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Agenda Packet 03/29/2011
• N®ATI'C} Note: The Mayor may determine the order of business for a particular City Council meeting. The agenda should be arranged to best serve the needy and/or convenience of the Council and the pudic. The items of business for regular Council meetings may include the following: A. CALL TO ORDER — SPECIAL MEETING AT 5:00 P.M. D. ROLL CALL PLEDGE OF ALLEGIANCE C. RESOLUTION: Resolution to Correct Public Hearing Date Correct Public Hearing Date to April 5, 2011 for Consideration of Petition to vacate portions of right -of -ways within the • Mount Angeles View Housing Development. WORK SESSION: 1. 2010 Year -End Financial Report 2. 2011 Budget - Capital Projects 3. 2012 Budget - Major Themes / Budgeting for Priorities 4. Retail Market Analysis D. ADJOURNMENT ORT)NGELE W A S H I N G T O N , U.S.A. AGENDA CITY COUNCIL MEETING 321 East 5 Street MARCH 29, 2011 SPECIAL MEETING 5:00 p.m. Pass Resolution Conduct Work Session NOTE: HEARING DEVICES AVAILABLE FOR THOSE NEEDING ASSISTANCE MAYOR TO DETERMINE TIME OF BREAK March 29, 2011 Port Angeles City Council Meeting Page - 1 Y W A S H I N G T O N , U.S.A. CITY COUNCIL MEMO DATE: MARCH 29, 2011 To: CITY COUNCIL FROM: YVONNE ZIQMKQWSKI SUBJECT: 2010 YEAR -END PRELIMINARY FINANCIAL REPORT The wrap -up of 2010 marks the end of one of the most unpredictable yet exciting years 1 have spent as Finance Director in Port Angeles. Even as our nation continues to struggle through one of the worst recessions in recent history, the City of Port Angeles was able to weather the storm by sticking to our established policy of conservative budgeting. However, we are not able to see the true impact of our hard work until we reflect on the combined cost - saving efforts of management and staff, along with several one - time, non - sustainable revenue streams that we received last year. Only then can we truly understand why 2010 will be unforgettable for the City of Port Angeles, especially those in the Finance Department. This report provides the result of City operations as compared with the amended budget, addresses notable variances to the budget, and concentrates mostly on the General Fund. The final step of the budget process is evaluation, which includes a comparison of budget assumptions against actual events. It is necessary to state that the budget is only a best estimate based on all factors known at the time it is developed. The prudent and recommended practice is to use a conservative approach to both revenue projections and expenditures. Finance staff is very diligent in monitoring the City's budget performance and providing reports so that any corrective action can take place in the amended budget. In 2010, the budget was amended earlier so that critical unbudgeted project expenditures could move forward. Many of the positive changes to revenue estimates occurred after the budget was amended. 2010 Amended Variance GENERAL FUND Actual Budget $ % Revenues 18,307,728 17,919,514 388,214 2.17 Expenditures 17,022,644 17,278,695 (256,051) (1.48) Rev -Exp. $ 1,285,084 $ 640,819 1 $ 644,265 t We finished 2010 by collecting 102% of budgeted revenues and spending 99% of budgeted expenditures. This is great news, and if utilized correctly, will allow us to positively position ourselves for future budgets. However, we continue to evaluate budgetary practices to ensure assumptions are realistic, especially when resources are scarce. Also, we need to analyze to see if some of the results are sustainable for the future. General Fund Revenues As of December 31, 2010, General Fund revenues amounted to $18.3M; this is 2% or $388K over budget. There were several factors contributing to the increases in revenues over projections. However, it is important to note that these changes were virtually all positive with revenues exceeding our estimates. Almost all of the increase was in the category of tax and permits. Tax revenues, which comprise over 60% of the General Fund budget and include property, sales and use, utility, leasehold, and gambling taxes, came in at $388K or 2% over budget. While this variance is significant, it is important to look at these on an individual basis. Below is a more detailed analysis of budget estimates vs. actuals. Utility Taxes Utility taxes, including electric, water, wastewater, solid waste collection and transfer station, and stormwater, have a direct correlation to utility revenues and need to be analyzed together with all utility revenues. These revenues are estimated and very closely controlled and monitored by Public Works and Finance collectively. Below is a discussion of assumptions made during the budget process, actual utility tax revenue results and future considerations. Budget Assumptions: Utility tax revenues are based largely on utility revenue projections submitted by Public Works. Finance performs a separate estimate and works with Public Works staff to resolve any differences. During the 2010 budget amendment process last summer it was decided to be conservative rather than speculative. In addition to reviewing historical revenues, other factors which affect these revenues were also considered. Some of these factors included weather (especially for electric and water), temporary production closure (Nippon), and conservation efforts. Since more than half of this revenue comes from the electric utility, and Nippon revenues comprise approximately half of electric utility revenues, a considerable focus was placed on this revenue. For 2010, information received from Nippon indicated that there would be two periods of closure in the second part of the year. These closures did not occur. Budget vs. Actual Discussion: Overall, almost $3.8M in utility taxes were collected, which is $176K more than budgeted. Almost, all of this variance is attributed to the electric utility, which exceeded expectations by 10% (or $174K). Electric Utility - There are three major types of customers: residential, commercial, and industrial. Estimates for the commercial customers were exactly on target. Revenue from residential customers, which depends greatly on weather, was 6% over budget. The amended budget was decreased for residential customers based on the first six month's revenues, (which was below 2008 and 2009 during the same period). We also took into account the forecast for warmer weather in October - December 2010. As of September receipts were right on target for the year. However, at the end of the year, actual receipts from residential customers exceeded budget by 6 %. This is likely due to the fact that November had record cold temperatures. It is also important to mention that even with this surge of residential electric revenue at the end of 2010, overall receipts were still the lowest since rates were increased in 2007. It is a challenge to anticipate when changes in weather patterns will occur, and if they occur at the end of the year it is too late to amend the budget. 1500 1300 - n3 1100 900 1- 700 - 500 300 Residentia E ectric Revenue c _a L - >. c faiJ 4--) +1 > C.3 gO 2008 2009 =2010 As mentioned previously, almost half of the electric utility revenue is derived from one customer, the paper mill. Their consumption depends greatly on production cycles, and reports indicated that there would be two planned production interruptions at the end of the year. Had these closures occurred, actual electric revenues from Nippon would have come closer to budget estimates. The actual receipts exceeded expectations by 20 %, resulting in additional utility tax of almost $153K. It is important to note that budgeted revenue estimates for Nippon were already budgeted $427K over 2009 actual receipts and increasing them further would not have been prudent given the information available at the time of budgeting. If this step was made and the closures occurred, we would be in a much more difficult position of trying to explain how our revenues were less than estimated. 