FY 2016 Budget Discussion Prior to Proposed Budget Submittal July 23 rd,2015

FY 2016 Budget & CIP Overview  Today is the fourth City Council Workshop with Budget and CIP discussion Enterprise Funds: discuss preliminary water, sewer, and recycling rates General Fund: discuss items requested in addition to base budget  Consider Special Meeting to discuss and review City Council feedback Proposed Budget to be filed with City Secretary and given to City Council on Tuesday, August 11 th and covered in City Council workshop on Thursday, August 13 th

City Council: July 23, 2015 Preliminary Water & Sewer Rate Discussion Presentation By: Andrew Burnham, Senior Vice President

Rate Study Process Revenue Requirements Cost Allocation Rate Design Analysis & Outreach Operating CostsOperating Costs Capital CostsCapital Costs Financial PoliciesFinancial Policies Debt CoverageDebt Coverage ReservesReserves Define Classes of UsersDefine Classes of Users Fair & EquitableFair & Equitable Comparison to Current Revenue RecoveryComparison to Current Revenue Recovery Evaluate ObjectivesEvaluate Objectives ConservationConservation Identify StructuresIdentify Structures Customer ImpactsCustomer Impacts Fee & Policy ReviewFee & Policy Review Adjustment DriversAdjustment Drivers National TrendsNational Trends Local PracticesLocal Practices 2

Key Near-Term Cost Drivers  Gulf Coast Water Authority (GWCA)  Significant increases in purchased water cost  30% in FY 2016, 10% in FY 2017; Increasing from $8.6 to $12.1M by 2017  Weather  FY 2015 rainfall is historically high, leading to reduced irrigation demand  Reserves  Under pressure and will need to be restored to industry guidelines  Cash Funded Capital  Funding requirements for ongoing capital improvements  Debt Service  To support debt needed for larger and long-lived projects 3

Waterworks Fund 4

Water Rate Drivers 5 Priority Includes: 30th Street to East Beach - 20" Water Line $16,146,000 Base + Priority CIP Base CIP

Sewer Fund 6

Sewer Rate Drivers 7 Base CIP Base + Priority CIP Priority Includes: 11 Mile Road Sanitary Sewer Project $,1,638,000 East Beach Lift Station and Force Main $12,790,000 Bay Harbor & Indian Beach $ 6,147,735

Multi-Year Residential Utility Bill Impacts Baseline CIP Conclusion: Individual rate adjustments moderated on a total bill basis Note: rate structure modifications could be made that would mitigate impact to low volume and average users Rate adjustments from FY 2017 – FY 2020 are projections and will be updated 8

Multi-Year Residential Utility Bill Impacts Baseline + Priority CIP Conclusion: Individual rate adjustments moderated on a total bill basis Note: rate structure modifications could be made that would mitigate impact to low volume and average users Rate adjustments from FY 2017 – FY 2020 are projections and will be updated 9

Rate Study Process Revenue Requirements Cost Allocation Rate Design Analysis & Outreach Operating CostsOperating Costs Capital CostsCapital Costs Financial PoliciesFinancial Policies Debt CoverageDebt Coverage ReservesReserves Define Classes of UsersDefine Classes of Users Fair & EquitableFair & Equitable Comparison to Current Revenue RecoveryComparison to Current Revenue Recovery Evaluate ObjectivesEvaluate Objectives ConservationConservation Identify StructuresIdentify Structures Customer ImpactsCustomer Impacts Fee & Policy ReviewFee & Policy Review Adjustment DriversAdjustment Drivers National TrendsNational Trends Local PracticesLocal Practices 10

Local Area Rate Structures (Per publicly available data/research as of 7/6/15) 13 Our Conclusions:  Most have some form of inclining block structure  City’s tiers are very large, notably for residential users  City’s Conservation pricing signal is not very strong

