FY2020 – FY2029

Town of Palm Beach

Long Term Financial Plan

Prepared by the Finance Department 360 South County Road,

Palm Beach, FL 33480

Presentation at the July 15, 2020, Budget Workshop

TABLE OF CONTENTS

Table of Contents

Long Term Financial Plan Overview and Executive Summary

The National Advisory Council on State and Local Budgeting (NACSLB) and the Government Finance Officers Association (GFOA) both recommend that governments establish a financial planning process that assesses the long-term financial implications of current and proposed policies, programs, and assumptions, and develops appropriate strategies to achieve its goals.

The Long Term Financial Plan (LTFP) is intended to serve as a tool, providing the Mayor, Town Council and staff with the insight required to address issues impacting the Town’s financial condition. This plan consists of the following sections:

• Executive Summary

• Current Financial Condition

• General Fund Revenue and Expense Trend Analysis

• Forecast Details

• Enterprise Funds Forecast Summary

• Coastal Fund Forecast Summary

• Townwide Underground Utility Fund Forecast Summary

• Other Funds Trend and Forecast Summary

• Reserve Analysis

  Financial planning expands a government’s awareness of potential challenges and opportunities, as well as options for addressing them. The long-term revenue, expenditure and service implications of continuing or ending existing programs or adding new programs, services and debt can be identified. The financial planning process helps shape decisions about corrective measures to proactively address forecasted financial challenges. Generally, long-term financial plans have a time horizon that extends between five and ten years from the current period, with a five-year horizon being most common. The Town of Palm Beach plan uses a ten-year plan.

  
  

  A financial plan does not state what is certain to happen. Rather, it highlights significant issues or problems that must be addressed if goals are to be achieved and provides forecasts of results expected if certain actions are taken.

  
  

  The General Fund trend section includes 9 years of actual expenditures including the FY20 budget. A summary table containing the revenue and expenditure information for the past 10 years can be found at the end of this section of the document. In addition, a summarized forecast is also included as part of the executive summary.

  
  

  The current financial status for FY20 has been provided in this document. In addition, a monthly financial report is provided to the Mayor and Town Council and posted on the Town’s website.

  Due to the COVID-19 recession, General Fund revenues will not exceed budget estimates in most categories and expenditures are on track to finish the year under the budget target, unless we experience a hurricane or other unexpected event. We anticipate a small surplus at the end of the fiscal year.

  
  

  The emphasis of this document is on the Town’s General Fund. Forecast and trend information on the Enterprise Funds, Coastal Protection Fund, Townwide Underground Utility Fund, Risk Insurance Fund, Health Insurance Fund, OPEB Trust Fund, Debt Service Funds and the Retirement Fund are also included in this document.

  
  

  General Fund

  
  

  General Fund Historical Trends

  The 10-year revenue and expenditure history shows the trend in revenues and expenditure categories and the ending surplus/deficits for FY11– FY20. See page 5 for the ten-year revenue and expenditure history summary. Most of the deficits that were experienced over the 10-year period were the result of using unassigned fund balance for capital and coastal projects. Each surplus/deficit is described below:

  
  

• FY11 – Budget included a transfer from fund balance of $4,541,745 to fund the contingency reserve, the final funding for the early retirement buyout, and a transfer to the coastal protection fund of $2,898,277. The actual transfer was $2,010,598.

• FY12 – Budget included a transfer of $807,000 from fund balance to fund the contingency reserve. The ending surplus was $2,500,562 resulting from higher than anticipated revenues and expenditure savings.

• FY13 – The budget included a transfer of $843,000 from fund balance to fund the contingency reserve. The ending surplus of $2,196,059 was the result of higher than anticipated revenues and expenditure savings.

• FY14 – Budget included a transfer from fund balance of $4,860,000 to fund the annual contingency reserve and $4,000,000 for coastal protection. The actual transfer was

  $1,470,831 due to higher than anticipated revenue and expenditure savings.

• FY15 – The budget included a transfer to the coastal projection fund of $4,777,000 and during the year, the Town Council approved an additional transfer of $6,600,000 to the coastal protection fund from fund balance in order to increase the reserves of the Coastal fund. Due to higher than anticipated revenues, most of this transfer was made with the current surplus, and only $195,076 was funded from reserve balances.

• FY16 – The budget included a transfer of fund balance of $944,686 to fund the contingency reserve. The ending surplus of $1,918,445 was due to higher than anticipated revenues and expenditure savings.

• FY17 – The budget included a transfer of fund balance of $960,300 to fund the contingency reserve and a transfer of fund balance of $2,800,000 to fund an extraordinary transfer to the Retirement Fund to begin to lower the Unfunded Liability. The ending deficit of $2,824,289 was due to these transfers.

• FY18 – The budget included a transfer of fund balance of $655,877 to fund the contingency reserve and a transfer of fund balance of $3,832,893 to partially fund the additional transfer to the Retirement Fund to begin to lower the Unfunded Liability. The ending surplus of

  $1,104,772 was due to cost cutting measures implemented during the year.

• FY19 – The budget included a transfer of fund balance of $560,000 to fund the contingency reserve. The ending surplus of $3,235,251 was due to higher than anticipated revenues and further cost cutting expenditure measures implemented during the year.

  
  

   FY20 – The budget included a transfer of fund balance of $610,000 to fund the contingency reserve.

  
  

  More detail regarding revenue and expenditure trends can be found in the section titled General Fund Trends

  
  

  General Fund Forecast

  The forecast summary can be found on page 6. The General Fund forecast assumptions can be found under the section titled Forecast. On the expenditure side the proposed FY21 budget has been used as the baseline for the forecast. Because the proposed budget is 4.69% less than the FY20 budget, the new forecasted expenditures are lower. We reduced funding for the coastal protection program to $4,777,777 in the proposed FY21 budget which represents the original tax increase in FY15 to start the funding of the program. FEMA, Federal and State grants have allowed a reduction in annual funding. Going forward, the transfer is increased at 3% per year throughout the 10-year period. Overall, the General Fund expenditure forecast includes annual increases that range between 1.74% and 3.96% throughout the forecast period.

