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Agenda 03/12/2019 Item #11A03/12/2019 EXECUTIVE SUMMARY Recommendation to Adopt the FY2020 Budget Policy. OBJECTIVE: That the Board of County Commissioners (Board) adopt policies to be used in developing the Collier County Government budget for FY 2020. CONSIDERATIONS: For staff to begin preparation of the FY 2020 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 2020 budget. The budget policy document is broken down into three distinct elements. The first consists of budget policies proposed in FY 2020 that require policy direction from the Board. The second element consists of routine budget policies that the Board has endorsed for several 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 20, 2019 and if necessary Friday, June 21, 2019 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 11 through June 14, 2019 in Orlando. For informational purposes, adoption of the maximum tentative millage rates is scheduled for Tuesday, July 9, 2019. The Board is required by Florida Statutes to provide the Property Appraiser with the proposed millage rates within 35 days of taxable value certification which is generally on or around August 4, 2019 to prepare the Notice of Proposed Property Taxes. Finally, the Board needs to establish September public hearing dates for the adoption of the FY 2020 budget. The School Board has tentatively scheduled September 10, 2019 for their final budget hearing. Recommended dates for the Collier County budget public hearings are Thursday September 5, 2019 and Thursday September 19, 2019. FISCAL IMPACT: The adopted policies will serve as the framework for the development of budget and ad valorem taxation issues for FY 2020. GROWTH MANAGEMENT IMPACT: There is no Growth Management impact. LEGAL CONSIDERATIONS: The County Attorney has approved this item as to form and legality. Majority support is required for Board approval. - JAK RECOMMENDATION: 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, 2019 deadline for the Supervisor of Elections, the Sheriff’s Office and the Clerk’s budget submittals. PREPARED BY: Mark Isackson, Director of Corporate Financial and Management Services 11.A Packet Pg. 93 03/12/2019 ATTACHMENT(S) 1. Resolution FY 20 Budget Policy and Constitutionals (PDF) 2. FY20 Budget Policy PowerPoint (PDF) 3. Fiscal Year 2020 proposed budget policies (PDF) 11.A Packet Pg. 94 03/12/2019 COLLIER COUNTY Board of County Commissioners Item Number: 11.A Doc ID: 8235 Item Summary: *** This item to be heard at 9:30 *** Recommendation to adopt the FY2020 Budget Policy. (Mark Isackson, Corporate Financial and Management Services Division Director) Meeting Date: 03/12/2019 Prepared by: Title: Operations Coordinator – Office of Management and Budget Name: Valerie Fleming 03/05/2019 11:15 AM Submitted by: Title: Division Director - Corp Fin & Mgmt Svc – Budget and Management Office Name: Mark Isackson 03/05/2019 11:15 AM Approved By: Review: Office of Management and Budget Valerie Fleming Level 3 OMB Gatekeeper Review Completed 03/05/2019 11:15 AM Budget and Management Office Mark Isackson Additional Reviewer Completed 03/05/2019 11:24 AM County Attorney's Office Jeffrey A. Klatzkow Level 3 County Attorney's Office Review Completed 03/05/2019 3:19 PM County Manager's Office Leo E. Ochs Level 4 County Manager Review Completed 03/06/2019 12:05 PM Board of County Commissioners MaryJo Brock Meeting Pending 03/12/2019 9:00 AM 11.A Packet Pg. 95 11.A.a Packet Pg. 96 Attachment: Resolution FY 20 Budget Policy and Constitutionals (8235 : Recommendation to adopt the FY 2020 Budget Policy) Collier County FY 2020 BCC Budget Policy March 12,2019 1 11.A.b Packet Pg. 97 Attachment: FY20 Budget Policy PowerPoint (8235 : Recommendation to adopt the FY 2020 Budget FY 2020 Budget Policy Highlights 1.Ke y Annual Policies for Consideration and Board Direction (Policy Document Pages 3-40) 2.Continuing Policies to be Endorsed by the Board (Policy Document Pages 41-43) 3.Three (3) Ye ar General Fund and Unincorporated Area General Fund Analysis (Policy Document Pages 44-54) 2 11.A.b Packet Pg. 98 Attachment: FY20 Budget Policy PowerPoint (8235 : Recommendation to adopt the FY 2020 Budget Suggested Board Budget Guidance Action After due consideration it is recommended that; The Board approve all recommended Budget Po licies with any changes dealt with on an exception basis. 3 11.A.b Packet Pg. 99 Attachment: FY20 Budget Policy PowerPoint (8235 : Recommendation to adopt the FY 2020 Budget Millage Rate Policy —Ta xable Value! Budget Planning Around a 4% TV Increase —General Fund Millage Rate of $3.5645 per $1,000 of Ta xable Value;Why? ü Property taxes comprise on average 70% of general governmental revenues ü Several FY 20 new funding initiatives including strategic land purchases; enhanced storm-water maintenance and capital;school safety officer mandates;newly activated innovations zones;etc. ü Grow reser ves to ensure sufficient cash at year end and provide a buffer against unexpected expenses or Board policy shifts ü Protect cash position and fund general governmental capital deferred while funding Hurricane Irma recove ry and waiting for reimbursement. ü Ensure that dollars are available to cash flow another natural disaster in 2019-2020 ü Continue inve stment in public safety operations and infrastructure ü Continued inve stment in capital infrastructure ü Operate and maintain new capital facilities constructed 4 11.A.b Packet Pg. 100 Attachment: FY20 Budget Policy PowerPoint (8235 : Recommendation to adopt the FY 2020 Budget Millage Rate Policy Continue Unincorporated Area General Fund (111) millage rate at $0.8069 per $1,000 of Ta xable Value ü Allocate $0.0908 (amount increased by) to maintain constructed median landscaping ü Equivalent transfer from Fund (111) to storm-water maintenance and capital programming for projects benefitting the Unincorporated Area ü Fund new Innovation Zones ü Maintain commitment to community parks;code enforcement; zoning and land use;natural resources;and road maintenance; ü Continue capital commitment to community parks;and the transportation network; Why? Maintain Budget Flexibility;Public Health,Safety and We lfare Program Investment;Continuing Infrastructure Investment;Human Capital Investment and; Reser ves 5 11.A.b Packet Pg. 101 Attachment: FY20 Budget Policy PowerPoint (8235 : Recommendation to adopt the FY 2020 Budget Millage Rate Policy -MSTU’s MSTU’s –Assuming Increasing Taxable Value •With Advisor y Board Oversight –Ta x Neutral (Rolled Back Rate –same revenue as last year) to Millage Neutral •No Advisor y Board –Rolled Back Rat •FY 2018 –12 millage neutral rates; 3 ro lled back rates; 4 Other 6 11.A.b Packet Pg. 102 Attachment: FY20 Budget Policy PowerPoint (8235 : Recommendation to adopt the FY 2020 Budget Unincorporated Area Proper ty Tax Impact (Homestead Proper ty) 7 FY 19 Pa rcel Ta xable Va lue Example FY 20 Ta x Base Esc. P roj. (Cap 3%) FY 20 Parcel Ta xable Va lue Example General Fund Ta x Rate Unincorp. Area GF Ta x Rate FY 19 County GF and Unincorp. GF Tax Example FY 20 County GF and Unincorp. GF Tax Example Difference Between FY19 & FY20 100,000 1.025 102,500 3.5645 0.8069 437.14 448.07 10.93 125,000 1.025 128,100 3.5645 0.8069 546.43 559.98 13.55 175,000 1.025 179,400 3.5645 0.8069 765.00 784.23 19.23 225,000 1.025 230,600 3.5645 0.8069 983.57 1,008.04 24.48 250,000 1.025 256,300 3.5645 0.8069 1,092.85 1,120.39 27.54 275,000 1.025 281,900 3.5645 0.8069 1,202.14 1,232.30 30.16 300,000 1.025 307,500 3.5645 0.8069 1,311.42 1,344.21 32.79 325,000 1.025 333,100 3.5645 0.8069 1,420.71 1,456.11 35.41 500,000 1.025 512,500 3.5645 0.8069 2,185.70 2,240.34 54.64 600,000 1.025 615,000 3.5645 0.8069 2,622.84 2,688.41 65.57 287,500 1.025 181,940 3.5645 0.8069 775.93 795.33 19.41AVG 11.A.b Packet Pg. 103 Attachment: FY20 Budget Policy PowerPoint (8235 : Recommendation to adopt the FY 2020 Budget Unincorporated Area Proper ty Tax Impact (Non Homestead Proper ty) 8 FY 19 Parcel Ta xable Va lue Example FY 20 Ta x Base Esc. P roj. (Cap 10%) FY 20 Parcel Ta xable Va lue Example General Fund Ta x Rate Unincorp. Area GF Ta x Rate FY 19 County GF and Unincorp. GF Tax Example FY 20 County GF and Unincorp. GF Tax Example Difference Between FY19 & FY20 100,000 1.040 104,000 3.5645 0.8069 437.14 454.63 17.49 125,000 1.040 130,000 3.5645 0.8069 546.43 568.28 21.86 175,000 1.040 182,000 3.5645 0.8069 765.00 795.59 30.60 225,000 1.040 234,000 3.5645 0.8069 983.57 1,022.91 39.34 250,000 1.040 260,000 3.5645 0.8069 1,092.85 1,136.56 43.71 275,000 1.040 286,000 3.5645 0.8069 1,202.14 1,250.22 48.09 300,000 1.040 312,000 3.5645 0.8069 1,311.42 1,363.88 52.46 325,000 1.040 338,000 3.5645 0.8069 1,420.71 1,477.53 56.83 500,000 1.040 520,000 3.5645 0.8069 2,185.70 2,273.13 87.43 600,000 1.040 624,000 3.5645 0.8069 2,622.84 2,727.75 104.91 287,500 1.040 299,000 3.5645 0.8069 1256.78 1307.05 50.27AVG 11.A.b Packet Pg. 104 Attachment: FY20 Budget Policy PowerPoint (8235 : Recommendation to adopt the FY 2020 Budget FY 2020 New Funding Initiatives/Requirements General Fund Unincorp. Area General Fund Golden Gate Golf Course (Debt Service)2,000,000 0 Golden Gate Golf Course Development Planning & Maintenance 1,000,000 0 New (2) Innovation Zones 683,500 350,000 School Safety Officer Program 3,000,000 0 Big Corkscrew Reg Pk –Phase 1 Operations & Maintenance 1,000,000 0 Amateur Sports Complex Operations 2,000,000 0 Marginal Increase in Stormwater Maintenance and Capital Funding 2,500,000 2,500,000 Loss of Communication Services Revenue Sharing Dollars 0 500,000 General Grant Matches including Hurricane Hardening 2,000,000 0 Marco Airport Te rminal;Everglades Sea Base;and Immokalee Airport Runway Rehab –Grant Matches 1,000,000 0 Everglades City Utilities 200,000 0 Collier Area Transit Subsidy Addition 1,000,000 0 Information Tech Hardening & Mgt Software Upgrades 2,000,000 0 Compensation Administration 380,600 152,000 Future Long-Te rm Asset Maintenance Reserve 5,000,000 0 To tal 23,764,100 3,502,000 9 11.A.b Packet Pg. 105 Attachment: FY20 Budget Policy PowerPoint (8235 : Recommendation to adopt the FY 2020 Budget FY 2020 New Funding Initiatives/Requirements (continued) General Fund Unincorp. Area General Fund New Funding Initiatives & Requirements Total 23,764,100 3,502,000 FY 20 Millage Neutral Property Tax Increase 12,587,900 1,768,100 Constitutional Officer Po rtion of New Property Tax Dollars 6,294,000 0 New Millage Neutral Property Taxes to Fund New Initiatives 6,293,900 1,768,100 Funding Shortfall at Millage Neutral (less Constitutional portion)(17,470,200)(1,733,900) FY 20 Projected Rolled Back Rate Revenue Loss from Millage Neutral (4,866,400)(415,900) FY 20 Projected Rolled Back Rate Revenue 7,721,500 1,352,200 Constitutional Officer Po rtion of New Property Tax Dollars @ Rolled Back Rate 3,860,800 0 New Millage Neutral Property Taxes to Fund New Initiatives @ Rolled Back Rate 3,860,700 1,352,200 Funding Shortfall at Potential Rolled Back Rate (less Constitutional portion) (19,903,400)(2,149,800) 10 11.A.b Packet Pg. 106 Attachment: FY20 Budget Policy PowerPoint (8235 : Recommendation to adopt the FY 2020 Budget Hurricane Irma Expenses (Recover y Budget) and Budget Management Process Fund Category FEMA Revenue Budgeted Capital Project Deferral Reserves (Reduced) Total Budget Deferrals General Governmental $15,547,600 $14,834,900 $26,990,700 $57,573,200 Enterprise $7,500,000 $41,557,700 $22,300,000 $71,357,700 Constitutional - Sheriff $4,500,000 $4,500,000 Total $23,247,600 $56,392,600 $53,790,700 $133,430,900 11 •17 months since Hurricane Irma landfall and the County has spent $105 million through Januar y 2019 with an additional $34 million budgeted in FY 19 for remaining clean up efforts. •Reimbursement received totals $27.8 million. •Approximately 60.0% of actual expenses is connected with community wide debris removal;7.6% for debris removal from canals;and the remaining 32.4% paid for various structural repairs and damage to the transportation network,parks system,general governmental buildings, landscaping and water and wastewater systems. •Budget management will include monitoring all reimbursement proceeds and directing those proceeds to the appropriate capital accounts where expenses were incurred and/or reser ve s. •Corresponding review of available Hurricane budgeted appropriations and when appropriate , r edirecting budget back to the appropriate capital accounts and/or reser ve s. 11.A.b Packet Pg. 107 Attachment: FY20 Budget Policy PowerPoint (8235 : Recommendation to adopt the FY 2020 Budget FY 2019 Adopted Gross Budget by Fund Type 12 General Fund 25% General Fund - Constitutional Officers 13% Special Revenue Funds 19% General Gov't Debt Ser vice Funds 2% General Gov't Capital Projects Funds 9% Enterprise Funds 24% Internal Service Funds 8% Permanent (Trust) Funds 0% Unincorporated Gen Fd, Conservation Collier, TDC, Planning & Development Services, Road & Bridge, MSTU's, Pelican Bay, Grants Water / Sewer;EMS, Solid Waste, Public Transit Services (This fund type includes Operations, W/S Debt, and Capital) 11.A.b Packet Pg. 108 Attachment: FY20 Budget Policy PowerPoint (8235 : Recommendation to adopt the FY 2020 Budget General Fund Expense Slide by Categor y 13 11.A.b Packet Pg. 109 Attachment: FY20 Budget Policy PowerPoint (8235 : Recommendation to adopt the FY 2020 Budget General Fund FY 2020 Planning Proforma 14 11.A.b Packet Pg. 110 Attachment: FY20 Budget Policy PowerPoint (8235 : Recommendation to adopt the FY 2020 Budget General Fund Cash Planning and Obser vations —Ye ar ending cash balance influences budget planning. —FY 18 and FY 19 budget management designed to increase cash. —Still positioning budget to manage Hurricane Irma expenses and deferred capital projects while waiting for reimbursement reve nue. —First two months cash flow requirements in new FY (October and November) now totals $71 million and growing. —Reser ves growing to protect year ending cash;hedge against unanticipated expenses and/or policy shifts;safety net in the event of natural disasters;signal of financial strength;and important component of budget flexibility strateg y. 15 11.A.b Packet Pg. 111 Attachment: FY20 Budget Policy PowerPoint (8235 : Recommendation to adopt the FY 2020 Budget Agency Allocations —Premise is that all agencies will work together and cooperatively should the need arise for budget reductions due to taxable values below the planning threshold;re ductions in proper ty tax reve nue;any state tax reform legislation; re ductions in state shared reve nue;or unfunded mandates. —Conve rsely –increases in reve nue above the planning threshold will also be allocated based upon Board direction. 16 11.A.b Packet Pg. 112 Attachment: FY20 Budget Policy PowerPoint (8235 : Recommendation to adopt the FY 2020 Budget Reve nu e Centric —Enterprise Funds;Internal Ser vice Funds;Special Reve nue Funds and other Operational Funds which are suppor ted by fees with no reliance upon ad valorem reve nue will be allowed to establish budgets and conduct operations around reve nue centric guidelines dictated by cash on hand and anticipated receipts. —Within the General Fund and Unincorporated Area General Fund,net cost to these funds offset by fee reve nue will be monitored and negative fee variances will be addressed through expense cuts and not subsidized by ad valorem reve nue . 17 11.A.b Packet Pg. 113 Attachment: FY20 Budget Policy PowerPoint (8235 : Recommendation to adopt the FY 2020 Budget Agency Positions —Expanded position requests limited to Board approved capital facility openings and/or Board directed ser vice leve l adjustments. —All budget to budget expanded requests will be rev iewe d by the County Manager and final re commendations presented as par t of the FY 2020 budget workshop in June . 18 11.A.b Packet Pg. 114 Attachment: FY20 Budget Policy PowerPoint (8235 : Recommendation to adopt the FY 2020 Budget Compensation —Appropriate a general wage adjustment (GWA) of $1,200 to all base salaries which represents an average of 2.2% off the average agency salar y of $55,500 as part of FY 2020 budget planning with the structure of such adjustment developed by the County Manager and presented at the June budget workshop. —FY 2020 GWA for the CM Agency valued at $3.0 million —Ta rgeted pay plan maintenance appropriation for FY 2020 equivalent to .5% or $565,000 is re commended to strengthen certain lower classification pay grades where a market imbalance exists. —Cost of Living December ove r December 2018 is 2.9% 19 11.A.b Packet Pg. 115 Attachment: FY20 Budget Policy PowerPoint (8235 : Recommendation to adopt the FY 2020 Budget Health Care —Maintain for the County Manager Agency an average cost distribution between the Board and Employe es at 80% (Employe r) 20% Employe e. —Fo r FY 2019,the County experienced no (0%) health insurance rate increase . D ue to continued exceptional plan performance and plan reser ve s which exceed statutor y minimums,no (0%) health insurance rate increase is proposed for FY 2020. 20 11.A.b Packet Pg. 116 Attachment: FY20 Budget Policy PowerPoint (8235 : Recommendation to adopt the FY 2020 Budget Retirement Rates —Adherence to OMB rates published within the OMB budget instructions. —Rates Established based upon State Guidance . 21 11.A.b Packet Pg. 117 Attachment: FY20 Budget Policy PowerPoint (8235 : Recommendation to adopt the FY 2020 Budget Storm-Wa ter Funding —FY 2019 general governmental storm-water operating and capital funding totaled $8.2 million. —FY 2020 planning model increases funding by $1,000,000 to $9.2 million. —With the Board decision to not pursue a storm-water utility in FY 2020, County Manager committed to increasing general governmental maintenance funding above the planning model consistent with industr y standards with the final amount depending upon receipt of actual taxable value numbers;overall budget submissions.;and Board Direction. —Eligible replacement and new capital projects will be evaluated with the potential for special obligation revenue bond financing up to $30 million in projects in lieu of the current cash and carr y methodology. —Legally available non ad-valorem revenue will be used to fund any debt ser vice which is estimated at approximately $2.7 million annually. 