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BUDGET AT A GLANCE BUDGET OVERVIEW CITYWIDE BUDGET SUMMARY ALL FUNDS SUMMARY CITYWIDE FTE SUMMARY ---PAGE BREAK--- ---PAGE BREAK--- BUDGET OVERVIEW 2019-2020 ADOPTED BUDGET CITY OF REDMOND The Budget Overview serves as a review of the recommended 2019-2020 financial plan and includes revenue and expenditure projections over the biennium based on the City’s six-year forecast. This budget continues to use the priorities defined by the Redmond community in 2008 (with subsequent revisions) and expands on these concepts in pursuit of Redmond’s long range vision. The process used by the City, known as Budgeting by Priorities (BP), relies on the Price of Government concept outlined in the book Price of Government by David Osborne and Peter Hutchison. PRICE OF GOVERNMENT The Price of Government is literally defined as the sum of all taxes, fees and charges collected by all sectors of government divided by the aggregate personal income of that government’s constituents. The calculation is used to define the band within which residents are willing to pay for government services. The Price of Government for Redmond, illustrated below, shows all revenues as a percent of personal income fell to 4.9% in the 2017-2018 biennium and is projected to increase to 6% in 2019-2020, primarily due to large transportation grants and capital contributions. However, removing the large one- time revenue collections, the Price of Government drops to 5.4% over the biennium. The Price of Government City of Redmond, Washington 2019-2020 Budget 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00% 8.00% 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 All Revenues Taxes & Fees Estimates Large Grant Actual data City of Redmond, WA Community Price of City Government Large Grants 15 ---PAGE BREAK--- Keeping the Price of Government in mind (the “price”), this budget continues to conservatively forecast revenues and rely on right-sizing costs, innovation and efficiencies and matching service expenditures with demand to balance Redmond’s resources. As revenue collections fall below a “price” of fewer resources are available to maintain current levels of service. The Long Range Financial Strategy targets the Price of Government between 5.0% – 5.5%, and given current revenue projections, the “price” (removing large one-time revenue collections) will hover between 5.0%-5.5% for the foreseeable future without additional revenue increases. LONG RANGE FINANCIAL STRATEGY Redmond’s General Fund six-year financial forecast identifies revenue and expenditure expectations that extend beyond the biennial budget. Redmond aligns forecast assumptions with policies outlined in the City Council’s Long Range Strategic Financial Plan, as well as the goals articulated in budget formulation. The 2019-2020 forecast shows growth in some revenues such as property tax, sales tax utility taxes and development revenue. Although the revenue outlook is better, the City remains cautionary due to the volatility of some revenue sources such as sales tax and development revenue, the potential for decreases in State-shared revenues and uncertain impacts on the expenditure side for retirement and medical costs. The chart below illustrates an updated long range financial forecast and shows projected gaps in future budgets. City of Redmond 2019-2020 General Fund Budget Estimated Gap Based on Budgeted Revenues and Expenditures These revenue and expenditure trends consider the volatility and diversity of each revenue source and the ongoing and/or one-time nature of municipal costs. A more detailed explanation of sources and uses can be found on the following pages. $1 $21 $41 $61 $81 $101 $121 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Beginning Balance Revenues Expense Ending Balance Millions $2.2 $3.3 $7.3 $5.8 16 ---PAGE BREAK--- MAJOR REVENUES & EXPENDITURES The City of Redmond is a non-charter code city with authority to levy or assess all revenues generally available to all classes of cities and towns in Washington State. The government-wide financial statements in the City’s Annual Financial Report are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund and fiduciary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. The budget is developed using the modified accrual basis of accounting for all funds. Revenue and Expenditure Summary The Revenue and Expenditure Summary includes a discussion of major revenues utilized by the City and information on major factors affecting those sources. Total revenues over the biennium equal $797.7 million, including beginning fund balances and transfers; this is an approximate 17% increase over the current 2017-2018 biennium. The budget includes a series of transfers between the General Fund and capital funds, capital maintenance and construction funds and between capital construction funds for various projects. This has the effect of double counting these amounts. The budget includes a 1% property tax increase, a 3% cable services utility tax increase, an inflationary increase on the business tax and 2% and 4% water and wastewater utility rate increases respectively. The components of the City’s 2019-2020 revenue sources are shown in the graph below. 