  
  

  Most revenue increases were based on historical trends. We prepared the forecast using property tax revenue to balance each year of the forecast. The FY22 forecast contains a property tax revenue increase of 2.15%. A taxable value increase of 4.41% in FY22, would reflect a decrease of 2.16% in the millage rate and would result in a $0 increase per million of taxable value. It is far too early in the process to predict the total impact of the COVID-19 pandemic recession and its effect on Town revenues and expenditures and ultimately what the property tax increase will be for FY22.

  
  

  	FY22	FY23	FY24	FY25	FY26	FY27	FY28	FY29
  Revenues	83,203,392	85,294,006	88,270,677	91,765,020	94,829,851	97,407,721	99,171,430	101,435,203
  Expenditures	83,203,392	85,294,006	88,270,677	91,765,020	94,829,851	97,407,721	99,171,430	101,435,203
  Surplus/(Deficit)	(0)	0	(0)	0	0	0	0	(0)
  Property Tax Revenue % Increase	2.15%	2.55%	4.13%	4.88%	3.88%	2.99%	1.58%	2.42%

  
  

  Enterprise Funds

  The Town Marina forecast was recently updated by USMG. The forecast covered a 5 year period. Staff has updated the forecast with FY21 budget information and extended it out to FY29. For FY21, the marina will be closed for construction and is scheduled to open in the fall of 2021.

  
  

  The revenue forecast through year 5 was prepared by USMG, for the remaining years of the forecast lease revenues were increased by 3% per year. The forecast used the same assumptions for expenses as were used in the General Fund.

  
  

  The Par 3 revenue projections are based on an improving economy after the pandemic, strategic price increases, growth in play and increased merchandise sales. Once the course reopened, demand for use has been very high, so we expect improved performance in future years. Expenses increase due to operating costs for the new clubhouse, and gradual increases for costs of goods, services, and salaries/benefits.

  
  

  The Building Enterprise Fund is being established this year to account for all building permit revenue and expenses to allow for greater transparency as required by the State of Florida. The revenue and expenditure forecasts can be found later in this document.

  
  

  Coastal Protection Fund

  The Coastal Protection Fund section includes the Cash Flow projections for the next 10 years as well as actual results since 2013. Included are summaries of the current proposed budget, which includes $12 million for the Mid-town seawall and funding levels based on the reset to $4,777,000 in FY21.

  
  

  Other Funds

  Other Funds included in this document are the Risk Insurance Fund, the Health Insurance Fund, the OPEB Trust Fund, the Debt Service Funds, and the Retirement Fund. Trend and forecast information can be found later in this document under the section marked “Other Funds”.

  
  

  The Risk Fund forecast contains a 5% per year increase for property insurance, a 2% per year increase for liability insurance and a 3% per year increase for Worker’s Compensation insurance. The Health Fund and OPEB Trust fund forecast the same increases in health insurance costs as outlined in the assumption table. The Debt Service fund identifies future debt service for all Revenue Bonds based on the updated debt service schedules after the recent refinancings and also includes the 2018 GO Bond debt service forecast. The Retirement fund reflects the actuaries forecast based on current assumptions and the compensation and benefit study results with stress tests at 3% and 5% actual investment returns.

  
  

  Reserve Status

  The final section of this document contains an update of the status of Town Reserves as of September 30, 2019. The reserve balances exceed all of the policy minimums that have been established. A total of $22.7 million in excess reserves above the policy minimums has been identified.

  
  

  Revenue and Expenditure History FY2011 - FY2020

  
  

  	FY11 Actual	FY12 Actual	FY13 Actual	FY14 Actual	FY15 Actual	FY16 Actual	FY17 Actual	FY18 Actual	FY19 Actual	FY20 Budget
  Revenues
  Ad Valorem Taxes	36,635,343	36,662,916	37,473,108	39,110,926	43,869,888	47,890,700	50,195,981	52,282,254	54,883,747	55,979,439
  Non Ad Valorem Taxes	7,189,368	7,315,317	7,533,859	7,946,097	8,056,312	8,061,358	8,188,599	8,392,264	8,526,302	8,817,700
  Licenses & Permits	6,382,545	6,498,207	7,572,518	8,053,581	10,657,676	10,096,673	7,677,953	10,071,916	11,853,215	8,485,100
  Intergovernmental	1,319,119	1,051,432	990,715	1,071,413	1,102,689	1,122,465	1,028,493	1,406,615	1,282,065	1,099,600
  Charges for Services	3,461,766	4,081,259	3,576,156	3,741,183	3,957,603	4,123,243	3,681,626	3,763,590	5,152,779	6,319,199
  Fines and Forefeitures	1,297,226	1,106,435	1,253,760	1,924,182	1,099,525	1,016,089	938,624	1,068,544	904,075	942,000
  Investment Earnings	495,649	495,311	32,425	383,726	597,585	490,102	424,365	702,261	969,178	1,230,000
  Miscellaneous and Transfers	2,774,498	1,534,738	1,871,043	1,584,625	1,098,106	1,117,897	1,209,878	1,008,466	2,621,707	958,728
  Total Operating Revenues	59,555,514	58,745,615	60,303,584	63,815,733	70,439,384	73,918,527	73,345,519	78,695,910	86,193,068	83,831,766
  Transfers from Fund Balance					‐	‐	‐	‐	‐	610,000
  Total Revenues	59,555,514	58,745,615	60,303,584	63,815,733	70,439,384	73,918,527	73,345,519	78,695,910	86,193,068	84,441,766
  Expenditures
  Salaries and Wages	24,396,538	23,627,363	22,943,974	23,152,224	23,478,697	23,581,853	24,128,637	23,764,069	24,909,207	28,004,601
  Pension Benefits	8,771,681	3,180,126	3,831,588	4,977,617	5,454,327	6,180,062	7,819,957	8,971,687	9,099,192	10,461,176
  DC Plan Benefits	‐	222,307	537,532	1,088,013	1,132,126	1,132,836	671,355	404,640	408,097	558,296
  Other Employee Benefits	6,601,573	6,616,971	6,736,760	6,741,912	6,680,817	6,627,932	6,763,691	6,742,200	6,549,843	6,784,000
  Contractual	6,963,078	7,139,390	7,224,092	7,602,595	8,191,690	8,876,307	9,649,474	10,021,787	9,870,999	10,682,513
  Commodities	1,484,765	1,547,738	1,554,104	1,642,397	1,517,617	1,438,222	1,774,332	1,733,077	1,692,833	1,753,420
  Equipment Replacement	2,547,679	1,881,319	2,033,744	2,097,896	1,893,244	2,858,676	3,053,651	2,538,572	2,533,598	2,422,703
  Library Services	272,400	272,400	288,989	297,659	306,580	315,777	350,250	335,008	345,058	352,650
  Other	9,172	12,932	29,863	4,251	‐	‐	70,455	‐	‐	‐
  Transfer to Capital Improvement	500,000	1,000,000	1,000,000	1,000,000	1,000,000	1,030,000	2,290,200	2,118,024	2,200,000	2,420,000
  Transfer to Coastal Protection	3,090,000	3,960,000	4,765,099	7,200,000	11,377,000	8,015,220	7,265,000	7,410,300	7,349,124	6,520,211
  Transfer to the Underground Utility Fund	‐	‐	‐	‐	‐	2,530,250	267,041	‐	135,000	144,450
  Transfer to Retirement Fund	‐	‐	‐	‐	‐	‐	2,800,000	4,759,016	9,501,699	5,420,000
  Debt Service	3,500,000	3,500,000	3,500,000	6,100,000	6,100,000	6,265,462	6,088,728	5,982,331	5,994,738	5,983,913
  Retiree Health	1,533,000	1,493,000	1,769,000	1,506,000	1,577,000	1,180,000	1,339,000	960,000	435,383	423,014
  Transfer to Risk Insurance Fund	1,896,226	1,791,507	1,892,780	1,876,000	1,925,362	1,967,485	1,838,037	1,850,382	1,933,046	1,900,819
  Contingency	‐	‐	‐	‐	‐	‐	‐	‐	‐	610,000
  Total Expenditures	61,566,112	56,245,053	58,107,525	65,286,564	70,634,460	72,000,082	76,169,808	77,591,093	82,957,817	84,441,766
  Surplus/(Deficit)	(2,010,598)	2,500,562	2,196,059	(1,470,831)	(195,076)	1,918,445	(2,824,289)	1,104,817	3,235,251	‐

