Mayor S. Scott Vandergrift City Manager Robert Frank Commissioners John Grogan, District 1 Rosemary Wilsen, District 2 Rusty Johnson, District 3 Joel F. Keller, District 4 MEMORANDUM TO: Honorable Mayor and City Commissioners FROM: Robert D. Frank, City Manager DATE: August 1, 2013 RE: Budget Message for Fiscal Year 2013-2014 I am pleased to submit for your consideration the recommended budget for Fiscal Year 2013-2014. Over the past few years we have worked to provide high quality facilities and services while being fiscally conservative. This has proven to be difficult, but I have been very proud of the work that we have accomplished in maintaining a track record of reducing taxes. We enter this budget season with a slightly different atmosphere. This year’s budget preparation benefitted by a slight turnaround in the City’s economy, as with most other cities in Central Florida. During the previous year’s budget process I reported to you that the economic decline was slowing; this year, I have better news. Last year, the City’s gross taxable value decreased 2.9% from the previous year, a combined 21.7% decrease over the past three years. I am pleased to say that the City’s gross taxable value for the coming year is $1,676,861,448, a small but encouraging 1.2% increase from the prior year’s value (a $110,627 increase in revenue), which show’s that our statement last year that the decline was slowing was correct. As we are all aware, the City of Ocoee, like all Florida local governments, relies primarily on Ad Valorem and Intergovernmental revenues for our income. This reliance imposes stresses on the City’s budgeting process, as the value of residential and commercial real estate fluctuates. Of course, the last few years have seen a steady decline in property values and in the revenue property taxes generate. Since the real estate peak of 2008, overall property values have fallen by 25%. In 2010 alone, the city’s four largest commercial properties declined in value by a total of over $29 million. We are beginning to see a slight rebound in the nonresidential markets; however, it should be noted that a slight lag time is expected between residential and non-residential economic growth. The decline has been more severe with residential property. The average home value in the city in 2008 was $183,554. This year, it is $153,977, an increase of 12.4% from 2011. Other sources City of Ocoee ▪ 150 North Lakeshore Drive ▪ Ocoee, Florida 34761 phone: (407) 905-3100 ▪ fax: (407) 905-3167 ▪ www.ocoee.org _____________ Page Two Budget Message of revenue, such as development impact fees, are still well below the level required to pay related bond debts. The shortfall places an additional stress on the General Fund, which must make up the difference. We continually look for ways to provide better services with less dollars. The City has benefitted from some of our reorganization efforts in last year’s budget resulting in savings on technology programs and capital projects. Despite a previous year in which we had less revenue and again lowered the millage, the City was able to preserve and enhance services provided. The City Commission’s visionary efforts have resulted in a new iconic community center that will be completed later this year, an expanded capability of providing reclaimed water to our customers (benefitting the environment and saving dollars), and a gateway and entryway sign program sporting a new City logo that will be complete by the time you adopt the proposed budget. Additional projects include enhancements at parks (Central Park lighting), and continued improvements at the Tom Ison Center for Seniors and Veterans, by leveraging federal and local grants. Despite our continued challenges and the beginning economic recovery, the City will begin the next year with a solid financial outlook. The City continues to be proactive in efforts to mitigate effects of property tax reform and to help control costs. Over the years, these practices have included our self insurance strategy which has been extremely effective with implementation of the employee clinic, as well as newfound success with outsourcing of our fleet auto parts shop, which will continue to save the City dollars. While many of the practices for fiscal health in declining economies are already in place, we have once again prepared a budget that is below the rolled back rate. In the current fiscal year we continue to evaluate our workforce to optimize quality of resources and streamlined government. I am very proud of the fact that the City’s strong financial management practices and fiscal conservatism have allowed us to produce a balanced budget without substantially reducing basic services. Total appropriations for the coming year are $55,232,710, which includes the General Fund, the Utilities Fund, the Stormwater Fund, the Water and Sewer Fund, the Solid Waste Fund, and the Impact Fee Funds. The total General Fund budget is $34,741,730. This is decrease from the current year budget of 1.19% ($35,161,555). The current year’s millage rate is 5.8460. Based on this, the rolled-back rate for the coming year is 5.9307 which is less than last years rolled back rate of 6.1304 due to our slight increase in property values. I am very pleased to report that the recommended budget is balanced at a conservative 5.8460 millage rate. This rate is actually a 9.77% decrease from the rolled-back rate (compared to 4.86% in FY 2012-13), resulting in a $93,852 reduction in ad valorem revenues. Page Three Budget Message For example: A Homeowner with a $200,000 home and a $50,000 Homestead exemption will pay $876.90 at the current rate and $889.61 at the rolled back rate. A Homeowner with a $150,000 home and a $50,000 Homestead exemption will pay $584.60 at the current rate and $590.37 at the rolled back rate. As seen on the following chart, the general fund revenues are partitioned as follows: Ad Valorem taxes and Intergovernmental Revenues comprise 55% of general fund revenues. Franchise fees and utility fees comprise 16% of the general fund budget. These percentages are comparable to previous years, and the City continues to provide exceptional services with fewer dollars per capita. I wish to point out that we are once again taking a conservative approach to the revenue projections, as evidenced below in the chart. As noted by our auditors in our recent year end up-date (2012), the ratio of revenue to population for Ocoee is $722 (this number decreased from $783) compared to $754 for the benchmark cities with populations of 15,000 to 49,999. Like most municipalities, the single largest cost component of the budget is personnel costs. Total personnel costs for the General Fund are $21,653,935 which is down from $22,533,668 in the current year’s budget. Our employees remain our Page Four Budget Message single greatest asset, and I have gone to great lengths to keep personnel costs to a minimum by continued reliance on strategic management versus relying on layoffs. The City plans to continue reviewing each position as it becomes vacant and focusing on optimizing resource allocation and continuing expedient operations at no loss of service. The next chart illustrates the apportionment of expenditures for the General Fund. As a percentage of total expenditures, personnel costs have remained steady at 64%. Operating expenses account for approximately 24% and capital expenditures are approximately 6% of the general fund budget. The City’s proposed General Fund capital outlay budget of $2,187,830 reflects a decrease over the current year’s budget.