To: Honorable Mayor and Members of Town Council
From: David L. Corliss, Town Manager
Title
Discussion/Direction: Priorities for Draft 2017-2019 Balanced Financial Plan
Body
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Executive Summary
As has been the practice in recent years, a three-year financial plan is under preparation for Town Council’s review. The framework for this initiative ties back to the Town’s numerous Council-adopted long-range plans, which define levels of service and provide clear direction on priorities and projects.
Overall, the Draft 2017-2019 Balanced Financial Plan shows the Town is in good financial condition across most areas. The draft, however, does indicate future deficits in some capital funds. It’s important to note that tonight’s discussion with Council regarding this draft is one step in a multi-phased process, which will result in the adoption of the 2017 Budget and 2017-2019 Balanced Financial Plan in September. In order for Council to adopt a balanced plan at that time, the imbalances identified in this draft will need to be resolved - either by scaling back on projects or by securing additional revenue.
As presented now, the draft plan does not include any tax increases or adjustments in impact fees. However, staff is working with a consultant and developers to study a potential increase in impact fees in support of needed capital projects. Information regarding these fees will be presented to Council later in the 2017 Budget process.
The draft plan does include a $1-$3 proposed increase in most greens fees at Red Hawk Ridge Golf Course, in order to account for escalating operational and maintenance costs. Also, information for the Utilities funds is based on the 2015 rates and fees study, as the 2016 study remains underway.
Overarching goals of the Draft 2017-2019 Balanced Financial Plan include 1) addressing top-priority, though not all, level-of-service issues identified by staff; and 2) incorporating additional major priorities and projects in a responsible and conservative manner.
The goal for this meeting is to brief the Council on the status of the draft plan; respond to any questions or comments; and receive any further direction from Council regarding priorities. Obviously, additional work will be needed in the coming weeks. The Proposed 2017 Budget and revised Draft 2017-2019 Balanced Financial Plan are planned to be presented to the community at the August 16, 2016, Town Council meeting.
DISCUSSION
2017 Budget Priorities
Based upon Council-adopted policies, including the 2013 Strategic Plan; 2015 community survey results; and Council actions and direction regarding strategic priorities, the 2017 Budget priorities - set forth in the Draft 2017-2019 Balanced Financial Plan - can be summarized as follows:
• Balanced budget: Adopt a 2017 Budget that is balanced - meaning that operating revenues exceed operating expenditures - with no tax increases and that maintains required reserves and adheres to all Town Council-established financial priorities
• Managed growth: Effectively plan and manage for balanced community growth, which adds value to the community and maintains and enhances community character
• Surface transportation: Enhance surface transportation, including upgrading the Town’s traffic signal system, improving key intersections, maintaining streets and completing other capacity and safety improvements; the possible impact fee implementation and 10-year plan responds to this issue
• Public safety: Provide established levels of service for public health and safety services, including maintaining a competitive compensation system; the current priority is the construction and staffing/operation of Fire Station 152 in Crystal Valley Ranch by 2018
• Renewable water: Continually and systematically work to achieve the 75% renewable water goal, paid for through water user rates and fees, without reliance on tax revenues; current major priorities include utilization of WISE water by 2017, implementation of the Box Elder wellfield project and design and construction of the Plum Creek diversion project
• Economic development: Utilize public/private partnerships to achieve a vibrant local economy to provide for core priorities; this includes maintaining a minimum unobligated balance of $2 million in the Economic Development Fund for the pursuit of economic development opportunities consistent with goals, as well as the use of the Downtown Special Fund and tax increment financing to facilitate Downtown redevelopment projects, with a focus on mixed-use projects in the Downtown core
• Parks and Recreation: Provide and maintain an outstanding neighborhood park system, consistent with level-of-service goals; another current priority is the construction of Festival Park improvements
• Community character: Maintain community character, including maintaining a vibrant Downtown; supporting local businesses; involving the community in decision making; and improving and expanding community events
• Services and staff: Maintain quality of Town services and provide for planned employee compensation and benefit programs
It would be helpful for Council to provide feedback regarding these priorities and/or any additional areas of strategic direction or priority in the coming weeks, as staff works to finalize the 2017-2019 Balanced Financial Plan and the Proposed 2017 Budget.
Financial Overview
The Draft 2017-2019 Balanced Financial Plan was developed using conservative and informed financial modeling and forecasting. Annual growth in sales tax revenue is included at 7.2% in 2017, 6.7% in 2018 and 5.8% in 2019. Residential growth is expected to continue to be strong over the three-year planning period and is budgeted at 700 single-family units and 100 multifamily units in 2017; 700 single-family units and 192 multifamily units in 2018; and 600 single-family units and 72 multifamily units in 2019.
