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HomeMy WebLinkAboutPACKET Town Board Budget Study Session 2014-07-30 Wednesday, July 30, 2014 TOWN BOARD 8:00 a.m. – 11:00 a.m. STUDY SESSION Rooms 202/203 1. Review of Board Retreat held June 26, 2014. 2. Review of flood recovery expenses and funding. 3. Update on flood effects to financial statements/budgets. 4. Forecast of fund balances. 5. General thoughts on remainder of 2014 and 2015. a. Review of department needs b. Personnel costs c. Benefits costs and changes AGENDA Page 1 FINANCE Memo To: Honorable Mayor Pinkham Board of Trustees Town Administrator Lancaster From: Steve McFarland – Finance Officer Date: July 30, 2014 Re: Town Board Study Session Comments related to Board Retreat Agenda: Review of Board Retreat held June 26, 2014 Information will be provided by Town Administrator Lancaster. Review of flood recovery expenses and funding The financial effects of the flood have been felt in nearly every department and fund. Information changes daily, sometimes hourly, and the information provided in this memo will be outdated by the time we go through the Budget Study sessions in October. As such, staff is more interested with providing an overview of the financial picture at this time. The array of flood related projects and cost centers, coupled with the numerous agencies and their various reimbursement ratios and requirements have made it difficult to forecast the Town’s future financial position. We have control over some areas: accurate documentation of costs and timely submitting for reimbursements, application for additional funding sources when they become available, balancing economics of construction costs with being responsive to the public. There are also several areas over which we have little control: construction cost escalation, grant awards (competitive and are not guaranteed), the timing of reimbursements – especially from FEMA/OEM, and the timing of the work on projects where we have partners (Fish Creek). The following is a listing of what we know regarding major flood cost centers for 2014. Page 2 FINANCE Memo  Rock crusher project Almost all of the rock crusher costs/revenues were captured in 2013. The net project cost was ~ -$200,000. There are still some costs (~$30,000) remaining for clean-up/repair work in the Cherokee Draw area.  Fall River exigent work The Fall River exigent project, originally estimated at $913,000, should come in under budget and be 100% reimbursable. Project costs are primarily covered by NRCS. Project expenses are currently at ~$760,000 and we have been reimbursed ~$318,000. We will be submitting another reimbursement request for ~$395,000 by the end of July.  Damage to Town properties reimbursable through insurance (CIRSA) Damage to Town property of ~$1,500,000 ($500,000 to General; $1,000,000 to Utillities) has been reported. CIRSA has reimbursed ~$1,450,000.  Walsh Engineering is creating master plans for Fall River and Fish Creek, and has been engaged to assist with other flood-related matters. Estimated cost is $400,000; $350,000 is expected to be recoverable, leaving the Town responsible for $50,000.  RG & Associates and HDR Engineering are contracted to complete engineering and design phases, and for construction and project management for Fish Creek, Community Drive and assorted other locations (27 sites). Completion of the work ($565,000 for RG; $802,000 for HDR) will allow for bidding for construction/repair work in said areas. Approximately $300,000 of the ~$1,370,000 has been invoiced to the Town. We will be submitting reimbursement requests to appropriate agencies (in this case, FEMA) at the end of the month. It is hoped that we will be able to recover at an 80% rate, which means that the Town will ultimately be responsible for ~$275,000 of the ~$1,370,000.  FEMA On a State-wide basis, FEMA/OEM has been slow to reimburse flood- affected communities, with Estes Park being no exception. Estes Park has received $76,000 for small projects, but is still waiting for reimbursement on two submittals totaling ~ $235,000. At the end of July the Town will submit for an additional ~$71,000. (Flood financial summary handout at session) Update on flood effects to financial statements/budgets The General Fund entered 2014 with an available fund balance of $3,750,000. The existing flood-related costs are manageable, with the important issue being the timeliness of reimbursements. Once projects are reimbursed at forecasted levels, the net effect (Town portion) of flood-related costs is estimated to be $355,000 for 2014 (to date). This number represents $30,000 for Cherokee Draw, $50,000 for Walsh Engineering, and $275,000 for RG/HDR. In the interim, the gap is much larger due to Page 3 FINANCE Memo waiting on reimbursements (~$300,000 from FEMA, ~$400,000 from NRCS, ~$300,000 from RG/HDR project). The gap will fluctuate depending upon timeliness of reimbursements coupled with continued invoices from RG/HDR. The real costs lie in the capital/construction portion of the many projects. For example, Fish Creek alone was initially estimated at $5,000,000. The cost of the capital projects far exceeds available fund balance, which means that the costs of a project as large as Fish Creek could jeopardize the solvency of the General Fund (and therefore the ability to provide basic government operations and