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FY 2023-24 Budget Workshop #2
City Council Conference Room
Monday, March 20, 2023 | 4:00 pm
FY 2023-24 Budget Theme
Innovation at Work
Our Brand
A safe, diverse, equitable and inclusive
community that connects people, chooses
innovation and inspires excellence
05.
Key Budget
Dates and
Questions
01.
FY 2023-24
Budget Overview
and General Fund
Operating Budget
Update
04.
Assessed
Valuation and
Property Tax
Update
02.
Proposed 5-Year
One-time
General Fund
Balance Forecast
03.
Proposed
10-Year Capital
Improvement
Program (CIP)
Agenda
Chandler Budget Process Timeline
FY 2023-24 starts 7/1/2023.... Another exciting year in Chandler’s history!
Strategic Framework Guides
Our Decision Making
•Being the Most Connected City
•Being a Leader in Trust and Transparency
•Maintaining Fiscal Sustainability
•Attracting a Range of Private Sector Businesses
•Fostering a Contemporary Culture that
Embraces Unity
•Being Safe and Beautiful
Strategic Policy Goals
Focus Areas
•Economic Vitality
•Innovation and Technology
•Mobility
•Neighborhoods
•Quality of Life
•Good Governance
Recent Media Headlines
Chandler “Headlines”
•Strike three- Softball umpire agreement increases 65.2%
•Landscaping costs trimming up the budget, contract costs up
56.1%
•Water Meter costs flowing higher, contract price up 83.3%
•Inflation continues to clean up, as water and wastewater
treatment chemical contract costs increase 80.6%
FY 2023-24 Budget Overview
and General Fund
Operating Budget Update
FY 2023-24 Budget Overview Increase Drivers (all funds)
Revenues
• Increased revenues to reflect actual economic environment
• Increases are coming from continued development, inflation and strong spending
• Increased State Shared revenues with updated projections
Expenditures
• Inflation increasing operations and capital budgets
• Personnel costs increasing to invest in City workforce and retain employees; market, merit,
and healthcare
• Capital projects increased to address aging infrastructure, bond authorized projects, and
grant funded projects
• Infrastructure projects to support Intel expansion (FY 2022-23 $148M & FY 2023-24 $30.5M)
Grants
Debt
• Includes $20M in American Rescue Plan Act (ARPA) funds included in FY 2023-24 budget as
carryforward
• Continued focus on Grant opportunities and having “shovel ready” projects that may qualify
• Additional one-time payments to continue planned paydown of PSPRS unfunded liability
Major Ongoing Expenditures
•Personnel (75% of budget)
•O&M to support services
Major Revenues
•51% Transaction Privilege Tax
•34% State Shared Revenues
General Fund Forecast
Higher Revenues AND Higher Expenditures
Drivers
•Strong economy / Inflation
•High development (i.e. Intel,etc)
Resetting ongoing/one-time
•Sustainable portion must
support higher expenditures
Revenues
Ongoing vs. One-Time
Expenditures
Ongoing vs. One-Time
Current Budget
•Did not include Intel impacts
•Anticipate to be over budget
Drivers
•Competitive wages & benefits
•High inflation on goods &
services (+25 to 100%)
Maintain services vs. new
•Spending more to just maintain
•O&M for new CIP committed
Current Budget Impacted
•High inflation and slow supply
chain for capital & operating
Ongoing/One-Time Local Sales Tax (TPT) Revenues
51% of General
Fund revenue
Current revised
revenues include
inflationary impacts
to revenues (Phoenix
area about 10% impact)
Sales tax revenues
fluctuate due to
economic volatility,
including increased
development
Potential Legislative Cuts of $25M threaten 2 categories of ongoing TPT
State Shared Revenues (in Millions)
34% of General Fund
JLBC Urban Revenue Sharing (Income Tax)
distribution projection went from 15% to 18% to
cities FY 2022-23, but residential flat tax will not be
realized until 2 years later (FY 2024-25)
with a gradual step down in the rate.
Corporate flat tax may be next.
FY 2023-24 Ongoing Decision Package
Recommendations (All Funds)
All Funds
$16.9M in ongoing requests
$9.5M recommended
*$8.8M net of offsets
General Fund (GF)
$12.7M in ongoing requests
$6.6M recommended
*$6.1M net of offsets
Significant Enhancements
Contract increases for services
and goods
Maintenance costs related to
new capital projects
Public Safety Personnel Police
and Fire
Continued investments in
cybersecurity
Costs associated with new
personnel (vehicles, IT, etc.)
