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HomeMy WebLinkAboutAgenda BOC 072414AGENDA CITY OF PALM BEACH GARDENS BUDGET OVERSIGHT COMMITTEE Wednesday July 24, 2014, 8:30 AM CITY COUNCIL CHAMBERS I. CALL TO ORDER II. PLEDGE OF ALLEGIANCE III. ROLL CALL: Regular Members Mark Marciano Chair L. Marc Cohn Vice-Chair Mark Feldmesser Regular Member Dennis Beran Regular Member Mark Schulte Regular Member IV. ADDITIONS, DELETIONS, MODIFICATIONS V. APPROVAL OF MINUTES: 1. June 18, 2014 VI. ITEMS BY COUNCIL LIAISON VII. ITEMS BY STAFF LIAISON: 1. Status of FY 2015 Budget preparation 2. Discuss Budget Oversight Committee Report VIII. OLD BUSINESS IX. NEW BUSINESS X. COMMENTS BY PUBLIC XI. COMMENTS BY THE BOARD XII. ADJOURNMENT FY 2014/15 Operating and Capital Improvement Budget Update City of Palm Beach Gardens Budget Oversight Committee July 24, 2014 Agenda Timetable Changes since budget worksheets were sent out last month Impact on Five (5) Year Projection Where additional revenue is allocated next year Discuss BOC report to Council FY 2015 Budget Update Certified property valuation issued June 28 Final value $8.77 billion – up from $8.13 billion this year Council set tentative maximum millage on July 10 – operating rate 5.7404, debt service rate .1615 These are maximum rates – they can be lowered, but not raised during September Publish final line-item budget first week in August Public hearings on September 3 and 18 BOC prepares report and presents to Council Formal public presentation in September Changes Since June Meeting Preliminary Working Draft For Discussion Purposes Only June 18 BOC Revenue $71,850,938 Operating Expenditures (69,314,268) Capital Expenditures (1,417,350) Transfers (2,150,836) Expenditures in Excess of Revenues (1,031,516) Budget Stabilization Reserve $3,036,105 Operating Millage 5.7404 Debt Millage .1622 Changes Since June Meeting Preliminary Working Draft For Discussion Purposes Only June 18 BOC July 24 BOC Revenue $71,850,938 $72,070,616 Operating Expenditures (69,314,268) (69,199,144) Capital Expenditures (1,417,350) (1,367,350) Transfers (2,150,836) (2,321,026) Expenditures in Excess of Revenues (1,031,516) (816,904) Budget Stabilization Reserve $3,036,105 $3,250,717 Operating Millage 5.7404 5.7404 Debt Millage .1622 .1615 Changes Since June Meeting Preliminary Working Draft For Discussion Purposes Only June 18 BOC July 24 BOC Change Revenue $71,850,938 $72,070,616 Operating Expenditures (69,314,268) (69,199,144) Capital Expenditures (1,417,350) (1,367,350) Transfers (2,150,836) (2,321,026) Expenditures in Excess of Revenues (1,031,516) (816,904) Budget Stabilization Reserve $3,036,105 $3,250,717 Operating Millage 5.7404 5.7404 Debt Millage .1622 .1615 Changes Since June Meeting Preliminary Working Draft For Discussion Purposes Only June 18 BOC July 24 BOC Change Revenue $71,850,938 $72,070,616 $219,678 Operating Expenditures (69,314,268) (69,199,144) Capital Expenditures (1,417,350) (1,367,350) Transfers (2,150,836) (2,321,026) Expenditures in Excess of Revenues (1,031,516) (816,904) Budget Stabilization Reserve $3,036,105 $3,250,717 Operating Millage 5.7404 5.7404 Debt Millage .1622 .1615 Changes Since June Meeting Preliminary Working Draft For Discussion Purposes Only June 18 BOC July 24 BOC Change Revenue $71,850,938 $72,070,616 $219,678 Operating Expenditures (69,314,268) (69,199,144) 115,124 Capital Expenditures (1,417,350) (1,367,350) Transfers (2,150,836) (2,321,026) Expenditures in Excess of Revenues (1,031,516) (816,904) Budget Stabilization Reserve $3,036,105 $3,250,717 Operating Millage 5.7404 5.7404 Debt Millage .1622 .1615 Changes Since June Meeting Preliminary Working Draft For Discussion Purposes Only June 18 BOC July 24 BOC Change Revenue $71,850,938 $72,070,616 $219,678 Operating Expenditures (69,314,268) (69,199,144) 115,124 Capital Expenditures (1,417,350) (1,367,350) 50,000 Transfers (2,150,836) (2,321,026) Expenditures in Excess of Revenues (1,031,516) (816,904) Budget Stabilization Reserve $3,036,105 $3,250,717 Operating Millage 5.7404 5.7404 Debt Millage .1622 .1615 Changes Since June Meeting Preliminary Working Draft For Discussion Purposes Only June 18 BOC July 24 BOC Change Revenue $71,850,938 $72,070,616 $219,678 Operating Expenditures (69,314,268) (69,199,144) 115,124 Capital Expenditures (1,417,350) (1,367,350) 50,000 Transfers (2,150,836) (2,321,026) (170,190) Expenditures in Excess of Revenues (1,031,516) (816,904) Budget Stabilization Reserve $3,036,105 $3,250,717 Operating Millage 5.7404 5.7404 Debt Millage .1622 .1615 Changes Since June Meeting Preliminary Working Draft For Discussion Purposes Only June 18 BOC July 24 BOC Change Revenue $71,850,938 $72,070,616 $219,678 Operating Expenditures (69,314,268) (69,199,144) 115,124 Capital Expenditures (1,417,350) (1,367,350) 