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Municipal Budget & Finance 101

Municipal Budget & Finance 101. GFOAz Annual Conference 2003 Doug Sandstrom, City of Surprise Byron Smith, League of Arizona Cities and Towns. Revenue Sources. Intergovernmental (State Shared Revenue) Local Taxes Sales (TPT) Property User Fees. Category

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Municipal Budget & Finance 101

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  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. 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 State Shared Revenues-General

  4. Category Sales Tax 25% of Distribution Base Population Distribution General Government Purposes $318,000,000 History 1942 Initiative 1960 Initiative Increased Share State Shared Revenues-General

  5. 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 State Shared Revenues-General

  6. 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 State Shared Revenues-General

  7. 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 State Shared Revenues-General

  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. 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 Local Revenues - Fees

  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. • Don’t 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/HOA’s • 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 • Can’t 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

  30. 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

  31. 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

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