  
  

  Revenue and Expenditure Forecast LTFP FY2020 - FY2029

  
  

  	FY20	FY21	FY22	FY23	FY24	FY25	FY26	FY27	FY28	FY29
  Revenues
  Ad Valorem Taxes	55,979,439	57,134,000	58,364,632	59,853,789	62,328,118	65,371,794	67,908,039	69,940,308	71,044,088	72,761,104
  Non Ad Valorem Taxes	8,817,700	8,601,000	8,852,580	9,111,578	9,378,215	9,652,717	9,935,317	10,226,255	10,525,779	10,834,143
  Licenses & Permits	8,485,100	1,995,100	2,073,298	2,092,042	2,150,198	2,170,084	2,231,358	2,252,455	2,317,016	2,339,397
  Intergovernmental	1,099,600	956,000	927,464	947,928	968,878	990,326	1,012,285	1,034,767	1,057,785	1,081,353
  Charges for Services	6,289,199	5,384,700	5,564,664	5,671,785	5,774,139	5,879,304	5,987,360	6,098,389	6,212,477	6,329,711
  Fines and Forefeitures	942,000	916,000	929,640	933,389	937,250	941,226	945,321	949,539	953,882	958,356
  Investment Earnings	1,230,000	904,773	1,040,000	1,190,000	1,215,000	1,215,000	1,240,000	1,290,000	1,390,000	1,390,000
  Miscellaneous and Transfers	515,728	3,719,500	4,302,622	4,328,915	4,330,248	4,331,620	4,333,034	4,359,490	4,385,815	4,437,180
  Total Operating Revenues	83,358,766	79,611,073	82,054,900	84,129,426	87,082,046	90,552,071	93,592,714	96,151,203	97,886,842	100,131,244
  Transfers from Fund Balance	1,083,000	1,304,500	1,148,492	1,164,580	1,188,632	1,212,950	1,237,138	1,256,519	1,284,588	1,303,958
  Total Revenues	84,441,766	80,915,573	83,203,392	85,294,006	88,270,678	91,765,021	94,829,852	97,407,722	99,171,430	101,435,202
  Expenditures
  Salaries and Wages	28,004,601	26,512,380	27,569,524	28,141,972	29,262,992	30,539,101	31,852,537	33,254,145	34,711,835	36,211,280
  Pension Benefits	10,474,061	11,099,260	11,376,360	11,793,745	12,368,536	12,912,678	13,350,195	13,187,217	12,157,767	11,654,490
  DC Plan Benefits	559,296	502,742	518,974	528,194	547,263	569,076	591,267	614,427	638,468	663,218
  Other Employee Benefits	6,770,115	6,279,584	6,541,872	6,841,689	7,215,878	7,482,886	7,798,538	8,136,111	8,496,466	8,873,702
  Contractual	10,682,513	10,407,395	10,596,923	10,816,291	11,040,238	11,268,861	11,502,258	11,740,530	11,883,148	12,129,467
  Commodities	1,753,420	1,712,155	1,739,556	1,774,353	1,809,845	1,846,047	1,882,974	1,920,639	1,959,058	1,998,245
  Equipment Replacement	2,422,703	2,293,961	2,329,453	2,375,532	2,422,533	2,470,473	2,519,373	2,569,256	2,620,141	2,672,044
  Library Services	352,650	352,650	363,230	374,126	385,350	396,911	408,818	421,083	433,715	446,726
  Transfer to Capital Improvement	2,420,000	2,662,000	2,928,200	3,221,020	3,543,122	3,897,434	4,287,178	4,715,895	5,187,485	5,446,859
  Transfer to Coastal Protection	6,520,211	4,777,000	4,920,310	5,067,919	5,219,957	5,376,556	5,537,852	5,703,988	5,875,107	6,051,361
  Transfer to the UUTF	144,450	165,000	176,550	188,909	202,132	216,281	231,421	‐	‐	‐
  Extraordinary Transfer to Retirement Fund	5,420,000	5,420,000	5,420,000	5,420,000	5,420,000	5,420,000	5,420,000	5,420,000	5,420,000	5,420,000
  Debt Service	5,983,913	5,691,148	5,646,719	5,640,423	5,648,771	5,658,776	5,667,781	5,858,767	5,854,128	5,855,211
  Retiree Health	423,014	429,858	402,178	384,768	391,956	842,833	829,891	816,793	792,449	768,629
  Transfer to Risk Insurance Fund	1,900,819	2,010,439	2,063,184	2,098,605	2,141,578	2,192,247	2,250,708	2,330,436	2,412,656	2,497,479
  Contingency	610,000	600,000	610,358	626,460	650,527	674,860	699,060	718,434	729,006	746,491
  Total Expenditures	84,441,766	80,915,572	83,203,391	85,294,006	88,270,678	91,765,020	94,829,851	97,407,721	99,171,429	101,435,202
  Surplus/(Deficit)	‐	‐	‐	‐	‐	‐	‐	‐	‐	‐

