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Agenda 02/25/2014 Item #11A2/25/2014 11.A. EXECUTIVE SUMMARY Recommendation to adopt the FY 2015 Budget Policy OBJECTIVE: That the Board of County Commissioners (Board) adopt policies to be used in developing the Collier County Government budget for FY 2015. CONSIDERATIONS: In order for staff to begin preparation of the FY 2015 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 2015 budget. The budget policy document is broken down into three distinct elements. The first consists of budget policies proposed in FY 2015 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 26, 2014 and Friday, June 27, 2014 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 17 through June 20, 2014 in Orange County. For informational purposes, adoption of the maximum tentative millage rates is scheduled for Tuesday, July 8, 2014. The Board is required by Florida Statutes to provide the Property Appraiser with the proposed millage rates by August 1, 2014 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 2015 budget. The School Board has tentatively scheduled September 9, 2014 for their final budget hearing. Recommended dates for the Collier County budget public hearings are Thursday September 4, 2014 and Thursday September 18, 2014. 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 2015. 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, 2014 deadline for the Supervisor of Elections, the Sheriffs Office and the Clerk's budget submittals. PREPARED BY: Mark Isackson, Director of Corporate Finance and Management Services Packet Page -153- COLLIER COUNTY Board of County Commissioners Item Number: 11.11.A. 2/25/2014 11.A. Item Summary: Recommendation to adopt the FY 2015 Budget Policy. (Mark Isackson, Corporate Financial and Management Services Director) Meeting Date: 2/25/2014 Prepared By Name: LehnhardPat Title: Operations Coordinator, Office of Management & Budget 2/18/2014 9:42:46 AM Submitted by Title: Director -Corp Financial and Mngmt Svs, Office of Management & Budget Name: IsacksonMark 2/18/2014 9:42:48 AM Approved By Name: KlatzkowJeff Title: County Attorney, Date: 2/18/2014 3:53:00 PM Name: IsacksonMark Title: Director -Corp Financial and Mngmt Svs, Office of Management & Budget Date: 2/18/2014 4:12:04 PM Packet Page -154- 2/25/2014 11.A. Fiscal Year 2015 Proposed Budget Policies Collier County Board of County Commissioners February 25, 2014 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 year forecast for the General Fund and the Unincorporated Area General Fund" Polic± eeommendatlonsr�hlgh{e :fir grad; While it is 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 2015 and beyond. The FY 2015 budget will be prepared within an improving economic environment which saw back to back taxable values increases county -wide for the first time since FY 2008. Median home prices have stabilized, visitation to the destination increased year over year, new construction permitting is escalating and the County's unemployment rate is dropping. While these are positive economic signs, the new economic reality of a global economy dictates that continued caution be exercised as the County moves forward with future financial planning. Collier County will continue to exhibit proactive and fiscally conservative budget practices which have included Board directed policy guidance requiring no increases in property tax rates; continued growth in General Fund budgeted reserves; fully funded and policy compliant debt management; no planned County Manager Agency layoffs, facility closures, or front line operating service cuts; and continued high priority asset maintenance and equipment replacement. These practices have been instrumental in sustaining quality services and programs especially in an environment where revenues are constrained. Nonetheless, these same practices will be equally important as the organization prepares to address the expectations of service delivery, program demands and infrastructure challenges associated with what is expected to be an improving economic environment. Annual Budget Policies Adopted Significant Budget Influences: Each fiscal year based upon fiscally conservative budgetary guidance, limited resources are allocated to competing services, programs and 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 critical priority infrastructure and equipment. Ad valorem taxes will once again dominate the County's budgetary revenue mix — comprising about 44% of total net annual operating revenue and 65% of General Fund revenue sources. Packet Page -155- Sources of Current County Government Operating Revenues all Funds (FY 2014) Service Charges Impact Fees 7% Gas /Sales Tax 9% General Fund 86% Property Tax by Major Funds Bond roceeds/ Interest 1% Valorem 44% 2/25/2014 11.A. FY 2014 General Fund Revenue Sources Ad V.1-- Transfers from Consitutional Officers 1.7% MSTU's 3% . Pollution Control 1% Area General Fund 10% Interfund Transfers and Payments 2.5% uarrywrwaw Interest & 14.8% Misc. 0.5% fles Tax 9.3% tevenue aring .3% Intergov'tal Fines, Revenues Permits, 0.5% Charges 3.5% Thus, significant attention is paid to ad valorem taxes and those factors that can influence millage rate and tax levy decisions. For FY 2015, 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. • 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 as the economy improves and 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; Sheriff substation and evidence facility; Project (25) digital enhancements to the public safety radio system. 