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Agenda 03/10/2015 Item #11D 3/10/2015 11 .D. EXECUTIVE SUMMARY Recommendation to adopt the FY 2016 Budget Policy OBJECTIVE: That the Board of County Commissioners (Board) adopt policies to be used in developing the Collier County Government budget for FY 2016. CONSIDERATIONS: In order for staff to begin preparation of the FY 2016 budget, direction is needed from the Board on major policy issues. Attached to this Executive Summary is a listing of pertinent policy issues that will affect preparation of the FY 2016 budget. The budget policy document is broken down into three distinct elements. The first consists of budget policies proposed in FY 2016 that require policy direction from the Board. The second element consists of standard budget policies that the Board has endorsed for a number of fiscal years. The third element consists of a three-year analysis of the General Fund(001)and the Unincorporated Area General Fund(111). Establishing broad goals to guide governmental decision makers is the first of four budget process principles developed by the National Advisory Council on State and Local Budgeting(NACSLB)and endorsed by the Governmental Finance Officers Association(GFOA). The Board needs to establish June budget workshop dates. Tentative dates are Thursday, June 25, 2015 and if necessary Friday, June 26, 2015 with meeting times scheduled from 9:00 a.m. to 5:00 p.m. The Florida Association of Counties annual conference is scheduled for June 16 through June 19,2015 in St.John's County. For informational purposes, adoption of the maximum tentative millage rates is scheduled for Tuesday, July 14, 2015. The Board is required by Florida Statutes to provide the Property Appraiser with the proposed millage rates by August 1, 2015 in order to prepare the Notice of Proposed Property Taxes. Finally, the Board needs to establish September public hearing dates for the adoption of the FY 2016 budget. The School Board has tentatively scheduled September 8, 2015 for their final budget hearing. Recommended dates for the Collier County budget public hearings are Thursday September 10, 2015 and Thursday September 24, 2015. LEGAL CONSIDERATIONS: The County Attorney has approved this item as to form and legality. Majority support is required for Board approval.—JAK FISCAL IMPACT: The adopted policies will serve as the framework for the development of budget and ad valorem taxation issues for FY 2016. GROWTH MANGEMENT IMPACT: There is no Growth Management impact. RECOMMENDATIONS: That the Board adopts budget policies as detailed in the attachments to this Executive Summary, establishes June budget workshop dates and September public hearing dates. In addition, the Board needs to adopt the attached Resolution establishing a May 1, 2015 deadline for the Supervisor of Elections,the Sheriff's Office and the Clerk's budget submittals. PREPARED BY: Mark Isackson,Director of Corporate Finance and Management Services Packet Page-225- 3/10/2015 11.D. COLLIER COUNTY Board of County Commissioners Item Number: 11.11.D. Item Summary: Recommendation to adopt the FY 2016 Budget Policy. (Mark Isackson, Corporate Financial and Management Services Director) Meeting Date: 3/10/2015 Prepared By Name: Valerie Fleming Title: Operations Coordinator, Office of Management&Budget 3/3/2015 11:35:07 AM Submitted by Title: Operations Coordinator, Office of Management&Budget Name: Valerie Fleming 3/3/2015 11:35:08 AM Approved By Name: KlatzkowJeff Title: County Attorney, Date: 3/3/2015 3:34:16 PM Name: IsacksonMark Title: Division Director-Corp Fin&Mgmt Svc, Office of Management&Budget Date: 3/3/2015 3:43:42 PM Name: OchsLeo Title: County Manager, County Managers Office Date: 3/3/2015 4:14:38 PM Packet Page-226- 3/10/2015 11 .D. RESOLUTION NO. 2015- A RESOLUTION PURSUANT TO SECTION 129.03, FLORIDA STATUTES, REQUIRING THE FY 16 TENTATIVE BUDGETS OF THE SHERIFF, THE SUPERVISOR OF ELECTIONS AND THE CLERK TO BE SUBMITTED TO THE BOARD OF COUNTY COMMISSIONERS BY MAY 1, 2015. WHEREAS, Chapter 129, Florida Statutes, addressing the County annual budget, provides specifically in Section 129.03, Florida Statutes, that the Board of County Commissioners may, by resolution, require the tentative budgets of the Sheriff,the Supervisor of Elections and the Clerk to be submitted by May 1 of each year. NOW, THEREFORE, BE IT RESOLVED BY THE BOARD OF COUNTY COMMISSIONERS OF COLLIER COUNTY, FLORIDA,pursuant to Section 129.03, Florida Statutes, that the Sheriff, the Supervisor of Elections and the Clerk of the County of Collier, Florida, are hereby required to submit their respective tentative budgets for the FY 16 fiscal year to the Board of County Commissioners by May 1, 2015. This Resolution shall be effective on its adoption. This Resolution adopted this 10th day of March, 2015, after motion, second and majority vote. ATTEST: BOARD OF COUNTY COMMISSIONERS DWIGHT E. BROCK, Clerk COLLIER COUNTY, FLORIDA By: By: , Deputy Clerk Tim Nance, Chairman I Approvrod is o,ferni and legality: t.. Jeffrey A. Klatzkow,County Attorney i a Packet Page-227- 3/10/2015 11 .D. Fiscal Year 2016 Proposed Budget Policies Collier County Board of County Commissioners March 10, 2015 Historically,the annual budget policy approved by the Board of County Commissioners (Board), has consisted of three (3) sections which are "annual budget policies to be adopted" "continuing budget policies to be reaffirmed" and a "three ear forecast for the General Fund and the Unincorporated Area General Fund". Polio ect m°e c a i6r7 .WF e ar�rtgray While it it suggested that this format continue, the policy document will also cover significant budget influences and discuss the strategies which may be utilized to address these influences as the budget document evolves for FY 2016 and beyond. The FY 2016 budget will be prepared within an economic environment where all housing, employment and demographic indicators point to continued growth. Taxable Value County wide has increased for three (3) consecutive years. Median home prices are increasing at a pace higher than state and national averages, visitation to the destination is at record highs, new construction permitting continues to trend up and the County's unemployment rate is dropping. While these are positive economic signs, fiscal conservatism must co-exist with funding for priority service, program and infrastructure replacement and maintenance as the County moves forward with future financial planning. The FY 2016 budget must strike a balance between funding for continued and expanded programs and operations and the need to fund replacement capital infrastructure and maintenance as well as new capital initiatives. This will place extraordinary pressure on the General Fund and Unincorporated Area General Fund. That said, the budget document must continue to remain flexible - a key component of the budget management process. Anticipating and planning for potential new Board policy initiatives is also an important part of FY 2016 budget planning. These initiatives may include; additional landscape treatments, expanded storm-water improvements, impacts from any impact fee policy initiatives, and AUIR/CIE obligations. This is on top of the continuing need to fund deferred high priority asset maintenance and equipment replacement items. Packet Page-228- 3/10/2015 11 .D. Annual Budget Policies Adopted Significant Budget Influences: Each fiscal year based upon fiscally conservative budgetary guidance, limited resources are allocated to competing services,programs,projects and capital initiatives. Within the pyramid of service and program delivery, significant resources have been devoted to public safety, public health, debt management and replacement of priority mission critical infrastructure and equipment. Ad valorem taxes will once again dominate the County's budgetary revenue mix — comprising about 43% of total net annual operating revenue and 65% of General Fund revenue sources. Fully three quarters (75%) of General Fund revenue is comprised of property taxes, sales tax and state shared revenue. Sources of Current County Government Operating Revenues all Funds(FY 2015) FY 2015 General Fund Revenue Sources Service Ad Valorem Charges Impact Fees 65% I ntergov'ta l 32% 5% Revenues Bond Sales Tax 9% 2% Proceeds/ Interest 1% State Revenue Sharing 2% Transfers from Permits/ Constitutional Intergov'tal Assessments Carryforward Fines, Revenues ffi Ocers Interfund Interest& Ad Valorem 2% Transfers and 15% Misc. Permits, 1% Fines 8% Gas/Sales Tax 43� Payments 1% Charges 9% 2% Property Tax by Major Funds General Fund MSTU's 3% 86% Pollution Control 1% Unincorporated Area General Fund 10% Thus, significant attention is paid to ad valorem taxes and those factors that can influence millage rate and tax levy decisions. For FY 2016, significant influences include; • Protecting beginning year General Fund and Unincorporated Area General Fund cash balance without the introduction of new or expanded revenue sources and with continuing expense side service and capital expenditure pressure. • Maintaining the County's investment quality credit rating. 2 Packet Page-229- 3/10/2015 11 .D. • Balancing modest discretionary operational spending increases to agencies and departments which are funded within the General Fund and Unincorporated Area General Fund with a continuing commitment to high priority public health and safety programs; asset maintenance and replacement; and non discretionary expenses such as health insurance, fuel, and utilities. • Continued investment in the County's work force especially in a strong economic environment where competition within the skilled trades and various professional subsets intensifies. • Level of General Fund operating and capital support extended to Constitutional Officers. • General Fund and Unincorporated Area General Fund support for new or re-prioritized operating and capital initiatives such as asset management; economic development; EMS facilities and operations; EMS helicopter; ambulances; landscaping maintenance and enhancement; parks and recreation development; Sheriff Capital; and digital enhancements to the county wide public safety radio system. • Impacts of potential unfunded mandates including continued state legislative attacks on county revenues (SB 110—Communication Services Tax); potential mandates to require law enforcement officers to wear body cameras; as well as continuing federal mandates like the Affordable Care Act(ACA). • Extent of capital, debt and operational transfer dollars expended by the General Fund and Unincorporated Area General Fund. • Proper level of resources to cover the organizations priority asset maintenance and equipment replacement obligation. • Extent of non ad valorem revenue projected to support operations such as sales tax, state shared revenues and departmental revenue from general fund operations. Taxable Value and Millage Targets for the General Fund (County-Wide) and Unincorporated Area General Fund The County has lost over $17.9 billion in taxable value — almost 22% of its tax base since FY 2008. The value of this tax base erosion is over $63 million dollars when applying the current General Fund millage rate. Recovery to FY 2008 levels will take time. Assuming five (5)percent annual tax base increases, it will take five (5) fiscal years (FY 2020) to regain the tax base lost since FY 2008. More aggressive tax base increases similar to state estimates in the seven (7) percent range will shorten that time frame to four (4) years (FY 2019). The following table provides a history of General Fund (county wide) and Unincorporated Area General Fund taxable value over the past eight (8) years (tax year 2007-2014) as well as the budget planning projection for tax year 2015 (FY 2016). 