  
  

  Status of the FY20 Budget

  
  

  The adopted FY20 budget was 2.4% more than the FY19 budget. Personnel count totaled 362.25 positions. A monthly financial report has been sent each month to the Mayor and Town Council detailing the status of revenues and expenditures in the General Fund, Enterprise Funds and summary information for other funds. Due to the sudden recession caused by the COVID-19 pandemic a more detailed look at the budget-to-date is warranted. The current estimates discussed below are based on actual results through May 31, 2020.

  
  

  General Fund Revenues

  
  

  Revenues for FY20 in total are expected to be below budget estimates. A few of the budgeted revenues for FY20 are expected to be at or over budget. These include: Ad Valorem taxes, business tax receipts, other licenses, fees, and permits, grant revenue, and miscellaneous revenues. Property taxes are collected early in the fiscal year so we have received to-date 99.4% of the expected revenues and should finish the year at or above 101%. Business Tax receipts are mostly collected early in the fiscal year and we are currently at 98.7% of expected revenue. Other licenses, fees and permits include right of way permits and residential parking permits. The right of way permit income currently exceeds budget estimates at 117% and the trend is expected to continue through the fiscal year. We have received FEMA grant revenue for prior year hurricane expenditures and a small distribution from the pandemic related CARES act. We expect additional funding for COVID-19 related expenditures, but receipt of these funds may not occur in FY20. All of the above revenue sources positively impact the budget by $1.2 million.

  
  

  There are other revenues that are expected to finish the year close to the budget estimates. These include: Building permit revenues and parking fines. Building permit revenue declined during March and April, but picked up in May. We expect the pace of these revenues to continue through the fiscal year and to come in at or even slightly above budget. Parking fines have exceed the budget to-date. In April there was a decline, but May exceeded prior year revenues. If this trend continues, the fiscal year revenues should end the year at or slightly below estimates.

  
  

  Revenues that have been more impacted by the recession caused by the pandemic include: Gas tax, utility taxes, state shared revenues which include sales tax distributions, franchise fees, public safety fees, parking meter fees, recreation fees, code enforcement fines, and investment earnings. The budget impact from the reduced receipts from these sources could total approximately $2.5 million.

  
  

  In total, the FY20 revenue budget may come in around $1.3 million below the budget estimates.

  
  

  General Fund Expenditures

  
  

  Through May, expenditures for most departments were below the budget standard. General Government, and Library Services are above the budget standard. General Government is over budget due to payments made for the vacation buy-back program in November and all COVID-19 related expenditures were charged to this program. Direct COVID-19 expenditures to-date have totaled $61,043. Library Services is over the budget standard due to the payment of both

  
  

  installments to the Four Arts Library; this program is expected be at the budget standard by the end of the fiscal year.

  
  

  All other departments are below the budget standard to-date. The main reason for the reduction in expenditures for these departments is personnel costs. There are currently 30 vacant positions of which 10 have been frozen. In addition, savings were realized during the implementation of the compensation study. Salaries at the current trend may finish the year over $3 million below budget. Employee benefits other than pensions will also come in below budget. Some of the reduction in salary cost will be offset by increases in contractual costs. Some parking enforcement positions have been contracted out and some of the recreation positions have been filled by contractual positions. Contractual costs are expected to end the year $470,000 above budget. Commodity costs are anticipated to come in $370,000 below budget due to reductions in fuel costs and the reduction in operations during the pandemic.

  
  

  Based on current estimates, we expect to end the year approximately $3 million below the expenditure budget.

  
  

  Summary

  
  

  Over the past two years, staff has be able to reduce expenditures and improve efficiencies. These actions have allowed departments to run more efficiently with less resources and reduce the impact of the current COVID-19 recession.

  
  

  Unless the revenue status worsens, or if Palm Beach experiences a major storm event during the summer, we expect to end the year with a surplus of approximately $1.7 million.

  
  

  Tables summarizing General Fund Revenues and Expenditures through May 31, 2020, can be found on the next two pages.

  
  

  General Fund Revenues

  
  