Potential Commodity Charge Modifications  Changes to residential rate structure  Adjust inclining blocks per current data, practices, costs, objectives  Smaller tiers with steeper pricing (promotes affordability & conservation)  Alternative structure for non-residential users  Most common practice nationally and in the state is uniform rate  Separate rate structure for irrigation meters  Apply seasonal or inclining block rate structure  Greater conservation pricing & cost allocation for these peak uses 14

Local Area Base Charges (Per publicly available data/research as of 7/6/15) 15 Our Conclusions:  City has highest minimum charges in area for residential users  Seasonality, no scaling for larger meter sizes  Water usage included is comparable – sewer a little high

Potential Base Charge Modifications  Adjust the % of revenue recovered in base charges  Consider affordability, reserves, seasonality, fixed cost recovery  Scale base charges for larger meters  Use AWWA factors, observed usage, etc.  Result: More costs to customers with larger potential demands  Update level of consumption included in the charges  Way to address affordability for very low use  Could be scaled based upon meter size  Synchronize amount between water and sewer  Consider establishing a customer charge component  Isolates customer-costs so they are not scaled by meter size 16

Conclusions & Next Steps  Water/Sewer facing significant financial challenges  GCWA and Capital Projects Funding  Impact to low volume users can be mitigated via rate design, while also promoting equity within the utility system and water conservation  Next steps:  Integrate feedback from Council into analysis  Proceed with review of alternative rate structures  Determine specific level of rates and customer impacts from changes  Bring back initial results to Council/Stakeholders in August  Perform adjustments and hold public hearings in September  Implement new structure in October (FY 2016) 15

18 Discussion Presentation Contact Information: Andrew Burnham, Senior Vice President Office: Mobile:

Recap: FY 2015 – FY2020 CIP – Water

Recap: FY 2015 – FY2020 CIP – Sewer

FY 2016: General Fund Budget is Balanced  Reduced from forecasted amount of $49.1M to $48.4M  Cost increases/revenue losses include: 2% raise - $977K Adjusting employees to minimum General Fund - $92K Street light costs caused by change in rate tariff - $400K County Services (Inmate housing and animal control) increasing $246K Infrastructure and debt service transfer - $543K (increase in set aside) Loss of salary reimbursements - $600K (Police, CDBG, & other) Island Transit subsidy up $50K  Strategies Applied vacancy rates to salaries and benefits Adjusted non-personnel accounts based on spending history and current need  Current services with emphasis on Council goals

Recap: FY 2016 City Manager’s Recommendations Potential Sources:  Annual property tax increment from TIRZ 11 (FY17 - $939K)  TIRZ 11 cash balance, City share - approximately $2M  One cent on property tax rate - $414K *Ladder truck personnel cost not included in recurring cost in FY16 projection ($500K recurring annually) *

FY 2016 Budget Additions  Discuss items requested in addition to base budget Discuss need for special meeting on July 28 th or July 30 th to review Council’s feedback Purpose of special meeting is to determine City Council’s expectations of the content of the proposed budget Proposed Budget to be submitted to City Council Tuesday, August 11 th and covered in City Council workshop on Thursday, August 13 th  Options to consider funding additional items in the budget Option #1: Include additional items in proposed budget and forward fund from Fund Balance in FY16 in anticipation of TIRZ 11 closure. Option #2: Close TIRZ 11 and then amend the budget accordingly.

FY 2016: Total Potential Costs

FY 2016: Council Direct Reports

FY 2016: Police

FY 2016: Fire

FY 2016: Parks & Recreation

FY 2016: Public Works – Streets Division

FY 2016: Planning & Development Services

FY 2016: City Manager’s Priorities

FY 2016 Budget Additions  Options to consider funding additional items in the General Fund Budget Option #1: Include additional items in proposed budget and forward fund from Fund Balance in FY16 in anticipation of TIRZ 11 closure. Option #2: Close TIRZ 11 and then amend the budget accordingly.  Options to present the Waterworks and Sewer fund budgets Option #1: Include no anticipated revenue from a rate increase Option #2: Include sufficient anticipated revenue from a rate increase to cover GCWA and other mandatory increases Option #3: Present a proposed budget based on the baseline operating and CIP cost recommendations