FY2017 – FY2026

FY2017 – FY2026


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Town of Palm Beach

Long Term Financial Plan FY2017 – FY2026


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PREPARED BY: FINANCE DEPARTMENT

33480 | www.townofpalmbeach.com

33480 | www.townofpalmbeach.com

360 SOUTH COUNTY ROAD, PALM BEACH, FL

Presentation at the March 30, 2017, Special Town Council Meeting

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 45

General Fund Expenditure Forecast Details 46

Recreation Enterprise Fund Trend Analysis 47

Recreation Enterprise Fund Forecast Summary 54

Capital Funds 58

Other Funds 62

Reserve Analysis 71


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 that 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:


We look forward to working with the Town Council on the FY18 budget.


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Town of Palm Beach | 4

Town of Palm Beach

Revenue and Expenditure History FY2008 - FY2017


FY08 Actual

FY09 Actual

FY10 Actual

FY11 Actual

FY12 Actual

FY13 Actual

FY14 Actual

FY15 Actual

FY16 Actual

FY17 Budget

Revenues

Ad Valorem Taxes

41,457,250

42,887,216

41,508,570

36,635,343

36,662,916

37,473,108

39,110,926

43,869,888

47,890,700

49,494,500

Non Ad Valorem Taxes

7,281,836

7,386,397

7,371,330

7,189,368

7,315,317

7,533,859

7,946,097

8,056,312

8,061,358

8,103,000

Licenses & Permits

7,773,244

5,543,034

4,777,557

6,382,545

6,498,207

7,572,518

8,053,581

10,657,676

10,096,673

7,303,500

Intergovernmental

1,248,316

1,485,128

1,101,206

1,319,119

1,051,432

990,715

1,071,413

1,102,689

1,122,465

1,178,500

Charges for Services

2,808,506

3,278,180

3,215,943

3,461,766

4,081,259

3,576,156

3,741,183

3,957,603

4,123,243

3,816,550

Fines and Forefeitures

1,183,318

1,152,807

594,473

1,297,226

1,106,435

1,253,760

1,924,182

1,099,525

1,016,089

1,255,000

Investment Earnings

1,368,751

1,923,224

1,168,997

495,649

495,311

32,425

383,726

597,585

490,102

704,339

Miscellaneous and Transfers

924,286

801,901

1,930,162

2,774,498

1,534,738

1,871,043

1,584,625

1,098,106

1,117,897

1,030,758

Total Operating Revenues

64,045,507

64,457,887

61,668,238

59,555,514

58,745,615

60,303,584

63,815,733

70,439,384

73,918,527

72,886,147

Transfers from Fund Balance

3,966,230

Total Revenues

64,045,507

64,457,887

61,668,238

59,555,514

58,745,615

60,303,584

63,815,733

70,439,384

73,918,527

76,852,377


Expenditures

Salaries and Wages

25,280,657

27,346,557

26,359,064

24,396,538

23,627,363

22,943,974

23,152,224

23,478,697

23,581,853

24,737,579

Pension Benefits

7,218,551

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

DC Plan Benefits

-

-

222,307

537,532

1,088,013

1,132,126

1,132,836

942,432

Other Employee Benefits

6,323,368

7,285,058

6,913,472

6,601,573

6,616,971

6,736,760

6,741,912

6,680,817

6,627,932

6,808,159

Contractual

8,120,662

8,709,551

7,070,741

6,963,078

7,139,390

7,224,092

7,602,595

8,191,690

8,876,307

9,432,209

Commodities

2,051,710

1,748,218

1,627,774

1,484,765

1,547,738

1,554,104

1,642,397

1,517,617

1,438,222

1,810,844

Equipment Replacement

3,282,121

2,723,701

2,518,060

2,547,679

1,881,319

2,033,744

2,097,896

1,893,244

2,858,676

2,694,682

Library Services

259,350

272,400

272,400

272,400

272,400

288,989

297,659

306,580

315,777

325,250

Other

116,392

55

(2,075)