22 11.A.b Packet Pg. 118 Attachment: FY20 Budget Policy PowerPoint (8235 : Recommendation to adopt the FY 2020 Budget Uses of Gas Ta xe s —Continue Board policy where pledged gas taxes pay debt service on the gas tax revenue bonds which have final maturities in June 2023 and 2025 respectively;remaining gas tax funds programmed to support construction and transportation network improvements. —Tr ansfer dollars totaling $9.6 million planned in FY 2020 from the General Fund to Tr ansportation Capital Fund (310) will provide funding support for maintenance of the roadway network and other transportation related expenses. —Tr ansfer dollars from the Unincorporated Area GF planned at $3.5 million in FY 20 to Tr ansportation Capital Fund (310) augmented by a $2.6 million direct budget appropriation in this fund for road maintenance. —Gas Taxes grew modestly up 4.1% to $22.7M in FY 18.Forecast FY 19 and planning FY 20 revenue will be in the $23M range. —$1M in gas taxes freed up annually for transportation network improvements beginning in FY 2015 due to restructuring of the gas tax debt. 23 11.A.b Packet Pg. 119 Attachment: FY20 Budget Policy PowerPoint (8235 : Recommendation to adopt the FY 2020 Budget General Fund General Capital/Debt Ser vice and Debt Management —Tr ansfer an equivalent planning sum of up to .3333 mils for county-wide capital purposes; paying non-growth related reve nue bond debt; provide impact fee trust fund loans to cover growth related debt obligations and to fund much needed general governmental priority re placement capital projects within the parks system and general governmental facilities. 24 11.A.b Packet Pg. 120 Attachment: FY20 Budget Policy PowerPoint (8235 : Recommendation to adopt the FY 2020 Budget General Gove rnmental,Enterprise Fund and Other Reser ve Po licies —GF –floor ; 8 % of operating expenses or $32.9 million –Ceiling;16% of operating expenses or $65.9 million;current planning reserve for FY 2020 is $50.1 million an increase of $5.6 million. —Other Gen.Govt.Funds –Generally 2.5% of operating expenses with a ceiling of no more than one months expenses.Ceiling for the Unincorporated Area GF is $4.7 million;current planning reserve for FY 2020 is $2.46 million. —Other general governmental funds that receive transfer revenue from the GF will have reser ves sized to cover the first month of operations or until the first GF transfer is scheduled. —Reser ve policy for Pelican Bay Ser vices Division (PBSD) operating fund (109) set between 15- 30 percent of operating expenses given the districts coastal nature,level of infrastructure investment,natural assets and commitment to maintenance and resource protection. —CCWSD user fee reserves established minimally between 5% and 15% of revenues with working capital resources set between 45 days and 90 days.Within the family of CCWSD family of user fee operating and capital funds reser ves will range between $17.4 and $34.7 million while working capital resources will total roughly $26.2 million or 68 days of reserves. —Over a three to five year period,establish a solid waste restricted reser ve of ten (10) percent of the FY 2019 budgeted charges or $4.4 million. —Ta rgeted reserves within the GMD building permit fund (113) and planning fund (131) set at 18 months and 24 months of total budget appropriations respectively. 25 11.A.b Packet Pg. 121 Attachment: FY20 Budget Policy PowerPoint (8235 : Recommendation to adopt the FY 2020 Budget Financing New and Replacement Capital Infrastructure —Finance Committee is engaged and continually reviewing all appropriate capital financing options. —FY 20 budget planning does not program issuance of debt as part of the adopted budget. —Any new debt issue recommendation will include a consolidated financing plan based upon the number of current and future capital projects and initiatives to be financed,the timing of project implementation,expected payout schedule, t he appropriate type of debt and existing market conditions. —Issuance of debt in the areas financed would supplement the cash and carry approach and funding would be redirected from the respective program areas to fund debt ser vice. —Cost to finance always a concern,but County’s credit rating will reduce the interest expense. —Long term debt means that future users of capital facilities and infrastructure and not just current users will participate in paying for facilities. 26 11.A.b Packet Pg. 122 Attachment: FY20 Budget Policy PowerPoint (8235 : Recommendation to adopt the FY 2020 Budget School Resource Officer Funding —Program functional in some County school for decades. —County Commission through the Sheriff's Agency has funded a program providing coverage in many schools for years. —SB 7026 passed in 2018 —Legal responsibility to comply with SB 7026,including funding is the responsibility of the Collier County School District —Current program costs are approximately $7.0 million annually and since enactment of the Statute, t he Sheriff has a presence in ever y County public school facility and charter school in compliance with the current State law. —Additional recurring funding of $3,000,000 expected over next four (4) years. —Continue discussions with all stakeholders at the conclusion of the legislative session with the goal of developing a recurring funding formula that splits equally the cost of the program between the Collier County School District and Collier County for Board consideration. 27 11.A.b Packet Pg. 123 Attachment: FY20 Budget Policy PowerPoint (8235 : Recommendation to adopt the FY 2020 Budget Schedule —Resolution requiring FY 2020 budget submittals by the Sheriff;Super visor of Elections and Clerk of Courts on May 1st. —FY 2020 June Budget Wo rkshop Dates –Thursday June 20th and if necessar y Friday June 21th —Adopt Tentative Maximum FY 2020 Millage Rates on Tu esday Ju ly 9,2019 —Board Receives Tentative FY 2020 Budget Document on Friday July 12,2019 —First FY 2020 Public Budget Hearing on Thursday September 5th with the Final FY 2020 Budget Hearing on Thursday September 19th 28 11.A.b Packet Pg. 124 Attachment: FY20 Budget Policy PowerPoint (8235 : Recommendation to adopt the FY 2020 Budget Policy Document Page 1 Fiscal Year 2020 Proposed Budget Policies Collier County Board of County Commissioners March 12, 2019 11.A.c Packet Pg. 125 Attachment: Fiscal Year 2020 proposed budget policies (8235 : Recommendation to adopt the FY 2020 Budget Policy) Policy Document Page 2 Table of Contents Section Pages 1. Overview and General Budget Planning 3 to 5 2. General FY 2020 Budget Planning – Significant Influences 5 to 8 3. New General Governmental Initiatives 8 to 9 4. Taxable Value and Tax Rate Discussion 9 to 11 5. Summary of FY 2020 Budget Strategies 12 to 15 6. Local Option Infrastructure Sales Tax and FY 2020 Planning 16 to 17 7. Future General Governmental Capital Improvements 17 to 20 8. Gas Taxes; Use of Gas Taxes and Gas Tax Pledged Debt 20 to 21 9. Safe School Officer Program 21 10. General State Legislative Update 21 to 22 11. General Fund allocation by Agency/Department 22 to 23 12. Millage Rate Targets for MSTU’s 23 to 24 13. Revenue Centric Budgets 24 14. Expanded Positions and Programs 24 15. Compensation Administration 25 16. Health Insurance 26 to 28 17. Retirement Rates and Accrued Salary Savings 28 18. Financing New and Replacement Capital Infrastructure 28 to 30 19. Storm-Water Management Funding 30 to 31 20. General Fund Capital/Debt Service Contribution and Debt Mgmt. 31 to 32 21. General Governmental; Enterprise Fund and Other Reserve Policies 32 to 39 22. CPI Based Enterprise Fee Adjustments 39 23. Suggested Scheduling Timeline 39 24. Comparative Budget Data 40 25. Regular Routine Budget Policies for FY 2020 41 to 43 26. Three Year Budget Projections – General Fund 44 to 50 27. Three Year Budget Projections – Unincorporated Area GF 51 to 54 11.A.c Packet Pg. 126 Attachment: Fiscal Year 2020 proposed budget policies (8235 : Recommendation to adopt the FY 2020 Budget Policy) Policy Document Page 3 Overview and General Budget Planning 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”. Annual policy adopted are highlighted in gray on policy document pages 21 thru 25; 28 & 30 thru 32; 34 thru 39. 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 and budget planning evolves for FY 2020 and beyond. The regional economic environment remains relatively stable among key financial, housing, employment, visitation and demographic indicators. Taxable value County wide has increased for the seventh (7th) consecutive year and the tax base is at an all-time high. The County’s credit rating remains “investment quality” among all three major rating agencies under a stable outlook; general governmental and enterprise fund cash balances are strong, despite funding a $140 million-dollar Hurricane clean-up; reserves meet policy standards for a coastal community; and the County is positioned when necessary to access the credit market for strategic capital projects. County median home prices have consistently reached the low to mid $400K value for most of calendar 2018 and, the November 2018 value totaled $427K. Single family home sales have dropped consistently from a high of 530 units in May 2018 to 343 in November 2018. November 2018 destination visitation is up 4.7% year over year, and the January to November 2018 visitation is up 2.2% over the same 2017 period. Direct visitor spending also increased for the January to November 2018 period by 3.9%. Visitation remains strong and the destination marketing program is expected to keep Collier County a prime location for tourists. While trending down from a 2018 high of 368 permits issued in July 2018, new construction permitting for November 2018 is consistent with typical fall period numbers at 242 permits issued albeit below the 12-month average of 283 issued permits. The County’s unemployment rate remained at 3.0% in November 2018 which continues below the state and national averages. While the regional economy continues to remain stable, senior leadership regularly evaluates all economic indicators and the organization is always positioned financially to respond quickly if necessary to softening economic conditions. Hurricane Irma Budgetary and Financial Impact It’s been 17 months since landfall of Hurricane Irma and the County through the end of January 2019 has spent $105.5 million on restoration of the community in the aftermath with an additional $32.3 million appropriated in FY 2019 for remaining clean-up activities. Reimbursement revenue from insurance proceeds and FEMA received through 1/31/19 total $27.8 million. The timing of further reimbursements will be monitored in FY 2019 and budget management decisions within the General Fund and Unincorporated Area General Fund 11.A.c Packet Pg. 127 Attachment: Fiscal Year 2020 proposed budget policies (8235 : Recommendation to adopt the FY 2020 Budget Policy) Policy Document Page 4 including paring back $13 million in General Fund cash support appropriated for public utilities, parks and facilities capital will be considered. The challenging part with any major tropical event is the level of coordination and preparedness required and engaging the community from a readiness standpoint. Financially, the County is always prepared to cash flow and expend appropriated dollars to restore the community from any natural disaster. As a reminder, to cash flow a natural disaster, three specific budget techniques are utilized. First, in funds where sufficient cash exists, FEMA revenue is budgeted, and corresponding expense budget appropriated anticipating some level of reimbursement in the coming months/years. Note that there is no cash behind budgeting FEMA revenue. Existing and routine incoming fund cash is relied upon until the receipt of FEMA revenue. Second, existing capital project budgets are reviewed and re-allocated were appropriate. Third, general governmental and enterprise reserves are drawn down in appropriate and prudent amounts. The following summary table updates the extent of budget deferrals necessary to fund Hurricane Irma recovery as of January 22, 2019. Fund Category FEMA Revenue Budgeted Capital Project Deferral Reserves (Reduced) Total Budget General Governmental $15,747,600 $14,834,900 $26,990,700 $57,573,200 Enterprise $7,500,000 $41,557,700 $22,300,000 $71,357,700 Constitutional - Sheriff $4,500,000 $4,500,000 Total $23,247,600 $56,392,600 $53,790,700 $133,430,900* *Does not include $4.3 million in payroll expense Of the $105.5 million spent through the January 22, 2019, approximately 60.0% is associated with community wide debris removal; 7.6% is appropriated for debris removal from canals; and the remaining 32.4% was spent for various structural repairs and damage to the transportation network, parks system, general governmental buildings, landscaping and water and wastewater systems. The County has been awaiting a partial reimbursement exceeding $45 million from FEMA through the State of Florida for months to pay for debris clean-up which underscores the importance of local governments ability to cash flow natural disasters. If reimbursement revenue is delayed further – well into the last quarter of FY 2019 and FY 2020, typical operational and capital transfers out of the General Fund and Unincorporated Area General Fund may be cut/delayed protecting cash balances and existing capital dollars deferred will not be restored until reimbursement revenue is received. Likewise, delays in receipt of FEMA reimbursements which are funneled through the State will mean that certain enterprise capital projects will continue to be postponed. General Budget Planning The FY 2020 budget plan will allocate funding for recurring operational expenses albeit limited and continue funding for replacement capital infrastructure and maintenance as well as new capital initiatives not funded through the local option infrastructure sales tax. Capital and operational programming continue to compete for limited resources which always is a pressure point as appropriation decisions are made for the General Fund (001) and Unincorporated Area General Fund (111). That said, the budget document must continue to remain flexible - a key component 11.A.c Packet Pg. 128 Attachment: Fiscal Year 2020 proposed budget policies (8235 : Recommendation to adopt the FY 2020 Budget Policy) Policy Document Page 5 of the budget management process and widely recognized by those agencies who are consumers of the County’s budget data and offer financial ratings of our agency. The budget as a flexible financial planning document will be subject to many changes in FY 2020 with several financial variables yet to be determined, including; • Tax policy decisions by the Board will determine the level of budget flexibility which may be achieved with passage of the Local Option Infrastructure Sales Tax. • With no storm-water utility and related fee for FY 2020, the General Fund and Unincorporated Area General Fund will be the default funding source. Depending upon the Board’s desired storm-water service level, actual taxable value and overall budget submissions capital transfers in other general governmental areas like transportation, parks, facilities and operating transfers may be reduced. • Board policy guidance on issues like workforce housing and mental health. • Timing of FEMA and other Hurricane Irma reimbursement revenue. • Level of General Fund transfer support to the constitutional officers and specifically the Sheriff. 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 and will continue to be devoted to public safety, public health, debt management and replacement of priority mission critical infrastructure and equipment. Property (ad valorem) taxes will once again dominate the County’s budgetary revenue mix which for FY 2019 comprise about 44% of total net recurring annual operating revenue and 69% of General Fund recurring revenue sources (less the revenue reserve). Eighty (80%) of General Fund revenue is comprised of property taxes, sales tax and state shared revenue. Ad Valorem 44%Gas/Sales Tax 7% Permits/ Assessments/ Fines 8% Intergov'tal Revenues 2% Service Charges 31% Impact Fees 5% Bond Proceeds/ Interest 3% Sources of Current County Government Operating Revenues all Funds (FY 2019) Ad Valorem 69% Sales Tax 9% State Revenue Sharing 2% Intergov'tal Revenues 1% Fines, Permits, Charges 3% Inter est & Misc. 0% Carryforward 9% Interfund Transfers and Payments 5% Transfers from Consitutional Officers 2% FY 2019 General Fund Revenue Sources 11.A.c Packet Pg. 129 Attachment: Fiscal Year 2020 proposed budget policies (8235 : Recommendation to adopt the FY 2020 Budget Policy) Policy Document Page 6 Thus, significant attention is paid to ad valorem taxes and those factors that can influence millage rate and tax levy decisions. The decision to develop the FY 2020 budget around the rolled back rate, millage neutral rate or other rate is a key decision made by the Board and this decision will determine the level and extent of operational, capital and constitutional funding. Under millage neutral policy guidance applied to the tax base planning scenario, the FY 2020 General Fund levy will increase $12,587,900 over FY 2019. Under a rolled back tax rate policy, the General Fund Levy will increase $7,721,500 which is a $4,866 400 levy loss from millage neutral. The following points are noteworthy in considering general governmental tax policy for FY 2020. • The County’s current General Fund millage rate of $3.5645 has been levied for the past ten (10) years or since FY 2010. During the recession when taxable value dropped some $24 billion, this millage rate levy adopted by the BCC pursuant to policy r equired General Fund budget reductions totaling $123 million between FY 2009 and FY 2013. Conversely, keeping the millage rate neutral since FY 2014 when taxable value began increasing has allowed the County to raise $98.3 million in additional dollars above the rolled back rate to fund general governmental capital and operating programs cut during the recession or to maintain levels of service deemed important by the BCC as part of annual budget guidance. • Levying the rolled back rate in FY 2020 based upon a planned 4% increase in the tax base would result in a $7.7 million dollar increase over the FY 2019 levy, but a reduction of $4.9 million if millage neutral was applied to the planned tax base increase. The concern is not year one of levying the rolled back rate, it is the cumulative effect should the Board decide that rolled back rate is the new normal; or the rolled back rate is abandoned when the tax base decreases, and millage neutral then becomes the tax policy because the rolled back rate increases as the tax base declines. • Property taxes comprise 69% of total General Fund revenue. • If the Board had voted to levy the rolled back rate in FY 2019, $9 million in General Fund capital and or operating program cuts would have been necessary. This level o f budget adjustment would not be accomplished by reducing reserves since reserves are an integral component of preserving General Fund cash at year end; provide a signal of financial strength to the rating agencies; and serve as financial leverage for unfo reseen natural disasters and/or shifts in Board policy mid-year. Cuts would have likely come from reduced capital transfers funding transportation system improvements, storm-water and parks; elimination of all expanded requests funded by the General Fund required to service new facility improvements and current service County Manager Agency operating reductions. General Fund 85% MSTU's 2% Pollution Control 1% Unincorporated Area General Fund 12% Property Tax by Major