  General Fund Revenues For the Period Ended May 31, 2020 (67% of FY2020)
  	FY2020 Budget	FY2020 YTD Actual	% Budget vs. Actual	FY2019 Budget	FY2019 YTD Actual	% Budget vs. Actual	FY2019 Actual	% Budget vs. Actual
  Ad Valorem Taxes Sales, Use and Fuel Taxes Utility Service Taxes Business Tax Receipts Building Permits Franchise Fees Other Licenses, Fees and Permits Federal and Local Grants State Shared Revenues Shared Revenues from Other Local Units Public Safety Fees Physical Environment Fees Transportation Fees Culture and Recreation Other Charges for Services Judgments and Fines Violations of Local Ordinances Interest and Other Earnings Rents and Royalties Disposition of Fixed Assets Miscellaneous Revenues Interfund Transfers	55,979,439 352,000 6,107,000 763,000 7,008,000 2,358,700 771,100 32,700 1,046,900 20,000 2,468,000 1,323,000 1,386,000 1,025,599 86,600 762,000 180,000 1,230,000 72,267 0 361,461 1,108,000	55,647,673 196,017 3,658,701 753,404 4,606,471 1,082,147 821,266 362,771 619,542 9,119 1,420,902 1,004,145 646,293 345,878 54,881 541,406 120,500 512,274 22,307 0 270,634 16,667	99.4% 55.7% 59.9% 98.7% 65.7% 45.9% 106.5% 1109.4% 59.2% 45.6% 57.6% 75.9% 46.6% 33.7% 63.4% 71.1% 66.9% 41.6% 30.9% 0.0% 74.9% 1.5%	54,210,963 352,000 5,955,000 750,000 6,944,000 2,290,000 650,108 32,755 1,028,500 15,000 1,408,000 1,361,108 1,127,800 412,050 86,600 986,000 185,000 828,000 36,964 0 348,000 7,052,377	53,719,131 204,896 3,628,021 731,345 6,174,614 1,090,623 772,509 62,428 648,998 8,429 1,494,878 1,061,853 849,482 252,743 65,243 458,179 312,800 611,558 17,996 0 451,595 1,391,721	99.1% 58.2% 60.9% 97.5% 88.9% 47.6% 118.8% 190.6% 63.1% 56.2% 106.2% 78.0% 75.3% 61.3% 75.3% 46.5% 169.1% 73.9% 48.7% 100.0% 129.8% 19.7%	54,883,747 353,375 5,945,986 773,039 9,892,112 2,226,940 1,234,249 195,379 1,063,200 23,485 2,301,067 1,175,710 1,219,460 364,021 92,503 581,201 322,875 969,180 38,290 0 376,212 2,161,035	101.2% 100.4% 99.8% 103.1% 142.5% 97.2% 189.9% 596.5% 103.4% 156.6% 163.4% 86.4% 108.1% 0.0% 106.8% 58.9% 174.5% 117.1% 103.6% 100.0% 108.1% 30.6%
  Total Revenues	84,441,766	72,712,998	86.1%	86,060,225	74,009,043	86.0%	86,193,065	100.2%

  
  

  General Fund Expenditures

  
  

  General Fund Comparison of Expenditures Expenditures by Department For the Period Ended May 31, 2020 (67% of FY2020)
  	FY2020 Budget	FY2020 YTD Actual	% Budget vs. Actual	FY2019 Budget	FY2019 YTD Actual	% Budget vs. Actual	FY2019 Actual	% Budget vs. Actual
  Legislative	154,400	80,056	51.9%	157,500	83,439	53.0%	149,895	95.2%
  General Government	614,643	699,673	113.8%	985,190	717,647	72.8%	918,805	93.3%
  Town Manager	774,011	520,079	67.2%	801,228	476,057	59.4%	777,982	97.1%
  Advice and Litigation	528,200	190,046	36.0%	732,824	455,799	62.2%	691,685	94.4%
  Information Systems	2,775,010	1,770,663	63.8%	2,624,700	1,801,756	68.6%	2,464,496	93.9%
  Human Resources	752,902	423,231	56.2%	907,212	462,676	51.0%	724,036	79.8%
  Town Clerk	307,400	153,082	49.8%	312,626	209,025	66.9%	309,377	99.0%
  Finance	1,818,911	1,195,122	65.7%	1,716,405	1,112,394	64.8%	1,688,181	98.4%
  Planning, Zoning & Building	4,215,179	2,557,450	60.7%	4,215,588	2,431,894	57.7%	3,782,180	89.7%
  Recreation	1,682,074	897,401	53.4%	1,150,554	548,060	0.0%	960,997	83.5%
  Library	352,650	352,650	100.0%	345,058	172,529	50.0%	345,058	100.0%
  Fire-Rescue	14,456,969	9,007,148	62.3%	13,277,708	8,512,083	64.1%	13,068,438	98.4%
  Police	16,809,302	10,313,510	61.4%	14,857,128	9,608,394	64.7%	14,766,404	99.4%
  Public Works	15,777,708	9,925,667	62.9%	15,932,617	9,827,374	61.7%	14,761,236	92.6%
  Emergency Management	-	154	0.0%	14,749	-	0.0%	57	0.4%
  Transfers:
  Capital Improvement Fund	2,420,000	1,613,333	66.7%	2,200,000	1,466,667	66.7%	2,200,000	100.0%
  Coastal Protection Fund	6,520,211	4,346,807	66.7%	7,349,124	4,899,416	66.7%	7,349,124	100.0%
  Transfer to Retirement Fund	5,420,000	5,420,000	100.0%	9,501,699	6,860,000	72.2%	9,501,699	100.0%
  Transfer to Underground Utility	144,450	96,300	66.7%	135,000	90,000	66.7%	135,000	100.0%
  Debt Service Fund	5,983,913	3,989,275	66.7%	5,994,738	3,996,492	66.7%	5,994,738	100.0%
  OPEB Trust Fund	423,014	282,009	66.7%	435,383	290,255	66.7%	435,383	100.0%
  Risk Insurance Fund	1,900,819	1,267,213	66.7%	1,933,059	1,265,595	65.5%	1,933,046	100.0%
  Contingency	610,000		0.0%	480,136		0.0%	0	0.0%
  Total	84,441,766	55,100,869	65.3%	86,060,225	55,287,552	64.2%	82,957,817	96.4%
  General Fund Comparison of Expenditures Expenditures by Type
  	FY2020 Budget	FY2020 YTD Actual	% Budget vs. Actual	FY2019 Budget	FY2019 YTD Actual	% Budget vs. Actual	FY2019 Actual	% Budget vs. Actual
  Salaries and Wages	28,004,601	16,318,871	58.3%	26,200,355	15,884,988	60.6%	24,909,207	95.1%
  Pension Benefits	11,043,453	7,362,302	66.7%	9,648,558	6,432,372	66.7%	9,648,558	100.0%
  Other Employee Benefits	7,183,033	4,736,579	65.9%	7,094,515	4,815,701	67.9%	6,843,958	96.5%
  Contractual	10,682,513	8,362,720	78.3%	10,953,049	7,999,646	73.0%	11,769,115	107.5%
  Commodities	1,753,420	918,973	52.4%	1,775,363	995,041	56.0%	1,727,763	97.3%
  Capital Outlay	2,422,703	1,583,057	65.3%	2,484,571	1,674,701	67.4%	2,533,597	102.0%
  Contingency	610,000	0	0.0%	480,136	0	0.0%	0	0.0%
  Transfers and Other	22,742,043	15,810,774	69.5%	27,423,678	17,485,104	63.8%	25,525,619	93.1%
  Total	84,441,766	55,093,277	65.2%	86,060,225	55,287,552	64.2%	82,957,817	96.4%

  
  

  Enterprise Funds

  The Town currently has two enterprise funds accounting for the operations of the Town Marina, and Par 3 Golf Course.

