March 10, 2010
Fiscal Year 2008 Budget

TO: Jamestown City Council Members
FROM: Mayor Sam Teresi
RE: FY 2008 Executive Operating Budget and Capital Improvement Program
DATE: October 8, 2007

In accordance with Section C-39 (D) (1) of the Jamestown City Charter, I have attached for your review and action the Executive Operating Budget and Capital Improvement Program for Fiscal Year 2008.

This comprehensive plan, compiled with the assistance of  Director of Financial Services/City Clerk Jim Olson and City Comptroller Joe Bellitto, is the culmination of several months worth of effort involving the various department and agency directors of city government, along with input from members of the City Council.

STRUCTURE / ZERO BASED BUDGETING

As may be seen, the structure of the attached is very similar to that of previous years.  Included are detailed line item accounts of the adopted FY 2007 Budget, year to date expenditure totals in each budget category,  FY 2008 departmental and agency requests and a line item summary of the final Executive Budget and Capital Improvement Program.  Also included is a realistic forecast of all non-property tax revenue sources. 

As has been the case in every budget during my tenure as Mayor, we have again employed what is commonly referred to as a “zero based budgeting” approach, and have done so in the context of a multi-year look at the city’s future expenditure requirements and revenue prospects.  As has been the case during the past seven years, this budget has been built upon a “clean slate” zero starting point.

In other words, every single expenditure and revenue line item in this budget, regardless of what has been allocated in past years, began at the zero point, and is based upon hard documentation and/or our best forecast of the actual needs for the coming fiscal year.

In the case of expenditure line items, the bare minimum funding level necessary to deliver the service in question was programmed and in the case of non-property tax revenues, the most aggressive, yet defendable amount was incorporated into this financial plan.

In short, this budget clearly does not utilize the respective figures from the previous budget as a starting point upon which an arbitrary series of percentage increases have been applied.

Based upon the most current, available data, it is the professional opinion of the Executive Budget Team that this plan is balanced and honest, provides adequately for a basic level of mandated and essential municipal services, addresses the requirements of the City Charter, and is consistent with the objectives and strategies contained within the City’s Fiscal Recovery Plan as presented to the City Council on June 19, 2000.

PROCESS

Initial preparations for this plan actually began shortly after the adoption of the 2007 Budget.  The process moved into full swing with a series of individual meetings involving senior financial staff members several months ago.  Pre-budget preparation meetings and discussions were then held with various city council members and department and agency representatives.  The Executive Budget Team then proceeded with its series of reviews and revisions prior to the preparation and submission of this fiscal plan.

ISSUES

As with the preparation of any budget document, the Executive Budget Committee was confronted and required to deal with a series of issues and dynamics that have profoundly impacted this proposal.  Included were the following opportunities, concerns and challenges.

Positives/Opportunities

  1. Disciplined/Realistic Budgeting – The level of public education, discussion and input over the past seven years has clearly helped to produce tighter, more realistic and honest budgets on which to build this year’s plan.
  1. Restructuring/Downsizing of Operations – The determined efforts and difficult decisions of the past several years to change the way the City does its business, and the related reduction of our operations, have taken significant pressure off of numerous areas in the proposed 2008 budget.

    Previous actions to restructure departments, eliminate positions and institute and abide by a hiring freeze have dramatically impacted this executive budget plan.  Had these steps not been taken during the past seven years, the increase in costs included in this plan would have been significantly greater and potentially devastating from a fiscal standpoint.  Included for your review is a summary comparison of FY2000 employment totals and current levels by department.
  1. Positive Fund Balance – Due to the above referenced change in budgeting philosophy and practices over the past several years, and the tight day-to-day management of city operations by Department Heads and staff, the City ended FY 2006 with a final, audited, accumulated General Fund balance of $2,127,493.  This compares to the accumulated NEGATIVE fund balance of ($1,371,007) (created by the deficit plagued years of the late1990’s) that the City carried into the 2001 fiscal year.

