1. 11 Presented to the City Council by Horatio Porter, Budget Officer March 9, 2010 FY2011 Budget Prioritization

2. 22 Purpose Recap Prior Discussions / Actions Present Staff’s Prioritization of City Services Review Existing Funding Sources Identify Next Steps

3. 3 Process Timeline FY2010 Adopted BudgetNovember 10 th Budget Session Jan 14 th /21 st Budget Sessions

4. 4 Began with a $59M General Fund Budget Gap Created “buckets” to capture ideas Many tough decisions led to a balanced budget Need for budget policies / priorities Start the FY2011 process earlier FY2010 Adopted Budget

5. 5 1 st FY2011 Budget Session Contrasted decision making by Ford and GM 1.Be realistic about revenue expectations 2.Cut product offerings. Offer fewer and better products 3.Clean sheet of paper approach 4.Make tough decisions, sell it or close it 5.Time is of the essence Consequences – GM filed Bankruptcy – Ford reported a profitable 3 rd Quarter November 10 th Budget Session

6. 6 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?

7. 7 Effects of the Economy – National League of Cities  Growing Demands – Infrastructure costs – Public Safety costs – Healthcare and Pension Costs  Primary Drivers – Real estate market – Consumer spending – Unemployment rate – Employee wages – State budget shortfalls Jan 14 th /21 st Budget Sessions

8. 8 Effects of the Economy – Budget Reductions by Other Cities Austin (population – 758,000) – Deferred pay increase for Police and EMS – Raised Property Taxes by 5% in FY2010 – Facing a Budget gap in FY2011 Dallas (population - 1.3M) – Increased their payment in lieu of taxes from Water Dept – Eliminated or Consolidated 8 Departments – For FY2011 – Seeking a 30% reduction from most Depts Jan 14 th /21 st Budget Sessions

9. 9 Effects of the Economy – Budget Reductions by Other Cities Denver (population – 600,000) – Used excess fund balance to close gap Las Vegas (population – 558,000) – Reduced labor contracts with unions/associations Milwaukee (population – 604,000) – Raised Property Taxes 8 cents Oklahoma City (population – 552,000) – Eliminated scheduled pay increase for general employees Phoenix (population – 1.6M) – Laying off Police Officers and Fire Fighters Jan 14 th /21 st Budget Sessions

10. 10 Effects of the Economy – Economic Lag: Time period between when economic conditions change and when those changes impact city revenues In 1991 Recession - 2 years In 2001 Recession - 18 months Current Recession – Unknown – Effects of the recession will continue – Significant budget reductions made in past 2 yrs – Unlikely to get large scale reductions in non public safety departments Jan 14 th /21 st Budget Sessions

11. 11 “Only when declining revenues threaten an organization’s ability to operate do they typically respond with strategic analysis on what services should be provided.” Jan 14 th /21 st Budget Sessions ~ Government Finance Officers Association December 2009 Monthly Magazine

12. 12 Approach to the Crisis – Typical across the board cuts – Strategically define our core responsibilities Jan 14 th /21 st Budget Sessions

13. 13 Identified Priorities – Define the role of City government – Address basic expectations of our residents – Provide focus on where to invest resources Identified resource opportunities – Homestead Exemption – Tax Rate – Other Fee Increases – Transportation Utility Adopted Resolution on Budget Priorities (Jan 26, 2010) Jan 14 th /21 st Budget Sessions

14. 14 Recent Efforts Goal: Align current General Fund services with Council adopted budget priorities Budget Staff developed a tool to evaluate city services – Does your service address severe, urgent and widespread safety issues? – Is your service a result of a legal requirement? – Does your service impact the City’s assets? – Does your service collect/generate revenue? Asked Dept Heads and Assistant City Managers to assist Result: Preliminary Program Prioritization

15. 15 Preliminary Prioritization Caveats Funding recommendations to City Manager – 2 Benefit Committees (Pension and Healthcare) – Departments will have new mandates – Employee association meetings – Citizen’s feedback – All of these represent unprioritized obligations Additional future increases – Fire Contract – Zoo Contract

16. 16 Preliminary Prioritization Caveats First pass at aligning services with priorities Gives Council a framework to review city services Will be one of many tools used in the budgeting process Is not a recommendation but an illustration

17. 17 Public Services Direct Impact on Residents 8 Priorities Administrative Services Indirect Impact on Residents 5 Priorities Priority Classification

