Meeting Capital Challenges through Multi-Year Financial Planning


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Presentation, Meeting Capital Challenges through Multi-Year Financial Planning, presented at Winter 2012 NCLGBA Conference

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Meeting Capital Challenges through Multi-Year Financial Planning

  1. 1. Town of HillsboroughEmily Bradford, Budget & Management Analyst
  2. 2. Before the Multi-Year Financial Plan Budget ordinance and CIP prepared on a typewriter (late ’90s!). Built forecast from scratch at beginning of budget season. Spending down fund balance and retained earnings. 18 months from bankruptcy in both funds! Proposed budget:  7-cent tax rate increase  23.5% water and sewer rate increase
  3. 3. Why a Multi-Year Financial Plan? Get out of the weeds! More information to process which forces everyone to focus on the big picture.  Year 1 – 60%  Year 2 – 20%  Year 3 – 20% Few surprises because the Board has seen and talked about it for 3 years. Moves focus beyond just the current fiscal year. Want to know how this year’s decisions will impact years 2 and 3. Cuts/deferments are easier on staff. They don’t just disappear, they can still see them in the plan.  Plan for how to address needs in the short-term, but also plan for when item/position comes online.
  4. 4. Extended Budget Season FY13’s budget didn’t look good:  Declining/flat revenues  Nothing left to defer  Operational expenses already cut to the bone  10% of General Fund staff eliminated in FY12 Started budget process 3 months early. Presented “workbook” to Board in early February rather than May.  More time to work on the most pivotal issues.
  5. 5. Capital Improvement Plan 10-year plan. Capital projects/items >$100K. Includes both capital and operational cost estimates.
  6. 6. Wastewater Treatment PlantUpgrade $19.2M WWTP upgrade currently under construction.  $1.46M annual debt service payments, increasing WWTP’s budget by 2.4 times in FY15. Need equivalent of 2,736 new homes using 4,500 gpm for debt payments to have no impact customers.  Phase I of UNC Hospital = 233 homes  Full build out = 1,346 Efland-Cheeks sewer system disconnecting from Hillsborough in FY15 – 7.5% reduction in revenue.
  7. 7. WWTP (continued) Rate Increase Options:  Massive rate increase in FY15 to cover lost revenue and debt service payment (>50%)?  Series of smaller rate increases? 8.8% annual rate increases from FY12-18.  Reserve revenues from rate increases to use in early years of debt repayment to cover the difference until rates are sufficient.  Any growth in total water usage likely to be counteracted by customer conservation due to increasing rates.
  8. 8. Water System Enhancements FY13 – 5% water rate increase, with no increases projected for FY14 & FY15. FY16-18 – water rate increases anticipated to fund:  Construction of phase II of the reservoir.  Expansion of Water Treatment Plant.
  9. 9. Fiscal Radar Annual budget gives little advance notice of problems looming on the horizon. Multi-year plant helps avoid surprises.  Encourages you to look forward and identify, address and mitigate potential problems while they are still manageable.  See how today’s decisions impact the financial condition of the Town in the future.