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TOWN OF PALM BEACH LONG TERM FINANCIAL PLAN


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FY2014

– FY2024

PREPARED BY: FINANCE DEPARTMENT

360 South County Road, Palm Beach FL 33480 www.townofpalmbeach.com


TABLE OF CONTENTS


Table of Contents

Introduction 1

Current Status of FY14 Budget 2

Reserve Status 6

General Fund Trend Analysis 12

Initiatives to Restore and Maintain Fiscal Stability……………………………………………………………………………….12 Revenue Trends 17

Expenditure Trends 25

General Fund Forecast Summary 46

Recreation Enterprise Fund 62

Recreation Enterprise Trends 62

Recreation Enterprise Forecast. 68

Other Funds 72


INTRODUCTION


Long Term Financial Plan Overview


The National Advisory Council on State and Local Budgeting (NACSLB) recommends 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 Town of Palm Beach has prepared a Long Term Financial Plan every year since 2003 except in 2008, when a more extensive Comprehensive Review of Town Operations (CRTO) was completed. 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:



Financial planning expands a government’s awareness of potential problems and opportunities, and of options for addressing them. The long-term revenue, expenditure and service implications of continuing or ending existing programs or adding new programs, services and debt can be identified. The financial planning process helps shape decisions and permits necessary and corrective action to be taken before problems become more severe.


A financial plan does not state what is certain to happen. Rather, it highlights significant issues or problems that must be addressed if goals are to be achieved and provides forecasts of results expected if certain actions are taken.


The emphasis of this document is on the Town’s General Fund. Forecast and trend information on the Recreation Enterprise Fund, Risk Insurance Fund, Health Insurance Fund, OPEB Trust Fund, and Debt Service Funds are also included in this document.


This LTFP will be presented at the Town Council meeting on April 8, 2014, in the Town Council Chambers.


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Town of Palm Beach | 1


Status of the FY14 Budget


The FY14 budget is 9.54% more than the FY13 budget., due primarily to a $2.6 million increase in annual debt service and a $4.2 million transfer to the Coastal Protection Fund. Personnel count was reduced by 5 positions, bringing the total reduction in employees since FY07 to 66.79 (all by attrition with no layoffs). A monthly financial report has been sent to the Mayor and Town Council detailing the status of revenues and expenditures in the General Fund, Recreation Enterprise Fund and summary information for other funds.


General Fund Revenues


Overall, revenues for FY14 are expected to exceed the budget estimates. Several of the budgeted revenues for FY14 are under the budget standard through February. These include utility taxes, franchise fees, sales and use taxes, building permit, public safety revenues, code violations, rents, and investment income. Utility taxes, sales and use taxes, franchise fees, and state shared revenue are below the budget standard, but above FY13 collections. None of these revenue sources represent cause for concern. We will be monitoring these revenue accounts closely for the remainder of the fiscal year and will continue to provide a monthly financial update to the Mayor and Town Council.


General Fund Expenditures


Through February, expenditures for most departments were below the budget standard. General Government, Information Systems, and Library Services are above the budget standard. General Government is over budget due to payments made for the vacation buy-back program in November; this program is expected be at or below the budget standard by the end of the fiscal year. Information Systems is over budget due to annual payments made for software support; this program is expected be at or below the budget standard by the end of the fiscal year. Library Services is over the budget standard due to the first of two installment payments made to the Four Arts Library; this program is expected be at the budget standard by the end of the fiscal year. All of these overages are planned expenditures that present no cause for concern. All other operating departments are below the budget standard.


Summary


Year to date revenues are $1,839,544 more than FY13 revenues as of the end of February. Expenditures for FY14 are $1,433,665 more than expenditures through February 2013.


Unless the revenue status worsens, or if Palm Beach experiences a major storm event during the summer, we expect to end the year with a surplus.


Tables summarizing General Fund Revenues and Expenditures through February 2014 can be found on the next two pages.


General Fund Revenues


General Fund Revenues

For the Period Ended February 28, 2014 (42% of FY2014)

FY2014

Budget

FY2014

YTD Actual

% Budget vs. Actual

FY2013

Budget

FY2013

YTD Actual

% Budget vs. Actual

FY2013

Actual

% Budget vs. Actual

Ad Valorem Taxes

38,647,700

34,077,982

88.2%

36,865,400

32,440,082

88.0%

37,473,108

101.6%

Sales, Use and Fuel Taxes

310,000

100,339

32.4%

310,000

97,230

31.4%

299,081

96.5%

Utility Service Taxes

5,007,500

1,923,168

38.4%

4,957,500

1,859,745

37.5%

5,198,714

104.9%

Business Tax Receipts

665,500

604,681

90.9%

625,000

599,831

96.0%

666,789

106.7%

Building Permits

5,610,700

2,230,663

39.8%

5,333,300

2,279,092

42.7%

6,500,257

121.9%

Franchise Fees

2,050,000

474,301

23.1%

2,210,000

449,326

20.3%

2,036,065

92.1%

Other Licenses, Fees and Permits

369,000

232,871

63.1%

306,000

177,654

58.1%

459,522

150.2%

Federal and Local Grants

21,000

0

0.0%

3,850

3,861

100.3%

3,861

100.3%

State Shared Revenues

1,001,000

422,518

42.2%

996,600

346,446

34.8%

944,041

94.7%

Shared Revenues from Other Local Units

30,000

11,490

38.3%

20,000

32,420

162.1%

42,813

214.1%

Public Safety Fees

1,508,500

594,612

39.4%

1,582,700

597,349

37.7%

1,440,533

91.0%

Physical Environment Fees

1,218,925

938,218

77.0%

1,217,566

969,695

79.6%

1,264,060

103.8%

Transportation Fees

789,000

355,772

45.1%

811,000

315,863

38.9%

830,151

102.4%

Other Charges for Services

35,850

18,063

50.4%

40,850

14,414

35.3%

41,413

101.4%

Judgments and Fines

971,000

501,960

51.7%

1,087,000

396,989

36.5%

837,791

77.1%

Violations of Local Ordinances

210,000

43,650

20.8%

212,000

100,400

47.4%

416,394

196.4%

Interest and Other Earnings

425,373

136,008

32.0%

900,500

59,225

6.6%

32,425

3.6%

Rents and Royalities

98,845

0.0%

95,981

8,827

9.2%

69,606

72.5%

Disposition of Fixed Assets

0

0

0.0%

0

83,574

100.0%

425,474

100.0%

Miscellaneous Revenues

92,000

10,677

11.6%

94,000

5,404

5.7%

351,269

373.7%

Interfund Transfers

6,344,600

368,750

5.8%

5,841,588

368,750

6.3%

885,000

15.1%

Total Revenues

65,406,493

43,045,722

65.8%

63,510,835

41,206,178

64.9%

60,218,364

94.8%


General Fund Expenditures


General Fund Comparison of Expenditures Expenditures by Department

For the Period Ended February 28, 2014 (42% of FY2014)

FY2014

Budget

FY2014

YTD Actual

% Budget vs. Actual

FY2013

Budget

FY2013

YTD Actual

% Budget vs. Actual

FY2013

Actual

% Budget vs. Actual

Legislative

95,600

37,919

39.7%

95,600

27,218

28.5%

59,958

62.7%

General Government

788,300

476,905

60.5%

571,140

405,450

71.0%

623,738

109.2%

Town Manager

802,669

332,646

41.4%

741,371

302,375

40.8%

735,878

99.3%

Advice and Litigation

518,915

134,297

25.9%

468,915

219,552

46.8%

538,450

114.8%

Information Systems

1,867,798

986,996

52.8%

1,822,385

987,874

54.2%

1,812,592

99.5%

Human Resources

710,293

256,668

36.1%

679,988

229,162

33.7%

633,447

93.2%

Finance

1,956,080

803,953

41.1%

1,882,423

738,687

39.2%

1,835,107

97.5%

Planning, Zoning & Building

3,716,581

1,389,010

37.4%

3,600,142

1,314,886

36.5%

3,301,796

91.7%

Library

297,659

148,830

50.0%

288,989

136,200

47.1%

288,989

100.0%

Fire‐Rescue

11,031,311

4,330,179

39.3%

10,652,190

4,136,670

38.8%

10,267,593

96.4%

Police

13,507,634

5,060,004

37.5%

12,885,527

4,823,713

37.4%

11,996,206

93.1%

Public Works

14,523,703

5,722,020

39.4%

14,330,768

5,393,208

37.6%

13,051,893

91.1%

Emergency Management

47,950

771

1.6%

47,950

4,440

9.3%

5,581

11.6%

Transfers:

Capital Improvement Fund

1,000,000

416,665

41.7%

1,000,000

416,685

41.7%

1,000,000

100.0%

Coastal Protection Fund

4,200,000

1,750,000

41.7%

4,765,099

1,161,290

24.4%

4,765,099

100.0%

Debt Service Fund

6,100,000

1,458,335

23.9%

3,500,000

1,458,315

41.7%

3,500,000

100.0%

OPEB Trust Fund

1,506,000

627,500

41.7%

1,769,000

737,080

41.7%

1,769,000

100.0%

Risk Insurance Fund

1,876,000

782,425

41.7%

1,892,780

788,653

41.7%

1,922,571

101.6%

Contingency

860,000

0

0.0%

717,013

0

0.0%

0

0.0%

Total

65,406,493

24,715,122

37.8%

61,711,280

23,281,457

37.7%

58,107,899

94.2%

General Fund Comparison of Expenditures Expenditures by Type


FY2014

Budget


FY2014

YTD Actual


% Budget vs. Actual


FY2013

Budget


FY2013 YTD

Actual


% Budget vs. Actual


FY2013

Actual


% Budget vs. Actual

Salaries and Wages

24,298,881

8,898,237

36.6%

24,444,929

8,937,771

36.6%

22,943,974

93.9%

Pension Benefits

6,173,015

2,572,090

41.7%

4,495,764

1,873,235

41.7%

4,495,764

100.0%

Other Employee Benefits

8,415,555

3,857,028

45.8%

8,588,286

3,984,926

46.4%

8,379,116

97.6%

Contractual

8,472,843

4,244,984

50.1%

8,258,348

3,992,922

48.4%

9,116,873

110.4%

Commodities

1,701,960

577,266

33.9%

1,528,071

475,639

31.1%

1,584,342

103.7%

Capital Outlay

2,010,580

791,688

39.4%

2,084,014

844,473

40.5%

2,033,744

97.6%

Contingency

860,000

0

0.0%

843,000

0

0.0%

0

0.0%

Other

13,473,659

3,773,830

28.0%

11,468,868

3,172,490

27.7%

9,554,088

83.3%

Total

65,406,493

24,715,122

37.8%

61,711,280

23,281,457

37.7%

58,107,900

94.2%


Recreation Enterprise Fund

The revenues for the Recreation Center and investment earnings are under budget due to the seasonal nature of these programs and the current interest rate environment. Town Dock revenue is over budget due to the annual slip lease revenue. Tennis revenue is over the budget standard due to the sale of annual permits and Par 3 Golf Revenue is over budget due to increased play and the opening of the Par 3 clubhouse in January.