2019-2020 Revenues by Type All Funds ($797.7 million) On the expenditure side, in the 2019-2020 Budget, the General Fund has increased to support investments in strategic technology solutions, addresses development review service demands, makes investments in environmental sustainability and safety practices and programs. In other funds, specifically capital, the budget has increased due to maintenance and renovation of City buildings, Beginning Funds 28% Licenses & Permits 5% Interfunds 17% Property Tax 7% Sales & Use Tax 7% Utility Tax 3% Other Taxes 3% Miscellaneous 1% Charges for Services 20% Other Governments 7% Other Revenue 2% Taxes 20% 17 ---PAGE BREAK--- infrastructure improvements that are needed to bring light rail to Redmond and commitments to the City’s vision of two vibrant urban centers and connected neighborhoods. In addition, the budget conforms to all Council policy directives regarding reserves and transfers to the Capital Investment Program (CIP). (See the Budget by Fund section for a financial summary of sources and uses of City funds.) 2019-2020 Expenditures by Type All Funds ($797.7 million) As in most service organizations, salary and benefit costs make up most of budgeted expenditures. The number of full time equivalent (FTE) employees are expected to increase by 5.82. This is a combination of adding 1.32 Maintenance Technician positions and 2.00 Program Coordinator positions to Parks, a 0.50 Support Services Specialist position in Police, a 1.00 Engineer position in Public Works (fully funded within Capital Investment Projects) and a 1.00 Business Analyst position in Human Resources. The Parks and Police positions are budget neutral as they will be funded via a conversion of funding for supplemental positions to regular positions. Challenges to balancing the budget were met through a variety of reductions that focused rightsizing resources, evaluating programs, seeking resource leverage opportunities, building new community partnerships, gaining additional efficiencies in current operations, increases in City revenues and eliminating some new requests. Adjustments to expenditures include: • Aligning budget requests with the City’s key strategic initiatives; • Increasing or repurposing staffing to focus on priority issues, creating more effective and efficient processes, meeting new regulations, maintaining recently constructed capital Ending Fund Balance 21% Services & Supplies 9% Miscellaneous 0% Utilities & Maintenance 5% Salaries & Benefits 28% Interfund Payments 4% Intergovernmental 6% Capital 15% Debt Service 2% Transfers Out 10% Department Additions Parks 3.32 Police 0.50 Human Resources 1.00 Public Works 1.00 Total 5.82 Conversion from Supplemental to Regular (3.82) Net Total Additional FTEs 2.00 2019-2020 FTE 18 ---PAGE BREAK--- improvements and increasing levels of service for communications, environmental sustainability and records management; • Continuing to make investments in technology, the environment and human service programs; and • Maintaining reserves and contingencies and planning for Redmond’s future. More detail of changes can be found in each offer in the priority sections of the budget. General Fund Revenues General Fund operating revenues are forecasted to grow from $170.6 million in 2017-2018 to an estimated $189.5 million in 2019-2020, a change of 11% excluding the beginning fund balance, as a result of increases in development related activities, cable tax and sales tax. Current projections forecast the 2019-2020 beginning fund balance to be approximately $8.9 million which includes the Economic Contingency set by policy at 4% or $3.3 million. This is in addition to the General Fund Operating Reserves set by policy at 8.5% or $7.5 million. 2019-2020 General Fund Revenue by Type The General Fund supports basic operations of the City (Police, Fire, Public Works, Parks & Recreation, Planning, Human Resources, Finance, Technology & Information Services and Administration) ($198.4 million) Beginning Funds 4% Property Tax 21% Other Taxes 1% Sales/Use Tax 29% Utility Tax 12% Development Fees 13% Other Revenue 14% Other Governments 6% Sales Tax Sales tax represents 29% or $57.7 million of the City’s General Fund, making it the Fund’s largest revenue source. The overall sales tax rate for Redmond totals 10% of which 0.85% is distributed to the City for general government purposes and 0.10% for criminal justice programs. Most of the sales tax collected in Redmond is distributed to other jurisdictions. Over the biennium, sales tax is projected to grow by 10% in 2019 and 2020 compared to forecasted estimates in the 2017-2018 biennium. Much of this growth is due to one-time sales tax on construction for major development projects. Taxes 63% Distribution of Sales Tax State 65% State Admin 1.5% City 8.5% Transit 14% Criminal Justice 1% RTA 9% Veteran's Levy 1% 19 ---PAGE BREAK--- 2018 Distribution of Property Tax Estimate 2015 2016 2017 2018 2019 2020 (thousands) 23,756 26,301 25,652 26,699 28,326 29,381 % Change 15.6% 10.7% -2.5% 4.1% 6.1% 3.7% Actual Forecast Sales Tax Property Tax Redmond currently receives approximately $1.15 per $1,000 of assessed valuation from property owners located within the City limits. This equates to $41.3 million over the 2019-2020 biennium and assumes a Council approved 1% increase each year. Detailed below are historical collections of property taxes in Redmond. The additional amounts in excess of the 1% allowed by State legislature are attributable to revenues from new construction, annexations and the collection of unpaid taxes from previous years. Estimate 2015 2016 2017 2018 2019 2020 (thousands) 17,380 17,743 19,047 19,535 20,280 21,033 % Change 4.0% 2.1% 7.3% 2.6% 3.8% 3.7% Actual Forecast Note: The increase on existing properties is 1% consistent with State law. Property Tax Redmond’s levy is only one component of the total property tax rate that property owners pay in King County. The total property tax rate includes additional levies that are earmarked for the State, public schools, Emergency Medical Services (EMS), hospitals, local libraries, King County and the Port of Seattle. Utility Tax State law enables cities to levy taxes on natural gas, telephone