April 30, 2013
City of Roseburg Budget Committee Members:
Subject: 2013-2014 Budget Transmittal Memo
I am pleased to present the proposed FY 2013-2014 City of Roseburg budget for your consideration. The Budget is a tool used by Staff and Council to provide a roadmap for future operations and capital investments. We have attempted to provide funding at a level consistent with current operational service levels and incorporated strategies to achieve Council’s goals. However, because of cost increases, this proposed budget provides slightly reduced services in the General Fund.
While the global recession is technically over, our state and local economy continues to suffer from high unemployment and other conditions attributed to the poor economy. Many more rural communities have seen significant reductions in property values and associated revenue due to a decline in residential property development. The City property values are beginning to rise again and should return to historical levels over the next few years. Assessed value growth has not met the 3% threshold allowed by state law the last few years, but has not declined.
The City worked with developers and other local government partners to insure that recent commercial development could occur within the City limits and allow for economic expansion and assessed value growth. These steps, in addition to seeking greater efficiencies in our operations and leveraging local dollars with state and federal grants, have allowed us to make important capital investments in transportation and other infrastructure.
We continue to meet challenges associated with increasing PERS contributions, which will increase by almost 6% of payroll effective July 1, 2013 unless legislative action is taken prior to July. Resources needed to operate City government are also stretched by rising health and property insurance costs. We are close to concluding bargaining with the IAFF, our local fire union. We are entering negotiations with the Police Employees Association and have one year left on our general service agreement with IBEW. It is important to note that while the impacts of collective bargaining have financial implications related to our budgets each year, approval of collective bargaining agreements is the responsibility of Council, not the Budget Committee. Information related to the impacts of collective bargaining has been included in the proposed budget.
CITY GOALS AND OBJECTIVES
In February 2013, the Council adopted five goals that will provide direction to Staff over the next few years as we develop budgets and strategies to meet those goals. Council chose to return to a goal setting process that provided direction related to the “big picture” rather than a listing of individual actions or activities. The five goals are as follows:
- Identify and Implement Long-Term Infrastructure Funding Mechanisms to Ensure the City can Meet Long-Term Infrastructure Stability and Sustainability.
- Develop Strategies to Provide Long-Term Operational Stability and Sustainability.
- Update and Implement the Urban Renewal Financial and Project Plan: Evaluate Establishment of Additional Urban Renewal Plan Area(s).
- Citywide Beautification.
- Define and Establish Business Friendly and Improve City Image.
City Staff continues to outline activities and priority projects that will allow us to measure progress towards achieving the goals. As you review the departmental and fund narratives you will see how these goal areas are being addressed through individual department goals and projects.
Again this year, Staff reduced proposed General Fund expenditures to meet the Budget Committee’s goal of a 30% General Fund reserve. Over the course of the next twelve months we will be revisiting reserve requirements with Council as part of our operational sustainability goal. We have used the financial resources estimated to be available to continue to provide a high level of services that are needed and valued by City residents. We accomplished many things over the course of the last year, a few of which are included below.
The Finance Department received its 19th consecutive Award for Excellence in Financial Reporting from the Government Finance Officers Association in addition to providing quarterly financial updates to Council. The IT department helped coordinate installation of kiosks in the Public Safety Center and City Hall which provide information for visitors and constituents at a touch screen. The City Manager’s office developed a Council Policy Manual and began work on customer service training throughout the organization. A number of administrative Staff also participated in Economic Development activities through The Partnership, the Industrial Development Board and the Umpqua Business Center.
The Fire Department completed its second year with four additional firefighters with funding provided by a federal SAFER grant. The grant money extends through about mid-year of this budget cycle and requires local funding for an additional year. The additional Staffing has allowed for better scheduling and less utilization of overtime to meet service needs outlined by our operational policies. They also planned and coordinated a community safety training exercise in conjunction with the Great Oregon Shakeout which included participation by the City of Roseburg, Douglas County, Mercy Medical Center and a number of other local businesses. Community awareness of how to respond during a natural disaster is an essential part of our preparedness program.
