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BUDGET AT A GLANCE BUDGET OVERVIEW CITYWIDE BUDGET SUMMARY ALL FUNDS SUMMARY CITYWIDE FTE SUMMARY ---PAGE BREAK--- BUDGET OVERVIEW 2015-2016 ADOPTED BUDGET CITY OF REDMOND The Budget Overview serves as a review of the recommended 2015-2016 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 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 ranges between 5% and This is typical for local governments. The Price of Government City of Redmond, Washington 2015-2016 Budget Actual data 8.00% 7.00% 6.00% All Revenues Taxes & Fees Taxes Only Property Taxes Sales Taxes Other Taxes Previous Estimates 5.00% 4.00% 3.00% 2.00% 1.00% 0.00% 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Notes: Compares ratio of total city revenues to total personal income Data for "taxes only", "taxes & fees", and "all revenues" are cumulative ‐ individual tax types data is not cumulative Estimates 9 ---PAGE BREAK--- Keeping the Price of Government in mind, 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 fewer resources are available to maintain current levels of service. Targeting a price of government between 5% – 5.5% is consistent with the City’s long range financial strategy and will allow Redmond to make needed investments in the Community. LONG RANGE FINANCIAL STRATEGY Redmond’s General Fund Six-Year Financial Forecast identifies revenue and expenditure trends 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 2015-2016 forecast has showed modest growth in some revenues such as property, sales and development revenue, whereas utility taxes continue to decline. Although the revenue outlook is better, the City remains cautionary due to potential decreases in state-shared revenues and uncertain impacts on the expenditure side such as retirement costs. The chart below now illustrates an updated long-range finance forecast that shows modest gaps in future budgets. City of Redmond 2015-2016 General Fund Budget Estimated Gap Based on Budgeted Revenues and Expenditures These revenue and expenditure trends take into account 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. -$20 $0 $20 $40 $60 $80 $100 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Beginning Balance Revenues Expense Difference Ending Balance Millions $2.6M $2.5M $2.8M $3.0M 10 ---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 This section includes a discussion of major revenues utilized by the City and information on major factors affecting the revenue sources. Total revenues over the biennium equal $618 million, including beginning fund balances and transfers; this is an approximate 6% increase over the 2013-2014 biennium. The budget is artificially inflated due to a series of transfers between the capital maintenance and construction funds, between capital construction funds for various projects and between the General Fund and the capital funds. In addition, the budget includes a 1% property tax increase, (allowed by law) a new 3% cable utility tax, an increase to the business tax to “catch-up” on inflationary impacts since 2007 and water/wastewater utility rate increases as described in the following pages. The components of the City’s 2015-2016 revenue sources are shown in the graph below. 2015-2016 Revenues by Type All Funds ($618 million) Beginning Funds 23% Licenses & Permits 3% Interfunds 19% Property Tax 8% Sales/Use Tax 8% Utility Tax 3% Other Taxes 3% Miscellaneous 1% Charges for Services 22% Other Governments 8% Other Revenue 2% Taxes 22% 11 ---PAGE BREAK--- In the 2015-2016 Budget, the General Fund has grown to take into account the increase in service demand in development review, right-sizing of line items as in the case of public safety overtime and gains in efficiencies due to implementation of technology projects. In other funds, specifically capital, the budget has increased due to one-time money being committed to the City’s vision of the two urban centers and Redmond neighborhoods. In addition, the budget maintains 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.) 2015-2016 Expenditures by Type All Funds ($618 million) As in most service organizations, salary and benefits make up a majority of budgeted costs. The number of full-time equivalent (FTE) employees are expected to increase by 17.98, a combination of converting 5.50 limited duration employees to regular employees who have been providing service to the community for some time, 4.11 employees funded by grants, 0.37 FTE added to part-time employees to make them full-time, five additions to the workforce, primarily focusing on maintenance, 3.00 additional firefighters (via a Technical Amendment) due to the reinstatement of a Fire Station #13 engine at the request of Fire District #34. Offsetting the FTE increase is a reduction of 1.0 FTE due to a planned vacancy in July 2015. The FTE changes by department are shown below. Ending Fund Balance 13% Services and Supplies 4% Miscellaneous 1% Utilities & Maintenance 4% Salaries and Benefits 23% Interfund Payments 7% Intergovernmental 5% Capital 26% Debt Service 7% Transfers Out 10% Department Additions Reduction Total Executive 3.00 3.00 Finance 0.50 0.50 Fire 4.00 4.00 Human Resources 0.04 0.04 Parks 0.33 0.33 Planning 1.00 -1.00 0.00 Police 1.11 1.11 Public Works 8.00 8.00 Total 17.98 -1.00 16.98 2015-2016 FTE Total FTE variance between the 2013-2014 and 2015-2016 Budget is different on Staffing Authorizations as some limited duration FTEs were already present during 2013-2014. 