Memorandum

City of Lawrence

City Manager’s Office

 

TO:

Diane Stoddard, Interim City Manager

CC:

Brandon McGuire, Assistant to the City Manager

FROM:

Casey Toomay, Assistant City Manager

DATE:

June 22, 2015

RE:

2016 General Fund Baseline Budget

 

As shown on the attached summary of the General Operating Fund, the cost of existing staffing and service levels in 2016 is expected to exceed projected revenues.  This baseline does not include any additional positions and most of the equipment and vehicle replacement needs will be made from the City’s reserve funds. 

 

As we continue budget discussions, it may be necessary to consider additional resources in order to provide funding for these important priorities or any other priorities (non-motorized transportation, mental health, affordable housing, etc.) identified by the City Commission.

 

Expenditures  

As shown on the table below, the 2016 baseline expenditure budget in the General Fund is $3,549,321, or 4.7%, more than the 2015.  More than half of this increase is in the Personal Services category.  Another larger portion of the increase can be attributed to transfers, which includes the transfer of sale tax proceeds.  Sales taxes are all deposited in the General Operating Fund before being transferred to other City funds.  In 2016, sales tax revenues are projected to grow 3% over 2015 projected revenues.

  

Category

2015
Budget

2016
Baseline
Budget

+/-

%
change

Personal Services

 $44,690,765

 $46,600,664

 $1,909,899

4.3%

Contractual Services

11,595,130

12,203,889

608,759

5.3%

Commodities

4,455,613

4,723,423

267,810

6.0%

Capital Outlay

 831,800

791,800

 (40,000)

-4.8%

Transfers

14,152,910

14,955,763

 802,853

5.7%

Contingency

  45,000

45,000

   -  

Total

 $75,771,218

 $79,320,539

 $3,549,321

4.7%

 

 

The attached spreadsheet shows the General Fund line items in order of largest increases over the 2015 budget.  Additional information on the most significant of these increases is provided below. 

 

Personal Services. This is the largest expense category in the General Operating Fund.  Items that are expected to increase more than $10,000 for 2016 include:

·         Regular Salaries and Holiday Pay.  The baseline budget includes an increase of $1,005,625, or 3.2%, over 2015 for employee compensation.  While compensation remains subject to change related to employer-employee negotiations, the baseline budget includes an amount of funding to address the following compensation related items:

o   the existing step pay plans for both MOU groups;

o   a 2% merit pool for non-MOU employees; and

o   adjustments to all three pay plans related to the market, including compression in public safety departments.  Included in this amount is a place holder for additional compensation for MOU groups subject to ongoing employer-employee negotiations.

·         Overtime.  Increased need for overtime in the Investigations division of the Police Department, as well as salary increases and increased benefit costs, continue to impact overtime.  The 2016 budget includes an increase of $288,850, or 15.6%, over the 2015 budget.

·         Employee Healthcare Contributions.  Each year, the City contributes an amount per FTE into a reserve fund from which the City, which is self-insured, pays healthcare claims for employees and retirees.  The healthcare committee recommends a 4% increase in the City’s overall contribution to the Healthcare fund.  The impact on the General Fund is an increase of $179,465.

·         Employee Pension Contributions.  Increased salaries and overtime mean the City’s contribution to the Kansas Police and Fire Retirement System (KP&F) paid from the General Fund is projected to increase $175,630, or 3.8%, over the amount budgeted for 2015.  The City’s contribution to the employees covered under the Kansas Public Employees Retirement System (KPERS) paid from the General Fund is projected to increase $80,160 or 6.9%, over the amount budgeted for 2015.  Any additional compensation adjustments will result in additional increases in these amounts. 

·         Part Time Salaries. Shifting work from a full-time position to two part-time positions in the HR division, as well as an increase in the Fire Medical department to reflect 2014 actuals for extra-board firefighters result in an increase of 25.3%, or $108,300, for 2016.

·         Longevity.  This program awards employees for their tenure with the City.  The payment remains at the discretion of the City Commission, however, it is included in the baseline budget.  Additional employees eligible for the program and associated benefits along with suggested expansion to include regular part-time employees mean an increase of $68,270, or 20%, over the 2015 budget. 