3 Packet Page-230- 3/10/2015 11 .D. Unincorporated Unincorporated County Wide County Wide Area Taxable Area % inc. Tax Year Taxable Value % inc. (dec) Value (dec.) 2007 (FY 2008) $82,542,090,227 $53,397,231,747 2008(FY 2009) $78,662,966,910 (4.7%) $50,860,023,424 (4.8%) 2009(FY 2010) $69,976,749,096 (11.0%) $44,314,951,279 (12.8%) 2010(FY 2011) $61,436,197,437 (12.2%) $38,146,886,403 (13.9%) 2011 (FY 2012) $58,202,570,727 (5.2%) $36,013,774,963 (5.6%) 2012(FY 2013) $58,492,762,303 .50% $36,026,786,779 .04% 2013 (FY 2014) $60,637,773,315 3.7% $37,207,018,234 3.3% 2014(FY 2015) October DR 422 Number(not final) $64,597,046,689 6.5% $39,634,406,695 6.5% 2015(FY 2016) $69,441,825,191 7.5% $42,606,987,197 7.5% The State Ad Valorem Estimating Conference released numbers in December 2014 for the 2015 tax year(FY 2016). The report projects that Collier County taxable values on July 1, 2015 will increase 8.5%. For budget planning purposes at this time a 7.5% positive taxable value adjustment will be used. Any positive difference in taxable value above the planning threshold and the resulting increase in ad valorem revenue can be applied to General Fund and Unincorporated Area General Fund reserves and/or competing operating and capital programs and services as directed by the Board. The General Fund and Unincorporated Area General Fund tax or "millage" rate has varied over the years and has been influenced by the taxable value environment and State legislation. Tax or "millage"rates for the past nine (9)years are shown in table form below. Millage Area FY 07 FY 08 FY 09 FY10 FY 11 FY 12 FY 13 FY 14 FY 15 General Fund $3.5790 $3.1469 $3.1469 $3.5645 $3.5645 $3.5645 $3.5645 $3.5645 $3.5645 Unincorporated Area $.8069 $.6912 $.6912 $.7161 $.7161 $.7161 $.7161 $.7161 $.7161 Assuming the Board maintains a millage neutral tax rate position for FY 2016, the following ad valorem dollar increases/ (decreases) within the General Fund and Unincorporated Area General Fund can be expected from that budgeted in FY 2015 (adjusted for the October taxable value recapitulation)under varying taxable value results. Taxable Value 5%Increase 7%Increase 7.5% 8.5%Increase 9%Increase Result Increase General Fund(001) $11,512,800 $16,117,900 $17,269,200 $19,571,800 $21,759,200 Unincorporated $1,419,100 $1,986,800 $2,128,700 $2,412,500 $2,682,100 Area General Fund (111) Dollars above or Fund (S5,756.400) Fund ($1,151.300) Fund SO Fund $2,302,600 Fund $4,490,000 (below)budget 001 001 001 001 001 planning threshold Fund ($709.600) Fund ($141,900) Fund $0 Fund $283,800 Fund $553,400 111 111 111 111 111 4 Packet Page-231- 3/10/2015 11 .D. Of course if taxable values fall below the 7.5 percent planning scenario, budget planning will be reduced accordingly. Conversely if taxable values exceed the planning benchmark, additional ad valorem dollars can be used to increase reserves and/or applied to much needed programs and services as directed by the Board. It is likely that budgeted ad valorem revenue will be millage rate driven rather than a strategy of setting the millage rate based upon a targeted ad valorem revenue number. The County Manager is proposing to submit one FY 2016 millage neutral budget along with service level and related budgetary and millage implications. Holding the General Fund millage rate at $3.5645 and the Unincorporated Area General Fund millage rate at $.7161 for the seventh consecutive fiscal year in FY 2016, (millage neutral scenario) under an increasing taxable value planning scenario will result in targeted and measured divisional operating increases coupled with an ability to continue systematically replacing much needed equipment and asset maintenance deferred during the economic recession. Increasing operating expenses are expected and will be appropriated to account for new programs and services instituted during FY 2015, inflationary adjusted fixed costs and maintaining a competitive compensation package. The December 2013 over December 2014 CPI is 1.4 percent. A component increase of 3% devoted to operations at the division level is planned. A significant portion of remaining budget planning dollars will be applied to Agency wide capital equipment and asset replacement. For the second time since FY 2009, no mid-year operating cuts are contemplated in FY 2015. This does not mean that management of the budget will cease. To the contrary, close expenditure controls are always in place and monitored continually. Likewise, execution patterns are scrutinized along with transfer dollars to make sure that appropriations are properly executed and spent for the intended purpose. The table below identifies the level and extent of adopted and mid-year budget reductions since FY 2009 to achieve a millage neutral tax rate budget and maintain adequate General Fund cash balances consistent with an investment quality credit rated organization. General Fund Budget Reductions $30 — $20 $10 $0 1 Fir ill o -$10 -$20 Total Reductions — -$30 $90,747,200 -$40 FY 09 FY 10 FY 11 FY 12 FY 13 FY 14 FY 15 It Reductions for the Adopted Budget IS Mid-Year Budget Reductions 5 Packet Page-232- 3/10/2015 11 .D. While it is important to continue the recovery process from significant budget reductions necessitated by the economic recession, this recovery and the level of dollars devoted to replacing deferred assets must be measured against the continued need to maintain prudent reserve levels; protect against revenue shortfalls and reliance upon ad valorem tax revenue; guard against any assault by the state legislature on the ad valorem and general county tax/revenue structure; and fulfill public expectation to maintain/enhance service levels. A lofty and challenging task to be sure. Erosion of General Fund and Unincorporated Area General Fund equity must always be guarded against. The following table presents the estimated backlog of various categories of deferred general governmental asset maintenance or replacement since FY 2007. These deferrals include passenger vehicles; light and heavy duty trucks; light and heavy equipment; facility infrastructure maintenance; park infrastructure maintenance; storm-water maintenance and; road maintenance where the primary funding source is the General Fund and Unincorporated Area General Fund. Category Growth Public Services Administrative Total Management Services Vehicles and Equipment $6,316,200 $3.854,400 $2,001,500 $12,172,100 Governmental Facilities and Infrastructure Assets $0 $3.107,000 $14,406,600 $17,513,600 Storm-Water $10,353,000 $0 $0 $10,353,000 Road Maintenance $6,950,000 $0 $0 $6,950,000 Total $23,619,200 $6,961,400 $16,408,100 $46,988,700 A detailed breakdown of the general governmental asset maintenance and replacement backlog will be developed for Board review at the June workshop similar to last year. This detailed table will show the FY 2016 backlog; the dollars budgeted in FY 2016 to reduce the backlog and the FY 2017 roll over amount. The total FY 2016 backlog value is estimated to increase $4,871,500 from last year's planning number. For FY 2016, funding will be earmarked for priority backlog vehicles, equipment and infrastructure. Once again, budget savings from fuel purchase will be calculated and Departments will be able to apply these savings in FY 2015 toward the purchase of priority backlog vehicles and equipment. The general governmental savings (excluding transit and enterprise operations) is estimated at approximately $500,000 and will serve to reduce the vehicle and equipment backlog shown above. Fuel savings across all funds is approximately $900,000. It will likely take at least $12-15M per year as a set aside to completely eliminate the backlog over five (5) years assuming complete elimination of the backlog is desirable. This annual set aside would account for the marginal rollover adjustment that exists from one year to the next. However, operating revenue limitations and the continuing need to fund existing operations as well as new operating and capital initiatives will prevent this level of set aside. A more realistic approach is to recognize that a certain level of backlog will always exist and pursue replacement on a priority basis, beginning with mission critical equipment and infrastructure and progressing down from there. The following table provides a description of what is currently planned in FY 2016 from the General Fund budget to support ongoing capital requirements; continue to address part of the backlog described in the previous table; and fund growth and non-growth debt obligations. 6 Packet Page-233- 3/10/2015 11 .D. Category Non Loans to Loans to County Transfer to Transfer Total Growth Impact Fee Impact Fee Wide Roads to Storm- Debt Funds- Funds- Capital Water Debt Projects FY 2014 $3,657,700 $4,342,300 $0 $10,661,400 $8,768,800 $4,730,100 $32,160,300 FY 2015 $3,079,600 $3,307,100 $7,813,200* $10,729,800 $9,499,900 $4,627,600 $39,057,200 FY 2016 $3,075,000 $6,816,600 $0 $10,670,000 $11,510,300 $4,627,600 $36,699,500 *EMS$1,731,500+$4,022,800 SOE+$2,058,900 substation. Non growth related debt serviced by legally available non= ad valorem revenue from the General Fund remains relatively flat year over year reflecting the various debt restructurings approved by the Board. Through the County's debt restructuring and normal debt retirement, non growth related annual revenue bond debt service paid from the General Fund has decreased 61% or over $4.8M since FY 2010 when the debt restructuring initiative began. Cumulatively across all debt types (General Governmental and Business), non growth related annual debt service has dropped 39.7%. The FY 2015 impact fee loan figure is artificially low due to several factors including unanticipated impact fee revenue not forecast in FY 2014. County-wide capital allocations have traditionally included new money components for general governmental capital projects as well as maintaining and replacing existing general governmental infrastructure. The following chart provides a summary description of dollars programmed and subsequently forecast for transfer in FY 2015 versus dollars planned for FY 2016 by category. County—wide Capital Category FY 15 Budget FY 15 Forecast FY 16 Budget EMS Station $1,731,500 $1,731,500 $0 Sheriff Orange Tree Sub-Station $1,058,900 $1,058,900 $0 SOE Complex(plus$1.5m loan from PUD) $4,022,800 $4,022,800 $0 Helicopter and Ambulances * does not $2,191,200* $2,191,200* $2,000,000 include one-time State money received and used for ambulances Sheriff Special Ops $0 $425,000 $0 Jail A/C Replacement $2,310,000 $2,310,000 $0 Sheriff's replace accounting system $1,000,000 $1,000,000 $0 800 MHz $3,900,000 $3,900,000 $4,400,000 State&Regional Eco Development $475,000 $475,000 $0 Park Capital $500,000 $500,000 $1,070,000 Museum Capital $250,000 $250,000 $200,000 General Building and A/C Repairs $1,000,000 $1,000,000 $1,500,000 General Governmental Vehicle $1,000,000 $1,000,000 $1,500,000 Replacement Supplement Other General Governmental $103,600 $103,600 $1,500,000 Total $19,543,000 $19,968,000 $12,170,000 For FY 2014, the $3,000,000 allocation to replace the existing Helicopter was cut and $2,000,000 re-budgeted in FY 2015 to better reflect the state of purchase execution and allow the Board time to discuss the operation approach and purchase methodology. Setting aside $2,000,000 beginning in FY 2015, a total of$6,000,000 would be available in FY 2017 for this acquisition. 