Funds 11.A.c Packet Pg. 130 Attachment: Fiscal Year 2020 proposed budget policies (8235 : Recommendation to adopt the FY 2020 Budget Policy) Policy Document Page 7 • Programmed within the General Fund for FY 2019 is roughly $18 million dollars supporting various general governmental capital initiatives in the areas of transportation, parks and recreation, storm-water, airports, museums and of course all constitutional capital requests. • Constitutional operating transfers out of the General Fund (less paid by Board requirements) constitute 50.7% of all General Fund appropriations. While the Board can control these appropriations, based upon history it is not likely that cuts would be made to constitutional officer operations, especially the Sheriff. School safety officer programming will impact the sheriff’s budget significantly adding about $3.0 million per year over the next four (4) years unless some level of offset is offered by the State and/or School District. • Of the $435.9 million-dollar FY 2019 General Fund Budget only about 27 percent or $119.3 million is considered somewhat discretionary. The remaining appropriations are classified as Health, Safety and Welfare; Debt Service and or Mandates where there is very limited to no discretion over appropriations. Property tax revenue comprises 72% of Unincorporated Area General Fund recurring operating revenue sources and when including the Communication Services revenue sharing from the State the revenue mix jumps to 79%. Continued reduction in state shared communication services tax revenue or worse will significantly impact general governmental services appropriated in this fund. 11.A.c Packet Pg. 131 Attachment: Fiscal Year 2020 proposed budget policies (8235 : Recommendation to adopt the FY 2020 Budget Policy) Policy Document Page 8 Like the General Fund, a significant amount of flexibility exists within the Unincorporated Area General Fund if a response to any state shared revenue reduction is required. This response would have an impact to general governmental operating programs and capital transfers. New General Governmental Initiatives: New general governmental capital improvements/initiatives over the next few years include: potential acquisition of the Golden Gate Golf Course or other strategic opportunity land purchases; hardening County facilities in preparation for natural disasters and the related grant match; upgrades to IT infrastructure and the County’s various management, financial and accounting software like SAP; constructing and operating amateur sports complex facilities; Big Corkscrew Regional Park capital and operations; Sheriff’s capital projects including a new evidence facility; school safety officer recurring funding; Vanderbilt Beach Road extension; bridge rehabilitation and replacement; anticipated Board enhancements in storm-water maintenance service levels as well as capital infrastructure upgrades; increasing Collier Area Transit subsidy; Airport system capital grant matches for runway rehabilitation, terminals, etc.; . Whether paid by cash, financed or funded through the Local Option Infrastructure Sales Tax, operating and maintaining this enhanced level of infrastructure improvement will require substantial investment of scarce and limited general governmental operating revenue which is predominately property taxes. Recognizing the County’s growing future general governmental asset maintenance responsibility, a new fund will be created for FY 2020 fencing off dollars in incremental amounts up to $5 million annually dedicated to protecting the County’s future hard and soft infrastructure investment. Regular annual deposits to this fund – like the County’s vehicle replacement funds- emphasizes the need to isolate dollars for this future asset maintenance obligation knowing the many competing programs, services and initiatives must receive dollars from a limited resource pool. 11.A.c Packet Pg. 132 Attachment: Fiscal Year 2020 proposed budget policies (8235 : Recommendation to adopt the FY 2020 Budget Policy) Policy Document Page 9 Each year as new general governmental capital improvements are brought on line pursuant to Board policy, the level of operations required to support these facilities grows. Not lost are the regular contributions to CRA’s and innovation zones which grow annually as the tax base increases, assuming no change in tax rates, and these dollars while supporting development and incentives in targeted areas represents reduced dollars to support general governmental services. General Fund and Unincorporated Area General Fund contributions to CRA’s for FY 2019 total $5.3 million and 473K respectively and these numbers will grow in FY 2020 with two more innovation zones activated. Other factors that will be significantly impacted by general governmental tax policy include; 1. Extent of capital, debt and operational transfer dollars expended by the General Fund and Unincorporated Area General Fund. In the numbers estimate above, a $4.9 million General Fund revenue loss between millage neutral and rolled back will impact mostly capital transfers and recurring operations. Levying the rolled back rate in the Unincorporated Area General Fund will result in a loss of $415,900 to capital transfer appropriations. 2. Level of service standards set by the Board for agencies and departments which are funded within the General Fund and Unincorporated Area General Fund. 3. Proper level of resources to cover the organization’s current and future asset maintenance responsibility. Competing priorities between operating and capital expenses within a revenue structure heavily reliant upon property taxes. 4. General Fund and/or Unincorporated Area General Fund support for new or re-prioritized operating and capital initiatives like general governmental facilities maintenance; transportation system improvements, storm-water, median landscaping, asset management, equipment replacement, economic development; tax increment financing initiatives; EMS capital; Constitutional capital; workforce housing; amateur sports complex management and maintenance; natural disaster hardening including wildfire mitigation; social service programming; IT hardening and management software upgrades; and/or other unforeseen operational or capital policy directives. 5. Impacts of potential unfunded mandates including continued state legislative attacks to limit a counties home rule ability to raise property tax revenue and repeated attempts to reduce existing shared revenue sources like the Communication Services Tax (CST); school safety officer mandates without recurring state funding; further reductions in state health care and social service funding as well as impacts from any reduction in federal payment in lieu of taxes (PILT) funding. 6. Level of General Fund Ad Valorem operating support extended to constitutional officers and specifically the Sheriff. What will not be impacted by the Board’s tax policy decisions are: 1. Maintaining sufficient beginning year General Fund and Unincorporated Area General Fund cash balance; 2. Policy driven growth in general governmental reserves; 3. Payment on the County’s debt service; and 4. Maintaining the County’s excellent investment quality credit rating. 11.A.c Packet Pg. 133 Attachment: Fiscal Year 2020 proposed budget policies (8235 : Recommendation to adopt the FY 2020 Budget Policy) Policy Document Page 10 Discussion of Taxable Values, Millage Targets for the General Fund (County-Wide) and Unincorporated Area General Fund and Related FY 2019 Budget and Financial Strategies While the county-wide tax base has increased for seven (7) consecutive years, maintaining a millage neutral policy position remains the recommended objective. The following table provides a history of Countywide and Unincorporated Area taxable values over the past twelve (12) years (tax year 2007-2018) as well as the budget planning projection for tax year 2019 (FY 2020). 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) $60,637,773,315 3.7% $37,207,018,234 3.3% 2014 (FY 2015) $64,595,296,747 6.5% $39,634,174,211 6.5% 2015 (FY 2016) $70,086,389,131 8.5% $43,075,586,559 8.7% 2016 (FY 2017) $77,115,163,725 10.0% $47,455,161,371 10.2% 2017 (FY 2018) $83,597,615,791 8.4% $51,754,136,138 9.1% 2018 (FY 2019) $88,286,266,672 5.6% $54,781,508,980 5.8% 2019 (FY 2020) Planning $91,817,717,339 4.0% $56,972,769,339 4.0% The December 2018 State Ad Valorem Estimating Conference Report was released recently for the 2019 tax year (FY 2020). The report projects that Collier County certified taxable values on July 1, 2019 will increase 6.1%. This number is aggressive. Staff hav e been adept over the years at sizing the budget around a conservative yet functional taxable value planning number considering that most budget planning is over before the certified taxable value number is received from the Property Appraiser. The taxable value estimate must allow for operational and capital programming needs as well as reserve growth. Budget planning around a 4.0% taxable value increase is realistic. Any positive difference in taxable value above the planning ceiling assuming a resulting increase in ad valorem revenue at millage neutral can be used to strengthen the Board’s General Fund and Unincorporated Area General Fund reserves and/or be applied to recurring and new programs, services and initiatives as directed by the Board. Property tax revenue comprises 69% of the General Fund (001) and 31% of the total net county recurring revenue budget, including fund balances. From new money sources, which excludes fund balance, property taxes comprise 44% of available total net operating revenue sources. According to the Tax Foundation web site local government property tax collections as a percentage of all general governmental collections for municipalities within the Southeast region total 66.4%. 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. 11.A.c Packet Pg. 134 Attachment: Fiscal Year 2020 proposed budget policies (8235 : Recommendation to adopt the FY 2020 Budget Policy) Policy Document Page 11 Tax or “millage” rates for the past fourteen (14) years are shown in table form below. Millage Area FY 06 FY 07 FY 08 FY 09 FY10-FY16 FY17-FY19 FY 20 Planning General Fund $3.8772 $3.5790 $3.1469 $3.1469 $3.5645 $3.5645 $3.5645 Unincorporated Area General Fund $.8069 $.8069 $.6912 $.6912 $.7161 $.8069 $.8069 The following table depicts taxable values and levies at various tax base increase scenarios under a millage neutral rate and one scenario which depicts the roll back rate at the policy planning scenario. The County Manager is proposing to maintain the General Fund tax rate at millage neutral or $3.5645 per $1,000 of taxable value. Likewise, the Unincorporated Area General Fund tax rate will be recommended at $.8069 with the incremental rate above current millage neutral or $.0908 earmarked to fund the unincorporated area landscape median program which will temporarily shift to solely a maintenance program for cost reasons after three years of capital construction. The respective General Fund and Unincorporated Area GF dollar values at the various scenarios are shown below. Current Taxable Value Pre VAB FY 2020 @ 4% applying projected FY 2020 RB Rate FY 2020 @ 3% FY 2020 @ 4% Policy Planning Numbers FY 2020 @ 5% FY 2020 @ 6% General Fund 88,286,266,672 91,817,717,339 90,934,854,672 91,817,717,339 92,700,580,006 93,583,442,672 Unincorporated Area GF 54,781,508,980 56,972,769,339 56,424,954,249 56,972,769,339 57,520,584,429 58,068,399,519 Current Levy General Fund 314,696,398 322,417,914 324,137,289 327,284,253 330,431,217 333,578,181 Unincorporated Area GF (Operating) 39,229,039 40,382,299 40,405,910 40,798,200 41,190,491 41,582,781 Unincorporated Area GF (Landscape Cap) 4,974,161 5,173,127 5,123,386 5,173,127 5,222,869 5,272,611 Unincorporated Area GF at $.8069 44,203,200 45,555,426 45,529,296 45,971,328 46,413,360 46,855,392 4% - Variance applying the projected FY 2020 RB Rate from Current Levy 3% - Variance from Current Levy 4% - Variance from Current Levy 5% - Variance from Current Levy 6% - Variance from Current Levy General Fund (millage neutral) 7,721,517 9,440,892 12,587,856 15,734,820 18,881,784 Unincorporated Area GF (Operating) 1,153,260 1,176,871 1,569,162 1,961,452 2,353,742 Unincorporated Area Landscape Median Program at $.0908 millage neutral 198,966 149,225 198,966 248,708 298,450 Total Unincorporated Area GF 1,352,226 1,326,096 1,768,128 2,210,160 2,652,192 If taxable values fall below the four (4.0) 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 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. 11.A.c Packet Pg. 135 Attachment: Fiscal Year 2020 proposed budget policies (8235 : Recommendation to adopt the FY 2020 Budget Policy) Policy Document Page 12 Summary of Significant FY 2020 Proposed Budget Strategies to Achieve a Structurally Balanced Budget The following table highlights certain FY 2020 budget strategies which will be detailed within this document and which the Board will consider as part of Adopted Budget Policies. 1 The County Manager is proposing to submit one FY 2020 millage neutral General Fund (001) operating budget along with service level and related budgetary and millage implications. Designate approximately sixty-three (63) percent of the planned property tax revenue increase after constitutional transfers and satisfying reserve requirements to capital initiatives with the remaining thirty-seven (37) percent after constitutional transfers and satisfying reserve requirements to cover operations and recurring costs due to any expanded services. Planning for recurring operating cost increases of 1.5% is below the identified CPI increase of 2.9% and will result in department reductions within strategic identified areas to meet budget guidance. 2 Proposed guidance for the Unincorporated Area General Fund (111) includes maintaining the millage rate at $.8069 and earmarking $.0908 or the marginal increase above the current operating millage rate to continue funding the median landscape program which will temporarily shift to solely a maintenance program for cost reasons after three years of constructing capital medians deferred during the recession. The operating millage rate of $.7161 will be used to fund reserves at policy levels and fund recurring and/or any expanded operations as well as capital transfers. 3 County Manager agency expanded services will be limited to staffing new Board approved capital facilities or Board directed level of service adjustments. County Manager Agency personal services for FY 19 grew by $9.3 million to $180.6 million or 49.8% of total Collier Co. government personal services. Constitutional budgeted personal services for FY 19 grew by 12.5 million to $181.9 million. 4 Pursue a strategy in FY 2020 which continues to place a premium on current infrastructure replacement/maintenance on a pay as you go basis and integrate capital financing where prudent and economically appropriate pursuant to the Debt Management Policy. No debt will be programmed as part of the adopted budget. Instead, any financing will be part of the amended budget based upon policy directives. 5 Recognizing the County’s mounting future general governmental asset maintenance responsibility, a new capital reserve fund will be created for FY 2020 fencing off dollars in incremental amounts up to $5 million annually dedicated to protecting the County’s future hard and soft infrastructure investment. Regular annual deposits to this fund – like the County’s vehicle replacement funds- emphasizes the need to isolate dollars for this future asset maintenance obligation knowing the many competing programs, services and initiatives must receive dollars from a limited resource pool. 6 Continue budget parameters for enterprise operations which are tied to working capital guidelines established by GFOA; capital obligations from the capital improvement element (CIE); any rate or fee studies stipulations; priority agency wide initiatives; and statutory or ordinance spending limitations. A critical review of reserve levels versus capital appropriations will be discussed during budget deliberations especially considering the recent hurricane. 11.A.c Packet Pg. 136 Attachment: Fiscal Year 2020 proposed budget policies (8235 : Recommendation to adopt the FY 2020 Budget Policy) Policy Document Page 13 7 Continue General Fund (001) county-wide debt and capital transfers at an amount equal to or less than a 1/3rd mil equivalent to cover regular special obligation revenue bond debt service; provide loans to the impact fee trust funds to cover the debt service gap due to insufficient impact fee collections; fund park’s capital; support airport capital grant matches; fund constitutional officer capital needs; and to help pay for critically needed general governmental facility repairs. 8 The FY 20 budget planning model under a millage neutral tax rate for FY 2020 allocates $9.2 million dollars from the General Fund and Unincorporated Area General Fund toward existing storm-water infrastructure maintenance and operations under the assumption that replacement and new storm-water capital projects would be financed as part of a larger general governmental debt issue. This represents a $1.0 million increase over FY 2019 for maintenance and operations. Increases for maintenance and operations above the planning model based upon Board direction. 9 The FY 2020 planning model at millage neutral increases the park capital general governmental recurring transfer by $1.0 million to $3.85 million. 10 The method for cash flowing the projects earmarked for funding as part of the Local Option Infrastructure Sales Tax initiative may involve a fiscal year draw on General Fund Reserves and gap financing through the issuance of Commercial Paper through the Florida Local Government Finance Commission – which the County is a charter member. Most important is continuing to increase General Fund reserves consistent with policy. A separate section of this policy document will discuss the budgeting and cash flow process to ensure smooth execution of funded sales tax projects. 11 Establish General Fund contingency reserve at 2.5% of total budgeted appropriation (less capital/debt transfers). Grow the General Fund cash balance reserve by $5,600,000, bringing total reserves to $50.1 million. This growth in the General Fund reserves is extremely important to protect the funds beginning FY cash position, present a position of financial strength to the rating agencies, avoid more aggressive expenditure controls as budget margins tighten and position the County to become more self-reliant knowing that federal and state funding as well as funding guidelines will continue to tighten and become more onerous. Also, as much as $20 million of reserves may be drawn each year during FY 19 and FY 20 to cash flow certain projects funded as part of the local option infrastructure sales tax program. Any reserves drawn would be re-paid within two to three months as sales tax proceeds are received. 