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FY2018 – FY2027


Town of Palm Beach

Long Term Financial Plan


Prepared by the Finance Department 360 South County Road,

Palm Beach, FL 33480


Presentation at the April 9, 2018, Budget Workshop

TABLE OF CONTENTS


Table of Contents


Executive Summary 1

General Fund Revenue and Expenditure Trend Analysis 10

General Fund Forecast Summary 31

General Fund Revenue Forecast Details 44

General Fund Expenditure Forecast Details 45

Recreation Enterprise Fund Trend Analysis 46

Recreation Enterprise Fund Forecast Summary 52

Other Funds 57

Reserve Analysis 66


Long Term Financial Plan Overview and Executive Summary


The National Advisory Council on State and Local Budgeting (NACSLB) and the Government Finance Officers Association (GFOA) both recommend that governments establish a financial planning process that assesses the long-term financial implications of current and proposed policies, programs, and assumptions, and develops appropriate strategies to achieve its goals.


The Long Term Financial Plan (LTFP) is intended to serve as a tool, providing the Mayor, Town Council and staff with the insight required to address issues impacting the Town’s financial condition. This plan consists of the following sections:



More detail regarding revenue and expenditure trends can be found in the section titled General Fund Trends


General Fund Forecast

The forecast summary can be found on page 6. The General Fund forecast assumptions can be found under the section titled Forecast. The following assumptions were used to create the forecast. Property tax revenue has been forecasted to increase at 3.25% per year. On the expenditure side, all recommended and approved cost reductions from the Comprehensive Review of Town Operations have been included in the forecast. Many of the pay and benefit changes being considered are still pending so we used the forecasted increases from the FY17 LTFP to calculate these expenditures.

We projected funding for the coastal protection program based upon the FY18 budgeted amount increased at 3% per year throughout the 10-year period. Overall, expenditure increases range from a decrease of 1.72% for FY19 to annual increases of between 2.76% and 3.27% throughout the forecast period.


Most revenue increases were based on historical trends. For property tax revenue we used a 3.25% increase per year in revenue. The Revenue forecast reflects only the revenue increases that were approved through the Comprehensive Review of Town Operations. Any other fee increases still under consideration will be incorporated into the plan upon approval.


The General Fund forecast summary shows deficits in FY19, FY20 and FY21 and surpluses from FY22 through FY28. The FY19 forecast shows a deficit of $983,428, which we believe will be eliminated as staff continues to work through the budget process. Once the FY19 deficit is eliminated, the forecasted deficits in FY20 and FY21 will be eliminated and the out year surpluses will increase due to the new baseline that will be set with the FY19 budget.


Recreation Enterprise Fund

The Recreation Enterprise Fund Trend and Forecast details can be found later in this document under the Recreation Enterprise Fund tab. A summary of the forecasted revenues and expenditures can be found on pages 7 - 9. The summary identifies a reduction in revenues for the Recreation Center in FY19 due to the anticipated reconstruction of the recreation center and related reduction in program revenue. In 2020, growth in revenues increases due to the reopening of the Recreation Center. The Town Docks forecast reflects the status quo and will be updated once the master plan has been presented and approved.



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Town of Palm Beach | 3


Recreation Enterprise Fund expenses decrease in 2019 due to the closing of the Recreation Center and then increase in 2020 once the center reopens and then show a growth rate of 2.5% per year.


The Recreation Center reconstruction cost is to be funded as follows: One-third from the Mandel Foundation, one-third from the Friends of Recreation, and one-third from the Town. Staff is recommending the use of the Risk Fund and Health Fund excess reserves to fund the Town’s portion of the costs.


During FY18, a master plan is expected to be completed for the replacement of the Town Docks. The master plan is to be designed to maximize revenues at the docks. The draft Master Plan alternatives show additional revenues ranging from $13.5 million to $16.4 million compared to the

$3.8 million under current conditions. Construction costs are estimated to be between $26.3 million and $31.8 million. A Dock Replacement Fund was established in 2002 and has been funded with an amount equal to the annual depreciation on the docks. The current amount in the Dock Replacement Reserve is $3,801,256. This reserve will not be sufficient to completely finance the anticipated costs of the dock replacement and a loan will be required for the balance. The estimated increased revenue from the docks after the reconstruction will be more than enough to service the debt. The Marina forecast does not include any costs associated with the reconstruction nor any additional revenues or expenses based on the new plan. Once the master plan is reviewed and a final design plan is approved, the numbers in the forecast will be updated to reflect the final plan.


Other Funds

Other Funds included in this document are the Risk Insurance Fund, the Health Insurance Fund, the OPEB Trust Fund and the Debt Service Funds. Trend and forecast information can be found later in this document under the section marked “Other Funds”.


The Risk Fund forecast contains a 5% per year increase for property insurance, a 2% per year increase for liability insurance and a 3% per year increase for Worker’s Compensation insurance. The Health Fund and OPEB Trust fund forecast a 7% increase in health insurance costs in FY19 and then 6.5% in FY20, 6% in FY21, 5.5% in FY22 then 5% thereafter. The Debt Service fund identifies future debt service on the 2013 and 2016 ACIP bonds and does not anticipate any additional revenue bond debt.


Reserve Status

The final section of this document contains an update of the status of Town Reserves as of September 30, 2017. The September 30, 2017, amounts have been derived from the draft financial statements prepared by the Town auditors. The financial statements will be presented at the April 10, 2018, Town Council meeting. The reserve balances exceed all of the policy minimums that have been established. The General Fund unassigned fund balance exceeds the required minimum by

$1,165,947.


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Town of Palm Beach | 4

Town of Palm Beach

Revenue and Expenditure History FY2009 - FY2018


FY09 Actual

FY10 Actual

FY11 Actual

FY12 Actual

FY13 Actual

FY14 Actual

FY15 Actual

FY16 Actual

FY17 Actual

FY18 Budget

Revenues

Ad Valorem Taxes

42,887,216

41,508,570

36,635,343

36,662,916

37,473,108

39,110,926

43,869,888

47,890,700

50,195,981

51,470,500

Non Ad Valorem Taxes

7,386,397

7,371,330

7,189,368

7,315,317

7,533,859

7,946,097

8,056,312

8,061,358

8,188,599

8,425,000

Licenses & Permits

5,543,034

4,777,557

6,382,545

6,498,207

7,572,518

8,053,581

10,657,676

10,096,673

7,677,953

7,672,975

Intergovernmental

1,485,128

1,101,206

1,319,119

1,051,432

990,715

1,071,413

1,102,689

1,122,465

1,028,493

1,185,450

Charges for Services

3,278,180

3,215,943

3,461,766

4,081,259

3,576,156

3,741,183

3,957,603

4,123,243

3,681,626

3,943,650

Fines and Forefeitures

1,152,807

594,473

1,297,226

1,106,435

1,253,760

1,924,182

1,099,525

1,016,089

938,624

1,138,800

Investment Earnings

1,923,224

1,168,997

495,649

495,311

32,425

383,726

597,585

490,102

424,365

581,858

Miscellaneous and Transfers

801,901

1,930,162

2,774,498

1,534,738

1,871,043

1,584,625

1,098,106

1,117,897

1,209,878

1,005,000

Total Operating Revenues

64,457,887

61,668,238

59,555,514

58,745,615

60,303,584

63,815,733

70,439,384

73,918,527

73,345,519

75,423,233

Transfers from Fund Balance

5,065,996

Total Revenues

64,457,887

61,668,238

59,555,514

58,745,615

60,303,584

63,815,733

70,439,384

73,918,527

73,345,519

80,489,229


Expenditures

Salaries and Wages

27,346,557

26,359,064

24,396,538

23,627,363

22,943,974

23,152,224

23,478,697

23,581,853

24,128,637

26,001,862

Pension Benefits

6,621,068

7,303,519

8,771,681

3,180,126

3,831,588

4,977,617

5,454,327

6,180,062

7,819,957

8,971,687

DC Plan Benefits

-

222,307

537,532

1,088,013

1,132,126

1,132,836

671,355

543,995

Other Employee Benefits

7,285,058

6,913,472

6,601,573

6,616,971

6,736,760

6,741,912

6,680,817

6,627,932

6,763,691

6,896,505

Contractual

8,709,551

7,070,741

6,963,078

7,139,390

7,224,092

7,602,595

8,191,690

8,876,307

9,649,474

9,617,449

Commodities

1,748,218

1,627,774

1,484,765

1,547,738

1,554,104

1,642,397

1,517,617

1,438,222

1,774,332

1,949,093

Equipment Replacement

2,723,701

2,518,060

2,547,679

1,881,319

2,033,744

2,097,896

1,893,244

2,858,676

3,053,651

2,459,607

Library Services

272,400

272,400

272,400

272,400

288,989

297,659

306,580

315,777

350,250

335,008

Other

55

(2,075)

9,172

12,932

29,863

4,251

70,455

Transfer to Capital Improvement

1,817,000

4,828,957

500,000

1,000,000

1,000,000

1,000,000

1,000,000

1,030,000

2,290,200

2,118,024

Transfer to Coastal Protection

2,000,000

1,046,900

3,090,000

3,960,000

4,765,099

7,200,000

11,377,000

8,015,220

7,265,000

7,410,300

Transfer to the Underground Utility Fund

-

2,530,250

Transfer to Retirement Fund

-

2,800,000

4,759,016

Debt Service

3,790,000

3,922,000

3,500,000

3,500,000

3,500,000

6,100,000

6,100,000

6,265,462

6,088,728

5,982,331

Retiree Health

1,649,000

1,550,000

1,533,000

1,493,000

1,769,000

1,506,000

1,577,000

1,180,000

1,339,000

960,000

Transfer to Risk Insurance Fund

1,918,000

1,904,463

1,896,226

1,791,507

1,892,780

1,876,000

1,925,362

1,967,485

1,838,037

1,828,475

Contingency

-

655,877

Total Expenditures

65,880,608

65,315,275

61,566,112

56,245,053

58,107,525

65,286,564

70,634,460

72,000,082

75,902,767

80,489,229

Surplus/(Deficit)

(1,422,721)

(3,647,037)

(2,010,598)

2,500,562

2,196,059

(1,470,831)

(195,076)

1,918,445

(2,557,248)


Page 5

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Town of Palm Beach

Revenue and Expenditure Forecast LTFP FY2018 - FY2027


FY18

FY19

FY20

FY21

FY22

FY23

FY24

FY25

FY26

FY27

Revenues

Ad Valorem Taxes

51,470,500

53,143,291

54,870,448

56,653,738

58,494,984

60,396,071

62,358,944

64,385,609

66,478,142

68,638,681

Non Ad Valorem Taxes

8,425,000

8,650,890

8,906,991

9,170,706

9,442,263

9,721,895

10,009,843

10,306,356

10,611,688

10,926,104

Licenses & Permits

7,672,975

7,856,200

7,888,680

7,901,640

7,952,033

7,965,782

8,018,840

8,033,427

8,089,292

8,147,650

Intergovernmental

1,185,450

1,058,900

1,082,766

1,107,205

1,132,231

1,157,859

1,184,105

1,210,983

1,238,509

1,266,700

Charges for Services

3,943,650

4,030,193

4,101,561

4,169,093

4,238,541

4,309,961

4,383,411

4,458,948

4,536,633

4,616,528

Fines and Forefeitures

1,138,800

1,186,000

1,189,550

1,209,720

1,215,131

1,220,704

1,226,444

1,232,355

1,238,444

1,244,715

Investment Earnings

581,858

870,000

1,275,000

1,575,000

1,850,000

1,950,000

2,125,000

2,200,000

2,300,000

2,300,000

Miscellaneous and Transfers

1,005,000

892,080

810,692

811,838

813,018

814,234

815,486

816,775

818,104

819,472

Total Operating Revenues

75,423,233

77,687,554

80,125,688

82,598,940

85,138,201

87,536,506

90,122,073

92,644,453

95,310,812

97,959,850

Transfers from Fund Balance

5,065,996

1,414,513

1,425,496

1,221,327

1,233,164

1,246,234

1,260,416

1,275,148

1,289,799

1,302,904

Total Revenues

80,489,229

79,102,067

81,551,184

83,820,267

86,371,365

88,782,740

91,382,489

93,919,601

96,600,611

99,262,754


Expenditures

Salaries and Wages

26,001,862

25,930,767

25,888,780

26,361,742

26,892,839

27,780,964

28,745,983

29,742,836

30,776,041

31,846,018

Pension Benefits

8,971,687

8,963,736

9,251,694

9,455,952

9,377,990

9,026,106

8,681,520

8,299,419

7,860,349

7,350,325

DC Plan Benefits

543,995

549,269

563,303

576,118

590,334

607,790

627,841

648,407

669,657

691,606

Other Employee Benefits

6,896,505

6,937,708

7,104,150

7,343,244

7,615,235

7,907,205

8,212,016

8,553,952

8,911,066

9,284,064

Contractual

9,617,449

9,580,306

9,818,878

10,043,930

10,274,164

10,509,698

10,750,656

10,997,162

11,249,346

11,507,339

Commodities

1,949,093

1,980,280

2,026,622

2,074,048

2,122,584

2,172,257

2,223,091

2,275,116

2,328,357

2,382,845

Equipment Replacement

2,459,607

2,346,966

2,399,325

2,452,910

2,507,748

2,563,868

2,621,302

2,680,080

2,740,062

2,739,710

Library Services

335,008

345,058

355,409

366,072

377,054

388,366

400,016

412,017

424,377

437,109

Transfer to Capital Improvement

2,118,024

2,329,826

2,562,809

2,819,090

2,100,999

3,256,049

3,418,851

3,589,794

3,769,284

3,957,748

Transfer to Coastal Protection

7,410,300

7,632,609

7,861,587

8,097,435

8,340,358

8,590,569

8,848,286

9,113,734

9,387,146

9,668,761

Debt Service

5,982,331

5,802,306

5,794,481

5,756,731

5,754,481

5,756,481

5,757,356

5,766,606

5,759,106

5,947,232

Retiree Health

960,000

546,800

525,000

542,798

563,044

584,777

607,467

632,920

659,502

687,267

Transfer to Risk Insurance Fund

1,828,475

1,901,614

1,977,679

2,056,786

2,139,057

2,224,619

2,313,604

2,406,148

2,502,394

2,602,490

Extraordinary Transfer to Retirement Fund

4,759,016

5,240,000

5,240,000

5,240,000

5,240,000

5,240,000

5,240,000

5,240,000

5,240,000

5,240,000

Transfer from the ERF

(649,751)

Contingency

655,877

648,002

658,985

670,077

681,914

694,984

709,166

723,898

738,549

751,654

Total Expenditures

80,489,229

80,085,496

82,028,702

83,856,933

84,577,801

87,303,733

89,157,155

91,082,089

93,015,236

95,094,168

Surplus/(Deficit)

(983,429)

(477,518)

(36,666)

