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HomeMy WebLinkAboutResolution 64, 2022CITY OF PALM BEACH GARDENS CITY COUNCIL Agenda Cover Memorandum Meeting Date: October 6, 2022 Resolution 64.2022 Subject/Agenda Item: PFM Group Consulting, LLC — Review of Key Strategies & Initiatives 2022 Consideration for Adootion. 1XI Recommendation to APPROVE Recommendation to DENY Reviewed by: Originating Dept.: Costs: $ NIA Council Action: (Total) JAdministration rApproved � Lf[ ] Approved wl $ NIA ConditionsR. m ax L aAssistant to the City [ ]Denied Current FY Manager [ ] Continued to: Advertised: Funding Source: NIA Attachments: Date: [ ] Operating Paper: [ ] Other Resolution 64, 2022 - Exhibit "A": - PFM Group Consulting, [ X ] Not Required LLC — Review of Key Strategies & ---_---------------_--�_�__ Initiatives 2022 Contract/Agreement: Effective Date: NIA Expiration Date: Submitted by: NIA Assistant to the City Manager Joh oehm Affected parties: [ ] Notified Budget Acct.#: NIA Approved by: City Manager [ X ] Not R d i; . F rris Meeting Date: October 6, 2022 Resolution 64, 2022 Page 2 of 2 BACKGROUND: The City of Palm Beach Gardens (the "City") retained PFM Financial Advisors and PFM Group Consulting (collectively, "PFM") to advise the City on several key issues involving budgeting and economic development. Many cities seek this third - party perspective as a part of a strategic planning process. PFM stated in the report, "given the variety of impactful issues under consideration in the City, this was a logical and pro -active undertaking by the City government leadership." The project encompassed a seven -week period to assess the City's Budget and Policies, Tax and Revenue Policies, and Economic/Community Development Strategies. The findings and recommendations were evaluated analytically to determine whether they provide a positive contribution to the City's economy and vision for the community. This was augmented, where appropriate, with benchmarking, case studies, and/or financial analysis. The City held a Council Workshop on August 17, 2022, for PFM Group Consulting Director Randall Bauer to present the report and address questions from City Council about the report's findings. COUNCIL DISCUSSION/ACTION: During the August 17, 2022, Council Workshop, City Council directed staff to bring the PFM Report back at a later Council Meeting to consider adopting the report as a Council Strategic Plan that will help streamline a vision for the City's future. With a majority affirmative vote by City Council, Resolution 64, 2022 will be approved and adopted. 1 RESOLUTION 64, 2022 2 3 4 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PALM 5 BEACH GARDENS, FLORIDA, ADOPTING PFM GROUP 6 CONSULTING, LLC'S REVIEW OF KEY STRATEGIES & 7 INITIATIVES 2022 AS A COUNCIL STRATEGIC PLAN; PROVIDING 8 AN EFFECTIVE DATE; AND FOR OTHER PURPOSES. 9 10 11 WHEREAS, the City of Palm Beach Gardens (the "City") retained PFM Financial 12 Advisors and PFM Group Consulting (collectively, "PFM") to advise the City on several 13 key issues involving budgeting and economic development; and 14 15 WHEREAS, many cities seek this sort of third -party perspective as a part of a 16 strategic planning process; and 17 18 WHEREAS, the project assessed the City's Budget and Policies, Tax and 19 Revenue Policies, and Economic/Community Development Strategies; and 20 21 WHEREAS, the findings and recommendations were evaluated analytically to 22 determine whether these policies and strategies provide a positive contribution to the 23 City's economy and vision for the community; and 24 25 WHEREAS, the City held a Council Workshop on August 17, 2022, for PFM Group 26 Consulting to present the report; and 27 28 WHEREAS, the City Council directed staff to bring the PFM Report back to 29 consider adopting it as a Council Strategic Plan that will help streamline a vision for the 30 City's future; and 31 32 WHEREAS, the City Council deems approval of this Resolution to be in the best 33 interests of the health, safety, and welfare of the residents and citizens of the City of Palm 34 Beach Gardens and the public at large. 35 36 37 NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY 38 OF PALM BEACH GARDENS, FLORIDA, that- 39 40 SECTION 1. The foregoing recitals are hereby affirmed and ratified. 41 42 SECTION 2. The PFM Review of Key Strategies & Initiatives 2022, attached 43 hereto as Exhibit "A," is adopted as a Council Strategic Plan that will help streamline a 44 vision for the City's future. 45 46 SECTION 3. This Resolution shall become effective immediately upon adoption. Page 1 of 2 Resolution 64. 2022 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 PASSED AND ADOPTED this day of , 2022. ATTEST: Patricia Snider, CMC, City Clerk APPROVED AS TO FORM AND LEGAL SUFFICIENCY R. Max Lohman, City Attorney VOTE: MAYOR REED VICE MAYOR LITT COUNCILMEMBER WOODS COUNCILMEMBER MARCIANO COUNCI LMEMBERTINSLEY CITY OF PALM BEACH GARDENS, FLORIDA Iaffis Chelsea Reed, Mayor AYE NAY ABSENT a Shared OocumentslRESOLUTIONS120221Resolution 64 2022-PFM Group Consulting -Adoption -Key Strategies-Initiatives.docx Page 2 of 2 Resolution 64, 2022 W:4C11.=319OW low., IND.- % rS T "vv ;ere .1 .. . ....... 7�- PFIVI Group Consulting, LLC BNY Mellon Center 1735 Market Street 42"d Floor Philadelphia, PA 19103 In consultation with Hank Fishkind, Ph.D. — - -0- 1 MAN CONTENTS INTRODUCTION................................................................................................................. 2 CITY O VER VIEW................................................................................................................ 5 CROSS CUTTING OBSERVATIONS................................................................................ 7 IMPACTS OF A TRIPLE -A CREDIT RATING................................................................. 10 10-YEAR BUDGET FORECAST...................................................................................... 14 MAINTAINING A STABLE MILLAGE RATE.................................................................. 19 USEOF RESERVES........................................................................................................ 26 WESTERN GROWTH PROJECTIONS FOR NEEDS AND REVENUE......................... 31 CURRENT USE OF 1-CENT SALES TAX...................................................................... 35 VALUE OF 2024 COUNTY -WIDE 1-CENT SALES TAX FOR TRANSPORTA TION... 39 MOBILITY PLAN TO MOVE PEOPLE, NOT JUST VEHICLES .................................... 41 TRANSIT ORIENTED DEVELOPMENT DISTRICT IN THE DOWNTOWN AREA....... 45 ECONOMIC DEVELOPMENT INCENTIVES.................................................................. 49 WORKFORCE HOUSING................................................................................................ 55 DOWNTOWN DEVEL OPMEN TSIPGA STATION, FPL SITE, SALE OF LEGACY PLACE, AND LOEHMANN'S PLAZA............................................................................. 59 THE TRANSFORMA TIONAL VALUE OF A PALM BEACH GARDENS CENTRAL RAILSTATION................................................................................................................. 64 MIXED -USE DEVELOPMENTS....................................................................................... 69 RECREATIONAL AMENITIES EXPANDED AND UPGRADED .................................... 72 ANNEXATION INITIATIVES............................................................................................ 74 SUMMARY........................................................................................................................ 77 APPENDIX A: FINANCIAL MANAGEMENT POLICIES ................................................ 79 APPENDIX B: NON -FINANCIAL MANAGEMENT POLICIES ....................................... 83 I INTRODUCTION The City of Palm Beach Gardens (the City) retained PFM Financial Advisors and PFM Group Consulting (collectively PFM) to advise the City on several key issues involving budgeting and economic development. Many cities seek this sort of third -party perspective as a part of a strategic planning process. Given the variety of impactful issues Linder consideration in the City, this was a logical and pro -active undertaking by the City government leadership. The topics that PFM has analyzed include the following, which are grouped into the following three broad categories: City Government Budget and Policy • Maintaining a AAA Bond Rating ■ 10-year budget forecasting • Western Growth projections for needs and revenue • Current Use of 1-cent Sales Tax ■ Value of 2024 Countywide 1-cent Sales Tax for Transportation City Tax and Revenue Policy ■ Maintaining a Stable Millage Rate to ensure adequate reserves ■ Economic Development Incentives City EconomiclCommunity Development Issues ■ Value of future Tri-Rail andlor Brightline Station ■ Transit Oriented Development District in the downtown area • Mobility Plan to move people, not just vehicles ■ PGA Station, FPL Site, Sale of Legacy Place, and Loehmann's Plaza • Mixed -Use Developments • Workforce Housing Program • Recreational Amenities expanded and upgraded • Annexation Initiatives 2 Project Approach Given the wide range of potentially impactful topics, PFM identified and used a senior project team.' In general, the project team relied on a three -phased approach related to each project area. These included a data gathering phase, an analytical phase, and, finally, the findings and recommendations phase. The project was relatively brief, encompassing a seven -week period. As a result, it was agreed that the analysis and findings and recommendations would be focused to accommodate the expedited timeline. As noted in the project plan, most topics were evaluated analytically to determine whether they provide a positive contribution to the City's economy and vision for the community. This was augmented, where appropriate, with benchmarking, case studies and/or financial analysis. Project Activities To arrive at its findings and recommendations, the project team undertook the following activities. it should be noted that the City staff that engaged with PFM were extremely helpful — providing useful data and information, scheduling and participating in interviews and site visits, and answering the dozens of questions that the project team posed throughout the course of the analysis. Project kick-off. Attended by the project team and key members of the City leadership and staff, this provided an opportunity to introduce the project and team, outline the project plan and timeline, provide information and answer questions. Data and information request. PFM identified and the City provided documentation and information related to the City finances and budget; economic development incentives, tools, and policies; and specific data and information related to individual projects or planned initiatives. 1 The project team was led by PFM Group Consulting Director Randall Bauer In over 16 years at PFM, Randall has led dozens of projects focused budget and tax policy and economic development incentives for state and local governments. Prior to joining PFM, he spent 18 years in state government, most recently as a state budget director. also included PFM Financial Advisors Managing Director Jay Glover, who served as the engagement director and a technical advisor on public finance and related City issues. PFM Director Dr. Hank Fishkind served as a primary subject matter expert related to economic and community development issues. While Dr. Fishkind left the formal employ of PFM during the project, PFM contracted with Dr. Fishkind to continue to provide advice and expertise for the balance of the project. The project team also included Senior Managing Consultant Stan Geberer, who has over 30 years' experience related to real estate and community development; Senior Managing Consultant Deanna Kimball, an expert on budget models and budgeting in general; and Senior Analyst Joe Buckshon. who is a key member of the PFM economic development consulting team. in Detailed interviews. The project team conducted detailed interviews with City subject matter experts on the topics addressed in the report as well as external stakeholders representing the City business community as well as developers and community development subject matter experts_ • Site visits. The PFM project manager spent two days in Palm Beach Gardens meeting with key staff, reviewing documentation and the City budget model, and touring key City locations related to the project. Project reporting. PFM provided the City with written weekly reports detailing project activities from the reporting period, planned activities for the next reporting period, and any issues in need of resolution by the City. As noted, City readership and staff were extremely helpful and forthcoming with data and information throughout the project, and we thank them all for their efforts. The project team also wishes to thank City Manager Ron Ferris for his project leadership and support; Deputy City Manager Stephen Stepp for his tireless work as the City project manager; and Administrative Services Manager Jamie Cobb, who skillfully managed the thankless task of scheduling meetings and interviews through the project. Of course, the findings and recommendations within the report (as well as any errors or omissions) are those of the project team and do not necessarily reflect the policies or perspectives of the City or its leadership and staff. 4 pin Isnwall1 RATJI-WA The City of Palm Beach Gardens is located in Palm Beach County in south Florida. The City was founded in March 1959 when John D. MacArthur announced a plan to develop about 4,000 acres of land into a new community_ MacArthur had a vision for a different type of City, which included homes for 55,000 residents and winding streets named for the beautiful vegetation that surrounded them. As development continued, MacArthur made an additional donation to support the establishment of the new home office of the Professional Golfers Association (PGA), which was completed in March 1965. In the decades since, Palm Beach Gardens has matured into a thriving community with a unique aesthetic honoring the original intentions of its founder. As of 2019, the American Community Survey (ACS) reported the City had a population of 56,219 residents.2 Most residents identify as white (78 percent), and more than half are female (54 percent). Palm Beach Gardens is relatively affluent with a median household income about 1.5 times the median in the state of Florida. The population is relatively highly educated when compared to the statewide figures, and poverty levels are lower. Table 1: Selected Demographic Information I Median Age Palm Beach Gardens 51 State of Florida 42 Median Household Income $87,969 $55,660 Poverty Rate 6.2% 14% High school degree (or higher) 95% 88% Bachelor's degree (or higher) 52% 31 % Post -graduate degree 22% 11% Median owner -occupied housing unit value $378,500 $245,100 Among municipalities in Palm Beach County, Palm Beach Gardens has the lowest population per square mile, primarily because it has the largest land area in the county (approximately 59 square miles).3 A significant portion of land within the city limits has been designated for conservation. At the same time, several major developments have recently broken ground or are in the final stages of design. These include the Avenir development in the Western portion of the City and major redevelopments downtown, Data in this section, unless otherwise noted, comes from the U.S. Census, 2019 American Community Survey, 5- year estimate; 2020 Census data is under review after the figures were found to be inaccurate in March 2022 3 2021-2022 operating Budget, City of Palm Beach Gardens; Page 39 b7 including within the transit -oriented development (TOD) district. City departments, external stakeholders, and residents have collaborated to develop several strategic documents that organize these long-term efforts, including but not limited to: • Palm Beach Gardens Comprehensive Plan (2016)4 • Transit Oriented Development Master Pian5 • Mobility Plan6 ■ Citizen Surveys' • Stormwater Master Plan'3 • One -Cent Infrastructure Sales Surtax Capital Improvement Plan' The City also publishes an overall set of Strategic Goals with associated performance metrics to track progress ("our Vision — A Strategic Plan").10 ' https:llwww.pbgfl.com/160/Comprehensive-Land-Use-Plan 5 https:/lwww.pbgfl.mm/DocurnentCenter[Viewll4740/Ordinance-10-2020-GPTA-for-TCD?bjdld= 6 https:llwww.pbgfl.com/DocurnentCenterNiewll287O/Ordinance-15-19---Approving-and-Adopting the -Mobility -Plan- a nd-Mobi I ity-Fee?bidld= 7 https://www.pbgfl.comJDocumentCenterNiewll4578/Palm-Beach-Gardens-2020--Resident-Satisfaction- 5urvey_Raduced?bid Id= e httpsiltwww.pbgfl.comlDocumentGenterNiew/96/infrastrurture-PDF 9 https:/lwww.pbgfl.com/DocumentCenterNiew/l5932I2021-2022-Operating-and-Capital-Improvements- 8udget?bidld= 10 https:llwww.pbgfl.cornlDorurnentCenterNiew/15932/2021-2022-Operating-and-Capital-improvements- Budget?bidld= A As the project team undertook its review and analysis of data and information related to the City, region, and State, there were several themes that cut across individual areas. Because it would be redundant to mention them in all the places where they apply, this section will discuss them. In addition, it is useful to understand these `cross cutting' concepts at the start, as they help explain some of what the City is currently undertaking — or planning to undertake in the future, ■ Proactive approaches. Throughout discussions with stakeholders (both internal and external) there were frequent mentions of situations where City leadership has sought out opportunities (as opposed to waiting for them). This has led to the City hosting a variety of recreational and sporting events that might not otherwise have occurred. It has also helped the City enhance its reputation within the region and with prospective residents and commercial interests. ■ Teams -oriented planning and implementation. City leadership has sought to approach most issues from a teaming perspective. Many of the economic and community development issues discussed within this report have benefited from the engagement and involvement of many City departments. Besides the `usual suspects' on community and economic development projects (construction services, engineering, finance, planning and zoning), the City teams also include representatives from the fire and police departments, neighborhood services, parks and public services, recreation, etc. This provides a broader perspective on how to plan and execute projects and avoids the `silo' mentality that often leads to poor communication and bottlenecks. ■ Significant amount of community and economic development activity. Within the City, there is a very large amount of planned or underway community and economic development activity. Many (but not all) of that activity is discussed within the report. That is an exciting (but not new) set of circumstances for the City. This activity has the potential to dramatically alter the face of key areas of Palm Beach Gardens, and it bodes well for the continued growth and development of the City, both from the residential and commercial perspectives. At the same time, it is also somewhat daunting. While the City's teams -oriented approach can help spread some of the community and economic development workload, there are still approvals and reviews that largely impact the same group of people. It will be important for the City to ensure that it can maintain a reasonable workload for those individuals. This is important for the City as well as those impacted by the planning process. In the project teams interviews, it 7 YV� was mentioned that the City can be a tough negotiator, which can lengthen planning, review, and approval processes. On the other hand, there are many instances where the submittals are deficient and/or do not meet City requirements. Of course, the City should ensure that development plans and final outcomes are in the City's best interest; at the same time, it will be important to ensure that those processes are not being slowed down because of a lack of staff time to undertake the necessary City activities. It is the project team's understanding that the City tracks these metrics, which aligns with best practices in this area. Given all the activity within the City, it is quite possible that some of the recommendations within specific sections of this report will have to be prioritized. A sort of triage approach to activities within projects is generally necessary — there are still only so many working hours in a week. The project team recognizes that not everything that is under review will be accomplished