7 Packet Page-234- 3/10/2015 11 .D. Funds continue to be allocated for upgrading the county-wide public safety communication system. In FY 2014, $1,500,000 was allocated and the FY 2015 appropriation is $3,900,000. Continuing along the planned five (5) year phased implementation schedule, $4,400,000 will be allocated in FY 2016, while $2,444,000 and $945,000 is planned for FY 2017 and 2018 respectively. As the project moves toward completion and project execution patterns are monitored, budget will be sized appropriately by FY to close the project out. Again, this follows the philosophy of not moving money out of the General Fund until and unless execution on those transfer dollars will occur in the FY. Funding for transportation related system improvements from the General Fund and Unincorporated Area General Fund will increase modestly in FY 2016 under the current planning scenario from that budgeted in FY 2015 by $410,600 to $43,458,600. Of course the allocation may change as the FY 2016 budget evolves leading into the June workshop. This allocation includes dollars for road resurfacing, intersection improvements, bridges, storm-water, landscape maintenance and operations, and general maintenance of infrastructure network. Management has the flexibility to allocate these General Fund and Unincorporated Area General Fund transfer dollars to mission critical projects or initiatives at the expense of those efforts not deemed a high priority. This has and will continue to be the management strategy given the competition for general government resources, planned cuts in the communication services tax and heavy reliance upon property taxes. Additional gas tax dollars within Gas Tax Fund (313) totaling $1,000,000 annually have been freed up and are available for system maintenance and improvements above that transferred from the General Fund and Unincorporated Area General Fund beginning in FY 2015 due to restructuring of the gas tax debt at substantially lower interest costs. These additional gas tax dollars not devoted to paying debt service will be available annually until the debt expires in 2025. The requirement to pay Marco Island $1,000,000 by agreement ends in July 2017 freeing up additional gas tax dollars in FY 2018 for system maintenance and improvements. Capital transfers from the General Fund and Unincorporated Area General Fund to governmental facilities, and parks have increased. Sheriff Capital until otherwise known is planned consistent with the AUIR. Existing capital projects like the Sheriff's ops facility, jail A/C repairs and Sheriff's accounting system are in progress and no new money has been allocated in FY 2016. The Governor and legislature over the past few years including this year has discussed reducing the state communication services tax (CST). This year is no exception. The Governor is proposing a 3.8% CST cut while SB 110 contains language cutting the CST by 2%. This form of revenue sharing by the State is a major source of revenue within the Unincorporated Area General Fund and for FY 2015, it is estimated that Collier County could lose as much as $1,100,000. While the proposed senate bill contains language to redirect more shared revenue to local governments to offset the proposed tax rate reduction, a worst case impact is planned for. Any final legislation could only cut the state portion of the tax or that portion distributed to local governments. One can only anticipate that this state shared revenue source may eventually be eliminated. According to Florida Tax Watch, Florida more than almost any state relies on local governments to provide public services. The millage rate equivalency to replace a potential loss of$1,100,000 is$.0277. 8 Packet Page-235- 3/10/2015 11.D. The millage equivalent to replace a complete loss of this tax is$.1262. This loss of revenue if not replaced will certainly impact programs funded within the Unincorporated Area General Fund including road and landscape maintenance, storm-water, and parks and recreation operations and capital maintenance. A state legislative proposal to eliminate the sales tax on the sale of manufacturing equipment creates additional adverse revenue pressure for local governments. Recirmli nde e 7 oard s'of ' v to,g:General Func '001" 'U co pt orate ea< e eral 6 ® w t liage eutr a ® a de� I® ;�(ram w smeary dim o e � �� i l,. �, Q t i pur e a ero ress '_� � �. S`o-�ro<f �r 5n e&r$ ��' ^�"-�k �n-n 7ti '�s+�.. a s w 4 m '.x et I11a1�] nano.', equipmen1... eplacemen - c initiatives General Fund Budget Allocations by Agency and Component The purpose of this allocation is to identify those critical appropriation components within the General Fund. All agencies work diligently with the County Manager in support of budget policies adopted by the Board. Equally important is the premise that all agencies would share in any budget reductions necessitated by taxable values below the planning threshold, reductions in property tax revenues, new state tax reform initiatives, reductions in state shared revenue and unfunded mandates. FY 2015 Percent of General Fund Budget Property Appraiser 2% Clerk of Courts 2% Sheriff 43% Courts 1% Supervisor of Reserves 8% 1% Tax Collector 3% Debt/Capital Subsidy 8% BCC/Co County Attorney 3% Road Program Managers Subsidy 3% Agency 26% Considering that transfers to the Constitutional Agencies in FY 2015 account for 51% of total General Fund budgeted expenses and 76% of the General Fund ad valorem budgeted revenue, their participation in any necessary reductions due in part to unexpected ad valorem revenue shortfalls or unforeseen unfunded mandates is essential. It should be noted that these expense percentages are gross figures and do not account for statutorily required year ending constitutional officer turn back. This turn back revenue is budgeted and forecast each year. Constitutional turn back revenue totaled $8,156,661 and $7,830,593 respectively for year ending FY 2013 and FY 2014. Turn back by the Tax Collector accounted for 71% of all turn back revenue in FY 2013 and 73%of all turn back revenue in FY 2014. 9 Packet Page-236- 3/10/2015 11.D. Recommended Budge li'oli .6ri roue tl is~pol cy Millage Targets for Collier County MSTU's/MSTD's MSTU's are created by ordinance and generally there are provisions governing the maximum millage rate that can be levied. Local ordinance is the control, even if the rolled back rate exceeds the ordained millage cap. There are twenty two (22) dependent MSTU's or MSTD's active under Collier County's taxing umbrellas which are managed by staff. Of these, thirteen (13) have advisory boards which provide recommendations to the Board of County Commissioners. _sy ,, u" _ d�lf rt sv S `;,' TI's Romiede a ud `oli r R sa t wluvdvor a oar ti �r gh>t betuv:tt Q 6:it llk g . osido E c es 0af h -7, , , ': ..4 � �' t 0t1, 1.+ , �. fix prf e s e �ncm®e"�i aOn Or, a 4it ona ' e e s :win... 4, 1).3'.:11‘ i�rrsnt l _ „� ..'-',1!, i n"6x"na s 111s '" �' e� a s � s � e e #®—r.6 a. �Y,=st. e . ci ® � .41.,;etu e ra 6Ptto" _� w� 1s :lg 9'e r r 7 i u a ®®mt�i1„ ' a n rO xa (y ulremen 6 1Lie � c t� k f p . �. i , �. � e ;. ,...�.��..�..,. �.��." 1��c��coc�v�sa o+�arg�rer�rnmend� po ,,offered duuig$t ie�ud fuse; . y c�k. c�. Revenue Centric Budgets It is generally recognized that all budgets and expense disbursements regardless of fund or activity are revenue and cash dependent. This concept establishes that enterprise funds, internal service funds, certain special revenue funds and other operational funds which rely solely on fee for service income with zero reliance upon ad valorem revenue should be allowed to establish budgets and conduct operations within revenue centric guidelines dictated by cash on hand and anticipated receipts. This concept also presumes continual monitoring of cash and receipts and, if necessary, subsequent operational adjustments dictated by cash flow. As such, ad valorem agency limitations suggested above will not apply. Certain cost centers or functions have a net cost to the General Fund (001) or Unincorporated Area General Fund (111). In these instances where fee for services offset the ad valorem impact, then the budget reduction guidance should account for this positive impact upon the net cost to the General Fund (001)or to the Unincorporated Area General Fund (111). Under this revenue centric approach, Divisions will be held to their departmental fee for service projections and any negative fee variances will be addressed through service cuts and not subsidized by Ad Valorem taxes. Division Administrator discretion upon guidance by the County Manager should be afforded in these scenarios. Recommended Budggt_Policy Continue revenue eentr c budget policy. 10 Packet Page-237- 3/10/2015 11 .D. Expanded Positions The County Manager's Agency added 75.8 FTE's to the operation between adoption of the FY 2014 budget and adoption of the FY 2015 budget. The majority of these positions were added in Growth Management and Administrative Services. Thirty one (31) positions were in Growth Management. Transitioning out of the economic recession, many enterprise operations that service the building industry or provide services as a direct result of increasing housing activity will likely see pressure to increase employment levels. Although this trend toward increasing employment will likely be tempered with the use of part time and contractual service employees. Twenty one (21) Administrative Service positions were associated with expanded operations in EMS designed to equalize county wide response times while thirteen(13) Administrative Service positions were associated with staffing the new mile marker 63 facility on alligator alley. We are faced with the continuing challenge of conducting the business of government within the context of evaluating strategic organizational efficiencies and re-alignments required to match service demands with available resources. Consequently, as part of any decision to make major organizational, service or other changes, proper analysis is undertaken. This analysis includes review of the customer needs, the organizational structure, the underlying processes and service delivery models and the proper full time equivalent employee mix. Outcomes include streamlined business processes, elimination of any wasted effort in the processes, and a management and staffing structure that is expected to be able to deliver the required services. For FY 2016, it is likely that expanded position requests will be recommended once again, especially within various growth management division functions; agency enterprise operations and general governmental services in order to satisfy stakeholder demands and meet high level service expectations of those who reside in and visit our County. Recommended Budget.Policy Similar to FY 2015, expanded position requests will be fully vetted with.the Board, enumerated rwithin the Budget document Including details ofexparided operational;costs.and any offsetting program revenue. Compensation Administration The philosophy of Collier County Government is to provide a market-based compensation program that meets the following goals: 1. Facilitates the hiring and retention of the most knowledgeable, skilled and experienced employees available. 2. Supports continuous training,professional development and enhanced career mobility. 3. Recognizes and rewards individual and team achievements. The Consumer Price Index 12 month percent change from December 2013 to December 2014 is 1.4% for the Miami-Fort Lauderdale area. This is the index that Collier County traditionally uses when considering a general wage adjustment. Similar to last year, rather than waiting to appropriate dollars for a compensation adjustment on an event driven basis, the County Manager proposes to appropriate dollars for the adjustment as part of budget planning for FY 2016 with the recommended structure submitted for Board consideration at the June Workshop meeting. 11 Packet Page-238- 3/10/2015 11 .D. At the beginning of FY 2015, the County engaged with an external consulting firm to conduct a comprehensive study of the BCC's Pay and Classification Plan with the objective of designing a compensation strategy that reduces turnover, attracts qualified personnel and both fairly and equitably compensates employees for their expertise, contributions and commitment to Collier County Government. The study revealed that approximately 20% of job classifications are below the median value for the southern Florida region. To achieve the desired objectives stated above, the County Manager is proposing a pay plan maintenance appropriation valued at 1.5% of base salary or approximately $1,700,000 which is designed to maintain employee pay ranges at the average or percentile) of the competitive market. Further, the County Manager is also proposing a $1,000 or 1.5% general wage adjustment whichever is greater in line with the change in the Consumer Price Index. These two compensation events serve to stabilize employee earning which were eroded during the recession when no compensation adjustments were provided. ice„ v '" � �`? g'?{� a ��-�F°r?'