1,793,564

1,479,007

2,225,334

2,837,512

3,585,375

4,168,586


Page 6


Summary of Operating Revenue


2018

Budget

2019

Budget

2020

Budget

2021

Budget

2022

Budget

2023

Budget

2024

Budget

2025

Budget

2026

Budget

2027

Budget

Revenues

Youth Program Fees

306,000

147,367

425,824

434,340

443,027

451,888

460,926

470,144

479,547

489,138

Adult Program Fees

26,000

22,909

46,564

47,495

48,445

49,414

50,402

51,410

52,439

53,487

Facility Rental Fees

500

0

15,480

15,944

16,423

16,915

17,423

17,946

18,484

19,038

Seaview Park Concession

1,000

0

4,724

4,866

5,012

5,162

5,317

5,476

5,641

5,810

Promotional Merchandise

1,000

0

1,974

2,033

2,094

2,157

2,222

2,288

2,357

2,428

Tennis Mixers

4,000

4,120

4,244

4,371

4,502

4,637

4,776

4,919

5,067

5,219

Tennis Program Fee

1,200

1,800

1,800

1,800

1,800

1,800

1,800

1,800

1,800

1,800

Tennis 12 Play Pass

42,000

43,260

44,558

45,895

47,271

48,690

50,150

51,655

53,204

54,800

Tennis Daily Court Fees

27,500

28,325

29,175

30,050

30,951

31,880

32,836

33,822

34,836

35,881

Tennis Annual Pass Fees

49,000

50,470

51,984

53,544

55,150

56,804

58,509

60,264

62,072

63,934

Tennis Pro Admin Fees

13,500

13,500

13,500

13,500

13,500

13,500

13,500

13,500

13,500

13,500

Tennis Maintenance & Imp Fee

14,000

14,420

14,853

15,298

15,757

16,230

16,717

17,218

17,735

18,267

Tennis Facility Rentals

7,000

7,210

7,426

7,649

7,879

8,115

8,358

8,609

8,867

9,133

Tennis Merchandise

15,300

15,759

16,232

16,719

17,220

17,737

18,269

18,817

19,382

19,963

Tennis Teaching Services

77,000

79,310

81,689

84,140

86,664

89,264

91,942

94,700

97,541

100,468

Annual Leases

2,955,000

3,243,779

3,341,092

3,441,325

3,544,565

3,650,902

3,760,429

3,873,242

3,989,439

4,109,122

Transient

500,000

515,000

530,450

546,364

562,754

579,637

597,026

614,937

633,385

652,387

Electricity

165,000

165,000

165,000

165,000

165,000

165,000

165,000

165,000

100,000

100,000

Waiting List Fee

3,200

3,000

3,000

3,000

3,000

3,000

3,000

3,000

3,000

3,000

Dock Maintenance & Imp

75,000

77,250

79,568

81,955

84,413

86,946

89,554

92,241

95,008

Ice Sales

1,400

1,442

1,485

1,530

1,576

1,623

1,672

1,722

1,773

1,827

Replacement Reserve

0

0

0

0

0

0

0

0

0

0

Sales Tax Commissions ‐Other

300

309

318

328

338

348

358

369

380

391

Misc Revenue Docks

500

515

530

546

563

580

597

615

633

652

Golf Pro Administrative Fee

15,000

18,000

18,000

18,000

18,000

18,000

18,000

18,000

18,000

18,000

Golf Resident Pass Fees

19,300

19,879

20,475

21,090

21,722

22,374

23,045

23,737

24,449

25,182

Golf Non‐Res. Pass Fees

8,000

8,240

8,487

8,742

9,004

9,274

9,552

9,839

10,134

10,438

Golf 12 Play Passes

12,000

12,360

12,731

13,113

13,506

13,911

14,329

14,758

15,201

15,657

Greens Fees

830,000

846,600

863,532

880,803

898,419

916,387

934,715

953,409

972,477

991,927

Golf Riding Cart Rental

308,500

317,755

327,288

337,106

347,219

357,636

368,365

379,416

390,799

402,523

Golf Pull Cart Rental

41,500

42,745

44,027

45,348

46,709

48,110

49,553

51,040

52,571

54,148

Golf Driving Range

92,000

94,760

97,603

100,531

103,547

106,653

109,853

113,148

116,543

120,039

Golf Maint & Improve Fee

90,000

92,700

95,481

98,345

101,296

104,335

107,465

110,689

114,009

117,430

Club Rentals

57,000

58,710

60,471

62,285

64,154

66,079

68,061

70,103

72,206

74,372

Golf Teaching Services

35,000

35,700

36,414

37,142

37,885

38,643

39,416

40,204

41,008

41,828

Golf Merchandise

167,000

170,340

173,747

177,222

180,766

184,381

188,069

191,831

195,667

199,580

Golf F&B Revenue (Restaurant)

467,000

471,670

476,387

481,151

485,962

490,822

495,730

500,687

505,694

510,751

Programs & Events

5,000

5,150

5,305

5,464

5,628

5,796

5,970

6,149

6,334

6,524

Golf Outings

65,000

66,950

68,959

71,027

73,158

75,353

77,613

79,942

82,340

84,810

Page 7


Gift Certificates

5,000

5,100

5,202

5,306

5,412

5,520

5,631

5,743

5,858

5,975

Interest Earnings

14,400

25,000

25,000

25,000

25,000

25,000

25,000

25,000

25,000

25,000

Electricity Sales ‐ Golf

4,200

5,200

5,500

5,500

5,500

5,500

5,500

5,500

5,500

5,500

Vending Machine Comm Golf

0

0

0

0

0

0

0

0

0

0

Sales Tax Commissions ‐ Golf

300

309

318

328

338

348

358

369

380

391

Misc Revenue ‐ Golf

500

525

551

579

608

638

670

704

739

776

TOTAL REVENUES

6,641,400

6,730,188

7,224,630

7,409,385

7,599,278

7,794,456

7,995,070

8,201,275

8,348,232

8,566,106

7.0%

1.3%

7.3%

2.6%

2.6%

2.6%

2.6%

2.6%

1.8%

2.6%



Page 8


Summary of Operating Expenses

2018

Budget

2019

Budget

2020

Budget

2021

Budget

2022

Budget

2023

Budget

2024

Budget

2025

Budget

2026

Budget

2027

Budget

Expenses

Salaries/Wages

1,392,733

1,408,009

1,625,098

1,664,100

1,711,860

1,760,134

1,816,987

1,875,130

1,935,134

1,997,059

Pension Benefits ‐ DB

260,386

255,126

264,353

272,759

272,023

262,529

254,128

244,878

234,275

222,046

Pension Benefits ‐ DC

54,250

55,335

56,672

58,032

59,698

61,381

63,364

65,392

67,484

69,644

Other Employee Benefits

341,866

346,857

356,199

368,274

382,011

396,757

412,151

429,420

447,455

466,293

Contractual

1,523,980

1,401,426

1,683,329

1,722,719

1,763,031

1,804,286

1,846,506

1,889,714

1,933,933

1,979,187

Commodities

363,970

354,462

394,061

403,282

412,719

422,376

432,260

442,375

452,726

463,320

Capital Outlay

0

0

0

0

0

0

0

0

0

0

TOTAL OPERATING EXPENSES

3,937,185

3,821,215

4,379,712

4,489,167

4,601,341

4,707,463

4,825,395

4,946,909

5,071,009

5,197,549

‐3.8%

‐2.9%

14.6%

2.5%

2.5%

2.3%

2.5%

2.5%

2.5%

2.5%

Operating Revenues

over/(under) Expenses

2,704,215

2,908,973

2,844,918

2,920,218

2,997,938

3,086,993

3,169,674

3,254,367

3,277,224

3,368,557

Transfer from Town Reserves

3,263,868

Donations

6,571,154

Capital Expenses

(10,291,511)

(293,500)

(172,000)

(215,500)

(81,000)

(81,000)

(120,000)

(51,000)

(78,000)

(78,000)

Depreciation*

(1,049,626)

(1,171,668)

(1,296,273)

(1,323,495)

(1,351,288)

(1,379,665)

(1,408,638)

(1,438,220)

(1,468,422)

(1,499,259)

Depreciation (Credited to show cash)

1,049,626

1,171,668

1,296,273

1,323,495

1,351,288

1,379,665

1,408,638

1,438,220

1,468,422

1,499,259

Transfer to General Fund

(585,000)

(485,000)

(385,000)

(385,000)

(385,000)

(385,000)

(385,000)

(385,000)

(385,000)

(385,000)

Debt Service

(198,263)

(199,338)

(199,813)

(194,813)

(194,688)

(194,313)

(193,688)

(187,938)

(191,938)

(191,938)

Contingency (5% operating expenses)

(168,303)

(191,061)

(218,986)

(224,458)

(230,067)

(235,373)

(241,270)

(247,345)

(253,550)

(259,877)

TOTAL REVENUES

OVER/(UNDER) EXPENSES


1,296,160


1,740,074


1,869,119


1,900,447


2,107,183


2,191,307


2,229,717


2,383,083


2,368,735


2,453,742


* Includes depreciation on assets, as well as the transfer of monies into the Equipment Replacement , Dock Replacement, and the Golf and Tennis M&I Reserve Funds


Page 9

General Fund Trend Analysis

Financial trend analysis assists the Town in evaluating its financial condition. The trend analysis describes the fluctuations in the major categories of General Fund revenues and categories of expenditures. The financial trends present a picture of the Town’s financial strengths and weaknesses and allow staff to identify emerging issues before they become serious problems.


The Town was not immune to the effects of the 2007-2009 recession and the slow economic recovery that followed. Town taxable value dropped 15% between 2009–2012. Total General Fund revenues dropped 8.8% during that time. Property values have increased since 2012 and non ad valorem revenues, such as building permits, public safety fees, utility taxes and some state revenues have also increased. There is still weakness in investment income due to the low interest rate environment.


The amounts in this section represent actual expenditures for the years FY09 through FY17 and budgeted amounts for FY18.


General Fund Revenues

Revenues determine the capacity of a municipality to provide services. Important issues to consider when reviewing revenue trends are growth, flexibility, diversity, reliability and administration.

Revenues should grow at a rate equal to or greater than the combined effects of inflation and expenditures.


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General Fund Revenues are 17% higher in FY18 than they were in FY09. The major causes of recent increases are the FY15 and FY16 property tax revenue increases for coastal protection projects and increased revenue from parking meter, permit revenues, and utility tax revenues.


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10 | Town of Palm Beach

Ad Valorem Revenue


Ad valorem taxes are the Town’s largest revenue source. Municipalities in Florida are not permitted to levy property taxes at a rate of more than 10 mills for the operating millage. From 2009-2012 ad valorem revenue declined due to property tax reform measures adopted by the State of Florida in FY08 and also due to a decline in taxable value in FY10, FY11 and FY12. In FY15, ad valorem revenue increased by 11%, with the entire increase allocated to coastal protection funding, and in FY16 another increase of 9.71% was approved to increase funding for coastal protection. The FY18 increase was 2.54%. Currently, ad valorem revenue accounts for 63.95% of total revenue.


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The millage rate was maintained at 3.2512 from FY09 through FY13, which resulted in declining revenue due to the declining taxable values for FY10 – FY12. Taxable value increased since 2012. The millage rate increased in 2015 to fund the coastal protection fund. Recent increases in taxable value have allowed the Town to reduce the millage rate.


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Town of Palm Beach | 11

State law limits millage rate increases to the rolled back rate (the rate that produces the same taxes as the prior year, exclusive of taxes from new construction) plus growth in personal income. Local governments are allowed to override the cap by extraordinary vote, either a 2/3 vote of the Council for up to a 10% increase over the rolled back rate, or a unanimous vote of the Council for an increase in excess of 10%. The total millage, for Palm Beach taxpayers, which includes all other applicable taxing districts, decreased 3.16% from 17.2001 to 16.6568. The Town’s portion of the total millage is 19.23% of the total tax bill. The chart below identifies the taxing districts and the effect the changes in millage from FY17 to FY18 had on a taxpayer with a $1 million value (assumes no change in taxable value from year to year). The total change was a reduction of $543.30 per million.



Taxing Authority

FY17

Millage Rate

FY18

Millage Rate

FY18 Tax Change Per

$1 Million Value $1 million Value % Change

% of Total Tax Bill


Palm Beach


3.2706


3.2037


$3,204


-$66.90


-2.05%


19.23%

Palm Beach County

4.9142

4.9023

$4,902

-$11.90

-0.24%

29.43%

Palm Beach County School District

7.0700

6.7690

$6,769

-$301.00

-4.26%

40.64%

South Florida Water Mgmt

0.2836

0.2659

$266

-$17.70

-6.24%

1.60%

Children Services

0.6833

0.6590

$659

-$24.30

-3.56%

3.96%

Florida Inland Navigation

0.0320

0.0320

$32

$0.00

0.00%

0.19%

Health Care District

0.8993

0.7808

$781

-$118.50

-13.18%

4.69%

Everglades Construction

0.0471

0.0441

$44

-$3.00

-6.37%

0.26%

Grand Total

17.2001

16.6568

$16,657

-$543.30

-3.16%

100.00%


The Town of Palm Beach’s total millage rate is the second lowest in Palm Beach County. The owner of a home with a taxable value of $1 million pays $16,657 in total taxes in Palm Beach versus

$18,047 in Boca Raton, $19,710 in Palm Beach Gardens and $21,948 in West Palm Beach.


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Many other municipalities in Palm Beach County have enterprise funds and charge separate fees for sewer, stormwater, sanitation, and other services over and above the funds collected from ad valorem taxes. The Town of Palm Beach does not charge separate fees for these services as all costs are included within the Town’s tax rate.


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12 | Town of Palm Beach


Non Ad Valorem Tax Revenue


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Non Ad Valorem tax revenue includes local option gas taxes, franchise fees and utility service taxes.


Local Option Gas Tax and Franchise fee revenue declined from FY10 through FY13 and have increased in recent years. Utility service taxes have increased throughout the 10-year period. The budget estimates for FY18 were conservatively based upon prior year trend.


License and Permit Revenue


License and permit revenue includes, business licenses, building permit revenues and parking permits. The trend chart is shown below.


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Town of Palm Beach | 13

Building permit revenue makes up the majority of these revenues. Building permit revenues dropped significantly in FY09 and FY10. The recession and downturn in housing caused the decline. Since FY10, revenues have improved due to increases in building activity. FY15 and FY16 were record years for permit activity. In FY17, a decline in permit activity occurred. The FY18 budget reflects a conservative estimate for building permit revenues due to a slow-down from the historic highs. The number of business licenses have declined from FY09 through FY15. A change in state law exempting real estate brokers from the business tax caused a further decline in FY15. Other licenses and fees have increased since FY12 due to increases in right-of-way permit and parking permit revenues.


Intergovernmental Revenue


Intergovernmental revenue includes revenue received from Federal, State, County and Local government sources. Revenues from the State of Florida sources include State revenue sharing, local government sales tax, and alcoholic beverage licenses. Local revenues include County occupational license revenue and Palm Beach County 911 reimbursement. Federal, State and Local grants are also included in this category.


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State revenues declined during FY12 and FY13, but have rebounded to prior levels.


Charges for Services


Charges for services include public safety fees, solid waste fees, parking meter collections and other small fees such as copy charges and lien searches.


Public safety fees have increased in the past due to increases in the EMS transport fees in FY12, and increases in revenues for police special detail. Revenues for police special detail have dropped off in FY17. Revenue for FY18 was conservatively estimated.


Physical environment fees include solid waste fees and beach cleaning fees. Solid waste fees are billed through the non-ad valorem assessment process on the property tax bill. Compacted garbage


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14 | Town of Palm Beach

fees are billed quarterly by the Town. These fees increase annually based upon the cost of providing the service. Beach cleaning fees were collected until FY10 when the program was discontinued.


In FY11, parking meter rates at Mid-Town Beach and Phipps Ocean Park were increased from $2 to

$5 per hour. Parking meter revenue has increased in recent years due to the Park Mobile program.


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Fines and Forfeitures


Fine and forfeiture revenue includes traffic violation fines, parking fines and penalties, right of way fines, and code enforcement violation fines.


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In FY09, FY11 and FY14 large code enforcement fines were collected causing spikes in revenues.

In FY13 revenues from parking tickets increased due to an increase in parking fines. In recent years, parking fines have declined due to improved compliance. The FY18 budget was based on the trend at the end of FY17 showing improved revenues.


