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Home My WebLink About06-19-17 City Commission Packet Materials - A2. FY18 Budget Work Session - Enterprise Funds Commission Memorandum REPORT TO: Honorable Mayor and City Commission FROM: Anna Rosenberry, Assistant City Manager Dennis Taylor, Interim City Manager SUBJECT: Fiscal Year 2018 (FY18) Budget Work Session Enterprise Funds MEETING DATE: June 19, 2017 AGENDA ITEM TYPE: Action Item – Budget Work Session RECOMMENDATION: Listen to staff presentations, ask questions, give direction, as you see fit. BACKGROUND: Attached are a budget worksheets and other materials regarding a portion of our Enterprise Funds. This information has been prepared to assist us in developing the City’s Final Budget, and is based on what is contained in the FY18 City Manager’s Recommended Budget, available at http://www.bozeman.net/government/finance/budget-and-financial-reports Based on feedback during this work session, and other work sessions held this spring, we intend to prepare the Final Budget resolution. The hearing for adoption of the Final Budget is scheduled for June 26, 2017. ENTERPRISE FUNDS: Enterprise Funds are financed by user charges, penalties, and interest income; they operate on a self-supporting basis. During this Work Session, we will cover the following Enterprise Fund information in this order: 1. Water Fund 2. Wastewater Fund 3. Storm Water Fund 4. Solid Waste Fund 5. Parking Fund 110 FISCAL EFFECTS: Although the Final Budget adoption has far-reaching fiscal effects, there are no immediate fiscal effects as a result of this work session. The funds discussed tonight have proposed budgets with changes in rates and fees that will affect all property owners and system users. The Worksheets outline these effects in detail. As presented, the City Manager’s Recommended Budget is projected to have the following effects on the typical City resident, with areas affected by tonight’s Enterprise Funds highlighted in yellow. Typical Resident: Annual Increase Recommended Budget Street Maintenance Assessments $ 28.78 Arterial Street Assessment $ 27.57 Forestry Assessment $ 2.93 Property Taxes $ - Water Services $ 10.12 Sewer Services $ 11.90 Storm Water Services $ - Annual Increase $ 81.30 Monthly Increase $6.78 Attachments: FY18 Enterprise Fund Budget Worksheets On File: City Manager’s Recommended Budget for FY18 Report compiled on: June 12, 2017 111 Water Fund - FY18 Budget Worksheet The Water Plant, Water Operations Divisions and Public Works Administration cost center are paid for by the Water Fund. Public Works Administration information begins on page 147 of the City Manager’s (CM) Recommended Budget. Water Treatment Plant information begins on page 159 of the CM Recommended Budget document. Water Operations information begins on page 163 of the CM Recommended Budget document. Water Fund – FY18 Expenditure Total $11.9 Million The Water Fund is an enterprise fund that supports the operations of water treatment and distribution, as well as the administration of Public Works. It is a self-funded utility; the primary source of revenue is from water customer payments. The proposed budget for FY18 is as follows: Water Fund FY18 Personnel & Benefits $3,079,228 Operating $4,766,817 Capital $2,808,400 Debt Service $1,313,010 Total Expenditures $11,967,455 Personnel & Benefits 26% Operating 40% Capital 23% Debt Service 11% Water Fund Expenditures 112 Personnel: The FY18 City Manager Recommended budget proposes adding: 1.0 FTE Water Treatment Plant Operator Capital Projects: Water Fund Capital Projects total $2,808,400 Water Fund – FY18 Revenues Total $12 Million The CM Recommended Budget is based a 2.0% increase in water rates for FY18. Water utility charges are the main source of revenue, with minor amounts collected from interest income, misc. revenue sources and rents. Beginning in FY15, the Public Works