9,172

12,932

29,863

4,251

Transfer to Capital Improvement

2,096,000

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

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

Transfer to the Underground Utility Fund

-

-

2,530,250

Transfer to Retirement Fund

-

-

2,500,000

Debt Service

3,652,000

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

Retiree Health

1,466,000

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

Transfer to Risk Insurance Fund

2,392,000

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

Contingency

-

-

960,300

Total Expenditures

62,258,811

65,880,608

65,315,275

61,566,112

56,245,053

58,107,525

65,286,564

70,634,460

72,000,082

76,852,377

Surplus/(Deficit)

1,786,696

(1,422,721)

(3,647,037)

(2,010,598)

2,500,562

2,196,059

(1,470,831)

(195,076)

1,918,445


Page 5

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Town of Palm Beach

Revenue and Expenditure Forecast LTFP FY2017 - FY2026


FY17

FY18

FY19

FY20

FY21

FY22

FY23

FY24

FY25

FY26

Revenues

Ad Valorem Taxes

49,494,500

51,103,071

52,763,921

54,478,749

56,249,308

58,077,410

59,964,926

61,913,786

63,925,984

66,003,579

Non Ad Valorem Taxes

8,103,000

8,342,760

8,589,646

8,843,871

9,105,653

9,375,218

9,652,798

9,938,632

10,232,966

10,536,053

Licenses & Permits

7,303,500

7,376,100

7,381,100

7,416,380

7,416,380

7,453,424

7,571,424

7,610,320

7,660,320

7,701,161

Intergovernmental

1,178,500

1,142,570

1,173,023

1,197,276

1,222,111

1,247,541

1,273,581

1,300,247

1,327,554

1,355,518

Charges for Services

3,816,550

3,936,900

4,021,013

4,088,451

4,157,812

4,229,152

4,302,527

4,377,998

4,455,624

4,535,468

Fines and Forefeitures

1,255,000

1,238,000

1,262,760

1,266,575

1,288,015

1,293,831

1,299,821

1,305,990

1,312,344

1,318,888

Investment Earnings

704,339

1,000,000

1,325,000

1,600,000

1,800,000

1,950,000

2,050,000

2,200,000

2,300,000

2,400,000

Miscellaneous and Transfers

1,030,758

879,580

780,692

681,838

683,018

684,234

685,486

686,775

688,104

689,472

Total Operating Revenues

72,886,147

75,018,981

77,297,155

79,573,140

81,922,297

84,310,810

86,800,563

89,333,748

91,902,896

94,540,139

Transfers from Fund Balance

3,966,230

1,551,268

1,586,421

1,613,259

1,646,608

1,678,983

1,713,920

1,750,518

1,786,842

1,822,445

Total Revenues

76,852,377

76,570,249

78,883,576

81,186,399

83,568,905

85,989,793

88,514,483

91,084,266

93,689,738

96,362,584


Expenditures

Salaries and Wages

24,737,579

25,117,162

25,853,401

26,100,775

26,627,954

27,162,702

28,054,797

29,025,720

30,029,077

31,068,004

Pension Benefits

7,819,957

8,961,987

9,706,228

10,576,237

11,335,240

11,596,466

11,892,222

12,173,806

12,461,878

12,748,675

DC Plan Benefits

942,432

584,999

601,904

614,737

626,960

642,376

662,594

685,258

708,589

732,721

Other Employee Benefits

6,808,159

7,080,608

7,383,991

7,639,623

7,943,678

8,320,767

8,753,114

9,194,086

9,673,852

10,179,721

Contractual

9,432,209

9,614,545

9,818,264

10,057,296

10,270,433

10,488,104

10,710,407

10,937,439

11,169,302

11,406,100

Commodities

1,810,844

1,851,976

1,883,372

1,922,928

1,963,314

2,004,549

2,046,650

2,089,635

2,133,523

2,178,332

Equipment Replacement

2,694,682

2,269,742

2,315,118

2,361,448

2,408,750

2,457,045

2,506,355

2,556,700

2,608,102

2,660,413

Library Services

325,250

335,008

345,058

355,409

366,073

377,054

388,366

400,016

412,017

424,377

Transfer to Capital Improvement

2,290,200

2,420,000

2,662,000

2,928,200

3,221,020

3,543,122

3,720,278

3,906,292

4,101,607

4,306,687

Transfer to Coastal Protection

7,265,000

7,482,950

7,707,439

7,938,662

8,176,822

8,422,126

8,674,790

8,935,034

9,203,085

9,479,177

Debt Service

6,088,728

5,982,331

5,989,806

5,981,981

5,944,231

5,941,981

5,943,981

5,944,856

5,954,106

5,946,606

Retiree Health

1,339,000

1,350,000

1,450,000

1,400,000

1,449,000

1,518,000

1,625,000

1,750,000

1,751,000

1,840,000

Transfer to Risk Insurance Fund

1,838,037

1,842,223

1,869,148

1,905,754

1,949,340

2,024,308

2,102,003

2,182,445

2,265,810

2,352,235

Extraordinary Transfer to Retirement Fund

2,500,000

Contingency

960,300

1,013,018

1,048,171

1,075,009

1,108,358

1,140,733

1,175,670

1,212,268

1,248,592

1,284,195

Total Expenditures

76,852,377

75,906,549

78,633,900

80,858,059

83,391,173

85,639,333

88,256,227

90,993,555

93,720,540

96,607,243

Surplus/(Deficit)

663,700

249,676

328,340

177,732

350,460

258,256

90,711

(30,802)

(244,659)


