Frisco Draft Budget, 2023 - City Manager's Office Letter
CITY MANAGER'S OFFICE
CITY OF FRISCO
GEORGE A. PUREFOY MUNICIPAL CENTER 6101 FRISCO SQUARE BLVD 5TH FLOOR FRISCO. TEXAS 75034 TEL 972.292.5106 FAX 972.292.5122 WWW.FRISCOTEXAS.GOV
August 2, 2022
Honorable Mayor Cheney and City Council Members,
The Proposed Fiscal Year 2023 (FY 23) budget (October 1, 2022 - September 30, 2023) is presented for your consideration and approval.
The Proposed Budget as presented is balanced. Revenues are sufficient to cover program costs or fund balances are being drawn down for special programs or expenses. Strong financial reserves and our basic financial policy framework have provided us with stability during a time of economic uncertainty.
As our theme for FY23, we are following the City Council's Embracing Change and Inviting Possibilities initiative from the January 2022 Winter Work Session. This has most certainly been a year of change. Change, not only in the obvious management changes; but also in the economy, workforce challenges, and the continued growth of the city. I compliment city staff who have met these challenges head on. I also appreciate the effort of our Department Directors in presenting prudent budget requests for continued excellence in programs and service delivery.
We propose a city property tax rate at $.4466. This is below the voter approval tax rate of $.447544 and above the no new revenue rate calculation of $.399647. The proposed tax rate has been consistent at $.4466 since FY18. The increase in property value for the same property which was on the tax rolls this current year is 11.16%. New values, or properties added during the year, make up 4.45% of the total 15.61% increase in prior year taxable values. Market values for homes in Frisco has increased considerably during the past few years, and these values are reflected in the tax appraisal values for FY23. Property tax collections budgeted are based on the certified values or certified estimates from Collin and Denton County Central Appraisal Districts which were used to prepare the 2023 Tax Rate Calculation Worksheet.
Of significance for the proposed budget is Council's approval of the Over 65 Tax Freeze in June and the continuation of the $80,000 Over 65 Exemption for homesteads. Council also approved an increase in the regular Homestead Exemption from 10% to 12.5% which has an estimated tax (revenue reduction) impact of $15.4 million to the General Fund and Debt Service Fund. Council's goal is to continue incremental increases to the Homestead Exemption over the next few years to the maximum exemption allowed by state law of 20%. The exemptions provide property tax relief to the homeowners within the city, while also lowering our taxable values and allowing the city to maintain a tax rate that supports operations and programming.
Frisco's (and for that matter, the entire State of Texas) sales tax collections are at historically high levels. This is due not only to increases in sales within our retail outlets and sales tax base, but also due to costs of goods and services being higher than usual because of inflation. Our estimates for FY23 are conservative as we continuously monitor collections. We will only budget minimal increases for this volatile revenue source. Franchise tax collections are budgeted at a slight increase. Building permit fees continue to be consistent and a strong revenue stream for the General Fund with increases projected for FY23.
Increases to the current water and sewer utility rates are recommended to offset rising costs from the North Texas Municipal Water District. Inflation has dramatically increased costs for chemical supplies and maintenance. These costs are allocated to all users of the system. Additionally, with Frisco's population growth and very little rainfall this summer, our water consumption has increased significantly over the past 12 months. An additional fee increase is proposed for the Environmental Services Fund to offset increasing costs for fuel and contractual CPI adjustments with the service provider and for our on-site operations. No fee changes are proposed for FY23 for the Stormwater Drainage Fund. As has been our practice, we will bring forward a fee ordinance for Council consideration in September which will reflect these increases that will be effective January 1, 2023.
Frisco's Reserve Funds are strong, and the fund balances proposed for FY23 follow the financial policy guidelines. Unassigned Fund Balance in the General Fund is projected at approximately 26% of budgeted expenditures for FY23. Council policy is to maintain at least 25% (three months) in fund balance for the General Fund. The days in cash reserve in the Utility Operating Fund is projected to be 225 days with our policy to maintain 7 months or 210 days in cash. The Capital Reserve Fund, Insurance Reserve Fund and the Assigned Fund Balance in General Fund for deferred maintenance and projects are maintained with this budget proposal.
