16 minute read
Budget Transmittal Letter
August 1, 2020
Dear Mayor and City Council: In accordance with the City Charter and the laws of the State of Texas governing home rule cities, please accept this letter as the budget transmittal and executive summary for the Fiscal Year 2021 annual budget. The budget is structurally balanced, meaning that reserves have not been used to balance the operating budget. It provides for all available resources and expenditures for the City and acts as the general financial and operating plan for the City of Forney. INTRODUCTION
As always, this budget was prepared with great diligence in allocating limited resources for the best benefit to the citizens of Forney. The budget is a balanced budget; however, in order to present a fiscally responsible budget, staff was asked to defer personnel requests, equipment purchases and capital projects until next year. This is not a reflection on the merit of these requests, but rather it is indicative of the need to limit expenses until more information is available regarding the impact of the Covid-19 pandemic on the economy. This budget was more challenging than prior budgets due to the Covid-19 pandemic. Many businesses were forced to close temporarily, and citizens were required to shelter in place. City buildings were closed to the public and the majority of City business was conducted over the internet. The pandemic timing presented a unique problem in budgeting in that the budget process would be completed before the City had significant information regarding the impact to City revenue streams. This budget is more conservative than prior budgets as revenue and expenses were both kept relatively flat. However, the budget does include a one-time 5% payment equal to each employee’s annual salary as well as two new positions both to be awarded at mid-year based on revenue collections.
FINANCIAL INFORMATION & FUND SUMMARIES
General Fund The General Fund is the City’s principle operating fund and is supported by taxes, fees, and other revenues that are not restricted to specific uses. This fund accounts for City functions such as police, fire, community development, parks, municipal court and administration.
General Fund Revenue Fiscal Year 2020 total General Fund revenue is expected to end the year 16% above the original budget. This is the result of increased permits and inspections as well as sales tax collections.
Total revenue for Fiscal Year 2021 is projected to be $23,073,677. This is an increase of 5.82% from the prior year’s budget. This increase is primarily due to increased property tax and sales tax revenues.
Taxable Valuation & Tax Rate The total certified property valuations for Fiscal Year 2021 are $2,206,782,929. This is an increase of 13.98% or $270,799,261 in total valuation. Thirty-two percent of this increase, $86,255,622, can be attributed to new construction. The remainder is an increase in existing property valuation, which indicates a thriving community.
History Projected Budget
2019 Actual 2020 Budget 2020 Revised 2021 Budget % Change
Tax Revenue Sales Revenue Court Fines Permits & Inspections Donations & Grants
15,943,698 16,659,508 17,973,033 18,328,205 10.02% 611,029 971,720 965,620 1,168,222 20.22% 254,571 230,960 175,980 180,560 -21.82% 1,969,508 1,249,500 3,136,938 1,184,500 -5.20% 228,157 216,000 303,396 - -100.00% Interest & Penalty (454,900) 500,000 735,000 250,000 -50.00% Miscellaneous 215,757 77,347 129,533 50,000 -35.36% Transfers In to General Fund 2,170,274 1,899,802 1,899,802 1,912,190 0.65%
General Fund Revenue 20,938,094 21,804,837 25,319,302 23,073,677 5.82%
Fiscal Year 2020 Fiscal Year 2021 Variance
M&O 0.386125 $6,720,728 0.378201 $7,587,887 -0.00792 $867,159 Debt Service 0.193875 $3,374,506 0.160509 $3,220,300 -0.03337 -$154,206 Total 0.580000 $10,095,234 0.538710 $10,808,187 -0.04129 $712,953
While valuations have increased by 72.8% since 2017, the total tax rate has decreased by $.112402. The increased valuations, along with sound debt management including early redemptions and refunding, has contributed to the decreased tax rate. A $0.538710 tax rate is proposed for Fiscal Year 2021. This represents a $0.04129 decrease from the prior year.
While the debt service portion of the tax rate will be decreasing, the maintenance and operations portion will be increasing slightly. Additional revenue will be generated from
new construction as well as increased valuations and will be used for increased operating cost. Further information on the changes in the tax rate, including adjustments for tax abatements and tax increment financing districts, can be found in the General Fund section of this document.
Sales & Property Reduction Taxes
Over the past five years, sales tax revenues have increased an average of 11% per year. This continued increase is indicative of a growing local economy, resulting from continued population growth within the city limits and the surrounding areas, as well as increased commercial development. The city has always taken a very conservative approach to budgeting sales tax. The Fiscal Year 2020 budget assumed a 5% increase in sales tax revenue and actual collections are trending higher toward a 18% increase from the prior year. For Fiscal Year 2021, the budget has been left flat with the current year end estimate due to the uncertainty of the economic impact of the pandemic.