50,000 Transfers (2,150,836) (2,321,026) (170,190) Expenditures in Excess of Revenues (1,031,516) (816,904) $214,612 Budget Stabilization Reserve $3,036,105 $3,250,717 Operating Millage 5.7404 5.7404 Debt Millage .1622 .1615 Changes Since June Meeting Preliminary Working Draft For Discussion Purposes Only June 18 BOC July 24 BOC Change Revenue $71,850,938 $72,070,616 $219,678 Operating Expenditures (69,314,268) (69,199,144) 115,124 Capital Expenditures (1,417,350) (1,367,350) 50,000 Transfers (2,150,836) (2,321,026) (170,190) Expenditures in Excess of Revenues (1,031,516) (816,904) $214,612 Budget Stabilization Reserve $3,036,105 $3,250,717 $214,612 Operating Millage 5.7404 5.7404 Debt Millage .1622 .1615 Changes Since June Meeting Preliminary Working Draft For Discussion Purposes Only June 18 BOC July 24 BOC Change Revenue $71,850,938 $72,070,616 $219,678 Operating Expenditures (69,314,268) (69,199,144) 115,124 Capital Expenditures (1,417,350) (1,367,350) 50,000 Transfers (2,150,836) (2,321,026) (170,190) Expenditures in Excess of Revenues (1,031,516) (816,904) $214,612 Budget Stabilization Reserve $3,036,105 $3,250,717 $214,612 Operating Millage 5.7404 5.7404 0 Debt Millage .1622 .1615 Changes Since June Meeting Preliminary Working Draft For Discussion Purposes Only June 18 BOC July 24 BOC Change Revenue $71,850,938 $72,070,616 $219,678 Operating Expenditures (69,314,268) (69,199,144) 115,124 Capital Expenditures (1,417,350) (1,367,350) 50,000 Transfers (2,150,836) (2,321,026) (170,190) Expenditures in Excess of Revenues (1,031,516) (816,904) $214,612 Budget Stabilization Reserve $3,036,105 $3,250,717 $214,612 Operating Millage 5.7404 5.7404 0 Debt Millage .1622 .1615 (.0007) Preliminary Working Draft For Discussion Purposes Only 2015 2016 2017 2018 2019 Taxes Ad Valorem Taxes 49,177,378 50,623,668 52,321,603 54,158,865 55,108,723 Local Business Taxes 1,430,000 1,444,300 1,458,743 1,473,330 1,488,064 Utility Taxes 2,184,000 2,205,840 2,227,898 2,250,177 2,272,679 Special Assessment - 123,976 123,976 123,976 123,976 Franchise Fees 5,240,000 5,292,400 5,345,324 5,398,777 5,452,765 Licenses and Permits 3,047,500 3,123,768 2,213,233 1,953,431 1,884,821 Intergovernmental 4,990,000 5,039,900 5,090,299 5,141,202 5,192,614 Charges for Services 4,116,489 4,140,007 4,163,759 4,187,749 4,211,979 Fines and Forfeitures 155,000 156,550 158,116 159,697 161,294 Investment Income 255,000 255,000 255,000 255,000 255,000 Miscellaneous 790,425 798,329 806,313 814,376 822,519 Other Financing Sources 684,824 690,660 694,320 687,882 688,779 72,070,616$ 73,894,397$ 74,858,584$ 76,604,463$ 77,663,214$ General Government 15,704,000 16,046,888 16,483,110 16,936,342 17,407,394 Public Safety 39,968,307 41,047,085 42,586,029 44,194,483 45,876,132 Physical Environment 8,302,802 8,531,035 8,766,370 9,009,060 9,259,368 Culture/Recreation 643,410 660,625 678,334 696,552 715,295 Capital Outlay 1,367,350 1,215,750 1,751,650 1,911,550 3,017,550 Debt Service 4,580,625 4,457,135 4,176,057 3,905,879 3,178,464 Operating Transfers 2,321,026 600,000 - - - 72,887,520$ 72,558,518$ 74,441,550$ 76,653,866$ 79,454,203$ Excess Revenues (Expenditures)(816,904) 1,335,879 417,033 (49,403) (1,790,989) Unassigned Fund Balance - Beginning 23,470,597 23,470,597 23,470,597 23,470,597 23,470,597 Assigned for Budget Stabilization - Beginning 4,067,621 3,250,717 4,586,596 5,003,629 4,954,226 Unassigned Fund Balance - Ending 23,470,597 23,470,597 23,470,597 23,470,597 23,470,597 Assigned for Budget Stabilization - Ending 3,250,717 4,586,596 5,003,629 4,954,226 3,163,238 Unassigned Fund Balance % of Expenditures 32.20%32.35%31.53%30.62%29.54% Projected Operating Millage 5.7404 5.7404 5.7404 5.7404 5.7404 Projected Debt Millage 0.1615 0.1429 0.1381 0.1333 0.0584 Projected Total Millage 5.9019 5.8833 5.8785 5.8737 5.7988 EXPENDITURES/OTHER FINANCING USES Total Expenditures and Other Financing Uses Total Revenue and Other Financing Sources REVENUES/OTHER FINANCING SOURCES Analysis of General Fund Budget Changes Preliminary Working Draft For Discussion Purposes Only Adopted FY 2014 Revenue/Sources $95,948,242 Less: Beginning Balance (28,217,345) Transfers (689,030) Total Current Revenue $67,041,867 Expenditures/Uses $95,948,242 Less: Reserves (28,217,345) Transfers (200,000) Total Current Expenditures $67,530,897 Analysis of General Fund Budget Changes Preliminary Working Draft For Discussion Purposes Only Adopted FY 2014 Proposed FY 2015 Revenue/Sources $95,948,242 $102,873,995 Less: Beginning Balance (28,217,345) (30,803,379) Transfers (689,030) (684,824) Total Current Revenue $67,041,867 $71,385,792 Expenditures/Uses $95,948,242 $102,873,995 Less: Reserves (28,217,345) (29,986,475) Transfers (200,000) (2,321,026) Total Current Expenditures $67,530,897 $70,566,494 Analysis of General