2012 2:00:00 PM

Monday, April 23, 2012 2:00 PM
745 4th Street, Sparks, NV 89431

General Business: 6.4

Title: Consideration, discussion, and possible approval of fiscal year 2012-2013 budget and fiscal items including 1) the City Manager’s recommendations for the City of Sparks final budget; 2) the City’s property tax rate; 3) committing $200,000 of Business License revenue to the Stabilization Fund; 4) the creation of a new Internal Services Fund called the “Employee Retirement Benefits Fund”; 5) initiating a second round of the Sparks Sustainable Services Initiative (SSSI); 6) the proposed five year Capital Improvement Plan; and 7) the proposed use of unspent 2007 CTAX bond proceeds.

Petitioner/Presenter: Shaun Carey, City Manager/Jeff Cronk, CPA, Financial Services Director

Recommendation: That the City Council approve 1) the City Manager’s recommendations for the 2012-2013 final budget; 2) no change to the City’s property tax rate; 3) committing $200,000 of Business License Revenue to the Stabilization Fund; 4) the creation of a new Internal Services Fund called the “Employee Retirement Benefits Fund”; 5) initiating a second round of the Sparks Sustainable Services Initiative (SSSI); 6) the proposed five year Capital Improvement Plan; and 7) the proposed use of unspent 2007 CTAX bond proceeds.

Financial Impact: Establishing the City’s budget for Fiscal Year 2012-2013.

Business Impact (Per NRS 237):
A Business Impact Statement is not required because this is not a rule.

Agenda Item Brief: This agenda item provides the City Council with the City Manager’s recommendations for the fiscal year 2012-2013 budget and fiscal impacts for the City of Sparks.