    It should be noted that in conjunction with the prior decision to encumber  $603,885 for a debt reserve fund in conjunction with the Downtown Parking Development Program, the determination of the City Council to appropriate $300,000 of the fund balance as a revenue source in the FY 2007 Budget, and the proposal to utilize $250,000 from the fund balance as a revenue source in this budget plan, only $723,608 of the $2,127,493 Accumulated Fund Balance falls within the “unappropriated” category and is available for use in bonafide, “critical need” situations.

    While this hard earned fiscal cushion has yet to accumulate to the optimal level recommended for operations the size of Jamestown, it is nevertheless a significant accomplishment in which we can all take satisfaction.  Additionally, it is always better and somewhat easier to put together a budget plan while operating in the BLACK, as opposed to the deficit, “one foot in the hole” position in which we were forced to start during past years.
  1. Increased Tax Base – As outlined within this budget packet, for the fourth year in a row and only the sixth time in the last 18 years, the City has again realized an INCREASE in its total taxable assessment.  This increase has been driven by the impact of a number of new commercial and residential private investment projects brought on line during the last 12-18 months.  This growth is taking pressure off of and helping existing property owners and taxpayers.

    As of October 3, 2007, the City’s full value taxable assessment was $676,661,390. This stands in comparison to a taxable assessment of $672,916,122 with which the City began the 2007 fiscal year, amounting to an increase of $3,745,268 (.56%)
  1. Health Care Benefits Management – Increased levels of employee contributions (as provided for through recently settled labor contracts) and the tight management of the self insurance fund by both our in-house staff and our new third party and pharmacy benefit administrators, have helped to somewhat moderate the size of the increase in the FY 2008 budget appropriation.
  1. Increased State Aid – In its 2007-2008 Budget, the State of New York included a major, long overdue “corrective action” increase in general-purpose aid for municipalities.  Through the State’s AIM (Aid and Incentives for Municipalities) Program, Jamestown will realize a $785,450 increase over the amount included in the City’s 2007 Budget.  In order for the City to obtain this increase, however, it must continue to meet a variety of performance standards, which include but are not limited to:

    • Developing a multi-year financial plan to promote long-term fiscal health and enhance sound financial management practices.
    • Restraining the growth in employment, spending, debt service and property tax levies/rates.
    • Maintaining an adequate financial reserve or fund balance.
    • Limiting the use of one-time revenue sources (ie: appropriations from the fund balance).
    • Pursuing cost saving efficiencies within existing operations through cooperative ventures with other municipalities.

    It should be noted, however, that even with this increase, total general-purpose State aid to the City stands at a level similar to that received in the late 1980’s.
  1. Increased Utility Revenues – As forecasted and recommended by the management and financial staff of the City’s Board of Public Utilities, increases in water, electric, district heating and solid waste tax equivalency payments are projected for the coming year and thus, included in the 2008 Budget.  A $10,000 decrease in the tax equivalency payment from the wastewater division budget has been forecasted for 2008.
  1. Increased Revenues from Rentals – In conjunction with efforts to restructure and reduce the size of city government over the past several years, city operations have been compressed into less space.  This has effectively opened up additional areas within the Municipal Building for new rental and revenue opportunities with County and State government tenants.

    This increase is also the product of the rental agreement with Verizon Communications to locate a cellular telephone tower on the Municipal Building roof and the lease of the vacant storefront space in the Spring Street Parking Ramp to the Infinity Performing Arts Program.
  1. Investment Income – Due to the City’s investment performance to date and the recent and continued projected growth in interest rates, a very aggressive increase in revenues from investments has been incorporated into this budget plan.
  1. Sales Tax Revenues – A very aggressive $225,000 increase in sales tax revenues has been included in this Budget Plan.

    During the coming weeks however, this forecast needs to be revisited and re-evaluated.  Recent decisions by the County to eliminate sales tax payments on footwear, clothing and home energy purchases, along with the capping of the sales tax on gasoline and diesel purchases, have had an adverse impact on this budget line.

    Furthermore, a decision by the County to pursue the option of turning over to the State a portion of local sales tax revenues in exchange for further Medicaid relief, could severely impact revenue obtained through this source.

