Council Memo

Report on FY2020 City Budget for Activity through December 31, 2019.




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Document Comments

Recommended Action: This item is for presentation only. No formal action will be taken.


Item Summary


This is a budget report for Fiscal Year 2020 of revenues and expenditures through December 2019.  The upcoming budget process for Fiscal Year 2021 will also be discussed.

Meeting History

Feb 25, 2020 1:00 PM  City Council Study Session Meeting
draft Draft

Finance Director Mark Woodfill provided a presentation regarding the status of the FY20 mid-year budget.

Operating Expenditures:

* General Fund (Public Safety, Parks, Library & Government Functions) - 44%

* Restricted Fund (Streets, Bed Tax & Grants) - 17%

* Enterprise Fund (Water, Wastewater, Solid Waste, Airport & Golf Course) - 39%

FY20 Operating Budget:

* Police - 33.3%

* Fire - 26.6%

* PSPRS Unfunded Liability Payment - 20.1%

* Recreation Services - 8.8%

* General Government - 5.8%

* Library - 5.4%

Year to Date (Dec. 31, 2019) Expenditures:

* Operating Budget:

- General Operations $42,469, 937 (45.5% of budgeted amount)

- PSPRS Unfunded ARC $2,374,080 (39.8% of budgeted amount)

- PSPRS 0.75% Tax $6,440,439 (50.1% of budgeted amount)

- Grant Contingency $4,100,000

- Bond Refunding $16,337,310

* Capital $17,562,340 (16.9% of budgeted amount)

* Total Budget $85,184,106 (38.7% of budget)

There has been strong sales tax growth overall, and staff is able to project out approximately 18 months from where we currently are. Bed tax continues to hold strong as well.

FY21 Budget Considerations:

* Funding for Airport Capital Projects

* Continue funding PSPRS annual required contribution from operating funds

* Funding employee market compensation plan

* Funding options for unsewered areas

* Legislative attacks on cities ability to continue taxing certain transactions

* Addressing city service areas improvements, using outcome based budgeting

* Property tax levy

Mr. Woodfill provided an overview of Council's option for a Truth in Taxation process to adjust a property tax levy option and reviewed the timeline for such a process.

Mayor Mengarelli commented that it is good to see the revenue up and see that Prop443 is helping with the unfunded liability in such a positive way. He asked Mr. Woodfill to address the city's contingency or "rainy day fund" moving forward.

Mr. Woodfill stated that Council's policy is to have 20% operating revenues in general fund as contingency and that while this is not a huge amount it is higher than it has been in the past and leaves room for ongoing services to be provided to the residents. In general Arizona is a difficult state to save in because most of a municipalities revenue comes from sales tax and the like which can be more limited in economic downturns, but a 20% contingency is adequate and held us through during last significant recession along with other minor cuts.

Councilman Blair asked if it would be possible to have funding for compensation study as a placeholder so that any salary changes recommended for staff after the completion could be put into effect in the FY21 budget year and if that would work for funding toward addressing unsewered areas in the city as well.

Mr. Woodfill commented that Public Works staff is currently looking into options for funding toward the unsewered areas issue and those will be presented in upcoming budget workshops. Additionally, he stated that they plan to bring in the existing compensation plan and the usual 3% increases, as well as any additional increases through allocations. He reminded Council that it would also be possible to use WIFA funding toward addressing the unsewered areas.

Mayor Pro Tem Orr asked if staff needs direction on the potential of a property tax levy and commented that she would not vote to enact that given the higher sales tax and additional citizens are already paying toward the Prop443 funds.

Councilman Goode echoed Mayor Pro Tem Orr’s comments regarding the property tax levy and stated that he would not support an increase. He also commented that he has looked at other surplus contingencies and 20% is considered quite adequate and that if there is a drop in revenue for a business cycle there would be enough to deal with that but a technical recession would be much more difficult. There are a lot of construction projects happening now, and he asked where we are projected to be at closer to the end of the fiscal year with that. Finally, Councilman Goode stated that he feels it is important we look at options for improvements in working with local franchises and agencies to ensure there are not project delays.

Mr. Woodfill commented that staff will be addressing funding for projects toward the end of the year and reminded Council that there are funds which are encumbered to projects that have not yet been expended.

Public Works Director Craig Dotseth echoed Mr. Woodfill's comments and reiterated that currently we are at approximately 52% of the budget for necessary projects, have two currently out to bid and a few more coming as well. Public Works is working with a number of partners in order to get the projects completed on time and on budget.

Councilman Sischka asked about the option to combine multiple funds to help cover costs for brining residents onto city water and sewer.

Mr. Woodfill stated that they are still waiting to get a better idea of where the water and wastewater funds are at before looking at specific options, but said that staff can appropriate funds as directed as long as it within the guidelines of accountability for finance.

City Manager Michael Lamar commented that the key is freeing up funds where necessary without recombining the funds.

Mayor Mengarelli stated that he has heard the consensus of Council seems to be a no on the truth in taxation, property tax levy option.

Mr. Woodfill agreed and reviewed the upcoming budget process through July, including workshop and public hearings

* Operating Budgets & Personnel Requests - due February 28th

* Capital/Grant Requests - due March 6th

* Personnel & Capital Request Review Meetings - April 13-24

* Council Budget Workshops - May 19 & May 26 (if necessary)

* Adoption of Tentative Budget - June

* Public Budget & Notice of Hearing - June

* Final Hearing & Adoption of Final Budget - June

Public Comment:

Howard Mechanic, member of the public, addressed Council regarding combining water/wastewater funds and stated that he believes under state law the only way to transfer funds is if there is a legitimate way for that fund to be spent and based on what the city is considering in having additional fees for water outside of city limits that should go to unsewered projects because it is creating excess funds.

Mr. Woodfill commented that state law relates to setting of rate and /requires separation of water and sewer rates and user fees, but that there is nothing in state law that would prevent allocation of funding as necessary.