Expenses are over the budget standard for Town Docks due to the full payment for the annual submerged land lease. Equipment Replacement is over the budget standard due to the purchase of equipment for the Par 3 Golf Course. These items were planned expenditures that present no cause for concern.


Town of Palm Beach, Florida

Recreation Enterprise Fund Revenue and Expenditure Report February 28, 2014

Budget FY2014

YTD

Actual

% Budget vs Actual

Budget FY2013

YTD Actual 2013

% Budget vs Actual

Actual 2013

% Budget vs Actual

Revenues

Town Dock Revenue

3,183,500

3,123,518

98.12%

3,235,500

2,784,946

86.07%

3,036,368

93.85%

Recreation Center Revenue

347,000

84,620

24.39%

351,300

99,765

28.40%

315,150

89.71%

Tennis Revenues

230,100

124,839

54.25%

229,600

125,988

54.87%

187,083

81.48%

Par 3 Golf Revenue

1,198,600

562,668

46.94%

1,066,800

453,622

42.52%

943,337

88.43%

Investment Earnings

7,600

1,785

23.49%

17,500

6,445

36.83%

(2,219)

‐12.68%

Miscellaneous Revenue

17,600

48,086

273.22%

16,500

4,947

29.98%

19,005

115.18%

Total Revenues

4,984,400

3,945,516

79.16%

4,917,200

3,475,714

70.68%

4,498,723

91.49%

Expenditures

Administration

416,481

167,562

40.23%

341,715

144,110

42.17%

306,766

89.77%

Tennis

346,463

127,566

36.82%

342,666

122,721

35.81%

267,767

78.14%

Recreation Center

687,374

206,973

30.11%

671,435

209,587

31.21%

523,797

78.01%

Town Docks

865,332

392,541

45.36%

842,653

412,014

48.89%

755,437

89.65%

Par 3

1,050,337

425,342

40.50%

1,042,764

458,591

43.98%

920,883

88.31%

Equipment Replacement

80,200

42,288

52.73%

32,000

30,954

96.73%

58,354

182.36%

Debt Service ‐ Par 3

126,300

52,625

41.67%

128,000

53,335

41.67%

117,337

91.67%

Depreciation

597,900

0

0.00%

515,000

0

0.00%

0

0.00%

Total Expenditures

4,170,387

1,414,897

33.93%

3,916,233

1,431,311

36.55%

2,950,341

75.34%

Operating Revenue over/(und

814,013

2,530,619

1,000,967

2,044,403

1,548,382

Transfers and Contingency

(1,134,220)

(368,750)

(1,120,600)

(368,750)

(800,000)

Total Revenues over/(under)

(320,207)

2,161,869

(119,633)

1,675,653

748,382

% of Fiscal Year Completed: 42%


Town of Pa m 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 FY14 General Fund operating budget (General Fund budget less

coastal transfer) is $15,301,623. The FY13 ending fund balance was $20,043,760.


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.

For the FY14 budget, a transfer of $860,000 from

fund balance was used to fund the contingency reserve as directed by policy. During FY13, the Town Council approved a budget amendment transferring $2,000,000 from the undesignated fund balance to the coastal protection fund for future coastal projects and the FY14 budget contains an additional transfer of $4,000,000 to the coastal protection fund.


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Reserves - Risk Fund


The total reserve balance for the Risk Fund was

$8,625,018 as of September 30, 2013. 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

Included in the FY14

budget is a Town Council authorized the transfer of $2,000,000 of the excess Risk Fund

reserves to the Coastal Protection Fund. This amount has been deducted from the reserve balance. The trend for the Risk Fund Reserve is shown in the table.


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


The Recreation Enterprise Fund reserve is to be maintained at a minimum level of 25% of budgeted revenues totaling $1,246,100 for FY14. 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.


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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 FY13, the net asset balance for the Recreation Enterprise Fund (REF) was $3,753,556. 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 FY13,

2,551,321 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.


The Par 3 Golf Cour e charges an additional $2 per round to fund a maintenance and improvement

reserve.

At the end of FY13, the balance is $212,375.


In FY10, a maintenance and improvement fee was implemented for the Tennis program. This reserve at the end of FY13 is $31,075 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 FY13 is $472,319.


Equipment Replacement Fund


The Townwide Equipment Replacement Fun equipment, vehicles and computers when they

is intended to fund the replacement cost of existing

reach the end of their useful life.

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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 sched by GASB34.

le required


The balance in the Equipment Replacement Fund for year-end FY13 is $15,483,961. For

FY14, income including the depreciation transfer will total $1,959,535 and expenditures for capital equipment are budgeted at $3,010,895. An analysis of the reserves determined an excess balance of

$2,858,913 caused by the accumulated interest earned by the fund and identification of equipment that will not be replaced. The Town Council authorized a transfer of this excess amount to the

coastal protection fund for FY14. reserve is shown in the chart.

The transfer has been deducted from the total and the reduced


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, 2013, was

$3,390,226. The FY14 appropriation for the pay-out of eligible accrued vacation, sick and compensatory time from this reserve is $599,600.


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Health Insurance Reserve


The balance of the reserve in the Health Fund at the end FY13 is $4,025,042. 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.

The balance has been improving over the past 5 years.


OPEB (Other Post Employment Benefits) Trust


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The Town’s OPEB Trust Fund was established 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 is overseen by the Town’s

Investment Advisory Committee.

The net asset

balance in this trust is $24,814,790 as of

September 30, 2013.

The actuarially determined

transfer from the General Fund for the OPEB liability for FY14 is $1,506,000. 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 fund at

he end of FY12 were

$187,286,530. The balance at the end of FY13 is

$198,460,764.


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 FY14 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. In most years a small amount from the contingency is allocated for expenditures through an affirmative vote of the Town Council.


The table on the following page identifies the contingency budgets and actual expenditures for the fiscal years 2010 through 2014.


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Contingency Reserves FY2013 and FY2014


Contingency

2010

2011

2012

2013

2014

General Fund Budget

967,000

929,468

807,397

843,000

860,000

General Fund Actual

719,250

421,302

806,988

556,668

‐0‐

CIP Budget

432,500

186,000

181,000

201,000

205,000

CIP Actual

‐0‐

45,000

94,000

‐0‐

‐0‐

ERF Budget

500,000

500,000

500,000

500,000

500,000

ERF Actual

237,214

51,311

‐0‐

156,528

61,869

Risk Budget

500,000

500,000

500,000

500,000

500,000

Risk Actual

‐0‐

‐0‐

50,000

‐0‐

‐0‐

Health Budget

500,000

500,000

500,000

500,000

500,000

Health Actual

‐0‐

85,000

‐0‐

‐0‐

‐0‐

Recreation Budget

253,300

176,700

155,000

235,600

249,220

Recreation Actual

‐0‐

‐0‐

137,000

35,000

‐0‐


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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 and 2013, the rating agencies reviewed the Town’s credit ratings in preparation for the issuance of the 2010 and 2013 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 2010 and 2013 Revenue Bonds and confirmed the Town’s Aaa issuer credit rating. Standard and Poor’s issued a AA+ credit rating on the 2010 and 2013 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 on the following page summarize the trend of the unassigned net position, net asset balances, compensated absence, and replacement reserve balances for FY09 through FY13.


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Reserve Balances Fiscal Years 2009 – 2013



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2009

2011

2012

2013

Fund

2010

20,980,277

18,394,714

18,155,941

21,424,261

20,043,760

General Fund


3,333,242


3,065,810


3,621,915


3,315,135


3,390,226

Compensated Absence (GF)


10,840,088


11,667,524


13,672,222


14,870,188


12,625,048

Equipment Replacement Fund

1,050,115

294,764

413,966

707,381

486,466

Recreation Enterprise Fund

351,468

426,749

458,002

397,132

472,319

Recreation ERF

196,718

2,084,181

2,240,125

2,395,723

2,551,321

Dock Replacement

0

50,872

108,722

162,138

212,375

Par 3 M&I Reserve

0

8,446

16,418

23,867

31,075

Tennis M&I Reserve

1,845,717

2,565,197

2,683,896

3,234,334

4,025,042

Health Fund

7,620,642

6,669,596

6,863,675

7,990,553

6,625,018

Risk Fund

15,898,539

17,524,179

18,173,086

20,942,253

24,814,790

Health - OPEB Trust

163,129,393

174,544,804

170,564,741

187,286,530

198,460,764

Pension Fund

225,246,199

237,296,836

236,972,759

262,749,495

273,738,204

Total



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GENERAL FUND TREND ANALYSIS


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Initiatives

to Restore and Maintain Fiscal Stability


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| Town of Palm Beach

Initiatives to Restore and Maintain Fiscal Stability


In late 2007, Town staff presented a Comprehensive Review of Town Operations to identify costs savings measures and non-tax revenue increases. In the years since, the Town has implemented many of the recommendations from this review and researched and implemented many other cost savings measures in order to provide fiscal sustainability for the Town of Palm Beach taxpayers.

The budget peaked in FY09 due to soaring personnel and pension costs. The tables below show the FY09 vs. FY14 budget comparisons.



Revenue


FY2009


FY2014

FY09 vs. FY14

Difference

%

Change

Ad Valorem Taxes

$42,543,000

$38,647,700

($3,895,300)

-9.16%

Non Ad Valorem Taxes

7,043,000

7,367,500

324,500

4.61%

Licenses & Permits

5,612,900

6,588,200

975,300

17.38%

Intergovernmental

1,261,400

1,052,000

(209,400)

-16.60%

Charges for Services

3,158,400

3,552,275

393,875

12.47%

Fines and Forfeitures

1,521,200

1,181,000

(340,200)

-22.36%

Investment Earnings

1,201,300

425,373

(775,927)

-64.59%

Miscellaneous

309,300

247,845

(61,455)

-19.87%

Interfund Transfers

550,000

885,000

335,000

60.91%

Transfers From Reserves – Contingency/Compensated Absences

2,135,100

1,459,600

(675,500)

-31.64%

Total Revenue Budget

65,335,600

61,406,493

(3,929,107)

-6.01%

Fund Balance Transfer – Coastal Protection

2,000,000

4,000,000

2,000,000

100.0%

Total Revenues

$67,335,600

$65,406,493

($1,929,107)

-2.86%



Expenditure Category


FY2009


FY2014

FY09 vs. FY14

Difference

%

Change

Salary and Wages

$28,624,800

$24,298,881

($4,325,919)

-15.11%

Pension Benefits

6,649,700

6,173,015

(476,685)

-7.17%

Other Employee Benefits

9,166,730

8,415,555

(751,175)

-8.19%

Contractual

7,588,890

8,472,843

883,953

11.65%

Commodities

1,698,390

1,701,960

3,570

0.21%

Capital Outlay

2,804,666

2,010,580

(794,086)

-28.31%

Other

8,802,424

10,133,659

1,331,235

15.12%

Total Operating Expenditures

$65,335,600

$61,206,493

($4,129,107)

-6.32%

Coastal Transfer

2,000,000

4,200,000

2,200,000

110.00%

Total General Fund Budget

$67,335,600

$65,406,493

($1,929,107)

-2.86%


As these tables show, the operating budget since 2009 has declined 6.32%. Property taxes have been reduced by 9.16% and expenditures in almost every area have been cut.


