1. Municipal Budgeting in Arizona: What Budget Leaders Need to Know Tom Belshe, League of Arizona Cities and Towns Pilar Aguilar, City of Avondale 2007 GFOAz Summer Training August 8, 2007

2. Revenue Sources State Shared Revenues State Shared Revenues State Transaction Privilege Tax (Sales Tax) State Transaction Privilege Tax (Sales Tax) State Income Tax State Income Tax Highway User Revenues Funds (HURF) Highway User Revenues Funds (HURF) Local Transportation Assistance Fund (LTAF) Local Transportation Assistance Fund (LTAF) Vehicle License Tax (VLT) Vehicle License Tax (VLT) Population Requirement for State Shared Revenues Population Requirement for State Shared Revenues

3. Revenue Sources Federal Revenues Federal Revenues Block Grant Programs Block Grant Programs In theory, a block grant program is designed to fund various Federal programs within a broadly defined area. The Federal government has curtailed a number of programs. The amount of Federal assistance, type of programs and the projects for which the money can be expended from other sources are constantly changing. The Federal government has curtailed a number of programs. The amount of Federal assistance, type of programs and the projects for which the money can be expended from other sources are constantly changing.

4. Revenue Sources Local Revenues Local Revenues Property Tax Property Tax Local Sales Tax (TPT) Local Sales Tax (TPT) Business License Tax Business License Tax Franchise Tax Franchise Tax Fines & Fees Fines & Fees Development Impact Fees Development Impact Fees

5. The Model City Tax Code All of the cities and towns in the state that impose a local sales tax have adopted the model city tax code with various options. All of the cities and towns in the state that impose a local sales tax have adopted the model city tax code with various options. Twin goals of the MCTC Twin goals of the MCTC Provide a greater degree of uniformity among cities and towns Provide a greater degree of uniformity among cities and towns Individual cities and towns retain the right to determine the items taxed as well as the exemptions to be granted Individual cities and towns retain the right to determine the items taxed as well as the exemptions to be granted

6. State Imposed Expenditure Limitation Base Limit Base Limit Actual payments of local revenues for FY 1979-80 Actual payments of local revenues for FY 1979-80 The Economic Estimates Commission determines limit for every city and town The Economic Estimates Commission determines limit for every city and town Consists of expenditures “controlled” by the State limitation Consists of expenditures “controlled” by the State limitation Does not include those revenues specifically exempted from the limitation Does not include those revenues specifically exempted from the limitation

7. State Imposed Expenditure Limitation Alternative Limitation Options Alternative Limitation Options Local Home Rule (Alternative Expenditure) Limitation Local Home Rule (Alternative Expenditure) Limitation Permanent Base Adjustment Permanent Base Adjustment Capital Projects Accumulation Fund Capital Projects Accumulation Fund One-time Override One-time Override All Options Require Voter Approval

8. State Budget Law Requirements Developing the Budget Developing the Budget Budget Adoption Budget Adoption Final Budget Adoption Final Budget Adoption Adoption of Levy Adoption of Levy Truth in Taxation Truth in Taxation Encumbrances Encumbrances

9. Primary Property Tax Limitation Limited to an increase of 2% over the previous year's maximum allowable primary levy plus an increased dollar amount due to a net gain in property not taxed the previous year. Subject to Truth in Taxation

10. Truth in Taxation If the proposed primary tax levy, excluding amounts attributable to new construction, is greater than the amount levied by the city or town in the previous year the council must publish a notice.

11. Truth in Taxation Truth in Taxation Notice Requirements: Truth in Taxation Notice Requirements: The notice has to be published twice in a newspaper of general circulation in the city or town. The notice has to be published twice in a newspaper of general circulation in the city or town. The first publication shall be at least fourteen but not more than twenty days before the date on which the proposed levy is to be discussed. The second publication must be at least seven but not more than ten days before the hearing The first publication shall be at least fourteen but not more than twenty days before the date on which the proposed levy is to be discussed. The second publication must be at least seven but not more than ten days before the hearing The notice has to be published in a location other than the classified or legal advertising section of the newspaper The notice has to be published in a location other than the classified or legal advertising section of the newspaper