Another revenue-related item of note incorporated within the draft plan is a proposed change in the base to which the Town applies its building use tax. The Town assesses this tax on construction materials based upon square footage valuations, which are currently out-of-date. The balanced three-year plan uses accurate valuations in line with the current rates recommended by the International Code Council, which is common municipal practice. This recommendation is reflected within the three-year plan and has caused projected revenue increases within several funds.
With the just-listed revenue assumptions included in the Draft 2017-2019 Balanced Financial Plan, a General Fund operating surplus is reflected in each year from 2017-2019. This is with the inclusion of 8% Town and employee medical and dental insurance premium increases for all three plan years, as well as with performance-based compensation increases of 4% each year across all impacted funds. (Public safety increases are incorporated in the plan at 5%.) Annual market evaluation of Town compensation and benefits will continue to be conducted to ensure appropriate competitiveness.
Service levels were evaluated within each department as part of the annual financial planning process. Several service pressure points were identified, and provisions for some of the forecasted additional needs have been included, as detailed in the next section.
Financial Details
The Draft 2017-2019 Balanced Financial Plan (Attachment A) shows that the estimated costs of addressing top-priority level-of-service needs and of implementing additional major priorities and projects can be accommodated in all operating funds using estimated revenues. The same cannot be said, however, for the Town’s capital funds, several of which indicate future deficits when future needed projects are included within the draft plan.
Capital funds receive their revenues mainly from impact fees paid by new development. Over the past months, staff has been working with an external consultant to study whether the impact fees the Town charges are set at the appropriate level for the Town to recover its growth-related capital costs. At a future meeting, staff will provide Council additional information on this topic so Council can discuss whether the Town’s impact fees should be increased to accommodate for future needs. Anticipated needs over the next three years are included within the draft plan so that Council can see the cost of the needs.
Also included within the draft plan are 12 additional full-time positions needed to address top-priority level-of-service needs, along with increases in expenditures for equipment, technology and services. Following is a summary of the most significant items (generally, totaling $100,000 or more) in the draft plan for 2017, by fund and by department.
GENERAL FUND
Division of Innovation and Technology:
• Addition of a GIS Analyst, at an estimated ongoing annual cost of $105,000
• Continuation of annual Cisco networking device replacement program, for an estimated 2017 cost of $169,000
Finance Department:
• Addition of a Building Use Tax Auditor at mid-year, at an estimated 2017 cost of $59,000 and an estimated ongoing annual cost of $103,000
Development Services:
• Addition of a Neighborhood Services Liaison, at an estimated ongoing annual cost of $102,000, along with a one-time vehicle cost of $30,000
Police Department:
• Addition of two Patrol Officers, at an estimated ongoing annual cost of $237,000, along with a one-time vehicle cost of $58,000, to be paid from the Police Capital Fund
• Continuation of body-worn camera initiative, for an estimated 2017 cost of $109,000
• Continuation of the Police portion of the public safety radio program, for an estimated 2017 cost of $103,000
• Accommodation for Police Officers to enter into the Fire and Police Pension Association’s supplemental Social Security and Statewide Death and Disability programs, for an estimated ongoing annual cost of $80,000
Fire Department:
• Continuation of the Fire portion of the public safety radio program, for an estimated 2017 cost of $210,000
• The purchase of power stretchers to assist in safely transporting patients, for an estimated one-time 2017 cost of $225,000
• The purchase of automatic CPR devices, to assist in the treatment of cardiac patients, for an estimated one-time 2017 cost of $100,000
• Addition of a Fire Prevention Officer, the cost of which is being shared with the Development Services Enterprise Fund; the Fire Department’s annual portion of this position is estimated at $60,000; there is also a one-time 2017 cost to this fund of $30,000, which is half the cost of the vehicle associated with this position
Parks and Recreation:
• Continuation of annual trail improvements, at an estimated 2017 cost of $229,686
TRANSPORTATION FUND
• Continuation of annual Pavement Maintenance Program, focused in 2017 on southern Castle Rock, at an estimated 2017 cost of $4.8 million
• Continuation of annual bridge maintenance program, at a 2017 cost of $685,000
• Addition of a Senior Traffic Signal Technician, at an estimated ongoing annual cost of $98,000, plus one-time vehicle, equipment and software costs of $147,000
