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18 - Proposed Budget Discussion and DirectionItem No. 18 Memorandum TO: Mayor & City Council FROM: Grayson Path, City Manager SUBJECT: PROPOSED FY20/21 BUDGET DATE: August 24, 2020 BACKGROUND: During the August 10, 2020 City Council Meeting as well as the August 17, 2020 City Council Budget Workshop, the City Council has heard presentations regarding the Proposed FY20/21 Budget as prepared by the City Manager, Department Heads and Staff. The City Manager issued a Memorandum summarizing the Proposed FY20/21 Budget on August 4, 2020 which was summarized and presented at the August 10th Council Meeting. A more detailed presentation was given at the August 17th Budget Workshop that examined key expenses by department. The Proposed FY20/21 Budget is for October 1, 2020 — September 30, 2021. STATUS OF ISSUE: The City Council has asked many good questions throughout these last two meetings, staff have attempted to provide answers to each question. If there is a question that has not been answered, please let us know and we will get the answer to the Council. Otherwise, the Proposed FY20/21 Budget has not been adjusted since the initial presentation. The City Council has the authority to request edits tonight. This agenda item is dedicated to further discussing the budget, asking questions, making any edits the Council deems appropriate, and preparing it for the following agenda item where the City will approve a Resolution declaring a Property Tax Rate and Public Hearings for the Proposed FY20/21 Budget and Property Tax Rate. Depending on the types of changes made by the City Council tonight (if any), the Staff may need to adjust the next agenda item to account for the change in the proposed Property Tax Rate. City Staff might be able to make that adjustment tonight if a short recess is granted. To correct a misstatement at the Budget Workshop, the City Manager believed that the $650,000.00 shown under line item 01-9999-91-00 to represented the City pulling from reserve to balance the FYI 9/20 Budget. It then came to his attention that this figure in 01-9999-91-00 is an accounting adjustment that is artificially and incorrectly canceling out three specific expenses in the FYI 9/20 Budget, thus causing the appearance that the FY20/21 Budget is approximately $848k more than FY19/20. Actually, the $650,000.00 consists of the following: 1. $20,000.00 Transfer from General Fund to Capital Fund for Library Building Repairs. This was budgeted and approved in Ordinance 2019-031, but was not entered in to the budget software until the error was discovered on April 22, 2020. This is not specifically identified in its own line item, but likely under 01-0401-64-00. 2. $120,000.00 Transfer from General Fund Reserves to the Police Department Budget for a new Police Phone System, via Ordinance 2019-047 to amend the Budget adopted in Ordinance 2019-031. This item is found under 01-1003-31-99. 3. $510,000.00 Transfer from General Fund Reserves to the General Expense Budget for CoVid-19 Testing Kits, via Ordinance 2020-010 to amend the Budget adopted in Ordinance 2019-031. This item is found under 01-0370-89-00. In the end, depending on how one views "increases" in budget from year to year, the City Manager still states that the Proposed FY20/21 Budget is $198,218.00 more than the FY19/20 Budget, instead of the previously shown $848,218.00 when the $650,000.00 adjustment is listed which cancels these three expenses out incorrectly. Staff are looking into this issue. It nevertheless does not impact the Proposed FY20/21 Budget, but it was important enough to correct and restate here. BUDGET: This item represents the Proposed FY20/21 Budget. OPTIONS: 1. Continue to review, ask questions, and/or request edits to the Proposed FY20/21 Budget. 2. Approve the Budget as drafted in preparation for Public Hearings to be held in September. RECOMMENDATION: Approve the Budget as drafted in preparation for Public Hearings to be held in September. The following agenda item will accomplish this via Resolutions. Memorandum TO: Governing Body FROM: Grayson Path, City Manager SUBJECT: Proposed FY20/21 Budget DATE: August 4, 2020 Introduction It is with pleasure that I present to you the City Manager's Proposed FY20/21 Budget. As each of you are aware, this is my first City of Paris Budget, and although it is not my first Municipal Budget to produce in my career, it nevertheless was a steep learning curve to step in to this role in late April 2020 and immediately attempt, among all of my other duties, to understand the City of Paris budget, from the City Charter, to State Code, to the very Accounting structure that forms the budget, much had to be reviewed in a very short period. Nevertheless, with the help of so many great City Staff, I am pleased with the product I am now presenting to you. I do though intend to perfect my process in years to come as I become more familiar with the City of Paris. Therefore, by all means please send me comments and feedback. My first item I intend to change next year will of course be to present this to you sooner. I thank you for your patience this year. After reviewing the City of Paris Charter, I have decided to structure this Memorandum in such a way that easily points back to each appropriate Section in the Charter. The duty and responsibility of a Public Servant is to carry out the Code of the City to the best of his/her ability, therefore in order to provide greater transparency to those reviewing this Memorandum for completeness to the Code, I will divide this Memorandum by the very Sections found in the Charter. This has the unintended consequence of breaking up a desired "flow", sometimes making this Memorandum bulky, but nevertheless it provides thoroughness as well as fulfills my obligation to you in providing the information required by the Charter. I will be making a presentation, summarizing this Memorandum, to the City Council on August 10, 2020. At that time, we will also touch on upcoming deadlines pursuant to the City Charter and Senate Bill 2. I will also be asking you at that meeting as to the next steps you, as a Governing Body, would like to proceed towards in order to review, discuss, consider, etc. the Proposed FY20/21 Budget including any workshops, employee meetings, additional information, etc. you would like to hold. Please be considering this in preparation for the August 101 discussion. I would also like to apologize to the Governing Body for the complexity of the material I am presenting to you at this time. The City Charter is clear as to what I must report on, therefore I have no room to maneuver for much of what is presented here. In addition, I hope the Governing Body can understand and appreciate that Municipal Budgets are indeed complex, for a reason. I have heard two different schools of thought by previous councils