FY 14-15 Budget Presentation 19 May 2014

Mission Statement: To provide value added services in a customer friendly, cost efficient and effective manner resulting in a safe and prosperous community

Positive Focus Honored to work with a progressive, forward thinking and committed Mayor, City Council, Department Directors and dedicated employees

Live Within Our Means…. By law, NC localities must operate within a balanced budget It is often said: …in tough times, government should tighten its belt and live within its means When the City tightens its belt, citizens, customers and employees will inevitably feel the squeeze

FY15 Budget Development Staff training in August-October on use of new, comprehensive MSExcel buget development workbooks Departmental budget development from late October to first of January Constrained, prioritized departmental budget requests submitted to CM first of January

FY15 Budget Development CM review of budgets with Department Directors in mid-January Analysis of revenue stream and projections developed in February Budget balancing during March and April Work Budget Book prepared April and May

The FY15 Budget is… Seriously Constrained, particularly the General Fund A No-Frills Budget

We’ve been in this mode since 1999 Henderson continues to endure a protracted period of austerity The FY15 Budget does not have the elasticity and flexibility normally associated with good budgeting This problem is particularly acute in the General Fund

Total Budget The Total Budget, adjusted for inter-fund transfers, is: $37,053,400

Total Budget: Fee/Rate/Tax Increases No Property Tax Increase No Sanitation Fee Increase Regional Water Rate Increase = 5% Water Rate Increase = 5% Sewer Rate Increase = 3%

Monthly Utility Impacts on Residential Customer Customer using about 5,000 gpm In City—Water = $0.69 increase In City—Sewer = $1.65 increase Out of City Water = $1.24 increase Out of City Sewer = $3.16 increase

Total Budget: Personnel Impacts No Cost of Living Adjustment Career Development Continues Phase 1 of 5-Year Plan to Implement Classification & Pay Plan Unfreezing Two Positions: Assistant Finance Director—General Fund Public Services Director—Water and Sewer funds Reduction-in-Force of 2 Full-Time & 4 Part-Time Positions Main Street Director—General Fund Police Office Assistant—General Fund Four (4) School Crossing Guards—General Fund Training for Employee Performance Evaluations for the Supervisory Staff

Pay Plan Implementation On Average, the City’s compensation for employees is 22.67% less than its peers according to a Fall 2013 market survey done by The MAPS Group $117,000 is provided across the four funds to provide for Phase 1 implementation (5-year plan)

Medical Insurance Utilization is Excellent!

Medical Insurance 10% Rate Reduction!

Medical Insurance Kudos! Kudos to HR Director Cathy Brown and all employees/retirees that have worked hard to keep costs down Wellness program working well Kudos to Phil Burnette, City’s Health Plan Administrator, for negotiating this year’s rate reduction and helping us establish the wellness program 3 years ago

Individual Funds Now that we’ve taken a look at the global budget issues, let’s look at the four operating funds: General Fund (governmental) Regional Water Fund (enterprise) Water Fund (enterprise) Sewer Fund (enterprise)

General Fund Work Horse of all City Budgets Provides for GENERAL services including Public Safety: Police, Fire, E-911 Cultural: Library, Recreation, Public Health & Welfare: code enforcement, sanitation, Planning/Zoning, transportation General Administration of City Archaic revenue structure: Property Tax

General Fund Revenues: Primary Revenue Sources Property Tax: 38% Sales Taxes: 15% Sanitation Fee: 12% 65% of fund budget

Property Tax 38% of General Fund Budget One of only two significant major revenue sources that is at the discretion of Council Tax rate is currently 62 cents No increase in tax rate is recommended

Property Tax Rate Trend

Property Tax Basics Increases in property tax revenues have come primarily from 1) MPMC converting from non-profit to public; 2) tax rate increases in FY10 and 14; 3) Tax and Tag program for motor vehicle registration 4) Some limited natural growth Property Tax Collection Rate for FY13 93.59%: Overall 94.30%: All Property Excluding Motor Vehicles 85.35%: Motor Vehicles