Summary of Major Financial Initiatives


The major changes implemented by the Town since 2009 are summarized below:


Salary and Wages Since 2007, the Town has reduced staffing levels by 66.79 FTEP (16%).

This was accomplished entirely through attrition with no lay-offs. In addition, across-the-board pay increases were eliminated and all pay was frozen during FY10 and FY11.


Pension Benefits The Town began to consider pension reform in late 2008. In 2009, the Town hired a consultant to review the pension system and provide recommendations. In 2010, staff recommended a hybrid pension plan and after negotiations with the police and fire-fighter unions, the pension reform measures were adopted and implemented in 2012. The first year cost savings in FY12 was $5,369,248. Since that time, the Pension Board has reduced the investment return and wage inflation assumptions and the Town approved changes in employee contribution rates.


Other Benefits Employee benefit costs have been reduced due to many factors including the reduction in the number of employees. In addition, the Town has taken measures to reduce health insurance costs through wellness programs, modifying employee and retiree contribution amounts, implementing plan modifications, and offering 3 plan options with pricing models that encourage employees to choose less expensive plans.


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The Town modified the employee bonus program to make it entirely performance based. The grandfathered longevity program costs are

13 | Town of Palm Beach

declining due to the significant number of grandfathered employee retirements.


Contractual Services The Town has contracted out some of the services that were previously handled by employees. These services include: Landscape maintenance, Electrical Repairs, vehicle repairs, EMS billing, and fire-rescue vehicle repair.


Capital Outlay The Town maintains an equipment replacement reserve. Over the past few years, Town staff has reviewed the assets in the reserve and either eliminated or extended the expected life of many of the assets. This effort has produced long term cost savings for the Town and has allowed the Town to transfer $2,858,913 of “excess” reserves to the Coastal Protection Fund for beach projects in FY14.


Debt In 2010, the Town issued 2010A bonds to refund the 2003 and 2008 outstanding debt and to begin to implement the Accelerated Capital Improvement Program (ACIP). In 2013, the Town issued bonds for the second phase of the ACIP, the bondable portion of the Coastal Program and to reimburse the Recreation Enterprise Fund for the Town portion of the Par 3 Clubhouse Construction. The FY14 budget included funding for the debt service on the 2013 bond. The net impact of these actions is an increase in annual debt service that is more than offset by a reduction in the amount that would have had to be appropriated annually to fund these capital improvements with cash.


Capital Improvement As mentioned above, the Town issued bonds totaling $41,232,000 in 2010 to fund the ACIP. Projects completed since 2010 include: pump station improvements, significant sections of force main replacement, street and traffic light improvements, telemetry system improvements, and the subaqueous force main crossing. An assessment project coordinated with the Worth Avenue commercial district included improvements to the roadway and streetscape design of the area. This project was financed with the 2010B bonds and will be paid for with assessments on the affected property owners. The 2013 Bond will provide funding of

$55,560,548 for the second phase of the ACIP. Projects in this phase include: the Town Hall Square and Memorial Fountain replacement projects; The North Ocean Boulevard Seawall replacement project; additional pump station improvements and force main replacements; drainage improvements; curb, gutter, and sidewalk replacement program; and additional street light improvements.


Coastal Protection The Town adopted a 10 year $84,189,000 Coastal Protection Program.

This program includes beach renourishment projects, seawall replacements, groin rehabilitation projects, and sand transfer plan costs. Since 2009, the Town has accumulated approximately $20 million in reserves in the Coastal Protection Fund from transfers from “excess”


reserves in the General Fund, Equipment Replacement Fund, and Risk Insurance Fund. The 2013 bond included funding of $11.9 million for “bondable” structures such as seawalls and groins. In 2013, the Town Council studied options to finance the remaining costs of the program. Town Council approved an ad valorem tax increase beginning in FY15 to fund annual costs of $4,776,000. The FY15 LTFP includes an ad valorem increase to cover these costs.


Property Taxes Since FY09, property taxes have declined $3,895,300 (9.16%). This reduction was due in part to reductions in taxable value from the 2010 peak of $13.380 billion, dropping to a low of $11.623 billion in 2012, then recovering to the current value of $12.529 billion. The millage rate was maintained at 3.2512 from 2009 through 2013 and reduced in 2014 to 3.2468. Cumulative savings for Palm Beach taxpayers total $23,508,445 over the five year period. As mentioned above, the FY15 budget will include a property tax increase to fund the annual coastal protection costs as well as additional funding for debt service for the 2013 bond. Property values in the Town are expected to increase which will offset the extent of the millage rate increase.


Other Revenues Building permit revenues declined due to the recession, but have

recovered and now exceed 2009 levels.

$550,000 to $885,000.


Recreation Enterprise Fund


In conjunction with the Townwide review of operations, the Recreation Department went through a thorough analysis of all operations, considered privatizing or outsourcing certain functions, and ultimately decided on new business growth strategies as well as redistributing and reorganizing staffing levels to ensure the long term sustainability of the fund.


Revenues Much of the revenue increase in the Marina operations represents strategic increases in rates and growth in business. The renovated Par 3 Golf Course opened in December 2009, and enhanced marketing efforts, new price structures, growth in play, and payments from the restaurant vendor have increased revenues. The Tennis and Recreation Center program revenue increased due to changes in the structure of teaching contracts and increased participation.


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15 | Town of Palm Beach


Expenditures The Recreation Enterprise Fund has eliminated 11.2 (37%) positions throughout the various operations of the Fund. In the Marina operations, an Assistant Dockmaster position was eliminated, The Par 3 golf course has made use of contract labor for maintenance, and eliminated an Equipment Operator position. The Golf Pro-Manager leadership model was eliminated and replaced with a Golf Manager. The Tennis program eliminated the Tennis Pro-Manager position, and eliminated a facility supervisor and maintenance worker. The Assistant Director of Recreation position was eliminated. The costs savings provided the ability for the fund to increase the annual transfer to the General Fund from

$550,000 to $885,000.


Capital Improvement In 2009, the Par 3 Golf Course was redesigned and rebuilt. The Par 3 Foundation was formed and a significant portion of the costs of the project was funded by donations from the Foundation. The total cost of the project was $5,452,150 and the Town’s portion totaled $2,000,000, of which $1,740,844 was included in the 2010 bond. In 2013, the Par 3 Foundation and the Town worked together to design and construct a new two story clubhouse. The construction budget for the clubhouse was

$3,135,000 and the Town’s portion was $1,250,000. The Clubhouse opened January, 2014. Electrical upgrades at the Australian Dock were completed in 2013 at a cost of $130,666.


GENERAL FUND TREND ANALYSIS


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General Fund Revenue

Trend Analysis


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| Town of Palm Beach

General Fund Revenue 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 departmental 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. Recently, property values have increased and non ad valorem revenues, such as building permits, public safety fees, utility taxes and some state revenues have also shown imp ovement. There is still weakness in investment income.


General Fund Revenues


Revenue

determine the capacity of a municipality to provide services.

Important issues to consider

when reviewing revenue trends are growth, flexibility, diversity, reliability and administration.

Revenue

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

expenditures. In this section, the details of the ten-year trend for all major General Fund revenues are discussed.


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General Fund Revenues are 12.8% higher in FY14 than they were in FY05. Between FY05 and the FY07 peak, revenues increased 13.1%. Between FY07 and FY12, revenues decreased by 10.4%.

Between FY12 and FY14, revenues increased by 11.34%.

The major cause of the increase is due to

a $4 million transfer from unassigned net assets in FY14 to fund coastal protection projects. Without that transfer, the increase from FY12 to FY14 would have been 4.53%.


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. In recent years, ad

valorem revenue has declined due to property tax reform in FY08 and to a decline in taxable value in FY10, FY11 and FY12. In FY13, ad valorem revenue increased by 2.41% and in FY14 ad valorem revenue increased by 4.83%. Ad Valorem Revenue peaked at 67.3% of total revenues in FY10. Currently, ad valorem revenue accounts for 59.09% of total revenue.


Revenue increases from FY05 through FY07 were accomplished with increasing taxable value and declining millage rates. 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 by 2.69% in FY13 resulting in a slight increase in property tax revenue and in FY14, taxable value increased and the millage rate was decreased to 3.2468. The additional revenue generated was used to partially fund the increased debt service for the 2013 bond issue.


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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%. For FY14, the Town adopted a millage rate slightly less than FY13 which resulted in an increase in taxes of $1,782,300 due to a 5.16% increase in taxable value. The total millage, for Palm Beach taxpayers, which includes all other applicable taxing districts, decreased

1.58% from 18.3348 to 18.30460.

The Town’s portion of the total millage is 17.99% of the total tax

bill. The chart below identifies the taxing districts and the effect the changes in millage from FY13 to FY14 had on a taxpayer with a $1 million value (assumes no change in taxable value from year to year).


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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 $18,046 in total taxes in Palm Beach versus

$19,489 in Boca Raton, $21,319 in Palm Beach Gardens and $23,341 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 fees for these services as all costs are included within the Town’s tax rate.

Non Ad Valorem Tax Revenue


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



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Local Option Gas Tax and Franchise fee revenue declined from FY10 through FY13. It is

anticipated that revenues will increase slightly or remain flat for FY14.

Utility service taxes have

increased throughout the 10 year period. The budget estimates for FY14 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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Building permit revenue makes up the majority of these revenues. Building permit revenues dropped significantly from a high of $6.8 million in FY08 to $3.9 million in FY10. The recession and downturn in housing caused the decline. Since FY11, revenues have improved due to increases in building activity. The FY14 budget reflects a conservative estimate for building permit revenues.

The number of business licenses have declined since FY09. A change in state law exempting real

estate br

kers from the business license tax will cause a further decline in FY14.


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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The large amount of grant revenue for FY05 and FY06 is due to FEMA reimbursements for Hurricanes Frances, Jeanne and Wilma. State revenues have declined in the past few years due to declines in sales tax r ceipts because of the downturn in the economy.


Charges for Service


Charges

or 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 over the past 10 years due to the addition of fire prevention fees in FY06, increases in the EMS transport fees in FY12, and increases in revenues for police special detail.


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

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.


Parking meter rates were increased in FY08 from $1 to $2 per hour. In FY11, meter rates at Mid- Town Beach and Phipps Ocean Park were increased from $2 to $5 per hour.


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Fines and Forfeitures


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


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Parking fines and penalties were increased in FY08. In FY07, FY08 and FY09, large code

enforcement fines were collected.

Revenues from these sources declined in FY10 but increased in

FY11 due to the collection of large code enforcement fines. In FY13 revenues from parking tickets increased due to an increase in parking fines.

