FINANCIAL HIGHLIGHTS OF THE 2023 BUDGET (cont)

Budget Objective and Priorities

The objective of the 2023 budget is to preserve the current level of services to the community while managing increased operational expenditures and capital needs. Significant assumptions that impact the budget include the following:

• The Town will sustain the current level of community programming and repair and maintenance of infrastructure.

• Sales tax revenue growth is budgeted at 8% for 2023.

• Both performance pay and commissioned officer step increases are budgeted at 5% due to the current labor market.

• A compensation study will be completed in 2023, and the Town will implement some or all of the recommendations.

• Growth in discretionary expenses is contained to balance capital needs and inflation.

Four priorities were established for the 2023 budget:

• Maintain required General Fund cash reserves and build cash reserves for the Cultural and Recreation Funds

• Maintain community programs and the repair and maintenance program for infrastructure

• Balance competing funding needs between operating expenses, increased staffing and infrastructure

• Identify funding sources for needs identified in the 2021 Facilities Master Plan

The first two priorities remain in place from the 2022 budget. First, General Fund cash reserves remain a priority as they are a legal requirement and are set by the Council. Additionally, the COVID-19 pandemic highlighted the need for cash reserves in the Cultural and Recreation funds, since a significant portion of their revenue is from charges for services. Unforeseen events that impact demand or the Town’s ability to provide programming also impact these departments’ ability to cover overheard operating costs. Now that the funds have recovered from COVID-19, the Town is taking steps to grow the cash balance as a hedge against future impactful events. Second, citizen demand for community programs is strong, and maintaining infrastructure before costly failures is both a best practice and Town responsibility

Third, development growth in the Town has created a need for additional infrastructure investment and increased operational expense, including increased staff to manage the growing number of new capital and infrastructure repair and maintenance projects. These must be carefully balanced to fit within the revenue constraints of the Town. The Town used a scoring process for capital projects, incremental expense increases over $50,000 and new personnel to prioritize the most important items for each category by fund.

Finally, Town municipal buildings are aging and required to support increasing numbers of staff and community members. Recognizing that significant repairs and expansion are becoming necessary, the Town undertook a Facilities Master Plan in 2021 to identify needs for repair and/ or replacement of Town equipment, facilities and other assets. The plan identified four projects to accommodate needed growth. Funds were set aside starting in 2021 in the Capital Renewal and Replacement Reserve Fund to help fund the needs identified in the plan; however, cost increases in all public works projects indicate that the original project cost estimates in the master plan are likely too low. Therefore, additional funding was set aside in 2022 and the 2023 budget to fund these projects, and other potential revenue sources, such as the Excise Tax Fund, are being considered if necessary as the projects progress.

Town staff has implemented a thoughtful process of strategic planning and preparing a carefully balanced budget that supports the direction of the Town Council and the Town’s strategic goals. The Council has ample opportunity for input as the proposed budget is being prepared. Therefore, Town Council passed the 2023 budget as originally presented, with no changes between the proposed and final adopted budget.

General Fund

Sales tax makes up almost 71% of the General Fund revenue, so estimating the 2022 projected and 2023 budgeted revenue accurately is key to the overall direction of the 2023 budget. Sales tax growth has fluctuated for several years. Growth was 6.3% in 2019, 7.8% in 2020, 18% in 2021 and is projected to close 2022 at 12%. With some of the growth attributed to short-term factors, a conservative projection of 8% was used for 2023. The experience of other Denver area municipalities, local economic projections and continued population growth were all considered in developing the budget.

The top five General Fund revenue sources, including sales tax, account for about 85% percent of the total revenue in the General Fund. Overall, growth for these revenue sources in the General Fund is budgeted to grow 7% from the 2022 projection and generate $4.4 million in incremental revenue.

The Town uses an incremental approach to budgeting. An incremental approach uses a base, or existing, budget and adjusts up or down as necessary. Discretionary spending has been reduced significantly through several years of cost cutting, so a base level of expenditures is considered necessary as a starting point. Funding of personnel-related costs, including a 5% increase for performance pay and commissioned officer step plan, compensation study related changes, medical benefit cost increases and new full-time positions require an additional $5.3 million in expenditures in the General Fund.

Other expenditure increases include inflation related cost increases in operations and community programs. Repair and maintenance costs for streets and snow removal activities are also increasing by about $1.3 million due to increased labor and materials costs.

Several small capital projects are also included in the 2023 General Fund budget, including traffic safety, police and parks maintenance equipment. The Town Hall expansion project was moved to the Capital Renewal and Replacement Reserve fund where all of the facilities master plan projects are now held.

In summary, the 2023 General Fund budget implements the Town’s four budgetary priorities. The resulting balanced budget maintains excellent service to the community and Town employees while maintaining and improving Town infrastructure.