Maumelle’s Financial Future RJ Mazzoni “Sound Financial Planning for a Prosperous Maumelle”

General Fund Revenue Sanitation and Street Fund are independent of the General Fund Not included in this analysis Planned Revenue is income estimate to plan the next year’s budget All taxes, grants, franchise fees, building permits, etc Slightly conservative to provide for unplanned city expenses throughout the year Arkansas law mandates every city has a balanced budget If our expenditures exceed our planned revenue, we must draw from the City Reserve Fund The City Reserve Fund is used to fund major projects or meet budget deficits Audited Revenue is the actual total funding Maumelle received

General Fund Revenue Sources

Revenue Sources

Actual operational expenses must be below actual revenue

Actual Annual Revenue Averages $215,000 above initial Mayor’s estimate

Expenditures The General Fund supports daily City operations All salaries, benefits, utilities, supplies, equipment purchases, and capital improvements Does not include street repair or sanitation costs Cities must have balanced budget Spending in excess of annual income must come from the City’s Reserve Fund City Reserve Fund Maumelle’s “Savings Account” Used if revenue is less than forecast or city commits to major capital improvement project City Ordnance requires maintaining at least 20% of our annual budget (2018 = $2.68M) Maumelle’s fund ended 2017 with $5.25M

Where our Money is Spent General Fund: Includes all salaries, benefits, utilities, supplies, small equipment purchases, etc Capital improvements are also funded Does not include street repair, or sanitation costs

How our Money is Spent

(Actual—Top 3 Departments) Annual Spending (Actual—Top 3 Departments) As Maumelle has grown, our need for premier first responders has also increased

(Actual—Daily City Operations ONLY) Annual Spending (Actual—Daily City Operations ONLY) Avg Revenue Growth: 2.2% Avg Expenditure Growth (2012 – 2015): 2.3% Avg Expenditure Growth (2016 – 2018): 4.0% $621,000 Capital Project Funding Estimated—Added only 2018 salary increases to 2017 year-end expenses $867,000 All salaries, benefits, utilities, supplies, small equipment purchase, etc Does not include major projects, street repair, or sanitation costs

Good Remaining money after operational expenses are fulfilled Used for major equipment purchases and unplanned expenses throughout the year Good

Salary & Benefits vs Operations (Excludes Capital Projects) Spending increases are linked to our growth in personnel--primarily our First Responders

If current spending increase trends continue (4%), our expenditures will exceed our revenue in 2022

The Way Ahead Sound Annual Budgeting Maumelle’s 2.2% annual revenue increase insufficient to keep up with our growth Limit future annual budget increases to 3% (maximum of 3.5%) Prioritize competitive salaries (we need to retain our quality people) Pre-2016 annual budget increases was 2.3% Maximum annual spending increase to ensure operating expenses do not exceed annual revenue Identify Future Large Expenditures & Develop Funding Plan Create Capital Project Fund Develop 5 Year Plan to ensure our economic health Economic Development of Annexed area and North Maumelle $76M of Maumelle resident’s money spent outside of our city annually Increased Tax Base from Annexed area is critical to our economic prosperity Reduce Existing Debt and NO NEW BONDS

If current spending increase trends continue (4%), our expenditures will exceed our revenue in 2022 Current Spending Trend 3.5% Increase My Plan (3% Increase)

The Way Ahead But we have a HUGE City Reserve fund! Or Do We????? Current Reserve: (EOY 2017) $5.25M Required Reserve (20% Budget) $2.68M Available Reserve $2.57M Fire Station $2.20M Fire Truck $1.20M Bottomline: ($830,000) 3% expenditure growth will fund these requirements with $1.8M extra over 5 years We need to create a Capital Fund to provide overall awareness of our Economic Status and Capital Investment Capability

Capital Project Fund Current City Reserve Fund is confusing and consists of many “parts” Unallocated Expenses--Funds spent, but not collected….(think uncashed checks) Excess capital from previous years Required Reserve (20% of Current Budget mandated by City ordnance) Currently, $6M is in our Reserve Fund, but < $2.6M is usable Create Capital Project Fund Use the $2.6M excess in the City Reserve to create a Capital Project Fund Would also fund Annual budget revenue shortfalls giving visibility on spending impacts Prioritize all major projects for future funding Capital Fund Priorities Immediate Health and Safety Economic Development Quality of Life Improvements Parks, facilities, etc

Economic Development Need to increase tax base to keep pace with population growth Maumelle has grown significantly over the years with little growth in city businesses Larger tax base will increase city revenue without raising sales tax! North Maumelle Will be ready for immediate growth once sewer pipe installation is complete Installation can be funded through Capital Project Fund Will not require any additional city infrastructure (Police/Fire Stations) Develop Annexed Area Longer term growth, but greater potential Will need to attract smaller businesses first—their success will lure big box stores Will eventually require city investment (e.g. Fire Station, Fire Truck) Fire Station and Fire Truck can be funded through Capital Project Fund Separate a percentage of tax revenue from initial area growth to fund future projects We either save money for them now, or need more bonds/taxes later

Third Interchange Economic Development Effective commercial development is critical for our economic prosperity Big Box Stores will be slow to commit Online shopping’s success has impacted traditional retailers Reluctant to invest limited capital for store construction Supreme Court decision allowing states to collect sales tax from online retailers will help us We must make this a “Proof of Concept” to ensure future participation Make the area a “destination” or “go-to” location Initially concentrate on small business organizations Nicer restaurants, specialized retail shops Recruit businesses to geared towards younger generation Once this area generates a profit, larger businesses will be lured in Plan for 3-5 years before we see major commercial development

Debt Reduction Maumelle residents pay $3.2M for debt payments annually $490,000 payment for 2012 Bonds until 2037 $1,550,000 payment for 2015 Bonds until 2030 $1,200,000 payment for 2018 Bonds until 2038 (Estimated) Commit to pay off early With historical increase in sales tax only, we can pay city debt off in 15 years With moderate economic development from the third interchange we can pay debt in 12.5 years Once debt is paid off, our city sales tax will be lower than our neighboring cities Will fuel additional economic growth in the annexed area To succeed, we need to commit to sound budgets & NO NEW BOND DEBT

Conclusion Failing to plan is no different than planning to fail! Maumelle is in a healthy position financially right now, but we need to improve Population Growth with little economic expansion has whittled away our resources Sound financial planning now will ensure a successful Maumelle in the future Failing to plan is no different than planning to fail!