Background: N/A

Analysis: The City Manager and Financial Services Director are presenting the City Manager’s final budget recommendations for fiscal year 2012-2013. 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 2012-2013, and City Council will receive public comment on the fiscal year 2012-2013 tentative budget on Tuesday morning, May 15, 2012 at 9:00 am. Immediately following the public hearing on the 2012-2013 tentative budget at 9:00 am, the City Manager and Financial Services Director will present the final budget 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 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 2012-2013. 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 2012-2013. Today, the City Manager is seeking the following: 1. Approval of the fiscal year 2012-2013 City Manager’s budget recommendations; 2. Approval of the City’s property tax rate (no change is recommended); 3. Formal Council action to “commit” $200k of Business License revenue to the Stabilization Fund per Council Policy in accordance with GASB 54 requirements. 4. Direction to establish a new Internal Services Fund to be called “Employee Retirement Benefits Fund”, designed to accumulate assets to offset the City’s OPEB liability; 5. Approval to initiate a second round of the Sparks Sustainable Services Initiative (SSSI); 6. Approval of the proposed five-year Capital Improvements Plan (CIP); 7. Approval of the proposed use of remaining unspent 2007 CTAX bond proceeds; 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 ’13 Summary of the City Manager’s budget recommendations for FY ’13: • Follow Council adopted fiscal policies; • Maintain a “status-quo” budget; • "New needs" & exceptions to a status quo budget included based upon Council direction received on April 9, 2012 workshop. City Manager Recommendations include: o 2.5 currently vacant public safety FTE (2 Fire Fighters & 1/2 Victim Advocate pending loss of grant funding); o Contracted Plans Examination Services (funded within the Development Services Fund); o Contracted services to help City staff overhaul the City’s development ordinances; • Transfer $60k to the General Fund from the Development Services Fund to begin paying back the $1.1M the General Fund subsidy during FY ’10 and FY ’11: o 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; o Council previously has stated the desire to pay back the General Fund once the Development Services Fund is able to do so; o Another $268k transfer to the Development Services Fund was budgeted in FY ’12; however, revenues have improved, and it appears there will be enough resources in this Fund that the transfer from the General Fund will not be necessary in FY ’12; o Additionally, it also appears likely that during FY ’13, the Development Services Fund will be able to begin to pay back the General Fund subsidy from FY ’10 and FY ’11; o Thus, a transfer from the Development Services Fund to the General Fund of $60k is included in the City Manager’s recommendations for FY ’13 to begin paying back the roughly $1.1M subsidy that occurred in FY ’10 and FY ’11. • Reduce Health Insurance Fund contributions and premium rates by 8%. This will provide $400k in savings for the General Fund. 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 after abatement is calculated; • Increasing the property tax rate to the maximum level is expected to generate an additional $825k of General Fund revenue; • Raising the property tax rate is not being recommended by the City Manager at this time. Item #3 -- Information Regarding Commitment of Revenues to the Stabilization Fund: Formal Council action is needed prior to the end of June 30, in order to commit revenues to the Stabilization Fund per GASB 54 requirements. The City Manager is seeking formal Council action at today’s meeting to commit $200k of Business License revenue to the Stabilization Fund to comply with those requirements. Item #4 -- Information Regarding the City’s OPEB Liability: One of Council’s fiscal policies is to consider funding the City’s OPEB liability. The City Manager is recommending continuing the City’s “pay-as-you-go” funding status; however, the City Manager is also recommending the creation of a new Internal Services Fund called the “Employee Retirement Benefits Fund” as a vehicle to accumulate assets to offset the OPEB liability over time. Item #5 -- Information Regarding Round 2 of the Sparks Sustainable Services Initiative (SSSI): The City Manager’s FY ’13 budget recommendations identify actions designed to meet the Council’s fiscal policy of maintaining a minimum unrestricted ending fund balance equal to 8.3% of total expenditures. Looking ahead to FY ’14, a preliminary shortfall of about $3.1M is anticipated assuming revenues remain flat. In anticipation of this shortfall, the City Manager is seeking authority to launch a second round of the Sparks Sustainable Services Initiative (or, SSSI). Aspects of the first round of the SSSI project was implemented in FY ’11 and FY ’12. A second round is being recommended by the City Manager to be implemented during FY ’13 so that actions may be identified and recommended by the City Manager for incorporation into the FY ’14 budget. Item #6 -- Information Regarding the City’s Five-Year Capital Improvements Plan (CIP): > The CIP document can be found as an attachment to the Budget Recommendations Book 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 and with the collaboration of the Finance 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) • Regional Transportation Commission (RTC) • Nevada Department of Transportation (NDOT) For the purposes of enhancements and miscellaneous, grant resources are available for restricted use projects as outlined in this plan. 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. Item #7 -- Information Regarding the Proposed Use of Unspent 2007 CTAX Bond Proceeds: > Staff recommendations are included in the City’s Five-Year Capital Improvements Plan In 2007, the City of Sparks sold bonds backed by a pledge of the City’s CTAX revenues (the “CTAX bonds”) to finance the acquisition or construction of multiple capital projects, including: • Phase 1 of the Larry D. Johnson Community Center • Victorian Square public improvements • Design costs for a new City Hall • Golden Eagle Regional Park The City sold $14,475,000 in bonds and most recently refinanced this debt in 2011. Sparks Redevelopment Area 1 (RDA 1) is responsible for a portion (about 29%) of the principal and interest payments on this debt. The City spent a majority of the proceeds (the “CTAX bond proceeds”) to fund costs associated with the projects specified above. There remain, however, unspent and unencumbered CTAX bond proceeds totaling approximately $1.58 million, primarily because the City did not undertake a full design of the City Hall complex that was previously being considered for Victorian Square. Swendseid & Stern, the City’s legal counsel for the sale of the CTAX bonds, has advised that the City has significant latitude as to the use of the remaining CTAX bond proceeds for capital projects. The City Council and Redevelopment Agency Board have previously considered the expenditure of the remaining CTAX bond proceeds, including most recently in February, 2011 with the approval of a revised RDA 1 Action Plan. The City and Agency have since proceeded with implementation of the Action Plan, including design and construction of the C Street parking garage phase 1 repairs, design of the Victorian Square plaza enhancements (with construction of the phase 1A improvements to be bid this summer), and the provision of additional funding to support special events. This agenda item asks the City Council to provide direction to staff regarding the use, for one or more capital projects, of the remaining CTAX bond proceeds. Possible projects include some that were considered as part of the RDA 1 Action Plan as well as more recently identified projects. The projects include: C Street parking garage phase 2 repairs. The phase 1 repairs are currently underway. The phase 2 repairs would focus on major retrofit or replacement of the garage’s stairwells and its two elevator towers as well as structural repairs (to the center beam and ramp columns). The total estimated cost is $600,000 but the project could be undertaken in sub-phases. City Hall electrical upgrades. The projects consist of full review, design and installation of an upgraded electrical system for the existing City Hall complex. The current electrical system at City Hall is antiquated and has no capacity to allow for HVAC modifications or upgrades. Additionally, parts of the existing system are over capacity and it is difficult to add new technologies to City Hall without affecting operation of existing equipment (computers, printers, servers, card key systems, etc.). The upgrades would include an upsized NV Energy Transformer, new upgraded electrical switch gear, re-wiring of the entire City Hall complex with a 3 wire system (contains true ground, City Hall has two wire system now w/o true ground), and all circuit breaker panels would be replaced and upgraded. The estimated cost is approximately $900,000 to $1,000,000 but the project could be undertaken in sub-phases. Victorian Square phase 1b plaza enhancements. Phase 1B includes a tensile fabric pavilion, lighting and sound system, as well as the infrastructure for an ice rink. Based on the 50% design, the project engineer estimates phase 1b will cost approximately $2.53 million to construct. This figure includes a 10% contingency. The remaining CTAX bond proceeds could also be used to make regularly scheduled principal and interest payments on the CTAX bonds (prepayment penalties would apply if the City prepaid debt rather than simply using the proceeds to make regularly scheduled payments in fiscal years 2013 and 2014). Staff requests City Council direction as to the use of the remaining $1.58 million of CTAX bond proceeds and offers the following recommendations: 1) $600,000 for C Street parking garage phase 2 repairs. 2) $980,000 for City Hall electrical upgrades.

Alternatives: City Council could also choose alternatives other than those presented today, and direct staff to prepare a final budget for fiscal year 2012-2013 and five-year Capital Improvements Plan for approval implementing any alternate actions accordingly.

Recommended Motion: Recommended Motion #1: “I move to approve the City Manager’s budget recommendations for fiscal year 2012-2013”. Recommended Motion #2: “I move to keep the City of Sparks property tax rate unchanged.” Recommended Motion #3: “I move to commit $200k of Business License revenue to the Stabilization Fund for fiscal year 2012-2013.” Recommended Motion #4: “I move to direct the Financial Services Director to begin the process of establishing a new Fund called the “Employee Retirement Benefits Fund” for the purpose of accumulating assets to offset the City’s OPEB liability.” Recommended Motion #5: “I move to authorize the City Manager to begin a second round of the Sparks Sustainable Services Initiative (SSSI) during FY ’13 in anticipation of a FY ’14 budget shortfall. Recommended Motion #6: “I move to approve the proposed five-year Capital Improvements Plan for fiscal year 2012-2013 through fiscal year 2016-2017”. Recommended Motion #7: “I move to approve the proposed use of unspent 2007 CTAX bond proceeds as presented”.

Attached Files:

FY13 CM Budget Recommendations Book to Council 4 23 12-FINAL.pdf

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