2018/04/09 - Walter's Blog: Budget Expenses

In previous blogs, I discussed the budget structure and revenues, now I can move on to proposed expenditures in the annual budget. Unlike the federal government, cities cannot budget in a deficit and revenues must meet expenses. Therefore, we are required by law to have a balanced budget. This is more difficult in some years than others, depending on how your revenues are structured.

O’Fallon is more vulnerable to economic downtowns than most cities in the U.S. The largest revenue source in most cities is the property tax, which is consistent and stable. Only 3% of our General Fund comes from property tax, and we rely primarily on the sales tax (43% of the General Fund).

Sales tax revenues can fluctuate widely from year to year, bringing years of plenty or paucity depending on the regional economy and economic development opportunities. Our sales tax revenue declined dramatically during the 2007-2009 recession, but our revenues have recovered over the past few years. The budget reflects expenditures in all funds of $74,453,583, which are equally balanced by revenues. This represents a decrease of approximately 9% compared to the previous year. The reason for the decrease is due to the Destination O’Fallon capital projects 2017, which consisted of an expansion of the Family Sports Park.

Here is a chart showing our Budget History. The budget fluctuates from year to year due to capital projects:

If you take out capital projects, our budget trend looks like this:

Here is a chart that shows where General Fund expenses are allocated:

Payroll

The total payroll for all operations, including fringe benefits, is $22,741,820. Payroll is 29.6% of the total operating expenditures for the entire budget. This budget includes 3% salary increases for full-time employees. There are eight new positions: two patrol officers for a full year, one patrol officer for ½-year, an administrative services coordinator, and two water line maintenance workers.

General & Administration

General expenses represent 11% of the General Fund budget totaling $2,248,200. This includes $1.87 million in transfers to various funds for bond payments as well as the transfer of $200,000 to a reserve account to be used for projects outlined in our Strategic Plan. This budget includes $166,000 for the fulfillment of the Azavar utility contract and establishment of the contract for cable and telecom franchise taxes. General expenses reflect a 5% increase from FY2018. Administration expenses are 7% of the General Fund budget totaling $1,468,126 which represents a 13% increase over last year’s budget. Included in this budget are the setting up of a capital reserve for future spending or revenue shortfalls and several employee programs originally covered in the Economic Development budget (see below).

Public Safety

The top City Council priority for this budget was Public Safety. The Police Department is the largest budget in the General Fund, totaling $7,175,296. The budget includes three new vehicles, a reserve amount for future HVAC replacement, and 2½ additional officers. Fiscal year 2018-19 also includes a revenue source for Secondary Employment ($55,000) to help offset personnel costs when various businesses request additional security services. Combined Dispatch totals $1,238,087 and makes up 6% of the General Fund budget. A partnership has been negotiated with Fairview Heights to help offset the costs.

EMS is budgeted through a dedicated property tax and totals $2,928,081. This is $357,266 above FY2018 and includes purchases of three CPR machines, a replacement ambulance, and setting up a $115,000 reserve for future capital expenditures.

The Fire Department budget totals $2,561,132 and is funded through a dedicated property tax. The budget includes increased personnel costs for night-time coverage, the purchase of a replacement fire truck and adding to the reserve for future capital spending.

Economic Development

In response to the City Council’s priority to strengthen economic development, the Economic Development budget in the General Fund was merged with the Hotel/Motel Tax budget because they both serve similar purposes to strengthen and grow the local economy, attract visitors, and improve the business climate. The new Economic Development/Tourism budget is now separate from the General Fund and has specific allocations for economic development activities. New projects include an economic development website, marketing and infrastructure improvements for the Mid America Commerce Center, and business recruitment strategies.

Public Works

Public Works (including streets, water, sewer, and stormwater) also were City Council priorities for this budget. The primary feature of this is $1.7 million for the new Pavement Management Program, a multi-year initiative to improve O’Fallon’s streets. In addition, the Presidential Streets stormwater and street improvements continue along with the following projects: PSB to Smiley drainage improvements Phase 2, Milburn and Old Collinsville Road roundabout, and the Green Mount/Central Park intersection improvements. Engineering staff will be involved in reengineering and rebuilding major arterial and collector roads and intersections and improving capacities to handle increased traffic volumes in growing parts of the city.

The Water Fund is budgeted at $13,461,042. This is a 21% increase over last year. The budget includes two water line maintenance employees, water main replacements for Mark Drive, Southview Gardens subdivision, State Street and Union Hill. FY2019 provides for the purchase of an EZ Valve system and dump truck replacement.

The Sewer Fund is projected to increase 19% from $9,189,235 to $10,967,883. The largest project is the Wastewater Treatment Plant expansion, which is a multi-year project totaling more than $8 million. Other sewer projects include Southview Gardens sanitary sewer lining, State Street sewer replacement, Woodstream trunk main replacement, and the E. State Street sanitary sewer extension. The Streets, Water and Sewer budget include the shared purchase of an excavator and trailer and a four-post lift for the dump truck.

Parks and Recreation

The Parks budget totals $2,506,912 and continues the department’s terrific recreation programs for all ages. This is an increase of 5% from FY2018 and includes resurfacing the tennis courts, backstop replacements, asphalting the Savannah Hills trail, a summer camp bus, a work truck for the horticulture crew, and a large area mower.

While the Family Sports Park is entering its eleventh full season, this will be the first full season with the seven new all-weather turf fields that are part of the Destination O’Fallon initiative. Fourteen soccer tournaments are scheduled in 2018 and 55 total events including the soccer, baseball, and softball fields. $1,422,265 is budgeted for general operations of the park, including maintenance and equipment. Major purchases for the Sports Park include retrofitting the lamp poles for LED lights, a lightning detection system, and a turf vacuum.

A new Community Special Events budget has been created to manage events planned at the new multi-purpose Downtown Plaza as part of Destination O’Fallon. The plaza is expected to be complete in the summer.

Community Development

Quality building and sustainable development are keys to the future of O’Fallon. While we have not returned to our record home construction pace of 2006, housing continues to be strong and has stabilized over the past couple of years. New subdivisions include Reserves at Timber Ridge, Bethel Ridge Farm, Parkview Meadows, and Park Bridge Station. Commercial development has also seen an increase with the recent construction of Dewey’s Pizza, Sugar Fire BBQ, and Starbucks.

Capital

Destination O’Fallon is an economic development initiative that is an investment in the O’Fallon community. It will benefit our businesses, spur economic growth, support the youth and families of our community, and help us realize the vision we all share for a successful and prosperous O’Fallon. The FY19 budget includes the completion of the all-weather turf baseball and softball fields and the Downtown Plaza. Also included in Capital is $300,000 for an additional parking lot next to City Hall for employee and downtown parking.

Summary

Local revenue sources are improving, and this budget does not contain any major cuts in programs or expenditures. We would be more optimistic but the budget crisis in the state government has the potential to significantly affect this budget and the City’s services. If additional revenue reductions are made by the state government, the City Council will need to revisit this budget to consider additional spending cuts. Despite the uncertainty, the budget is balanced and meets the needs, goals and demands of the City in all service areas.

O’Fallon employees are doing a good job to balance the service demands of historic and new residential neighborhoods, regional shopping and interstate highway development, and newly growing centers of employment. Particularly in our uncertain economy, the demands for resources in such a fast-growing and diverse community are significant and pose significant budgetary challenges. While we strive to manage the growth in our community’s infrastructure, we must also manage the growth and capacity of the organization to maintain the City Council’s high-performance expectations. The strong working relationship between City Council and staff in these areas has proven O’Fallon to be a special community.

The new budget goes into effect on May 1.