City of South Burlington City Council Adopted January 12, 2013 FY 2014 Budget - Keys to Financial Success Prepared by Sandy Miller, City Manager and Bob Rusten, Deputy City Manager 1

Where We Were June 30, 2010 From Auditors Report (1/7/13) Unfunded deficits at City approximating over $6,000,000. Unfunded Pension Obligation over $8,000,000 Non-compliant borrowing obligations. Operational deficits in the General and other Funds. Multi million dollar deficit being faced in Airport Parkway Project. 22 citations of “Not best” Management practices. 8 Material Weaknesses in above mentioned citations. No management corrective action plan in place. Little institutional budget knowledge and rationale. 2

Where We Are June 30, 2012 From Auditors Report (1/7/13) If Council accepts “write-off plan” presented by Management: 1) City has a corrective action plan. 2) Management has institutional knowledge. 3) City still has fund balance. 4) City is now generating positive cash flow. 5) City had 5 citations as not “best practices.” 6) City had no material weaknesses cited. 7) City refinanced pension obligation saving City money. 8) City has continued implementation of “best practice” fiscal system. 3

Proposed FY 2014 Budget Built to Achieve: Expands miles of roads paved by increasing Paving Budget by over $100,000 to $575,000. Advances the Market Street Reconstruction Project. Reserves money for future city-wide reappraisal. Continues reducing long-term city debt. Funds vehicle replacement schedule. Funds final component of Interim Zoning - Form Based Code committee work. Reserves money towards City Center and new stand-alone Library projects. Continues down the Path to Sustainability achievement. Pursues State awarding of a Tax Incrementing Finance (TIF) District. Achieves funding requirements of Pension Liability Note. Funds the sick bank reserve fund to actuary-suggested levels. Plans to achieve improved accessibility of electronic information for staff and citizens. Incorporates staff/union ideas to: reduce expenses; improve workplace and service delivery. Resolves all identified historical city financial deficits that totaled over $15,000,000. 4

Cost Saving Actions and Initiatives Looking for Ways to Save You Money Investigating with both School and neighboring municipalities ways to share services and thereby reduce costs. South Burlington’s Insurance Service Office rating is now one of the top three in the state due to our Fire Department, Dispatching system and water supply capabilities. This rating can result in lower fire insurance premiums for residential and small commercial buildings. Currently collaborating with school to jointly hire a pension asset manager which should result in lower costs than doing separately, and perhaps lower fees/higher rates of return. Investigating ways to expand our alternative non-property tax revenue base. City Departments encouraged to evaluate new ideas to increase efficiency and reduce long- term costs. 10 year Capital Improvement Plan will lessen unanticipated and more costly expenditures for capital items. Initiates staff hiring where such hiring will overall reduce costs. Working with our insurance agents to determine ways to reduce our Worker’s Comp and Property Liability Insurance Costs. 5

Issues Facing the General Fund in FY 2014 Revenue Reduced from FY 2013 to FY 2014: Market Street Grant$ 14,690 Fire Impact Fees$ 86,000 Ambulance Fees$146,000 Road Opening Fees$ 22,600 Class Two Paving Grant$134,520 Total Reduction in Revenue$403,810 6

Issues Facing the General Fund in FY 2014 (continued) Increased Spending from FY 2013 to FY 2014: Interim Zoning$95,320 Health Insurance$176,300 Pension$224,245 Health Sick Bank$ 31,250 Fire Truck$100,000 Police Department Vehicles$ 38,500 PACIF$179,502 Total Increased Spending $845,117 7

Issues Facing the General Fund in FY 2014 (continued) Total Reduction in Revenue $403,810 Total Increased Spending $845,117 Grand Total $1,248,927 8

Increases in FY 2014 General Fund Non-Property Tax Revenue The City continues to increase ways to raise money other than through property taxes: $ 10,000 – Building and Sign Permits. $ 29,000 – Recreation Program Fees. $125,000 – Local Option Tax. $ 75,000 – Police Impact Fees. $ 47,000 – Hinesburg Road Grant. $ 27,197 – Reparative Board Grant. _________ $313,197 - Total 9

FY’14 Water 1.Water user fees are proposed to increase 3.9%, due to higher operating costs to manage the water system. 2.South Burlington’s water rates are the 4 th lowest of the 15 member communities served by Champlain Water District. 3.Efficient operation allows us to initiate a 7-year water meter replacement program which does not increase rates. 10

FY’14 Stormwater 1.The FY’14 budget plans for the Vermont ANR required future MS4 permit expenses expected to cost over $40 million dollars. To start the 20 year plan, a rate increase of 2.5% is proposed for FY’14. 2.To comply with the permit, the City must develop Flow Restoration Plans (FRPs). The FY’14 budget includes a one-time expense of $256k for this work. The FRPs will identify projects and their work schedule so that all work is completed by 2033, as required by MS4. 3.The ERU rate schedule is designed for the MS4’s 20-year compliance and proposes to gradually raise the money needed to implement the FRPs. The next 10 years we project an annual 2.5% ERU increase. 11

FY’14 Sewer 1.FY’14 and future rate increases (projected to be 2% annually) will produce necessary cash reserves to help pay for projected ~2022 upgrades/improvements to the Bartlett Bay Sewer Treatment Plant. This financial planning will avoid future large rate increases. 2.The FY’14 budget includes the first of 20 annual loan repayments ($1.27M) for the recently completed Airport Parkway Sewer Treatment Plant project. This is offset annually by Colchester’s payment to us of $742k. 3.An increase of $109,532 in annual expenses for our discharges to Burlington’s sewer system is required. In response to this we are doing a cost/benefit analysis to explore options of providing this service at a lower cost to our rate payers. 12

Estimated City Taxes and Utilities Based on Fiscal Year 2014 Budgets City Tax Rate estimated as a 1.99 cent increase, from $ to $ For an average condo value of $224,000 an increase of $44.58 annually. For an average primary residence value of $323,000 a $64.28 annual increase. Each $100,000 in assessed valuation yields a $19.90 increase. For Average Home Owner: Water rate proposed increase = $9.20 annually. Stormwater proposed increase = $1.80 annually. Sewer proposed increase = $7.26 annually. Total Estimated City Tax and Utility Increase Condo, $224,000 = $62.84 annually, $5.24 monthly. Single Family Detached, $323,000 = $82.54, $6.88 monthly. 13