12 ---PAGE BREAK--- Taxes 62% Challenges to balancing the budget were met through a variety of reductions that focused on gaining additional efficiencies in current operations, proposed increases in City revenues and eliminating some new requests. Adjustments to expenditures include: • Eliminating a majority of new programs requested; • Formalizing efficiencies in current operations, charging additional staff time to the capital investment program (CIP) and utilizing capacity in the City’s public safety and parks levy funds; • Increasing maintenance to preserve Redmond’s capital investments to address infrastructure concerns that were expressed in the City’s community survey; and • Assessing the use of fund balances and other one-time funds to continue making investments in technology, to maintain reserves and contingencies and planning for Redmond’s future. Each offer outlines proposed scalability and the recommended changes that appear in the budget. General Fund Revenues General Fund revenues are forecasted to grow modestly from $149.2 million anticipated in 2013-2014 Budget to an estimated $158.1 million in 2015-2016, a change of 6% excluding beginning fund balance. Current projections forecast the 2015-2016 beginning fund balance to be approximately $9.45 million which includes the Economic Contingency set by policy at 4% or $2.7 million. This is in addition to the General Fund Operating Reserves set by policy at 8.5% or $6 million. 2015-2016 General Fund Revenue by Type The General Fund supports basic operations of the City (Police, Fire, Public Works, Parks & Recreation, Planning, Human Resources, Finance & Information Services and Administration) ($167.6 million) Beginning Funds 6% Property Tax 21% Other Taxes 1% Sales/Use Tax 29% Utility Tax 11% Development Fees 18% Other Revenue 1% Other Governments 13% 13 ---PAGE BREAK--- Distribution of Sales Tax Distribution of Property Tax State of Washington 23% Port 2% Library 5% School District 33% King County 14% Emergency Medical Services 3% Hospital 5% City of Redmond 15% Sales Tax Sales tax represents 29% or $48.2 million of the City’s General Fund, making it the Fund’s largest revenue source. The overall sales tax rate for Redmond totals 9.5% of which .85% is distributed to the City for general government purposes and 0.01% for criminal justice programs. The majority of the sales tax collected in Redmond is distributed to other jurisdictions. Sales tax is projected to grow by 6% annually in 2015 and 2016 compared to forecasted estimates in the 2013-2014 biennium. Sales Tax Actual Estimate Forecast 2009 2010 2011 2012 2013 2014 2015 2016 (thousands) 17,896 17,681 23,484 19,271 21,042 22,026 23,392 24,839 % Change -6.1% -1.2% 32.8% -17.9% 9.0% 4.6% 6.2% 6.0% Note: The City received a sales tax refund in 2011 which affects the trend illustrated in the table above. Property Tax Redmond currently receives approximately $1.49 per $1,000 of assessed valuation from property owners located within the City limits. This equates to $35.8 million over the 2015-2016 biennium and assumes a Council approved 1% increase. 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 uncollected taxes from previous years. Historical Redmond Property Tax Collections Property Tax Actual Estimate Forecast 2009 2010 2011 2012 2013 2014 2015 2016 (thousands) 13,343 14,758 15,726 16,026 15,904 16,811 17,525 18,246 % Change 6.4% 10.6% 6.6% 1.9% -0.7% 5.7% 4.2% 4.1% Note: The significant increase in 2010 is due to the addition of almost $1 billion in assessed value from new construction. The increase on existing properties is 1% consistent with state law. Redmond’s levy is only one component of the total property tax rate that a property owner will pay in King County. The total property tax rate includes additional levies that are earmarked for the state, schools, emergency medical services (EMS), hospitals, local libraries, King County and the port. Distribution of Sales Tax State 68% Veteran's Levy 1% Criminal Justice 1% Transit 15% City 9% State Admin 2% Regional Transit Authority 4% 14 ---PAGE BREAK--- 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. A tax is also permitted on solid waste, water, wastewater and stormwater utilities. In 2015, the City imposed a new 3% utility tax on cable television services within the City. Illustrated below are the utility taxes Redmond levies and the amount expected to be collected in 2015 and 2016. Utility Taxes (thousands) Franchise Fees / Utility Taxes Actual Estimate Forecast 2009 2010 2011 2012 2013 2014 2015 2016 Admissions Tax 406 481 438 480 504 529 556 584 Cellular 2,270 2,122 1,964 1,930 1,646 1,597 1,549 1,502 Electric Tax 5,958 6,019 6,174 6,141 4,795 4,939 5,087 5,240 Gambling Tax 18 54 34 30 39 29 30 31 Garbage 498 478 476 527 556 564 571 588 Natural Gas Tax 1,460 1,151 1,344 1,224 954 972 991 1,010 Telephone 1,176 1,082 987 1,017 866 840 815 790 Cable Tax 0 0 0 0 0 0 466 466 Other Taxes1 15 21 940 1,000 947 22 22 22 Totals 11,801 11,408 12,357 12,349 10,307 9,492 10,087 10,233 