On Wednesday, May 10th, Tallahassee City Commissioners will receive a 2017 budget update from city staff and information about the fiscal year 2018 budget process.
The update will reveal few surprises about the 2017 budget and actual spending, but the information on the 2018 budget includes proposals for millions in revenue increases for the General Fund, a 3 percent raise for city employees and an increase in city paid health benefits.
While there is no proposed increase in the property tax mileage rate, the City staff is assuming that property tax revenues will increase by approximately $1.4 million through a 3.5% growth in property values.
In addition to the property tax revenues, the city staff is expecting an increase in the utility transfer to the general fund.
The City’s electric, gas, water, sewer, stormwater and solid waste utilities each contribute funding to the general fund annually.
The change in contribution is based on CPI as of March of each year and applied to the prior year’s amount. While the CPI to be applied has not yet been published, an estimate of 2.5 percent has been used for the projections.
In 2017 the utility fund transfer was $41.8 million. A 2.5 percent increase will generate an additional $1.0 million for the General Fund in 2018.
General employees include all employees that are not part of a collective bargaining unit. The recommendation for fiscal year 2018 is to provide a 3.0% raise. Employees will only be eligible for this increase based on the results of their annual evaluation. This increase allows the City to continue to recruit and retain high-quality personnel at all levels of service provision.
Through a collective bargaining agreement with the Florida Police Benevolent Association, all Police Officers and Investigators will receive a 2.0% across-the-board increase to base salary for each of the three years, FY 2017 being the last year of this contract.
Effective October 1, 2014, the City entered into a three-year collective bargaining agreement with the International Association of Fire Fighters (IAFF) – Rank and File bargaining unit, and an agreement with the IAFF – Supervisors bargaining unit. The agreement for the Rank and File Firefighters provides a 3.0% across-the-board increase for each of the three years ending FY 2017, as well as a step plan that provides a 4.0% annual increase.
The assumption made for health benefit costs for the FY 2018 budget is the inclusion of a 5.0% increase in the City’s share of this cost. Although the City will not receive confirmation of final premium costs until later this year, this assumption is considered reasonable based on review of premium costs over the last two to three years. At this assumption, the City’s share of employee premiums ranges from $5,750 to $12,500 per year.
2017 Budget Update
Both StarMetro and the electric utility are experiencing some variation from the 2017 budgeted revenues and expenses. All other funds are operating within projections.
Overtime expenses in StarMetro are projected to exceed the budget plan but will be covered through a combination of increased revenue and operational changes.
StarMetro’s unanticipated cost increases due to overtime were highlighted earlier as an issue worthy of tracking due to its potential financial impact. These costs were due to a shortage in staffing as well as several new community-wide initiatives that increased the cost of operations above the budget plan if they were to continue through this full fiscal year.
While personnel costs have exceeded budget, management has begun to take action to mitigate overtime for the remainder of the year by advertising for new full-time OPS positions and improving hiring incentives.
In relation to the fund’s health, StarMetro is currently on target to end the year within budget. Using current revenue assumptions and monthly averages, total revenue is expected to exceed budgeted expenses.
While there has been reduced single ride fare revenue, the fund has received additional operating assistance through FDOT grants, which will offset an increase in personnel expenses from overtime.
Additionally, the Ten Ride Dial-A-Ride program is generating double the monthly projected revenue and the Online Starcard is generating approximately 3.5 times the budgeted revenue monthly.
The only current risk to the fund’s anticipated revenue by year-end is the contract the City holds with Florida State University. StarMetro has responded to Florida State University’s Invitation to Bid and is awaiting an award determination. If StarMetro is not chosen as the University’s transportation vendor, a reduction in service is anticipated, resulting in staff changes through attrition and/or layoffs to balance the fund for year-end.
Reduced sales in the Electric Utility through the end of the second quarter were the result of a mild winter, which caused lower sales than projected and will be addressed by reserves if there is a mild summer.
The actual revenues for the Electric Department through March of Fiscal Year 2017 are $123.4 million. Retail sales for the first six months of Fiscal Year 2017 are 5.5% lower than projected for this period, which is primarily the result of a mild winter in the service territory. Assuming sales for the remainder of the year meet projections, Electric will end the year approximately 2.6% below forecast on retail sales, resulting in a potential non fuel revenue shortfall of $4.1 million.
However, this shortfall is expected to be offset by operational efficiencies and other savings. Expenditures are currently 4.7% below forecast.