  1. Civil Service Commission Savings – The proposed 2008 budget contains both reduced revenue and expenditure lines relating to the operation of the Jamestown Civil Service Commission.  These reductions are contingent upon the approval, via pubic referendum on November 6th , of the proposal to dissolve the Commission and merge this function into the County’s Human Resources Department on or before July 2008.  Should the proposal fail, these line items will need to be adjusted accordingly.
  1. Miscellaneous Revenue Increases – This budget contains substantial increases in a variety of miscellaneous revenue sources including the Police Department (largely from reimbursement payments from the State in conjunction with Court Security Officer expenses) and the City Clerk’s Office (based on enhanced recent performance).  The budget also contains an increase in net revenues from parking violations which is directly related to the hiring of a part-time, call-in parking enforcement officer to cover vacation periods, sick days, etc. for the two full-time PEO’s.  Should the call-in position not be filled, a corresponding reduction in revenue will need to occur.

Concerns/Challenges

  1. Stagnant Local Economy – The national recession of a few years ago hit employers and consumers within the Jamestown region particularly hard.

    While there are definitely some strong signs of new and improving activity, Jamestown and Western New York have historically and continue to lag behind the state and nation in economic performance.

    And, this continues to have an adverse impact on the City budget, not only from a diminished revenue-generating standpoint, but also from the increased demand on basic municipal (and most notably public safety) services that is directly associated with a weakened economy.
  1. Salaries and Benefits – In conjunction with the City’s previously negotiated and approved labor agreements with its various bargaining units, (all of which include an assortment of lucrative wage and benefits packages, minimum staffing agreements, no layoff clauses, post retirement benefits, etc., etc.), the category of salaries and related personnel benefits remains as the #1 problem/challenge in the 2008 budget.

    Additionally, a number of arbitration decisions (issued over the past several years), courtesy of the New York State Public Employees Relations Board (PERB), have proven to be particularly damaging to our efforts to slow and reign in skyrocketing wage and benefits packages.

    The dramatic increase in the wage and benefits lines of this budget is also directly attributed to the flawed and biased system in New York State governing public employee contract settlements, in which existing agreements simply CANNOT be scrapped.  In other words, the system in New York State dictates that new contracts must be negotiated and built upon base contracts that have evolved layer by layer over previous years…and quite often, this is done with little or no regard to the ability of local property taxpayers to afford such wage and benefit rich packages.

    This dramatically increased appropriation in the 2008 Executive Budget has come despite a fairly significant decrease in employment numbers during recent years.   I would like to again refer you to the attached chart comparing current city employment levels with those of past years.
  1. State Retirement System Obligations – Due in large part to the dramatic loss of stock market revenues after the 9/11 attacks, corrective actions taken by the State Comptroller during the past few years and the dollar growth in the City’s payroll, there has once again been a substantial increase in the amount budgeted to cover projected, mandatory payment obligations to the State Retirement System.

    For illustrative and comparison purposes, the City’s total State Retirement System Payment in 1999 (for our legally required participation in both the Police/Fire and the General Employees Systems) was $67,980.

    The combined City Budget allocation for 2008 (which does not include City employees working out of the Board of Public Utilities) is $2,312,000.   This represents an increase of $270,675 from the 2007 budget.
  1. Health Insurance – Due to a variety of factors, including the size, age and growth  of our self-insured employee and retiree pool, along with skyrocketing expenses within the health care industry, the cost of health benefits remains a problem that continues to crowd out other needs and priorities within this budget.

    The $4.5 million allocation in the 2008 Budget reflects and is contingent upon savings projected during 2007, which will be “rolled” over into 2008.  Additionally, substantial savings are projected from the change in the City’s Pharmacy Benefits Plan Administrator.