1. Other taxes above include a utility tax on water sales. This was imposed in 2011 with a corresponding decrease in the water rates to provide for fire protection related costs, resulting in a shift of how these costs are funded (by a utility tax rather than utility rates) with no net change to the consumer/taxpayer. This practice was suspended in 2014 after a judicial ruling. Development Revenue A development user fee study approved in 2011 enacted a revised fee structure targeting full cost recovery for all development related fees. The forecasted revenue for this biennium assumes a continuation of this policy as well as factors in the development surge currently being experienced by the City. Development Revenues (thousands) Development Related Fees Actual Estimate Forecast 2009 2010 2011 2012 2013 2014 2015 2016 Residential Permits 419 654 516 529 791 933 1,070 1,113 Commercial Permits 255 170 402 422 631 701 729 758 Plumbing/Electric1 1,613 1,895 2,044 2,727 3,095 3,426 3,637 3,748 Plan Review2 631 458 636 718 1,070 988 1,028 1,069 Plan Checks 491 263 390 430 296 387 403 419 Totals 3,409 3,440 3,988 4,826 5,883 6,435 6,867 7,107 1. Includes heating/plumbing, building, electrical permits. 2. Includes building inspection/plan reviews. 15 ---PAGE BREAK--- Development revenues in the 2015-2016 Budget are projected to grow 7% compared to 2014 estimates and another 3% in 2016. According to the most current forecast, development will continue to grow steadily through the next three years, then moderate during the latter half of the forecast. Other General Fund Revenues Other revenues collected by the City include intergovernmental revenue from other jurisdictions, such as the state or county, business license fees, interest earnings, and overhead charges to the City’s utilities. Redmond expects moderate growth in these revenue sources through the next biennium. Other General Revenues (thousands) Other Revenues Actual Estimate Forecast 2009 2010 2011 2012 2013 2014 2015 2016 Licenses/Permits 4,268 3,810 3,747 3,640 3,912 3,958 4,617 4,702 Intergovernmental 7,637 6,942 8,353 8,197 8,380 8,093 8,976 9,107 Fines/Forfeits 1,051 1,036 841 716 440 453 453 453 State Entitlements 2,100 1,886 1,621 1,589 1,386 1,544 1,556 1,567 Miscellaneous 1 4,225 6,270 4,486 3,822 3,527 3,538 4,202 4,232 Totals 19,281 19,944 19,048 17,964 17,645 17,586 19,804 20,061 1. Includes indirect costs, interest earnings, grants and rentals; 2013 includes temporary retirement savings. Broader Economic Context The broader economy continues to exhibit signs of recovery. The Gross Domestic Product (GDP) has been growing slowly and consumer spending continues to strengthen. Retail activity continues a slow but steady improvement, and in 2013 Redmond experienced a welcomed upsurge (from the lows created by the Great Recession) in construction activity that is predicted to continue through the biennium. In Redmond, it appears the rate of economic growth continues at a slow, but steady pace. Similar to past budgets, the 2015-2016 plan is built on a conservative forecast with modest growth in sales tax and licenses and permits (which is consistent with the Council’s financial policies on revenues). The budget does include an increase to the business license fee of $7.90. The business license fee that supports general operations has not been raised since 2007 and the addition takes into account inflationary increases since that time. Based on past trends, utility taxes are showing no growth in the taxes attributable to telephone services, but a modest uptick in other utilities and inclusion of a new utility tax on cable television services. Development revenue is expected to continue to show signs of a surge and then grow moderately during the latter half of the forecast. The changes in budgeted expenditures are outlined below. General Fund Expenditures The $167.6 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 proposed biennial budget supports 654.47 full-time equivalent employees (FTEs) including a net increase of 16.98 FTE from the adjusted 2013-2014 Budget. Transfers to other funds constitute another significant portion of General Fund costs. Transfers are made to support the City’s CIP, Information Technology, Human Services, Arts, and Special Event Activity Funds, as well as maintenance of City Hall. 16 ---PAGE BREAK--- The City is expected to end the 2013-2014 biennium with approximately $9.45 million in one-time revenue (this is compared to the $9.98 million carried into the 2013-2014 Budget). This money is proposed to go towards one-time uses including funding the economic contingency, other salary and benefit contingencies as well as, investments in technology. The budget proposes a new innovations fund of $200,000 intended to provide resources to be leveraged for improved customer service or cost containment initiatives, a program that proved to be very successful in the 2013-2014 biennium. The budget also supports the historical transfers to the City’s Capital Investment Program as provided for in the Financial Policies. Salaries and Benefits Overall, in a budget to budget comparison, salary and benefit costs are projected to increase by 3.4% 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 2015-2016 bienium are market