1. It’s Your Budget! ELECTED OFFICIALS WORKSHOP JULY 27, 2016

2. What is a Budget? Budget: A plan specifying how resources, especially time or money will be allocated or spent during a particular period. The budget is the most important financial document of a governmental unit because it expresses public policy, financial intent, operational performance and accountability for resources.

3. Why Make a Budget? “ Good plans shape good decisions. That's why good planning helps to make elusive dreams come true.” author unknown “ In politics, nothing happens by accident. If it happens, you can bet it was planned that way.” Franklin D. Roosevelt “ Budget: a mathematical confirmation of your suspicions." A.A. Latimer

4. Budget Process Although the details of the budget process vary significantly from city to city, there are four main sequential stages in the lifecycle of a public budget: 1.Preparation: the budget involves the development of expenditure estimates for departments in light of available revenues. 2.Approval: budget estimates are then submitted to a city council or board for review and modification, often with citizen input from public meetings. The budget is then legally approved and adopted. 3.Implementation: the budget is then implemented by municipal departments throughout the year. 4.Evaluation/Audit: the performance of all governmental units is monitored and measured throughout the fiscal year. Those indicators are evaluated at the year's end to inform the budget process for the following year.

5. When to Make a Budget? NDCC Ch. 40-40 Municipal Budget Law http://www.legis.nd.gov/cencode/t40c40.pdf 40-40-04. Municipality to prepare preliminary budget statement. The governing body of each municipality, annually on or before September tenth, shall make an itemized statement known as the preliminary budget statement showing the amounts of money which, in the opinion of the governing body, will be required for the proper maintenance, expansion, or improvement of the municipality during the year. 40-40-09. Determination of amount to be levied – Adoption of Levy – Limitations. After completing the final budget on or before October seventh, the governing body shall proceed to make the annual tax levy in the amount sufficient to meet the expenses for the ensuing year as determined at the budget meeting. 40-40-10. Certified copies of levy and final budget sent to county auditor. Immediately after the completion of the final budget and the adoption of the annual tax levy by the governing body of a municipality in accordance with the provisions of this chapter, and in no case later than October tenth, the auditor of the municipality shall send to the county auditor a certified copy of the levy as adopted and a certified copy of the final budget.

6. Budget Plan… It all starts with a plan: Plans start with a stated goal. A basic goal in municipal budgeting is to allocate resources to governing body goals and commitments. Assess community needs, priorities, challenges and opportunities. Governing body/committees discuss and identify budget priorities by identifying areas of growing need: sidewalks, infrastructure repairs, public safety, etc. Try to refine the goals to the top 3 – 5, distinguish between a goal that is measurable and attainable and a strategy (a process to accomplish something measurable and attainable)

7. Budget Strategy (sort the pieces) Budget Strategy Example Address infrastructure problem Promote full disclosure budgeting Integrate CIP for complete budgeting Collect all revenue earned Reduce or eliminate give-aways Quantify services provided

8. Parts of the Budget Schedule A - Certificate of Levy Schedule B - General Fund Departments for City Auditor, Police, Fire, etc. Schedule C - Special Revenue Funds Highway Distribution (can not levy for Highway Distribution) Emergency City’s Share of Special Improvements Schedule D - Debt Service Funds 2012 Street Improvement 2013 Water Improvement Schedule E – Enterprise Funds Water Sewer Garbage

9. Revenue Budgeting & Taxes 1.Benchmark year to date revenue from all sources (June month end financials are a good starting point) 2.Make revenue projections for upcoming budget period (be realistic, use current trends, NDLC projections from City Scan, information from your Assessor on mill value) 3.Be conservative when estimating revenues 4.The property tax portion of municipal budgeting can be the balancing point; greater demand for services, growing population, aging assets, competition for workforce can all put pressure on property taxes and mill rates. Watch your mill equivalents as you work through revenue forecasting. NDCC mill levy limits are available at: http://www.nd.gov/tax/data/upfiles/media/levy-limitations.pdf?20160722131248