I have worked with. Some prefer many funds clearly breaking out the expenses through many different line items, while others prefer condensed and summarized funds with very few line items. The version you have before you in this Memorandum would fall under the first school of thought — many funds with many line items, thus breaking out the entire budget in to much more defined individual purposes. This of course produces a lengthy budget to go through and review, but, it is the most transparent approach you can have. A very condensed and summarized budget where line items are lumped together, while extremely easy for Staff to work with and Councils to flip through, is also much less transparent as the purpose of each line item is obscure, turning them more in to larger "miscellaneous" line items rather than subject -specific that is accomplished with more broken Page 1 of 15 out line items like we have today. If the Governing Body were to prefer a much more summarized budget, we could certainly look in to what would need to be done to accomplish this for FY21/22, but please know that by doing this, you do lose transparency. At the same time, there can come a point to where you have too many line items such that every expense becomes its own line. I believe our budget has found the happy middle ground — not to say there could be some improvement as I become more familiar with it in time. In addition, while I trust our Departments to faithfully and frugally handle their budgets no matter the approach, I also know that having detailed broken out line items has the natural impact of forcing departments to pay careful attention to each and every purchase. If at any time the reader of this Memorandum has any questions, please contact my office at City Hall. I will be more than happy to answer any questions you have. Summary Prior to getting started with the substance of this Memorandum, I would like to present to you the summary results. Of greatest interest to most any Council Member and Citizen is the impact of the proposed budget to the Property Tax Levy. I will discuss this more later in this Memorandum, but the Operational and Maintenance as well as the Debt Service Tax Rates are decreasing in FY20/21. The following represents a comparison of FY 18/19 vs. FY 19/20 vs. FY20/21 Tax Rates: Year O&M µDebt.......... Total FY18/19 $0.43831 $0.11364 $0.55195 FY19/20 $0.40868 $0.10740 $0.51608 FY20/21 $0.40229 $0.08290 $0.48519 Preliminary Difference -$0.00639 -$0.0245 -$0.03089 FY19/20 vs. FY20/21 Difference -$0.03602 -$0.03074 -$0.06676 FY18/19 vs. FY20/21 The Proposed FY20/21 Tax Rate will be the lowest Tax Rate for at least the last five years. The reasons for the above Tax Rate will be explained further in this Memorandum. This Tax Rate is, to the best of our determination using the Comptroller's Forms, in full compliance with Senate Bill 2, also known as the Texas Property Tax Reform and Transparency Act of 2019, approved by the Texas Legislature in 2019. Among other things, this Act is designed to restrict the City's ability to raise property taxes. This is a double edged sword. I will provide more details regarding this Act later in this Memorandum, nevertheless, given the restrictions this Act places upon Municipalities, it is strongly recommended that the City of Paris utilize the allowed restricted growth passed by the State Legislature in order to keep up with the vital services we offer the citizens. To fall behind under this Legislation could eventually prove irreversible thus detrimental to the desired operations and services the citizens expect of the City. Next, the second key element of interest would be the balancing of the Operational Funds. The City of Paris has numerous Funds, the vast majority of which are Special Purpose Funds which will be discussed later in this Memorandum. The Operational Funds though are Fund 01 — General Fund, 10 — Water and Sewer Fund, and 45 — Sanitation and Landfill Fund. These three funds make up the vast majority of the financial accounting and are what the City operates out of to perform its daily tasks. In addition, these three funds are unique from other funds in that they are supported primarily from Taxes, Fines, Fees, and Utility Rates, thus the importance to balance them. Through the hard work of many City Staff, we have completely realigned most every line item in order to capture and repurpose available funds for efficiency and to become even more effective in the duties we are tasked with performing, all while keeping the Property Tax Rate low. Basically, we are finding new ways to use the same funds, with a little growth as allowed by the Senate Bill 2, to get more accomplished as discussed in the Budget Message below. Page 2 of 15 Fund........... , Revenue www Y Expenditure Net, 01— General Fund $24,443,660.00 $24,443,660.00 $0.00 10 — Water and Sewer Fund $15,269,187.00 $15,269,187.00 $0.00 45 — Sanitation and Landfill Fund $1,165,350.00 $1,165,350.00 $0.00 The Proposed FY20/21 Budget has all three of the above Operational Funds balanced. One final helpful key, the City's Accounting System is structured based on Account Numbers. We utilize consistent numbering for each of the Departments, but it first takes some training to learn how to read the system. The following is an example of a typical Account Number: "01-0101-12-00". To assist you in reading this, please take the following example: Fund Number Example: General Fund, Water and Sewer Fund, etc. "BBBB" = Line Item Example: Salaries and Wages, Office Supplies, Communications, Buildings and Grounds, etc.; these are consistent throughout all departments. So "0101" in all Departments is "Salaries and Wages". "CC" = Department Number Example: City Council, Police, Fire, Library, Water Production, etc. Sub -Department Number and/or Special Sub -Accounts Example: Pool (Sub -Department of Parks), Capital Purchase Accounts such as a Vehicle or Heavy Equipment, etc. If at any time you have questions regarding the Accounting Structure, please let either myself or Gene Anderson, Finance Director, know. City of Paris Charter Pursuant to the City of Paris Charter, Section 21(3), the City Council has the power and duty to: Section 21(3) — `Adopt the budget of the city. " To accomplish this, the City Manager has the power and duty under Section 40(2) to: Section 40(2) — "Prepare the budget and submit it to the council and be responsible for it administration after adoption. " Article V, entitled "The Budget", sections 44 — 60 of the City of Paris Charter further spell out the composition, transparency, publication, and other key components of the Budget and Budget Process. This Memorandum is therefore designed to fulfill, to the best my ability, Article V. The remainder of this Memorandum will be structured off of the requirements of Sections 44 — 47, in order. Pursuant to Section 48, this budget