12 Use gas tax revenue to support road capital, maintenance and debt (with an emphasis on debt) consistent with budget planning and statutory requirements. 13 Continue dialog on future new sustaining revenue sources intended to diversify the composition of the County’s general governmental revenue mix. Component increases of 1.5% devoted to operations at the department level is planned. This means that department operations for FY 2020, which rely on the General Fund and Unincorporated Area General Fund for dollars, will be restricted to a one and one-half percent (1.5%) increase for current programs and services as well as any expanded services. This includes operating transfers. For FY 2020, the percentage operating adjustment will be translated into a dollar value for each department head to allocate as priorities dictate. Limited general governmental operational expense increases are expected and will be appropriated to account for new programs and services instituted during FY 2019, inflationary adjusted fixed costs and maintaining a competitive compensation package. The December 2017 over December 2018 CPI is 2.9 percent. A significant portion of remaining budget planning dollars will be applied to Agency wide capital equipment, asset replacement and new capital projects not covered by the local option 11.A.c Packet Pg. 137 Attachment: Fiscal Year 2020 proposed budget policies (8235 : Recommendation to adopt the FY 2020 Budget Policy) Policy Document Page 14 infrastructure sales tax or impact fees. This will manifest itself primarily through General Fund and Unincorporated Area General Fund capital transfers for general governmental and constitutional facilities, the transportation network, parks, storm-water and heavy equipment. For FY 2020 planning purposes and discussion in this policy document, the total General Fund Budget is represented to increase by $32,093,500. The following table depicts by category the revenue and expense positive or negative changes connected with the FY 2020 General Fund Planning Budget and the variances from FY 2019. Also shown for comparison are the budget variances by category between FY 2018 and 2019. Major Revenue Variances: Variance between FY 2019 and Planning FY 2020 Variance between FY 2018 and FY 2019 Ad Valorem Taxes $12,510,700 $16,786,800 Sales Tax 0 2,000,000 Revenue Sharing 0 1,000,000 Department Revenues (95,000) 35,500 Enterprise and Federal PILT and Cost Allocation 393,700 1,854,600 Transfer Revenue (12,685,400) 11,332,200 Carryforward 32,590,300 (10,050,500) Less 5% Required Revenue Reserve (620,800) (1,008,600) Total Revenue Increases $32,093,500 $21,950,000 Major Expenditure Variances County Manager, Court’s and Other General Operations $1,166,800 $4,923,600 Operating Transfer’s 3,141,300 2,823,200 Capital Transfer’s 4,042,000 (4,243,000) Sheriff Transfer 10,540,700 12,568,700 Other Constitutional Transfer’s 1,375,000 1,846,600 Reserves 11,827,700 4,030,900 Total Expenditure Increases $32,093,500 $21,950,000 Several observations can be made from this table. As we have noted continuously throughout this document, property tax revenue dominates general governmental funding. Of significance also is the importance of a healthy carry-forward (fund balance) at year end which influences expenditure planning and the respective capital and operating allocations. Maintaining a healthy fund balance requires priority funding of reserves as indicated in the analysis above. The increase in General Fund carryforward planned at year ending 9/30/19 is directly related to proactive budget management knowing that reimbursement revenue from FEMA and the State covering certain eligible Hurricane Irma expenses will not be timely. Most of this positive carryforward variance is the result of actual operating revenue received during FY 2018 over forecast of $8.3 million. Operating expenses in FY 2018 were $4.3 million less than expected in forecast and certain capital transfers totaling $5.3 million were deferred. Money budgeted to be transferred out of the General Fund to various capital project funds for Hurricane Irma cash flow purposes totaling $14.7 million were not made because sufficient cash exists within the designated funds. However, these cash flow transfers have been re-budgeted in FY 2019 should the need arise. The increase in reserves represents a regular managed increase of $5.8 million consistent with policy planning standards plus a set aside of $6 million to support if necessary transportation capital projects like intersection improvements and bridge rehabilitation which were deferred to cash flow canal debris removal associated with Hurricane Irma. Receipt of reimbursement revenue for canal clean up if any may take months and certain postponed projects may require funding 11.A.c Packet Pg. 138 Attachment: Fiscal Year 2020 proposed budget policies (8235 : Recommendation to adopt the FY 2020 Budget Policy) Policy Document Page 15 which is sourced from the General Fund. A positive outcome for FY 2018 and that forecasted in FY 2019 is the increase in impact fee collections which has lowered projected FY 2020 General Fund contributions to the impact fee trust funds necessary to growth related debt service by $1.4 million. While not a trend due to the extreme volatility of impact fee collections, these increased collections over budget is a contributing factor allowing for a greater level of capital transfers planned in FY 2020 to Parks, Storm-Water and the Transportations System. Each new program, service, initiative or capital facility has recurring funding obligations and the layering effect becomes magnified each fiscal year. Whether staffing the Eagle Lakes recreational complex, Big Corkscrew Regional Park, economic development incentive zones, Storm-Water programming, senior facility initiatives, buying land, affordable housing, social services, public safety facilities, school safety officer funding or the myriad of other current or future funding requirements; the County’s investment in public safety and servicing a demanding citizenry requires stable resources and currently that stable resource is primarily property taxes. As a balancing measure, budget management is always ongoing and more magnified as the County awaits its due reimbursements from paid expenses associated with Hurricane Irma. 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. While it is important to always recognize our ongoing program, service and capital commitments which have made Collier County a premier location to “Live, Work and Play”, the level of dollars devoted to this crucial goal must be measured against the continued need to maintain prudent reserve levels; protect against any revenue shortfalls; 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. Maintaining sufficient General Fund cash is always a major focus and by policy the cash position is set at a minimum of 10% of actual expenditures. Given our current General Fund reserve levels and cash flow requirements, it has been prudent to maintain a cash position in this fund of between 15% and 20% of actual expenses and based upon year ending FY 2018 numbers that cash position would be between $55 million and $72 million. The actual General Fund cash position at year ending 2018 totaled $62,924,200. -$40 -$30 -$20 -$10 $0 $10 $20 $30 $40 FY 09 FY 10 FY 11 FY 12 FY 13 FY 14 FY 15 FY 16 FY 17 FY 18 FY19MillionsGeneral Fund Budget Reductions Changes in the Adopted Budget Mid-Year Budget Reductions 11.A.c Packet Pg. 139 Attachment: Fiscal Year 2020 proposed budget policies (8235 : Recommendation to adopt the FY 2020 Budget Policy) Policy Document Page 16 Local Option Infrastructure Sales Tax: The Office of Management and Budget continues to work collaboratively with the Clerk of Court’s Finance section to set up the appropriate account structure necessary to budget, track, manage and report on all aspects related to collecting and spending Local Option Infrastructure Sales Tax proceeds. Sales Tax Capital Fund (318) has been created and a base budget will be set up consisting of at least thirteen (13) cost centers within Fund (318) intended to capture capital expenses by functional area such as public safety; physical environment; transportation; culture and recreation and general governmental consistent with generally accepted accounting principles. Funded programs will be created within each cost center to specifically capture detailed expenses by designated projects which will be approved by the Board and provide the necessary budget, and reporting structure to reconcile actual expenses against budget. Sales Tax proceeds will be deposited within one cost center sufficient for reporting purposes. It is expected that initial sales tax revenue will be received toward the end of March 2019. It is expected that many projects will be ready for Board approval and subsequent award before there is sufficient sales tax revenue available. Therefore, the ability to cash flow projects as part of the appropriation process will be necessary. Using Commercial Paper (CP) is the obvious approach with the intent on paying off any CP issued promptly upon the receipt of sufficient sales tax proceeds to avoid payment of interest for an unreasonable length of time. The exact amount of any bridge financing will be determined based upon the specific timing of projects set for approval and execution, the amount of budget required, and specific sales tax proceeds received. Most likely, staff will approach the Board with a general CP resolution in the summer/fall in a not to exceed amount in the $200 million range and then draw funds as necessary for cash flow purposes. Adopting the general CP resolution does not obligate the County to draw funds. It simply positions the County to draw funds timely in incremental amounts as necessary to expedite setting up the required budget and required contract approval. It is too early to tell what level of budget flexibility might be achieved from the Local Option Infrastructure Sales Tax. But from the list below, it is reasonable to think that cash and carry transfers typically dedicated as part of general governmental capital transfers for EMS facilities and general governmental facility maintenance would depending upon spending patters provide the best opportunity for near term flexibility. 11.A.c Packet Pg. 140 Attachment: Fiscal Year 2020 proposed budget policies (8235 : Recommendation to adopt the FY 2020 Budget Policy) Policy Document Page 17 The following projects are slated for funding pursuant to Ordinance 2018-21. Future General Governmental Capital Improvements Long Term Capital Reserve Recognizing the County’s mounting future general governmental asset maintenance responsibility, a new Reserve Fund will be created for FY 2020 fencing off dollars in incremental amounts up to $5 million annually dedicated to protecting the County’s future hard and soft general governmental infrastructure investment. Regular annual deposits to this fund – like the County’s vehicle replacement funds- emphasizes the need to isolate dollars for this future asset maintenance obligation knowing the many competing programs, services and initiatives must receive dollars from a limited resource pool. Capital Asset Management Each year a significant portion of available annual resources are devoted to the maintenance and management of the County’s general governmental infrastructure base. This strategy will continue knowing that proceeds from the Local Option Infrastructure Sales Tax can only be used for capital construction not maintenance and that the proceeds will be applied to specifically identified and strategic capital projects. The current pay as you go strategy recognizes that satisfying all new planned and programmed capital requirements over the next five (5) years will require some level of financing despite the local option infrastructure sales tax. The new general governmental debt component will likely finance identified replacement and new storm-water capital projects; phase two of the Big Corkscrew Regional Park; payoff the variable rate commercial paper draw used to purchase the Amateur Sports complex property and other identified Board initiatives that might be ripe for financing. 11.A.c Packet Pg. 141 Attachment: Fiscal Year 2020 proposed budget policies (8235 : Recommendation to adopt the FY 2020 Budget Policy) Policy Document Page 18 Augmenting the annual cash and carry component of infrastructure maintenance is the new FY 2020 initiative to set aside dollars in a separate reserve fund for future infrastructure maintenance. Despite the challenge, available resources will continue to be allocated in the most prudent and economical manner to fund operations at required service levels and construct and maintain strategic capital improvements. The following table provides a description of historical budget allocations and what is currentl y planned in FY 2020 from the General Fund budget to support ongoing asset maintenance, strategic new capital requirements; and fund growth and non-growth debt obligations. Category General Fund Non-Growth Debt Loans to Impact Fee Funds - Debt Loans to Impact Fee Funds – Projects* County Wide Capital Transfer for other Capital Transfer to Parks Transfer to Road Network Transfer to Storm- Water Long Term Replacement Capital Reserve Total FY 2014 $3,657,700 $4,342,300 $0 $6,841,400 $3,800,000 $0 $8,768,800 $4,730,100 $0 $32,140,300 FY 2015 $3,079,600 $3,307,100 $7,813,200 $7,788,600 $3,441,200 $500,000 $9,499,900 $4,627,600 $0 $40,057,200 FY 2016 $3,077,500 $5,376,500 $900,000 $10,677,500 $4,333,100 $750,000 $14,559,800 $1,549,600 $0 $41,224,000 FY 2017 $3,073,000 $2,476,900 $0 $10,697,500 $4,000,000 $2,495,700 $8,460,000 $2,525,000 $0 $33,728,100 FY 2018 $2,855,200 $3,306,800 $2,000,000 $12,006,000 $4,313,500 $1,100,000 $11,650,400 $1,627,000 $0 $38,858,900 FY 2019 $3,479,400 $3,958,700 $216,200 $11,160,800 $645,000 $1,100,000 $8,555,800 $2,500,000 $0 $31,615,900 FY 2020 $3,609,400 $2,799,000 $0 $9,427,000 $1,666,700 $2,100,000 $9,555,800 $3,500,000 $5,000,000 $37,657,900 *FY 2015: EMS Station, SOE Complex, & Sheriff Substation. FY 2016: Additional funding for Sheriff Substation. FY18: EMS Station. FY 19 EMS Station. For FY 2020, funding as planned above will of course be subject to Board guidance on millage rates and taxable property values received in July 2019. Factoring out planned Constitutional Officer transfers, countywide capital and debt service expenses contained within the planning model amounts to 16.8% of General Fund planned appropriations for FY 2020. The General Fund regularly appropriates substantial dollars to new general governmental capital and asset replacement projects benefitting all countywide residents. This level of capital planning which generally translates into approved budget appropriations provides part of the highly desirable budget flexibility which is essential to sound fiscal management. Preserving General Fund cash, maintaining adequate reserves, protecting the County’s investment quality credit rating and paying debt service will always take priority as expenditure planning evolves. Generally, these priorities are strategically managed and sufficient allocations are made in harmony with other capital and operating spending appropriations. Robust capital contributions are also appropriated within the Unincorporated Area General Fund to augment the County’s commitment to capital programming. The following table depicts these planned capital contributions. Category Unincorp. Area General Fund Transfer to Parks Transfer to Roads Transfer to Storm-Water Total FY 2014 $0 $0 $1,300,000 $1,300,000 FY 2015 $500,000 $3,860,000 $1,050,000 $5,410,000 FY 2016 $500,000 $2,427,300 $4,011,800 $6,939,100 FY 2017 $750,000 $3,300,000 $4,172,000 $8,222,000 FY 2018 $1,250,000 $4,000,000 $4,267,900 $9,517,900 FY 2019 $2,750,000 $4,250,000 $3,000,000 $10,000,000 FY 2020 $1,750,000 $3,500,000 $3,000,000 $8,250,000 Non-growth-related debt serviced by legally available non-ad valorem revenue from the General Fund ticked up in FY 2019 due to the issuance of Commercial Paper to purchase property where the Amateur Sports Complex will be constructed. Through the County’s debt restructuring and normal debt retirement, non-growth related annual revenue bond debt service paid from the 11.A.c Packet Pg. 142 Attachment: Fiscal Year 2020 proposed budget policies (8235 : Recommendation to adopt the FY 2020 Budget Policy) Policy Document Page 19 General Fund has decreased from $8,154,400 in FY 2010 to $3,609,400 in FY 2020, a 56% decrease. Cumulatively since FY 2011 across all debt types (General Governmental and Business), non- growth related annual debt service has dropped 37.8%. The FY 2020 impact fee loan projection from the General Fund is planned to decrease year over year due primarily to an increase in general governmental impact fee receipts over forecast. Countywide 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 for transfer in FY 2016, FY 2017, FY 2018, FY 2019 and that planned for FY 2020 for various strategic general governmental capital initiatives. Except for the Domestic Animal Services shelter improvement project and future EMS stations no projects within the table below are slated for funding from the Local Option Infrastructure Sales Tax. General Fund Supported Capital Category FY 16 Budget FY 17 Budget FY 18 Budget FY 19 Budget FY 20 Budget Sheriff Orange Tree Sub-Station $900,000 $0 $0 $0 $0 EMS Station and Ambulance $0 $0 $2,000,000 $2,100,000 $0 Helicopter $2,000,000 $2,000,000 $1,250,000 $0 $0 Jail & other Sheriff Facility Repairs $664,200 $1,059,500 $4,100,000 $1,000,000 $1,000,000 Sheriff’s Accounting System Replacement $1,000,000 $0 $0 $0 $0 Voting Machines $0 $0 $345,000 $350,000 $350,000 800 MHz Public Safety Communication System $6,200,000 $3,525,000 $850,000 $0 $0 Domestic Animal Control Shelter $0 $0 $500,000 $0 $0 State & Regional Eco Development $475,000 $500,000 $0 $0 $0 Library Capital/Books $350,000 $450,000 $550,000 $850,000 $950,000 General Building Maintenance and A/C Repairs not Sales Tax Funded $1,500,000 $4,090,500 $5,250,000 $6,000,000 $5,000,000 Other General Governmental $488,300 $1,072,500 $411,000 $1,077,000 $2,127,000* Museum Capital $200,000 $200,000 $313,500 $200,000 $200,000 Airport Capital (Grant Match) $313,100 $300,000 $1,000,000 $445,000 $1,466,700 General Governmental Vehicle Replacement Supplement $1,500,000 $1,500,000 $1,750,000 $0 $0 Park Capital $1,070,000 $2,495,700 $1,100,000 $1,100,000 $2,100,000 Transportation Capital $14,559,800 $9,935,500 $11,650,400 $8,555,800 $9,550,800 Storm-water Capital $1,549,600 $2,525,000 $1,627,000 $2,500,000 $3,500,000 Total $32,770,000 $29,653,700 $32,696,900 $24,177,800 $26,249,500 *$2,127,000 = $1m SAP; $800k replenish reserves; balance is minor maintenance $327k for software costs. Due to Hurricane Irma, capital dollars allocated within certain projects were repositioned in FY 2019 to cash flow repairs and/or soft costs for FEMA consulting services connected with the reimbursement process. For example, while $2,100,000 was allocated to construct a new EMS facility in FY 2019, a delay in execution of the project to FY 20 meant that $1,883,800 was re- appropriated toward the Maguire FEMA consulting contract which is eligible for FEMA reimbursement. Future EMS stations will be funded through the Local Option Infrastructure Sales Tax. Likewise, $6,000,000 was originally allocated to Facilities Management for general building repair and maintenance, $1,563,400 was diverted to cash flow hurricane repair efforts. Direct capital maintenance funding for parks, transportation and storm-water related system improvements and operations from the General Fund and Unincorporated Area General Fund will increase modestly in FY 2020 under the current planning scenario from that budgeted in FY 2019 by $1,250,000 to $23,405,800. Of course, the allocation may change as the FY 2020 budget evolves leading into the June workshop, once taxable values are known, and budget requests are 11.A.c Packet Pg. 143 Attachment: Fiscal Year 2020 proposed budget policies (8235 : Recommendation to adopt the FY 2020 Budget Policy) Policy Document Page 20 vetted. This allocation includes dollars to maintain the transportation network, dollars for road resurfacing, intersection improvements, bridges, storm-water, airport capital grant matching and regional/community park system improvements. 