City Fiscal Year 2021 Budget Message
DARON JORDAN | City Manager
When our team began working on the General and Combined Utility Fund budgets late last year, none of us could have predicted that we were on the verge of a worldwide health pandemic that would have deep implications for our economy. At the time we never anticipated the terms like “2019 Novel Coronavirus”, “COVID-19”, or “#HealthyAtHome” would result in our having to refocus of our daily operations to continue providing essential services to our community while working to limit the exposure of our team to this deadly virus. Even so, those circumstances created a reality, or a “New Normal”, under which we are tasked to operate.
Still, even as we adjust daily to the ever changing landscape of our “New Normal”, as the City Manager I am still required under the Constitution of the Commonwealth of Kentucky to present for your consideration a draft budget that is to serve as the framework for General Fund and Combined Utility Fund operations during Fiscal Year 2021. On the pages that follow this budget message, you will find for your consideration draft operating budgets for the City of Paris, KY. In crafting these budgets, our team remained aware that these are the public’s funds and that we, as public servants, have a sacred duty to always operate in a transparent manner that retains the public’s trust. During my tenure as your City Manager, I have worked hard to ensure that any budget presented for consideration is committed to the long-term financial viability of the City of Paris as a governmental organization.
The crafting of the FY ’21 budgets has presented a unique set of challenges as a direct result of COVID-19. The large number of businesses that have been temporality shuttered have resulted in financial, and emotional, strains on business owners while also resulting in a large number of furloughed or laid-off workers. Given that our General Fund Budget is highly dependent on revenues from our business community, and that many of those businesses currently remain closed, we have had to make some very broad assumptions in crafting a draft General Fund budget. Similarly, our Combined Utility Fund Budget is dependent upon our customers having the financial ability to make full, and timely, payments of their utility bills. When many of our residential customers do not know when they will return to work, and when many of our commercial customers have ceased operations under state orders, we are faced with a lack of consistent and timely revenue in which to fund our Combined Utility Operations. Those uncertainties further underscore the value of our leadership team in participating in the budget process. I am extremely grateful for their hard work, and determination, in helping us get this point of presenting you these balanced draft budgets. Both budgets keep with the strong foundational principals of stewardship and financial stability. Having the Leadership Team take an active role in the budget process allows us to remain focused on our commitment of providing cost effective service delivery and a high level of customer service.
Year in Review:
During the current Fiscal Year, our financial stewardship allowed us to continue to place funds in reserve for future needs and emergency situations. That diligence helps us weather the current financial loss of revenues due to the pandemic. It also allows us stay faithful to meeting our financial obligations to our team, vendors, and our community partners. Those stewardship efforts result in our ability honor our financial commitments to agencies that, in collaboration with with the Bourbon County Fiscal Court, we have entered into interlocal agreements to fund. Those interlocal agreements help fund the work of the Joint Parks & Recreation Board, the Bourbon County Joint Planning Commission, E911, EMS, and the Paris-Bourbon Count Tourism Commission.
We also continued to fulfill our contractual agreements to fund other community agencies. Agencies like CASA, Chamber, EDA, Senior Citizen Center, and the YMCA are all important agencies to our community as they enhance our quality of life. This past year we also continued the tradition of providing free rent, and utilities, within the confines of City Hall to several of these same agencies. The current donated value of those donated services is almost $80,000 annually.
This past year, under the leadership of Commissioner Allen-Edwards, our Planning and Zoning Administrator Ms. Lacey, our State Representative Matt Koch, and community member Bill Alverson, we began holding community meetings with residents on the Westside of town. These meetings, attended by many of you, have allowed us to focus time and energy towards a portion of our community that historically has not received the attention deserving of all sections of our town. The first meetings have now coalesced into several formalized committees and our engagement of EHI Consultants. EHI will help guide this process as we continue forward and I believe that our whole community benefits through this endeavor.
While our present challenges require our continued focus and commitment, at some future point it will be appropriate to further acknowledge our accomplishments from this past year. Even without the challenge of the current health pandemic we still have issues like the spread of drug trafficking, an aging infrastructure, and increased pension costs that strain our budget. When other area local governments are discussing employee layoffs, or not providing additional compensation, we have been able to forego that discussion because of fiscal prudence by our leadership team. As previously mentioned, I am very proud of our team and their commitment to work within the fiscal constraints of a budget while seeking inventive ways to enhance services to our community. With their assistance the FY ’21 budgets meet the constitutional mandate to balance between revenues and expenditures and are built upon a conservative revenue assumption directly tied to the uncertain overall economic impact of COVID-19.
