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Attachment 3 - Finance Commission Public CommentsATTACHMENT 3 economically sensitive revenues to offset the continue to projected cost increases”. This raises the question, what happens if this doesn’t happen and the cost of providing critical services such as safety services continues to accelerate? What then is the plan? Thank you. Phil Koen 28 FY 2020/21 FY 2020/21 Q2% of FY 2019/20 Q2% of FY 2020/21 FY 2021/22 FY 2021/22 FY 2021/22 Actuals Q2 Actuals Adjusted Budget Q2 Adjusted Budget Estimated YE Including Mid-Year Proposed Revenues Property Tax 15,826,162$ 5,481,928$ 34.6%36.3%5,761,081$ 15,881,866$ 15,401,391$ VLF Backfill Property Tax 4,052,672 - 0.0%0.0%- 4,154,320 4,229,462 Sales & Use Tax 6,794,218 2,429,968 35.8%29.7%2,143,460 7,213,540 7,069,045 Measure G Sales & Use Tax 1,139,386 383,684 33.7%42.8%412,881 964,319 1,173,733 Franchise Fees 2,499,463 807,883 32.3%37.3%968,181 2,597,630 2,503,560 Transient Occupancy Tax 1,044,820 399,620 38.2%77.4%711,861 920,040 1,400,000 Business License Tax 1,386,943 224,388 16.2%13.4%167,942 1,250,000 1,250,000 Licenses & Permits 2,999,711 1,494,487 49.8%82.5%2,180,000 2,641,779 3,065,997 Intergovernmental 1,573,697 818,352 52.0%9.5%370,615 3,881,836 1,130,125 Town Services 4,835,962 3,691,233 76.3%100.5%3,854,415 3,834,579 4,152,549 Fines & Forfeitures 103,467 31,638 30.6%58.4%118,809 203,450 218,120 Interest 876,460 (1,485,278) -169.5%-15.4%(85,001) 551,233 551,233 GASB 31 to Market (780,399) 517,744 -66.3%114.7%(126,168) (110,000) (110,000) Use of Property 36,372 - 0.0%- - - Miscellanious Other 335,906 1,367,206 407.0%24.4%153,036 626,631 964,163 Park Construction Tax 14,921 - 7,680 7,000 8,280 Debt Service - Entry Eliminated for ACFR 1,908,494 - 0.0%0.0%- 1,899,850 1,899,850 ARPA Income Replacement - Entry Eliminated for ACFR 79,176 Proceeds for Sales of Assets 1,201,369 - 0.0%- Fund Transfer In 652,056 104,659 16.1%16.5%104,659 633,352 633,352 Total Revenues & Transfers In 46,580,856$ 16,267,512$ 35%36%16,743,451$ 47,151,425$ 45,540,860$ Use of Other Funding Sources: Use of Reserves - Capital/Special Projects - Capital 3,401,479$ -$ 0.0%0.0%-$ 550,000$ 550,000$ Use of Reserves - Capital/Special Projects - Other 250,596$ 250,596$ Use of Reserve - Pension/OPEB 4,532,500$ Use of Reserve - Accumulated Measure G - - - 590,581 590,581 Use of Reserves - Surplus Property - - - 1,200,000 1,200,000 Use of ARPA - Income Replacement - 1,444,021 Use of ARPA - Community Grants 550,000 Total Other Funding Sources 7,933,979$ -$ 0%0%-$ 3,141,177$ 4,035,198$ Total Revenues and Use of Reserves 54,514,835$ 16,267,512$ 30%33%16,743,451$ 50,292,602$ 49,576,058$ Expenditures Town Council 192,280$ 99,787$ 51.9%45.2%91,800 202,891$ 193,559$ Attorney 537,296 311,520 58.0%33.8%226,341 669,733 554,137 Administrative Services 4,667,995 2,467,813 52.9%45.3%2,584,905 5,701,385 5,501,110 Non- Departmental 8,642,563 4,437,554 51.3%32.0%1,159,874 3,628,466 4,046,008 Community Development 4,994,391 2,589,502 51.8%63.4%3,460,301 5,461,716 5,094,473 Police 16,570,836 9,041,998 54.6%47.6%8,266,574 17,376,333 17,289,979 Parks & Public Works 8,175,987 4,185,306 51.2%46.7%4,020,953 8,605,418 8,332,422 Library 2,828,873 1,445,899 51.1%44.4%1,356,415 3,053,708 2,886,606 Capital Outlay 2,365 - - - - Total Department Expenditures 46,612,586$ 24,579,379$ 53%47%21,167,163$ 44,699,650$ 43,898,294$ Debt Service - Entry Eliminated for ACFR 1,908,494$ -$ 0.0%0.0%-$ 1,899,850$ 1,899,850$ ARPA Income Replacement - Entry Eliminated for ACFR 79,176$ Transfers Out 3,401,479 - 0.0%0.0%- 2,801,047 2,801,047 Total Additional Non-Departmental Expenditures 5,389,149$ -$ 0%0%-$ 4,700,897$ 4,700,897$ Total Operating Expenditures 52,001,735$ 24,579,379$ 47%43%21,167,163$ 49,400,547$ 