Page 6


Summary of Operating Revenue


2017

Budget

2018

Budget

2019

Budget

2020

Budget

2021

Budget

2022

Budget

2023

Budget

2024

Budget

2025

Budget

2026

Budget

Revenues

Youth Program Fees

295,500

147,367

425,824

434,340

443,027

451,888

460,926

470,144

479,547

489,138

Adult Program Fees

27,000

22,909

46,564

47,495

48,445

49,414

50,402

51,410

52,439

53,487

Facility Rental Fees

1,500

0

15,480

15,944

16,423

16,915

17,423

17,946

18,484

19,038

Seaview Park Concession

1,200

0

4,724

4,866

5,012

5,162

5,317

5,476

5,641

5,810

Promotional Merchandise

1,200

0

1,974

2,033

2,094

2,157

2,222

2,288

2,357

2,428

Tennis Mixers

4,300

4,429

4,562

4,699

4,840

4,985

5,134

5,288

5,447

5,611

Tennis Program Fee

1,800

1,800

1,800

1,800

1,800

1,800

1,800

1,800

1,800

1,800

Tennis 12 Play Pass

35,500

36,565

37,662

38,792

39,956

41,154

42,389

43,661

44,970

46,319

Tennis Daily Court Fees

31,000

31,930

32,888

33,875

34,891

35,937

37,016

38,126

39,270

40,448

Tennis Annual Pass Fees

55,000

56,650

58,350

60,100

61,903

63,760

65,673

67,643

69,672

71,763

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

8,100

8,343

8,593

8,851

9,117

9,390

9,672

9,962

10,261

10,569

Tennis Facility Rentals

3,500

3,605

3,713

3,825

3,939

4,057

4,179

4,305

4,434

4,567

Tennis Merchandise

16,000

16,480

16,974

17,484

18,008

18,548

19,105

19,678

20,268

20,876

Tennis Teaching Services

65,000

63,500

65,405

67,367

69,388

71,470

73,614

75,822

78,097

80,440

Annual Leases

2,800,000

2,884,000

2,970,520

3,059,636

3,151,425

3,245,967

3,343,346

3,443,647

3,546,956

3,653,365

Seasonal Leases

185,000

190,550

196,267

202,154

208,219

214,466

220,900

227,527

234,352

241,383

Transient

475,500

489,765

504,458

519,592

535,179

551,235

567,772

584,805

602,349

620,420

Electricity

140,000

140,000

140,000

140,000

140,000

140,000

140,000

140,000

140,000

100,000

Waiting List Fee

3,000

3,000

3,000

3,000

3,000

3,000

3,000

3,000

3,000

3,000

Ice Sales

800

824

849

874

900

927

955

984

1,013

1,044

Replacement Reserve

50,000

0

0

0

0

0

0

0

0

0

Sales Tax Commissions ‐Other

200

206

212

219

225

232

239

246

253

261

Misc Revenue Docks

50,000

500

515

530

546

563

580

597

615

633

Golf Pro Administrative Fee

2,000

15,000

15,000

15,000

15,000

15,000

15,000

15,000

15,000

15,000

Golf Resident Pass Fees

19,500

20,085

20,688

21,308

21,947

22,606

23,284

23,983

24,702

25,443

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

13,000

13,390

13,792

14,205

14,632

15,071

15,523

15,988

16,468

16,962

Greens Fees

748,800

763,776

779,052

794,633

810,525

826,736

843,270

860,136

877,339

894,885