and electric utilities in an amount up to 6% of the total charges. In 2015, the City imposed a new 3% utility tax on cable television services within the City and will increase the tax another 3% to 6% for 2019 and 2020. Illustrated below are the utility taxes Redmond levies and the amount expected to be collected in 2019 and 2020. Estimate 2015 2016 2017 2018 2019 2020 Electric Tax 5,820 5,831 5,954 6,073 6,195 6,319 Garbage 592 735 840 865 891 918 Natural Gas 1,065 966 1,158 1,180 1,202 1,225 Telephone/Cellular 2,593 2,434 2,340 2,387 2,435 2,483 Cable1 361 664 503 513 1,047 1,068 Other Taxes 610 591 556 581 598 615 Totals 11,041 11,221 11,351 11,599 12,368 12,628 1. In 2015, the City instituted a 3% utility tax on cable services. The percentage imposed will be raised another 3% to a total of 6% in 2019. Utility Tax (thousands) Actual Forecast State of Washington 29% Port 1% Library 4% School District 31% Transit 2% King County 14% Emergency Medical Services 3% Hospital 3% City of Redmond 13% 20 ---PAGE BREAK--- Development Revenue A development user fee study approved in 2011 enacted a revised fee structure targeting full cost recovery for all development related fees. Council is in the process of approving updated user fees; conservative estimates were used. The forecasted revenue for this biennium assumes a continuation of this policy and factors in the development activity currently being experienced by the City. In 2019 and 2020, fees for business licenses were increased by an estimated CPI of 2.4%, which brought the fee collected in the General Fund from $48.00 per FTE to $49.00 and $50.00 per FTE in 2019 and 2020, respectively. Development revenues in the 2019-2020 Budget are projected to grow 6.5% compared to 2018 estimates followed by a 3.7% increase in 2020. Estimate 2015 2016 2017 2018 2019 2020 Plan Review1 1,270 1,362 1,240 1,200 1,204 1,218 Plan Checks 448 453 405 400 602 604 Mixed Use Permits 681 1,367 1,897 1,800 2,040 2,345 Residential Permits 1,011 1,042 713 1,000 750 754 Commercial Permits 1,459 1,292 1,506 400 1,758 1,779 Plumbing/Electric2 1,965 2,211 2,591 3,479 2,526 2,533 Other License/Permits 4,604 4,568 5,077 5,571 5,867 6,056 Totals 11,438 12,295 13,429 13,850 14,747 15,289 1. Includes building inspection and plan reviews. 2. Includes heating, plumbing and electrical permits. Development Related Fees (thousands) Actual Forecast Other General Fund Revenues Other revenues collected by the City include intergovernmental revenue from other jurisdictions, such as the State or County, interest earnings and overhead charges to the City’s utilities. Redmond expects moderate growth in these revenue sources through the next biennium. Broader Economic Context As the broader economy recovers, the Gross Domestic Product (GDP) shows growth and consumer spending continues to strengthen. Since mid-2015, retail activity has shown steady improvement and construction continues to surge. In Redmond, it appears the rate of economic growth continues at a steady pace with a surge in the construction sector. Similar to past budgets, the 2019-2020 plan is built on a conservative forecast with Estimate 2015 2016 2017 2018 2019 2020 Fines/Forfeits 519 457 407 511 692 698 State Entitlements 1,722 1,905 1,973 1,729 2,011 2,033 Intergovernmental 10,392 9,688 10,015 8,021 10,988 11,215 Miscellaneous 3,250 3,436 3,678 4,777 4,713 4,643 Totals 15,883 15,486 16,073 15,038 18,404 18,589 Other General Revenues (thousands) Actual Forecast 21 ---PAGE BREAK--- modest growth in sales tax and licenses and permits (which is consistent with the Council’s financial policies on revenues). General Fund Expenditures The $198.2 million budgeted (including fund balance) in the General Fund supports the basic operations of the City, such as Police, Fire, Parks, Planning, Public Works and Administration. The biennial budget supports 711.92 full time equivalent (FTE) employees including an increase of 5.82 FTEs from the adjusted 2017-2018 Budget. Of the 5.82 FTE additions 3.82 are funded via conversions of supplemental positions, and are therefore budget neutral. Transfers to other funds constitute another significant portion of General Fund costs. Transfers are made to support the City’s Capital Investment Program (CIP), Community Facilities Districts, Information Technology, Human Services, Arts, and Special Event Activity Funds. The City is expected to end the 2017-2018 biennium with approximately $8.9 million in one-time revenue (this is compared to the $10.8 million carried into the 2017-2018 Budget). This money will go towards one-time uses including funding the economic contingency, investments in technology, studies to inform program development and capital needs, and to address maintenance needs of City facilities and infrastructure. The budget proposes funds to continue the City’s process improvement initiatives and to focus on cultural inclusion programs. The budget also supports the historical transfers to the City’s Capital Investment Program as provided for in the Financial Policies with additional money being contributed to maintenance of City facilities. Salaries and Benefits Overall, in a budget to budget comparison, salary and benefit costs are projected to increase by 11% over the biennium, excluding the salary and benefit contingency set aside for future labor agreements. The largest cost drivers for salary and benefits in the 2019-2020 biennium are market adjustments, State retirement costs, worker’s compensation insurance and additional staff required for large development agreements. Medical rates are budgeted to decrease 9% after an analysis of reserves in the Medical Self-Insurance Fund. However, the actual rate changes are assessed closer to the start