CAL Annual Conference Library Finance 101
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CAL Annual Conference Library Finance 101

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CAL Annual Conference Library Finance 101 CAL Annual Conference Library Finance 101 Presentation Transcript

  • CAL Annual Conference Library Finance 101 November 21, 2009 Andrew Romero, CGFM, Finance Director, High Plains LD Chris Brogan, CGFO, Chief Finance Officer, Pueblo LD Michael Varnet, CPA, Chief Finance Officer, Pikes Peak LD Steve Wasiecko, MPA, Operations Manager, Aurora Municipal Library
  • Library Finance
    • 1  min:   Introduction – Andrew Romero
    • 5 min: District Revenue/Issues - Chris Brogan
    • 5 min: Municipal Library Revenue/Issues - S teve  Wasiecko
    • 9 min: TABOR – Mike Varnet
    • 5 min: Basic Financial Reports – Chris Brogan
    • 15 min: Annual Fiscal Cycle - Andrew Romero
    • 4   min: Q&A
    Program Overview November 21 st , 2009 3:30pm – 4:15pm
    • Property tax – dedicated mill levy
    • Specific Ownership (SO) tax
    • Abatements & refunds – certify mill
    • -Revenue calculations
      • -5 ½% limit
    Library Finance District Revenue
  • Library Finance District Revenue
  • Library Finance Municipal Revenue Sources
  • Library Finance Structural Sales Tax Problem
    • Household Spending Pattern Shift
    • The Move to a Service Economy
      • 1960 – 60% on taxable goods
      • 2008 – 40% on taxable goods
    • Internet Sales
    • Revolving Retail Center Viability
    • Reliance on Consumer Spending
  • Library Finance Municipal General Fund Uses
  • Library Finance Moral of the Story: Become a District Library Revenue Per Capita
    • Background
    • Key Issues (not all inclusive)
      • Tax limit
      • Property tax revenue limitation
      • Fiscal year spending limitation
      • Multi-year financial obligations
      • Emergency reserves
    Library Finance TABOR
    • TABOR Definitions
    • "District" means the state or any local government, excluding enterprises.
    • "Emergency" excludes economic conditions, revenue shortfalls, or district salary or
    • fringe benefit increases.
    • "Enterprise" means a government-owned business authorized to issue its own revenue
    • bonds and receiving under 10% of annual revenue in grants from all Colorado state and local
    • governments combined.
    • "Fiscal year spending" means all district expenditures and reserve increases except, as
    • to both, those for refunds made in the current or next fiscal year or those from gifts, federal Funds, collections for another government, pension contributions by employees and pension fund earnings, reserve transfers or expenditures, damage awards, or property sales.
    • "Inflation" means the percentage change in the United States Bureau of Labor Statistics
    • Consumer Price Index for Denver-Boulder, all items, all urban consumers, or its successor index.
    • "Local growth" for a non-school district means a net percentage change in actual value
    • of all real property in a district from construction of taxable real property improvements, minus
    • destruction of similar improvements, and additions to, minus deletions from, taxable real property.