within the same timeframe. ■ Resource availability can also be a constraint. While many of the community and economic development issues discussed within the report will mainly rely on private investment, there are same that will require significant public investment. Some of these have the potential to be particularly impactful for the City and region — in particular, related to a rail station in Palm Beach Gardens. While the project team believes that significant private investment may also be possible in that case, for very large projects that require significant City investment, resources may well be a constraint that will have to be taken into consideration as projects move forward, As will be discussed within the report, we believe the City made a good strategic decision to issue revenue bonds in 2017 to finance infrastructure improvements with its share of the County one -cent infrastructure sales surtax. We believe it will also be important for the City to consider similar options and opportunities in the future. While the City has generally preferred a pay -go approach to capital projects, there may be advantages (primarily related to expediting projects) with a similar financing approach. Of course, the resource needs go beyond developing and maintain infrastructure. One of the key issues for developers and new businesses is whether the City can expeditiously act on their needs for permitting, planning, and approvals. While the general observation of the project team is that the City has done a good job in this area, all planned activities have the potential to strain the existing city staff. It may well be necessary to augment that staff as major projects come to fruition. N ■ Ongoing investments require a stable City budget. As will be noted, the City has made significant investments in public amenities. Based on survey results and other data and information, these are valued by the City's residents and business community. It is also worth noting that these amenities require staffing for programs, facility maintenance and, over time, renovation. The City has been in the enviable position of having population and commercial growth that has expanded its tax base. City policies have helped to incent that growth. It has modified zoning in key areas to expand opportunities for mixed used commercial development. It has also used targeted incentives, which have brought Carrier Corporation, Alton Town Center, and increased commercial employment opportunities along the Donald Ross corridor. While these enviable conditions may well continue into the foreseeable future, cost increases are also a likely expectation as well — and current inflation in the national economy is an example of this. It will be important to ensure that the City has the resources necessary to maintain the quality of amenities that city residents have come to expect. ■ Interconnected nature of currentifuture initiatives. The topics that the City identified for research, analysis and recommendations are all important in their own right, and many of them are distinctly inter- connected. Several initiatives are just getting started, and in many cases, the COVID-19 Pandemic has slowed their development and/or implementation. With so much new underway and so much interconnectivity, it is going to be vitally important that the staging of implementation recognizes and reflects some of the lynchpin nature of certain initiatives. In particular, workforce housing will become vitally important as all the new office development comes online. Without strong results for low to moderate income housing delivery, there is the risk of losing economic and community development momentum because of lack of available housing for a significant component of the labor force. Recognizing this, in 2020, the City created a comprehensive workforce housing program to incept workforce housing. The City is now actively implementing this initiative. To date, approximately $5.5. million from the City's workforce housing fund has been dedicated to these efforts. As a result, there are three affordable housing projects currently Underway, marking important milestones in the program implementation. These are positive and measurable responses, but the demand for affordable housing is still expected to outstrip availability for the foreseeable future. R: IMPACTS OF A TRIPLE -A CREDIT RATING For many state and local governments, obtaining the highest credit rating (AAA from Standard and Poor's or Fitch or Aaa from Moody's) is considered a significant achievement. The highest rating is often relied upon as an affirmation of the government's financial stewardship as well as an indicator of general excellence in government service and the strength and vitality of the state or local community. Credit ratings are opinions of the credit quality of individual debt obligations or of an issuer's general creditworthiness (without respect to individual debt obligations or other specific securities). Municipal ratings are based on the analysis of five primary factors related to municipal finance: market position, financial position, debt levels, governance, and covenants. Each of the factors is evaluated individually and for its effect on the other factors in the context of the municipality's ability to repay its debt. A triple A (AAA) rating is the highest possible rating that may be assigned to an issuer's bonds by two of the major credit rating agencies, S&P Globai Ratings and Fitch Ratings. Moody's Investor Service uses a slightly different scale, and its top rating, Aaa, is considered the same as the other services' AAA rating. AAA -rated bonds have a high degree of creditworthiness, because their issuers are easily able to meet financial commitments and have the lowest risk of default. Generally, a AAA high-grade rated bond offers more security and lower profit potential (lower yield) than a "B-" rated speculative bond. The following table summarizes the comparable investment grade ratings of the three major ratings agencies: Table 2: Comparable Investment Grade Ratings for Major Ratings Agencies Moody's S&P Global Fitch Ratings Investors Ratings Best Quality Service Aaa High Quality Aal.. . . ► .. .. ► .. .. Upper-d Grade A2 A ► ► ► ... B.aa3 131313-::: 10 The following summarizes the City's most recent ratings agency reports: ■ S&P Global Ratings: In September 2014, S&P raised its rating on the City's general obligation debt one notch, to `AAA' from 'AA+' and its rating on the City's public improvement revenue bonds one notch, to 'AA+' from `AA', both with a stable outlook_ The stable outlook reflects S&P's opinion that with steadily improving economic and financial metrics, Paim Beach Gardens will likely maintain very strong liquidity and budgetary flexibility, further supported by strong budgetary performance and management conditions." • Moody's Investors Service: In December 2020, Moody's noted that Palm Beach Gardens' credit position is exceptional, and its Aaa rating is well above the median rating of Aaa for U.S. cities. Moody's identified several notable credit factors, including a very strong financial position, an extensive tax base, strong wealth and income profile, and extremely small debt burden.II • Fitch Ratings: In May 2021, Fitch affirmed approximately $680,000 outstanding non -ad valorem revenue bonds at'AA+' and its Issuer Default Rating (IDR) at 'AAA', with a stable outlook. According to Fitch, this reflects the City's strong operating performance, solid revenue growth prospects that are further enhanced by considerable independent revenue -rating flexibility, solid control over expenditures, conservative budgeting, and a low long-term liability burden." These positive ratings enable the City to achieve the lowest cost of borrowing when it accesses the financial markets to fund capital pro}ects or to refinance existing debt. This was most recently demonstrated when the City issued its Pubiic Improvement Bond, Series 2021 at an all -in true cost of 2.19 percent with a 20-year repayment. The following figure and accompanying table illustrate the potential impact of various credit ratings on City borrowing costs based on the Municipal Market Data (MMD) index on March 1, 2022.11 11 Standard and Poor's Ratings Services, "Palm Beach Gardens, Florida: Appropriations; General Obligation," (September 4, 2014). 17 Moody's Investors Service, "Issuer Comment: City of Palm Beach Gardens, FL," (December 14, 2020), 13 Fitch Ratings, "Fitch Affirms City of Balm Beach Gardens, FL's [OR at'AAA'; Outlook Stable," (May 12, 2021)- 11 The MM❑ index is a proxy for where municipal bonds with various credit ratings would price on a given day. 11 3 2.5 a 2 a 1.5 m 1 0.5 Figure 1: MMD Index Based on Various Credit Ratings (As of March 1, 2022) 7 2.36 .18 .93 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 2-0 2122 23 24 25 26 27 28 29 30 Year -AAA GO -AA GO A GO -BAA GO Table 3: MMD Index Based on Various Credit Ratings (As of March 1, 2022) Year 1 AAA ■ 0.81 AA ■ 0.87 A • 0.97 BAA ■ 1.17 16 AAA ■ 1.69 AA GO 1.89 A ■ 2.08 BAA GO 2.42 2 1.05 1.11 1.24 1.44 17 1.71 1.91 2.1 2.44 3 1.15 1.23 1.36 1.55 18 1.73 1.93 2.12 2.46 4 1.24 1.32 1.46 1.67 19 1.75 1.97 2.16 2.5 5 1 1.3 1.39 1.52 1.77 20 1.77 2.01 2.2 2.54 6 1.37 1.51 1.68 1.93 21 1.8 2.04 2.23 2.57 7 1.44 1.58 1.76 2.1 22 1.83 2.07 2.26 2.6 8 1.47 1.63 1.8 2.15 23 1.86 2.1 2.29 2.63 9 1.5 1.66 1.84 2.2 24 1.87 2.11 2.3 2.64 10 1.53 1.69 1.87 2.24 25 1.88 2.13 2.31 2.65 11 1.59 1.75 1.96 1 2.31 26 1.89 2.14 2.32 2.66 12 1.61 1.78 1.98 2.34 27 1.9 2.15 2.33 2.67 13 1.63 1.8 2.01 2.36 28 1.91 1 2.16 2.34 2.68 14 1.65 1.83 2.03 2.38 29 1.92 2.17 2.35 2.69 15 1.67 1.87 2.06 2.4 30 1.93 1 2.18 2.36 2.7 As shown in the preceding table, the estimated difference between the AAA (1.93 percent) and AA (2.18 percent) interest rates is 25 basis paints - or 0.25 percent - over 30 years. Assuming a $20 million borrowing amortized over 30 years, the annual debt service savings generated by having the AAA credit rating is approximately $30,000 - or $900,000 over the fu11 30-year term of the proposed financing. It is important to note that credit spreads change based on changes in the market conditions, and market 12 99 conditions have changed remarkably in the past couple of months as the Federal Reserve has raised the federal funds rate and signaled additional future rate hikes; therefore, the actual benefit of the AAA rating can change over time. Accordingly, these figures are provided for illustrative purposes only. Findings The City is well -positioned to maintain its favorable ratings. In fact, ratings agencies have very few criticisms of the City's approach and have identified few risks or weaknesses. For example: • Fitch Ratings noted that, while not expected, shifts in fundamental credit characteristics — including a significant decline in reserves or erosion in the tax base — could lead to negative rating action/downgrade. • S&P noted in its 2014 report that if financial performance or available liquidity were to weaken significantly, pressuring overall budgetary flexibility and liquidity measures, it could lower the rating. ■ Moody's noted that the City has a somewhat inflated pension liability; its Moody's-adjusted net pension liability to operating revenues (1.9x) unfavorably slightly exceeds the U.S. median. Notably, the City's approach to long-term planning directs it to monitor the funding progress of the public safety pension plans, and act to reduce the impacts of the plans' unfunded liabilities. Recommendations The City should continue to monitor the factors considered important by the major rating agencies and work to retain its highest credit rating. While there is some tangible financial benefit to the highest rating for debt issuance true interest costs, there is also substantial benefit from a `prestige' standpoint: cities with a AAA rating enjoy some 'benefit of the doubt' when rankings are made, or groups of cities are assessed. The good news for the City is that the factors that drive the top credit ratings (stable or growing tax base, conservative budgeting, strong reserves, low indebtedness, strong community wealth profile) are all embodied in long-standing City policies. Parenthetically, this also underscores the value of policies like maintaining the existing tax base. 13 003 IilCs'A Vrm9VIaxel a : WSWV-il Financial forecasting is the process of projecting revenues and expenditures over a long-term period, using assumptions about economic conditions, future spending scenarios and other salient variables. Financial planning uses forecasts to provide insight into future financial capacity s❑ that strategies can be developed to achieve long- term sustainability considering the government's service objectives and financial challenges. Long-term financial planning -- the process of aligning financial capacity with long-term service objectives — combines financial forecasting with strategizing. it is a highly collaborative process that considers future scenarios and helps governments navigate challenges. Long-term financial planning works best as part of an overall strategic plan. Many governments have a comprehensive long-term financial planning process because it stimulates discussion and engenders a long --range perspective for decision makers. It can be used as a tool to prevent financial challenges; it stimulates long-term and strategic thinking; it can give consensus on long-term financial direction; and it is useful for communications with internal and external stakeholders. The Government Finance Officers Association (GFOA) recommends that "all governments prepare and maintain a long-term financial plan that projects revenues, expenses, financial position, and external factors for all key funds and government operations at least five years into the future."15 It is also considered a 'best practice' by credit rating agencies. As Fitch Ratings wrote in a Special Report (on the Impact of Management Practices on Municipal Credit), "The multiyear plan's value is to anticipate future challenges that may be encountered due to projected revenue and expenditure imbalances. This allows executives and legislators to `get in front of potential budget stress and take corrective action long before budgetary gaps develop into crises. The multiyear plans for New York and Philadelphia serve as good models that can be emulated by local governments, large and small." It should be noted that PFM assisted the City of Philadelphia with its multi -year plan and has done the same for dozens of local governments around the country. The goal of the City Council for the next 10 years is to continue to strive to accomplish its stated vision while at the same time maintaining the operating tax rate flat at 5.5500 mills and the debt service tax rate at zero, thereby providing residential and commercial taxpayers a level of confidence when formulating future financial decisions. To accomplish this, the City employs a conservative financial strategy directed by the following guidelines: 15 "Best Practices: Long -Term Financial Planning," Government Finance Officers Association, Board Approval Date: March 4, 2022- Accessed electronically at https://www.gfoa.org/materials/long-term-financial-planning 14 • Utilize debt financing only for essential capital projects, and only when it can be demonstrated that borrowing is more advantageous than funding capital items on a pay-as-you-go basis, e.g., extremely low interest rates; impacts to reserves; accelerating projects to take advantage of low construction costs, etc. Reduce existing debt service expenditures using debt refunding, when financially prudent to do so. ■ Maintain a strong financial position by ensuring compliance with the City's fund balance policy regarding use of reserves. • Ensure future collective bargaining and public safety retirement agreements are financially sustainable. ■ Examine alternative delivery of service methods. ■ Focus on goals/objectives/performance measures so that logical and fair decisions can be made regarding the effectiveness of various services. ■ Promote a diverse tax base so that there is less reliance on residential properties. • Closely monitor the current economy and new legislation, s❑ that pro -active measures may be taken. This is especially critical, considering the current COVI❑-19 pandemic and its effects on the local economy. The City has identified the following as the biggest challenges it faces that affect its financial strategy and long-range plan for the next ten years and beyond: • Growth issues related to development of the Avenir project, a mixed -use community on 4,700 acres of land in the western fringes of the City, adjacent to protected conservation lands. The Avenir project began construction in 2020. • Ensure compensation is competitive to attract and retain highly qualified employees. At the same time, the City must be sure that future collective bargaining agreements are not only fair, but financially sustainable. • Monitor the funding progress of the public safety pension plans, and act to reduce the impacts of the plans' unfunded liabilities. While the preceding are the most significant challenges that have been identified by the City, it is notable that other factors can — and do — impact the City's approach to financial strategy and long-range plans, including (but not limited to) inflation, supply chain issues, natural disasters, and the effects of the CGV1D-19 pandemic. To develop its 10-year financial plan, City leadership reviewed the following: • Pertinent items contained within the various planning documents. ■ The City's current year budget and actual historical data regarding revenues and expenditures. im ■ An analysis of the City's General Fund revenues, current taxable valuation, and projected valuation from future developments. Available alternative revenue options were also considered when formulating the forecast. ■ The City's Capital Improvements Program. • Constraints imposed by tax reform legislation which placed caps on local governments' future tax revenues. • Substantial new construction and resulting anticipated new revenue has been factored into the forecast. Very significant fiscal contributions are expected from the Alton and Avenir development projects as well as the entire TOD area, including but not limited to Downtown PGA, PGA Station, and PGA Office Center/FPL. • An analysis of financial policies as they relate to desired unassigned fund balance levels. The minimum level, as set forth in the City's Fund Balance Policy, is a minimum of 17 percent of operating expenditures. • Beginning in 2007, Palm Beach County and the City of Palm Beach Gardens experienced several years of declines in the real estate and housing markets. However, as noted earlier, there have been several new residential and non- residential projects approved recently, as well as an increase in construction activity on existing approved developments. In addition, property values in the City have increased for ten consecutive years, increasing by 3.50 percent in FY2022, including new construction and annexations. The assumptions used in formulating the ten-year forecast, beginning in FY2022, are as follows: • Growth from re-evaluations of existing property: average of 2.9 percent per year_ • New construction is projected per estimates from the City's Planning & Zoning Department for FY2022 through FY2031 and reflects new construction from the aforementioned developments. • Operating millage rates are projected flat through FY2031. The debt service miliage rate was eliminated in FY2020 and is projected to remain at zero through FY2031. ■ Average growth of other revenues: 2.0 percent per year. ■ Average inflation rate for operating expenditures: 3.0 percent per year_ ■ Inflation factors for other services are projected as follows: a A 5.0 percent average annual increase in health insurance costs has been projected through FY2031. A 7.5 percent average annual increase in workers' compensation and property/liability insurance has been projected through FY2031. • Capital Outlay consists of items in the ten-year capital projections. Findings 16 Pon Generally, the City's Projection Model is well -designed. In fact, many aspects of the Model align with/resemble the tool PFM regularly uses to assist its local government clients with budget forecasting. Revenue and expenditure projections are developed at the line -item level based on a variety of key assumptions that impact on the City's finances. For example, as previously stated, a 5.0 percent average annual increase in health insurance costs has been projected through FY2031. This is because the City maintains a very sound self -insured health benefit fund that has accumulated significant reserves since its inception in 2008 (currently around 10 months of medical claims are held in reserve). This has allowed the City to mitigate the normal increases that fully insured programs may have experienced over the last several years. The City works closely with the fund's actuary every year in setting the funding levels for the Plan, considering current medical cost trends and historical actual claims. The City also prepares analyses periodically to compare the actual self -insured costs to fully insured cost projections to determine the most effective means of delivering employee health coverage. The City considers ail these factors when formulating the Model each year and is ready to adjust projected increases if needed. Additionally, the Model considers City initiatives, such as the impacts of Avenir and other current and planned developments. Further, from an architectural perspective, the Model is dynamic. outputs and projections can be `rolled up' or summarized in a variety of ways, which is likely useful in helping the City to discuss its forecast with a variety of audiences. Recommendations While the Projection Model is well -constructed, there may be opportunities to further increase its flexibility and/or usefulness via technical updates and modifications to inputs. For example: ■ While the City prepares a comparison of financial actuals to projections each year, the Model itself is forward -facing only (i.e., it does not allow a user to view historical actuals, which are a key component in the development of assumptions related to future trends). The City should consider integrating this review of historical activity within the Model to streamline its analysis of the key financial drivers that have or have the potential to impact its finances. ■ While the Projection Model is easily updated to reflect changes in assumptions, it is not possible to compare the City's baseline financial picture to one reflective of those changes on a side -by -side basis (a capability of PFM's core financial model). 