 

Non-Personnel Related Expenses.  Items not related to salaries and benefits that are projected to increase by more than $10,000 include:

·         Transfer to Infrastructure Reserve Fund.  The 2016 budget includes an increase of $1,289,262 over 2015.  Most of this increase is due to the fact that in 2015, $900,000 of 0.3% infrastructure sales tax was transferred to the City’s Equipment Reserve Fund to be used toward the purchase of SCBA equipment for the Fire Medical Department.  In 2016, those funds will be transferred to the Infrastructure Reserve fund.  The 2016 budget also assumes an increase due to the projected increase in revenue from sales tax. 

·         Transfer to Transit.  This increase of $272,008, or 7.0%, represents the increase projected in the 0.2% transit sales tax for 2016.  Proceeds from sales tax are deposited in the General Fund before being transferred out to, in this instance, the Transit Fund.

·         Utilities / Electricity.  This 9.6%, or $171,203, increase is in response to rate increases from Westar.

·         Transfer to Recreation Fund. A portion of the proceeds from the City’s share of the County-wide sales tax are transferred the Recreation Fund for operations.  An increase in the transfer was anticipated to support operations of Sports Pavilion Lawrence.  The increase is $89,206, or 3.8%, over the 2015 budget. 

·         Construction Materials/ Salt.  Implementation of the pre-treatment and brine systems for ice and snow removal has increased the salt required to treat city streets.  The 2016 budget includes an increase of $86,000 for salt. 

·         Construction Materials/ Street Maintenance Program.  The 2016 budget includes an increase of 4.6%, or 79,846, for the City’s street maintenance program due to increased material costs. 

·         Professional Services / Other.  The 2016 budget includes an increase of $65,015 over the 2015 budget for professional studies in Planning and Development Services and the Metropolitan Planning Organization (MPO.)  This category also includes increased cost of emergency room services for people taken to the ER by patrol. 

·         Communications/ Telephone.  The 2016 budget includes an increase of $58,690 in order to bring the budget more in line with 2014 actual costs for telephone services including internet access, leased communication lines, trunk lines, cell phones, teleconferencing, etc. 

·         Educational/ Conferences and Seminars.  This increase of $46,695 is largely due to an increase in training funds for the Police Department.  Slight increases in funding for training in Municipal Court and Planning are also included.   

·         Repair & Maintenance / Building Repairs.  The 2016 budget includes an increase of $42,664 over the 2015 budget in order to increase funding available for building repairs for each fire medical facility from $5,000 to $10,000 annually. 

·         Insurance/ Property.  The City maintains property insurance on City facilities.  Premiums are expected to increase in 2016 by 18.5%, or $30,000. 

·         Insurance/ WC Reinsurance.  The cost of the City’s worker’s compensation reinsurance is projected to increase 29.5%, or $20,957, over the 2015 budget. 

·         Insurance/ Police Professional.  The cost of the insurance the City maintains for police professional is projected to increase $20,180 or 28.4% over the 2015 budget.

·         Educational / Paramedic Education.  The 2016 Budget includes an increase of $20,000 to provide additional paramedic education training.   

·         Supplies / Ammunition.  The 2016 budget includes an increase of $20,000, or 33.3%, to bring in more in line with the actual cost for ammunition used for training in recent years. 

·         Repair & Maintenance/ Motor Vehicle Repairs.  This increase of $19,492, or 1.8%, is due to increased costs for vehicles in Public Works resulting from deferred replacement.   

·         Other / Other Contractual Services.  The increase of $18,200, or 7.6%, includes increased funding for the City’s share of the City/County Sustainability Coordinator, Innoprise fees for the Community Development module, and increased cost of contracted cleaning of park and recreation facility restroom and shelter cleaning.

·         Other/ Mowing.  This increase of $17,000, or 11%, is to account for adding right–of-way mowing at VenturePark and 31st Street to the City’s contract for mowing.

·         Insurance/Public Officials.  The cost of liability insurance for public officials provided by the City is increasing $14,818, or 22.5%, for 2016. 

·         Operating Supplies/ Trees, Seeds, Plants.  The cost of trees is up 30%, resulting in an increase in the 2016 budget of $22.5%, or $14,500, over the 2015 budget.

·         Supplies/ Maintenance Supplies.  The 2016 budget includes an increase of $14,050 to bring this line item more in line with actual spending in 2014. 

·         Supplies/ Software.  An increase of 6.7%, or $13,850, to fund the annual fees for Lawrence Listens and other social media management software for the entire organization. 

·         Supplies/ Tools.  An increase of $11,979 is included to bring this line item more in line with actual spending for fire suppression tools. 