    Library Finance
    • TABOR Limitation Factors
      • Inflation
        • Consumer Price Index – Denver/Boulder/Greeley
      • Growth
        • Actual valuation information provided by County Assessor
    Library Finance
    • Tax Limit
      • Advance voter approval for:
          • Any new tax
          • Tax rate increase
          • Mill levy increase
          • Tax policy change causing a net tax revenue increase
    Library Finance
      • Property Tax Revenue Limitation
      • Current year limit – prior year base adjusted for growth and inflation
      • Property tax revenue excluded from limit
        • Refund and abatements
        • Voter-approved adjustments
    Library Finance
    • Property Tax Revenue Limitation
      • Example
        • 2009 property tax revenue $5,000,000
        • Inflation 1%
        • Growth 2.5%
        • Total TABOR factors 3.5%
        • 2010 property tax revenue limit $5,175,000
    Library Finance
    • Fiscal Year Spending Limit
      • Really a revenue limit
      • Current Year Limit = prior year FYS adjusted for inflation and growth
      • All governmental expenditures plus reserve increases with the exception of:
        • Gifts/donations
        • Federal funds
        • Collections for another government
        • Pension contributions by employees and pension earnings
        • Reserve transfers or expenditures
        • Damage awards
        • Property sales
    Library Finance
    • Multi-Year Financial Obligations
      • Prohibited by TABOR except for :
        • Voter approved
        • Setting cash aside irrevocably to cover debt service
        • Non-appropriation clause
        • Check with Legal Counsel
    Library Finance
    • Emergency Reserves
      • 3% of Fiscal Year Spending
      • Can’t be used for:
        • Economic conditions
        • Revenue shortfalls
        • Salary or fringe benefit increases
    Library Finance
    • Monthly reports – internal
      • Reports for board (balance sheet, cash flow, statement of revenue & expense)
      • Reports for departments
    • Annual reports – external
      • General Purpose Financial Statements
      • Comprehensive Annual Financial Report
        • GFOA award program
    Library Finance Basic Financial Reports
    • Annual Audit report (statutory requirement)
    • GASB 34 compliance
      • 1. Fund statements; Government-wide statements
      • 2. Capital assets – including capitalized books
      • 3. Depreciation
    • Submit report to Division of Local Government and State Auditor; bond holders; D&B; attorney; bond insurers; etc…..
    • Mount on web site
    Library Finance Basic Financial Reports continued
  •  
    • The Process of Budget Development
    • Step 1: what the Library hopes to accomplish next year
    • Step 2: determine total financial resources necessary for what the library wants to accomplish in the coming year
    • Step 3: securing the funding needed to carry out the planned service program
    Library Finance Annual Fiscal Cycle
    • Typical budget calendar
    • February-March : Review annual report and previous year’s data
    • Spring : Review long-range plan and library service goals in light of trends.
    • Mid-year :
    • 1. Review expenditures and revenues.
    • 2. Begin budget process, establish budget calendar and guidelines.
    • 3. Review budget guidelines and obtain direction from board or Finance committee.
    Library Finance Annual Fiscal Cycle
    • Typical budget calendar (cont.)
    • Late summer : Prepare draft budget.
    • Late summer / Early fall : Draft budget to governing body for approval.
    • Fall : Adjustments make if necessary, and approval needed before December 15 th to meet deadline for mill levy certification.
    Library Finance Annual Fiscal Cycle
  • Library Finance Annual Fiscal Cycle Available at: www. dola .state.co.us/info_publications.html
    • Budget Preparation
    • The budget preparation process has two significant categories. These categories can be approached separately or together when preparing the budget.
    • Operating budget:
      • 1 Personnel
      • 2 Ongoing expenses
      • 3 Fixed costs
      • 4 Ongoing funding sources (property tax, utility fees, charges for services)
    • Capital Budget:
      • 1 Long-term
      • 2 Large projects
      • 3 Equipment
      • 4 Related funding/debt (mineral taxes, capital grant)
    Library Finance Annual Fiscal Cycle
  • Library Finance Annual Fiscal Cycle
  • Library Finance Appendix
    • Budget Resources
    • US!
