Office of the City Manager

October, 2012

To the Honorable Mayor and Members of the City Council:

In accordance with the Civil Statutes of the State of Texas and the Charter of the City of Lamesa, the proposed budget and program of services for the fiscal year beginning October 1, 2012 is submitted for your review and consideration.  The budget is intended to present, in financial terms, the overall plan for providing municipal services during the forthcoming year.  Moreover, the budget  provides the basis for a higher level and quality of services of the City’s infrastructure to ensure  progress and development. This budget provides funding for mostly similar levels of service offered by the City as last year.

Summary

The FY 2012-2013 budget is prepared for a balanced base budget with limited resources and it has been a challenging experience.  To continue to meet its challenges in the future, the City must seek to strengthen its General Fund revenue base, at present consisting mainly of property tax, sales tax and franchise fee proceeds. The Enterprise Funds Water/Wastewater and Solid Waste’s Working Capital have improved and we continue to cut expenditures without impairing the essential services. In the coming years, fiscal restraint is imperative and an improved economic landscape is crucial to our financial position, as well as diversifying our revenue and tax base.

Although the current economic conditions are ambivalent, sales tax receipts are higher compared to last year.  It appears the economy has rebounded slightly attributed to oil business activity and alcohol sales. Our local economy is still fickle and city population  decreased from 9,950 to 9,422.  The City’s fiscal policy must maintain debt restraint in order to alleviate future financial impediments.

Budget Overview

 In the tradition of past years, the budget reflects that fund balances must be utilized in order to balance the budget.   This year General Fund, Water/WasteWater Solid Waste  revenues will exceed expenditures except for the Municipal Golf Course program - expenses are usually held below budget.  However, there is no water or wastewater rate increase for this fiscal.  It is anticipated that the City of Lubbock will begin on their  water treatment capital improvement project this year.  Furthermore, a new lift station will be constructed on Benny Boyd’s car dealership land-$500,000 budgeted.  There is no Solid Waste rate increase but $600,000 Tax Anticipation Note will be issued this year for the construction of a  new Type I landfill cell.  A new Type IV construction and debris cell may be built but it will be based on the contract bids for the Type I landfill cell..

The projected ending fund balance for the General Fund for September 30, 201 is $227,417 an increase from the projected fund balance of $66,662 for the end of the current fiscal year.  One of our fiscal goals has been for each fund to be totally self-sustaining.  The budget for the General Fund does not accomplish that goal, as it is still  dependent on the water/wastewater and the solid waste funds for reimbursements for services rendered.  There will be no need for a property tax rate increase and recommend tax rate stay the same as last fiscal year 0.72430.

Similarly, the total working capital available (unreserved ending fund balance) in the Water and Wastewater Fund will be $516,827 compared to an estimated projection of $715,032 for the end of the current fiscal year.

The working capital (unreserved ending fund balance) in the Solid Waste Management Fund will be $323,305 compared to an estimated projection of $618,738 for the end of the current fiscal year.

The Municipal Golf Course estimated revenues will be $142,000 and expenditures estimated at $194,686.  We need to transfer funds, “$52,286” from the General Fund to create at least a zero fund balance.  The Municipal Golf Course is unable to generate enough revenue to sustain its operations-General Fund will need to continue subsidizing  its operations. 

Key Changes in the 2012-2013 Budget

ü  Revenues –  Budgeted revenues for all funds are expected to increase $160,755 over the budgeted revenues for Fiscal Year 2011-2012.

ü  Expenditures - Budgeted expenditures for all funds are expected to increase  $1,965,833.00  over the budgeted expenditures for Fiscal Year 2011-2012.

ü  Capital Expenditures - Scheduled replacements for this year includes one police vehicle,  a side loader garbage truck Solid Waste Department, Landfill Type I cell, a wastewater lift station, water utility truck, street department dump truck  and one commercial riding lawn mower Parks Departments.

ü  Personnel – .10 personnel positions are cut for this year’s budget- this includes a one police detective position, ½ police officers position, and administrative Clerk for City Manager- this is a half position. Total personnel for 2012-13 (76.70) compared to 2011-12 (76.80).

ü  Overview of the General Fund

The General Fund is the primary source of funding for City services. General Fund revenues are derived from real estate and personal property taxes, fines, and fees for service. The proposed FY 2012-2013 General Fund revenue budget is $3,702,117 an increase over the FY 2011-2012 budget of $3,526,883.

Except for this fiscal year, the General Fund historically has had a deficiency of revenues over expenditures.  We have been able to manage this deficiency in most past years by foregoing expenditures during the year and experiencing slightly higher than expected revenues. We will continue to find ways to reduce expenditures in lieu of additional revenue sources. 

