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City
Manager's Budget Transmittal Letter |
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Introduction
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Budget /
Revenues /
Expenditures
/ Personnel |
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I am pleased to provide the Proposed Budget for the fiscal year ending September 30, 2004 for your consideration. The Proposed Budget offers expenditures within fiscal year 2004 available revenues. The principal purpose of this message is to serve as an executive summary and to highlight the main financial factors, including revenues by fund, major expenditure issues, personnel changes, pay and benefit plan modifications, program changes, and new initiatives. This year's format is a change from previous presentations. The most noticeable change is a reduction in total length from nearly 600 pages for the 2003 Budget to almost half that length for the Proposed 2004 Budget. The changes are intended to present the budget data in a more easily readable format which focuses on the major operational and funding issues. The major changes are:
The effect of the latter item is that internal service charges now appear as redundant expenses which leaves an impression of a large General Fund increase when compared to last year. A summary of revenues and expenditures/expenses by fund is presented in the front of the Budget document. An overall review of each department is presented, followed by separate sections for each division within that department which provide line item budget detail, explanatory comments for notable increases or decreases, staffing levels, and capital improvements. Appendix information includes Proposed Fee Increases, Computation of Proposed Ad Valorem Tax Revenue, Certification of Taxable Value, Summary of Millage Rates and Tax Collections, General Fund Undesignated Fund Balance Analysis, Budget Workshop and Public Hearing Calendar, Five Year Capital Outlay Summary by Department, Equipment Replacement Schedule Criteria, Employee Classifications by Pay Grade, and Major Active Grants. The following table provides a
comparison of the Budget for the previous fiscal year, current and
projected 2003 fiscal year, and proposed 2004 fiscal year by Fund. The
increase in the General Fund from the 2002-2003 Revised Budget to the
2002-2003 Projected Budget primarily reflects the elimination of
contra accounts for General Fund services provided to other
departments/divisions. Administrative fee revenues were increased and
were offset by similar increases in expenditure accounts, so there is
no net budgetary impact. |
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*Includes Downtown
Redevelopment, Babcock Street Redevelopment, Olde Eau Gallie
Redevelopment, Housing & Community Development, CDBG, SHIP, and HOME. |
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GENERAL FUND
These increases are consistent with the policy direction provided to maintain current service levels. Salary, health insurance, and pension contributions are increasing $2,699,451 in the General Fund. The full year cost of adding nine firefighter positions approved in the 2002-2003 fiscal year alone was $411,528. Property Taxes are projected to increase
$1,470,959 to $13,336,708 based on a proposed millage rate of 4.7856
mills. This is 8.0% over the roll back rate of 4.4311 mills and 5.8% over
the current property tax rate of 4.5228 mills. This tax increase is
necessary to provide funding for increased costs, particularly for pension
costs and labor costs, which are more fully described in the following
sections on Expenditures and Pay Plans and Pension Contributions. It is
hoped that the one cent Infrastructure Sales Tax will be approved by
voters in November. If this occurs, it will take pressure off the need for
property tax increases, and it is expected that Melbourne could maintain
the same property tax rate for at least the following two fiscal years. |
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As indicated in the chart above, the tax rate that is recommended reflects the first increase beyond the 4.5228 millage rate in seven years. A comparison of Melbourne's proposed 2004 fiscal year millage rates and the adopted fiscal year 2003 millage rates for other cities is presented below: |
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Melbourne's proposed millage rate is 4.7856. The Titusville millage rate includes recreation special district millage. |
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 Two
new revenue sources are included in the budget. The Fire Department has
proposed a Commercial Lift Assist Fee to cover the cost of responding to
calls from nursing homes, assisted living facilities, and rehabilitation
facilities to lift patients. These calls strain Melbourne's fire/medic
response system because backup systems must be in place to provide
sufficient coverage when staff are responding to the lift assist calls.
This fee is estimated to generate $60,000. The recently approved one
percent utility rate of return transfer from the Water and Sewer System
Fund is estimated to generate $320,000. Fee increases in leisure services,
pools, auditorium, and civic centers are also recommended. These will
generate an estimated $70,000. Staff are reviewing other potential fee
increases for various services such as fingerprinting, extra duty police
officers, lien research, false alarm fines, and trash hauling permits.WATER AND SEWER SYSTEM FUND The rate increases adopted in 2002 have generated revenues to adequately operate the System, meet debt service requirements, fund capital improvements, and begin to rebuild working capital reserves during the 2002-2003 fiscal year. The second series of rate increases is scheduled to be effective October 1, 2003 with five percent increases in both water and sewer rates. The estimated 2003-2004 Water and Sewer System fund revenues are $33,887,706 which include revenues from rates, fees, interest income, and intrafund transfers. These revenues will be necessary to provide for operating costs, including salary, health insurance, and pension increases of $515,725, and other System costs associated with bond obligations, grant requirements, and capital improvements. Additionally, staff are reviewing other
fees for potential increases such as port-a-let disposal, industrial
pre-treatment, and reuse water. A bond issue of approximately $26 million
is scheduled for later in the 2003-2004 fiscal year to finance several
major projects planned for the 2004 and 2005 fiscal years. A revenue
sufficiency analysis will be completed late fall, 2003 to ensure that
rates are sufficient to fund the additional debt service requirements. The Golf Courses continue to suffer losses.