services). Timely reimbursements (FEMA, FHWA) would be a necessity once the project began. Even allowing for timely reimbursements, the Town will have to carefully plan with our partners so as to make the project financially viable. The Town is in the process of applying for grants, including CDBG-DR (Community Development Block Grants – Disaster Recovery), Energy Mineral Impact Grant, and Hazard Mitigation Grant Programs (HMGP). These grants would/could be used to help cover the Town’s expected 12.5% share of various capital projects, and in flood recovery. Forecast on fund balances There are currently no issues involving fund balances within any fund other than the General Fund. Financial discussions involving the General Fund often center around “fund balance percentage” (FB%). FB% is an industry-standard way of measuring solvency. The formula, “amount of available funds ($) / forecasted expenses for the year”, reports how much money is held in reserve to fund the annual budget. If there is a 25% fund balance, then the Town is able to fund 25% of the budget from fund balance. The addition of the flood related costs to the financial statements is going to render FB% highly volatile, especially on a short term basis. The cyclicality of revenues, especially sales tax, exacerbates short-term financial analysis. For the short term, it might be better to focus on raw numbers – how much money do we have left in the General Fund? The most current financial statements (June 30, 2014) show about $575,000 (about $1,000,000 less than the same time last year) remaining in the General Fund fund balance. Fund balance ought to begin increasing as reimbursements and the larger sales tax months come in. Governmental accounting practices recognize that many communities have variable rates of cash flow and do not Page 4 FINANCE Memo measure financial statements on a monthly basis. Financial positions will only be officially recognized and reported as of December 31, 2014. Should the General Fund get into a cash flow crunch, the Town has options. Monies could be borrowed from other funds (most likely L&P, Vehicle Replacement). Also, the Town plans to utilize the anticipated income to the Open Space Fund (~$300,000) for reimbursement for trail repair related costs. The Town could also tap into its TABOR reserve (~$360,000), assuming it can be repaid within a calendar year. General thoughts on remainder of 2014 and 2015 Significant areas of interest/concern for the Revised 2014 Budget and 2015 Budget:  The 2014 Revised Budget and 2015 Budget will have 4 new Special Revenue Funds that will house the proceeds from the 1% sales tax increase. If sales tax continues at its current pace, the new funds should take in ~$1,200,000 this year, and $2,000,000 in 2015. The $3,200,000 would be split as follows: 60% - street fund, 25% - community center/senior center fund, 12.5% - expansion of trails fund, 2.5% - emergency response fund.  The Community Reinvestment Fund (CRF) has become the Town’s capital improvement fund, and as such is dynamic. While a mid-year (May 2014) revision was approved, several updates since then are worth noting: o MPEC is still expected to stay within budget. o The Parking Structure is expected to exceed original estimates, meaning that the Town will likely have to come up with more than the original out of pocket forecast of $930,000. o The 2014 Budget reports a Fall River Trail grant of ~$337,000, with an accompanying expense of ~$400,000. Staff has learned that this is not a grant that requires a match, so the expenditure could be reduced to ~$337,000 if desired, freeing up ~$60,000. o Staff is going to recommend moving STIP contributions and expenditures over to the new Street Fund so that street-related expenditures can be housed in one fund. The General Fund would therefore transfer the annual $435,000 to the new Street Fund rather than into the CRF. o Fund balance is forecasted at ~$1,520,000, of which $200,000 is comprised of a reserve for the museum storage facility. There is no restriction on the remaining ~$1,300,000 fund balance, although it is worth noting that ~$1,000,000 of the balance came from the sale of Lot 4. Page 5 FINANCE Memo  The Community Services Fund (CSF) houses the museum, senior center, visitors’ center, transportation, events, and the new MPEC operations budgets. The MPEC budget is the “wild card” as it is new. Staff will have a better level of expectations for this cost center by the October Budget Sessions.  The $4,200,000 FLAP grant/project will appear in the budget, and should be cost-neutral.  Town Administrator Lancaster will be discussing, in addition to other items: o Review of Departmental needs o Personnel costs o Benefit costs and changes Further details and slides will be made available at the Study Session. Concluding thoughts Staff continually monitors the financial health/progress of the Town. This includes:  Monthly reports that are disseminated to leadership  Internal reports generated daily to track costs/reimbursements of flood-related projects  Annual updates to the 5-year forecasting model (slide(s) at Session).  Annual updates to the FTMS model. The Financial Trends Monitoring System is an industry standard group of reports that shows financial health of the Town in different areas: revenues, expenses, fund balances, asset management, demographics. (slide(s) at Session).