Municipal Budgeting in Municipal Budgeting in Arizona:Arizona:

What Budget Leaders Need to What Budget Leaders Need to KnowKnow

Tom Belshe, League of Arizona Cities Tom Belshe, League of Arizona Cities and Townsand Towns

Pilar Aguilar, City of AvondalePilar Aguilar, City of Avondale

2007 GFOAz Summer Training2007 GFOAz Summer TrainingAugust 8, 2007August 8, 2007

Revenue SourcesRevenue Sources

State Shared RevenuesState Shared Revenues State Transaction Privilege Tax State Transaction Privilege Tax

(Sales Tax) (Sales Tax) State Income TaxState Income Tax Highway User Revenues Funds Highway User Revenues Funds

(HURF)(HURF) Local Transportation Assistance Local Transportation Assistance

Fund (LTAF)Fund (LTAF) Vehicle License Tax (VLT)Vehicle License Tax (VLT) Population Requirement for State Population Requirement for State

Shared RevenuesShared Revenues

Revenue SourcesRevenue Sources

Federal RevenuesFederal Revenues Block Grant ProgramsBlock Grant Programs

In theory, a block grant program is designed to fund various Federal programs within a broadly defined area.

The Federal government has curtailed a The Federal government has curtailed a number of programs. The amount of Federal number of programs. The amount of Federal assistance, type of programs and the projects assistance, type of programs and the projects for which the money can be expended from for which the money can be expended from other sources are constantly changing. other sources are constantly changing.

Revenue SourcesRevenue Sources

Local RevenuesLocal Revenues Property TaxProperty Tax Local Sales Tax (TPT)Local Sales Tax (TPT) Business License TaxBusiness License Tax Franchise TaxFranchise Tax Fines & FeesFines & Fees Development Impact FeesDevelopment Impact Fees

The Model City Tax CodeThe Model City Tax Code

All of the cities and towns in the state All of the cities and towns in the state that impose a local sales tax have that impose a local sales tax have adopted the model city tax code with adopted the model city tax code with various options. various options.

Twin goals of the MCTC Twin goals of the MCTC Provide a greater degree of uniformity Provide a greater degree of uniformity

among cities and townsamong cities and towns Individual cities and towns retain the right Individual cities and towns retain the right

to determine the items taxed as well as the to determine the items taxed as well as the exemptions to be grantedexemptions to be granted

State Imposed Expenditure State Imposed Expenditure LimitationLimitation Base LimitBase Limit

Actual payments of local revenues for FY Actual payments of local revenues for FY 1979-80 1979-80

The Economic Estimates Commission The Economic Estimates Commission determines limit for every city and towndetermines limit for every city and town

Consists of expenditures “controlled” by Consists of expenditures “controlled” by the State limitation the State limitation

Does not include those revenues Does not include those revenues specifically exempted from the limitation specifically exempted from the limitation

State Imposed Expenditure State Imposed Expenditure LimitationLimitation Alternative Limitation OptionsAlternative Limitation Options

Local Home Rule (Alternative Local Home Rule (Alternative Expenditure) LimitationExpenditure) Limitation

Permanent Base AdjustmentPermanent Base Adjustment Capital Projects Accumulation FundCapital Projects Accumulation Fund One-time OverrideOne-time Override

All Options Require Voter All Options Require Voter ApprovalApproval

State Budget Law State Budget Law RequirementsRequirements Developing the BudgetDeveloping the Budget Budget AdoptionBudget Adoption Final Budget AdoptionFinal Budget Adoption Adoption of LevyAdoption of Levy Truth in TaxationTruth in Taxation EncumbrancesEncumbrances

Primary Property Tax Primary Property Tax LimitationLimitation

Limited to an increase of 2% over the Limited to an increase of 2% over the previous year's maximum allowable previous year's maximum allowable primary levy plus an increased dollar primary levy plus an increased dollar amount due to a net gain in property not amount due to a net gain in property not taxed the previous year. taxed the previous year.

Subject to Truth in TaxationSubject to Truth in Taxation

Truth in TaxationTruth in Taxation

If the proposed If the proposed primaryprimary tax levy, tax levy, excluding amounts attributable to new excluding amounts attributable to new construction, is greater than the amount construction, is greater than the amount levied by the city or town in the previous levied by the city or town in the previous year the council must publish a notice.year the council must publish a notice.

Truth in TaxationTruth in Taxation Truth in Taxation Notice Requirements:Truth in Taxation Notice Requirements:

The notice has to be published twice in a The notice has to be published twice in a newspaper of general circulation in the city or newspaper of general circulation in the city or town. town.