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Town of Palm Beach | 15

Investment Income


The Town’s Investment Advisory Committee oversees the investment of the Town’s surplus funds as well as the investments in the Town’s OPEB trust. The Town’s surplus funds are invested in fixed income securities, money market accounts, two bond funds with the Florida League of Cities Investment Trust and Certificate of Deposits.


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Since 2009, historically low interest rates have caused investment revenue to decline.


Miscellaneous and Transfers


Miscellaneous revenue includes rents and royalties, sales of fixed assets and other revenue. Transfers include transfers from the Recreation Enterprise Fund.


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16 | Town of Palm Beach

In FY10, FDOT took by eminent domain, Town property located just east of the Flagler Bridge. FY11 revenues included a transfer from the Capital Improvement Fund and an increase in the Recreation Enterprise Fund transfer. The Town had transferred $2.6 million in FY10 to the Capital Improvement Program to begin to fund the 20 year CIP program. Bonds were issued in FY10 to fund the program, so most of the funds were no longer needed in the CIP program and $1.4 million was transferred back to the General Fund. FY12 includes a transfer of $800,000 from the Recreation Enterprise Fund and insurance proceeds from a large claim. Revenues in FY13 and FY14 include a transfer of $885,000 from the Recreation Enterprise Fund and the proceeds from the sale of property. In FY16, FY17, and FY18 the transfer from the Recreation Enterprise Fund was reduced by $100,000 in each year to add to the funding of the Dock Replacement Reserve.


General Fund Expenditures

Expenditures are a measure of a municipality’s service output. Ideally, a municipality’s expenditure growth should not exceed its revenue growth rate and the government should have maximum flexibility to adjust spending.


Since FY09, the General Fund budget has increased a total of 22%. A significant portion (87%) of the increase is due to increases in the coastal protection fund, the transfers to the debt service fund, and Capital Improvement Fund, and the extraordinary retirement contribution to reduce the UAAL. Operating costs have only increased 3.78% during the 10-year period. The increases are described in greater detail later in this section. The total General Fund budget increased by 4.73% in FY18 from the FY17 budget. The 3 additional firefighters were added to the budget and contractual pay increases were added due to the negotiated firefighter union contract. Pension costs increased due to the smoothing of the lower returns in FY15 and the changes in the mortality tables. In addition the Town Council approved a policy to transfer an additional $5,420,000 per year to the retirement fund to reduce the unfunded liability.

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The major changes in the General Fund budget for FY09 – FY18 are detailed in the chart on the following pages by fiscal year. Large expenditures for capital and coastal projects and other non- recurring expenditures are noted in bold face type. Personnel cost changes are noted in italics.


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Town of Palm Beach | 17


Year

Major Areas of Change to General Fund Revenues and Expenditures

FY2009

Budget Increase 4.7%

  • Total General Fund Budget - $67,335,600

  • Reduced millage rate by 3.34% to 3.2512, taxable value increased 7.73%

  • Special competitive pay increases for all firefighters and police officers - $585,984

  • First year cost of the early retirement buyout - $922,800

  • Decrease in the contribution to the retirement fund - ($636,848)

  • Increase in the transfer to the Health Insurance Fund - $900,000

  • Townwide software upgrade - $350,000

  • Transfer to the Coastal Protection Fund for pending litigation -

  • Increase in Debt Service Funding - $138,000

  • Decrease in the transfer to the Risk Insurance Fund - ($474,000)

  • Decrease in the transfer to the Capital Improvement Fund - ($279,000)

  • Reduced .89 positions

$2,000,000

FY2010

Budget Decrease

.7%

  • Total General Fund Budget - $66,853,300

  • Maintained millage rate at 3.2512, taxable value declined 2.23%

  • Reduction in property tax revenue - ($1,217,000)

  • Elimination of 9.25 positions (savings of $1,058,100)

  • Salary freeze implemented for all employees

  • Second year cost of early retirement buyout - 858,000

  • Increase in contribution to retirement fund - $655,631

  • Elimination of extraordinary longevity - ($88,700)

  • Decrease in Town contribution for health insurance - ($300,000)

  • Final year of Townwide software upgrade - $160,000

  • Decreased contribution for feral cat program - ($50,000)

  • Increase in debt service funding - $132,000

  • Increase in transfer to the Capital Improvement Program - $3,011,957 (included $2,600,000 from fund balance for one time transfer for 20 year CIP program)

  • Contracted a Pension Consultant - $127,268

  • Contracted with an Internal Auditor - $110,710

  • Elimination of printing and mailing of Annual Report - ($9,500)

FY2011

Budget Decrease 4.7%

  • Total General Fund Budget - $63,734,848

  • Maintained millage rate at 3.2512, taxable value declined 11.42%

  • Reduction in property tax revenue - ($5,080,500)

  • Second year of a salary freeze for all employees

  • Elimination of 32.65 positions - (savings of $1,788,439)

  • Increase in contribution to retirement fund - $1,568,698

  • Final payment for early retirement buyout - $136,000

  • Decrease in Town contribution for health insurance - ($205,000)

  • Reduced funding for lobbying services - ($50,000)

  • Cut employee events - ($40,000)


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18 | Town of Palm Beach


  • Eliminated funding for 4th of July event - ($25,000)

  • Decrease in debt service funding - ($422,000)

  • Decrease in transfer to the Capital Improvement Program - ($4,328,957)

  • Transfer to Coastal Protection Fund $3,090,000 (partially funded with a transfer from fund balance of $2,898,277)

FY2012

Budget Decrease 8.2%

  • Total General Fund Budget - $58,535,436

  • Maintained millage rate at 3.2512, taxable value declined .46%

  • Reduction in property tax revenue - ($246,300)

  • Decrease in contribution to retirement fund due to pension reform – (savings of

  • Elimination of 4.68 positions

  • Reinstated performance based pay increases for employees - $327,300

  • Increase in health insurance funding - $272,700

  • New funding for the Palm Beach County Inspector General - $100,000

  • Modification to funding for Equipment Replacement Program - (Savings of

  • Increased transfer from Recreation Enterprise Fund - $161,000

  • Increased the transfer to the Capital Improvement Program by - $500,000

  • Transfer to Coastal Protection Fund - $3,960,000

$5,577,544)

$344,271)

FY2013

Budget Increase 2.01%

  • Total General Fund Budget - $59,711,280

  • Maintained millage rate at 3.2512, taxable value increased by 2.69%

  • Increase in property tax revenue - $866,200

  • Elimination of 8.71 positions

  • Increased the pay ranges 3% for all non-union positions.

  • Increase in pension costs - $1,035,548

  • Increase in health insurance and OPEB costs- $556,727

  • Decrease in FICA tax - $115,019

  • Increase in sewage treatment and disposal costs - $303,634

  • Increase in risk insurance costs - $101,273

  • Transfer to Coastal Protection Fund - $2,765,099

FY2014

Budget Increase 9.54%

  • Total General Fund Budget - $65,406,493

  • Reduced millage rate to 3.2468, taxable value increased by 5.16%

  • Increase in property tax revenue - $1,782,300

  • Elimination of 5.00 positions

  • Provided for merit pay raises for all non-union positions

  • Increase in DB pension costs - $1,939,921. Changed investment earnings and wage assumptions. Used $930,690 in prepaid Town contributions as a partial offset.

  • Provided for a discretionary 4% employer contribution to DC plan - $587,902

  • Modification to required employee contribution to pension plan - $152,515

  • Increase in debt service transfer for 2013 bond - $2,600,000

  • Transfer to Coastal Protection Fund - $4,200,000

FY2015

  • Total General Fund Budget - $67,295,344



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Town of Palm Beach | 19


Budget Increase 2.89%

  • Increased millage rate to 3.4058, taxable value increased by 7.53%

  • Increase in property tax revenue - $4,777,000

  • Addition of 2.58 positions

  • Provided for merit pay raises and an increase in the employee pay ranges.

  • Increase in DB pension costs - $509,600

  • Provided for a discretionary 4% employer contribution to the DC plan

  • Transfer to Coastal Protection Fund - $4,777,000

FY2016

Budget Increase 6.86%

  • Total General Fund Budget - $71,914,331

  • Decreased millage rate to 3.3779, taxable value increased by 9.74%

  • Increase property tax revenue - $3,706,700

  • Addition of 4.91 positions

  • Provided for merit pay raises and a 2% increase in the employee pay ranges.

  • Increase in pension costs - $800,441

  • Provided for a discretionary 4% employer contribution to the DC plan

  • Transfer to Coastal Protection Fund - $8,015,220

  • Purchase of an Opticom System - $171,000

  • Purchase of StarChase Pursuit Management Systems - $16,800

FY2017

Budget Increase 6.87%

  • Total General Fund Budget - $76,852,377

  • Decreased millage rate to 3.2706, taxable value increased 8.84%

  • Increased property tax revenue $2,363,500

  • Decrease of 2.22 positions

  • Provided for merit pay raises and a 2% increase in the employee pay ranges.

  • Increase in pension costs - $1,279,333

  • Provided for a discretionary 4% employer contribution to the DC plan

  • Transferred $2,500,000 from unassigned fund balance to the Retirement Fund

  • Increased the transfer to the OPEB trust due to the reduction in the investment assumption change from 8% to 7.5% - $159,000

  • Increased the transfer to Capital Improvement Fund by $1,260,200

  • Decreased transfer to the Coastal Protection Fund by $750,220

FY2018

Budget Increase 4.73%

  • Total General Fund Budget $80,489,411

  • Decreased millage rate to 3.2037, taxable value increased 6.42%

  • Increased property tax revenue $1,976,000

  • Increase in overtime for visits by the President and dignitaries $204,000

  • Increase of 7 positions

  • Provided for merit pay raises ($434,799) and a 2.5% increase in the employee pay ranges. ($108,897)

  • Health Insurance cost increased $242,549 – Paid from Health Insurance Reserves

  • Increase in DB pension costs of $1,151,730 offset by a reduction in DC pension costs of

  • Included costs for the pension changes for firefighters and general employees.

$398,437


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20 | Town of Palm Beach


  • Provided for an extraordinary transfer to the Retirement Fund of

  • Decreased the transfer to the OPEB Trust fund due to favorable experience $379,000

  • Increased transfer to Coastal Protection fund by $145,300

$4,759,016 as part of the $5,420,000 policy mandated transfer. The balance was transferred in FY17.


General Fund Operating Expenditures


The chart below shows the trend in General Fund expenditures broken out between operating expenditures and transfers.


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Since FY09, operating expenditures have increased a total of $2,068,836 or 3.78% over the 10-year period. Most of the increase coming from pension benefits and contractual expenditures. Of the total budget increase over the same time period, $14,608,803 or 22.17%, the balance of $12,539,968 is from the Town transfers, specifically coastal protection and debt service and the new extraordinary transfer to the retirement fund. From the lowest point of the budget trend in FY12, the budget has increased by 43% with one half coming from operating expenditures and the other half of the increase coming from transfers. A more detailed analysis of the expenditures by category follows.



Salaries and Wages

Expenditure by Category Trend Analysis


The salary and wage trend is shown on the graph below. FY18 salaries are 4.92% less than they were in FY09. In FY08 the Town offered an early retirement buyout for employees. A total of 21 employees took advantage of the buyout and beginning in FY09 these costs were added to the budget. The final payout for the buyout was in FY11. In FY09, special competitive pay increases were granted for all firefighters and police officers. A wage freeze was in effect for FY10 and FY11 for all employees. For FY12, merit and step increases were included the budget and in FY13 through


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Town of Palm Beach | 21

FY18 merit and step increases were included, along with an increase in employee pay ranges. The FY16 actual salary amount reflected the retirement of 13 employees. The FY18 budget increased over the FY17 budget due to the additional positions, merit pay and an increase in the ranges. The increase over the actual FY17 amount is due to a reduction in expenses paid out in FY17 due to the retirements and vacancies that occurred during the year.


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Since FY09, 40.52 positions have been eliminated from the budget through attrition. Since FY15

    1. positions were added to the budget.


      Employee Benefits


      For purposes of this analysis, we have broken employee benefits into retirement benefit trends and other employee benefit trends. On May 1, 2012, pension reform measures to decrease the level of benefits and reduce the long term cost were implemented. The first year savings was $5,369,248. The pension benefit is a hybrid plan with a defined benefit and defined contribution component. Increases in FY13 and FY14 were due to modifications to the plan and more retirements than anticipated. The actuarial assumptions for investment returns and wage inflation were reduced and employee contribution rates were modified. In FY14, the Town Council approved a discretionary 4% employer contribution to the defined contribution plan. During FY16, the Town Council adopted changes to the police and non-union firefighters pension plan, and in FY17, changes to the union firefighters pension plan. These changes eliminated the DC portion of the benefit and improved the multiplier and age benefit for a pure DB plan. Also in FY17, the Town Council adopted changes to the General Employees pension plan. The changes included modifications to both the DC and DB benefits and kept the hybrid DB/DC system. In FY18, costs increased due to the change in mortality table and the smoothing of investment losses in FY15. The Town Council approved a policy to transfer additional funds to the retirement system to lower the unfunded liability. In FY17 the Town transferred $2,800,000 and in FY18 the town transferred $4,759,016 for this funding.


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      22 | Town of Palm Beach


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      Other employee benefits include health insurance, FICA, bonuses, allowances, incentives, and uniform maintenance. Since FY09, Other employee benefits have decreased 5.33% over the 10-year period. Since FY13, health insurance costs have been maintained through changes in the program, cost shifting to employees, and having fewer employees in the plan due to the reduction in full time staff positions and wellness programs. In FY18, health insurance costs increased but the increase was funded from the Health Insurance reserves. The majority of the increase in FY18 was due to an increase in FICA expense because of the increase in salaries.


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      Town of Palm Beach | 23

      Contractual Services


      Contractual services include legal advice, lobbyists, consulting services, sewage treatment, solid waste disposal costs, building maintenance, landscape contracting and software maintenance.


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      Contractual services have increased 10.42% since FY09. The increases in FY09 were due to increases in lobbying costs, software licensing and support, pension reform study, legal advertising, roadway micro resurfacing program, sewage treatment and disposal costs, landscape contracting, sand transfer plant costs, Phipps Ocean Park and Mid-Town beach renourishment post construction monitoring, and risk insurance funding. In FY09, funds also were set aside to repay FEMA for an overpayment in reimbursement of hurricane debris removal costs. Much of the increase since FY11 is due to increases the use of contractual services for duties that were once done in house like contracting with Palm Beach County for Fire-Rescue mechanic services and landscape contracting. Other contractual cost increases were due to increases in sewage treatment and disposal costs, legal services, lobbying, landmark preservation consulting, credit card fees for payment of building permits, landfill maintenance, employee recruiting, and digital scanning. In FY17, costs increased due to the post storm clean-up efforts for hurricanes Mathew and Irma.


      Commodities


      Commodity costs include fuel, electric, water, office supplies and equipment, building and vehicle maintenance supplies, publications and subscriptions, membership dues, medical supplies, and uniform services.


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      24 | Town of Palm Beach


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      The total cost of commodities in FY18 is 11.49% higher than it was in FY09. Decreases from FY09 through FY11 were due to the implementation of cost containment measures throughout all Town departments. The increase for FY12 related to anticipated increases in fuel costs. The decreases since FY15 are due to decreases in fuel costs and supplies. FY16 actual amounts reflect lower fuel expenditures during the year than the amounts budgeted and other savings during the year amounting to total savings of $336,017 versus the budgeted amount. The FY17 costs increases were due to increased costs for fuel and other operational supplies. The FY18 budget increase was due to additional uniforms for the new firefighter positions, telecommunication lockers and patrol equipment. In addition, travel and per diem costs were moved from the contractual category to commodities for a more accurate costs for training.


