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FY 2025-26 Budget Workshop #2 City Council Conference Room Monday, March 24, 2025 Strength in Numbers Our Brand A safe, diverse, equitable and inclusive community that connects people, chooses innovation and inspires excellence FY 2025-26 Budget Theme 02. Proposed 5-Year One-time General Fund Balance Forecast 03. Assessed Valuation and Property Tax Update 04. Key Budget Dates and Questions Agenda 01. FY 2025-26 Budget Overview and General Fund Operating Budget Update New Fiscal Year 2025-26 starts 7/1/2025 “Strength in Numbers” Council/Resident Process Staff Process Chandler Budget Process Timeline Strategic Framework Guides Our Decision Making Focus Areas Economic Vitality Sustainability and Technology Neighborhoods Connectivity Quality of Life Community Safety Fiscal Year (FY) 2025-26 Resident Budget Survey Actionable Items In response to the Resident Survey, departments have reviewed the comments relevant to their areas and identified 34 actionable items. Each department is actively working to address these items accordingly. See handouts FY 2025-26 Budget Overview and General Fund Operating Budget Update FY 2025-26 Budget Drivers (all funds) Revenues • Revenues reflect actual economic environment with analysis on sustainable level • Increases coming from continued increased local spending (slowing) with decreases from remaining residential rental revenue • State Shared revenues updated with latest projections using State and League forecasts Expenditures • Funding to convert one-time funded positions to ongoing, maintain service delivery after adjusting for inflation, and ensure social safety net services continue • Personnel costs increasing to build the strength of our workforce to meet evolving resident expectations. Reflects ongoing savings from PSPRS employer contribution • Capital projects increased for new infrastructure and carry forward of projects underway Grants Ongoing Savings with One-time $ • Federal changes are being monitored in previously identified grants with a continued focus on finding grant opportunities for which the city may qualify. • Maintain funded status of PSPRS to ensure unfunded liability does not grow Annual Budget Evaluation Modified Zero Based Budget (MZBB) Started last year with two cost centers: Buildings & Facilities and Fleet Continued this year with: Management Services, Community Services and City Clerk Departments • Reviewed two years of actuals (FY 2022-23 & FY 2023-24) • Verified if funding levels at the account line level were adequate based on trends with an emphasis on core service delivery line items • Removed one-time funding and prior year carryforward • Excluded personnel lines except overtime and temporary • Required back-up for any lines that were underfunded • Made budget adjustment recommendations based on findings • Adjustments included budget decreases that were reallocated to fund budget increases by account and across cost centers Goal: To ensure adequate funding of core services and efficient use of resources through reallocation prior to adding new Annual Budget Evaluation MZBB Results FY2025-26 Base Budget Reallocation FY 2025-26 Base Budget Increase City Clerk $8,300 $2,500 Community Services 419,800 - Management Services 24,500 - Totals $452,600 $2,500 City Clerk • Most budget lines were adequate for service delivery at current levels. One minor enhancement to funding is needed of $2,500 to shore up spending needs. • Additional service enhancements will need to be requested in a change request decision package, as there was no additional funding found to be available for reallocation Community Services • After adjustments, all budget lines were adequate for service delivery at current levels • Maximized reallocations as shown on the right. Additional service enhancements will need to be requested in a change request decision package, as there was no additional funding found to be available for reallocation Management Services • After adjustments, all budget lines were adequate for service delivery at current levels • Additional service enhancements may need to be requested in a change request decision package, as there was minimal funding found to be available for reallocation Housing & Community Development Federal Grants Continuing Resolution passed 3-14-25, giving short term funding. Also gives executive power to make decisions. CDBG & HOME – may be some reduction due to new entitlement communities Major Ongoing Expenditures • Personnel (70.8% of ongoing GF budget 58.8% of Total GF budget) • O&M to support existing services Major Revenues • 55% Transaction Privilege Tax • 31% State Shared Revenues General Fund Forecast Revenues and Expenditures Drivers • Economy showing slower growth • Development still occurring • Grant funding unknowns and full loss of residential rental TPT Resetting ongoing/one-time • Sustainable ongoing portion of revenue compared to one-time continues to narrow Revenues Ongoing vs. One-Time Expenditures Ongoing vs. One-Time Current Budget • Anticipates closer alignment with revenues as state shared revenue changes stabilize Drivers • Conversion of grant programs to local funding • Continued cost increases on some goods, services and technology Maintain services vs. new • Spending more to just maintain service levels • Adds in O&M for new capital projects Current Budget Impacted • Inflation and contract resets in capital & operating still impacting budget Ongoing/One-Time Local Sales Tax (TPT) Proposed Revenues 55% of FY 2025-26 General Fund revenue Sales tax revenues fluctuate due to economic volatility, including increases or decreases in development, inflation and consumer confidence Prior year legislative reduction of Residential Rental TPT began Jan. 1 2025 State Shared Revenues (in Millions) 31% of General Fund for FY 2025-26 Priorities for Ongoing Dollars 1. Maintain existing service levels within core programs and strategic focus areas including contract and other increases 4. Build the strength of our workforce to meet evolving