�m^e � �^ Gar t.4� �r � .m-,-_am�r'�.r,r Recolminien E e+ :u e ge l olicy; p Erya ehate%, o uivalen toy u,$ 000 -o % gener to " � ` a wage ad E�'E n ` r is a n � E nano. E m < � a budget p a.mi ngaaCl e" e C c E ®jus en 'e e s E o e t' ager a ar forBoad QnS1Le A R . s.. E 4Tl£ v C misner en n msl s has o ed�ad -WE ; �comps o plan follwugai the Program Component FY 07 FY 08 FY 09 FY 10- FY 13 FY 14 FY 15 FY 16 FY 12 Recommended General Wage Adjustment 4.70% 4.10% 4.20% 0.00% 2.00% $1,000 2.00% 1.50%/$1,000 /$1,000 Awards Program 1.50% 1.50% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Pay Plan Maintenance 0.25% 0.25% 0.00% 0.00% 0.00% 0.00% 0.00% 1.50% Total 6.45% 5.85% 4.20% 0.00% 2.00% $1,000 2.00% 3.00% Health Care Program Cost Sharing The County is self funded and seeks to operate the health plan with the same diligence as a small insurance company. Like an insurance company,the County faces a significant budget risk within the health plan due to the potential for a statistical claim cost variance of 10%around the expected mean claims cost. Such variance is normal statistically and has its roots in the fact that total medical costs are extremely sensitive to the number of claimants who experience catastrophic losses. The expected number and size of large claimants is by nature extremely random and volatile. To manage and prevent this variability,the County reinsures catastrophic losses and maintains a prudent reserve to comply with Florida Department of Insurance requirements as well as to protect the General Fund from this volatility. There are several goals that guide how the County operates the plan within the small insurance company context. These are: 1. Comply with all legal and regulatory requirements for plan operation 2. Manage plan cost trends to be 30%or more below published trends 3. Maintain overall controllable expenses, reinsurance costs, network fee arrangements and reserves at prudent levels 12 Packet Page-239- 3/10/2015 11 .D. 4. Protect our employees from the economic impacts of illness or injury 5. Prevent illness when possible by helping our employees and their spouses become aware of their health, and act on that knowledge Coverage under the Plan extends to all County employees, with the exception of the Sheriff's Office, which operates its own self-funded plan. Nationally, as well as here in Florida, medical plan costs, and the premium dollars required to fund them, continue to increase annually. The County's medical plan has the potential to be similarly impacted by these rising costs. For FY 2015, the County experienced no (0%) health insurance rate increase. Due to exceptional plan performance over the past two plan years, plan reserves exceed statutory minimums. Therefore, it is recommended that there be a no (0%)rate increase for FY 2016. It should be noted that employer health insurance contribution increases are absorbed within operating appropriations. With the objective of mitigating increases to the plan, the County will continue to emphasize participation in existing wellness program, proper structuring of reinsurance to manage adverse plan impacts and prudent plan management. Historically, Board budget guidance has required all agencies to uniformly share health insurance contributions between employers and employees. If all agencies maintained the recommended cost distribution percentages of 80% employer and 20% employee, it is estimated that for FY 2015, $3.7M in General Fund constitutional transfer savings would have been realized. 2015 Health Plan Contributions by Agency Average Average 2015 Savings if Monthly Monthly all Agencies Agency EE Rate ER Rate Total EE% ER% EE's Sgl Fam were @ 80/20% BCC $271.00 $ 1,084.00 $1,355.00 20.00% 80.00% 1374 559 815 $ - SOE $271.00 $ 1,084.00 $1,355.00 20.00% 80.00% 18 9 9 $ - COC $271.00 $ 1,084.00 $1,355.00 20.00% 80.00% 166 73 93 $ - PA $ 14.58 $ 1,340.42 $1,355.00 1.08% 98.92% 48 23 25 $ 554,196.00 TC $ 18.08 $ 1,336.92 $1,355.00 1.33% 98.67% 130 36 94 $ 183,180.00 CCSO $ 42.73 $ 1,286.83 $1,329.56 3.21% 96.79% 1112 381 731 $2,979,324.00 Total $3,716,700.00 Certain provisions of the federal Affordable Care Act (ACA) could have a negative fiscal impact to Collier County if not managed properly. The most penal is the "Pay or Play" provision. This provision imposes a $2,000 penalty per employee working more than 30 hours per week if the employer does not offer coverage to 95% of the eligible population. The 95% provision does not take effect until calendar 2016 or the County's FY 2017. Right now, the employee group which must be managed is the "job bank" pool. These employees are generally classified as temporary in nature, are not eligible for health insurance and are not considered FTE's approved by the Board. However for ACA purposes they are considered part of the eligible health insurance population if they work in excess of 30 hours per week. 13 Packet Page-240- 3/10/2015 11 .D. Currently, approximately 66 job bank employee's work at or over 30 hours per week. Based upon our eligible population, 95% would equate to 80 employees. If somehow the County failed to satisfy the 95%provision,the fine would total approximately $3.2 million. This issue will require ongoing management and the Board should be aware that job bank employees working 30 hours a week or more may transition to FTE status as part of the budget process or via separate executive summary and others may have their hours reduced depending upon operational considerations. Regardless, the existing CMA covering this employee classification will be revised to stipulate that those employees working 30 hours a week or more will be eligible for health insurance benefits under the County's program. Recommended Budgeaf Polvicy- In FY 2016 the average cost distribution o health insurance r rehrmn, iums ie we z Board County� mm�."nscsiuxnee®r s is dthey n fl 0 e mplo '+er�e ms aamr,e Ff 8a0 (.pernyer and 20 p ' still m ''''**16:410P e*P$4t , 041 '*% '4.0.0 `4 tAI 440:4, 20%a rempoveer sharebe � niform. erns aeencie ,r including he nnstitutional D iceir s d, This policy treats .all ycountyemployees equally n,terms`of.cost sharing 'or h alth nsurance premiums. Retirement Rates All agencies including Constitutional Officers must use the retirement rates published within the OMB budget instructions. OMB is monitoring all proposed bills. The legislature usually establishes the new retirement rates in the beginning of May with the Governor signing the bill into law at the end of May. The preliminary retirement rates that will be published in the instructions are based on Florida Statutes Chapter 121 second year rates (rates that will go into effect July 1, 2015 if the legislators fail to establish new rates for state fiscal year 2015-2016). Recommended Budget Policy Adherence to the©MB rates published within the OMB budget instructions. Accrued Salary Savings Today's economic climate has led to an increased movement of employees to and from the organization. When employees leave,they are generally replaced and the process of replacement takes varying lengths of time depending on the position being recruited. This fact coupled with the full budgeted amounts for health insurance and worker's compensation being transferred to the self-insurance funds, impacts the amount of accrued salary savings due to position vacancies. For FY 2015, this rate was established at 2%. For FY 2016, it is suggested that the attrition rate remain at 2%. Recommended Budget Policy: Continue the accrued salary savings policy at a 2%rate. 14 Packet Page-241- 3/10/2015 11.D. Storm Water Management Capital Funding The Board previously adopted (County Resolution 2010-137) a policy with funding equivalent up to 0.1500 mills annually from the General Fund for countywide storm water initiatives. The planned contribution from the General Fund for FY 2016 is $4,627,600 or a millage equivalent of$.0666 based upon projected taxable value. The purpose of this dedicated funding source is to address long-standing capital project needs in the storm water program area, as well as to identify to grantor agencies that Collier County has a dedicated funding source to provide local matching requirements to available grants. To address storm water funding needs in the unincorporated area staff plans to dedicate via transfer from the MSTD General Fund (111) at least$1,200,000 in FY 2016. Recommended Budget Policy Establish funding in accordance with;Resolution 201fl 137 and_ identify critical areas of lOndern1WongNut the County which will receive priority new funding Proposed Use of Gas Taxes Previously, the Board directed through policy that all available uncommitted gas taxes will be used to support maintenance of the transportation network and related capital initiatives. Historically, the General Fund has transferred dollars to Gas Tax Fund (313) supporting the maintenance and improvement of the transportation network. Immediately prior to the decline in taxable values, this General Fund transfer amounted to $24 million. Recent reductions in the General Fund transfer to roads has meant that gas taxes (the pledged revenue source) fund a significantly greater portion of debt service on the 2012 and 2014 Refunding Gas Tax Revenue Bonds. Current debt service is approximately $13.1 million per year. The Series 2012 refunding debt expires in June 2023 while the Series 2014 refunding debt expires in June 2025. The recent debt restructuring has resulted in a $1.0 million annual savings in debt service which began in FY 2015. This savings will manifest itself in additional dollars for maintenance and infrastructure improvements. The General Fund transfer proposed for FY 2016 is $11.5 million an increase of $2.0 million from FY 2015. These additional dollars will support maintenance on the roadway network including intersection improvements, resurfacing, bridges and other critical maintenance needs. Gas tax revenue from all sources in recent years has averaged approximately $18.5 million per year. When you consider the payment of annual debt service ($13.1M), the $2 million dollar annual Collier Area Transit subsidy, and $1 million dollar annual payment to Marco Island pursuant to agreement, only a modest amount of gas tax dollars remains available for maintenance and system improvements. Recommended Budget Policy Continue the Board's policy allowing gas taxes to pay,,for debt service on the Gas Tax Revenue Bonds, support,Collier Area Transit operations:'and fund the Marco Island Agreemet n ar0'.:that transfer dollars from the General"Fund continue to support/supplement maintenance on the roadway network' 15 Packet Page-242- 3/10/2015 11 .D. General Fund General Capital/Debt Contribution and Debt Management The General Fund (001) has provided via transfer the sum equivalent of up to 1/3 mil to non impact fee eligible county wide capital functions and a debt payment component since FY 2006. For FY 2015, the equivalency rate was .3520 and for FY 2016 the equivalency rate is planned at .2673. During the economic downturn, the majority of this transfer evolved into a debt service payment. However, over the past three (3) fiscal years restructuring the debt portfolio has eased the debt burden freeing up more dollars to support county-wide capital projects and necessary maintenance. For FY 2015 $16,351,800 of the $22,738,600 equivalency transfer was planned for capital projects. For FY 2016, $8,670,000 of the $18,561,600 equivalency transfer is devoted to capital projects down $7,681,800 from FY 2015. For FY 2016, the General Fund (001) transfer (loan) will be sized to cover debt service which cannot be covered by impact fees. This amount totals $6,816,600. Total loans outstanding to the impact fee trust funds since inception (FY 2005)through FY 2015 total $86,405,081. Payment of debt is a top priority. Under the FY 2016 budget planning scenario dollars generated from the up to 1/3rd mil equivalent allocation will be sufficient to cover revenue bond debt service. Of the $18.6 million projected transfer in FY 2016, $6.8 million will be required to cover the growth related debt service gap due to insufficient impact fee revenue and $3.1 million is budgeted to cover non growth related debt. Going forward, this loan requirement may approach $7.0 million annually since the greatest amount of debt resides within impact fee trust funds generating the least amount of impact fee revenue (i.e. EMS, Libraries, Corrections, Law Enforcement and General Government Facilities). Within the framework of a fully funded and policy compliant debt management program, the County has taken advantage of historically low interest rates and reduced the cost of borrowing through aggressive restructuring of the debt portfolio. Since FY 2010, the County restructured $379.1M in long term general governmental debt and variable rate commercial paper, achieving a level of budget certainty, reducing the cost of borrowing within the portfolio by $25.7M while returning all $19.5M borrowed from enterprise funds to establish a debt service reserve surety necessitated by collapse of the bond insurance market. The cumulative net interest rate of the general governmental debt portfolio has been reduced from approximately five (5) percent to roughly three (3) percent. The following charts depict the managed drop in annual debt service payments servicing all debt and annual debt service connected with our general governmental credit. 