Transcript Municipal Budget & Finance 101

Municipal Budget & Finance 101
GFOAz Annual Conference 2003
Doug Sandstrom, City of Surprise
Byron Smith, League of Arizona Cities
and Towns
Revenue Sources
Intergovernmental (State Shared Revenue)
Local Taxes
– Sales (TPT)
– Property
User Fees
State Shared Revenues-General
Category
History
 Urban Revenue
Sharing (Income Tax)
– 14.8% of 2 Years
Prior
– Population
Distribution
– General Government
Purposes
– $365,065,000
 1972 Initiative
– Preempted from
Local Income and
Luxury Tax
 15% Originally
– Has Fluctuated Over
Time
State Shared Revenues-General
Category
 Sales Tax
– 25% of Distribution
Base
– Population
Distribution
– General Government
Purposes
– $318,000,000
History
 1942 Initiative
 1960 Initiative
– Increased Share
State Shared Revenues-General
Category
 Highway User
Revenue Fund
(HURF)
– 27.5%
– Population and County
of Origin of Gas Sales
Distribution
– Restricted to Streets
and Roads
– $294,000,000
History
 1946 Initiative
– Originally just Gas
Tax
– Now Includes Other
Transportation
Related Fees
State Shared Revenues-General
Category
 Vehicle License Tax
– About 20% of VLT
– Population
Distribution within
Counties
– General Government
Purposes
– $140,000,000
History
 Evolved from
Personal Property Tax
on Vehicles
State Shared Revenues-General
Category
 Local Transportation
Assistance Fund
(LTAF)
– First $23 million after
operating costs are
met
– Population
Distribution
– Restricted to
Transportation/Transit
History
 First in Line after it
Passed
State Shared Revenues-Local
City of Surprise
– 14% of general fund operating budget
• Not dedicated to any particular activity
– HURF funds are used exclusively for street
maintenance operations
• General fund subsidizes 24% of total streets budget
– LTAF
• Entire amount funds our Transit division
• Dial-a-Ride
• Must live within this allocation
Local Revenues – Sales Tax
Model City Tax Code
– Established in 1987 after attempt to preempt
local sales tax authority
– Brought uniformity with continued local
control but with options and green pages
Only 1 of 5 states that have this much
authority over the tax base.
National effort to Streamline
Local Revenues – Sales Tax
Sales Tax
– 51% of general fund operating budget
– Several Components
•
•
•
•
Retail
Restaurant & Bar
Hotel/Motel
Construction – Onetime Revenue
– Attempt to maximize ongoing components
Local Revenue - Sales Tax
City of Surprise, AZ Local Sales Tax
20,000,000
Sales Tax
16,000,000
Total General
Fund
12,000,000
8,000,000
4,000,000
0
FY19 FY19 FY20 FY20 FY20 FY20 FY20
98
99
00
01
02
03
04
Major Sales Tax Components
Construction, Retail & BBB
Sales Tax Collection
10,000,000
8,000,000
6,000,000
4,000,000
2,000,000
0
70%
60%
50%
Construction
40%
30%
Retail Trade
20%
Bed, Board &
Booze
10%
0%
FY19 FY19 FY20 FY20 FY20 FY20 FY20
98
99
00
01
02
03
04
Local Revenues - Fees
 Permits & Fees
– 16% of total General Fund Revenue
– Cost recovery (including overhead)
 User fees
–
–
–
–
–
Pay to Play
Only participants pay
Cost recovery Philosophy
1% of general fund revenue
Political Implications
Local Revenues – Utility Fees
Utility Fees
– Business like activities
– Type of User Fee
– Each activity should be self supporting
•
•
•
•
Sewer
Water
Replenishment
Sanitation
– Political Implications
• City of Surprise 3-Year Ramp-up
Local Revenues - Utility Fees
Combined Water, Sewer & Replenishment
Revenues & Expenditures
8,000,000.00
101%
109%
6,000,000.00
69%
4,000,000.00
2,000,000.00
163%
74%
72%
200%
150%
100%
86%
50%
0%
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97
98
99
00
01
02
03
9
9
9
0
0
0
0
1
1
1
2
2
2
2
FY
FY
FY
FY
FY
FY
FY
Revenues
Expenditures
Coverage
Local Revenues - Property Tax
Primary & Secondary
– Primary may be used for any general
government purpose
– Secondary is directly tied to debt service
– Both Require Voter Approval
– Primary has 2% increase over maximum levy
Truth-in-Taxation
– Notification
– Based on Levy not Rate
Local Revenues – Property Tax
 Must be adopted on or before the 3rd Monday in
August
– At least 7-days after final budget
– Requires a Public Hearing
 Truth-in-Taxation
– Must be published twice in a local newspaper
• 1st Publication 14 – 20 Days
• 2nd Publication 7 – 10 Days
– Requires Roll Call vote of the council
– Requires a Public Hearing
Truth in Taxation
NOTIFICATION OF CITY OF SURPRISE
TOTAL PROPERTY TAX RATE REMAINING CONSTANT
The Truth in Taxation notice printed below - as required by state law - only tells half the story.
