projects will be managed through the Water operations fund instead of the General Fund. 7
General Fund Expenditures Total General Fund Recurring Expenditures ($ millions) Expenditure Types Department Operations Debt Payments Transfers to Other Funds Total Recurring Expenditures
FY 2016/17 403.0 22.5 47.1 472.6
Budget FY 2017/18 444.2 26.7 51.6 522.5
Q2 Projection 443.1 26.7 53.9 523.7
Variance 1.1 -2.3 -1.2
Percent Change 0.2% 0.0% -4.5% -0.2%
8
Fund Balance/Cash Carryforward ($ millions)
Fund Balance/Cash Availability June 30,
Restricted: Assignment for use: Public Safety pension payment Fire Fighter Recruit Class Financial system software upgrade One-time distribution to employees Permit system software purchase Route Enhancements Bus Shelters Elections Fire/Police Vehicles Imprest Cash Self-Insurance Medical Plan Set Aside Fuel Contingency Account Operating Contingency TARP Settlement Assignment for use subtotal
2015 Actual 45.7
2016 Actual 39.2 1.8
2.7 1.6 0.6
Available Proposed for use in for use in 2017 FY 2018/19 FY 2018/19 Actual 41.5 44.8 18.8 1.8 2.6 1.7 0.8
3.2
1.7
1.1 1.5 2.7 1.7
0.6 0.2 2.1 2.6 8.0 18.4
0.6 0.2 2.1 2.6 5.3 17.8
4.3
8.5
0.8 3.2 0.6 0.2 2.1 2.6 8.0 43.2
Unassigned
15.7
28.3
18.0
16.6
Ending Balance
65.7
76.0
102.7
79.8
0.6
3.7
0.6 0.2 1.0
9
FY 2018/19 Preliminary Forecast: Presented January 2018 FY 17/18 Projected Total Change Per Year as per 5-year Model
$ 2,535,490
Forecast FY 19/20
Forecast FY 18/19 $
5,780,930
$
5,468,840
Forecast FY 20/21 $
Forecast FY 21/22
Forecast FY 22/23
9,792,430
$ 10,956,180
$ 12,924,110
5,980,930 1,100,000 212,780 1,083,290
7,275,130
7,297,110 1,100,000 101,000 1,105,060
Menu of Options: Expenditures: Add 20 Police Officers and Training Fire Fighter Recruit Class (28) TC3 Program Expansion Public Safety Communications Center ERP - Procurement Implementation Total Options Employee Retention: Employee Retention effective April 2018 (2.5%) Employee Retention effective July 2018 (2.0%) Employee Retention effective July 2019 (2.0%) Total Employee Retention
$
-
From Cash Carryforward (TARP & PSPRS Refunds): Fire Fighter Recruit Class Employee Distributions ($1,000 per employee) Total from Cash Carryforward
4,686,950
212,780
212,780 1,072,560 1,500,000 7,472,290
1,500,000 5,106,080
1,526,680
6,106,720 4,426,220
$ 1,526,680
$ 10,532,940
Total change per year Cumulative impact over time
$
3,393,300
$
6,106,720 4,426,220 4,511,420 $ 15,044,360
$
8,377,000
6,106,720 4,426,220 4,511,420 $ 15,044,360
101,000 1,094,120 $
8,470,250
6,106,720 4,426,220 4,511,420 $ 15,044,360
$
9,603,170
6,106,720 4,426,220 4,511,420 $ 15,044,360
$
(9,858,090) $ (17,047,810) $ (13,628,930) $ (12,558,430) $ (11,723,420)
$ 2,535,490
$
(7,322,600) $ (24,370,410) $ (37,999,340) $ (50,557,770) $ (62,281,190)
$
-
$
$
-
$
1,100,000 2,690,000 3,790,000
$ $
2,710,000 2,710,000
$ $ $
2,710,000 2,710,000
$
-
$
-
$
-
$
-
10
FY 2018/19 Preliminary Forecast Updated Description: Total Net Revenue Change as per January, 2018 presentation Recurring Expenditures: Additional Police Officers (20) Police and Community Service Officers Recruiting, Training & Retaining Miscellaneous Changes (e.g. Zoo Utility expense) Wage Increase Net revenue change subtotal One-Time Expenditures: Permitting System ERP Upgrade Fire Recruit Class Employee Distributions IT Required Hardware Adjusted forecast of Net Revenue:
Forecast FY 18/19 $ 5,780,930 (1,302,260) (3,877,270) 883,300 (6,000,000) (4,515,300)
$