16 14 • 5 12 10 Property Tax N ippon Electric Revenues 1 1 1 2005 2006 2007 2008 2009 2010 These estimates followed the City's financial policies which state: "Because revenues, especially those of the General Fund, are sensitive to local and regional economic conditions, revenue estimates will be conservative and will be made by an objective, analytical process." "Year -end surpluses in the General Fund may be used for nonrecurring capital expenditures or dedicated to the Capital Facilities Plan. " Future Considerations: Designate $175K of additional utility tax revenue for capital projects. This is a great opportunity to be able to fund critical projects such as the Lauridsen Bridge, or other much needed street projects which were deemed essential by citizen survey responders. Reinvesting these funds back into the community is very positive for our citizens and could help achieve our goal of creating job opportunities. Budget Assumptions: The regular levy property tax was not increased in 2010. In fact, reserves were used to reduce the special levy by $80K to offer taxpayers relief while recovering from the economic recession. Although property tax has been a very dependable source of revenue and is at the very foundation of our operating funds, property tax collections have not reached 100% collection in several years. During the budget amendment period, there was no indication that property tax receipts would exceed the budget. As of October 2010 property tax receipts were $27K below October of 2009, a year in which only 98% of property tax was collected. With all this information in mind, property tax was budgeted based on the regular levy information provided by the County, with a provision of $27K for uncollectible taxes. Budget vs. Actual Discussion: The property tax revenue budget was $3.554 million but we collected $36K (or 1 %) more than budgeted. How is this possible? On average, the actual collection of property taxes is 97 -98% of the levy; in 2010 it was 101%. Why? Collection of prior year taxes exceeded $107K, and a one -time allocation from the Treasurer's office of $7.3K exceeded not only our expectations, but also the prior year average collection. In most years, property tax receipts are below the levy as a result of uncollectible accounts. Just as a comparison, in 2009 we collected $12.1K less than budgeted (even with provision for uncollected property tax). Property tax receipts were over $76K more than in 2009. It is important to note that there was NO increase in the 2010 property tax levy. Sales Tax 102% 100% 98% 96% 94% 1 Property Tax Collection Rate 2006 2007 2008 2009 2010 Property Tax Collection Rate Future Considerations: Council may want to consider using this additional collection to offset a property tax levy increase for 2012. It is important to remember that this source of revenue is relied upon more heavily during periods of economic downturn. Sales tax is very difficult to predict for many reasons; it is very sensitive to the local economy, retail base, unemployment, consumer confidence, and construction level. This is a tax we watch very closely and analyze by timing, sources, sectors, etc. Budget Assumptions: There are a number of assumptions that are made to project sales tax and it is not an exact science. Although sales tax revenues are projected based on many local factors, we also monitor what is happening at the state level. First we begin with historical information. Since in 2009 we received almost $191( less than estimated, we were careful with our assumptions, especially in this economy. Second we look at unemployment and compare with reports at the state level. Although Clallam County unemployment has improved since the beginning of 2010, we still ended the year at the highest unemployment rate for December in more than 15 years. In the face of higher than average unemployment and closure of some retail businesses, it would not be prudent to estimate this revenue at a higher level than 2009, especially as the trend for the last five years was to steadily decrease. Construction activity was projected low based on available knowledge of planned construction activities, with a combined permit value estimated at only $18 million (construction of Peninsula College building was permitted in 2009 and incorporated in 2010 sales tax estimates). During the budget amendment process, information from our building division indicated that some projects were not anticipated to move forward, reducing already lowered expectations for this sector. The housing market is another indicator of whether citizens feel confident to make home purchases. Reports from local real estate agencies revealed that over 22% of home sales were bank owned or repossessions. Also, real estate excise tax receipts were corning in below budget. This information supports assumptions that although economic recovery may be under way, the affects of the recession are still being felt and it is going to be a slow road to recovery. Aside from all of the normal economic indicators, review and accounting for any special circumstances also takes place. Sales tax estimates were increased based on the construction of the Peninsula College building; however, reductions were made to adjust for the loss of Gottschalks and weak economic activity (a net reduction of approximately $85K from 2009 actual receipts). Also during mid -year 2010 we began hearing about the impending move of the Price Ford dealership which caused some doubt as to whether we would receive a full year of receipts. Revenue estimates are always cautionary when not enough information is available to support making changes. As an example, there was no increase in revenues projected for the upcoming $71 million Nippon biomass project. We will review potential revenue for the amended 2011 budget, but we believe that very minimal sales tax revenue will result from this project since all machinery and equipment used for production is tax exempt. The amended 2010 budget was not increased at mid -year because (shown in the graph below) October revealed only three out of ten months with any sign of growth over 2009 sales tax levels. These increases in revenue were a result of the Peninsula College building project (of which 76% of revenues from this project were received by October). Also, sales tax receipts from construction of the Peninsula College building were expected to be more toward the beginning of the year since construction began in 2009. At the end of October, only 81% of the sales tax revenue budget was received which was 2% below receipts in October of 2009. Although we expected a slight increase for Christmas retail, the November and December increase was higher than anticipated. Along with monitoring local factors, information reported as late as November 2010 in the Washington State Economic and Revenue Forecast report indicated that retail sales fell below forecasts and a slower rate of revenue growth was anticipated. This trend was apparent in Clallam County as well. Other funds such as PenCom and Criminal Justice received sales tax revenue below the budget. Up until General Fund's November sales tax receipts were received there was no foreseeing that revenues in this month would soar 13.5% over 2009. 400 300 200 100 - 0- 2010 Sales Tax Comparison to 2009 so c Sales Tax Revenue % of Change 2010 to 2009 Budget vs. Actual Discussion: Sales tax revenue was budgeted at $2.752K and $2.878K was received, which represents an additional $125K. Sales tax increases over 2009 (aside from the Peninsula College building project) were mostly related to service areas such as rental /leasing, hospital, food and accommodations, public administration/support, transportation, waste management and professional services. Excluding the Peninsula College building, construction sales tax was only higher than 2009 by $13K, which may have been related to the reported increase in single family construction for the second half of 2010. While an increased construction level is always good news, the revenue itself is not sustainable, especially if it is related to governmental projects. This is one -time revenue and therefore should not be recommended for on -going expenditures. One -time revenue from construction has always been considered too risky to be sustainable. To compare, in 2009 revenue from "construction" sales tax was $134K lower than in 2010. In summary the budget for sales tax revenues was based on: • 2009 sales tax receipts • Decrease in receipts related to Gottschalks, weak economic activity including auto sales, retail, and construction • Increase for Peninsula College building construction Receipts exceeded the budget due to the following positive events: • Although auto sales declined, it wasn't at the lower level expected • Timing of Peninsula College building construction receipts • Over the entire year retail partially recovered the loss of Gottschalks, Murray Motors and Dollar Store(recovery came mostly in the last two months of year) • Retail activity was below 2009 in September & October which didn't inspire the need to amend the budget, however, receipts increased in November & December (13.5% above December of 2009). • Single family construction increased in the second half of the year • Larger than anticipated increases in the service industry. • Price Ford remained in the City for the duration of 2010 (this move is included in 201.1 budget assumptions) 40 30 20 - 10 - Construction Sales Tax 2010 vs. 2009 -10 Jan Feb Mar Apr May June July Aug Sept Oct Nov D Sales Tax from College Project Change in Construction Future Considerations: This $125K of additional sales tax receipts is one -time revenue and therefore should not be recommended for on -going expenditures but may be considered for use toward governmental capital projects such as the Lauridsen Bridge or waterfront