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PRESENTATION OF PROPOSED FY 2009-2010 CITY BUDGET

PRESENTATION OF PROPOSED FY 2009-2010 CITY BUDGET CALL FOR PUBLIC HEARING John L. Gray City Manager Lexington City Council Meeting May 26, 2009 INTRODUCTION

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PRESENTATION OF PROPOSED FY 2009-2010 CITY BUDGET

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  1. PRESENTATION OF PROPOSEDFY 2009-2010 CITY BUDGET CALL FOR PUBLIC HEARING John L. Gray City Manager Lexington City Council Meeting May 26, 2009

  2. INTRODUCTION • In accordance with State law, the proposed City budget for fiscal year beginning July 1, 2009 and ending June 30, 2010 is presented for City Council review and action • Budget proposes funding for City operations, capital items and debt payments

  3. Standard Initial Development ofFY 2009-10 Budget • Department Heads provided input to Finance Director for Five-Year Financial Planning Model and results presented to City Council at February 2009 Retreat • Department Heads submitted zero-based budget requests to Finance Department for 2009-2010 budget development in February 2009

  4. Standard Initial Development ofFY 2009-10 Budget – (cont’d) • Requests were reviewed with each Department Head by City Manager, Assistant City Manager and Finance Director and spending priorities were set in order to balance in April 2009 • City Council reviewed the budget in detail during budget workshops held May 4th and 5th • All legal requirements for balancing the budget for presentation to Council have been observed

  5. Key Questions forBudget-Making in 2009 • Can basic City services and partnerships for services be continued? • In the midst of a recession, can the City avoid a property tax rate increase? • What is the lingering impact of industrial plant closings and job losses on the City’s budget? • Will the federal economic stimulus funding help the City’s budget

  6. Key Questions forBudget-Making in 2009 – (cont’d) • What effect will the housing market crisis and lack of consumer confidence (i.e. sales tax) have on the City’s budget? • What toll will unfunded federal and state mandates have on the City’s budget?

  7. Guides for Setting Priorities in Proposed FY 2009-10 Budget • City Council’s General Approach to Governing • City Council’s Priorities from 2009 Retreat • The Way Forward – Setting Priorities in Uncertain Times • A Number of Council and Staff Priorities are Identical

  8. City Government’s Financial Position Has Eroded Since 2001 • Loss of manufacturing plants and jobs due to: • Mergers and Acquisitions • New Technology • Cheap Foreign Labor • These losses have resulted in dramatic reductions in City property taxes and utility revenues

  9. Total Impact of Loss of Key Revenues and Jobs Since 2001 • $9.2 Million Annual City Revenues Lost (equivalent value in property tax rate – 70.5 cents) • Over 3,000 Jobs Lost • 12 Plants Closed (Lexington Home Brands, Duracell, PGT, Stanley, Smurfit Stone, TI Industries) • Mixed Signals of Recovery and Further Decline (New Restaurants, Uptown Lexington Business Activity, Surveys of Consumer Confidence and Factory Output Increasing, Layoffs at PPG)

  10. City Council’s General Approach to Governing • Expand citizen involvement – Boards and Committees – and heed recommendations • Employ professional staff for best advice available • Pursue partnerships • Plan, plan, plan!!! • Make strategic investments • Maintain financial integrity • Take calculated risks

  11. City Council’s Goals from 2009 Retreat • Economic Development 1. Continue to recruit and promote business (job creation) 2. Appoint LHB Redevelopment Authority – Vigorously work to redevelop LHB and entire Depot District • City Government Financial Integrity 1. Keep tax and fee increases to a minimum 2. Grow tax base

  12. City Council’s Goals from 2009 Retreat – cont’d • City Government Services and Facilities 1. Relocate Fire Station #2 2. Police Training Academy • City Staffing • Hire and develop quality employees • Infrastructure • West Bypass Extension

  13. City Council’s Goals from 2009 Retreat – cont’d • Education • Investigate school system consolidation • Lexington’s Image • Work on becoming an All America City; apply when time is right • Redevelop Business Districts and Neighborhoods • Redevelopment of LHB property

  14. City Council’s Goals from 2009 Retreat – cont’d • Quality of Life • Recruit more jobs with higher wages and benefits • Core Values • Take strategic chances with new initiatives