(1,483,300) (1,500,000) (1,087,080) (2,700,000) (506,000) (11,791,680)
11
Direction to Staff • Authorize 29-year amortization for the Public Safety Personnel Retirement System (PSPRS). • Authorize a 2.5% salary adjustment for most employees. • Direct me to develop strategies for implementation of the employee retention program. • Authorize proceeding with a police officer retention program
• Direct me to proceed with exploring the consolidation of City Court with Pima County. • Direct me to continue to explore self-funding for our health insurance. • Direct me to explore the alternative revenue models presented: • • • •
Districts Surcharges Differential surcharges Review of all fees
• Direct me to continue with the development of a Capital Improvement Plan along with strategies for funding it. • General Obligation Bonds (GO) • Highway User Revenue Fund (HURF) capital program funding
12
13
$35.0
$30.0
$25.0
Performance 1-3% Market 2% Retention EE Health Benfits 2.5% Pay Adjustment
Performance $12.0M
Increase in Cost measured in Millions
$20.0
1-3% Market $8.1M
1-3% Market $8.1M
2% Retention $6.0M
2% Retention $6.0M
2% Retention $6.0M
EE Health Benfits $2.3M
EE Health Benfits $2.3M
EE Health Benfits $2.3M
2.5% Pay Adjustment $6.0M
2.5% Pay Adjustment $6.0M
2.5% Pay Adjustment $6.0M
FY19
FY20
FY21
$15.0
$10.0
$5.0
$0.0
2.5% Pay Adjustment - $1.4M 4/1/2018
Ongoing Operational efficiencies and other additional revenues.
35.0
30.0
25.0
Increase in Cost measured in Millions
20.0
15.0
10.0
5% Pay Adjustment $12M
5.0
5 % Pay Adjustment $6M 0.0
4/1/2018
FY19
FY20
Staffing Levels 7000 6000
6028
5628
5000
5419
4944
4938
4918
4782
4782
4000
4526
4504
3000 2000 1000 0
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18 17
Turnover History 14%
13%
12% 10% 8%
12% 9%
9% 7%
6%
8%
8%
9%
9% Turnover Rate
4% 2% 0%
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
Police Dept. Turnover by # of Separations 2015 108 2016 155 2017 111 2018 61 YTD 18
Compensation – COLA’s
* 2014
$1.00 per hour for all non-exempt Emergency Communication Workers $ .55 per hour for all other employees (except Emergency Communication Workers) and for exempt commissioned police officers and firefighters (except the rank of Police Lieutenant and Fire Battalion Chief) Step increase for commissioned staff hired before 1-1-11 $ .55 per hour for commissioned staff hired after 1-1-11 and those at the top of their range % increase = to next closest non-exempt rank for Police Lieutenants and Fire Battalion Chiefs
Furlough History: Not Cumulative Employees Reinstated to Full Pay FY 09-10 5 days commissioned
All employees except
FY 10-11
9 days
All employees
FY 11-12
5 days
All employees except Environmental Services
Police and Fire
Compensation – Market Rates • Market
• Comparisons are needed by: • Comparable Cities • Local Market Competition • Regional Market Competition
• Strategy
• Software System/Technology • In house review capability
20
Wage Compression vs. Stagnant Wages • Wage Compression
• Stagnant Wages
• High Level Review Conducted
• Stagnant Wages from 2009-2012
• No indication of compression • Slight variations across departments
• Slight Wage movement 20132014 • Step Scale Limitations
Pay inequities that arise when new employees demand and get wages higher than those being paid to the current employees. • Time in seat; Hourly Wage; Annual Salary
Despite the falling unemployment numbers, wages have stayed at essentially the same level for years.
