FY 2020-21 Proposed Budget Finance Department 1 August 6, 2020 ID 20-1154
Presentation Objectives • COVID Financial Response Timeline • Proposed Budget Priorities • Financial Overview • Assessed Value and Tax Rate Assumptions • Tax Rate Discussion • General Fund Revenue Discussion • General Fund Forecast • Capital Improvement Plan • Other Funds • Next Steps 2 August 6, 2020 ID 20-1154
COVID Financial Response Timeline On March 13, 2020, the City of Denton declared a Local Disaster for Public Health Emergency • In response to the pandemic staff has taken the following steps to mitigate the financial impact of COVID-19 • Financial Event (COVID) Action City declares local emergency in response to COVID-19 • Financial Disaster Plan Implemented Non-essential businesses close in response to pandemic • Finance Staff began forecasting possible financial impact in response to March non-essential business closer • Delayed and reprioritized capital projects • City implements hiring freeze • Ceased discretionary travel and training • Ceased merit increases • Analyzed contracts for possible savings Non-essential businesses remain close in response to pandemic • Phase #1 cost reduction strategies • Forecasted General Fund revenue loss of $10 - $15 million April • Forecasted Utility revenue loss $10 - $20 million • Electric Return on Investment (ROI) increased to 6% • Enacted Voluntary Separation Program (VSP) Non-essential businesses begin a phased reopening approach • Staff begins to adjust forecast based on a slow recovery in the economy Denton County notifies the City of CRF funding • Received notification from Denton County of $7,619,755 in CRF funding May Staff receives April sales tax data from comptroller • Finance Staff update end of year forecast based on April sales tax collection June • Departments update end of year estimate for FY 2019-20 • Forecasted General Fund revenue loss of $5 - $7 million • Forecasted Utility revenue loss $4 - $6 million • VSP ended 3
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Assessed Value (AV) and Tax Rate Assumptions 2020 Appraisal Process • Denton CAD protests significantly higher across all entities. • ARB review timeline delayed due to remote review process. • Implementation of new software by Denton CAD caused issues. • Certified Totals were not available on July 24 th as typically anticipated. • Denton CAD provided a Certified Estimate. Certified Estimates • Currently, there are a total of 8,125 parcels under protest representing 39% of total value. • The proposed budget assumes approval of 85% of value under protest. 85% is a projection for budget purposes and based on limited information from DCAD. • Staff will continue to revise projections and present tax rate implications to Council in advance of budget adoption • • The “No New Revenue” and “Voter Approval” tax rate calculates assume the lowest protest values resulting in a “No New Revenue Rate” higher than our current tax rate. 5 August 6, 2020 ID 20-1154
Assessed Value and Tax Rate Assumptions (cont.) Property Value Growth (Annual Percentage Change) 14% 14% $14,000,000,000 12% 12% 12% $12,000,000,000 10% 10% $10,000,000,000 Total Assessed Value 9% 8% 8% $8,000,000,000 6% 5% $6,000,000,000 4% 4% 4% 3% 3% $4,000,000,000 2% 1% -2% $2,000,000,000 0% -2% $0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Tax Year 6 August 6, 2020 ID 20-1154
Assessed Value and Tax Rate Assumptions (cont.) Currently, 39.3% of total assessed value is under protest. • If Appraisal District has not approved appraisal records, the Chief Appraiser shall provide a • certified estimate. The high percentage of protest creates uncertainty in total assessed values and revenues. • Values as of Certified Total or Certified Estimate ~ July 24 th Each Year Fiscal Year Certified Value* Total ARB Proposed ARB Properties In Value Value (85%) Review 2020-21 $8,796,479,166 $5,688,656,463 $4,835,357,994 39.3% 2019-20 $12,545,128,503 $244,259,543 $244,259,543 1.91% 2018-19 $10,936,139,629 $491,429,271 $492,429,271 4.30% 2017-18 $10,123,139,187 $293,722,030 $293,722,030 2.82% 7 August 6, 2020 ID 20-1154 *Includes TIRZ and Frozen Value