16 Packet Page-243- 3/10/2015 11 .D. Total Annual Debt Service Payments ( General Governmental Annual Debt Service Payments $100 $100 $80 $80 $60 c $60 - E $40 $40 $20 $20 N N N N N N M M M M O .-1 H ."1 H N N N N N M M M M Y >- Y Y Y T >- >- Y Y >- T > T >- > > r T >- > >- >- Y Y Y > Y > Y LL LL LL LL LL LL LL LL LL LL LL LL LL LL LL LL LL LL LL LL LL LL LL LL LL LL LL LL LL LL Collier County's total principal debt outstanding at 9/30/14 totals $568M of which $333M is connected with infrastructure improvements by population growth and related service demands. The County's principal debt has been reduced by $236M since FY 2008. Annual principal and interest payments servicing the County's current total outstanding debt represents 5.8% of the County's net budget. Recommended Budget Pohcy Transfer an equivalent sum ofup to t/3 mi to the LCounty Wide Capital Fund forr purposes` ofypaying nan growth xelate 'revenue bond debt, to provide impact fee fund loans tc coven growth related debt`obligations, and.to fund much needed general a „k r...,. .. ,,. governmental priority`capital needs. Reserves General: Reserve is a budget/policy term referring to resources set aside to provide a buffer against risk. Likewise reserves may also be referred to as a portion of fund balance—only on the expense side of the equation. Reserves are the cornerstone of financial flexibility and provide government with options for responding to unexpected issues and a buffer against shocks and other forms of risk. It is essential for governments to maintain adequate levels of fund balance to mitigate current and future risks such as revenue shortfalls, natural disasters and unanticipated expenditures. As such, budgeted reserves serve to protect beginning cash position in a fund and are an essential component of Collier County's overall financial management strategy and a key factor in external agency measurement of Collier County's financial strength. Various bond rating agencies recognize that the best reserve policies provide both specificity and flexibility accomplishing one or more of at least the following three criteria: • establishing a target level of reserves or a reserve floor • specifying the appropriate circumstances for drawing down reserves • directing the replenishment of reserves In general, rating agencies view positively higher reserve levels, although local governments can maintain high credit ratings with lower reserve levels if other indicators of financial flexibility such as revenue raising ability, stable diverse revenue structure, expenditure flexibility and conservative budgeting practices are strong. 17 Packet Page-244- 3/10/2015 11 .D. A resery four, c©nf gene 11s: 1ca11y udgeteed opera g f e exce at o the Gonstl utrana ge i!i °eser ieS, Or: ne�11st to Olga enc �,� _r 6S air P}rpriatec within the sa enera p. m-------"`cl. The following is a history of budgeted reserves within the General Fund and Unincorporated Area General Fund since FY 2008 as well as the%of reserves against total operating expenses. Fiscal Year General Fund Unincorporated Area %of General %of Reserves General Fund Reserves Fund Expenses Unincorporated GF Expenses 2016 $28,423,400 $2,130,800 8.8% 5.2% (Planning) 2015 $26,670,700 $2,220,100 8.5% 5.6% 2014 $26,217,400 $1,715,000 8.9% 4.5% 2013 $24,844,400 $1,596,200 8.7% 4.3% 2012 $18,180,900 $1,739,500 6.2% 4.5% 2011 $14,210,200 $2,925,100 4.7% 7.4% 2010 $15,569,100 $3,422,400 4.9% 7.2% 2009 $17,541,200 $2,853,500 5.0% 5.8% 2008 $20,506,000 $6,336,600 5.5% 12.9% Optimally, and in order to achieve a regular and sustained General Fund beginning fiscal year cash position of at least $50 million, budgeted reserves should be a minimum of $35 million. Unless and until General fund reserves rise to this level, expense side management of the budget will be necessary. For the second consecutive year, mid-year operating cuts regardless of execution patters were not made. While this is good news, management of the budget remains a regular occurrence especially as it relates to scrutinizing regular expenditure patters and monitoring transfers out of the General Fund to insure that dollars leaving are programmed for project expenditures within the FY. Florida State Statutes: In all respects, budgeted reserves shall conform to requirements of Florida State Statutes. The State establishes maximum limitations on certain reserves. The maximum limitations for contingency reserves and for cash flow reserves are 10% and 20% of a fund's total budget respectively. There is no statutory limit on capital reserves. Recommended Budgeted Policy Reserve Position four,the General Fund The Governmental ' $; ,- 4,r.tom r 4 rtmtp ina 11,,:wzr x011.4 , Y r t -a�¢ � a� `1 3 * '' Finance Off cers Associations GFOA) recommends asp°a baseline, to floor, that .:.r-Off t >), -+m"y t'm t t wjN' 404 P.4 0 Z a 5%,, '`' '.ors-474: x-r' 10 ` rAza tava"x Arowt*E-Ain s,„ reserves be'set at 16%�o regular,operatmg,revenues ar month of regular operating expenses. 4�. w ri , 1 , k t v "the , SMeS�M This wok ld put Collier' ::9.,14;1,t .,General"�Fund reserve floor t minimum in range. Coe Gu n hanever attained a a General Fd budgeed ret earn e position highr thn the F Y , ,6�k 6 a } evar ,d g. x g 201 ro osed,m.psi li of$2 , 3 400 s re e sition xo�des a con ene serve et d ev ` a the re , o e e uivale to,2 o o . opera •e Co e pun is vulnerable extrom tee er even r en Yts was 110 'k e e ; h , s see en e es o u`rc es e relavely sable an n e ndi e a u. e no a e adc it o e onn ' otala fd --tt j"r i , , � a r:�° � 0 n 4. 'A " �z�`" "� ereserve position th ?le nd w u d eused in theevent o asign cant eather e n r ot� r natural disaster 18 Packet Page-245- F-' 8 " " 10 3/1ra0t/20 ... 15 11 .D. e m WW tloo W .r 4?? W xse• " o e is W k exip W w ..q--‘-`1- ' itai &W s e}.A. si 1 ese ? LL e •t e ! 9_Pe r 4t y -c .ai.ca dfis - 1 •nhis sugge ts�# s P� E W 9 e W f,..ai_l I 2 W• W 9 o e• ete h 1i B:cwElwe� - e ® W W • e ar.,:!, ° essJ p W tl tl � i S W" i e . „r �0 '. .a+s*a ° c, ,,), ; ^ -.,, oaile c I getd floo l ecnomc e ,a e• •� • o a e f the xeserve shne s se o s • e W � eas-r, a Re lenin " o e ove y k e e ` W e e pare s• ` ae$uccee ® tl r o•ti p ® A• ® • W e con t 5 ' e . v ernmenta nds sortfa' x' ° f Si ( the e a I!.'rs l W �•e i ®W W . � EB ®di W e i C e6 . ` ta Recommen 6s a 4 g Qk ®fie Xancludili na " W W t M r F, C .,, • W W emen tl ma {te an ne i e � e UJr � t ; nl n{ t e e ® . " . axirntun s yW �" :, t$a n im „ a' W ? W i $;1 +.nca®i r ,m, n e ► it Ma " 73.4noi-" 5 e tl tl • ma W - -.N • iS e 1 eceive tl nlu ntl .t m-eX•erase W o ® ` ps W a e nC l®s W n5 n W e eeia i• ume � ie e e• t e � « '.1., cn e �e W 6u ' sReseve a n W ' sta sscecw ,e a Brer. ! Ca c n, N es d � e °; te � aeTMferSche•ul Budget Policy Reserve Position for the Pelican Bay Services Division Family of Funds (109, 778,320 and 322). �^* "" ^xt "3'°"fl''.;s°°°T .�'n r ,gar *fix a ©peratingf Reserves Fundy 3 i ) it is recommended t iat the funds reserve3 position,- be �, d , r{` � 3 a �,. '- �'"`` ," , '` � �N s z,-r £ 4-,,a a -w.bt r '" r�s,z`d ' "�t ®stab hs ed n�be ee r : 50 an` 00 ®�operating 4expense. This s p-arse„ arl3 -important given *s c`a 'l . ' . "�-r ` 'F w'"'t rKv.16e14-416,664''�e' ` P..7 q�3 +°'",��*` +`,`'�'`,§�- 4 ,y,,.a the distne c•as W a e • Tifras ctlir investment, al assets end commitment to maintenance are•re our a rotectioi Street fight n nand � � $ � ey o serves in this fund w be established inu such amounts` ,,,,SOP ecess o ' e aside W �o accom lisp li ht n ro ectsx consistent with the p � g�r.� J Pelca B y uru prov r e?nt P an ';Jr^ ,,n.. rr s s-r'*".., � q'^.tr '° '4 mss, -r .p^�t r Capital Project nds 320 &:322:5 Reserve levels are generally minimal with thema�ontyµo budgetedudollars appropriated within defined and active projects. Budget Policy Reserve Position for Enterprise Funds, including the Collier County Water- Sewer District Fund (408,412,414) and the Solid and Hazardous Waste Management Funds (470,471,472,473,474). Collier County Water-Sewer District (CCWSD): Like a General Fund reserve, a utility system reserve may be measured as a percent of regular revenues or regular expenditures, depending on the predictability or volatility of each. The Collier County Water-Sewer District reserve policies should be based on sound fiscal principles designed to enable the utility to maintain continuity of operations in adverse conditions and avoid user rate shock (rate stabilization). 19 Packet Page-246- 3/10/2015 11 .D. In addition, various bond rating agencies, particularly Fitch Ratings, recognizes that the best reserve policies provide both specificity and flexibility, accomplishing one or more of at least three main criteria: • Establishing a target level of reserves, • Specifying the appropriate circumstances for drawing down reserves, and • Directing the replenishment of reserves For enterprise funds, the GFOA recommends starting with an assumption of 90 days, and adjusting based on relevant risks with 45 days as a bare minimum, and recognizes the difference between enterprise funds that are supported from the general government and those that are not. The utility system, with gross assets of approximately $1.2 billion, should maintain a reserve necessary to ensure the maintenance of life sustaining services to the public during non-routine and unforeseen disaster situations such as hurricanes or other related weather events, other environmental or natural disasters, or other events that cause disruptions in public services, such as system failures and line breaks. Collier County lies within a coastal zone highly susceptible to hurricane and storm damage to water and sewer treatment facilities, transmission lines and distribution/collection mains. Many of the buried water and wastewater lines sit in sandy soil that is prone to shifting during heavy rain events. Uncertainty in economic markets with regards to cost of construction materials, interest rates, personnel and health costs add to the risk factors facing the utility. In the CCWSD, user fee revenue is used to support the operating budget as well as the capital repair and rehabilitation program for the horizontal (in-ground) and vertical (above ground) assets. Reserves can be classified as either"restricted" or"unrestricted": • Restricted reserves - are those established for specific purposes only, such as reserves for debt required by bond covenants, as well as reserves for growth in the impact fee funds that can be utilized only for growth related projects. • Unrestricted reserves — are available to ensure continuity of services as identified above. Unrestricted reserves in the CCWSD include reserves for contingencies (i.e. "rainy day" significant unforeseen events), reserves for cash flow in the event of revenue disruptions, or reserves for capital for necessary but unforeseen repair and rehabilitation projects. Recommended Reserve Policy for the CCWSD. At a minimum, the unrestricted T reserves should be budgeted within a range of 5°o to 15% of budgeted revenues (revenues`are fairly stable, but may be subject to temporary disruptions from hurricanes for natural disasters), or Within'a range;of 45 90 days of I udgeted operating expenses Operating;expenses are more volatile given aging utility infrastructure and unforeseen events) Forty five (45)to nine (90): days of reserves based on Fund.(408), (412), and 4145 budgeted FY 2015 operating,expenses would range from$14.3 million to$28. ,6 million. FY 2015 budgeted reserves total$16.6 million representing fifty two(52)=days of reserves. 