Workshop topics

Loveland City Council tackles ‘tough questions’ at 2023 budget workshop – Loveland Reporter-Herald

City of Loveland Chief Financial Officer Brian Waldes leads City Council and other city staff through a discussion of the challenges and opportunities of the 2023 budget process during a study session. a day at the Forge on Monday. (Jocelyn Rowley/Loveland Reporter-Herald)

The town of Loveland has seen substantial revenue growth over the past two years and should now have a large cash reserve by 2023, according to the town’s chief financial officer, Brian Waldes.

However, a number of new challenges and unforeseen demands have also arisen in recent years, leading to “tough questions” about how city resources should be prioritized.

On Monday at The Forge, Waldes and a team of facilitators from Trebuchet Consulting led City Council and Chiefs of Staff through a day-long budget “workshop” to discuss some of those priorities and decide on the best approach to manage the reserve in 2023 and beyond. .

“The good news is that we have a very strong fund balance and there are no flashing red lights,” Waldes said. “But at the same time, we have to make our decisions to move forward in a very, very measured way.”

Waldes opened the presentation with a current overview of Loveland’s finances and an explanation of the revenues and funding commitments that led to this point.

According to Waldes, the city is currently in a “sound” financial position, thanks to a series of one-time payments that have added significant revenue to the city’s coffers over the past 12 months, including $9.4 million from the American Rescue Plan Act and large building permit fees from Amazon Inc.

The city is also on track to collect about 12% more revenue from sales and property taxes in 2022 than in 2021, due to a combination of inflation, population growth and pent-up demand left behind by the pandemic.

As a result, overall operating revenue is expected to be $126.7 million in 2022, compared to $110.9 million in 2021.

On the other side of the ledger, Loveland’s operating expenses in 2022 are also expected to increase significantly, from $85.8 million to $109.7 million.

Most of the increase is due to higher personnel costs, but the city also absorbed higher costs for materials and supplies due to inflation and supply chain issues.

Still, the city is expected to have an income-to-expense ratio of 1.16 at the end of 2022, up from 1.3 in 2021, but higher than 2019 (1.09).

The result will be an unrestricted fund balance at the end of the year totaling $27.2 million. This is in addition to the city’s estimated $26.3 million in various reserve accounts, bringing the total amount of uncommitted funds for 2023 to $57.5 million, although a portion is reserved. for emergency use only.

While that sounds like good news for councilors and city staff hoping to see their priorities funded sooner rather than later, Waldes was quick to throw cold water on the notion.

Tax revenue growth is expected to level off in 2023, at around 3%, but without one-time payments, total revenue is expected to be around 9% lower than in 2022. Meanwhile, operating expenses are expected to reach $112.3 million. next year, about 2% less than revenue.

In 2024, however, the ratio is expected to reverse, due to an anticipated economic recession which could reduce projected revenues.

“If we have a general fund that’s in that kind of situation, where expenses exceed income, well, over a period of time, we’ll end up running out of balance,” Waldes said. “So that’s the balancing act that we’re looking at.”

Waldes and his team then presented the city council with a series of potential “decision packages” for the 2023 budget, to help set priorities in the years to come. These contained items considered discretionary, but which were “requested” by city staff.

Among them were three “slices” of general fund spending, grouped in order of priority. In the tranche recommended by staff, there was $2.2 million in current expenditures, including a $1.9 million increase in staff compensation. The “medium” bucket consisted mostly of one-time expenses, including safety gear for road crews and a summer employee recognition event.

The third or lowest priority band included proposed expenditures of $1.02 million, including $299,440 in current expenditures.

Waldes also proposed decision packages to increase the LPD and LFRA staff, as well as major projects, such as the ban on outdoor camping, the airport terminal and parking management.

City council members then conducted prioritization exercises to determine the level of urgency and support for these proposed expenditures, which Waldes and budget managers will use when drafting the final budget.

The discussion then moved to capital projects, which encompass transit, facilities and “big projects,” such as the Draper, Pulliam Community Building and the HIP Streets plan.

Council was asked to choose between three levels of funding — $8 million, $10 million or $12.1 million — to meet the city’s exceptional needs. The highest tier would provide funding for all pending projects, excluding these major projects, while the lowest tier would require substantial list cuts. However, some capital projects come with ongoing costs, Waldes warned, meaning the budget impact lasts beyond next year.

Although no formal action was taken on the 2023 budget, the council eventually reached a loose consensus on a “conservative” approach to future finances. Specifically, they agreed to review the recommended decision set, the major project set, and the $10 million in capital expenditures for next year.

Council also agreed to consider the proposal for substantial increases for the police and fire departments.

The next budget planning meeting with Waldes and the finance team will be on September 27 with dedicated and corporate funds as the topic. The 2023 budget will undergo a formal review and vote in October.