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 and two bond funds with the Florida League of Cities Investment Trust.


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Interest rates in FY05, FY06 and FY07 were higher than the recent historical trend. Since then, historically low 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 enterprise fund and other transfers between funds.


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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 include a transfer of $885,000 from the Recreation Enterprise Fund and the proceeds from the sale of property.


GENERAL FUND TREND ANALYSIS


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General

Fund

Expenditure Trend Analysis


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| Town of Palm Beach


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.


The total General Fund budget increased by 9.54% in FY14 from the FY13 budget. A transfer of

$4,200,000 from excess unassigned net assets to the coastal protection fund was the major cause of

the increase. Operating expenditures increased 7.48% year over year.

Between FY05 and FY09, the

average annual increase was 6.38% and the total increase was 17.3%. Between FY09 and FY12, expenditures decreased 14.6%.


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Increases in expenditures in FY06 relate to the response to and recovery from Hurricanes Frances, Jeanne and Wilma. A significant portion of the hurricane expenditures were reimbursed from FEMA and state sources. The major changes in the General Fund budget for FY05 – FY14 are detailed below. 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.


Year

Major Areas of Change to General Fund Revenues and Expenditures

FY2005

Budget Increase 10.4%

  • Total General Fund Budget - $52,380,731

  • Reduced the millage rate by .6% to 4.0287, taxable value increase 9.22%

  • Added 5.3 positions to the budget

  • Increase in the contribution to the retirement fund - $746,692

  • Increase in health insurance costs - $347,166

  • Increase in the transfer to the Capital Improvement Fund for the Town Hall renovation project $1,171,000 (transfer from fund balance reserves)

  • Increase in debt service funding - $84,700

  • Decrease in transfer to Risk Insurance Fund – ($300,000)

  • Purchase of tasers for the Police Department - $58,300

  • Costs associated with the recovery efforts for Hurricanes Frances and Jeanne

FY2006

Budget

  • Total General Fund Budget - $57,544,075


Increase 9.9%

  • Reduced millage rate by 3% to 3.908, taxable value increased by 12.4%

  • Added 5.5 new positions to the budget

  • Implementation of the compensation study - $312,000

  • Increase in the contribution to the retirement fund - $718,274

  • Police and Firefighter retirement multiplier improvement – 3.25% to 3.5% (Estimated cost $555,578)

  • Increase in health insurance costs - $470,071

  • Funding for a traffic and parking improvement plan - $150,000

  • First year funding of Townwide software upgrade - $230,000

  • Purchase of the police radio system - $665,000

  • Increase in debt service funding - $830,650

  • Increase in the transfer to the Capital Improvement Fund - $116,559

  • Decrease in the transfer to the Risk Insurance Fund – ($120,033)

  • Modification to the ERF for replacement cost funding - $4,205,523 added to the reserve with a transfer from fund balance.

  • Costs for response to and recovery from Hurricane Wilma

FY2007

Budget Increase 8.9%

  • Total General Fund Budget - $62,642,654

  • Reduced millage rate by 4.62% to 3.7273, taxable value increased by 16.13%

  • Increase in the contribution to the retirement fund - $1,751,939

  • Added 1.87 positions to the budget

  • Increased in the transfer to the Capital Improvement Fund - $762,200

  • Increased funding for coastal permitting, monitoring and legal -

  • Town wide software upgrade - $350,000

  • Increase in milling and resurfacing funding - $275,000

$1,057,000

FY2008

Budget Increase 2.7%

  • Total General Fund Budget - $64,332,559

  • Property Tax Reform was enacted to the State of Florida requiring a reduction in property tax revenue of $1,925,130 and a millage rate reduction of 9.76% to 3.3637

  • Increased parking ticket fines and meter rates - $400,000

  • Reduced transfer to the Capital Improvement Fund ($1,282,801)

  • Eliminated 3.95 positions

  • Increase in the contribution to the retirement fund - $674,018

  • Increase in the transfer to the Health Insurance Trust - $472,300

  • Townwide software upgrade - $350,000

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

  • Purchase of parking kiosks - $500,000, and electronic chalking devices

  • Increase in depreciation due to modification of policy - $669,153

  • Increase in debt service funding - $123,000

  • Increase in the transfer to the Risk Insurance Fund - $171,799

- $210,000

FY2009

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


Budget Increase 4.7%

  • 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)

  • 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


Expenditure by Category Trend Analysis


Salaries and Wages


The salary and wage trend is shown on the graph below. Salary and wage increases from FY05 through FY09 were due to staffing increases and across the board and pay for performance salary increases. In FY05 – FY06, costs also increased due to overtime related to Hurricanes Frances, Jeanne and Wilma. In FY06, salaries for certain positions were increased following an independent

compensation study.

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. were gra

The final payout for the buyout was in FY11. In FY09, special competitive pay increases ted 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 merit

and step increases were included, along with a 3% increase in employee pay ranges. budget included merit and step increases for employees.

The FY14


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Another reason for the growth in Salaries and Wages in the early part of the decade is the addition

of personnel from FY03 to FY07.

During that time, 17.1 positions were added to the budget.

Since

FY07, 66.79 (16%) positions have been eliminated from the budget through attrition. Town staffing is now at its lowest level since 1986. The trend in Full Time Equivalent Positions (FTEP) is shown on the following page:


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Employee Benefits


For purposes of this analysis, we have broken employee benefits into pension trends and other employee benefit trends.


The Town’s cost to provide employee pension benefits increased 762% from FY02 through FY11. The increases were due to poor market performance in FY01 and FY08 as well as benefit increases in FY01 and FY05. 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 new

benefit is a hybrid plan with a defined benefit and defined contribution component. Increases in FY13 and FY14 were due to additional modifications to the plan. 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.


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Other employee benefits include health insurance, FICA, bonuses, allowances, incentives, and uniform maintenance. The total cost of other employee benefits in FY14 is 18.53% higher than it

was in FY05. Nationally, health insurance increases for the last decade have been over 100%. Town has taken measures to control the increase in health insurance costs and has offered less expensive plan options to employees.

The


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In FY09, the transfer to the Health Insurance Fund increased by $900,000. Since FY09, health insurance costs have been maintained and increases have been minimized through changes in the

program, cost shiftin

to employees, and having fewer employees in the plan due to the reduction in

full time staff positions.


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The trend for benefits as a percent of salary through FY11 shows steady increases due primarily to pension costs. The trend declined significantly in FY12 due to the implementation of pension

reform.

In FY13 and FY14, the trend increased due to the increases in DB and DC pension costs

mentioned above.


Contractual Service


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


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The total cost of contractual services in FY14 is 9.36% higher than it was in FY05.

Increases in

FY05 and FY06 are due to the costs associated with hurricane response and recovery. The increases in FY08 and FY09 were due to increases in lobbying costs, software licensing and support, codification updates, legal adverti ing, the Comprehensive Plan, roadway micro resurfacing program, sewage treatment and disposal costs, landscape contracting, sand transfer plant costs, Phipps Ocean Park and Mid-Town 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. In FY12, $100,000 was added to the budget for the voter approved costs related to the new Palm Beach County Inspector General’s Office. Increases in FY13 were due to increases in sewage treatment and disposal costs, contracting with Palm Beach County for Fire-Rescue mechanic services, landscape contracting, legal services, lobbying, landmark preservation consulting, credit card fees for payment of building permits, and coastal regional monitoring costs. In FY14, contractual costs increased due to landfill maintenance, employee recruiting, and digital scanning.


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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The total cost of commodities in FY14 is 2.62% lower than it was in FY05. The increase in FY05 was due to the hurricane response and recovery. The increase in FY06 was due to computer equipment and software purchases. The increase in FY08 was due to a spike in fuel costs.

Decreases during 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 increase in FY14 is due to increases in fuel, minor computer equipment, supplies, and uniforms.


Capital Outlay/Equipment Replacement


Capital Outlay expenses include depreciation

n the Town’s fixed assets, purchases of new

equipment that are not purchased through the Equipment Replacement Fund, purchases of equipment through grant funding, and storm and sanitary sewer rehabilitation costs that are not included in the Capital Fund.


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The total cost of capital equipment in FY14 is 28.65% higher than it was in FY05.

In FY02 the

Town established the Equipment Replacement Fund (ERF). Beginning in FY03, transfers were


made to the ERF based on the annual depreciation of the original cost of the fixed assets. In 2007, the policy was modified to increase the transfer based on depreciation calculated on the replacement cost of the asset to ensure funds are available to purchase expensive equipment with long useful lives. The depreciation increase is reflected in the FY08 peak year, which also included new parking kiosks, electronic chalking devices, and surveillance cameras for the Town’s bridges. 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 increase in FY13 is due to increases in depreciation on new equipment purchased in late FY11 and FY12.


Transfer to Capital Funds


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, the Town issued a bond that included approximately $43 million to fund the initial 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 below.


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In FY05, $1.2 million was transferred for the Town Hall renovation project. 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 transferr d 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 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 $4,200,000 was transferred. A reserve of approximately $20 million from these transfers is available to partially fund the $84 million coastal protection program.



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


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Debt Service


The Town issued Revenue Bonds in 2000 for the Coastal Protection Project. In FY06, the Town refinanced the 2000 bonds and issued additional debt for the construction of the Central Fire-

Rescue Station. In 2008 the Town issued a revenue note for the Town Hall renovation project. In

2010, the 2000 revenue bond for coastal projects was paid in full. In addition, 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.


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. new pronouncement required an actuarial study to determine the amount of the Town’s total

The

liability and the amount of the annual contribution. The Town’s total Actuarial Accrued Liability as of October 1, 2012 was calculated to be $29,288,881. The actuarial value of assets in the trust at that time was $20,942,251. The Unfunded Actuarial Accrued Liability is $8,346,630. The funded ratio for the plan was 71.5%. The actuarial valuations are performed on a bi-annual basis. The annual budgeted contribution for FY14 is $1,506,000.


The increase between FY07 and FY08 is a result of the implementation of GASB 43. The FY07 amount represents the pay-as-you-go funding prior to GASB 43 and the FY08 amount represents


the actuarially determined contribution based upon the Town’s liability and the initial $16 million invested in the trust. Changes in the retiree contribution formula in FY09 (shifting more cost to participating retirees) caused the Town’s liability to decline in FY10 through FY12.


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 FY05, the transfer to the Risk Fund has declined by 56%. In FY05, additional funds were transferred from fund balance to cover uninsured costs for a construction related lawsuit. 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.


Departmental Expenditure Trend Analysis


Legislative


The Legislative program includes funding for the Mayor and Town Council, intergovernmental, and lobbying expenses.


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In FY09, the budget for lobbying services was increased to include a Washington DC lobbyist on

retainer.

In FY11, the funding was cut by 50% for lobbying services in both Washington and

Tallahassee. The budget was increased in FY14 to restore the full retainer cost for federal lobbying services.


General Government


The General Government budget represents the cost of all government services and activities which are not specifically or reasonably classified elsewhere within the departmental program classifications.