adjustments, State retirement costs and an increase in Firefighter FTEs via a Technical Amendment due to the reinstatement of an engine at Fire Station #13 at the request of Fire District #34. Medical rates are not budgeted to increase annually 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, as well as an analysis of reserves in the Medical Self-Insurance Fund will help us to determine the actual medical rates which are expected to be consistent with the budget estimates. Transfers Out Transfers from the General Fund total 10% of the General Fund budget or $15.6 million. These transfers include Human Services, Arts and Community Events, City Hall maintenance and contributions to the Capital Investment Program (CIP). CIP contributions have decreased by approximately 35% or $3.8 million from the 2013-2014 Budget mostly due to the elimination of one- time funds used to support significant CIP projects, such as converting the one-way Downtown streets to two-way, Downtown Park design and the 116th Street roundabout in the 2013-2014 biennium. Salaries & Benefits 66% Utilities & Maintenance 6% Miscellaneous 2% Services & Supplies 5% Intergovernmental 3% Transfers Out 10% Interfund Payments 8% General Fund Expenditures by Type ($167.6 million excluding fund balance) 17 ---PAGE BREAK--- Services & Supplies The services and supply category includes expenditures, such as operating supplies, professional services, legal, travel, training and postage. Services and supplies have increased for 2015-2016 due primarily to professional services required for critical consultant expertise to supplement staff work on LEAN efficiency training, emergency response planning and subarea plans for Overlake Village and Southeast Redmond. Services and Supplies (thousands) Services and Supplies Actual Estimate Forecast 2009 2010 2011 2012 2013 2014 2015 2016 Supplies 1,506 1,796 1,104 1,653 1,529 1,605 1,810 1,798 Legal 305 503 368 367 585 473 428 438 Professional Services 1,431 1,901 1,398 1,217 1,228 1,500 1,986 1,577 Communication 357 401 319 328 500 296 414 427 Rentals 88 99 70 131 68 68 69 70 Totals 3,687 4,700 3,259 3,696 3,910 3,942 4,707 4,310 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 The majority of the increase is due to fleet fuel transfers, insurance support, and both one-time and ongoing transfers to Information Services to support continuation of technology efforts. 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 $0 $1,000,000 $2,000,000 $3,000,000 $4,000,000 $5,000,000 $6,000,000 $7,000,000 $8,000,000 $9,000,000 Info Services/GIS Insurance Fleet 18 ---PAGE BREAK--- Intergovernmental Intergovernmental expenses represent payments to other governments for services, such as fire dispatch, jail and court services. Redmond currently contracts with NORCOM for fire dispatch services and with the City of Issaquah, Snohomish County and the South Correction Entity (SCORE) for jail services. For 2015-2016, fire dispatch costs in the General Fund have increased due to increases in call volume and operational costs of NORCOM. Intergovernmental Expenditures (thousands) Inter- governmental Actual Estimate Forecast 2009 2010 2011 2012 2013 2014 2015 2016 Jail 978 893 708 662 657 660 698 698 Fire Dispatch 485 329 480 369 459 472 558 588 Court/Other1 1,253 1,200 1,053 970 879 1,149 1,136 1,151 Totals 2,716 2,422 2,241 2,001 1,995 2,281 2,392 2,437 1. Other includes elections and auditor services. 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 including fire stations. 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. Included in the 2015- 2016 forecast is an additional stormwater charge ($239,109) toward the City’s impervious surface obligation. Projected Utility Rate Increases Projected Utilities 2015 2016 Telephone 2.40% 2.40% Cable 3.00% 3.00% Electricity 2.90% 2.90% Natural Gas 2.90% 2.90% Garbage 0.80% 0.80% Stormwater 0.00% 0.00% Water 3.00% 3.00% Wastewater 2.00% 2.00% 19 ---PAGE BREAK--- Utilities/Repairs and Maintenance (thousands) Utilities/R&M Actual Estimate Forecast 2009 2010 2011 2012 2013 2014 2015 2016 Utilities 2,482 2,519 2,484 3,573 3,649 2,643 3,189 3,344 Repairs & Maintenance 1,288 1,412 1,323 1,104 1,010 977 1,330 1,330 Totals 3,770 3,931 3,807 4,677 4,659 3,620 4,519 4,674 Miscellaneous The last category of expenditures, miscellaneous, includes the economic contingency, capital purchases, tuition, advertising and other expenditures. GENERAL FUND SUB-FUNDS AND SPECIAL REVENUE FUNDS Special revenue funds account for revenues and expenditures that are restricted for a particular use. With the change required for GASB 54, funds that were previously categorized as special revenue funds, became sub-funds of the General Fund. 