Golf Riding Cart Rental

207,000

213,210

219,606

226,194

232,980

239,970

247,169

254,584

262,221

270,088

Golf Pull Cart Rental

35,000

36,050

37,132

38,245

39,393

40,575

41,792

43,046

44,337

45,667

Golf Driving Range

94,000

96,820

99,725

102,716

105,798

108,972

112,241

115,608

119,076

122,649

Golf Maint & Improve Fee

101,000

104,030

107,151

110,365

113,676

117,087

120,599

124,217

127,944

131,782

Club Rentals

51,000

52,530

54,106

55,729

57,401

59,123

60,897

62,724

64,605

66,543


Page 7


Golf Teaching Services

34,000

34,680

35,374

36,081

36,803

37,539

38,290

39,055

39,836

40,633

Golf Merchandise

176,000

179,520

183,110

186,773

190,508

194,318

198,205

202,169

206,212

210,336

Golf F&B Revenue (Restaurant)

387,000

390,870

394,779

398,726

402,714

406,741

410,808

414,916

419,066

423,256

Programs & Events

16,000

16,480

16,974

17,484

18,008

18,548

19,105

19,678

20,268

20,876

Golf Outings

32,000

32,960

33,949

34,967

36,016

37,097

38,210

39,356

40,537

41,753

Gift Certificates

5,000

5,100

5,202

5,306

5,412

5,520

5,631

5,743

5,858

5,975

Interest Earnings

13,700

25,000

25,000

25,000

25,000

25,000

25,000

25,000

25,000

25,000

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

0

0

0

0

0

0

0

0

0

0

TOTAL REVENUES

6,207,900

6,123,973

6,603,277

6,772,779

6,946,993

7,126,052

7,310,096

7,499,266

7,693,710

7,853,579

15.0%

‐1.4%

7.8%

2.6%

2.6%

2.6%

2.6%

2.6%

2.6%

2.1%


Page 8


Summary of Operating Expenses


2017

Budget

2018

Budget

2019

Budget

2020

Budget

2021

Budget

2022

Budget

2023

Budget

2024

Budget

2025

Budget

2026

Budget

Expenses

Salaries/Wages

1,354,465

1,418,928

1,584,187

1,626,801

1,666,170

1,714,156

1,762,666

1,820,305

1,879,647

1,940,924

Pension Benefits ‐ DB

200,340

219,332

232,624

249,605

265,330

274,935

283,403

293,181

302,826

312,820

Pension Benefits ‐ DC

81,794

83,274

85,423

87,721

89,844

92,431

95,047

98,155

101,355

104,659

Other Employee Benefits

354,183

371,007

387,368

400,848

416,882

436,768

459,567

482,821

508,121

534,797

Contractual

1,563,947

1,437,271

1,715,400

1,749,708

1,784,702

1,820,396

1,856,804

1,893,940

1,931,819

1,970,455

Commodities

539,152

344,168

381,386

389,013

396,794

404,730

412,824

421,081

429,502

438,092

Capital Outlay

0

0

0

0

0

0

0

0

0

0

TOTAL OPERATING EXPENSES

4,093,881

3,873,980

4,386,387

4,503,697

4,619,722

4,743,416

4,870,312

5,009,483

5,153,271

5,301,747

14.4%

‐5.4%

13.2%

2.7%

2.6%

2.7%

2.7%

2.9%

2.9%

2.9%

Operating Revenues

over/(under) Expenses

2,114,019

2,249,993

2,216,890

2,269,082

2,327,271

2,382,637

2,439,784

2,489,783

2,540,439

2,551,831

Capital Expenses

(679,519)

