Budget Process

[Paul Prince]

At this week's City Council, Councilor Saum requested an agenda item to discuss the budget process. His thoughts are included in the city council packet. I agree with the spirit of his efforts, but have some specific thoughts to share.

Several months ago I spent some time writing down thoughts on this topic, intending to bring this into our upcoming Strategic Planning session. Let me share some of that here for Council and citizen visibility. I welcome input and assistance from all council members to make this years budget process dramatically improved over the past years, and particularly last year which was a notably painful experience.
My objectives:
1. Have a well organized process that starts with guidance and goals from Council.
2. Define a timeline to allow for quality data preparation by city staff, and meaningful reviews and input from the public.
3. Understand tradeoffs required to meet the general citizen goal of reducing taxes.

First some ideas on a process and timeline, then ideas on better organization of budget data into manageable "Budget Areas" rather than the extremely long list of departments in past budgets.
Process:
Current: Annual budget is a complete bottoms-up effort by city staff, with no guidance from Council and limited time to complete.

• City Manager preps initial budget with staff participation but without any Council input. Rush to incorporate Tax info and present to council in August for first discussion. This past year the gap between the first staff budget and City Council expectations was huge.

Proposed: EARLY Tops down first pass budget based on previous years budget, goals of council, and rough guidance on growth and goals for tax rate..

1. Post-Mortem on previous year’s budget (February)

1. Dept’s with over +/-10% variance on expenses or revenue (minimum $40K variance), with explanation
2. Major spend items that were added to original plan, deferred or cancelled.
3. Total spend (before transfers) per budget area (more on this later) broken down to
   • Personnel
   • Services
   • Materials & Supplies
   • Assets

1. Budget Work Session (Mar/April); Council provides first guidance on budget questions

1. Total spend Flat/Up/Down?
2. Pop. Growth assumptions?
3. Total Tax assumptions?
4. Major changes in city services from previous year (adds/removals)

1. City delivers budget overview (May/June) ;
   1. list any requested services that will-not be provided in that budget.
   2. Council provide feedback on must have services.

1. City responds (July) with detailed department data showing needed tax dollars to meet requirements

1. Update with tax info from Travis county (August)

1. Council deliberates services and projects to be provided, and associated tax rate (August)

Departments & Data Management
Current data is too sub-divided to easily understand and effectively manage. Departments should still enter data separately, but reports, analysis, and management (by the City Manager and Council) should be done by logical groups of departments. See below for possible definition of these Budget Areas.

Using this framework, direction from Council might be:
“For the next year, General City Operations should meet a budget of 5% reduction from the previous year. Public safety should meet a budget of not more than 5% growth, Amenities should remain flat, etc.”.

Year over year comparisons should focus on normal operating costs (Personnel, Services, Materials/Supplies), with large asset costs (unusual expenses) considered and justified separately. For example, a ballfield project one year should not be used to justify increased headcount the next year while.

General Fund (20 active departments)
[Group into 6 budget areas, and include Expenses to cover loss (if any) in GC and Airport]

1. General Operations

• Admin
• Non-Dept
• Finance
• HR
• Secretary
• Econ Devt
• Legal
• Bldgs Maint
• Council
• IT

1. Amenities

• Parks
• Aquatics
• Library

1. Public Safety

• Mun Court
• PD
• Code Enf
• Dispatch

1. PW Streets

1. Dev Svcs

1. Solid Waste

• Other
  • Golf Course Transfer
  • Airport Transfer

​

… There are 2 Unused departments in the General Fund

• Aviation (this is different than the Airport Fund)
• Debt Svc (this is different than the Debt Service Fund)

Utility Fund (11 active departments)
[Group into 3 budget areas]

1. General Operations
   • Utilities Admin
   • Transfer
   • PW Admin
2. Water
   • Water services
   • WTP 1
   • WTP3
3. Sewer
   • Sewer services
   • Sewer plant
   • Effluent disposal
   • Booster Stations
   • Lift Stations

 

[Shane Saum]

Thank you Councilman Prince for thoughts on my agenda item.

I agree with your timeline and is why I brought this item forward in January, as well as this needs to start as a top down approach from Council. I consider this first discussion to be the start of the "post-mortem" on last years budget, at least as far as the process went. Now in February, I would like us to be reviewing the actual line items and we will send back to staff "these are your reduced budgets to begin with." In my original proposal, anything above that initial reduction the Council provides to staff will need to be included in an exceptional item process where they need to document for Council their reasoning to go above it. What I have discussed with Councilman Benefield is that perhaps anything above payroll should need to justify their budget through the exceptional items request process. This would allow Council to have a full understanding of each departments budget proposal.

It was my perspective last year that the process needed to be simplified and that any new wrinkles was adding burden to staff and leading to a less efficient process. By simply starting the process with at least a flat 5% reduction, we are simplifying the starting process.

• Starting with at least a 5% reduction ensures departments assess their operations critically, identifying inefficiencies and redundancies from the start.
• Exception-based budgeting allows Council to focus on departments that genuinely need additional resources rather than assuming certain departments are allowed to grow year-over-year like the police department.

Transparency and ease of use of the data was a huge issue last year and I agree if possible, to General Fund and Utility Fund groupings you proposed. Hopefully staff does not have technology issues that prevent them from being able to do this. If we do not get further background tonight on the technological issues we have encountered, I hope those are addressed on Feb. 6th.