Permits & Inspections This revenue category as a whole is expected to end the year at approximately 151% above the original budget. While nearly all of the individual permit fee categories will end Fiscal Year 2020 with increases, the largest increases will be reflected in Zoning & Platting Fees, Engineering Consulting Fees and Building Permits.
Increases in these fees are due mainly to several large commercial projects, but there has also been an increase in residential building. Revenues for Fiscal Year 2021 are budgeted to remain flat due to the completion of the commercial projects as well as the uncertainty of the economy during the ongoing pandemic.
Other Revenue Sources Sales Revenue includes fire protection fees and park revenue. Fire Protection fees are charged to the Kaufman County Emergency Services District #6 (ESD #6) and the Town of Talty. Nearly 40% of the Forney Fire Department calls are outside the City limits and in ESD #6. Therefore, ESD #6 will continue to contribute their entire assessment of $0.03 to the City for Fiscal Year 2021. This revenue item is budgeted at a 19% increase based on certified tax valuations. Park revenues are expected to remain flat. Court Fines may increase slightly as things have begun to reopen. Miscellaneous Revenues and Donations and Grants are budgeted to decrease. Interest Income is expected to continue to decline.
The Fiscal Year 2021 Budget includes an increase in expenditures of 8.28%. This increase is primarily the result of increased benefits related costs as well as a one-time payment for each employee which equals up to 5% of their base salary.
Additional funding was added to several key maintenance and miscellaneous areas. These funds will remain unspent until revenue collections have been evaluated. Facilities Maintenance – Additional $300,000 Building Maintenance Fleet Services – Additional $105,000 Vehicle Maintenance Streets – Additional $350,000 Roadway Maintenance & Additional $30,000 Sidewalk Improvements Finance – Additional $280,000 Incentives & Tax Agreements
Employee Compensation Personnel costs account for 69% of the General Fund’s expenses. The Fiscal Year 2021 budget does not include any merit increases or steps for employees. However, the budget does include funds for a one-time payment representing up to 5% of each employee’s base salary. Revenue collections will be evaluated at mid-year to determine if the payments are feasible. Health Insurance Premiums The budget includes a 14% increase in health care costs. The industry average for health care cost increases is between 12% and 15%. The City competitively bids our employee health insurance in October.
Texas Municipal Retirement System The Texas Municipal Retirement System contribution rate for 2021 will increase to 14.26% from 13.93% in January of 2021. With the longer tenure of employees and increased salaries, the City’s contribution to TMRS will increase by $61,088 to $1,569,891 for the upcoming fiscal year.
New Positions The Fiscal Year 2021 budget includes funding for up to two new full-time positions in the General Fund. Revenues will be evaluated at mid-year to determine if the new positions are warranted. Currently the budget includes six months funding for a part-time Facilities Maintenance Technician, a full-time Parks Maintenance Technician, and moving the part-time Municipal Court Prosecutor to a full-time Assistant City Attorney.
By Category 2019 Actual 2020 Budget 2020 Revised Projected 2021 Budget % Change Budget Salary & Benefits 13,242,251 14,644,132 14,029,932 15,258,819 4.20% Services & Supplies 3,446,474 3,557,638 3,544,181 3,599,789 1.18% Maintenance & Repair 1,670,521 1,491,682 1,611,568 2,249,382 50.80% Capital Outlay (0) 50,293 53,664 - -100.00% Information Technology 665,936 527,847 596,543 626,709 18.73% Miscellaneous 100,793 280,450 678,676 518,500 84.88%
General Fund Expenses 19,125,974 20,552,041 20,514,563 22,253,199 8.28%
Contingency & Reserves A $200,000 line item contingency is included to offset unexpected costs. There will not be a transfer to the emergency reserve fund in Fiscal Year 2021 as the fund balance would adequately cover more that 25% of general fund expenditures.
CAPITAL PURCHASES FUND The Capital Purchases Fund is used to make one-time purchases for General Fund Departments. It is primarily funded through a transfer from the General Fund of unrestricted fund balance. Segregating these purchases in this manner helps to ensure that fund balance is not used for recurring operating expenses and assists in the tracking of fixed assets.
There are no approved purchases scheduled for Fiscal Year 2021 but $600,000 will be transferred to the fund for possible future purchases.
UTILITY FUND The Utility Fund is an enterprise fund that accounts for the water, sewer, and refuse services that are provided to the City’s residents. Revenues are derived from charges for water consumption, wastewater collection, and refuse services.
Utility Fund Revenue Fiscal Year 2020 total Utility Fund revenue is expected to end the year 5.27% above the original budget. The increase is attributable to residential and commercial growth as well as new and existing industrial and wholesale contracts.
Utility Rates The North Texas Municipal Water District will not be increasing water rates for Fiscal Year 2021. Therefore, City of Forney utility customers will not receive a rate increase.