17 It is PFM's understanding that (1) the Model was initially constructed by the Deputy Finance Administrator, and (2) the Model can currently be updated and managed by the City Finance Administrator and/or Deputy Finance Administrator. Given the demonstrated value and importance of the Model — coupled with the need for business continuity — the City should consider training additional emp#oyees on its use, as well as developing a guide or user manual to instruct potential additional users regarding its use. 18 MAINTAINING A STABLE MILLAGE RATE The City, as with nearly all local governments in Florida, is highly dependent on revenue from property taxes. In fact, for the FY2020-21 budget, property taxes made up over 71 percent of its general fund revenue. The next largest source, charges for services, made up less than one -tenth of the revenue raised from property taxes. Because of its importance for funding necessary City services, it is important that the property tax can continue to grow commensurate with the need for increases in public services. As the City grows, many service expenditures must scale to accommodate that growth. As inflation drives cost increases, it is also necessary for revenues to grow to be abie to pay for wage increases as well as the increased cost of things like equipment, durable goods, and motor fuel. There are two primary determinants of property tax revenue — the value of taxable property and the millage rate that is assessed on the taxable value. The City, because of its continued growth and the appreciation of the value of property, has seen the total taxable value of property increase, from $7.50 billion in FY2010-11 to $12.28 billion in FY2019-2020. The following table details the changes in assessed value of taxable real property.16 Table 4: Changes in City Assessed Value of Real Property Year 2011 ResidentialFiscal Property $5,848,513,461 Property $1,449,291,192 Property $159,894,950 Other Property $46,154,142 Total $7,503,853,745 2012 5,845,989,740 1,356,197,434 148,956,614 46,668,841 7,407,812,629 2013 5,971,301 A86 1,362,505,644 137,804,685 54,067,590 7,525,769,405 2014 6,179.351,874 1,399,487,396 138,859,513 53,618,149 7,771,316,932 2015 6,655,059,315 1,519,351,040 70,050,865 138,572,340 8,383,033,560 2016 7,120,899,821 1,733,042,304 75,316,429 100,964,163 9,030,222,717 2017 7,578,568,351 1,949,533,937 82.092,236 108,638,650 9,718,833,174 2018 8,205,876,033 2,140,701,464 91,118,225 106,370,063 10,544,065,785 2019 8,648,423,475 2,277,266,953 102,974,514 152,169,262 11,180,834,204 2020 9,457,125,507 2,506,801,419 114,807,321 205,391,600 12,284,125,847 This represents a compound annual growth rate (CAGR) of 5.63 percent. This is a reasonable rate of growth that would exceed the average growth rate in inflation. Of course, increases in population and economic activity will also require additional resources. 16 "Comprehensive Annual Financial Report For Fiscal Year Ended September 30, 2020," City of Palm Beach Gardens, April 30, 2021. p. 141. Accessed electronically at httos:llwww. PWA-comlDocumentCenterlViewl1501 alComprehensive-Annual-Fi nancial-Report-09302020 19 0 While taxable valuation growth of 5.63 percent is a decent CAGR, the actual property tax revenue growth rate will be diminished if the millage rate is lowered at the same time. In fact, that was the case in both 2015 and 2016. The following details the City operating millage, debt service millage, and total city millage for the last 10 years.17 Table 5: Historic City Millage Rates Fiscal Year 2011 Operating 5.7404 Debt Service 0.1854 Total City 5.9258 2012 5.7404 0.1821 5.9225 2013 5.7404 0.1790 5.9194 2014 5.7404 0.1733 5.9137 2015 5.6700 0.1615 5.8315 2016 5.5500 0.1371 5.6871 2017 5.5500 0.1281 5,6781 2018 5.5500 0.1178 5.6678 2019 5.5500 0.0503 5.6003 2020 5.5500 0.0000 5.5500 It is notable that from FY2010-11 to FY2013-14, the City operating millage rate was 5.704. It then declined in 2015 to 5.6700 (a reduction of 1.2 percent). it then declined to 5.5500 in 2016 - an additional decline of an additional 2.1 percent. Since 2016, the City has maintained the operating millage rate at 5.5500. Of course, the operating millage has been held stable, but the total City millage has actually declined in each year, because the debt service millage has declined. In this case, the debt service payments are staying the same from year to year, but the larger base of taxable value requires a smaller millage rate to raise the necessary revenue to make the debt service payment. That bond issuance was fully paid off in 2020, meaning the total City millage will stabilize at 5.5500 (absent any additional bonded indebtedness or changes in the operating millage). Comparisons of property tax millage rates between local governments is usually not an ,apples to apples' comparison. For example, some local governments apply service charges while others include them as part of general operations supported by property taxes. Some local government services may also be provided by other taxing entities. The following details the FY2019-2020 operating and debt service millage rates for Palm Beach Gardens and the other large villages, towns, or cities in Palm Beach 17 Ibid., P143. To IWO County. The rates come from the local government's Comprehensive Annual Financial Reports, all of which can be found on the Florida Auditor's website.18 Table 6: Comparable Cities Millage Rates (FY 2019-2020) Local Wellington Population 62,650 Operating 2.4700 Debt Service 0.0000 Combined 2,4700 Jupiter 63,188 2.4633 0A 891 2.6524 Boca Raton 95,139 3.5700 0.1080 3.6790 Palm Springs 23,867 3.5000 0.3381 3.8381 Royal Palm Beach 39,801 5.3800 0.0000 5.3800 _ Palm Beach Gardens 56,709 5.5500 0.0000 5.5500 Greenacres 39,945 6.4000 0,0000 6.4000 Lake Worth 38,875 5.4900 1.1100 6.600019 Delray Beach 67,168 6.6611 0.2034 6.8645 Boynton Beach 78,495 7.9000 0.0000 7.9000 Riviera Beach 36,057 8.4520 0.0000 8.4520 West Palm Beach 116,781 8.3465 0.1201 8,4667 The City of Palm Beach Gardens maintains a spreadsheet that seeks to make an `apples to apples' comparison of the various taxes and charges for services that are applied in these neighboring cities. The City combines the following to reach a total cost for the residential taxpayer (city, school, and other property taxes calculated on a $350,000 taxable property value with a $50,000 homestead exemption and a $25,000 homestead exemption for school district tax levies): ■ City property tax (combined operating and debt service) ■ School property tax ■ Other property tax ■ Fire rescue and/or fire protection (for those cities with a separate, non -operating millage, for this service) ■ Utility taxes ■ Telecommunications service tax (calculated by assuming an annual bill of $3,600) ■ Stormwater/solid waste assessment Based on the listed taxes, charges for services, and assumptions, the total bill for these services by City provides a different perspective, with Palm Beach Gardens having the lowest total combined taxes and charges; 18 Florida Auditor General, Index of Municipalities Comprehensive Annual Financial Reports, accessed electronically at https:/Iflauditor.goy/pageslmunici;)alities efiles.html 19 The City also has an MTSIJ (Fire and EMS) miliage rate of 3.4600. 21 Table 7: Comparable Cities' Combined Taxes and Charges city Palm Beach Gardens Total Taxes and Charges $8,082 Jupiter $8,167 Boca Raton $8,378 Royal Palm Beach $8,573 Delray Beach $8,654 Wellington $8,706 Greenacres $8,965 Palm Springs $9,103 Boynton Beach $9,207 Riviera Beach $9,641 West Palm Beach $9,795 Lake Worth $10,356 While property taxes are often considered an unpopular tax, it is the largest source of local government revenue in nearly every state in the nation. The advantages of the property tax include-?0 ■ Is stable. Given its broad base, particularly for residential real property, it is relatively easy to predict and tends to grow from year to year_ Also, once the taxable base is established, it does not vary during the tax year. Other major sources, such as sales and income taxes, cannot be so readily estimated for a fiscal year. • Is difficult to evade. Real property is fixed and immobile. If real property taxes are not paid, in most states, an automatic tax lien may be placed on the property, and, eventually, the property sold to enforce payment of back taxes, penalties and interest. For this reason, the collection rates on real property taxes are generally the highest among major focal government tax sources. Finances property -related services. A lot of public services support property (such as fire and police protection, street maintenance). Moreover, in some regions, variation in provided public services directly impacts on property values. ■ Taxes non-resident property owners. Non-resident property owners might not otherwise be taxed by sales or income taxes. In this way, they support services that support their property. 21 see, For example, "A Revenue Guide for Local Government, 211d Edition" Robert L Bland, ICMA, 2010, pp. 84-85, 22 Mom ■ Is transparent. In nearly every state, local property valuations and the tax applied to the property are public records. By contrast, exactly how much tax is paid (and by whom) is generally not public information. There are various examples of local governments who have moved away from the real property tax as their primary source of revenue and have encountered financial challenges as a result. For example, Loudoun County, Virginia is a high -wealth county in Northern Virginia -- in fact, it had the highest median household income of any county in the U.S. in 2021. It is also home to the largest concentration of data centers in the nation. As a result, its personal property tax revenue on tangible business equipment has surged in the last several years. As the following chart shows, daring this time, personal property tax revenue associated with computer equipment grew from 15 to 39 percent of its tax revenue. Meanwhile, successive reductions in its millage rate reduced real property tax revenue from 71 to 52 percent of total tax revenue. Figure 2: Loudoun County, Virginia Proportion of General Fund Tax Revenue 80.0% 70.096 70.9% 69.9°I. 88.7`Ia 66.7% ° 50.0°I° 84.41� 63.0% 60.1 % 57.8% ° 5s.s � 50.0°k 51.5% 40.0% 38.9% 30.6% 32.7% �•� 24.5°Ia 28.0% ............ 20.1% 22.0% 20.00k 15.2% 17.2% 17.91% 10.0°/° 13.8% 12.9% 13.4% 13.2% 13.7% 12.5% 11.9% 11.6% 10.5% 0.7% 0.0% 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 (Adapted) (Adopted) Real Property -Personal Property other Local Taxes Sources: Loudoun County FY 2022 Adopted Budget Volume 1, Loudoun County General Fund Revenues Only (FY 2000+) During FY2020-21, Loudoun County had a significant miss on its personal property tax revenue estimate, with it coming in about $69 million below its estimate (actual revenue 23 from that source of $344 million).' There were a variety of reasons for this, and the primary reasons related to it being more difficult to estimate business tangible personal property tax revenue than it is for real property tax revenue. This relates to issues of equipment depreciation, mobility, and business cycles. By contrast, the County's real property tax revenue estimates were remarkably accurate. The key difference between real property taxes and other types of taxes is that property tax rates are set after the property tax base is determined. Greater rate flexibility means that local governments can vary millage rates to make property tax revenues more stable even if the local property tax base experiences short-term fluctuations. Rate changes for sales or income taxes are much less frequent and hence those tax revenues are more likely to experience fluctuations. In fact, an analysis in Georgia of a plan to replace property tax revenue with sales tax revenue identified significant potential revenue fluctuation as a likely ❑utcome.22 Of course, there is a valid counterpoint: should circumstances create a situation where the current millage rate is raising significantly more real property revenue than its typical or historic share, it may allow for a rate reduction — provided, of course, that in the long run it does not erode the real property tax share of city revenues. In fact, the City Budget Oversight Review Board (BORB), in its 2021 report to the City Council, suggested a scenario where a reduced millage rate could be considered: "The BORB encourages the Council and City to monitor and compare the actual financial results to the 10 year financial forecast; if the actual financial results d❑ not forecast the requirement to use 100% of the budget stabilization fund and eliminate the need to dip into the unassigned reserves, then the Council should give consideration to reducing the millage rate." From the project team's perspective, this would be an acceptable set of circumstances for considering a reduction in the real property tax millage rate. Findings The following are key findings related to the existing tax rate structure and millage rate: 21 "FY 2022 Business Personal Property Taxes on Computer Equipment Forecast Update," Loudoun County Board of Supervisors Finance/Government Operations and Economic Development Committee, July 13, 2021, accessed electronically at https://Ioudoun.granicus.comlMetaViewer.php7view id=77&clip id=6721&meta ld=197263 22 "Tax Revenue Stability of Replacing the Property Tax with a Sales Tax," Fiscal Research Center, Andrew Young School of Poi icy Studies, Georgia State University, September 2007. Accessed electronically at https://cslf.gsu.edu/riles/2014/06/tax revenue stability of replacing the property tax with a sales tax brief.pdf 24 • The current City tax structure is heavily dependent on the real property tax, and, given available municipal taxes in the State of Florida, that dependence is not likely to diminish. • The real property tax has several notable advantages, including stability, high collection rates, exporting some of the burden to non-residents, and transparency. ■ In recent years, the general operating millage has been held constant, but the total City millage rate has declined Because of a reduced required millage rate for debt service. The City has a 0.0000 miliage rate for debt service, so those reductions will not occur in future tax years. ■ The elimination of general obligation debt is a positive achievement and advances its overall financial stability. • The City's overall millage rate falls into about the middle of municipalities within the County, but it can be difficult to do an 'apples to apples' comparison because some cities charge fees for services that others build into general operations paid for with property taxes. Recommendations As has already been discussed, a stable tax and revenue structure is valued by the credit rating agencies and necessary to fund essential services. Because real property taxes are the primary source of revenue for the City (a situation that is not likely to change in the near or not -so -near future), the project team recommends that the City continue to maintain its current 5.5500 general operating millage rate. However, as noted in the discussion, there are limited circumstances where a rate reduction would be worthy of consideration. These would include the situation where the relative share of real property tax revenue of City revenue can be maintained over the long run. They would also include the situation described by the BORB, where actual financial results do not forecast the requirement to use 100% of the budget stabilization fund and eliminates the need to dip into the unassigned reserves. 25 0 USE OF RESERVES The current City budget uses approximately $2.8 million of budget stabilization reserves to eliminate the need for a tax increase. Looking to the future, by maintaining the same operating miIlag e rate of 5.55, the ten-year financial forecast projects a gradual reduction in reserves through FY2027. Beginning in FY2028, projections indicate this tread will reverse and surpluses will begin to be added back to reserves as more development in Avenir comes onto the tax rolls. These projections will be updated annually to reflect the current financial status of the City, economic treads, and the status of development projects, along with any operational changes, such as operating and debt service due to new or expanded services. The City will be monitoring these issues closely and is committed to providing the most accurate financial information as possible by constantly monitoring actual financial results versus Original budget projections, amending the budget accordingly, and updating our revenue and expenditure assumptions, if necessary, throughout the coming fiscal year. In addition to this information, a comprehensive listing of the City's financial and non- financial management policies is provided in the appendices. The following table compares the City's ten-year plan approach to GFOA recommendations regarding regular engagement of long-term financial planning. As indicated, the City's current process is comprehensive and satisfies each of the GFOA recommend ations.23 Table 8: GFOA Recommendations, Long -Term Financial Planning Element City Approach Time Horizon: A plan should look at least five to ten years in the Aligns with future. Governments may elect to extend their planning horizon recommendations. further if conditions warrant. Scope: A plan should consider all appropriated funds, but Aligns with especially those funds that are used to account for the issues of recommendations - top concern to elected officials and the community. Frequency. Governments should update long-term planning Aligns with activities as needed to provide direction to the budget process, recommendations. though not every element of the long-range plan must be repeated. Content: A plan should include an analysis of the financial Aligns with environment, revenue and expenditures forecasts, debt position recommendations, and affordability analysis, strategies for achieving and maintaining 23 GFOA, "Best Practices: Long -Term Financial Planning." Accessed electronically at https://www.gfoa.ora/materip[glongLterm-fi nancial-Riann ing 26 MP financial balance, and plan monitoring mechanisms, such as a scorecard of key indicators of financial health. Visibility: The public and elected officials should be able to easily Aligns with learn about the long-term financial prospects of the government recommendations. and strategies for financial balance. Hence, government should devise an effective means for communicating this information, through either separate plan documents or by integrating it with existing communication devices. Further, GFGA recommends that all longterm financial plans include the following phases and steps:24 