TO: Mayor and Council FROM: Kip Padgett, City Manager SUBJECT: FY 2013 Recommended Budget DATE: May 9, 2012 CITY OF GAINESVILLE CC: Angela Sheppard; Melody Marlowe; Denise Jordan OFFICE OF THE CITY MANAGER Post Office Box 2496 Gainesville, Georgia 30503-2496 Attached for Mayor and Council review is the City Manager’s proposed Telephone: 770.535.6865 FY 2013 budget. The budget contains a summary of revenues and expenditures for the General Fund and the Capital Improvements Plan, Fax: 770.535.6896 as well as eighteen other funds. This balanced budget has been Web Site: www.gainesville.org prepared and is being presented to the Governing Body in accordance with the City Charter, and with Chapter 2-3 of the Gainesville City Code. A tax increase is not recommended; however, this budget does recommend a roll-up of the millage rate. In preparing the FY 2013 budget, many issues played a key role in its development. Most notably are the following: Economic Concerns: We are beginning to see some bright spots in the economy. As you will see, some of our revenue items are beginning to show sustained increases. We still have to remain cautious as unemployment remains high and the housing market is still weak. Revenues: The city’s revenue portfolio is beginning to show signs of improving. Our once traditionally strong areas, such as LOST are beginning to show steady, sustained increases. In fact, most of our revenues this year are showing increases, with a few exceptions. Property taxes: This continues to be the biggest challenge on the revenue side of the budget. Property tax digest fell by 9% in FY 12. In FY 13, we would experience another 7% decrease without a roll up. Electricity and Fuel: Increases in electrical rates and the continued uncertainty of fuel costs generates a challenge to all departments as they strive to continue to meet required service levels and hold their budget near FY 2012 levels. FY 2012 Surplus: A surplus in some revenue line items will permit us to purchase some necessary capital items as well as perform paving projects in the coming year. It is ideal to use surplus funds for these type activities since the funds are one- time funds and not meant to supplement the operating budget. Page 1 of 59
Operating revenues for the General Fund saw an increase of $1million or 5.1% due mainly to items such as the local option sales tax and permits fees for inspection. However, the real and personal property tax digest experienced declines, necessitating a millage rate roll up in order to maintain level property tax revenue. It is important to note the city’s continued emphasis of keeping property taxes low. Property taxes account for 19% of the total revenue received. Of that total, only 34% comes from residential properties. It is also important to note that CITY OF GAINESVILLE property taxes continue not to be the primary source of revenue for the city OFFICE OF THE CITY MANAGER The General Fund budget is $27,982,554, an increase of 2.0%. While Post Office Box 2496 most departments submitted budgets that are in line with FY 2012 Gainesville, Georgia 30503-2496 requests, some necessitated an increase. The nineteen other funds remain close to FY 2012 levels or in line with projected revenues for Telephone: 770.535.6865 each fund and can be seen in the attached budget documents. Fax: 770.535.6896 However, a few departments and agencies merit discussion below. Web Site: www.gainesville.org Community Service Center (CSC): The CSC is mainly dependent upon the general fund for the required match to the various grants it receives. Some grants have seen a decline due to cutbacks at the State and Federal levels. While the City has met the funding requirements for its share of the department, it is important to note that the funding uncertainty of Hall County will be a key issue for the CSC and its ability to operate at current levels. Parks and Recreation (P&R): Due to the decline in FY 12 property taxes, P&R has to again depend on reserves to balance its budget for FY 2013. Most capital needs required by them are being delayed until future years. However, a millage roll up will assist them in meeting most of their operational needs. A $75,000 transfer from the Hotel/Motel tax fund is also proposed. Capital Improvement Program (CIP): The attached budget includes a summary of proposed capital projects for the coming fiscal year. This fund, totaling $3,000,000, includes a continued emphasis on road improvement projects and identified capital needs in the police department. In years past, the police department has had a vehicle replacement policy to avoid large single year vehicle purchases. Due to the economy over the past four years, vehicle replacement has not kept up with the needs of the department. Public Utilities (PUD): The utility fund budget is increasing by 9.1% for FY 2013. The main reasons are the continued increase in power, chemical and fuel costs required to operate our water and wastewater facilities. Some operating capital needs that have been delayed in past years are at a critical threshold for replacement. Page 2 of 59
Chattahoochee Golf Course (CGC): Although an enterprise fund, the golf course is still dependent on the general fund to assist in covering debt obligation for course renovations that occurred in 2007. In reviewing expenditures over revenues, it is worth noting CGC can be self-supporting. However, by adding the debt service to the equation it requires money from the General Fund. It is the intent to keep any transfer below $200,000. CITY OF GAINESVILLE Moving into FY 2013, it is important to be aware of concerns that may OFFICE OF impact our budget, both this year and in years to come: THE CITY MANAGER Post Office Box 2496 Actions to reduce or eliminate franchise fees and insurance Gainesville, Georgia 30503-2496 premium taxes would have a dramatic impact on our operations. These two funding sources represent $5.5 million to our general Telephone: 770.535.6865 fund. Although there was limited discussion in the General Fax: 770.535.6896 Assembly this year, cities must remain vigilant on these issues. Web Site: www.gainesville.org Decline in property assessments and any continued action by the General Assembly to affect assessments could have continued effects on revenue from property tax. Although changes to our benefits have reduced our Other Post- Employment Benefits (OPEB) liability, this area needs to continually be monitored and an appropriate funding mechanism put in place. The Eleventh Circuit Court has rever sed Judge Magnuson’s decision which is welcome news to our community. We must still practice conservation efforts to insure adequate water supply as we anxiously await the Corp of Engineers analysis on the allowed uses of Lake Lanier. As the SAFER grant continues to decrease in funding, Council will need to remain cognizant that an increase in revenues will need to occur to help lessen or offset the need for an increase in the millage rate in the FY 2015 timeframe. It is not financially sound policy to use one-time funds to fill any perceived or actual gaps to recurring costs. Our debt service is funded through a dedicated millage rate. As property taxes have declined so has the revenues needed to adequately fund debt service in the long term. Bond payments on the Frances Meadows Center and Parking Deck are made out of these funds. The city also depends on this fund for its fleet replacement needs, especially in public safety. Although this fund will meet the need this year and to a limited degree in FY 2014, reductions in capital purchases will have to occur in FY 2015 (which will further stress capital needs) or an increase in revenue (i.e. millage rate) will need to occur. It is important to note that delay of capital purchases in the vehicle fleet presents its own challenges with reliability and maintenance issues, especially where public safety is concerned. Page 3 of 59
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