48,599,191$ Allocate to Budget Stabilization/Catastrophis Reserve 65,764 Allocate to Compensated Absences 110,509 Allocate to Surplus Property Reserve 1,200,000 Allocate to Sale of Property Reserve 5,302 Allocate to Pension/OPEB Reserve 300,000 Allocate to Measure G - Capital 482,160 586,867 Allocate to Restricted Pension Trust 390,000 390,000 Excess (Deficiency) of Revenues Over Expenditures 831,525$ (8,311,867)$ *(4,423,712)$ *19,895$ -$ SUMMARY OF REVENUES AND EXPENDITURES GENERAL FUND *FY 2020/21 and FY 2021/22 Q2 Net Operating Revenues are negative because some revenues budgeted for the entire fiscal year are received in the third or fourth quarters and fund expended in the first or second quarters. ** FY 2021/22 General Fund Budget included the ARPA revenue receipt, now the ARPA revenue is budgeted in a Special Revenue Fund. Page 114 Item 6. 43,641 010 Adj Ren agar on eStructuralDeficit Achieving a Structurally Balanced Budget https://www.gfoa.org/materials/achieving-a-structurally-balanced-budget[2/13/2022 10:05:08 AM] Most state and local governments are subject to a requirement to pass a balanced budget. However, a budget that may fit the statutory definition of a "balanced budget" may not, in fact, be financially sustainable. For example, a budget that is balanced by such standards could include the use of non- recurring resources, such as asset sales or reserves, to fund ongoing expenditures, and thus not be in structural balance. A true structurally balanced budget is one that supports financial sustainability for multiple years into the future. A government needs to make sure that it is aware of the distinction between satisfying the statutory definition and achieving a true structurally balanced budget. GFOA recommends that governments adopt rigorous policies, for all operating funds, aimed at achieving and maintaining a structurally balanced budget. The policy should include parameters for achieving and maintaining structural balance where recurring revenues are equal to recurring expenditures in the adopted budget. As a first step, the government should identify key items related to structural balance. These include: recurring and non-recurring revenues, recurring and non-recurring expenditures, and reserves. Recurring revenues are the portion of a government's revenues that can reasonably be expected to continue year to year, with some degree of predictability. Property taxes are an example of recurring revenue. A settlement from a lawsuit is a good example of non-recurring revenue. Home /Best Practices /Achieving a Structurally Balanced Budget BEST PRACTICES Achieving a Structurally Balanced Budget Adopt rigorous policies, for all operating funds, aimed at achieving and maintaining a structurally balanced budget Sharhis LOG IN|SIGN UP MEMBER COMMUNITIESLEARNING DASHBOARDEVENTSMATERIALS LIBRARY MEMBERSHIP & EDUCATION BEST PRACTICES & RESOURCES ADVOCACY & AWARDS I WANT TO SEARCH Achieving a Structurally Balanced Budget https://www.gfoa.org/materials/achieving-a-structurally-balanced-budget[2/13/2022 10:05:08 AM] Some revenue sources may have both non-recurring and recurring components. These sources require finance officials to exercise judgment in determining how much of the source is truly recurring. For instance, a government may regularly receive sales tax revenues, but a large part of its base may be made up of retailers with highly volatile sales. In this case, it may be prudent to regard unusually high revenue yields as a non-recurring revenue under the assumption that such revenues are unlikely to continue, making it imprudent to use them for recurring expenditures. Another example might be building permit revenues in a period of high growth in the community. Governments should review their revenue portfolio to