• Addition of two Operators in the Streets Division to work on year-round issues including snow and ice control, pothole filling, crack sealing and more, at an estimated ongoing annual cost of $156,000
• Addition of a Field Supervisor in the Streets Division, to round out the crew with the two new Operators, at an estimated ongoing annual cost of $93,000
• Addition of a Project Manager to oversee capital improvement projects, at an estimated ongoing annual cost of $127,000
• Phase three of three of traffic signal system upgrades, for an estimated 2017 cost of $400,000
• Construction of two new traffic signals at yet-to-be-determined locations, for an estimated 2017 cost of $460,000
• Reconstruction of Meadows Parkway between Prairie Hawk Drive and U.S. 85, for an estimated one-time 2017 cost of $1.987 million
• Reconstruction of Emerald Drive between Plum Creek Parkway and Emerald Court, for an estimated 2017 one-time cost of $1.339 million
• Continuation of rehabilitation of Wilcox Street crosswalks, in 2017 between Fifth and Eighth streets, for an estimated 2017 cost of $161,000
• Construction of a roundabout at Third and Perry Streets, for an estimated 2017 one-time cost of $1 million
CAPITAL FUNDS
Parks and Recreation Capital Fund:
• Connecting trails to parking lots at Philip S. Miller Park, for an estimated 2017 one-time cost of $100,000
• Planning for the Town’s next neighborhood park, planned to be constructed in 2018, pending funding availability, for an estimated 2017 one-time cost of $200,000
Facilities Capital Fund:
• Construction of a combined Parks and Facilities maintenance building, for an estimated one-time 2017 cost of $3.5 million, $1.47 million of which would be contributed from the Parks and Recreation Capital Fund, pending funding availability, and $1.02 million of which would be contributed from the General Long Term Planning Fund
Fire Capital Fund:
• Construction of and apparatus for Fire Station 152 in Crystal Valley Ranch, for an estimated one-time 2017 cost of $6.2 million
Transportation Capital Fund:
• Design of an expansion to the Public Works Service Center, for an estimated one-time 2017 cost of $220,000
• Improvements at Founders Parkway and Allen Way, for an estimated one-time 2017 cost of $400,000
• Improvements at Founders Parkway and Crowfoot Valley Road, for an estimated one-time 2017 cost of $650,000
• Initial planning, design and right of way acquisition for the Crystal Valley Parkway Interstate 25 interchange, for an estimated one-time 2017 cost of $2.3 million
• Addition of a second northbound to westbound left turn lane at U.S. Highway 85 and Meadows Parkway, for an estimated 2017 one-time cost of $107,000
GENERAL LONG-TERM PLANNING FUND (TECHNOLOGY AND CAPITAL REPLACEMENT)
• Construction of a wireless ring to provide redundant connectivity to main Town facilities, for an estimated one-time 2017 cost of $170,000
• Continuation of annual server replacement program, for an estimated 2017 cost of $158,000
GOLF FUND:
• Bunker renovation and cart path improvements, for an estimated one-time 2017 cost of $150,000
• A proposed $3 increase in 18-hole greens fees, and a proposed $1 increase in 9-hole greens fees (the proposed increases would not apply to junior or league rates); the proposed increases would generate an estimated $72,500 in revenue annually for the Golf Fund beginning in 2017, which would help account for escalating operational and maintenance costs
DEVELOPMENT SERVICES ENTERPRISE FUND
• Addition of a Combination Building Inspector, at an estimated ongoing annual cost of $110,000
• Project to scan paper records into an electronic database, at an estimated one-time 2017 cost of $100,000
• Furnishings for the planned addition to Town Hall that will house the Development Services Enterprise team, at an estimated one-time 2017 cost of $500,000
• Contract labor in support of increased development projects, at an estimated one-time 2017 cost of $400,000
• Addition of a Fire Prevention Officer, the of which is being shared with the Fire Department; the Development Services Enterprise Fund’s annual portion of this position is estimated at $54,000; there is also a one-time 2017 cost to this fund of $30,000, which is half of the cost of the vehicle associated with this position
COMMUNITY CENTER FUND:
• Replacement of an HVAC chiller and condenser, at an estimated one-time 2017 cost of $200,000
UTILITIES FUNDS
Water Resources Fund:
• Continuation of the WISE project, for an estimated 2017 cost of $9.67 million
• Continuation of the Chatfield Reallocation project option acquisition, for an estimated 2017 cost of $1.2 million
• Continuation of the aquifer storage and recovery pilot program, for an estimated 2017 cost of $500,000
• Progress toward Chatfield and Newlin Gulch pipelines and pump stations and Plum Creek Water Reclamation Authority upgrades for the Newlin Gulch pipeline, $5.66 million
• Continuation of alternative source of supply project, for an estimated 2017 cost of $13.2 million
• Construction of the Plum Creek diversion, well fields and related pipelines and pump station, for an estimated 2017 cost of $15.57 million
• Addition of advanced treatment processes to the Plum Creek Water Purification Facility, for an estimated 2017 cost of $10.8 million