  15. City Government Adept at Change • City government forced to change not only due to manufacturing losses but also due to utilities deregulation and state and federal mandates • City government has been changing and innovating for 15 years • Reduced workforce by 20% • Automated services – garbage pick-up, meter reading • Outsourced services – electric line tree trimming, building repairs, utility bill printing and mailing, sports officials

  16. City Government Adept at Change – cont’d • Applied business approach to utilities and golf enterprises • Expanded city population and tax base through annexation • Targeted tax base rebuilding through economic development incentive grants • Expanded citizen involvement through two strategic planning efforts and doubling boards and commissions • Aggressive pursuit of state and federal grants • Pursuit of partnerships with local governments and non-profits

  17. Interim Measures to Meet Current Budget Challenges City Manager ordered reductions/changes in current spending October 2008: 2% reduction in spending in General Fund Hiring freeze Reduction in vehicle and equipment purchases Reengineering ideas submitted by department heads $820,000 spending reduction in Enterprise Funds Total reductions in current budget spending estimated at $1.3 million Began exploring joint service efforts with Davidson County

  18. The Way Forward – The Basics City government without luxury of time or crystal ball to discern impacts of Federal bailout or State budget decisions City budget process must be completed by June 30, 2009 City government must hold on to successful governing principles and business practices City government must also begin making some fundamental changes in services and spending Continue to reserve the right to play

  19. The Way Forward – Setting Priorities in Uncertain Times Spending Controls and Innovations in Budgeting Planned Growth Increase Fund Balance Maintain and Create Jobs Advance Needed City Facilities Support Key Non-Profits Pursue State and Federal Grants Pursue Redevelopment of Blighted Areas Pursue Local Government Efficiencies Retain Professional City Workforce

  20. The Way Forward – Examples Spending Controls and Innovations in Budgeting i.e. Control Increasing Health Insurance Costs Planned Growth i.e. Implement Annexation and Update Areas of Consideration Increase Fund Balance i.e. Significant Reduction in Balancing Budget Maintain and Create Jobs i.e. Maintain Partnerships with Uptown Lexington, Economic Development Commission, Lexington Tourism Authority, Davidson County Government and NC Department of Commerce; Incentive Contracts

  21. The Way Forward – Examples – cont. Advance Needed City Facilities i.e. Police Academy Training Center, Relocation of Fire Station 2, Utilities Operations Center Expansion – Phase I Natural Gas, Youth Recreation Center including Lexington Senior High School Athletic Field House Support Key Non-Profits i.e. Direct Services and Job Creation by Grants to Agencies Pursue State and Federal Grants i.e. CDBG; Received $2.1 Million Neighborhood Stabilization Grant; Public Safety; Parks and Recreation; Clean Water; Drug Forfeitures; Stimulus Funding Opportunities

  22. The Way Forward – Examples – cont. Pursue Redevelopment of Blighted Areas i.e. Appoint Redevelopment Commission; new lease for warehouse space with Lexington Home Brands (LHB) will help fund Commission operations; initial results of Phase II Environmental Assessment of LHB Plant 1 Property promising Pursue Local Government Efficiencies i.e. Reengineering Recommendations from City Department Heads and Brainstorming Exercise with County Department Heads Retain Professional City Workforce i.e. Maintain City’s Competitive Edge of Friendly, Professional, Reliable Service

  23. Impacts to City Employees in Next Year’s Budget Reduced on-call pay Reduced take home vehicles Eliminates 2% 401-K contribution by City (reserved as Productivity/Efficiency Program) No merit pay (2nd year) Eliminates 8 positions – from 348 full time to 340 (includes 2 Golf positions during current budget year) 48 hours without pay per employee through furlough program Reduced health insurance benefits

  24. Plus-side for City Employees No layoffs Retains good health insurance, retirement, and longevity pay Annual and sick days plus holidays No health insurance premium increases

  25. Impacts to City Taxpayers/Customers 4.7% wholesale electric rate increase effective July 1, 2009 (City’s consumption losses not added to rate increase) State mandated Renewable Energy Portfolio Standards (REPS) surcharge passed through to electric customers Programmed 2.5% water increase delayed until January 1, 2010 Programmed 5% sewer increase delayed until January 1, 2010 Eliminates $1.00 per month residential recycling credit as recommended by State (only 29% of households recycle) Pilot project of alternating opening of City Pool days after heavy 1st two weeks of use

  26. Plus-side for City Taxpayers/Customers No property tax increase despite lower revenues in General Fund Despite electric consumption losses, not added to electric wholesale rate Basic City services remain intact Reminder – City utilities are run as businesses, distinct and separate from the General Fund and the City’s property tax rate Planned water and sewer rate increases delayed six months Only about 29% of eligible households recycle affected by elimination of $1.00 per month recycling credit