resident expectations 3. Convert successful social safety net programs to ongoing funding from grants 2. Ensure sufficient ongoing funding for facilities and infrastructure including technology and security 5. New enhancements or additions, considering the option of one-time pilot programs first Focus FY 2025-26 Ongoing Decision Package Recommendations (All Funds) All Funds $16.7M in ongoing requests (PY $29M) $9.5M recomm. net of offsets (PY $17.5M) General Fund (GF) $13.8M in ongoing requests (PY $18.9M) $7.1M recomm. net of offsets (PY $10.9M) Significant Recommendations Contract increases for services and goods Maintenance costs related to new capital projects Public safety personnel programs and services Neighborhoods funding Final navigator position conversions and housing stability team Continued investments in cybersecurity and ERP replacement Costs associated with new personnel (vehicles, IT, etc.) Surface water delivery increases Utility and chemical increases FY 2025-26 Workforce Needs FY 2024-25 Adopted 1,804 FTE + FTE Proposed for FY 2025-26 FTE converted from one-time funded to ongoing (12) PY-26: Housing Assistance Senior Coordinator - Neighborhoods Recreation Program Coordinator - Neighborhoods Customer Service Representative - Neighborhoods (2) Community Navigators* - Neighborhoods Community Resources Senior Specialist* - Neighborhoods Housing Stability Coordinator* – Neighborhoods (2) Housing Stability Senior Specialist* - Neighborhoods IT Programmer Sr Analyst (Web Devl) – Information Technology (2) Civilian Background Investigators - Police Other Non-GF funded FTE (1) PY-3: Senior Water Quality Technician – Public Works & Utilities FTE with Revenue/Re-allocation Offsets (2) PY-8: Transportation Engineer (100%-Revenue) – Development Services Assistant City Attorney Litigation (100%-Reallocation) - Law Other General Fund (GF) funded FTE (3) PY-6: Community Risk Reduction Manager- Fire Crime Prevention Specialist – Police Business Systems Analyst (Network) – Police Maximized reallocations & repurposing of existing positions prior to adding positions to address needs *Position previously funded with grant dollars Prior Year 48 FTE Current Year 18 FTE FTE added related to CIP projects (0) PY-5 General Fund Ongoing Forecast- Structurally Balanced Total revenues changes with the ebbs and flows of the economy impacting primarily one-time revenues. Ongoing revenue is increasing at a gradual pace. Modest wage changes are estimated for years 2-5 and ongoing revenues continue to be within current revenue assumptions for structural balance. 377 365 366 372 377 313 321 328 335 343 307 315 322 332 342 270 290 310 330 350 370 390 FY2025-26 FY2026-27 FY2027-28 FY2028-29 FY2029-30 Millions Total Revenues (ongoing & one-time) Ongoing Portion of Revenues Ongoing Expenditures (est wage incr yrs 1-5) Proposed 5-Year One –Time General Fund Balance Forecast Priorities for One-Time Dollars 1. Maintain reserves sufficient to meet financial policies including PSPRS fully funded status 3. New initiatives and capital that generate sustainable ongoing financial savings 4. Focus operating & capital spending to move forward strategic focus area action items 2. Reinvest in existing aging infrastructure, systems, including projects that generate ongoing savings 2024-25 One-Time Decision Package Recommendations (All Funds) Significant Recommendations Citywide Technology Projects, Cyber Security & ERP Bond Election Enhanced Citywide Marketing Park Irrigation Improvements Continued Transit Services One-time contracted services Police School Engagement, Mental Health, and Real Time Crime Center Equipment & Technology Human Services Allocations, Heat Relief and Operation Open Door Water conservation Program Utility Chemical Increases All Funds $22.5M in one-time requests (PY $22.4M) $17.6M recommended net of offsets (PY $21M) General Fund (GF) $16.9M in one-time requests (PY $18.8M) $14.6M recommended net of offsets (PY $15.7M) Maintain Funded Status of PSPRS to Ensure Unfunded Liability Does not Grow Supports use of additional one-time funds to payoff any remaining unfunded liability on an annual basis Note: PSPRS has not released the modeler to confirm effect of actual rate of return to show impact to liability Police 81.7% to 94.6% Fire 85.9% to 94.1% __________________________ Total 83.3% to 94.4% Note: FY 2024-25 $7M payment not yet reflected Planned FY 2025-26 additional payment of up to $25M Based on current wages/counts, reduction for FY 2025-26 is approx. $9.7M which was estimated at $8- $10M 5-Year One-Time General Fund Balance Forecast Appropriated 15% Contingency ($55.3M of fund balance), Council Contingency $350K ($75K ongoing), and other reserves Proposed 5-Year One-Time General Fund Balance Forecast Assessed Valuation and Property Tax Update $0.950 $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 26 Property Valuation and Tax Rate History Tax rate was increased during declining values, and decreased during periods of increasing values Property Tax Rate Comparison Per $100 of Assessed Value 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 2024 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 directive at Workshop #1: 1. Leave secondary rate alone 2. Discuss options on primary Impact to Median Value Homeowner Primary Tax Rate Options $0.01 change to Property Tax Rate equals $412,426 FY 2025-26 budget draft assumes primary tax rate remains flat, allowing for capture of ongoing revenue which will not require a Truth-in-Taxation process Notes: FY 2009-10 was last time Truth-in-Taxation process was required. There have been 9 consecutive years of primary rate reductions. Budget Event Date Council Budget Kickoff Completed Resident Budget Survey with Council Videos Completed Council Workshop #1 Completed Council Workshop #2 Tonight Council Workshop #3 Capital Improvement Program 3/27/2025 All Day Budget Briefing 5/2/2025 Council Meetings Tentative Adoption 05/22/2025 Public Hearing and Final Adoption 06/12/2025 Adoption of Tax Levy & Fee Action 06/26/2025 Key Budget Dates Questions?