  
  

  Town Marina

  
  

  On May 1st, the Town Marina closed operations to begin the demolition, dredging and reconstruction of a new marina. Revenues were expected to be significantly less than prior years due to the shortened season. Revenues through May were $268,023 over the budget estimate for the year.

  
  

  Expenses are expected to finish the year slightly less than the budget estimates. An operating surplus of approximately $400,000 is expected. The surplus will be set aside in reserves to use to fund expenses during the closure.

  
  

  Town of Palm Beach, Florida Marina Enterprise Fund Revenue and Expenditure Report May 31, 2020
  	Budget FY2020	YTD Actual 2020	% Budget vs Actual	Budget FY2019	YTD Actual 2019	% Budget vs Actual	Actual 2019	% Budget vs Actual
  Revenues
  Annual Slip Rental	1,587,362	1,696,593	106.88%	3,654,694	3,221,437	88.15%	3,198,708	87.52%
  Transient Slip Rental	595,000	602,546	101.27%	698,899	622,024	89.00%	703,473	100.65%
  Electricity	135,000	136,576	101.17%	275,150	144,905	52.66%	194,309	70.62%
  Waiting List Application Fee	15,000	-	0.00%	3,500	2,000	57.14%	6,000	171.43%
  Maintenance and Improvement Fee	-	0	0.00%	52,243	11,747	22.49%	12,992	24.87%
  Ice Sales	650	417	64.15%	1,500	900	59.97%	924	61.60%
  Sales Tax Commissions	-	187	0.00%	300	173	57.57%	293	97.57%
  Investment Income	-	164,916	100.00%	1,000	307,957	30795.66%	469,816	46981.59%
  Miscellaneous Revenue	200	-	0.00%	1,000	200	20.00%	152	15.21%
  Total Revenues	2,333,212	2,601,235	111.49%	4,688,286	4,311,342	91.96%	4,586,667	97.83%
  Expenditures
  Salaries and Wages	242,373	127,682	52.68%	248,934	130,579	52.46%	217,873	87.52%
  Employee Benefits	116,915	77,901	66.63%	98,751	66,526	67.37%	98,432	99.68%
  Contractual	715,025	503,618	70.43%	754,300	527,431	69.92%	704,290	93.37%
  Commodities	9,875	2,417	24.48%	11,600	8,573	73.90%	13,752	118.55%
  Depreciation	1,060,000	-	0.00%	1,063,735	-	0.00%	1,063,735	100.00%
  Capital Expenses	-	-	0.00%	40,000	37,735	94.34%	37,735	94.34%
  Contingency	54,209	-	0.00%	55,679	-	0.00%	-	0.00%
  Transfer to the General Fund	-	-	0.00%	1,282,160	854,773	66.67%	1,282,160	100.00%
  Total Expenditures	2,198,397	711,618	32.37%	3,555,159	1,625,618	45.73%	3,417,977	96.14%
  Operating Revenue over/(under) Expenditures	134,815	1,889,618		1,133,127	2,685,724		1,168,690
  Town Docks Project	37,511,546	1,457,767		1,776,316	682,500		1,124,925
  Total Revenues over/(under) Expenditures	(37,376,731)	431,850		(643,189)	2,003,225		43,765

  
  

  Par 3 Golf Course

  
  

  The Par 3 Golf Course was the first public course to shut down and close operations on March 18, 2020. The course reopened on April 30th with longer intervals between starting times which reduced capacity to 66%. Due to the closure during the height of the season, and the reduced capacity revenues losses have been significant. Revenues are 18% below year over year revenues. In June, play has picked up and revenues are better than originally thought. The revenue shortfall for FY20 is estimated to be approximately $400,000 below budget estimates.

  
  

  Due to the closure, expenses are estimated to be approximately $270,000 less than budget. Salaries, contractual and commodity expenditures will be less than the budget standard. If these revenue and expenditure projections hold, the Par 3 golf course will end the year with a deficit of approximately

  $200,000.

  
  