and all supporting schedules will be filed with the City Clerk when submitted to the Governing Body and shall be a Public Record for the inspection of anyone. Page 3 of 15 City of Paris Charter — Article V — Section 44. "The f scal year of the City of Paris shall begin on the first day of October and shall end on the last day of September of each calendar year. Such fiscal year shall also constitute the budget and accounting year. " The Proposed Budget is for the Fiscal Year beginning October 1, 2020 and ending on September 30, 2021. This will be shown throughout this document as "FY20/21". City of Paris Charter — Article V — Section 45. "The City Manager, between thirty and ninety days prior to the beginning of each fiscal year, shall submit to the Council a proposed budget, which budget shall provide a complete financial plan for the fiscal year, and shall contain the following: " The following sections of this Memorandum shall be divided up between the fifteen (15) sub -sections of Section 45. These sub -sections are designed to represent the "complete financial plan for the fiscal year", City of Paris Charter — Article V — Section 45(1) "A budget message, explanatory of the budget, which message shall contain an outline of the proposed financial policies of the city for the fiscal year, shall set forth the reasons for salient changes from the previous fiscal year in expenditure and revenue items, and shall explain any major changes in financial policy. " Financial P� The overall Financial Policy of the City of Paris as shown through its Proposed FY20/21 Budget is to serve the public with professionalism, civility, honesty and integrity and to provide a safe and prosperous community by being responsible stewards of the taxpayer dollars and to provide quality, efficient and effective services that facilitate and enhance the quality of life, recreational enjoyment, economic opportunity, responsible planning, improvement of infrastructure, and public safety for all. Budget Messae In order to accomplish the Financial Policy stated above, the City Manager carefully considered the priorities for the Proposed FY20/21. These priorities consist of addressing employee pay, replacing outdated equipment, adding some new critical positions, realigning all line items for maximum efficiency of funding, maintaining our operational services as expected by the citizens, and following the restrictions found in the Texas Property Tax Reform and Transparency Act of 2019. 1. Employee Pay — The greatest asset the City of Paris has it's is Employees. Other than Sanitation, and to a degree Utilities, the primary role of local governments is to provide those services needed by the community that the Private Sector cannot provide. The primary reason the private sector does not provide these services is they are labor intensive with little to no profit return. In addition, the tax payers expect the highest of quality from the City services, thereby the expectation is for the employees to be of such a quality that accomplishes the Financial Policy stated above. Upon my arrival in April 2020, it became immediately clear that the City of Paris has fallen behind in Page 4 of 15 properly compensating its employees. In all departments, it is clear based on the annual comparable pay studies that we participate in for other communities that the City of Paris compensation plan has not kept up with providing a fair compensation by way of both wage and benefits as compared to similar situated communities in Texas. In almost every study I saw, the City of Paris was either the bottom or next to the bottom in most every department when compared to our peers. When diving further in to this matter, I learned that the City has given three (3) Cost -of -Living Adjustments (COLAs) in the last ten (10) years. This number is not much better when going back twenty (20) years. In many of our departments, we have consistently seen multiple positions remain vacant for the last five (5) or more years, relying heavily upon temporary workers to fill the void. While there are of course any number of reasons for why someone leaves a job, I do believe that pay is a primary issue. While we value our temporary workers, this does not allow for consistency or development of internal knowledge and experience to allow the City to move beyond just providing the most basic of services. In addition, in several departments, instead of filling a few fulltime positions to do the work, we are budgeting large amounts of funds for temporary workers in order to get the job done that a fulltime would have performed. In other cases, we are budgeting large amounts of Overtime pay due to an inability to keep positions filled. It is only natural that as positions become filled — and stayed filled — both Overtime and Temporary Worker expense will begin to drop. I want to find a way to retain employees across all of our Departments. To combat this problem, I would like to implement a program that I used in my last community. The goal is to move the compensation and benefit plan to a fair and marketable level when compared to peer positions while balancing it financially through carefully planned and strategic phases in order to acclimate the budget over a matter of a few years. This will ultimately benefit the citizens of Paris as we will begin to retain skilled and quality staff who will develop a growing experience to better achieve the Financial Policy stated above. At the same time, we have to be mindful of the tax payer dollar and the rise in property valuations and the impact of a higher tax rate. Therefore, I propose that we begin a multi-year process starting with a COLA and a Comparable Pay Study in FY20/21. In order to figure out where we need to go, we need a roadmap. I have proposed that we hire a Professional Consultant in FY20/21 who will study the City's wage and benefit plan and compare it to several comparable peer communities. Then, over the next several years, we will phase in the adjustments to get ourselves back to the midpoint. There is no way we can erase twenty years of falling behind in one single year, but by beginning the process now, we can develop the long term impact we are seeking. In addition, there are mechanisms we can put in place as we make these phases each year to soften the impact to the tax payer. This must be done one step at a time, and we will have to modify the plan each year for the next several years, but I have absolute confidence that we can get ourselves to where we need to be. Therefore, the Proposed FY20/21 Budget has a 2% COLA factored in as well as $30,000.00 for the Comparable Pay Study, spread out pro -rata between the General Fund, Water/Sewer Fund, and Sanitation Fund. It must be made completely clear that a COLA has been applied to all Full-time positions except the City Manager position. The City Manager's pay is not scheduled to change in FY20/21. 