21
Compensation – Pay for Performance • Merit Pay or Pay for Performance
• Standard method of evaluating employee performance is required • Digital instrument preferred method for monitoring efficiency of overall program
• Strategy • • • •
Software System/Technology On going training Fiscal Year 2018 – scheduled purchase Prepare for Merit Increases by FY 2020 22
Employee Salaries
23
Recent Benefit Enhancements • Tuition Reimbursement Increase • $1500 to $5250 per fiscal year
• Vacation Accrual Increases
• Eliminated 6 month vesting period • Vacation accrual tiers added to provide an incentive and reward structure
• Paid Parental Leave
• 6 continuous weeks of paid leave commencing the day of the birth or adoption of a child
• Earned Paid Sick Time (Proposition 206 – The Fair Wages and Healthy Families Act) • • • •
Employees regardless of classification or employment status are entitled to earn and use Minimum of 40 hours are accrued at 1 hour for every 30 hours of work for all non-perms First 40 hours of all sick leave is designated as Earned Paid Sick Time Not additional hours 24
Health Insurance • Health Insurance for July 1, 2018 • 3.95% rate increase ($2.3M) – • City can absorb cost increase or increase COLA
• Plan Design Modifications • Assumption – City covers premium increase
• Return with Study Session Item to discuss more in depth
Reducing Dependence on Sales Tax Districts • Parks - Community Parks Maintenance Districts
• Created through a petition process (50% of property owners by number and valuation) • Limited in scope (maintenance of not more than 160 acres; not for capital improvements) • Broader taxing district for Parks city-wide would require amending AZ statutes
• Fire • • • • •
Created through Petition process (like annexation - 50% of owners by number and valuation) Requires PC BOS approval to initiate petition process If formed, governed by elected Board Funded by secondary property tax levy Allowing creation by election would require amending AZ statutes 26
Possible Surcharges • Environmental Services POSSIBLE: Surcharge Fee Price Escalator Residential-Individual APC Residential-Shared APC Commercial-Fee per Collection Commercial-Fee per Roll-Off Pull
2019
2020
2021
2022
2023
2024
0%
0%
0%
0%
0%
$2.00
$2.00
$2.00
$2.00
$2.00
$2.00
$1.00
$1.00
$1.00
$1.00
$1.00
$1.00
$1.00
$1.00
$1.00
$1.00
$1.00
$1.00
$5.00
$5.00
$5.00
$5.00
$5.00
$5.00
$3,641,329
$3,673,506
$3,706,019
$3,738,856
PROJECTED REVENUE Projected Total
$3,577,899
$3,609,452
27
Differential Water Rates Background Services by Jurisdiction
• Yes, it is legal • Yes, many peer cities charge a differential rate
Marana South Tucson 4.7% 0.7%
Oro Valley 0.5%
Unincorporated Pima County
28.6%
COT 65.5% 28
Outside Jurisdiction Differential Rates Tucson
Base Rate (typical SFR meter) Inside Outside
Volume (1st tier SFR use) Inside Outside
Inside/Outside Adjuster
$13.53/mo
$1.73/ccf
none
Albuquerque
$9.79/mo
$13.86/mo
$2.02/ccf
Chandler
$9.07/mo
$12.70/mo
$1.60 per 10,000 gal
$1.40 per 100 ccf $2.24 per 10,000 gal
El Paso
$6.63/mo
$7.63/mo
$1.99/ccf
$2.29/ccf
Flagstaff
$15.27/mo
$16.80/mo
Glendale
$10.20/mo
$13.26/mo
$3.98 per 1,000 gal $2.26 per 1,000 gal
$4.38 per 1,000 gal $2.94 per 1,000 gal
Phoenix
$5.50/mo
$8.25/mo
$4.08 flat
$6.12 flat
Scottsdale
$11.90/mo
$13.69/mo
Tempe
$11.50/mo
$14.95/mo
$1.65 per 1,000 gal $1.80 per 1,000 gal
$1.90 per 1,000 gal $2.34 per 1,000 gal
Yuma
$17.47/mo
$23.24/mo
$1.53/ccf
$2.03/ccf
Service Connections (Feb 2018) Total
Outside
242,989
84,866 (34.9%)
+50%
420,062
2,147 (0.51%)
+15%
~91,000
1,427 (1.6%)
26,383
2,713 (10.3%)
n/a +40% +15% +10% +30%
+30% +30%
29
Differential Rates Examples Phoenix: Customers outside the City are charged a higher rate in order to recover the additional cost incurred in providing service to them. Scottsdale: The fully loaded cost of providing service to customers outside the City boundaries could be as much as 49% higher than for inside City customers, therefore a surcharge is substantiated. Yuma: It is a benefit and incentive for customers to be inside the City, or to be annexed. City customers receive a 30% discount on water service compared to County customers.
