CITY COUNCIL BUDGET WORK SESSION J. Lloyd Snook, III, Mayor Juandiego Wade, Vice Mayor February 2, 2023 Michael K. Payne, Councilor Hybrid Meeting Brian R. Pinkston, Councilor In-person: CitySpace Main Conference room Council vacancy Kyna Thomas, Clerk (100 5th Street NW) Electronic: www.charlottesville.gov/zoom AGENDA 5:00 PM Budget Work Session – Budget Development (Budget Documents available at https://www.charlottesville.gov/169/Budget) I. Call to Order II. Roll Call III. Work Session IV. Public Comment V. Adjournment City Council Budget Work Sessions will be conducted in hybrid format with electronic access by Zoom at www.charlottesville.gov/zoom and in-person seating for up to 20 pre-registered members of the public and limited staff in CitySpace (100 5th Street NW). Seats may be reserved at https:// www.charlottesville.gov/1543/Reserve-a-Seat-for-City-Council-Meeting The public may view this meeting electronically by registering in advance for the Zoom webinar or view on the City's streaming platforms and local government Channel 10. Individuals with disabilities who require assistance or special arrangements to participate in the public meeting may call (434) 970-3182 or submit a request via email to ada@charlottesville.gov. The City of Charlottesville requests that you provide a 48-hour notice so that proper arrangements may be made. FY 2024 Budget Development Operating and Capital Improvement Budget February 2, 2023 BUDGET WORK SESSION FY 2024 BUDGET DEVELOPMENT 1 FY 2023 Budget Development Agenda 1. Key Dates 2. Budget Guidelines 3. Financial Polices 4. FY 24 Revenue Growth 5. FY 24 Expenditure Drivers 6. Council Budget Priorities 2 FY 2024 Budget Development Key Dates • Feb 8 – Real Estate Tax Rate (and rollback rate) advertisement will be sent to paper for publication per State requirement that must occur 30 days before the real estate tax rate public hearing (publish on Feb 15) – Other changes to local taxes require a 7 day advertisement and separate public hearing • March 6 - Proposed City Operating and Capital Budget and Adopted School Budget Formally Presented to Council • March 20 - First Tax Rate Public Hearing • March 22 – First Budget Public Hearing • April 3 - Second Budget Public Hearing/Budget and Tax Levy First Reading • April 11 - Budget and Tax Levy Second Reading and Final Approval Office of Budget and Performance Management 3 www.charlottesville.gov/budget FY 2024 Budget Development Scheduled Worksessions Mar 9 Budget Worksession #1 (FY 24 Revenues & Expenditures) Mar 16 Budget Worksession #2 (Outside and Non Profit Agencies) Mar 30 Budget Worksession #3 (Capital Improvement Program) Apr 6 Budget Worksession #4 (Budget Wrap-up) Link to detailed calendar Office of Budget and Performance Management 4 www.charlottesville.gov/budget FY 2024 Budget Development Budget Guidelines 1. Annually review major local tax rates. 2. Develop operational budgets within projected available revenues. 3. Incorporate the Council's Strategic Vision Areas and Strategic Plan Goals 4. Continue the strong commitment to education by allocating up to 40% of new City real estate and property tax revenue to schools. 5. Invest strategically in employees by providing adequate pay, benefits, training 6. Fund no new programs or major expansion of existing programs without fully offsetting revenues or reductions in expenditures. Office of Budget and Performance Management 5 www.charlottesville.gov/budget FY 2024 Budget Development Budget Guidelines 7. Balance reinvestment in the City’s existing infrastructure and facilities and creation of new opportunities for investing in the future of the City. 8. Conduct the Vibrant Community Fund process, to evaluate agency requests for program congruence with Council’s strategic areas. 9. Transfer at least 3% of general fund expenditures to the Capital Improvement Fund (CIP). 10. Budget a reserve for Council Strategic Initiatives. 