2. Replacing Outdated Equipment — Through the process described in item #4 below, the City has freed up a significant amount of funding through efficiency of this proposed budget in order to dramatically impact the lagging replacement of key equipment in several departments. In order for the Employees to do their work and fulfill the Financial Policy, they must have adequate equipment. Once again, much of the work the City provides its citizens is labor intensive. Therefore, the proposed FY20/21 budget includes a series of equipment purchases, some of which are outright, others will be done through either a loan or lease -purchase as allowed via Local Government Code Sections 271.005 and 271.903. Page 5of15 Speaking with our Public Works, by making the listed purchases in the Proposed FY20/21 Budget, this will catch the City up by several years. There of course is no guarantee that something will not fail in time, forcing us to replace it sooner than expected, but through the talent and skill of our Garage Department, much of our equipment lasts well longer than normal life expectancy. Nevertheless, there comes a point when everything needs to be replaced. In addition, I am proposing that we institute loans and/or lease -purchases in the General Fund in order to update several pieces of equipment instead of just one or two. All of these items need to be addressed now, they cannot wait to be addressed one at a time over the next several years, while other pieces of equipment likewise begin to fail. Reasonable loans and/or lease -purchases are a cost effective way of maintaining your fleet while getting the job done. More details as to what these items are will be provided later in this Memorandum. 3. New Positions — In my short tenure, I have had the pleasure of working very closely with each Department Head. While much more still needs to be observed and learned, it has become clear to me that the City is in need of two new positions. These are not new concepts to the City as both have been budgeted for in the past, but for one reason or another, they are no longer with the City. First, the City of Paris is in need of a City Planner. The Community Development Department does a great job of keeping Planning and Zoning moving through the processes, but the City Engineer and I are in full agreement that this community is large enough, growing enough, and complex enough to have an individual trained in Planning and Zoning taking the reigns and guiding us through it. The City has undergone some updates to the Zoning and Subdivision Ordinances in recent years, but we now need someone trained in this area to take us to the next level. In addition, the Community Development Department is stretched very thin; the addition of the City Planner will alleviate a great load on the City Engineer and staff, allowing for focus on other key areas while Planning and Zoning will have someone completely focused on it. Second, the City of Paris is in need of a fourth Code Enforcement Officer. It was made very clear to me upon my hiring that Code Enforcement must be one of my priorities. I have worked very closely with the Code Enforcement Department these past three months, and I will state clearly that I am very impressed with the work they do. But if we are going to take it to the next level, we need an extra hand to spread the load out. The demand placed upon this Department is great. A fourth Code Enforcement Officer will allow the City to be divided up in to four quadrants while also focusing time on the numerous complaints that come in and addressing the recently approved Downtown Vacant Building Ordinance. I have other ideas that I plan to implement with the Code Enforcement Department to further enhance their work, but a key element will be adding this fourth position. In both cases, we have not budgeted an entire year's worth of compensation as it will take time to advertise, interview, and hire. Again, we are seeking to propose an efficient budget. 4. Realignment of Line Item Budgets — In developing the FY20/21 Proposed Budget, I implemented a line -by-line realignment analysis, comparing the FY20/21 requests by each department against the Actual Revenues and Expenditures of each FY since FY15/16. Such an analysis allows the City to realign all line item budgets with the Actual trend of each line item. When this is not done over a period of time, individual line items can either become inflated or deflated. The expectation of a budget is for it to reasonably reflect the services a department plans to provide the tax payers. Therefore, when these realignments are not done, the budgets can get off track with reality. When you examine the trend line over a matter of years though, you can see the true requirements to operating a Department, developing a budget that makes sense, is lean, and is trimmed to provide the necessary services expected by our citizens with a slight adjustment for growth as costs rise. An example of this is provided below. Page 6 of 15 Line Item 15/16 16/17 17/18 18/19 19/20 20/21 Original 20/21 Ad usted XX-XXXX-XX $1lk $12k $11.5k $13k $12k $26k $13k YY-YYYY-YY $1lk $12k $11.5k $13k $12k $9k $13k In both examples above, you can identify a relative trend for Actual Expenditure from FY15/16 to current. In the XX example, "FY20/21 Original' is a sudden increase up to $26k. In the YY example, "FY20/21 Original" is a sudden decrease down to $9k. In both cases, the true operational cost of this line item calls for $13k, which is what the line item is adjusted to under "FY20/21 Adjusted". This however is not the final step. Following this adjustment, I met with each Department and re-examined all line items, one by one, discussing these proposed adjustments. If there was a known reason for the increase/decrease prior to the adjustment, then I took this in to consideration and adjusted the line item further accordingly. The purpose was to make sure every line item budget meant something. Through this process, the Department Heads and I adjusted over 400 individual line items. Some of these were an increase in the line item budget which better reflected the true cost of service we provide the citizens, but the significant majority of the lines, including the overall impact to the net balance, was a decrease in line item budgets, thus freeing up a significant amount of funding for much needed services, equipment, and cost -of -living adjustments. While doing this, it became very clear to me that for the past five or more years, the City has routinely budgeted to fill vacant Full -Time positions in many of its departments. Yet, as you examined the trend line, it also became clear that we historically never fill those positions, but rather have to rely heavily upon temporary help to get the job done. I equate this issue to the inadequate pay scale and