    • Colorado Financial Management Manual
      • http://www.leg.state.co.us/osa/coauditor1.nsf/UID/0E8C123D05928FB687256E9000607525/$file/2003+FMM+with+NO+appForExempt.pdf?OpenElement
    • GFOA – Budget Practices
      • http://www.gfoa.org/services/nacslb/
    • GFOA Budget Award Winners – budget documents
      • http://www.gfoa.org/documents/budgetWinners 2004.doc
    • CGFOA members
      • http://www.cgfoa.org
    • C ML
    • http://www.cml.org/info/reach/directory.aspx
  • Library Finance Appendix
    • TABOR Resources
    • Colorado Financial Management Manual – Section 6
    • http://www.leg.state.co.us/OSA/coauditor1.nsf/UID/0E8C123D05928FB687256E9000607525/$file/2003+FMM+with+NO+appForExempt.pdf?OpenElement
    • Consumer Price Index – Denver/Boulder/Greeley
    • http://data.bls.gov/PDQ/servlet/SurveyOutputServlet?data_tool=dropmap&series_id=CUURA433SA0,CUUSA433SA0
    • Colorado Division of Local Affairs
    • www.dola.state.co.us  
    • CPI forecasts – Department of Local Affairs
    • http://www.dola.state.co.us/dlg/ta/budgeting/inflation.html
    • COMMON ACRONYMS
    • CAFR – Comprehensive Annual Financial Report
    • CGFM – Certified Government Financial Manager
    • CGFO – Certified Government Finance Officer
    • CGFOA – Colorado Government Finance Officers Association
    • CPA – Certified Public Accountant
    • FASB – Financial Accounting Standards Board (private sector)
    • GAO - Governmental Accountability Office
    • GAAP – Generally Accepted Accounting Principles
    • GAAS - Generally Accepted Auditing Standards
    • GAGAS – Generally Accepted Government Auditing Standards
    • GAS – Government Auditing Standards ( the Yellow Book)
    • GASB – Government Accounting Standards Board (issues statements for implementation)
    • GFOA – Government Finance Officers Association (professional association – makes recommendation to GASB)
    Library Finance Appendix
  • Library Finance Appendix
    • Presenter Bios
    • Andrew Romero began his appointment as Finance Director for the District on June 5, 2006. Prior to this appointment, he was the Comptroller for the City of Greeley, in Greeley, Colorado, from 1994 to 2006. Mr. Romero is a graduate of the University of Arizona and holds a Bachelor of Science degree with a major in Accounting. He is a member of the Association of Government Accountants and the Government Finance Officers Association. He is a Certified Government Financial Manager (CGFM). (970) 506-8566/ [email_address]
    • Chris Brogan is currently the Chief Financial Officer for Pueblo City-County Library District, where she directs all of the budgeting, auditing, investing, and financial operations for the district. She has worked in public library finance for over thirty years. Chris holds Bachelor of Science degrees in Accounting and Public Administration from Regis University, and is certified through the Colorado Government Finance Officers Association as a Certified Government Finance Officer. She is active in both the local and national Government Finance Officers Associations, and is a founding member of the Front Range Library Finance Officers group. (719) 562-5652 / [email_address]
  • Library Finance Appendix
    • Presenter Bios
    • Michael Varnet, CPA has been with the Pikes Peak Library District (El Paso County, Colorado) for 18 years. He has been the District’s CFO throughout his tenure at PPLD. In addition, he has served as part of PPLD’s Interim Leadership Team and he has served in the capacity of Interim Information Technology Officer and Interim Facilities Officer during his tenure. He has been a licensed Certified Public Accountant since 1981(Colorado, Utah and New Mexico). He holds a BA in Accountancy from the University of Illinois, and he is currently working on his Masters in Business Administration from the University of Colorado. He is also an active member of the Government Finance Officers Association. He is also a founding member of the Front Range Library Finance Officers group. (719) 5316333 ext. 1050 / [email_address]
