Municipal Budget

1
Municipal Budget Finance 101

• GFOAz Annual Conference 2003
• Doug Sandstrom, City of Surprise
• Byron Smith, League of Arizona Cities and Towns

2
Revenue Sources

• Intergovernmental (State Shared Revenue)
• Local Taxes
• Sales (TPT)
• Property
• User Fees

3
State Shared Revenues-General

• Category
• Urban Revenue Sharing (Income Tax)
• 14.8 of 2 Years Prior
• Population Distribution
• General Government Purposes
• 365,065,000

• History
• 1972 Initiative
• Preempted from Local Income and Luxury Tax
• 15 Originally
• Has Fluctuated Over Time

4
State Shared Revenues-General

• Category
• Sales Tax
• 25 of Distribution Base
• Population Distribution
• General Government Purposes
• 318,000,000

• History
• 1942 Initiative
• 1960 Initiative
• Increased Share

5
State Shared Revenues-General

• Category
• Highway User Revenue Fund (HURF)
• 27.5
• Population and County of Origin of Gas Sales
  Distribution
• Restricted to Streets and Roads
• 294,000,000

• History
• 1946 Initiative
• Originally just Gas Tax
• Now Includes Other Transportation Related Fees

6
State Shared Revenues-General

• Category
• Vehicle License Tax
• About 20 of VLT
• Population Distribution within Counties
• General Government Purposes
• 140,000,000

• History
• Evolved from Personal Property Tax on Vehicles

7
State Shared Revenues-General

• Category
• Local Transportation Assistance Fund (LTAF)
• First 23 million after operating costs are met
• Population Distribution
• Restricted to Transportation/Transit

• History
• First in Line after it Passed

8
State Shared Revenues-Local

• City of Surprise
• 14 of general fund operating budget
• Not dedicated to any particular activity
• HURF funds are used exclusively for street
  maintenance operations
• General fund subsidizes 24 of total streets
  budget
• LTAF
• Entire amount funds our Transit division
• Dial-a-Ride
• Must live within this allocation

9
Local Revenues Sales Tax

• Model City Tax Code
• Established in 1987 after attempt to preempt
  local sales tax authority
• Brought uniformity with continued local control
  but with options and green pages
• Only 1 of 5 states that have this much authority
  over the tax base.
• National effort to Streamline

10
Local Revenues Sales Tax

• Sales Tax
• 51 of general fund operating budget
• Several Components
• Retail
• Restaurant Bar
• Hotel/Motel
• Construction Onetime Revenue
• Attempt to maximize ongoing components

11
Local Revenue - Sales Tax
12
Major Sales Tax Components
13
Local Revenues - Fees

• Permits Fees
• 16 of total General Fund Revenue
• Cost recovery (including overhead)
• User fees
• Pay to Play
• Only participants pay
• Cost recovery Philosophy
• 1 of general fund revenue
• Political Implications

14
Local Revenues Utility Fees

• Utility Fees
• Business like activities
• Type of User Fee
• Each activity should be self supporting
• Sewer
• Water
• Replenishment
• Sanitation
• Political Implications
• City of Surprise 3-Year Ramp-up

15
Local Revenues - Utility Fees
16
Local Revenues - Property Tax

• Primary Secondary
• Primary may be used for any general government
  purpose
• Secondary is directly tied to debt service
• Both Require Voter Approval
• Primary has 2 increase over maximum levy
• Truth-in-Taxation
• Notification
• Based on Levy not Rate

17
Local Revenues Property Tax

• Must be adopted on or before the 3rd Monday in
  August
• At least 7-days after final budget
• Requires a Public Hearing
• Truth-in-Taxation
• Must be published twice in a local newspaper
• 1st Publication 14 20 Days
• 2nd Publication 7 10 Days
• Requires Roll Call vote of the council
• Requires a Public Hearing

18
Truth in Taxation
19
Local Revenues Property Tax

• 6 of City of Surprise General Fund operating
  revenues

20
Local Revenues - Property Tax Rates
21
Local Revenue Property Taxes
22
State Imposed Expenditure Limitation

• 1979-80 Base limit adjusted annually
• Population and Inflation
• Uniform Expenditure Reporting System
• Penalties for Non-Compliance
• Why 1979-80?
• Prop 13 in California
• City of Surprise FY2003 Budget
• State Limit 11,657,725
• Adopted Budget 141,175,000

23
Alternative Expenditure Limitations

• Home Rule aka Alternative Expenditure Limitation
  (AEL)
• Permanent Base Adjustment
• Capital Projects Accumulation Fund
• One-Time Override
• Similar process for all
• Detailed and Summary Analysis
• Submission to Auditor General, etc.
• Dont fail unless other political turmoil exists

24
COS Expenditure Limitation
25
City of Surprise

• Home Rule Election on March 11, 2003
• Passage of an Alternative Expenditure limitation
  is imperative
• Process
• Publicity pamphlet
• Neighborhood Meetings/HOAs
• City Council District Meetings
• Council as Spokespeople
• Education is key

26
COS Home Rule Analysis
27
COS Permanent Base Adjustment

• Intend to Pursue PBA in 2005
• Mid-point of 4-year Home Rule
• Fail safe

28
Budget/Tax Levy

• Process/calendar determined locally
• State Budget Forms
• Provided by Auditor General
• Tentative Budget must be adopted by the 3rd
  Monday in July
• Cant go above this adopted amount in Final
• Final Budget Adoption
• 2nd Monday in August if Property Tax
• No Specific Date if No Property Tax
• Adoption can be by simple motion

29
Surprise FY2004 Budget Calendar

• October 29 CIP Kick-off
• December 13 CIP Projects Due
• December 18 Budget Kick-off
• February 14 All Budget Requests Due
• March 17 21 Management Team Budget
  Reviews
• April 16 Tentative Budget presented to
  City Manager
• May Council Retreat
• June 12 Tentative Budget Adopted

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Other

• Accounting
• No expenditure may be made that is not authorized
  in the budget
• May not exceed amounts indicated in final budget
• Budget transfers that do not change the bottom
  line
• Audits
• Required Annually for Cities (Bi-annually for
  Towns)
• Outside CPA or Licensed Public Accountant
• Filed with Auditor General by October 31
• 120 day extension available

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Other

• Bonding
• General Obligation
• Voter Approval Required
• Revenue
• Voter Approval Required
• Non-Profit Corporation
• MPC Generally Revenue Producing projects
• No Voter Approval
• Investments
• Deposits in Excess of 100,000
• Local Government Investment Pool (LGIP)

32
Federal Requirements

• Single Audit
• Required on federal grants if more than 300,000
  is received in a given year
• Generally contract with current Auditor
• Davis-Bacon Act
• All projects utilizing 25 or more federal funds
  must pay prevailing wages

33
Purchasing

• Bidding Requirements
• General Projects - 16,565 (Labor Only)
• Street Projects - 177,487 (Total Cost)
• Recreational Projects - 153,189 (Total Cost)
• Sale of Real or Personal Property
• Professional Service Alternatives
• Design/Build
• Architects
• Engineers

34
Dates to remember

• Specific Dates are listed in the League Book
• Budget Adoption
• Tax Levy Adoption
• Truth-in-Taxation
• Audit Filing
• Public Notices

35
Municipal Budget Finance 101

• GFOAz Annual Conference 2003
• Doug Sandstrom, City of Surprise
• Byron Smith, League of Arizona Cities and Towns