The Police Department instituted a very successful K-9 program during the last year. With a significant contribution from a local individual and additional local fundraising, the department purchased and introduced three K-9s, two in regular patrol and one in narcotics detection. The program has been very successful and the community involvement and support for this program has been very gratifying. The Department continues to work closely with our Volunteers in Police Service as well, this year logging almost 2,600 in community volunteer hours. They also continue to partner with the Roseburg Area Youth Service (R.A.Y.S.) program operated through the Douglas County Juvenile Department.
Community Development successfully processed an Urban Growth Boundary expansion which included an area north from Edenbower at I-5 to Wilbur. A portion of that area owned by Central Oregon and Pacific Railroad was also annexed into the City limits. The Department also worked to achieve National Historic Register status for the Umpqua Valley Arts Center facility which is owned by the City and also the Roseburg Veterans Affairs Campus. Our work on historically significant properties is important to our organization and the community.
Public Works developed and oversaw a number of projects during the last year including a $2 million airport runway extension, over $2 million in water transmission main replacements, the Hucrest School area storm drainage improvements as well as adding badly needed turn lanes at Stewart Parkway and Edenbower and Edenbower and Aviation.
The Parks Division worked extensively with volunteer groups to complete a small but important project in the Parrot Creek area as well as partnering with the Audubon Society on geocache project and an outdoor education project in the natural area of Stewart Park. The Division also replaced dugouts at Gaddis Park with safer visually enhanced enclosures and worked with the Cal Ripken volunteers to install drainage improvements in that park.
A waterfront multi-modal trail was replaced in Riverside Park near the Visitors Center from Flint Street to the north end of Spruce Street.
We made every effort to provide a proposed budget that continued current operations in the General Fund and enhanced levels of service in some of the enterprise funds. As a result of significant increases in our Public Employee Retirement System rates effective July 1, 2013, status quo service costs would have increased over $600,000 and we could not meet our General Fund reserve requirement of 30%. As a result, we are proposing primarily the same level of service in departments providing direct services to our constituents, but a slightly reduced level of service internally in administration and support services.
In the Fire Department, the SAFER grant will continue to provide a portion of the funding for the four additional fire personnel that were hired in 2011-12. That level of service will continue at least through 2014. We continue to evaluate support staffing levels in each of our departments, and we propose a .5 FTE reduction in office staff.
The Police Department is proposed to continue at current service levels, maintaining 40 FTE in the proposed budget. We continue to evaluate the effectiveness of all areas of service provided through the Department. Last year was the first full year with the addition of 3 K-9 units, and we look forward to continuing the programs in which these units are involved.
Public Works Administration has also proposed a .5 FTE reduction in support Staff, but for the most part, engineering, building maintenance and the street division will operate at virtually the same level. The message will go into more detail relating to the entire Public Works budget as it has been in a separate fund for many years, but is now going back into General Fund for accounting and reporting purposes.
The only additional FTE included in the General Fund proposed budget is a transfer of an employee from the Golf Enterprise Fund to the Parks Maintenance Division. The Stewart Park golf course operations were contracted out through a request for proposal process in April 2013, and the new agreement requires the concessionaire to provide all course services including pro shop, driving range, maintenance and improvements, thus eliminating the maintenance requirements for the City.
Community Development and Information Technology will continue at current Staffing levels; however we continue to evaluate returning compliance services in Community Development. As we determine how best to move forward with Beautification and Enhanced City Image goals, this is an area that will need to be addressed.
Reductions of .5 FTE each are included in the City Manager’s Office, the Finance Department and Municipal Court. Some of the reductions are a result of efficiencies that have been developed over the last few years and some are to accommodate resource restrictions. Again, we will monitor how effective these reductions are and make sure that service levels both internally and externally can continue to be met.
Significant Budgetary Changes
The most significant change in the General Fund is the inclusion of Public Works administration, engineering and street maintenance. The primary purpose for including these departments in the General Fund relates to changes in reporting requirements as outlined by the Governmental Accounting Standards Board. New pronouncements required changes in reporting for Special Revenue funds, and the Public Works fund no longer qualified as a Special Revenue fund. In addition, it is my philosophy that each of these departments are supported by general revenue sources and should be included as part of the General Fund.