The program has funded compensated absence pay-outs, the early retirement buy-out program, holiday decorations, annual report and calendar, July 4th celebration, one-time studies, Palm Beach Island Cats donations, Palm Beach County In pector General Fees and other expenditures that are not related to specific departments.


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In FY05, pay-outs for compensated absences, a compensation study, and a citizen survey were included in the budget. In FY09 and FY10, most of the increase is due to the costs associated with the early retirement incentive program. In addition, in FY09, expenses related to the Shore Protection Board and costs for a study related to a reverse osmosis water system were included in the program. In FY10, a pension consultant was hired to conduct an analysis of options for reducing the Town’s pension costs and the Town Council hired a contractual internal auditor to review Town operations. The decline in FY13 was due to a drop in anticipated pay-outs for compensated absences. The FY14 budget included additional funding for the compensated absence pay-outs.


Town Manager


Expenditures for the Town Manager’s Office are 25.06% higher in FY14 than they were in FY05. From FY05 through FY09, the budget increased by 28.53%. Since FY09, the budget has declined by 2.71%. Most of the increases through FY09 were due to increased personnel costs. The reduction in FY10 was due to the elimination of the Assistant Town Manager position.


The Town Manager’s Office budget represents 1.23% of the total Town budget in FY14. The Town Manager’s Office currently has 5.1 full time staff members.


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Advice and Litigation


The Advice and Litigation program reflects expenditures related to the Town Attorney and other attorneys, including the labor attorneys who represent the Town in collective bargaining negotiations and disciplinary matters.


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The expenditures for advice and litigation are 64.72% higher in FY14 than they were in FY05. From FY05 through FY08, expenditures increased by 56.5%. Since FY08, the expenditures have increased by 5.22%. In FY12, legal costs spiked due to costs related to labor matters and union negotiations.


The Advice and Litigation budget represents .79% of the total Town budget in FY14.


Information Systems


The Information Systems budget accounts for all computer hardware and software costs, telephone fixed costs and internet costs.


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In FY06, expenditures increased due to initial funding for the implementation of a new Townwide software system. These expenditures continued through FY10.


In FY14, expenditures for the Information Systems program are 44.22% higher than they were in FY05, but they are 12.69% lower than they were in FY09.


The Information Systems budget represents 2.86% of the total Town budget in FY14. Information Systems has 6 full time staff members.


Human Resources Departmen


The Human Resources Department oversees all hiring, compensation and employee benefit administration.


The expenditures for the Human Resource Department are .43% lower in FY14 than they were in

FY05. From FY05 through FY08, expenditures increased by 1.77%.

From FY08 through FY14,

expenditures declined by 2.16%.

In FY14, recruiting costs increased.


The Human Resource budget represents 1.09% of the total Town budget in FY14. Resource Department currently has 4.38 full time staff members.

The Human


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Finance Department


The Finance Department oversees the operations of the Town Clerk, Purchasing and all accounting, investment, and finance functions of the Town.


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The expenditures for the Finance Department are 21.09% higher in FY14 than they were in FY05.


The Finance budget represents 2.99% of the total Town budget in FY14. The Finance Department currently has 18.14 full time staff members. The FY13 increase in FTE is due the conversion of a part time position to a full time position in the purchasing division to address the increased workload related to the Accelerated Capital Improvement Program.


Planning, Zoning and Building Department


The Planning, Zoning and Building Departments implements and recommends the policies relative to the development, redevelopment and use of real property. In addition, this Department includes the budgets for code enforcement (which is administered by the Police Department) and fire prevention (which is administered by the Fire-Rescue Department).


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The expenditures for the Planning, Zoning and Building Department are 33.22% higher in FY14 than they were in FY05. In FY06, expenditures increased due to the expansion of the Fire

Prevention program including the addition of 3 additional personnel.

In FY08, the code

enforcement division was established and personnel from the Police Department were charged to this budget to expand the Town’s code enforcement efforts. Building permit activity has increased since 2010. Increases in contractual costs relating to inspections and digital scanning caused the FY14 budget to increase.


The Planning, Zoning and Building budget represents 5.68% of the total Town budget in FY14. The Department budget currently has 26.25 full time staff members.


Fire-Rescue Department


The Fire-Rescue Department provides for EMS services and fire prevention and response services. The Town has three Fire-Rescue stations.


The expenditures for the Fire-Rescue Department are 23.94% higher in FY14 than they were in FY05. For the period of FY05 through FY11, expenditures increased by 51.7%. The decrease from FY11 to FY14 was 18.3%. In FY05, the Town began billing for EMS services and added an EMS billing technician. In FY05 and FY06 expenditures increased due to the response to the hurricanes. In FY10, the Ocean Rescue program was moved from the Police Department to the Fire-Rescue


Department. The 10 lifeguards were added to the staffing levels of Fire-Rescue. In FY11, 3

firefighters and 1 Administrative Lieutenant were cut from the budget.

In FY12, the Fire-Rescue

Chief position was eliminated from the budget and the Public Safety Director position was establish d to oversee the operations of the Police Department and Fire-Rescue Department. In addition, Fire Lieutenant, Driver/Engineer EMT, and Lifeguard Supervisor positions were eliminated. In FY13, 2 lieutenant positions and a mechanic position were eliminated. In FY14, 3 firefighter positions and a medical billing specialist were eliminated and EMS billing was contracted out. In total 14.3 positions have been elimina ed from the Fire Rescue department since 2009.

From FY02 through FY11, the Town’s retirement contribution for the Firefighter’s Pension Plan increased from $233,590 to $3,189,802. This represented a 1266% increase. Pension reform measures reduced the budget in FY12. The F re-Rescue budget represents 16.87% of the total Town budget in FY14. The Fire-Rescue Dep rtment currently has 75.9 full time staff members.


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Police Department


The Police Department provides for the prevention of crime and the protection of life and property.


The expenditures for the Police Department are 3.28% higher in FY14 than they were in FY05.

For

the period of FY05 through FY09, expenditures increased by 13.92%.

Since FY09, expenditures

have decreased by 9.34%. Increases in FY05 and FY06 were due to overtime related to the

hurricanes. In FY06, a new radio system was purchased.

In FY08, the budget included funding for

the electronic chalking devices for parking enforcement. In FY11 a total of 12.2 positions were

eliminated, but those savings were offset by increases in pension costs.

In FY12, expenditures

declined due to a reduction in personnel and pension costs. For the period of FY02 through FY11, the Town’s contribut on to the Police Retirement Fund increased from $310,756 to $2,828,758.

This is an 810% increase. Pension reform measures reduced the budget in FY12.

FY13 actual costs

were lower than budget estimates due to vacancies in the department. Increases in maintenance costs for surveillance equipment, new software, and increases in uniform costs for new hires caused the FY14 budget to increase.


The Police Department budget represents 20.65% of the total Town budget in FY14. The Police Department currently has 103.35 full time staff members.


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Public Works Department


The Public Works Department provides for the maintenance of the Town’s parks, buildings, equipment and infrastructure, for collection and disposal of residential and commercial garbage, and for storm and sanitary sewer maintenance and treatment.


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The expenditures for the Public Works Department are 30.27% higher in FY14 than they were in FY05. For the period of FY05 through FY08, expenditures increased by 31.6%. Since FY08, expenditures have decreased by 1.02%. In FY05 and FY06, most of the increase is due to the


overtime related to the hurricane efforts for debris removal and repair of Town facilities. In FY05, an Assistant Director position was added and in FY06, a mechanic and an equipment operator

position were added.

In FY08, expenditures relating to the purchase of a parking kiosk system and

contractual costs for coastal projects were included. In FY09, costs associated with an accelerated roadway milling and resurfacing project were included. Since FY08, 13.87 positions have been cut from the Department’s budget. Contractual cost increases have offset some of the personnel savings, as the Town has implemented “privatization” of some Public Works services. The FY13 budget increased due to increases in pension costs and sanitary sewage treatment costs. Increases in FY14 include landfill maintenance costs, fuel and personnel expenses.


The Public Works budget represents 22.21% of the total Town budget in FY14. The Public Works Department currently has 88.04 full time staff members.


Four Ar s Library


The Town contracts with the Society of the Four Arts Library to provide library services to Palm Beach residents. The annual appropriation takes the place of, and is substantially less than, property taxes that would be levied upon Town residents by the Palm Beach County Library District. Using FY14 taxable value and the Palm Beach County library millage, the taxes that would be paid to the County library system would total approximately $7,200,000.


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The expenditures for the Four Arts Library are 11.15% less in FY14 than they were in FY05. In FY05, an additional $100,000 was appropriated to the library for a renovation project. The increase from FY06 to FY14 was 26.66%. The Four Arts Library budget represents .46% of the total Town budget in FY14.


Long Term Financial Plan Forecast Summary


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 FY14 budget and forecasts through FY24.


Assumptions


The forecast for the first 2 - 3 years is based upon recent trends and specific expectations. The forecast for the remaining 6 - 7 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:


FY15

FY16

FY17

FY18

FY19

FY20

FY21

FY22

FY23

FY24

Ad Valorem Tax Increase

3.0%*

3.0%

3.0%

3.0%

3.0%

3.0%

3.0%

3.0%

3.0%

3.0%

General Inflation

2.1%

2.1%

2.1%

2.1%

2.1%

2.1%

2.1%

2.1%

2.1%

2.1%

Salaries & Wages

3.0%

3.0%

3.0%

3.0%

3.0%

3.0%

3.0%

3.0%

3.0%

3.0%

Health Insurance

10.0%

10.0%

10.0%

10.0%

10.0%

10.0%

10.0%

10.0%

10.0%

10.0%

Pension

9.5%

7.8%

9.9%

0.23%

2.36%

3.8%

3.9%

4.1%

4.0%

4.15%

Other Employee Benefits

3.2%

-0.1%

1.4%

.9%

1.4%

3.1%

3.2%

3.1%

2.1%

2.9%

Property Insurance

5.0%

5.0%

5.0%

5.0%

5.0%

5.0%

5.0%

5.0%

5.0%

5.0%

Liability Insurance

5.0%

5.0%

5.0%

5.0%

5.0%

5.0%

5.0%

5.0%

5.0%

5.0%

W/C Insurance

3.0%

3.0%

3.0%

3.0%

3.0%

3.0%

3.0%

3.0%

3.0%

3.0%


*Ad Valorem tax increase for FY15 for operating purposes is 3%, additional increases are included for coastal protection funding and debt service funding as previously approved by Town Council.


The assumption for inflation of 2.1% is based upon the forecast in the Livingston Survey issued by the Federal Reserve Bank of Philadelphia. The salary and wage assumption is based upon the average annual increases for all employee groups. The health insurance forecast assumption remained constant at 10% based upon input from our health consultants regarding future increases related to the Affordable Care Act. The pension forecast assumption was updated by the Town’s pension


actuary to reflect the actual costs of the adopted pension reform measures and the costs associated

with the

nvestment and wage assumption changes made by the Retirement Board in 2013. The

other employee benefit assumptions have been calculated based upon anticipated retirements and other inflation factors. Property, Liability and Workmen’s Compensation insurance assumptions are based upon information received from our brokers regarding potential increases.