11. Budget a Fund Balance Target Adjustment pool of funds to help ensure that the City continues to meet the important financial policy of maintaining an unappropriated fund balance in the General Fund. Office of Budget and Performance Management 6 www.charlottesville.gov/budget FY 2024 Budget Development Long-Term Financial Policies 1. Maintain a minimum General Fund balance of at least 14% of General Fund budget. This policy provides the City with sufficient working capital and a margin of financial safety to address unforeseen, one-time expenditure emergencies or significant unforeseen declines in revenues in a specific fiscal year. In the event of a drawdown, the reserve must be replenished to the 14% level within three years. 2. Maintain a minimum Downturn Reserve Fund balance of no less than 3% of General Fund budget. Drawdown of this reserve can occur in the event that revenues decline by more than 1.5% of current fiscal year estimate and will be limited to less than half of the balance of the Downturn Reserve Fund. In the event of a drawdown, the reserve must be replenished to the 3% level within three years. 3. Maintain sufficient working capital in the utility funds (Water, Wastewater, Gas, Stormwater). Office of Budget and Performance Management 7 www.charlottesville.gov/budget FY 2024 Budget Development Long-Term Financial Policies 4. Stabilize all non-general funds by ensuring they have a positive fund balance. 5. Debt service as a percentage of the general fund total expenditure budget has a ceiling of 10%, with a target of 9%. In calculating compliance with this ratio, the City will exclude debt serviced by dedicated revenues, i.e. self- supporting debt. 6. Transfer an amount equivalent to 1 percent of the meals tax rate to the Debt Service Fund Office of Budget and Performance Management 8 www.charlottesville.gov/budget FY 2024 Budget Development FY 24 Revenue Growth FY 2023 Adopted FY 2024 Proposed $ Change Budget Budget* $13,945,943 $212,889,991 $226,701,302 Increase Office of Budget and Performance Management 9 www.charlottesville.gov/budget FY 2024 Budget Development FY 24 Projected Revenue FY 2023 FY 2024 Local Taxes Adopted Budget Projection* $ Change Real Estate Tax $ 89,487,993 $ 99,403,417 $ 9,915,424 Personal Property Tax 12,000,000 12,500,000 500,000 Public Service Tax 1,589,086 1,630,567 41,481 Utility Taxes 4,600,000 4,600,000 - Virginia Communications Sales and Use Tax 2,125,000 2,125,000 - Tax on Bank Stock 1,200,000 1,157,411 (42,589) Tax on Wills & Deeds 725,000 725,000 - Sales & Use Tax 13,900,000 14,400,000 500,000 Transient Room Tax 7,000,000 7,400,000 400,000 Meals Tax 14,075,026 15,000,000 924,974 Cigarette Tax 550,000 550,000 - Vehicle Daily Rental Tax 82,500 170,000 87,500 Plastic Bag Tax - 40,000 40,000 Office of Budget and Performance Management 10 www.charlottesville.gov/budget FY 2024 Budget Development FY 24 Projected Revenue FY 2023 FY 2024 Adopted Budget Projection* $ Change Licenses and Permits Business & Professional Licenses $ 8,700,000 $ 8,700,000 - Vehicle Licenses $ 890,000 $ - (890,000) Building and Related Permits $ 1,330,000 $ 949,000 (381,000) Other Permits $ 150,000 $ 216,000 66,000 Intergovernmental Revenue State Highway Assistance $ 4,263,654 $ 4,645,517 381,863 Reimbursement/Constitutional Offices $ 1,755,297 $ 1,961,537 206,240 State Aid for Police Protection $ 2,238,352 $ 2,460,982 222,630 Other Intergovernmental Revenue $ 1,187,175 $ 1,096,026 (91,149) City-County Revenue Sharing Agreement $ 15,545,227 $ 15,715,740 170,513 Office of Budget and Performance Management 11 www.charlottesville.gov/budget FY 2024 Budget Development FY 24 Projected Revenue Charges for Service Recreation Income $ 1,472,699 $ 1,509,269 36,570 EMS Billing Revenue $ 900,000 $ 765,000 (135,000) Payment in Lieu of Taxes $ 6,268,888 $ 6,746,568 477,680 Reimbursable Overtime $ 331,579 $ 229,100 (102,479) Transfers from Other Funds Transfer from Parking Enterprise Fund $ 500,000 $ - (500,000) Miscellaneous Revenues Interest Income $ 580,000 $ 1,050,000 470,000 Designated Revenues Meals Tax Designated for