Fund Budget Changes Preliminary Working Draft For Discussion Purposes Only Adopted FY 2014 Proposed FY 2015 Change % Change Revenue/Sources $95,948,242 $102,873,995 $6,925,753 7.2% Less: Beginning Balance (28,217,345) (30,803,379) (2,586,034) 9.2% Transfers (689,030) (684,824) 4,206 (.6%) Total Current Revenue $67,041,867 $71,385,792 $4,343,925 6.4% Expenditures/Uses $95,948,242 $102,873,995 $6,925,753 7.2% Less: Reserves (28,217,345) (29,986,475) (1,769,130) 6.2% Transfers (200,000) (2,321,026) (2,121,026) 1,060.5% Total Current Expenditures $67,530,897 $70,566,494 $3,035,597 4.4% Additional Funding Requested for Repairs and Maintenance Preliminary Working Draft For Discussion Purposes Only Program Description New Funding Requested in FY 2015 Facilities Roof repair and maintenance, bathroom and plumbing repairs, carpet/flooring replacement $301,500 Medians Increase number of cuts of City maintained medians to 41 per year 326,000 Parks Turf replacement, irrigation repairs, playground equipment replacement and repairs 168,600 Parking Lots Resurfacing of various parking lots throughout City 164,000 Painting Interior and exterior painting of various City buildings 57,600 Total $1,017,700 Where Is The Additional General Fund Revenue Going Next Year? Additional Expenditures Additional Revenues/Sources Increase in Personnel Costs/Union Contracts Increase in Operating Costs Increase in GF Capital and Debt Service Increase in Transfers to Other Funds for CIP Increase in Ad Valorem Revenue Increase in Other Revenues Decrease in Transfers from Other Funds Use of Budget Stabilization Reserves Grand Total Preliminary Working Draft For Discussion Purposes Only Where Is The Additional General Fund Revenue Going Next Year? Additional Expenditures Additional Revenues/Sources Increase in Personnel Costs/Union Contracts $1,559,190 Increase in Operating Costs Increase in GF Capital and Debt Service Increase in Transfers to Other Funds for CIP Increase in Ad Valorem Revenue Increase in Other Revenues Decrease in Transfers from Other Funds Use of Budget Stabilization Reserves Grand Total Preliminary Working Draft For Discussion Purposes Only Where Is The Additional General Fund Revenue Going Next Year? Additional Expenditures Additional Revenues/Sources Increase in Personnel Costs/Union Contracts $1,559,190 Increase in Operating Costs 1,290,020 Increase in GF Capital and Debt Service Increase in Transfers to Other Funds for CIP Increase in Ad Valorem Revenue Increase in Other Revenues Decrease in Transfers from Other Funds Use of Budget Stabilization Reserves Grand Total Preliminary Working Draft For Discussion Purposes Only Where Is The Additional General Fund Revenue Going Next Year? Additional Expenditures Additional Revenues/Sources Increase in Personnel Costs/Union Contracts $1,559,190 Increase in Operating Costs 1,290,020 Increase in GF Capital and Debt Service 186,387 Increase in Transfers to Other Funds for CIP Increase in Ad Valorem Revenue Increase in Other Revenues Decrease in Transfers from Other Funds Use of Budget Stabilization Reserves Grand Total Preliminary Working Draft For Discussion Purposes Only Where Is The Additional General Fund Revenue Going Next Year? Additional Expenditures Additional Revenues/Sources Increase in Personnel Costs/Union Contracts $1,559,190 Increase in Operating Costs 1,290,020 Increase in GF Capital and Debt Service 186,387 Increase in Transfers to Other Funds for CIP 2,121,026 Increase in Ad Valorem Revenue Increase in Other Revenues Decrease in Transfers from Other Funds Use of Budget Stabilization Reserves Grand Total Preliminary Working Draft For Discussion Purposes Only Where Is The Additional General Fund Revenue Going Next Year? Additional Expenditures Additional Revenues/Sources Increase in Personnel Costs/Union Contracts $1,559,190 Increase in Operating Costs 1,290,020 Increase in GF Capital and Debt Service 186,387 Increase in Transfers to Other Funds for CIP 2,121,026 Increase in Ad Valorem Revenue Increase in Other Revenues Decrease in Transfers from Other Funds Use of Budget Stabilization Reserves Grand Total $5,156,623 Preliminary Working Draft For Discussion Purposes Only Where Is The Additional General Fund Revenue Going Next Year? Additional Expenditures Additional Revenues/Sources Increase in Personnel Costs/Union Contracts $1,559,190 Increase in Operating Costs 1,290,020 Increase in GF Capital and Debt Service 186,387 Increase in Transfers to Other Funds for CIP 2,121,026 Increase in Ad Valorem Revenue 3,032,717 Increase in Other Revenues Decrease in Transfers from Other Funds Use of Budget Stabilization Reserves Grand Total $5,156,623 Preliminary Working Draft For Discussion Purposes Only Where Is The Additional General Fund Revenue Going Next Year? Additional Expenditures Additional