2014 Forecast


The forecast charts shown on the following pages include a comparison of the original 2009 forecast through 2020 to the 2013 and 2014 forecast projections. The original 2009 forecast showed deficits throughout the forec st period. Since that time, staff and the Town Council have been able to make major reductions in expenditures and to slow future growth to sustainable levels. The 2014 forecast highlights the progress and also includes sufficient funding for the Town’s future infrastructure and coastal projects. The 2014 forecast contains funding for the investment assumption change (8% to

    1. %) fo

      the pension system that was approved in 2013.

      The 2015 forecast budget is $494,000

      more than anticipated due to this change.


      General Fund Revenue Forecast


      In total, the General Fund revenue forecast has declined since the 2009 forecast, mainly due to the reduction in property tax revenue and license and permit revenue. Improvement in these revenue

      sources over the past few years has improved the forecast over the 10 year period.

      The forecast is

      conservative and should allow for minor fluctuations in various revenue sources. The forecast details for each major revenue category are included in this analysis.


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      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. We

      project the increase to be 3% for each year of the forecast.

      In addition, $4,776,607 has been

      included for the annual funding for the coastal protection program and $175,000 for additional debt service for the 2013 bond, as directed by the Town Council during 2013. The total increase in ad valorem revenue for FY15 is estimated to be 15.8%.


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      Non Ad Valorem Taxes


      Non ad valorem taxes include local option gas taxes, franchise fees and utility service taxes. There has been little change in the forecast for these revenues since 2009. The decline in revenue is due to

      reductions in recent collections of franchise fee and utility tax receipts. shown b low.

      The forecast trend chart is


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      License and Permit Revenue


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


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      The real estate market has improved in recent years. The budget for FY14 was increased over the 2013 forecast due to improved collections. The 2014 forecast shows higher revenues in 2014 and 2015 due to improved conditions, but, to be conservative, the forecast period from 2016 through

      2024 from does not anticipate much of an increase in the license and permit revenue sources.

      Due

      to a recent change in state law, the forecast for business tax receipts has been reduced to reflect the exemption of real estate brokers from purchasing a license.


      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. also included in this category.

      Federal and State grants are


      The forecast for intergovernmental revenues has declined due to declines in revenues received from the State of Florida for sales tax and revenue sharing. The forecast anticipates a small inflationary increase per year in the State revenues.


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      Charges for Service


      Charges

      or 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 these revenues has increased since 2009 but lower public safety revenues and solid waste collection revenue caused the 2014 revenues to decline.


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      Fines and Forfeitures


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


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      Revenue

      from these sources have decreased since the 2009 forecast.

      The majority of the decrease

      is due to the forecast for code enforcement fines. This revenue source is volatile and for FY14,

      collections are exceeding budget expectations.

      During 2012, the Town Council approved increases

      in parking ticket fines. The forecast from 2013 to 2014 is virtually unchanged.


      Investment Income


      The investment income forecast has declined from 2009 due to the prolonged depressed interest rate environment. We are predicting, for purposes of this forecast, investment returns will continue to remain depressed through most of the forecast period with a slight improvement over 2014.


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      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 forecast is due to an increase in the fees associated with the charitable solicitation permits and an increase in the transfer from the Recreation Enterprise Fund due to the savings generated through the reorganization efforts. The decrease in 2015 is due to the termination of a lease for a cellular tower.


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      Total General Fund Expenditures


      Overall, significant cuts have been made since the original 2009 forecast. Most of the savings is due to reductions in personnel, pension and related employee benefit costs. The balance is due to reductions in the equipment replacement fund depreciation transfer, and a reduction in the transfer for risk insurance. The 2014 forecasted expenditures have increased due primarily to increased debt service for the 2013 bonds and an increase in the transfer to the coastal protection fund to fund the approved 10 year program.


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      Salary and Wages


      Salary and Wage increases are based upon the modifications to the Town’s employee pay policies, reductions in personnel, and replacements of retirees at lower salaries through the forecast period. The forecast assumptions show an average annual increase of 3%, but between employee groups the growth rates range from between less than 1% to 3.75%.


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      This expenditure category has decreased significantly since the original 2009 forecast. The 2009 assumptions for salary and wage increases had been 5.5%. Between FY01 and FY09, Town salaries increased at an average rate of over 6% per year – more than double the average annual rate of inflation for the same period. Future salary growth was reduced to an average of 3% per year or less. A combination of actions (changing pay policies, reducing staffing, etc.) has made this goal achievable throughout the forecast period. The 2014 forecast for salaries is reduced even further due to additional reductions in personnel in FY14 and retirements in FY15.


      Pension Benefits


      The pension estimate is based up

      n the actuary’s estimates for pension costs based upon the

      pension reform chan

      es implemented in 2012. These changes have significantly reduced this

      category of expenditures throughout the forecast period.


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      The Town’s Retirement Board recommended a change in the investment assumption from 8% to 7.5% in 2013. This change is added additional cost for pension benefits and is the major cause for the increase from the 2013 forecast. The Town also made a change to the employee contribution rates for some of the employee groups.


      The Town has always budgeted and contributed the required contribution as determined by the

      actuary. payroll.

      For the past few years, the State has required a contribution based upon a percent of Since total Town payroll has been declining, the amount due per the State requirements has

      been lower than the Town’s budgeted contribution. The Town contributed the total budgeted amount, resulting in surplus contributions to the Retirement Fund. Total prepaid contributions through September 30, 2013, were $2,169,323. The Town used $930,690 of the prepaid amount in

      the FY14 budget to offset a portion of the investment assumption change increase.

      The 2015

      forecast uses $750,000 of prepaid funds to offset the pension increase and the 2016 forecast uses the balance of the prepaid contribution ($488,633) to smooth the effects of implementing the assumption change increase. In FY14 the Town Council approved a discretionary DC contribution of 4% for all non-union employees. The forecast includes the discretionary contribution.


      Other Employee Benefits


      Other Employee Benefits includes all other benefits including health insurance. We anticipate

      health insurance cost

      will increase at 10% per year and other employee benefits (including FICA,

      longevity, incentives, and allowances) will increase at a much lower rate. The forecast decreased from 2013 due to steps taken to reduce insurance costs in 2014.


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      Contractual


      Contractual expenditures are forecasted to increase by the rate of inflation. As a result of the privatization that has occurred since 2009, contractual expenses are higher than the original 2009 forecast, but this increase has been far surpassed by the related savings in employee pay and benefits.


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      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.

      The 2014 forecast has increased based upon FY14 budget increases in these areas.


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      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. During FY11, staff conducted a

      thorough review the useful lives of the Town’s equipment.

      In some cases, departments identified

      equipment that could be retired instead of replaced. In others, departments extended the expected useful life of equipment before scheduled replacement. Due to this review and subsequent work by

      departments, savings have been forecasted for the future. depreciation on new equipment purchased in 2013.

      The 2014 forecast increase is due to


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      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.


      • The forecast includes a transfer to the Capital Improvement Program of $1 million per year for Capital Projects (such as the Town’s annual road paving program) that have not been included in the 20 year CIP program.


      • The Town Council approved a 10 year $84 million Coastal Protection program in 2013. The first year funding is $4,776,607. Due to the amount of reserves that have been accumulated in this fund, the transfer is much less than originally anticipated. The transfer is forecasted to increase at a rate of 3% per year.


      • Debt service was increased for 2014 by $2.6 million and an additional $175,000 is necessary in 2015 for the 2013 Revenue bond. The 2013 forecast assumed the bond for the second phase of the Accelerated Capital Improvement Program would be issued in 2017 and debt service would begin in 2018.


      • Risk insurance premium increases have been estimated as follows: Property Insurance 5% per year, Liability Insurance 5% per year, and Worker’s Compensation 3% per year throughout the forecast period. The 2015 budget forecast also includes an increase for claim reserves.


      • Retiree Health Insurance is based upon a forecast for Town Contributions prepared by the Town’s actuary.


      • The General Fund contingency appropriation has been estimated to be 1.5% of the forecasted expenditures as required by Town policy. The General Fund contingency is funded through a transfer from fund balance rather than through operating revenues. Staff is reviewing the amount of the transfer and may make a recommendation to revise the policy and lower the appropriation during the budget process.


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


image


Projected Surplus/ Deficit


Due to the deep cuts in expenditures mentioned in the section above, the projection of annual surpluses/deficits has changed dramatically since the 2009 forecast. Deficits were originally forecast

to begin

n 2012 and continue throughout the forecast period, peaking at $20.2 million in 2020.

Compared to last year’s forecast, the 2014 forecast contains smaller projected surpluses in the early years due to the appropriations for the Coastal Protection Program, 2013 debt service and other minor increases. However, even after accounting for these increases, the longer term forecast has improved in 2014 as compared to a year ago.


image


Planning for the FY15 Budget


The Long Term Financial Plan is a baseline forecast. It is not a budget. Staff currently is preparing the FY15 proposed budget to reflect exact needs and specific proposals, and we intend to submit a proposed budget that is in line wi h the forecast.