Again, the Ad Valorem tax rate will stay at  $0.72430 per $100 and the total appraised value will increase for 2012-13.  The City's financial position will be lucid after completion of the 2012- 2013 fiscal year and with the benefit of a few months experience on sales tax receipts and other costs. 

 The Street Department’s  is anticipating  seal coating approximately 30- 50  blocks- budgeted approximately $98,000 for the project.

Overview of the Water and Wastewater Enterprise Fund

The Water and Wastewater Enterprise Fund water sales for 2011-12 increased slightly due to a dry summer season.  Last year our total projected working capital at the end of the year was $467,862. This year we project that the total working capital at the end of the year will be $715,032. There is a projected balance of $516,827 at the end of the next fiscal year.

 There is no water and wastewater rate increase. It is estimated this years revenue will exceed expenditures.  The debt service with operation and maintenance of the new wastewater treatment plant will create further expenditures for the upcoming fiscal year.

Overview of the Solid Waste Management Enterprise Fund

Overall, the Solid Waste Management Fund estimated working capital for end of September 2011 is $512,707 and the estimated working capital for October 2012 is approximately $618,739.  The Type IV cell life span has debris  material in prior years.  A $600,000 TAN will be issued for the construction of a new Type I landfill cell.

Personnel

As you are aware, significant reductions in staffing levels have occurred during the last twenty six years.  The reduction of over thirty two positions without a significant impact on services has been made possible over the years through the use of better equipment, better organization, and more qualified and better-trained employees.  In the last few years employees have been asked, and responded, with increased productivity and have received little reward.  There will be some raises for employees from 5% to 10%  based on performance or just to compete with oil field activities- lost approximately five employees due to the oil field wages.

Capital Replacements

Only items costing more than five thousand dollars are now considered as capital items. Most computers are no longer being counted as capital items. This budget provides for capital replacements only where deemed absolutely necessary to continue current levels of service. The Water Department will continue with a program of water line replacement on as needed basis. The City has applied for a $350,000 CDBG “grant funds” for a 6 inch water line replacement from NE 3^rd Elgin to Harford and North 4^th  Ave. P to South 1^st Ave. P –project completed this year.

Prospects for Future Progress

Again,  Preston Smith Unit-prison has continued to be a financial asset for the city.  We feel that it has made a positive contribution to our sales tax and enterprise fund revenues. Hopefully, the Lamesa Economic Development Corporation will be able to attract new sources of economic activity and add to our growth.  The addition of new businesses and jobs will have a positive impact on our revenues. LEDC was the primary force in obtaining the new prison expansion and pledged $100,000 a year for five years for city utility service to the new unit. Furthermore, LEDC financially assisted the City in constructed two new water wells on LEDC farm land to supply water to Preston Smith Unit-$300,000.

Lamesa citizens voted and passed  a Type B ¼ sales and use tax for the City of Lamesa.  The certification of formation was filed with Secretary of State and the new Type B is now call Lamesa Economic Alliance Project.  We must continue to support local business activities and aggressively pursue new industries for local economic growth.

Emerging Issues

This year sales tax is expected to improve with the increased oil business and alcohol beverage sales.  However, the drought will have an impact on our local Agriculture economy.  There are several major issues that have emerged and we will have to deal with in the near future

1. TCEQ unfunded mandates
2. CRMWA water cost and bond issuance
3. Additional Water Wells and Water Rights acquisition
4.  Health Insurance Cost
5. Capital Equipment Program

Many challenges face our organization in the area of Federal and State environmental mandates. We will continue to expend resources to meet these demands. Though the   U.S. 87 reliever route and the 180 extension to the reliever route will not be constructed in the near future, we need to continue supporting the Ports to Plains and La Entrada Al Pacifico corridors efforts.  Obstacles tend to be opportunities, these trade corridors will eventually be built and will create economic development growth.

Summary and Conclusion

We are continuing a process of evaluation of our financial strategy for the coming years.  Fund balances must be maintained in the enterprise funds and continue to decrease expenditures in the General Fund and the other two Enterprise Funds. We will continue to look at different revenue sources or levels or make adjustments to the services provided.

City staff will continue to monitor the financial situation in a timely manner and will be prepared to bring recommendations to the Council at any time during the year if serious declines in revenues or unexpected expenses are foreseen.

I would like to express my appreciation to the Mayor and Council.  What the staff works on and presents would be meaningless if the Council was not interested in striving for a professional, well run organization.  I appreciate the opportunity to work for you, and will always attempt to be attentive to the desires of the Council.

Hopefully, this budget reflects the thinking and policies of the City Council and is representative of the desires of the Citizens of Lamesa.  I especially hope you will let me know if you have any questions about this budget or the overall budget process.

Respectfully submitted,

City Manager