being unable to keep employees due in large part to low wages compared to their peers in other communities. Therefore, we have two options — either we keep budgeting for these vacant slots hoping we will get lucky and fill them, or, given five or more years of history showing us this is not happening, we capture this excess and apply it towards the COLA to start combatting the true problem. I did not extract all vacant positions because we do hope to hire a few new Full Time employees in FY20/21, but rather in many departments that had this problem, we extracted several which contributed to the overall savings that has now helped with items #1-3 above. Maintaining Operational Services — By performing the Realignment Process in #4 above, it gave me a good image of what it takes to provide the services we do. Predominately throughout the entire budget, it is clear to me that the City Staff have done a great job of being frugal, consistent, and conscientious of the tax payer dollar. You do not see the dramatic swings that might come with wasteful spending, but rather the Departments are steadily providing the services under the same budgets year after year, only with minimal increases to account for increases in prices. Through the realignment process in #4 above, we have set each individual line item such that it matches the true cost to provide the service as seen over the past five years. Any adjustments up or down are for known reasons (a new piece of equipment, dropping the need for a particular subscription, better pricing through new bids, increases in service costs, etc.). 6. Texas Property Tax Reform and Transparency Act of 2019 — This Act was passed by the Texas Legislature in 2019. This represents a fairly comprehensive amendment to how Municipalities in Texas prepare their budgets. This Act takes affect this year, thus the FY20/21 is the first Budget impacted. A large amount of the Act changes how the Texas Comptroller operates, but there is a fair amount of edits to how the City of Paris must handle the procedure of passing a budget (notices, deadlines, public hearings, content of material produced, etc.), but the primary and long lasting impact that the City of Paris will feel for years to come is the restriction in Property Tax Growth. The Texas Municipal League Page 7 of 15 (TML) has produced an Explanatory Q&A, found on their website, that I would direct anyone seeking further information to review. The reader can also read S132 directly, but I would strongly recommend starting with the TML Q&A first to give you an idea of what it is you are reading in the Act. The Act is rather complicated. The TML Q&A does a very good job of capturing the essence of S132. "At its most fundamental level, S.B. 2 reforms the system ofproperty taxation in three primary ways.- (]) ays:(1) lowering the tax rate a taxing unit can adopt without voter approval and requiring a mandatory election to go above the lowered rate; (2) making numerous changes to the procedure by which a city adopts a tax rate; and (3) making several changes to the property tax appraisal process. " The Act produces the following formula when calculating our new Property Tax Rate: "Voter -Approval Rate = (No -New -Revenue Maintenance and Operations Rate x 1.035) + Current Debt Service Tax Rate" In short, the City of Paris can only grow its Operational and Maintenance Tax Rate by 3.5% each year without, possibly, triggering a mandatory election (hence the "Voter Approval' terminology). Cities with populations less than 30,000 have an additional threshold called the "De Minimis Rate" that is calculated differently (not shown here), would exceed the Voter -Approval Rate and would give said Cities the ability to raise additional Property Tax without triggering the election. There are reasons for the creation of this threshold, but that can be discussed at another time. In this situation, an election would only be required if the final requested Property Tax rate exceeded both the Voter Approval Rate as well as the De Minimis Rate. It is not recommended that the City of Paris utilize this additional growth created by the De Minimis Rate unless necessary. The Proposed FY20/21 Budget maxes out the Voter -Approval Rate without exceeding it. From professional experience working in the State of Nebraska which has had a "Growth Restriction" as this was called, it is strongly recommended that the City of Paris attempt to utilize this allowed growth each year in order to keep up with the growing costs of performing the Financial Policy as stated above. The costs that the City sees (third party, professional services, benefits, insurance, fuel, etc., basically the private sector) is not limited by this same Legislation, therefore if the City falls behind, it could find itself unable to keep up, thus cutting services. Fortunately, the Legislation is currently written such that a City can still utilize unused growth within three years (if the City utilizes 2.5% of the allowed 3.5% in year one, it can still use that additional I% within the next three years). After that though, the City forever loses that growth potential, thus the road to falling behind begins. Utilizing the 3.5% growth each year also allows for steady and healthy increases instead of drastic and last minute ones. I am in no way proposing that we arbitrarily increase the budget each year by 3.5% if it is not needed. We have seen examples of some prices going down at times. But if the service calls for this, given the Legislators have already acted on behalf of the General Public by limiting the growth potential, the 3.5%, which is not a lot to work with, would be reasonable to utilize when necessary. For FY20/21, the primary reason for the decrease in Property Tax Rate is the net impact of Valuation increases mixed with the 3.5% growth. The valuation has grown more than the 3.5% would raise, thus a decrease in Tax Rate. The City has the ability to exceed this further via the De Minimis Rate, but that is not recommended at this time. Page 8of15 Reasons forwSalient Changes from. the Previous,. Fiscal Year So as not to repeat myself, please see Sections 45(7) and 45(8) below, which are combined in this Memorandum. Changes in Financial Policy; As of the writing of this Memorandum, I was unable to locate the previous Financial Policy, Therefore, at this time I am unable to comment. This will not be the case next year. City of Paris Charter — Article V — Section 45(2) "A consolidated statement of receipts and expenditures for all funds. " In situations above where you see a negative net (ex: Municipal Court Security Fee), this Fund has existing carryover funding available that can also be used next year. So the Revenue line shows the new Revenue raised, while the Expenditure line shows the possible expenditure of both new Revenue and previous years' Revenue. In other cases, a positive net is shown when the City foresees more collection than expense, but these are primarily in Special Funds which have very restricted and narrowly defined expense options. Finally, the Operational Funds, among a few others, show a zero net meaning they are balanced, new revenue = expense. City of Paris Charter — Article V — Section 45(3) "An analysis ofproperty valuations. " Page 9 of 15 2020-21 2019-20 2018-19 2017-18 2016-17 Total Taxable Value 1 $1,876,141,460 $1794,161,289 $1,732,236,641 $1,681,747,299 �.