General

Fund

Forecast Summary


image


image

| Town of Palm Beach

Town of Palm Beach

Revenue and Expenditure Forecast LTFP FY2014 - FY2024


FY14

FY15

FY16

FY17

FY18

FY19

FY20

FY21

FY22

FY23

FY24

Revenues


38,647,700


44,758,738


46,101,500


47,484,545


48,909,081


50,376,354


51,887,645


53,444,274


55,047,602


56,699,030


58,400,001

Ad Valorem Taxes

Non Ad Valorem Taxes

7,367,500

7,810,125

8,041,266

8,279,279

8,524,368

8,776,743

9,036,623

9,304,231

9,579,797

9,863,558

10,155,760

Licenses & Permits

6,588,200

6,762,825

6,762,825

6,796,451

6,796,451

6,831,759

6,831,759

6,868,832

6,868,832

6,907,758

6,948,631

Intergovernmental

1,052,000

1,057,280

1,084,848

1,113,239

1,142,476

1,172,585

1,203,592

1,235,524

1,268,408

1,302,273

1,337,148

Charges for Services

3,552,275

3,562,343

3,693,017

3,759,985

3,827,518

3,912,880

3,985,715

4,060,640

4,137,714

4,217,000

4,298,563

Fines and Forefeitures

1,181,000

1,251,720

1,251,720

1,276,754

1,276,754

1,302,289

1,306,162

1,328,335

1,334,196

1,340,231

1,346,445

Investment Earnings

425,373

650,500

900,500

1,025,500

1,150,500

1,375,500

1,525,500

1,775,500

1,925,500

2,075,500

2,075,500

Miscellaneous and Transfers

1,132,845

1,104,500

1,106,600

1,108,763

1,110,991

1,113,286

1,115,649

1,118,084

1,120,591

1,123,174

1,125,834

Total Operating Revenues

59,946,893

66,958,031

68,942,276

70,844,516

72,738,139

74,861,396

76,892,645

79,135,420

81,282,640

83,528,524

85,687,882

Transfers from Fund Balance

5,459,601

1,511,398

1,538,237

1,573,417

1,597,146

1,631,511

1,670,606

1,714,792

1,760,036

1,807,209

1,855,417

Total Revenues

65,406,494

68,469,429

70,480,513

72,417,933

74,335,285

76,492,907

78,563,251

80,850,212

83,042,676

85,335,733

87,543,299


Expenditures


24,298,881


24,827,784


25,132,450


25,795,486


25,856,917


28,582,817


27,400,559


28,358,021


29,347,842


30,365,904


31,403,858

Salaries and Wages

Pension Benefits

4,977,617

5,472,148

5,902,961

6,494,601

6,520,683

6,681,567

6,944,825

7,220,962

7,518,990

7,824,191

8,151,829

DC Plan Benefits

1,195,398

1,232,843

1,256,068

1,285,343

1,298,374

1,341,542

1,390,038

1,439,499

1,490,605

1,543,142

1,596,785

Other Employee Benefits

6,909,555

7,398,840

7,902,469

8,519,118

9,111,936

9,830,341

10,639,168

11,533,885

12,512,164

13,581,178

14,749,933

Contractual

8,472,843

8,653,215

8,873,753

9,061,464

9,235,659

9,431,055

9,670,037

9,874,647

10,083,601

10,296,993

10,514,916

Commodities

1,701,960

1,787,201

1,829,132

1,867,544

1,909,863

1,942,470

1,983,262

2,024,910

2,067,433

2,110,849

2,155,177

Equipment Replacement

2,010,581

2,062,198

2,104,562

2,147,817

2,191,979

2,237,069

2,283,105

2,330,109

2,378,099

2,427,097

2,477,123

Library Services

297,659

306,588

315,786

325,260

335,017

345,068

355,420

366,083

377,065

388,377

400,028

Other

Transfer to Capital Improvement

1,000,000

1,000,000

1,000,000

1,000,000

1,000,000

1,000,000

1,000,000

1,000,000

1,000,000

1,000,000

1,000,000

Transfer to Coastal Protection

4,200,000

4,776,607

4,919,905

5,067,502

5,219,527

5,376,113

5,537,397

5,703,519

5,874,624

6,050,863

6,232,389

Debt Service

6,100,000

6,273,613

6,265,462

6,275,412

6,266,687

6,274,162

6,266,337

6,267,587

6,268,212

6,263,087

6,266,837

Retiree Health

1,506,000

1,577,000

1,667,000

1,765,000

1,869,000

1,981,000

2,101,000

2,230,000

2,367,000

2,514,000

2,671,000

Transfer to Risk Insurance Fund

1,876,000

2,075,518

2,140,987

2,181,713

2,227,437

2,260,185

2,334,387

2,411,911

2,492,878

2,577,474

2,665,901

Contingency

860,000

1,010,077

1,048,047

1,078,495

1,100,678

1,134,498

1,173,979

1,218,504

1,264,293

1,311,767

1,361,924

Total Expenditures

65,406,494

68,453,632

70,358,582

72,864,755

74,143,757

78,417,887

79,079,514

81,979,637

85,042,806

88,254,922

91,647,700

Surplus/(Deficit)

15,797

121,931

(446,822)

191,528

(1,924,980)

(516,263)

(1,129,425)

(2,000,130)

(2,919,189)

(4,104,401)

Town of Palm Beach Revenue Forecast FY14 - FY24


Analysis of Revenues by Category Revenue Sources

2014

Budget

2015

Estimated

2016

Estimated

2017

Estimated

2018

Estimated

2019

Estimated

2020

Estimated

2021

Estimated

2022

Estimated

2023

Estimated

2024

Estimated


Ad Valorem Revenues


38,647,700


44,758,738


46,101,500


47,484,545


48,909,081


50,376,354


51,887,645


53,444,274


55,047,602


56,699,030


58,400,001

% Increase

3.13%

15.81%

3.00%

3.00%

3.00%

3.00%

3.00%

3.00%

3.00%

3.00%

3.00%

$ Increase

1,174,592

6,111,038

1,342,762

1,383,045

1,424,536

1,467,272

1,511,291

1,556,629

1,603,328

1,651,428

1,700,971

Non Ad Valorem Taxes

7,367,500

7,810,125

8,041,266

8,279,279

8,524,368

8,776,743

9,036,623

9,304,231

9,579,797

9,863,558

10,155,760

% Increase

-2.21%

6.01%

2.96%

2.96%

2.96%

2.96%

2.96%

2.96%

2.96%

2.96%

2.96%

-166,359

442,625

231,142

238,013

245,089

252,375

259,880

267,608

275,566

283,762

292,202

Licenses and Permits

6,588,200

6,762,825

6,762,825

6,796,451

6,796,451

6,831,759

6,831,759

6,868,832

6,868,832

6,907,758

6,948,631

% Increase

-13.00%

2.65%

0.00%

0.50%

0.00%

0.52%

0.00%

0.54%

0.00%

0.57%

0.59%

$ Increase

-984,318

174,625

0

33,626

0

35,308

0

37,073

0

38,927

40,873

Intergovernmental Revenue

1,052,000

1,057,280

1,084,848

1,113,239

1,142,476

1,172,585

1,203,592

1,235,524

1,268,408

1,302,273

1,337,148

% Increase

6.19%

0.50%

2.61%

2.62%

2.63%

2.64%

2.64%

2.65%

2.66%

2.67%

2.68%

$ Increase

61,285

5,280

27,568

28,390

29,237

30,109

31,007

31,932

32,884

33,865

34,875

Charges for Services

3,552,275

3,562,343

3,693,017

3,759,985

3,827,518

3,912,880

3,985,715

4,060,640

4,137,714

4,217,000

4,298,563

% Increase

-0.67%

0.28%

3.67%

1.81%

1.80%

2.23%

1.86%

1.88%

1.90%

1.92%

1.93%

$ Increase

-23,881

10,068

130,674

66,968

67,533

85,361

72,836

74,925

77,074

79,286

81,563

Fines and Forefeitures

1,181,000

1,251,720

1,251,720

1,276,754

1,276,754

1,302,289

1,306,162

1,328,335

1,334,196

1,340,231

1,346,445

% Increase

-5.80%

5.99%

0.00%

2.00%

0.00%

2.00%

0.30%

1.70%

0.44%

0.45%

0.46%

$ Increase

-72,760

70,720

0

25,034

0

25,535

3,873

22,173

5,860

6,035

6,215

Interest Income

425,373

650,500

900,500

1,025,500

1,150,500

1,375,500

1,525,500

1,775,500

1,925,500

2,075,500

2,075,500

% Increase

1211.86%

52.92%

38.43%

13.88%

12.19%

19.56%

10.91%

16.39%

8.45%

7.79%

0.00%

$ Increase

392,948

225,127

250,000

125,000

125,000

225,000

150,000

250,000

150,000

150,000

0

Miscellaneous and Transfers

1,132,845

1,104,500

1,106,600

1,108,763

1,110,991

1,113,286

1,115,649

1,118,084

1,120,591

1,123,174

1,125,834

% Increase

-39.45%

-2.50%

0.19%

0.20%

0.20%

0.21%

0.21%

0.22%

0.22%

0.23%

0.24%

$ Increase

-738,198

-28,345

2,100

2,163

2,228

2,295

2,364

2,434

2,508

2,583

2,660

Transfers from Fund Balance

5,459,600

1,511,398

1,538,237

1,573,417

1,597,146

1,631,511

1,670,606

1,714,792

1,760,036

1,807,209

1,855,417

% Increase

100.00%

-72.32%

1.78%

2.29%

1.51%

2.15%

2.40%

2.64%

2.64%

2.68%

2.67%

$ Increase

5,459,599

-3,948,202

26,839

35,180

23,729

34,365

39,095

44,186

45,244

47,173

48,208

Total Revenues

65,406,493

68,469,428

70,480,514

72,417,934

74,335,286

76,492,907

78,563,251

80,850,211

83,042,675

85,335,733

87,543,300

% Increase

8.46%

4.68%

2.94%

2.75%

2.65%

2.90%

2.71%

2.91%

2.71%

2.76%

2.59%

$ Increase

5,102,908

3,062,935

2,011,086

1,937,420

1,917,352

2,157,621

2,070,344

2,286,960

2,192,464

2,293,058

2,207,567


Page 60

Town of Palm Beach Expenditure Forecast FY14 - FY24


Analysis of Expenses by Category Expenditure Categories

2014

Estimated

2015

Estimated

2016

Estimated

2017

Estimated

2018

Estimated

2019

Estimated

2020

Estimated

2021

Estimated

2022

Estimated

2023

Estimated

2024

Estimated


Salaries/Wages


24,298,881


24,827,784


25,132,450


25,795,486


25,856,917


26,582,817


27,400,559


28,358,021


29,347,842


30,365,904


31,403,858

% Increase

5.91%

2.18%

1.23%

2.64%

0.24%

2.81%

3.08%

3.49%

3.49%

3.47%

3.42%

$ Increase

1,354,907

528,903

304,667

663,036

61,431

725,900

817,741

957,462

989,822

1,018,061

1,037,954

Pension Benefits

4,977,617

5,472,148

5,902,961

6,494,601

6,520,683

6,681,567

6,944,825

7,220,962

7,518,990

7,824,191

8,151,829

% Increase

29.91%

9.94%

7.87%

10.02%

0.40%

2.47%

3.94%

3.98%

4.13%

4.06%

4.19%

$ Increase

1,146,029

494,531

430,812

591,640

26,082

160,884

263,258

276,137

298,028

305,201

327,638

DC Plan

1,195,398

1,232,843

1,256,068

1,285,343

1,298,374

1,341,542

1,390,038

1,439,499

1,490,605

1,543,142

1,596,785

% Increase

122.39%

3.13%

1.88%

2.33%

1.01%

3.32%

3.61%

3.56%

3.55%

3.52%

3.48%

$ Increase

657,866

37,445

23,225

29,275

13,032

43,168

48,496

49,461

51,106

52,537

53,643

Other Employee Benefits

6,909,555

7,398,840

7,902,469

8,519,118

9,111,936

9,830,341

10,639,168

11,533,885

12,512,164

13,581,178

14,749,933

% Increase

2.56%

7.08%

6.81%

7.80%

6.96%

7.88%

8.23%

8.41%

8.48%

8.54%

8.61%

$ Increase

172,796

489,285

503,630

616,649

592,818

718,405

808,827

894,717

978,279

1,069,014

1,168,755

Contractual

8,472,843

8,653,215

8,873,753

9,061,464

9,235,659

9,431,055

9,670,037

9,874,647

10,083,601

10,296,993

10,514,916

% Increase

17.29%

2.13%

2.55%

2.12%

1.92%

2.12%

2.53%

2.12%

2.12%

2.12%

2.12%

$ Increase

1,248,751

180,372

220,538

187,711

174,195

195,397

238,981

204,610

208,955

213,391

217,923

Commodities

1,701,960

1,787,201

1,829,132

1,867,544

1,909,863

1,942,470

1,983,262

2,024,910

2,067,433

2,110,849

2,155,177

% Increase

9.51%

5.01%

2.35%

2.10%

2.27%

1.71%

2.10%

2.10%

2.10%

2.10%

2.10%

$ Increase

147,856

85,241

41,931

38,412

42,318

32,607

40,792

41,648

42,523

43,416

44,328

Equipment Replacement

2,010,581

2,062,198

2,104,562

2,147,817

2,191,979

2,237,069

2,283,105

2,330,109

2,378,099

2,427,097

2,477,123

% Increase

-1.14%

2.57%

2.05%

2.06%

2.06%

2.06%

2.06%

2.06%

2.06%

2.06%

2.06%

$ Increase

-23,163

51,617

42,365

43,254

44,162

45,090

46,037

47,003

47,990

48,998

50,027

Library Services

297,659

306,588

315,786

325,260

335,017

345,068

355,420

366,083

377,065

388,377

400,028

% Increase

3.00%

3.00%

3.00%

3.00%

3.00%

3.00%

3.00%

3.00%

3.00%

3.00%

3.00%

$ Increase

8,670

8,930

9,198

9,474

9,758

10,051

10,352

10,663

10,982

11,312

11,651

TRANSFER TO OTHER FUNDS

CAPITAL IMPROV. FUND (307)