  Town of Palm Beach, Florida Golf Enterprise Fund Revenue and Expenditure Report May 31, 2020
  	Budget FY2020	YTD Actual 2020	% Budget vs Actual	Budget FY2019	YTD Actual 2019	% Budget vs Actual	Actual 2019	% Budget
  Revenues
  Golf Pass Fees	16,400	27,994	170.69%	31,000	13,268	42.80%	15,286	49.31%
  Greens Fees	1,093,000	779,664	71.33%	915,500	856,072	93.51%	966,276	105.55%
  Food and Beverage Sales	455,000	266,287	58.52%	455,000	343,903	75.58%	453,183	99.60%
  Golf Riding Cart Rental	315,000	227,379	72.18%	282,000	274,459	97.33%	334,663	118.67%
  Golf Pull Cart Rental	43,000	20,574	47.85%	43,000	32,166	74.80%	34,065	79.22%
  Driving Range Fees	125,000	70,322	56.26%	95,000	98,653	103.85%	119,719	126.02%
  Golf Outings	85,000	34,719	40.85%	65,000	62,927	96.81%	71,240	109.60%
  Town Tournaments	3,000	1,083	36.10%	4,500	931	20.69%	3,074	68.32%
  Merchandise Sales	200,000	151,804	75.90%	180,000	168,025	93.35%	202,154	112.31%
  Electricity Sales	5,000	0	0.00%	5,000	3,962	79.23%	3,962	79.23%
  Town Share Golf Teaching Services	37,000	31,833	86.04%	37,000	33,329	90.08%	44,083	119.14%
  Golf Pro Administrative Fee	-	0	0.00%	17,000	3,695	21.74%	3,695	21.74%
  Golf Maintenance and Improvement Fee	-	10,278	0.00%	120,000	94,559	78.80%	114,515	95.43%
  Gift Certificates Sales - Net Redemptions	-	8,123	0.00%	14,000	3,925	28.04%	4,500	32.14%
  Club Rentals	70,000	51,352	73.36%	69,000	66,131	95.84%	78,654	113.99%
  Sales Tax Commissions	150	210	140.00%	150	240	160.00%	360	240.00%
  Investment Income	-	61	0.00%	0	1,878	0.00%	4,079	0.00%
  Use of Reserves	274,634	0	0.00%	634,504	0	0.00%	0	0.00%
  Miscellaneous Revenue	3,500	4,247	121.33%	3,500	3,860	0.00%	5,838	0.00%
  Total Revenues	2,725,684	1,685,929	61.85%	2,971,154	2,061,984	69.40%	2,459,346	82.77%
  Expenditures
  Salaries and Wages	569,252	319,839	56.19%	565,932	289,277	51.12%	475,054	83.94%
  Employee Benefits	288,231	200,246	69.47%	248,179	171,382	69.06%	247,906	99.89%
  Contractual	574,935	326,011	56.70%	530,350	332,561	62.71%	581,032	109.56%
  Commodities	337,425	215,352	63.82%	309,650	188,311	60.81%	298,925	96.54%
  Capital Equipment	55,000	49,701	90.37%	138,500	98,314	70.98%	127,545	92.09%
  Use of M&I Reserves	173,500	41,352	23.83%	355,634	107,670	30.28%	180,790	50.84%
  Debt Service - Par 3	199,813	133,209	66.67%	199,338	132,892	66.67%	199,338	100.00%
  Depreciation	417,230	204,409	48.99%	366,915	204,409	55.71%	306,613	83.57%
  Contingency	85,298	-	0.00%	89,630	-	0.00%	-	0.00%
  Transfer to the General Fund	25,000	16,667	66.67%	25,000	16,667	66.67%	25,000	100.00%
  Total Expenditures	2,725,684	1,506,785	55.28%	2,829,128	1,541,482	54.49%	2,442,203	86.32%
  Total Revenues over/(under) Expenditures	-	179,145		142,026	520,501		17,144
  % of Fiscal Year Completed: 67%

  General Fund Trend Analysis

  Financial trend analysis assists the Town in evaluating its financial condition. The trend analysis describes the fluctuations in the major categories of General Fund revenues and categories of expenditures. The financial trends present a picture of the Town’s financial strengths and weaknesses and allow staff to identify emerging issues before they become serious problems. The Town financial trends have been analyzed using the International City Management Association’s (ICMA) guidelines contained in “Evaluating Financial Condition”. This analysis is designed to present information on the fiscal health of the Town as part of the Long Term Financial Plan.

  
  

  The City’s financial trends are analyzed annually in order to understand the financial condition of the Town. The factors include:

• The economic condition of the Town;

• Types and amounts of revenues and whether they are sufficient, and the right mix to support the Town;

• Expenditure levels and whether these expenditures are sufficient to provide the desired level of services the citizens expect;

• Fund balances and debt levels and their impact upon current Town financial resources.

The amounts in this section represent actual expenditures for the years FY11 through FY19 and budgeted amounts for FY20. The FY20 budget in the trend document does not take into account any revenue changes due to the shutdown related to the COVID-19 pandemic. The projected results are discussed in greater detail in the Current Status section of the document.

General Fund Revenues

Revenues determine the capacity of a municipality to provide services. Important issues to consider when reviewing revenue trends are growth, flexibility, diversity, reliability and administration.

Revenues should grow at a rate equal to or greater than the combined effects of inflation and expenditures.

General Fund Revenues are 41.5% higher in FY20 than they were in FY11. The major causes of recent increases are property tax revenue increases for coastal protection projects and pension funding and increased revenue from parking meter, permit revenues, and utility tax revenues.

Ad Valorem Revenue

Ad valorem taxes are the Town’s largest revenue source. Municipalities in Florida are not permitted to levy property taxes at a rate of more than 10 mills for the operating millage. From 2010-2012 ad valorem revenue declined due to a decline in taxable value. In FY15, ad valorem revenue increased by 12%, with the entire increase of $4.7 million allocated to coastal protection funding, and in FY16 another increase of 9.17% was approved to increase funding for coastal protection. The FY20 increase was 3.26%. Currently, ad valorem revenue accounts for 66.3% of total revenue.

The millage rate was maintained at 3.2512 from FY09 through FY13. Taxable value has increased since 2012. The millage rate increased in 2015 to fund the coastal protection financing plan. Recent increases in taxable value have allowed the Town to reduce the millage rate to the lowest historical level.

State law limits millage rate increases to the rolled back rate (the rate that produces the same taxes as the prior year, exclusive of taxes from new construction) plus growth in personal income. Local governments are allowed to override the cap by extraordinary vote, either a 2/3 vote of the Council for up to a 10% increase over the rolled back rate, or a unanimous vote of the Council for an increase in excess of 10%. The total millage, for Palm Beach taxpayers, which includes all other applicable taxing districts, increased 2.95% from 16.2970 to 16.7774. The Town’s portion of the total millage is 18.29% of the total tax bill. The chart below identifies the taxing districts and the effect the changes in millage from FY19 to FY20 had on a taxpayer with a $1 million value (assumes no change in taxable value from year to year). The total change in FY20, was an increase of $480.40 per million due entirely to the voter approved increase in millage for the Palm Beach County School District for additional security, higher teacher salaries and mental health programs.

The Town of Palm Beach’s total millage rate is the second lowest in Palm Beach County. The owner of a home with a taxable value of $1 million pays $16,777 in total taxes in Palm Beach versus

$18,303 in Boca Raton, $18,967 in Jupiter, $19,846 in Palm Beach Gardens and $22,176 in West Palm Beach.

Many other municipalities in Palm Beach County have enterprise funds and charge separate fees for sewer, stormwater, sanitation, and other services over and above the funds collected from ad valorem taxes. The Town of Palm Beach does not charge separate fees for these services as all costs are included within the Town’s tax rate.

Non Ad Valorem Tax Revenue

Non Ad Valorem tax revenue includes local option gas taxes, franchise fees and utility service taxes.