    • Steve Wasiecko has been with the City of Aurora, Colorado for 23 years. He has served in the positions of Financial Analyst, Budget Officer, City Clerk, Manager of Administrative Services for the City’s Library, Recreation and Cultural Services Department overseeing Finance, Personnel, Marketing, Computer Systems , Courier Services, Facilities coordination and contracts. He currently is the Acting Library Operations Manager. He holds a BA in Economics and Political Science from the University of Colorado, Boulder and a Masters in Public Administration from Colorado State University. (303) 739-6632 / [email_address]
  • Library Finance Appendix TABOR MEMO Prepared by Mike Varnet, Pikes Peak Library District TABOR Discussion The purpose of this report is to present an abbreviated discussion about TABOR, and to further discuss its implications on governmental entities. The majority of the information included in this document comes from the Colorado Municipal League’s (CML) “TABOR – A Guide to the Taxpayer’s Bill of Rights” 1999 edition. Overview Voters in Colorado approved TABOR on November 3, 1992. TABOR became law on January 14, 1993. TABOR has several names: Amendment 1, The Bruce Amendment, Article X, Section 20, The Taxpayer’s Bill of Rights and of course TABOR. TABOR contains multiple subjects, most of which are discussed below. The voters of Colorado at any point probably will never repeal TABOR in full in the future because, primarily as a result of TABOR, a constitutional amendment was added in 1994 that imposes a “single subject rule” on all statewide ballot issues. TABOR cannot be repealed in one initiated or referred measure. Ten Things to Understand about TABOR The CML publication lists ten things that every government official should understand about TABOR to help ensure compliance with its many provisions: Understand TABOR as a revenue limitation Understand what “De-Taboring” is and is not Understand the broad limitations TABOR places on “tax increases” Understand the difference between taxes and fees Understand that TABOR restricts a wide range of multiple fiscal year obligations Understand TABOR’s strict limitation on election dates and procedures for fiscal ballot questions Understand the “enterprise” exception Understand the TABOR defense against unfunded state mandates Understand the potential liabilities created by TABOR Understand that elected officials still have an important role to play in controlling governmental finances
  • Library Finance Appendix Applicability to Local Governments TABOR applies to all state and local governments. TABOR does not apply to “enterprises”. Fiscal Year Spending Calculations TABOR includes several limits within its text. The first limit is called the Fiscal Year Spending limit (FYS). By definition, the FYS limit is not really an expenditure limit, but rather a revenue limit. FYS is defined by TABOR as “total expenditures plus reserve increases less reserve decreases, less certain exclusions.” From an accounting perspective, this definition equates to revenue and other financing sources. So, in effect, FYS is really a revenue limit. Many government entities have adopted was is called the “Black Box” theory. In short, this means all cash sources (inflows of funds – revenues or otherwise) are included in the FYS calculation, and only those funds that meet the exclusion definitions per TABOR are excluded from the FYS calculations. Some governments set their strategy to simply prevent funds from being entered into the “black box”. The following list of items depicts those items that are excluded from FYS calculations (referred to as the base for the FYS limits): Enterprises Voter approved revenue changes Emergency tax revenues Refunds Gifts (including grants from private foundations, but not grants from the State or any of its sub-organizations) Federal funds (including the CMAQ grant funds) Collections from another government Pension contributions by employees and pension fund earnings Reserve transfers or expenditures Damage awards Property sales Lottery receipts In addition, the courts have now clarified that the proceeds from new debt or other financial obligations that are created with voter approval are excluded from the FYS base.