of each calendar year when an actuarial analysis can be done using the latest information. This will help us to determine the actual medical rates which are expected to be consistent with the budget estimates. Salaries & Benefits 65% Utilities & Maintenance 5% Miscellaneous 1% Services & Supplies 7% Intergovernmental 3% Transfers Out 10% Interfund Payments 9% General Fund Expenditures by Type ($192.7 million excluding fund balance) 22 ---PAGE BREAK--- Transfers Out Transfers from the General Fund total 10% of the General Fund budget or $18.7 million. These transfers include Human Services, Arts and Community Events, City Hall maintenance as well as contributions to the Capital Investment Program (CIP), equipment replacement and reserves. CIP contributions have increased by approximately 14% or $1 million from the 2017-2018 Budget due to increased revenues in the General Fund of which 5% is transferred to the Capital Investment Program. Services & Supplies The services and supply category includes expenditures, such as operating supplies, professional services, legal, travel, training and postage. Professional services have increased 56% or $2.4 million for 2019-2020 due primarily to studies for the North-South Corridor, urban design standards, safety, compensation and environmental sustainability, new peer support program, crucial conversation training costs, community center planning (previously in capital fund) and paralegal assistance for real property transactions. Estimate 2015 2016 2017 2018 2019 2020 Supplies 1,656 1,810 1,902 1,997 2,009 1,985 Legal 438 303 327 341 500 507 Professional Services 1,744 2,225 2,063 2,207 3,822 3,103 Communication 384 419 440 467 769 768 Rentals 62 35 63 77 75 60 Equipment & Software 79 65 136 166 28 17 Other Services & Charges 1,466 1,142 1,147 1,287 1,512 1,410 Totals 5,829 5,999 6,078 6,542 8,715 7,850 Actual Forecast Services and Supplies (thousands) Interfund Payments Interfund payments include transfers from operating departments to internal service funds (i.e. Fleet Maintenance, Insurance Claims and Information Technology) for services provided. Internal service funds are supported by a variety of City funds; however, the majority of their support comes from the General Fund. In a budget to budget comparison, interfund payments have increased by approximately 10.5% or $1.6 million. The increase is due to both one-time and ongoing transfers to Technology and Information Services to support continuation of technology efforts, strategic system investments and licensing agreements. It is important to note that additional interfund payments go towards medical and workers’ compensation claims which are a part of the benefits cost category. Interfund Payments 23 $0 $2,000,000 $4,000,000 $6,000,000 $8,000,000 $10,000,000 $12,000,000 $14,000,000 $16,000,000 Info Services/GIS Insurance Fleet ---PAGE BREAK--- Intergovernmental Intergovernmental expenses represent payments to other government agencies for services, such as fire dispatch, jail and court services. Redmond currently contracts with Northeast King County Regional Public Safety Communications Agency (NORCOM) for fire dispatch services and with the South Correction Entity (SCORE) for jail services. For 2019-2020, dispatch services have increased due to increased call volume. Estimate 2015 2016 2017 2018 2019 2020 Jail 850 1,078 837 865 853 861 Dispatch 648 688 576 595 616 633 Court 619 557 634 740 750 750 Other1 311 253 485 492 501 469 Totals 2,428 2,576 2,532 2,692 2,720 2,713 1. Includes election services, State audits, fire training and human services. Actual Intergovernmental (thousands) Forecast Utilities, Repairs & Maintenance (R&M) Utility costs for the City include telephone, electricity, natural gas, garbage, water, wastewater and stormwater costs. The repairs and maintenance category includes maintenance for all City buildings and technology applications. The forecasted increases for utilities are shown in the table below, as well as the historical and projected costs for utilities, repairs and maintenance line items. Projected Utility Rate Increases Utilities 2019 2020 Telephone 2.00% 2.00% Cable 0.00% 0.00% Electricity 0.00% 0.00% Natural Gas 0.00% 0.00% Garbage 2.80% 2.80% Stormwater 0.00% 0.00% Water 2.00% 2.00% Wastewater 4.00% 4.00% Projected Estimate 2015 2016 2017 2018 2019 2020 Utilities 2,865 2,927 2,856 3,027 3,150 3,203 Repairs and Maintenance 1,299 1,287 1,916 1,971 1,765 1,675 Totals 4,164 4,214 4,772 4,998 4,915 4,878 Actual Utilities, Repairs and Maintenance (thousands) Forecast 24 ---PAGE BREAK--- Miscellaneous The last category of expenditures, miscellaneous, includes the economic contingency, capital purchases, tuition, advertising, bank fees for acceptance of credit card payments and other expenditures. GENERAL FUND SUB-FUNDS AND SPECIAL REVENUE FUNDS Special revenue funds account for revenues and expenditures that are restricted by State law for a specific use. Examples of some larger special revenue funds are Advanced Life Support (ALS) which is supported by the Emergency Medical Services (EMS) Levy and the Real Estate Excise Tax Fund which collects real estate excise tax to be used toward capital investment. Special revenue funds in the 2019- 2020 Budget total $63.1 million (including transfers and ending fund balances) and are illustrated below. In comparison, the sub-funds of the General Fund total $90.7 million and include the major maintenance funds for each of the General Government CIP functional areas, the public safety levy passed by voters in 2007, as well as funds used to replace fire and general City equipment. Following the illustration below is a discussion of the 2019-2020 projected revenues for some of the larger funds