Frisco, like other employers, has been faced with ongoing workforce challenges. One area of concentration during budget development has been improving pay and benefits for our city employees. We have reviewed our compensation and benefits by listening to our staffs concerns and by surveying metroplex cities to stay in line with the markets of our competitors for employee talent. Proposed enhancements and changes funded in this budget include:
• Continuation of the merit pay program (pay for performance) with an average 4% pool funded • Added two new staff holidays for a total of 10 days each calendar year • Increased the annual longevity payout and cap to provide a higher annual retention bonus for years of service • Opened the Employee Wellness Center • Maintained flat health insurance premiums for employees (since 2017) provided they earn the health and tobacco discounts/incentives offered • Updated pay policies for overtime calculations
All in, the city has invested a significant amount in not only attracting quality new staff, but also invested in our current staff who carry on our excellence in services.
41.5 FTE new positions are included in this proposal for the General Fund, and 4.5 FTE new positions are proposed for the other funds for a total of 47 new positions. Of the total, 19 are new Frisco Police Department staff and 3 are included in the Frisco Fire Department. Details are included in the Executive Summary for new staffing proposals for all departments.
The proposal provides funding of over $6.8 million for replacement capital equipment, vehicles, and library books, along with maintenance for roads, parks, hike/bike trails, sidewalks, bridges, and infrastructure projects. Also included is a continuation of the funding for facility deferred maintenance, such as HVAC systems and roofs, and our information technology refresh program. New capital equipment funding is $2.2 million.
We look ahead to opening the new Public Library in early 2023 and completing the expansion and reinvestment/remodel of the Public Works Facility and Police Department Facility. Funding to manage the costs associated with these new facilities has been added to the respective operational budgets.
ARPA (American Rescue Plan Act) funding from the federal government is included at $16,638,254 to offset costs of infrastructure projects for drainage and water. These funds are one-time grants, based on our population, provided for improvements to infrastructure within Frisco.
The bond program for FY23 includes $113,425,000 authorized voter approved General Obligation bonds (GO's) for roads, parks, public safety equipment and facilities; and $15 million in (Certificate of Obligation) CO's for utility infrastructure; and $29.7 million in CO's for the Performing Arts Center Garage. In August, City Council will name a Citizen Bond Committee for 2023-2028 (CBC 23-28). The Committee will determine the bond requests for the next five years after presentations from city department heads. City Council will have the opportunity to call for a bond election for May 2023 in January 2023. If approved by the voters, this will provide capital financing for the next five years. Tax rate implications and operational impacts will be discussed as we develop the recommendations.
Throughout this document we provide the data behind the summary totals for review and analysis. During August and September, with our transparency and communication efforts, we will provide additional information and provide opportunity for citizen input through several public hearings. All presentations, videos and documents regarding the city budget and tax rates will be posted to the city website www.friscotexas.qov.
The City of Frisco's staff is focused and engaged. Departmental collaboration is evident as we continue to provide programs, services, and work on various projects throughout the City. Staff have responded to the call to embrace change and we will continue to evolve with our great city while providing services in a courteous and efficient manner. New possibilities and opportunities continue as our staff are always looking ahead. Innovation and continuous improvement are necessary for Frisco to provide the highest quality services effectively and efficiently for our residents, businesses, and visitors. The City of Frisco will continue to be known for excellent public service. That tradition is founded on the dedication, skills, and talents of the elected officials, volunteer board members, and our employees.
As always, our staff is to be commended for their professionalism. I greatly appreciate the efforts of all departments who contributed to this budget effort. Especially, I want to acknowledge the excellent work of Jenny Hundt, our Director of Budget and Planning; our budget department staff including Tanya Anderson, Blaine Morris, Lynn Reagan and Brett Peterson; and our Chief Financial Officer, Anita Cothran. I also wish to thank the Mayor and City Council for their vision, leadership, and direction during this time of change and transition.
Respectfully submitted, Henry J. Hill Interim City Manager