City officials believe property owners in Surprise deserve to know the whole truth.
The following information is intended to give property taxpayers a better understanding of the
municipal tax system and its impact on property owners this year.
Municipal property taxes include primary and secondary taxes. Primary taxes fund general
government operations including police and fire services. Secondary taxes go toward interest and
principal payments on voter-approved general obligation bonds issued by a city for capital
improvements, such as sewer and wastewater treatment facilities, library, public safety, court and
other public buildings.
The Truth-in-Taxation notice deals only with primary property taxes and, as a result, may be
misleading. Yes, the City of Surprise intends to increase the primary property tax rate for fiscal
year 2003-2004, but what the Truth-in-Taxation notice doesn’t say is that the City intends to
decrease the secondary property tax rate by the same amount. It means the combined City of
Surprise primary and secondary tax rate will remain constant at $0.9109 per $100 of
assessed value.
Figure it out for yourself. The current year primary rate is .6632 per $100 of assessed valuation;
the proposed rate is .6936 - an increase of .0304. The current year secondary rate per $100 of
assessed valuation is $0.2469; the proposed rate is .2165 - a decrease of .0304. In actual dollars
and cents, the primary tax on a home with an assessed value of $100,000, for example, will
increase from $66.32 to $69.36, but the secondary property tax will decrease from $24.69 to
$21.65, for a total tax bill that remains the same as last year’s $91.01!
Please note: Actual dollar impacts will differ from property to property based on the new
assessed valuation as determined by the Maricopa County Assessor’s Office. Provided the
average homeowner does not experience a substantial increase in the home’s assessed
valuation, most residents will experience little change in their total City of Surprise tax bill.
Again, the information below deals exclusively with Primary Property Taxes and is worded
exactly as required by State Statutes. If you would like more information, please contact the City
of Surprise Public Information Office at (623) 875-4280.
TRUTH IN TAXATION HEARING
NOTIFICATION OF TAX INCREASE
In compliance with section 42-17107, Arizona Revised Statutes; the City of Surprise is notifying
its property taxpayers of the City of Surprise’s intention to raise its primary property tax taxes
over last year’s level. The City of Surprise is proposing an increase in primary property taxes of
$223,061 or 11%.
For example, the proposed tax increase will cause the City of Surprise’s primary property taxes
on a $100,000 home to increase from $62.49 (total taxes that would be owed without the
proposed tax increase) to $69.36 (total proposed taxes including the tax increase).
This proposed increase is exclusive of increased primary property taxes received from new
construction. The increase is also exclusive of any changes that may occur from property tax
levies for voter approved bonded indebtedness or budget and tax overrides.
All interested citizens are invited to attend the public hearing on the tax increase that is
scheduled to be held during the regular council meeting at 7:00 p.m. on June 26, 2003 at the City
of Surprise City Council Chambers located at 12425 W. Bell Road, Surprise, AZ 85374.
Local Revenues – Property Tax
6% of City of Surprise General Fund
operating revenues
Local Revenues - Property Tax Rates
Comparison of FY2003 Property Tax Rates
Proposed FY2004 City of Surprise
2.0000
Library
District
1.5000
Flood
Control
1.0000
Secondary
0.5000
Primary
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-
Local Revenue – Property Taxes
FY2003
Rate
Primary Property Tax Rate
Secondary Property Tax Rate
Property Tax Levy on a $100,000 home
Primary
Secondary
Total City Property Tax Levy
Property Tax Levy on a $150,000 home
Primary
Secondary
Total City Property Tax Levy
Proposed
FY2004 Rate
Change
$ 0.6632 $
$ 0.2469 $
0.6936
0.2165
$0.0304
($0.0304)
66.32
24.69
91.01
69.36
21.65
91.01
3.04
(3.04)
0.00
99.48
37.04
136.52
104.04
32.48
136.52
4.56
(4.56)
0.00
State Imposed Expenditure
Limitation
1979-80 Base limit adjusted annually
– Population and Inflation
– Uniform Expenditure Reporting System
– Penalties for Non-Compliance
Why 1979-80?