    During the coming weeks, the performance of the health care fund will need to be closely monitored.  Should it appear that the projected 2007 savings will not materialize, an appropriate adjustment (increase) in the 2008 budget appropriation will need to occur.
  1. Debt Service – With accelerated payment schedules on existing debt obligations, required payments on recent financing for newly constructed Downtown parking facilities, expenses related to the comprehensive property re-evaluation project, required payments on recently purchased public works and fire department equipment, and long overdue energy related improvements to City owned facilities, debt service payments in the FY 2008 Budget will increase.  This will occur despite recent savings from the refinancing, restructuring and retirement of some of the City’s older obligations.
  1. Fuel, Utilities and Materials – As with private business and family budgets, the City’s utility expenses, fuel for its fleet of vehicles and the cost for materials made out of petroleum have all seen dramatic increases over the past year and are projected to continue through 2008.
  1. Investment in Capital and Equipment – Due to years of poor planning, legitimate inability, unwillingness and at times outright neglect, the City’s infrastructure, physical plant, equipment and rolling stock assets remain in dire need of a multi-million dollar transfusion.  Due to a variety of other competing needs, previously agreed to obligations and legal mandates, this budget, unfortunately, will once again provide an inadequate appropriation for equipment and capital projects.

 

  1. Street Lighting – Due to the recently approved electric rate increase, the appropriation for operating the City’s 3,500 streetlights has been raised significantly.

    It needs to be noted that the budgeted figure of $499,000 was generated in consultation with BPU financial staff.

 

FY 2007 EXECUTIVE BUDGET – POINTS OF INTEREST

The following is a summary of some of the points of interest within the Executive Budget, as outlined in greater detail in the attached.

  1. An increase of $336,150 over the amount budgeted for 2007 has been included in this plan for employee salaries.  This amount is in accordance with and necessitated by the terms of previously approved labor contracts and Police and Fire impact pay arbitration awards imposed on the City by the State of New York.  This increase comes in spite of a decrease in total city government employment during the past five years.

    $208,604 of this increased amount is directly attributed to the Fire Department with the balance ($127,546) spread amongst the various other City departments and bargaining units.
  1. Increased appropriation for contracted employee and retiree health care and dental benefits ($181,180).

    As previously indicated, health care fund expenditures during the coming weeks will need to be closely monitored.  Should it become evident that projected savings during the remainder of 2007 will not be attainable, an appropriate increase in the 2008 budget allocation will need to occur.
  1. Significant increase in the mandatory appropriation for State retirement system obligations ($270,675).
  1. Increased appropriation for street lighting ($36,000).
  1. Increased allocation for utilities, fuel, and other contractual services ($193,583).
  1. Increased debt service payments (Parking Development, DPW equipment, fire truck acquisition and energy improvement projects) ($169,584).
  1. Increased appropriation for acquisition and replacement of operating equipment ($51,517).

    This is largely the product of two (2) factors.  1) The significant reduction in appropriation for equipment purchases contained in the 2007 Budget, and, 2) the ill advised “pay me now or pay me later” budgeting practice that the City has been following for a generation or longer.  “Later” has arrived and this critical need area in the budget can no longer be ignored.  While still inadequate, this modest increase is none the less an appropriate step in the right direction.
  1. Increased Capital Projects Appropriation ($75,000).

