BUDGET MESSAGE
August 13, 2007
City of Lewiston, Idaho The Honorable Mayor Jeffrey G. Nesset, Members of the City Council and Citizens of the City of Lewiston P.O. Box 617 Lewiston, Idaho 83501
Honorable Mayor, Council Members and Lewiston Residents:
As City Manager, I am pleased to submit for your consideration the preliminary budget for Fiscal Year 2008. This budget represents the combined efforts of City staff in developing a financial management plan for providing basic services to the City, and implementing organizational goals and objectives established in conjunction with the City Council. The budget is the product of multiple work sessions of the Council and staff oriented toward balancing available resources with the fiscal requirements of maintaining services and the City’s capital infrastructure.
FISCAL PLANNING ACTIVITIES
Preparation of the 2008 budget was generally more efficient than the prior fiscal year since all City Council members and staff, particularly Council and I, were not completing our first budget for the City. Familiarity with processes, challenges, and opportunity lead to a positive budget process.
In preparing the FY 2008 Budget, the following fiscal planning tools were employed by the City Council to determine how limited funds would be appropriated among the various programs and objectives in the upcoming fiscal year:
City Strategic Plan: Historically, the City has used its Strategic Plan to establish goals and objectives, and has updated the plan annually. During this fiscal year, the Council devoted efforts to revise the plan and its format. Strategic planning was supplemented with visioning exercises to refine and prioritize programs and objectives contained in the FY 2008 Budget.
Five-Year Financial Plan: This document establishes a five-year financial forecast for the City for operating capital investment based upon trended assumptions to project the City’s long-term fiscal position.
Two-Year Budget: The City utilizes a multi-year budget model which marries the Strategic Plan and Financial Management Plan into a two-year working budget document. FY 2008 is the first year of the next two-year budget cycle. Historically, the two-year budget has been adopted every other year. Recognizing that an annual budget is still required regardless of the two-year model, commencing with the 2008 fiscal year, the two-year budget will be updated on an annual basis. The second year shall serve as a shadow of the current fiscal year containing a higher level of detail than what is found in the Financial Management Plan.
Citizen’s Survey: Historically, the City has conducted a survey of residents regarding satisfaction with City services and other policy considerations impacting the budget. A citizen’s survey was conducted in the spring of 2007, using a modified format from that used in past years. Notable comments contained in the report include the following:
1. “It is safe to state that citizens of Lewiston do not support any reduction in services, even if it means there will be no lowering of taxes or avoiding increased taxes. Considering the stated preferences for additional taxes if needed for programs, it would appear citizens are not in any mood to endure service cuts of any kind.”
2. “As public administrators, we have consented to providing more services for less for so long that there is no perception of limit to the practice.”
CURRENT FISCAL CONDITIONS AND CHALLENGES
As an outcome of the City Council’s goal setting during the budget process, the City Council identified the following areas of emphasis or new initiatives entering the 2008 fiscal year:
While a number of other priority areas were also identified, the listed areas carried direct budget impacts.
Trying to fund new initiatives is often challenging, particularly when new revenue sources are not provided, or if funding is not available within an existing budget. Compounding the challenge for the City entering the 2008 fiscal year was the fact that the fiscal management plan carried a projected deficit of $1,405,680. The funding needed and projected for the Council’s new initiatives totaled $755,000, resulting in a potential combined deficit of $2,160,680. At the same time, the City’s fiscal policy allowed for an increase in property tax revenue (2% plus growth) which would generate approximately $412,000, far below what was needed to fully fund current service levels and new initiatives.
In order to fully fund the budget, the following assumptions are incorporated in FY 2008 and will be implemented subsequent to adoption of the budget:
1. The General Fund will no longer purchase hydrants using property tax to improve the LOID system, resulting in a $34,000 savings.
2. $10,000 of cemetery perpetual care revenue will be appropriated for current year’s maintenance.
3. Recreation fees will be increased to generate an additional $50,000 in revenue.
4. EMS fees will be increased by approximately 8 percent to generate $250,000 in additional revenue.
5. An additional $100,000 in fleet reserves will be appropriated.
6. $632,000 savings due to the refinancing of the police pension unfunded liability will be appropriated.
7. The tax levy will be increased an additional 1 percent as allowed by law to generate $130,000 and actual new growth will be $199,557; an increase of $49,557 over original assumptions.
8. $359,170 in fund balance will be appropriated in the General and Transportation Funds.
In return, funding to maintain existing programs or new initiatives will be appropriated as follows:
1. $150,000 of additional investment in community park to leverage $408,000 in federal funds and $250,000 in School District matching funds – 2008 total is $908,000.
2. $172,000 of additional funds for sidewalk construction ($102,000 grant proceeds and $70,000 City funds) – 2008 total is $202,000.
3. $45,000 of additional funding to maintain current levels of public transit service, including the purchase of a new bus – 2008 total is $115,750 (non-grant revenue/local contribution).
4. $30,000 to initiate the National Main Street Program to promote downtown redevelopment and a healthy downtown.
5. $50,000 to implement the Valley-wide Tourism Plan.
6. $10,000 of additional funding for Valley Vision and the Community Economic Development Association.
7. $200,000 of additional funding for street and transportation improvements – 2008 total is $1,056,000. This is considerably less than the additional $850,000 recommended.
PROPERTY TAXES
The general area of greatest interest to the public when considering the City budget is usually taxes, as opposed to outcomes. In Lewiston, the discussion of taxes usually focuses on the growth in the tax levy, or what the City collects from taxes. While the percentage of increase in the levy may be one benchmark, it is not always the best indicator of taxes or tax incident. A growth in levy is often offset by a growth in assessed value or homeowner’s exemption, which may actually result in a lower tax rate. As such, the tax levy and projected tax rate for FY 2008 compares to FY 2007 as follows:
* The available foregone tax balance is approximately $1,300,000.
Projected 2008 tax impacts compare to the 2007 fiscal year as follows:
2007
2008
Based on assessed values as estimated by County Assessor. Homeowners exemption increasing from $75,000 to $89,325 and no change in individual assessment values.
It is estimated that a home with a $200,000 residential assessed value in 2007 could increase in assessed value by approximately 12 percent, or $24,000, prior to an actual tax increase for 2008.
As a budgetary footnote, the County is expected to increase their levy 3 percent. While the School District’s levy is fixed, property taxes will increase as assessed values increase, which on average is approximately 12-15 percent.
FUND BY FUND ANALYSIS AND HIGHLIGHTS
The City utilizes a fund-based budget and accounting system. Under this system, various activity and service components are segregated based upon the revenue source and functional service activity. Individual fund highlights are as follows:
TAX SUPPORTED FUNDS
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