Neighborhoods funding (Court
and other Navigators and Code
Inspector)
Surface water delivery increases
Good Governance:
Human Resources Principal Analyst to address recruitment and
employee relations (1)
FY 2023-24 Workforce Needs
FY 2022-23 Adopted 1,727 FTE + 28 New FTE Proposed for FY 2023-24
Public Safety:
Additional Fire Fighter Rover positions (8 FTE) to offset overtime needs,
better allow for staffing breaks, and meet staffing demands
Continue fully funding over-hires Police (15) including 5 as Investigative
Specialists and Fire (9) including 4 to assist in Peak time coverage to
supplement staffing and prepare for upcoming retirements
Additional civilian Police resources to support sworn Officers
(2 FTE - 1 Business Systems Support Analyst and 1 Senior Systems
Support Specialist)
Addition of Polygraph Examiner (1 FTE) as new civilian position to allow
sworn position to be repurposed
Addition of Public Information Officer (1 FTE) as new civilian position to
allow more flexibility for sworn officers and building social media
brand to enhance recruitment and community outreach
Addition of Detention Supervisor (1 FTE)
School Resource Officer (1 FTE), grant funded
Quality of Life:
Athletic field groundskeeper team (5 FTE) to support and enhance
new and existing fields at Tumbleweed Park
Economic Vitality:
Tourism Marketing Coordinator (1 FTE)
Workforce Development Project Manager to address workforce
needs in partnership with the business community as one-time
funded pilot program
Information Technology:
Resources to address large number of new projects, maintenance
of existing systems, and mobile environment (2 FTE - 1 Security
Administrator, 1 IT Programmer Senior Analyst)
Neighborhoods:
Resources to enhance neighborhood outreach, some of which has
been funded by federal dollars (5 FTE) (2 Community Navigators,
1 Community Resource Specialist, 1 Housing Specialist, and
1 Commercial/Residential Code Inspector)
Addition of a Support Court Navigator as one-time funded
Maximized reallocations & repurposing of existing positions prior to adding positions to address needs
FY 2023-24 Estimated Wage Changes
1% Values of Merit and Markets – Input to See Impact
General Fund Ongoing
Impact
%
FY 2023-24
Ongoing
FY 2024-25
Ongoing
Total
Wages and Benefit Values
Generals Merit %
1
647,000
152,000
799,000
Generals Market %
1
1,034,000
-
1,034,000
Public Safety Merit %
1
197,400
106,000
303,400
Public Safety Market %
1
708,000
708,000
Total Personnel Increases
2,586,400
258,000
2,844,400
Year 1
Year 2
Total
Generals Merit %
647,000
152,000
799,000
Generals Market %
1,034,000
1,034,000
Public Safety Merit %
197,400
106,000
303,400
Public Safety Market %
708,000
708,000
Total
2,586,400
258,000
2,844,400
1% Values of Merits and Markets
General Fund Ongoing Forecast
Total revenues change with economy, as ongoing increases at a gradual pace. Estimating modest wage
changes years 2-5 causes ongoing revenues to potentially fall short based on current revenue assumptions.
Note: Ongoing expenditure forecast includes FY 2023-24 decision package adds, estimated wage & benefit changes, O&M related to CIPs, ARPA funded
Police positions converting to General Fund in FY 2024-25, $12M in PSPRS employer contribution reductions, $2M/year in estimated DP adds/inflation,
and self-insurance fund contribution increases.
Potential Ongoing & Other Legislative Impacts
to FY 2023-24 Revenues
Legislative Item
Financial Impact
Food for Home Consumption (Grocery) Tax
$14,000,000
Residential Rental Tax (Governor Vetoed for now)
$11,000,000
Exempt hygiene products (Governor’s Budget)
$2,000,000
Corporate Flat Tax
Two Year Delay $5M future
Impact
Failure of Proposition 400 Extension
$12,000,000 Operating
$101,800,000 Capital
Reductions in ongoing revenue, wage increase and inflation risks that lie ahead
could exacerbate a potential problem.
