Budgetary Policy

[Paul Prince]

Council and Staff,
As requested at the last Council meeting by the Mayor, I am initiating this discussion thread. The primary objective is to update the "Fiscal and Budgetary Policy" to align with the budget process I had proposed to Council in last year's February strategic work session.

The current Fiscal and Budgetary Policy document is 23 pages long with 13 sections. I think a pretty significant cleanup through the entire document is needed, and suggest that this be assigned to the Finance Sub-Committee (Saum, Owen, Prince, and Staff members) to be brought back to council in the March timeframe for discussion and possible adoption.

For now, I have attached here a markup (redline and clean) of only the first two sections.
The proposed budget process is in Section II.1, "II. Operating Budget, 1. Preparation".

It would be helpful to have agreement to follow this (or a modification of this) process as we go into our February strategic planning discussions.

Paul

 

[Shane Saum]

Thank you, Councilman Prince, for initiating this and for putting a concrete starting point on the table. I agree with the path forward of assigning this work to the Finance Subcommittee and bringing a refined proposal back to Council in March.

On the redline you shared, I like the overall direction and agree with several of the proposed changes, including removing the Comprehensive Plan language and adopting the clearer, more predictable annual budget schedule. I also support using this framework as guidance as we head into our February strategic and budget discussions.

One addition I would like the subcommittee to consider incorporating is the budget discipline approach we used last year, where departments begin with a baseline that is 10 percent below the prior year’s actual spend or budgeted amount, whichever is less, and are required to provide clear, exceptional item explanations for any requests above that level. I believe this helped focus discussions on priorities rather than incremental growth and would be valuable to formalize.

I also think there is an opportunity to further shorten and simplify the policy overall while preserving the core guardrails around transparency, accountability, and Council oversight. I look forward to continuing that refinement as part of the subcommittee work.

Finally, since the proposed process includes a February post-mortem on the prior year’s budget, I would like to confirm that we include this as part of the February 5th discussion item I previously requested, with staff prepared to walk through that review consistent with the framework outlined here.

Appreciate the work on this and look forward to continuing it collaboratively.

 

[Charles West]

Councilor Prince,


Attached is the most recent revised fund list for our budget and clean up for financial transparency, you will see the list is 14 funds divided by their functions and complies with GFOA recommendations. To me it cleans up the process and ensures the required funds are kept separated when budgeting and providing monthly reports. The pass-through fees and escrow accounts will be kept within our accounting system with a monthly spread sheet to show escrow accounts what they are for, and any funds expended out of them. The accounts on this list will be the accounts we have bank / investment accounts for and there would be one to two additional investment accounts used to maintain the operating reserves for the General Fund and Utility Fund. These recommendations are for discussion to possibly be incorporated into the budgetary policy document.

Thanks,
Charles

 

[Paul Prince]

Thank you Charles.
It would be helpful to have a "crosswalk" as you put it, to provide a mapping from our Logic Investments to these funds. Currently the monthly Finance reports show 18 Logic accounts plus another 18 containing the interest for these. If I counted right, you have 14 Funds in this document

It is my understanding that there is not, and never has been, a Logic account for the Airport or Golf Course. Both are managed through the General Fund Reserve account. We need to either truly treat these two "Enterprise Funds" as real funds, or put them into the GF as departments just like we handle the library, the Police Department and many other city functions.

Lastly, we have not yet had a healthy post mortem review of last years finances. I assume this weeks "Budget Workshop" council agenda item does not include any FY2025 post mortem. We can and should discuss this in the finance sub-committee to define what we want in this review.

I would suggest that this post mortem include the following:
1. For each FUND show the actual vs budget expenses by expense type
(personnel, O&M, Supplies, Services, Fixed Assets)
List the primary departments that had major misses from the budget for each expense type, with explanation as appropriate.
2. For each FUND show the actual vs budget revenue
List primary revenue line items that had major misses from the budget, with explanation as appropriate.
3. Show year end fund balances and our reserve status (in dollars and days) at that time.

The majority of our focus should be on the big spend areas, GF, UF, and CIP. I recommend staying mostly at the total fund level, only diving into departments as needed to explain key drivers of misses on the totals.
There were some big deviations on the budget last year which we should visit. (per the unaudited September EOY finance department report).
1. General Fund
FY2025 GF expenses: Actual = $11.9M, Budget = $15.6M... $3.7M underspend [what was deferred, or other root causes?]
FY2025 GF revenue: Actual = $12.2M, Budget = $12.0M... very close
2. Utility Fund
FY2025 UF expenses: Actual = $14.0M, Budget = $17.1M... $3.1M underspend [what was deferred, or other root causes?]
FY2025 UF revenue: Actual = $10.5M, Budget = $12.6M... $2.1M shortfall [what were the primary shortfall areas?]
3. Capital Improvements
FY2025 CIP expenses: Actual = $6.7M, Budget = $8.1M... $1.4M underspend [what was deferred, or other root causes?]

 

[Charles West]

Councilor Prince,

The mapping is something I am working on with Nichole to help us keep moving forward with the COA project and over all financial transparency for the city. We had 34 Investment accounts which have now been pared down to 17 with more recommended changes coming. The separate interest accounts were rolled back into the account they go with. I do not understand why the interest was placed in a separate account as that is something I have never seen done within municipal government.

Golf and the Airport need to be treated as enterprise funds in my opinion and not included anywhere withing the General Fund budget unless a transfer is needed and then that needs to fully be vetted by the city council in my opinion.

As to a postmortem regarding the budget, I fully agree with doing it each year, but I would request that it be done after the audit is completed due to numbers usually change due to adjustments made or requested by the auditors.

 

[Karen Van Ness]

This is not directly budget-related, but would it be possible to include, along with the post-mortem budget review proposed by Councilor Prince, a presentation / discussion on the financial procedures and controls used by Nicole and other applicable staff? This could also be its own discussion item but, as you progress through the account cleanup, it would be helpful to understand compliance and controls, as well as more details on our audit process.