The first publication shall be at least fourteen The first publication shall be at least fourteen but not more than twenty days before the date but not more than twenty days before the date on which the proposed levy is to be discussed. on which the proposed levy is to be discussed. The second publication must be at least The second publication must be at least seven but not more than ten days before the seven but not more than ten days before the hearinghearing

The notice has to be published in a location The notice has to be published in a location other than the classified or legal advertising other than the classified or legal advertising section of the newspapersection of the newspaper

Truth in TaxationTruth in Taxation Truth in Taxation Notice Requirements Truth in Taxation Notice Requirements

(cont’d):(cont’d): The notice must be at least one-fourth page in size The notice must be at least one-fourth page in size

and shall be surrounded by a solid black border at and shall be surrounded by a solid black border at least one-eighth inch in widthleast one-eighth inch in width

The headline of the notice must read “Truth in The headline of the notice must read “Truth in Taxation Hearing - Notification of Tax Increase” in Taxation Hearing - Notification of Tax Increase” in at least eighteen point type and the text must be at least eighteen point type and the text must be in substantially the same form as the statute in substantially the same form as the statute

In addition to publishing the notice according to In addition to publishing the notice according to the above requirements, it is required that the city the above requirements, it is required that the city or town to issue a press release with the same or town to issue a press release with the same information included in the notice required aboveinformation included in the notice required above

Budget CycleBudget Cycle

Strategic Planning/Forecast Agency Preparation

Management Review

Legislative ActionImplementation

Evaluation CitizenInput

Public ParticipationPublic Participation

Annual resident appreciation nightAnnual resident appreciation night Semi-Annual resident satisfaction Semi-Annual resident satisfaction

surveysurvey Citizens’ CIP CommitteeCitizens’ CIP Committee Open house meetingsOpen house meetings

Rate/fee changesRate/fee changes Council workshops/goal settingCouncil workshops/goal setting

The Budget ProcessThe Budget Process Rate & Fee ReviewRate & Fee Review

July - DecemberJuly - December Capital Plan DevelopmentCapital Plan Development

August - OctoberAugust - October Revenue EstimatesRevenue Estimates

September - NovemberSeptember - November Council RetreatCouncil Retreat

NovemberNovember

The Budget ProcessThe Budget Process Manager’s Budget KickoffManager’s Budget Kickoff

JanuaryJanuary Expenditure EstimatesExpenditure Estimates

January - MarchJanuary - March Council ReviewCouncil Review

AprilApril Budget AdoptionBudget Adoption

May & JuneMay & June

Financial ForecastFinancial Forecast

Historical dataHistorical data Tax ratesTax rates Economic indicatorsEconomic indicators New legislationNew legislation Fee/cost recovery analysisFee/cost recovery analysis Operating impact of CIPOperating impact of CIP

Capital BudgetCapital Budget

Council goalsCouncil goals Operating impactOperating impact Debt capacityDebt capacity Development feesDevelopment fees

Operating Budget Operating Budget DevelopmentDevelopment Council goalsCouncil goals Demographic growthDemographic growth Inflationary pressuresInflationary pressures New programsNew programs CarryoverCarryover Performance measuresPerformance measures

Budget BalancingBudget Balancing

Plan debt service payments firstPlan debt service payments first Match ongoing expenditures with Match ongoing expenditures with

ongoing stable revenuesongoing stable revenues Identify best uses of one-time Identify best uses of one-time

fundingfunding Reduce costs where possibleReduce costs where possible Identify new revenue sourcesIdentify new revenue sources

Contingency BudgetContingency Budget

Allows for unforeseen emergenciesAllows for unforeseen emergencies Natural DisastersNatural Disasters Legislative ActionLegislative Action Citizen InitiativesCitizen Initiatives

Can cover revenue shortfallsCan cover revenue shortfalls Economic RecessionEconomic Recession

Only available to City CouncilOnly available to City Council

Grant ManagementGrant Management

Cost/Benefit AnalysisCost/Benefit Analysis Review grant requirementsReview grant requirements Maintain necessary Maintain necessary

documents/recordsdocuments/records Monitor grant expendituresMonitor grant expenditures

Uniform Expenditure Uniform Expenditure Reporting SystemReporting System(UERS)(UERS) Annual expenditure limitation reportAnnual expenditure limitation report Financial statements prepared Financial statements prepared

according to GAAPaccording to GAAP Reconciliation of the financial Reconciliation of the financial

statements to the expenditure statements to the expenditure limitation report for cities and townslimitation report for cities and towns

Alternative Expenditure Alternative Expenditure Limitation ReportLimitation Report Adjustments/ExclusionsAdjustments/Exclusions

Grants and AidGrants and Aid Bond ProceedsBond Proceeds Amounts received as trustee/custodianAmounts received as trustee/custodian HURF in excess of 1979-80 distributionHURF in excess of 1979-80 distribution Debt service requirementsDebt service requirements Contracts with other political subdivisions Contracts with other political subdivisions

Due to Auditor General within four months of Due to Auditor General within four months of fiscal year end along with audited financial fiscal year end along with audited financial statementsstatements

Questions