Proposed 5-Year
One –Time
General Fund
Balance Forecast
Council Priorities for One-Time Dollars
1. Continue Reduction of PSPRS
Pension Debt to generate
ongoing savings
4. Maintain Reserves sufficient
to meet financial policies
3. Operating & Capital spending
to move strategic goals
2. Reinvest in existing aging
infrastructure,
neighborhoods & systems
5. New initiatives and Capital
Including Sustainability
2023-24 One-Time Decision Package
Recommendations (All Funds)
Significant Enhancements
City-wide Technology Projects
Enhanced Marketing
Athletic Field & Park
Improvements
Continued Passport Services
One-time contract increases
Airport enhancements to expand
development area
Economic Development
programs: Digital marketing for
business attraction, Career and
Chandler Innovations Fairs
Police Equipment, Technology &
Behavioral Health resources
Human Services Allocations
Sustainability projects: Urban
Forestry Program and increased
funding for water conservation
All Funds
$27.8M in one-time requests
$27.1M recommended
*$24.1M net of offsets
General Fund (GF)
$15.7M in one-time requests
$14.7M recommended
*$12.9M net of offsets
Continued Planned Paydown of
PSPRS Unfunded Liability
Supports use of additional one-time funds to payoff $136.5M in unfunded
liability and expedites ongoing savings to minimize future budget increases
Note: PSPRS has not released the modeler to confirm final payoff and related ongoing savings
5-Year One-Time General Fund Balance Forecast
Proposed 5-Year One-Time General Fund Balance
Forecast
Minimum Reserve
Target Represents 4
months of budgeted
operating revenues
Unappropriated
Budget
Stabilization
reserve $20M
Unappropriated
balance
designated for
future one-time
projects
$53M
Appropriated
15%
Contingency
$55.2M, Council
Contingency
$350K, and
other reserves
General Fund Balance Reserves/Contingencies
Total FY 2023-24 Estimated Year End General Fund Balance $129.3M
Contingencies
are funds set
aside for
emergencies and
unforeseen
expenditures
Reserves
are funds set
aside for specific
purposes
FY 2023-24 Reserve Polices
Planning for Risk
Minimum Fund Balance Policy:
Current policy requires maintaining a minimum reserve
equal to 4 months of operating revenue or $122.7M as
Fund Balance
Alternative would be to change to 4 months of ongoing
operating revenue estimated to be $93.5M vs. $122.7M
$29M of additional fund balance could then be
appropriated for a variety of one-time purposes without
impacting AAA bond rating
Minimum Fund Balance Recommendation:
Change reserve policy to 4 months of ongoing revenues
versus total revenues to keep time period the same but
better reflect what actual needs could be
Minimum fund balance at 3 months of ongoing ($70M),
could be viewed as too big of a change by rating agencies
Appropriated Contingency Policy:
Current policy is to appropriate 15% of General Fund
operating revenues as contingency $55.2M for the new fiscal
year
Alternate could lower the contingency to 12% of General
Fund operating revenues or $44.2M for the new year versus
$55.2M
$11M of additional fund balance not appropriated could then
be used for a variety of one-time purposes
Budget Stabilization Reserve Policy
Recommendation:
Policy allows use of fund balance for up to 3 years should a
sudden drop in revenues require ongoing expenditure
reductions to services
Set level at $20M from $10M to more appropriately set risk
Proposed 5-Year Enterprise Fund Balance
Projections
Cost of Service implemented starting July 2022 to bring each customer class closer to paying based on usage characteristics
Proposed 10-Year
Capital Improvement
Program (CIP)
Fiscal Foundations –
Current 10-Year CIP Council Guidelines
• Minimize increase in property taxes
• Maintain, enhance, or re-imagine existing infrastructure
• Finish planned construction of streets, parks, fiber and
utility systems
• Prior to adding capital, ensure related ongoing O&M can
be supported
• Utilize master plans to guide long-term capital investment
• Deliver on commitments made to residents through 2021
bond election
• Balance inflation, workload, and timely completion of high-
visibility and grant-funded projects
10-Year CIP Overview
•
2023-2032 CIP total is $1,979,068,477
($314.3M more than the 2023-2032 CIP)
•
Updated to reflect inflationary pressures
•
Increased focus on aging infrastructure
•
Includes $178.5M in projects for
infrastructure to support Intel
expansion
•
Bond authorization longevity shortened
by inflation and additional projects
•
Additional capacity from secondary levy
growth higher than anticipated (+5.3%)
Summary of Proposed Key Capital Projects