10. Enterprise & Debt Service Fund Revenue Revenue forecasting for enterprise funds may be done by historical & trend based budgeting coordinated with utility rate reviews; Review sales trends and make your initial revenue projection based on available information. Revenue forecasts may be adjusted to meet expenditures through increased sales and or rate adjustments. Lost or unaccounted for revenue can impact enterprise funds substantially R evenue forecasting for debt service funds are dependent on the type of debt; Special assessment debt service fund revenue projections are made by the special assessments scheduled to be certified. Sales Tax funded debt service revenue projections are activity based, but need to meet scheduled debt service commitments Enterprise funded debt service needs to be part of the Enterprise fund budgets

11. Matching Revenue & Expense Balanced budgeting…. The simple statement that expenses cannot be budgeted beyond realizable revenues is especially true in North Dakota municipal governments: 40-40-15. Expenditures made or liabilities incurred beyond appropriation - Joint and several liability of members of governing body. Except as otherwise provided in section 40-40-18, no municipal expenditure may be made nor liability incurred, and no bill may be paid for any purpose in excess of the appropriation made therefore in the final budget. Expenditures made, liabilities incurred, or warrants issued in excess of the appropriations are a joint and several liability of the members of the governing body who authorized the making, incurring, or issuing thereof or who were present when they were authorized and did not vote against authorizing the same. Try to create a preliminary budget that is balanced, if you cannot close the gap between revenues and expenses, the Governing body should discuss the gaps and potential solutions. The preliminary budgets with expenses exceeding revenues will have to be addressed prior to adoption of the final budget.

12. Preliminary Budget Statement & Hearing 40-40-05. Contents of preliminary budget statement. The preliminary budget must include a detailed breakdown of the estimated revenues and appropriations requested for the ensuing year for the general fund, each special revenue fund, and each debt service fund of the municipality. The revenue and expenditure items for the preceding year and estimates of the revenue and expenditures for the current year must be included for each fund to assist in determining the estimated revenues and appropriation requested for the ensuing year. The budget must also include any transfers in or out and the beginning and ending fund balance for each of the funds. The budget must be prepared on the same basis of accounting used by the municipality for its annual financial reports. 57-15-02.1 Property Tax Levy Increase Notice and Public Hearing A taxing district may not impose a property tax levy in a greater number of mills than the zero increase number of mills, unless the taxing district is in substantial compliance with this section. The governing body shall cause publication of notice in its official newspaper at least seven days before a public hearing on its property tax levy.

13. Adoption of Budget 40-40-09. Determination of amount to be levied - Adoption of levy - Limitations. After completing the final budget on or before October seventh, the governing body shall proceed to make the annual tax levy in an amount sufficient to meet the expenses for the ensuing year as determined at the budget meeting. Preliminary budget transforms into adopted budget Budget ordinance/resolution is adopted Certification of Tax Levy is prepared for the governing body to review prior to adoption of the final budget When the governing body has approved the budget a certified (adopted) copy is sent to the County Auditor with the certification of levy – no later than October 10 th.

14. Budget Amendments 57-15-31.1 Deadline date for amending budgets and certifying taxes. No taxing district may certify any taxes or amend its current budget and no county auditor may accept a certification of taxes or amended budget after the tenth day of October of each year if such certification or amendment results in a change in the amount of tax levied. The current budget, except for property taxes, may be amended during the year for any revenues and appropriations not anticipated at the time the budget was prepared.

15. Contingency Planning 1. Postpone capital improvements and/or infrastructure projects 2.Postpone equipment purchases 3.Implement a hiring freeze 4.Request department heads to find ways to cut expenses 5.Across the board cuts for each departmental budget

16. Phases of Financial Recovery 1.Bridging: Getting through the immediate crisis and creating breathing room to make more sustainable reforms. (Budget amendments and expense cuts in the current year) 2.Reform: Carrying out the short-term recovery plan and developing and implementing long term policies. (Creating budgets and operational policies that match your realizable resources) 3. Transform: Institutionalization of long term financial planning and becoming more resistant to financial distress and adaptable to a changing environment. (Lessen your city’s dependency on revenue from concentrated sources)