The 2014 Operating Budget is submitted for your review 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 2014 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. The following highlights are provided:
Revenues – Revenues for the proposed budget, including inter-fund transfers, are projected at $67,840,340. Estimated revenue from 2014 as compared to 2013 is estimated to increase approximately 2.6% (all sources), as a result of increases in utility revenue and income tax withholding payments. The additional income tax revenue paid to the General Fund has, as its primary intended purpose, the bolstering of 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.
The largest source of revenue, the 1.5% Income Tax, is projected to generate $24,704,430 for 2014. Revenues are being projected based on 2013 actual collections from this revenue source. The income tax revenues will be allocated as follows for 2014:
General Fund (1.2%) $ 19,763,544
Street Improvement Fund (.15%) $ 2,470,443
Capital Improvement Fund (.15%) $ 2,470,443
Total $ 24,704,430
Expenditures – Overall 2014 expenditures from all uses total $66,890,689. The increase of 5.9% from the 2013 original budget is primarily a result of increased transfers to other funds, such as the Street fund and Fire Levy fund, as well as of increases in health care costs and negotiated union contracts. 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 2013, it is unlikely that the same level of balances will be added back to the respective funds at the end of 2014. Note that relatively fixed costs such as wages, along with related expenses such as taxes and pension contributions, comprise 53%, or approximately $33,500,000, of the City’s total operating budget.
The top five of the City’s funds are depicted below. The graph compares the 2013 and 2014 expenditure budgets (absent transfers). The General fund will decrease by 2% to $24,979,769. The decrease from 2013 is largely due to continued attrition of vacant positions. The Street fund will increase by 1% to 3,9,51,655. The Fire Levy fund will decrease 0.3% to $5,502,682. The Water/Sewer funds will decrease 0.76% to $9,013,008. The Recreation Facilities fund will decrease 2.24% to $1,612,321.
2014 Expenditures by Major Funds
Grants to outside agencies from the general fund have been budgeted at the same level in 2014, at $36,000. Grant requests were submitted from Partners in Prime, Fairfield Community Foundation, Fairfield Summer Community Theater, the Hamilton-Fairfield Symphony Orchestra, Fairfield Youth Baseball Association and Learning Impacts Family Enrichment. Presentations from the grant requestors were heard during the Budget Hearing on November 11, 2013. The specific allocation of available grant funds will be discussed during the Budget Hearings on November 25 and/or December 3, 2013.
General Fund transfers to other funds, including the Street, Construction and Maintenance Fund, Fire Levy Fund and the Fleet Maintenance Fund, total $1,475,000 for 2014.
Debt Service – 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 managing the debt effectively, the City’s bond rating received a continuance of its investment grade rating of “Aa1” on April, 2013. The City’s current net outstanding debt for the 2014 Operating Budget will be $28,323,956. The total debt payments in 2014 will be $1,042,269 for interest and $3,643,040 for principal.
Fund Balance – The General Fund balance has been the subject of much discussion over the past couple of 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 2013 revenues by 3.9%. The public vote on the income tax re-apportionment helped to offset State influenced revenue losses, as well as to bolster the General Fund balance, the latter of which is expected to be approximately $9.8 million at the end of 2013. Of this amount, $6 million of the General Fund balance is being budgeted as a reserved fund balance; in conjunction with Council’s goals. This leaves an unreserved cash balance of $3.8 million to continue to provide services to residents as well as to offset future unforeseen national, regional and/or local economic changes, in the event of negative occurrences. A historical perspective chart will be provided at Council’s November 25 budget presentation.
The 2014 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.
Summary – 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.