(193,500)

(293,500)

(172,000)

(215,500)

(81,000)

(81,000)

(120,000)

(51,000)

(78,000)

Depreciation*

(955,329)

(1,075,391)

(1,197,974)

(1,323,132)

(1,350,917)

(1,379,287)

(1,408,252)

(1,437,825)

(1,468,019)

(1,498,848)

Depreciation (Credited to show cash)

955,329

1,075,391

1,197,974

1,323,132

1,350,917

1,379,287

1,408,252

1,437,825

1,468,019

1,498,848

Transfer to General Fund

(685,000)

(585,000)

(485,000)

(385,000)

(385,000)

(385,000)

(385,000)

(385,000)

(385,000)

(385,000)

Debt Service

(185,967)

(198,263)

(199,338)

(199,813)

(194,813)

(194,688)

(194,313)

(193,688)

(187,938)

(191,938)

Contingency (5% operating expenses)

(321,200)

(193,699)

(219,319)

(225,185)

(230,986)

(237,171)

(243,516)

(250,474)

(257,664)

(265,087)

TOTAL REVENUES

OVER/(UNDER) EXPENSES


242,333


1,079,531


1,019,732


1,287,084


1,300,971


1,484,778


1,535,955


1,540,621


1,658,838


1,631,806



The funding for Capital Improvement Pay-as-you-go fund and the Coastal Management Program comes from the General Fund. In 2015, the Town Council approved a property tax increase to fund the Coastal Protection plan, and in 2016 the Town Council approved an increase to the annual funding.


The Capital Improvement Pay-as-you-go fund transfer was increased from $1,030,000 in FY16 to $2,290,200 in FY17. This increase was to begin to build up reserves to fund future projects. The forecast projects a 10% increase in this funding per year through FY22.



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Town of Palm Beach | 58


The following chart shows the transfers from the General fund for capital and coastal projects FY17 and the next 4 years.


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The following chart summarizes the projected capital project expenditures for FY17 through FY21.


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Town of Palm Beach | 59


The following pie chart shows the capital project expenditures by category of expenditure for FY17 through FY21.


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Details of the specific projects represented above can be found in the FY17 budget document in the Capital Funds section of the document. Recreation Enterprise Fund projects are in the Recreation Enterprise fund section of the budget document.


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Town of Palm Beach | 60

Town of Palm Beach Capital Project Funds Five Year Projection


Fund

Description

FY2017

FY2018

FY2019

FY2020

FY2021

Total

Pay‐as‐you‐go

Beginning Balance

General Fund Transfer Interest Earnings

WPB Water Main Improvements Projects

5,506,265

2,290,200

66,600

800,000

(3,156,800)

5,506,265

2,420,000

67,000

800,000

(3,786,603)

5,006,662

2,662,000

67,000

800,000

(5,823,200)

2,712,462

2,928,200

67,000

800,000

(5,162,200)

1,345,462

3,221,020

67,000

800,000

(5,273,200)

5,506,265

13,521,420

334,600

4,000,000

(23,202,003)

Ending Balance

5,506,265

5,006,662

2,712,462

1,345,462

160,282

160,282

Coastal

Beginning Balance

General Fund Transfer Interest Earnings Projects

3,609,835

7,265,000

81,038

(3,356,715)

7,599,158

7,482,950

236,955

(4,111,038)

11,208,025

7,707,439

236,233

(4,316,038)

14,835,659

7,938,662

363,200

(4,674,538)

