Memorandum
City of Lawrence
City Manager’s Office
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TO: |
David L. Corliss, City Manager |
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CC: |
Diane Stoddard, Assistant City Manager Cynthia Wagner, Assistant City Manager |
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FROM: |
Casey Toomay, Budget Manager |
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DATE: |
6/12/14 – Updated 06/16/14 |
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RE: |
2015 General Fund Baseline Budget |
As shown on the attached summary of the General Operating Fund, the cost of existing staffing and service levels in 2015 is expected to exceed projected revenues. A mill levy increase of a minimum of 1.5 mills appears necessary in order to maintain existing services without spending down fund balance in 2015. Staff has also prepared a draft 2015 baseline budget which does not include a mill levy increase, this shows a deficit of over $ 2 million and a fund balance below our desired guideline of between 15% and 30% of budgeted expenditures. Additional expenditure and revenue information is provided below.
Expenditures
As shown on the table below, Personal Services (expenditures related to salaries and benefits) are the largest expense category in the General Operating Fund. The table also shows, the 2015 baseline budget for this expense category is $1,452,400, or 3.4%, more for 2015 than it was in the 2014 Budget. The increase in non-personnel related expense categories in the baseline budget for 2015 is $571,252, or 1.9%.
|
Category |
2014 Budget |
2015 |
+/- |
% change |
|
Personal Services |
$43,223,173 |
$44,675,573 |
$1,452,400 |
3.4% |
|
Contractual Services |
$11,124,108 |
$11,455,130 |
$331,022 |
3.0% |
|
Commodities |
$4,447,145 |
$4,503,363 |
$56,219 |
1.3% |
|
Capital Outlay |
$1,001,200 |
$995,800 |
($5,400) |
-0.5% |
|
Transfers |
$13,963,499 |
$14,152,910 |
$189,411 |
1.4% |
|
Contingency |
$25,000 |
$25,000 |
$0 |
0.0% |
|
Total |
$73,784,125 |
$75,807,776 |
$2,023,651 |
2.7% |
The attached spreadsheet shows the General Fund line items in order of largest increases over 2014 budget. Additional information on the most significant of these increases is provided below.
Personal Services. Items in this category that are expected to increase more than $10,000 for 2015 include:
· Regular Salaries and Holiday Pay. Compensation programs required under the terms of the Memoranda of Understanding (MOU) as well as a merit pool for non-MOU covered employees result in an increase of $520,613 over 2014 budget. This amount includes a 1% general wage adjustment for Fire Medical MOU-covered employees which remains subject to change related to ongoing employer-employee negotiations. Also included are the Director of Arts and Culture that was approved by the City Commission in 2014 and an additional public works inspector previously lost to attrition.
· Employee Pension Contributions. The City’s contribution to the Kansas Police and Fire Retirement System (KP&F) paid from the General Fund is projected to increase $373,451, or 9.3%, over the amount budgeted for 2014. 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 $153,783 or 16.5%, over the amount budgeted for 2014.
· 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. In an effort to better align the funding source with the expense of retiree healthcare costs, the allocation method has been changed. The result is an increase of $159,165 in the General Operating Fund, which includes police and fire, the source of most retirees on the City’s healthcare plan. Other funds will see a reduction in their healthcare contributions.
· Part Time Salaries. Salary increases for part time temporary and part time permanent employees are projected to result in an increase of 13.1%, or $91,963. Included in this amount are salaries for extra-board firefighters.
· Overtime. Salary increases and increased benefit costs continue to increase the cost of providing overtime. The 2015 budget includes an increase of $69,183, or 4.6%, over the 2014 budget.
· FICA and Unemployment. Both these items are expected to increase. An increase of $74,873 is included for FICA, while an increase of $5,397 is included for Unemployment in the 2015 budget as recommended.
The table below summarizes the cost and the mill levy equivalent of these personnel related increases.
|
Description |
Cost Increase |
Mill Levy Equivalent |
|
Regular salaries and holiday pay |
$524,000 |
0.619 |
|
Employee pension contributions |
$527,234 |
0.622 |
|
Healthcare contributions |
$159,165 |
0.188 |
|
Part Time Salaries |
$91,963 |
0.109 |
|
Overtime |
$69,183 |
0.082 |
|
FICA and Unemployment |
$80,270 |
0.095 |
|
Total |
$1,451,815 |
1.714 |
Non-Personnel Related Expenses. Items not related to salaries and benefits that are projected to increase by more than $10,000 include:
· Transfer to Equipment Reserve Fund. This increase can largely be attributed to proceeds from the 0.3% sales tax being transferred to the City’s Equipment Reserve Fund to be used toward the purchase of SCBA equipment for the Fire Medical Department. In addition, the proceeds from the 0.05% transit sales tax are budgeted to be transferred to the City’s equipment reserve fund in 2015 and an increase in sales tax is projected.
