The City Manager and Financial Services Director are presenting the City Manager’s final budget recommendations for fiscal year 2013-2014. Today, the City Council is asked to direct staff in preparing the City’s final budget document for submission to the State of Nevada. City staff has filed the tentative budget for the fiscal year 2013-2014, and City Council will receive public comment on the fiscal year 2013-2014 tentative budget on Tuesday morning, May 21, 2013 at 9:00 am. Immediately following the public hearing on the 2013-2014 tentative budget at 9:00 am, the City Manager and Financial Services Director will present the final budget document which will be prepared based upon direction received today. The final budget must be filed with the Nevada Department of Taxation by June 1 annually. During years in which the Legislature is in session, should the Legislature take action which affects the City’s budget for the subsequent fiscal year, an additional 30 days would be granted to file an amended budget if necessary with the Nevada Department of Taxation.

Attached to this agenda is the City Manager’s Budget Recommendation book as well as the proposed five-year Capital Improvements Plan (CIP). The City Manager’s Recommendation book provides a synopsis of results and expectations of the City Manager’s budget recommendations for the various Funds of the City of Sparks and the Sparks Redevelopment Agency for fiscal year 2013-2014. Today, the Financial Services Department Director will be presenting the material found in the City Manager’s Recommendations book, and is seeking feedback and approval to proceed to prepare the City’s final budget for fiscal year 2013-2014.

Today, the City Manager is seeking the following:

1. Approval of the fiscal year 2013-2014 City Manager’s budget recommendations;

2. Approval of the City’s property tax rate – an increase in property tax rate equal to 2 pennies per $100 of assessed value is being sought.

3. Approval of the proposed five-year Capital Improvements Plan (CIP).

Item #1 -- Information Regarding the City Manager’s Budget Recommendations:

• See attached Budget Recommendations book for more detailed information on the City Manager’s budget recommendations for FY ’14

Summary of the City Manager’s budget recommendations for FY ’14:

• Follow Council adopted fiscal policies according to direction received at the March 18, 2013 Council workshop;
  • Notably, the City Manager’s recommendations include a General Fund ending fund balance equal to 7.3% of expenditures; however, under the City Manager’s direction, City staff will be utilizing the Project Innovations process to try to achieve the Council’s goal of maintaining an ending fund balance equal to 8.3% of expenditures.  To do so will require finding budget reductions amounting to an estimated $560k in FY ’14, and an additional $1,150k in FY ’15 as we begin to look forward
• Reflects the various initiatives approved by Council to fill the previously identified $2.5M budget gap as decided upon at the March 18, 2013 workshop.  A detailed list of these results can be found on Page 48 of the City Manager’s Budget Recommendations book;
• The City Manager is recommending approval of the various new positions and reclassifications affecting various Funds managed by the City.  The full discussion and review of these requests can be found in the City Manager’s Budget Recommendation book beginning on page 22;
• City memberships and contributions as approved at the April 7, 2013 Council meeting;
• Notice from the Dept. of Justice that the COPS grant which currently funds 6 Police Officers has been extended for 1 year, bringing General Fund savings to FY ’14 of about $350k.  This is not a new award, but rather an extension of time to completely expend the previous grant award.  Funding is estimated to be completely expended approximately by the end of the 3^rd quarter of FY ’14 (around April, 2014); beginning at that time the General Fund will be responsible for covering all costs associated with those 6 positions;
• Transfer $352k to the General Fund from the Development Services Fund to continue paying back the General Fund subsidy totaling $1.116M that occurred during FY ’10 and FY ’11:
  • The General Fund transferred $916k in FY ’10, and $200k in FY ’11, into the Development Services Enterprise Fund to subsidize the operations of that Fund until that Fund could become financially stable once again;
  • Council previously has stated the desire to pay back the General Fund once the Development Services Fund is able to do so;
  • $60k has been paid back in FY ’13, and the City Manager is recommending another $352k to be paid back in FY ’14, leaving $704k remaining to be paid back;
  • The idea is to pay this subsidy back over time.  However, the Development Services Fund financial health will be monitored to see if the time can be expedited.
• Reduce Health Insurance Fund contributions and premium rates by 8%.  This will provide approximately $400k in savings for the General Fund;
• Includes a 1% salary reduction for Mgmt/OE/OS/CF personnel reflecting splitting the 2% PERS rate increase;
  • The PERS contribution rate is increasing from 23.75% to 25.75% for Regular Members, and from 39.75% to 40.5% for Police/Fire Members
• Use of unspent CTAX bond proceeds to pay CTAX debt service payments;
  • Approx. $1.6M of ’07 CTAX bond proceeds remain unspent.  This is planned to be used for debt service needs over the course of FY ’14 and FY ’15.  Approximately $730k is planned to be used in FY ’14
• Subsidize the Redevelopment Agency Area #2 debt service needs in the amount of about $750k; 
  • The City issued debt in 2007 which was to be paid for by the Redevelopment Agency Area #2.  However, property taxes within Area #2 are not sufficient to meet the entire debt service.  Thus, the City will need to subsidize that debt service by approximately $750k.  This subsidy began in FY ’13 with an amount of $200k
• Additional highlights, details, and financial summaries can also be found in the financial and economic presentation section of the City Manager’s Budget Recommendations book.