Administration costs are recouped through internal billings to other City departments. a. Public Works Reimbursements from other departments: $1,486,808 GIS FY18 GIS11:COMPUTER REPLACEMENTS 26,400.00$ GIS FY18 GIS04:AERIAL PHOTOGRAPHY 85,000.00$ GIS FY18 GIS05:LIDAR 75,000.00$ GIS FY18 GIS06:GPS SYSTEM REPLACEMENT 17,500.00$ WATER PLANT FY18 W81:COMM TOWER AT THE SOURDOUGH RESERVOIR 25,000.00$ WATER PLANT FY18 W58:MODULE REPLACEMENT 50,000.00$ WATER PLANT FY18 W77:CONTROL SERVER REPLACEMENT 25,000.00$ WATER CONSERVATION FY18 WC02:METER SOFTWARE SUBSCRIPTION 60,000.00$ WATER OPERATIONS FLOW METER 80,000.00$ WATER OPERATIONS FY18 W66:METERS, TRANSDUCERS, COMMUNICATIONS 10,000.00$ WATER OPERATIONS FY18 W59:REPLACE #1422-1992 TOYOTA PICKUP 30,000.00$ WATER OPERATIONS FY18 W51:REPLACE #2529-1997 1 TON CHEVY PICKUP 45,000.00$ WATER CONSTRUCTION FY18 W03:ENGINEERING/DESIGN FOR ANNUAL WATER PIPE WATER CONSTRUCTION REPLACEMENT PROGRAM 22,500.00$ WATER CONSTRUCTION FY18 W04-18:WATER PIPE REPLACEMENT PROGRAM-CONST 1,200,000.00$ WATER CONSTRUCTION FY18 W74:PEAR ST BOOSTER STATION UPGRADE 547,000.00$ WATER CONSTRUCTION FY18 W75:LEAD SERVICE LINE REPLACEMENT 200,000.00$ WATER CONSTRUCTION FY18 WIF39:SOURDOUGH TRANSMISSION MAIN PH 1 310,000.00$ Water Fund, 32.0% Wastewater Fund, 27.8% Solid Waste Fund, 16.7% Street Maintenance, 17.8% Vehicle Maintenance, 4.2% Stormwater , 1.6% PUBLIC WORKS ADMINISTRATIVE COST ALLOCATION 113 The total cost to be allocated to various departments includes all expenses of Public Works Administration, Engineering and GIS. Costs are allocated based on each department’s percent of total operating expenditures for the departments from our most-recently audited financial report. b. Water sales With June still unaccounted for, we are trending ahead of our estimate for FY17, due to higher water sales in July thru October 2016. Annually, the months of July through October reflect the weather-related water sales changes. In wet years, we will see flat or declining sales; in dry years we will see expanded sales. The chart below shows water sales for those months during the past 5 years. During FY14 and FY15, there were no rate increases for metered water; for FY16 & FY17 there was a 2.5% rate increase. None the less, these four months comprised more than 50% of our metered water sales revenue for FY17; up from 48% in FY16. c. Water Impact Fees are accounted for in a separate fund for budgeting purposes. Our budget estimate for FY18 was established during our capital planning processes last fall and is based on the 5-year average for collections (FY12-16). Year-to-Date revenues have outstripped that 5-year average estimate for FY17. $868,188 $775,816 $713,561 $952,301 $921,116 $1,044,056 $968,636 $1,006,420 $961,348 $1,103,815 $1,014,466 $961,084 $820,027 $1,028,548 $1,106,909 $657,635 $716,947 $586,266 $650,661 $764,305 FY13 FY14 FY15 FY16 FY17 Metered Water Sales July August September October Water Revenues FY13 FY14 FY15 FY16 FY17 Metered Water Sales 6,704,914$ 7,069,422$ 6,442,037$ 7,528,313$ 7,471,000$ July 868,188$ 775,816$ 713,561$ 952,301$ 921,116$ August 1,044,056$ 968,636$ 1,006,420$ 961,348$ 1,103,815$ September 1,014,466$ 961,084$ 820,027$ 1,028,548$ 1,106,909$ October 657,635$ 716,947$ 586,266$ 650,661$ 764,305$ 3,584,345$ 3,422,483$ 3,126,274$ 3,592,858$ 3,896,145$ 53%48%49%48%52% 114 Capital Projects for the Water Impact Fee fund are: FY18 WIF31:GROUNDWATER TEST WELL $ 400,000.00 FY18 WIF39:SOURDOUGH TRANSMISSION MAIN PH 1 $ 2,790,000.00 d. Purchase of Water Rights have been included in our rate models, with $200,000 per year in utility money to purchase water rights. This recent policy change is meant to be in addition to the current “Cash in Lieu of Water Rights” program related to annexations and development projects. This money is spent sporadically, as opportunities to purchase water rights are encountered. Water Impact Fee