2 Packet Page -156- 2/25/2014 11.A. • Impacts of potential unfunded mandates including continued state legislative attacks on county revenues (SB266 — Communication Services Tax, SB624 — Fair Associations and specific prohibitions against storm -water fees, impact fees, etc.. and HB 7023 Economic Development and prohibitions against new development transportation concurrency and proportionate share contributions) as well as continuing federal mandates 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 Millaze Targets for the County -Wide and MSTD General Fund The County has lost over $21 billion in taxable value — almost 27% of its tax base since FY 2008. The value of this tax base erosion is over $77 million dollars when applying the current General Fund millage rate. Recovery to FY 2008 levels will take time. Assuming four (4) percent annual tax base increases, it will take eight (8) years to regain the tax base lost since FY 2008. More aggressive tax base increases in the six (6) percent range will shorten that time frame to five (5) years. The following table provides a history of county wide and unincorporated area taxable value over the past seven (7) years (tax year 2007 -2013) as well as the budget planning projection for tax year 2014 (FY 2015). Tax Year County Wide Taxable Value County Wide % inc. dec Unincorporated Area Taxable Value Unincorporated Area % inc. 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) October DR 422 Number (not final) $60,649,643,777 3.7% $37,217,233,359 3.3% 2014 FY 2015 $63,378,877,700 4.5% $38,892,008,900 4.5% The State Ad Valorem Estimating Conference released numbers in December 2013 for the 2014 tax year (FY 2015). The report projects that Collier County taxable values on July 1, 2014 will increase 6.4 %. For budget planning purposes at this time a 4.5% 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. Packet Page -157- 2/25/2014 11.A. 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. Milla a Area FY 06 FY 07 FY 08 FY 09 FY10 FY 11 FY 12 FY 13 FY 14 General Fund $3.8772 $3.5790 $3.1469 $3.1469 $3.5645 $3.5645 $3.5645 $3.5645 $3.5645 Unincorporated Area 1 $.8069 $.8069 1 $.6912 1 $.6912 $.7161 $.7161 1 $.7161 1 $.7161 $.7161 Assuming the Board maintains a millage neutral position for FY 2015, the following ad valorem dollars within the General Fund and Unincorporated Area General Fund can be expected from that budgeted in FY 2014 under varying taxable value results. Taxable Value 2% Increase 3% Increase 4.5% 5.5% Increase 6% Increase Result Increase General Fund (001) $4,062,800 $6,224,600 $9,467,400 $11,629,300 $12,710,200 Unincorporated $492,000 $758,500 $1,158,300 $1,424,800 $1,558,000 Area General Fund (11]) Dollars above or Fund ($5,=104,600) Fund ($3,242.800) Fund $0 Fund $2,161,900 Fund $3,242,800 (below) budget 001 001 001 001 001 planning threshold Fund ($666.300) Fund ($399.800) Fund $0 Fund $266,500 Fund $399,700 ill ill ill 111 111 Of course if taxable values fall below the 4.5 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 2015 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 sixth consecutive fiscal year in FY 2015, (millage neutral scenario) under an increasing taxable value planning scenario will result in targeted and measured divisional operating increases coupled with an abilitv to becin systematically replacing much needed eauipment 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 2014, inflationary adjusted fixed costs and maintaining a competitive compensation package. The December 2012 over December 2013 CPI is 1.9 percent. A component increase of 2% 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 first time since FY 2009, no mid -year operating cuts are contemplated in FY 2014. This does not mean that management of the budget will cease. To the contrary, close expenditure controls are always in place and monitored continually. 4 Packet Page -158- 2/25/2014 11.A. 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 $20 $10 $o - -_ :JE:' c -$10 FY FY 13 FY 14 o_ -$20 Total Reductions -$30 $107,964,400 -$40 a Reductions for the Adopted Budget ■ Mid -Year Budget Reductions While it is important to begin 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 equity must always be guarded against. The following table presents the estimated backlog of various categories of deferred general governmental asset maintenance or replacement over the past six (6) years. 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 Management Total Mana ement Services Offices Vehicles and $4,179,000 $2,945,000 $1,306,000 $458,000 $8,888,000 Equipment Governmental $0 $2,039,300 $18,955,000 $0 $20,994,300 Facilities and Infrastructure Assets Storm -Water $7.459.900 $0 $0 $0 $7,459,900 Road Maintenance $4,775,000 $0 $0 $0 $4,775,000 Total $16,413,900 $4,984.300 $20.261,000 $458,000 $42,117200 R Packet Page -159- 2/25/2014 11.A. The following table provides a description of what is currently planned in FY 2015 from the General Fund budget to support ongoing capital requirements; begin to address part of the backlog described in the previous table; and fund growth and non - growth debt obligations. Category Non Growth Loans to County Wide Transfer to Transfer to Total Debt Impact Fee Capital Roads Storm - Trust Funds $1,000,000 $1,000,000 Water Tree Sub - Station FY 2014 $3,657,700 $4,342,300 $10,641,400 $8,768,800 $4,730,100 $32,140,300 FY 2015 $3,082,600 $5,694,800 $13,400,000 $12,000,000 1 $3,700,000 1 $37,877,400 Non growth related debt serviced by legally available non- ad valorem revenue from the General Fund has decreased year over year due to the various debt restructurings approved by the Board. Through this aggressive debt restructuring and normal debt retirement, non growth related revenue bond debt service has decreased 63% or over $5M since FY 2010 when the Board's debt restructuring initiative began. Loans to the impact fee trust funds would have remained relatively flat, but construction of a planned EMS station in FY 2015 consistent with the AUIR led to an additional $1.5M loan from the General Fund to EMS Impact Fee Fund (350). 