Five Year Fiscal Forecast and Operating Strategic Plan from a Small City

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Five Year Fiscal Forecast and Operating Strategic
Plan from a Small City

• GFOAT
• April 15, 2008

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Huttos Background

• Residential Growth
• 1,250 in 2000 census 17,000 today
• Lag in commercial growth
• Significant infrastructure needs
• Growing departments and staff
• Contracts that were expected to increase water
  rates
• Limited financial planning to this point
• First year of an adopted CIP
• Basic budget spreadsheet to GFOA recognized
  budget
• Annual audit to preparing a CAFR

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Step One Education on Need for Multi-Year
Forecasting/Budgeting

• Ensure proper planning for
• Infrastructure needs
• Operating programs
• Maintenance
• On-going financial health of the City
• Stability of Tax Rate
• Affordability for citizens
• Use as a blueprint for discussions with
  governmental partners
• County, TxDot, TWDB, others
• Communication Tool

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Reasons for Multi-Year Forecasting/Budgeting

• City looks at multi-year impact of programs
• Tool for decision making
• Provides for consistent delivery of service
  expected by citizens
• Ensures a minimum level of service
• Indicates where projects must be phased in order
  to afford the cost
• Provides Gap Analysis
• Opens dialogue for strategies to manage growth
  and estimates costs determines where funding
  will be short
• Shows where creative funding is needed or where
  expectations need to be better managed
• Lowers risk of making short term decisions that
  cannot be easily afforded in the long term

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What the Five Year Plan is Not

• Not an adopted budget
• Budget adoption is annual set by charter
• Budget is a legal requirement specific
  appropriations
• Five Year Plan is a planning tool forecast only
• Departments project programs and staffing
  requests
• Finance projects revenues based upon trends and
  developer
• Provides no assurance to departments that
  specific programs will be funded in future years
  each budget year must follow the legal process
  set by state law and charter
• Does not prevent future councils from changing
  budget priorities from year to year

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The Five Year Plan Includes

• Councils long range goals
• Capital Needs
• Operating plans by department
• Tie to Councils goals
• New programs
• Expense estimates
• Performance measures and projections
• Revenue forecast and assumptions
• Tax Rate Model/Implications
• Utility Rates/Implications
• Projected fund balances/working capital
• Analysis of results - Gap analysis

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Who should be involved?

• City Manager support
• City Council buy in
• ALL DEPARTMENTS
• Possibly rate consultants, financial advisors

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Strategic Planning
City of Hutto Strategic Guide 2030
Five Year Fiscal Forecast
Five Year CIP
Five Year Strategic Plan
Annual Council Priorities
Annual Operating Budget
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Steps

• Review charter and policies
• Buy in from City Mgt
• Utilize Planning staff expertise for population
  and land use projections
• Agree on growth assumptions
• Buy in from departments
• Whats in it for them
• Identify their plans
• Utilize their expertise in various fields

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Steps

• Develop Templates
• Easier for departments
• Use department descriptions and other info from
  your budget
• Costs should be generated by departments, with
  Finance assistance
• General estimates, not detailed
• They should spend time on performance/workload
  measures
• Justify new staff and programs
• Ratios such as transactions per clerk officers
  per 1,000 population, etc

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Steps

• Educate staff, if needed
• General Fund versus Utility Fund, etc.
• Trend analysis to back up assumptions for
  revenues
• Gather information from developers, agreements,
  plats, etc for commercial and sales tax growth
  (reasonable estimates)
• Get help if needed (rate consultants)
• Set up models
• General, Utility, Debt Service (Capital)
• Base expenditures separated from new programs
• Limited, probable, aggressive (low/medium/high)
  scenarios on revenues

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Steps

• Forecast tax rates if fully funded
• Impact of new staffing new facilities, other CIP
• Three scenarios for each fund
• Low/Medium/High
• Dim/Probably/Optimistic
• Communicate Results
• With management staff
• During budget process with all staff
• To Council

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Steps

• Council communication
• Explain scenarios
• Give options
• Keep it at a policy level if possible
• Reference any plans they have already adopted
• Comprehensive plans
• Parks Plan
• CIP
• etc

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Utility Fund - Water
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Utility Fund - Water
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Wastewater Utility
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Wastewater Utility
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Wastewater Utility
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Wastewater Utility
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General Fund
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Share your revenue assumptions for major revenue
sources

• Revenue Assumptions
• Sales Tax continued moderate growth of 5 on
  base with impact of New Quest and Crossings of
  Carmel Creek and other developments included in
  timing
• Property Tax continued residential growth of
  12 (past three years 32 average) with expected
  commercial factored in
• Franchise growth mirrors residential growth

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General Fund Revenues
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General Fund Revenues
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Expenditures General Fund 66 Growth over
next 5 years
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General Fund Expenditures

• Expenditure Assumptions Growth and Inflationary
• 3.5-7 increase in salaries (market and merit)
• 5 increase in benefit costs
• 10 increase in insurance costs
• 5 supplies and materials
• 5-6 repairs and maintenance (on-going)
• 5-8 other cost increases
• NEW PROGRAMS and STAFFING

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General Fund
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General Fund No New Programs/Staffing
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New Program Requests by Year Includes on-going
costs
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General Fund - Operations

• Deficit peaks in year 2010 at 2.2 million
• Revenues begin catching up after FY 2010/2011
• Commercial growth at Crossings of Carmel Creek
  and Town West Commons

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Final thoughts

• Dont focus too much on details
• Break up cost centers only as meaningful
• Personnel, insurance, supplies, maintenance,
  capital, other
• Use as a tool to communicate with other
  departments
• Balance or not to balance
• We chose not to balance show the deficit and
  discuss reasons why and strategies to prevent
• Use a format that is easy to ready
• US News not Wall Street Journal
• Graphs, charts, bullet points, etc.
• Update the plan annually
• Communicate, communicate, communicate
• Finances opportunity to show how municipal
  finance works and the reasons for the difficult
  budget decisions made each year