      Capital Outlay/Equipment Replacement


      Capital Outlay expenses include depreciation on the Town’s fixed assets, purchases of new equipment that are not purchased through the Equipment Replacement Fund, and purchases of equipment through grant funding.


      The total cost of capital equipment in FY18 is 9.7% lower than it was in FY09. The Town has established the Equipment Replacement Fund (ERF). Transfers are made to the ERF based on the annual depreciation based on the replacement cost of each asset. In FY12, the depreciation transfer decreased by $344,271. The reduction is the result of a thorough analysis by staff of the useful lives of the equipment, which resulted in extension of useful lives for some items and elimination of some other items. The increases since FY12 were due to increases in depreciation on new equipment purchased. In FY16, an Opticom system was purchased and in FY16 and FY17 there was a specific increase in the estimated depreciation for 3 fire rescue pumpers due to the higher than anticipated increases in the cost of these vehicles.



      image

      Town of Palm Beach | 25


      image


      Transfer to the Capital Improvement Fund and Coastal Protection Fund


      Historically, the Town funded capital projects on a pay-as-you-go basis. If additional funding was necessary for larger projects, transfers from fund balance were used to supplement the funding.

      In FY10 and FY13 the Town issued bonds to fund the costs of the 20 year Accelerated Capital Improvement Program. The trend in the transfer to the Capital Improvement Program and the Coastal Protection fund is shown on the chart below.


      image


      The coastal transfer since FY09 has increased $5,410,300, and the CIP transfer has increased

      $301,024. In FY09, $2 million was transferred to the Coastal Protection Fund for pending litigation regarding Lake Worth Inlet. In FY10, a one-time transfer of $2.6 million was included to begin to fund the 20-year Capital Improvement Program and $1,046,000 was transferred from the unassigned net assets to the Coastal Protection Fund for a sand search study and groin analysis. In FY11, a total of $3,090,000 was transferred to the Coastal Protection Fund for projects and $500,000 was budgeted for the pay-as-you-go portion of the Capital Improvement Program. In FY12, $3,960,000



      image

      26 | Town of Palm Beach

      was transferred to the Coastal Protection Fund and the transfer to the Capital Improvement Program was increased to $1,000,000. In FY13, $4,765,099 was transferred to the Coastal Protection Fund and in FY14 an additional $7,200,000 was transferred to build reserves for the Mid- Town and Phipps beach renourishment projects. In FY15, $6,600,000 was transferred to the coastal fund from various town reserves, in addition, a property tax increase of $4,777,000 was established to begin to fund the coastal protection fund through property taxes. In FY16 the transfer to coastal was increased to $8,015,220 due to higher than expected costs of the Mid-Town and Phipps beach renourishment projects. In FY17, the coastal transfer was decreased due to the reduction in the funding for the Reach 8 restoration project. Also in FY17, the transfer to the CIP fund was increased to begin to build up the reserves for capital projects once the ACIP bond funds have been spent and to fund a portion of the underground utility project costs for the Lake Worth section and to hire a project coordinator. For FY18, a 3% increase was appropriated to the Coastal Protection transfer and the CIP transfer was decreased by $172,176 due to the transfer of projects to the ACIP fund.


      Transfers to the Debt Service Fund, OPEB Trust Fund and Risk Insurance Fund


      image

      Debt Service


      Debt service costs have increased 57.8% since FY09. In 2010, the 2000 revenue bond for coastal projects was paid in full and the Town issued a bond for the 20 year accelerated capital improvement program and refinanced the 2006 bond and the 2008 revenue note. The payoff of the 2000 bond and the issuance of the new bond resulted in lower annual debt service payments in FY11. In 2013, the Town issued bonds for the second phase of the accelerated capital improvement program. The FY14 increase reflects the additional debt service for the new bonds. In FY16, the Town refunded the 2010 bonds which lowered the debt service for the Town’s bonds reflected in the FY17 and FY18 budgets.



      image

      Town of Palm Beach | 27

      Retiree Health Benefits (OPEB Trust)


      For many years, the Town accumulated reserves in the Health Insurance Fund in anticipation of the implementation of GASB 43 which required governments to begin to fund their retiree health benefits in the same manner as retirement benefits. In FY07, the Town established the Health Insurance Trust with a transfer of $16 million from the health insurance fund. Prior to the implementation of GASB 43, the Town paid retiree health benefits on as pay-as-you-go basis. The new pronouncement required an actuarial study to determine the amount of the Town’s total liability and the amount of the annual contribution. The Town’s total OPEB Liability as of October 1, 2017 was calculated to be $27,963,573. The actuarial value of assets in the trust at that time was

      $31,275,719. The OPEB asset is $3,312,146. The OPEB asset is projected to be $3,865,440 at September 30, 2018. The funded ratio for the plan is 111.8% for FY17 and projected to be 113.2% for FY18. The annual budgeted contribution for FY18 is $960,000 which is $379,000 less than FY17.


      Risk Insurance Fund


      The Town funds the Risk Insurance Program with a transfer from the General Fund. The Risk Insurance program includes insurance for property, liability and worker’s compensation insurance.


      Since FY09, the transfer to the Risk Fund has declined by 4.7%. Overall the Town’s risk insurance costs have declined over the past decade, due to the changes in carriers and cost-saving measures in the overall insurance program.


      Trend Summary


      Significant changes in the budget have been made over the past 10 years. Operating costs have only increased 3.78% during the 10-year period. A bulk of the increase since FY09 has been due to coastal protection, debt service costs and the new policy to annually transfer $5,420,000 to the retirement fund. The following two pages contain tables showing the year by year actual changes in the main revenue and expenditure categories since FY09.



      image

      28 | Town of Palm Beach

      Town of Palm Beach Revenue Trend Analysis FY09 - FY18


      Analysis of Revenues by Category Revenue Sources

      2009

      Actual

      2010

      Actual

      2011

      Actual

      2012

      Actual

      2013

      Actual

      2014

      Actual

      2015

      Actual

      2016

      Actual

      2017

      Actual

      2018

      Budget


      Ad Valorem Revenues


      42,887,216


      41,508,570


      36,635,343


      36,662,916


      37,473,108


      39,110,926


      43,869,888


      47,890,700


      50,195,981


      51,470,500

      % Increase

      3.45%

      -3.21%

      -11.74%

      0.08%

      2.21%

      4.37%

      12.17%

      9.17%

      4.81%

      2.54%

      $ Increase

      1,429,967

      -1,378,646

      -4,873,227

      27,573

      810,191

      1,637,818

      4,758,962

      4,020,812

      2,305,281

      1,274,519

      Non Ad Valorem Taxes

      7,386,397

      7,371,330

      7,189,368

      7,315,317

      7,533,859

      7,946,097

      8,056,312

      8,061,358

      8,188,599

      8,425,000

      % Increase

      1.44%

      -0.20%

      -2.47%

      1.75%

      2.99%

      5.47%

      1.39%

      0.06%

      1.58%

      2.89%

      $ Increase

      104,561

      -15,068

      -181,961

      125,948

      218,543

      412,238

      110,215

      5,046

      127,241

      236,401

      Licenses and Permits

      5,543,034

      4,777,557

      6,382,545

      6,498,207

      7,572,518

      8,053,581

      10,657,676

      10,096,673

      7,677,953

      7,672,975

      % Increase

      -28.69%

      -13.81%

      33.59%

      1.81%

      16.53%

      6.35%

      32.33%

      -5.26%

      -23.96%

      -0.06%

      $ Increase

      -2,230,210

      -765,477

      1,604,988

      115,662

      1,074,311

      481,064

      2,604,095

      -561,003

      -2,418,719

      -4,978

      Intergovernmental Revenue

      1,485,128

      1,101,206

      1,319,119

      1,051,432

      990,715

      1,071,413

      1,102,689

      1,122,465

      1,028,493

      1,185,450

      % Increase

      18.97%

      -25.85%

      19.79%

      -20.29%

      -5.77%

      8.15%

      2.92%

      1.79%

      -8.37%

      15.26%

      $ Increase

      236,812

      -383,922

      217,913

      -267,687

      -60,716

      80,697

      31,276

      19,776

      -93,972

      156,957

      Charges for Services

      3,278,180

      3,215,943

      3,461,766

      4,081,259

      3,576,156

      3,741,183

      3,957,603

      4,123,243

      3,681,626

      3,943,650

      % Increase

      16.74%

      -1.90%

      7.64%

      17.90%

      -12.38%

      4.61%

      5.78%

      4.19%

      -10.71%

      7.12%

      $ Increase

      470,013

      -62,236

      245,822

      619,493

      -505,103

      165,027

      216,420

      165,640

      -441,616

      262,024

      Fines and Forefeitures

      1,152,807

      594,473

      1,297,226

      1,106,435

      1,253,760

      1,924,182

      1,099,525

      1,016,089

      938,624

      1,138,800

      % Increase

      -2.58%

      -48.43%

      118.21%

      -14.71%

      13.32%

      53.47%

      -42.86%

      -7.59%

      -7.62%

      21.33%

      $ Increase

      -30,511

      -558,334

      702,753

      -190,790

      147,325

      670,422

      -824,657

      -83,436

      -77,465

      200,176

      Interest Income

      1,923,224

      1,168,997

      495,649

      495,311

      32,425

      383,726

      597,585

      490,102

      424,365

      581,858

      % Increase

      40.51%

      -39.22%

      -57.60%

      -0.07%

      -93.45%

      1083.43%

      55.73%

      -17.99%

      -13.41%

      37.11%

      $ Increase

      554,473

      -754,227

      -673,348

      -338

      -462,886

      351,301

      213,859

      -107,483

      -65,737

      157,493

      Miscellaneous and Transfers

      801,901

      1,930,162

      2,774,498

      1,534,738

      1,871,043

      1,584,625

      1,098,106

      1,117,897

      1,209,878

      1,005,000

      % Increase

      -13.24%

      140.70%

      43.74%

      -44.68%

      21.91%

      -15.31%

      -30.70%

      1.80%

      8.23%

      -16.93%

      $ Increase

      -122,386

      1,128,261

      844,336

      -1,239,760

      336,305

      -286,418

      -486,519

      19,791

      91,981

      -204,878

      Transfers from Fund Balance

      0

      0

      0

      0

      0

      0

      0

      0

      2,557,247

      5,065,996

      % Increase

      0.00%

      0.00%

      0.00%

      0.00%

      0.00%

      100.00%

      100.00%

      100.00%

      100.00%

      100.00%

      $ Increase

      0

      0

      0

      0

      0

      0

      0

      0

      2,557,247

      2,508,749

      Total Revenues

      64,457,887

      61,668,238

      59,555,514

      58,745,615

      60,303,584

      63,815,733

      70,439,384

      73,918,526

      75,902,767

      80,489,229

      % Increase

      0.64%

      -4.33%

      -3.43%

      -1.36%

      2.65%

      5.82%

      10.38%

      4.94%

      2.68%

      6.04%

      $ Increase

      412,720

      -2,789,649

      -2,112,725

      -809,898

      1,557,969

      3,512,149

      6,623,651

      3,479,142

      1,984,241

      4,586,462


      Page 29

      Town of Palm Beach Expenditure Trend Analysis FY08 - FY17


      Analysis of Expenses by Category Expenditure Categories

      FY2009

      Actual

      FY2010

      Actual

      FY2011

      Actual

      FY2012

      Actual

      FY2013

      Actual

      FY2014

      Actual

      FY2015

      Actual

      FY2016

      Actual

      FY2017

      Budget

      FY2018

      Budget


      Salaries/Wages


      27,346,557


      26,359,064


      24,396,538


      23,627,363


      22,943,974


      23,152,224


      23,478,697


      23,581,853


      24,128,637


      26,001,862

      % Increase

      8.17%

      -3.61%

      -7.45%

      -3.15%

      -2.89%

      0.91%

      1.41%

      0.44%

      2.32%

      7.76%

      $ Increase

      2,065,900

      -987,493

      -1,962,526

      -769,175

      -683,389

      208,251

      326,473

      103,155

      546,784

      1,873,225

      Pension Benefits

      6,621,068

      7,303,519

      8,771,681

      3,180,126

      3,831,588

      4,977,617

      5,454,327

      6,180,062

      7,819,957

      8,971,687

      % Increase

      -8.28%

      10.31%

      20.10%

      -63.75%

      20.49%

      29.91%

      9.58%

      13.31%

      26.54%

      14.73%

      $ Increase

      -597,483

      682,451

      1,468,162

      -5,591,555

      651,462

      1,146,029

      476,710

      725,735

      1,639,895

      1,151,730

      DC Plan

      -

      -

      -

      222,307

      537,532

      1,088,013

      1,132,126

      1,132,836

      671,355

      544,177

      % Increase

      0.00%

      0.00%

      0.00%

      0.00%

      141.80%

      102.41%

      4.05%

      0.06%

      -40.74%

      -18.94%

      $ Increase

      -

      -

      -

      222,307

      315,226

      550,480

      44,113

      711

      -461,481

      -127,178

      Other Employee Benefits

      7,285,058

      6,913,472

      6,601,573

      6,616,971

      6,736,760

      6,741,912

      6,680,817

      6,627,932

      6,763,691

      6,896,505

      % Increase

      15.21%

      -5.10%

      -4.51%

      0.23%

      1.81%

      0.08%

      -0.91%

      -0.79%

      2.05%

      1.96%

      $ Increase

      961,690

      -371,586

      -311,900

      15,398

      119,788

      5,152

      -61,095

      -52,885

      135,759

      132,814

      Contractual

      8,709,551

      7,070,741

      6,963,078

      7,139,390

      7,224,092

      7,602,595

      8,191,690

      8,876,307

      9,649,474

      9,617,449

      % Increase

      7.25%

      -18.82%

      -1.52%

      2.53%

      1.19%

      5.24%

      7.75%

      8.36%

      8.71%

      -0.33%

      $ Increase

      588,889

      -1,638,810

      -107,663

      176,312

      84,702

      378,503

      589,094

      684,618

      773,167

      -32,025

      Commodities

      1,748,218

      1,627,774

      1,484,765

      1,547,738

      1,554,104

      1,642,397

      1,517,617

      1,438,222

      1,774,332

      1,949,093

      % Increase

      -14.79%

      -6.89%

      -8.79%

      4.24%

      0.41%

      5.68%

      -7.60%

      -5.23%

      23.37%

      9.85%

      $ Increase

      -303,493

      -120,444

      -143,009

      62,973

      6,366

      88,293

      -124,781

      -79,394

      336,110

      174,761

      Equipment Replacement

      2,723,701

      2,518,060

      2,547,679

      1,881,319

      2,033,744

      2,097,896

      1,893,244

      2,858,676

      3,053,651

      2,459,607

      % Increase

      -17.01%

      -7.55%

      1.18%

      -26.16%

      8.10%

      3.15%

      -9.76%

      50.99%

      6.82%

      -19.45%

      $ Increase

      -558,421

      -205,640

      29,618

      -666,360

      152,425

      64,152

      -204,652

      965,432

      194,975

      -594,044

      Library Services

      272,400

      272,400

      272,400

      272,400

      288,989

      297,659

      306,580

      315,777

      350,250

      335,008

      % Increase

      5.03%

      0.00%

      0.00%

      0.00%

      6.09%

      3.00%

      3.00%

      3.00%

      10.92%

      -4.35%

      $ Increase

      13,050

      0

      0

      0

      16,589

      8,670

      8,921

      9,197

      34,473

      -15,242

      Other

      0

      0

      0

      0

      0

      0

      0

      0

      0

      0

      Total Operating Expenses

      54,706,552

      52,065,030

      51,037,713

      44,487,614

      45,150,783

      47,600,314

      48,655,098

      51,011,666

      54,211,347

      56,775,388


      TRANSFER TO OTHER FUNDS AND OTHER EXPENSES

      Capital Improvement Fund (307)