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 2014 versus dollars programmed for FY 2015 by category. County —wide FY 14 Budget FY 14 Forecast FY 15 Budget Capital Category Jail A/C $1,300,000 $1,300,000 $2,400,000 Replacement Sheriff Orange $1,000,000 $1,000,000 $1,400,000 Tree Sub - Station Sheriff Special $425,000 $425,000 $0 Os 800 MHz $3,000,000 $2,000,000 $3,900,000 Helicopter and $3,800,000 $800,000 $2,800,000 Ambulances Park Capital $0 $0 $500.000 General Building $750,000 $750,000 $1,000,000 and A/C Repairs General $0 $0 $1,000,000 Governmental Vehicle Replacement Supplement Other General $366,400 $366,400 $400,000 Governmental (Gov Max budget program, Library books, etc.) Total $10,641,400 $6,641,400 $13,400,000 For FY 2014, the $3,000,000 allocation to replace the existing Helicopter was cut and 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. 6 Packet Page -160- 2/25/2014 11.A. The 800 MHz budgeted transfer was reduced by $1,000,000 in FY 2014 forecast pending Board discussion on the system as well as any policy directive. 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. The transfer to roads is increasing and reflects additional dollars allocated to road resurfacing, intersection improvements, bridges and general maintenance of the transportation infrastructure network. The storm -water transfer reflects final funding for the Lely Area Storm -water Improvement Project (LASIP) in FY 2014 and FY 2015 as well as operations. Not reflected is storm -water funding which is programmed in the Unincorporated Area General Fund (I 11) in the amount of $1,300,000 in FY 2014 and $1,000,000 in FY 2015. The legislature over the past few years has discussed reducing the state communication services tax and it appears that SB 266 which reduces said tax by 2% will pass and take effect on January 15, 2015. 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 will lose $250, 000. For FY 2016 and beyond, the revenue loss is estimated at $500, 000. The millage rate equivalency of this revenue loss is $.0067 and $.0134 respectively for FY 2015 and FY 2016. This loss of revenue will certainly impact programs funded within the Unincorporated Area General Fund including road and landscape maintenance, storm -water maintenance and parks operations. 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. Packet Page -161- 2/25/2014 11.A. FY 2014 Percent of General Fund Budget Property Appraiser 2% Clerk of Courts Sheriff 43% 2% Courts 1% Supervisor of Reserves 8% -_ Elections 1% Tax Collector 4% Debt / Capital Subsidy 6% BCC / Co Road Program County Attorney 3% Subsidy 3% Managers Agency 27% Considering that transfers to the Constitutional Agencies in FY 2014 account for 52% 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 $10,966,274 and $8,156,661 respectively for year ending FY 2012 and FY 2013. Turn back by the Tax Collector accounted for 52% of all turn back revenue in FY 2012 and 71 % of all turn back revenue in FY 2013. Millaae Targets for Collier County MSTU's/MSTD's With a simple majority vote in FY 2015, the Board has the latitude to levy the rolled back millage rate (tax neutral), plus an inflationary adjustment based on the growth in Florida per capita personal income. 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. 8 Packet Page -162- 2/25/2014 11.A. 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 (00 1) 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 Budget Policy Continue revenue 9 budget policy Limitations on Expanded Positions to Maximize Organizational Efficiencies The County Manager's Agency added 25.7 FTE's to the operation between adoption of the FY 2013 budget and adoption of the FY 2014 budget. Twenty two (22) of these 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 be tempered with the use of part time and contractual service employees. 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 snatch 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. Packet Page -163- 2/25/2014 11.A. For FY 2015, it is likely that expanded position requests will be recommended 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. 