Revenues/Sources Increase in Personnel Costs/Union Contracts $1,559,190 Increase in Operating Costs 1,290,020 Increase in GF Capital and Debt Service 186,387 Increase in Transfers to Other Funds for CIP 2,121,026 Increase in Ad Valorem Revenue 3,032,717 Increase in Other Revenues 1,311,208 Decrease in Transfers from Other Funds Use of Budget Stabilization Reserves Grand Total $5,156,623 Preliminary Working Draft For Discussion Purposes Only Where Is The Additional General Fund Revenue Going Next Year? Additional Expenditures Additional Revenues/Sources Increase in Personnel Costs/Union Contracts $1,559,190 Increase in Operating Costs 1,290,020 Increase in GF Capital and Debt Service 186,387 Increase in Transfers to Other Funds for CIP 2,121,026 Increase in Ad Valorem Revenue 3,032,717 Increase in Other Revenues 1,311,208 Decrease in Transfers from Other Funds (4,206) Use of Budget Stabilization Reserves Grand Total $5,156,623 Preliminary Working Draft For Discussion Purposes Only Where Is The Additional General Fund Revenue Going Next Year? Additional Expenditures Additional Revenues/Sources Increase in Personnel Costs/Union Contracts $1,559,190 Increase in Operating Costs 1,290,020 Increase in GF Capital and Debt Service 186,387 Increase in Transfers to Other Funds for CIP 2,121,026 Increase in Ad Valorem Revenue 3,032,717 Increase in Other Revenues 1,311,208 Decrease in Transfers from Other Funds (4,206) Use of Budget Stabilization Reserves 816,904 Grand Total $5,156,623 Preliminary Working Draft For Discussion Purposes Only Where Is The Additional General Fund Revenue Going Next Year? Additional Expenditures Additional Revenues/Sources Increase in Personnel Costs/Union Contracts $1,559,190 Increase in Operating Costs 1,290,020 Increase in GF Capital and Debt Service 186,387 Increase in Transfers to Other Funds for CIP 2,121,026 Increase in Ad Valorem Revenue 3,032,717 Increase in Other Revenues 1,311,208 Decrease in Transfers from Other Funds (4,206) Use of Budget Stabilization Reserves 816,904 Grand Total $5,156,623 $5,156,623 Preliminary Working Draft For Discussion Purposes Only Discuss Budget Oversight Committee Report BOC Report Prior year report distributed to Committee last month Prepare draft for discussion/review at August meeting Present to Council at September 3 Budget Hearing 7/1612014 Fitch Ratings 1 Press Release Fitch Ratings Tagging Info Fitch Upgrades Palm Beach Gardens, FL"s GO Bonds to "AAA"; Outlook Stable Ratings Endorsement Policy 16 Jul2014 4:08PM (EDT) Fitch Ratings-New York-16 July2014: Fitch Ratings has upgraded the following ratings on the city of Palm Beach Gardens , Florida (the city): -$111,589 general obligation (GO) bonds, series 2000 to 'AM from 'AA+'; -$2.8 million public improvement refunding bonds , series 2011 A to 'AA+' from 'AN; -$8.2 million taxable public improvement refunding bonds , series 2011 B to 'AA+' from 'AA'. The Rating Outlook is revised to Stable from Positive. SECURITY The GO bonds are general obligations ofthe citysecured by its full faith and credit and unlimited taxing power. The public improvement bonds are backed by the city's covenant to budget and appropriate non-ad va lorem revenues to pay debt service, subject to the funding of essential government services and obligations with a specific lien on non-ad valorem revenues. The covenant is cumulative and continues until the bonds have been paid in full. KEY RATING DRIVERS STRON G FINANCIAL MANAGEMENT: The rating upgrade recognizes the city's conservative budgeting practices , consistently positive operating resu lts , and maintenance of high reserves. Recent negotiated pension reforms have led to moderately improved funded levels and lower contribution costs. EXPANDI NG ECONOMY, AFFLUENT TAX BASE: The city's employment base continues to expand and diversify. Resident income metrics are well above the Florida and U.S. norm , as are educational attainment levels. MODERATE DEBT BURDEN: Debt levels are moderate and are primarily driven by overlapping debt of the county and school board. All city issued debt is scheduled to be retired in the next 10 years. COVENANT DEBT NOTCH ING: A one-notch rating d istinction from the GO bonds reflects the absence of a pledge of specific revenue securing the public improvement bonds and inability to com pel the city to i ncrease non-ad va lorem revenues. RAT IN G SE NSITIVITIES STABLE CREDIT FUNDAME NTALS: The rating is sensitive to shifts in fundamental credit characteristics, incl uding the city's strong financial management practices. The Stable Outlook reflects Fitch's expectation that such shifts are unlikely. CRED IT PROFILE Palm Beach Gardens is located in southeast Florida in Palm Beach County (GO bonds rated 'AM with a Stable Outlook byRtch) approximately 10 miles north of West