project. Other Taxes: Parking and gambling taxes were unpredictably higher (MK and $20K respectively). Since parking tax is new revenue, budget estimates were somewhat cautious. With another year of revenue under our belts, it is much easier to comfortably project at higher levels based on more historical information and future budgets will be adjusted accordingly. Gambling taxes are very unpredictable and in 2010 we had to significantly decrease our projections, especially when several establishments closed. This revenue source will continue to be treated very cautiously since we continue to see decreased stability in receipts, and information received at the state level is neither timely nor transparent. f Year Gambling Taxes Gambling % of Tax Change 2000 80,834 -4.20 2001 11 1,422 37.84 2002 109,063 -2.12 2003 78,442 -28.08 2004 161,650 106.08 2005 222,088 37.39 2006 163,150 -26.54 2007 168,816 3.47 2008 185,410 9.83 2009 - 144,856 - 178.13 2010 Actual 41,569 128.70 Building and Planning Revenues 300 _ 200 - co 3 100 - 1= 0 - 100 - - 200 - Community Development Revenue 2005 2006 2007 2008 2009 2010 Gambling Activity Revenue % Change Budget Assumptions: Finance staff works closely with Community and Economic Development staff to estimate and monitor revenues. Estimates for 2010 were conservative in anticipation of reduced construction activity. in the second half of 2010, knowledge that certain larger planned projects were not going forward prompted further reduction in revenue estimates (planned airport project did not happen). Budget vs. Actual Discussion: Actual receipts came in at almost $60K more than the amended budget, mainly as a result of additional grant revenues of $20K and an increase in single family projects in the second half of 2010. Although we can consider families investing more in construction projects as very good news for our community, Community Development revenue still came in below the 2010 original budget of $276K. That being said, any increase in single family building and construction activities may indicate a more stable and improving economy. 2010 2010 2009 10 va 09 Revenue Source Amended Actual Actual %variance Building Perrnits $ 120,000 $ 131,753 $ 233,982 - 433% Plumnbing Permits 11,000 13,196. 13,002 1-5% Mechanical Permits 12,000 25,044 20,756 20.7% Sign Permits 2,500 4,563 2;696 69.3% Plan Checking Fees 60,000 70,965 118,677 -40.2% Planning Permits 5,300 8,065 6,660 21.1% Zoning Fees 9,425 7,313 13,933 - 47.5% Total Revenue $ 220,225 .$ 260,899 $ 409,706 ! - 36.3 °A 200 - 100 - - (100) - (200) General Fund Revenue Summary Overall, we collected approximately $388K more than budgeted as shown in the previous chart. The majority of this is from property tax collections, utility tax from Nippon and sales tax from construction and retail. Sustainable increases in revenues should be included in the operating budgets in the future, while revenues resulting from "one- time" collections or events should be designated for "one- time" expenditures, such as improving the economic base and infrastructure. These steps will stimulate this community and will increase the tax base instead of tax rate. Another option similar to rate stabilization is to "bank" this revenue to offset increases to future budgets. General Fund Expenditures General Fund operating expenditures were 99% of budget, or $17.02M vs. $17.28M budgeted. This is a savings of $256K. In an effort to never exceed the budget, expenditures within 1% below the budget is desired. 2010 General Fund Expenditures 2010 Account Description Actual Personnel Wages & Benefits Supplies Charges for Services County Jail Court Transfers to Other Funds Contribution to PenCom 2010 Budget vs. Actual 12,132,317 574,019 2,295,353 593,395 112,928 1,124,958 1 89,674 17,022,644 2010 Variance Budget $ 12,347,981 649,970 2,381,112 465,000 120,000 1,124,958 1 89,674 17,278,695 (215,664) (75,951) (85,759) 128,395 (7,072) (256,051) Budget Assumptions: The 2010 budget included a 2% COLA, a decrease in PERS and LEOFF rates, a 10% increase in AWC and Teamster medical premiums, a 5.5% increase in AWC dental insurance and retirement costs of almost $82K. The budget always assumes full staffing according to financial policies which requires budgeting of all expenditures. Personnel: The majority of savings ($216K) were in personnel services. Personnel wages and benefits are budgeted based on full staffing, unless we are aware of retirements or other changes in staffing levels. The 2010 budget included retirements of $82K for PERS 1 employees, of which $53K was not expended. It is also important to state that over the past year we incorporated a policy of "freezing" positions when vacant, controlling overtime, and controlling seasonal employment and unemployment benefits. Some departments incorporated "flex time," some looked at other areas of reorganization and scheduling. These steps helped in reducing overtime costs and resulted in over $75K in savings. Overall, overtime costs in 2010 were the lowest in five years, $444K in 2007 vs. $275K in 2010. Another change was in the area of part- time seasonal employees. By following the City Manager guidelines, the overall cost was also the lowest in five years ($534K in 2006 vs. $308 in 2010) and $10K below budget. So overall, these changes, reorganizations, and consistency in applying them, paid great dividends. By following these guidelines, we may control some of the personnel costs in the future. ▪ 500 1.01 400 300 200 100 0 , 600 1 2 ▪ 500 re 400 300 200 100 0 General Fund Overtime , 2006 2006 2007 2008 •QmOvertime men% Change 2009 General Fund Part and Seasonal 2007 2008 2009 ■•■'Part-time/Seasonal womb% Change 2010 2010 10 - 5 - 0 - (5) - (10) (15) - (20) - (25) (30) 10 -5 - 0 (5) (10) - (15) - (20) - (25) (30) Supplies: Another example of controlled costs is supplies expenses, which reduced 10% from 2009. 800 40- -0 2 600 z 400 - 200 - 0 180 160 140 - 120 - 100 80 60 40 20 - 0 General Fund Supplies (Excluding Fuel) 2005 2006 2007 2008 2009 2010 GFSuppIies =bin% Change Charges for Services: Other cost savings were in travel and training. By using more web training and sharing costs with other agencies, we were able to end the year at $41K below budget, and the lowest expenses in five years ($164K in 2008 vs. $134K in 2010) as well. General Fund Travel & Training 2006 2007 2008 2009 4.4.BG F Travel & Training alliwhincrease 2010 60 - 40 - 20 - 0 '- (20) (40) 30 - 25 - 20 15 - 10 - 0 - (5) (10) (15) Equipment services charges also require additional analysis. This was the first year of incorporating direct charges for all repairs and fuel usage instead of estimating costs based on prior year activities. This is not an easy task, since the cost is based on repairs which are usually related to breaks or emergencies. The same applies to fuel and we are concerned that fuel prices will continue to increase this year. Reserves • 450 -0 400 ro ▪ 350 o 300 250 - 200 - 150 100 50 0 General Fund Equipment Expense 2006 2007 2008 2009 2010 GE4mEquipment Expense (including fuel) Not all expenses came in under budget. Those which are not under the City's control, such as jail costs and public defender, were almost $128K more than budgeted, even though we amended the budget higher in mid -year, and municipal court fine revenue came in under budget. Reserves or "unassigned fund balances" provide a measure of the financial resources available for future use, especially during temporary revenue shortfalls or emergencies. How do we determine what is the "right amount" of reserves? There are a few considerations, such as reliability of revenue sources, timing of cash flows and outflows, and the desired (projected) level of capital spending. In general, fund balance should be maintained at a level that provides an adequate cushion in the event of economic recession or anticipated revenue shortfalls. While 2010 was better than anticipated, we are not out of the woods yet. Being conservative and proactive positioned us in a much better situation as compared to others in the area, state, and even in the country. 