Complete Document - City of Auburn

Budget Message (continued) May 28, 2002The County also has a need to expand the Justice Center to provide more office andcourtroom space. We realize that we will be expected to pay our fair share of theconstruction cost of the new jail and Justice Center, as well as the operational costs forthem once they are built. We believe that this proposed arrangement is the best for bothcities and the County. We expect that all parties will agree for this project to move forwardduring the next two years. It is very likely that an additional source of revenue will beneeded Countywide to pay for these projects, the cost of which is estimated to exceed $12million.School Funding- I mentioned earlier that the City Schools are expecting prorationof the allocation it receives from the State of Alabama during the 2002-03 school year.Unless the State is willing to provide more funding for schools over the next year or so, it islikely that the City Council will have to wrestle with the need to find additional revenue forour Schools or School leaders will have to determine how they can work within the revenuethat they now have. We are not far enough along in the process to know for sure the extentof the problem; but I feel we should at least be aware that the State’s failure might present aproblem for the City.Financial OverviewThe proposed budgets for FY 03 and FY 04 will maintain the City’s strong financialposition with an ending balance in excess of at least $8 million each year. The $8 millionincludes the $4 million that the Council set aside in the Permanent Reserve Fund. While thisamount is more than the Council’s policy requirement of six percent, I feel that the City shouldmaintain as healthy an ending balance as possible, especially in light of the unknown fundingsituation for the Schools. There are several other reasons for the City to have an adequateending balance. One is that the rating agencies require us to have an ending balance in thisrange if we are to maintain our excellent credit ratings of AA- and AA3 from Standard &Poor’s and Moody’s Investor Services. A second reason is that on occasion unforeseenevents that must be funded confront us. We pride ourselves on planning, but no amount ofplanning can predict every event that may impact us financially.In order for us to maintain our strong financial position, we must keep our operatingexpenses at reasonable levels, so that we do not build in expenses that we will not be able tomaintain if we do not have adequate growth in our revenue. Of course, the main expense inCity government is Personal Services, which should be kept under fifty percent of theGeneral Fund budget. In the FY 03 budget, the cost for Personal Services is 45.48 percentof the total General Fund and in FY 04, the percentage is 48.45 percent. Even with the payraises both years, we have been able to keep the percentage of the budget for PersonalServices below 50 percent. Some departments certainly could accomplish even more work ifwe were able to afford to provide additional employees to them. The additional employeesshown in the General Fund are Information Technology workers that have been upgraded toregular full-time because of the workload through the contract with the Schools. Bymaintaining the number of employees at the level where efficiency is optimized, we are ableto pay employees well, provide developmental opportunities for employees, fund the Schools,and have resources to build the necessary infrastructure for a growing city.Revenues- Excluding debt proceeds and transfers, the biennial budget includes anincrease in projected total revenue in the General Fund of $403,458 (1.28%) for FY 03 and30