There are a couple of significant impacts related to the inclusion of these departments back into General Fund. The first is an increase in the General Fund budget from the prior year of almost $2.5 million. In and of itself, this is not an increase in the total budget as these departments were previously included in the Public Works Special Revenue fund, and the overall budget increase is nominal. The more prominent impact of including Public Works back into General Fund is that based on a policy adopted by the Budget Committee in the past, we are required to propose a budget with at least a 30% operating contingency/ending fund balance. The inclusion of Public Works had the result of increasing this requirement by almost $750,000. The proposed reserves are at just under 31%, or $6.169 million. This requirement puts significant limitations on budget flexibility, and the overall policy will be revisited with Council as part of our sustainability goal. Having appropriate reserves is essential to providing sustainable operations for our community, but it should be established in conjunction with other financial and operating policies to insure that it becomes part of a long term operational plan, not just a savings account.
As indicated above, most of the other changes related to small reductions in FTE in support services throughout the budget. Each of these reductions will be evaluated over time as we attempt to provide a baseline service level to which we will compare long term resources for sustainability. The current proposed budget contains about $19.7 million in current year resources and $20.12 million in current year expenditures. The primary reason expenditures outstripped resources is the increase in PERS rates and the overall impact of personnel costs. We are primarily a service organization, and we will always need to balance the cost of personnel in relationship to the services we provide. We will be addressing this approximate 2% imbalance over the course of the next year through development of the sustainability goal action items. Philosophically, it is important to match current resources and expenditures over time so that the implications of revenue or cost shifts can be evaluated against organizational baseline service standards.
Two other changes to the budget are of significant note. The City has maintained Housing Rehab Loan Fund for many years. In April, City Council passed a resolution to transfer the majority of current and future resources to NeighborWorks Umpqua through a transfer agreement. The proposed budget for 2013-14 includes a transfer of part of the remaining cash to the Park Improvement Fund and a residual equity transfer to General Fund to close out this fund. NeighborWorks Umpqua will continue to provide a revolving loan fund for improvements to low income housing in the City limits. After 2013-14 this fund will no longer have current budget impacts.
The other change moves the Golf Enterprise Fund to a Special Revenue Fund and eliminates the budget for golf operations. As mentioned previously, course operations which were provided by the City have now been contracted out. There are now only two revenue sources - course concessionaire payments and a cell tower lease. These two revenues will continue to be budgeted in the Golf Special Revenue Fund to cover administrative oversight costs and remaining debt service for an inter-fund loan.
Collective Impacts – Outside Influences
As indicated previously, the increase in our PERS rates, initially estimated at almost 6% of payroll effective July 1, 2013 made it very difficult to balance our operational budget. PERS reform is being considered by the Oregon Legislature as I am writing this message. Much of the proposed legislation would not structurally change the system; therefore, it merely pushes our cost down the road. If no further reforms are considered, rates will likely increase again in July 2015 and stay at the higher rates for another 20 years. We are in the system, and only the legislature and eventually, the courts can impact the PERS system. We have an obligation to pay the rates as determined by the actuary in accordance with state statute. If no changes are forthcoming, rates will stabilize around 25% of payroll, or about 15% higher than rates were throughout the 1990’s.
The other primary outside influence on the cost of providing service is the Public Employee Collective Bargaining Act (PECBA) and how it has been interpreted over the years. Our strike prohibited employee groups (police and fire) are subject to provisions that allow for binding interest arbitration rather than the regular requirement to reach agreement only through the collective bargaining process. If impasse is reached, proposals are submitted to an arbitrator, and the arbitrator has the final choice in determining the final compensation.