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 2012 to December 2013 is 1.9% for the Miami -Fort Lauderdale area. This is the index that Collier County traditionally uses when considering a compensation adjustment. Rather than waiting to appropriate dollars for a compensation adjustment on an event driven basis as has been the case in the previous two (2) fiscal years, the County Manager proposes to appropriate dollars for the adjustment as part of budget planning for FY 2015 with the recommend structure submitted for Board consideration at the June Workshop meeting. Program Component FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 FY 13 FY 14 FY 15 Request Cost of Living 4.70% 4.10% 4.20% 0.00% 0.00% 0.00% 2.00% 0.00% 0.00% Awards Program 1.50% 1.50% 0.00% 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% $1.000 2.00% Total 6.45% 5.85% 4.20% 0.00% 0.00% 0.00% 2.00% $1,000 2.00% Health Care Program Cost Sharing Collier County provides a self - funded Group Benefits Plan for health care and prescription drug coverage. Coverage under the Plan extends to all County employees, with the exception of the Sheriff s Office, which provides 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 is similarly impacted by these rising costs. For FY 2014, the County experienced a 4.0 % health insurance rate increase. This increase resulted in an average annual employer premium increase of $624 and an average employee premium increase of $120. It is anticipated that health plan costs will remain stable for FY 2015. 10 Packet Page -164- 2/25/2014 11.A. This will be accomplished through a combination of plan design changes, provider fee negotiations and wellness efforts. 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 2014, $3.7M in General Fund constitutional transfer savings would have been realized. 2014 Health Plan Contributions by Agency ------------------------------- - - - - -- 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, 2014 if the legislators fail to establish new rates for state fiscal year 2014- 2015). 11 Packet Page -165- Average Average 2014 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 --- - -- - -' 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, 2014 if the legislators fail to establish new rates for state fiscal year 2014- 2015). 11 Packet Page -165- 2/25/2014 11.A. Accrued Salary Savings Reduced FTE counts, low turnover and stringent limitations on expanded positions, 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 2014, this rate was reduced to 2 %. For FY 2015, it is suggested that the attrition rate remain at 2 %. With the economy improving there is always the threat of an uptick in employee turnover. 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 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 snatching requirements to available grants. Addressing storm water funding needs in the unincorporated area staff plans to dedicate via transfer from the MSTD General Fund (11 l) at least $1,000,000 in FY 2015. Proposed Use of Gas Taxes Previously, the Board directed through policy that all available gas taxes will be used to support the Road Construction Capital Improvement program. Immediately prior to the decline in taxable values, this transfer amounted to $24 million. Recent reductions in the General Fund (001) transfer to roads has meant that gas taxes (the pledged revenue source) fund a significant portion of debt service on the 2003 and 2005 Gas Tax Revenue Bonds. Current debt service is approximately $14 million per year and the General Fund transfer proposed for FY 2015 is $12 million an increase of $3.2 million from FY 2014. 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, 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. 12 Packet Page -166- 2/25/2014 11.A. 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. Recently this transfer has been in equivalency far less than 1 /3rd of a mil. For FY 2014, the equivalency rate was .2447 and for FY 2015 the equivalency rate is planned at .2900. During the economic downturn, the majority of this transfer evolved into a debt service payment. However, over the past two 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 2014 $6,841,400 of the $14,841,400 equivalency transfer was planned for capital projects. For FY 2015, $9,600,000 of the $18,377,400 equivalency transfer is devoted to capital projects up $2,758,600 from FY 2014. For FY 2015, the General Fund (001) transfer (loan) will be sized to cover debt service which cannot be covered by impact fees. This amount totals $5,694,800. Total loans outstanding to the impact fee trust funds since inception (FY 2005) through FY 2014 total $72,073,566. Payment of debt is a top priority. Under the FY 2015 budget planning scenario dollars generated from the 1 /3rd mil equivalent allocation will be sufficient to cover revenue bond debt service. Of the $18.4 million projected transfer in FY 2015, $5.7 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. 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 $289.3M in long term debt and variable rate commercial paper, achieving a level of budget certainty, reducing the cost of borrowing within the portfolio by $15.9M while returning all $19.5M borrowed from Enterprise funds to establish a debt service reserve debt surety necessitated by collapse of the bond insurance market. Collier County's principal debt outstanding at 9/30/13 totals $596M of which $346M is connected with infrastructure improvements by population growth and related service demands. The County's principal debt has been reduced by $208M since FY 2008. Annual principal and interest payments servicing the current outstanding debt represents 6.2% of the County's net budget. 13 Packet Page -167- 2/25/2014 11.A. 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. 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 Reserves Unincorporated Area General Fund Reserves % of General Fund Expenses % of Unincorporated GF Ex enses 2015 (Planning) $27,283,700 $1,537,200 9.0% 4.0% 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 $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. 