12. Truth in Taxation Truth in Taxation Notice Requirements (cont’d): Truth in Taxation Notice Requirements (cont’d): The notice must be at least one-fourth page in size and shall be surrounded by a solid black border at least one-eighth inch in width The notice must be at least one-fourth page in size and shall be surrounded by a solid black border at least one-eighth inch in width The headline of the notice must read “Truth in Taxation Hearing - Notification of Tax Increase” in at least eighteen point type and the text must be in substantially the same form as the statute The headline of the notice must read “Truth in Taxation Hearing - Notification of Tax Increase” in at least eighteen point type and the text must be in substantially the same form as the statute In addition to publishing the notice according to the above requirements, it is required that the city or town to issue a press release with the same information included in the notice required above In addition to publishing the notice according to the above requirements, it is required that the city or town to issue a press release with the same information included in the notice required above

13. Budget Cycle Strategic Planning/ForecastAgency Preparation Management Review Legislative ActionImplementation Evaluation Citizen Input

14. Public Participation Annual resident appreciation night Annual resident appreciation night Semi-Annual resident satisfaction survey Semi-Annual resident satisfaction survey Citizens’ CIP Committee Citizens’ CIP Committee Open house meetings Open house meetings Rate/fee changes Rate/fee changes Council workshops/goal setting Council workshops/goal setting

15. The Budget Process Rate & Fee Review Rate & Fee Review July - December July - December Capital Plan Development Capital Plan Development August - October August - October Revenue Estimates Revenue Estimates September - November September - November Council Retreat Council Retreat November November

16. The Budget Process Manager’s Budget Kickoff Manager’s Budget Kickoff January January Expenditure Estimates Expenditure Estimates January - March January - March Council Review Council Review April April Budget Adoption Budget Adoption May & June May & June

17. Financial Forecast Historical data Historical data Tax rates Tax rates Economic indicators Economic indicators New legislation New legislation Fee/cost recovery analysis Fee/cost recovery analysis Operating impact of CIP Operating impact of CIP

18. Capital Budget Council goals Council goals Operating impact Operating impact Debt capacity Debt capacity Development fees Development fees

19. Operating Budget Development Council goals Council goals Demographic growth Demographic growth Inflationary pressures Inflationary pressures New programs New programs Carryover Carryover Performance measures Performance measures

20. Budget Balancing Plan debt service payments first Plan debt service payments first Match ongoing expenditures with ongoing stable revenues Match ongoing expenditures with ongoing stable revenues Identify best uses of one-time funding Identify best uses of one-time funding Reduce costs where possible Reduce costs where possible Identify new revenue sources Identify new revenue sources

21. Contingency Budget Allows for unforeseen emergencies Allows for unforeseen emergencies Natural Disasters Natural Disasters Legislative Action Legislative Action Citizen Initiatives Citizen Initiatives Can cover revenue shortfalls Can cover revenue shortfalls Economic Recession Economic Recession Only available to City Council Only available to City Council

22. Grant Management Cost/Benefit Analysis Cost/Benefit Analysis Review grant requirements Review grant requirements Maintain necessary documents/records Maintain necessary documents/records Monitor grant expenditures Monitor grant expenditures

23. Uniform Expenditure Reporting System (UERS) Annual expenditure limitation report Annual expenditure limitation report Financial statements prepared according to GAAP Financial statements prepared according to GAAP Reconciliation of the financial statements to the expenditure limitation report for cities and towns Reconciliation of the financial statements to the expenditure limitation report for cities and towns

24. Alternative Expenditure Limitation Report Adjustments/Exclusions Adjustments/Exclusions Grants and Aid Grants and Aid Bond Proceeds Bond Proceeds Amounts received as trustee/custodian Amounts received as trustee/custodian HURF in excess of 1979-80 distribution HURF in excess of 1979-80 distribution Debt service requirements Debt service requirements Contracts with other political subdivisions Contracts with other political subdivisions Due to Auditor General within four months of fiscal year end along with audited financial statements Due to Auditor General within four months of fiscal year end along with audited financial statements

25. Questions