the Debt Service Fund $ 2,564,974 $ 2,727,272 162,298 School Contracted Services $ 7,806,634 $ 9,291,621 1,484,987 Total Change $ 13,945,943 *Projected as of January 23, 2023 % Change 7.23% Office of Budget and Performance Management 12 www.charlottesville.gov/budget FY 2024 Budget Development FY 24 Projected Revenue Total Budget $ Change FY07 $ 120,145,206 - FY08 134,662,800 $ 14,517,594 FY09 140,992,521 6,329,721 FY10 142,443,480 1,450,959 FY11 140,751,728 (1,691,752) FY12 143,306,538 2,554,810 FY13 146,269,910 2,963,372 FY14 148,167,862 1,897,952 FY15 150,742,327 2,574,465 FY16 156,391,435 5,649,108 FY17 162,017,737 5,626,302 FY18 171,657,127 9,639,390 FY19 179,725,535 8,068,408 FY20 188,800,371 9,074,836 FY21 191,195,873 2,395,502 FY22 192,212,843 1,016,970 FY23 212,889,291 20,676,448 Office of Budget and Performance Management 13 www.charlottesville.gov/budget FY 2024 Budget Development Amended FY 23 Budget FY 23 Adopted Budget $ 212,889,291 On-going Expenses added using one-time Funds $ 3,300,000 Amended Budget Base for FY 24 $ 216,189,291 Additional Amendments - FY 22 Year-End Surplus $ 22,914,915 *One-Time Expenses FY 23 Total Budget as Amended $ 239,104,206 * FY 24 Projected Revenue $ 226,701,302 Office of Budget and Performance Management 14 www.charlottesville.gov/budget FY 2024 Budget Development FY 24 Expenditure Drivers Increases already included: On-going expenses funded by one-time funds - $3.3M  Additional Staffing for Fire, Human Resources, Human Rights - $1.6M  CAT and School bus driver pay increases - $688k  Restoring pre-COVID funding levels for Facilities Repair - $200k  Restoring pre-COVID funding levels for Vehicle Replacement - $829k Schools – Local Contribution - $4.2M  per 40% Formula Intergovernmental/Multi-Jurisdictional Agency Increases - $911k $13.9M New Revenue - $8.4M Cost Known Increases = $5.5M Remaining Office of Budget and Performance Management 15 www.charlottesville.gov/budget FY 2024 Budget Development FY 24 Expenditure Drivers Increases Being Considered: Employee Compensation and Benefits - $3.7M increase  July 1, 2023 4% Merit - $2.4M  Retiree 2% COLA - $1M  City cost increase for employee healthcare - $277,905  No changes or cost increases related to Health Insurance for Employees Vibrant Community Fund - $200k increase  Based on previous feedback from Council Meals Tax Transfer to Debt Service – $826k  Meals Tax Transfer - $162k increase (per financial policy)  Capacity Transfer - $664k increase Office of Budget and Performance Management 16 www.charlottesville.gov/budget FY 2024 Budget Development FY 24 Expenditure Drivers Other Items:  Collective Bargaining  Services for the Unhoused  Climate Action  City Share of Regional Projects  Jail Renovations  RWSA Baling Facility (CIP)  Fund for Pathways/Emergency Assistance  Departmental New Requests  $6M estimated total  27 new positions Office of Budget and Performance Management 17 www.charlottesville.gov/budget FY 2024 Budget Development Capital Budget Overview PROPOSED CIP - DRAFT FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 Totals Sources of Funds: General fund transfer $ 9,390,407 $ 9,623,029 $ 10,022,514 $ 10,300,601 $ 10,587,028 $ 49,923,579 Year- End Surplus 8,632,134 895,316 - - - $ 9,527,450 Bond issues 79,073,907 14,726,587 13,095,174 7,565,095 10,639,212 $ 125,099,975 Contribution from Schools 2,716,933 200,000 200,000 200,000 200,000 $ 3,516,933 Other 40,000 2,940,000 40,000 40,000 40,000 $ 3,100,000 Total sources $ 99,853,381 $ 28,384,932 $ 23,357,688 $ 18,105,696 $ 21,466,240 $ 191,167,937 Uses of funds: Education $76,780,672 $5,337,504 $5,757,489 $4,900,000 $4,900,000 $97,675,665 Economic development $0 $0 $0 $0 $0 $0 Facilities Capital Projects $1,738,877 $1,457,083 $1,696,794 $1,459,155 $1,493,929 $7,845,838 Public safety and justice $1,306,215 $303,800 $898,918 $1,484,065 $1,550,768 $5,543,766 Transportation and access $7,169,936 $8,861,545 $4,724,487 $4,632,476 $4,600,293 $29,988,737 Parks and recreation $1,947,681 $1,015,000 $1,015,000 $1,015,000 $1,015,000 $6,007,681 Affordable Housing $10,620,000 $11,120,000 $8,975,000 $4,325,000 $7,616,250 $42,656,250 General government $290,000 $290,000 $290,000 $290,000 $290,000 $1,450,000 CIP Contingency $0 $0 $0 $0 $0 $0 Total uses $ 99,853,381 $ 28,384,932 $ 23,357,688 $ 18,105,696 $ 21,466,240 $ 191,167,937 Office of Budget and Performance Management 18 www.charlottesville.gov/budget FY 2024 Budget Development Capital Improvement Program Debt Affordability "Planning" "Consequences" Ratio of Debt General Fund Service to Total General Additional Debt Service Fiscal Bond Issue Annual Debt Expenditure General Fund Fund Funds To Be Fund (1) Year Amount Service (2) Budget (3) Expenditures Transfer(4) $ Increase Added Balance(5) 2016 11,125,466 9,128,798 156,391,435 5.84% 9,279,578 - 11,962,480 2017 11,140,000 10,103,067 162,018,737 6.24% 9,817,330 537,752 11,880,013 2018 4,610,000 10,615,335 171,657,127 6.18% 10,371,750 554,420 11,905,368 2019 9,520,000 10,375,167 179,725,535 5.77% 11,003,348 631,598 12,830,074 2020 - 10,743,891 188,863,920 5.69% 11,049,584 46,236 13,410,785 2021 22,655,000 10,684,789 191,195,873 5.59% 10,354,393 (695,191) 13,225,476 2022 18,350,000 11,542,935 192,212,843 6.01% 11,215,048 860,655 12,987,105 2023 15,000,000 13,174,455 212,889,291 6.19% 13,072,874 1,857,826 3,894,224 16,687,786 2024 35,000,000 13,681,939 216,082,630 6.33% 13,736,827 663,953 - 16,742,674 2025 46,000,000 15,759,829 219,323,870 7.19% 14,543,091 806,264 - 15,525,936 2026 30,250,000 18,473,156 222,613,728 8.30% 15,403,178 860,086 - 12,455,957 2027 15,000,000 20,549,227 225,952,934 9.09% 16,320,802 917,624 - 8,227,533 2028 15,000,000 20,731,635 229,342,228 9.04% 17,299,937 979,136 - 4,795,835 2029 15,000,000 21,039,002 232,782,361 9.04% 18,344,836 1,044,899 - 2,101,669 2030 15,000,000 21,152,166 236,274,097 8.95% 19,460,046 1,115,210 - 409,549 2031 15,000,000 21,528,737 239,818,208 8.98% 20,650,431 1,190,386 - (468,757) 2032 15,000,000 21,903,326 243,415,481 9.00% 21,921,198 1,270,766 - (450,885) 2033 15,000,000 22,817,062 247,066,713 9.24% 23,277,913 1,356,715 - 9,965 2034 15,000,000 22,890,168 250,772,714 9.13% 24,726,533 1,448,620 - 1,836,365 Office of Budget and Performance Management 19 www.charlottesville.gov/budget FY 2024 Budget Development Funding for Council Priorities Affordable Housing  $10.6M CIP Buford School Reconfiguration Project  Fully Funded Climate Change  Gas Decarbonization Study  Transit Alternative Fuel Study  EV Charging Infrastructure  Leveraging Existing CIP $$ for Grants and other opportunities for Energy Performance Improvements ADA Transition Plan  $500k in the CIP What else would Council like to see in FY 24?? Office of Budget and Performance Management 20 www.charlottesville.gov/budget FY 2024 Budget Development Public Hearing Notice First Tax Rate Public Hearing March 20, 2023 6:30 PM February 8th – Legal Ad Finalized February 15 – Ad to be Published *Virginia Code Section 58.2-3321 which will set the date for a public hearing on the tax rate. This advertisement must be placed in the Daily Progress at least 30 days before the date of the public hearing. Office of Budget and Performance Management 21 www.charlottesville.gov/budget FY 2024 Budget Development Major Taxes What Does Incremental Increase Generate Based on FY 24 Estimated Revenue Tax Rate Revenue Type Rate Increase Revenue Increase $0.96/$100 Real Estate Tax $0.01 $1,035,452 6.5% Meals Tax 1.0% $2,727,272 $4.20/$100 Property Tax $0.01 $29,762 8.0% Lodging Tax 1.0% $925,000 Office of Budget and Performance Management 22 www.charlottesville.gov/budget FY 2024 Budget Development Questions and Discussion Office of Budget and Performance Management 23 www.charlottesville.gov/budget FY 2024 Budget Development Wrap-up and Public Comment City Manager’s Proposed Budget Formally Presented to City Council: March 6th 6:30PM Council Chambers Next Budget Worksession: March 9h 6PM CitySpace Office of Budget and Performance Management 24 www.charlottesville.gov/budget