20 Packet Page-247- 3/10/2015 11.D. Replenishment of unr estrictd reservs may drop below t hetrgeted#loon(45 days)or$14.3 ri e a mrllron;uing i F 2fl 15 un ers outu occu succeedt idget eye es n scamounts, as deemed prudentixndex existuig econbmlc oP914.1ons as approye�b *the Bgarzl. Solid and Hazardous Waste Management Enterprise Funds: The Solid and Hazardous Waste program in Collier County includes the operation of the solid and hazardous waste disposal program, the recycling program, and the management of the mandatory residential curbside collections program. These funds also include both restricted capital reserves (for landfill closure) and unrestricted operating and capital reserves. The department is responsible for the right of way disaster debris removal on County roads and monitoring project for Collier County in the event of a natural disaster, such as the Hurricane Wilma (Category 3, dry storm cash flow exposure of$25 million) event in the 4th quarter of 2005. As such, the Solid Waste System should maintain unrestricted reserves of 60 to 90 days of operating expenditures to be used to ensure the maintenance of services to the public during non- routine and unforeseen disaster situations such as hurricanes and other weather-related events, as well as other environmental or other natural disasters that cause disruptions in public services. Recommended`Reserve Policy for the olid and FYazardousz rite Enterprise Funds Sixty (60 ozn ety ( y ay wire e ,lat asa eund (4o.ron a 474) budgeted ,. 015 operating expenseswopl,d,range fro ;Smillion,to5$9,14 nfltion.' F2015 'eserves for the Solid and Hazardous Waste ManagementLEn#erpr se Funds total�,$7 0 million or s xty,five'(65) days o� es�rves . . a. . ti .. �. �.,.,t. _�. _.. _ ., � w y, Replmshrnen# of unrestncted reserves F that rnay. drop below the targeted.. floor (6Q days) or $6 5M�would occur m succeeding budget cycles in,such£amounts as deemed prudent°under existing economic conditions,as appro ed by the Board. Growth Management Division (GMD) - Planning & Regulation Enterprise Fund 113 and Enterprise Fund 131: Fund 113, referred to as the Building Department Fund, collects revenues primarily related to building permit activities, including building permits, structural, electrical, plumbing, and mechanical inspections, plans reviews, and the licensing and oversight of building contractors. GMD Building.Permit Fund (113);Recommended Reserve: Targeted reserves for this'fund shall be,6 months of the totat operatirig,12.,iiciget of the current fiscal year. The Growth Management Division/Planning & Regulation Fee Schedule, adopted by resolution by the Board of County Commissioners, provides the guidelines to implement fee adjustments if total reserves rise or fall below established thresholds. Fund 131, referred to as the Land Development Services Fund, collects revenues primarily related to land development permit activities, including planning and zoning, engineering, and environmental and natural resources. GMD Planning Fund (131) Recommended Reserve Targeted reserves for this fund shall be 9 months 'Of.the total-operatmg budget'of the current fiscal year The extra 3 months of targeted reserves required*„in coxnpanson to Fund 1 .3v reflects:the unpredictable nature and length Of processirig'time.for land development related activities: 21 Packet Page -248- 3/10/2015 11 .D. Internal Service Fund Reserves Reserves for Internal Service funds reflect amounts that are intended for and must be used to meet a specific purpose. The restriction can be set by legal agreement, statute, regulations, and/or mandatory reserves. For purposes of this policy emphasis is placed on the risk management group of funds and information technology. tr'"f 74.: 'd P " *rte a tt15 =tr- o " r .F, n S a Recommened oneyi n r -to esta s e lent cashfw� r elnternal ervice Fun ds o -0y ' r ` "va o ; a benchm k f �c a ;o ror a s oki iis ealculaed Continency reserves;represe I t .mounts, .vaila 6. or,appr a on 6.'Boar, to 6-ect any �� !e,��oea ' peoun €1 0 8' ,�Qrida�� atlltes and`.rraannno ee 0' of .ta�.appropna`6 a ee t Collier ;oiin self 4ns a and is sub ect o, nandatoryfireserve a or losses` ,Each earzan 'b +� r ` -,''''',4''''''' a s .� mil^ , `�'tt �, r^P+esx a - °s.�, '�a tsr' actuarl e Y Fa e. e ae e I s elf- a uranc h ,.resen value ':61:2:. o e e = w o ' a 1 1' u oe 6 `srrese m v e es dad. t ?-*251.'4'-. x� ' ,.. r- `'4: S reserves ana o e i t ent k 6. � �1_ anag @ a «e, ese �e balance,th eSt e • s ° a e® 5 100,00 1 ¢ e he ® ible 0 .'6 66 ?° ..• Co T „erage ,.r potentia atastrop_ c u. ., es;Associated ¢ }xi '';',41;i.,--,:e=sstornvents' Aa,marg ; a se. u: e®o a. onfi rd en�ceji n terv:nxRa.3r l s then_a e �this'r^as e amm"a^^o ug rttoo assure t t h e `b4,,x}r2,„: �' �� k c ,F w � 4 `„-4 t•'' S O � yt A estimate 1 ufcent to meet te i aym arts Te Boa e .y r missnners has ' � ur , i trdition y ado t as eo tame v t nb get 4icy a75 confic ence antervalj R^-.7 ---,TM 5 x =' „4,,-,', 5 c' r.c+:k+m6 a` r s.+' t'ems :, -"' T-s ite The,Group,Life,anc,Health Insurance£F'unc wi 0, ! Has ' anageme hav d additional'statutory reserve requirements tha ,are calculated each year and added#'ther'es�cted reserve cite o %-. -m'm wra ' r=:: ' n r n”`w;J' :%tt x,?n , ? z� Y.T TN- �3srl;'" ids r r The informatlo �T chnology a ital Fund's4re ted esery amore.s are det�eyr ed by the d tots �comrri ttec pzata proJectsr,rne D �n ® ogress a. the endIof e !ear Once the projects aretmprera�r��arls a r roraated Designated reserves are established to provide funds for a specific purpose where£the actual cost is unknown. .. CPI Based Enterprise Fee Adjustments On June 10, 2014, the Board during discussions on the water, wastewater, irrigation quality water and bulk potable water rate study provided unanimous guidance to index all enterprise fees annually equal to the year over year December adjustment in the Consumer Price Index (CPI) — Miami, Fort Lauderdale SMSA. Rather than going through time consuming and potentially costly rate studies, the Board suggested that the CPI adjustment be programmed and subsequently be reviewed by the Board during the budget process. This allows the Board discretion in approving the CPI adjustment and not simply passing the adjustment on automatically. 22 Packet Page-249- 3/10/2015 11 .D. Recommended Budget Polite £Provide the Board with an annul report on potential enterprise �� rate and �justments� pcordance J am' Changesaas=1nc hc�5 QYe nci that any rate fee adj ustments,be inc udedwvlf a therpr©P.ed:udget f©r.i ar consideration Scheduling Issues Decisions Required Staff Recommended Date(s) Establish Budget Submission Dates May 1, 2015 by Resolution for the Sheriff, the Supervisor of Elections and the Clerk of Courts. June Budget Workshops (BCC Agency/Courts and Constitutional Officers Budget Workshops) Thursday, June 25 and Friday June 26, 2015 FAC Conference is June 16—June 19, 2015 in St. Johns County. Adoption of Tentative Maximum FY July 14, 2015 (Tuesday) 2016 Millage Rates Submission of Tentative FY 2016 Friday July 17,2015. Budget to the Board Establish Public Hearing Dates (see September 10, 2015 (Thursday at 5:05 pm) note) September 24, 2015 (Thursday at 5:05 pm) Note: The School Board has first priority in establishing public hearing dates for budgets. The School Board's final budget hearing is tentatively scheduled for September 8, 2015. The Commission chambers are reserved for the tentative dates for Collier County Government budget public hearings. Recommended Budget Policy Approve the dates identified above and attached resolution establishing May 1, 2015 budget submittal dates for the Sheriff,the Supervisor of Elections and the Clerk. Comparative Budget Data Provide comparative budget data using FY 2015 adopted budget data (cost and employees per capita based on unincorporated area population) by Agency with Budget Submittals for Similar Sized Florida Counties. Recommended Budget Policy: Counties for comparison purposes include: • Sarasota County • Lee County • Charlotte County • Manatee County • Martin County 23 Packet Page-250- 3/10/2015 11 .D. Continuing Existing Budget Policies for FY 2016 Grant Funded Positions: Any positions formerly funded with grant funds being recommended for inclusion in a general (non-grant funded) operating budget shall be treated as expanded service requests. Self-Insurance: To conduct an actuarial study of the self-insured Workers' Compensation, Property and Casualty, and Group Health Insurance programs. Program funding to be based upon an actuarial based confidence interval of 75%, with the exception of group health to which a confidence interval is not applicable. Contract Agency Funding: The Board will not fund any non-mandated social service agencies. Median Maintenance: Recognize the Unincorporated Area General Fund MSTD (111) as the appropriate, dedicated funding source for median beautification maintenance costs. Carry forward: All funds that are unexpended and unencumbered at the end of the fiscal year will be appropriated as carry forward revenue in the following year. Carry forward revenue represents not only operating funds but also previously budgeted operating, debt service, and capital reserves that are "carried forward" to fund these same reserves in the new year or to fund capital projects in the current or future years. The largest sources of carry forward are the capital, debt service, and enterprise funds. In both the General Fund and MSTD General Fund, carry forward fund balance is maintained to provide cash flow for operations prior to the receipt of ad valorem taxes and other general revenue sources. General Fund balance is required to meet significant public safety and priority operating needs for October and November, prior to the receipt of any significant ad valorem tax revenue (ad valorem taxes represent 65.0%of the total FY 2015 General Fund adopted revenues). Fund balance is also an important measure used by bond rating agencies in determining the County's credit worthiness. Specific concerns for Florida communities were reliance on the tourism industry and sales tax revenue, and the ongoing threat from hurricanes and wildfires. For Florida coastal communities, a minimum carry forward balance of 10% of total General Fund expenditures was recommended by the ratings agencies. Of course this figure and recommendation was general in nature and subject to each county's individual cash flow needs. A higher percentage would be considered positive—especially during any ratings surveillance. The recommended level of year ending cash and cash equivalents (carryforward) in the General Fund should be a minimum of 10%of actual expenditures. At year ending September 30, 2014, actual General Fund carryforward balance totaled $59,824,600 which represented approximately 20.9% of actual FY 2014 expenses. Indirect Cost Allocation Plan: The policy of charging enterprise and special revenue funds for support services provided by General Fund departments will be used again in FY 2016. The basis of these charges is a detailed indirect cost allocation plan prepared, periodically, by a consultant and adjusted by staff to reflect the organizational environment on a real time basis. 24 Packet Page -251- 3/10/2015 11 .D. Impact Fees: Collier County will assess impact fees at such levels as allowed by law, established by the Board of County Commissioners and supported by impact fee studies. Enterprise Fund Payment in Lieu of Taxes: The Solid Waste Fund and the Collier County Water-Sewer District will once again contribute a payment in lieu of taxes (PILT) to the General Fund. For FY 2015, the payment in lieu of taxes calculation was based upon a "franchise fee equivalent basis" commonly referred to as a percentage of gross receipts. Five percent (5%) of gross receipts were applied in FY 2015 and this method and percentage is planned for in FY 2016. This method is a common approach used by local governments and is generally consistent with fees paid by private utilities operating in a local government jurisdiction. Prior to FY 2013, PILT was based upon the prior year General Fund millage rate multiplied by the prior year gross (non-depreciated) value of property,plant, and equipment. Debt Service: Any capital projects financed by borrowing money shall limit the repayment period to the useful life of the asset. Interim Financing: Collier County may also borrow funds on an interim basis to fund capital projects. In these cases a repayment source shall be identified and the financing source that has the lowest total cost shall be employed. The Collier County Debt Management Policy provides that advance refunding for economic savings will be undertaken when a present value savings of at least five percent of the refunded debt can be achieved. The policy also states that five percent savings is often considered a benchmark and that any refunding that produces a smaller net present value savings may be considered on a case by case basis. A smaller net present value savings may be prudent for example when the intent is to eliminate old antiquated and limiting bond covenant language. Ad Valorem Capital and Debt Funding: Continuation of a fixed General Fund equivalent millage dedicated to capital projects, debt financing and impact fee fund debt loans. The recommended rate is up to the equivalent of 0.3333 mills. (See history below). General Fund Capital Equivalent Millage History (FY 1991 -FY 2016) 1.2000 1.0000 .cacc 0.8000 0.6580 0.6000 ,; 0.5426 0.5474 0.4000 --- .:0.4148 0.3809 0.3333 0.3333 0 3520 I. 0.2783 0.2067 0.2000 0.3040 0 3325 0.2354 0.1931 0.2447 0.2673 0.0000 . qi) # �5 �� 1 qg di) Op Oti Oti O>) O� O� Ob O Oq' O� �O �� <1' ti!' ti) 44 4 ` 44444`. 