  • Library Finance Appendix Revenue Limits and Refunds There are no provisions in TABOR to implement any “income averaging” or otherwise accounting for cyclical swings in revenue that will occur over a multi-year period. The base for the current year FYS is simply the prior year FYS, adjusted for CPI and growth (discussed later). This is also known as the “ratchet effect” of TABOR. Again, if revenue is down in one year, it cannot be recovered in subsequent years without voter approval. Revenue in the subsequent years can increase only by inflation and growth. Inflation is defined as the CPI for Denver-Boulder, all items, all urban consumers. Local growth is defined by TABOR as “a net percentage change in actual value of all real property in a district from construction of taxable real property improvements, minus destruction of similar improvements, and additions to, minus deletions from, taxable real property.” TABOR stipulates that excess revenue must be refunded to the district’s taxpayers within the next year unless voter approval is obtained to keep the excess revenue. There are several methods as how the excess revenue shall be collected. The Pikes Peak Library District has found that a temporary credit to the mill levy is the most expeditious method to refund excess revenue. “ De-Taboring” and Other Voter-Approved Revenue Changes TABOR allows voters to approve a revenue change that is not a tax increase. The Supreme Court has recognized three different types of ballot questions that allows entities to keep revenue in excess of TABOR’s various limitations: “ Where a district proposes any of the forms of revenue increases…. such as a new tax, increased tax rates, or tax policy changes that result in increased tax revenue;” “ Where revenue actually collected exceeds the dollar amounts of the spending limits;” and “ Where the revenues generated by a specific tax increase exceed the estimated maximum dollar amount included in the election notice and ballot title under which the voters approved the tax increase.” “ De-Taboring” is sometimes misconstrued that a local government is opting out of TABOR. Local governments have no such options. De-Taboring applies only to excess revenue. It is a broad form of voter approval that allows the government to keep and spend revenue in excess of TABOR limits. In drafting “De-Taboring” ballot questions, the following items must be considered: Reference to TABOR Disclaimer of any tax increase Broad form or dollar specific Starting year Time limited or open ended Revenue sources to be “De-Tabored” Property tax revenues – reference to the 5.5% limit Earmarking generally, specifically or not at all Districts that are successful in such elections still must calculate FYS annually because there are still requirements that FYS apply such as future election notices in which FYS for the current year and four proceeding years must be presented, emergency reserve balances, which are calculated at 3% of FYS annually, and so forth. In addition, if the excess revenue issue is sunsetted, the district will need to know its base all along in order to calculate FYS properly when the term is up.
  • Library Finance Appendix Property Taxes TABOR includes limits to property tax revenue. Similar to FYS limits, the property tax revenue limit basically equates to the prior year property tax amount levied plus the same adjustment for inflation and local growth. In addition, unless voters have approved otherwise, government entities must also comply with the statutory 5.5% property tax revenue limitation. TABOR prohibits any mill levy increases from the prior year without voter approval, even if the levy is raised in the face of declining valuations simply to keep revenue constant. TABOR flatly prohibits the imposition of any emergency property tax. Governmental entities may be left totally helpless if the need to raise emergency revenue is needed. In addition, the State can never adopt a statewide property tax. Enterprises TABOR defines an enterprise as “a government-owned business authorized to issue its own revenue bonds and receiving under 10% of its annual revenue from grants from all Colorado state and local governments.” The Colorado Springs Department of Utilities and Memorial Hospital are two examples of enterprises under TABOR, and their revenue activities are excluded from TABOR limits. Debt and Other Multiple Fiscal Year Obligations TABOR does not allow multi-year debt or other financial obligations without voter approval or without adequate cash reserves pledged irrevocably and held for payment in all future years. The courts have held that obligations with appropriate non-appropriation language included within the legal documentation do not equate multi-year debt per TABOR requirements. Emergency Reserves Government entities are required to keep an “emergency reserve” on hand at all times. This reserve is defined as the amount equal to 3% of the entities FYS amount. Should the government declare an emergency and taps into this reserve, it needs to be replenished within the next fiscal year. This reserve cannot be used for economic conditions, revenue shortfalls, or district salary or fringe benefit increases.
  • Library Finance Appendix TABOR Ballot Issues TABOR requires a vote for 14 distinct types of propositions: New tax Tax rate increase Mill levy above that for the prior year Assessment ratio increase Extension of an expiring tax Tax policy change resulting in a revenue increase Ratification of an emergency tax Debt increases Multiple year obligations Revenue change not involving a tax increase Retention of revenue in excess of a projected tax increase Four year delay in voting Additions to election notices Weakening of other limits The CML publication provides detail as to what each of these issues represent. The CML publication provides detailed explanations for each item listed above. TABOR Ballot Issue Elections TABOR imposes various requirements on elections. This includes the timing of elections, timing of notices, the requirements of such notices, pro and con statements, fiscal year spending disclosure requirements, and wording of the ballot issue itself. Many governmental entities participate in County-sponsored coordinated elections. The entity would enter into an Intergovernmental Agreement with the county, and it will stipulate the district’s share of the cost.