For your consideration, here are some general highlights of each draft budget:
Overview of Items Consistent Across Both Budgets:
• Retains current budgeted staffing levels with any vacancies being reviewed on a case-by-case basis
• Retains ability for team members to earn pay increases based on exceeding job performance goals and expectations
• Retains longevity pay incentives
• Retains all existing benefits
• Increases city contribution towards employee health benefits by $100 per month, per employee (resulting in an increased investment into our team of about $125,000 annually)
• Expands benefit options to include the creation of a Health Flex Spending Account while retaining the current Health Savings Account (HSA) option
• Carries forward to subsequent Fiscal Year’s certain planned Capital Improvement projects
General Fund Budget Overview:
• Budgeted expenditures decreased by 0.6% from the FY ’20 adopted budget
• Anticipates an average of about 6.12% reduction in tax revenues
• Budget is based on keeping tax rates level
• Third straight year that the transfer from the Combined Utility Fund to the General Fund (otherwise known as Payment In Lieu of Taxes) decreased (down from budgeted $384,000 in current year to $240,000 in FY ’21)
• Reduces anticipated revenue from KY Transportation Cabinet in Municipal Road Aid Funds to $100,000 (down from $170,000 in current fiscal year)
• Reduces expenditure on road repairs to $150,000 (down from $200,000 in current fiscal year)
• Funding retained for outside agencies at current levels that provide services not offered by the City and that have a public benefit
• Maintains funding to address “Slum & Blight” at current FY budgeted level ($75,000)
• Requires a transfer from reserves in the amount of $500,000 to balance Combined Utility Fund Budget Overview:
• Budgeted expenditures increased by $ 176,888 (or 1.82%) over the current FY budget
• Projects a decrease of four percent (4%) in both water and sewer revenues
• Electric revenues projected to remain flat
• Reduces transfer of Payment in Lieu of Taxes to the General Fund by thirty-seven and one-half percent (37.5%)
• Carry forward of $350,000 in current reserves to pay for contracted services related to the recently approved infrastructure assessments
• Transfer of roughly $157,000 from regular reserves to help balance budget (down from $216,050.00 in current budget)
Although there was some relief by the state legislature this year, as it relates to pension costs, the true lack of pension reform serves as the largest impact on our long-term financial solvency. The continued strain of increasing pension obligation has a direct impact on all employee benefits.
Our General Fund Budget is also strained by the required contribution into EMS services to keep those services operational. The required contribution of $400,000 into EMS results in additional strain on our budget that many other surrounding communities do not face. Like the pension obligation, the annual contribution of $400,000 from our General Fund revenues directly impacts our ability to invest in our team and in other areas of the budget like increased funding for street repairs and capital improvement projects.
The biggest budgetary challenge that we will face in the coming fiscal year, is the uncertainty of how the economy will rebound from the current health pandemic. We have looked at historical data, listened to local industry leaders about their financial projections, and researched national trade publications as part of the budget process and to gauge the financial impact. However, the pandemic and the limited data on the potential economic impact, is a challenge not normally faced in the budget preparation process. The lack of such economic data will result in the need for an overly keen awareness, by our whole team, of our actual financial position as we move forward during the next budget cycle.
Our departmental leadership continues to search for opportunities to increase efficiencies and to focus on actions that allow the city to provide essential services in the most cost effective manner possible. Doing so continues to build on the foundation of our current financial stability while exploring opportunities to enhance services to our community.
This budget continues to increase our community’s quality of life by:
• Retaining a focus on addressing slum or blighted properties and working to repurpose those properties back to an active tax base contributor
• Working with our local, and state, EDA partners to find creative ways of providing economic development incentives that promote economic growth and an expanded tax base
• Supporting continued financial transparency that allows the community access to financial data and serves to hold each of us accountable to be good stewards of community resources
• Continued support, when financially able, of community agencies that serve our most underserved populations
• Strategically investing in all sections of the community, with an directed focus in areas that may have traditionally been overlooked
Mayor and Commissioners, your participation in the budget workshops has strengthened our ability to present you with draft budgets that are fiscally responsive to the needs of our departments in light of the additional, and unusual, financial constraints faced because of the current pandemic. In reviewing the attached General and Combined Utility Fund budgets I believe you will see that these drafts are based on the understanding of limited finances and an uncertain economic future.
I am honored to work alongside a dedicated group of individuals that believe in fiscal constraint and have a heart for public service. Our team works to maximize our limited resources while providing service to our community. While it is a statutory requirement for the City Manager to present the budget draft for your consideration, these budgets are the result of the hard work of our whole leadership team. I cannot thank them enough for their assistance in getting us to this point in the process.
I am also grateful to you, as Mayor and Commissioners, for your input and participation in the budget process. I believe when we work collectively as a team, the end result is a product that we can all be confident meets the needs of our community and adheres to fiscally responsible practices.
Statutorily the budget process now moves to the next phase where you must finalize its adoption before the end of June. Therefore, it is my recommendation to the Commission that you take the following actions:
1. Have a first reading of the budget during this Commission meeting.
2. Take the opportunity to review the proposed draft budgets in depth and then provide direction for any adjustments, or modifications, that should be made to these budgets prior to their final adoption; and
3. Schedule the final budget adoption to take place during a Commission meeting on, or before, June 30, 2020.