Palm Beach and 70 miles north of Mami. The city had a 2013 popu lation of 50,699 and is a relatively upscale residentia l community with a large retiree presence. https ://wNw.fitchratings.com'creditdesWpressJeleases/detail.cfm?print= 1&pr _id=839954 1/4 rl 7/16/2014 Fitch Ratings I Press Release FINANCIAL PROFILE A KEY RATING STRENGTH Palm Beach Gardens has a history of conservative budgeting, and its consistently strong reserve levels are evidence of prudent financial management. The city produced an operating surplus after transfers over seven consecutive fiscal ~ars from 2006-2013. The city ended fiscal 2013 with an operating surplus after transfers of $5.9 million, increasing the unrestricted general fund balance to $31.2 mill ion or 44.8% of spending. The city's fund balance policy recommends maintenance of atleast 17% or two months of operating expenditures, which Fitch deems satisfactorygiven the city's dependence on propertytaxes, generally a very predictable revenue stream. The city adopted a balanced budgetfor fiscal 2014 that did not appropriate existing fund balance. Officials are estimating that~ar-end revenue will be about $2.6 million above budget with a roughly$484,000 use of general fund balance. The reduction in fund balance is largely tied to an increase in capital spending for the construction of a fire station. The city is still formulating the fiscal2015 budget. The city annually updates a detailed multi-~ar financial forecast. The current projection, which Fitch believes is designed with fairly reasonable revenue assumptions, shows some use of fund balance for capital but maintains the city's strong financial position. Property taxes accountfor approximately two-thirds of general fund sources. The city's operating millage rate of 5.74 mills is competitive and comfortably under the 10 mill statutorycap. No change is expected to the operating mill age for fiscal 2015. The city's tax base appears to be on the rebound, posting growth of 3.6% and 7.9% for fiscal 2014 and 2015, respectively. The city further maintains a healthy degree of revenue-raising flexibility via utility taxes, communication service taxes, and fees for solid waste and storm water. MODERATE DEBT, RAPID REPAYMENT The city's overall debt burden is moderate at $3,829 per capita and 1.9% of full market value. The majority of the city's debt profile is driven by overlapping debt of the county and school board. Future capital needs total only $25.5 mill ion (or 0.3% of market value) through fiscal ~ar 2018. All outstanding debt of the city is repaid within 10 ~ars , which offers capacity to address longer-term infrastructure needs should any arise. MANAGEAB L E PENSION COSTS Pension benefits are offered through several city administered plans and the well-funded state run Florida Retirement System (FRS). The city's defined benefit pension plans cover fire, police, and general emplo~es (the general em plo~es plan was closed to new hires in 1995). Fitch notes that the city has negotiated pension reforms with its unions (including reducing the multiplier, changing pensionable earnings to base payonly, and reducing the maximum benefit from 100% to 75% of average final compensation), leading to moderately improved funded levels. On an aggregate basis the city's pension plans have a 73.3% reported funded rate, adjusted to an estimated 70.1% by Fitch assuming a 7% investment rate of return. This funding level is up from a relatively low 51.2% in 2008. As a result of the program modifications the city's total pension contribution was reduced from $8.3 million in fiscal2012 to $6.6 million in fiscal2013. The city continues to make 100% of the actuarial required contribution to each plan. The $40.8 million combined unfunded actuarial accrued liability (UAAL) for the plans remains moderate relative to market value (0.4%). Other post-em plo}'111 ant benefits (OPEB) are limited, with an unfunded liability of 0.1% of market value. The city contributes the pay-as-}Qu-go amount. Carrying costs for debt, pension, and OPEB are manageable at 15.4% offiscal2013 governmental fund spending. DIVERSE ECONOMIC BASE Palm Beach Gardens enjoys a fairly diverse economic base including healthcare (meeting the needs of the high concentration of retirees), tourism and leisure, engineering, and education (including Nova Southeastern University, Barry University, and Palm Beach State College). The regional economy also benefits from the https:/!wNN.fitchratings.com/creditdesklpress_releases/detail.cfm?print=1&pr_id=839954 214 7/1612014 Fitch Ratings 1 Press Release established presence of The Scripps Research Institute and the Max Planck Society, which attract high-quality jobs and ~unger professionals to the region. Income metrics are verystrong. Per capita income measures more