Mobilization Phase: The mobilization phase prepares the organization for long-term planning by creating consensus on what the purpose and results of the planning process should be. The mobilization phase includes the following elements: Table 9: Description of Mobilization Phase Elements Element Alignment of Description This step includes determining the composition of the project Resources team, identifying the project sponsor, and formulating a strategy for involving other important stakeholders. This step also involves the creation of a high-level project plan to serve as a roadmap for the process. Preliminary This step helps raise awareness of special issues among Analysis planning participants, such as the board or non -financial executive staff. A scan of the financial environment is common at this point. Identification of Service policies and priorities have important implications on Service how resources will be spent and how revenues will be raised. Policies and A strategic plan or a priority setting session with elected Priorities officials could be useful in identifying service policies and priorities. Validation and Financial policies set baseline standards for financial Promulgation stewardship and perpetuate structural balance, so a planning of Financial process must corroborate policies in place (as well as the Policies I GFOA, "Best Practices: Long -Term Financial Planning.' Accessed electronically at h ttgs:llwww.gfo a. o rglm ate dalM on a -term -fin anda I-olann i n q 27 Element Description ❑rganization's compliance with those policies) and identify new policies that may be needed. Definition of The purpose and scope of the planning effort will become Purpose and clear as a result of the foregoing activities, but the process Scope of should include a forum for developing and recognizing their Planning explicit purpose and scope. Source: GFGA, Best Practices: Long -Term Financial Planning Analysis Phase: The analysis phase is designed to produce information that supports planning and strategizing and includes the projections and financial analysis commonly associated with long-term financial planning. The analysis phase includes the following elements: Table 10: description of Analysis Phase Elements Element Description Information This is where the government analyzes the environment to Gathering gain a better understanding of the forces that affect financial stability. Improved understanding of environmental factors should lead to better forecasting and strategizing. Trend After the environment has been analyzed, the planners can Projection project various elements of long-term revenue, expenditure, and debt trends. Analysis The forecasts can then be used to identify potential challenges to fiscal stability. These could be fiscal deficits (e.g., expenditures outpacing revenues), environmental challenges (e.g., unfavorable trends in the environment) or policy weaknesses (e.g., weaknesses in the financial policy structure). Scenario analysis can be used to present both optimistic, base, and pessimistic cases. Source: GFQA, Best Practices: tong -Term Financial Planning Decision Phase: After the analysis phase is completed, the government must decide how to use the information provided. Key to the decision phase is a highly participative process that involves elected officials, staff, and the public. The decision phase also includes a culminating event where the stakeholders can assess the planning process to evaluate whether the purposes for the plan described in the mobilization phase were fulfilled and where a sense of closure and accomplishment can be generated. Finally, the decision phase should 28 address the processes for executing the plan to ensure tangible results are realized. ■ Execution Phase: After the plan is officially adopted, strategies must be put into action (e.g., funding required in achieving goals). The execution phase is where the strategies become operational through the budget, financial performance measures and action plans. Regular monitoring should be part of this phase. The following figure highlights the various long-term financial planning phases recommended by GFGA. Figure 3: Summary of Long -Term Financial Planning Phases Use Recommended Prae.t a and Other Resources to AUke the Casa Obrftwnchd Planning Align Resources: Define tltie Piarnning Process & PaMelpant Roles Finarvcial Preliminary Service Policies Motrilfration Policies Analysis & Frlorltiss Phase Derene the Furpasa & Fiscal Environrrwrital Analysis Revenue Expenditure Debt Analysis Forecast Foresees[ Analysis Picas• Financial Balance Analysis Financial Strategy Development - - Decision Phase Plan Canduskm & Teansitkrn to Aetlaa Budget A Financing Reps erManitar#►Q Execution Phase Source: GFDA, Best Practices: tong -Terra Financial Planning Findings Based on the foregoing information and analysis: 29 • The City's Budgeting for and policies around reserves aligns with GFGA's best practices. • While the 10-year financial model projects some reduction in reserves in the short-term, there is a strong likelihood that development already underway will reverse this trend in a few years. • There are sufficient conservative budgeting practices in place that the current projected financial course should be attainable. Recommendations While current policies should, under current projections, allow the City to maintain a structurally sound budget and replenish reserves, the City should be careful to ensure that future development and budgeted spending for operations remain within current projections. Should there be material changes to the revenue or expenditure trajectories, the City should revisit them to allow for the replenishment of reserves within the timeframe of its 10-year financial plan. 30 PIN WESTERN GROWTH PROJECTIONS FOR NEEDS AND REVENUE In 1998, Palm Beach County and the Cities of Palm Beach Gardens and West Palm Beach conducted a Western Northlake Corridor Land Use Study (WNCLUS) to provide guidance as to appropriate land uses within the Northlake Boulevard area. The study made a series of recommendations and resulted in an interiocal agreement between the Cities and the County. Many of the recommendations have been implemented, and the study has served as a guide for land use and development decisions in the area. In 2005, the County and the Cities decided to update the 1998 study due to a recommendation to reassess the need for commercial uses, substantial changes in population and amount of potential non-residential development — as well as other changes within the study area. The update was to ensure that a relevant guide to land use remained in the Western Northlake Corridor. In 2008, a team — comprised of staff from the County, municipalities, and the Indian Trail Improvement District — reinstated efforts to evaluate changed conditions since 1999 and determined the need for and the supply of office and commercial space within the area of study. The team agreed that the recommendations from the original study remain valid. Indeed, the current construction of thousands of new homes, stores, and restaurants -- including the west edge of Palm Beach Gardens — is expected to transform the rural feel of central -western Palm Beach County. With the substantial amount of growth expected over the next 10-15 years, the City's ten-year financial forecast factors in projected development at Avenir, a mixed -use community an 4,700 acres of land in the western area of the City, adjacent to projected conservation lands;25 newly annexed western developments, new City facilities and additional personnel and operating demands associated with this expansion. There are, understandably, growth issues related to Avenir and other "western growth" developments. Although multi -year forecasting is not an exact science and is subject to many uncontrollable factors (such as the COVID-19 economic downturn), it can serve as a useful tool in trying to chart a financial path for the short- and long-term and provides an opportunity to monitor actual versus projected results each year so that proactive measures may be taken to balance future budgets. A significant capital improvement project affecting the FY2022 budget is the recently approved par-3 18-hole addition to the existing Sandhill Crane municipal golf course. As a condition of development approval, the developers of Avenir conveyed 115 acres of land to the City to be used for recreational purposes. Staff researched potential uses for 25 Avenir, a 3,900-home development (including age -restricted residences) with another 2 million square feet of office and commercial spare, will rise on Northlake Boulevard over the next 30 years. 31 this property and, as part of this analysis, engaged True Club Solutions to prepare a market analysis and feasibility study on several golf related options for the property. Based on this analysis, staff recommended the construction of an 18-hole par-3 golf course, clubhouse, and driving range on this parcel. To finance the construction of this project, staff recommended issuing non -ad valorem revenue bonds, to be repaid with impact fees from western development and revenues generated from the project - not ad valorem taxes. At the January 14, 2021 Council meeting, Resolution 7, 2021 was approved authorizing the issuance of the Series 2021 Public Improvement Bond in the amount of $14 million. Although the course will not be in service in FY2022, the debt service will begin in October 2021, and it will be paid next fiscal year via a transfer from the Recreation Impact Fund. After the course is complete and in operation, future years' debt payments will be paid via recreation impact fees, public facility impact fees, and fees generated by the facility. The following table provides a summary of western growth. Table 81: Western Growth Summary Location Detail City -Approved Developments Bayhill Commons (AKA SW corner of Approved through the County for 37,274 Northlake 201Vintage Northlake Blvd. SF of commercial retail Oaks) and 112th Site plan shows two medical office Terrace (in buildings. front of Rustic Prospective buyer has submitted petitions Lakes) for land use and zoning amendments with concurrent site plan petition for 148 townhomes—Staff has advised the density was too high. 1121h/Northlake Office SE corner of Approved through the County for 82,799 (AKA WBW, IX, Northlake Blvd. SF of general office and 11,290 sf of Inc./Vintage Crossing) and 112th Medical Office Terrace (in The same developer for Vintage Oaks front of Rustic has submitted petitions for land use and Lakes) rezoning amendments with concurrent site plan petition for 79 townhomes on this site. The petition has not been deemed sufficient at this time. 32 Location Detail Northlake CLF North side of Approved for 10,500 SF of Medical or Northlake Blvd. Dental Office and 125-bed ALF at the NW The Star of David Cemetery property corner of north of the site has purchased the parcel Northlake Blvd. and has a petition in with the City to and Memorial convert the currently vacant parcel into Park Drive. additional cemetery plats. Coun!y-Approved Develo ments Avocado Northlake SW corner of Currently under review with the County Northlake Blvd. for a charter school. and Avocado Blvd, Coconut Plaza SE corner of Approved by the County by R-2021-1761 Northlake Blvd. conditional use for retail gas and fuel and Coconut sales with convenience store Blvd. Approved by the County by R-2021-1760 for up to 44,005 SF of retail and 5,000 SF of Convenience Store with 20-station fuel center. Shops at Indian Trail SW corner of Approved through the County with R- Northlake Blvd. 2014-0111 and Coconut Approved for total of 106,566 SF of Blvd. commercial 71,966 SF General Retail 15,600 SF Pharmacy 7,200 SF Financial Institution 3,800 Drive Through Restaurant 4,000 SF Medical Office 3,000 SF Convenience Store with 16 fueling stations and car wash. No construction has begun on site. Pierce Hammock South side of Elementary School Northlake Blvd. between 140th Ave. and Grapeview Blvd. Source' Palm Beach Gardens 33 While the preceding table summarizes key western growth projects as identified by the City in the data provided, additional current and planned projects are also contributing to the growth of the area, including: • The build -out of commercial corridors • City annex ■ City's 50-acre ED parcel ■ Proposed fire station R New developer -funded infrastructure Findings It is clear that the City is relying on Western growth for additional city -related revenue and general growth. The factual nature of that growth is evident: on the project team site visit, the tour of that area demonstrated significant housing and related construction activity. The construction of the new municipal golf course is a key part of the overall development approach, as it will be a magnet for new residents that value that amenity and likely spur additional services in the area. Given the strong performance of the existing golf course (which is running surpluses — when many municipal golf courses struggle to balance their operational budgets), there should be reasonable confidence that this new course will also perform well. Western growth, including Avenir and the Northlake corridor, will have a lasting positive impact on the City revenue structure. An important issue for the City's overall development is whether additional services for residents (including grocery and related stores, restaurants, shops, and other recreational outlets) will be drawn to these areas. Mixed use land use designations and site plan requirements have been put in place to facilitate provision of urban amenities and services. Related site plan requirements have been extensive at Avenir, including 2,300 acres of conservation space, school sites, on - site employment opportunities, and other city services. These will be necessary to reduce traffic -related congestion between the western portion of the City and other locations. Ultimately, buildout of the comprehensive livelworklplay design plan will be the next phase for the City, in terms of development and for future planning. 34 1411::041211i116-3:W*1FiQ44LTki0Y3W4KIN i7 Section 212.055, Florida Statutes, authorizes local governments to impose a discretionary sales surtax of up to one cent to finance, plan, and construct infrastructure projects, among other purposes. However, local governments may not impose the surtax on any sales amount above $5,000 on any item of tangible personal property and long-distance telephone services. Florida's six percent sales and use tax does not have the $5,000 cap that is imposed on the surtax. The levy of the surtax must be pursuant to an ordinance of the county's governing board and approved by a referendum of the electors of the county. The surtax proceeds may be distributed pursuant to Section 218.62, Florida Statutes. On November 8, 2016, Palm Beach County voters approved a ballot issue to levy a one -cent infrastructure sales surtax to pay for the acquisition of or improvements, renovations, or repairs to public infrastructure. This additional tax, which went into effect January 1, 2017, is to be in place until December 31, 2026, or when $2.7 billion in revenue is collected, whichever is earlier. Revenue generated by the surtax is to be shared by the County (30 percent), its 39 municipalities (20 percent) and the Palm Beach County School District (50 percent). It was anticipated that Palm Beach County municipalities would colfectively receive $45.8 million per year, equal to $537.6 million over the 10-year period (with a 3 percent year -over -year increase). Palm Beach Gardens estimated annual share of surtax proceeds is $3.0 million, equal to $35.6 million over ten years (again, assuming a 3 percent year -over -year increase). Staff reviewed current and long-term infrastructure needs of the City to formulate a plan for the expenditure of the proceeds. This analysis included input from many sources, including senior staff from all departments, a consultant that had been working on a long-term space needs analysis, the City's then -current budget and long-range capital improvements plans and the results of a citizen survey. Based on a thorough analysis and discussions among staff and with the City's consultant, the plan aimed to address current and projected shortages of office, meeting and storage space, current and future parks and recreation needs, and long-term maintenance needs associated with the expansion of City facilities on land to be dedicated to the City from Avenir. The following table illustrates the status of the City's one -cent infrastructure sales surtax projects as of April 30, 2021. 35 Table 12: One -Cent Sales Surtax Infrastructure Projects (as of April 30, 2021) District Park -- Phases I and II Development* Phase 1 elements included several full-size multi -purpose fields, sports lighting for each field, a concession building with bathrooms and a meeting room, a playground, a splash pad, lighted parking, a freshwater lake, and a turf maintenance facility City Hall, Police Department and Fire Department ExpansioniRenovations Four story, metal tower that serves as training site for fire rescue personnel, police K-9 training area, expansion and renovation of City Nall, renovations to police station Operations Center`* Construct a 40, 000 square foot, Category 5 Operations Center; consolidate Public Works and Public Services Divisions into one location; also used during emergency management response and houses emergency response staff and equipment Continaencv $13,700,000 1 $13,235,144 1 $464,856 $9,305,228 [ $9,285,929 1 $19,299 $6,890,565 1 $6,871,157 1 $19,408 $39,207 1 $0 1 $39,207 Source: City of Palm Beach Gardens FY2021-22 Adopted Budget * The City held the grand opening of the Gardens North County District Park on June 29, 2019. This project was completed in one year and under budget. Available balance will be used for additional amenities such as pavilions and a children's splash playground. " Staff moved into the new operations building on October 1, 2019, and an open house for the public called 'Trucks 'n' Stuff' was held on February 8, 2020. To finance the construction of infrastructure projects identified in the plan, City Council authorized the issuance of a not -to -exceed $30 million Public Improvement Bond, Series 2017, which is repaid with surtax revenues. This is an allowable use of the surtax proceeds under Florida Statute, which states that "School districts, counties and municipalities receiving proceeds under the provision of this subsection may pledge 36 such proceeds for the purpose of servicing new bond indebtedness incurred pursuant to law."26 As discussed previously, the City's policy is to utilize debt financing only for essential capital projects, and only when it can be demonstrated that borrowing is more advantageous than funding capital items on a pay-as-you-go basis (e.g., extremely low interest rates; impacts to reserves, accelerating projects to take advantage of low construction costs, etc.)_ Findings The City's approach — i.e., the issuance of revenue bonds to facilitate and expedite the construction of the projects, while funding those bonds with the safes surtax proceeds — is a wise strategy. This strategy enables projects to get underway quickly, rather than waiting for revenue to be in -hand to complete planned projects. And the City reports that it has been successful in undertaking projects (the majority of which are largely complete) via this process. It is notable that the environment where the decision was made to bond for construction was a near perfect illustration of the opportune time to borrow, Interest rates were low, and construction industry inflation was significantly higher than the borrowing costs. One commonly cited index for inflation in the construction industry notes the following related to historic construction cast indices:27 • Long-term construction cost inflation is normally about double consumer price index (CPI). • Although inflation is affected by labor and material costs, a large part of the change in inflation is due to change in contractors/supplier margins. • When construction volume increases rapidly, margins increase rapidly. • Nonbuilding Infrastructure inflation, from 2013 to 2017 averaged less than one percent, but then jumped to 5 percent in 2018 and 2019. Inflation fell to -0.2 percent in 2020 but jumped to 9 percent in 2021. Recommendations Again, the City's approach is effective and planful. Accordingly, few recommendations and/or opportunities for improvement have been identified: 25 Florida statutes section 212.055(2)(e) 21 "Category Archives- Inflation Indexing," Construction Analytics, accessed electronically at htti)s://edzarenski.com/eatego!y/inflation-indexing! 