__.. $1627,397,467 Percent Difference 5% 4% 3% 3%N/A $0.51608 �w... O&M Tax Rate 0.40229 -............_....... ........ -...., - 0.40868 . , ..... ..... ...... ........... ......... _..._ 0.43831 0.44248 .. __ ... 0.42443 Debt Tax Rate 0.0829 0.1074...............................011364. .....,......,.........,v.,...........0 0.10947 ...... 0.07752 Total Tax Rate 0.48519 0.51608 195 0 55195 0.550.55195 -m 0.50195 Percent Difference -6% -6% 0% 10% N/A While Total Taxable Value has increased in recent years, the City's Total Tax Rate has decreased. The Texas Property Tax Reform and Transparency Act of 2019 will continue to manage, or as the intended goal of the Legislators might be summarized as to say "keep in check", the City's O&M Tax Rate (note: the Debt Tax Rate is unaffected by this Act). City of Paris Charter - Article V - Section 45(4) `An analysis of the tax rate. " The Operational and Maintenance as well as the Debt Service Tax Rates are decreasin- in FY20/21. The following represents a comparison of FY 18/19 vs. FY 19/20 vs. FY20/21 Tax Rates: Year O&M Debt Total FY18/19 $0.43831 $0.11364 $0.55195 FY19/20 $0.40868 $0.10740 $0.51608 FY20/21 $0.40229 $0.08290 $0.48519 Difference -$0.00639 -$0.0245 -$0.03089 Difference -$0.03602 -$0.03074 -$0.06676 Preliminary FY 19/20 vs. FY20/21 FY 18/19 vs. FY20/21 This Tax Rate is, to the best of our determination using the Comptroller's Forms, in full compliance with Senate Bill 2, also known as the Texas Property Tax Reform and Transparency Act of 2019, approved by the Texas Legislature in 2019. The Tax Rate shown above is Preliminary as the Chief Appraiser has not fully completed the Appraisal process. In addition, we are attempting to verify our calculations using the complicated Comptroller Forms produced for SB2, however, we feel comfortable that our calculations will not change significantly. Ultimately, it is still preliminary until the City Council approves it. To calculate the Property Tax of a Home, the following formula can be used: (Value of Home/100) x $0.48519 = Property Tax to be Paid Example: $100,000.00 Value Home: ($100,000.00/100) x $0.48519 = $1,000 x $0.48519 = $485.19 Please note that the Property Tax Rates of Lamar County, Paris Junior College, and either the Paris ISD, North Lamar ISD, or Chisum ISD will also affect the Property Tax to be Paid. In FYI 9/20, the following shows the Property Tax Rates broken out by School District. Page 10 of 15 ._.. .. ----- ....., Total Taxes under Chisu m ISD Total Taxes under North Lamar ISD Total Taxes under Paris ISD TaKing Enfity 2019 Rate Percent of Total Taxing Entity [ 2019 Rate Percent of Total Taxing Entity 2019 1Rale Pry*rcent of Total Cay of Paris _,._ $0.5161 -----, 24% City of Paris [ $0.5161 26% City of Paris $0.5161 22% Paris Junior College $0.0840 4% Paris Junior College $00840 4% Paris Junior College $00840 4% Lamar County .,.......... $0.3940 18% Lamar County $0.3940 ......... 20% --...... y .,�_111-1 Lamar Count ,,,,..,,........,., $0.3940 , 17% Chisum ISD �����, $1.1500 ., ......... 54% ......-----..... North Lamar ISD -. ----- $0.9700 . .. 49% Paris ISD ....... $1.3534 ......... 58% $2.1441 100°x6 $1.9641 100% $2.3475 100% Depending on which ISD a resident lives, the City of Paris' Property Tax Rate in 2019 was either 24%, 26% or 22% of their total Property Tax Bill. The 2020 Property Tax Rates are not yet known, but they are likely not to change dramatically. It should therefore be noted that the City's 3.5% growth as allowed by the Texas Property Tax Reform and Transparency Act of 2019, while critical to the City's Financial Policy and planned operation, is a nearly de minimis impact as compared to the total tax bill owed by a resident. City of Paris Charter — Article V — Section 45(5) "Tax levies and tax collections by years for at least five years or, if records for five years are not available, then for as many years as are available. " fiscal Year Total Tax Levy ........ Total Tax Collected Percent Collected FY18/19 $9,381,829.00 $ 9,208,248.00 98.15% FY17/18 $9,145,965.00 $ 8,973,214.00 ........ 98.11% FY16/17 $8,093,094.00 ..... $ 7,940,08����. 7.00 .....- �������� 98.11% 16 $7 627 731.00 $ 7 406',"8-3-0.00 97.10% FY14/15 / $7,626,530.00 $ 7 348,2 50.00 96.35% Total Tax Levy is what could have been paid if 100% of the taxes were paid. Total Tax Collected is what was actually paid. City of Paris Charter — Article V — Section 45(6) "General Fund Resources in detail. " Please see Exhibit A attached for a detailed listing of all Funds by line item (not just General Fund). This Exhibit A shows the Proposed FY20/21 Budget (shown on the sheets as "Proposed FY2021 Budget"). The "Year Budget" is the FYI 9/20 Budget. The "Current Year" is how much has been received to -date as of the printing of Exhibit A. And finally FY2019, FY2018, FY2017, and FY2016 are the prior four years of Actual Revenues that were used in the Realignment Process to help produce the Proposed FY20/21 Budget. For your convenience, the key information has been highlighted in yellow, with red being used for the Fund Totals. There is of course a lot of information here, but for a community the size of Paris, budgets are complex. The purpose of showing you this much information is to give transparency and support the Realignment process that was discussed in the Budget Message section above. City of Paris Charter — Article V — Section 45(7), 45(8), 45(9) "Summary of proposed expenditures by function, department, and activity. " "Summary ofproposed expenditures by character and object. " "Detailed estimates of expenditures shown separately for each activity to support the summaries No. 7 and 8 above. Such estimates of expenditures are to include an itemization ofpositions showing the number of persons having each title and the rate of pay. " Page 11 of 15 Please see Exhibit B attached for a detailed listing of all Funds by line item. This Exhibit B shows the Proposed FY20/21 Budget (shown in the software as "Proposed FY2021 Budget"). The "Year Budget" is the FY19/20 Budget. The "Expended Year" is how much has been spent to -date as of the printing of Exhibit B. And finally FY2019, FY2018, FY2017, and FY2016 are the prior four years of Actual Expenditures that were used in the Realignment Process to help produce the Proposed FY20/21 Budget. For your convenience, the key information has been highlighted in yellow, with red being used for the Fund Totals. There is of course a lot of information here, but for a community the size of Paris, budgets are complex. The purpose of showing you this much information is to give transparency and support the Realignment process that was discussed in the Budget Message section above. To assist you in identifying Operating Departments, the following legend is a breakdown of the Departments by Fund Number and Department Number, and for added convenience, I have entered the total Proposed FY20/21 Budget for each Department (in some situations, you must add the Expense and Capital Outlay -Equipment to get the total). Fund Number Department Number Department ........p Total ... Proposed FY20/21 Budget 111 _ City Council $ 114,250.00 1 .... .. ....... .... 