in these two categories. Arts 1% Parks Maintenance 5% Equipment Replacement 9% Operating Reserves 9% Human Services 3% Real Property 1% Business Tax 14% Community Events 1% Parks & Public Safety Levies 19% Parks Capital Maintenance 14% Transportation Capital Maintenance 12% General Gov't Capital Maintenance 12% Recreation Activity 9% Tourism 3% TDM Services 6% ALS 28% Development Agreements 25% Public Safety Donations 1% Solid Waste 4% Real Estate Excise 23% Cable Access 1% Advanced Life Support (ALS) In 2004, Redmond became a lead agency for the Northeast Advanced Life Support consortium made up of Redmond, Kirkland, Woodinville, Duvall, Fall City and unincorporated areas of King County surrounding those communities. An Emergency Medical Services (EMS) property tax is paid by all property owners in King County to support paramedic services throughout the County. Forecasted revenues for this service are based on the Emergency Medical Services Levy Strategic Plan approved by King County voters in 2013 and equal $17.4 million for the 2019-2020 biennium. Public Safety and Parks Levy Funds In 2007, Redmond voters passed special property tax levies to support Public Safety and Parks services. These levies supported the addition of firefighters and police personnel, as well as park maintenance and recreation programs. These revenues are subject to the 1% growth limitation imposed by the State legislature on property taxes. Special Revenue Funds ($63.2 million) General Fund Sub-Funds ($90.7 million) 25 ---PAGE BREAK--- Estimate 2015 2016 2017 2018 2019 2020 Public Safety Levy 5,044 5,471 5,680 5,342 6,194 6,995 Parks Levy 345 366 312 406 475 492 Totals 5,388 5,836 5,991 5,747 6,669 7,487 Forecast Note: Excludes fund balances Special Levies (thousands) Actual Reserve Funds The City maintains accounts dedicated to supporting the City’s required reserves. According to fiscal policies, the City will maintain General Fund reserves to mitigate a significant crisis, a Law Enforcement Officers and Firefighters (LEOFF 1) reserve to pay medical costs for retirees under the LEOFF 1 retirement system, as well as equipment replacement reserves for citywide equipment and fire vehicles. Reserves are also set aside in the Fleet Maintenance Fund (an internal service fund) for the replacement of City vehicles. Estimate 2015 2016 2017 2018 2019 2020 General Fund Reserve 6,070 25 6,430 - 7,067 - LEOFF 1 Reserve 613 40 757 - 709 40 Capital Equipment Reserve 3,061 - 2,933 - 2,723 - Fire Equipment Reserve 4,553 - 1,907 - 2,578 - Totals 14,297 65 12,028 - 13,077 40 Operating Reserve Fund Balances (thousands) Forecast Actual Note: Reserves are budgeted in the first fiscal year of the biennium. The second year represents any contributions to reserves based on the City's forecast. DEBT SERVICE FUNDS The City has a debt service fund to pay for voted and non-voted debt. This fund is used to account for the principal and interest payments for the 2013 refinance and purchase of the City Hall building, Bear Creek Parkway and Couplet Conversion projects. These debt obligations total $11.6 million over the biennium. CAPITAL INVESTMENT PROGRAM (CIP) In the 2019-2020 Budget, Redmond has worked hard to strengthen the alignment between the CIP and the City’s long range vision as articulated in the Vision Blueprint and the Comprehensive Plan. This alignment is especially important in the City’s two urban centers of Downtown and Overlake, as the City seeks to direct its public infrastructure investment in ways that will facilitate continued private redevelopment of these areas. While there are infrastructure and capital needs beyond the urban centers, capital projects are prioritized in much the same way as operational offers. By focusing public projects in its urban centers, the City is taking tangible steps towards realizing its vision for these areas, signaling its commitment to private developers and thereby encouraging them to continue to invest in Redmond while protecting the character of Redmond’s established neighborhoods. 26 ---PAGE BREAK--- Capital Investment Program projects range from major maintenance of streets, sidewalks, utility and building infrastructure improvements to mobility improvements in the urban centers. These projects are funded through a variety of revenue sources, both public and private. Beginning fund balances, Real Estate Excise Tax (REET), impact fees, grants, business tax and transfers made from the General Fund are the major revenues that make-up a significant portion of the $96.9 million of 2019-2020 general CIP revenues. Other CIP revenues include private contributions and interest earnings. Total 2019-2020 General CIP Revenues ($111 million including fund balance) Real Estate Excise Tax (REET) REET is a 0.5% tax on the sale of real estate inside Redmond city limits and is restricted to expenditures on capital investments. REET collections have grown steadily since the significant decline in 2009. Estimates in the 2019-2020 Budget project this revenue will increase from its historical base of $4.7 million to $5.0 million per year. Business Tax (BTTI) The City assesses a per employee fee to businesses operating in Redmond to support transportation and transportation demand management investments. In 2015 a $7.00 increase to this fee was adopted, bringing the total fee from $57.00 to $64.00 per full time equivalent employee, and has been indexed to inflation by 2.4% each year, bringing the total to $66.00 in 2019 and $67.00 in 2020. The long-term growth in the revenue is projected to be approximately 1.7%, commensurate with projected employment growth in the City. Beginning Funds 29% Real Estate Excise Tax 11% General Fund Transfers 10% Other Revenue 19% Private