18. 18 Public Services Priorities 1.Has an immediate effect on public safety 2.Legal requirement or is a long-term contract 3.Has a long-term effect on the public safety 4.Construction / maintain City assets 5.Has a long-term effect on public safety, but is not severe nor widespread 6.Generates / Collects revenue 7.Has a beneficial impact to our residents 8.Everything else

19. 19 Administrative Services Priorities A.Legal requirement B.Impacts services in the short term C.Has a long-term effect on the organization D.Necessary but not required E.Beneficial but not critical

20. 20 General Fund FY2011 – Budget Review Gap $30M - $35M 8 & E 7 & D 1- 6 & A - C

21. 21 Public Services - Priority 1 Services targeted at public safety problems Severity – life threatening, severe injuries Urgency – immediate response Coverage area – widespread Example of services include:  Fire Suppression  Police Traffic Division  Fire Arson and Bomb  Traffic Signal Maintenance Program  Gang Unit  Police Communications  Police Field Operations

22. 22 Public Services - Priority 2 Meets a Charter/State/Federal mandate or is a long-term contract Legally obligated to perform the service No authority to revoke the requirements for the service Contract locks the City into a long-term obligation Example of services include:  Library Department  City Plan Commission  Environmental Review  Economic Development 380 Agreements  Fort Worth Zoo Contract  Jail Contract

23. 23 Public Services - Priority 3 Loss of services will have a long-term and potentially severe effect on the general public Example of services include:  Animal Care & Control  Fire Inspections  Street Maintenance (contract and in-house)  Planning and Development Inspections  Bridge Maintenance  Roadway Lighting  Consumer Health

24. 24 Public Services - Priority 4 Necessary to construct, reconstruct and maintain City infrastructure Example of services include:  Parkland Maintenance  Facilities Operations/Maintenance  Traffic Operations  Citywide Mowing  Park Infrastructure Inspection/Maintenance  Park Trades Maintenance  Vehicle Replacement Program

25. 25 Public Services - Priority 5 Impact on public safety but is not severe nor widespread Example of services include  Code Field Operations  Directions Home Program  Street Permit Program  Code Building Standards  Mounted Patrol  Police Victim Assistance  Fire Safety Education

26. 26 Public Services - Priority 6 Provides funds through a direct revenue-generating or collection function Example of services include:  Programs with a Grant Match  Municipal Court Core Operations  Gas Leasing  Treasury - Cashier Services  Real Property Services  Transportation Impact Fees & Planning

27. 27 Public Services - Priority 7 Has a beneficial effect on the population and is not the core service of another entity Council has more discretion on these services No other organization provides this service to the residents Benefits a large numbers of citizens Example of services include:  Neighborhood Libraries  Youth Athletics Program  MWBE Office  Community Outreach  Human Relations Commission  Urban Design  Community Centers (Non-CAP Sites)

28. 28 Public Services - Priority 8 Service that does not meet the priorities set forth above The service is available to citizens through another entity The service does not meet any of the above priorities General Fund subsidy helps leverage other investments Example of services include  Cowboy Santas  Internal Police Service Programs  Program funding for Arts  Business Assistance Center  Early Childhood Matters  Athletic Facilities & Programming  Aquatics

29. 29 Administrative Services - Priority A Meets a Charter/State/Federal mandate or is a long-term contract Legally obligated to perform the service No authority to revoke the requirements for the service Contract locks the City into a long-term course of action Example of services include  Accounting  Attorneys and staff  Annual External Audits  Internal Audit  Utility Cost  City Insurance  Annual Appraisal District Services

30. 30 Administrative Services - Priority B Necessary in the short term for the delivery of a service Loss of this service would interrupt delivery of public services within 30 days (immediate/imminent impact) Example of services include  Contractual Staff for ERP  Building Security Initiatives

31. 31 Administrative Services - Priority C Loss of this Service will have a long-term and potentially severe effect on the organization Example of services include  Human Resource Information Systems and Records  Outside Legal Funding  Utilities Management  Classification/Compensation/Civil Service Plans  Human Resource Disability Program

32. 32 Administrative Services - Priority D Necessary in the long-term for the delivery of a service Example of services include  Governmental Relations  Human Resources  Learning Services  Employee Relations  Labor Relations  Staffing Services

33. 33 Administrative Services - Priority E Beneficial but not critical in the delivery of a service The service does not directly impact service delivery Example of services include  Education Reimbursement Program  Employee Assistance Program  Vacation Buy Back Program