Assessed Value and Tax Rate Assumptions (cont.) Proposed Budget Assumption 85% Protest Value State Calculated AV City Calculated AV Certified Value $8,796,479,166 Certified Value $8,796,479,166 Protest Value $4,343,166,707 Protest Value $4,835,357,994 Frozen Values ($1,594,241,870) Frozen Values ($1,594,241,870) TIRZ ($179,689,497) TIRZ ($198,541,948) Certified Estimate $11,365,714,506 Total AV $11,839,053,342 AV Increase over July 2019 Certified Values – 1% AV Increase over July 2019 Certified Values – 4% State Calculated No New Revenue Rate - $0.616399 Proposed Tax Rate - $0.590454 State Calculated Voter Approval Rate - $0.635860 Current Tax Rate $0.590454 • 8 August 6, 2020 ID 20-1154 In 2019, City received 87% of the protest value •
Assessed Value and Tax Rate Assumptions (cont.) Lowest Value 82% 85% 87% Certified Value $8,796,479,166 $8,796,479,166 $8,796,479,166 $8,796,479,166 Protest Value $4,343,166,707 $4,664,698,300 $4,835,357,994 $4,949,131,123 Frozen Values/TIRZ ($1,773,931,367) ($1,786,827,560) ($1,792,783,818) ($1,840,915,177) Total AV $11,365,714,506 $11,674,349,906 $11,839,053,342 $11,904,695,112 Proposed Tax Rate $0.590454 $0.590454 $0.590454 $0.590454 Total Levy $67,109,316 $68,931,666 $69,904,164 $70,291,748 Levy Difference from Proposed ($1,822,350) ($972,498) $0 $670,329 Budget 9 August 6, 2020 ID 20-1154
Assessed Value and Tax Rate Assumptions (cont.) Over 65 Tax Freeze History Actual Tax Levy Taxable Assessed Value City Tax Revenue Freeze Taxable Equivalent* Difference Difference FY 2020-21 $ 1,593,633,620 $ 1,427,164,560 $ (166,469,060) $ (980,178) FY 2019-20 $ 1,434,521,842 $ 1,257,454,060 $ (177,067,782) $ (1,045,504) FY 2018-19 $ 1,253,423,086 $ 1,140,448,592 $ (112,974,494) $ (700,981) 10 10 August 6, 2020 ID 20-1154
Tax Rate Discussion Fiscal Year Operations Rate Debt Rate Total Rate Average Taxable Value Average Tax Bill *Proposed Rate 2021 $0.380364 $0.21009 $0.59045* $248,909 $1,470 2020 $0.385364 $0.20509 $0.59045 $248,909 $1,470 2019 $0.40543 $0.21505 $0.62048 $233,165 $1,447 2018 $0.43031 $0.20755 $0.63786 $214,379 $1,367 2017 $0.46674 $0.21660 $0.68334 $197,379 $1,349 The proposed budget includes a tax rate equal to the current tax rate of $0.59045. • Of this amount, $0.380364 is provided to operation and maintenance expense and $0.210090 for debt. The maintenance and operations rate decreased by $0.005. • The debt service rate will increase by $0.005 , to support the City’s continued • investment in public safety and street infrastructure. The 2021 taxable value is currently equal to the 2020 value. This is due to the fact • that the taxable value received from Appraisal District is below the 2020 value. 11 11 August 6, 2020 ID 20-1154
Tax Rate Discussion (cont.) Residential Annual Tax and Utility Bill Impact Tax Impact Fiscal Year 2019 2020 2021 - Proposed Comments Tax Rate $0.62048 $0.59045 $0.59045 Average Taxable Value $233,165 $248,909 248,909 $1,470 Average Tax Bill $1,447 $1,470 $0 Increase Utility Impact Water $650 $650 $637 2% Rate Decrease Wastewater $378 $378 $378 No Rate Change Electric $1,500 $1,500 $1,500 No Rate Change Solid Waste $300 $260 $248 $1.00/Month Decrease* $2,763 Average Utility Bill $2,820 $2,788 $24.00 Utility Decrease Total Average Bill $4,267 $4,258 $4,233 $24.00 Decrease 12 12 August 6, 2020 ID 20-1154 * Residential rate decrease
General Fund Revenue Discussion – Sales Tax Total Sales Tax Collection • Sales tax through May totaled $25,114,194 $45,000,000 which is $33,539 below the original budget $40,000,000 • The revised forecast is $1.45 million below the $35,000,000 adopted FY 2019-20 budget of $39,281,942. This represents a 10% reduction from June- $30,000,000 September. $25,000,000 • Preliminary FY2021 Sales Tax Budget is $36,441,831. $20,000,000 $15,000,000 10% Sales Tax Reduction in October through • March of FY2021 $10,000,000 • Staff will receive June and July sales tax data $5,000,000 during August and September $0 Budget April 21, 2020 Revised Estimate 13 13 August 6, 2020 ID 20-1154
General Fund Revenue Discussion – Sales Tax (cont.) Sales Tax History 45,000,000 40,000,000 35,000,000 30,000,000 25,000,000 20,000,000 15,000,000 10,000,000 5,000,000 - Annual Sales Tax Total 14 14 August 6, 2020 ID 20-1154
Cost of Service 7% General Fund ROI 7% Revenues Ad Valorem Tax Fees, Permits, FY 2019-20 38% Use of Reserves 14% Proposed Budget $140,303,258 Franchise Fees 4% Sales Tax 30% 15 15 August 6, 2020 ID 20-1154
Expenses Transfers General Fund 1% Cost of Service Expenditures by 12% Category Operations 11% FY 2019-20 Miscellaneous Proposed Budget 3% $140,301,932 Insurance 1% Maintenance & Personnel Repairs Services 1% 69% Materials & Supplies 2% August 6, 2020 ID 20-1154 16 16 The proposed FY 2020-21 budget includes $703,450 in homelessness initiatives •
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