37 ■ In its 2020 One -Penny Safes Surtax Annual Update, the Palm Beach County Office of Inspector General suggested that all municipalities maintain transparency by publicly publishing, posting; or conducting community outreach events on surtax program initiatives and project status.28 The City should ensure its process includes such outreach. ■ Given that this is a period where high inflation is expected to persist for some time, the City should consider other opportunities for bonding for major projects, taking into consideration, of course, an also -rising interest rate environment. 28 Palm Beach County Office of Inspector General, "GIG Insights One -Penny Sales Surtax Annual Update — 2020," (November 9, 2020). Accessed electronically at htta://www.obcgov.comfoig/docs/surtax/OIG Insights Update 2020.odf 38 VALUE OF 2024 COUNTY -WIDE 1-CENT SALES TAX FOR TRANSPORTATION The value to the City from the use of the current 1-cent County sales tax was discussed in the prior section. In fact, it has created an outstanding new park and recreational complex while also providing resources to upgrade existing city government facilities, including for police, fire, and emergency response functions. Of course, the County sales tax is time (and revenue) limited, meaning that at its current collection rate, it will hit its $2.7 billion limit in 2025 or 2026. If collections do not reach the $2,7 billion level, it will automatically be sunset at the end of 2026. In the last year, there has been discussion of extension of the sales tax for transportation projects. There is a strong argument to be made for that extension, First, from a tax policy perspective, much of the tax is exported to County non-residents (primarily seasonal `snowbirds' or those attracted by recreation and tourism opportunities). In this way, non-residents help to pay for the infrastructure and government operations that are necessitated by those non-residents. Second, the method for distributing revenue (to both the County and municipalities) provides a reasonable mix of funding for county -wide and city -specific projects. Finally, an extended program provides additional bonding capacity should the City determine that it is cost-effective. Palm Beach County leaders have begun discussions related to County -wide projects that might benefit from the extended sales tax. These include a coastal commuter rail line, dedicated bus lanes on major roads, and other projects that have been delayed or derailed because of gas tax receipts that are less than current forecasts.29 Throughout the discussion in other sections of the report, the need to focus on issues of mobility are critical for continued growth and development within the City. While enacting a one cent sales tax for transportation projects would not be a panacea for the City, it could, if the revenue is appropriately managed, be one component part of a long- range funding plan. It is notable that the revenue currently received by the City from the 1 cent sales tax saw reductions from forecasts in 2020, related to the COVI❑-19 Pandemic. In FY2020- 2021 it was budgeted for $3.84 million. Given that Florida passed an economic nexus law (meaning governments can compel out of state e-commerce businesses with 39 See for example, "Traffic Sensitive Fled Lights? PBC May Float Transportation Tax,' The Palm Beach Post, March 23. 2021. accessed electronically at httos'Ilwww.palmbeachpost.com/stony/news/locall2021103/23ltraffic-sensitive- red-liq hts- lac -ma -float-trans ortation-tax14768373001/ and "floes One Cent Make Sense? Transportation Planners Eye Sales Tax to Help Residents Get 'from Point A to Point S to Point C' Wthout a Car," OnGardens.org, March 18, 2021, accessed electronically at https://ongardens.org/2021/03/18/does-one-cent-make-sense-transportation- lanner" y e-sales-tax-to-hel -residents et-f ro m-12oint-a-to pint-b-to- oint-c-without-a-Carl 9K significant sales into the state to collect sales tax from their Florida customers] effective July 1, 2021, it is likely that sales tax collection rates will increase in coming years based on this development alone. Findings and Recommendations ■ The current 1 cent sales tax for infrastructure projects will sunset sometime in 2025 or 2026. ■ There has been interest expressed at the County level in putting a sales tax question on the general election ballot in 2024 (as local option sales tax ballot questions must be held via a general, rather than special election). ■ There is an opportunity for the City to gain a new revenue source that can be dedicated to transportation -related projects. ■ Given the importance of these projects for many current and planned initiatives — and the need for funding in most of them -- it would make sense for the City to identify the projects that would be funded via this revenue source and advocate for them. • Based on the success of the 2017 bond issuance, the City should also consider issuing a revenue bond (or bonds) for those projects via this revenue source (if enacted) as well. 40 NOR MOBILITY PLAN TO MOVE PEOPLE, NOT JUST VEHICLES The City Council approved and adopted the City Mobility Plan and Fee in September of 2019. Accordingly, the Mobility Fee Land Development Regulations Amendment was also approved and adopted by the City Council in September of 2019, with an effective date of January 1, 2020. In September of 2020, the City Council approved and adopted Mobility -related Comprehensive Plan Text Amendments to various elements of the Comprehensive Plan, as well as a Land Development Regulations Amendment to provide consistency with the adopted Mobility Plan and Mobility Fee. The amount of the fee varies, based on residential or non-residential land use types. For example, a single-family home, based on square footage, may vary from $4,991 to $6,655. An office building may vary from $3,978 to $9,250, while retail establishments (by type) may vary from $2,981 to $59,651.30 According to the City's Comprehensive Annual Financial Report, at the end of FY2019-2020, the mobility fee fund totaled $2,375,230 for transportation -related uses. The Mobility Fee Assessment Area encompasses the eastern portions of the City. The Mobility Plan integrates multi -modal oriented land uses, people -focused complete and living streets. Because the Mobility concept is people -centric rather than car -centric, it aids in creating vibrant destinations and innovative parking strategies that encourage walking, bicycling and other multi -modal transport and reduces overall dependence on automobile travel. Mobility fees are used to fund infrastructure necessary to facilitate the movement of people through all means, not just automobiles. Mobility fees allow for the funding of bikeways, pedestrian access routes, sidewalks, dedicated mass transit routes, multi -modal and other facilities. Mobility fees can also fund roadways and roadway improvements but is more inclusive as to the types of transportation projects which can be funded. Funding mobility and mobility related projects is becoming more and more necessary as cities and towns develop, build out, and become increasingly urbanized. Dependency on automobiles as the exclusive means for transportation is inefficient, environmentally costly, as well as being costly to develop new roadways in places like Palm Beach Gardens where land and roadway corridor rights of way are scarce and real estate prices are high. Numerous communities facing continued urbanization throughout Florida have undertaken implementation of a mobility fee program designed to replace roadway impact fee programs. Examples of locations in Florida with a mobility fee program 30 "REVISED IMPACT/MOBILITY FEES - EFFECTIVE JANUARY 1, 2020," City of Palm Beach Gardens, accessed electronically at httos Ilwww.obotl.com1792llmpact-Fees 41 include (among others) Alachua County, City of Altamonte Springs, City of Maitland, Sarasota County, and Osceola County. Importantly, Mobility Fees help set the stage to accommodate and encourage innovative land use and development policy decision making. Mixed -use projects, urban infill and innovative redevelopment initiatives are all supported and facilitated in design concept when supported with a mobility fee program. In this regard, Palm Beach Gardens has embarked on a multi -faceted growth and development approach. Taken individually each initiative has merit and value for the City. However, each initiative also integrates with the other development programs and initiatives and in so doing created a synergy within the City that is greater than the sum of the individual planning and development components. In this way, urban redevelopment, TOD projects, Mobility fees, comprehensive planning, economic development, and many of the other planning policies of the City all represent different supporting "spokes on the wheel" helping to enhance the quality of life and make the City more livable. These initiatives should be viewed both on their individual merits as well as on the comprehensive effect for an integrated approach to City quality of life. The map below illustrates the Mobility Fee Assessment Area. To the degree future development and potential annex areas are not included in the Mobility Fee Assessment area, the City may consider expanding the Mobifity fee area to help bring mobility advantages to all areas of the City. 42 Figure 4: Mobility Fee Assessment Area Source: Palm Beach Gardens Mobility Fee Report (Vote: Mobility Fee Area: east of Bee Line Highway; Roadway Impact Fee Area: West of Bee Line Highway Findings and Recommendations • With the 2019 completion of the Mobility Plan report, the City instituted the Mobility Fee Plan and Assessment Area, replacing the County administered impact fee program in portions of the City. • In May 2021, Palm Beach County fled suit against the City over concerns regarding impact fee remittances to the County. This legal issue has not been resolved as of this date. ■ The lawsuit may create uncertainty for the City as well as developer owned properties located in and subject to the PBG Mobility Fee Assessment Area. ■ Resolving the legal question is important regarding whether or how roadway impact fees are paid in the city and eliminating the concern over unpaid impact fees. Generating mobility fee revenue is critical for assuring that redevelopment programs and TOD projects can be successfully undertaken. 43 99 ■ Through passage of the Mobility Plan and TOD areas, Palm Beach Gardens has demonstrated commitment to funding mobility needs. ■ Uncertainty regarding mobility plan revenue generation may impact the economic development momentum within the City. There is financial risk to the City if repayment of impact fees to the County is required. However, the potential repayment amounts are not expected to create financial/budget concern and the City's commitment to fund mobility projects is both strong and clearly demonstrated, ■ To date, the City has received $2.2 million in funding commitments for several mobility projects through TPA grant revenues. These include pedestrian crossing facilities; Kyoto Gardens Drive sidewalks and bike lane and Burns Road two-way bicycle track. These suggest that even without the mobility fee, the City can maintain its pipeline of mobility projects and identify alternate funding sources. 44 TRANSIT ORIENTED DEVELOPMENT DISTRICT IN THE DOWNTOWN AREA The genesis of the Palm Beach Gardens TOD program was funded through federal grants acquired by the South Florida Regional Transportation Authority (SFRTA), the operating authority of the Tri-Rail commuter train service. Development of TOD policies took place approximately from 2917-2019. The TOD directive is created to work in conjunction with the adopted Mobility Plan, The Palm Beach Gardens Mobility Plan was adopted in 2019. Both the Mobility Plan and TOD efforts are comparatively newly adopted within the City and represent forward - thinking approaches. It will take time to fully implement these policies and programs. Implementation is underway and it is important to continue to work toward effective implementation in order not to lose the momentum being generated. Significant momentum, development flexibility, and development density has been created within a one-half mile radius of the proposed PGA Tri-Rail train station. Projects benefitted and approved under the TOD planning guidelines include, but are not limited to Loehmann's Plaza, sections of PGA Station, FPL Phases I and 11, Downtown Palm Beach Gardens, Gardens Mall, and Legacy Place redevelopment. However, much of these lands have existing development and will require significant investment for redevelopment purposes. Most redevelopment efforts will likely result in increased development density on these sites. Minimum density standards and P3lfiscal/TIF funding agreements may be necessary to begin to attain the needed density to support a Tri-Rait commuter train station. Density allowances have been increased to gain critical mass within the TOD core area. Additional density increases may be necessary to compete with population densities of locations competing for train station stops and to gain full advantages of mobility opportunities in TOC core and TOD supporting core areas. Expanding the TOD may help and benefit gaining the Tri-Rail train stop. To maintain the economic development momentum that has been created, careful consideration should be given to expand the TOD district to the entire central business district of the City. There may be other areas within the Mobility Fee District which could be designated for higher density or TOD designations, taking care to identify and preserve traditional neighborhoods or areas, which for a variety of reasons, may not be appropriate locations for TOD/Mixed Use or redevelopment efforts, at this time. Support and community consensus to expand these areas will be required. Increasing predictabilitylcertainty in the planning, site plan and development process can contribute to consensus building. Public benefits include expanded tax base and municipal fiscal strength and increases local job opportunities. Through the Mobility Plan the City has 45 strengthened commitments to mobility projects. Continued communication ❑f public advantages of TOD/Mobility planning such as bikeways, pedestrian access and associated linear parks may help build public support. Such projects can be readily identified in the capital improvements plan and highlighted in public facing venues to increase awareness and support. The link to the Tri-Rail transit -oriented development planning process is shown below. Palm Beach Gardens was one of seven cities throughout the tri-county region to benefit from the SFRTA federal grants to undertake this planning process. Renderings for the Palm Beach Gardens rail station from the Tri-Rail website are shown below. 46 Figure 5: Tri-Rail Coastal Link Station Master Plan Source: City of Palm Beach Gardens 47 Findings The TOD is an important land use overlay to help achieve mobility goals. Its continued implementation is an important component of several related planning and economic development initiatives — current and planned. The County legal challenge to the mobility fee, which is part of the TOD funding mechanism, may impact mobility funding sources, potentially requiring alternate funding sources to be identified and implemented. Regardless of the funding sources for the Mobility Fee: the City's Mobility Plan is adopted and remains in place. Attaining sufficient density within this area will be important to attain development and density levels for other planned projects to be successful. ■ Expanding the TOD could be considered in the future to include properties such as the Gardens Mall or other areas which may support walkability and mobility alternatives in the urban core. Recommendations The benefits of the TOD can be substantial and to date have resulted in some initial supporting development in the TOD area. As noted, we believe that expanding the district will help achieve Mobility Plan goals. We believe highlighting mobility projects recently undertaken or programmed, in public facing formats and forums, help illustrate the City's the commitments to Mobility Plan goals, and this will build community support for the TOD, the Mobility Plan and Mobility Fees. The TOD emphasizes land use patterns with a focus on pedestrian connectivity and mobility. These are important elements for environmentally sustainable growth patterns in the City's Central Business District. The TOD emphasizes workforce housing and employment, both of which are critics; to economic and fiscal sustainability in the City. 48 While estimates vary, state and local governments provide Billions of dollars each year to spur business activity within their borders. There have been literally hundreds of studies conducted to seek to determine the efficacy of these incentives, and supporters and opponents of incentives can each point to research and practice that supports their perspective. It is likely that economic development incentives will continue to be provided throughout the U.S. and continue to be controversial in some places but not in others. In Palm Beach Gardens, its voters approved the use of tax abatement for its economic development program and there have been notable successes associated with its use. As a result, the benefits of economic development incentives. will depend an specific facts and circumstances and will vary from time to time and place to place. In Florida, there are a variety of incentives that are provided at the state, county, and municipal levels of government. For this discussion, benefits offered by the State of Florida are available to the City and the other jurisdictions with whom it regularly competes, s❑ they are something of a moot point. Likewise, many (if not most) of the local governments Palm Beach Gardens competes with for residents and commerce are within Palm Beach County, so incentives offered at the County level will also tend to balance out. At the Florida municipal government level, economic development incentives can take many forms. The Florida Legislature's Office of Economic and Demographic Research annually collects data from Florida county and municipal governments related to economic development incentives. For reporting purposes, the Office classifies local government economic development incentives into four general types :31 ■ Direct financial incentives to businesses. ■ Indirect financial incentives benefitting businesses. ■ Tax -based and fee -based incentives to businesses. ■ Below -market rate leases or deeds for real property given to businesses. The Office's March 2022 report includes data from several Palm Beach County municipalities (listed in the following table in population ranked order) It is notable that there was no response from the cities of West Palm Beach, Delray Beach, and Riviera Beach. The following reflects the dollar amounts within the four broad categories for those Palm Beach County reporting municipal governments: 31 "Florida County & Municipal Economic Development Incentives: Local Fiscal Year 2019-2020 Report Based on 2021 Survey Responses," Florida Legislature's Office of Economic and Demographic Research, March 2022, accessed electronically at http:/Yedr.state.fl.us/ContenUlocai-government/reports/econincentives2O.odf 49 Table 13: Comparable Cities Use of Economic Development Incentives (FY2019-2020) Municipality Population Direct Indirect Fee and Below Total (2020) Incentives Incentives Tax Market Based Incentives leases or Deeds GardensPalm Beach Greenacres i Royal Palm Beach Palm Springs:. Of the municipalities that responded to the survey, Palm Beach Gardens had the greatest dollar value associated with incentives far FY2019-2020. While the incentive amount in 2019-2020 was substantially greater than in the prior 10 years, this was primarily due to $1.0 million being added to the City's 5ma11 Business Relief Fund. These funds were used to provide emergency grant funding for local small businesses during the COVID-19 pandemic to assist with operating costs, payroll, rent, etc. This report also summarizes past use of incentives, from FY2010-2011 through FY2019-2020. In some of those years, other Palm Beach County municipalities are included. For example, West Palm Beach reported $692,073 as the total value of economic development incentives in FY2016-2017 (but did not report a value in any other year of those years). Likewise, Delray Beach reported the use of incentives in four years and Lake Worth Beach in three years. As noted, last year's $2,012,874 was an outlier for Palm Beach Gardens. The following table provides the reported information for the Palm Beach County municipalities that reported the use of incentives in the fiscal years 2011-2012 through 2019-2020. 