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, uncertainty with the communication services tax, heavy reliance upon property taxes and the natural hazards which can impact coastal communities. Gas Taxes and Future Gas Tax Pledged Debt: 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 in FY 2012 and FY 2014 at substantially lower interest costs. These gas tax dollars not devoted to paying debt service will be available annually until the debt expires in 2023 and 2025. The County approved three separate ordinances levying the maximum local option gas taxes of 12 cents for purposes of paying debt service and maintaining the roadway system. All three ordinances which extend for twenty (20) years are set to expire on or about December 31, 2025. The Board should begin to consider extending each local option gas tax ordinance in the full 12 cent amount which can be accomplished by local authority. The first 11 cents (commonly referred to as the 1 cent to 5 cents and 1 cent to 6 cents series) can be extended by a simple majority vote of the Board while the 9th cent requires a super majority vote. The strategy behind an early extension before December of 2025 involves capitalizing on greater coverage ratios to wrap new debt of roughly $30 plus million around the existing low interest rate maturities to fund necessary major transportation network improvements to segments like Livingston Road, Airport Road, etc. which are approaching 20 years of useful life. Interest rates on investment quality bonds remain low especially for Collier County. The Finance Committee will continue to refine the concept and strategy and further information to the Board will be forthcoming. 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. Beginning in FY 2019, no general governmental dollars will be transferred to the Gas Tax Fund (313). Instead, general governmental dollars will be transferred to Capital Fund (310) supporting the maintenance and improvement of the transportation network. This change was made to specifically track use of gas tax proceeds in accordance with state statutes without any comingling of general governmental money. Gas taxes are the pledged source of repayment on the current Series 2012 and Series 2014 Gas Tax Refunding Bonds. Gas taxes collected in FY 2018 from all sources in totaled $22.7 million. When you consider the payment of annual debt service ($13.1M), the remaining $9.6 million is programmed for construction and maintenance of the transportation network consistent with strict statutory guidelines. 11.A.c Packet Pg. 144 Attachment: Fiscal Year 2020 proposed budget policies (8235 : Recommendation to adopt the FY 2020 Budget Policy) Policy Document Page 21 Augmenting transportation network improvements budgeted in Gas Tax Fund (313) are regular general governmental transfers to Transportation Capital Fund (310). The General Fund capital transfer planned for FY 2020 to Fund (310) is $9,555,800 representing a $1,000,000 increase from FY 2019. The Unincorporated Area General Fund transfer planned to Fund (310) for FY 2020 is $3,500,000 a decrease of $750,000 from FY 2019. These dollars support maintenance on the roadway network including intersection improvements, resurfacing, sidewalks, pathways, asset management and traffic control software, and other critical maintenance needs which are not eligible for gas tax funding by statute. Recommended Budget Policy: Continue the Board’s policy applying gas tax revenue to pay for debt service on the Gas Tax Revenue Bonds, and that the remaining gas tax revenue and transfer dollars from the General Fund and Unincorporated Area General Fund continue to support/supplement maintenance on the roadway network. Safe School Officer’s and School Guardians: The program of placing a school safety officer in some Collier County Schools has been in place for decades and this program has recently been elevated to greater public attention since the Parkland shooting and State passage of SB 7026 which requires the placement of safe school officers or public guardians at each school facility within the District, including charter schools. It is important to note that legal responsibility to comply with the requirements of SB 7026, including funding rests with the Collier County School District. Collier County is compliant with the state law and the priority is always continued compliance through enhanced protocols, strategies and personnel. Recently, all stakeholders have been meeting to discuss partnership funding of the program on a recurring basis. Currently and for many years, the County Commission through the Sheriff’s agency has provided funding for safety officer presence in some of our schools. It is not known at this time whether the State will commit to recurring funding for this legislative initiative. Pre-Parkland, school safety officer expenses were roughly $5.8M annually. This cost has escalated to about $7.0 million currently. From a policy funding standpoint, the County can continue to fund the program with zero contributions from the School District; or negotiate some cost sharing arrangement. With the program funded for FY 2019, conversations with the stakeholders have been on hold pending the 2019 state legislative process and what funding may be available to local entities. Staff will continue discussions at the end of the current legislative session with the goal of developing a recurring funding formula that splits program costs between the School District and the County. General State Legislative Update Currently, executive and legislative branch economists have projected a $465 million increase in revenues to finish out this fiscal year and a $380 million projected increase during the next fiscal year. This total projection is predominately based upon increased collections in sales and corporate income taxes. Governor DeSantis will likely craft his first budget with these figures in mind. However, another set of projections will be released as legislative appropriators deliberate on the budget bill. 11.A.c Packet Pg. 145 Attachment: Fiscal Year 2020 proposed budget policies (8235 : Recommendation to adopt the FY 2020 Budget Policy) Policy Document Page 22 In addition to our own State project appropriations requests to improve our environment and the economy it drives, Collier has also partnered with municipalities to support their project requests to improve water quality in the County and the Gulf. The total investments for all these projects would be over $21 million when all federal, state, and local funds are applied. Collier County is also seeking to restore the original 2011 statutory language that prompts the Florida Department of Transportation to provide ongoing reimbursement funds for operational costs of the Public Safety Center at Mile Marker 63, from toll revenues generated on Alligator Alley. These reimbursement funds currently expire on June 30, 2019 and would result in a cost- shift to taxpayers in the Ochopee Fire District, and/or additional contributions from the General Fund from Federal Payment In lieu of Taxes (PILT) proceeds. Station operations total approximately $1.8 million. Toll proceeds were originally dedicated as a proper “user fee” to finance the Public Safety Center’s exclusive services to the Alley as it is surrounded by state and federal lands with no localized tax base. Collier County pays the Greater Naples Fire District to manage the rest of the Ochopee Fire District from MSTU generated property tax revenue and Federal PILT funds. Various Bills have been filed which preempt local regulations on businesses and business entities; redefining the local tax referenda process including requiring that a referendum be passed by a specific voter percentage; regulating CRA’s; reducing the communication services tax rate; redefining government accountability; and revising local government transparency standards. Discussions and actions regarding maintaining or enhancing state funds supporting school public safety officers will be monitored. Recommended Budget Policy: Develop a General Fund (001) operating budget at the millage neutral rate of $3.5645 and provide the Board with a summary divisional description of what millage neutral purchases in terms of services and the progress made in devoting dollars to asset maintenance and strategic capital initiatives. Approve guidance for the Unincorporated Area General Fund (111) which includes maintaining the millage rate at $.8069 and earmarking $.0908 or the marginal increase above the current operating millage rate to continue the median landscape program which has transitioned to median maintenance due to escalating costs. The existing millage rate of $.7161 will be used to fund existing and expanded operations as well as capital transfers. General Fund Budget Allocations by Agency and Component The purpose of this allocation is to identify those agency 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. 11.A.c Packet Pg. 146 Attachment: Fiscal Year 2020 proposed budget policies (8235 : Recommendation to adopt the FY 2020 Budget Policy) Policy Document Page 23 Considering that transfers to the Constitutional Agencies in FY 2019 account for 52% of total General Fund budgeted expenses and 72% of the General Fund ad valorem budgeted revenue, their participation in any necessary reductions due in part to unexpected ad valorem revenue shortfalls, tax rate reductions 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 $10,084,838 and $10,033,387 respectively across all funds for years ending FY 2017 and FY 2018 respectively. For year ending 2018, actual collections exceeded budget in the General Fund by $2.2 million. The General Fund receives on average 85% to 90% of all turn back revenue. Turn back revenue from the Tax Collector accounted for 62% of all fund turn back revenue in FY 2017 and 81% of all fund turn back revenue in FY 2018. Recommended Budget Policy: Continue this policy. Millage Targets for Collier County MSTU’s, MSTD’s A Municipal Service Taxing Unit (MSTU) is a mechanism by which a county can fund a service from a levy of ad valorem taxes, not countywide, but within all or a portion of the county. In the County budget, an MSTU is used to segregate the ad valorem taxes levied within the taxing unit to ensure that funds derived from such levy are used to provide the contemplated services within the boundaries of the taxing unit as required. 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 eighteen (18) dependent MSTU’s active under Collier County’s taxing umbrellas. Of these, eleven (11) have advisory boards which provide recommendations to the Board of County Commissioners. BCC / Co Attorney 1% County Managers Agency 29% Road Program Subsidy 2% Debt / Capital Subsidy 5% Reserves 10% Courts 1% Clerk of Courts 2% Property Appraiser 1% Sheriff 44% Supervisor of Elections 1% Tax Collector 4% FY 2019 Percent of General Fund Budget 11.A.c Packet Pg. 147 Attachment: Fiscal Year 2020 proposed budget policies (8235 : Recommendation to adopt the FY 2020 Budget Policy) Policy Document Page 24 Recommended Budget Policy: For FY 2020, it is suggested that those existing MSTU’s without advisory board oversight be limited to a rolled back millage rate position unless staff presents a compelling reason for additional funds during budget presentations. Additionally, it is suggested that existing MSTU’s with advisory board oversight be allowed to consider tax rate options ranging from tax neutral (rolled back rate) to millage neutral depending upon program requirements and taxable values with specific advisory board recommendations offered during the budget review cycle. 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. For FY 2019, the following budget priorities must be satisfied for enterprise and special revenue operations; working capital guidelines established through policy or best practices; capital obligations from the capital improvement element (CIE); any fee or rate stud y expense stipulations; priority agency wide initiatives; any statutory or ordinance spending restrictions. 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, Departments will be held to their fee for service projections and any negative fee variances will be addressed through expenditure cuts and not subsidized by Ad Valorem taxes. Department Head discretion upon guidance by the County Manager should be afforded in these scenarios. Recommended Budget Policy: Adopt this Enterprise Fund and General Governmental revenue centric budget policy. Expanded Positions For FY 2020, Departments will carefully consider expanded positions since proposed operating expenditure guidance will likely require a significant re-prioritization of current budget. Any expanded requests will be limited to new capital facility openings and/or Board directed service level adjustments. All budget to budget expanded positions and programs will be reviewed by the County Manager and his recommendations will be presented as part of FY 2020 budget workshop discussions in June. Recommended Budget Policy: Expanded position requests will be limited to Board approved capital facility openings and/or Board approved service level adjustments with final County Manager recommendations presented at the June budget workshop. 11.A.c Packet Pg. 148 Attachment: Fiscal Year 2020 proposed budget policies (8235 : Recommendation to adopt the FY 2020 Budget Policy) Policy Document Page 25 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. Establish equitability in position pay ranges and to rates paid incumbents in those positions 4. Recognizes and rewards individual and team achievements. The Consumer Price Index 12-month percent change from December 2017 to December 2018 is 2.9% for the Miami-Fort Lauderdale area. This is one of the indices that Collier County traditionally uses when considering a general wage adjustment. The annual Florida Relative Price Index, an index comparing the relative cost of living among the State’s 67 counties, is also used as a basis for compensation plan recommendations. Like 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 2020 with the recommended structure submitted for Board consideration at the June Workshop meeting. For FY 2020, the County Manager is recommending a flat $1,200 increase to base salaries within each pay grade classification. The average salary paid within the County Manager’s Agency is $55,500 and the $1,200 increase represents a 2.2% increase on this average salary which is below the 2.9% cost of living for 2018. In addition, a .5% or $565,000 allocation is programmed to strengthen certain targeted lower classification pay grades where a market imbalance exists. Pay plan adjustments to the compensation plan was last completed in FY 2018 at a cost of $727,700 with no adjustments occurring in FY 2019. This compensation adjustment and pay plan maintenance allocation is estimated to total $3.6 million for the County Manager’s Agency. Recommended Budget Policy: Appropriate dollars equivalent to a $1,200 base wage increase to all classifications representing an average 2.2% increase plus a .5% or $565,000 pay plan maintenance component to strengthen certain targeted lower classification pay grades where a market imbalance exists. In previous years, the Board of County Commissioners has authorized adjustments to the compensation plan as shown within the following table. Program Component FY 09 FY 10 – FY 12 FY 13 FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 General Wage Adjustment 4.20% 0.00% 2.00% $1,000 2.00% / $1,000 1.50% / $1,000 3.00% 2.90% 2.00% $1,200 represents average of 2.2% Awards Program 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Pay Plan Maintenance 0.00% 0.00% 0.00% 0.00% 0.00% 1.50% 0.00% 0.60% 0.00% 0.50% Total 4.20% 0.00% 2.00% $1,000 2.00% 3.00% 3.00% 3.50% 2.00% Average of 2.7% 11.A.c Packet Pg. 149 Attachment: Fiscal Year 2020 proposed budget policies (8235 : Recommendation to adopt the FY 2020 Budget Policy) Policy Document Page 26 Health Care Program and 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 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 eligible County employees, except for 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. Due to exceptional plan performance over the past seven (7) plan years, plan reserves exceed statutory minimums. Therefore, it is recommended that there be no (0%) rate increase for FY 2020. It should be noted that employer health insurance contribution increases are abs orbed within operating appropriations. Since 2009, Collier County Government has invested in processes to heighten employees and spouse’s awareness of their health and make available resources to assist covered employees and spouses in improving and maintaining their health. These programs have achieved meaningful reductions in risk and improvements in outcomes for the covered participants. In addition, the County was recently approved as a Blue Zones Workplace. The trend in cohort data in the form of the number of population health risks is positive. The number of participants with 4-5 risk factors is decreasing (Yr. 2018 15.7% vs. Yr. 2016 19.6%). The number of participants with 0-2 risk factors is increasing (Yr. 2018 34.2% vs. Yr. 2016 31.1%). Seventy-two percent (72%) of the diabetic population improved their A1c value with 60% achieving goal range of 7% or lower; 38% improved Triglycerides, 45% improved LDL; 76% improved at least 1 risk factor. Employees and spouses have embraced the County’s preventive educational and qualifier processes which have contributed greatly toward the financial strength of the health program. Over 11.A.c Packet Pg. 150 Attachment: Fiscal Year 2020 proposed budget policies (8235 : Recommendation to adopt the FY 2020 Budget Policy) Policy Document Page 27 the last nine (9) years, participation has been consistently more than 93% for those meeting the necessary qualifiers. This rate far exceeds those of large employers nationwide. 