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2 - Budget Finance Committee Recom FY 18-19 FINAL August 13, 2018 To: Mayor and City Commission The City of South Miami FY 2019 Budget and Finance Committee Members would like to begin by thanking the Commission and staff for their dedication and commitment to the City of South Miami and its residents. It is an honor for this committee to serve the City of South Miami in this important task of making recommendations regarding the City’s proposed budget. Special thanks to City Manager, Steven Alexander, and his staff for their tireless support and guidance in this complex process. The positive encouragement and exceptional knowledge of the Finance Department, was invaluable for the committee. This report was a collaborative effort and as such we would also like to thank the City’s Department Directors, many of whom we met with in our research and deliberations on the proposed budget, the entire staff of the City of South Miami who work hard to make sure the expenses stay within the budget to the extent possible. GOALS AND OBJECTIVES The purpose of the Committee, as stated in section 2-26.8 of the City’s Code of Ordinances, is to provide advice and recommendations to the City Commission regarding the adoption and implementation of financially sound annual budgets and investment policies. To accomplish this purpose, the Committee is charged with reviewing and evaluating the draft proposed budget, the City's investments, employee pension and other retirement accounts; examining ways to preserve existing revenue sources and exploring additional funding sources; and giving advice to the City Commission on projected earnings of investments and desirable or necessary further investments, revenue, expenditures and strategic planning (which includes analyzing existing service levels and determining sufficiency and appropriateness). The Committee also reviewed the Comprehensive Annual Financial Report. The 2019 Budget and Finance Committee met several times, from March through August 2018 in order to provide informed recommendations on the budget. The Committee interviewed Department Directors and Departmental budgeting staff, the experts with knowledge in public administration, finance, and budgeting. The Committee undertook a detailed examination of the City’s proposed budget to assess the policies, funding levels and projections within the documen t. Particular attention was paid to those operations which have a large financial impact on the City’s budget, such as Police, Public Works, Parks, and Finance. The Committee anticipates that adopting the recommendations herein will have both an immediate and a long-term beneficial financial impact on the City. Each recommendation is intended to improve the overall financial policy and health of the City of South Miami. BUDGET REPORT SUMMARY To the best of our knowledge, the City’s existing proposed FY 2019 Budget format is in compliance with Government Finance Officers Association (GFOA) principles. GFOA specifies best practices in public budgeting: “A government should develop a policy that defines a balanced operating budget, encourages commitment to a balanced budget under normal circumstances, and provides for disclosure when a deviation from a ba lanced operating budget is planned or when it occurs.” This is quoted from the GFOA website: http://www.gfoa.org. Every year the Budget and Finance Committee members, with the help and support of the CFO, evaluate the City’s existing policies and confirm they meet the GFOA budgeting standards. Below is the background and Committee recommendations. BACKGROUND The purpose of the City of South Miami's Financial and Budgetary Policies, which is incorporated annually within the City’s fiscal year budget, is to have a one-source document for all City financial and budget policies. The intention of the policies is to guide elected officials, the City Manager and staff in their on-going role as the financial stewards of the City. The policies guide essential decisions affecting budget and financial matters to ensure that the City is financially prepared to meet its immediate and long-term service objectives. The individual policies serve as guidelines for financial planning, budget preparation, implementation, evaluation and internal financial management of the City, and may be amended from time-to- time. One of the citywide initiatives recommended during the adoption of the FY 2014/15 budget was the review and further enhancement of the City's financial policies. The Budget & Finance Committee, with support from the City Administration, began the task of analyzing the City's existing financial and budgetary policies, identifying best practices as recommended by the Government Finance Officer Association (GFOA), and reviewing policies of other highly-regarded municipalities. After review, the Budget & Finance Committee believes the existing policies, in addition to the policies which were implemented in FY 2015-16, such as, increasing the Emergency Reserve Fund to 25%, have not only improved the City’s financial position, but places the City in a better situation in case of an unexpected disaster. The Committee found that the City continues to generally follow the National Advisory Council on State and Local Budgeting (NACSLB) adopted budgeting framework and recommended budget practices that were subsequently endorsed by GFOA. We commend the City for its commitment to this excellent budget format. BUDGET AND FINANCE COMMITTEE PRELIMINARY RECOMMENDATIONS Based on the Committee’s review and pursuant to numerous discussions, the Committee has provided some recommendations for the Commission to consider. Operating Budget As previously stated, the Committee finds that t he City of South Miami follows the GFOA recommended principles in the proposed budget for FY 20 18-19. This is well documented in the General Fund Summary and is illustrated in the following graph. Note: The graph shows the following: FY 2007-2017 (actual numbers), 2018 (estimated numbers), 2018-19 (proposed numbers). After three quarters of FY 18, actual revenues are on track to meet FY 18 revenue projections in most cases. Unexpected/Underestimated revenues are expected to offset unforeseen any revenue shortcomings. 