than 200% ofthe state and U.S. norm, and the city's labor force exhibits a high level of educational attainment. The city's May 2014 unem plo~ ent rate of 4.4% compares well to the state (6.1 %) and nation (6.1 %). COVENANT DEBT Non-ad valorem revenue in fiscal2013 totaled $24.4 million, compared to maximum annual debt service (MADS) on the outstanding public improvement bonds of$2.4 million. Fitch adjusts non-ad valorem revenue to consider the prior obligation to fund essential governmental services, resulting in available non-ad valorem revenue of an estimated $16.2 million. Non-ad valorem revenues are very diverse and include franchise fees ($5.1 mill ion in fiscal 2013), licenses and permits ($3.5 million ), intergovernmental revenues ($6.5 million), utilitytaxes ($2.2 million), and service charges ($4 million). Leveraging risk is tempered by the dependence on non-ad valorem revenue to fund governmental operations. In addition, the bond resolution imposes a standard 2.0x MADS anti-dilution test. Contact: Primary Analyst Andrew Hoffman Analyst +1-212-908-0527 Fitch Ratings, Inc. 33 Whitehall Street New York, NY 1 0004 Secondary Analyst Michael Rinaldi Senior Director +1-212-908-0833 Committee Chairperson Steve Murray Senior Director +1-512-215-3729 Media Relations : Elizabeth Fogerty, New York, Tel: +1 (212) 908 0526, Email: elizabeth.fogerty@fitchratings .com . .Additional information is available at 'www.fitchratings.com'. In addition to the sources of information identified in Fitch's Tax-Supported Rating Criteria, this action was additionally informed by information from Credits cope, University Financial Associates, S&P/Case-Shiller Home Price Index, IHS Global Insight, National Association of Realtors, Underwriter, Bond Counsel, Underwriter Counsel, and Trustee. Applicable Criteria and Related Research: -'Tax-Supported Rating Criteria' (Aug. 14, 2012); -'U.S. Local Government Tax-Supported Rating Criteria' (Aug. 14, 2012). Applicable Criteria and Related Research: Tax-Supported Rating Criteria U.S. Local GovernmentTax-Supported Rating Criteria https :/fv.NNI.fitchratings.com'creditdesklpress_releases /detail.cfrn?print=1&prjd=839954 3/4 ·1 7/161201 4 Additional Disclosure Solicitation Status Fitch Ratings I Press Release ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COI\1/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCYS PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIAAND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCr SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU- REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright© 2014 by Fitc h Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. https:/lwNN.fitchratings.com'creditdesWpressJeleases/detail.cfm?print=1&prjd=839954 4/4 Budget Advisory Committee Report to the City Council For the Fiscal Year Beginning October 2013 The Budget Advisory Committee is pleased to present a summary of comments and suggestions for Council's consideration for the fiscal year 201~ Budget. The Committee continues to have a good working relationship with the staff and council liaison, Mayor Premuroso. They have been very responsive to any questions or suggestions posed by the Committee. The City is fortunate to have a staff that is very knowledgeable and has the experience to make hard decisions that are in the best interest of the residents of our City. We congratulate the City, Finance Administrator, Allan Owens, and his staff for . receiving the GFOA's Distinguished Budget Presentation Award for the fiscal year beginning October 1, 2012. This award is the highest form of recognition in governmental budgeting. Furthermore, the city received another positive mention on its financial status as its fiscal rating was improved to "positive" as opposed to "stable" in past years by Fitch Ratings. In addition, Fitch Ratings has rated the City of Palm Beach Gardens an AA+ rating. This follows Moody's recent AAA rating of the financial status of the City. In reviewing the Fitch report, several points were made in terms of the city's tax diversity, strong revenues, substantial reserves, moderate operating millage, satisfactory debt service and a positive review of the city's approach to pension reform. The Committee is pleased to note that real estate values in the City of Palm Beach Gardens have begun to stabilize. The Certified Property Valuation received from the Palm Beach County Property Appraiser of $8.2 billion reflects a slight increase in property values of 3.6% from 2013. With the improving economy, this trend should continue. The Committee commends council action taken to adopt a more detailed policy for the level of and use of the monies in the reserve fund. It is the goal of the City to achieve and maintain an Unassigned Fund Balance in the General