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 2019, $1.94M in General Fund constitutional transfer savings would have been realized as depicted below. Since the Presidential and Congressional elections of 2016, limited changes were made to the Affordable Care Act. Staff will monitor the activities of federal policy makers and adjust the County’s health plan accordingly. But for now, certain provisions of the current federal Affordable Care Act (ACA) impact Collier County if not managed properly. The most penal is the “Pay or Play” provision. This provision imposes a $2,320 penalty per eligible employee (less the first 30) working more than 30 hours per week or 130 hours per month if the employer does not offer coverage to 95% of the eligible population. The 95% provision took effect on January 1, 2016 with penalties, if any, being assessed beginning in calendar year 2018 or the County’s FY 2018. To date, no penalties have been assessed. These compliance provisions will continue until rescinded or amended and present the potential for federal penalties. Currently, 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 more than 30 hours per week or 130 hours per month. Based upon the December 2019 census, current compliance is 99.9%. If somehow the County failed to satisfy the 95% provision, the fine could total approximately $5.7 million. 11.A.c Packet Pg. 151 Attachment: Fiscal Year 2020 proposed budget policies (8235 : Recommendation to adopt the FY 2020 Budget Policy) Policy Document Page 28 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. Recommended Budget Policy: In FY 2020, no rate increase is recommended and the average cost distribution of health insurance premiums between the Board of County Commissioners and employees will remain 80% (employer) and 20% (employee). It is still recommended that the 80% employer share and 20% employee share be uniform across al l agencies, including the Constitutional Officers. This policy treats all county employees equally in terms of cost sharing for health insurance 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 proposed House and/or Senate Bills (Florida Statute Chapter 121). Recommended Budget Policy: Adherence to the OMB 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 2016, this rate was established at 2%. For FY 2020, it is suggested that the attrition rate remain at 2%. Recommended Budget Policy: Continue the accrued salary savings policy at a 2% rate. Financing New and Replacement Capital Infrastructure The County in April 2018 made a commercial paper draw of $12 million to purchase property on which to construct the Amateur Sports Complex. Monthly service on this paper is paid from the General Fund. Subsequently, $62.9 million in new Series 2018 Tourist Tax debt to finance construction of Amateur Sports Complex facilities was issued in October 2018. Prior to this activity, the last time Collier County issued debt for capital improvements was through various commercial paper loans between September 2007 (FY 2007) and September 2008 (FY 2008) totaling $78.4 million to finance various general government and public safety projects. All commercial paper loans outstanding at the time were refinanced through long term debt in July 2010 and again in December 2017. The issuance of debt for capital improvements is generally considered as an alternative to pay as you go under the philosophy that future tax payers who will 11.A.c Packet Pg. 152 Attachment: Fiscal Year 2020 proposed budget policies (8235 : Recommendation to adopt the FY 2020 Budget Policy) Policy Document Page 29 also enjoy the capital improvements should participate in funding capital improvements rather than that burden falling solely to existing tax payers. Pursuant to the Collier County Debt Management Policy, several guiding principles have been identified that provide the framework within which the issuance, management, continuing evaluation of and reporting on all debt obligations issued by the County takes place. Asset Life: The County will consider long-term financing for the acquisition, maintenance, replacement or expansion of physical assets (including land) only if they have a useful life of at least five (5) years. Debt will be used only to finance capital projects and equipment, except in case of emergency. County debt will generally not be issued for periods exceeding the useful life or average useful lives of the project or projects financed. Capital Financing: Debt of longer amortization periods will be issued for capital projects when it is an appropriate means to achieve a fair allocation of costs between current and future beneficiaries. Debt shall not, in general, be used for projects solely because insufficient funds are budgeted at the time of acquisition or construction. To the degree possible, the County will rely on specifically generated funds and or grants and contributions from other governments to finance its capital needs on a pay as you go basis. To achieve this, it may become necessary to secure short term (not exceeding 5 years amortization) construction funding. Such financing is anticipated and allows maximum flexibility in CIP implementation. A decision to issue some component of short or long-term debt is based upon level of service standards, the timing of any capital improvement, ability to execute, the credit market environment, and cost of capital. The County had pursued a strategy in recent history (FY 2008 and prior years) by inc urring short term commercial paper loans for capital projects and refinancing that short-term debt with longer term bonds or other long-term credit instruments which match the asset’s useful life. Short term commercial paper loans carry a low variable interest rate – currently about 2.85% and funds can be accessed within about 30-45 days of approving the authorizing resolution. The advantage of long term debt especially in a low interest rate environment is that budget certainty for the cost of credit is achieved. Generally, a project should be ready for construction and proceeds must reasonably be expected to be spent within a three-year window from debt issuance or adverse tax consequences may occur. Long term debt can be issued normally within a 90-120-day window. The County’s current general governmental long-term debt portfolio is comprised primarily of special obligation revenue bond debt under a covenant to budget and appropriate all legally available non- ad valorem revenue. It is anticipated that this type of long term debt would be used under future new credit scenarios. New Debt Strategy: Passage of the Local Option Infrastructure Sales Tax will not eliminate the need to finance future infrastructure needs. At the very least, new debt would be considered in the following circumstances; 11.A.c Packet Pg. 153 Attachment: Fiscal Year 2020 proposed budget policies (8235 : Recommendation to adopt the FY 2020 Budget Policy) Policy Document Page 30 • Potential financing of an estimated $30 million to fund substantial maintenance of the existing storm-water network as well as prudent expansion of the system in conjunction with enhanced general governmental maintenance funding which the Board may determine. • Financing Phase 2 of the Big Corkscrew Regional Park in an estimated amount of $30 million. • Connected with the above financings, repay the variable rate commercial paper draw used to purchase the amateur sports complex property. • Other long-term financing needs like the potential gas tax wrapping concept; and strategic opportunity land purchases The following illustrates various long-term financing scenarios, the annual debt service and the respective interest rates. Recommended Budget Policy: It is not suggested that any financing strategy be built into the FY 2020 adopted budget. It is recommended that the Finance Committee continue to work with the County’s various agency department stakeholders regarding project scope, timing and execution patterns and with our debt issuance team to develop a strategy and be ready to pursue a debt issuance plan based upon Board direction. Storm Water Management Funding The budget planning model under a millage neutral tax rate for FY 2020 allocates $9.2 million dollars from the General Fund and Unincorporated Area General Fund toward existing storm- water infrastructure maintenance ($6.5 million) and operations ($2.7 million) with the assumption that replacement and new storm-water capital projects would be financed as part of a larger general governmental debt issue. This is a $1.0 million increase for maintenance and operations over FY 2019. Recommended Budget Policy: For FY 2020 continue the general governmental equivalency millage method as the basis for funding storm-water operations and capital transfers from the 11.A.c Packet Pg. 154 Attachment: Fiscal Year 2020 proposed budget policies (8235 : Recommendation to adopt the FY 2020 Budget Policy) Policy Document Page 31 General Fund and Unincorporated Area General Fund with the amount of such funding if any above the current $9.2 million planning appropriation determined by Board policy. 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 2019, the equivalency rate was $.2329 and for FY 2020 the equivalency rate is planned at $.2135. During the economic downturn, most of this transfer evolved into a debt service payment. However, restructuring the debt portfolio has significantly eased the debt burden freeing up budget to support county-wide capital projects and necessary maintenance (Fund 301). For FY 2019, $12,905,800 of the $20,560,100 equivalency transfer was planned for capital projects. For FY 2020, $13,193,700 of the $19,602,100 equivalency transfer is devoted to capital projects. This contribution represents a modest increase from FY 2019 and this planned allocation may change depending upon Board adopted millage rate policy; changes in the tax base; Board adopted operational service level changes; or other reprioritized initiatives. For FY 2020, the General Fund (001) transfer (loan) will be sized to cover debt service which cannot be covered by impact fees. This amount totals $2,799,000 and currently does not contemplate new impact fee eligible capital projects such as EMS facilities (covered by local option sales tax proceeds); land purchases or other projects. The loan amount for FY 2020 represents a $1.16 million decrease over FY 2019, reflective of modest gains projected in impact fee collections for FY 2020. Total loans outstanding to the impact fee trust funds (i.e. EMS, Libraries, Corrections, Law Enforcement and General Government Facilities) from the General Fund since inception (FY 2005) through FY 2019 totals $103.2 million. Payment of debt is always a top priority. Under the FY 2020 budget planning scenario dollars generated from the up to 1/3rd mil equivalent allocation will be sufficient to cover all revenue bond debt service. Of the $19.6 million projected transfer in FY 2020, $2.8 million will be required to cover the growth-related debt service gap due to insufficient impact fee revenue; and $3.6 million is budgeted to cover non- growth-related debt. Going forward, the level of General Fund loan subsidy is heavily dependent upon the level of impact fee collections and any new eligible growth-related capital projects planned. Collier County embarked upon an aggressive debt restructuring program in the summer of 2010 and to date $422.8M in general governmental debt has been refinanced. As a result, the cost of borrowing has been reduced by $1,895,900 annually with this recurring savings applied toward high priority general governmental operating and capital programs. The cumulative net interest rate of the general governmental debt portfolio has been reduced from approximatel y 5% to roughly 3.5% and annual principal and interest payments servicing all outstanding County debt represents 4.5% of the County’s net adopted FY 2019 budget. General governmental debt outstanding represents 2.8% of the County’s net adopted FY 2019 budget. The following charts depicts annual debt service payments servicing all debt and annual debt service connected with our general governmental credit. 11.A.c Packet Pg. 155 Attachment: Fiscal Year 2020 proposed budget policies (8235 : Recommendation to adopt the FY 2020 Budget Policy) Policy Document Page 32 Collier County’s total audited principal debt outstanding at 9/30/18 totals $470.1M of which $268.3M relates to infrastructure improvements driven by population growth and related service demands. The County’s principal debt has been reduced by $322M since FY 2008. Outstanding debt at 9/30/18 includes $12.0 million in Commercial Paper drawn to pay for property on which the Amateur Sports complex will be constructed. Total principal debt outstanding will jump to $494 million adjusted at fiscal year ending 2019 when including the new TDT financing. Recommended Budget Policy: Transfer an equivalent sum of up to 1/3 mil to the County Wide Capital Fund for purposes of paying non-growth-related revenue bond debt; to provide impact fee fund loans to cover growth related debt obligations; and to fund much needed regular ongoing general governmental priority capital needs. General Governmental, Enterprise Fund, and Other Fund Reserve Policies General Fund: Reserve is a budget/policy term referring to resources set aside to provide a financial barrier 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. One such un-planned risk may for example include the potential for a grant award to be rescinded after work on the activity begins. Grant revenues are appropriated at the time of award with the expectation of future cash inflows from the grantor agency. Until reimbursements are received, the General Fund provides the cashflow for general governmental grant funded activities and is responsible for financing grant related activities in full, should the County default on any grant provisions or a grantor agency cancels, revokes, or de- obligates an award. 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. $0 $20 $40 $60 $80 $100 MillionsTotal Annual Debt Service Payments $0 $20 $40 $60 $80 MillionsGeneral Governmental Annual Debt Service Payments 11.A.c Packet Pg. 156 Attachment: Fiscal Year 2020 proposed budget policies (8235 : Recommendation to adopt the FY 2020 Budget Policy) Policy Document Page 33 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. A reserve for contingency is typically budgeted in all operating funds, except for the Constitutional agency funds. Reserves for the Constitutional Agency funds shall be appropriated within the County General Fund. 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 Expenses 2020 $50,112,700 $2,463,600 12.2% 4.3% 2019 $44,481,200 $2,982,300 11.4% 5.3% 2018 $40,450,300 $3,255,000 10.8% 5.5% 2017 $33,899,700 $2,432,900 9.6% 4.8% 2016 $27,890,800 $1,905,600 8.4% 4.4% 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 to achieve a regular and sustained General Fund beginning fiscal year cash position of at least $55 to $72 million, budgeted reserves should be a minimum of $50 million. Otherwise, expense side management of the budget in the form of capital transfer reductions and or reductions in operating transfers may become necessary. Due to Hurricane Irma, budget management leading into year ending 2018 was prudent to ensure sufficient cash exists in the General Fund and certain capital funds receiving General Fund dollars. General Fund capital transfers budgeted to support transportation system projects were reduced by $3.5 million to boost year ending General Fund cash. The importance of achieving sufficient year ending General Fund cash cannot be overstated. In addition, $13 million in structural cash flow transfers from the General Fund to public utilities capital, facilities capital and park’s capital funds were not made due to sufficient cash in these respective funds at year ending 2018. These same transfers were re-programmed as part of the FY 2018 adopted budget in the event cash flow becomes an issue prior to the receipt of Hurricane re-imbursement revenue. Budget management is always ongoing and more magnified at times when Hurricane events occur. 11.A.c Packet Pg. 157 Attachment: Fiscal Year 2020 proposed budget policies (8235 : Recommendation to adopt the FY 2020 Budget Policy) Policy Document Page 34 Expenditures and revenues are monitored continually, and any budget adjustments are made accordingly. Likewise, execution patterns are scrutinized along with transfer dollars – specifically out of the General Fund to make sure that appropriations are properly executed and spent for the intended purpose. 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 for the General Fund : The Governmental Finance Officers Association (GFOA) recommends as a baseline, or floor, that General Fund reserves be set at 16% of regular operating revenues or 2 months of regular operating expenses. This would put Collier County’s General Fund reserve floor (minimum) based upon FY 2019 budget numbers in the $63M-$65M range. Collier County has never attained a General Fund budgeted reserve position higher than the FY 2020 proposed position of $50,112,700. This reserve position includes a contingency reserve set at the recurring policy level equivalent to 2.5% of operations. While Collier County is vulnerable to extreme weather events given its coastal location, the County’s revenue sources are relatively stable and expenditure patterns are not volatile. Further, the General Fund budget is flexible with capital transfers out representing on average ten (10) percent of appropriations. In addition, the County’s total all funds reserve position is stable and will be used in part to cash flow a significant weather event or other natural disaster. These factors suggest a less aggressive reserve position with a floor or minimum of 8% of operating expenses and a ceiling or maximum not to exceed 16% of operating expenses. Applying these percentages to our current FY 2020 proposed planning budget, the reserve floor and ceiling would total $32,935,000 and $65,870,000, respectively. Planned reserves within the General Fund fall within this range. Replenishment of reserves that drop below the targeted floor (minimum) would occur in succeeding budget cycles in such amounts as deemed prudent under existing economic conditions as approved by the Board. The goal will be to recover at least 25% of the reserve shortfall in year one; 25% in year two; and the remaining shortfall in year three. Recommended Budgeted Reserve Position for Other General Governmental Funds including the Unincorporated Area General Fund: The Unincorporated Area General Fund is primarily an operating fund. While capital transfers have increased over the past few years, the Unincorporated Area General Fund and for that matter other general governmental funds do not have nearly the cash flow requirements of the General Fund. Thus, the reserve requirements for the Unincorporated Area General Fund should be set at a minimum of 2.5% of operating expenses or $1.42 million with a ceiling or maximum of no more than one month’s expenses which for FY 2020 is approximately $4.72 million. Reserve requirements for other General Governmental Funds including those that receive significant transfer revenue from the General Fund will be sized sufficient to cover operations during the first month or until the first General Fund transfer is scheduled pursuant to the OMB Transfer Schedule. 