1,000,000

1,000,000

1,000,000

1,000,000

1,000,000

1,000,000

1,000,000

1,000,000

1,000,000

1,000,000

1,000,000

COASTAL PROTECTION FUND (309)

4,200,000

4,776,607

4,919,905

5,067,502

5,219,527

5,376,113

5,537,397

5,703,519

5,874,624

6,050,863

6,232,389

DEBT SERVICE FUND (203)

6,100,000

6,273,613

6,265,462

6,275,412

6,266,687

6,274,162

6,266,337

6,267,587

6,268,212

6,263,087

6,266,837

RETIREE HEALTH INS.(OPEB) (610)

1,506,000

1,577,000

1,667,000

1,765,000

1,869,000

1,981,000

2,101,000

2,230,000

2,367,000

2,514,000

2,671,000

RISK-W/C, LIAB.PROP. (501)

1,876,000

2,075,518

2,140,987

2,181,713

2,227,437

2,260,185

2,334,387

2,411,911

2,492,878

2,577,474

2,665,901

CONTINGENT APPROP.

860,000

1,010,077

1,048,047

1,078,495

1,100,678

1,134,498

1,173,979

1,218,504

1,264,293

1,311,767

1,361,924

Total Transfers and Other

15,542,000

16,712,814

17,041,401

17,368,122

17,683,329

18,025,958

18,413,100

18,831,521

19,267,007

19,717,191

20,198,051

% Increase

20.23%

7.53%

1.97%

1.92%

1.81%

1.94%

2.15%

2.27%

2.31%

2.34%

2.44%

$ Increase

2,615,121

1,170,814

328,586

326,722

315,206

342,630

387,142

418,421

435,486

450,184

480,860

Total Expenditures

65,406,493

68,453,631

70,358,583

72,864,754

74,143,757

76,417,887

79,079,514

81,979,636

85,042,806

88,254,922

91,647,701

% Increase

12.62%

4.66%

2.78%

3.56%

1.76%

3.07%

3.48%

3.67%

3.74%

3.78%

3.84%

$ Increase

7,328,833

3,047,137

1,904,952

2,506,172

1,279,003

2,274,130

2,661,626

2,900,123

3,063,170

3,212,116

3,392,779

Recreation Enterprise Fund Trends


Marina


Revenue

2003 - 2008: Revenue increases reflect strategic increases in rates and growth in transient business. 2010 - 2011: Decrease in revenue is attributed to continuing slow economy and boating/yacht market, and not achieving 100% occupancy.

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


Expenses

2009: Increased expenses are attributed to minor facility improvements.

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

2011: Decreased expenses 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 due to fully funded Dockmaster position and partial reallocation of an Assistant Director’s salary.

2013: Increased expenses due to minor facility improvements.

2014: Increased expenses are due to upgraded shore power and minor facility improvements.


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Par 3 Golf Course


Revenue

2008: Decreased revenue is attributed to downturn in play due to slumping economy. 2009: The Par 3 closed for renovation starting in April 2009.

2010: The Par 3 remained closed until mid-December. Also, unseasonable weather negatively

impacted play from December -

arch. Along with the weather challenges, the overall economic

conditions had a lasting effect on golf play.

2010 - 2011: Revenue increases reflect re-positioning efforts of the golf course, through enhanced marketing approaches, new price structures, and growth in play.

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

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


Expenses

2008: Decrease in expenses can be attributed to the elimination of Registration Clerk II position. 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 pur hase 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.


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Tennis Programs & Facilities


Revenue

2009: Revenue increase is attribu ed to pricing increases for annual passes and daily play rates. 2010 - 2013: Revenue increase due to growth in income share from the teaching contract, and increased participation.

2014: Revenue increase is attribu ed to expectation that lower nonresident fees will increase overall participation, thus total revenue.


Expenses

2008: Decrease reflects the elimination of the Pro-Manager position.

2009: Increase can be 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.


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Recreation Center


Revenue

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 anticipated participation growth through additional offerings.


Expenses

2007: Recreation Supervisor position added to meet programming needs (offset by elimination of Tennis Manager), and new furniture/equipment was purchased for the facility.

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. Also had a few periodic expenses, such as painting of the facility, new air handler installation, and re-finishing of floors.

2010: Decrease in expenses is attributed to the elimination of periodic 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.


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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.


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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.


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Full Time Positions


2007: A

ded Recreation Supervisor and increased part-time positions to more adequately respond

to programming needs.

2008: Eliminated Tennis Pro-Manager position (duties shifted to Assistant Director and Tennis Facility Supervisors) and Tennis Assistant position. The remaining reduction in total FTE resulted from minor part-time staff reductions across all divisions.

2010: Eliminated Equipment Operator position. 2011: Eliminated As istant 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 not included in FTE count.

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


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Marina

Recreation Enterprise Fund Forecast


Gradual growth in revenue is based on improving economy, increasing occupancy with long-term leases, strategic price increases for dockage and electrical charges, and growth in transient business. 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 improving economy, strategic price increases, growth in play and increased merchandise sales. It also includes new revenue associated with the new clubhouse restaurant vendor agreement. 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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Tennis Programs & Facilities

Gradual revenue growth is based on an improving economy, strategic price decreases for

nonresidents to foster growth in overall play. services, and salaries/benefits.

Expenses gradually increase for costs of goods,


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Recreation Center


Gradual revenue growth is based on an improving economy and participation growth due to increased program offerings. Expenses gradually increase for costs of goods and services, mostly related to minor facility repair and upkeep, and increase in salaries/benefits.


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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


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Transfer to General Fund


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


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The net profits realized after the annual transfer of $885,000 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.

Growth of net assets will provide a revenue source for future major capital projects, such

as the rebuilding of the Town Docks. Although fund balance may not be able to cover the entire costs of future projects, having a significant balance to draw from would minimize the Town’s borrowing needs.


Self Insurance Fund – Risk Management


The Risk Management program is under the direction of the Town Manager’s Office. Responsibility includes insurance m nagement for workers' compensation, property and casualty, general liability, automobile liability, public officials and employment practices; claims investigation and administration including litigation strategies; contractual review regarding hold harmless, indemnification and insurance requirements of vendors, contractors, etc.; safety, loss prevention and control programs; and comprehensive review of proposed legislation which could impact the Town from an insurance control perspective.


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 2007 and 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.



The Net Assets of the fund have increased 45% since 2005. The reserves have been used to fund uninsured losses. The FY14 budget contains a transfer from the excess Net Assets of the Risk Fund to the Coastal Protection Fund of $2,000,000.


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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.


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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, Retirement Health Savings Accounts,

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 of Town employees.


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


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In 2007, revenues and expenditures associated with retiree health insurance costs were transferred out to the newly established OPEB trust. 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 and 2013 were below expectations and cost containment measures

were implemented.


Prior to the establishment of the OPEB trust in 2007, the Health Fund accumulated reserves in anticipation of the liability associated with retiree health insurance. A total of $16,000,000 was transferr d from the Health Insurance Fund reserves to the OPEB trust to offset the accrued liability and reduce the annual required contribution. Since that time the reserves of the Health Fund Reserves have been improving and 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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The Health Fund forecast assumes an annual increase of 10% for health insurance costs. 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. However, given the significant rate of inflation of health care costs in the broader economy and continued uncertainty about the full impact of changes in applicable Federal regulations, we believe it is prudent to use a conservative 10% annual increase factor in this forecast.


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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, 2012. The Town’s Actuarial Accrued Liability as of September 30, 2012 was determined to be $29,288,881.

The annual budgeted contribution for FY14 is $1,506,000.

In 2013, the Investment Advisory

Committee approved a reduction in the interest rate assumption from 8% to 7.5%.

The actuary

prepared a updated calculation with the new rate assumption and the Actuarial Accrued Liability as of September 30, 2013 increased to $33,442,489.


The trend in revenues and expenditures since 2007 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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The 10 year forecast assumes a 10% annual increase in health insurance costs. 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. However, given the significant rate of inflation of health care costs in the broader economy and continued uncertainty about the full impact of changes in applicable Federal regulations, we believe it is prudent to use a conservative 10% annual increase factor in this forecast. The Town’s contribution estimates were based upon actuarial estimates.


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The Health Insurance reserves are forecasted to increase from $25.5 million to $52.6 million during

the forecast period.

The increase is derived from the annual surplus (revenues over expenditures)

and investment income at an average of 7.5% per year.


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Debt Service Fund


During 2010, the To

n 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 fund d a portion of the Town’s Accelerated Capital Improvement Program totaling

$41,232,000 and $1,740,844 was used to reimburse 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 are payable over a thirty year period.


On January 1, 2012, the Town exercised a pro rata extraordinary mandatory redemption in the amount of $1,485,000 for the 2010B Worth Avenue Commercial District Bonds. Excess funds were remaining after the project was completed and were used for this redemption.


In December 2013, t

e Town issued bonds totaling $55,590,000 for the second phase of the

Accelerated Capital Improvement Program, the “bondable” portion of the Coastal Protection Program, and to refund the Recreation Enterprise Fund for the Town’s share of the Par 3 Clubhouse. The transfer from the General Fund to the Debt Service Fund for FY14 was increased by $2,600,000 to cover the first year debt service on the new bonds.


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



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


The forecasted total annual debt service for the period of FY14 through FY24 is shown in the chart below. The forecast includes the new 2013 bond issue with partial debt service beginning in 2014.


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The total principal debt outstanding for the all debt recorded as of this forecast for FY14 through FY24 is shown in the chart below.


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The Per Capita debt utilizing the current census population of 8,358 for the period of 2014 through 2024 is shown below.


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