Item #2 -- Information Regarding the City’s Property Tax Rate:

• Per NRS 362.140, the property tax rate is capped at $3.64 per $100 of assessed value;
• SB 507 (’03 Legislature) added a total of 2 cents outside of the cap, which effectively raised the cap to $3.66 per $100 of assessed value;
• The City of Sparks current property tax rate is $3.6163 per $100 of assessed value;
• This means that the City of Sparks total tax rate is $0.0437 (4.37 cents) under the maximum rate allowed of $3.66 per $100 of assessed value;
• The City Council has the authority to raise the property tax rate up to the $3.66 cap;
• Each penny that increases the tax rate is expected to generate an additional $189k of General Fund revenue before abatement is calculated;
• Increasing the property tax rate to the maximum level is expected to generate an additional $825k of General Fund revenue;
• The City Manager has included a property tax increase of 2 cents per $100 of assessed value as directed by Council at the March 18, 2013 workshop.  This will be added to the City’s operating rate which currently stands at $.9161, thus increasing it to $.9361 per $100 of assessed value;
• The proposed increase of 2 pennies is expected to generate approximately $360k of additional General Fund revenue in FY ’14;
• If approved, this will be the first property tax increase in 9 years since the current rate was established in FY ’04.

Item #3 -- Information Regarding the City’s Five-Year Capital Improvements Plan (CIP):

• The CIP document can be found as the final attachment to the City Manager’s Budget Recommendations book. 
  • Various small changes were made to the proposed CIP compared to what was presented to Council the 3/18 workshop include.  Total expenditures are now expected to be $32,299,475, up slightly by $11,945 compared to what was presented on 3/18/13

Nevada Revised Statues (NRS) 354.59801 requires that each local government have on file, a copy of its plan for capital improvements.  NRS 354.5945 further requires a five year capital improvement plan be submitted to the:

• Department of Taxation
• Debt management commission of Washoe County
• Director of the Legislative Counsel Bureau

In addition, NRS 354.5945 requires that copies be available for public record and inspection at:

• The Sparks City Clerk
• The Washoe County Clerk

Because of regional efforts, additional focus must be given to how capital projects included in the City’s Capital Improvement Program (CIP) relate to the regional master plan.

Under the direction of the City Manager and the Deputy City Manager of Community Services and with the collaboration of the Financial Services Department, the five-year CIP has historically been compiled by accumulating and prioritizing City Council and department requests, projecting all available and appropriate funding sources, and meeting with appropriate City staff to determine timeline and costs.  The above factors are then considered and scheduled in the CIP by priority, category and funding source.  During the planning process, care is taken to insure that projects scheduled in the capital plan are supported by expected funding sources for each category.

The revenue sources dedicated for ongoing capital road projects in the City are gasoline fuel taxes.  These fuel taxes are remitted to the City’s Road Fund (1401) and are required to be utilized for streets.  Additional ongoing revenues coming from the TMWA Memorandum of Understanding Agreement (MUA) and the electric and gas franchise fees coming from NVEnergy has added to our ability to maintain and enhance our roadway system now and in the future. 

Capital projects paid for through the General Fund are accounted for in Fund 1404 (Capital Projects and FIP Capital Projects), whose main resource is a General Fund transfer.  In addition, projects in support of the Victorian Square Development Plan that will be using consolidated tax revenue resource are included in the FIP Capital Project portion of Fund 1404.

A special ad valorem (property tax) levy of five cents collected by the County and remitted to Sparks is the funding source for the City’s capital facility improvements and has been regained from the State.  40% of the proceeds collected will be remitted to the Counties and Cities, while 60% will be remitted to the State.  Projects found in the Capital Facilities Fund 1405, are spending the rest of this special levy. Per NRS 354.598155, this fund is authorized to make a variety of outlays for capital projects in the categories of:

• Land,
• Improvements to land,
• Major items of equipment, or
• The renovation of existing governmental facilities not including normal recurring maintenance

Other sources of capital funding are available but restricted.  Examples include

• The NVEnergy electric and gas franchise fees for parks and recreation projects
• Residential construction taxes dedicated to neighborhood park construction, rehabilitation or improvements
• Sewer user’s and connection fees
• Bond proceeds for purposes authorized when the bonds were issues
• Municipal court assessments for purposes to enhance or support municipal court facilities and operations.

In addition:

• Community Development Block Grant (CDBG) & other grants from time to time

• Regional Transportation Commission (RTC)
• Nevada Department of Transportation (NDOT)

The Motor Vehicle Fund (1702) provides funding to replace and maintain City vehicles and equipment, recovering costs to user departments through

• Maintenance and repair
• Depreciation charges

As with any planning effort, the City’s Five Year CIP is a working document.  As time progresses, future capital needs and priorities change annually and are then adjusted accordingly.