1 Presented to the City Council by Horatio Porter, Budget Officer November 10, 2009 Budget Policy Development

2 Purpose Present a recap of FY2010 Budget Decisions Identify Potential Funding Priorities Review Existing Funding Sources Begin Dialogue for Developing FY2011 Budget Policy Document

3 Sample of Policy Guidelines Accounting Detailed Policies Budget Policies Fiscal Procedures Comprehensive Plan Financial Management Policy Statements

4 Process Timeline.. Present Relevant Policies Staff Provides Recommendations Council Finalizes Policy Framework Describe Policies Explain effect on the City Quantify financial impact Ensure all are identified Deliberate Clarify Document Present final policies Memorialize policies Begin FY2011 Budget development Nov 10 th Jan 14 th / 21 st Mar / Apr

5 Leadership in a Crisis January 2006, North American International Auto Show Speaker: Jerry York 5 Key Points Contrast how GM and Ford addressed those issues

GM vs Ford 1.Be realistic about revenue expectations A.GM – focused on sales volume, selling cars at a loss B.Ford – reengineered operations, focused less on market share 2.Cut product offerings. Offer fewer and better products A.GM – Closed 1 brand (Oldsmobile) B.Ford – Shifted focus from SUVs to small cars 3.Clean sheet of paper, evaluate everything A.GM – No material changes in production B.Ford – Cut material costs, made plants more flexible 6

GM vs Ford 4.Make tough decisions, sell it or close it A.GM - Worked on green technology, hydrogen cars and solar panel (but maintained 60 models across 8 brands) B.Ford – Exited certain markets: Sold Jaguar, Land Rover and Aston Martin (generated cash) 5.Time is of the essence A.GM – Didn’t make any significant changes B.Ford – Made tough timely decisions 7

Results 8 FORD POSTS Q NET INCOME OF $1 BILLION; CASH FLOW TURNS POSITIVE; NORTH AMERICA PROFITABLE June 2, 2009 CNNMoney.com November 2, 2009 – Ford’s Website GM bankruptcy: End of an era After years of losses, the troubled automaker is forced into bankruptcy. GM is set to close a dozen facilities and cut more than 20,000 jobs.

Implication / Application 1.Be realistic about revenue expectations Deal with the reality of a flat or declining revenue stream. 2.Cut product offerings. Offer fewer and better products Determine what services you will provide and be the best at delivering those offerings 3.Clean sheet of paper Everything should be critically evaluated and challenged to improve 4.Make tough decisions, sell it or close it Programs that are not making a measurable impact should be eliminated 5.Time is of the essence Act now 9

Citizen’s Needs City Services City Employees Maintain Investments What Should We Invest In? Property & Sales Taxes Hotel & DFW Car Taxes Current & New Fees Gas Lease Revenues What Funding Sources Do We Use? 10

Police Fire Public Safety Financial Management System Infrastructure Municipal Support Financial Stability & Administrative Health What Should We Invest In? 11

Community Centers Libraries Parks / Pools Code Compliance / Courts Neighborhood Services Bridges Streets City Planning Planning & Infrastructure What Should We Invest In? 12

Master Aquatic Plan Comprehensive Library Plan Neighborhood Transportation Infrastructure Capital Needs Arts Programming Social Services Funding Other Investments? 13

14 Review of Citywide Expenditures* FY2010 Adopted Budget * Excludes Internal Service Funds and Insurance Funds

15 Current Investment* FY2010 Adopted Budget Includes General Fund, CCPD and Debt Service

16 Expenditure Allocation FY2010 Adopted Budget Includes General Fund, CCPD and Debt Service

17 Compensation by Employee Group FY2010 Adopted Budget Includes CCPD Funding

18 Possible Budget Policy Considerations (Investments) 1.Priority of Public Safety 2.Financial stability of organization 3.Importance of neighborhood services 4.Attracting & retaining talented employees 5.Benefit packages 6.Arts program funding

19 Property & Sales Taxes Current & New Fees Hotel & DFW Car Tax Gas Lease Revenues What Funding Sources Do We Use?

20 Review of Citywide Revenues* * Excludes Internal Service Funds and Insurance Funds

21 Homestead Exemptions Tax Rate Allocation TIFs Property Taxes City of Fort Worth The T CCPD Sales Tax Cost Recovery Transportation Impact Fees/Rates What Funding Sources Do We Use?

Property Tax Rate by Taxing Entity

23 Homestead Exemption Overview Implications to City Financial Impact The City has a homestead exemption of 20% which is the maximum under State law, while many of the surrounding cities have little or no exemption and a comparatively lower tax rate. The City foregoes $28.2 million per year due to the exemption which translates into 7 cents on the tax rate. An adjustment to the homestead exemption could be transferred into a tax rate reduction for all, adding to the economic health of the City. Our homestead rate allows our residents to exempt over $3B dollars in value from the tax roll.

24 Homestead Exemption 2009 Tax Year 0%

25 Tax Rate Allocation Overview Implications to City Financial Impact The City has decreased the allocation of the ad valorem tax for debt service from 41% in 1995 to less than 17% today resulting in a stagnant level of investment despite the City’s geographic and population growth. The City could consider shifting some of operations and maintenance levy to the debt levy by reducing other spending or identifying offsetting revenue such as the street maintenance fee. The City projects transportation infrastructure needs of over $1 billion over the next ten years when considering existing capacity deficiencies, future capacity demands and related maintenance.

26 Tax Rate Trend 41.6% 15.7% 39.7% 36.8% 34.0% 15.6% 17.8% 19.7% 21.4% 22.5% 25.2% 27.9% 29.1% 32.3% 16.9%

27 Tax Rate Allocation

28 Property Tax Allocation as of FY2010

29 Sales Tax Allocation as of FY2010 * The ½ cent to the T is managed by the Fort Worth Transportation Authority Board

30 Sales Tax Rate Comparisons Texas Comptroller, 2009

31 Unrestricted Restricted External Internal Gas Lease CDBG Stimulus Grants Grant Funding Transportation Impact Possible Fees Other Sources?

32 Possible Budget Policy Considerations (Resources) 1.Do we adjust the Homestead Exemption? 2.Do we shift a portion of the tax rate from Operating to Debt? 3.Do we increase the tax rate? 4.Do we revisit the Gas lease policy? 5.Do we raise fees to cover more direct costs? 6.Do we pursue a transportation impact fee? 7.How do we allocate the DFW Airport Car Rental Tax?

33 Possible Budget Policy Considerations (Investments) 1.Priority of Public Safety 2.Financial stability of organization 3.Importance of neighborhood services 4.Attracting & retaining talented employees 5.Benefit packages 6.Arts program funding

34 Today Complete list of Investments / Resources Nov - Jan Staff developing recommendations DecemberStaff distribute a report that provides details Jan 14 th / Jan 21 st Work sessions reviewing recommendations March / April Adopt Budget Policy Statements April / May Staff begin FY2011 Budget Development Policy Development – Next Steps:

Questions / Comments 35