Property Tax Revenues

Sales Taxes A small decline in FY15 due to loss of State Hold-Harmless payments and a lack-luster economy

Undesignated Fund Balance

General Fund: Expenditures Trend Analysis Not keeping pace with inflation

Trend Analysis Part 2 FY15 less than FY14 and lower than FY09

General Fund Expenditures: Where Does the $ Go? —Part 1

Where Does the $ Go? The community and Council have stated public safety is extremely important. Indeed it is! One needs to understand how much of the General Fund budget is dedicated to Public Safety vis-à-vis all other services

Where Does the $ Go? —Part 2a Public Safety requires 47% of Fund’s resources

Where Does the $ Go? –Part 2b Current Year Property Tax Does Not Pay for Costs of Public Safety

Where Does the $ Go? –Part 2c Public Safety Personnel Costs require 61% of the Fund’s Personnel Resources

Where Does the $ Go? –Part 3a 26% of General Fund Expenditures are restricted by State Statue, Federal Regulations, Contractual Agreements, Vested Benefits and Inter-Departmental Sales

Where Does the $ Go? – Part 3b When one considers restricted and public safety expenditures which comprise 67% of the total General Fund, any remaining budget balancing would affect all other departments, which comprise only 33% of the Fund’s budget. Across the board cuts just don’t work. Note: E-911 and Asset Forfeiture expenses are reflected in the Restricted Expenditures for the purposes of this pie chart

General Fund Expenditures: Gaps Operating expenses are estimated to the bone—extremely limited flexibility Streets and storm drainage improvements are terribly under funded Vehicle and equipment replacement is lagging, particularly in Public Services Employee compensation is lagging

Regional Water Fund: Revenues 99% of revenues come from the sale of water to the three regional partners: Henderson, 60%, and Warren County and Oxford at 20% each 5% rate increase to help mitigate revenue losses from reduced consumption and to keep capital reserve contributions at near-projected levels

Regional Fund Revenue Sources

Regional Water Fund: Decreasing Water Sales

Regional Fund Rate Increase Trend

Regional Fund Expenditure Centers

Regional Water Fund Major Initiatives Obtain Inter-Basin Transfer of Water Permit to 20mgd that will provide for expansion of plant Physical Expansion of Plant to 20mgd Capital improvements: Chemical Pit and Clearwell Roof Continuation of rate stabilization/debt service plan

Water Fund: Revenues 97% of revenues come from the sale of water to 8,800+/- customers Four governmental customers Vance County 1A comes on-line this year Granville County not yet active customer Operates as an Enterprise Fund

Water Fund Revenue Centers

Water Fund Revenues: Rate Increase Each 1% = about $26,000

Water Fund Revenues: Rate Increase Comparison

Water Fund Expenditure Centers

Water Fund: Major Initiatives Water Meter Replacement Program continues 2” Line Replacement continues Rate Stabilization transfers to capital reserve Re-establish Public Services Director Position

Sewer Fund: Revenues 91%, from sewer user fee Operates as an enterprise fund

Sewer Fund Revenues

Sewer Fund Revenues: Rate Increase

Sewer Fund Revenues: Rate Impact Comparison

Sewer Fund Expenditure Centers

Sewer Fund Expenditures: Major Initiatives Underway Renovation to Sewer Plant Underway Sandy Creek Lift Station Replacement Continued support of rate stabilization/debt service plan Re-establish Public Services Director Position

Tighten the Belts Belt tightening affects not only the City, it also affects its customers and citizens through reductions in levels of service or elimination of certain services The staff and I look forward to working with Mayor and Council as we begin the budget review/adoption processes

First Budget Review Tomorrow Night Utility Enterprise Funds 30: Water, 31: Sewer, 64: Regional Water Capital Reserve Funds 70: CR Utilities, 79: CR Rate Stabilization Capital Projects Funds 43: CIP Water, 44: CIP Sewer, 46: CIP Regional

FY15 Budget Presentation: In Closing Thank you for your time and patience this evening Comments? Questions?