14 Packet Page -168- 2/25/2014 11.A. For the first time in five (5) years, 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. M1 Packet Page -169- 2/25/2014 11.A. 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). 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 which historically have included a water main break on US41 for $4 million, refund of prior year customer overcharges $1.6 million, and a recent break in a 36" wastewater force main), reserves for cash flow in the event of revenue disruptions, or reserves for capital for necessary but unforeseen repair and rehabilitation projects. 16 Packet Page -170- 2/25/2014 11.A. 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. 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. 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. 17 Packet Page -171- 2/25/2014 11.A. 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. 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. is Packet Page -172- 2/25/2014 11.A. Schedulin6 Issues Decisions Required Staff Recommended Date (s) Establish Budget Submission Dates May 1, 2014 by Resolution for the Sheriff, the Supervisor of Elections and the Clerk June Budget Workshops (BCC Agency /Courts and Constitutional Officers Budget Workshops) Thursday, June 26 and Friday June 27, 2014 FAC Conference is June 17 — June 20, 2013 in Orange County. Adoption of Tentative Maximum FY July 8, 2014 (Tuesday) 15 Milla e Rates Submission of Tentative FY 2015 Friday July 11, 2014. Budget to the Board Establish Public Hearing Dates (see September 4, 2014 (Thursday at 5:05 pin) note) September 18, 2014 (Thursday at 5:05 m) 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 9, 2014. The Commission chambers are reserved for the tentative dates for Collier County Government budget public hearings. Comparative Budeet Data Provide comparative budget data using FY 2014 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 19 Packet Page -173- 2/25/2014 11.A. Continuing Existing Budget Policies for FY 2015 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 Azency FundinLY: The Board will not fund any non - mandated social service agencies. Median Maintenance: Recognize the Unincorporated Area General Fund MSTD (I 11) 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 2014 General Fund adopted revenues). Fund balance is also an important measure used by bond rating agencies in determining the County's credit worthiness. Staff from Moody's Investors Service was contacted previously to determine an appropriate level of carry forward revenue. 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, 2013, actual General Fund carryforward balance totaled $56,083,800 which represented approximately 20.3% of actual FY 2013 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 2015. 20 Packet Page -174- 2/25/2014 11.A. 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. 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 2014, 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 2014 and this method and percentage is planned for in FY 2015. 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). 21 Packet Page -175- 2/25/2014 11.A. General Fund Capital Equivalent Millage History (FY 1991- FY 2016) 1.2000 1.0000 0.8000 d 0.6000 0.4000 0.2000 86 0.0000 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 nonnal and customary debt service on non growth related revenue bond debt. Capital Improvement ProLyram (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. PA Packet Page -176- 0.6580 0.5474 0.5426 0.4148 0.3809 0.3333 0.33 0.2900 0267 70217131 93 0.2447 0.2 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 nonnal and customary debt service on non growth related revenue bond debt. Capital Improvement ProLyram (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. PA Packet Page -176- 2/25/2014 11.A. Three -Year Budget Projections Ad Valorem Tax Funds (FY 2015 - FY 2017) 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) Millage History and Millage 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 2015 through FY 2017. Millage neutral rather than tax neutral rates are used for planning purposes considering the belief that taxable values will continue to increase modestly in the future. While the County Manager will be recommending a millage neutral budget in FY 2015 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. 23 Packet Page -177- 2/25/2014 11.A. The following tables depict the respective millage neutral tax rates for FY 2015, 2016 and 2017 as well as additional ad valorem dollars which could be raised under certain increasing tax base assumptions. General Fund FY 13 Adopted and Recommended Millage Neutral Milla e Rates Additional Ad Valorem Revenue Projection Each Year FY 14 3.5645 FY 15 3:5645 $9,467,400 @ 4.5% TV Increase FY 16 3.5645 $11,295,700 @ 5% TV Increase FY 17 3.5645 $11,860,500 @ 5% 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 2015, the projected rolled back rate within the General Fund is $3.4523 which would raise $7,08,lflpdess than millage neutral or levying the current rate of $3.5645. While the rolled back rate would produce $2359,40 more than the FY 2014 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 4.5% in FY 2015 (the 2014 tax year). For FY 2016, our planning model assumes that taxable value on existing