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 in capital construction. Special revenue funds in the 2015-2016 Budget total $42 million (including transfers and ending fund balances) and are illustrated below. In comparison, the sub-funds of the General Fund total $70 million and include the capital maintenance funds for each of the CIP areas, the public safety levies passed by voters in 2013, as well as funds used to replace fire and general city equipment. Following is a discussion of the 2015-2016 projected revenues for some of the larger funds in these two categories. Advanced Life Support (ALS) In 2004, Redmond became a lead agency for the Northeast ALS consortium made up of Redmond, Kirkland, Woodinville, Duvall, Fall City and unincorporated areas surrounding those communities. An Special Revenue Funds General Fund Sub-Funds Recreation Activity 14% Tourism 3% ALS 33% Development Review 3% Public Safety Donations 1% Solid Waste 5% Real Estate Excise 31% Cable Access 2% TDM Services 8% Arts 1% Parks Maintenance 7% Equipment Replacement 16% Operating Reserves 10% Human Services 3% Real Property 0% Business Tax 14% Community Events 2% Public Safety Levies 22% Parks Capital Maintenance 2% Transportation Capital Maintenance 10% General Gov't Capital Maintenance 13% 20 ---PAGE BREAK--- emergency medical services property tax is paid by all property owners in King County and the taxes collected 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 2007 and equal $13.7 million for the 2015-2016 biennium. Fire, Police, & Parks Levy Funds In 2007, Redmond voters passed special property tax levies to support Fire, Police 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 Levy Funds (thousands) Special Levies Actual Estimate Forecast 2009 2010 2011 2012 2013 2014 2015 2016 Fire Levy 2,284 1,982 2,047 2,206 2,643 2,750 3,034 2,997 Police Levy 2,195 1,422 1,601 1,564 2,117 2,528 2,531 2,669 Parks Levy 320 251 297 282 245 272 332 343 Totals 4,799 3,655 3,945 4,052 5,005 5,550 5,897 6,009 Note: Excludes fund balances. Reserve Funds The City maintains accounts dedicated to supporting the City’s reserves. According to fiscal policies, the City will maintain General Fund reserves to mitigate a significant crisis, a Law Enforcement Officers and Firefighters (LEOFF I) reserve to pay medical costs for retirees under the LEOFF I 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 Citywide vehicles. Operating Reserve Fund Balances (thousands) Reserves Actual Estimate Forecast 2009 2010 2011 2012 2013 2014 2015 2016 General Fund Reserve 5,378 194 5,852 196 6,035 0 6,070 25 Building Permit Reserve1 1,110 0 310 0 0 0 0 0 LEOFF I Reserve 388 0 388 40 454 0 613 40 Capital Equipment Reserve 3,708 0 3,096 0 3,056 0 2,895 0 Fire Equipment Reserve 2,743 0 3,045 0 3,984 0 4,615 0 Totals 13,327 194 12,691 236 13,529 0 14,193 65 1. In 2013-2014, the Building Permit reserve was combined with the General Fund Reserve. 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. 21 ---PAGE BREAK--- 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 purchase of the City Hall building, Bear Creek Parkway and Downtown Park projects. These debt obligations total $10.8 million over the biennium, including principal and interest. CAPITAL INVESTMENT PROGRAM In the 2015-2016 Budget, Redmond has worked hard to strengthen the alignment between the CIP functional areas 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 priority areas. While there are infrastructure and capital needs beyond the urban centers, capital projects still should be 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. In 2011, the Council adopted an eighteen year capital investment strategy or Vision Blueprint that outlined the investment needed in the long-term to realize the City’s vision. The goals of the Vision Blueprint are to: • Implement the Comprehensive Plan vision for Downtown, Overlake and established neighborhoods; • Identify key strategic actions needed to carry out the vision; • Summarize planned capital facility improvements sequencing and costs for the next 18 year period; • Guide future decisions about priority infrastructure projects and programs in each of the CIP areas; • Address deficiencies such as level of service requirements; • Address maintenance, repair and upgrades as needed; • Address funding strategies; and • Address monitoring and reporting on progress. Capital Investment Program projects range from street extensions and conversions to Downtown Park design, as well as utility and building infrastructure improvements and maintaining capital investments. 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 $92.9 million of 2015-2016 general CIP revenues. Other CIP revenues include developer contributions and interest earnings. 22 ---PAGE BREAK--- Total 2015-2020 General CIP Revenues 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 projects. REET collections have grown steadily since the significant decline in 2009. Estimates in the 2015-2016 Budget project this revenue will maintain its historical base of $4 million per year. Business Tax (BTTI) In 2014, a $57.00 fee was assessed per employee to businesses operating in Redmond to support transportation and transportation demand management projects. Included in this budget is a $7.00 increase to this revenue, bringing the total fee to $64.00 per full-time equivalent employee. Growth in business tax revenue will mitigate some of the losses from decreasing impact fees. The long term growth in the revenue is projected to be approximately 1.2%, commensurate with projected employment growth in the City. 