30
Surcharge based on Bill Amount (10/20/30%) Outside Tucson Rates - Revenue Estimates 2/23/2018
Number of Water Accts Outside Tucson Limits
Projected Revenues
82,050
Estimated Additional Revenues*
Increase Percent
FY 2018 (Baseline)
$
60,596,000
$
FY 2019
$
60,596,000
10%
$
FY 2020
$
60,596,000
FY 2021
$
FY 2022 FY 2023
-
Number of Water Accts in Other Jurisdictions
Projected Revenues
13,795
Estimated Additional Revenues*
Increase Percent
$
-
Est Additional Revenues* County Only (68,255 Accts) $
-
FY 2018 (Baseline)
$
9,462,000
6,059,600
FY 2019
$
9,462,000
10%
$
946,200
20%
$ 12,119,200
FY 2020
$
9,462,000
20%
$
1,892,400
$ 10,226,800
60,596,000
30%
$ 18,178,800
FY 2021
$
9,462,000
30%
$
2,838,600
$ 15,340,200
$
60,596,000
30%
$ 18,178,800
FY 2022
$
9,462,000
30%
$
2,838,600
$ 15,340,200
$
60,596,000
30%
$ 18,178,800
FY 2023
$
9,462,000
30%
$
2,838,600
$ 15,340,200
$
5,113,400
*Estimated revenue increases assumes that both base rates and volumetric rates would be increased by the applicable percentage. 31
City of Tucson Capital Assets • Parks and Recreation • Facilities • Vehicles • Tucson House • Technology • Golf • Equipment • Road Repairs 32
Develop CIP
DRAFT 33
General Obligation Bonding Capacity Based on the 2017/18 Net Assessed Full Cash Assessed Value of $3,403,761,338: 6% Bonding Capacity for General Municipal Purpose Bonds = $201,270,680 20% Bonding Capacity for Water, Sewer, Light, Parks, Open Space, Public Safety, Transportation and Recreational Facility Bonds = $477,527,267 34
Projected Tax Rate/Capacity Analysis City of Tucson, Arizona Projected Tax Rate/Capacity Analysis
$45,000,000
$1.6000 $1.5000 $1.4000 $1.3000 $1.2000 $1.1000 $1.0000 $0.9000 $0.8000 $0.7000 $0.6000 $0.5000 $0.4000 $0.3000 $0.2000 $0.1000 $0.0000
$40,000,000 $35,000,000
$25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000
Outstanding GO Debt Service
Estimated Additional Debt Service
Outstanding GO Debt Rate
2039
2038
2037
2036
2035
2034
2033
2032
2031
2030
2029
2028
2027
2026
2025
2024
2023
2022
2021
2020
2019
$0 2018
Debt Service
$30,000,000
Tax Rate
Example: $225,000,000 November, 2019 Bond Authorization with Fifteen Year Amortization (With 2% Annual Primary Property Tax Growth and Total Tax Rate Capped at $1.47)
Projected Total Tax Rate
35
HURF – Moving to Pay-as-You-Go System Street and Highway User Revenue Bonds Total Debt Outstanding = $64.2M 100%
$$4.7
90%
$4.8
$5.1
$5.7
80%
Millions
70% 60%
$16.9
50%
$16.9 $12.2
40%
$12.1
$11.8
$11.2
30% 20% 10% 0%
$0.0 2017/18
2018/19
2019/20
2020/21
2021/22
2022/23
Fiscal Year Debt Service
Available HURF Pay-As-You-Go
36
Direction to Staff • Authorize 29-year amortization for the Public Safety Personnel Retirement System (PSPRS). • Authorize a 2.5% salary adjustment for most employees. • Direct me to develop strategies for implementation of the employee retention program. • Authorize proceeding with a police officer retention program
• Direct me to proceed with exploring the consolidation of City Court with Pima County • Direct me to continue to explore self-funding for our health insurance. • Direct me to explore the alternative revenue models presented: • • • •
Districts Surcharges Differential surcharges Review of all fees
• Direct me to continue with the development of a Capital Improvement Plan along with strategies for funding it. • General Obligation Bonds (GO) • Highway User Revenue Fund (HURF) capital program funding
37
Budget Calendar FY 2018/19 April 3, 2018
Study Session: Discussion of FY 2018/19 General Fund, Special Revenue and Enterprise Funds
April 17, 2018
Study Session: Submission of the City Manager’s Recommend FY 2018/19 Budget, including the Five-Year Capital Improvement Program
May 8, 2018
Study Session: Discussion of Recommended FY 2018/19 budget Regular Agenda: Public Hearing on the Recommended Budget
May 22, 2018
Regular Agenda: Adoption of a Tentative Budget for FY 2018/19
June 5, 2018
Regular Agenda: Public Hearing on the FY 2018/19 budget as tentatively adopted Truth in Taxation Public Hearing for the primary property tax increase Special Agenda: Final Budget Adoption
June 19, 2018
Regular Agenda: Adoption of FY 2018/19 property tax levies 38