property will increase 5 %. Taxable value in FY 2017 is projected to also increase 5 %. The Property Appraiser will provide preliminary taxable value estimates for FY 2015 on June 1, 2014. Actual and assumed changes in County taxable values are as follows: 24 Packet Page -178- 2/25/2014 11.A. Historical and Projected Changes in Collier County Taxable Values (FY 2005 - FY 2017) 19.9% 30.0% 11.9 °0 25.4% . o � 0.5% 25.0% FY05 FY06 FY07 FY08 FY 13 FY 14 FY 15 FY 16 FY 17 -4.7% -5.2% -11.0% .12.2% 20.0% 15.0% d eo 10.0% 5.0% 4.5% 5.0% 5.0% 0.0% -5.0% -10.0% -15.0% 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 2015 SiLnificant 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. • $800,000 for continued ambulance replacement. • $2,000,000 allocation toward replacement of EMS Helicopter. • Five year phased approach to upgrading the county -wide 800MHz radio system platform. First phase allocated $2,000,000 to network switching and console enhancements. Second phase in 2015 allocates $3,900,000 for P25 site upgrades. • 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 ($10,894,800). • Storm water capital funding of $3,700,000 to complete LASIP and storm -water operations; additional dollars may be allocated at the Boards discretion to address other county wide critical storm -water maintenance issues. • General Fund support of road construction and maintenance funded at $12,000,000 an increase of $800,000 over last year's planned allocation. 25 Packet Page -179- 19.9% 11.9 °0 . o � 0.5% FY05 FY06 FY07 FY08 FY 13 FY 14 FY 15 FY 16 FY 17 -4.7% -5.2% -11.0% .12.2% 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 2015 SiLnificant 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. • $800,000 for continued ambulance replacement. • $2,000,000 allocation toward replacement of EMS Helicopter. • Five year phased approach to upgrading the county -wide 800MHz radio system platform. First phase allocated $2,000,000 to network switching and console enhancements. Second phase in 2015 allocates $3,900,000 for P25 site upgrades. • 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 ($10,894,800). • Storm water capital funding of $3,700,000 to complete LASIP and storm -water operations; additional dollars may be allocated at the Boards discretion to address other county wide critical storm -water maintenance issues. • General Fund support of road construction and maintenance funded at $12,000,000 an increase of $800,000 over last year's planned allocation. 25 Packet Page -179- 2/25/2014 11.A. • General Fund support of EMS established at $12,567,400 — up 8% from last year reflecting the recurring costs of additional services to equalize response times county- wide. Capital contributions noted above are separate from operating subsidy. • 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 2014 ad valorem tax revenue forecast is 96% of actual taxes levied. FY 2014 forecast totals $208,204,400 — a reduction of $8,242,200 from the adopted budget. A millage neutral position for FY 2015 produces a levy of $225,914,000. • Sales tax revenue forecast for FY 2014 is projected at $31,725,000 representing an increase of 2.3% over budget. FY 2015 budgeted revenue is projected at $32,560,000 or 5% over the adopted 2014 budget. • State Revenue Sharing for FY 2014 is projected to increase $150,000 or 1.9% over budget. • Constitutional Officer turn-back is a conservative budget estimate and for FY 2015 $6,612,000 is projected — an increase of $1,012,000 over the FY 2014 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 $15,000 to $300,000 reflecting stable fund balances: 26 Packet Page -180- 2/25/2014 11.A. 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: Use of General Fund dollars to support this life /safety function has and continues to be a priority. Road Construction ProLyram 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 $12 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. 27 Packet Page -181- 2/25/2014 11.A. General Fund Support of Road Construction (FY 2003 - FY 2017) $45 $40 $35 $30 6 $25 $1.5 ° $20 $15 15. $10 $5 $0 FY 03 FY 04 FY 05 FY 06 FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 FY 13 FY 14 FY 15 FY 16 FY 17 ■ Transfer from General Fund ❑ Returned to General Fund 13 Additional Funds Transferred o Vehicle Replacement FY 2016 A millage neutral budget in FY 2016 with an increase of 5% 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 2016 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 ambulance replacement. • Set aside final $3,000,000 to replace EMS Helicopter. • Year three funding to upgrade the county -wide 800MHz radio system platform by allocating $4,400,000 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 2016 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 2016 without a sufficient budgeted beginning fund balance would likely result in a $5.3 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. 28 Packet Page -182- 2/25/2014 11.A. FY 2017 A millage neutral budget in FY 2017 coupled with a 5% 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 2017 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 4 funding to upgrade the county -wide 800MHz radio system platform committing $2,444,000 to continued network site improvements, and microwave connectivity. • Contingency reserves are maintained at policy. • Maintain General Fund road subsidy. • Maintain General Fund support for Transportation Operations. 