1. Budget Boot Camp GFOAz Budget Forum October 22, 2015

2. Introductions/Overview Purpose of Budgeting/Roles Components of a Budget Development of Budget Process Revenues Expenditures Adoption/Implementation of Budget Legal Framework Questions/Discussions Objectives

3. Introduction A little about me…. A little about you…  City of Reno  City of Eugene  City of Glendale  City of Peoria  Willamalane Park District  Parks and Recreation  Neighborhood Programs  Development and Engineering  Economic Development  Finance and Budget  Strategic Initiatives  Labor Negotiations  Performance Management

4. Purpose of Budgeting To meet organizations strategic goals Process to determine what & how services will be delivered to citizens Identifies how services will be financed Pursue politically chosen goals for citizens

5. Purpose of Budgeting Internal Control mechanism for planning and controlling operations One of the most important activities undertaken by governments Revenues MUST = Expenditures Bottom line, you can add revenues, reduce expenditures or a combination of both!

6. Purpose of Budgeting Simplistic Version: “On what basis shall it be decided to allocate X dollars to activity A versus activity B?” Not as easy as it sounds……

7. Roles in Budgeting Citizens – Offer perspective on service priorities, tax burden, level of trust. Elected Officials - Set Policy Guidelines, Review and Modify Budget Where Necessary, Communicate Position to Constituents, Resolve Conflicts Department Staff - Develop Program Objectives, Identify Service Levels, Prepare Budget Requests Executive Management - Prepare a Recommended, Balanced Budget, Incorporate Council Priorities, Assess Service Levels

8. Sorting Through the Issues Regional Economy State Financial Situation Public Safety Growth-Related Issues Street & Right-of-Way Maintenance Community-Oriented Objectives Revenue Reliance Unfunded Mandates Industry Retention Economic Development Water Supply/Allocations Transportation-related Issues Costs above regular inflation rate Employee Pensions ExpendituresRevenues

9. What are the top three issues facing your organization? Exercise Regional Economy State Financial Situation Public Safety Growth-Related Issues Street & Right-of-Way Maintenance Community-Oriented Objectives Revenue Reliance Unfunded Mandates Industry Retention Economic Development Water Supply/Allocations Transportation-related Issues Costs above regular inflation rate Employee Pensions From the perspective of your:  Elected Official  Department Head – pick a department  General Staff – pick a job

10. Why So Many Funds?

11. Types of Funds Fund Type Use General Fund Day to day City operations Special Revenue Restricted revenue sources Enterprise Funds Running a business Internal Service Funds Service to other departments Capital Projects Large construction projects Debt Service Interest & principal on debt

12. Who Should Pay For What Services? General Taxes and Other Revenues –Public Safety, schools, libraries, parks, administration Special Revenues –Specific Use funds, Grants, Dedicated Sales Tax User Fees –Recreation programs, building permits, entry fees, Enterprise Funds – Full/Partial Cost Recovery –Water, Wastewater, Solid Waste, Storm water, etc.

13. What is in a Budget?

14. Components of a Budget

15. Operating Budget Components of a Budget One to two year financial plan Identifies both revenues and expenses May include traditional line items May include program and performance components Should identify ongoing vs. onetime expenditures

16. State Budget by Function

17. County Budget by Function

18. 18 Municipal Budget by Function

19. Capital Budget Components of a Budget Multi-Year plan (usually 5-10 years) Identifies Project Cost, Timing and Funding Source(s) Identifies operating impact of projects Financed by pay as you go, grants, or borrowing The first year of a capital plan is the “capital budget”

20. Capital Program Components of a Budget

21. General Obligation Bonds Backed by property taxes (secondary rate) Prop 117 limitations – effective FY2016 Revenue Bonds Typically backed by rates Municipal Property Corporation Bonds Typically backed by excise taxes Water Infrastructure Financing Authority (WIFA) AAA rate + Subsidy Highway User Revenue Bonds Special Improvement District Bonds Components of a Budget Bonds

22. Other Components of a Budget Debt Service Principal and Interest payments on long term debt (Bonds, Loans, etc.) Must budget for these payments Contingency Different than reserves Budgetary function that provides the legal authority to spend. Provide some flexibility for those unforeseen items, emergencies, or mid-year budget changes.