      1,817,000

      4,828,957

      500,000

      1,000,000

      1,000,000

      1,000,000

      1,000,000

      1,030,000

      2,290,200

      2,118,024

      Coastal Protection Fund (309)

      2,000,000

      1,046,900

      3,090,000

      3,960,000

      4,765,099

      7,200,000

      11,377,000

      8,015,220

      7,265,000

      7,410,300

      Transfer to Underground Utility fund

      0

      0

      0

      0

      0

      0

      0

      2,530,250

      0

      0

      Transfer to Retirement Fund

      0

      0

      0

      0

      0

      0

      0

      0

      2,800,000

      4,759,016

      Debt Service Fund (205)

      3,790,000

      3,922,000

      3,500,000

      3,500,000

      3,500,000

      6,100,000

      6,100,000

      6,265,462

      6,088,728

      5,982,331

      Retiree Health Insurance (OPEB Trust)

      1,649,000

      1,550,000

      1,533,000

      1,493,000

      1,769,000

      1,506,000

      1,577,000

      1,180,000

      1,339,000

      960,000

      Risk Fund (502)

      1,918,000

      1,904,463

      1,896,226

      1,791,507

      1,892,780

      1,876,000

      1,925,362

      1,967,485

      1,838,037

      1,828,475

      Contingency

      0

      0

      0

      0

      0

      0

      0

      0

      0

      655,877

      Inventory Adjustments

      55

      -2,075

      9,172

      12,932

      29,863

      4,251

      0

      0

      70,455

      0

      Total Transfers and Other 11,174,055

      13,250,245

      10,528,398

      11,757,439

      12,956,742

      17,686,251

      21,979,362

      20,988,417

      21,691,420

      23,714,023

      % Increase

      16.05%

      18.58%

      -20.54%

      11.67%

      10.20%

      36.50%

      24.27%

      -4.51%

      3.35%

      9.32%

      $ Increase

      1,545,066

      2,076,190

      -2,721,847

      1,229,042

      1,199,303

      4,729,509

      4,293,111

      -990,945

      703,003

      2,022,603

      75,730,395

      Total Expenditures

      65,880,608

      65,315,275

      61,566,111

      56,245,054

      58,107,525

      65,286,565

      70,634,460

      72,000,082

      75,902,767

      80,489,411

      % Increase

      5.82%

      -0.86%

      -5.74%

      -8.64%

      3.31%

      12.35%

      8.19%

      1.93%

      5.42%

      6.04%

      $ Increase

      3,621,796

      -565,333

      -3,749,164

      -5,321,058

      1,862,471

      7,179,040

      5,347,895

      1,365,623

      3,902,685

      4,586,644


      % Increase

      3.95%

      -4.83%

      -1.97%

      -12.83%

      1.49%

      5.43%

      2.22%

      4.84%

      6.27%

      4.73%

      $ Increase

      2,076,730

      -2,641,522

      -1,027,317

      -6,550,099

      663,168

      2,449,531

      1,054,784

      2,356,568

      3,199,681

      2,564,041

      % Increase

      3.95%

      -4.83%

      -1.97%

      -12.83%

      1.49%

      5.43%

      2.22%

      4.84%

      6.27%

      4.73%

      $ Increase

      2,076,730

      -2,641,522

      -1,027,317

      -6,550,099

      663,168

      2,449,531

      1,054,784

      2,356,568

      3,199,681

      2,564,041

      Page 30


      General Fund Long Term Financial Plan Forecast

      Financial forecasts are the foundation of a long term financial plan. These forecasts provide the Mayor, Town Council and staff with information they need to more effectively determine future levels of service and methods of funding. This forecast of General Fund revenues and expenditures includes the FY17 budget and a 9 year forecast through FY26.


      Assumptions


      The forecast for the first 2 - 4 years is based upon recent trends and specific expectations. The forecast for the remaining years is less tactical and more mathematical, and is based primarily upon estimates by actuaries and long term inflation expectations.


      The major assumptions that were used to prepare the forecast are as follows:


      FY19

      FY20

      FY21

      FY22

      FY23

      FY24

      FY25

      FY26

      FY27

      Ad Valorem Tax Increase

      3.25%

      3.25%

      3.25%

      3.25%

      3.25%

      3.25%

      3.25%

      3.25%

      3.25%

      General Inflation

      2.2%

      2.34%

      2.34%

      2.34%

      2.34%

      2.34%

      2.34%

      2.34%

      2.34%

      Salaries & Wages

      2.6%

      2.1%

      2.1%

      2.3%

      3.2%

      3.5%

      3.5%

      3.5%

      3.5%

      Health Insurance

      7.0%

      6.5%

      6.0%

      5.5%

      5.0%

      5.0%

      5.0%

      5.0%

      5.0%

      Pension (ADEC)

      -0.2%

      3.27%

      2.26%

      -0.8%

      -3.7%

      -3.8%

      -4.4%

      -5.2%

      -6.4%

      Other Employee Benefits

      1.4%

      3.2%

      3.4%

      3.7%

      3.9%

      3.9%

      4.2%

      4.2%

      4.2%

      Property Insurance

      5.0%

      5.0%

      5.0%

      5.0%

      5.0%

      5.0%

      5.0%

      5.0%

      5.0%

      Liability Insurance

      2.0%

      2.0%

      2.0%

      2.0%

      2.0%

      2.0%

      2.0%

      2.0%

      2.0%

      W/C Insurance

      3.0%

      3.0%

      3.0%

      3.0%

      3.0%

      3.0%

      3.0%

      3.0%

      3.0%


      Revenue forecasts are based upon historical trends and recent activity. To be conservative, the ad valorem tax increase is projected at 3.25% per year rather than estimate the increase in taxable value. Each revenue category forecast is described in greater detail later in this section.


      The assumption for inflation of 2.2% for FY19 and 2.34% for the remainder of the forecast period is based upon the forecast in the Livingston Survey issued by the Federal Reserve Bank of Philadelphia, this estimate has inched up this past year. The salary and wage assumption is based upon the average annual increases for all employee groups and forecasted retirements. Since no change for modifying merit pay was approved, we kept the same assumptions as in FY17. The health insurance forecast assumption is based upon input from our health consultant’s actuary. The pension forecast assumption was updated by the Town’s pension actuary and the FY19 estimate is based on the actual contribution in the September 30, 2017 actuarial report. The other employee benefit assumptions have been calculated based upon anticipated retirements and other inflation factors and does not include health insurance. Property, Liability and Workmen’s Compensation insurance assumptions are based upon information received from our brokers regarding potential increases.


      image

      31 | Town of Palm Beach


      2018 Forecast

      The forecast charts shown on the following pages include a comparison the forecasts prepared in 2016 and 2017 to the current 2018 forecast. In some cases the forecast for 2016 and 2017 are identical. In 2016, only an internal working copy of the LTFP was produced after the 2016 budget was final. The 2016 numbers were used as the starting point for the 2017 forecast and the amounts were updated for 2017 where applicable. During FY18, staff and the Town Council have been able to make major reductions in expenditures and to slow future growth to sustainable levels. The 2018 forecast shows steady progress with meeting the Town’s needs for funding the additional contribution for the retirement program and maintaining service levels.


      General Fund Revenue Forecast


      The forecast for revenues is conservative and should allow for minor fluctuations in various revenue sources. The forecast contains revenue estimates for revenue increases approved by the Town Council in the Comprehensive Review of Town Operations. The forecast details for each major revenue category are included in this analysis.


      image


      Property Tax Revenue


      Rather than using a complex formula anticipating taxable value and personal income growth, we forecast the increase in ad valorem revenues based upon a basic percentage increase estimate. The 2018 forecast includes the FY18 budget plus a 9 year forecast. Property tax revenues in FY18 increased by 3.99%. Over the past 5 years, taxable value has increased by 35% an average of 7.1% per year. We increased the forecast slightly since FY16, due to the recent trends in taxable value increases.


      image

      Town of Palm Beach | 32


      image


      Non Ad Valorem Taxes


      Non ad valorem taxes include local option gas taxes, franchise fees and utility service taxes. The forecast for 2018 has increased because recent revenue collections have improved over the 2017 forecasts. The forecast trend chart is shown below:


      image


      License and Permit Revenue


      License and permit revenue includes business licenses, building permit revenues and parking permits.


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      33 | Town of Palm Beach


      The FY17 forecast was adjusted downward after a sharp decline in revenues early in FY17. After the FY17 forecast was prepared, the permit revenues rebounded back to trend. FY18 revenue forecast has been adjusted for anticipated increases in right of way permits and taxi permits. In addition, FY18 revenue has improved and the forecast reflects the improvement in certain permit revenue sources.


      image


      Intergovernmental Revenue


      Intergovernmental revenue includes revenue received from Federal, State, County and local government sources. Revenues from the State of Florida include State revenue sharing, local government sales tax and alcoholic beverage licenses. Local revenues include County occupational license revenue, and the 911 reimbursement from Palm Beach County. Federal and State grants are also included in this category.


      image


      image

      Town of Palm Beach | 34


      The forecast for intergovernmental revenues has remained flat based on revenues received from the State of Florida for sales tax and revenue sharing. The FY18 budget and forecast contained anticipated grant funds, but the forecast does not plan for any grant revenue. The FY18 forecast decline is due to a reduction in 911 funding from Palm Beach County. The forecast anticipates a small inflationary increase per year in the State revenues.


      Charges for Services


      Charges for services include public safety fees, solid waste fees, parking meter collections and other small fees such as copy charges and lien searches. The forecast for 2018 reflects the current trend in these revenue sources and an anticipated increase in the lien search fee, ID cards, special solid waste pickups and the new proposed fees for lateral locates and cap off fees.


      image


      Fines and Forfeitures


      Fine and Forfeiture revenue includes traffic violation fines and penalties, parking fines and penalties and code enforcement violation fines.


      Revenues from these sources have decreased since the 2016 forecast. Parking ticket fines and moving violation revenue have decreased and the 2018 forecast has been adjusted to reflect the recent actual activity. The downward trend in these revenues reflect improved parking compliance.


      image

      35 | Town of Palm Beach


      image


      Investment Income


      We are forecasting investment returns will decrease from the FY17 forecast due to the rising interest rate environment. Recent increases in rates over the long term should have a positive impact on revenues. In the short term certain bond funds may experience market losses. The Investment Advisory Committee and our investment consultants are monitoring the situation closely and will adjust the duration of the portfolios as required to mitigate the losses.


      image


      Miscellaneous and Transfers


      Miscellaneous revenue includes rents and royalties, the sale of fixed assets and other revenue. Transfers include transfers from the Recreation Enterprise Fund. The increase in the 2018 forecast is due to new revenue from the p-card rebate program, and higher than anticipated DC forefeiture funds. The forecast decreases due to the reductions in the transfer from the Recreation Enterprise


      image

      Town of Palm Beach | 36


      Fund. The Recreation Enterprise Fund transfer to the General Fund will decrease through 2020 and instead the funds will be directed to the Dock Replacement Fund to reduce the amount of borrowing for this project.


      image


      Total General Fund Expenditures


      The 2018 forecast contains additional funding of $5,420,000 annually for the pension fund, in addition, the forecast reflects the expenditure reductions from the Comprehensive Review of Town Operations (CROTO) to offset the additional pension funding. Changes in the forecast by category are described in the balance of this section.


      image


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      37 | Town of Palm Beach


      Salary and Wages


      The forecasted salary and wage increases are based upon the employee pay policies and replacements of retirees at lower salaries through the forecast period. The salary and wage assumption is based upon the average annual increases for all employee groups and forecasted retirements.


      A combination of actions (changing pay policies, reducing staffing, etc.) has improved the salary forecast significantly over recent years. The 2018 forecast contains the personnel cuts outlined in the CROTO to take effect immediately and the reductions planed through attrition in future years. Since no change was approved in the merit pay system, the forecast reflects the current program.


      image


      Pension Benefits


      The pension estimate is based upon the actuary’s forecast for pension costs for the annual required contribution and estimates for the General Employee DC contributions. The forecast for annual contributions is represented in the chart below with the navy blue bar. The actuary forecasts the costs to decline over the 10 year period which is an improvement from the forecast presented last year. The purple bar on the chart represents the annual required contribution plus the newly adopted annual additional contribution of $5,420,000 to reduce the UAAL.


      The forecast reflects the Town’s Retirement Board recommended a change in the investment assumption from 7.5% to 7.0% over a 5-year period, the change in the wage assumption and the new mortality tables.


      The forecast includes the updated lower DC contribution amounts for General Employees throughout the 9-year period. The new benefit changes eliminated the DC contributions for public safety employees.


      image

      Town of Palm Beach | 38


      image


      Other Employee Benefits


      Other Employee Benefits includes all other benefits including health insurance. Health insurance costs have remained flat for four years. To be conservative, the health insurance forecast reflects an increase of 7% for FY19, then 6.5% for FY20 and .5% reductions until 5% increases are reflected thereafter. Other employee benefits (including FICA, longevity, incentives, and allowances) are expected to increase at a much lower rate. The forecast decreased since 2016 due to the freeze in the longevity program and reduced FICA costs due to recent retirements and turnover.


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      39 | Town of Palm Beach


      Contractual


      The contractual forecast since 2017 has decreased due to cuts in training, street sweeping, security monitoring, hedge trimming and air conditioning maintenance identified in the CROTO. Contractual expenditures are forecasted to increase by the rate of inflation.


      image


      Commodities


      The commodity forecast is based upon the assumed rate of inflation. Commodity budgets include fuel, supplies, dues, software, some computer hardware and vehicle maintenance and uniforms.


      image


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      Town of Palm Beach | 40


      Equipment Replacement/Capital Outlay


      This category includes depreciation on Town vehicles and equipment that is charged to the departments and transferred to the Equipment Replacement Fund. It also includes purchases of new equipment that is not replacement equipment. The 2016 forecast contained a specific increase in the estimated replacement value of 3 fire-rescue pumpers due to higher than anticipated increases in the cost of these vehicles. The 2018 forecast is slightly higher than the 2017 forecast due to replacements made during the year.


      image


      Transfers


      The Transfers category includes transfers to the Capital Improvement Program, Coastal Protection Fund, Debt Service Fund, Risk Insurance Fund and Retiree Health Insurance Trust. It also includes the annual contingency allocation.

      image


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      41 | Town of Palm Beach


      • The FY18 budget includes a transfer to the Capital Improvement Program of $2,118,024 for Capital projects. This transfer is intended to begin to build reserves for capital projects once the ACIP bond funds have been spent. In subsequent years the forecast assumes a 10% increase per year until 2023 then a 5% increase thereafter. The increases are in anticipation of the expenditure of all of the bond proceeds in 2019 and the need to increase funding in the Capital Improvement fund going forward to move toward pay-as-you-go funding for capital improvement projects.


      • The Town Council approved a 10 year $84 million Coastal Protection program in 2013. The first year funding in FY15 was approved at $4,777,000. The transfer increased to $8,015,220 due to increased beach renourishment project costs. In FY17, the transfer was lowered to

        $7,265,000 due to the reduction in scope of some projects. The forecast for FY18 forward assumes a 3% increase per year in funding.


      • Debt service decreased in FY17 due to the refunding of the 2010A bonds at a lower interest rate. The forecast includes the debt service on both the 2013 and 2016 bonds.


      • Risk insurance premium increases have been estimated as follows: Property Insurance 5% per year, Liability Insurance 2% per year, and Worker’s Compensation 3% per year throughout the forecast period.


      • Retiree Health Insurance is based upon a forecast for Town Contributions prepared by the Town’s actuary. Due to the over funded status of this trust the transfer has been reduced from $960,000 in FY18. The amount included in the forecast is $546,800 which represents the amount needed to keep the plan 100% funded if the investment return assumption is set at 6.25%.