18,462,983

8,176,822

490,156

(26,308,538)

3,609,835

38,570,873

1,407,582

(42,766,867)

Ending Balance

7,599,158

11,208,025

14,835,659

18,462,983

821,423

821,423

2013 Bond Issue

Beginning Balance

Projects

20,196,064

(7,257,692)

12,938,372

(4,455,000)

8,483,372

(8,483,372)

20,196,064

(20,196,064)

Ending Balance

12,938,372

8,483,372

Recreation

Beginning Balance

General Fund Transfer Mandel Foundation Grant

Friends of Recreation Donations FRDAP Grant

Al Fresco ‐ 1/2 of Veranda Project Maint & Improve Reserves Undesignated Reserves

Interest Earnings Projects


50,000

33,000

466,000

241,789

13,700

(804,489)

800,000

4,366,000

5,000,000

139,500

26,000

14,000

(10,345,500)

4,200,000

410,000

336,000

14,000

(4,960,000)

108,500

86,000

14,000

(208,500)

97,500

11,000

14,000

(122,500)

5,000,000

4,366,000

5,000,000

50,000

33,000

1,221,500

700,789

69,700

(16,440,989)

Ending Balance

Town‐wide Undergrounding


Beginning Balance

Debt Financing/Assessments Projects


11,950,000

(11,950,000)


9,260,000

(9,260,000)


10,940,000

(10,940,000)


10,420,000

(10,420,000)


14,270,000

(14,270,000)


56,840,000

(56,840,000)

Ending Balance


61


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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Town of Palm Beach | 62



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 and 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. The annual deficit that is forecasted is the use of reserves to fund the uninsured loss budget. In a typical year, funds are returned to the reserves as noted in the above chart so no deficits actually occur, unless we have an extraordinary year of claims.


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63 | Town of Palm Beach


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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Town of Palm Beach | 64


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The Health Fund forecast assumes an increase in FY18 of 7% and then annual increases of 6.5% for health insurance costs through the remainder of the forecast period. 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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65 | Town of Palm Beach


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 conducted as of September 30, 2016. The Town’s Actuarial Accrued Liability as of September 30, 2016 was determined to be $34,693,373. The Unfunded Actuarial Accrued Liability (UAAL) is $6,120,414, resulting in a funded ratio of 82.4%. The annual budgeted contribution for FY17 is $1,339,000. In 2013, the Investment Advisory Committee approved a reduction in the interest rate assumption from 8% to 7.5%. The Investment Advisory Committee is considering a further decrease to 7% and is studying this matter at a future meeting with the new investment consultant.


The trend in revenues and expenditures since 2008 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 increase in revenue in 2013 was due to better than expected investment performance.


The Trust’s net assets declined in 2008 due to the decline in the stock market. Contributions and improved returns in the market have improved the net asset reserves for this fund.


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Town of Palm Beach | 66


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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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67 | Town of Palm Beach


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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Town of Palm Beach | 68



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 FY17 through FY26 is shown in the chart below:


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69 | Town of Palm Beach



The total principal debt outstanding for the all debt recorded as of this forecast for FY17 through FY26 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 2017 through 2026 is shown below:


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Town of Palm Beach | 70


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 FY17 General Fund operating budget (General Fund budget less CIP, coastal and extraordinary retirement transfer) is

$16,199,294. The FY16 ending fund balance was

$21,615,082. The unassigned fund balance exceeds the minimum requirement by $5,415,788.


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 FY16, the Town Council authorized the transfer of $2,530,250 to begin to fund the underground utility project. In addition, contained in the FY17 budget is a extraordinary transfer of $2,500,000 to the Retirement Fund to begin to reduce the UAAL. The fund balance amount of $21,615,082 is net of these two transfers.


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Reserves - Risk Fund


The total reserve balance for the Risk Fund was

$8,458,781 as of September 30, 2016. 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 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.


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Town of Palm Beach 71


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 $1,551,975 for FY17. 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 FY16, the net asset balance for the Recreation Enterprise Fund (REF) was

$4,999,782. 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 FY16, $3,356,781 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.