  27. Key Features/Investments in Next Year’s Budget $14,000 in State landfill fee appropriated for innovative recycling programs $225,000 for street maintenance $25,000 for joint disaster recovery program with County for computer systems $20,000 for energy efficiency improvements in City buildings identified through energy audits Implementation of automated meter reading and GIS computer mapping programs continue

  28. Key Features/Investments in Next Year’s Budget Finalize Natural Gas expansion to Southmont and begin expansion to Tyro area Relocate Fire Station 2 and begin Utilities Operations Center expansion – Phase I Natural Gas General Fund is $1.2 million lower than current year Proposed total budget is $3.9 million below current budget of $95.8 million

  29. Balancing the Budget Original proposed budget was out $1.7 million in the General Fund and over $4 million in Enterprise funds 205 changes made in General Fund revenues and expenditures Individual General Fund changes as low as $16 (a benefit reduction) to as high as $205,500 (elimination of an equipment purchase) Another 189 changes made in Enterprise and Internal Service Funds (includes elimination of $575,000 in contracted services from Electric Department)

  30. Reserve the Right to Play Budget is positioned for economic improvements or further decline Revenues are conservatively estimated Pursuit of stimulus and other funding is aggressive Basic City services intact as is professional workforce to deliver them Reduced use of Fund Balance for unforeseen emergencies

  31. Reserve the Right to Play – cont’d Opportunities for economic development through Economic Development Commission, Lexington Tourism Authority and Uptown Lexington, Inc. continue Support for non-profits helping those in need and improving quality of life continue Tough budget year in which sacrifices asked of City employees, citizens and customers, but City remains positioned for recovery and advancement

  32. Cautionary Note No flexibility within department budgets or contingency in overall budget; any emergencies or opportunities will require use of fund balance Virtually no capital outlay in the budget – vehicles and equipment getting older No merit pay or cost of living for City employees – conditions will improve and we will be in competition with surrounding larger cities and counties We are buying time in this budget with hope the economy will improve – no guarantees it will – more difficult budget moves to remain in balance could still lie ahead

  33. General Fund Balance $1.5m estimated reduction in 3 years from $6.5m to $5m

  34. How Will Fee and Rate Increases in Municipal Services Affect the Average City Resident? • For a home that recycles, the discontinuance of the residential recycling credit will cost an additional $12 per year or $1 per month • For a home that uses 1,000 kWh, the 4.7% proposed electric rate increase will affect a City resident by: • Approximately $62 per year or $5.16 per month • For a water and sewer residential customer who uses 7 CCFs (5,200 gallons), a monthly bill will increase by: • $2.01 per month delayed beginning January 1, 2010 • Total increase for last 6 months of next fiscal year of $12.06 • The proposed fee and rate increases affect the average resident by a TOTAL OF $86 NEXT YEAR

  35. City of LexingtonBudget Summary and Comparison

  36. City Budget is City Council’sNumber One Policy Statement Economic development initiatives are pursued Service levels are set Partnerships are nourished New technology acquired Community’s security enhanced through public safety Service efficiencies are sought

  37. City Budget is City Council’sNumber One Policy Statement – cont’d Public schools are supported Supports City employees in delivering efficient and effective services Public infrastructure is built and maintained Recreation for citizens is provided Public health guarded by sanitation and water resources

  38. City Budget is City Council’sNumber One Policy Statement – cont’d Reliability of utility services is funded Key City services necessary to support local economy are maintained City’s financial integrity maintained to meet service and debt obligations Customer service is enhanced

  39. CITY BUDGET - THE ULTIMATE PARTNERSHIPBETWEEN CITY COUNCIL, CITY STAFF, CITIZENS, CUSTOMERS AND PARTNERS

  40. CITY MANAGER’S RECOMMENDATION City Council to call for public hearing on proposed FY 2009-10 budget for June 8, 2009, at 7:00 p.m. at City Hall

  41. Public Input Encouraged • The proposed budget and City Manager’s PowerPoint presentation will be available in the City Clerk’s office for inspection and copying • Proposed budget and City Manager’s PowerPoint presentation can be found on the City’s website at www.lexingtonnc.net with direct link on the home page • Public hearing notices in The Dispatch, City Government Cable TV Channel 13, and City’s website

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