Revenues (includes interest)FY16 FY17 YTD FY18 CM Rec Budgeted Revenues 1,344,000$ 1,475,000$ 1,798,400$ Actual Revenues 2,268,000$ 1,773,000$ Fees Collected Over Our Estimates 924,000$ 298,000$ $2,268,000 $1,773,000 $1,344,000 $1,475,000 $1,798,400 FY16 FY17 YTD FY18 CM Rec Water Impact Fees Budgeted Revenues Actual Revenues 115 Wastewater Fund – FY18 Budget Worksheet Both the Water Reclamation Facility (WRF) and the Wastewater Operations Divisions are paid for by the Wastewater Fund. Wastewater Operations information begins on page 167 of the City Manager’s Recommended Budget document. Water Reclamation Facility information begins on page 170 of the City Manager’s Recommended Budget document. Wastewater Fund - FY18 Expenditure Total $9.2 Million The Wastewater Fund is an enterprise fund that supports the operations of wastewater treatment and distribution. It is a self-funded utility; the primary source of revenue is from wastewater customer payments. The proposed expenditure budget for FY18 is as follows: Wastewater Fund FY18 Personnel & Benefits $2,143,921 Operating $3,803,613 Capital $1,562,500 Debt Service $1,704,247 Total Expenditures $9,214,281 Personnel: The FY18 budget does not propose adding positions. Personnel & Benefits 23% Operating 41% Capital 17% Debt Service 19% Wastewater Fund Expenditures 116 Capital Projects: Wastewater Fund - FY18 Revenues Total $8.9 Million The CM Recommended Budget includes a 2% rate increase for all customer classes. Unlike water rates, wastewater rates do NOT see the fluctuation related to summer weather watering or other seasonal issues. a. Wastewater utility charges are the main source of revenue, with minor amounts collected from interest income, and refunds/reimbursements. b. Wastewater Impact Fees are accounted for in a separate fund for accounting purposes. However, unlike Water Impact Fee collections, Wastewater Impact Fee collections have not been exceeding budget estimates. WASTEWATER OPERATIONS FY18-WW07 ENGINEERING PROJECT DESIGN 22,500.00$ WASTEWATER OPERATIONS FY17-WW08-18 WASTEWATER PIPE REPLACEMENT 1,000,000.00$ WATER RECLAMATION FACILITY FY18 WW39:SANDLAST & PAINT OLD CLARIFIER 90,000.00$ WATER RECLAMATION FACILITY FY18 WW45:FINAL&SECONDARY CLARIFIER LAUNDER CVR 200,000.00$ WATER RECLAMATION FACILITY FY18 WW66:ODOR CONTROL FOR OLD PRETREATMENT BLDG 40,000.00$ WATER RECLAMATION FACILITY FY18 WW81:MEMBRANE ROOF REPLACEMENT 60,000.00$ WATER RECLAMATION FACILITY FY18 WW53:POSITIVE DISPLACEMENT LOBE PUMPS 50,000.00$ WATER RECLAMATION FACILITY WW45 & WW43 CLARIFIER COVERS COMPLETION (FY15/16)100,000.00$ Wastewater Revenues FY16 FY17 Estimate FY18 CM Rec Metered Sewer Charges - Budget 7,570,500.00$ 8,079,901.00$ 8,749,027.00$ Metered Sewer Charges - Actual 7,890,347.00$ 8,336,000.00$ Difference in dollars 319,847 256,099 Difference as a % of Budgeted Amount 4.2%3.2% Wastewater Impact Fee Revenues (includes interest)FY16 FY17 Estimate FY18 CM Rec Budgeted Revenues - Fees 1,065,500.00$ 1,103,550$ 1,221,150$ Actual Revenues 1,034,195.00$ 1,077,000$ Fees Collected Over Our Estimates (31,305)$ (26,550)$ $1,034,195.00 $1,077,000 $1,065,500.00 $1,103,550 $1,221,150 FY16 FY17 Estimate FY18 CM Rec Wastewater Impact Fees Budgeted Revenues - Fees Actual Revenues 117 Capital Projects: WASTEWATER IMPACT FEE FY18 WWIF27:S UNIVERS DISTRICT/CATTAIL CRK BASIN 795,000.00$ WASTEWATER IMPACT FEE FY18 WWIF31:DAVIS LIFT STATION ETC 645,000.00$ 118 Storm Water Fund – FY18 Budget Worksheet This is the City’s newest self-funded utility, created in FY13. Storm Water program information begins on page 156 of the CM Recommended Budget document. Stormwater Fund - FY18 Expenditure Total $1.5 Million Stormwater Fund FY18 Personnel & Benefits $451,548 Operating $161,466 Capital $650,000 Debt Service $225,346 Total Expenditures $1,488,360 Personnel: We recommend adding 1.0 FTE Stormwater Specialist to assist with program