    It should be noted that $603,750 of the total $700,000 appropriated for Capital Projects will be provided from State CHIPS funding to the City.  The remaining $96,250 is the actual allocation from City generated funds.
  1. The Contingency Account allocation of $200,000 is $25,000 more than the amount included in the FY 2007 Budget and has been included specifically in recognition that 4 of the 5 City bargaining unit contracts will be settled during 2007.
  1. Increased Social Security obligations ($25,689).
  1. Increased Workers Compensation Program Expense ($38,000).
  1. Increase in revenues from parking violations ($35,000).  As previously indicated, this increase is contingent upon the addition of a part-time call-in PEO.  Should the position not be filled, this budgeted $35,000 increase will need to be reduced accordingly.
  1. Aggressive increase in Sales Tax Revenues –  ($225,000) See previous comments and conditions.
  1. Funding for agency contracts –Flat.
  1. Aggressive projected increase in Utilities Revenues ($113,000).
  1. Aggressive projected increase in investment revenues ($45,000).
  1. Increased revenues from the rental of city properties ($3,400).
  1. Increased projected revenues from Downtown parking ramps and surface lots ($7,000).
  1. Decreased projected revenues from parking meters ($18,000).
  1. A very reluctant $250,000 appropriation from the accumulated General Fund Balance.  This represents a decrease of $50,000 from the amount appropriated in the 2007 Budget and will serve as a first step in the process of weaning ourselves from this addictive and dangerous practice.
  1. A $130,000 appropriation from the Cherry Street Parking Ramp Legal Settlement Fund.  This represents the remaining proceeds from this source.
  1. An increase in general purpose state aid ($785,450).
  1. Decreased appropriation for Jamestown Civil Service Commission expenses ($23,024).  As indicated earlier, this savings is contingent upon the approval, via public referendum on November 6th, of the proposal to dissolve the Commission and merge its function with the County’s Personnel Office, effective July 2008.  Should this ballot proposal fail, $23,024 in related expenses will need to be restored to the 2008 General Fund Budget.
  1. Increased expenditures of $1,339,038 or 4.5% over the 2007 Budget.  Contracted salary increases, benefits, state retirement obligations, fuel/ utility costs and increased debt service payments account for all of this increase.
  1. Increase in non-property tax (outside) revenues of $1,276,500 or 7.8% over the 2007 Budget level.
  1. A tentative increase in property tax revenues of $112,538 or 0.8% over the 2007 Budget level.
  1. A tentative increase in the full value real property tax rate of $0.06 per $1,000 of assessed valuation, or a 0.32% increase over the 2007 level. 

FUTURE ISSUES/CHALLENGES

As I have suggested over the years, a good, honest and realistic budget proposal cannot be developed within a vacuum, but rather, must be created with an eye toward future issues and concerns.

In past Executive Budget presentations, I have repeatedly made the attempt to identify and plan ahead for factors that would be impacting future budgets.  A review of the budget proposals and veto messages from previous years will confirm that these forecasts and warnings have largely materialized.  Continuing with that practice, I have outlined below numerous factors, which will likely impact the FY 2009, 2010 and 2011 budget plans.


NEXT STEPS

During the coming weeks, a variety of actions will be required in order to put this budget plan, or one utilizing it as a base, into action.  As I am sure that you are all aware, I stand ready and look forward to working with you and assisting in any manner deemed helpful to bring this process to a successful conclusion on or before December 1st.

In accordance with past practice, I would be happy to arrange for a series of meetings with representatives of the various departments to review in greater detail not only what I have outlined in this plan, but to examine from the departments’ perspective their identified needs and the impact of this proposal. 

During this review period, we will be receiving additional and/or updated information that may necessitate further attention and revisions to selected revenue and expenditure lines.  Specifically, we will all need to pay close attention to the following before final action is taken on the 2008 plan:

Please keep in mind that this is an extremely tight budget that is consistent with the principals and recommendations contained within the City’s Financial Recovery Plan developed and presented publicly to the City Council on June 19, 2000.  As such, any and all modifications to either the appropriations or revenue lines, with the desire to impact the final tax levy and rate, must be based upon sound fiscal reasoning, solid documentation and generally accepted accounting principals.

In so far as the revenue lines in this budget are extremely aggressive, I would strongly recommend that any changes to this plan come from the expenditure side of the equation…so long as the proposed cuts are legal and achievable. 

Given Jamestown’s history with and past reliance on inflated and unsubstantiated revenue allocations, it is important that we avoid falling back into the trap that once took this City to the brink of bankruptcy and a state control board.

During the coming weeks, I look forward to working with you every step of the way to further improve this budget.  I would again encourage each member of the City Council to conduct his or her own review and feel free to contact me, or any member of the Executive Budget Team whenever questions should arise.

Again, as I have said before, we are all in this together and we must attempt to work as one to insure the development of a plan that all can be relatively comfortable with, is honest in its approach, provides for the needs of the community and continues the change that we all recognize as necessary.

Samuel Teresi
Mayor

pc: Department Head