Contributions 1% Grants 19% Impact Fees 7% Business Tax 4% 27 ---PAGE BREAK--- General Fund Transfer Per City policy, 5% of General Fund operating revenues (minus development revenues and significant one-time collections) is transferred into the City’s Capital Investment Program. In addition, $1.4 million annually of sales tax on construction goes to support the debt service on the City Hall building, as well as $300,000 per year for pavement management projects. Impact Fees The City collects impact fees from developers for transportation, fire and parks. These impact fees are restricted to capacity building projects that mitigate the impacts of growth in the community. In 2016 these fees we increased to compensate for the capacity of the existing infrastructure for transportation, fire and parks that the development will utilize. Estimate 2015 2016 2017 2018 2019 2020 REET 7,183 8,250 6,160 6,415 5,015 5,015 Business Tax 4,979 5,066 5,404 5,472 5,538 5,604 General Fund Transfer 4,815 4,994 5,357 17,987 4,006 7,450 Impact Fees 1,652 10,325 4,150 8,830 3,838 3,842 Totals 18,631 28,635 21,071 38,705 18,397 21,911 CIP Revenues (thousands) Forecast Actual Note: General Fund Transfer includes 5% of General Fund revenues, sales tax on construction and pavement management project funding. A significant portion of the biennial CIP has been dedicated to projects in the two urban centers, such as the Adaptive Signal System Project, senior center renovations and seismic upgrades, the Connecting Washington Project and the 152nd Avenue Northeast Improvements in the Overlake area and maintenance projects in established neighborhoods. Expenditures by functional allocation are shown below. 2019-2020 CIP Expenditures by Functional Area ($85.1 million excluding fund balance) Parks 25% Transportation 63% General Government 12% 28 ---PAGE BREAK--- ENTERPRISE FUNDS Water, Wastewater and Stormwater Revenue Water, Wastewater and Stormwater fees fund most of the costs associated with providing these services in the community. (Other sources include development related revenues, grants and interest earnings.) Total Water/Wastewater and Stormwater revenues (including the Novelty Hill Service Area and excluding revenue bond proceeds and beginning fund balances) are expected to increase from a budgeted $113.4 million to $123.7 million, a 9.1% increase. Included in the budget are water and wastewater rate increases for both in-City and Novelty Hill customers. These rate increases are primarily due to a rise in purchased water costs. City policy calls for a rate update to be performed in conjunction with the adoption of each biennial budget, this update occurred in July 2018. The table on the next page reflects the rates recommended in the 2019-2020 Budget. Water and Wastewater Rate Increases Estimate 2015 2016 2017 2018 2019 2020 Water & Wastewater 38,159 39,987 40,063 37,348 47,357 40,218 Stormwater 13,162 17,867 16,375 14,348 17,640 14,273 Novelty Hill 8,117 7,216 7,446 3,800 11,411 8,060 Totals 59,438 65,070 63,884 55,496 76,408 62,551 Note: Excludes fund balances. Utility Revenue (thousands) Actual Forecast Water, Wastewater and Stormwater Expenditures Money spent to support utility operations and capital investment programs (CIP) is separated into eight Enterprise funds Water and Wastewater Operations, Water CIP, Wastewater CIP, Stormwater Operations, Stormwater CIP, and Novelty Hill Service Area Water and Wastewater Operations, Novelty Hill Water CIP and Novelty Hill Wastewater CIP. The total budget for all eight funds equals $249.5 million (including ending fund balance and transfers) with $139 million dedicated to operations and $110.5 million earmarked for capital investments. Included in the utility capital investments funds are Description 2019 2020 City of Redmond Water 2.0% 2.0% Wastewater 4.0% 4.0% Novelty Hill Water 3.0% 3.0% Wastewater 5.0% 5.0% 29 ---PAGE BREAK--- expenditures to support the Downtown and Overlake Urban Center vision, environmental enhancements, stormwater controls and pump station improvements (see CIP section for more detail). Prospects for the Future In the City’s long range forecast, salary and benefit expenditures will continue to be the largest expenditures and will rise approximately 4.5% - 5.5% in future years, net of the large development agreements compensation costs. Contributions to the State retirement funds, overtime and medical costs including workers compensation are the main drivers of these expenditures. The City will continue to vigilantly seek innovations, efficiencies and cost containment as structural realities continue to put pressure on citywide revenues. Past cost containment measures and implementation of innovations and Lean process efficiency improvements will help Redmond manage expenditure increases into the future. Concentration on monitoring outcomes and the long range strategic vision and key strategic initiatives on a consistent basis, will keep Redmond moving forward toward the vision of a community with two vibrant urban centers and thriving connected neighborhoods. $0.0 $20.0 $40.0 $60.0 $80.0 $100.0 Water & Wastewater Ops Stormwater Ops Novelty Hill Ops Water CIP Wastewater CIP Stormwater CIP Novelty Hill Water CIP Novelty Hill Wastewater CIP Millions 30 ---PAGE BREAK--- Fund Number Fund 2015-2016 Budget 2017-2018 Budget 2019-2020 Budget Budget to Budget Difference Percent Change 100 GENERAL FUND $168,766,207 $181,486,732 $198,398,969 $16,912,237 9.3% L FUND SUB-FUNDS 011 Arts Activity $911,612 $883,326 $793,530 ($89,796) -10.2% 012 Parks Maintenance & Operations $3,867,536 $4,267,701 $4,518,116 $250,415 5.9% 013 Special Events $919,656 $968,514 $1,353,513 $384,999 39.8% 019 Human Services $1,724,440 $2,350,947 $2,537,786 $186,839 7.9% 020 Fire Equipment Reserves $5,768,533 $2,825,548 $3,611,734 $786,186 27.8% 021 Operating Reserves $7,076,774 $7,903,527 $8,675,365 $771,838 9.8% 027 Capital Equipment Reserve $5,079,905 $6,388,142 $4,577,619 ($1,810,523) -28.3% 030 Business Tax $9,855,781 $11,602,099 $12,400,003 $797,904 6.9% 0311 Real Property $171,407 $2,237,226 $571,689 ($1,665,537) -74.4% 0352 Public Safety Levy $15,913,503 $15,050,443 $15,701,385 $650,942 4.3% 037 Parks Levy $1,310,363 $1,319,458 $1,388,913 $69,455 5.3% 095 Parks Maintenance Projects $1,567,671 $4,773,082 $13,229,735 $8,456,653 177.2% 096 Transportation Maintenance Projects $8,593,471 $6,138,701 $10,772,857 $4,634,156 75.5% 099 General Government Maintenance Projects $10,003,828 $18,637,895 $10,545,948 ($8,091,947) -43.4% Subtotal - General Fund Sub-funds $72,764,480 $85,346,609 $90,678,193 $5,331,584 6.2% GRAND TOTAL GENERAL FUND $241,530,687 $266,833,341 $289,077,162 $22,243,821 8.3% SPECIAL REVENUE FUNDS 110 Recreation Activity $6,066,254 $6,556,171 $5,728,157 ($828,014) -12.6% 1153 Development Review $2,249,142 $6,640,007 $15,901,233 9,261,226 139.5% 117 Cable Access $1,149,118 $910,308 $862,187 (48,121) -5.3% 118 Transportation Demand Management $3,721,356 $4,074,455 $3,580,561 (493,894) -12.1% 122 Advanced Life Support (ALS) $15,115,172 $15,706,190 $17,354,006 1,647,816 10.5% 124 Aid Car Donation $536,645 $345,392 $451,485 106,093 30.7% 125 Real Estate Excise Tax (REET) $14,581,634 $19,171,816 $14,416,884 (4,754,932) -24.8% 126 Drug Enforcement $64,044 $141,133 $126,056 (15,077) -10.7% 131 Hotel/ Motel Tax $1,273,411 $1,657,972 $1,996,843 338,871 20.4% 140 Solid Waste/ Recycling $2,183,317 $2,583,553 $2,834,067 250,514 9.7% Subtotal - Special Revenue Funds $46,940,093 $57,786,997 $63,251,479 $5,464,482 9.5% DEBT SERVICE FUNDS 233 City Hall/ Bear Creek Parkway/ Couplet Conversion $41,293,013 $13,445,884 $11,565,451 (1,880,433) -14.0% Subtotal - Debt Service Funds $41,293,013 $13,445,884 $11,565,451 ($1,880,433) -14.0% CAPITAL INVESTMENT PROGRAM (CIP) FUNDS 315 Parks CIP $17,242,559 $23,039,624 $12,628,018 (10,411,606) -45.2% 316 Transportation CIP $50,482,548 $71,927,772 $58,738,576 (13,189,196) -18.3% 319 General Government CIP $16,479,464 $9,674,280 $5,464,802 (4,209,478) -43.5% Subtotal - CIP Funds $84,204,571 $104,641,676 $76,831,396 ($27,810,280) -26.6% COMMUNITY FACILITIES DISTRICT (CFD) FUNDS 3613 CFD 2014-1 $0 $31,634,236 $22,491,223 ($9,143,013) -28.9% 3624 CFD 2016-1 $0 $24,618,000 $13,188,657 (11,429,343) -46.4% Subtotal - CFD Funds $0 $56,252,236 $35,679,880 ($20,572,356) -36.6% CITYWIDE BUDGET SUMMARY 2019-2020 ADOPTED BUDGET CITY OF REDMOND 31 ---PAGE BREAK--- Fund Number Fund 2015-2016 Budget 2017-2018 Budget 2019-2020 Budget Budget to Budget Difference Percent Change CITYWIDE BUDGET SUMMARY 2019-2020 ADOPTED BUDGET CITY OF REDMOND ENTERPRISE FUNDS (UTILITIES) 401 Water/ Wastewater M&O $84,132,881 $89,390,099 $87,575,289 ($1,814,810) -2.0% 402 Novelty Hill M&O $17,298,194 $20,130,397 $19,470,685 (659,712) -3.3% 403 Water CIP $15,947,111 $20,747,220 $23,579,167 2,831,947 13.6% 404 Wastewater CIP $11,939,495 $13,413,702 $20,400,971 6,987,269 52.1% 405 Stormwater M&O $35,427,924 $33,706,365 $31,912,958 (1,793,407) -5.3% 406 Stormwater CIP $36,985,255 $45,798,908 $41,951,620 (3,847,288) -8.4% 407 Novelty Hill Water CIP $7,629,231 $8,871,686 $11,824,546 2,952,860 33.3% 408 Novelty Hill Wastewater CIP $8,092,217 $9,459,349 $12,681,208 3,221,859 34.1% Subtotal - Enterprise Funds $217,452,308 $241,517,726 $249,396,444 $7,878,718 3.3% INTERNAL SERVICE FUNDS 501 Fleet Maintenance $11,224,194 $11,137,496 $10,502,978 ($634,518) -5.7% 510 Insurance Claims & Reserves $3,321,521 $3,557,262 $3,507,936 (49,326) -1.4% 511 Medical Self Insurance $32,804,070 $30,256,723 $36,606,038 6,349,315 21.0% 512 Workers' Compensation $3,030,255 $4,197,634 $3,867,939 (329,695) -7.9% 520 Information Technology $11,540,456 $14,895,438 $17,385,504 2,490,066 16.7% Subtotal - Internal Service Funds $61,920,496 $64,044,553 $71,870,395 $7,825,842 12.2% FINAL BUDGET - ALL FUNDS $693,341,168 $804,522,413 $797,672,206 ($6,850,207) -0.9% Footnotes: 1. Fund 031 was created to manage and direct unencumbered proceeds from the sale of real property. 2. Fund 035 is comprised of Police Levy fund and Fire Levy fund. 3. Fund 115 was reactivated due to Development Agreements established in 2014. 4. Fund 361 was established July 15, 2014 by Council Resolution No. 1411 to fund improvements at the Overlake Transit Center (OTC). 5. Fund 362 was established July 21, 2016 by Council Resolution No.1453 to fund multimodal improvements, intersection improvements and the NE 40th Street Trunkline project. 32 ---PAGE BREAK--- ALL FUNDS SUMMARY 2015-2016 Actual 2017-2018 Budget 2017-2018 Estimates 2019-2020 Budget Change Percent Change REVENUE Property Tax $47,531,013 $51,091,497 $51,432,527 $54,757,799 $3,325,272 6.5% Sales Tax 53,363,718 53,582,235 51,224,801 61,603,136 10,378,335 20.3% Utility Taxes 21,059,175 22,717,294 21,813,181 23,782,952 1,969,771 9.0% Other Taxes 26,601,152 23,113,863 24,465,637 22,354,388 (2,111,249) -8.6% Total Taxes 148,555,057 150,504,889 148,936,145 162,498,275 13,562,130 9.1% Licenses & Permits 22,645,102 27,319,340 27,845,281 40,888,993 13,043,712 46.8% Intergovernmental 19,477,515 25,942,770 24,448,832 33,095,626 8,646,794 35.4% Charges for Services 216,564,181 213,181,772 221,312,317 234,091,965 12,779,648 5.8% Fines & Forfeits 1,274,055 1,188,000 1,105,462 1,417,019 311,557 28.2% Interest 2,605,854 2,371,782 4,822,255 4,306,263 (515,993) -10.7% Other Revenue 13,627,519 41,876,443 19,760,600 14,815,331 (4,945,269) -25.0% Non-Revenue 116,596,213 108,554,354 105,653,103 82,262,160 (23,390,943) -22.1% TOTAL REVENUE $541,345,497 $570,939,350 $553,883,995 $573,375,631 $19,491,636 3.5% EXPENDITURES Salaries & Wages $113,214,518 $124,608,243 $120,607,456 $138,720,920 $18,113,464 15.0% Overtime 6,765,845 5,090,033 6,888,229 5,509,924 (1,378,306) -20.0% Supplemental Help 2,716,150 3,754,170 3,136,822 3,527,054 390,232 12.4% Other Compensation 603,232 404,471 516,562 408,110 (108,452) -21.0% Personnel Benefits 66,424,991 73,991,004 72,664,849 79,035,876 6,371,027 8.8% Supplies 8,034,732 24,696,192 9,941,230 9,902,362 (38,868) -0.4% Professional Services 29,941,005 18,075,198 33,141,987 25,174,331 (7,967,656) -24.0% Communication 1,306,454 1,394,982 1,287,032 1,742,655 455,623 35.4% Training 918,571 1,477,451 947,724 1,633,986 686,262 72.4% Advertising 242,334 395,144 307,025 406,983 99,958 32.6% Rentals 341,590 1,337,406 500,157 1,500,233 1,000,076 200.0% Insurance 1,889,986 1,952,610 2,070,717 2,149,959 79,242 3.8% Utilities 7,222,274 7,738,090 7,049,378 7,448,156 398,778 5.7% Repairs & Maintenance 9,149,939 23,538,121 16,461,748 35,530,265 19,068,517 115.8% Other Services & Charges 26,954,784 30,662,050 25,987,853 32,146,545 6,158,692 23.7% Intergovernmental 39,607,119 41,107,732 40,935,097 44,450,007 3,514,910 8.6% Capital 56,203,973 152,864,402 75,699,516 134,059,610 58,360,094 77.1% Interfund Payments 25,370,126 26,991,532 27,184,467 29,887,506 2,703,038 9.9% Debt Service 41,780,938 17,767,795 22,586,569 17,340,552 (5,246,017) -23.2% Transfers Out 83,209,964 108,078,346 102,929,610 81,880,951 (21,048,659) -20.4% TOTAL EXPENDITURES $521,898,526 $665,924,972 $570,844,030 $652,455,985 $81,611,955 14.3% NET CHANGES $19,446,971 ($94,985,622) ($16,960,035) ($79,080,354) ($62,120,318) 366.3% FUND BALANCE JANUARY 1 $181,150,259 $233,833,063 $241,256,610 $224,296,575 ($16,960,034) -7.0% FUND BALANCE DECEMBER 31 $200,597,230 $138,847,441 $224,296,574 $145,216,222 ($79,080,353) -35.3% Fund Notes: Descriptions of all budgeted funds can be found in the following pages. 33 ---PAGE BREAK--- Budget to 2015-2016 2017-2018 2019-2020 Budget Budget Budget Budget Difference1 GENERAL FUND AND SUB-FUNDS Executive/Legal4,5 18.75 21.25 20.25 (1.00) Finance & Information Services5 30.00 0.00 0.00 0.00 Finance5 0.00 29.00 29.00 0.00 Fire 132.50 135.00 135.00 0.00 Human Resources2,4 11.54 12.00 14.00 2.00 Parks & Recreation4,5,7 37.85 49.86 53.84 3.98 Planning & Community Development3,5 72.89 73.33 73.33 0.00 Police1 129.41 129.42 129.92 0.50 Public Works5,6 61.40 50.00 50.45 0.45 Technology & Information Services5 0.00 4.00 4.00 0.00 Arts Activity 1.00 1.00 1.00 0.00 Community Events7 1.00 1.00 2.00 1.00 Parks Maintenance & Operations1,3,7 10.01 11.01 11.01 0.00 GENERAL FUND AND SUB-FUNDS TOTAL 506.35 516.87 523.80 6.93 OTHER FUNDS Recreation Activity4,7 11.16 10.16 7.50 (2.66) Development Agreements8 6.00 37.50 37.50 0.00 Operating Grants 5.00 6.00 6.00 0.00 Advanced Life Support 31.00 31.00 31.00 0.00 Solid Waste & Recycling6 3.63 3.80 3.95 0.15 38.82 41.20 41.40 0.20 Stormwater Management 26.93 27.24 27.24 0.00 Fleet Maintenance6 7.08 7.33 7.53 0.20 Worker's Compensation Insurance 0.00 0.00 0.00 0.00 Information Technology5 27.00 25.00 26.00 1.00 OTHER FUND TOTAL 156.62 189.23 188.12 (1.11) TOTAL ALL FUNDS1,2 662.97 706.10 711.92 5.82 SUPPLEMENTAL FTEs9 54.93 47.50 45.08 (2.42) STAFFING AUTHORIZATIONS FULL-TIME EQUIVALENTS (FTEs) CITY OF REDMOND Water & Wastewater6 34 ---PAGE BREAK--- Notes: 1. 2. 3. 4. 5. 6. 7. 8. 9. - Real Property moved from the Public Works Department to the Finance Department. - 1.32 FTE Maintenance Technicians in the Parks and Recreation Department; and - The City Clerk's office moved from the TIS Department to the Executive Department; In the 2019-2020 Budget the following positions were added through the repurposing of positions within the department: - 1.0 FTE Senior Engineer in the Planning Department. In the 2019-2020 Buget a 1.0 FTE Safety Manager was added in the Human Resources Department through the repurposing of a Deputy City Administrator in the Executive Department. (The FTE reduction in Executive is offset by the move of a Graphic Designer from Parks to Executive in the 2019-2020 Budget) In the 2019-2020 Budget a 1.0 FTE Business Analyst was added in the Human Resources Department. - Transportation Demand Management and Economic Development divisions moved from Executive to Planning; - Facilities Maintenance moved from the Public Works Department to the Parks and Recreation Department; and Several positions were reallocated within the Public Works Department to reflect division needs. - The Customer Service division moved from the Executive Department to the Parks department; - A 1.0 Technology and Information Services Director was added; Includes one time funding for staffing to support public records requests and ongoing supplemental funding to support videography of Council meetings and the maintenance of new capital projects. Several positions were reallocated within the Parks and Recreation Department to reflect division needs. During 2017 and 2018 the following organizational changes were made: - 1.0 FTE Program Coordinator in the Parks and Recreation Department; - 1.0 FTE Facilities Assistant Maintenance & Operations Manager in the Parks and Recreation Department; and In 2018, Council approved additional staff in relation to Private Development Agreements. In the 2019-2020 Budget, 3.82 full time equivalent (FTE) employees were added that were offset by converting funding for supplemental staffing; this includes: - 0.50 FTE Support Services Position in the Police Department. - The Technology and Information Services (TIS) Department was separated from the Finance Department; - 1.0 FTE Program Assistant in the Parks and Recreation Department; 35 ---PAGE BREAK---