50 Table 14: Total Value of Reported Economic Development Incentives (for the fiscal year ended September 301h) Boca Raton $111,250 $164,600 $127,875 297,738 F $242,194 $80,500 $100,000 $238,000 -Boynton Beach $313,500 $36,000 $99,000 Delray Beach $70,000 $40,000 $6 749 $11,276 Jupiter $896,090 $597,590 $259,539 $229,390 $187,827 $17,990 $523,000 $449,512 Lake Park $98,532 $43,458 $100,000 Lake Worth Beach $146,536 $36,275 $18,668 Palm Beach Gardens $50,000 $264,700 $26,250 $340,024 $2,012,8 74 Riviera Beach $127,800 West Palm Beach $692,073 Source: Florida County and Municipal Economic Development Incentives- LFY 2019-2020 Report, Florida Legislature's Office of Economic and Demographic Research 51 Another Florida local government approach to providing economic development incentives is through Community Development Agencies (CRAB). These special districts can, under Florida law, carry out the redevelopment of designated slum or blighted areas, with funding generated through tax increment financing (TiF). In this approach, the taxable value of property within the designated area is fixed at a certain date, and the subsequent annual incremental increase in property tax revenue to the county and municipality (but not the school district) is deposited into a special fund to be used to fund redevelopment projects. In some cases, revenue bonds are also used by the county or municipality on behalf of the CRA. There are a variety of eligible uses for CRA funds, including administrative expenses of redevelopment, to acquire property, to pay for public infrastructure improvements, to develop affordable housing, to develop community policing innovations, and to subsidize festivals and other community recreation events. There are 221 CRAs within the State of Florida. Of those, 11 are in Palm Beach County. Cities and towns with a CRA are Belle Glade, Boca Raton, Boynton Beach, Delray Beach, Lake Worth Beach, Riviera Beach, West Palm Beach, Jupiter, Lake Clark Shores, Lake Park, and Palm Springs. Palm Beach County also administers a CRA for Westgate/Belvedere Homes. Palm Beach Gardens does not have a CRA at this time. In reviewing Palm Beach Gardens' economic development offerings, there are sufficient tools available to the City to be competitive with other locations within the region. Further, the City is an 'in demand' location where incentives do not generally need to be offered (or offered in large quantities) to attract suitable economic development projects. For very large projects, it is likely that State (or county) incentives will have the greatest opportunity for impact, and many of the other measures the City undertakes to be an attractive location may well outweigh financial inducements in any event. During discussions and tours of the City, available affordable housing is a major concern — as it is in nearly every growing city in the U.S. There are tools, particularly targeted at improvements to existing residential housing stock, that could prove useful in rehabilitating existing housing. One type of program that has been put to good redevelopment use in other cities are tax abatement programs targeted at improvements to existing residential real property. In these programs, the property taxes on improvements to real property are abated for some period of time, often 5 to 10 years. In some cases, the percentage of the abatement may also vary, depending on the improved property or the number of years of the abatement, The following identifies some residential abatement programs and their key characteristics: 52 ■ St. Louis, Missouri Offers abatements of 5-10 years. Housing conditions determine the length and percentage of abatement. Abatement is offered for specific block groups identified by housing market conditions. • Cincinnati, Ohio Provides abatements for 10-15 years, with the length varying by the types of improvement. To be eligible, the property must be in a community reinvestment area, and there is an investment threshold of $2,500 to $5,000, depending on the type of residential property. ■ Atlanta, Georgia Offers abatements for 10 years. Properties must be in an Urban Enterprise zone to he eligible, The value of the abatement is reduced in the final five years of the abatement (stair -steps down by a percentage each year). ■ Richmond, Virginia Provides abatements for qualifying properties. Qualified single-family properties must be at least 20 years old, and the proposed work must improve the property's assessment value by at least 20 percent. Multi -family properties must be at least 20 years old, and improvements should increase the property value by at least 40 percent. They must also be in the city's enterprise zones. The abatement is 100 percent of the improvements for the first 7 years, which then decreases by 25 percent each year for years 8 through 10. Abatement programs have proven to be popular and successful. As an example, a 2019 evaluation of Richmond's program by the Center for Urban and Regional Analysis at Virginia Commonwealth University found that most of the rehabilitated properties using the tax abatement program had declining assessed values prior to rehabilitation and substantial increases in value afterwards — and these values increased at a higher rate than the average citywide growth rate for each property category. Further, for most property types, the revenues foregone in abatement were estimated to be recouped within two to three years after the abatement expires. Density bonuses for new projects that include work -force housing are widely used throughout Florida. These programs have had some success. However, their range and scope has been limited. To significantly increase the supply of affordable housing will require stronger measures. These include: (a) establishing minimum densities in targeted areas; (b) allowing smaller unit sizes; and (c) waiving impact fees and utility connection charges. 53 Combining these policies with transit -oriented design in designated and appropriate areas of the City will be effective in stimulating the supply of affordable housing. Findings Based on the previous discussion and the project team's research; The City has made frequent (but not substantially different) use of economic development incentives compared to other Palm Beach County municipalities. The City maintains most of the same types of economic incentive offerings and tools as its peer municipalities, with the possible exception of a CRA. The City is an `in demand' location, and other tools that it might offer (such as by - right zoning) are probably more important to prospective developers or companies as are economic incentives. Recommendations Because of the need for affordable and/or workforce housing, the City should investigate other tools that might be useful. One such tool would be tax abatements on rehabilitation or other improvements of existing housing. This should include limitations on its use that might include identifying zones within the City for its use. In addition, the City should consider establishing transit -oriented design zones coupled with provisions to encourage affordable housing using density bonuses, minimum density requirements, smaller unit sizes, and waivers of impact fees and connection charges. Given its importance, the City should continue its focus on timely review and approval of development plans as a key growth incentive to reduce developer costs. To facilitate timely review, the City may wish to consider minimum development plan submittal requirements. Minimum submittal requirements will help keep consistency and integrity of the character of development throughout the City. This may also allow the City review to be more focused and not spent on issues that should have been dealt with by the submitter earlier in the process, 54 psm, WORKFORCE HOUSING In municipalities across the country, elected officials and their staff are being pressed to address housing affordability. Local context is critically important to designing a policy solution, and Palm Beach County is no exception. According to American Community Survey (ACS) data from 2019 (the most recent year available), the median value of owner -occupied housing units in Palm Beach Gardens was $378,500. This figure is more than 1.5 times the Florida statewide figure of $215,300.12 Given recent trends in the housing market, it is not inconceivable to put the current figures at 10-20 percent higher than the 2019 level.33 For example, a more recent report found the median home price in Palm Beach County to be $466,000. Rents have followed a similar trend. Based on 5-year estimates provided by the 2018 ACS, more than 50 percent of households in Palm Beach Gardens were rent burdened (paying more than 30 percent of income on housing). Throughout conversations with stakeholders in the community, workforce and affordable housing were raised as an opportunity for Palm Beach Gardens to ensure its growth is sustainable and to share its exceptional quality of life with residents who wish to live, work, and play locally. PFM sees potential to improve in this area through a combination of incentives and policy implementation. In 2020, the City of Palm Beach Gardens approved and adopted its workforce housing program and commissioned a study, which was conducted by the Strategic Planning Group (SPG). A further study conducted in 2020, in collaboration with SPG, presented several solutions to increase development of workforce housing which were then prioritized according to City needs. Top priorities were: ■ Non-residential Square Footage Intensity Bonus ■ Residential Density Bonuses (expand to citywide) ■ Establishing a Housing Trust Fund ■ Impact Fee Waivers (or Credits) ■ Building Permit Application Fee Waivers ■ Expedited Permitting ■ Develop Accessory Dwelling Unit Regulations ■ Community Contribution Tax Credit Program In alignment with this study, Palm Beach Gardens has initiated policies to further incentivize the creation of workforce and affordable housing, This includes density bonuses as part of both the City's Comprehensive Plan (three dwelling units per acre), encouraging the development auxiliary 1 accessory dwelling units in new residential 32 U.S. Census Bureau (2019). American Community Survey 5-year estimates. Retrieved from Census Reporter Profile page for Palm Beach Gardens, FL <http:/lcensusreporter.org/profiles/16000US1254075-palm-beach-gardens- fi/> 33 https:llwww.zillow.com/research/zillow-2022-housing-predictions-30394/ 55 MID areas. and an additional Transit Oriented Development policy to grant a six dwelling unit per acre incentive for workforce housing, specifically. The City is also leveraging its workforce housing program to generate funding that can directly support building new housing units. For example, the Avenir development committed a one-time payment of $5 million for workforce housing and Arcadia Gardens contributed an additional $550,000. In all, Palm Beach Gardens has incentivized or constructed approximately 32 workforce housing units, with another 55 units funded and awaiting completion.34 As an example of another local program aimed at this issue, Pafm Beach County implemented a Workforce Housing Program through the Office of Housing & Economic Development that does not apply to Palm Beach Gardens. The Program, which was launched in 2004, applies to all developments with a residential component of 10 or more units in the urbanlsuburban tier of unincorporated Palm Beach County. Developers have the option to build the units at the stated sale or rent prices (determined based on AMI) or pay an in -lieu fee to the Office of Housing & Economic Development. Given the voluntary nature of the program, many developers elect to pay the in -lieu fee, which places the onus on the County to develop most of the units." After a very slow start, and recent program improvements, the County has now produced 485 workforce housing units for rent and 92 units for sale in approximately 18 years.313 The experience of the County program should serve as a learning opportunity for Palm Beach Gardens, which, despite early success in its program, still needs thousands of units of workforce and affordable housing to meet its needs. Findings and Recommendations These recommendations are appropriate based on PFM's review of the supporting study and associated reports. In particular, the density and intensity bonuses that are applicable to the downtown development zones and TOD district should be maximized to the degree possible. The project team discussed the existing minimum densities in the downtown and TOD areas and would recommend Palm Beach Gardens consider increasing those minimums to the degree it is feasible. This should include consideration of a "tapering" of the densities that allows for increasing the core of the TOD, and layering in lower maximum heights and densities as the overlay approaches low-rise residential neighborhoods. ■ As has been shown in the County example, the City should strongly consider its role in the development process for workforce housing units. Having a "a Figures include HUD CDBG, Sclera, and planned PGA Station units; all data on Workforce Housing units via City of Palm Beach Gardens project team 15 https://discover.pbcgov.org/pzblpIanningIProjects-Programs/VVorkfarceHousingProgram.aspx 36 http://metropolitan.fiu.edu/research/periodic-publicatlonslrecent-reports/palm-beach-county-affordable-housing- needs-assessment-02262021-final. pdf 56 robust Housing Trust Fund via in -lieu payments is a positive factor, however fundraising is only part of the equation. There must be a practical approach to building additional units of housing that are appropriately priced for all levels of median income, whether available to rent or to buy. PFM recommends setting a multi -year plan for creating the required housing units, including potential areas for development, funding sources, and available incentive funding (as is needed and appropriate for the project), • In fact, the velocity of building new housing may be the number one factor to consider when looking to enhance the current program. According to the Housing Leadership Council of Palm Beach County, the County is currently lacking about 78,000 units of affordable and workforce housing to meet market demand. When using the City's own methodology, an estimated 27 percent of Palm Beach Garden households are in need of a more affordable home — translating to more than 5,000 units. Clearly there cannot be one solution to generate this volume of housing, and not all the burden can be placed on one stakeholder or organization. Given that Palm Beach Gardens already intends to leverage its TOD to produce these units, solutions that take advantage of the near -term opportunities created by significant redevelopment projects should be prioritized. Currently, the residential capacity of three major downtown developments in Palm Beach Gardens is 1,095 units trough that has potential to increase via the aforementioned incentives in the TC0,37 ■ PFM concurs workforce housing should be a major consideration in long- term, strategic projects and proposals such as the potential Tri-Rail and/or Brightline Stations and any areas that are candidates for annexation, as described in the Workforce Housing Study. Workforce housing is likely to be more prevalent when it is treated as a necessary component of large development strategies rather than siloed as a separate and discrete consideration. • As PFM has recommended in related sections of this review, the TOD area must be considered as a central tenet of any workforce housing strategy. The City already anticipates and has incentivized an increase in density and should consider additional programs or incentives that layer workforce housing into the strategy. The Center for Neighborhood Technology tracks a Housing plus Transportation Costs Index (H+T) which measures a municipality's median monthly housing costs combined with transportation costs. An H+T of 45 percent of household monthly income is considered affordable — Palm Beach Gardens' H+T currently measures at 73 percent, where housing accounts for 47 percent, and transportation for 26 percent.38 By including both figures, it allows for the City 17 Includes PGA station, Legacy Place, Downtown PGA and Loehmann's Plaza 38 hops:!/htaindex.cnt.org[fact-sheets/?Iat=26.8396096&ing=-80.1019144&focus=place&gid=4523#fs 6YA to consider location as a critical factor in total affordability as well as quality of fife for residents. It can also serve as an edification of the mobility plan and arguments for continuation of taxes or fees related to transportation spending_ ■ An additional area of consideration should be the Gardens Mall and its potential for long-term mixed -Use re -development. CoStar data shows the Mall as "healthy" occupancy is very high which is a positive indicator when considering the overall state of the retail market. This takes it mostly off the table as a near -term solution, though the situation is worth monitoring as the loss of one or two anchor tenants could quickly change the trajectory. An additional hurdle to Gardens Mall redevelopment is the ownership structure. Anchor stores, such as Sears, each own their own store sites and parking areas. Forbes / Taubman owns and leases the core mall spaces. There are existing covenants between Forbes / Taubman and the anchor tenants requiring the core mall and anchor stores to continue operating while occupying mall space. Any proposal to make use of the substantial surface parking areas would be complex and potentially contentious, requiring resource -intensive negotiations to assure continued operations during periods of construction/demolition. • Given all of this, PFM believes additional study is needed to outline the potential uses and benefits to the community from densification on Gardens Mall property. It is possible that a creative developer, armed with the results of such a study, could demonstrate significant increases in foot traffic resulting from residential and potentially hotel activity that is built above parking areas and/or garages. Preliminary renderings of densification on portions of the mall site have been prepared. These should be revisited with a specific focus on providing workforce housing meeting the 60 to 120 percent AMI income level. ■ The City adopted the Workforce Housing Ordinance in late 2020, during the heart of the Covid pandemic. New policy implementation has been greatly challenged during the period immediately following adoption as a result. Nonetheless, as Palm Beach Gardens significantly expands workforce employment opportunities, the city becomes increasingly vulnerable to a loss of momentum in development and economic expansion, if complementary workforce housing cannot be located in the city or within close proximity to new employment opportunities. Implementation of the roadmap provided in the workforce housing ordinance should be emphasized to reduce the city's vulnerability in this area. 58 DOWNTOWN DEVELOPMENTS/PGA STATION, FPL SITE, SALE OF LEGACY PLACE, AND LOEHMANN'S PLAZA The one-half mile TOD area surrounding the proposed Tri-Rail station contains these four development/redevelopment projects: PGA Station, Downtown PBG, FPL Site, Legacy Place, and Loehmann's Plaza. The combined development potential for these projects is expected to include approximately 1,100 residential units, 1.5 million square feet of office space, 425,000 square feet of retaillrestaurant space, and 400 hotel rooms. These are characteristic of Urban densities. There is a considerable amount of additional proposed and under construction mixed use and residential development within one to three miles of the PGA station site. The employment generated by these four TOD developments could range from 8,500 to 10,000 new jobs. This could potentially generate demand for an additional 7,500 to 9,000 new residential units. Much of this additional residential capacity will be met in a one -to -three-mile radius. If the Tri-Rail or Brightline station stop is finalized, the rail access alone will generate need for approximately 1,000 additional residential units, pushing the TOD residential demand to as high as 10,000 units needed. This suggests the immediate TOD area could be expanded to one mile and generate a need for substantial additional residential development within an expanded TOD area. These metrics are important to understand, recognizing while the existing TOD area is approved for higher density, market forces will support even higher residential densities than have been approved to date. Accommodating portions of this additional demand within the TOD area can occur with additional redevelopment, which is allowable at 32 units per acre in the TOD area. As well, a combined service rail stop that allows direct transfer from Tri-Rail to Brightline could be transformational for the City, further enhancing demand in the TOD area. The City should be encouraged to think expansively and consider significant upside potential to the downtown TOD/Mobility area, beyond what is currently envisioned as a maximum potentia I. Legacy Place is immediately adjacent and to the east of PGA Station, on the east side of the railroad tracks. The site is a retail center and includes more than 400,000 square feet of retail space, constructed in 2007. Legacy Place consists of 42 acres, of which more than 30 acres is surface parking area. Legacy place was sold to new owners in Q4, 2021. Because the site is one of the core areas of the TOD and because of the recent ownership change, there is expectation development/redevelopment plans will be forthcoming for the site. This is a cornerstone of the TOD area and appears to be in the preliminary stages of redevelopment planning. TOD related market opportunity at this site includes walkability, existing retail, and significant density enhancements. 