Message from the Manager
Fiscal Year 2017-18 Budget
Dear Mayor, Mayor Pro Tem, and members of the City Council,
I am happy to present you with the City of Austin’s Proposed Budget for Fiscal Year 2017-18. Throughout the budget development process, extensive efforts were made to gather input from the City Council, boards and commissions, and the community at large. The recommendations contained in this document represent a culmination of that collaborative approach including setting aside $5.0 million to address new strategic priorities of the City Council. Of equal importance, the budget before you remains grounded in financial best practices by adhering to conservative revenue projections, funding recurring expenditures with recurring revenues, and maintaining robust reserve levels.
At $3.9 billion, the all funds budget is increasing 5.5 percent from the prior year. A portion of this increase is attributable to increasing power supply costs and regulatory charges in Austin Energy, both of which are pass through charges outside of the City’s control. Net of these non-discretionary increases, the all funds budget is increasing only 4.9 percent; significantly lower than the average increase of 6.1 percent over the past three fiscal years for these same cost centers. The primary focus of this year’s budget was to limit funding increases to those service areas most impacted by growing customer demands (e.g., Austin Code, Aviation, and Development Services) and, to the extent possible, to avoid increases to residential bills. I am pleased to report that five of the City’s seven rate assessing enterprise departments are holding base rates at FY 2016-17 levels. Notably, for the first time in more than a decade, Austin Water customers will experience no rate increase in FY 2017-18. This achievement is a testament to the hard work of AW staff in recent years to keep operational costs as low as possible and to aggressively reduce the department’s debt level.
The City’s General Fund budget of just over $1.0 billion is $59.8 million, or 6%, higher than in the prior year. This increase is the result of several factors including: increases in employee wages and health insurance costs; the need to provide full-year funding for a number of initiatives approved by Council in FY 2016-17 but only partially funded; and staffing increases in Development Services and Fire, the costs of which are fully offset through increased development fees and interagency reimbursements, respectively. The owner of a median valued homestead will see a $9.84 monthly increase in their tax bill. This higher-than-usual increase is primarily the result of two factors: first, growth in single family home values this year represented a significantly larger portion of the overall property value growth than in prior years; and second, the debt service portion of the tax rate is growing one third of a penny due primarily to the continued implementation of voter approved bond programs. Not only is the General Fund balanced - as required by State law - but it has been prudently crafted using a conservative estimate for sales tax growth of three percent in FY 2017-18. Furthermore, assuming the State does not enact any new laws restricting local revenue sources, the budget is projected to remain structurally sound and sustainable into the future.
The budget is proposed at the State defined rollback tax rate of $0.4451 per $100 of taxable value. I believe this is a fiscally prudent course of action in light of the risk of lower revenue caps being imposed in future fiscal years by the State. As staff projected last September during the FY 2016-17 budget deliberations and reaffirmed during the Financial Forecast presentation in April, funding for new General Fund initiatives was extremely limited this year. In anticipation of this challenge, I directed all departments early on to realize savings of at least 1% of their respective budgets in the current year. By this action, not only were we able to offset higher-than-anticipated Fire overtime costs in FY 2016-17 but we were able to bolster our reserves by $7.4 million. Furthermore, other than the aforementioned cost-neutral staffing additions in Development Services and Fire, the only additions to the General Fund workforce are nine new positions for the opening of the New Central Library and one position added to Austin Public Health funded through existing department resources. In fact, all other General Fund and support departments were instructed to submit their budgets with no staffing additions or service enhancements. The result of this increased level of austerity is twofold: first, public safety funding as a percentage of the overall General Fund budget will decline for the third consecutive year, from 69.7% in fiscal year 2014-15 to 66.5% in the current budget; and second, $4.0 million was able to be set aside in the General Fund, and an additional $1.0 million in the Budget Stabilization Reserve Fund, to address new strategic priorities of the City Council.
In regards to the City’s Capital Improvement Program (CIP), the FY 2017-18 budget includes new appropriations of $850.9 million in support of a 5-year CIP spending plan of $3.9 billion. As has been the case for the past several years, FY 2017-18 capital spending will be concentrated in three departments, with nearly 70% occurring in Austin Energy, Austin Water, and Aviation. Total FY 2017-18 spending on 2016 Mobility Bond projects is projected at $60.4 million with $24.9 million slated for corridors, $7.6 million for regional mobility improvements, and $27.6 million for local mobility projects, including new sidewalks, bike lanes, urban trails, safety improvements, and capital renewal. Specific Mobility Bond projects that will get underway next fiscal year include improvements to FM620/RM2222 in partnership with the Texas Department of Transportation; design work for Spicewood Springs Road; safety improvements at the intersections of Slaughter and South 1st and at South Congress and Oltorf; and initial design work for the corridor construction program.
The fiscal plan laid out in these pages reflects a heightened level of collaboration between city departments, city management, and City Council. From the very beginning of the budget process, senior City staff joined Council at the table in a series of work sessions to formulate a strategic plan for the organization that would align City operations to the overarching vision of the Imagine Austin comprehensive plan. Those early work sessions resulted in broad consensus on six strategic outcomes for the organization, namely: Mobility, Economic Opportunity and Affordability, Safety, Health, Cultural and Learning Opportunities, and Government that Works.