· Emergency Communications and Other Services Provided by Douglas County. The total baseline budget request for the services provided by Douglas County (Emergency Communications, Health Department, Community Service Worker, JLE building maintenance, Sustainability Coordinator) is 7.8%, or $110,739, more than the 2014 budget. The bulk of the increase in is overtime and salary increases for Emergency Communications.
· Service Contracts / Other Service Contracts. This increase of $84,953 is largely due to lease payment for non-apparatus vehicles in the Fire Medical Department. Also included is an increase for use of the FOP lodge facilities for training.
· Transfer to Transit. This increase of $73844, or 2.4%, represents the increase projected in the 0.2% transit sales tax for 2015. Again, proceeds from sales tax are deposited in the General Fund before being transferred out to, in this instance, the Transit Fund.
· Other / Other Contractual Services. The increase of $53,411 is largely due to budgeting for copier lease, document shredding, and real estate taxes budgeted in different account in 2014.
· Insurance/ Property. The City maintains property insurance on City facilities. Premiums are expected to increase in 2015 by 65%, or $52,000.
· Professional Services / Legal. This $40,000, or 16.7%, increase is to account for the increasing cost of indigent defense. The City currently contracts with a private law firm to provide defense for people who are unable to provide their own attorneys in municipal court. This increase for 2015 brings the budget more in line with actual expenses for 2013.
· Operating Supplies / Equipment <$5000. This increase of $34,589, or 19.1%, can largely be attributed to equipment needs in the Patrol and Information Technology Divisions of the Police Department.
· Utilities / Electricity. This 2.1%, or $32,540, increase is in response to rate increases from Westar.
· Vehicle Replacement. This 7.8%, or $26,000, increase can be attributed to one additional vehicle replacement in 2015.
· Motor Vehicle Supplies / Gasoline – Unleaded. The increase of 5%, or $25,780, can be attributed to projected fuel price increases for 2015.
· Insurance/Public Officials. The cost of liability insurance for public officials provided by the City is increasing $21,000, or 70%, for 2015.
· Conferences and Seminars. This increase of $20,322 is largely to bring the 2015 budget more in line with 2013 actual expenses in the Fire Medical Department for federally mandated HazMat training and for certifications for Technical Rescue capabilities.
· Overlay Program. An increase of $20,000 is budgeted as matching funds for apron repairs on the east side of the hangars at the municipal airport.
· Humane Society. The Lawrence Humane Society provides animal shelter and other services related to enforcement of the City’s animal control ordinances. The City provided an increase in 2014 although it was not at the requested level. An additional $20,000 is needed to bring the City’s contribution to roughly 35% of the shelter’s annual budget, which is more in-line with the percentage of animals the shelter cares for annually that are brought in by the City.
· Mowing. This increase of $15,000 is to account for adding mowing at VenturePark to the City’s contract for mowing.
· Motor Vehicle Repairs. This increase of $11,250, or 1%, is due to increased expenses for vehicles in Public Works, Parks and Recreation, and Code Enforcement resulting from deferred replacement.
Revenues
The assessed valuation is expected to grow 1.6% for 2015. Other revenue sources (sales tax, franchise fees, licenses and permits, etc.) are also expected to grow. Without any increase in the mill levy, General Fund revenues are projected to total $73,747,105, approximately $1,741,086, or 2.4%, over 2014 Budget.