tasks, including the increased sampling required by the City’s new stormwater permit. Capital: Stormwater Utility Fund Capital Projects Include: Stormwater Fund - FY18 Revenues Total $1.4 Million The Stormwater department is funded primarily through Stormwater utility charges. These monthly charges are based on the impervious area of a lot, which does not fluctuate seasonally or change much from year-to-year unless there is new annexations and Personnel & Benefits 30% Operating 11%Capital 44% Debt Service 15% Stormwater Fund Expenditures FY18 STRM04:ANNUAL PIPE REHAB & DRAINAGE DESIGN 25,000.00$ FY18 STRM10:ANNUAL SYSTEM ENHANCEMENT DESIGN 25,000.00$ FY18 STRM13:ANNUAL PIPE REHAB & DRAINAGE CONST 105,000.00$ FY18 STRM42:SYSTEM ENHANCEMENT PRG:MASON & TRACY 25,000.00$ FY18 STRM44:SYSTEM ENHANCEMENT PRG:MAIN & WILLSN 75,000.00$ FY18 STRM45:SYSTEM ENHANCEMENT PRG:MAIN & 3RD 75,000.00$ FY18 STRM46:SYSTEM ENHANCEMENT PRG:MAIN & GRAND 75,000.00$ FY18 STRM47:SYSTEM ENHANCEMENT PROG:MAIN & TRACY 75,000.00$ FY18 STRM48:ANNUAL PED RAMP REPLACEMENT PROGRAM 100,000.00$ FY18 STRM43:DIGITAL UNIVERSAL CAMERA-DUC 70,000.00$ 119 developments. FY18 will mark the second full fiscal year with new rate model in place. We are recommending no rate increase this year. The fund also receives a transfer of General Fund dollars $140,000 to make the payment on the Landfill Remediation system loan (a requirement of the State Revolving Fund loan program.) Stormwater Revenues FY16 FY17 Estimate FY18 CM Rec Service Charges - Budget 825,000$ 1,309,700$ 1,296,753$ Service Charges - Actual 949,000$ 1,297,732$ Difference in dollars 124,000 (11,968) Difference as a % of Budgeted Amount 15.0%-0.9% 120 Solid Waste Fund – FY18 Budget Worksheet The Solid Waste Fund accounts for our garbage collection and recycling divisions. Solid Waste Collection & Recycling information begins on page 174 of the CM Recommended Budget Document. Solid Waste Fund - FY18 Expenditures Total $3.7 Million Solid Waste FY18 Personnel & Benefits $ 1,197,422 Operating $ 2,114,835 Capital $ 430,000 Total Expenditures $ 3,742,257 Personnel: The budget includes the addition of a City Service Worker (1.00 FTE) – Solid Waste to keep up with customer account growth for garbage services. Capital: The following Capital items are included in the FY18 City Manager Recommended Budget: FY18 SW42: STORAGE BUILDING $ 130,000.00 FY18 SW49:#3452 SIDE LOAD TRUCK REPLACEMENT $ 300,000.00 Personnel & Benefits 32% Operating 57% Capital 11% Solid Waste Fund Expenditures 121 Solid Waste Fund - FY18 Revenues Total $3.8 Million The FY18 Recommended Budget is developed with a 2% rate increase for Solid Waste services. This increase was adopted last year for both FY17 & FY18, to address general inflationary increases for personnel, operating expenses and equipment. Solid Waste FY18 Recycling Revenue $ 396,150 Collection Route Assessments $ 3,391,291 Interest Income $ 6,752 Roll-off Container Rentals $ 8,000 Miscellaneous Revenue $ 16,209 Total Revenues $ 3,818,402 Recycling Revenue $396,150 10% Collection Route Fees $3,391,291 89% Interest Income $6,752 0% Container Rentals $8,000 0%Misc Revenue $16,209 1% Solid Waste FY18 122 Parking Fund – FY18 Budget Worksheet The Parking Enterprise Fund is managed by the city’s Parking Commission. Their budget is developed with the help of the Parking Manger and approved by the City Commission. The Parking budget discussion begins on page 144 of the CM Recommended Budget Document. Parking Fund - FY18 Expenditures Total $968,230 Personnel: No additional staff are proposed. The addition of an intern/short-term worker is included. Capital: The following capital projects are planned for FY18. FY18:CIP P022:PARKING GARAGE & CITATION EQUIPMENT $ 250,000.00 FY18:CIP P020 LEASE 3 HYBRID ENFORCEMENT VEHICLES $ 10,000.00 Parking Fund - FY18 Revenues Total $982.500 The Parking Fund’s largest source of revenue is also the