These six outcomes will shape what we as an organization do for the next three to five years and this budget takes preliminary steps to begin reshaping the City’s spending plans around these priorities. The hard work of operationalizing these outcomes, which will occur through defining measures, setting performance goals, developing strategies and action plans, and aligning department budgets to Council’s priorities, is well underway and on pace to be completed in time to be fully integrated with next year’s budget process. On the next page, I highlight a number of items from each of the six strategic outcome areas that I feel collectively comprise some of the most noteworthy aspects of this budget.
Following the strategic planning work sessions, strong collaboration between Council, management, and department staff continued via a series of “department reviews” for each of the City’s eleven General Fund departments. Instead of using a customary top-down approach for this effort, the format and content for these work sessions was developed this year by an interdisciplinary group of department staff. The goal of the review process was threefold: first, to help Council gain a more in depth understanding of the services provided by our General Fund departments and the underlying operational factors that drive department budgets; second, to ensure that existing department budgets were properly aligned with City Council priorities; and third, to determine if any opportunities existed to reallocate funding from current programs to address new Council priorities. While no formal votes were taken, council members generally voiced support for maintaining current service levels for City programs.
One operational factor that drew a significant amount of Council attention during the review process was the Fire Department’s mandatory four-person staffing model, which in conjunction with an unusually high number of firefighter vacancies has resulted in the rapid escalation of Fire overtime costs. The FY 2017-18 Budget includes funding to continue four-person staffing on all fire apparatus but reduces Fire Department overtime requirements by $2.6 million by reassigning 21 sworn positions from staff positions to combat operations and by reducing the Team Lead ratio for cadet training classes. While this will negatively impact some non-emergency services, it is the most judicious measure available for controlling overtime costs until the high number of firefighter vacancies can be brought down. The budget also includes $250,000 for a consultant study of the Fire and Emergency Medical Services deployment models to determine if any opportunities exist for improving operational efficiency.
City Manager's Budget Highlights by Strategic Outcome
A final, and critical, aspect to our collaborative approach to budget development came through widespread community engagement. In crafting the budget, every effort was made to respect community preferences as articulated via surveys, online input, town hall meetings, and from the City’s numerous boards and commissions. This year, our engagement efforts included a new budget prioritization survey, a new informational budget video, an online budget simulator tool, participation in eight council member sponsored town hall meetings, and budget discussions at 17 boards and commissions meetings. This multi-faceted approach provided residents with a variety of ways to learn about the City’s budget and to express their opinions. It also balanced open-ended, in-person approaches to community engagement with randomly sampled, demographically representative, and statistically significant survey data. The numbers are impressive and speak for themselves: over 275 participants at district town hall meetings, 1,280 budget simulator submittals, and a combined 48,625 hits on the English and Spanish versions of our new informational budget video. A full report on the outcomes of this extensive community engagement campaign can be viewed at www.austintexas.gov/financeonline.
As might be expected from a populace as large and diverse as Austin’s, individual opinions about funding priorities ran the gamut from strong preferences for increasing funding for City services, even if that resulted in higher taxes and fees, to equally strong opinions about lowering taxes and fees, even if that required cutting services. Despite this wide dispersion of opinions, several generalizations can be drawn from the data.
- First, a slight majority (51%) of survey respondents stated a preference for keeping City services, taxes, and fees at existing levels. Comparatively, 19% felt that City services should be increased, even if it meant increasing taxes and fees, while 28% expressed a preference for reducing City taxes and fees, even if it meant reducing services. The results from our online budget simulator were similar with a plurality or better of respondents electing to maintain spending at existing levels in 10 of 11 service areas. As a result, this budget maintains all existing service levels, primarily limits funding for new initiatives to those services most severely impacted by the City’s growing population, and holds the line on base rates in five of the City’s seven enterprise operations that assess user fees to residents.
- Second, affordability continues to be a concern among a broad range of residents, although individual interpretations about what affordability means vary widely among demographic groups. Over the course of conducting eight town hall meetings a clear trend became apparent with residents from wealthier districts generally viewing affordability more in terms of rising taxes and fees while those from lower income districts tended to view affordability more in terms of the availability and quality of health and housing services.
- Third, traffic flow was consistently rated as the top issue confronting the City regardless of geographic location or demographic differences. In our budget prioritization survey, when asked an unprompted question about the single most important issue facing Austin, 47% of participant responses involved traffic, transportation, or roads. The next closest responses were housing at 14% followed by cost of living at 8%. Furthermore, 89% of respondents rated improving traffic flow on local streets as a high or very high priority for the City. I am excited by the strong commitment that the community recently made to improve the City’s transportation system by approving a $720 million Mobility Bond. Implementation of this program has begun and once completed it will have a transformational impact on the City’s mobility infrastructure.
I want to express my sincere gratitude to the City Council, community members, and City staff for the important roles they played in shaping this budget recommendation. It was truly a team effort! This budget makes smart investments in a number of programs needed to keep pace with our growing community’s service expectations. At the same time, it attempts to strike a fair balance between those community members who would like to see more expansive City services with those who are becoming increasingly concerned about the impact that rising taxes and fees are having on affordability. And lastly, it is a budget that reserves $5 million to fund new strategic initiatives of the City Council.
As we now transition from the budget proposal phase to the budget adoption phase, I look forward to continuing the mutually respectful and shared approach that have thus far been the hallmark of this budget cycle. City staff is at your disposal to respond to any questions or requests for information that you may have and to facilitate the budget adoption process in any manner possible.