6 a 5 4 3 2 1 0 Conclusion General Fund CIP & Reserves 2005 2006 2007 2008 440•CIP G F Unrestricted Reserves 2009 2010 Overall, 2010 ended on a good note producing a better than expected year for the City. This is very exciting as it may allow a reinvestment in the community which may help to achieve goals of providing job opportunities and increasing personal income. It also positions us to better absorb increases to future operating costs such as jail, fuel, medical, and retirement costs. The year ended very positive for retail and construction, and we will continue to monitor whether this trend continues. Signs that there is a "catch up" in paying prior year property taxes also may indicate economic recovery. This may be a result of no increase in property tax and a decrease in the special levy in 2010. Increased activity at the paper mill as they strategically plan for future power needs is very reassuring for our community. We were proactive and conservative while concentrating on services, infrastructure, and economic growth. This was a year of very controlled spending, but also controlled rates in utilities and taxes. With the exception of water rates, there were no utility rate adjustments, Council didn't increase property taxes, and reserves were used to decrease the special levies in 2010. City leadership further increased efforts to reduce and control costs. When leadership is steadfast in representing a certain ideology, it can tend to permeate through an organization. Cost control efforts extend well beyond personnel costs; vehicles are being rebuilt to extend the life of vehicles, and conservation efforts have reduced energy costs. These are just a few examples of many cost cutting measures in an effort to improve efficiencies. It is important that we take this opportunity to thank staff for their hard work in delivering cost - savings results when faced with the challenge. Without their cooperation, we may have been forced to lay -off employees and eliminate positions. Reorganizing and consistently evaluating how we provide services has produced efficiencies that we can all be proud of. Reducing some operating costs has allowed us to absorb other operating costs that are much more out of our control. This has also allowed for no reduction of service during one of the worst recessions in recent times. Looking forward, it will be important to continue our conservative budgeting, along with preparing for Budgeting for Priorities and other challenges as they are presented. Long -term stability will continue to be a.major focus including not only future organizational needs, but the needs of the citizens we serve. Having said that, it would be prudent to consider using a portion of the 2010 cost savings to: • Fund capital projects in 2011 • Set aside in contingency for a potential COLA in 2012 or to avoid layoffs • Set aside in contingency to prepare for cost increases in gas prices, retirement, and/or medical premiums • Keep property tax levy for 2012 at the current level While we continue to evaluate and monitor the 2011 budget performance, we will also begin to focus on the 2012 Budget at the end of March. As always, thank you for your continued support of staff as we work tirelessly to prepare the most accurate budget possible. W A S H I N G T O N , U.S.A. CITY COUNCIL MEMO DATE: MARCH 29, 2011 To: CITY COUNCIL FROM: KENT MYERS, CITY MANAGER YVONNE ZI®MKQWSJI., FINANCE DIRECTOR SUBJECT: STRATEGIC GOALS As the second step in moving forward with budgeting for priorities, the City Council Subcommittee met twice to review strategic goals for the City. Attached for your review, are five proposed goals. These goals will be the stepping stones toward implementing a planning and budgeting process for the next few years, so it is important that the City Council review them and provide feedback. As you review these goals, please carefully consider your vision for our community, the results of the citizen survey and other feedback from citizens. What is the City in business to achieve? it is imperative that our goals address what the community values most, to ensure that future spending of resources is in alignment with those priorities. These goals are meant to be broad and all encompassing of City programs and activities. They will not only be reported in the budget document, but they will be the foundation of priority driven budgeting as outlined in Budgeting for Priorities. As we move forward with Budgeting for Priorities, our focus will change from "what are we going to cut ?" to "what are we going to keep ?" Departments will develop their budgets based on how their programs best achieve the City's goals /priorities. This will involve research and strategizing to ultimately attain a measure of success. This structured process is designed to provide a logical method of prioritizing, encourage innovation, and enable us to avoid ineffectual budgeting practices, such as "across the board cuts." Thank you for your careful thought and consideration as we seek to deliver the BEST results that the citizens expect. • Fiscally Stable Provide consistent and quality services which are cost effective and sustainable, responsive to community needs, and valued by citizens. 0 Adhere to sound debt, reserve ,and investment policies Develop and maintain a long -term financial approach to ensure financial stability. Enhance and facilitate transparency, accountability, efficiencies ,and best practices. Conservative approach to budgeting and forecasting Provide consistent and quality municipal services that maximize return on investments, leverage of outside sources, are equitable for local taxpayers, and increase opportunity for economic development. Community Planning Ensure the Comprehensive Nan and local development codes are proactive, clear, and balanced. Foster distinctive, attractive neighborhoods with a strong sense of place and identity ,while preserving open space, natural beauty, and critical environmental areas. Promote the Port Angeles Downtown and Waterfront as a desirable place to live, work, and visit. Provide functional and aesthetically pleasing community design as the expected standard for developers, ensuring optimum use of City infrastructure. Facilitate the creation of an educated and skilled workforce that generates leadership, entrepreneurship and sustainable business models. Strive to provide a diversity of attractive housing, educational, and emplogrvent opportunities for a broad range of people, with a well maintained infrastructure designed ,f for future growth. Excellence Be objective, unbiased, and fair with defined long -term goals that serve the best interests of the community. City Council and employees will hold themselves to high ethical standards and be committed to their duties with respect and courtesy, striving for excellence everyday. Provide high quality basic services such as utilities, fire and police protection, street maintenance, and community development, in an efficient and effective manner. Communicate with the community the activities, goals and achievements of City government. Port Angeles City government is committed to demonstrating proactive leadership in developing partnerships with other agencies and the public to advance mutual interests. Strive, for government that is predictable, accountable and honest, actively seeks citizen involvement, incorporates a clear and achievable goal, and is committed to success. Our Community Develop and encourage community involvement, participation and pride. Diverse attainable housing and job opportunities for multiple generations and varied income levels. Broad spectrum of cultural and recreational opportunities for residents and visitors. Facilitates sustainable economic opportunities that complements our regional assets and natural features. Promote excellence in life -long education with K -12 systems, Peninsula College, and private resources, to create future leaders and improve workforce. Our community enjoys a superior quality of life composed of abundant recreational resources, a unique natural setting, thriving cultural opportunities, and a balanced economic base. Public Safety All calls for assistance are responded to in a timely manner by highly trained personnel and with necessary resources that are properly deployed. Appropriate disaster preparedness planning, and training is provided for all levels of City government. Complete interoperability is achieved through the appropriate provision of equipment and technology that enhances agency effectiveness and employee safety. Prevention and volunteer programs are an integral part of the public safety mission. Public, private, and intergovernmental partnerships are actively pursued to maximize the effectiveness of public safety resources. Our community is recognized as a safe place to live, work and play. We are known f or excellent public safety services that are provided by well - trained, highly competent personnel. Ins crrr or AGENDA Presented March 29, 2011 by: Kent Myers, City Manager Yvonne Ziomkowski, Finance Director "What great thing would you attempt if you knew you could not fail ?" - Robert H. Schuller • 2010 Year in Review • 2010 Year -End Financial Report • 2011 Budget — Capital Projects • 2012 Budget — Major Themes /Budgeting for Priorities 3/29/2011 61 16 2010 Year in Review ❑ 4 New Councilmembers took office ❑ January Council Retreat o Established economic development as highest priority 2010 Year in Review ❑ Assisted in Coordination of County -Wide Economic Summit o Over 150 participants in Summit process o Developed 5 clusters to provide better focus to economic development efforts: • Tourism ■ Marine Trade • Natural Resources • Composite Industries ■ Renewable Energy 3/29/2011 2 2010 