444`. ti4444444ti4tiA4A4A4A4A4A444A �s� 4A4A A 4 4A AC 1 25 Packet Page-252- 3/10/2015 11 .D. The General Fund continues to loan money to impact fee funds in order to pay their annual debt service payments. This of course is in addition to normal and customary debt service on non growth related revenue bond debt. Capital Improvement Program (CIP) Policies: On an annual basis, the County shall prepare and adopt a five-year Capital Improvement Element (CIE) consistent with the requirements of the Growth Management Plan. • Capital projects attributable to growth will be funded, to the extent possible, by impact fees. • Capital projects identified in the five-year CIE will be given priority for funding. The five-year plan for water and wastewater CIE projects will be based on projects included in the adopted master plans. Unlike operating budgets that are administered at the appropriation unit level, capital project budgets will continue to be administered on a total project budget basis. The minimum threshold for projects budgeted in capital funds is $25,000. 26 Packet Page-253- 3/10/2015 11 .D. Three-Year Budget Projections Ad Valorem Tax Funds (FY 2016 - FY 2018) OMB staff prepares annually a three-year projection of General Fund and MSTD General Fund revenues and expenditures to improve financial planning and to understand the long-term impact of funding decisions. These projections are complimented by a trend analysis of revenues and expenses which conclude the General Fund and Unincorporated Area General Fund sections respectively. The following 3-year budget projections are for the General Fund (001) and the MSTD General Fund (111). General Fund General Fund (001) Milla2e History and Milla 2e Rates As a point of reference, the following graph plots the historical General Fund millage rate, as well as millage neutral tax rates for FY 2016 through FY 2018. Millage neutral rather than tax neutral rates are used for planning purposes considering the belief that taxable values will continue to increase in the future. General Fund Millage History and Recommended Millage Neutral Tax Rates (FY 2005 to FY 2018) 4.5000 3.8772 3.8772 4.0000 3.5790 3.5645 3.5645 3.5645 3.5645 3.5000 U U ��r• U' III ■ e c 3.0000 ■ ■ U 111 II ■ 2.5000 M 111111 U' ■ U ■ .111 ■ 2.0000 I I I M E E ■ 1.5000 ■ ■ ■ m -■ 1.0000 MI ■ im 0.5000 ocb While the County Manager will be recommending a millage neutral budget in FY 2016 and while this millage neutral budget will contain funding for priority public safety and other significant asset maintenance/replacement initiatives,the Board should note the magnitude of our future asset maintenance responsibility and devote additional future dollars which may be generated from an increasing taxable value base to maintaining and or replacing corporate assets. 27 Packet Page-254- 3/10/2015 11 .D. The following tables depict the respective millage neutral tax rates for FY 2016, 2017 and 2018 as well as additional ad valorem dollars which could be raised under certain increasing tax base assumptions. FY 15 Adopted and Additional Ad Valorem General Fund Recommended Millage Revenue Projection Each Neutral Millage Rates Year FY 15 3.5645 FY 16 3.5645 $17,219,300 @ 7.5%TV Increase FY 17 3.5645 $17,326,900 @ 7%TV Increase FY 18 3.5645 $18,539,600 @ 7%TV Increase In order for Collier County to continue providing high quality best value services; continue to address backlog infrastructure maintenance; replace backlog equipment and vehicles; maintain its reserve and cash positions pursuant to policy and representative of a investment quality credit rated organization, it is essential to capture those additional ad valorem dollars generated by increasing taxable values. Failure to do so will jeopardize service levels and make it very difficult to maintain the wonderful infrastructure investment which this community enjoys. As an example, in FY 2016, the projected rolled back rate within the General Fund is $3.3716 which would raise $13,393,300 less than millage neutral or levying the current rate of$3.5645. While the rolled back rate would produce $3,826,000 more than the FY 2015 levy due to new construction taxable value, relying simply on new construction taxable value is not a sustainable model going forward when attempting to recover from an economic recession and knowing the level of investment required to simply maintain our assets let alone expand services and facilities based upon AUIR requirements and servicing the needs of an expanding population. The projected millage rates assume that the tax base will increase 7.5% in FY 2016 (the 2015 tax year). For FY 2017, our planning model assumes that taxable value on existing property will increase 7%. Taxable value in FY 2018 is projected to also increase 7%. The Property Appraiser will provide preliminary taxable value estimates for FY 2016 on June 1, 2015. Actual and assumed changes in County taxable values are as follows: 28 Packet Page-255- 3/10/2015 11 .D. Historical and Projected Changes in Collier County Taxable Values (FY 2005-FY 2018) 30.0% 25.4% 25.0% 19.9% 20.0% 15.00/(i 11.9% o 1 0.0/o I 0 6.5% 7.5% 7.0% 7.0%• 5.0% ° 0.5% 111 111 -5.0% -4.7% 1 -5.2% -10.0% -11.0% -12.2% -15.0% FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 Notes to Graph: FY 2007: The General Fund(001)millage rate adopted in FY 2007 was based upon a 16%increase in taxable value pursuant to BCC direction. FY 2008: As part of the Florida Legislative Property Tax Reform package implemented in FY 2008, Collier County adopted its final millage rate at 91%of the rolled back rate. FY 2016 Significant Expense Assumptions A millage neutral budget assuming an increasing taxable value base provides the County with those important additional ad valorem dollars necessary to maintain our assets, invest in our personnel, and service those who live and visit Collier County. Significant expense assumptions include; • Allocation for compensation administration—2%. • 2% attrition rate on regular salaries assumed in the County Manager's Agency. • $400,000 for continued regular routine ambulance replacement. Backlog replacement satisfied in FY 2015. • $2,000,000 allocation toward replacement of EMS Helicopter. • Five year phased approach to upgrading the county-wide 800MHz radio system platform. First phase (FY 2014) allocated $2,000,000 to network switching and console enhancements. Second phase in 2015 allocated $3,900,000 for P25 site upgrades. For FY 2016, the allocation is $4,400,000 for continued P25 upgrades and microwave/site connectivity. • Continued additional David Lawrence Center Funding in the amount of$300,000 • Continue General Fund general governmental capital, debt payment and impact fee loan transfer equivalent up to 0.3333 mills annually. • Storm water capital funding of $4,627,600 for continued countywide storm-water projects and storm-water operations; additional dollars may be allocated at the Boards discretion to address other county wide critical storm-water maintenance issues. 29 Packet Page-256- 3/10/2015 11 .D. • General Fund support of road construction and maintenance funded at $11,510,300 an increase of$2,010,400 over last year's planned allocation. • General Fund support of EMS established at $13,786,000 — up 3.7% from last year reflecting the recurring costs of additional services to equalize response times county- wide. This planned allocation includes funding for two regular routine ambulance replacements. • Full support for Transportation Operations from the General Fund (001) exclusively. • Mandates to be absorbed if possible within operating budgets, including Constitutional Officers. Significant Revenue Assumptions • FY 2015 ad valorem tax revenue forecast is 96% of actual taxes levied. FY 2015 forecast totals $221,936,300—a reduction of$8,369,700 from the adopted budget. Collections are within the 5% budgeted revenue reserve. A millage neutral position for FY 2016 produces a levy of$247,525,300. • Sales tax revenue forecast for FY 2015 is projected at $35,000,000 representing an increase of 2.0% over budget. FY 2016 budgeted revenue is projected at $36,036,000 or 5%over the adopted 2015 budget. • State Revenue Sharing for FY 2015 is projected to increase $220,000 or 2.6% over budget. • Constitutional Officer turn-back is a conservative budget estimate and for FY 2016 $6,630,400 is projected—an increase of$18,400 over the FY 2015 budget. • Measures to maintain beginning cash balance at between $50 million and $55 million continue to be necessary and include continued growth in budgeted reserves coupled with any combination of revenue receipts over budget and expense side budget management. • Interest income is projected to increase modestly by $50,000 to $350,000 reflecting stable fund balances. 30 Packet Page -257- 3/10/2015 11 .D. EMS Fund EMS is another fund that impacts significantly on the General Fund. Typically, this ad valorem support in recent years accounted for 50% to 55% of total EMS operating revenues. However, the percentage is likely to increase given instability in fee revenue collections and the Board policy directive to equalize response times county-wide. Historical and projected General Fund support of EMS operations by fiscal year is as follows: General Fund Support in EMS (FY 2005 -FY 2018) $18 $16 $15.4 $13.3 $� $13.8 $14.7 $14 $12.0 $12.8 $11.3 $11.3 $11.6 ::: ..:.' ',11.0 MIME ' i $61IIIIII ■ Iu ■ 1I1 $4 ' , 1 II $2III111 ■ 11111 $0 111 1 � 1 h 1 FY05 FY06 FY07 FY08 FY09 FY 10 FY 11 FY 12 FY 13 FY14 FY 15 FY 16 FYI 7 FY 18 Use of General Fund dollars to support this life/safety function has and continues to be a priority. Road Construction Program The Board approved road financing plan was based historically on using growth in taxable value and maintaining the General Fund millage rate to provide increasing dollars to meet the road funding commitments. These dollars are depicted on the following graph. With taxable values projected to increase, the General Fund contribution to road construction and maintenance is expected to total $11 million. As future budgets are planned and scarce resources allocated, infrastructure maintenance and non growth related improvements will certainly require a dedicated commitment of general revenue resources to protect this important investment. Capital obligations necessitated by state or federal agreement, like JPA's and DCA's will be funded. 31 Packet Page-258- 3/10/2015 11 .D. General Fund Support of Road Construction (FY 2003 -FY 2018) $45 $40 $35 $30 ff 6.( th c$25 $1.5 o$20 E$15 S15.G $5 1 > 1 1 1 I I ! 2 1 1 I $0 Py,3Pyo4Py0SPyo6Py,,Py08Py 09Py1 pPy1jPy/2Py13Py14Py15Py16Pyl7Py18 I Transfer from General Fund ❑Returned to General Fund 0 Additional Funds Transferred ®Vehicle Replacement FY 2017 A millage neutral budget in FY 2017 with an increase of 7% in taxable value will continue to allow for priority funding of public safety capital initiatives and AUIR capital programming like the EMS helicopter set aside; continued ambulance replacement; sheriff capital requests; and 800 megahertz equipment replacement. This of course is in addition to other infrastructure replacement needs and continuing expanded service requirements in those operations funded within the General Fund. In addition to annual inflationary cost increases, the following items were included in the FY 2017 budget analysis: • Maintain Capital projects funding in an equivalency up to 0.3333 mills. • Stormwater capital projects funding for county-wide initiatives. • Maintain General Fund support of EMS. • Continued routine ambulance replacement. • Set aside final $2,000,000 to replace EMS Helicopter. • Fourth phase of funding to upgrade the county-wide 800MHz radio system platform by allocating $2,400,000 to upgrade the site network. • Contingency reserves are maintained at policy. • Maintain General Fund road subsidy. • Maintain General Fund support for Transportation Operations expenses. In summary, the FY 2017 analysis signals caution especially when critical variables like taxable value, market conditions and general revenues are difficult to predict. Pursuing a millage neutral budget in FY 2017 without a sufficient budgeted beginning fund balance would likely result in a $6.9 million budget planning deficit as depicted in the trend analysis. Of course required correction on the expense side assuming revenue assumptions are accurate would be necessary. 