Water Fund:
• Continued rehabilitation and replacement of Town wells that have reached the end of their useful lives, for an estimated 2017 cost of $3.48 million
• Miscellaneous improvements at existing water treatment plants, for an estimated 2017 cost of $150,000
• Structural and/or site modifications to existing water tanks, for an estimated 2017 cost of $360,000
• Pump station and distribution system upgrades, for an estimated 2017 cost of $651,000
• Continued rehabilitation and replacement of water lines that have reached the end of their useful lives, for an estimated 2017 cost of $310,000
• Site improvements at Kellogg Court, for an estimated 2017 cost of $157,000
Stormwater Fund:
• Continuation of stream stabilization, for an estimated 2017 cost of $2.2 million
Wastewater Fund:
• Continuation of replacement of pumps and motors at wastewater lift stations, for an estimated 2017 cost of $494,000
• Continuation of sewer line rehabilitation, for an estimated 2017 cost of $385,000
• The Town’s portion of projects at the Plum Creek Wastewater Reclamation Authority, which treats the Town’s wastewater, for an estimated 2017 cost of $4.62 million
Outstanding Issues
As comprehensive as the Draft 2017-2019 Balanced Financial Plan is, there are some areas that are still under development and consideration. As further information becomes available, some of these items can be considered, while others will remain noted as future issues or items for future decision making.
• TABOR: The Town has identified a TABOR revenue issue in 2015, with $714,580 over the revenue cap. Staff will continue managing within TABOR as directed by Council, but there exists the potential that the Town will experience excess revenues again during the three-year planning period. Staff cannot finalize TABOR calculations until after a year has ended, which can impact future years’ financial plans. Staff and Council must keep this dynamic in mind when completing financial planning and resource allocation.
• Public Safety Training Facility: The Town is presently leasing a Public Safety Training Facility, but that option is time-limited, and a permanent space to house that function needs to be found. An assessment is underway to define needs, but no provision to buy or build a permanent facility is included in the draft three-year plan. Staff will continue to develop options in this regard, with a goal of presenting to Council for consideration a project that best meets the Town’s long-term needs in this area.
• Snowflex loan: Council has authorized the execution of a non-binding memorandum of understanding with SnowSports 365 for a $2.7 million loan toward a year-round snow sports center at Philip S. Miller Park. If this project progresses, the likely recommended funding source for this loan would be General Fund fund balance. No provision for this project is presently included within the draft plan.
• Rueter-Hess recreation: Planning is underway to make Rueter-Hess Reservoir, in which the Town is a partner, a recreational amenity. As a partner in this endeavor, the Town will be requested to make a financial contribution, the amount of which is not presently known. A placeholder amount of $25,000 is included in the draft plan, but financing will need to be examined and adjusted as recreational plans for Rueter-Hess are finalized.
• Riverwalk project: The Riverwalk project is a proposed mixed-use development on either side of Sellars Gulch just west of Wilcox Street, which could be catalytic for Downtown Castle Rock’s redevelopment. Economic assistance from the Downtown Development Authority and, possibly from the Town as well, will be needed for this project to come to fruition. No provision for this project is presently included within the draft plan.
• Transit feasibility study: Recent community discourse indicates transit needs within Castle Rock may be reemerging as an issue. Given this feedback, Council might wish to direct staff to pursue a study regarding the feasibility of a transit service that would provide a connection between Castle Rock and the Regional Transportation District service area south of Denver. No provision for such a project is presently included within the draft plan.
• Parking study outcomes: A study is underway to examine how parking conditions can be improved within Downtown Castle Rock. At present, no financial resources have been dedicated to implementing any outcomes of this study. At such time when study outcomes are available, Council might wish to dedicate funding to implementing parking solutions for Downtown.
CONCLUSION
Within this memo, staff has attempted to provide Council an overview of 2017 Budget priorities; general and detailed information about 2017 financial planning to date; and high-level information about several outstanding issues not provided for in the Draft 2017-2019 Balanced Financial Plan. Staff welcomes Council’s discussion of these and any other items, and any resulting direction, which could be used as staff continues work on the Proposed 2017 Budget and Draft 2017-2019 Balanced Financial Plan.
ATTACHMENT
Attachment A: Draft 2017-2019 Balanced Financial Plan