Revenues have not been sufficient to provide for operations and fund
capital replacement. Although no fee increases are proposed for this
$2,601,250 Proposed Budget, if the Golf Courses have a second consecutive
year of operating losses, we will recommend allocating up to $20,000 for a
study to review rates in the upcoming fiscal year in time for those rates
to be adopted for the 2004-2005 fiscal year. As indicated in the past, our
rates remain substantially below private and other municipal courses.
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SPECIAL REVENUE FUNDS Housing and Community Development--It
is anticipated that the federal Community Development Block Grant (CDBG)
program will be funded at $700,507. These funds will be used for park
improvements, landscaping, Booker T. Washington neighborhood
revitalization, grants for community programs, code enforcement, and
program administration. The federal HOME program is expected to receive
$287,009 to provide for housing construction and rehabilitation and rental
assistance for low income residents. Additionally, the State Housing
Initiative Partnership (SHIP) is expected to receive $643,614 for owner
occupied and rental housing rehabilitation, tenant assistance, and
purchase assistance programs for low income residents. These programs are
administered by the Housing and Community Development Department. CDBG
funding dedicated to the incubator project may have to be rededicated if
that project remains in its current stalled position. INSURANCE FUNDS Because Melbourne has a self-insured workers compensation program, the revenues of the Workers Compensation Fund are primarily provided by charges to the user funds. These charges are based on a percentage of the workers compensation manual premium calculation. Since Melbourne is self-insured and the claims are relatively low, it has not been necessary to budget at the full manual premium level in the user funds. No significant changes are proposed for the new fiscal year. The Risk Management Fund provides for general liability and property damage coverage to the user funds. This Fund was previously presented as a department of the General Fund, but is now presented as an Internal Service Fund to better identify the costs of this program and allocate the costs. As a result of updated asset valuations, the allocations to the respective user funds has been revised. Overall, these allocations were not increased, although insurance premiums are expected to increase approximately $200,000. This is because the insurance reserve expense has been reduced based on reserve requirements for the past few years. CAPITAL IMPROVEMENT FUND Funding for major capital improvements of
$18,705,622 is provided from the General, Water and Sewer, Stormwater
Utility, and Golf Courses Funds; the Downtown and Babcock Street CRA's,
Local Option Gas Tax, Transportation Impact Fees, Sidewalk and Bikeways
Impact Fees, and Bond Proceeds. |
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The proposed total budget identifies
expenditures of $113.4 million, which is approximately 10.1% and $11.4
million higher than the projected third quarter current fiscal year
budget. Operating and debt service expenses are proposed to increase $6.1 million, or 13.9%, to $44.1 million. The primary increases are in insurance, General Fund administrative charges, Information System costs, chemicals for the Water Treatment Plant, electricity for the Water and Wastewater Treatment Plants, and debt service for the Fee Avenue pool and Eber Road widening bonds. A transfer of $220,000 has been proposed to the General Fund Capital Construction Account to provide funding for design of City Hall renovations. Additionally, General Fund Contingency has been increased to $250,000 which is 0.5% of the General Fund budget. The recommended contingency for this Fund is $500,000 although it will likely take a few years to scale up to that level. The contingency used to be $150,000 and had been decreased to $74,000 in the 2003 fiscal year. A contingency level below 1.0% invites regular use of trust funds and reserves. Capital outlay/improvement accounts are proposed to increase $6.4 million, or 30%, to $21.2 million. This represents a combination of a 25.8% decrease in capital outlay and a 33.2% increase in capital improvement projects. Capital outlay budgets were decreased because the fixed asset threshold was increased; therefore, items which would have previously been purchased from capital outlay are now recorded as operating expenses. Some of the large capital improvements proposed are:
Several projects are proposed to be funded
by bond issues and this funding source is identified for those projects in
the respective department budgets. Debt service budgets have been proposed
for the Fee Avenue pool and Eber Road widening projects and to refinance
the Babcock Street Community Redevelopment Agency Note which matures in
2004. Although a Water and Sewer bond issue is expected in the middle of
the 2003-2004 fiscal year, no increase in debt service is proposed at this
time because very little of the associated debt service is expected to be
funded during this fiscal year. |
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This budget includes a net increase in staffing of one full-time and two part-time positions. Specific staffing additions and deletions are identified as follows:
These added/deleted positions do not
reflect transfers of positions between Departments/Divisions and are in
addition to the realignment of Divisions and positions which are occurring
as a result of the Departmental Reorganization described below. |
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About nine years ago Melbourne had two
Assistant City Managers-one for Management Services and one for Public
Works. Both Assistant City Managers were also able to provide some level
of support to the City Manager's office. When the Assistant City Manager
for Public Works retired, that position was deleted as a cost saving
measure and many of the former Public Works functions were assigned to the
remaining Assistant City Manager. The result is that the Assistant City
Manager was tasked with managing a number of disparate functions, and both
the City Manager's office and the departments reporting to the Assistant
City Manager lost some level of support. Usually an Assistant City Manager
supports the City Manager and does not also serve as a Department
Director. To improve upon the current situation the
following reorganization has been made in existing departments to achieve
optimal efficiency. To enable the Assistant City Manager to provide more
support to the City Manager's office, the Purchasing and Risk Management
Divisions will be reassigned to the Financial Services Department; the
Facilities Maintenance, Fleet Management, and Solid Waste/Recycling
Divisions will be reassigned to the Public Works and Utilities Department;
and the Traffic Signage and Signal Division will be reassigned to the
Engineering Department. The Grants Administrator, now in the Financial
Services Department, will be reassigned to the Housing and Community
Development Department. Once these transitions are complete, there may
need to be minor restructuring within certain positions. As a general
guideline none of the affected individuals (division chiefs or otherwise)
lose stature or pay by these changes. Further, the timing occurs based on
real program work considerations, or the fiscal year, as explained to each
affected division chief or unit supervisor by the affected department
directors.
