FY 13 REVISED MUNICIPAL BUDGET

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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 art• 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 ANDTHE TAX RATEHow 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

$10,000,000 $19,000,000 $0.5263

$10,000,000 $19,190,000 $0.5211

$10,100,000 $19,000,000 $0.5316

$10,100,000 $19,190,000 $0.5263

EFFECT OF REAPPRAISAL ON FORMULA

 Before

ReappraisalAfter

ReappraisalAssessed Value $14,000,000 $20,000,000

Budget $10,000,000 $10,000,000

Tax Rate $0.7143 $0.5000

EFFECT OF REAPPRAISAL ON PROPERTY TAXES

 Before

ReappraisalAfter

Reappraisal

Assessed Value $140,000 $200,000

Grand List Value $1,400 $2,000

Tax Rate $0.7143 $0.5000

Tax $1,000 $1,000

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.

FY 13 BUDGET REVISIONS

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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

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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

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Change in Tax Rate over Time

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Yearly Municipal Tax Rate

Financial Challenges Remain

•Keep municipal taxes within affordable limits

•Protect key existing public services

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Financial Challenges

•Preserve reserves to remain financially healthy – fiscally sound

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FY 13 - Then•Previous Request

• General Fund Budget $11,275,590• % Increase in Budget 4.2%• Fund Balance Reduction $ 135,000

• Tax Rate $ 0.5669• % Increase in Tax Rate 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.

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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 $ 0.5520• % Increase in Tax Rate 2.9%

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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

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More Spending Cuts Made

•Library cuts $15,000

•Nonprofit organizations $ 8,780

•Technical Rescue $ 1,500

•Rescue $ 3,500

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More Spending Cuts Made

•Parks & Recreation cuts $23,000•Police cuts $15,000•Other cuts $ 7,100

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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

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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 $2,969• Municipal taxes $1,342• Total taxes $4,311

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Cost of a 1.5¢ Tax Increase in FY 13

Assessed ValueFY 13 Tax Increase

Weekly Tax Increase

$150,000 $23 $0.43$200,000 $30 $0.58$250,000 $38 $0.72$300,000 $45 $0.87$350,000 $53 $1.01$400,000 $60 $1.15

$450,000 $68 $1.30$500,000 $75 $1.44$550,000 $83 $1.59

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FY 13 MUNICIPAL BUDGET REVISION

VOTE ON

MAY 1, 2012

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