·         Operating Supplies/ Protective Equipment.  An increase of $10,650, or 19.3%, is included in the 2016 budget for replacement of ballistic vests for police officers. 

·         Other/ Tree Removal.  The cost of contracted services for tree removal is increasing $10,000, or 25%, over the 2015 budget. 

 

Revenues

The projected revenues for 2016 are shown below.  While these numbers remain subject to change, currently assessed valuation is projected to grow 2.0%.  Sales tax revenue is projected to increase 3% over our 2015 projected receipts.  Overall, revenues are projected to be 4.7% more than the 2015 budget.     

 

Revenues

Budget
2014

Actual
2014

Budget
2015

Projected
2015

Projected
2016

Property Taxes

$16,655,568

$17,080,266

$18,144,964

$18,479,165

$18,848,748

Franchise Fees

7,087,000

7,645,920

7,325,000

7,800,486

7,956,496

Sales/ Use Taxes

1% city sales tax

15,397,100

15,893,674

15,891,468

16,688,357

17,189,008

0.3% infrastructure

4,619,150

4,768,102

4,767,440

5,006,507

5,156,702

0.2% transit

3,079,450

3,178,735

3,178,294

3,337,671

3,437,802

0.05% transit expanded

769,850

794,684

794,573

834,418

859,450

1% county sales tax

9,690,550

10,155,857

9,988,784

10,663,650

10,983,559

subtotal

    33,556,100

    34,791,051

    34,620,559

    36,530,604

    37,626,522

Intergovernmental Revenue

916,200

818,646

828,000

749,061

749,061

Licenses & Permits

1,384,800

974,690

1,506,500

1,044,819

1,044,819

Fines

2,994,000

3,177,454

3,170,000

2,986,807

2,986,807

Service Charges

753,300

461,222

691,526

502,732

502,732

Interest

160,000

98,659

75,000

99,646

100,642

Miscellaneous Revenue

4,842,300

4,948,486

4,939,951

4,939,951

5,038,750

Transfers

3,656,751

3,656,141

3,656,751

3,656,751

3,656,751

Total

$72,006,019

$73,652,535

$74,958,251

$76,790,022

$78,511,328

 

Despite healthy revenue growth, our 2016 baseline expenditures exceed projected 2016 revenues by $809,210.  However, the table below shows that while the 2014 budget was adopted with a deficit of $1.7 million, actual revenues in 2014 exceeded actual expenditures by $153,501.  The 2015 budget was adopted with a deficit of $812,967 and we are currently projecting ending the year with revenues exceeding expenditures by approximately $1 million. 

 

General Operating Fund

Budget
2014

Actual
2014

Budget
2015

Projected
2015

Projected
2016

Revenues

     $72,006,019

  $73,652,535

 $74,958,251

   $76,790,022

 $78,511,328

Expenditures

     73,784,125

  73,499,034

 75,771,218

  75,771,218

79,320,538

Difference

($1,778,106)

   $153,501

($812,967)

$1,018,804

($809,210)

 

Assuming no major changes to revenue projections are required, we should be able to manage our expenditures to revenues and fund the baseline budget for 2016 without the need for a property tax increase. 

 

Additional Needs and Requests For Consideration   

There are a number of items that are not included in the 2016 baseline budget.  If the City Commission wishes to fund these requests, it would be necessary to consider additional resources. 

 

Additional Staffing.  The attached memo outlines City department requests for additional staffing.  None of the positions identified in the memo to be funded in the General Operating Fund have been included in this baseline budget. 

 

Equipment.  Most of the equipment and vehicle replacement needs in the General Operating Fund have been funded from the City’s reserve funds rather than the operating budget.  While this is a short term solution for these departments, it is not a sustainable solution.  Additional resources are needed in the General Operating Fund to adequately fund equipment and vehicle replacement needs.

 

Outside Agency Requests.  The baseline budget does not include any of the increases requested by outside agencies for 2016.  Funding for these requests will require additional resources. 

 

Conclusion

While the baseline budget for 2016 expenditures exceeded projected revenues for 2016, it is possible to fund existing programs and staffing levels without the need for a property tax increase.  Additional resources may be needed in order to provide funding for increased employee compensation beyond what is included in the baseline budget, additional staffing, a long-term plan for increased equipment replacement needs, or funding for outside agencies. 

 

Staff looks forward to additional discussion on these items throughout the budget process.  Depending on Commission direction, some may be included in the Interim City Manager’s Recommended Budget.