Fund of not less than 17% of expenditures. The City currently has $23.5 million in unassigned reserves which equates to 35% of expenditures. The Committee recommends that the City continue above the minimum threshold of 17%, due to the financial crisis that we have just experienced. In addition, given the continued risk for hurricanes and potential flooding, along with the uncertainty of FEMA support during future catastrophic events, this Committee agrees with council and staff that a greater reserve fund must be maintained. Although our City and Northern Palm Beach County is poised for economic growth, we must be good stewards of the monies that have been entrusted to us. II Page The Committee supports the announcement by the City Council that the property tax rate will remain unchanged at $5.74 for each $1,000 of assessed value. This is slightly higher than the roll back rate of 5.606 mills. With debt service decreasing from 0.1790 mills to 0.1733 mills, the average homeowner in the City will see a mild reduction in city taxes. The City is now starting to see new residential and commercial development, which will increase revenues. We are also seeing new industry and business come into the City, which will expand the real estate tax base and help maintain the target of no millage rate increase for the next five years wh ile still maintaining the quality of life that we are accustomed to. The Committee recommends staff and council communicate to the residents of the City about the budget meetings for the proposed budget. Although we are seeing improvement in the economy, we must continue to reach out to the residents for their input. This Committee supports the City Council and Staff for the changes to the police and fire contracts that have been made due to the concern over the sustainability of the contract's liability that has become a significant factor in the City's finances. The Committee supports the changes to the contracts that have resulted in relief in the rate of growth of both salaries and benefits and pension that will help to reduce the costs of these major line items to the city . Although these were extremely hard decisions that were made, they were necessary to ensure that future benefits promised to our public safety employees can be made without unduly taxing future generations. This Committee commends the council, staff and union representatives for their actions that have allowed the ·Fire pension to be funded to a ratio of 71.9%, up from a low of 38.3% in 2004 . Similarly the Police pension is now funded up to a ratio of 69 .1%, up from a low of 48.9% in 2006 . Given that future GASB pronouncements will require inclusion of unfunded pension liabilities on the City's financial statements, this Committee feels that it is important for the funded ratios to continue to improve. This will help maintain pension stability and liquidity, thus maintaining the city's financial ratings and overall stability. One concern of the committee is the factor used for the return on investment calculation that is the basis for arriving at the annual contribution to t he pension plans of both Fire/Rescue and Police . The Fire Pension Fund currently uses an assumption of 8.25%, and the Police Pension Fund currently uses an assumption of 7.3%; however, the Police Pension Fund is currently lowering the assumption by .1% each year until it is reduced to 6.5%. It is our opinion that the assumption used by the Fire Pension Fund of 8.25% may be too high, and the Committee would like to see the Fund adopt a phased approach to lower the investment assumption over time, as the Police Fund is doing . The Committee recognizes that lowering this assumption will increase the City's contribution; however, a lower investment assumption is more realistic, and will put the pension plans on a path to further reduce the unfunded pension liability that will be required to be 2 1Pa ge reported by the new accounting rules. Once these liabilities are reported on the City's balance sheet, they will reduce the City's fund balance, and, perhaps, jeopardize our credit rating. Therefore, the City must be cautious in offering additional benefits until the funded ratios are considered adequate once the new reporting system is in place. The Committee suggests that the continued reliance on residential ad valorem taxes to provide the revenue necessary may no longer be prudent. The state mandates a maximum millage rate of 10.0 and the city will remain less than 60% of that maximum. With the prospect of expenditures rising, even just at the rate of inflation, this will put an excessive burden on the ad valorem tax which the Committee recommends should be shared by other usage fees. The communications service tax was raised to 3.5% in 2011 in an attempt to