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EXPANDED SERVICES / NEW INITIATIVES The following highlights major changes and program improvements in the budget proposal:
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PAY PLAN AND PENSION CONTRIBUTIONS Normal pay adjustments have been factored for budget purposes for non-bargaining and bargaining employees consistent with agreements for Police (PBA), Fire (IAFF), and "blue collar" (LIU) employees. The contribution to the Police Pension Plan
increases by 25.8%. The new level, 28.47% of payroll, is an increase of
$469,441. The contribution to the Fire Pension Plan increases by 35.6%.
The new level, 5.33% of payroll, is an increase of $67,687. The
contribution rate to the FRS as a percentage of payroll increases from
5.76% to 7.39% for regular employees, from 6.06% to 9.37% for senior
management class employees, and from 11.86% to15.23% for the elected
officials class, which all together is an increase of $99,771. The FRS
contribution rate for DROP employees remains at 9.11% of payroll. The
contribution to the General Employees Pension Plan is budgeted at 13.2%,
which is the required rate for the 2003 fiscal year. Updated contribution
rates for the 2004 fiscal year will be provided by the actuary, and the
associated budget adjustments will be made next year.
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The City Council has supported a potential one cent Infrastructure Sales Tax, which is anticipated to be on the ballot in November, 2003. If approved, this tax is estimated to generate $46.6 million in the next ten years. This money would be used to finance a lengthy list of capital projects and will require a specific project management component to complete in a timely manner. Accordingly, if the one cent Infrastructure
Sales Tax is approved, I will recommend the addition of a second Assistant
or Deputy Manager resulting in two Deputy Managers-one for administration
and one for operations-to better administer the needs of the City of
Melbourne while making the voter supported improvements. Additionally, the
methods used to schedule and build projects and the prioritization of the
Council regarding the project lists will undoubtedly need to be revised
with more input from Council.
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ACKNOWLEDGMENTS I wish to express appreciation to all the departments and staff who have assisted with their suggestions in formulating this budget proposal, and particularly to the Budget staff who thoroughly reworked the format to provide a more functional document. It is my hope that this document adequately reflects staff's best efforts and plans for continued service improvements to our citizens. With the guidance and leadership provided by the Mayor and City Council, we believe we can meet our objectives in providing high quality service. Respectfully submitted, Jack M. Schluckebier, Ph.D. |
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To
provide revenue to maintain the current level of service, fund needed
capital improvements of $518,000, and provide nine months debt service of
$95,420 for a new Fee Avenue swimming pool, a variety of revenue increases
are recommended. These include property tax increases, as well as certain
services fee increases. All revenue accounts have also been adjusted to
reflect growth and collection trends.
An increase in the stormwater fee from
$18.00 to $21.60 per year per equivalent residential unit is included in
the Proposed Budget to fund additional stormwater improvement projects.
The total proposed for stormwater projects is $814,700, an increase of
$455,342. Also, to be consistent in the allocation of General Fund costs
in support of all enterprise funds, a similar administrative charge is
budgeted in the Stormwater Utility Fund. By comparison, even after the
increase, Melbourne's stormwater rate remains lower than the applicable
rates of other cities and unincorporated areas of Brevard County.
Phase
II of the Surface Water Treatment Plant improvements project is
proposed to disinfect water with ozone, which reduces the need for
chlorine. Ozone is a more effective disinfectant, and significantly
improves the taste and odor of the finished water product. The work
will be financed by bond proceeds.