34. 34 Summary by Priority Public Services

35. 35 Summary by Priority Administrative Services

36. 36 Summary by Priority

37. 37 General Fund Budget by Priority

38. 38 General Fund FY2011 – Budget Review Gap $30M - $35M 8 & E 7 & D 1- 6 & A - C

39. 39 Summary of Lowest Priorities

40. 40 Revenue Options Adjust the Tax Rate Lower the Homestead Exemption Modify Over 65 Exemption Evaluate our level of participation in TIFs Use excess fund balance Increase Impact Fees Explore Transportation Utility

41. 41 Ad Valorem Tax Levy Tax Rate * (Property Value – Exemptions) = Tax Bill

42. 42 Comparative Tax Rate

43. 43 Comparative Avg. Home Values Includes Homestead Exemption

44. 44 Comparative Tax Bill

45. 45 Property Tax Rates 1990 – 2009 Per $100 of Assessed Value $0.855 Every penny on the tax rate = $4.1M of Citywide Revenue

46. 46 City Tax Policies Historic - Tax freeze to exclude the increased value of property due to eligible improvements (10 Years) Neighborhood Empowerment Zones – Tax freeze to exclude the increased value of property due to eligible improvements (5 Years) 380-Agreements – May grant public money for development/diversification of the property, elimination of unemployment/underemployment, or development and expansion of commerce (temporary) Tax Increment Financing Districts – Dedicates increment of ad valorem taxes above base year within a defined area to public improvements including infrastructure (usually up to 25 years)

47. 47 Review of TIF Districts

48. 48 City Policies for Abating Taxes for Residential Properties Over-65 Exemption – Exempts $40,000 from taxation Disabled Person – Exempts $40,000 from taxation Over-65 Tax Freeze – Freezes tax levy in place at the time of the application for exemption “Permanent”

49. 49 Over 65 Exemption Illustration

50. 50 Growing Number of Seniors Compared to Working Age Residents

51. 51 For current over 65 homeowners, tax bill is frozen forever Any change would only apply to future applicants Working with Appraisal Districts to quantify impact Effect of Over 65 Changes

52. 52 City Policies for Abating Taxes for Residential Properties Homestead Exemption - 20% of property value – In 1984, originally established at 15% – In 1987, passed an ordinance increasing it to 20% – Benefits Owner Occupant – Affects approx 130,000 households ½ Housing population – Widely disbursed throughout city – Many residents don’t receive this exemption Rent single family units Rent duplexes or multi-family units

53. 53 Homestead Exemption At 20%, total value of Homestead is $3.6B in exempted property value

54. 54 Homestead Exemption Citizen Impact - Annual

55. 55 Homestead Exemption (Big Cities)

56. 56 Homestead Exemption (Suburban Cities)

57. 57 Exemptions Timeline March 9 th, 2010 Present Options March 23 rd, 2010Staff make Recommendation (Need Decision/Direction from Council) April 20 th, 2010Council Passes Ordinance Lowering Exemption April 30 th, 2010Staff Submit Ordinance to Appraisal Districts May 14 th, 2010Appraisal Districts Release Preliminary Property Values

58. 58 Impact Fees Willdan Study Recommendations – Increase Debt Service Share of Ad Valorem Tax Revenues – Increase Transportation Impact Fee to 50% of Maximum Assessable Rates – Create a Street Maintenance Fee

59. 59 Transportation Utility Blue Ribbon Task Force on Transportation Impact Fee – To be charged with creation of a Transportation Utility to incorporate Willdan recommendations – Funds could cover existing and future transportation capacity deficiencies and network maintenance

60. 60

61. 61 Excess General Fund Fund Balance

62. 62 Summary of Capital/Operating Revenue Options

63. 63 Summary ~ Presentation demonstrates the cost of priorities and funding opportunities that we will consider as we begin to address the FY2011 budget challenges

64. 64 Next Steps Critically evaluate low priority services Analyze top priorities services Recommend viable revenue sources Inform residents on options Present to Council a hybrid approach to closing the budget gap

65. 65 On-goingMeet with Council to review Prioritization book March 23 rd Brief Council on Citizen Involvement Process April Begin Feedback process with Citizens (ongoing) May 18 th Brief Council on Preliminary Property Tax Values May 25 th Economic Forum / Presentation of 5 yr Forecast July 27 th Brief Council on Certified Property Tax Values Aug 10 th City Manager’s Proposed Budget Presentation Aug 12 th – 13 th Council Budget Retreat Aug / SeptCouncil Budget Study Sessions Sept 7 th Adopt FY2011 Budget and Tax Rate Timeline

66. 66 Questions / Comments 66