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, $1.2 million annually of sales tax on construction goes to support the lease 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 projects that mitigate the impacts of growth in the community. In 2014, the City decreased transportation impact fees for development activity. Business Tax 12% General Fund Transfer 9% REET 10% Miscellaneous 8% Impact Fees 11% Beginning Funds 36% Interest 1% Interfunds 0.2% Other Governments 13% 23 ---PAGE BREAK--- Major Capital Project Revenues (thousands) CIP Revenues Actual Estimate Forecast 2009 2010 2011 2012 2013 2014 2015 2016 REET 2,170 2,656 2,816 3,669 5,729 4,000 4,120 4,244 Business Tax 4,462 4,018 3,993 4,188 4,195 4,245 4,812 4,871 General Fund Transfer 7,250 4,704 4,540 3,381 4,821 4,952 4,987 5,157 Impact Fees 971 1,966 2,331 4,831 4,632 4,771 4,391 4,535 Totals 14,853 13,344 13,680 16,069 19,377 17,968 18,310 18,807 Note: General Fund Transfer includes 5% of General Fund revenues, sales tax on construction, pavement management. A significant portion of the biennial CIP has been dedicated to projects in the two urban centers, such as development of the Downtown Park, the Redmond Way/Cleveland Street conversion from one-way streets to two-way, development of the Redmond Central Connector, the Public Safety Rehabilitation and the Overlake Village Pedestrian Bridge. Expenditures by functional allocation are shown below. CIP Expenditures by Functional Area (excludes ending fund balances) ENTERPRISE FUNDS Water, Wastewater, and Stormwater Revenue Water, wastewater and stormwater fees fund most of the costs associated with providing these services in our community. (Other sources include hookup fees and interest earnings.) Total Water/Wastewater and Stormwater revenues (including the Novelty Hill Service Area and excluding revenue bond proceeds) are expected to increase from a budgeted $103.7 million to $105.9 million, a 2.1% increase. Proposed 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 and King County Wastewater Treatment charges. City policy calls for a rate update to be performed in conjunction with the adoption of each biennial budget which occurred in July 2014. The table on the next page reflects the proposed rates recommended in the 2015-2016 Budget. Transportation 50% Parks 20% General Government 30% 24 ---PAGE BREAK--- $0.0 $20.0 $40.0 $60.0 $80.0 Water/Wastewater Ops Novelty Hill Ops Water CIP Wastewater CIP Stormwater Ops Stormwater CIP Novelty Hill Water CIP Novelty Hill Wastewater CIP Millions Proposed Water/Wastewater Rate Increases Enterprise Fund Revenues (thousands) Utility Revenue Actual Estimate Forecast 2009 2010 2011 2012 2013 2014 2015 2016 Water/Wastewater1 31,566 23,237 30,639 32,788 34,782 32,535 34,258 35,120 Stormwater 10,865 11,367 12,264 11,234 12,819 11,783 11,886 11,900 Novelty Hill 6,089 5,500 7,318 7,358 7,792 6,150 6,249 6,439 Totals 48,520 40,104 50,221 51,380 55,393 50,468 52,393 53,459 Note: Excludes fund balances. Water, Wastewater and Stormwater Expenditures Money spent to support utility operations and construction is separated into eight utility funds Water/Wastewater Operations, Water Construction, Wastewater Construction, Stormwater Operations, Stormwater Construction, and Novelty Hill Service Area (UPD) Operations, UPD Water Construction and UPD Wastewater Construction. The total budget for all eight funds equals $192.1 million (including ending fund balance and transfers) with $127.8 million dedicated to operations and $64.2 million earmarked for construction. Included in the utility construction funds are expenditures to support the Downtown and Overlake Urban Center vision, as well as stream rehabilitation and pump station improvements (see CIP section for more detail). 2015 2016 Description Proposed Proposed City of Redmond Water 3.0% 3.0% Wastewater 2.0% 2.0% Novelty Hill Water 3.0% 3.0% Wastewater 3.0% 3.0% Utility Expenditures 25 ---PAGE BREAK--- Prospects for the Future In the City’s long-range forecast, salary and benefits will continue to make up the majority of General Fund costs and will rise approximately 3.5% - 4.5% in future years. Contributions to the state retirement and medical costs are the two main drivers of these expenditures. The City will remain vigilant about seeking innovations and efficiencies and cost containment as structural realities continue to put pressure on Citywide revenues. Past cost containment measures, implementation of innovations, efficiency improvements and new revenues will help Redmond manage expenditure increases into the future. Concentration on the long-range strategic vision and revenue strategy as well as monitoring outcomes on a consistent basis will keep Redmond moving forward toward the vision of a community of connected neighborhoods with two vibrant urban centers. 