Year in Review ❑ Expanded Citizen Outreach o Comprehensive Citizen Survey O Monthly Appearances at Farmer's Market o City Manager Coffees ❑ Numerous Public Meetings o City Budget Process o Waterfront & Transportation Improvement Plan 2010 Year in Review o Rayonier Property o DOE Agreed Order (3 years) o Jamestown S`Klaliam Tribe Salish village Concept o Completed Redevelopment Plan for Ennis Creek ® City Acquired Tank for CSO Project ❑ Pen -Ply Mill o 125 New Jobs o Plant Upgrades Completed o Nippon o $71 M Expansion o New BioMass Facility I3srr, A� r ears rnamet Waterfront & P 3/29/ 3 2010 Year in Review LEVX ▪ LEVX A Ma Farce Tec4nalagy o Relocated Offices Downtown o Plans to Grow Business Locally n Angeles Composite (ACTI) o Announcement to Grow Business in Port Angeles o New Composite Campus Plans o Construction in 2011 2010 Year in Review E New Construction o Peninsula College • Maier Hall • Parking Lot o SuperWalmart o Elwha Heritage Center 3/29/2011 4 2010 Year in Review Other Success Stories ✓ Expanded Marketing in Victoria ✓ Hurricane Ridge Road Opening o New Chamber Theme "The Authentic Northwest" ▪ Waterfront improvement Plans • Facade & Sign Grant Program ✓ Port Angeles Water Treatment Plant a Maloney Heights o Downtown Medical Clinic 2010 Budget Resu is 3/29/2011 5 2010 Budget Resu is Review 2010 Monitor • ; • \ esuts , ) Adopt Budget 1 Stakeholder Input y Vision /Mission. 1{ Goals . Citywide Summary 4.A. 105 j g ;;F • Revenues 95 ❑Expenditures �� � •SaNings in Persannel and 90 Supplies /Services Budget Actual •Capital expenses deferred A3ond proceeds - $10.211 2010 Amended Budget Actual Variance $ % Revenue 101,355,923 103 ,574,225 1 ' 2,218,302 2.19 1 Expenditure 97,855,330 96,350,588 (1,504,742) (1.54) Re -- Exp 4 +( - reserves 3,500,593 7,223,637 Operating/ Budget Impacts ("- Assessment Direction to Staff 3/29/2011 6 Citywide Revenues Misc. Citywide Revenues $143,574,225 Transfers 5.1% o Streetlight and pole replacement o Concrete cylinder pipe replacement D Sewer trestle at Francis & 8t St o 4th Street Stormwater improvements Designated for CIP 0.3% Loans &Bonds $10.2 mi ion Licenses & Permits 0.5% Intergovt. /Grants 3.0% nes & Forfeitures 0.3% ❑ Purpose: Take advantage of favorable lending rates to fund planned projects ❑ Some projects include: o Advanced Metering Infrastructure • Includes Electric, Water, & Wastewater utilities 3 7 Grants $3.5M ARRA — American Recovery and Reinvestment Act (stimulus grants) Grant awards remaining for future years Governmental $4.89M Proprietary — $5.26M City -wide portfolio of $65M - $73M Increase of $6M from 2009 due to bond proceeds Average yield on investments 2.4% - 1.9% Governmental ARRA $337K Governmental Proprietary $2.86M $186K Strictly restricted for specific use City -Wide nvestments Proprietary ARRA $126K 4000 Ark 3500 ro a. 3000 1— 2500. 2000. 1500 1000 500 0 1.125,54` 2;051,95 2,975.5 3,441.b4 1,355.72 2005 2006 2007 2008 2009 Investments 1,308.32 - 2010 3/29/2011 8 Citywide Expenditures Debt Service 4% Transfers 6% Intergovt. Services 596 Designated for Reserves 3% Citywide Expenditures by Function $96,350,588 City -wide Expenditures by Category vs. 2009 Personnel Supplies /Services Power Purchases Intergovt. Interfund Transfers Debt Service Capital Designated for Reserves Total aiO Budget:.' 23,575,032 29,108,124 19,387,000 5,721,524 3,601,109 4,411,978 13,609,900 22,801,100 25,875,941 23,575,477 6,716,013 5,005,763 4,557,035 7,819,259 *Harborworks loan of $570K included in expenses * Additional 2010 revenues of $7.2M designated for projects Supplies /Services 27% o 'A, 22,318,952 482,148 2.11 24,505,272 1,370,669 5.30 19,238,492 4,336,985 18.40 5,779,725 936,288 13.94 5,148,518 (142,755) -2.85 4,090,116 466,919 10.25 5,542,349 2,276,910 29.12 1,481,242 (1,481,242) N/A 3/ 9 Use of Reserves in 2010 - $4.3M ❑ Lodging Tax - $274K ❑ Street — $15K ❑ Econ. Comm Devel - $858K ❑ Cultural Resources - $232K ❑ REEf's — $217K ❑ PenCom - $82K ❑ PA Housing Rehab - $19K ❑ Drug Task Force - $39K o Debt Svc funds -$89K ❑ Gov't Capital Improv. - $541K a Solid Waste Coll - $139K o SW Transfer Station- $489K ❑ Conservation $439K ❑ Water Treatmt Plant - $35K ❑ Medic I —$6K ❑ Equipment Service - $868K Fund Overview General Fund Special Revenue Funds Debt Service Funds Capital Project Funds Utility Funds Internal Service Funds With current limitations some reserves cannot easily be regained by taxing or raising rates "Where there is no vision, there is no hope." George Washington Carver 3/2 9/ 20 11 10 2010 High fights ^' Revenues ❑ Revenues below budget o REET o Court fines o Criminal Justice o Interest Earnings ❑ Revenues above budget O Gambling taxes o Grants o Lodging tax o Property tax (collection of prior years) ® Sales tax o Utility taxes (Electric) Genera Fund Overview Variance $ % 388,214 2.17 (256,051) (1.48) 2010 Amended GENERAL FUND Actual Budget Revenues 18,307,728 17, 919, 514 Expenditures 17,022,644 17,278,695 Rev -Exp. $ 1285.084 $ 640,819 .$r & Unassigned Reserves as of 12/31/10 $4.1M 3/29/2011 11 Genera Fund Revenues General Fund Revenue Sources - $18,307,728 I nterest Licenses/ O .7% Permits 2.2% Intergovt 4.6% Fines/Forfeitu res 1.5% Transfers l und ‘ Fund C I osu re s _ 4.4m% Misc. 0.4% Major Tax Revenues — Comparison to Amended Budget Property 4/\ Utility Tax SalesTax ! 954 i 4.8% Tax - wo Three tax sources equal 58% of GF Budget .., %of GF Amended Difference Tax Source Original Budget Actual Revenues Budget Amended vs. Actual Property Tax 21% 3,974,842 4,000,224 4,036,248 36,024 (includes ST) Utility Tax 21% 3,552,524 3,615,928 3,792,287 176,359 Sales Tax 16% 2,651,868 2,651,868 2,779,435 127,567 3/29/2011 12 I1 Uti ity Taxes - $3.8M Budget Assumptions ❑ Based on utility revenue projections and utility tax rates ❑ Weather forecast ❑ Nippon budgeted $427K above 2009 actual receipts 0 2 periods of closure Nippon E ectric Revenue High usage in response to anticipated changes to BPA power allocations and tiered rates. Consumption level not anticipated to continue. Budget vs. Actual Discussion ❑ $176K above budget o Electric - 10% above estimates, or $174K ❑ November - record cold ❑ Nippon - $3M above 2009 receipts o Nippon closures didn't occur 16 15 14 13 12 11 10 2005 . 2006 2007 : 2008 2009 2010 3/29/2011 13 Residentia E ectric Revenue 2010 below 2008 & 2009 for majority of year 2010 Nov -Dec receipts highest in last several years due to November's record cold temperatures Residentia E ectric Revenue 6% over budget 2010 still the lowest year of revenue since a rate increase in 2007 75 Residential Electric Revenue. 2008 2009 2010 Full Year Residential Electric Revenue;_ 3/29/2011 14 Property Tax - $3.55M 1% _ $40K Budget Assumptions ❑ No increase in 2010 ❑ Reserves used to reduce special levy by $80K o Historical collection rate - 97- 98% ❑ October 2010 YTD receipts $27K below budget v Uncollectible provision included in the amended budget Property Tax Co ection Rate A higher collection rate will not become a trend as it will quickly even out. Economic Recovery? Budget vs. Actual Discussion ❑ $36K (or 1%) above budget ✓ $76K more than 2009 Q Nov -Dec receipts $104K more than 2009 ❑ A "catch up" in paying prior year's property taxes may be a result of: a no increase to the 2010 regular levy a decrease in the special levy of $80K 99% 98% 97% - 96% 95% 2006 2007 2008 Property Tax Collection 3/29/2011 15 Sa es Tax Budget - $2.75M ►l Safes tax revenue projections are based on rnany factors, both locally and at the state level Sales Tax budget forecast: Net reduction of $85K from 2009 receipts based on weak economic activity $z.78M received, $125K above budget in 2010, $92K was from one construction project at Peninsula College o Historical receipts and trends ❑ Economic Indicators o Unemployment o Personal Income o Housing o Local businesses and job opportunities ❑ Construction Activity ❑ Retail Activity ❑ Tourism or out -of -area visitors ❑ Auto sales and gas prices Genera Fund Sales Tax Revenue Historical Trend 3/29/2011 16 Sa es Tax — Economy Budget Assumptions ❑ Economic indicators o Unemployment high ■ December 2009 — 9.9% o Bank owned or repossessed home sales o Amended budget: o October YTD receipts 2% below budget o Three out of ten months revealed growth over 2009 a Related to construction at Peninsula College Budget vs. Actual Discussion We ended 2010 on a very positive note. ❑ Economic Indicators o December 2010 Unemployment - 10.1% o 22% Home sales bank owned or repossessed • Indicator of personal income and consumer confidence ❑ State reported slower revenue growth in November ❑ Clallam County sales tax o PenCom and Criminal Justice revenue below 2009 So how did the City receive sales tax revenue of $125K above the budget? 