11.A.c Packet Pg. 158 Attachment: Fiscal Year 2020 proposed budget policies (8235 : Recommendation to adopt the FY 2020 Budget Policy) Policy Document Page 35 Reserves Policy Position for the Motor Pool Replacement Family of Funds (409, 472, 491, 523) The Motor Pool Replacement Funds were re-established in FY 2016. The annual funding of the Reserve will be through an annual billing to the applicable user Divisions in an amount equal to the cost of the vehicle divided by the useful life of the vehicle. In FY 2016, the Motor Pool Replacement Fund was established for the various General Governmental Funds (523), Water/Sewer District (409), and Solid Waste (472). In FY 2017, the balance of user Divisions were included in the appropriation plan, i.e.: EMS (491) and Road and Bridge (Funds 101/523). Reserves within the four Motor Pool Replacement Funds maintain a current replacement reserve (reserve for future capital) equal to a minimum of one year’s estimated replacement cost of vehicles currently in service. Reserve Policy Position for the Pelican Bay Services Division Family of Funds (109, 778, 320 and 322). Operating Reserves Fund (109) – It is recommended that the funds reserve position be established at between 15% and 30% of operating expense. This is particularly important given the districts coastal nature, level of infrastructure investment, natural assets and commitment to maintenance and resource protection. Street Lighting Fund (778) – The level of reserves in this fund will be established in such amounts necessary to set aside funding to accomplish lighting projects consistent with the Pelican Bay Community Improvement Plan. Capital Project Funds (320 & 322) – Reserve levels are generally minimal with most budgeted dollars appropriated within defined and active projects. Reserve Policy 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, 473, 474). General: According to the GFOA, it is essential that a government maintain adequate levels of Reserves in its enterprise funds to mitigate current and future risks like revenue shortfalls and unanticipated expenses and to ensure stable services and fees. Collier County Water-Sewer District (CCWSD) Funds 408, 412, and 414: Like a General Fund reserve, a utility system reserve position 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). 11.A.c Packet Pg. 159 Attachment: Fiscal Year 2020 proposed budget policies (8235 : Recommendation to adopt the FY 2020 Budget Policy) Policy Document Page 36 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 $1.3 billion, should maintain a reserve position 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 mai ns. 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 debt reserves required by bond covenants, and/or reserves for growth in the impact fee funds which can be utilized only for growth projects. • Unrestricted Reserves – are available to ensure continuity of services as identified above. Unrestricted reserves in the CCWSD include general contingencies reserves (i.e. “rainy day” significant unforeseen events), cash flow reserves in the event of revenue disruptions, or capital reserves for necessary but unforeseen repair and rehabilitation projects. Recommended Reserve Policy for the CCWSD: At a minimum, the unrestricted reserves should be budgeted within a range of 5% to 15% of budgeted revenues (revenues are stable but may be subject to temporary disruptions from hurricanes or natural disasters), or within a range of 45-90 days of budgeted operating expenses (operating expenses are more volatile given aging utility infrastructure and unforeseen events). Forty-five (45) to ninety (90) days of reserves based on Fund (408), (412), and (414) budgeted FY 2019 operating expenses would range from $17.4 million to $34.7 million. FY 2019 Working Capital resources total $26.2 million representing sixty-eight (68) days of reserves. 11.A.c Packet Pg. 160 Attachment: Fiscal Year 2020 proposed budget policies (8235 : Recommendation to adopt the FY 2020 Budget Policy) Policy Document Page 37 Replenishment of unrestricted reserves that may drop below the targeted floor (45 days) or $17.4 million using FY 2019 numbers would occur in succeeding budget cycles in such amounts as deemed prudent under existing economic conditions as approved by the Board. Solid and Hazardous Waste Management Enterprise Funds 470, 471, 473, and 474: 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 reserv es (fund 471 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 Irma (Category 3, dry storm cash flow exposure up to $100 million) event in the 4th quarter of 2017. As such, the Solid Waste Division should maintain unrestricted reserves of 45 to 90 days of operating expenditures to be used to ensure the maintenance of on-going health and safety 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. Further, due to the magnitude of the impact that Collier County experienced in the Right of Way debris mission following Hurricane Irma, the Solid Waste Division should establish a restricted cash flow reserve equivalent to ten percent (10%) of solid waste revenues, to be used solely to fund the upfront cash needs that accrue with significant natural disasters. This amount should begin to approximate reimbursements that would not be forthcoming from FEMA and the State of Florida (typically twelve and one-half percent (12.5%) of the cost of the debris removal mission). Such a restricted reserve balance beginning in Fiscal 2019 would begin to eliminate the need to borrow from other Enterprise Funds and/or the General Fund while awaiting reimbursements from FEMA and the State. Recommended Reserve Policy for the Solid and Hazardous Waste Enterprise Funds: Forty- five (45) to ninety (90) days of unrestricted reserves based on Fund (470), (473), and (474) budgeted FY 2019 operating expenses would range from $6.7 million to $13.3 million. FY 2019 unrestricted reserves for the Solid and Hazardous Waste Management Enterprise Funds total $9.6 million or sixty-five (65) days of reserves. Replenishment of unrestricted reserves that drop below the targeted floor (45 days) or $6.7M would occur in succeeding budget cycles in such amounts as deemed prudent under existing economic conditions as approved by the Board. Establish a restricted reserve of ten (10) percent of the FY 2019 budgeted charges for services would total approximately $4.4 million. Most likely this restricted reserve will be funded over a three to five-year period. Growth Management Division (GMD) - Planning & Regulation Enterprise Fund 113 and Development Services 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. 11.A.c Packet Pg. 161 Attachment: Fiscal Year 2020 proposed budget policies (8235 : Recommendation to adopt the FY 2020 Budget Policy) Policy Document Page 38 GMD Building Permit Fund (113) Recommended Reserve: Targeted reserves for this fund shall be 18 months of the total budgeted expenses of the current fiscal year. The Growth Management Division/Planning & Regulation Fee Schedule, adopted by resolution of 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 24 months of the total budgeted expenses of the current fiscal year. The extra 6 months of targeted reserves required in comparison to Fund 113 reflects the unpredictable nature and length of processing time for land development related activities. 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. Recommended Policy: To establish sufficient cash flow for the Internal Service Funds, a benchmark of 90 days of the prior year’s working capital is calculated. Contingency reserves represent amounts available for appropriation by the Board to meet any lawful, unanticipated need of that fund. These reserve amounts are limited by Florida Statutes and cannot exceed 10% of the total appropriations of the fund. Collier County is self-insured and is subject to mandatory reserves for losses. Each year an actuarial study is completed for each of the County’s self-insurance funds and the present value of all outstanding losses is determined. This amount represents the first level of restricted reserves for our Risk Management Funds. Within the Risk Management’s restricted reserve balance, the Board has designated $5,000,000 for wind deductible maximum limits coverage for potential catastrophic losses associated with named storm events. A margin based upon a confidence interval is then added to this base amount to assure that the estimate is sufficient to meet future claim payments. The Board of County Commissioners has traditionally adopted, as contained within budget policy, a 75% confidence interval. The Group Life and Health Insurance Fund within Risk Management have additional statutory reserve requirements that are calculated each year and added to the restricted reserve category. The Information Technology Capital Fund’s restricted reserve amounts are determined by the total of committed capital projects they have in progress at the end of the year. Once the projects are completed, any remaining funds may be re-appropriated. 11.A.c Packet Pg. 162 Attachment: Fiscal Year 2020 proposed budget policies (8235 : Recommendation to adopt the FY 2020 Budget Policy) Policy Document Page 39 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. Recommended Budget Policy: Provide the Board with an annual report on potential enterprise rate and fee adjustments in accordance with CPI changes as indicated above and that any rate or fee adjustments be included within the proposed budget for Board consideration. Suggested Scheduling Timeline Decisions Required Staff Adopted Date(s) Establish Budget Submission Dates for the Sheriff, the Supervisor of Elections and the Clerk of Courts. May 1, 2019 by Resolution FY 2020 June Budget Workshops (BCC Agency/Courts and Constitutional Officers Budget Workshops) Thursday, June 20 and if necessary Friday June 21, 2019 FAC Conference is June 11 – June 14, 2019 in Orlando/ Orange County. Adoption of Tentative Maximum FY 2020 Millage Rates July 9, 2019 (Tuesday) Submission of Tentative FY 2020 Budget to the Board Friday July 12, 2019. Establish Public Hearing Dates (see note) September 5, 2019 (Thursday at 5:05 pm) September 19, 2019 (Thursday at 5:05 pm) Note: The School Board has priority in establishing public hearing dates for budgets. The School Board’s final budget hearing is tentatively scheduled for September 10, 2019. 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, 2019 budget submittal dates for the Sheriff, the Supervisor of Elections and the Clerk. 11.A.c Packet Pg. 163 Attachment: Fiscal Year 2020 proposed budget policies (8235 : Recommendation to adopt the FY 2020 Budget Policy) Policy Document Page 40 Comparative Budget Data Provide comparative budget data using FY 2019 adopted budget data (cost and employees per capita based on unincorporated area population) by Agency with Budget Submittals for Similar Sized Florida Counties. Adopted Budget Policy: Counties for comparison purposes include: • Sarasota County • Lee County • Charlotte County • Manatee County • Martin County 11.A.c Packet Pg. 164 Attachment: Fiscal Year 2020 proposed budget policies (8235 : Recommendation to adopt the FY 2020 Budget Policy) Policy Document Page 41 Regular Routine Budget Policies for FY 2020 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%, except for 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 (Fund Balance): 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 Unincorporated Area General Fund, carry forward is maintained to provide cash flow for operations prior to the receipt of ad valorem taxes and other general revenue sources. Proper General Fund carryforward (defined as cash only for purposes of this section) is necessary to meet significant constitutional transfer, 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 69.0% of the total FY 2019 General Fund adopted recurring operating revenues). Carryforward 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 cash 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 in the General Fund should be a minimum of 10% of actual expenditures. At year ending September 30, 2018, actual General Fund cash balance totaled $62,924,200, an increase of $16,367,600 over year ending FY 2017. The FY 2018 year ending cash position represents approximately 17.3% of actual FY 2018 expenses. Indirect Cost Allocation Plan: The policy of charging enterprise, special revenue, and grant funds for support services provided by General Fund departments will be used again in FY 2020. 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. 11.A.c Packet Pg. 165 Attachment: Fiscal Year 2020 proposed budget policies (8235 : Recommendation to adopt the FY 2020 Budget Policy) Policy Document Page 42 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 2019, 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 and one quarter percent (5.25%) of gross receipts of the Water/Sewer District were applied in FY 2019 with an additional .5% added to augment facilities operations. This method and percentage is planned for in FY 2020. One and three-quarter percent (1.75%) of Solid Waste tipping fees were applied in FY 2019 and this method and percentage is planned in FY 2020. 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 ongoing regular capital projects, debt financing and impact fee fund debt loans from the General Fund. The recommended rate is up to the equivalent of 0.3333 mills. (See history below). 1.0000 0.6580 0.5474 0.5426 0.4148 0.3040 0.3713 0.2354 0.3333 0.3530 0.1931 0.3520 0.2495 0.2701 0.2329 0.2135 0.0000 0.2000 0.4000 0.6000 0.8000 1.0000 1.2000 MillageGeneral Fund Capital Equivalent Millage History (FY 1991 -FY 2020) 11.A.c Packet Pg. 166 Attachment: Fiscal Year 2020 proposed budget policies (8235 : Recommendation to adopt the FY 2020 Budget Policy) Policy Document Page 43 The General Fund continues to loan money to impact fee funds to pay their annual debt service payments. This of course is in addition to normal and customary debt service on non-growth revenue bond debt. Loans from the General Fund to the impact fee trust funds began in FY 2005 and the value of all loans made now exceed $103 million. 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. 11.A.c Packet Pg. 167 Attachment: Fiscal Year 2020 proposed budget policies (8235 : Recommendation to adopt the FY 2020 Budget Policy) Policy Document Page 44 Three-Year Budget Projections Ad Valorem Tax Funds (FY 2020 - FY 2022) 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 Projected Millage Rates As a point of reference, the following graph plots the historical General Fund millage rate, as well as tax rates for FY 2020 through FY 2022. These rates do not include any marginal increase which the Board may direct by policy for a specific program or initiative. Millage neutral rather than tax neutral rates for general operations are used for planning purposes considering the belief that taxable value will continue to increase modestly in the future. While the County Manager will be recommending a General Fund millage neutral base operating budget in FY 2020 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 current and 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. 3.8772 3.8772 3.5790 3.1469 3.1469 3.5645 3.5645 3.5645 3.5645 3.5645 - 0.5000 1.0000 1.5000 2.0000 2.5000 3.0000 3.5000 4.0000 4.5000 General Fund Millage History and Recommended Millage Neutral Tax Rates (FY 2005 to FY 2022) 11.A.c Packet Pg. 168 Attachment: Fiscal Year 2020 proposed budget policies (8235 : Recommendation to adopt the FY 2020 Budget Policy) Policy Document Page 45 Diversifying the County’s tax base means in large part attempting to reduce risk. Risk of an economic downturn which surely will stagnate resources and organizational risk where the risk of stagnate resources exponentially impacts operations and capital resource allocation. Significant future resources must be devoted to capital maintenance in numerous areas. We have addressed our future heavy equipment, public safety ambulance and general vehicle replacement needs. But there remains substantial asset maintenance and replacement needs, not the least of which is general governmental building maintenance, park’s system infrastructure, constitutional officer capital requirements and other general governmental capital functions like, information technology upgrades, accounting system replacement, and other soft infrastructure needs. Then there is the issue of maintaining existing storm-water infrastructure which for FY 20 will be funded through general governmental appropriations. Risk reduction and revenue diversification is certainly not achieved under a tax policy that reduces a general, flexible revenue source like property taxes which can and will be used to offset the funding needs stated above when a very narrow and statutorily restricted new revenue source like a storm-water utility fee is introduced. The following tables depict the respective millage neutral tax rates for FY 2020, 2021 and 2022 as well as additional ad valorem dollars which could be raised under certain increasing tax base assumptions. Again, the table does not account for any marginal rate increase which may be earmarked by BCC policy for a specific program or initiative or for that matter any Board policy decision reducing tax rates. General Fund FY 19 Adopted and Recommended Operating Millage Neutral Millage Rates Additional Budgeted Ad Valorem Revenue Projection Each Year FY 19 3.5645 FY 20 3.5645 $12,587,900 @ 4.0% TV Increase FY 21 3.5645 $9,818,500 @ 3.0% TV Increase FY 22 3.5645 $6,742,000 @ 2.0% TV Increase For Collier County to continue providing high quality best value services; continue to address infrastructure maintenance; replace public safety and general governmental equipment and vehicles; maintain its reserve and cash positions pursuant to policy and representative of an investment quality credit rated organization, it is prudent to capture those additional ad valorem dollars generated by increasing taxable values. Further, tax policy should continue to account for the County’s effort to cash flow expenses connected with Hurricane Irma due to the significant delay in receiving FEMA reimbursements which may extend late into FY 2019 and likely into FY 2020 – a full 24 to 30 months post event. This delay will cause capital projects to be postponed and require the General Fund budget to appropriate structural cash flow transfers should it become necessary. Failure to capture additional property tax dollars resulting from increasing taxable values will jeopardize service levels and make it difficult to maintain the extraordinary infrastructure investment which this community enjoys. As an example, in FY 2020, the projected rolled back rate within the General Fund is $3.5115 which would raise $4,866,300 less than millage neutral or levying the current planning operating rate of $3.5645. While the FY 2020 estimated rolled back rate would produce $7,721,500 more than the FY 2019 levy due to new construction taxable value and a higher taxable value base, this is not a sustainable model going forward knowing the level of investment required to simply maintain our general governmental assets, and fund Sheriff operations let alone expand services and facilities based upon AUIR requirements and servicing the needs of an expanding population. 