23. Putting it All Together The Budget Cycle

24. PreparationAdoptionImplementationEvaluationAudit

25. For the Organization: Legislative vision and goals Fiscal picture for next year (Revenue Projections/Expenditure estimates) For the Departments: Instructions/rules to follow in preparation Budget justification Cost Estimations Performance Metrics Budget Preparation

26.  Operating Budget Supports Day-to-Day activities of City  Capital Budget Supports Large, One-Time Projects

27. OPERATING Five year forecast of major funds Year End Fund balances (CAFR) Project out revenues and expenditures one time vs. ongoing operating impacts of CIP Produce a ‘balanced budget’ Budget Preparation CAPITAL Project out revenues for various funds Prioritize projects Produce a final plan (typically 10 years)

28. Revenues Taxes Intergovernmental revenues Fees for service Fines and charges Special revenues Miscellaneous revenues Bond & Lease Proceeds Special Assessments Do you need any adjustments to taxes, rates or fees? Must post notice 60 days prior to budget hearing ARS 9-499.15

29. Expenditures State Expenditure Limitation Alternatives? Home Rule Arizona Constitution, Article IX, §20(9) Arizona Constitution, Article IX, §20(9) Permanent Base Adjustment Arizona Constitution, Article IX, §20(6) Arizona Constitution, Article IX, §20(6) One time override Arizona Constitution, Article IX §20(2)(c) Arizona Constitution, Article IX §20(2)(c)

30. Types of Budget Processes Performance Based Program Zero Based Modified Zero-Based (Target) Incremental Expenditure Control Based (ECB) Line Item

31. Some considerations: Central Budget office "rules of thumb” Policy Rationale Program changes Trend analysis Does it follow executive policy Budget Preparation Review of Requests

32. Budgeting in Arizona Keeping it Legal

33. Significant Statutory and Legal Requirements Different process for different levels of government Know key dates Use available resources

34. Statutory Requirements The following slides are from the League’s Budget & Finance Manual & are the statutory dates required. These are for reference after the presentation.

35. Statutory Requirements

38. Summary of Key Tasks/Dates Statutory Requirements Must adopt a balanced budget Tentative budget must be adopted by third Monday in July No requirement for final budget unless City/Town has property tax Property Tax must be adopted by 3 rd Monday in August but 14 days after final budget adoption Various restrictions on funds – HURF, Impact Fees

39. Statutory Requirements Tentative budget is required to be itemized per Auditor General Forms Published once a week for two consecutive weeks Notice of hearing date for final budget Both tentative and final must be published on City/Town website 7 business days after adoption Must remain posted for 60 months (five years) Summary of Key Tasks/Dates

40. Budgeting in Arizona Truth in Taxation

41. Levy versus rate! If current Assessed Valuation goes up, truth in taxation may be required Property Taxes Citizen perspective: If you had a house that was valued at $100K last year and it is valued at $110K this year and the rate stays the same, your levy is going up! Citizen perspective: If you had a house that was valued at $100K last year and it is valued at $110K this year and the rate stays the same, your levy is going up! Truth in Taxation

42. Notice published twice. 1st publication at least 14 days but not more than 20 days before public hearing 2nd publication at least 7 days but not more than 10 days before public hearing Publication cannot be published in classified or legal sections Truth in Taxation Notification/Publication Requirements

43. Notice must be ¼ of page in size and surrounded by a border of 1/8 inch Headline must read “Truth in Taxation Hearing- Notification of Tax Increase” at 18 point type Truth in Taxation Notification/Publication Requirements

44. Hearing must be held at least 14 days before the adoption of the levy Hearings for Truth in Taxation, levy and final budget can be combined Truth in Taxation hearing MUST be held before the adoption of final budget If you have truth in taxation, you MUST adopt tentative budget BEFORE statutory deadline of July 15 Truth in Taxation Tax Levy Adoption

45. Auditor General Forms

46. Resolution for the Adoption of the Budget Schedule A - Summary Schedule of Estimated Revenues and Expenditures/Expenses Schedule B - Tax Levy and Tax Rate Information Schedule C- Revenues Other Than Property Taxes Schedule D - Other Financing Sources/Uses and Interfund Transfers Schedule E - Expenditures/Expenses by Fund Schedule F - Expenditures/Expenses by Department (as applicable) Schedule G - Full-Time Employees and Personnel Compensation Auditor General Forms

49. Publication Requirements Population over 2,500 must establish and maintain an official internet website Posted no more than 7 days after estimates of revenues and expenditures are given to governing body A.R.S 42-17105 & 17103: Requires adoption of expenditure estimates (tentative budget) Posting of tentative and final budgets for 60 months

50. Resources AZ Auditor General Office http://www.azauditor.gov/ AZ League of Cities & Towns-Budget and Finance Manual http://www.azleague.org/

51. Budget Boot Camp GFOAz Budget Forum October 22, 2015