most unpredictable source: Fines & Forfeitures. These are the revenues derived from parking tickets issued to those that violate parking regulations. The second largest segment of revenue normally comes from the sale of Licenses and Permits at the parking garage and on the city-owned surface lots downtown. This year, the Downtown TIF is proposing to transfer $250,000 to the Parking Fund for capital projects Parking Fund FY18 Personnel & Benefits $342,633 Operating 365,597 Capital 260,000 Total Expenditures $968,230 123 Deficit Budgets in the Future – a Significant Concern: The Parking Commission and staff have been working to find ways to ensure that Parking Revenues can support all of the necessary costs of operations and capital for the parking function. Last year, we outlined issues with future deficit budgets related to revenues not covering operating costs. With improvements in fine revenues and permit revenues, the financial picture is looking better. For the coming year, revenues from permits and fines are estimated to be cover operations and capital costs. The Parking Commission and staff have made significant policy changes in the past year that have improved revenue to the Parking Fund. With small annual adjustments in rates planned, strong fine revenue and sale of parking garage permits, and continued support from the Downtown TIF for funding of capital, the Parking Fund is not projected to have a deficit balance. Continued improvement in the revenue structure will need to be made before the Parking Fund can support its own capital costs and the annual escalation in operating costs that is likely to occur. Parking Fund - 5 Year Budget Projection FY18 Budget Preparation Estimated Projected Projected Projected Projected Projected FY17 FY18 FY19 FY20 FY21 FY22 Beginning Fund Balance Not Restricted - Projected 261,542 367,747 382,107 286,406 244,750 105,263 Estimated Revenues: Downtown Permits 27,000 25,000 25,500 26,010 26,530 27,061 Garage - Permits 327,560 250,000 255,000 260,100 265,302 270,608 Garage - Transient 72,975 75,500 77,010 78,550 80,121 81,724 Garage - Validation 5,000 3,000 3,060 3,121 3,184 3,247 Permits - Residents 14,000 13,000 13,260 13,525 13,796 14,072 Permits - Employees 2,100 2,000 2,040 2,081 2,122 2,165 Permits - Visitors 10,700 10,500 10,710 10,924 11,143 11,366 Infraction - Admin Fees 54,500 42,000 42,840 43,697 44,571 45,462 Collection Fees 6,000 6,000 6,120 6,242 6,367 6,495 Boot Fees 2,500 2,000 2,040 2,081 2,122 2,165 Fines 267,000 300,000 306,000 312,120 318,362 324,730 Other Revenues 165,000 253,590 300,000 280,000 170,000 45,000 Total Estimated Revenues:956,335 982,590 1,043,580 1,038,452 943,621 834,093 Proposed Expenditures: Personnel 316,033 342,633 354,625 367,037 379,883 393,179 Operating 359,097 365,597 383,877 403,071 423,224 444,385 CIP 175,000 260,000 400,779 310,000 280,000 45,000 Total Proposed Expenditures:850,130 968,230 1,139,281 1,080,108 1,083,108 882,565 Ending Fund Balance - Projected 367,747 382,107 286,406 244,750 105,263 56,791 Operating Reserve - 45 day 83,235$ 87,316$ 91,048$ 94,945$ 99,013$ 103,261$ Capital Reserve - 5 year cash flow 259,000$ 259,000$ 259,000$ 259,000$ 259,000$ 259,000$ Total Recommended Reserve:342,235$ 346,316$ 350,048$ 353,945$ 358,013$ 362,261$ Reserve Deficiency 25,512 35,791 (63,642) (109,195) (252,750) (305,470) 124 The chart below shows our worst-case scenario for ending cash in the Parking Fund, as of this time last year. The next chart shows our updated projections of ending cash in the Parking Fund, with the impacts of the new revenue policies, including changes in fine revenues and permit amounts. While ending cash is projected to decline, the fund’s ending balance no longer enters a negative cash position in the updated projections. - 50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000 FY17 FY18 FY19 FY20 FY21 FY22 Ending Cash Balance -FY18 125