      • The General Fund contingency appropriation has been estimated to be 1% of the forecasted operating expenditures as required by Town policy. The General Fund contingency is funded through a transfer from fund balance rather than through operating revenues. The policy was modified to reduce the appropriation from 1.5% to 1% in FY18.


      • The Town’s contribution to the Four Arts Library is forecasted to increase by 3% per year.

Projected Surplus/ Deficit


The deficit prior to the completion of the Comprehensive Review of Town Operations was a little over $4 million for FY19. Through the comprehensive review we have reduced the deficit to

$983,428. We expect that during the budget process, we will be able to reduce this deficit even further through a combination of additional expenditure reductions and increases in revenues. The FY19 budget will be presented in July and will contain the results of a deeper review into all expenditure accounts throughout town.


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Town of Palm Beach | 42


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43 | Town of Palm Beach

Town of Palm Beach Revenue Forecast FY18 - FY27


Analysis of Revenues by Category Revenue Sources

2018

Budget

2019

Estimated

2020

Estimated

2021

Estimated

2022

Estimated

2023

Estimated

2024

Estimated

2025

Estimated

2026

Estimated

2027

Estimated


Ad Valorem Revenues


51,470,500


53,143,291


54,870,448


56,653,738


58,494,984


60,396,071


62,358,944


64,385,609


66,478,142


68,638,681

% Increase

3.99%

3.25%

3.25%

3.25%

3.25%

3.25%

3.25%

3.25%

3.25%

3.25%

$ Increase

1,976,000

1,672,791

1,727,157

1,783,290

1,841,246

1,901,087

1,962,872

2,026,666

2,092,532

2,160,540

Non Ad Valorem Taxes

8,425,000

8,650,890

8,906,991

9,170,706

9,442,263

9,721,895

10,009,843

10,306,356

10,611,688

10,926,104

% Increase

3.97%

2.68%

2.96%

2.96%

2.96%

2.96%

2.96%

2.96%

2.96%

2.96%

322,000

225,890

256,101

263,715

271,557

279,632

287,948

296,513

305,332

314,415

Licenses and Permits

7,672,975

7,856,200

7,888,680

7,901,640

7,952,033

7,965,782

8,018,840

8,033,427

8,089,292

8,147,650

% Increase

5.06%

2.39%

0.41%

0.16%

0.64%

0.17%

0.67%

0.18%

0.70%

0.72%

$ Increase

369,475

183,225

32,480

12,960

50,393

13,749

53,058

14,587

55,865

58,358

Intergovernmental Revenue

1,185,450

1,058,900

1,082,766

1,107,205

1,132,231

1,157,859

1,184,105

1,210,983

1,238,509

1,266,700

% Increase

0.59%

-10.68%

2.25%

2.26%

2.26%

2.26%

2.27%

2.27%

2.27%

2.28%

$ Increase

6,950

-126,550

23,866

24,439

25,026

25,628

26,245

26,878

27,526

28,191

Charges for Services

3,943,650

4,030,193

4,101,561

4,169,093

4,238,541

4,309,961

4,383,411

4,458,948

4,536,633

4,616,528

% Increase

3.33%

2.19%

1.77%

1.65%

1.67%

1.69%

1.70%

1.72%

1.74%

1.76%

$ Increase

127,100

86,543

71,368

67,531

69,448

71,420

73,449

75,537

77,685

79,895

Fines and Forefeitures

1,138,800

1,186,000

1,189,550

1,209,720

1,215,131

1,220,704

1,226,444

1,232,355

1,238,444

1,244,715

% Increase

-9.26%

4.14%

0.30%

1.70%

0.45%

0.46%

0.47%

0.48%

0.49%

0.51%

$ Increase

-116,200

47,200

3,550

20,170

5,411

5,573

5,740

5,912

6,088

6,271

Interest Income

581,858

870,000

1,275,000

1,575,000

1,850,000

1,950,000

2,125,000

2,200,000

2,300,000

2,300,000

% Increase

-17.39%

49.52%

46.55%

23.53%

17.46%

5.41%

8.97%

3.53%

4.55%

0.00%

$ Increase

-122,481

288,142

405,000

300,000

275,000

100,000

175,000

75,000

100,000

0

Miscellaneous and Transfers

1,005,000

892,080

810,692

811,838

813,018

814,234

815,486

816,775

818,104

819,472

% Increase

-2.50%

-11.24%

-9.12%

0.14%

0.15%

0.15%

0.15%

0.16%

0.16%

0.17%

$ Increase

-25,758

-112,920

-81,388

1,146

1,180

1,216

1,252

1,290

1,328

1,368

Transfers from Fund Balance

5,065,996

1,414,513

1,425,496

1,221,327

1,233,164

1,246,234

1,260,416

1,275,148

1,289,799

1,302,904

% Increase

27.73%

-72.08%

0.78%

-14.32%

0.97%

1.06%

1.14%

1.17%

1.15%

1.02%

$ Increase

1,099,766

-3,651,483

10,983

-204,169

11,837

13,071

14,182

14,732

14,650

13,105

Total Revenues

80,489,229

79,102,067

81,551,185

83,820,266

86,371,365

88,782,741

91,382,488

93,919,601

96,600,610

99,262,753

% Increase

4.73%

-1.72%

3.10%

2.78%

3.04%

2.79%

2.93%

2.78%

2.85%

2.76%

$ Increase

3,636,852

-1,387,162

2,449,117

2,269,082

2,551,098

2,411,376

2,599,747

2,537,113

2,681,008

2,662,143


Page 44

Town of Palm Beach Expenditure Forecast FY18- FY27


Analysis of Expenses by Category Expenditure Categories

2018

Budget

2019

Estimated

2020

Estimated

2021

Estimated

2022

Estimated

2023

Estimated

2024

Estimated

2025

Estimated

2026

Estimated

2027

Estimated


Salaries/Wages


26,001,862


25,930,767


25,888,780


26,361,742


26,892,839


27,780,964


28,745,983


29,742,836


30,776,041


31,846,018

% Increase

5.11%

-0.27%

-0.16%

1.83%

2.01%

3.30%

3.47%

3.47%

3.47%

3.48%

$ Increase

1,264,283

-71,095

-41,986

472,962

531,096

888,126

965,018

996,853

1,033,205

1,069,977

Pension Benefits

8,971,687

8,963,736

9,251,694

9,455,952

9,377,990

9,026,106

8,681,520

8,299,419

7,860,349

7,350,325

% Increase

14.73%

-0.09%

3.21%

2.21%

-0.82%

-3.75%

-3.82%

-4.40%

-5.29%

-6.49%

$ Increase

1,151,730

-7,951

287,958

204,258

-77,962

-351,885

-344,585

-382,101

-439,071

-510,024

DC Plan

543,995

549,269

563,303

576,118

590,334

607,790

627,841

648,407

669,657

691,606

% Increase

-42.28%

0.97%

2.55%

2.28%

2.47%

2.96%

3.30%

3.28%

3.28%

3.28%

$ Increase

-398,437

5,274

14,033

12,815

14,216

17,456

20,051

20,566

21,250

21,949

Other Employee Benefits

6,896,505

6,937,708

7,104,150

7,343,244

7,615,235

7,907,205

8,212,016

8,553,952

8,911,066

9,284,064

% Increase

1.30%

0.60%

2.40%

3.37%

3.70%

3.83%

3.85%

4.16%

4.17%

4.19%

$ Increase

88,346

41,203

166,443

239,093

271,991

291,970

304,811

341,936

357,113

372,998

Contractual

9,617,449

9,580,306

9,818,878

10,043,930

10,274,164

10,509,698

10,750,656

10,997,162

11,249,346

11,507,339

% Increase

1.96%

-0.39%

2.49%

2.29%

2.29%

2.29%

2.29%

2.29%

2.29%

2.29%

$ Increase

185,240

-37,143

238,572

225,052

230,233

235,534

240,958

246,507

252,184

257,992

Commodities

1,949,093

1,980,280

2,026,622

2,074,048

2,122,584

2,172,257

2,223,091

2,275,116

2,328,357

2,382,845

% Increase

7.63%

1.60%

2.34%

2.34%

2.34%

2.34%

2.34%

2.34%

2.34%

2.34%

$ Increase

138,249

31,187

46,342

47,426

48,536

49,672

50,835

52,024

53,242

54,488

Equipment Replacement

2,459,607

2,346,966

2,399,325

2,452,910

2,507,748

2,563,868

2,621,302

2,680,080

2,740,062

2,739,710

% Increase

-8.72%

-4.58%

2.23%

2.23%

2.24%

2.24%

2.24%

2.24%

2.24%

-0.01%

$ Increase

-235,075

-112,641

52,359

53,584

54,838

56,121

57,434

58,777

59,982

-352

Library Services

335,008

345,058

355,409

366,072

377,054

388,366

400,016

412,017

424,377

437,109

% Increase

3.00%

3.00%

3.00%

3.00%

3.00%

3.00%

3.00%

3.00%

3.00%

3.00%

$ Increase

9,758

10,050

10,352

10,662

10,982

11,312

11,651

12,000

12,361

12,731

Total Operating Expenses

56,775,205

56,634,089

57,408,162

58,674,016

59,757,948

60,956,254

62,262,426

63,608,989

64,959,255

66,239,015

% Increase

4.04%

-0.25%

1.37%

2.21%

1.85%

2.01%

2.14%

2.16%

2.12%

1.97%

$ Increase

2,204,094

-141,116

774,073

1,265,854

1,083,932

1,198,306

1,306,172

1,346,563

1,350,266

1,279,760

TRANSFER TO OTHER FUNDS

Capital Improvement Fund (307)

2,118,024

2,329,826

2,562,809

2,819,090

3,100,999

3,256,049

3,418,851

3,589,794

3,769,284

3,957,748

Coastal Protection Fund (309)

7,410,300

7,632,609

7,861,587

8,097,435

8,340,358

8,590,569

8,848,286

9,113,734

9,387,146

9,668,761

Extraordinary transfer to Retirement

4,759,016

5,240,000

5,240,000

5,240,000

5,240,000

5,240,000

5,240,000

5,240,000

5,240,000

5,240,000

Debt Service Fund (205)

5,982,331

5,802,306

5,794,481

5,756,731

5,754,481

5,756,481

5,757,356

5,766,606

5,759,106

5,947,232

OPEB Trust Fund (610)

960,000

546,800

525,000

542,798

563,044

584,777

607,467

632,920

659,502

687,267

Transfer to Risk Fund (502)

1,828,475

1,901,614

1,977,679

2,056,786

2,139,057

2,224,619

2,313,604

2,406,148

2,502,394

2,602,490

Contingency

655,878

648,002

658,985

670,077

681,914

694,984

709,166

723,898

738,549

751,654

Transfer from the ERF

-649,751

Total Transfers and Other

23,714,024

23,451,406

24,620,541

25,182,916

25,819,853

26,347,480

26,894,730

27,473,101

28,055,981

28,855,151

% Increase

6.43%

-1.11%

4.99%

2.28%

2.53%

2.04%

2.08%

2.15%

2.12%

2.85%

$ Increase

1,432,759

-262,618

1,169,135

562,375

636,937

527,627

547,250

578,371

582,880

799,170

-

Total Expenditures

80,489,230

80,085,496

82,028,703

83,856,932

85,577,801

87,303,733

89,157,156

91,082,089

93,015,236

95,094,166

% Increase

4.73%

-0.50%

2.43%

2.23%

2.05%

2.02%

2.12%

2.16%

2.12%

2.24%

$ Increase

3,636,854

-403,735

1,943,207

1,828,229

1,720,868

1,725,933

1,853,422

1,924,934

1,933,147

2,078,931


Page 45

RECREATION ENTERPRISE FUND TREND ANALYSIS

RECREATION ENTERPRISE FUND TREND ANALYSIS


Recreation Enterprise Fund Trends

Marina

Revenues

2010 - 2011: Decrease in revenue is attributed to the slow economy and boating/yacht market at that time, and not achieving 100% occupancy.

2012 - 2013: Revenue increases from growth in business as yachting industry improved. 2014: Revenue increases due to increased occupancy and minor increases in dockage rates and electrical charges.

2015: Growth in revenue can be attributed to achievement of 100% annual and seasonal lease occupancy and increased transient business.

2016: Revenue increases can be correlated to dockage rate increases and the increase in the number of transient nights.

2017: Revenue increases due to increases in dockage rates.

2018: Growth in revenue can be attributed to restructuring of dockage rates, institution of Maintenance & Improvement Fee and Utility Fees.


Expenses

2009: Increased expenses were attributed to minor facility improvements.

2010: Decreased expenses were due to an unfilled vacancy of the Assistant Dockmaster position for most of the fiscal year.

2011: Decreased expenses were due to the elimination of Assistant Dockmaster position, reduction in private security contract costs, and Dockmaster vacancy for a large part of the fiscal year.

2012: Increased expenses were due to fully funded Dockmaster position and partial reallocation of an Assistant Director’s salary.

2013: Increased expenses were due to minor facility improvements.

2014: Increased expenses were due to upgraded shore power and minor facility improvements. 2015: Expense increases were attributed to enhanced security measures, which included extended security guard hours and the installation of security cameras.

2016: Expenses at the marina showed little fluctuation with a .1% variance from the previous year. 2017: Expenses at the marina exhibited a minor reduction, with a .5% cut from the previous fiscal year.

2018: Increase in expenses is due to utility costs and calculations of submerged land lease based upon revenue.

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Town of Palm Beach | 46

RECREATION ENTERPRISE FUND TREND ANALYSIS

RECREATION ENTERPRISE FUND TREND ANALYSIS


Par 3 Golf Course

Revenues

2009: The Par 3 closed for renovation in April 2009.

2010: The Par 3 remained closed until mid-December. Also, unseasonable weather negatively impacted play from December - March. Along with the weather challenges, the overall economic conditions had an effect on golf play.

2011: Revenue increases reflect re-positioning efforts of the golf course, through enhanced marketing approaches, new price structures, and growth in play.

2012: Revenue decreased due to rainier than normal season and A1A road closure. 2013: Revenue increased from growth in business and improved golf economy.

2014: Revenue increased from growth in rounds played and merchandise sales, as well as new revenue associated with the restaurant vendor agreement.

2015: Revenue increased from growth in restaurant business and increased golf cart rental.

2016: Revenue growth can be attributed to expansion of restaurant business and increase in rounds of golf.

2017: Revenue increases are reflected in the restructuring of the fee schedule.

2018: Revenue growth can be attributed to enhanced marketing efforts through the redeveloped website and on-line store, slight modification to season dates and establishment of non-resident cart fees.


Expenses

2010: Expenses reflect the use of contract labor to establish and maintain a higher level of maintenance standards which offset the elimination of a full-time Equipment Operator position. 2011: Eliminated the Pro-Manager leadership model and a Golf Manager model was implemented. 2013: Increase in expenses due mostly to purchase of new golf cart fleet.

2014: Increase in expenses attributed to additional staff needed to meet increased play and pro-shop business, as well as operating costs for the new clubhouse.

2015: Increase in expenses due to higher personnel costs and building maintenance costs. 2016: Expenses reflect the addition of a Crew Foreman/Irrigation Specialist position and the additional costs for maintenance projects at the clubhouse and on the golf course.

2017: Expense increases can be attributed to the increase in maintenance projects completed on the Par 3 Clubhouse and Golf Course funded through the Maintenance & Improvement Fund.

2018: Expenses reflect the completion of multiple maintenance projects the previous fiscal year and a minimal equipment replacement schedule.