29 Packet Page -183- General Fund Trend Analysis General Fund Anahsis Amt of Equity (CF) reduced to balance the budge S7095,100 Budeeted Reserves 11:766,700 529S,900 (182.40D) 27,253,700 27,417.900 27,625:800 30 Packet Page -184- 2/25/2014 11.A. Forecast FY 201$ 31,115.200 Total Amt of Fquiry Consumed (24968.60D) Adopted Budget Forecast Forecast Forecast Forecast FT 2014 FY 2014 FY- 2015 FY 2016 FY 2017 ereanes: AdValorem 216,446,600 208:204,400 -3.8% 217,5',3,600 4.5% 228,452,300 5,cr% 239,874,900 Sales Tax 31,000,0D0 31,725,00D 2.3% 32,560;000 2.6% 33,211,2M 2.0`5 33,575,400 2.0`: Revenue Sharing 7,80D,000 7,950,000 1a-. 5,190,000 3.0% 8,353,800 2.0°.s 8,520900 .10% Other Revenues 25,966,00D 30,437,00D 5.1% 29,872100 -1.9% 29,947,400 0.3% 29,981,600 0.2% Less 5% Required by Law (13519 :100) 0 0 0 0 Carryforward 49226 -9DD 56- 053300 13.9% 47-998.700 -14.4%__36232.000 24.5% 30.933.200 i4.6% Total Revenues 319,920,400 334,40020D 4.1% 336,194,400 0.5% 336,196,700 0.0% 343,186,000 2.1% �penditures: Departments 62,301,800 57,880,400 77_2% 55,725,900 .5 %' 59,592300 2.o% 61M2200 2.0% Debt Service 3,657;700 1657,700 C.e% 3,052,600 -15' %_ 3,075,300 -0 °,�� 3,076,100 0.011y Cap -Loans to Impact Fee Fds 8.183,700 5,183,700 0 0°,: L0,- 894,800 33.1%' 8983,900 - 75 °.b a 9,4916D0 5.7% Capital 20,295,900 17923,400 -....1 22,900,000 27.8 %a 23,850,DDD 4.15ar 21,894,000 3.2'm Replacement Vehicles & Equip 0 0 N. A 1,000,000 N A 1,000,000 oxm r I,D60,000 0.0% Transfers 33,897200 33,591600 - 0.9°., 31,719,100 - 2.6'. -ar 33378,900 2.o%r 34.065200 2.2% Constitutional Officers 165,363,700 165,163,700 - . -% 170,640.D00 3.31, 175,083,100 2.6% 181,459,700 3.6°.: Reserves 26217 -400 0 0 0 0 TotalFxpenditures 319920,400 286,401,50D -1C.f% 299,962,400 -..i 305263,500 .S% 312 8070312 8070 00 _._.> Revenues less Expenditures (Carryyforward) 4x",998,700 36.232,000 30,933,200 31.115,200 Amt of Equity (CF) reduced to balance the budge S7095,100 Budeeted Reserves 11:766,700 529S,900 (182.40D) 27,253,700 27,417.900 27,625:800 30 Packet Page -184- 2/25/2014 11.A. Forecast FY 201$ 31,115.200 Total Amt of Fquiry Consumed (24968.60D) 2/25/2014 11.A. Unincorporated Area General Fund (I 11) MSTD General Fund (111) MillaLye History As a point of reference, the following graph plots the historical MSTD General Fund (I 11) millage rate, as well as millage neutral rates for FY 2015 through FY 2017. Millage neutral rather than tax neutral rates are used for planning purposes considering the belief that taxable values will continue to increase modestly in the future. Results of Unincorporated Area General Fund Analysis The County Manager will be recommending a millage neutral budget in FY 2015, 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. 31 Packet Page -185- 2/25/2014 11.A. The following tables depicts the respective millage neutral tax rates for FY 2015, 2016 and 2017 as well as additional ad valorem dollars which could be raised under certain increasing tax base assumptions. 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 2015, the projected rolled back rate within the Unincorporated Area General Fund is $.6940 which would raise $858,800 less than mllage neutral or levying the current rate of $.7161. While the rolled back rate would produce $299,4{0 more than the FY 2014 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 2015 The FY 2015 budget projection is based upon a 4.5% tax base increase. Property taxes and the state shared communications services tax represents on average approximately 80% of the operating revenue within the Unincorporated Area General Fund (111). 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. This would mean a pro -rated reduction of approximately $250,000 in FY 2015 and a full FY reduction of at least $500,000 in 2016 and beyond. This type of revenue reduction without a suitable replacement is troubling considering that Fund (I 11) is a true operating fund with recurring expenses and minimal reserves. Continued mllage neutral budget positions, further reductions in communication tax revenue and an increasing commitment to storm- water, landscape and road network maintenance as well as Community Park improvements will require mid -year budget reductions to maintain beginning cash at required levels absent the introduction of new revenue sources. Any required mid -year cuts will likely affect transportation operations, park and recreation programs and other non public safety services. 32 Packet Page -186- FY 13 Adopted and Additional Ad Valorem Unincorporated Area Recommended Millage Revenue Projections Each General Fund Neutral Tax Rates Year FY 14 0.7161 FY 15 0.7161 $1,158,300 @ 4.5% TV Increase FY 16 0.7161 $1,392,500 @ 5.0% TV Increase FY 17 0.7161 $1,462,200 @ 5.0% 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 2015, the projected rolled back rate within the Unincorporated Area General Fund is $.6940 which would raise $858,800 less than mllage neutral or levying the current rate of $.7161. While the rolled back rate would produce $299,4{0 more than the FY 2014 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 2015 The FY 2015 budget projection is based upon a 4.5% tax base increase. Property taxes and the state shared communications services tax represents on average approximately 80% of the operating revenue within the Unincorporated Area General Fund (111). 