3/29/2011 17 2010 Sales Tax Comparison to 2009 Sales tax increases in April, July, September and November were due to construction at Peninsula College Sa es Tax — Peninsula Co ege Construction Budget Assumptions ❑ Increase for Peninsula College Building Construction 350 300 1-- 250' 200 Jan Feb Mar Apr Maylune July Aug Sep Oct Nov Dec., ` Sales Tax Revenue Budget vs. Actual Discussion ❑ Peninsula College building construction $92K ® Largest monthly increase occurred in November Peninsula College Building Construction = One -time revenue 3/29 /2011 18 Sa es Tax - Construction rr Budget Assumptions ❑ Reduced Construction (Residential) Activity o Building permit values of $1$M vs. $42M in 2009 D Amended budget reduced: certain large projects were not moving forward (Airport) © No increase for Nippon $71M project Sa es Tax — Retai Budget Assumptions ❑ Reduced Retail Activity o Closure of Gottschalks ($40K) & Dollar Store ($5K) o Amended budget: Retail activity was below 2009 in September & October Budget vs. Actual Discussion ❑ Construction Activity - increased toward the end of 2010 D Single family building permits increased 2nd half of year u Building permit values still only $12.2M ($6M below original budget) D Increased number of smaller projects • 632 permits issued in 2010 vs. 539 in 2009 Budget vs. Actual Discussion ❑ Partial recovery of lost revenue from closed businesses • Great news since Gottschalks alone brought $40K of sales tax revenue ❑ Retail Activity increased in November & December (13.5% above December 2009) Buying locally works! 3/29/2011 19 Components of Sa es Tax With the exception of Construction, these categories were below 2009 However, there were larger than anticipated increases in the service industry (ie. Hospital) 1,160 960 760! 560 160. 2006 2007 2008 Construction Wholesale Automotive /Gas :. Other 2009 . 2010 . Retail Bui ding Permits o Indication of the state of local economy 3/29/2011 20 Bui ding Permits In 2009, Peninsula College building permitted - $160K Budget reduced at mid -year 2010 Revenue $39Kabove budget Community Development Revenue 2010 2010 2009 10 vs. 09 Revenue Source Amended Actual Actual %variance Building Permits $ 120,000 $ 131,753 $ 233,982 -43.7% Plumbing Permits 11,000 13,196 13,002 1.5% Mechanical Permits 12,000 25,044 20,756 20.7% Sign Permits 2,500 4,563 2,696 69.3% Plan Checking Fees 60,000 70,965 118,677 -40.2% Planning Perrnits 5,300 8,065 6,660 21.1% Zoning Fees 9,425 5,338 13,933 - 61.7% Total Revenue $ 220,225 $ 258,924 $ 409,706 "e wAtieN C BUILDING PERMITS Permits issued by City: 2010 632 2009..... 569 New Homes Permitted: 19 \ ►Value of Improvements: $12.2 million Building Permits & Planning Services 450 2` res 350` I— 300 250 200 150 100 50 2005 2006 2007 2008 2009 2010 Building Permits Charges for Svcs 3/29/2011 21 Overview — GF Revenue Overall GF revenues $388K above budget ❑ Utility Taxes — $176K above budget ❑ Sales Tax - $125K above budget ❑ Property Tax - $36K above budget ❑ Building Permit Activity - $39K above budget 2010 High fights Expenditures ❑ Expenditures under budget o Personnel • Vacancy • Overtime • Part - time/Seasonal o Supplies o Travel & Training ❑ Expenditures over budget o Jail • Equipment repair and fuel cost 3/29/2011 22 Genera Fund Expenditures GF Expenditures Personnel Supplies Charges for Services Court Jail Contribution to Pencom Transfers TOTAL 12,132,317 574,019 2,295,353 112,928 593,395 189,674 1,124, 958 General Fund Expenditures $17,022,644 * GF Expenditures $200K below 2009 Court 196 Jail 4% General Fund Expenditures by Object 12, 347,981 649,970 2,381,112 120,000 465,000 189,674 1,124,958 (215,664) (75,951) (85,759) (7,072) 128,395 Contribution to Pencom 196 -1.75 -11.69 -3.60 -5.89 27.61 0.00 0.00 Al 3/29/2011 23 Personne Expenses Budget Assumptions ❑ 2% Cost of living adjustment in 2010 ❑ One -time decrease in PERS and LEOFF rates ❑ 10% increase in medical premiums o 5.5% increase in dental ❑ Retirement costs of $82K ❑ Budgeted at full staffing according to financial policies Genera Fund Overtime Lowest in five years... » $444K in 2007 vs. $275K in 2010, decrease of 24% » Changes in scheduling »Reorganization » "Flex- time" » $75K Savings Budget vs. Actual Discussion ❑ $53K for retirement was not expended ❑ "freezing" positions when vacant ❑ Controlling overtime ❑ Reducing part - time/seasonal costs ❑ Changes in management D Reorganizing ✓ Scheduling ❑ Consistency in applying changes 3/29/2011 24 II - General Fund Part-time and Seasona Lowest in five years .,. n 534K in 2006 vs. $308K in 2010, decrease of 22% n Reductions and reorganizations $10K below budget Genera Fund Supplies (Exc uding Fuel) A controlled approach to spending $307 vs. $393Kin 2009, decrease of 10% 600 550 g` 500 450 400. 350 300 250 200 General Fund Part -time and Seasonal 2006 . 2007.. : 2008 Part - time /Seasonal 750. 700 O * 650 600 550 500 450 400 350 2005 ": 2006 2007 2008 2009 2010 • GF Supplies 3/29/2011 25 Genera Fund Trave &Traning Lowest in five years... >Web- training >Sharing costs with other agencies Trave! expenses$41K below budget >Decrease of 11% from 2009 Genera Fund Equipment Expense Direct charges of repairs and fuel expense Concern: Fuel prices are increasing Increase of 20% from 2009 450 400 r 354 150 2007 2008 2009 ` Equipment Expense (including fuel) 3/29/2011 26 Crimina Justice Costs ❑ Cost increases: a Jail costs up 36% • $128K above budget a County Court fees up 26% a Indigent Defense up 32% ❑ Revenue decrease: a Fines down 8% S 22.2K ❑ Increased Budget Impact +$233.7K C a am County Jai Costs Average annual increase of 20% $593K vs. $436K in 2009, increase of 36% 700 ▪ 600 3 r 500 1- 400 300 200 $154.9K " $ 23.4K $ 33.2K f 1 Net Criminal Justice Costs in 2010 $548K 100 0 2005 2006 2007 2008 2009 2010 •Jail Costs 1 3/29/2011 27 Changes to Genera Fund in 2010 Several funds merged into GF at end of 2010 (GASB 54 requirement) — $798K to GF o Recreational Activities — $29K, ($120K to Capital Projects) o MPD pool maintenance — $11K o Criminal Justice $320K o K-9 — $13K o Waterfront Trail — $36K o Contingency — $250K o LID Control - $139K These functions will be included in the GF effective January 1, 2011. General Fund CIP Unassigned Reserves — $4.1M In 2007 capital spending postponed in anticipation of 8th St bridges expenditures in 2008 0 2006 2007 2008 2009 2010 CIP • GF Unassigned Reserves 3/ 28 Specia Revenue Funds Lodging Tax Fund 2010 Amended Variance LODGING TAX FUND Actual Budget $ % Revenues 486,087 476,777 9,310 1.95 Expenditures 760,551 760,551 - - Rev. - Exp. $ (274,4.64) $ (283,774) $ 9,310 Reserves as of 12/31/10 $93,791) 3/29/ 29 Lodging Tax Lodging Tax - $14K above budget, or 3% $4K above 2009 level, 1% increase Possibly a result of construction activity Street Fund STREET FUND Revenues Expenditures Rev. - Exp. 510 c s 500. 0 490 480 470 460 450 .3 2006 2007 2008 2009 2010. Lodging Tax 2010 Amended Variance Actual Budget $ l 1,723, 217 1,714, 898 8,319 0.49 1,738,255 1,815,406 (77,151) (4.25) $ (15,038) $ ( 100, 508) $ 85,470 Reserves as of 12/31/10 $573,078 3/29/2011 30 Street — Motor Vehic e Fue Tax li No growth in Motor Vehicle Fuel Tax Street may require more support from General Fund No growth in tax when fuel prices are higher REET Funds REET #1 & #2 Revenues Expenditures Rev. - Exp. 470 460 450 s I 440 430 420 410 400 390 ti 2006 2007 2008 2009 Street- Motor Vehicle Fuel Tax 2010 Actual 239,022 455,753 $ (216,731) Amended Budget . 254,695 455,753 $ (201,058) Variance (15,673) -6.15 $ ( 15,673) Reserves as of 12/31/10 $379,625 3/29/2011 31 Rea Estate Excise Tax Decreased 23% from 2009 2008 -2010 lowest level in ten years Reports indicate 22% home sales in 2010 bank owned or repossessed 800 700 e 600 " : 500 400. 2006 2007 2008 REET Revenues Economic Deve opment Fund 2010 Amended Variance ECONOMIC DEVELOPMENT Actual Budget $ % Revenues 231,286 253,114 (21,828) -8.62 Expenditures 1,089,529 1,046,897 42,632 4.07 Rev. - Exp. $ (858,243) $ (793,783) $ (64,460) Reserves as of 12/31/10 $5,692,863 3/29/2011 32 Cu tura Resources Fund hi 2010 Amended Variance CU LTU RAL RESOURCES Actual Budget $ % Revenues 6,821 7,895 (1,074) - 13.60 Expenditures 238,539 272,839 (34,300) (12.57) Rev. - Exp. $ (231,718) $ (264,944) $ 33,226 L Historic Human Remains Detection Dog Reserves as of 12/31/10 $251,032 E ectric Uti ity Rura Econ. Dev. 2010 Amended Variance ELECTRIC UTILITY RURAL E.D. Actual Budget $ Revenues 55,096 54,836 260 0.47 Expenditures 25,000 50,000 (25,000) (50.00) Rev. - Exp. $ 30,096 $ 4,836 $ 25,260 Reserves as of 12/31/10 $287,488 3 33 P.A. Housing Rehab 2010 Amended Variance R.A. HOUSING REHAB Actual Budget $ % Revenues 179,711 200,033 (20,322) -10.16 Expenditures 198,403 198,340 63 0.03 Rev. - Exp. $ (18,692) $ 1,693 $ (20,385) PenCom PENCOM FUND Revenues Expenditures Rev. - Exp. Reserves as of 12/31/10 $375,454 2010 Amended Variance Actual Budget $ l 2,128,184 2,250,636 (122,452) -5.44 2,210,362 2,493,457 (283,095) (11.35) $ (82,178) $ (242,821) $ 160,643 Reserves as of 12/31/10 $375,454 3/29/2011 34 PenCom — Sa es Tax PenCom Sales Tax - $41K, or 5.9% above budget (budget reduced based on history & economy) Drug Task Force 880 2 860 840 820. 