To: Honorable Mayor and Members of Town Council
From: David L. Corliss, Town Manager
Title
Resolution Approving the 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 has been developed 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 2017-2019 Balanced Financial Plan shows the Town is in good financial condition. The Plan was generated as a draft for the 2017 Budget and demonstrated that certain capital funds had deficiencies due to inadequate revenues in years 2018 and 2019. The plan has been revised to incorporate anticipated revenue that may result from Council’s adoption of the Town’s Development Impact Fees. With this revision, all funds are now balanced for all three years of the plan, meaning that funds available plus annual revenues exceed the total planned expenditures in all funds. All funds are also balanced from an operating perspective.
The plan does not include any tax increases. However, it does include the adjustment to Town impact fees as noted above.
Overarching goals of the 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.
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 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 pending impact fee implementation and five-year CIP respond 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
Council has affirmed the above priorities and approach throughout the 2017 Budget process, and items set forth in this plan follow that guidance.
Financial Overview
The 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 plan is a proposed change in the base to which the Town applies its building use tax, the sales tax on construction materials. Consensus was reached with representatives of the development community on - and Council directed staff to prepare the ordinance to implement - a fee structure that will increase building use tax and impact fees by a total of 9% in 2017 and 8.5%, exclusive of any needed utility fee increases, in 2018. This has caused projected revenue increases in several funds.
With the just-listed revenue assumptions included in the 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 2018-2019, and capacity to accommodate the approved 1% increase in the Town retirement contributions, as well as with performance-based compensation increases of 4% each year across all impacted funds. 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 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. Included within the plan are 12 additional 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 plan for 2017, by fund and by department.
GENERAL FUND
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
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, half of the ongoing annual cost of which would be paid for by the Fire Department, which is estimated $60,000; plus $30,000, which is half of the one-time vehicle cost associated with this position
Parks and Recreation: Continuation of annual trail improvements, at an estimated 2017 cost of $230,000
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 $90,000, along with a one-time vehicle cost of $30,000
TRANSPORTATION FUND
• Continuation of annual Pavement Maintenance Program, focused in 2017 on southern Castle Rock, at an estimated 2017 cost of $4.1 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 - one at Meadows Boulevard and Butterfield Crossing Drive, and the other at a yet-to-be-determined location - 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
• Reconstruction of Prestwick Way for an estimated 2017 one-time cost of $432,000
• 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
UTILITIES FUNDS
Water Resources Fund:
• Addition of advanced treatment processes to the Plum Creek Water Purification Facility, for an estimated 2017 cost of $10.8 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
• Construction of the Plum Creek diversion, well fields and related pipelines and pump station, for an estimated 2017 cost of $9.8 million
• Continuation of the WISE project, for an estimated 2017 cost of $634,000
• Continuation of alternative source of supply project, for an estimated 2017 cost of $200,000
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 $660,000
• Continued rehabilitation and replacement of water lines that have reached the end of their useful lives, for an estimated 2017 cost of $301,000
• Site improvements at Kellogg Court, for an estimated 2017 cost of $158,000
Stormwater Fund:
• Continuation of stream stabilization, for an estimated 2017 cost of $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
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 $3.5 million, $1.47 million of which would be contributed from the Parks and Recreation Capital Fund, pending funding availability,$1.02 million of which would be contributed from the General Long Term Planning Fund and the remainder from the Facilities Capital Fund available fund balance
Fire Capital Fund: Construction of Fire Station 152 in Crystal Valley Ranch, for an estimated one-time 2017 cost of $4.76 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 $360,000
• 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
• Design costs to widen Ridge Road for an estimated one-time cost in 2017 of $400,000
• Design of future improvements at the intersection of Highway 86 and Fifth Street for an estimated one-time cost in 2017 of $175,000
• Design of a roundabout at the Plum Creek Parkway and Wolfensberger intersection for an estimated one-time cost in 2017 of $150,000
GENERAL LONG-TERM PLANNING FUND (TECHNOLOGY AND CAPITAL REPLACEMENT)
• Replacing the Fire Department Records Management System for an estimated one-time 2017 cost of $600,000
• Construction of a wireless ring to provide redundant connectivity to main Town facilities, for an estimated one-time 2017 cost of $170,000
DEVELOPMENT SERVICES ENTERPRISE FUND
• Addition of a Combination Building Inspector, at an estimated ongoing annual cost of $106,000
• 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 commercial development projects, at an estimated one-time 2017 cost of $400,000
• Addition of a Fire Prevention Officer, half of the ongoing annual cost of which would be paid for by the Development Services Enterprise Fund, which is estimated at $54,000; plus $30,000, which is half of the one-time vehicle cost associated with this position
GOLF FUND: Bunker renovation and cart path improvements, for an estimated one-time 2017 cost of $150,000
COMMUNITY CENTER FUND: Replacement of an HVAC chiller and condenser, at an estimated one-time 2017 cost of $200,000
Outstanding Issues
As comprehensive as the 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. It is important to emphasize that the financial information in the proposed plan represents the best information and analysis available at this point and is subject to change. To name a few, the financial plan will be impacted by Council decisions, actual revenue performance and other new issues than may emerge.
The plan provides a foundation for planning, decision making and sets a direction while establishing priorities, but it will need to be regularly updated and refined. Items not addressed in the proposed plan include:
• 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. No provision to buy or build a permanent facility is included in the 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 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 has been requested to make a financial contribution totaling $220,000 for 2017-2018. Only $25,000 is included in the plan; a financial solution would need to be determined should Council decide to move forward with this initiative.
• 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 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
The 2017-2019 Balanced Financial Plan demonstrates that the initiatives set forth within the 2017 Budget are sustainable. Anticipated revenue from the proposed impact fee ordinance would allow all funds to balance for all three years of the plan.
Once more, the overarching goals of the plan are to address top-priority level-of-service issues and to incorporate additional major priorities and projects in a responsible and conservative manner.
STAFF RECOMMENDATION
Staff recommends that Council approve the 2017-2019 Balanced Financial Plan as presented.
PROPOSED MOTION
“I move to approve A Resolution Approving the 2017-2019 Balanced Financial Plan.”
ATTACHMENT
Attachment A: Resolution
Attachment B: 2017-2019 Balanced Financial Plan