1 FY 13 REVISED MUNICIPAL BUDGET
Exactly What is a Budget?
Exactly What is a Budget? • A budget is a financial operating plan • A budget is a tool for communicating with the public about how their money is spent. • Citizens vote on the total budget amount not the individual line items
How the Budget is Prepared • The budget process begins in August each year for the following year beginning July 1 • The Select Board gives management budget parameters • Departments review their current spending and needs for the next year • Each department submits a preliminary budget by mid September
How the Budget is Prepared • The Town manager and CFO review the budget submissions & make recommendations for changes • The CFO prepares the budget for salaries and benefits and for expenses which affect multiple departments • The total budget is compiled, then reviewed by the Town Manager
How the Budget is Prepared • The preliminary budget is presented to the Select Board for discussion • Department Heads make presentations to the Select Board explaining their budgets • The Town Manager and CFO continue discussions with the Select Board to arrive at an acceptable budget
How the Budget is Prepared • The final budget is presented at a public hearing • Management & the Select Board further inform the citizens of the details of the budget through flyers, the website, public access TV, the newspapers and meetings • The Monday evening before the first Tuesday in March, a Town Meeting is held to discuss the budget with citizens
How the Budget is Prepared • The official vote on the total dollar amount of the budget is the first Tuesday in March
Important Stuff to Know • Expenses must equal revenues, unless the Fund Balance is used • All unexpended funds in the General Fund lapse to the Fund Balance on June 30 • The Fund Balance could be considered a Rainy Day Fund
Revenues • Projecting revenues is: • Part science • Part philosophy • Part luck
Revenues • Some revenue sources exceed projections • Other revenues do not meet expectations • Types of revenue • Property taxes • Fees • Other • Intergovernmental
Revenues • Things that sway revenues • The economy • The weather • Changes in property assessments • Changes in laws
Expenditures • Usually easier to predict than revenues • Largest area of expenditures is salaries and benefits, particularly health insurance
Things that can Change Expenditures • Natural disasters • Unique opportunities • Legal judgments • Federal or state mandates
GRAND LIST (GL) GROWTH AND THE TAX RATE How a reappraisal effects municipal taxes.
BUDGET / GRAND LIST (GL) = TAX RATE • As the GL increases and if the budget stays the same the tax rate will decreases in relation to the GL increase. • If the budget increases and the GL does not grow than the tax rate will increase. • Typically both the GL grows and the budget also increases.
EXAMPLES OF THE FORMULA Budget Grand List Tax Rate $10, 000 $19, 000 $0. 5263 $10, 000 $19, 190, 000 $0. 5211 $10, 100, 000 $19, 000 $0. 5316 $10, 100, 000 $19, 190, 000 $0. 5263
EFFECT OF REAPPRAISAL ON FORMULA Before After Reappraisal Assessed Value $14, 000 $20, 000 Budget Tax Rate $10, 000, 000 $0. 7143 $0. 5000
EFFECT OF REAPPRAISAL ON PROPERTY TAXES Before Reappraisal After Reappraisal Assessed Value $140, 000 $200, 000 Grand List Value $1, 400 $2, 000 $0. 7143 $0. 5000 $1, 000 Tax Rate Tax
RESULTS OF 2011 REAPPRAISAL • Typical reappraisal; 1/3 increases in tax payments, 1/3 decreases in tax payments, and 1/3 pays roughly the same amount in taxes • 35% of all tax payers had a less than 5% +/- change in property taxes • 57% of all tax payers had a decrease in their property tax payments • 43% of all tax payers had an increase in their tax payments
SUMMARY • GL growth = lower tax rates • Typically budgets and GL will both grow. • Ideally the GL will grow at a higher rate than the increasing cost of running the town. • Reappraisal is revenue neutral.
22 FY 13 BUDGET REVISIONS
23 Budget Revote Required • On March 6, 2012, the Colchester municipal budget was defeated by 394 votes • 56% of the people who voted said no • Only about 27% of registered voters voted
24 Where to Cut? How Much to Cut? • The Select Board and the Town Manager have spoken with many citizens to get input on where to cut the budget • We have read Front Porch Forum, The Sun & Burlington Free Press & others
25 Change in Tax Rate over Time Yearly Municipal Tax Rate
26 Financial Challenges Remain • Keep municipal taxes within affordable limits • Protect key existing public services
27 Financial Challenges • Preserves to remain financially healthy – fiscally sound
28 FY 13 - Then • Previous Request • General Fund Budget $11, 275, 590 • % Increase in Budget 4. 2% • Fund Balance Reduction $ 135, 000 • Tax Rate • % Increase in Tax Rate $ 0. 5669 5. 7% • The tax rate increased at a higher rate than the budget because we reduced the Reduction in Fund Balance from $446, 916 in FY 12 to $135, 000 in FY 13. This had the effect of increasing taxes.
29 FY 13 - Now • Revised Request • General Fund Budget $11, 085, 390 • % Increase in Budget 2. 4% • Fund Balance Reduction $ 236, 500 • Management is proposing a transfer of $101, 500 from the Police building fund to the General Fund, so Fund Balance will only be impacted by the original $135, 000 proposed • Tax Rate • % Increase in Tax Rate $ 0. 5520 2. 9%
30 Spending Cuts Made • Employee furloughs $43, 000 • The combination of furloughs and increases in health insurance will eliminate the value of raises in FY 13 for nonunion employees • Reduce hours for several part-time employees (no further cuts to Economic Development) $30, 000 • Reduce Fire Depts requests $21, 000
31 More Spending Cuts Made • Library cuts $15, 000 • Nonprofit organizations $ 8, 780 • Technical Rescue $ 1, 500 • Rescue $ 3, 500
32 More Spending Cuts Made • Parks & Recreation cuts • Police cuts • Other cuts $23, 000 $15, 000 $ 7, 100
33 Surplus Used • Proposing the transfer of excess funds of $101, 500 from Police Building account to General Fund and use it to reduce cuts in order to maintain services and avoid layoffs
34 Comparison of Municipal and School Taxes • The Municipal tax rate is about 31% of the total tax bill for Colchester residents. • If you have a house valued at $250, 000, your FY 12 property taxes would be as follows: • Education taxes • Municipal taxes • Total taxes $2, 969 $1, 342 $4, 311
35 Cost of a 1. 5¢ Tax Increase in FY 13 Assessed Value FY 13 Tax Increase Weekly Tax Increase $150, 000 $200, 000 $250, 000 $300, 000 $350, 000 $400, 000 $450, 000 $500, 000 $550, 000 $23 $30 $38 $45 $53 $60 $68 $75 $83 $0. 43 $0. 58 $0. 72 $0. 87 $1. 01 $1. 15 $1. 30 $1. 44 $1. 59
36 FY 13 MUNICIPAL BUDGET REVISION VOTE ON MAY 1, 2012
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