26 ---PAGE BREAK--- Fund Number Fund 2011-2012 Budget 2013-2014 Budget 2015-2016 Budget Budget to Budget Difference Percent Change 1005 GENERAL FUND $146,889,655 $160,275,294 $167,607,373 $7,332,079 4.6% GENERAL FUND SUB-FUNDS 011 Arts Activity $702,549 $745,282 $802,196 $56,914 7.6% 012 Parks Maintenance & Operations 3,250,340 3,686,158 3,545,247 (140,911) -3.8% 013 Special Events 975,930 792,035 1,094,203 302,168 38.2% 019 Human Services 1,392,729 1,824,326 2,253,923 429,597 23.5% 020 Fire Equipment Reserves 4,043,057 5,172,145 5,831,301 659,156 12.7% 021 Operating Reserves 7,586,283 7,932,785 7,203,423 (729,362) -9.2% 027 Capital Equipment Reserve 5,245,842 5,106,496 4,914,199 (192,297) -3.8% 030 Business Tax 9,067,266 8,391,806 9,799,160 1,407,354 16.8% 0311 Real Property 0 50,000 44,650 (5,350) -10.7% 035 Fire Levy 6,758,079 7,318,611 6,791,299 (527,312) -7.2% 036 Police Levy 7,348,043 8,834,780 8,820,902 (13,878) -0.2% 037 Parks Levy 940,264 1,131,214 1,288,679 157,465 13.9% 095 Parks Maintenance Projects 982,208 2,218,492 1,444,429 (774,063) -34.9% 096 Transportation Maintenance Projects 7,330,497 7,517,326 6,908,375 (608,951) -8.1% 099 General Government Maintenance Projects 4,674,499 12,697,821 9,283,498 (3,414,323) -26.9% Subtotal - General Fund Sub-funds $60,297,586 $73,419,277 $70,025,484 ($3,393,793) -4.6% GRAND TOTAL GENERAL FUND $207,187,241 $233,694,571 $237,632,857 $3,938,286 1.7% SPECIAL REVENUE FUNDS 110 Recreation Activity $4,613,406 $5,752,172 $5,951,267 $199,095 3.5% 1152 Development Review 0 1,350,427 1,404,952 54,525 4.0% 117 Cable Access 1,828,978 1,519,771 949,974 (569,797) -37.5% 118 Transportation Demand Management 3,925,576 3,659,030 3,491,177 (167,853) -4.6% 122 Advanced Life Support (ALS) 12,133,394 13,029,565 13,667,621 638,056 4.9% 124 Aid Car Donation 412,907 444,461 493,802 49,341 11.1% 125 Real Estate Excise Tax (REET) 4,656,000 7,897,632 12,868,532 4,970,900 62.9% 126 Drug Enforcement 90,970 48,139 41,965 (6,174) -12.8% 131 Hotel/Motel Tax 762,998 982,728 1,269,890 287,162 29.2% 140 Solid Waste/Recycling 1,406,827 1,786,540 1,976,183 189,643 10.6% Subtotal - Special Revenue Funds $29,831,056 $36,470,465 $42,115,363 $5,644,898 15.5% DEBT SERVICE FUNDS 2303 Excess Levy $808,153 $287,865 $0 ($287,865) -100.0% 233 Bear Creek Parkway/Downtown Park 15,683,347 45,774,565 10,778,507 (34,996,058) -76.5% Subtotal - Debt Service Funds $16,491,500 $46,062,430 $10,778,507 ($35,283,923) -76.6% CAPITAL INVESTMENT PROGRAM (CIP) FUNDS 3144 Council CIP $1,818,408 $280,247 $0 ($280,247) -100.0% 315 Parks CIP 23,281,838 10,608,600 13,349,568 2,740,968 25.8% 316 Transportation CIP 36,660,784 48,533,836 45,236,960 (3,296,876) -6.8% 3174 Fire CIP 8,249,686 2,300,000 0 (2,300,000) -100.0% 3184 Police CIP 873,355 150,958 0 (150,958) -100.0% 3194 General Government CIP 13,497,811 6,249,773 16,663,088 10,413,315 166.6% Subtotal - CIP Funds $84,381,882 $68,123,414 $75,249,616 $7,126,202 10.5% CITY OF REDMOND CITYWIDE BUDGET SUMMARY 2015-2016 ADOPTED BUDGET 27 ---PAGE BREAK--- Fund Number Fund 2011-2012 Budget 2013-2014 Budget 2015-2016 Budget Budget to Budget Difference Percent Change ENTERPRISE FUNDS (UTILITIES) 401 Water/Wastewater M&O $68,855,981 $76,586,031 $81,443,825 $4,857,794 6.3% 402 Novelty Hill M&O 13,711,666 13,703,058 16,438,299 2,735,241 20.0% 403 Water CIP 10,474,814 9,777,610 14,441,057 4,663,447 47.7% 404 Wastewater CIP 4,448,677 11,048,141 9,861,952 (1,186,189) -10.7% 405 Stormwater M&O 28,016,473 55,364,048 29,941,265 (25,422,783) -45.9% 406 Stormwater CIP 43,627,852 75,966,030 24,138,593 (51,827,437) -68.2% 407 Novelty Hill Water CIP 5,008,045 6,278,677 7,663,298 1,384,621 22.1% 408 Novelty Hill Wastewater CIP 4,997,487 6,691,851 8,136,088 1,444,237 21.6% Subtotal - Enterprise Funds $179,140,995 $255,415,446 $192,064,377 ($63,351,069) -24.8% INTERNAL SERVICE FUNDS 501 Fleet Maintenance $8,859,975 $8,976,360 $10,565,916 $1,589,556 17.7% 510 Insurance Claims & Reserves 2,707,692 2,565,685 2,762,288 196,603 7.7% 511 Medical Self Insurance 22,397,785 30,732,165 32,370,275 1,638,110 5.3% 512 Workers' Compensation 2,454,422 2,257,389 3,211,333 953,944 42.3% 520 Information Technology 10,922,236 9,884,974 11,238,536 1,353,562 13.7% Subtotal - Internal Service Funds $47,342,110 $54,416,573 $60,148,348 $5,731,775 10.5% FINAL BUDGET - ALL FUNDS $564,374,784 $694,182,899 $617,989,068 ($76,193,831) -11.0% Footnotes: 1. Fund 031 was created to manage and direct unencumbered proceeds from the sale of real property. 2. Fund 115 was reactivated due to Development Agreements established in 2014. 4. Funds 314, 317, and 318 were eliminated in 2013-2014 and combined with the 319 Fund. reinstatement of Fire Station #13 engine at the request of Fire District #34. 3. Fund 230 will be inactivated due to the final payment on the Unlimited Tax General Obligation (UTGO) refunding of debt on the Senior Center and Public Safety Building. 5. General Fund was updated to include the addition of 3.0 Firefighter FTEs to the Fire Department via a Technical Amendment, due to 28 ---PAGE BREAK--- ALL FUNDS SUMMARY 2011-2012 Actual 2013-2014 Budget 2013-2014 Estimated 2015-2016 Budget Change Percent Change REVENUE Property Tax $44,343,328 $45,265,938 $44,907,825 $48,259,635 $3,351,810 7.5% Sales Tax 45,010,349 43,679,548 45,472,854 50,745,425 5,272,571 11.6% Utility Taxes 22,399,782 23,771,492 17,729,505 19,074,952 1,345,447 7.6% Other Taxes 15,789,091 16,031,179 26,290,792 20,145,351 (6,145,441) -23.4% Total Taxes 127,542,551 128,748,157 134,400,976 138,225,363 3,824,387 2.8% Licenses & Permits 14,012,042 18,899,709 18,223,284 20,715,936 2,492,652 13.7% Intergovernmental 42,456,456 61,201,403 60,206,986 48,951,227 (11,255,759) -18.7% Charges for Services 110,020,872 114,109,117 118,133,535 123,607,217 5,473,682 4.6% Fines & Forfeits 4,156,057 1,658,746 921,865 952,824 30,959 3.4% Interest 2,252,213 4,187,156 2,919,672 3,823,914 904,242 31.0% Other