32 Packet Page-259- 3/10/2015 11 .D. FY 2018 A millage neutral budget in FY 2018 coupled with a 7% taxable value increase allows for continued funding of backlog asset maintenance and replacement while funding those programs and services enjoyed by an expanding population base. Once again, management of the budget will be important to achieve a sufficient beginning fund balance. The following items were included in the FY 2018 budget analysis: • Maintain Capital projects funding in an equivalency up to 0.3333 mills. • Stormwater capital projects funding for county-wide capital initiatives. • Maintain General Fund support of EMS. • Year 5 funding to upgrade the county-wide 800MHz radio system platform committing $945,000 to continued network site improvements, and microwave connectivity. • Contingency reserves are maintained at policy. • Maintain General Fund road subsidy. • Maintain General Fund support for Transportation Operations. 33 Packet Page-260- 3/10/2015 11 .D. General Fund Trend Analysis General Fund Analysis Adopted Budget Forecast Forecast Forecast Forecast Forecast FY 2015 FY 2015 FY 2016 FY 2017 FY 22018 FY 2019 Revenues: Ad Valorem 230,306,000 221936,300 -3.6% 231,511,500 7.5% 255282.00 7.0% 273,151,953 70% Sales Tax 34.320.000 35.000,000 2.0% 36.036.000 3.0% 37,837.800 5.0% 39,729,700 5.0% Revenue Sharing 8,410,000 8.700,000 2.4% 8,904.000 2.3% 9349.200 5.0% 9.816,700 5.0% Other Revenues 30,124,400 31,311,400 3.9% 30,259,500 -3.45. 30,591,600 -.l% 30.647,640 03% Less 53/4 Required by Law (14,457,300) 0 0 0 0 Carryfornard 51864500 59,124.600 .32% 45,782.100 -23.0% 38.004.500 .370%% 31.124.400 -312% 25.221.054 Total Revenues 341.637,600 356,772300 4.4% 359,563.100 0.8 1.4 371,065,300 -_« 384,470,394 3.65E Expenditures: Departments 63,807,900 59,-135,400 -6.2% 61.650.600 3.05, 64,703400 5.05. 67.908,640 5.0% Debt Service 3,079,600 3,079.600 0.55. 3,075.000 -0.35. 3,075,800 0.0% 2,537,900 -17.5% Cap-Loans to Impact Fee Fds 11.120,300 11,120,300 0.0% 6.816,600 31.75. 6,545,100 -4.2„ 7,006,600 7.1% Capital 24,920.000 24973,300 , 26.807-900 7.3% 27,6923 3.3%00 3.3 29.792.300 40% Replacement Vehicles£e Equip 0 0 N,A1.500.000 7,....7.4„ 2.000.000 3335, 2.000.000 0.05. Transfers 36.696.100 36.751,200 0_'. 35.741.00 .1% 37;589.400 5.2,z 39.461.300 5...4 Constitutional Officers 175353,000 175.23,400 -0.... 185.967300 6.1% 198334.900 6.75. 211,_535.600 5. Reserves 26.670,700 0 0 0 0 Total Expenditures 341.637,600 310.990.00 -9.0% 321,551,600 3.45. 339,940,900 359,249,340 3.7% Revenues less Expenditures(Carryforward) 45,782,100 38,004,500 31,124,400 25,221.054 Total Amt of Equity Consumed Amt of Equity(CF)reduced to balance the budge 14.042 500 7,777.600 6,880.100 5,903,347 (34.60 546) Budgeted Reserves 21.423400 28.191.900 29.353,300 34 Packet Page-261- 3/10/2015 11 .D. Unincorporated Area General Fund (111) MSTD General Fund (111)Millage History As a point of reference, the following graph plots the historical MSTD General Fund (111) millage rate, as well as millage neutral rates for FY 2016 through FY 2018. Millage neutral rather than tax neutral rates are used for planning purposes considering the belief that taxable values will continue to increase in the future. Unincorporated MSTD General Fund(111)Millage History and Recommended Millage Neutral Tax Rates (FY 2005 to FY 2018) 0.8500 0.8069 0.8069 0.8069 0.8000 0.7500 0.7161 0.7161 0.7161 0.7161 0.7000 1.6'12 0..'12 0.6500 0.6000 Results of Unincorporated Area General Fund Analysis The County Manager will be recommending a millage neutral budget in FY 2016, and while this millage neutral budget will contain funding for recurring operations it also includes resources to maintain the road network, storm-water system, community park capital and landscape asset. The Board should also note the magnitude of our future maintenance and asset replacement responsibility and dedicate resources gained through an increasing taxable value base toward this purpose. 35 Packet Page-262- 3/10/2015 11 .D. The following tables depicts the respective millage neutral tax rates for FY 2016, 2017 and 2018 as well as additional ad valorem dollars which could be raised under certain increasing tax base assumptions. FY 15 Adopted and Additional Ad Valorem Unincorporated Area Recommended Millage Revenue Projections Each General Fund Neutral Tax Rates Year FY 15 0.7161 FY 16 0.7161 $2,119,800 @ 7.5%TV Increase FY 17 0.7161 $2,135,700 @ 7.0%TV Increase FY 18 0.7161 $2,285,300 @ 7.0%TV Increase In order for Collier County to continue providing high quality best value services; continue to address backlog infrastructure maintenance; replace backlog equipment and vehicles; maintain its reserve and cash positions pursuant to policy and representative of a investment quality credit rated organization, it is essential to capture those additional ad valorem dollars generated by increasing taxable values. Failure to do so will jeopardize service levels and make it very difficult to maintain the wonderful infrastructure investment which this community enjoys. As an example, in FY 2016, the projected rolled back rate within the Unincorporated Area General Fund is $.6795 which would raise $1,559,300 less than millage neutral or levying the current rate of$.7161. While the rolled back rate would produce $560,400 more than the FY 2015 levy due to new construction taxable value, relying simply on new construction taxable value is not a sustainable model going forward when attempting to recover from an economic recession and knowing the level of investment required to simply maintain our assets let along expand services and facilities based upon AUIR requirements and servicing the needs of an expanding population. FY 2016 The FY 2016 budget projection is based upon a 7.5% tax base increase. Property taxes and the state shared communications services tax represents on average approximately 92% of the operating revenue (less transfers) within the Unincorporated Area General Fund (111). Once again, changes to distribution and structure of the communication services tax is being debated in Tallahassee. Current legislation pending in Tallahassee would cut the states communication tax by two (2) percent. The governor has proposed a larger tax cut. The estimated impact for FY 2016 is a reduction of$1.2M. This type of revenue reduction without a suitable replacement is troubling considering that Fund (111) is a true operating fund with recurring expenses and minimal reserves. Transfers from the Unincorporated Area General Fund grew by $4 million between FY 2014 and FY 2015 to $7.9 million. For FY 2016,transfer expense is planned at $8 million. The majority of these transfer dollars are programmed for Park, Transportation and Storm-Water capital purposes. Sustaining these capital appropriations and maintaining necessary transportation, landscaping park, code, planning and general operations in this fund requires at the very least a millage neutral tax position along with continued state shared communication services tax revenue. 36 Packet Page-263- 3/10/2015 11 .D. This model is not sustainable under a rolled back millage rate and /or loss of the communication services tax without mid — year budget reductions or the introduction of replacement revenue sources like a franchise fee. Any required mid-year cuts will likely affect transportation operations, park and recreation programs and other non public safety services. Beginning in FY 2009, the Unincorporated Area General Fund absorbed part of the Transportation operating transfer which had been borne previously by the General Fund (001). State Law and specifically section 129.02 requires the establishment of a separate County Transportation Trust Fund to "carry on all work on roads and bridges in the county...". Collier County Transportation operations are funded primarily within Transportation Operating Fund 101. Since inception of the Transportation Division in FY 2001 and continuing through FY 2008, Transportation Fund 101 has received as its primary revenue source a transfer from General Fund (001)—not MSTD General Fund (111). The following table depicts budgeted dollars transferred to support transportation operations (fund 101)from the General Fund and Unincorporated Area General Fund. General Fund (001) Unincorporated Area Total General Fund (111) FY 08 $18,066,900 $0 $18,066,900 FY 09 $9,864,700 $7,693,500 $17,558,200 FY 10 $7,935,400 $8,786,900 $16,722,300 FY 11 $12,971,400 $2,912,800 $15,884,200 FY 12 $12,366,900 $2,825,400 $15,192,300 FY 13 $11,496,300 $2,272,200 $13,768,500 FY 14 $15,548,500 $0 $15,548,500 FY 15 $16,091,300 $0 $16,091,300 FY 16 $14,503,400 $0 $14,503,400 The FY 2014 transfer was increased one time by an additional $2.4 million to fund needed equipment replacement and certain operations. This additional transfer reduced the road (fund 313) transfer one time accordingly. For FY 2016, this transfer will once again be solely funded from the General Fund. FY 2017 Assuming that taxable values will increase by 7% in FY 2016, a millage neutral budget coupled with a reduction in beginning fund balance could result in a potential budget planning deficit of $3.0M as depicted within the preceding trend analysis. This analysis has built in the aforementioned reduction in the communication services tax anticipated by state legislation. The trend analysis shows continued erosion of the funds cash position. This model is certainly not sustainable and absent revenue side enhancements budget reduction measures would be instituted. 37 Packet Page-264- 3/10/2015 11 .D. FY 2018 Continuation of millage neutral into FY 2018 under a 7% increase in taxable value would generate a modest increase in ad valorem revenue. This increase is certainly not enough to compensate for the loss in fund equity and planned capital asset maintenance. For planning purposes and assuming continued decline in beginning budgeted fund balance, a deficit of$4.1 million could be encountered. Absent multi-year budget management mid-year, the model depicts a total fund equity loss from FY 2015 through FY 2018 totaling$11.4 million. Unincorporated Area General Fund Trend Analysis Unincorporated Area MSTD General Fund(111}Trend Analysis Adopted Budget Forecast Forecast Forecast Forecast Forecast FY 2015 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 (increase 7.5%W( (increase 7%TV) (increase 7%7V) Revenues Ad Valorem 28,391,100 27,255,500 -4.0% 29,290,452 7.5%"31,340,783 7.0%r 33,534,659 7.0% Communication Services Tax 4,500,000 4,300,000 -4.4% 3,200,000 -25.6%r 2,200.000 -31.3%r 1,200,000 -45.5% Other Revenue 5,617,600 5,707,400 1.6% 6,988,048 22.4%r 7,197,689 3.0%r 7,269,672 1.0% Less 5%Required By Law (1,867,600) 0 -100.0% 0 0.0% 0 0.0% 0 0.0% Carryforward 5,490,400 7,368,100 54.2% 5,294,100 -25.1%r 4,054,300 -231%r 999,053 -75.4% (4,069,737) Total Revenues 42,131,500 44,631.000 5:9% 44,772,600 r 0.3% 44,792,772 r 0.0% 43,003,385 -4.0% Expenditures Landscape Maintenance 5,379,200 5,446,000 1.2 ro 5,517,300 1.5%r 6,069,030 1O.0%' 6,675,933 10.0% Roads 2,540,000 2,500,000 -1.6% 2,600,000 40%r 3,100,000 19.2%r 3,600,000 16.1% Parks&Rec. 12,340,100 12,078,000 -2.1% 12,600,000 4.3`%13,222,489 4.9%r 13,883,613 5.0% Code Enforcement 4,221,300 4,100,000 -2.9% 4,341,800 5.9%r 4,558,890 5/0%r 4,786.835 5.0% Other Departmental 7,531,700 7,313,800' -Z.9% 7,636,200 4.4%' 8,018,010 5.0%r 8,418.911 5.0% Transfers 7,899,100 7,899,100 0.0'5 8,023,000 1.6%r 8,825,300 10.0N%r 9,707,830 10.0>5 Reserves 2,220,100 0 -100.0% 0 0 0 Total Expenses 42,131,500 39,336,900 -6.6% 4.0,718,300 3.5%743,793,719 7.6%* 47,073,121 7.5% Fund Balance 5,294,100 4,054,300 _ 999,053 (4,069,737) Equity Reduction to balance budget 2,074,000 1,239,800 3,055,247 5,068,790 (11,437,837) Budgeted Reserves 2,130,800 2,130,800 2,130,800 38 Packet Page-265- 3/10/2015 11 .D. 39 Packet Page-266-