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47 | Town of Palm Beach

RECREATION ENTERPRISE FUND TREND ANALYSIS

RECREATION ENTERPRISE FUND TREND ANALYSIS


Tennis Programs & Facilities


Revenues

2009: Revenue increase is attributed to pricing increases for annual passes and daily play rates. 2010 - 2012: Revenue increase due to growth in income share from the teaching contract, and increased participation.

2014: Revenue increase is attributed to lower nonresident fees that increased overall participation, thus total revenue.

2015: Revenue increase due to increased sale of 12 play passes and daily court fees. Tennis teaching services contract revenue also contributed to revenue growth.

2016: Revenue decline can be attributed to a reduction in funds generated from tennis teaching services contract.

2017: Revenue increase can be attributed to the negotiation of an instruction contract with a new tennis professional.

2018: Revenue growth due to restructuring of fee schedule, which included the change in the play pass format and a small increase to the Maintenance & Improvement Fee.


Expenses

2009: Increase attributed to a partial re-allocation of an Assistant Director salary to match responsibilities, additional PT staff hours, equipment purchases to maintain the new courts, and new furniture/fixtures.

2011 - 2012: Decrease attributed to elimination of one Facility Supervisor and Maintenance Worker positions.

2013: Increase attributed to minor facility improvements and increased cost of employee benefits. 2014: Increase in expenses attributed to increases in contractual items.

2015: Increase in expenses due to need to replace air conditioning units and use of temporary staff to cover extended staff absence.

2016: Expense decrease attributed to extended vacancy in Maintenance Worker position and increased reliance on contractual staffing.

2017: Expense increase can be attributed to an increase in bank service charges and expenses incurred from repair of lighting at Seaview Park Tennis Center

2018: Expense increase is a result of replacement of select light fixtures at Seaview Park Tennis Center.


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Town of Palm Beach | 48

RECREATION ENTERPRISE FUND TREND ANALYSIS

RECREATION ENTERPRISE FUND TREND ANALYSIS


Recreation Center


Revenues

2010 - 2011: Revenues increased due to program growth, price increases, and additional offerings. 2012 - 2013: Revenues flat due to a leveling off of programming offerings and limited activity space. 2014: Revenue increase due to participation growth through additional offerings.

2015: Revenue decrease due to reduction in youth programming opportunities due to instructor unavailability.

2016: Revenue increase due to expansion of programming offerings. 2017: Revenue increase is a result of expanded summer camp program.

2018: Revenue is expected to remain static due to anticipated construction of new Recreation Center.


Expenses

2009: Seaview Park and Recreation Center building maintenance expenses were moved from the Administration program to the newly re-named “Recreation Center” program allowing for a more accurate description (financially and programmatically) of expenses, and few one-time expenses, such as painting of the facility, new air handler installation, and re-finishing of floors.

2010: Decrease in expenses was attributed to the elimination of one-time expenses from the prior year.

2012: Decrease attributed to elimination of Maintenance Worker position.

2013: Increase attributed to the addition of part-time no benefits staff support to perform functions of the Maintenance Worker position eliminated in FY12. Increase also attributed to increased cost of certain employee benefits and minor facility improvements.

2014: Increase due to anticipated rise in costs of contractual services and commodities in an effort to repair and/or complete minor improvements to the aging Recreation Center.

2015: Minimal increase in expense due to increased maintenance costs.

2016: Expense decrease due to extended vacancy of Maintenance Worker position.

2017: Expense increase due to hiring of full-time Maintenance Worker for the full fiscal year. 2018: Expense increase due to maintenance and operation costs.


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49 | Town of Palm Beach

RECREATION ENTERPRISE FUND TREND ANALYSIS

RECREATION ENTERPRISE FUND TREND ANALYSIS


Recreation Administration


2009: Expenses decreased due to transfer of Seaview Park and Recreation Center maintenance from this program to the Recreation Center program.

2012: Expenses decreased due to partial reallocation of an Assistant Director’s salary to other programs.

2013: Expenses decreased due to elimination of an Assistant Director position.

2014: Expenses increased due to addition of a 0.75 FTE Office Assistant II position to provide administrative support.

2015: Expenses decreased due to extended Director of Recreation vacancy. 2016: Expenses increased due to hiring of Director of Recreation.

2017: Expenses increased due to increase in retirement contributions.

2018: Expense increase due to software maintenance costs being removed from the IT budget and placed in the Recreation budget.


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Transfer to General Fund


Due to the cuts and efficiencies found in all areas of the Recreation Department, the transfer to the General fund increased in FY11, FY12 and FY13. In FY16, FY17, and FY18 the transfer was cut by $100,000 each year and the funds were redirected to the dock replacement reserve to build up funds for the replacement of the docks.



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Town of Palm Beach | 50

RECREATION ENTERPRISE FUND TREND ANALYSIS

RECREATION ENTERPRISE FUND TREND ANALYSIS


þÿ


Full Time Positions

2010: Eliminated Equipment Operator position. 2011: Eliminated Assistant Dockmaster position.

2012: Eliminated one Tennis Facility Supervisor position and the General Maintenance position. 2013: Eliminated one Assistant Director position. Part-time no benefits employees working in a temporary capacity were included in FTE count.

2014: A 0.75 FTE Office Assistant II position was added to provide administrative support for the Department.

2015: The .75 FTE Office Assistant II position upgraded to a full-time position for Administrative support and a PT No Benefits Pro Shop Assistant position was upgraded to a full-time position to allow for coverage of the tennis centers. Golf associate positions were increased. The tennis attendant and Labor positions in tennis were reduced and activity leader positions were reduced.

2016: A full-time Crew Foreman/Irrigation Specialist was added at the Par 3 Golf Course. 2017: Tennis attendant and labor positions were reduced as well as activity leader positions. 2018: The FT Office Assistant II position was reclassified to an Administrative Clerk position, resulting in salary savings.


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51 | Town of Palm Beach



Marina

Recreation Enterprise Fund Forecast


Gradual growth in revenue is based on continued improvement in the local economy, increasing occupancy with long-term leases, strategic price increases for dockage and electrical charges, and growth in transient business. The completion of the Master Plan in May of 2018 and the anticipated commencement of facility design and construction is expected to negatively impact revenue beginning in late 2019, as dock space minimizes. This trend will turnaround as the new facility becomes fully operational. These changes are not reflected in the LTFP at this time and will be included once the Master Plan is finalized. Revenue is forecasted to show considerable growth, upon the completion of this multi-year project. Expenses gradually increase for costs of goods, services, facility improvements, and salaries/benefits.


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Par 3 Golf Course


Revenue projections are based on an improved economy, strategic price increases, growth in play and increased merchandise sales all due to the recent success of the new clubhouse and restaurant agreement and course redesign. Expenses increase for additional staff needed to meet increased play and pro-shop business, operating costs for the new clubhouse, and gradual increases for costs of goods, services, and salaries/benefits.


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Town of Palm Beach | 52


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Tennis Programs & Facilities

Gradual revenue growth is based on an improving economy, strategic price decreases for nonresidents to foster growth in overall play. Expenses gradually increase for costs of goods, services, and salaries/benefits.


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Recreation Center


Revenue is expected to decline in fiscal year 2019, due to the projected construction of the new Recreation Center. This is due to the limitation of programming space. This trend will change direction when the building opens and participation growth is experienced due to increased program offerings as a result of expanded program spaces. Revenue from pass sales for the new amenities is expected to create a significant positive impact. Operating expenses will decrease in 2019 due to the closure of the building. These costs will increase due to the expense of goods and services, mostly related to minor facility repair and upkeep, and increase in salaries/benefits.


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53 | Town of Palm Beach


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Recreation Administration


Expenses gradually increase for costs of goods, services, and salaries/benefits.


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Total Recreation Enterprise Operating Fund

The forecast for the total operating revenues and expenditures for the Recreation Enterprise Fund is shown in the chart below. In 2018 and FY19, revenues and expenditures decline due to the expected closing of the Recreation Center for construction.


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Town of Palm Beach | 54



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Transfer to the General Fund


The transfer to the General Fund from the Enterprise Fund is forecasted to decrease from $585,000 to an annual transfer of $385,000 from 2020 through 2026. This decreased is based on the plan to add more funding to the dock replacement fund to offset the borrowing needed for this project.


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55 | Town of Palm Beach


Recreation Enterprise Fund Profits (after Transfer to General Fund, Capital Expenses and Debt Service)

The net profits realized after the annual transfer to the General Fund, payments for any capital expenses, and payment for debt service will be used to build the enterprise fund’s net asset balance or possibly transferred to the General Fund.


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Town of Palm Beach | 56


Self-Insurance Fund – Risk Management

The Risk Management program is under the direction of the Town Manager’s Office. Responsibility includes insurance management for workers' compensation, property and casualty, general liability, automobile liability, and public officials and employment practices insurance. Other responsibilities include: claims investigation and administration; contract review regarding hold harmless agreements, indemnification and insurance requirements of vendors; safety, loss prevention and control programs; and review of proposed legislation which could impact the Town.


The Office of Risk Management and the Town’s insurance programs are funded by an annual transfer from the General Fund and interest earned on the retained earnings within the fund.


The 10-year trend in revenues and expenditures is shown below.


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The 2010 expenditures included increases to the retention levels which caused adjustments to the reserves for worker’s compensation claims. In 2012, the retention levels were lowered which caused a decrease in expense. The increase in expense in 2013 was due to abnormally high claims for the year. Risk expenses in 2014 were lower than expected due to lower claims. In 2015 we increased funding for the stop loss from $780,000 to $900,000 and in 2017 we increased funding for the stop loss from $900,000 to $1,100,000.


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57 | Town of Palm Beach



The Net Assets of the fund have been used to fund uninsured losses. In FY14, a transfer from the excess Net Assets of the Risk Fund was made to the Coastal Protection Fund of $2,000,000 to fund coastal projects.


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The Risk Insurance Fund forecast assumes annual increases of 5% for property, 2% for liability insurance and 3% for workers’ compensation insurance. The stop loss reserves have been increased from $780,000 in 2014, $900,000 in 2015 to $1,100,000 in 2017 based upon the recommendation by our insurance carrier based upon the Town’s claims history.

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Town of Palm Beach | 58


Self-Insurance Fund – Health


The Health Insurance program consists of medical, dental, life, long-term disability, accidental death and dismemberment, supplemental life insurance, specific reinsurance, aggregate reinsurance, medical conversion, COBRA, network access fees, utilization review, consulting services, flexible spending program, and claims administration. This program is funded by a transfer from the General Fund as well as interest income earned on the net assets and payroll deductions from Town employees.


The 10-year trend in health revenues and expenditures is shown below.


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In 2010, a review of the health insurance program was completed and adjustments to employee contributions and insurance coverage produced savings for the fund. Health claims in 2012 through and 2016 were below expectations due to cost containment measures that were implemented.


Reserves of the Health Fund Reserves have increased throughout the 10-year period due to favorable claims experience and steps taken to manage the fund throughout the years. These reserves can be used in case of claims in excess of coverage.


The trend in the net assets of the health fund is shown in the chart on the following page.


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59 | Town of Palm Beach


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The Health Fund forecast assumes an increase in FY18 of 7% and then 6.5% for 2020, then decreasing by .5% each year until the increase reaches 5% in 2023 and for the rest of the forecast period. These estimates were provided by the Town’s health insurance actuary. Town staff believes we can continue to manage this benefit proactively to contain future cost increases to lower than market levels, as we have done in the past.


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Town of Palm Beach | 60


The Health Insurance Trust (OPEB)


In compliance with the requirements of applicable State Statutes, the Town makes post-employment health care benefits available to retirees and funds a portion of the retiree health insurance benefits. In FY2007, the Town established a Health Insurance Trust to comply with GASB 43 and 54, which required the establishment of a liability for actuarially determined costs of retiree health benefits.

The trust was established with an initial deposit of $16,000,000 transferred from the reserves from the Health Insurance Fund. The Town’s Investment Advisory Committee oversees the investment of the assets of this trust.


The bi-annual actuarial valuation of the retiree health plan was prepared as of September 30, 2017. The Town’s OPEB Liability as of September 30, 2017 was determined to be $27,963,573. The Plan net assets totaled $31,275,719 resulting in a funded ratio of 111.8%. The actuary also prepared a forecast for year ending 2018, which resulted in a funded ratio of 113.2%. The annual budgeted contribution for FY18 is $960,000. Included in the LTFP is a reduced transfer from the General Fund that reflects an amount that would keep the OPEB trust at 100% funded if the investment return assumption was reduced to 6.5% rather than 7% which was used in the actuarial report.


The trend in revenues and expenditures since 2009 is shown below.


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In 2010, modifications were made to the health plan and retiree contributions were increased to stabilize the growth in expenditures. The revenue increase in revenue in 2012, 2013, 2014, 2016 and 2017 was due to investment performance.


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61 | Town of Palm Beach


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The 10-year forecast assumes a 7% increase in health costs for FY18 and then a 6.5% annual increase thereafter. Town staff believes we can continue to manage this benefit proactively to contain future costs increases to lower than market levels, as we have done in the past. The Town’s contribution estimates were based upon actuarial estimates for the next 10-year period.


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Town of Palm Beach | 62


Debt Service Fund


In 2010 the Town issued 2010A Public Improvement Revenue and Refunding Bonds in the principal amount of $57,035,000, and 2010B Worth Avenue Commercial District Project bonds in the principal amount of $14,770,000.


The 2010A bonds refunded the 2003B bonds ($5,310,000), the 2008 Revenue Note ($10,000,000), and a 2009 Line of Credit ($600,000) which was issued for the Worth Avenue Project. The balance of the proceeds were to fund a portion of the Town’s Accelerated Capital Improvement Program totaling

$41,232,000 and $1,740,844 was used to reimburse the Town for the Town’s portion of the Par 3 Golf Course Project.


The 2010B bonds were used to fund the Worth Avenue Commercial District streetscape project. The Town imposed a capital special assessment against real property in the Worth Avenue Commercial District to pay the costs of the Worth Avenue Projects. The assessments will be payable over a thirty year period. The assessments will be security for the 2010B bonds.


On January 1, 2012, the Town used excess funds remaining after completion of the Worth Avenue Project to redeem $1,485,000 of the 2010B Bonds.


On August 25, 2016, the Town issued bonds to refund the 2010A & 2010B bonds. This transaction produced gross savings of $8,900,539 over 23 years. The net present value savings is $6,895,965 or 13.35%. This savings reduced debt service for FY17 by $247,655.29.


In 2013, the Town issued Public Improvement Revenue Bonds in a par amount of $55,590,000. The proceeds of the bond will be used for the second phase of the Town’s Accelerated Capital Improvement Program ($44,997,957) groin rehabilitation and seawall replacement ($11,900,000) and the Town’s portion of the Par 3 Clubhouse project ($1,250,000).


The debt service trend as a percent of General Fund Expenditures is shown below:


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63 | Town of Palm Beach



Total debt outstanding as a percent of taxable value trend is shown below:


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The forecasted total annual debt service for the period of FY18 through FY27 is shown in the chart below:


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Town of Palm Beach | 64



The total principal debt outstanding for the all debt recorded as of this forecast for FY18 through FY27 is shown in the chart below:

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The per capita debt utilizing the current census population of 8,041 for the period of 2018 through 2027 is shown below:


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65 | Town of Palm Beach


Town of Palm Beach Reserves

The Town Council has adopted eighteen financial policies, fifteen of which address reserves. The reserve policies serve to safeguard the Town’s financial resources and ensure fiscal stability. The size of a municipality’s fund balance can affect its ability to withstand financial emergencies. Reserves can also be used to accumulate funds for capital purchases or capital projects without having to borrow.