diversify the tax base . This Committee recognizes the importance of reviewing all sources of revenues, including waste collection, utility tax, further increases in communications service taxes but does not recommend any increase in such service fees or taxes at this time. The Committee recognizes that the city has taken steps to diversify its revenue sources in a couple of ways. The Northern Regional Communication Center is a cost sharing arrangement as its responsibility has expanded to include not only the City of Palm Beach Gardens but Juno Beach, the Town of Jupiter, and Jupiter Inlet Colony and those jurisdictions pay a fee toward covering operating and administrative costs . Due to the fact that the City generates approximately 79% of ad valorem taxes through residential assessments, the overriding concern is the need for alternative revenue sources so that the city will maintain its stellar bond rating. The budget advisory Committee recognizes that there is a need to constantly evaluate the budgeted expenditures for services the city provides its citizens. When there are limited resources , the guidelines used in the evaluation must insure that services provided benefit the entire city. One of the expenditures that may not meet those criteria is the storm water management and maintenance expenditure for the center city area. Those who live outside that footprint, which is west of Military Trail, are in fact taxed twice for the service. The area west are communities that fall under the jurisdiction of the North Palm Beach County Improvement District and are taxed by the Improvement District for the storm water management and maintenance and also pay taxes to the city for similar services. The Committee recommends a review of this and similar expenditures that could be taxed directly to only those citizens that benefit from these special services. Now that the City is seeing property values not only stabilize but increase , this will result_in an increase in revenue while holding the millage rate the same. The 31 Pa g e Committee agrees with the suggestion in the budget to now look at certain capital improvement projects that had been deferred and can begin to catch up. The Committee agrees with staff and council that one-time improvements to lighting at Gardens Park, improvements to Fire Station #2 and improvements to the public Palm Beach Gardens golf course were adequate given the additional resources made available to the city at this time. A major new economic project now being discussed is a new spring training facility east of Central Blvd and north of PGA Blvd to two new professional baseball teams. According to information provided by City staff, the economic potential from this new facility is projected to be approximately $58 million <1> per year. This will be a substantial addition to broaden the economic base of the City of Palm Beach Gardens and the whole North County area . If this project is not completed there is a distinct possibility of losing the two teams that currently occupy Roger Dean Stadium by the end of 2017 . This Committee would welcome the ability to participate in any way it can to substantiate and support this project as long as the project receive adequate funding from other sources including the State, County and other sources and does not place any additional tax burden on the resident of the City . The Committee is also encouraged by the additional residential units being constructed along Central Blvd and is excited about the diversification that the development of the Briger tract will bring. In summary , the city is in prime position to expand tax revenues by the addition of new businesses in the city, which should aid in reducing the burden on ad valorem taxes. With increasing property values and reductions and stabilizations in city expenditures including but not limited to the fire and police pensions, we feel the city has done a tremendous job weathering the recession and is in a prime position to realize additional growth in the future . In speaking for the other members of this Committee , it has been a pleasure to serve on the Committee , and we are very fortunate to work with Mayor Bert Premuroso, the finance administrator and staff. The openness and transparency of the budgetary process is welcomed by the members of this Committee and by the residents of the City of Palm Beach Gardens. <1> Based on average of two (2) separate studies: (1) 2006 Economic Impact of Baseball in Palm Beach County, Profile Marketing Research; and (2) St. Lucie Tribune editorial, referencing 2013 University of Michigan study regarding economic impacts of a second team in Port St. Lucie 41Page .. Respectfully submitted by: ~~ Dr. Mark Marciano Chair Regular Member Date Date ~;i,c4J/3 Oat Dat#J SIPage