59 The Palm Beach Gardens downtown urban core is fast becoming the preferred modern suburban office node in Palm Beach County. Office tenants throughout Palm Beach Gardens appear to be concentrating in medical services, high-technology, and business office service and finance. By contrast, the central business district in downtown West Palm Beach has focused more lately on financial and legal tenancy, driving per square foot office rental prices higher in the West Palm central business district (CBD). The price point shift in the West Palm CBD and tenant concentration there has created a suburban office market opportunity in Palm Beach County. Palm Beach Gardens appears well positioned to capitalize on this emerging opportunity. Average central business district office space rent in West Palm Beach is almost 46 percent higher than the average central business district rent in Palm Beach Gardens. This translates into rental rates that are $16 per square foot higher in West Palm CBD ($58) than rents in Palm Beach Gardens CBD ($42), among the newer office buildings. This is a dramatic price differential which places Palm Beach Gardens at a significant competitive advantage for certain types of office tenants. As a result, office vacancy is currently considerably higher in the West Palm CBD than in the Palm Beach Gardens CBD. In the coming few years as office occupancy finds a new normal in the post CGVI❑ pandemic era, we can expect to see some cyclical softening in West Palm CBD office rental rates. Short term historic office rental data from Costar indicates this is already in evidence. However, longer term structural changes in demand may allow West Palm CBD rates to continue to escalate, keeping the wide gap in office rental rates between Palm Beach Gardens and West Palm Beach. To the degree development costs or permitting costs rise and transportation access and other quality of life measures fail to maintain the strong momentum in gains being made in Palm Beach Gardens, the competitive office market positioning could become at risk in Palm Beach Gardens. Rental rate erosion has not taken hold in Palm Beach Gardens at present. There is a clear advantage in Palm Beach Gardens for some office users. Maintaining the competitive positioning for office occupancy and employment gains in the Palm Beach Gardens CBD, plus increasing residential densification in the TOD and Mobility Fee areas will be paramount to supporting transit, meeting and maintaining the economic diversification momentum, and supporting workforce housing demand with appropriately priced residential development. .N . rri_ ��`. - �.. - _ may. ~ � • ��S - Figure T: PGA Station Site — Looking West with Densification Rendering V Source, Treasure Coast Regional Planning Council Findings ■ The current potential of these four development projects is very large, in terms of residential units, office space, retail/restaurant space, and hotel rooms. ■ There is also the potential for significant new employment from these developments. ■ Palm Beach Gardens has some competitive advantages regionally. This includes but is not limited to competitively priced office space cost per square foot that can be a catalyst for some of this development; and close proximity to 1-95 which reduces transportation and commute times, all things being equal ■ This development will also be important for related projects, such as the rail station. Recommendations In light of anticipated increased residential demand coupled with a strategic competitive suburban office advantage, Palm Beach Gardens should consider expanding the TO❑ area and sharply increasing allowable densities, beyond current limits, within the TOD 62 area. Existing density within the TOD can accommodate some of the expected residential workforce housing demand if maximum redevelopment densities are achieved. Minimum density thresholds within the TOD can be considered as part of this. 63 THE TRANSFORMATIONAL VALUE OF A PALM BEACH GARDENS CENTRAL RAIL STATION Significant infrastructure investments help communities and places accommodate future growth and development. As such, bridges, highways, and rail lines traditionally have been the catalysts allowing communities to expand and diversify. Palm Beach Gardens has a transformational opportunity to develop central rail stations serving both Tri-Rail and Brightline; or serving a third future commuter rail service on the FLCIBrightline track. The development of a Palm Beach Gardens Central Station ("PBGCS") creates a compelling business and residential location with either direct or transfer station access to the higher speed: Brightline service. PBGCS may provide direct or transfer link access to Brightiine high-speed rail to Orlando International Airport's station in less than two hours and to Miami's central station in one hour. Tri-Rail connects PBGCS throughout South Florida. Development of PBGCS will create strong demand for the surrounding and near -by properties, which will stimulate development and redevelopment. With proper planning and the embrace of public -private partnerships, the City could foster a model for transit - oriented design. Furthermore, PBGCS will provide City residents with unparalleled transportation convenience while enhancing property values. There are very few transformational opportunities of the scale of a PBGCS to foster economic development. While the cost and difficulty of its development are substantial, the rewards could be even greater. The following map identifies the location of the proposed train station and other key components of the City: 64 Figure S: Location: of Palm Beach Gardens Central Station Currently, the tri-rail line terminates 3.5 miles north of West Palm Beach at Mangonia Park, near 45th Street. The Mangonia Park station is approximately 1 mile from the medical complex which includes the 280-bed HCA Florida JFK North Hospital, 124-bed adjoining psychiatric facility and medical office space. Beyond this point to the north a rail crossover is needed to bring the CSx Tri-Rail line onto the eastern -most Florida East Coast (FEC) rail line to serve the PBGCS. The FEC line runs adjacent to Dixie Highway (FL 811) in this area and is the rail line adjoining the PGA Station site in Palm Beach Gardens. The crossover, known as the Northwood Crossover, is located just 1 mile north of the West Palm Station. The Northwood Crossover located at 25th street is now completed. With proper permission and a user lease rental agreement between Tri-Rail and the FEC line owners, Tri-rail trains can run north of West Palm Beach to Palm Beach Gardens and beyond on the FEC line. A funding commitment for the user lease agreement is needed for Tri-rail to access the FEC line. This funding commitment may require state and county participation in addition to a city share of the commitment. 65 The FEC line is the same track as the Brightline intercity rail. Having Tri-Rail commuter train service with direct access to Brightline rail station service is a key regional infrastructure component. This would allow for increased ridership for both tines, effectively completing important regional linkages for both systems. The Northwood Crossover also allows for more efficient short haul train travel within Palm Beach County. Figure 9: Potential Rail Plan arM# �CSX rcU -n 32nd St 31st 5t m 30th Ct 1�T1 ` 0 31st St 30th St � C7 � - r 7 Q 7Rth At Service 5t 29th w T.Chn�Pt `o st 28 ft v t � 7 j� 1 Source: Florida DOT, District Four 2�h 23rd St d St 27th St r 2ft r 25th St rn m $ ' a [ 24th St p c - Northwood Rd CD ED 22nd St Linco PHASE 2 21 New Northwood Connection 2nth St 22nd St s 21s! 5t 4 N FF=odaliYard B wx„ int 66 Two important funding steps are needed to make the service to Palm Beach Gardens feasible. First, there is the need to fund operational costs. This includes track use lease costs and annual operations to run the trains themselves. Second, there is the need for capital construction funding for the PGA train station. It is estimated that combined lease and operational costs may reach $35 million annually. These costs would not all be borne by Palm Beach Gardens, but most likely a not insubstantial portion would. Negotiation with operating parties is needed to determine the share of City costs. Funds might be generated by an additional sales tax (likely not until 2026 if a referendum is passed) or other local funding sources_ A proposed share and funding mechanism needs to be identified. Capital construction costs for the station are estimated to reach near $fib million for five stations along the northern Palm Beach County route; this suggests that on average each station cost could reach $12 million. These funds could be generated using mobility fees; however, it is unlikely the PGA Station project alone and the remaining undeveloped areas within it could generate sufficient mobility fee or other tax increment finance (TIF) funds. Findings The PBGCS has the potential to be a transformational project for the City and region. There are several potential mechanisms to generate sufficient funds to help fund the train station. These include but are not limited to: ■ Increase the geography covered by the mobility fee district (including future annexed western growth areas). ■ Expand TOD district to one mile from PGA Tri-Rail Station. ■ Substantially increase the allowable development density within the district above existing high density (32 du ac) allowance. ■ Consider minimum density thresholds as a means to assure needed density. ■ Resolve lingering issues between City and County regarding mobility fees in an effort to expand mobility fee concept countywide to help support the northern sector of the County_ ■ Institute a TIF funding mechanism potentially within 3-miles of the train station. ■ Ensure the Palm Beach Gardens Mail is included within the new TIF district in coordination with existing Mall ownership, in conjunction with a phased approach. [:ri MID Dramatically expedite permit review time within this district through reduced allowable review times and increased form and function predictability for site plans and additional staff to support policy implementation and development review. • Expedited permit review can take place provided minimum application submittal standards are met. There are trade-offs in instituting these mechanisms. Foremost among them is allowing less government control over the process in exchange for maintaining and accelerating the good trajectory the city is on today. Losing momentum in the acquisition and development of regional infrastructure components can have permanent long-term consequences for the fiscal and economic health of the city. Recommendation From the project team's perspective, this project is a good example of an opportunity to develop a public -private partnership (P3) for development and operation of a PBGCS. It is notable that infrastructure project funding has been a fast-growing segment of Pas in the U.S. and around the world. There is an opportunity to tap into needed additional capital and development expertise that can get this project off the ground (and onto rails). P3 projects require strong support throughout the impacted government and business communities. As a recent review of successful P3 projects notes, each party must be as committed to achieving the others' goals as they are to their own goals.39 One of the important characteristics of the current City administration is a strong working relationship with community business and civic organizations. It is likely that that partnership can be put to good use for this project. The project team believes that the necessary interest exists to identify the financial resources necessary to undertake this project in the near future. 39 "What Successful Public -Private Partnerships Do," Dlyse Maltin, Harvard Business Review, January 9, 2019, accessed electronically at htt s://hbr.or l2019l01lwhat-successful- ublic- mate- artnershi s-do MIXED -USE DEVELOPMENTS Careful planning and consideration have gone into the creation of a distinct mixed use land use category and designation of mixed -use locations. In general, mixed developments promote horizontal and vertical integration of diverse land uses, enhanced densities and generate fewer roadway vehicle trips due to internal capture of automobile trips due to the synergies between mixed land uses. There are nearly 6,000 acres of lands within the City designated as mixed use. Of these lands, 80 percent are comprised of the Avenir mixed use development. Avenir is a large-scale development project in the western areas of the city. It's development entitlements include a complement of uses designed to integrate the live/learn/work/play community design. Another 12 percent of mixed -use lands, some 700 acres, are located east and west of I- 95, south of Donald Ross Road on the northern perimeter of the City, anchored by the planned Alton Commercial Industrial site. This leaves just under 500 acres designated elsewhere throughout the City in mixed use lands on a dozen or so separate smaller parcels ranging in size from 4 to 100 acres. Most of the mixed -use land designations in the City are planned with approved development entitlements or are built out and represent redevelopment opportunities. Significantly, these lands represent some 17 percent of the municipal land area and define the current extent of mixed -use development opportunity. In the case of future redevelopment, conversion of existing parcels to mixed -use designations should be encouraged, to the degree there is supportable demand for on - site non-residential Uses and to the degree those uses will enhance residential development. The higher density obtainable in the mixed -use designation can provide opportunities for more moderately priced workforce housing. Mixed use areas are also locations where innovative and alternative development types should be encouraged, Building product types are not static and in the wake of the pandemic and accompanying technological changes it can be expected there will be new forms of hybrid live/work homes and buildings. For example, the home -office concept may become more prominent and may expand into a wider array of business types, beyond the need for a desk and computer for some home -office workers. This may require larger units or units with a higher percentage of office/workspace within the unit than currently allowed. Mixed -use areas can be appropriate locations to consider increased flexibility for new and innovative building types. Zoning code flexibility is important to consider to allow the newest most efficient forms of live -work alternatives to take hold. 69 Figure 1 0: Map of Mixed -Use Lands in Palm Beach Gardens Findings and Recommendations ■ Mixed use land use and development is a means to bring to fruition and operationalize several City initiatives. These can include workforce housing development, TOD and mobility principles and enhanced livelworklplay opportunities which decrease automobile trips. ■ Most of the mixed -use land within the City is contained within the Avenir mixed use development. ■ Most of the remainder are anchored by the planned Alton Commercial industrial site. ■ Conversion of existing parcels to mixed use designations should be encouraged. ■ Mixed used areas can be locations to consider new and innovative building types. ■ As a result, zoning code flexibility is important to consider. 70 ■ Annexation of additional western area lands should be considered for mixed use land use categories and considered for inclusion in the mobility fee area 71 PIN RECREATIONAL AMENITIES EXPANDED AND UPGRADED Palm Beach Gardens has become a highly successful statewide sports event venue, with some national exposure and event activity. The combined effects of PGA golf, MLB spring training and baseball grapefruit league play, natural coastal/ocean amenity, and excellent weather have combined to position Palm Beach Gardens as a highly favored and successful sports venue. The Palm Beach County Sports Commission has been structured to support these efforts and is successfully doing so. Recreational amenities in Palm Beach Gardens reflect two components: enhanced quality of life for residents with indoor and outdoor national class facilities; and sports tourism, and attraction of regional, statewide, national, and international sports and cultural events. These events drive and supplement the tourist and visitor industry in Palm Beach County. The visitor industry in the County includes seasonal second homes, attractive beaches, business conventions, equestrian events, major league baseball spring training and farm team play and other scenic and outdoor recreation activities including boating and scuba diving. Sports events contribute substantially to the visitor industry supporting local hotels and restaurants. The City works closely with the county Sports Commission such that sporting events and related tourism does not limit access, enjoyment or monopolize capacity utilization for residents of extensive recreational amenities in the City. Key facilities in the City contribute to a highly successful sports and recreation infrastructure which serves city residents as well as tourist related businesses. These facilities include the Gardens North County District Park, Palm Beach Gardens Tennis and Pickleball Center, Gardens Park, Burns Road Community and Aquatic Center, PGA National Park, and Mirasol Park. Recommendations To further the potential success of these facilities and position the City to take better advantage of national and international level events, additional facility infrastructure development should take place. The additional facilities infrastructure needs include development of a state of the art multipurpose community center and an increased number of rectangular multi -purpose fields. These fields can accommodate soccer, lacrosse, and field hockey events. An indoor sports plex arena is needed to create a facility for indoor mat sports such as wrestling and gymnastics, and martial arts plus basketball. Finally, to allow the potential events and venues to accommodate multi -day collegiate or national level events, indoor locker room space is needed. Locker room space is key to the expansion of all mentioned events to the advanced national and international or collegiate level. 