identify non-recurring revenues and revenues with potentially volatile components, such as the examples above. Recurring expenditures appear in the budget each year. Salaries, benefits, materials and services, and asset maintenance costs are common examples of recurring expenditures. Capital asset acquisitions are typically not thought of as recurring because although some capital assets may be acquired every year, they are not the same assets year after year. In general, recurring expenditures should be those that you expect to fund every year in order to maintain current/status quo service levels. In general, a government has a greater degree of flexibility to defer non-recurring expenditures than recurring ones. Reserves are the portion of fund balance that is set aside as hedge against risk. The government should define a minimum amount of funds it will hold in reserve.2 This serves as a "bottom line measure" to help determine the extent to which structural balance goals are being achieved. If reserves are maintained at their desired levels, it is an indication that the organization is maintaining a structurally balanced budget. If reserves are declining, it may indicate an imbalance in the budget (e.g., if reserves are being used to fund on-going expenditures). It should be noted that reserves levels are not a perfect measure of structural balance, but are a good and readily available measure. With the forgoing terms defined, a government should adopt a formal policy calling for structural balance of the budget. The policy should call for the budget to be structurally balanced, where recurring revenues equal or exceed recurring expenditures. The policy should also call for the budget presentation to identify how recurring revenues are aligned with or not aligned with recurring expenditures.3 For a variety of reasons, true structural balance may not be possible for a government at a given time. In such a case, using reserves to balance the budget may be considered but only in the context of a plan to return to structural balance, replenish fund balance, and ultimately remediate the negative impacts of any other short-term balancing actions that may be taken. Further, the plan should be clear about the time period over which returning to structural balance, replenishing reserves, and remediating the negative impacts of balancing actions are to occur.4 Notes: Achieving a Structurally Balanced Budget https://www.gfoa.org/materials/achieving-a-structurally-balanced-budget[2/13/2022 10:05:08 AM] Note that this Best Practice excludes non-operating funds like capital and debt funds. While governments should ensure that these funds are financially sustainable as well, the specific recommendations found in this Best Practice may not always be a match to the circumstances of non-operating funds. Please note that the best practice is not advocating that recurring revenues be formally allocated or "earmarked" to recurring expenditures, but rather is advocating that the budget presentation provide transparency as to whether recurring revenues and recurring expenditures are balanced. Board approval date: Tuesday, February 28, 2012 Additional resources 116th GFOA Annual Conference MORE INFO Achieving a Structurally Balanced Budget https://www.gfoa.org/materials/achieving-a-structurally-balanced-budget[2/13/2022 10:05:08 AM] RESEARCH The Rethinking Budgeting Initiative MORE INFO AWARDS Distinguished Budget Presentation Award Program MORE INFO BEST PRACTICES Website Posting of Financial Documents Achieving a Structurally Balanced Budget https://www.gfoa.org/materials/achieving-a-structurally-balanced-budget[2/13/2022 10:05:08 AM] MORE INFO GFOA Government Finance Officers Association 203 N. 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