12 City Manager $...... 388,961.00 1 —.._ ........................................ 13 City Attorney ............ $ —_ 350,106.00 1 —........ 14 Municipal Court .................... ........ $ 236,171.00 1 15 City Clerk $ 152,255.00 1 21 Accounting & Auditing $ 450 ,421.00 .... ......... o lice $ 6,777,833.00 1 32Fire $ 4,679,007.00 A,.... .. 1 32-01 Code Enforcement_ .. $ ...... 63._8_,081.00 ... ..... 1 .. ..... 40 Community Development $ 507,302.00 . 1 40-01 �41 Main Street ee...........--......Engineering..............................$.......... $ ..... 108,618.00 .. 1 ...._........ 413,554.00 1 ..,.. �.....__� ........ 43 ......... Works ..... $ 223,673.00 ........... ..._ ParksPReer..ation,.....� Recreation, ROW $ �._._ .......... 1,033,600.00 .., 1 _ ..... ........... ..... w 43-01 ..... .........43-02 ... Municipal Pool �� $ 1.... .... ,,�n..���.., ......... .. — ----- Par...... _ks Concession .............................5.....�.�.�.�.�.�........�......_ ---------Girl's $ .... 8,854.00 �..... ...,, .................43 03 Softball Program --..._— --- . _._..-_........... 18,500.00 ..............,..,..... 1 43-04 Event Center $ - 1 _�.1..,.� — 44 ....... ...-. _�_._. ._._ _ .... _............. Sanitation -. ...... .....w. ............................ $ am.......... 46 Streets and Highways _ $ _............ ...... 1,519,574.00 148 .................................. Traffic and Public Lighting -- $ --....------ .... 497,353.00 1 ��......�......... 49 Garage �... ...... $ 360,021.00 1 54 EMS $ 3,045,929.00 1 61 Airport $ 257,850.00 1 62 Paris Band _.______ . $ .... 23,050.00 164 .T. .. ..�... Library ......... _ $ 727,331.00 _ 89..... Generl a ....� .. �....... $ _ .. .0.., 0 1,147,546_0...... 1 89-01 IT $ 569,124.00 1080 Warehouse $ 118,835.00 10 . �...�.... ......... 81 ........ ........ Water and Sewer Billing ...� Img $ 2,446,675.00 0 .... ..... ww _. 10 ...................10............................,. 82 ......... Water Production . ................. $ � 87.3.. ,457.00 83...............................m Water Distribu....„...................................... Distribution (Public Works) $ 1,601,634.00 � . 10 83-06C IP (Public Works) $ 394,074.00 10 85 ......... .....— Sewer Maintenance (Public Works) $ m 962,362.00 10 86 --. __�m._....._._....�....� Waste Water Treatment L_....._......_.................._._�................. �...� $ ._........_.......................------ 2,587,303.00 10 . ....... 87 Lift Stations $ .. _.. 4_44,214.00 45 .__ 44 .................. Sanitation ......m.Residential $ ...._ 638,203.00 45 44-01 Pick Up $ 527,147.00.. Page 12 of 15 The following Table is a listing of all of the significant purchases, including COLA, Professional Services, and Equipment, that have been added to the Proposed FY20/21 Budget. Department .__..._.__ Line Item I Description ........ Expense ® Notes Gene General Fund Salary Lines 2°6 COLA $295,338.62 '2%COLAAppliedto all FT Employees (except City Manage Water and Sewer Fund Salary Lines 2% COLA $ 60,769.72 2% COLA Applied to all FT Employees. p Landfill (Sanitation) Fund Salary Lines 12 COLA $ 7,073.31 ... � ...- --,n....... �,_ .. 1111.. 1111 1111... i2% COLA Applied to all FT Em . ----............-- City Council ---- -.-.-. ......., - ......w, Police 03-1002-31-99 Video/Audio Recording Devices $ 17,950.00 Interview Rooms Police 03-1002-31-99 Radio Consoles 0 $ 38,800.0 — Dispatch Police 3-1004-31-99 Vehicle Replacements p ants $199 000 00 a Four Patrol and One Animal Control, purchase outright Code Enforcement 03-0101-32-01 - Add Fourth Code Enforcement Officer $ 32,706.00 ------ __..., 1111.. _-_,_,_ Budgeted for 3/4 of year due to hiring process. Code Enforcement 01-0328-32-01 .. House Demolition . ......... $100,000.00 ......... ......-- Moved from Sanitation, added $20,000 _1111 Code Enforcement 01-0329-32-01 ........ Lot Mowing ------ $ 40,000.00 -------- - ...,...--._,_,_- Moved from Sanitation Code Enforcement 01-1005-32-01 Bobcat Tractor $ 11,000.00 Replace 2008 unit, S year financing. ...... .....---- Fire -. -- - 01 1002-32-99 - Gear Extractor _ $ 18,500.00 Fire Station 3 ....... . Fire 01-1006-32-99 .... ........ .... Brush Truck -__- $ 28,000.00 ...__...1111__._ .. ......... Replace 1999 Unit,5yearfinancing Commuro Development ty p O1-0101-40-00 City Ci Planner $ 46,209.00 ................................................... Budgeted for 3/4 of year due to hiring process. Community Development 01-0351-40-00 Historic Survey $ 15,000.00 �.0 � Second half of Historic Survey � ��e � � � Parks 01 0419-43-00 Trail de Paris Asphalt $ 30,00 0.00 r ������� ���- Year two of seven year program to re -asphalt entire trail. Parks 01-1004-43-99 Mini Dump Truck $ 11000 00 Replace 1996 unit, 5 year financing. Parks 01-1004-43-998/4 Ton Work Truck $ 9,000.00, Replace 1999,5yearfinancing. Parks Parks O1-1005-43-99 Skidste ........ $ 13 000.00 ......... .. -- — - .... -- ------- Replace 2000 unit, 5 year financing. ,1.,11,1. Parks 01-1010-43-99 Mini Excavator $ 6,500.00 ...------------- -- .................. _ Needed Drainage Work forsmallerjobs,5yearfinancing. Street 01-1005-46-99 Wheeled Excavator $ 30 000.00 .........--............ - Replace 2010 unit, l0 year financing. _ Street .-.. 01-1010-46-99 — Motor Grader _ 1111.. $ 30,000.00 .,.................... . ......., Replace 1985 unit, 10 year financing. Traffic 01-1004-48--99 3/4 Ton Work Truck $ 8,500.00 Replace 2007,5yearfinan ing o -,-... 0 . ................. rD _ cin .Rotate 2007 to another D mm ui _ Garage O1-0209-49-00 Tool Upgrades 4 7,000.00 upgrade tools to work on all vehicles and r ui1 merit. EMS C1-1004-5_4-99 Ambulance $ 1£3 x,000-00 Annual rotation of Ambulance Fleet (xi) IT 01-1003-89-01 Server Cluster Replacement S 66,000.00 Rotating aging Server out, downgrade primary to secondai Water and Sewer Billing ',10,0322-81-00 Comparable Pay Study „ 6,900.00 Prorata with General and Sanitation Water Production 10 0,507 82,01 Replace Swing Check Valve 5 17,000.00 Pat_Mayse Intake Pumps 82 and #3 —............................ Water Production 10-0507-82-03 Replace Ten (10) Turbidity Meters _ 4Q000.00 Water Treatment P PlantFilters Water Production 10 -0507 -82 -OD ��� & a Replace (10) Flow Transmitters m _ y 20,000.00 WaterT Treatment Plant Filters Water Production I10-0507-82-01 Replace Floating Mixers $ 17,000. 00 Water Treatment Plant Sedimentation Basins Water Production 10-0901-82 98 _ Roof Replacement $ 20000.00 Pat Ma se Intake Pum Buildi Y P ng _ Water Production 10 0901-82-98 Ilnterior Painting 86,000.00 WaterTreatment Plant Filter Gallery and Maxey Pump Bui Water Production 10-0903-82-98I tic Valves (x4) Install Pneuma es ,.. $100,000.00 -- — Ground Storage Tank. Water Production .Watenn...........-...1........ 1111.____ 30 0911-82-98 _ 1111., ...-..�.. _ ........,. Rehabilitate Intake M4 Pum ..............................m..................m.....m.m.,.,.,...,...,....................................................-,.,....,..,..,..,.. ®, $ 56,000.00 m .. .. _1111. 'Pat Mayse Intake Pump- Motor Rewind w-.... r Distribute 0-1002-83-06 Bulldozer $195,000.00 Replace 1978 unit, purchase outright. Water Distribution e,.., 10-1002-83-99 Backhoe $120,000.00 ... Replace 2000 unit, purchase outright. Water Distribution 10-1004-83-99 Service Work Truck $ 27,250.00 Replace �rc -_ Replace 2011, purchase outright. Rotate 2011 to another SewerMamtenance �.10-1004-85-06 Vactro n ' $ 64,000.00 . _ New trailer pull unit, purchase outright. Sewer Distribution 10-1002-85-99 ... ... . Mini Excavator . ..,, . $ 28 000.00 _. ReQlace 2005 unit, purchase outright. o— ;Sewer Distribution 10-1004-85-99 Service Work Truck $ 27,250.00 , 1111... Replace 2011, purchase outright. Rotate 2011 to another Waste Water Treatment 10 0902-8,,.,. ,,11 6-98 " .., ....... WWTF Engineering $427,592.00 ........ ...---------... ...---- .,___..__.,_,,._..... Bridge the gap until Long Term Loan/Bond comes through Lift Station 10-0402-87-00 Flow Equalization Basin Improvements $ 27,000.00 Entry drive replacement,lea cleaning two basins. Lift Station 10-1002-87-99 Flow Equalization Basin Improvements $ 5,000.00 ......— Entry drive replacement, cleaning two basins. — Lift Station 10-1004-87-99 Service Work Truck $ 27 000.00 Replace 1994, purchase outright. Sanitation 45 0322 44 00 Comparable Pay Study $ 600.00 1 Pith with General and W/S Sanitation 45-1004-44-99 Boom Truck with Grab Claw $ 45,000.00 Replace 2002 unit, 5 year financing. Please see Exhibit.Q for an itemization of positions showing the number of persons having each title and the rate of pay as shown in the Proposed FY20/21 Budget. City of Paris Charter — Article V — Section 45(10) "A revenue and expense statement for all types of bonds. " The following is a summary of the Long Term Financing that the City of Paris is currently scheduled to make payments on in the Proposed FY20/21 Budget. Page 13 of 15 City of Paris Charter — Article V — Section 45(11), 45(12) "A description of all bond issues outstanding, showing rate of interest, date of issue, maturity date, amount authorized, amount issued, and amount outstanding. " `A schedule of requirements for the principal and interest of each issue of bonds. " Please see Exhibit D, attached for a list of all Amortization Schedules for the Long Term Financing that the City of Paris currently has outstanding. City of Paris Charter — Article V — Section 45(13) "A special funds section. " The above are also shown in Exhibits A and B. City of Paris Charter — Article V — Section 45(14), 45(15) "The appropriation ordinance. " "The tax levying ordinance. " The Appropriation Ordinance and Tax Levying Ordinance will be provided at a future City Council Meeting for the Governing Body's consideration. City of Paris Charter — Article V — Section 46 "In preparing the budget, the City Manager shall in the preparation of the budget place in parallel columns opposite the several items of revenue the actual amount of each item of the last completed Page 14 of 15 fiscal year, the estimated amount for the current fiscal year, and the proposed amount for the ensuing fiscal year. " In light of the Budget Message #4, the Proposed FY20/21 Budget will show the Proposed FY20/21 Budget, the Budget for FY19/20 (the City of Paris is currently within the FYI 9/20, therefore Actual Yearend Values are not yet available), the Actual FY 18/19 Values, as well as the Actual Values for several previous Fiscal Years. Please see Exhibit A. City of Paris Charter — Article V — Section 47 "The City Manager, in the preparation of the budget, shall, in parallel columns opposite the various items of expenditures, place the actual amount of such items of expenditures for the last completed fiscal year, the estimate for the current fiscal year and the proposed amount for the ensuing fiscal year. " In light of the Budget Message #4, the Proposed FY20/21 Budget will show the Proposed FY20/21 Budget, the Budget for FY19/20 (the City of Paris is currently within the FYI 9/20, therefore Actual Yearend Values are not yet available), the Actual FYI 8/19 Values, as well as the Actual Values for several previous Fiscal Years. Please see Exhibit B. City of Paris Charter — Article V — Section 58 "Provision shall be made in the annual budget and in the appropriation ordinance for a contingent appropriation in an amount not more than three (3) percent of the total general fund expenditure, to be used in case of unforeseen items of expenditures. Such contingent appropriation shall be under the control of the City Manager and distributed by him, after approval by the City Council. [...J" The total General Fund Expenditure in the Proposed FY20/21 Budget is $24,443,660.00. Three Percent (3%) of this would be $733,310.00. The Proposed FY20/21 Budget has a listed contingency of $50,000.00 found under 01-0000-91-00. This has been the amount used for several years. City of Paris Charter — Article V — Section 59 "The total estimated expenditures of the general fund and debt service fund shall not exceed the total estimated resources of each fund (prospective income plus cash on hand). [...]" As has been shown in the above Memorandum, the Proposed FY20/21 General Fund is balanced where Expenditure is equal to Revenue. In addition, the Proposed FY20/21 Budget shows a slight net positive in each of the Debt Service Funds in order to meet our debt obligations. Conclusion The Proposed FY20/21 Budget is a true reflection of the Financial Policy stated on p.4. Through the hard work of many City Staff, the budget has been completely re-examined and realigned so that our most basic of services are properly accounted for, excess funding has been captured and re -directed to further the services we seek to provide, and the priorities listed in the Budget Message have been funded while keeping a careful eye on the impact to the taxpayer. We are very pleased to present this Proposed FY20/21 Budget to the City Council and we look forward to an opportunity to discuss it further. Page 15 of 15