72 73 ANNEXATION INITIATIVES Annexation is important for consistency, efficiency, and continuity of government service delivery. Having irregular municipal boundaries can cause confusion as to jurisdiction and delay important service response times. There are also instances where County services are not easily delivered to these areas, making municipal services the preferred option for maintaining service standards in the county. Annexation is also a way to bring important planning concerns and land use management and control to areas bordering the city. Such planning and land use management helps maintain the quality of fife within the City. For these and other reasons annexation is an important tool. In the western areas of there are four areas the city is considering for annexation. These include areas known as Mecca Farms (Areal 8), Caloosa (Area 19), North Palm Beach County General Aviation Airport (Area 20), and Palm Beach Park of Commerce (Area 25). These are generally areas which are, at present, undeveloped or have low density/minimal development. The City has prepared a preliminary Annexation Report for each of these areas detailing the current fiscal conditions associated with taxation and service delivery to these sites. Mecca Farms is owned by South Florida water management District. Mecca farms is undeveloped at present and expected to be used for water or environmental conservation purposes. To better understand fiscal implications of annexation, fiscal analysis of buildout scenarios should be examined. This would include alternative development scenarios for higher density and lower density, to bracket the range of potential future fiscal conditions. Caloosa is largely developed with residential housing at very low densities, approximately 1 unit per 5 acres, with average property value in excess of $300,000 per unit. Annexation of this area is fiscally positive for the City under present conditions. These conditions include private roads not maintained by the City and utilities available through well and septic tank. It is important to consider whether road maintenance and water/wastewater utilities will continue to be delivered in the future according to current conditions. If road maintenance or water/wastewater utilities will be delivered by the city in the future, fiscal costs to the city could be significantly higher than currently estimated. Preliminary fiscal analyses at the Airport and Park of Commerce should consider service requirements for existing non-residential uses. There are known calls for service at each location. Much of the Airport lands are in public ownership limiting 74 future ad valorem tax generation potential. Should annexation take place, a transfer of ownership or disposition/private sale of some airport lands should be considered. The airport is located on the Bee Line highway, with rail frontage making this a potential future multi -modal warehouse distribution site with air, rail, and truck access. The Palm Beach Park of Commerce appears to be roughly 30 percent built out. It has rail access and rail sidings serving the existing warehouse facilities. Figure 11: Map of Future Annexation Locations Findings and Recommendations There are some logical places that could benefit both the City and annexed residents. In some areas, the City (because of mutual aid agreements) is already providing services to these areas. The 10-year financial plan already takes into consideration the costs to the City to provide services to annexed areas and how that would impact the annexed taxpayers. In some instances, this can be both a `win -win' for residents and the City. Those identified areas should be considered opportune locations for conversations about annexation. Wl MR - Of course, prior to annexation initiatives, even more rigorous fiscal analysis should be conducted based on the build out scenarios for both the Airport and the Park of Commerce. Buildout scenarios should consider future land use designations, development opportunities/alternative and future anticipated tax base and service requirements, based on the build out conditions in each location. This will inform the City as to the long-term fiscal implications of the annexation prior to annexation taking place. Similar fiscal analyses of remaining eastern annexation areas should also take place prior to annexation. These analyses should consider existing development conditions both residential and non-residential uses as well as alternative buiidout scenarios including status quo conditions, redevelopment alternatives and impact on surrounding uses whether positive or negative. Annexation of lower value areas can create a fiscal drag and can be considered in conjunction with higher value annexations. This may offset annexation costs or revenue needs helping to maintain fiscal balance, while making delivery of urban services more efficient. Annexation helps eliminate pockets or Isiands" which are underserved, not currently served, or inefficiently served by municipal City services. This can significantly improve quality of life throughout the City. Smaller eastern annexation areas should be examined for ownership patterns. Public outreach is important in areas where high levels of parcelization and large numbers of property owners exist in a comparatively small area. The city conducts public outreach to help build public support in annex areas where high parcelizationlownership exists, and this is important to a successful annexation process. 76 AILTIU►_ILVA Throughout the analysis, several recurring themes have presented themselves, even in what are sometimes disparate topic areas. These include: City `curbside' appeal. The City has a broad array of attractive residential neighborhoods, commercial amenities, and city services. It provides abundant recreational, cultural, and other city -sponsored activities, and there are still many opportunities for continued opportunistic growth. City surveys and other benchmarks are strongly positive, and residents continue to 'vote with their feet,' as evidenced by continued strong population growth. ■ Strong commitment to excellence in City government. Palm Beach Gardens has earned and maintained the highest possible municipal credit rating from all the major credit rating agencies. its budget document and annual financial reports have also been noted for their excellence in government reporting. The City leadership has instilled a team -oriented approach to managing the city, and this hands-on commitment was noted and evident throughout the project on -site meetings and discussions. The City's leadership is committed to forward -looking planning and implementation, and past results are indicative of their success. ■ Significant new development that presents both great promise and challenges. There is significant private and public development currently underway that will significantly impact the City's commercial, residential, and recreational fabric for years to come. The FPL headquarters are an example of new commercial construction that will bring high paying jobs into the City, while the Avenir residential development is an example of City outer expansion that will provide housing and related amenities to a broader part of Palm Beach Gardens. The Jack Nicklaus Group designed 18-hole municipal golf course in that area exemplifies the continued growth in city -provided recreational services. Of course, this continued growth will present challenges, including transportation and other infrastructure. Demand for City services will also require a continually growing tax base. In this respect, the City's focus on maintaining a stable millage rate is important, as are maintaining cost effective methods to pay for and provide services. The City has shown foresight in several areas in the past, including identifying and implementing strategies to diversify the City tax base. Going forward, other strategies, such as selective annexation initiatives and continued Western growth, will likely be important for continuing tax base growth. 77 ■ Interconnected nature of community and economic development projects. The City presented an interesting mix of community and economic development topics for the project team to consider. While each was examined on its own, the discussion has often pointed out the interconnected nature of initiatives the City is either considering or in the process of implementing. While it is generally necessary for any organization to triage projects — as there are nearly always initiatives that exceed the available staff hours in the day — it is also the case that in Palm Beach Gardens, many of the issue areas discussed are reliant on advances in other initiatives. Very few of the efforts previously discussed can be siloed and exist solely on their own merits. That is the challenge with new development underway. It helps to explain why, as examples, the TOD district is closely connected to efforts to increase urban density, and why a train station in the City would be important for those efforts as well as supporting major projects like the FPL campus and redesign of urban shopping centers that feature acres of prime space currently devoted to parking lots. Each of these creates synergy, and they have the potential to build upon one another. The City has already demonstrated this integrated approach to community development and growth. While the importance of Western growth has been discussed, the projected "growth pipeline" within the TGD, downtown, at Loehmann's Plaza, the FPL site, and PGA Station are also notable. The ability to focus its resources on multiple different opportunities ties back to the City's stable financial position, which further underscores the need to maintain financial stability to help ensure sustained and successful growth strategies. • Willingness and ability to be opportunistic. The City has done an excellent job of attracting activities and events, as well as new residents and commerce. It has seized on opportunities, and this has served the City well. In discussions with City leadership, they express great confidence that current initiatives will reach fruition, even if some of the required resources have not been identified. From the project team's perspective, the strong financial planning systems and processes that are in place give the City a certain amount of latitude and the ability to `think big' in its current economic and community development efforts. APPENDIX A: FINANCIAL MANAGEMENT POLICIES Operating Budget • The City will present the City Council and the residents of Palm Beach Gardens with a balanced budget, a budget in which planned funds available equal planned expenditures, for each fiscal year beginning October 1 st. ■ The City will pay for all current expenditures with current revenues and fund balance. The City will avoid budgetary procedures that balance current expenditures at the expense of future years, such as postponing expenditures, underestimating expenditures, overestimating revenues, or utilizing short-term borrowing to balance the budget. • The budget will provide for adequate maintenance and repair of capital assets and for their orderly replacement. • The budget will provide for funding of the Police, Fire, and General Employees' defined benefit retirement plans based on the annual actuarial reports. ■ The City will maintain a budgetary control system to help it adhere to the budget. • The Finance Department will prepare monthly reports of revenues and expenditures for management purposes. In addition, quarterly financial reports will be prepared for the Council. • The City will update expenditure projections for each fiscal year. Projections will include estimated operating costs of future capital improvements. • Where possible, the City will integrate performance measurement, service level, and productivity indicators within the budget. • The City will aggressively seek state and federal funds that are available for capital projects. Capital Improvement Program (CIP) Policies ■ The City will develop ten-year capital projections and update them annually. ■ The City will enact an annual capital improvement budget based on the multi- year CIP. • The City will make all capital improvements in accordance with the adopted CIP. ■ The City will coordinate development of the CIP with development of the operating budget. Future operating costs associated with capital improvements will be projected and reported in the CiP and operating budget. ■ The City will use intergovernmental assistance to finance only those capital improvements that are consistent with the CIP and City priorities. • The City will identify the estimated acquisition and operating costs and potential funding sources for each capital improvement project proposal before submittal to the City Council for approval. Debt Policies • The City will confine long-term borrowing to capital improvement projects. • When the City finances capital projects by issuing debt, it will repay the debt within a period not to exceed the expected useful life of the project. ■ Where possible, the City will use revenue bonds instead of general obligation bonds. 79 ■ The City will follow a policy of full disclosure on every financial report and bond prospectus. ■ The City will utilize the form of borrowing that is most cost effective, including not just interest expense but all costs, including upfront costs, administrative and legal expenses, and reserve requirements. Revenue Policies • The City will maintain, as permitted by state law, a diversified revenue base to mitigate the effects of short-term fluctuations in any one revenue source. ■ The City will estimate its annual revenues by a conservative, objective, and analytical process. • The City will project and update annually revenues for the next ten fiscal years, as part of the CIP preparation process. ■ Annually, the City will calculate the full direct costs of activities supported by user fees and consider such information when establishing user charges. • Non -recurring revenues will be used only to fund non -recurring expenditures. Investment Policies • Disbursement, collection, and deposit of all funds will be appropriately scheduled to ensure the timely payment of expenditures and investment of funds. ■ The accounting system will provide regular information concerning cash positions and investment performance. • Governmental accounting principles distinguishes Fund Balance classified based on the relative strength of the constraints that control the purposes for which specified amounts can be spent. Beginning with the most restrictive constraints, Fund Balance amounts will be reported in the following categories: o Non -spendable Fund Balance: Amounts that are not in a spendable form (e.g., inventory), or are legally or contractually required to be maintained intact (e.g., principal of an endowment fund). o Restricted Fund Balance: Amounts that can be spent only for the specific purposes stipulated by external parties either constitutionally or through enabling legislation (e.g., grants or debt covenants). a Committed Fund Balance: Amounts that can be used only for the specific purposes determined by a formal action of the City Council. Commitments may be changed or lifted only by referring to the formal action that imposed the constraint originally. o Assigned Fund Balance: Amounts intended to be used by the City for specific purposes. Intent can be expressed by the City Council or by a designee to whom the governing body delegates the authority. In governmental funds, other than the General Fund, assigned balance represents the amount that is not restricted or committed. This indicates that resources in other governmental funds are, at a minimum, intended to be used for that fund (e.g., Impact Funds). a Unassigned Fund Balance: Includes all amounts not contained in other classifications and is the residual classification of the General Fund only. Unassigned amounts are the portion of Fund Balance which is not obligated or specifically designated and is available for any purpose. ■ Minimum Unassigned Fund Balance: It is the goal of the City to achieve and maintain an Unassigned Fund Balance in the General Fund at fiscal year-end of not less than 17 percent of expenditures, which represents approximately two months' operating expenditures. If the Unassigned Fund Balance at fiscal year-end falls below the goal, the City shall develop a restoration plan to achieve and maintain the minimum fund balance. ■ Use of Unassigned Fund Balance: Disbursement of funds from Unassigned Fund Balance in excess of the 17 percent target shall be authorized by an ordinance of the City Council and may be approved by inclusion in the approved annual budget (and amendments thereto). These funds shall be used only for non- recurring expenditures such as capital, grants, one-time programs, or for emergency and disaster relief, or as a budget stabilization reserve in the case of revenue declines, unanticipated expenditures, or unfunded mandates. However, should a projected budget surplus exist in any given year, such surplus may be used to offset operating expenses in the subsequent year, provided that such usage does not reduce Unassigned Fund Balance below the 17 percent target. Such use of Unassigned Fund Balance shall represent an Assignment of Fund Balance and be at the discretion of the City Manager when preparing the annual budget, subject to approval of the budget adoption ordinance by Council. After completion of the annual audit, the projected budget surplus will be compared to the actual surplus, and appropriate budget amendments made to adjust the budgeted Unassigned Fund Balance to actual. if the budgeted use of Unassigned Fund Balance causes the balance to fall below the 17 percent target, the Finance Administrator will so advise the City Manager and City Council for the necessary action to be taken to restore the Unassigned Fund Balance to the target level. Disbursement of funds from Unassigned Fund Balance below the 17 percent target are to be used only for emergency and disaster relief or as a budget stabilization reserve in the case of revenue declines, unanticipated expenditures, or unfunded mandates. The City shall develop a restoration plan and attempt to replenish these funds over a period not to exceed five years. The responsibility for designating funds to specific classifications shall be as follows: ■ Committed Fund Balance: The Council is the City's highest level of decision - making authority, and the formal action that is required to be taken to establish, 81 modify, or rescind a Fund Balance commitment is a resolution or ordinance, as appropriate and approved by the Council. Assigned Fund Balance: The City Council has authorized the City Manager as the official authorized to assign Fund Balance to a specific purpose as approved by this Fund Balance Policy. ■ Order of Expenditure of Funds: When multiple categories of Fund Balance are available for expenditure (e.g., a project is being funded partly by a grant, funds set aside by the Council, and Unassigned Fund Balance), the City will start with the most restricted category and spend those funds first before moving down to the next category with available funds. 82 APPENDIX B: NON -FINANCIAL MANAGEMENT POLICIES Comprehensive Plan Policies • Continue to ensure a high quality living environment through a mixture of land uses that will maximize Palm Beach Gardens' natural and manmade resources while minimizing any threat to the health, safety, and welfare of the City's citizens that is caused by incompatible land uses and environmental degradation, by maintaining compatible land uses which consider the intensities and densities of land use activities, their relationship to surrounding properties and the proper transition of land uses. • Maintain level of service standards which shall accommodate sustainable growth through financially feasible improvements to develop a convenient, safe, and energy efficient multi -modal transportation system for all persons living in and traveling through the City. • Provide sustainable, safe, and sanitary housing which meets the needs of all existing and future Palm Beach Gardens residents. • Provide adequate central sanitary sewage facilities for residential and non- residential development and redevelopment in the City. ■ Ensure the social, economic, and environmental resources of the Palm Beach Gardens coastal planning area are protected, maintained, and enhanced through the regulation of development activities that would damage or destroy such resources. ■ Preserve, manage, or restore the natural resources in the City to ensure their sustainability, high quality, and critical value to the quality of life in the City of Palm Beach Gardens. ■ Provide adequate sustainable park, recreation and open space facilities and areas offering a broad range of activities, convenient access, appropriate improvements, and sound management to all current and future citizens of Palm Beach Gardens with active and passive recreation opportunities in the interests of personal health, entertainment, and constructive use of leisure time. ■ Establish effective coordination measures among all pertinent public and quasi - public entities s❑ to best maintain Palm Beach Gardens' quality of life and sustainable use of resources. • Provide adequate facilities to ensure the provision of an effective and sustainable public safety program. ■ Assist in providing for future availability of public -school facilities consistent with the adopted level of service standards. This goal shall be accomplished recognizing the constitutional obligation of the School District to provide a uniform system of free public schools on a countywide basis. ■ Achieve sustainable economic development through a balanced and diversified economy which is compatible with the City's quality -built environment and protects important natural resources. 83