in the 1st 5 Years
Street/Transportation Projects
•
Street Repaving Program
•
Cooper Road/Insight Loop Extension
•
Downtown Street Improvements
•
Alma School Rd (Germann Rd to Queen Creek Rd)
•
Kyrene Road (Chandler Blvd to Santan 202)
•
Ray Road/Dobson Road Intersection Improvement
•
Turf to Xeriscape Program
•
Frye Rd Protected Bike Lanes
•
Paseo Trail Crossing Improvements
•
Kyrene and Highline Canal Branch Shared Use Path
Airport
•
Taxiway B Construction
•
Runway 4R/22L Rehabilitation
CAPA
•
Video Production Studio Digital Media Upgrade
Fire
•
Emergency Vehicle Replacements
•
Self Contained Breathing Apparatus Replacements
Community/Regional Park Improvements
•
Tumbleweed Regional Park Development/ Multi-Gen
•
A.J. Chandler Park Improvements
•
Existing Community and Neighborhood Park Imp
(includes sustainability projects for turf to xeriscape)
•
Existing Athletic Field Improvements
•
Mesquite Groves Phases I & II
•
Aging Park Facilities
•
Lantana Ranch Park Site
Technology
•
Police Virtual Private Network
•
Office 365 continued module implementations
•
ERP Modernization/Replacement
Development Services
•
Citywide Fiber Upgrades
Buildings & Facilities
•
Building Renovations and Repairs
•
Boys & Girls Club Tenant Improvement
Police
•
Forensic Services Facility
•
Police Main Stations Renovations
Summary of Core Infrastructure Capital Needs
Focus on improving overall quality
in rising cost environment
Streets/Transportation
•
Street Repaving Program +$12M
in GF 1st year to offset inflation
•
+$14M years 2-5 to add lane miles
Parks
•
+$1.6M for existing neighborhood &
community park improvements/
reimagining
•
$500K annual funding for aging park
landscape imp. but $800K year 1
•
$500K annual funding for
improvements to existing athletic
fields
Water (rate impact)
•
Pipe replacement +$1M year 1
•
Mains and Valves +$6M year 1
•
Facilities +$13.9M year 1
Wastewater (rate impact)
•
Sewer Assessment & Rehab +$11.6M
year 1
•
Facilities +$12.9M year 1
10-Year CIP by Focus Area
Refer to Proposed
10-year Capital
Improvement Program
(CIP) List
Assessed Valuation and
Property Tax Update
$1.000
$1.050
$1.100
$1.150
$1.200
$1.250
$1.300
0
500,000,000
1,000,000,000
1,500,000,000
2,000,000,000
2,500,000,000
3,000,000,000
3,500,000,000
4,000,000,000
4,500,000,000
Primary
Secondary
Limited
Combined Rate
35
Property Valuation and Tax Rate History
Tax rate was increased during declining values, and
decreased during periods of increasing values
Property Tax Rate Comparison
FY 2022-23
(per $100 of Assessed Valuation)
Dollars
Breakdown of $1 of Typical Chandler Property Tax Bill
City of Chandler
11 cents
Public Schools and
Community College
Districts
70 cents
Maricopa County
& Special Districts
19 cents
*Based on 2022 Tax Bill information. Exact split will vary depending on the
school district and any other special taxing districts on the bill.
Levy with Rates Unchanged
Council direction at 02/9/23 Workshop #1:
1. Leave secondary rate alone
2. Bring options on primary
Impact to Median Value Homeowner
Primary Tax Rate Options
$0.01 change to
Property Tax Rate
equals $389,965
Propose primary tax rate be reduced, lowering ongoing
revenue and eliminating need for Truth-in-Taxation process
Note: FY 2009-10 was last time Truth-in-Taxation process was required
Inflation Relief for Residents Discussion
One-Time Funding Impacts
Increase Funding for Non-Profits by Enhancing External Partnerships
•
Housing and Human Services Commission (HHSC) with direction from Council on types of non-profits to target (e.g.,
food banks, prescriptions)
•
AOK and/or utility DES program for utility bill relief
Ongoing Funding Impacts
Reducing Primary Property Tax Rate
•
Reducing $0.01 (-$390K) versus offsetting the full 5% assessed value increase for median value homeowner (-$2.1M)
Lower TPT and Cut Services OR Shift TPT from One Category to Another
•
0.10% (1/10th of a percent) across all categories +/- $10.5M
•
0.17% (1/17th of a percent) across Retail category +/- $10.5M
Support State Legislative Ideas
•
State Income Tax Credit ($200-$400) for Renters; targeted measure to support low income renters
•
HB 2401; TPT exemption of diapers and feminine hygiene
Budget Event
Date
Council Budget Kickoff
Completed
Citizen Budget Survey and Poll Questions, with Council
Outreach Videos
Completed
Council Workshop #1
Completed
Council Workshop #2
Tonight
All Day Budget Briefing
4/28/2023
Council Meetings
Amendment Discussion
05/11/2023
Tentative Adoption
05/25/2023
Public Hearing and Final Adoption
06/15/2023
Adoption of Tax Levy & Fee Action
06/29/2023
Key Budget
Dates
Questions?