The City Manager’s FY17 Recommended Budget in April presented a fiscally sound plan to carry out Council goals while assuring the responsible administration of the City.  The annual adoption of the budget for the new fiscal year is a culmination of six months of collaboration between Council, City Staff, and the community. 
In the broad sense of things we experienced a fairly good year in terms of increases in general fund revenues which came in at around $2.5 million dollars.  Our corresponding general fund operations budget for FY17 reflects an approximate $2.3 million dollar increase or 4.3% over last year’s budget. 

This year’s budget reflects a commitment to continue to prioritize and preserve city services and service levels.  Since the host of city services and their quality are primarily accomplished through people, our emphasis has been to offer competitive wages and benefits that result in the retention of current employees while bolstering our efforts to recruit highly competent professionals.  On July 1, 2016 we begin the 3 year process of moving all of our positions into a market based pay structure. This helps to fulfill Council’s goal to “Invest in our employees and implement retention and attraction strategies.”  While some positions will receive a higher amount to bring them into the new market based pay structure, all employees who are eligible, including temporary personnel, will receive at least a 2% increase over the next two fiscal years. 

This year we have been able provide some additional staffing the help us be more responsive in the delivery of city services to our community.  This will not only allow us to better serve our customers but also to build capacity within our staff in order to reduce burnout and improve moral.  The downsizing of our organization in response to the fiscal realities of the recession has created the need for many employees to take on extra work and responsibilities in order to maintain service levels.  While this is a commendable response to tough budgetary challenges, it is not a healthy long term strategy.  The following positions were determined to have the highest priority for meeting current needs across the organization and have been funded in this year’s budget with either recurring or one-time dollars:

• Building Inspector
• Fire Inspector
• GIS Administrator
• Payroll Specialist
• Animal Control Officer
• Stormwater Project Manager
• Water Conservation Specialist
• Parking Manager
• Parking Compliance Officers
• Volunteer Coordinator
• Library Clerk
• Courts Collection Specialist
• Contract Specialist
• Administrative Assistant – Courts
• Administrative Assistant – Housing
• Civilian Paramedic – CART/Fire Department
• Community & Neighborhood Liaison with NAU

During our April budget retreat Council considered and funded the following items which were not previously included in the Manager’s Recommended Budget for FY17.  The funding source for these additional items came from some additional general fund capacity of approximately $1 million created by cost allocation between funds, accelerator debt not spent, and changes in grants funding.  This amount was mostly one-time dollars and includes about $380,000 in new recurring dollars.

• Police & Fire uniform allowance of $80K in ongoing
• Southside Neighborhood Plan, $50K in 1x
• Boy’s & Girls Club funding, $50K in 1x
• FACTS, $25K in 1x
• NACASA, $3K in 1x
• Library Sunday hours, $61K in 1x
• Humane Shelter contract, $88K in 1x
• STEM funding, via FAC, of $60 in 1x
• Arizona-Mexico Commission Membership of $3K in 1x
• Metal detector for public facilities, $30K in 1x
• Metal detector staffing, $100K in ongoing
• 2% pay increase for temporary, non-benefit eligible city employees, $34K in ongoing
• Siler Homes after school program, $59K in 1x

It should be noted that Council added the funding for the metal detectors in public facilities in anticipation of some pending legislation at the state level.  Since this legislation did not pass, I am recommending that the $100K in recurring dollars set aside for metal detector staffing be reallocated to partially restore, on an ongoing basis, some of the police and fire overtime that was cut during the recession.  This would free up $100K in one-time dollars that could then be used for other funding opportunities.  Both the police and fire departments have worked diligently to manage their overtime budgets but the impacts of increased call volume to operations and staffing requirements has created difficulty in meeting current demand.  I recognize that the long term solution to this challenge will be to review staffing levels and operational deployment and that will certainly be among the priorities I would like to discuss with Council as we prepare for the FY18 budget. 

If Council should agree with the aforementioned proposal, that would leave approximately $475,000 in unallocated one time dollars available for use in FY17.  After consulting with the Budget Team my recommendation is to use these dollars to create a Facilities Contingency Fund that could be added to and rolled over each fiscal year.  Council would have the discretion to utilize a portion or all of this fund balance to finance municipal building projects.  We have been challenged in recent years to provide adequate municipal facilities to meet the present and future demand for city services with the resources that have typically been available.  We anticipate that this trend will only continue and having an additional funding source would certainly help to provide additional options for Council to consider. 

Since the Council Retreat, staff has reviewed capital projects and operational costs adopted in FY16 to be considered for carryover to the FY17 final budget.  These items will be discussed at the June 7^th Council meeting for tentative budget adoption. The final City Manager’s FY17 Proposed Budget to be presented to council on June 7^th and 21^st for adoption is $63.5 million for a $2.6 million increase to the General Fund budget over the FY16 budget.  The operational budget for the general fund will see a $4.0 million increase while capital, debt, and contingencies decreased by $1.4 million.  Revenues in the general fund are projected to see a $2.2 million increase over FY16 adopted budget.  In all other funds we are proposing a budget of $201.5 million which is a $20.7 million increase over FY16 budget.  The biggest impact is related to capital with an increase of $17.1 million. 

Some notable highlights from the FY17 Operating Capital budget include:

HURF:
Street Sweeper replacement, $250,000
Paint Striper replacement, $487,000
General Fund:
Quantum Pumper Type 1 Fire Truck, $587,700
Thermal Imaging Cameras, $24,000
Airport:
Rapid Response Fire Suppression Truck, $152,550
Library Fund:
Radio Frequency Identification System/Phase 1 Library Remodel, $554,735
ADA Compliance Remodel/front ramp & restrooms, $77,000

Some notable highlights from the FY17 Capital Improvements Program include:

Brannen Homes sidewalk improvement project for bike/pedestrian safety, $500,000
4^th Street Bridge/I-40 design, $350,000
Clay Ave. traffic calming, $350,000
Southside curbs, $300,000
Sunnyside phased streets improvements, $869,000
Franklin Ave. safety improvements, $437,626

The annual budget has significant impact to all city service levels and operations.  These impacts will be more specifically detailed in the adoption of the tentative budget on June 7th and the final budget that will be submitted for adoption by Council on June 21, 2016.

COUNCIL GOALS:
1) Invest in our employees and implement retention and attraction strategies
2) Ensure Flagstaff has a long-term water supply for current and future needs
3) Provide sustainable and equitable public facilities, services, and infrastructure systems in an efficient and effective manner to serve all population areas and demographics
4) Develop and implement guiding principles that address public safety service levels through appropriate staff levels
5) Explore and adopt policies to lower the costs associated with housing to the end user
6) Provide a well-managed transportation system
7) Continue to implement the Flagstaff Regional Plan and focus efforts on specific plans
8) Improve effectiveness of notification, communication, and engagement with residents, neighborhoods and businesses and about City services, programs, policies, projects and developments
9) Improve the economic quality of life for Flagstaff through economic diversification, and by fostering jobs and programs that grow wages and revenues
10) Support and assist the most vulnerable
11) Ensure that we are as prepared as possible for extreme weather events

No.  Council has provided direction in the development of the FY17 budget and will consider its final adoption at its regular meeting on June 21, 2016.  The Resolution for the adoption of the Tentative Budget will occur on June 7th, 2016.

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