Technical problems so I’m pasting the narrative the mayor handed out last night. Sorry for the funky format.
— Keila Szpaller
One table didn’t paste so I’m typing the info here:
Projected shortfall for business licensing: 16,376
Projected shortfall for excavation permits: 161,740
Projected shortfall for engineering and planning permits: 29,426
Projected shortfall for fines and forfeits: 151,603
Total for general fund: 359,145
Like the rest of the state and the nation, we’re watching and waiting as the financial crisis plays out. We’re continuing to be conservative, but practical, and make decisions based on facts and figures, not fear. As we review the middle of Fiscal Year 2009, we’re cautious and optimistic.
Building Inspection: Based on projections at this point, the Building Inspection Fund will have a positive cash balance at year end. At this point, based on data through December 31, 2008, the fund is now projected to be $321,554 short in revenues, so it is within our projections to date. If future months show revenue declines similar to December’s, further cost reductions may have to be considered. Today, inspections are tracking ahead of last January.
General Fund: Based on my staff’s work to save money and projected possible revenue shortfalls, the General Fund’s year-end balance should not decrease any further. The City’s 2009 budget continues to be structurally balanced and the city will maintain a safe General Fund reserve going into fiscal year 2010, with a goal of increasing the $1.2 million by several hundred thousand dollars this fiscal year and in each of the next three years. We build fund balance to absorb one-time costs or revenue shortfalls until the problem can be corrected.
The projected possible shortfall of $500,000 in revenue from fees and fines is currently estimated at $342,769 through November of 2008, so we are still well within the original estimate there. We have been anticipating a General Fund tax shortfall of $350,000, and at this point that number is still the projected shortage there. Property tax collections appear to be coming in at exactly the same level as last year. This is an area we will continue to monitor closely. At this point, we are hoping to have expenditure saving of $1,798,058 compared to the $1,705,000 requested. We will keep the council posted as the year progresses. A complete mid-year analysis is underway for the General Fund and we will update this report to council within the next two weeks.
Investments: The current yield differential between Treasury Bills and similar agency notes is 200 basis points (2 percent) or more. Last year, the city earned $997,792 of interest income. We know that it will be less this next year (perhaps 30 percent or less or more due to declining rates), but with Treasury Bills paying next to zero, the city would likely make only $500,000 in interest income for the year (and virtually zero the following year), if we were to liquidate all investments and move all available investable funds into T-bills. We have met with the city’s portfolio manager, Wells Capital, and their security analysts are convinced that the city’s government agency AAA rated investments (including FNMA, FHLMC, FHLB, FFCB) are still as safe as Treasuries, yet they will provide $600,000-plus more in investment income to the city. We are recommending holding our investments in these securities for the near term.
Collateral – city bank accounts: We have confirmed with US Bank that all city cash balances at US Bank will be collateralized at 102 percent with US government securities (i.e. FNMA, FHLMC, FHLB, FFCB) similar to all other city investments.
Transportation Impact Fees: Through June 30, 2008, $398,210 was collected in transportation impact fees (covered March – June of 2008…it was a new fee). An additional $215,482 has been collected from July-December of 2008, totaling $613,692 through December 30th. Inclusive of anticipated collections through year-end of FY 09, we will likely have close to $880,000 by June 30, 2009.
Proprietary funds: Sewer rates were not increased this past year but they are budgeted to increase in FY 2009, due to planned expansion of the wastewater plant. The City’s sewer fund is in good financial shape today and has been for the last three decades. Sewer user rates were proposed to be increased in FY2009 in response to the debt service needs to accommodate the proposed construction at the wastewater plant. However, this will not happen in FY09 as the proposed construction project has been delayed. Sewer rates have not been increased in eight years.
The City’s internal service fund for health insurance benefits has a fund balance in excess of $2,500,000, which is well in excess of three months of claims experience (currently have over 7 months of reserve), the targeted amount for the health plan’s fund balance.
Business Improvement District: The Business Improvement District had a year end fund balance in excess of $250,000. Current-year revenue receipts are on target, so this fund is in good financial shape.
Missoula Parking Commission. The Missoula parking Commission had a cash balance of $3,790,493 at year end. FY09 revenues are currently right on target for the present year and the fund is in excellent financial condition.
Missoula Redevelopment Agency. The Missoula Redevelopment Agency closed out Renewal District I two years ago, which was the sunset year for the downtown urban renewal district. The agency will move forward with substantially smaller budgets until the other two newer districts can be developed in a manner similar to the outstanding growth that occurred in the original district. The first phase of redevelopment of the downtown mill site along the Clark Fork River was initiated with the issuance of $3.6 million of tax increment bonds in Urban Renewal District II. This project will move into the second phase of development in FY09 or later depending on a number of factors.
Debt Financing. The debt service funds had a total year-end fund balance of $2,654,557, all of which is reserved for the payment of debt service. The City of Missoula’s total debt was increased by $36,207 during the 2008 fiscal year, as debt reductions were approximately equal to new debt incurred. State statutes limit the amount of voted general obligation debt a governmental entity may issue to 2.5 percent of its total assessed valuation. The current debt limitation for the City of Missoula is $85,308,000, which is significantly in excess of the City of Missoula’s outstanding general obligation debt. As of fiscal year end, the City of Missoula was only utilizing 21 percent of its legal, voted general obligation bond limit. In addition, the City was utilizing 60 percent of its legal debt limit for non-voted General Fund debt.
The City also recently received an improved credit rating from Standard & Poors for its financial management assessment (FMA) which resulted in an FMA of “strong,” the highest rating a city can receive from Standard & Poors. The city’s credit rating is an integral component in financing infrastructure projects and has led to an improved credit rating for the city’s voted general obligation debt from A to AA.
· Standard & Poors has this to say about the City’s “strong” FMA assessment:”A Financial Management Assessment of ‘strong’ indicates that practices are strong, well embedded, and likely sustainable. The government maintains most ‘best practices’ deemed critical to supporting credit quality and these are well embedded in the government’s daily operations and practices. Formal policies support many of these activities, adding to the likelihood that these practices will be continued into the future and transcend changes in the operating environment or personnel.”
· Standard & Poor’s has established an analytical methodology that evaluates established and ongoing management practices and policies in the seven areas most likely to affect credit quality. These areas are:
- Revenue and expenditure assumptions
- Budget amendments and updates
- Long term financial planning
- Long term capital planning
- Investment management policies
- Debt management policies
- Reserve and liquidity policies
- The City of Missoula was evaluated as having superior policies and practices in all of the areas above.