The Par 3 Golf Course charges an additional $2 per round to fund a maintenance and improvement reserve. At the end of FY16, the balance is $388,132.


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 FY16, the balance is $327,485.


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Town of Palm Beach 72


In FY10, a maintenance and improvement fee was implemented for the Tennis program. This reserve at the end of FY16 is $53,852 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 FY16 is $583,475.


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 FY16 is

$14,918,663. 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 $1,354,221 remains available. In FY14, the Town Council authorized a transfer of

$2,858,913 in excess reserves to the coastal protection fund.


For FY17, income including the depreciation transfer will total $2,414,133 and expenditures for capital equipment are budgeted at $2,135,219.


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 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, 2016, was

$3,061,180. The FY17 appropriation for the pay-out of eligible accrued vacation, sick and compensatory time from this reserve is $505,930.


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Town of Palm Beach 73


Health Insurance Reserve


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The balance of the reserve in the Health Fund at the end FY16 is $6,507,339. 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.


Capital Improvement Fund


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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. Since 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.


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 $28,401,183 as of September 30, 2016. The actuarially determined transfer from the General Fund for the OPEB liability for FY17 is $1,339,000. The Town continues to be well ahead of other government agencies in funding this liability.


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Town of Palm Beach 74


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 FY16 were $194,010,680. 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 1.5% of the FY17 operating budget. The Capital Fund Contingency 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 2013 through YTD 2017.

Contingency Reserves FY2013 – FY2017

Contingency

2013

2014

2015

2016

YTD2017

General Fund Budget General Fund Actual

843,000

556,668

860,000

356,300

909,000

246,361

944,686

764,145

960,300

171,902

CIP Budget CIP Actual

201,000

201,000

205,000

-0-

205,000

205,000

208,000

208,000

348,600

-0-

ERF Budget ERF Actual

500,000

156,528

500,000

136,869

500,000

-0-

500,000

29,111

500,000

-0-

Risk Budget Risk Actual

500,000

-0-

500,000

-0-

500,000

-0-

500,000

-0-

500,000

-0-

Health Budget Health Actual

500,000

-0-

500,000

-0-

500,000

-0-

500,000

-0-

500,000

-0-

Recreation Budget Recreation Actual

235,600

35,000

249,220

-0-

272,100

39,000

285,300

135,030

321,200

-0-


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Town of Palm Beach 75


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 issued a AA+ credit rating on the Revenue bonds 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 below and on the following page summarize the trend of the unassigned net position, compensated absence, and replacement reserve balances for fiscal year ending FY12 through FY16.

Reserve Balances Fiscal Years 2012 – 2016


Fund

2012

2013

2014

2015

2016

General Fund

21,424,261

20,043,760

22,298,680

22,267,051

21,615,082

Compensated Absence (GF)

3,315,135

3,390,226

3,456,532

3,168,789

3,061,180

Equipment Replacement Fund

14,870,188

12,625,048

12,232,932

13,304,714

14,918,663

Recreation Enterprise Fund

707,381

486,466

1,025,665

179,645

169,291

Recreation ERF

397,132

472,319

472,319

584,638

583,475

Dock Replacement

2,395,723

2,551,321

2,715,680

2,880,038

3,356,781

Par 3 M&I Reserve

162,138

212,375

279,252

351,246

388,132

Tennis M&I reserve

23,867

31,075

38,459

46,320

53,852

Par 3 Clubhouse M&I

0

0

0

147,602

327,485

Capital Improvement

5,623,928

4,990,855

5,670,416

5,898,531

5,506,265

Health Fund

3,234,334

4,025,042

5,025,134

5,740,869

6,507,339

Risk Fund

7,990,553

6,625,018

7,297,409

8,071,236

8,458,781

Health - OPEB Trust

20,942,253

24,814,790

27,628,798

26,629,096

28,401,183

Pension Funds

187,286,530

210,469,896

216,001,372

190,764,490

194,010,680

Total

268,373,423