11.A.c Packet Pg. 169 Attachment: Fiscal Year 2020 proposed budget policies (8235 : Recommendation to adopt the FY 2020 Budget Policy) Policy Document Page 46 The projected millage rates assume that the tax base will increase 4.0% in FY 2020 (the 2019 tax year). Taxable value in FY 2021 is projected to also increase 3%. The Property Appraiser will provide preliminary taxable value estimates for FY 2020 on June 1, 2019. Actual and assumed changes in County taxable values are as follows: 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 2020 Significant Expense Assumptions A millage neutral operating budget, again assuming no marginal adjustment for special policy initiatives of the BCC, 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 – $1,200 base salary increase representing an average of 2.2% based upon the average agency salary. • 2% attrition rate on regular salaries assumed in the County Manager’s Agency. • Motor pool replacement dollars for continued regular routine ambulance replacement. • $5,000,000 for general County Manager Agency building maintenance. • $5,000,000 allocation to a new long-term asset maintenance reserve • New voting machines totaling $350,000. • Continued Social Service and Mental Health Funding. • General Fund loans to the impact fee trust funds planned at $2,799,000 representing a reduction from last year’s budget allocation. • Ahead of the Board’s guidance on the proposed Utility and Fee, storm-water capital funding increased $1,000,000 to $3,500,000 for continued countywide storm-water projects and storm-water operations. • General Fund transfer dollars supporting road construction and maintenance funded at $9,555,800, an increase of $1,000,000 over the FY 2019 adopted budget. 19.9% 25.4% 7.2% -4.7% -11.0%-12.2% -5.2% 0.5% 3.7%6.5%8.5%10.0%8.4% 5.6%4.0%3.0%2.0% -15.0% -10.0% -5.0% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22MillageHistorical and Projected Changes in Collier County Taxable Values (FY 2005 -FY 2022) 11.A.c Packet Pg. 170 Attachment: Fiscal Year 2020 proposed budget policies (8235 : Recommendation to adopt the FY 2020 Budget Policy) Policy Document Page 47 • General Fund support of EMS Operations established at $18,288,900 – up 1.5% from last year reflecting recurring costs to equalize response times county-wide plus costs to operate new facilities. • Full support for Transportation Operations from the General Fund (001) exclusively. Continue transfer of dollars from the General Fund to the Motor Pool Replacement Fund for Road and Bridge vehicles. • Airport capital grant match funding totaling $1,466,700. • Continued corporate IT capital funding totaling $738,000. • Initial cash and carry deposit of $1,000,000 as the process of evaluating a new accounting system begins. • Capital funding for Sheriff Facilities totaling $1,000,000. • Mandates to be absorbed if possible within operating budgets, including Constitutional Officers. Significant Revenue Assumptions • FY 2019 ad valorem tax revenue forecast is 96% of actual taxes levied. FY 2019 forecast totals $303,207,500 – a reduction of $11,566,100 from the adopted budget. Collections are within the 5% statutorily budgeted revenue reserve. • A millage neutral position without any marginal increase which the BCC may apply for a specific program or initiative for FY 2020 produces a levy of $327,284,300. • Sales tax revenue sharing forecast for FY 2019 is projected conservatively at $41,000,000 which represents no change from the adopted budget. FY 2020 budgeted revenue is also planned at $41,000,000 which is no change from the adopted 2019 budget. Conservative revenue estimates are essential to achieving the required beginning cash balance position. • State Revenue Sharing forecast for FY 2019 at $11,000,000 is also projected conservatively at budget. FY 2020 budgeted revenue is planned at $11,000,000 which is no increase over the adopted 2019 budget. • Property taxes, sales taxes and revenue sharing deposited in the General Fund represent 93% of all recurring operating revenue which excludes carry-forward (fund balance). • Constitutional Officer turn-back is a conservative budget estimate and for FY 2020 $6,600,000 is planned. Turnback to the General Fund at year ending 2018 totaled $8,806,000 - $2,206,000 over forecast. • Measures to maintain beginning cash balance at between $55 million and $72 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 for FY 2020 is planned to increase by $250,000 to $1,000,000 indicative of consistently higher investment returns on cash balances. EMS Fund EMS Operations Fund (490) is another fund that impacts the General Fund. Typically, this ad valorem support in recent years accounted for 50% to 55% of total EMS operating revenues. The percentage varies given the instability in fee revenue collections and any Board policy directives. Historical and projected General Fund support of EMS operations by fiscal year is as follows: 11.A.c Packet Pg. 171 Attachment: Fiscal Year 2020 proposed budget policies (8235 : Recommendation to adopt the FY 2020 Budget Policy) Policy Document Page 48 Use of General Fund dollars to support this life/safety function has and continues to be a priority. Road Construction Program Board approved budgets have recently supplemented funding for the transportation network with general governmental dollars transferred from the General Fund to Transportation Capital Fund (310). This transfer is sized annually based upon the anticipated growth in taxable value and the recurring need to fund other strategic capital commitments. Over the past four (4) fiscal years this commitment has averaged $9.5 million annually. With taxable values projected to increase modestly for FY 2020, the General Fund contribution to road construction and maintenance is expected to total $9.5 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 to protect this important investment. Capital obligations necessitated by state or federal agreement, like JPA’s and DCA’s will be funded. FY 2021 A millage neutral operating budget in FY 2020 with an increase of 3% in taxable value will continue to allow for priority funding of public safety capital initiatives and general governmental capital programming referenced in this document. This of course is in addition to the many new initiatives and program enhancements, Board directed or otherwise required to support an expanding service base, all of which compete for limited general governmental resources. In addition to annual inflationary cost increases, the following items were included in the FY 2021 budget analysis: $10.9 $9.2 $11.0 $13.3 $12.0 $10.7 $11.3 $12.8 $11.3$11.6 $13.3$13.8$15.0 $17.6$18.0$18.3$18.6$18.8 $0 $2 $4 $6 $8 $10 $12 $14 $16 $18 $20 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22MillionsGeneral Fund Support of EMS (FY 2005 -FY 2022) 11.A.c Packet Pg. 172 Attachment: Fiscal Year 2020 proposed budget policies (8235 : Recommendation to adopt the FY 2020 Budget Policy) Policy Document Page 49 • Maintain general governmental capital projects funding in an equivalency up to 0.3333 mills. • Maintain General Fund support of EMS. • Contingency reserves are maintained at policy. • Maintain General Fund road subsidy. • Maintain General Fund support for park system maintenance and replacement • Maintain General Fund support for Transportation Operations expenses. • Continue annual contribution to the long-term asset maintenance reserve. In summary, the FY 2021 analysis signals caution especially when critical variables like taxable value, market conditions and general revenues are difficult to predict. Pursuing a millage neutral operating budget in FY 2021 without a sufficient budgeted beginning fund balance would likely result in a $9.9 million budget planning deficit as depicted in the trend analysis below. Of course, regular annual budget management to eliminate any actual equity reduction would occur in real time. FY 2022 A millage neutral operating budget in FY 2022 coupled with a projected 2% 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 2022 budget analysis: • Maintain general governmental capital projects funding in an equivalency up to 0.3333 mills. • Maintain General Fund support of EMS. • Contingency reserves are maintained at policy. • Maintain General Fund road subsidy. • Maintain General Fund support for park system maintenance and replacement • Maintain General Fund support for Transportation Operations expenses. • Continue annual contribution to the long-term asset maintenance reserve. The General Fund Trend Analysis model shown below is intended to offer a picture of very conservative revenue projections against operating and capital expenses which will likely be faced in the out years. Of course, financial staff manages the budget in real time and will mitigate unplanned equity reductions. But, imagine a scenario where major revenue sources like property taxes or state shared revenues were cut or reduced. The obvious impact would be subsequent expense reductions possibly coupled with new adopted revenue sources and thus the need for budget flexibility. 11.A.c Packet Pg. 173 Attachment: Fiscal Year 2020 proposed budget policies (8235 : Recommendation to adopt the FY 2020 Budget Policy) Policy Document Page 50 General Fund Trend Analysis 11.A.c Packet Pg. 174 Attachment: Fiscal Year 2020 proposed budget policies (8235 : Recommendation to adopt the FY 2020 Budget Policy) Policy Document Page 51 Unincorporated Area General Fund (111) MSTD General Fund (111) Millage History and Projected Millage Rates As a point of reference, the following graph plots the historical MSTD General Fund (111) millage rate, as well as the policy proposed millage rate for FY 2020 through FY 2022, which includes the proposed marginal millage rate increase to continue the landscape median capital program. Results of Unincorporated Area General Fund Analysis For FY 2019, the Board of County Commissioners maintained the Unincorporated Area General Fund millage rate at $.8069 or that rate levied in FY 2007 and earmarked the marginal increase above the operating millage rate of $.7161 or $.0908 to continue the median landscape capital program and allocate recurring dollars for maintenance of the landscape investment. Due to escalating costs, constructing capital medians deferred during the recession is programmed to cease in FY 2020 and the program will transition to maintaining the landscape assets constructed. The table below depicts the marginal dollar increase which will be devoted to general operations and general government capital as well as that component allocated toward continuing the median landscape program. Incremental ad valorem dollars obtained through tax base increases under the current $.7161 operating millage rate will fund recurring operations and provide capital transfer dollars toward maintaining the road network, storm-water system, and community parks. The marginal rate increase to $.8069 or $.0908 will be used exclusively to fund median landscape maintenance going forward. The Board should also note the magnitude of our future maintenance and asset replacement responsibility and dedicate resources gained through an y tax base increase assuming a millage neutral tax rate toward this purpose. 0.8069 0.8069 0.8069 0.6912 0.6912 0.7161 0.8069 0.8069 0.8069 0.8069 0.8069 0.6000 0.6500 0.7000 0.7500 0.8000 0.8500 MillageUnincorporated MSTD General Fund (111) Millage History and Recommended Millage Neutral Tax Rates (FY 2005 to FY 2022) 11.A.c Packet Pg. 175 Attachment: Fiscal Year 2020 proposed budget policies (8235 : Recommendation to adopt the FY 2020 Budget Policy) Policy Document Page 52 Unincorporated Area General Fund FY 19 Adopted and Recommended future Tax Rates Additional Budgeted Ad Valorem Revenue Projections Each Year – Operations and General Capital Additional Budgeted Ad Valorem Revenue Projections Each Year – Median Landscape Program FY 19 0.8069 FY 20 0.8069 $1,569,200 @ 4.0% TV Increase $199,000 @ 4.0% TV Increase FY 21 0.8069 $1,223,900 @ 3.0% TV Increase $155,200 @ 3.0% TV Increase FY 22 0.8069 $840,500 @ 2.0% TV Increase $106,600 @ 2.0% TV Increase For Collier County to continue providing high quality best value services; continue to address infrastructure maintenance; replace equipment and vehicles; maintain its reserve and cash positions pursuant to policy and representative of an investment quality credit rated organization, it is essential to capture those additional ad valorem dollars generated by increasing taxable values as shown above. 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 2020, the projected rolled back rate within the Unincorporated Area General Fund is $.7996 which would raise $415,900 less than levying the current millage rate of $.8069. While the rolled back operating rate would produce $1,153,300 more than the FY 2019 budgeted levy due to new construction taxable value and a higher taxable value base, this is not a sustainable model going forward knowing the level of expanded funding commitment required to operate and maintain the County’s current and future capital infrastructure investment enjoyed by our Unincorporated Area residents and visitors. Additionally, levying the rolled back rate when taxable values drop means the rolled back rate will increase and of course the temptation will be to revert to the millage neutral rate levied in the prior year which will raise even less property tax revenue. FY 2020 The FY 2020 budget projection is based upon a 4.0% tax base increase. Property taxes and the state shared communications services tax represent over 97% of the budgeted operating revenue (less transfers) within the Unincorporated Area General Fund (111). Once again, changes to distribution and structure of the communication services tax could be discussed as part of any state legislative budget proposal. Also, there is the assumption that no legislation will be passed further eroding a local government’s ability to set and raise ad valorem taxes. Capital transfers from the Unincorporated Area General Fund have grown substantially since FY 2014 and for FY 2020 $8.9 million is programmed representing a $4.8 million decrease over last year. These transfer dollars are programmed for Parks, Transportation, Storm-Water infrastructure, landscaping capital and heavy vehicles and equipment. The reduction is attributable to funding one-time turf conversions in FY 2019 which was not re-budgeted in FY 2020 and reducing substantially the landscape capital transfer in favor of maintaining existing built medians beginning in FY 2020. 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. The Board’s ultimate decision on whether to establish a storm-water utility and fee will impact budget planning for FY 2020 and beyond. Depending upon Board established tax rate policy, the planned $3.5 million transfer for storm-water programming could be re-prioritized to increase reserves; support much needed transportation network improvements; increase contributions to park capital projects and make a final one-time contribution to replace road and bridge heavy equipment deferred during the recession. This model is not sustainable under a rolled back millage 11.A.c Packet Pg. 176 Attachment: Fiscal Year 2020 proposed budget policies (8235 : Recommendation to adopt the FY 2020 Budget Policy) Policy Document Page 53 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. FY 2021 If taxable values increase by 3.0% in FY 2021, a millage neutral operating budget coupled with a reduction in beginning fund balance could result in a potential budget planning deficit of $3.5 million as depicted within the preceding trend analysis. This analysis assumes a state communication services tax reduction and substantial expense side increases to support landscape median maintenance and capital transfers. The model presents conservative revenue projections and aggressive expense projections in the maintenance and capital areas which results in a continued erosion of the funds cash position. The model is certainly not sustainable and real-time budget management would always ensure that any equity erosion beyond that planned would be curtailed. FY 2022 Continuation of millage neutral operating budget into FY 2022 under a 2.0% 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 depicted in the model. Increased funding for median landscape maintenance is anticipated. For planning purposes and assuming continued decline in beginning budgeted fund balance, a deficit of $6.5 million is depicted. Absent real-time budget management the model depicts a total fund equity loss from FY 2019 through FY 2022 totaling $13.7 million. The Unincorporated Area General Fund Trend Analysis model shown below is intended to offer a picture of very conservative revenue projections against operating and capital expenses which will likely be faced in the out years. Of course, financial staff manages the budget in real time and will mitigate unplanned equity reductions. But, imagine a scenario where major revenue sources like property taxes or state shared revenues were cut or reduced. The obvious impact would be subsequent expense reductions possibly coupled with new adopted revenue sources and thus the need for budget flexibility. 11.A.c Packet Pg. 177 Attachment: Fiscal Year 2020 proposed budget policies (8235 : Recommendation to adopt the FY 2020 Budget Policy) Policy Document Page 54 Unincorporated Area General Fund Trend Analysis 11.A.c Packet Pg. 178 Attachment: Fiscal Year 2020 proposed budget policies (8235 : Recommendation to adopt the FY 2020 Budget Policy)