Unassigned Fund Balance - General Fund


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Pursuant to adopted policy, the unassigned fund balance for the General Fund is to be maintained at a minimum level of 25% of current year

General Fund budgeted expenditures. This minimum level is to be maintained to protect the Town against economic downturns, temporary revenue shortfalls, unpredicted one-time expenditures, and for tax rate stabilization purposes. Twenty-five percent of the FY18 General Fund operating budget (General Fund budget less CIP, coastal and extraordinary retirement transfer) is $16,550,472. The FY17 ending fund balance was $17,716,419. The

unassigned fund balance exceeds the minimum requirement by $1,165,947.


The General Fund Undesignated Fund Balance has consistently exceeded the required minimum level of 25%. The chart details the General Fund Undesignated Fund Balance and the percent of budgeted expenditures the balance represents.


In FY17, the Town Council authorized the transfer of $2,500,000 to begin to fund the underground utility project. In the FY18 budget a extraordinary transfer of $3,832,893 to the Retirement Fund to begin to reduce the UAAL was included as part of the new policy to contribute an additional

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$5,420,000 each year. The balance was made up of other reductions from the budget. The fund balance amount of $17,716,419 is net of

these two transfers.


Reserves - Risk Fund


The total reserve balance for the Risk Fund was $7,578,199 as of September 30, 2017. Out of this reserve balance, the Town funds the Reserve for Catastrophic Exposures/Emergencies - Risk Fund in the amount of $2,500,000 and the Contingency Reserve for $500,000. The


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TOWN OF PALM BEACH


trend for the Risk Fund Reserve is shown in the table. In 2014 the Town Council approved a transfer of $2,000,000 from the reserves of the Risk Fund to the Coastal Protection Fund. The fund balance declined due to an increase in the estimate for outstanding losses that is reserved on the balance sheet at a 75% confidence level of $2,089,235. The minimum recommended reserve balance is $4,000,000, which represents the amount of the Reserve for Catastrophic Exposures/Emergencies and the Contingency Reserve plus an equity amount of $1 million to safeguard the Town’s budget from an adverse event recommended by the actuary. The excess reserve for this fund is $3,578,199.


Reserve for Catastrophic Exposures/Emergencies - Risk Fund


The Reserve for Catastrophic Exposures/Emergencies for the Risk Fund is funded at a minimum of

$2,500,000. This reserve was established to set aside emergency funds to protect the Town against the potential financial impacts large judgments in excess of insurance coverage and the financial impacts of response to and recovery from a man-made or natural emergency situation. In addition, the reserve can be used in response to increases in premium rates and/or loss fund increases. This reserve is funded with a budget appropriation from the Net Asset reserves of the Risk Fund.


Recreation Enterprise Fund Reserves


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The Recreation Enterprise Fund reserve is to be maintained at a minimum level of 25% of budgeted revenues totaling

$1,660,350 for FY18. The purpose of the reserve is to provide an adequate level of net assets for unanticipated financial impacts as well as to provide for one-time expenditures to improve the facilities.


The Town’s enterprise fund includes the operations of the Town Docks, the Par 3 Golf Course, tennis activities and youth and adult recreation programs.


At the end of FY17, the net asset balance for the Recreation Enterprise Fund (REF) was $6,167,708. Separate reserves have been set aside from this amount for the dock replacement, Par 3 Improvements, tennis improvements and equipment replacement.


At the end of FY17, $3,801,256 had been set aside in the Dock Replacement Reserve. The Dock Replacement reserve was created to fund the replacement cost of the construction of the Town’s docks whenever it is determined they must be replaced. The replacement reserve is to be maintained at 100% of accumulated depreciation plus accumulated interest earned on the reserve. In FY16, the Town committed to lowering the transfer to the General Fund each year by $100,000 and add these funds each year to the Dock Replacement Reserve.


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TOWN OF PALM BEACH


The Par 3 Golf Course charges an additional $2 per round to fund a maintenance and improvement reserve. At the end of FY17, the balance is $442,910.


In FY15, the Town established a Maintenance and Improvement fund for the Par 3 Clubhouse. This reserve is funded each year based on 50% of the net income from the operations of the Par 3 Golf Course. At the end of FY17, the balance is $287,426. This amount is lower than in FY17 due to projects completed for the Clubhouse that were paid from this reserve.


In FY10, a maintenance and improvement fee was implemented for the Tennis program. This reserve at the end of FY17 is $61,142 and has been set aside for improvements to the tennis centers.


The Recreation Enterprise Fund’s equipment replacement reserve allows for the purchase of capital equipment and is funded with accumulated replacement cost depreciation from Recreation Net Assets. The balance in the REF Equipment Replacement Fund for FY17 is $651,225.


Equipment Replacement Fund


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The Town-wide Equipment Replacement Fund is intended to fund the replacement cost of existing equipment, vehicles and computers when they reach the end of their useful life. This reserve significantly reduces the budgetary fluctuations due to purchases of large pieces of equipment and ensures compliance with the fixed asset inventory and depreciation schedule required by GASB34.


The balance in the Equipment Replacement Fund Reserve for year-end FY17 is $15,889,600. In FY13, the Town Council approved the use of up to $4,867,019 from this reserve for internal financing for small underground utility projects financed by special assessments. To date, a balance of $2,238,874 has been used for these projects. In FY14, the Town Council authorized a transfer of

$2,858,913 in excess reserves to the coastal protection fund. Currently the total amount in the fund available for equipment replacement is $12,253,342. This amount, plus the internal financing balance leaves an excess reserve of $1,397,384.


For FY18, income including the depreciation transfer will total $2,276,600 and expenditures for capital equipment are budgeted at $2,980,896.


Designation of General Fund Balance for Payment of Liability Related to Compensated Absences Leave Balances


A Reserve for Compensated Absences reduces the budgetary fluctuations due to the payout of accrued leave time to employees when they leave Town service. This reserve is funded at a rate of 100% of the fiscal year end accrued leave balances. Funds are appropriated annually from this



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reserve based upon estimates of pay-outs of eligible accrued vacation, sick and compensatory time and the related payroll tax liability. The balance in the reserve as of September 30, 2017, was

$3,210,518. The FY18 appropriation for the pay-out of eligible accrued vacation, sick and compensatory time from this reserve is $577,900.


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Health Insurance Reserve


The balance of the reserve in the Health Fund at the end FY17 is $6,904,823. These reserves guard against any deficiencies in the Town’s self-insurance health fund for active employees’ insurance expenditures. The trend in the reserve balance is shown in the chart. Since FY13, the Town has maintained level funding of health insurance benefits due to good claims experience and the wellness program. These reserves have

also provided cushion in case claims unexpectedly increase. Th actuary recommends a minimum reserve of 6 months of estimated claims as well is the Incurred but not Recorded (IBNR) claims. These amounts total $1,621,175, leaving a excess reserve amount of $5,283,648.


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Capital Improvement Fund


For many years, the Town funded all of the capital infrastructure improvements through pay-as-you-go financing. In 2010, the Town issued the first of two bonds for capital improvements to accelerate many large scale capital improvement projects identified in the 20 year plan. In 2012, the Capital Improvement Fund transfer from the General Fund was reduced to $1,000,000. In FY17, the transfer was increased to $2,290,200 to

begin to build up the reserves for projects once the bond proceeds have been spent. Once the bond proceeds have been spent on the remaining projects, it is proposed to return to pay-as-you-go financing. The balance in this reserve is set aside for use for future capital projects.


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Coastal Protection Fund


The Coastal Protection Fund reserves are in place toreserve funds for beach renourishment projects. The Coastal Protection financing plan calls for annual transfers from the General Fund to the Coastal Fund to accumulate funds for renourishment projects and the other costs associated with the plan.


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The FY18 transfer is $7,410,300 and the FY19 transfer from the General Fund will increase by 3% to $7,632,609. As of September 30, 2017, the reserve balance in this fund is $19,661,966. The next planned project is the Mid-Town beach renourishment project in FY21. At that time, sufficient funds will be available for this project.


OPEB (Other Post Employment Benefits) Trust


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The Town’s OPEB Trust Fund was established in 2007 to comply with GASB Statements 43 and 54, which required the establishment of a liability for actuarially determined costs of retiree health benefits. This fund’s investments are overseen by the Town’s Investment Advisory Committee.

The net asset balance in this trust is

$31,275,719 as of September 30, 2017. The total OPEB liability for 2017 is calculated to be $27,963,573, resulting in a Net OPEB asset of $3,312,146. The actuary estimates

the OPEB asset at the end of 2018 to be $3,865,440 resulting in a funded ratio of 113.2%. The actuary used at 7% investment return assumption in the calculation. The actuarially determined transfer from the General Fund for the OPEB liability for FY18 is $960,000. The Town continues to be well ahead of other government agencies in funding this liability.


Retirement Fund


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The Town provides pension benefits for General Employees, Lifeguards, Police Officers, and Firefighters. The funds were separately managed by 3 pension boards until the consolidation on April 1, 2012, into the Employee’s Retirement Fund. The Retirement Board oversees all of the Town’s pension assets and retirement programs. The net assets of the consolidated retirement fund at the end of FY17 were $209,822,728. The increase is a result of good investment performance

during the year. The decline from FY14 to FY15 was due to investment losses.


Contingency Reserves


Contingency reserves were established for the General Fund, Capital Fund, Equipment Replacement Fund, Recreation Enterprise Fund, Risk Insurance Fund and Health Insurance Fund to provide for unanticipated unbudgeted expenditures of a nonrecurring nature. The amount of the General Fund Contingency has been funded at 1% of the FY18 operating budget. The Capital Fund Contingency



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is appropriated at 10% of the capital budget, while the Equipment Replacement Fund, Risk, and Health Contingency Reserves are appropriated at $500,000 each. The Recreation Enterprise Fund Contingency is funded at 5% of the operating expenses. All of the contingency reserves are annually appropriated in the budget process from the net asset reserves of each of the funds. Amounts from the contingency are appropriated for expenditures through an affirmative vote of the Town Council.


The table below identifies the contingency budgets and actual expenditures for the fiscal years 2014 through YTD 2018.


Contingency Reserves FY2014 – FY2018


Contingency

2014

2015

2016

2017

YTD 2018

General Fund Budget

$ 860,000

$ 909,000

$ 944,686

$ 960,300

$ 655,877

General Fund Actual

$ 356,300

$ 246,361

$ 764,145

$ 759,644

$ ‐

CIP Budget

$ 205,000

$ 205,000

$ 208,000

$ 348,600

$ 284,500

CIP Actual

$ ‐

$ 205,000

$ 208,000

$ ‐

$ ‐

ERF Budget

$ 500,000

$ 500,000

$ 500,000

$ 500,000

$ 500,000

ERF Actual

$ 136,869

$ ‐

$ 29,111

$ 10,391

$ 19,613

Risk Budget

$ 500,000

$ 500,000

$ 500,000

$ 500,000

$ 500,000

Risk Actual

$ ‐

$ ‐

$ ‐

$ ‐

$ ‐

Health Budget

$ 500,000

$ 500,000

$ 500,000

$ 500,000

$ 500,000

Health Actual

$ ‐

$ ‐

$ ‐

$ ‐

$ 30,000

Recreation Budget

$ 249,220

$ 272,100

$ 285,300

$ 321,200

$ 168,303

Recreation Actual

$ ‐

$ 39,000

$ 135,030

$ ‐

$ 10,750


Unassigned Net Position


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All reserves are at or over the policy established minimum. The financial strength of the Town can be measured by the health of its reserves. Bond rating agencies look closely at the reserve levels and the financial policies in place when rating a municipality. In 2010, 2013, and 2016 the rating agencies reviewed the Town’s credit ratings in preparation for the issuance of the 2010, 2013 and 2016 Bonds. They cited the Town’s healthy reserves, solid fiscal policies, and conservative management practices as some of the reasons for our exceptional bond ratings. Moody’s Investors Service gave the Town an Aa1 for the Revenue Bonds and confirmed the Town’s Aaa issuer credit rating. Standard and Poor’s has recently upgraded the credit rating on the Revenue bonds to AAA and confirmed the Town’s issuer credit rating of AAA. These Revenue Bond ratings and issuer credit ratings are the highest ratings these two services issue and represent the highest quality investment grade debt.


The table and the chart on the following page summarize the trend of the unassigned net position, compensated absence, and replacement reserve balances for fiscal year ending FY13 through FY17.



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TOWN OF PALM BEACH


Reserve Balances Fiscal Years 2013 – 2017


Fund

2013

2014

2015

2016

2017

General Fund

$ 20,043,760

$ 22,298,680

$ 22,267,051

$ 21,615,082

$ 17,716,419

Compensated Absence (GF)

3,390,226

3,456,532

3,168,789

3,061,180

3,210,518

Equipment Replacement Fund

12,625,048

12,232,932

13,304,714

14,918,663

15,889,600

Recreation Enterprise Fund

486,466

1,025,665

179,645

169,291

777,250

Recreation ERF

472,319

472,319

584,638

583,475

651,225

Dock Replacement

2,551,321

2,715,680

2,880,038

3,356,781

3,801,256

Par 3 M&I Reserve

212,375

279,252

351,246

388,132

442,910

Tennis M&I reserve

31,075

38,459

46,320

53,852

61,142

Par 3 Clubhouse M&I

0

0

147,602

327,485

287,426

Donation Fund

526,299

611,943

564,368

1,180,331

3,018,697

Debt Service

263,400

1,745,086

1,567,384

955,441

1,569,976

Capital Improvement

4,990,855

5,670,416

5,898,531

5,506,265

6,325,066

Coastal Protection Fund

15,448,556

38,017,024

24,072,085

13,810,648

19,661,966

2013 ACIP Fund

0

43,347,077

34,967,926

20,196,064

12,095,772

Health Fund

4,025,042

5,025,134

5,740,869

6,507,339

6,904,823

Risk Fund

6,625,018

7,297,409

8,071,236

8,458,781

7,578,199

Health - OPEB Trust

24,814,790

27,628,798

26,629,096

28,401,183

31,275,719

Pension Funds

210,469,896

216,001,372

190,764,490

194,010,680

209,822,728

Total

$ 306,976,446

$387,863,778

$ 341,206,028

$ 323,500,673

$ 341,090,692


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TOWN OF PALM BEACH


Excess Reserves


Many of the Town reserves must be maintained at a minimum level set by policy or based on recommendations of the Town’s actuarial firms. The various capital fund reserves represent funds that have been accrued for future projects, or in the case of the 2013 ACIP funds, the remaining bond funds available for projects. The chart below shows the FY17 ending balance, minimum reserve amount and excess reserve balances.


Fund

2017 Reserve Balance

Minimum Required Balance

Excess Reserves

General Fund

$ 17,716,419

$ 16,550,472

$ 1,165,947

Compensated Absence (GF)

3,210,518

3,210,518

0

Equipment Replacement Fund

15,889,600

14,492,216

1,397,384

Recreation Enterprise Fund

777,250

777,250

0

Recreation ERF

651,225

651,225

0

Dock Replacement

3,801,256

3,801,256

0

Par 3 M&I Reserve

442,910

442,910

0

Tennis M&I reserve

61,142

61,142

0

Par 3 Clubhouse M&I

287,426

287,426

0

Donation Fund

3,018,697

3,018,697

0

Debt Service

1,569,976

0

1,569,976

Capital Improvement

6,325,066

6,325,066

0

Coastal Protection Fund

19,661,966

19,661,966

0

2013 ACIP Fund

12,095,772

12,095,772

0

Health Fund

6,904,823

1,621,175

5,283,648

Risk Fund

7,578,199

4,000,000

3,578,199

Health - OPEB Trust

31,275,719

27,963,573

3,312,146

Pension Funds

209,822,728

209,822,728

0

Total

$ 341,090,692