2017 Operating Budget
The 2017 Operating Budget is submitted in accordance with Article VI, Section 6.02, Paragraph (A)(6) of the Fairfield City Charter. The proposed budget represents this coming year’s plan for generating revenues and funding expenditures to implement specific programs, functions and activities during the 2017 fiscal year. The budget is the City’s primary fiscal planning document. Its major goal is to provide sound fiscal administration. Prudent financial management seeks to meet the needs of the City’s residents and businesses while recognizing the constraints of available revenues. Thoughtful expenditure priorities and maintenance of reasonable staffing levels are key to sound budgeting. The proposed Operating Budget was drafted with this in mind.
Revenues for the proposed budget, including inter-fund transfers, are projected at $77,740,640. Estimated revenue from 2017 as compared to amended 2016 is estimated to have increased approximately 2.4% (all sources).
The additional income tax revenue paid to the General fund has, as its primary intended purpose, bolstered the reserves to meet the City’s bond rating agency’s (Moody’s Investor Services) requirements. The estimated revenue allocation is shown in the chart below.
Sources of Revenue
The largest source of revenue, the 1.5% Income Tax, is projected to generate $28,560,000 for 2017. Revenues are being projected based on 2016 actual collections from this revenue source. The income tax revenues will be allocated as follows for 2017:
|General Fund (1.2%)||$22,848,000|
|Street Improvement Fund (.15%)||$2,856,000|
|Capital Improvement Fund (.15%)||$2,856,000|
Overall 2017 expenditures from all uses total $71,365,451. The decrease of 1.7% from the 2016 original budget is primarily a result of expiration of debt payments. Historically the City has spent an average of 95% of its budgeted operating funds which, in the past, has allowed for the remaining 5% of unspent funds to be added back to next year’s respective fund balances. With tighter up-front expenditures being budgeted this year, and in years past, it is unlikely that the same level of balances will be added back to the respective funds at the end of 2017. Note that relatively fixed costs such as wages, along with related expenses such as taxes and pension contributions, comprise 54.9%, or approximately $39,230,000, of the City’s total operating budget. As all five labor contracts expire in early 2017, this budget does not include any wage increases beyond the required step or license increases agreed to back in 2014.
The top 5 of the City’s funds are depicted below. The graph compares the 2016 and 2017 expenditure budgets (absent transfers). Each fund compared to last year is showing an increase:
- General fund - 1.05% ($26,321,194)
- Street funds - .02% ($4,568,237)
- Fire Levy fund - (-3.49%) ($6,313,194)
- Water/Sewer funds - 6.41% ($10,546,753)
- Recreational Facilities fund - .19% ($1,531,238)
The increases in the General, Streets and Recreational Facilities funds are due to increases in operating costs, whereas, the increase Water/Sewer funds due to an increase in the rebate to Butler County Water and Sewer for sewer charges the City collects on behalf of Butler County. The decrease in the Fire Levy fund is due to realigning of expenditures for 2017.
Grants to outside agencies from the general fund have been budgeted at the same level in 2017, at $36,000. Grant requests were submitted from:
- Fairfield Community Foundation
- Hamilton-Fairfield Symphony Orchestra
- Partners in Prime
Presentations from the grant requestors were heard during the Council-Manager Briefing on October 23, 2016. The specific allocation of available grant funds will be discussed during the Council/Manager Briefings on November 14 and/or November 28, 2016.
General fund transfers to other funds, including the Street, Construction and Maintenance, Street Improvement, Capital Improvement, Municipal Garage, and Recreational Facilities funds total $2,750,000 for 2017. Particular to the Fire Levy fund, the passage of an additional 2.5 mills for the Fire/EMS operations on November 8, 2016 will infuse much needed revenue to sustain Fire operations for many years to come while eliminating the General fund subsidy.
The City’s Debt Service funds are dependent on revenues from the General fund, Capital funds, and the Water, Sewer and Recreation Facilities funds. Due to the City’s commitment to have the debt service funds have first rights on City revenues, as well as our intent to manage the debt effectively, the City’s bond rating received a confirmation of its investment grade rating of “Aa1” in March, 2014. The City’s current net outstanding debt for the 2017 Operating Budget will be $16,894,238. The total debt payments in 2017 will be $731,474 for interest and $2,915,615 for principal.
The General fund balance has been the subject of much discussion over the past several years as State local government and estate taxes have decreased or been eliminated. The General fund’s main source of revenue, the local income tax, has now stabilized and is being conservatively projected to increase over 2016 projected revenues by 1.6%. The General fund balance is expected to be approximately $12.8 million at the end of 2016. In conjunction with Council’s goal of a 25% reserve, $7.3 million of the General fund balance is being budgeted as a reserved fund balance. This leaves an unreserved cash balance of $5.5 million to continue to provide services to residents as well as to offset future unforeseen national, regional and/or local economic changes, or in the event of negative occurrences. A historical perspective chart will be provided at Council’s November 28 budget presentation.
The 2017 Operating Budget demonstrates the overall financial strength of the City of Fairfield’s financial position, especially in the General fund. This strength is attributable to the vibrant and diverse economic base that continues to be Fairfield’s hallmark, along with the City’s consistent stewardship of managing expenditures, particularly during challenging economic times.
The Annual Operating Budget is a comprehensive road map used to guide the operations of the City. Fairfield has provided an excellent and comprehensive level of service to its residents and businesses within the constraints of available financial resources. This document is a plan to continue those existing service levels, while simultaneously maintaining the City’s strong financial position in a long term, sustainable manner.