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. This would mean a pro -rated reduction of approximately $250,000 in FY 2015 and a full FY reduction of at least $500,000 in 2016 and beyond. This type of revenue reduction without a suitable replacement is troubling considering that Fund (I 11) is a true operating fund with recurring expenses and minimal reserves. Continued mllage neutral budget positions, further reductions in communication tax revenue and an increasing commitment to storm- water, landscape and road network maintenance as well as Community Park improvements will require mid -year budget reductions to maintain beginning cash at required levels absent the introduction of new revenue sources. Any required mid -year cuts will likely affect transportation operations, park and recreation programs and other non public safety services. 32 Packet Page -186- 2/25/2014 11.A. Beginning in FY 2009, the MSTD General Fund (l l l) 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 (00 1) —not MSTD General Fund (111). The following table depicts budgeted dollars transferred to support transportation operations (fund 10 1) from the General Fund and Unincorporated Area General Fund. 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 15, this transfer will once again be solely funded from the General Fund. FY 2016 Assuming that taxable values will increase by 5% in FY 2016, a millage neutral budget coupled with a reduction in beginning fund balance could result in a potential budget planning deficit of $13M 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 and in fact without concentrated budget management, a reduction in fund equity from $4.2 million to $2.4 million is anticipated. This model is certainly not sustainable and budget reduction measures would be instituted. FY 2017 Continuation of millage neutral into FY 2017 under a 5% 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. 33 Packet Page -187- General Fund (001) Unincorporated Area General Fund (I 11) Total FY 08 $18,066,900 $0 $18,066,900 FY 09 $904,700 $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 $13,348,200 $0 $13,348,200 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 15, this transfer will once again be solely funded from the General Fund. FY 2016 Assuming that taxable values will increase by 5% in FY 2016, a millage neutral budget coupled with a reduction in beginning fund balance could result in a potential budget planning deficit of $13M 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 and in fact without concentrated budget management, a reduction in fund equity from $4.2 million to $2.4 million is anticipated. This model is certainly not sustainable and budget reduction measures would be instituted. FY 2017 Continuation of millage neutral into FY 2017 under a 5% 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. 33 Packet Page -187- 2/25/2014 11.A. For planning purposes and assuming continued decline in beginning budgeted fund balance, a deficit of $1.4 million could be encountered. Absent budget management mid -year, the model depicts a total fund equity loss from FY 2014 through FY 2017 totaling $5.4 million. Unincorporated Area MSTD General Fund (111) Trend Analysis 34 Packet Page -188- Adopted Budget Forecast Forecast Forecast Forecast Forecast FY 2014 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 (increase 4.5% TV) (increase 5% TV) (increase s % TV) Revenues Ad Valorem 26,692,300 25,624,600 -4.0% 26,736,564 4.3 %28,073,391 5.0':6 29,477,083 5.0% Communication Services Tax 4,800,000 4,800,000 0.0% 4,600,000 -41%r 4,100,000 - 10.9 %r 4,100,000 0.0% Other Revenue 4,736,900 4,691,000 -1.0% 5,845,336 24.6 %' 5,903,803 10°J,' 5,962,847 1.0% Less 5% Required By Law (1,763,300) 0 - 100. % 0 0.0% 0 0.016 0 0.0% Carryforward 4,969,.200 6,390,300 28.6% 4,232,100 - 33.8 %e 3;693,900 - 12.7 % - 2,435,886 -34.1% 1,037,073 Total Revenues 39,435,100 41,505,900 5.39; 41,414 -0.2% 41,7 0.990 41,975,626 0.5Rn Eroenditures Landscape Maintenance 5,161,900 5,129,200 -0.5% 5,362,400 4.5% 5,630,520 5.0 %e 5,912,046 5.0% Roads 6,102,100 6,100,000 0.0% 6,300,000 3.3 %� 6,500,000 3 -2 %r 6,700,000 3.1% Parks & Rec. 11,252,900 11,035,500 -19% 11,431,200 3.6% '11,861,333 3.8 %' 12,217,173 3.0% Code Enforcement 4,133,700 4,100,500 -0.8% 4,256,500 3.8 %r 4,384,195 3.0 %e 4,515,721 3.0% Other Departmental 7,306,700 7,138,200 r -2.3% 6,397,700 - 10.4 %' 6,589,631 3.01; 6,787,320 5.0% Transfers 3,762,800 3,770,400 029 =. 3,972,300 5.4%r 4,369,530 50.3% 4,806,483 10.0% Reserves 1,715,000 0 - 100.0-- 0 0 0 Total Expenses 39,435,100 37,273,800 -5.596 37,720,100 1 -2% 39,335,204 4.s% 4D,9 8,743 4.1% Fund Balance 4,232,100 3,693,900 2,435,886 1,037,073 Equity Reduction to balance budget 2,158,200 538,200 1,258,014 1,398,813 (5,353,227) Budgeted Reserves 1,347,200 1,347,200 1,347,200 34 Packet Page -188- 2/25/2014 11.A. RESOLUTION NO. 2014- A RESOLUTION PURSUANT TO SECTION 129.03, FLORIDA STATUTES, REQUIRING THE FY 15 TENTATIVE BUDGETS OF THE SHERIFF, THE SUPERVISOR OF ELECTIONS AND THE CLERK TO BE SUBMITTED TO THE BOARD OF COUNTY COMMISSIONERS BY MAY 1, 2014. 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 15 fiscal year to the Board of County Commissioners by May 1, 2014. This Resolution shall be effective on its adoption. This Resolution adopted this 25th day of February, 2014, after motion, second and majority vote. ATTEST: DWIGHT E. BROCK, Clerk form and legality: Jeffrey', A Count A BOARD OF COUNTY COMMISSIONERS COLLIER COUNTY, FLORIDA BY: Tom Henning, Chairman Packet Page -189-