0 500 1000 1500 2000 2500 3000 Dollars Comparison Revenues to Expenses (100s) Revenues Expenses GENERAL RECOMMENDATIONS Below please find the City’s adopted millage rate for the past 10 -years. FY 2009 5.2790 FY 2010 4.9526 FY 2011 4.9526 FY 2012 4.6662 FY 2013 4.3639 FY 2014 4.3639 FY 2015 4.3639 FY 2016 4.3000 FY 2017 4.3000 FY 2018 4.3000 As seen above, the City has been reducing the millage rate since 2010, while continuing to maintain healthy reserves and providing the City residents with first -class service. On July 17, 2018, the City Commission adopted a resolution which advertises a m illage rate of 4.3000 on the TRIM notices which are sent out to property owners in August. The 4.3000 maintains the City millage rate at the same amount for another year, which continues to be the lowest rate in recent history. The Budget and Finance Committee are pleased as residents with the low rate, however due to some arising concerns like the additional homestead exemption which the Committee expects will pass easily in November and inflation, would have preferred a responsible rate increase in an effort to continue to provide the level of service the residents are accustomed too or a having to sustain a greater millage rate increase in the future. Again, the Budget and Finance Committee understands the benefit to the property owners of the City in maintaining a low millage, but at the same-time understands that costs for services continues to rise and small manageable increases to the millage is needed, at times. This increase if instituted, would be the necessary result of outside forces, not mismanagement by the City of South Miami. With the above stated, an alternative to requiring millage increases to help maintain the quality of the City’s existing services would be the approval of responsible new development and redevelopment specifically within the City’s Transit Oriented Development District (TODD) and Hometown District Overlay. Currently, the City has seen serious interest by developers for Development Projects within the City’s TODD and Hometo wn District Overlay, and the City Commission should review and allow responsible development/redevelopment to continue to keep the existing property owner’s millage rate low. Redevelopment and revitalization of the downtown district is needed to keep the City thriving and providing businesses within the City the opportunity to compete with other businesses in other neighboring cities which have allowed redevelopment. Moreover, increased population density resulting from such new and redevelopment is generally associated with helping support local businesses, supporting mass transit, and providing a better mix of housing types. If the businesses are thriving, then the rental spaces within the properties increases, and the businesses can pay higher rental amounts, hence increasing the assessed value of the property, providing more ad valorem revenue to the City to help pay for the great city services currently in place. Furthermore, City Hall is located along Sunset Drive, on a property which is extremely valuable and located within the City’s Transit Oriented Development District (TODD). Developers have recently showed interest in redeveloping the City Hall Property and providing for approximately $36 million dollars over 30-years of new ad valorem revenue for the City, while also providing the City with a new state of the art City Hall and Police Department. Strong consideration should be provided in an effort to help continue funding city services without increasing taxes. The actual project will probably help maintain low taxes for the City’s existing property owners, while improving city services and aging city facilities. On July 3, 2018 the City Commission wisely adopted the Pedestrian Crossing Acquisition, Development, Operation and Maintenance Trust Fund, with the Budget and Finance Committee’s understanding, to help fund a pedestrian crossing bridge over US1. The Budget and Finance Committee strongly agrees with the need for a pedestrian crossing bridge over US1, especially with the expected development within the City’s downtown. With the expected new Development, comes many new businesses and residents, which will be visited from individuals coming from the only Metrorail Station that is located within a Downtown. The Budget and Finance Committee believes there is an existing need for a pedestrian bridge, and even more of a need once additional Development has occurred. Considering that, the developers should play a part in paying for the cost of planning, design, and construction of the pedestrian bridge, to help offset the large cost of a pedestrian bridge. The Budget and Finance Committee recommends the City lo ok to increasing the number of Parks for the residents to enjoy. Small parks or “mini-parks” provide tremendous benefit to residents and are significantly less costly than larger alternatives to maintain. From our understanding, small parks are not intended to service an entire city in the same way as a city park. Each should be created with the specific interests and needs of the surroun ding community, whose nearby individuals and families will use. It is the recommendation that the City’s Parks Acquisition, Development, Operations, and Maintenance Fund be used as the primary funding for such park acquisitions. Lastly, the Budget and Finance Committee is completely onboard with the City’s newly implemented shuttle system. The City’s shuttle bus can and should be one of the greatest assets of the City, providing residents, customers and visitors with a way to travel around the City, free of charge. The Budget and Finance Committee recommends completing periodic evaluations and determining the right stops, and possible increasing advertising/promotion of this new jewel. Furthermore, if the City could have developers help in paying for the shuttle service which would help their customers and our residents with their transportation needs, it would be great all-around. CLOSING STATEMENT AND SUMMARY Revenue projections for FY 2018-19 seem to be conservative, are in line with historic numbers, and apparently take known condition changes into account. Overall the Committee was impressed with the amount of detail provided by management and is supporting the budget as proposed. These Com mittee recommendations were discussed during budget meetings and arrived at by consensus. These recommendations were by and large arrived at unanimously. The proposed budget is necessarily a living document and changes almost daily as new information becomes available to management. This changing information is reflected in the budget to the extent possible. For that reason, it is important for the Commission to get regular updates from management before their final approval of the FY 2018-19 budget. The Budget & Finance Committee considered the most recent information that was available in its consideration of our recommendations. The Committee will be available to review further information or answer questions if the Commission desires. Respectfully and on behalf of the entire Budget & Finance Committee, including, Carolina Pelleya-White, Daniel Montana, Jennifer Korth Llorente, and Kyle Saxon.