Disclaimer: The comments in this blog are my personal opinion and may or may not reflect an adopted position of the city of Glendale and its city council.
For the next 6 weeks or so, the city council will be focused on Glendale’s budget. There will be a series of workshops devoted to it. The first one was held on March 7, 2017 and reviewed revenue projections, sources of the city’s revenues and the areas in which those revenues are spent. Keep in mind, per state law, Glendale and every other municipality must adopt a balanced annual budget. What does that mean? That means the total of the city’s expenses must be shown to be covered by the revenues it receives.
There are 2 parts to the city’s budget: its General Fund budget and the Enterprise Funds’ budgets. The General Fund budget covers all expenses incurred by the city except for: Water, Sewer, Sanitation and Landfill. These 4 areas are called Enterprise Funds and they get their revenues from rate payers or users.
The pot of money for the General Fund has 2 components: all revenues and a fund balance (a rainy day fund). The money is paid out to 5 areas: expenditures, operating costs, the Capital Improvement Plan, our debt payments and a contingency fund. Except for debt payments which are a fixed cost, the other 4 areas compete against one another for the available money.
Where does the city get its money? From 5 sources:
- Sales tax 44%
- State shared revenue 26%
- Other 17%
- Transfers In 11%
- Property Tax 2%
There is one special note about the sales tax the city collects and that is, it no longer manages or collects it. A year or two ago, the state legislature, in its wisdom, mandated that it would collect every city’s sales tax and distribute those funds collected to each city. Now Glendale has to pay the state nearly half a million dollars to collect its sales tax…a new expense that Glendale never had before. To add insult to injury, this program rolled out completely in January of this year, 2017. To date, the state has only collected and dispersed approximately 66% of the money Glendale itself usually collected. I contend that in addition to our regular budget planning for next year, the city should be planning an alternate budget in case the worst happens and it does not receive all of the sales tax from the state to which it is entitled.
There’s also another gimmick the state uses and that is with regard to state shared revenue. The largest component is state shared income tax. Every year we pay income tax to the state but cities do not get their share the following year. Instead the cities are paid two years later. That means the income tax you pay this year for 2016 won’t be seen by the cities until 2018. Think of the interest the state makes on millions and millions of dollars in income tax for that extra year until they disperse the money to the cities.
There are no certain figures for expenses within the General Fund budget for this year as we are in the process of crafting this year’s budget. In last year’s Fiscal 2016-17 General Fund budget, here were the areas of expense:
- Police department 43%
- Fire department 22%
- Other 16%
- Non-departmental 9%
- Public Facilities, Rec & Events 6%
- Public Works 4%
Note that 65% of the city’s money goes to pay for Police and Fire. When you see the city’s total budget of approximately $500 million remember that only a portion of that is the General Fund Budget (should be an estimated $200 million). The remainder (an estimated $300 million) is either Enterprise Funds or other special funds, such as the dedicated public safety sales tax or the transportation sales tax and as dedicated funds, cannot be used for any other purpose, such as the General Fund.
Out of a General Fund budget of approx. $200 million, 65% or approx. $130 million is for Public Safety (Police and Fire). That leaves about $70 million in the General Fund to pay for operating expenses (examples: all other employees’ salaries and benefits; our debt payments and our Capital Improvement Plan). Over half of the remaining $70 million (approx. $45 million a year) goes to pay the city’s debt service. That leaves us with an annual General Fund budget of $25 million a year.
As you can see, the city’s annual budget and the processes to create it are pretty complicated. It’s all in the numbers and a basic understanding of what numbers go where.
In Part 2 of Glendale’s budget 101 we will look at the proposed Capital Improvement Program or CIP. This is the budget portion that will be discussed by city council on Tuesday, March 21, 2017 at its 9 AM workshop. This will be televised live on Cox’s cable channel 11.
© Joyce Clark, 2017
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