Total sewer treatment and transmission costs as applied to the Utility Fund will be increasing by 43%. The City will pass 10% of this cost on to residential and commercial customers but the majority of the cost increase will be covered by industrial and wholesale contracts.
Revenue Summary
Sales Revenue Interest & Penalty Miscellaneous Transfers In
Utility Revenue History Projected Budget
2019 Actual 2020 Budget 2020 Revised 2021 Budget % Change 16,573,756 17,066,678 17,773,927 19,075,733 11.77% 164,652 195,000 169,500 169,500 -13.08% 43,476 6,500 14,497 6,500 220,000 220,000 - -100.00%
16,781,884 17,488,178 18,177,925 19,251,733 10.08%
The current garbage contract with Community Waste Disposal (CWD) includes an annual increase based on the consumer price index (cpi) and the city budgets an annual rate increase of 5%. The existing contract with CWD expires in 2021.
Utility Expenses Operating expenses in the Utility Fund are projected to decrease 1.42% from $14,765,648 to $14,556,261.
A significant portion of the 15.84% increase anticipated for Fiscal Year 2021 is related to the increased cost of providing water and sewer services. All together charges for sewer services provided by the North Texas Municipal Water District have increased by 43% in the Utility Fund. While the cost per 1,000 gallons of water did not increase, the City exceeded the 2020 contract minimum and the new minimum will increase water costs by 16%.
This fund also includes funds for a one-time payment representing up to 5% of each employee’s base salary and a 14% increase in health care coverage. TMRS contributions will increase by $3,312 to $136,066. No funding for utility capital purchases has been budgeted.
Contingency & Reserves A $50,000 line item contingency is included to offset unexpected costs. As with the General Fund Operating Reserve, there will not be a transfer to the reserve fund in Fiscal Year 2021 as the fund balance would adequately cover more that 25% of general fund expenditures.
CAPITAL IMPROVEMENT FUNDS The Capital Improvement Funds account for the design and construction of City facilities, roads and drainage, parks, and water and sewer systems. Unlike the operating budget, the capital improvement budgets do not conclude at the end of each fiscal year, as many CIP projects remain in progress over several years.
Capital Improvement Projects are funded from a number of different sources. Based on the funding sources, projects are put into one of two different funds: the General Capital Improvement fund, or the Utility Capital Improvement Fund.
With the unique set of challenges that Fiscal Year 2020 brought, this budget proposes transfers to the capital improvement funds but does not provide for specific projects. As with all of the additional funding and possible enhancements added to the Fiscal Year 2021 budget these
Expense by Category
History Projected Budget
2019 Actual 2020 Budget 2020 Revised 2021 Budget % Change
Salary & Benefits
funds will be reserved until it is determined that they will not need to be transferred back to the operating funds for regular operating expenses or emergency purposes.
General Fund to General Capital Improvement Fund - $2,462,000 Utility Fund to Utility Capital Improvement Fund - $1,500,000
DEBT SERVICE FUNDS The City issues debt to support capital improvements. This debt is either tax supported and accounted for in the Debt Service Fund, or it is utility revenue supported and accounted for in the Utility Debt Service Fund. The combined total debt payments for Fiscal Year 2021 will be $6,460,886.
General Debt Service Fund Revenues required to pay the City’s outstanding tax supported debt are restricted to debt payments. Revenues in this fund are collected through the debt service portion of the property tax rate and from the TxDOT Pass Through Toll reimbursement.
A committed fund balance is designated for early bond redemption. These funds are the accelerated portion of the reimbursement (amount above the guaranteed minimum annual payment) from TxDOT for the Pass Through Toll roadway projects. The City has retired an additional amount of the 2008 GO bonds annually according to the funds available. During Fiscal Year 2020, the City redeemed $2 million, bringing the total early redemption since Fiscal Year 2013 to $15,032,447. To date, this process has saved the City $7,660,350 in interest.
The required general debt payments for Fiscal Year 2021 total $5,937,711. In calculating the debt service tax rate, this number is reduced by the Pass Through Toll guaranteed minimum annual payment of $2,009,570 and $675,313 of available fund balance for the 2014 CO issue and the 2017 Tax Notes. This results in the tax rate being based on payments of $3,220,300 and is a reduction of $0.1325 per $100 valuation.
The final debt service portion of the tax rate is $0.160509 and will generate $3,220,300 in revenue for bond payments. Of this total, $0.108841 (68%) results from voter approved general obligation debt.