Over time, many of the decisions have required each agreement to provide total compensation in an approximate mid-range to other selected jurisdictions. The result of that process is that every time an employer is below the mid-range of comparables, it is required through arbitration to increase at least to the mid-range. It does not allow a jurisdiction to determine whether there is an actual “limit” to the compensation packages made available. If the cost exceeds our ability to pay, we are then required to either make reductions in other areas of the budget or reduce the Staffing eligible for the newly required compensation. Again, our lack of control in this area makes it difficult to contain costs and provide a consistently high level of service. Attempts to change these statutory requirements have largely been ignored by the legislature over the last fifteen years, and combined with the upward spiraling cost of PERS, it has become almost cost prohibitive to provide some governmental services.
OVERALL BUDGET SUMMARY
The total FY 2013-2014 proposed budget, including General Fund and all other fund expenditures is proposed at $59.170 million compared to the current year adopted budget of $59.306 million. There are significant capital expenditures included in all funds budget, primarily over $3 million in the Water Enterprise Fund and over $4 million in the Airport Enterprise Fund. Each of these fund expenditures will be significantly lower over the next couple of budget cycles.
GENERAL FUND SUMMARY
Basic operations in the General Fund include Parks, Public Works (included in 2013-14 for the first time in many years), Police, Fire, Community Development, Finance and Management Services, Municipal Court and Administration. The General Fund provides funding for most direct operational services that residents recognize and use frequently. The FY 2013-2014 General Fund is proposed at $26,287,645 including reserves of approximately 31% or $6,169,259.
GENERAL FUND REVENUES
Total operating revenues are proposed at $19,300,554, including revenue that was formerly recognized in the Public Works Special Revenue Fund, an increase of $1.79 million from the 2012-2013 adopted budget of $17,512,582, but a decrease from the overall revenues budgeted for both funds in the prior budget year. The most significant General Fund resource continues to be current and prior year property taxes. Property taxes are planned to increase to $12,195,000 or about 3% from the 2012-2013 adopted budget of $11,840,000. As the recessionary impacts subside, we anticipate property taxes will once again increase above the three percent benchmark allowed by statute.
With the passage of Measure 50 in 1997, the property tax system changed from a levy based system to a modified tax rate system. A permanent tax rate was established at $8.4774 for the City of Roseburg. As an example, a home with an assessed value of $150,000 will pay $1,272 in property taxes to the City.
GENERAL FUND EXPENDITURES
Total General Fund expenditures are proposed at $20,118,386, exclusive of reserves but inclusive of Public Works for the next fiscal year, equaling a $1,537,282 increase. The overall change when combining the General Fund and Public Works Special Revenue Fund actually shows a decrease of almost $1.4 million. Over time, the impacts of combining these two funds will be much more transparent. Local Budget Law requires that three prior years’ information must be shown in the budget document by fund for which appropriations were made, so the Public Works historical data will be contained in the Special Revenue portion of the budget for three more years.
ENTERPRISE, SPECIAL REVENUE, AND CAPITAL PROJECTS FUNDS
Enterprise Funds, Special Revenue Funds and Capital Projects Funds actually comprise the majority of the City’s overall budget. Enterprise Funds include the Water Fund, Storm Drainage, Off Street Parking and Airport. Special Revenue Funds consist of Grants, Hotel/Motel Tax, Bike Trail, Street Lights and Sidewalk Funds, Housing Rehab, Golf, Economic Development and the Stewart Trust. Capital Project Funds consist of Transportation, Park Improvement, Equipment Replacement, Assessment Improvements and Facilities Replacement.
Most of these funds will remain consistent with prior years except for the two funds previously discussed, Golf and Housing Rehab.
I look forward to reviewing the proposed budget with you and wish to thank the many City Staff members responsible for preparation of this proposed budget. Special thanks go to Cheryl Guyett, Director of Finance and Management Services. As in past years, Cheryl spent many long hours putting the budget together and making sure it represents the collective wisdom of all the Staff involved in development of the budget.
Cheryl Guyett, Finance and Management Services Director
Jim Burge, Police Chief
Sheila Cox, City Recorder
Mike Danielle, Airport Director
Debi Davidson, Management Technician
Brian Davis, Community Development Director
Debbie Keller, Accountant
Della Mock, Accountant
Mike Lane, Fire Chief
Nikki Messenger, Public Works Director
John VanWinkle, Human Resources Director
C. Lance Colley