800 780 760 740 720. 700 2006. 2008 PenCom Firearms Range Reserves as of 12/31/10 $12,745 2010 FIREARMS RANGE Actual Revenues 17,186 Expenditures 1,499 Rev. - Exp. $ 15,687 $ 2010 Amended Variance DRUG TASK FORCE Actual Budget $ % Revenues 2,730 5,321 (2,591) - 48.69 Expenditures 2,769 5,000 (2,231) (44.62) Rev. - Exp. $ (39) $ 321 $ (360) Reserves as of 12/31/10 $40.655 Amended Budget $ Variance 96 20,580 (3,394) -16.49 21,444 (19,945) (93.01) (864) $ 16,551 3/29/2011 35 Debt Service General Obligation Debt ❑ Senior Center/Fire Hall - matures in 2012 ❑ Library— matures in 2015 ❑ Western UGA ❑ Multi -Modal Property Debt Service Funds - Combined DEBT SERVICE FUNDS Revenues Expenditures Rev. - Exp. 2010 Amended Variance Actual Budget $ % 918,646 919,371 (725) -0.08 1,007,266 1,007,266 - - $ (88,620) $ (87,895) $ (725) Reserves as of 12/31/10 $783,503 3/29/2011 36 Capital Project Funds Capita Project Funds 2010 Amended Variance {CAPITAL PROJECT FUNDS Actual Budget $ Revenues 2,957,765 3,323,878 (366,113) -11.01 Expenditures 3,498,674 4,717,079 (1,218,405) (25.83) Rev. - Exp. $ (540,909) $ (1,393,201) $ 852,292 Reserves as of 12/31/10 $1,852,717 3/29/2011 37 Governmenta Capital Projects - CIP 2010 Completed Projects ❑ Race /Valley slides - $177K ❑ Eastern Corridor Phase ll — $635K ❑ 16th St Sidewalk - $474K ❑ lst/Peabody Signal Upgrade — $126K ❑ Data Voice - $240K ❑ Dedicated Generator - $72K Major Challenges Unfunded Mandates Tiered rate structure Infrastructure improvements Debt Service & Coverage Rate Stabilization Utilities Major CIP o PenCom Communications - $760K o City Hall Electric Conservation - $241K ❑ Dry Creek Bridge - $821K o Waterfront Development — $175K o Overlay Program - $1.3M ❑ Wayfinding Signage - $69K FEMA ❑ Ediz Hook Erosion & Dock Repair $90K o Tumwater Slide Repair - $31K o ODT Slide & Rip Rap Repair - $98K 3/29/2011 38 Enterprise Funds by Uti ity Solid Waste Stormwater Wastewater Transfer Station 12.9% 7.5% Solid Waste Collection 4$% r` Water Treatment Plan 0.2% Misc. 1.9% Interest Revenue 1.3% Electric Conservation 1.1% Contributions (other funds) 1.6% Enterprise Funds - $68,336,608 1.6% Medic I 2.1% Enterprise Funds Revenue Enterprise Funds - $68,336,608 Construction Contributions 0.3% Licenses & Permits 0.2% 1 ntergovt. 0.4% 3/29/2011 39 Enterprise Funds - Expense li Enterprise Funds Summary Expense by object I I 1 I I 1 2010 2010 1 Variance ! Actual Amended $ % 1 'Personnel 6,445,748 6,485,735 (39,987) -0.621 Supplies 1,281,882 1,415,997 (134,115) -9.471 Power Purchases 23,575,477 20,042,292 3,533,185 1 17.63! Charges for Services 13,629,404 14,122,431 I (493,027)1 -3.491 Taxes (Intergovernmental) 5,700,266 5,253,604 1 446,6621 8.5d !Contributions to other funds 1,766,590 2,165,098 ! (398,508)1 - 18.411 (Debt Service 3,417,559 3,148,081 1 269,4781 8.561 ;!Capital 2,761,006 5,073,663 1 (2,312,657) 1 - 45.581 )Tota 58,577,932 57,706,9011 871,0311 1.511 E ectric ELECTRIC FUND Revenues Expenditures Rev. - Exp. 2010 Amended Variance Actual Budget $ 9 38, 719,019 34, 851,872 3,867,147 11.10 33,784,645 30,478,223 3,306,422 10.85 $ 4,934,374 $ 4,373,649 $ 560,725 Reserves as of 12/31/10 $4.8M 3/29/2011 40 Water WATER FUND Revenues Expenditures Rev. Exp. Wastewater WASTEWATER FUND Revenues Expenditures Rev. - Exp. 2010 Actual 8,938402 5,238,428 $ 3,699,674 $ Amended Variance Budget $ % 8,891,931 46,171 0.52 6,258,582 ( 1,020,154) (16.30) 2,633,349 $ 1,066,325 _ Reserves as of 12/31/10 $2.9M Reserves as of 12/31/10 $3.2M CSO $4.5 M 2010 Amended Variant& Actual Budget $ 8,839,115 8,858,220 (19,105) -0.22 6,735,878 6,909,656 (173,778) (2.52) $ 2,103,237 $ 1,948,564 $ 154,673 3/29/2011 41 Enterprise Funds • Revenues: $3.3M SW Collections • Expenses: $3.4 M •Revenues: $5.1M Transfer Station • Expenses: $5.6M • Reserves: $1.5M ($3.6M LF Closure) Stormwater Medic © Water Treatment Plant - $26 M o Donated by National Park Service • Reserves: $3.1M • Revenues: $1.1M • Expenses: $963K • Reserves: $619K • Revenues: $1.4M • Expenses: $1.4M ■Reserves: $57K Donated Water Treatment P ant Largest project in utilities 3/29/2011 42 Enterprise Funds Capita Projects Projects Completed in 2010: o 1" & Peabody Signal - $126K ❑ Replacement of Emergency Generators - $72K ❑ Restoration of Buried Power Cables - $154K ❑ Replacement of College Substation Switch - $59K ❑ Laurel Substation Structure - $161K ❑ Water Line Replacements - $353K nterna Service Funds D Equipment Services o Information Technology ❑ Self- Insurance r $1 Million in Capital Projects completed in 2010 d 3/29/2011 43 nterna Service Funds 2010 Summary Equipment Services Information Technology c Self- Insurance • Revenues: $1M • Expenses: $1.9M • Reserves: $5.1M • Revenues: $1M • Expenses: $890K • Reserves: $1.1M • Revenues: $4.6M • Expenses: $4.6M • Reserves: $1.4M D Overall, 2010 ended on a very positive note D A proactive and conservative approach has allowed the City to weather the economic storm o No increase to property taxes & a decrease to special levy o No increase to utility rates with the exception of water rates o Controlled spending o No reduction in services o No lay-off`s 3/29/2011 44 Looking Forward • New Opportunities • Expectations for 2011 & Beyond • Areas of Concern • Budgeting for Priorities New Opportunities in 2011 ❑ New projects on horizon ❑ Key decisions that will impact future years ❑ Completion of plans: ▪ Harbor Management Plan ▪ Waterfront Plan ▪ Transportation Plan D Lincoln Park Master Plan "The future belongs to those who believe in the beauty of their dreams" Eleanor Roosevelt 3/29 /2011 45 E wha River Restoration ❑ Start Date — September 2011 ❑ Large Event — September 16 -18 ❑ Construction Jobs ❑ State, National & International Visitors ❑ Wide Media Coverage Major Projects in 2011 ❑ Ground Breaking for Composite Campus /ACTI ❑ Installation of New Wayfinding Signs ❑ Final Approval of Nippon Plans —Begin Improvements ❑ New Community Garden ❑ New Civic Historic District ❑ CSO Phase I Construction ❑ New Electric & Water Meters (AMI) Alf System 5 BENS :B Over $10 M in bonds were issued in 2010 to finance utility projects in 2011. 3/29/2011 46 Expectations for 2011 ❑ Retail Sector Analysis Report ❑ Feasibility Study on new Conference Center ❑ Regional Fire Authority ❑ City /County Task Force on Cooperative Approaches ❑ Think Local Campaign ❑ Construction of Dog Park ❑ Volunteer Involvement Program Expectations for 2011 (continued) ❑ Task Force Recommendations for Improvements to Civic Field D Consideration of Transportation Benefit District ❑ Shoreline Master Plan completed /approved ❑ First Street Stormwater Project ❑ Complete Study on Regionalization of Emergency Communications Services ❑ Continue Discussions on Clean -up /Restoration of Rayonier Property 3/29/ 47 2011 Budgeted use of Reserves Operating /Rate Stabilization ❑ PenCom - $87K ❑ Cultural Resources - $191K ❑ Debt Service - $9K ❑ Firemen's Pension — $112K ❑ Self- Insurance - $84K ❑ Electric Cons - $187K All funds have positive balances according to City Council Goals Areas of Concern ❑ Grants expiring in 2012 a Public Safety • Archaeology ❑ Sales Tax ❑ Debt Capacity o General o Utilities ❑ Community Needs Capital ❑ 0 0 0 ❑ ❑ 0 General Fund _ $415K Lodging Tax — $21K Economic Development $1.3M Govt'I projects — $509K Electric - $6.8M ($4.9M from bond proceeds) Water - $2.6M bond proceeds Wastewater -- $1M bond proceeds SW Collection — $341K SW Transfer Station - $373K Stormwater - $290K bond proceeds Equipment Svc — $295K Information Tech - $519K 3/29/2011 48 2011 Capita Projects ci Designate reserves to capital projects ✓ Lauridsen Bridge ✓ Waterfront Project a Street projects deemed essential by citizen survey responders o BTOP focal match Operating Revenue vs. One -time Revenue Grants Tax receipts above baseline Construction Activities Gambling Tax Liquor Board Receipts Interest Revenue Service Fees Baseline Telephone/Telecable Baseline Utility Tax Baseline Construction Activities Baseline Sales Tax Property Tax Use with Caution: One -time Expenditures Ongoing revenues: oderate volatility Purely perating 3/29/2011 49 Other Opportunities /Projects ❑ Lauridsen Boulevard Bridge © Waterfront Improvements Lauridsen Bou evard Bridge ❑ Design/permitting/public outreach — Accomplished 2012 o Construction — 2013 ($000's) Project Cost 4,716 3,716 1,000 Photo courtesy of Peninsula Daily News Funding Sources City Grants Funds City's Funding Options GF Reserves REET* 250 750 *$BOOK from reserves $250K 2012 & 2013 revenues 3/29/2011 50 Waterfront and Transportation Improvement P an ❑ Phase II -- Engineering, permitting and construction documents for a portion of downtown Waterfront • Black Ball Ferry Terminal west to Valley Creek • Transportation Comprehensive Plan Update (completed over two year period) ($000's) 2011 Budget Phase II Settlement Additional City Funding Options EURED Street Project Cost Reserves GF Reserves Reserves Reserves 1,250 500 300 150 300 Estimated Reserves Remaining YE 2011 ❑ Funding Waterfront Improvements and Lauridsen Bridge replacement reduces reserves to... a General Fund — $3.2M ▪ Street — $277K ✓ REET - $0 through end of 2013 • EURED - $140K 3/29/2011 51 2012 & Budgeting for Priorities ❑ Continue review of cost - saving measures o Goal or priority driven budget process ❑ Long -term and sustainable © Focus on results for the community o Addresses citizen survey ❑ Measure success Next Steps - 2011 ❑ Determine results ❑ Define results ❑ Document programs and services ❑ Value results ❑ Allocate Resources Create Service Efficiencies and innovation Identify Resources 0 Identify Priorities 0 Define Priorities 0 Evaluate and Score Programs 0 Allocate Resources Create Accountability for Results 3/29/2011 52 Strategic Budget Goa s Our Unique Community Fisca y Stab e Financially Responsible Government Provide consistent and quality services which are cost effective and sustainable, responsive to community needs, and valued by citizens. Adhere to sound debt, reserve, and investment policies Develop and maintain a long -term financial approach to ensure financial stability. 