General Debt Service Prinicipal Interest Annual PaymentPaid from Other Tax Rate Series 2008 General Obligation - TXDOT Pass Through - 149,313 149,313 149,313 -
Series 2011 General Obligation Refunding 96,806 96,806 0.004777 Series 2011 Combo Certificates of Obligation 190,000 99,831 289,831 0.014302 Series 2012 General Obligation Refunding 190,000 7,568 197,568 0.009749 Series 2012 Certificates of Obligation 45,000 16,650 61,650 0.003042 Series 2014 Certificates of Obligation 230,000 123,063 353,063 353,063 Series 2014 General Obligation Refunding (2005A) 215,000 24,325 239,325 0.011809
Series 2015 General Obligation Refunding (2007) 329,475 329,475 0.016258 Series 2016 General Obligation Refunding (2007) 1,545,000 97,075 1,642,075 0.081027
Series 2016 Certificates of Obligation (Redbud) 105,000 56,906 161,906 0.007989
Series 2017 Subordinate Lien Pass Through Refunding 1,745,000 349,450 2,094,450 1,860,258 0.011556
Series 2017 Tax Notes (Fire Equipment) 290,000 32,250 322,250 322,250 -
4,555,000 1,382,711 5,937,711 2,684,883 0.160509
Utility Debt Service Fund Revenues required to pay the City’s outstanding revenue supported debt are transferred from the Utility Fund, the Water Impact Fund and the Sewer Impact Fund. The exact amount required to cover the year’s bond payments is transferred in each year and the fund maintains a zero fund balance. The total required debt payment for the upcoming year is $514,675.
HOTEL OCCUPANCY TAX FUND The Hotel Occupancy Tax (HOT) Fund is a special revenue fund that receives revenue through a 7% tax charged on all room rates by hotels or motels within the city limits. Expenditures are restricted to activities that promote tourism and encourage visitors to stay in local hotels or motels. The revenue for this fund is based on historical information and is expected to decrease to $125,000 for Fiscal Years 2020 and 2021. No expenses or transfers are proposed for Fiscal Year 2021.
ECONOMIC DEVELOPMENT CORPORATION FUND The Economic Development (EDC) Fund is a special revenue fund that receives revenue from type 4B sales tax. Expenditures are restricted to activities that support and promote economic and community development.
Economic Development Revenue Economic Development Corporation revenues are expected to finish Fiscal Year 2020 at a 9.59% increase above the original budget due to increased sales tax collections.
Fiscal Year 2021 revenues are expected to increase 10.36% from the previous year due to increasing sales tax revenue.
Economic Development Corporation Expense Economic Development Corporation expenses have decreased 55% from the original budget in Fiscal Year 2020. This decrease is primarily the result of failed incentive agreements where the business was unable to meet City requirements.
Utility Debt Service Prinicipal Interest Annual Payment
Series 2011 Combo Certificates of Obligation 140,000.00 73,862.50 213,862.50 Series 2014 GO Refunding (2005A) 130,000.00 14,712.50 144,712.50 Series 2014A GO Refunding (2005B) 135,000.00 21,100.00 156,100.00
405,000.00 109,675.00 514,675.00
Revenue Summary
Tax Revenue Interest & Penalty Miscellaneous
Economic Development
History Projected Budget
2019 Actual 2020 Budget 2020 Revised 2021 Budget % Change 2,117,041 2,171,008 2,424,106 2,424,106 11.66% 30,947 20,000 10,000 10,000 -50.00% 96,457 105,334 82,534 100,210 -4.86%
2,244,445 2,296,342 2,516,640 2,534,316 10.36%
Salary & Benefits Services & Supplies Maintenance & Repair Capital Outlay Miscellaneous
Economic Development
2019 Actual 2020 Budget 2020 Revised 2021 Budget % Change 276,067 301,933 240,939 314,480 4.16% 268,673 526,340 314,001 272,062 -48.31% 324,259 1,405,000 694,859 396,000 -71.81% - - 37,000 - - 9,423 20,000 27,399 25,000 25.00%
878,422 2,253,273 1,314,198 1,007,542 -55.29%
CONCLUSION
The Fiscal Year 2021 budget is a balanced budget and provides an operating basis for the next year. It provides for strategic planning and investment in our most valuable asset, our workforce. At the same time, we are maintaining the long-term fiscal viability of the community by promoting cost saving measures and supporting quality development.
While the budget process is always a challenge, we have produced a budget that is both balanced and sufficient to meet the need of the upcoming fiscal year.
On behalf of myself and the staff, I want to express my appreciation to the City Council for your diligent efforts throughout the year in providing guidance, direction and support for this budget. I feel this budget accurately represents the goals of the City which are designed to provide the highest quality of services to our citizens with the resources available.
I also want to thank Charity Wilson, Assistant Finance Director, for her tireless efforts and professional dedication in assisting me to ensure the financial integrity of the annual budget.
Respectfully Submitted,
Deborah Woodham Director of Finance and Human Resources