Revenue 47,985,633 78,164,604 75,254,225 51,146,398 (24,107,827) -32.0% Non-Revenue 84,290,844 139,263,694 143,086,693 87,881,437 (55,205,256) -38.6% TOTAL REVENUE $432,716,669 $546,232,586 $553,147,236 $475,304,316 ($77,842,920) -14.1% EXPENDITURES Salaries & Wages $101,457,298 $107,829,648 $100,718,903 $114,562,454 $13,843,551 13.7% Overtime 2,973,357 3,111,087 4,446,287 3,465,501 (980,786) -22.1% Supplemental Help 2,809,866 3,009,508 3,184,055 3,427,483 243,428 7.6% Other Compensation 147,436 189,264 652,137 409,262 (242,875) -37.2% Personnel Benefits 52,206,311 64,330,002 58,598,649 71,037,395 12,438,746 21.2% Supplies 21,383,021 24,373,953 22,287,446 23,992,153 1,704,707 7.6% Professional Services 24,439,331 12,743,766 9,802,003 14,006,919 4,204,916 42.9% Communication 1,079,166 1,256,339 1,198,827 1,303,590 104,763 8.7% Training 710,409 985,500 794,987 538,528 (256,459) -32.3% Advertising 180,889 317,587 130,301 0 (130,301) -100.0% Rentals 405,685 447,499 372,499 406,615 34,116 9.2% Insurance 1,833,668 1,581,111 1,714,352 1,600,000 (114,352) -6.7% Utilities 5,953,808 6,863,193 7,045,272 7,416,921 371,649 5.3% Repairs & Maintenance 11,313,530 17,152,165 7,777,233 26,771,335 18,994,102 244.2% Other Services & Charges 9,119,701 10,308,985 7,342,398 8,612,917 1,270,519 17.3% Intergovernmental 29,941,233 34,638,795 33,827,796 37,506,211 3,678,415 10.9% Capital 50,396,420 120,531,642 123,468,004 88,596,321 (34,871,683) -28.2% Interfund Payments 19,869,564 21,589,489 21,762,868 28,215,224 6,452,356 29.6% Debt Service 16,229,608 51,327,732 60,362,169 21,263,945 (39,098,224) -64.8% Transfers Out 73,391,516 97,615,267 96,020,437 68,424,506 (27,595,931) -28.7% TOTAL EXPENDITURES $425,841,815 $580,202,532 $561,506,623 $521,557,280 ($39,949,343) -7.1% NET CHANGES 6,874,854 (33,969,946) (8,359,387) (46,252,964) (37,893,577) 453.3% FUND BALANCE JANUARY 1 144,169,285 147,950,313 151,044,139 142,684,752 (8,359,387) -5.5% FUND BALANCE DECEMBER 31 $151,044,139 $113,980,367 $142,684,752 $96,431,788 ($46,252,964) -32.4% FULL-TIME EQUIVALENTS 622.05 622.81 639.49 654.47 14.98 2.3% Fund Notes: Descriptions of all budgeted funds can be found in the following pages. Added 3.0 Firefighter FTEs to the Fire Department via a Technical Amendment, due to reinstatement of Fire Station #13 engine at the request of Fire District #34. Total FTE variance between the 2013-2014 and 2015-2016 Budget is different on Staffing Authorizations as some limited duration FTEs were already present during 2013-2014 Biennium Budget. 29 ---PAGE BREAK--- Budget to 2011-2012 2013-2014 2015-2016 Budget Budget Budget Budget Difference4 GENERAL FUND AND SUB-FUNDS Executive/Legal1 16.25 15.75 17.75 2.00 Finance & Information Services1, 2 31.50 28.50 29.00 0.50 Fire2 127.50 128.50 131.50 3.00 Human Resources2 10.50 10.50 10.54 0.04 Parks & Recreation2 37.56 36.06 35.10 (0.96) Planning & Community Development1, 2, 3 57.41 67.39 66.44 (0.95) Police2 127.10 129.30 130.41 1.11 Public Works2 45.47 45.47 40.87 (4.60) Arts Activity2 0.50 0.50 1.00 0.50 Community Events 1.00 1.00 1.00 0.00 Parks Maintenance & Operations 10.01 10.01 10.01 (0.01) Parks CIP Maintenance 2.00 2.51 2.75 0.24 Transportation CIP Maintenance2 10.55 10.55 20.70 10.15 GENERAL FUND AND SUB-FUNDS TOTAL 477.35 486.04 497.07 11.02 OTHER FUNDS Recreation Activity 10.49 10.61 11.16 0.55 Development Review Fund3 0.00 6.50 5.45 (1.05) Operating Grants Fund1, 2 3.00 3.00 5.00 2.00 Advanced Life Support 32.00 32.00 32.00 0.00 Solid Waste/Recycling 3.63 3.63 3.63 0.00 36.53 37.53 38.83 1.30 Stormwater Management2 27.48 27.60 27.25 (0.35) Fleet Maintenance 6.58 6.58 7.08 0.50 Worker's Compensation Insurance 1.00 1.00 1.00 0.00 Information Technology 24.00 25.00 26.00 1.00 OTHER FUND TOTAL 144.71 153.45 157.40 3.95 TOTAL ALL FUNDS 622.05 639.49 654.47 14.98 SUPPLEMENTAL FTEs 53.62 46.26 54.93 8.67 STAFFING AUTHORIZATIONS FULL-TIME EQUIVALENTS (FTEs) CITY OF REDMOND Water/Wastewater2 30 ---PAGE BREAK--- Notes: 1. 2. The following changes were also made in the 2015-2016 Budget: - 1.0 Human Resources Generalist and 1.0 Parks Maintenance Technician position were made full-time; - Police Department received additional grant funding for a Crime Analyst and Police Officer position; and 3. 4. Total FTE variance between the 2013-2014 and 2015-2016 Budget is different on Staffing Authorizations as some limited duration FTEs were already present during 2013-2014 Biennium Budget. In the 2015-2016 Budget, the Economic Development, Tourism and Transportation Demand Management Divisions will be moving from Planning to Executive Department. - Limited duration positions were converted to regular FTEs, including 3.0 in Executive (with grant funding for Operating Grants FTEs), 1.0 in Finance, 1.0 in Fire, 1.0 in Planning (also appearing in the 2013-2014 Budget) and 3.0 in Public Works (with 1.0 Administrative Specialist also appearing in the 2013-2014 Budget). - 5.0 new FTEs were added in Public Works Department; In June 2014, Council approved the addition of 17.0 limited term FTEs in relation to the Capstone Agreement and general development surge. - Add 3.0 Firefighter FTEs to the Fire Department via a Technical Amendment, due to reinstatement of Fire Station #13 engine at the request of Fire District #34. 31