0 Enhance and facilitate transparency, accountability, efficiencies, and best practices. Conservative approach to budgeting and forecasting Provide consistent and quality municipal services that maximize return on investments, leverage of outside sources, are equitable for local taxpayers, and increase opportunity for economic development. 3/29/2011 53 Community P anning Plan for a Sustainable Community Exce ence it Excellence in Government 0 Ensure the Comprehensive Plan and local development codes are proactive, clear, and balanced. Foster distinctive, attractive neighborhoods with a strong sense of place and identity, while preserving open space, natural beauty, and critical environmental areas. Facilitate the creation of an educated and skilled workforce that generates leadership, entrepreneurship and sustainable business models. Strive to provide a diversity of attractive housing, educational, and employment opportunities far a broad range of people, with a well maintained infrastructure designed for future growth. Be objective, unbiased, and fair with defined long -term goals that serve the best interests of the community. City Council and employees will hold themselves to high ethical standards and be committed to their duties with respect and courtesy, striving for excellence everyday. O 0 Promote the Port Angeles Downtown and Waterfront as a desirable place to live, work, and visit. Provide functional and aesthetically pleasing community design as the expected standard for developers, ensuring optimum use of City infrastructure. Provide high quality basic services such as utilities, fire and police protection, street maintenance, and community development, in an efficient and effective manner. Communicate with the community the activities, goals and achievements of City government. Port Angeles City government is committed to demonstrating proactive leadership in developing partnerships with other agencies and the public to advance mutual interests. Strive for government that is predictable, accountable and honest, actively seeks citizen involvement, incorporates a clear and achievable goal, and is committed to success. 3/29/2011 54 Our Community Our Unique Community Pub ic Safety Public Safety Develop and encourage community involvement, participation and pride. ED Diverse attainable housing and job opportunities for multiple generations and varied income levels. 0 Broad spectrum of cultural and recreational opportunities for residents and visitors. Facilitates sustainable economic opportunities that complements our regional assets and natural features. Promote excellence in life -long education with K -12 systems, Peninsula College, and private resources, to create future leaders and improve workforce. Our community enjoys a superior quality of life composed of abundant recreational resources, a unique natural setting, thriving cultural opportunities, and a balanced economic base. All calls for assistance are responded to in a timely manner by highly trained personnel and with necessary resources that are properly deployed. Appropriate disaster preparedness planning, and training is provided for all levels of City government. Complete interoperability is achieved through the appropriate provision of equipment and technology that enhances agency effectiveness and employee safety. Prevention and volunteer programs are an integral part of the public safety mission. Public, private, and intergovernmental partnerships are actively pursued to maximize the effectiveness of public safety resources. Our community is recognized as a safe place to live, work and play. We are known for excellent public safety services that are provided by well- trained, highly competent personnel. 3/29/2011 55 Looking Forward ❑ Moving forward with planned projects... o Allows City to take advantage of a favorable bidding climate o Reinvestment in the community may boost the local economy and create job opportunities a Looking forward...continue conservative budgeting o Implement Budgeting for Priorities o Focus on Tong -term stability 3/29/2011 56 • • Retail Market Analysis Kent Myers, City Manager. Special City Council Meeting - March 29, 2011 Cha enges in Loca Retai Sector Leakage of Retail Dollars to Other Cities and Counties r Closures of Retail Businesses/Empty Storefronts ■ Local Shoppers/Not Buying Local Seasonal Businesses/ Decrease During Winter Months -- 5 r Decline in Local Sales Tax Revenues 3/29/2011 1 Leakage of Retai: Do ars ► EDC County -Wide Study / September, 2010: About 57 Cents of Every Retail Dollar Spent in County and 43 Cents Spent Outside of County Per Capita Estimates -$1 1,721 Average Per Person Annual Expenditure for Retail with $ 5,075 Spent Outside of County Leakage of Retai Do ars ■ Recent Buxton Study (1 5 Minute Drive Time of City) ■ Major Leakage in a Number of Areas Including: • Cosmetics and Beauty Supplies • Electronic and Appliance Stores • Jewelry Stores • Children and Infant Clothing • Women's Clothing 3/29/2011 2 3/29/2011 • C osures of Retai Businesses ► Gottschalks ■ The Toggery ► Dollar Store ■ Downtown Antique Store ► Parker Paint Company ■ Customer Service Focus Underway AND.... Many Empty Buildings in Commercial Corridors Loca Shoppers Not Buying Loca ► Need for Education Program to Explain Importance of Buying Local ► Think Local Campaign Being Organized Final Plans Announced Soon 3 Seasona Businesses ► Difficulty for Certain Businesses to Maintain Profit Throughout the Year ■ Employees Laid Off or Become Part - Time During Slow Business Months ► 2007: $3,336,000 ■ 2010: $2,776,000 ■ $ 560,000 Decrease (20 %) Indicator that Local Shoppers are Shopping Out of Town Dec ine in Loca Sa es Taxes 3 • • • 4 3/29/2011 • • • What Has the City Done? ■ Completed AIA Study - Includes Major Community Improvements ■ Initiated Sign and Facade Grant Program ■ Created Plans for Complete Renovation of Waterfront Area What Has the {City Done? ► Assisted in Coordination of Special Events ► Increased Efforts to Promote City in Victoria and Other Areas ► PA Forward Business Survey - 2010 ► Co- sponsored Jon Schallert Workshop 5 What Has City Done? ► Reviewed and Revised Codes and Building Review Process to be more Conducive to Commercial Growth ■ Met with Connie Lipsker - Retail Consultant from Gonzaga University What Has City Done? ■ Developed Plans for Think Local Program ■ Met with Buxton Representative and Requested Leakage Study ► Scheduled Trip to Bothell to Review Retail Growth 3/29/2011 • • • • 6 3/29/2011 • • Next Step - Deve op Retai Market Ana ysis ■ Currently No Direction or Focal Point for Local Retail Development Efforts ■ Retail Market Analysis - Complete Assessment of Specific Retail Sectors with Growth Potential ■ Retail Market Analysis - Clear Direction on How to Recruit Businesses from these Retail Sectors Scope of Study ► Detailed Report on Retail Leakage for City ► Verification of Actual Local Trade Area ► Definition of Appropriate Markets for Specific Retail Focus o Recommendation for Business Recruitment Strategy Options for Retai Market Ana ysis 1. Finalize Request for Proposals, Advertise RFP and Evaluate Proposals (60 -90 Days) 2. Proceed with Negotiation with Buxton Contract for Services (15 -30 Days) Recommendation Proceed with Contract Negotiations with Buxton • Large Firm - Experience with over 200 Local Communities • Buxton Technology /Database Can Provide: • Detailed Assessment of Local Market • Positive References from Other Cities 3/29/2011 • • • • • • Recommendation Proceed with Contract Negotiations with Buxton • Company Connected to Major Retail Chains • Pricing Favorable Based on Preliminary Discussions (about $35,000) • Reduced Time for Completion of Study • Reduced Staff Time for RFP Process (50 -100 Hours) Questions? 3/29/2011 9