|
Revenue |
Budget |
Projected 2015 |
+/- |
% Change |
|
Property Taxes (no mill levy increase) |
$16,655,568 |
$17,153,365 |
$497,797 |
3.0% |
|
Franchise Fees |
$7,087,000 |
$7,325,000 |
$238,000 |
3.4% |
|
Sales/ Use Taxes |
||||
|
1% city sales tax |
$15,397,100 |
$15,891,468 |
$494,368 |
3.2% |
|
0.3% infrastructure |
$4,619,150 |
$4,767,440 |
$148,290 |
3.2% |
|
0.2% transit |
$3,079,450 |
$3,178,294 |
$98,844 |
3.2% |
|
0.05% transit expanded |
$769,850 |
$794,573 |
$24,723 |
3.2% |
|
1% county sales tax |
$9,690,550 |
$9,988,784 |
$298,234 |
3.1% |
|
subtotal sales/use tax |
$33,556,100 |
$34,620,559 |
$1,064,459 |
3.2% |
|
Intergovernmental Revenue |
$916,200 |
$858,000 |
($58,200) |
-6.4% |
|
Licenses & Permits |
$1,384,800 |
$1,506,500 |
$121,700 |
8.8% |
|
Fines |
$2,994,000 |
$3,115,000 |
$121,000 |
4.0% |
|
Service Charges |
$753,300 |
$497,000 |
($256,300) |
-34.0% |
|
Interest |
$160,000 |
$75,000 |
($85,000) |
-53.1% |
|
Miscellaneous Revenue |
$4,842,300 |
$4,939,930 |
$97,630 |
2.0% |
|
Transfers |
$3,656,751 |
$3,656,751 |
$0 |
0.0% |
|
Total |
$72,006,019 |
$73,747,105 |
$1,741,086 |
2.4% |
Assuming the expenditure level discussed above, budgeted expenditures would exceed projected revenues by $2,060,671. The Unreserved Ending Fund Balance would be $10,624,784, or 14.02% of expenditures.
The table below shows the General Operating Fund revenues for 2015 with a mill levy increase of 1.5 mills. As shown, total revenues (including revenue from the recommended mill levy increase) would be $75,807,776.
|
Revenue |
Budget |
Projected 2015 w/mill levy increase |
+/- |
% Change |
|
Property Taxes (with increase of 1.5 mills) |
$16,655,568 |
$18,423,865 |
$1,768,297 |
10.6% |
|
Franchise Fees |
$7,087,000 |
$7,325,000 |
$238,000 |
3.4% |
|
Sales/ Use Taxes |
||||
|
1% city sales tax |
$15,397,100 |
$15,891,468 |
$494,368 |
3.2% |
|
0.3% infrastructure |
$4,619,150 |
$4,767,440 |
$148,290 |
3.2% |
|
0.2% transit |
$3,079,450 |
$3,178,294 |
$98,844 |
3.2% |
|
0.05% transit expanded |
$769,850 |
$794,573 |
$24,723 |
3.2% |
|
1% county sales tax |
$9,690,550 |
$9,988,784 |
$298,234 |
3.1% |
|
subtotal sales/use tax |
$33,556,100 |
$34,620,559 |
$1,064,459 |
3.2% |
|
Intergovernmental Revenue |
$916,200 |
$858,000 |
($58,200) |
-6.4% |
|
Licenses & Permits |
$1,384,800 |
$1,506,500 |
$121,700 |
8.8% |
|
Fines |
$2,994,000 |
$3,115,000 |
$121,000 |
4.0% |
|
Service Charges |
$753,300 |
$497,000 |
($256,300) |
-34.0% |
|
Interest |
$160,000 |
$75,000 |
($85,000) |
-53.1% |
|
Miscellaneous Revenue |
$4,842,300 |
$4,939,930 |
$97,630 |
2.0% |
|
Transfers |
$3,656,751 |
$3,656,751 |
$0 |
0.0% |
|
Total |
$72,006,019 |
$75,017,605 |
$3,011,586 |
4.2% |
Even with an increase in the mill levy of 1.5 mills, budgeted expenditures for 2015 will exceed budgeted revenues by approximately $790,000. The Unreserved Ending Fund Balance would be $11,895,284, or 15.69%, of expenditures.
Staff remains committed to monitoring revenues and making necessary adjustments to expenditures in order to balance the budget in 2015.
Additional Needs and Requests For Consideration
Departments previously identified critical issues that should be addressed given additional resources. There are also a number of outside agencies that requested increased funding and several agencies that submitted requests that have never received City funding. The attached list summarizes these needs and requests and provides the mill levy increase that would be required to fund each of them.
Staff looks forward to additional discussion on these items throughout the budget process. Depending on Commission direction, some may be included in the City Manager’s Recommended Budget.