– Prop 13 in California
City of Surprise – FY2003 Budget
– State Limit
– Adopted Budget
$ 11,657,725
$141,175,000
Alternative Expenditure
Limitations
 Home Rule aka Alternative Expenditure
Limitation (AEL)
 Permanent Base Adjustment
 Capital Projects Accumulation Fund
 One-Time Override
 Similar process for all
– Detailed and Summary Analysis
– Submission to Auditor General, etc.
 Don’t fail unless other political turmoil exists
COS – Expenditure Limitation
State Limit
Exclusions
Limitation
Projected
Budget
FY2001
7,477,306
7,477,306 127,153,500
FY2002
9,745,014
9,745,014 178,405,950
FY2003
11,657,725
48,502,600
60,160,325 141,175,000
FY2004
13,691,691
24,674,900
38,366,591
FY2005
15,832,633
25,125,000
40,957,633 103,926,100
FY2006
18,495,860
25,635,700
44,131,560 115,522,500
FY2007
21,652,288
26,138,500
47,790,788 126,113,300
93,843,700
City of Surprise
 Home Rule Election on March 11, 2003
 Passage of an Alternative Expenditure limitation
is imperative
 Process
–
–
–
–
Publicity pamphlet
Neighborhood Meetings/HOA’s
City Council District Meetings
Council as Spokespeople
 Education is key
COS – Home Rule Analysis
Purpose
Public Safety
Streets
Public Works
Utilities
Community & Recreation
General Services
Total Expenditures
Source
Federal
State
Local
Total Revenues
2003-2004
17,138,100
3,972,300
5,662,700
20,165,400
17,252,400
29,652,800
2004-2005
19,336,700
4,370,000
7,151,800
22,524,600
18,336,800
32,206,200
2005-2006
26,397,300
4,806,500
6,288,300
23,477,700
19,530,200
35,022,500
2006-2007
26,257,300
5,287,600
6,652,400
26,417,000
23,344,200
38,154,800
93,843,700
103,926,100
115,522,500
126,113,300
2003-2004
2,627,600
7,507,500
83,708,600
2004-2005
2,909,900
8,314,100
92,702,100
2005-2006
3,234,600
9,241,800
103,046,100
2006-2007
3,531,200
10,089,100
112,493,000
93,843,700
103,926,100
115,522,500
126,113,300
COS – Permanent Base Adjustment
Intend to Pursue PBA in 2005
Mid-point of 4-year Home Rule
Fail safe
Budget/Tax Levy
 Process/calendar determined locally
 State Budget Forms
– Provided by Auditor General
 Tentative Budget must be adopted by the 3rd
Monday in July
– Can’t go above this adopted amount in Final
 Final Budget Adoption
– 2nd Monday in August if Property Tax
– No Specific Date if No Property Tax
 Adoption can be by simple motion
Surprise – FY2004 Budget Calendar
 October 29
 December 13
 December 18
 February 14
 March 17 – 21
 April 16
 May
 June 12
CIP Kick-off
CIP Projects Due
Budget Kick-off
All Budget Requests Due
Management Team
Budget Reviews
Tentative Budget
presented to City Manager
Council Retreat
Tentative Budget Adopted
Other
 Accounting
– No expenditure may be made that is not authorized in
the budget
– May not exceed amounts indicated in final budget
– Budget transfers that do not change the bottom line
 Audits
– Required Annually for Cities (Bi-annually for Towns)
– Outside CPA or Licensed Public Accountant
– Filed with Auditor General by October 31
• 120 day extension available
Other
 Bonding
– General Obligation
• Voter Approval Required
– Revenue
• Voter Approval Required
– Non-Profit Corporation
• MPC – Generally Revenue Producing projects
• No Voter Approval
 Investments
– Deposits in Excess of $100,000
– Local Government Investment Pool (LGIP)
Federal Requirements
Single Audit
– Required on federal grants if more than
$300,000 is received in a given year
– Generally contract with current Auditor
Davis-Bacon Act
– All projects utilizing 25% or more federal
funds must pay prevailing wages
Purchasing
Bidding Requirements
–
–
–
–
General Projects - $16,565 (Labor Only)
Street Projects - $177,487 (Total Cost)
Recreational Projects - $153,189 (Total Cost)
Sale of Real or Personal Property
Professional Service Alternatives
– Design/Build
– Architects
– Engineers
Dates to remember
Specific Dates are listed in the League
Book
–
–
–
–
–
Budget Adoption
Tax Levy Adoption
Truth-in-Taxation
Audit Filing
Public Notices
Municipal Budget & Finance 101
GFOAz Annual Conference 2003
Doug Sandstrom, City of Surprise
Byron Smith, League of Arizona Cities
and Towns