Local Option Gas Tax and Franchise fee revenue declined from FY11 through FY13 and have increased in recent years. Utility service taxes have increased throughout the 10-year period. The budget estimates for FY20 were conservatively based upon recent trends.

License and Permit Revenue

License and permit revenue includes, business licenses, building permit revenues and parking permits. The trend chart is shown below.

Building permit revenue makes up the majority of these revenues. The recession and downturn in housing caused the decline in FY11 and FY12. Since FY12, revenues have improved due to increases in building activity. FY15, FY16, FY18 and FY19 were record years for permit activity. In FY17, a decline in permit activity occurred due to a brief slowdown in construction. The FY20 budget reflects a conservative estimate for building permit revenues from the historic highs. The number of business licenses have declined from FY11 through FY15. A change in state law exempting real estate brokers from the business tax caused a further decline in FY15, but revenues have increased since that time. Other licenses and fees have increased since FY12 due to increases in right-of-way permit and parking permit revenues. FY19 shows a record amount of right-of-way permits due stricter enforcement. The FY20 budget contains conservative estimates for these revenues.

Intergovernmental Revenue

Intergovernmental revenue includes revenue received from Federal, State, County and Local government sources. Revenues from the State of Florida sources include State revenue sharing, local government sales tax, and alcoholic beverage licenses. Local revenues include County occupational license revenue and Palm Beach County 911 reimbursement. Federal, State and Local grants are also included in this category.

State revenues declined during FY12 and FY13, but have since rebounded.

Charges for Services

Charges for services include public safety fees, solid waste fees, parking meter collections and other small fees such as copy charges and lien searches.

Public safety fees have increased in the past due to increases in the EMS transport fees in FY12, and increases in revenues for police special detail. Revenues for police special detail have increased in FY19 and FY20 due to two new large contracts.

Physical environment fees include solid waste fees. Solid waste fees are billed through the non-ad valorem assessment process on the property tax bill. Compacted garbage fees are billed quarterly by the Town. These fees increase annually based upon the cost of providing the service.

In FY11, parking meter rates at Mid-Town Beach and Phipps Ocean Park were increased from $2 to

$5 per hour. Parking meter revenue has increased in recent years due to the Park Mobile program.

Fines and Forfeitures

Fine and forfeiture revenue includes traffic violation fines, parking fines and penalties, right of way fines, and code enforcement violation fines.

In FY11 and FY14 large code enforcement fines were collected causing spikes in revenues. In FY13 revenues from parking tickets increased due to an increase in parking fines. In recent years, parking fines have declined due to improved compliance. The FY20 budget is based on the recent trends.

Investment Income

The Town’s Investment Advisory Committee oversees the investment of the Town’s surplus funds as well as the investments in the Town’s OPEB trust. The Town’s surplus funds are invested in fixed income securities, money market accounts, two bond funds with the Florida League of Cities Investment Trust and Certificate of Deposits.

Since 2011, historically low interest rates have caused investment revenue to decline. The recent growth is due to higher reserves and recent increases in interest rates providing more opportunities to invest in short term securities. The FY20 budget was based on conservative estimates for investment returns.

Miscellaneous and Transfers

Miscellaneous revenue includes rents and royalties, sales of fixed assets and other revenue. Transfers include transfers from the Recreation Enterprise Fund.

FY11 revenues included a transfer from the Capital Improvement Fund and an increase in the Recreation Enterprise Fund transfer. The Town had transferred $2.6 million in FY10 to the Capital Improvement Program to begin to fund the 20 year CIP program. Bonds were issued in FY10 to fund the program, so most of the funds were no longer needed in the CIP program and $1.4 million was transferred back to the General Fund in FY11. FY12 includes a transfer of $800,000 from the Recreation Enterprise Fund and insurance proceeds from a large claim. Revenues in FY13 and FY14 include a transfer of $885,000 from the Recreation Enterprise Fund and the proceeds from the sale of property. In FY16, FY17, and FY18 the transfer from the Recreation Enterprise Fund was reduced by $100,000 in each year to add to the funding of the Dock Replacement Reserve. For FY19, the Recreation Enterprise Fund was eliminated and the recreation activities were returned to the General Fund. The Marina and Par 3 Golf Course are now accounted for in separate funds. In order to ease the burden on the General Fund in FY19, the transfer from the two enterprise funds was increased to $1,307,160 from $585,000 for the first year. In addition, surplus funds from the Equipment Replacement Fund were transferred to the General Fund in FY19 from funds that were set aside for the beach cleaning equipment that was not replaced and the savings on the purchase of the quint fire truck totaling $780,421.

General Fund Expenditures

Expenditures are a measure of a municipality’s service output. Ideally, a municipality’s expenditure growth should not exceed its revenue growth rate and the government should have maximum flexibility to adjust spending.

Since FY11, the General Fund budget has increased a total of 37.2%. A significant portion (44%) of the increase is due to increases in the coastal protection fund, the transfers to the debt service fund, and Capital Improvement Fund, and the extraordinary retirement contribution to reduce the UAAL. Operating costs have increased 19.6% during the 10-year period. The increase from the low point in the past decade (2012) was 50.1%. The increases are described in greater detail later in this section. The total General Fund budget increased by 2.4% in FY20 from the FY19 budget.

The major changes in the General Fund budget for FY11 – FY20 are detailed in the chart below and on the following pages by fiscal year. Large expenditures for capital and coastal projects and other non-recurring expenditures are noted in bold face type. Personnel cost changes are noted in italics.

General Fund Operating Expenditures

The chart on the following page shows the trend in General Fund expenditures broken out between operating expenditures and transfers since FY11.

Since FY11, operating expenditures have increased a total of $9,981,646 or 19.6% over the 10-year period. Most of the increase coming from pension benefits and contractual expenditures. The total budget increased $22,884,827 over the same time period with $12,903,181 or 43.6%, of the total from the Town transfers, specifically coastal protection and debt service and the new extraordinary transfer to the retirement fund. From the lowest point of the budget trend in FY12, the budget has increased $28,196,713 or 50.1% with $16,531,745 coming from operating expenditures and the other

$11,664,968 of the increase coming from transfers. A more detailed analysis of the expenditures by category follows.

Salaries and Wages

Expenditure by Category Trend Analysis

The salary and wage trend is shown on the graph below. FY20 salaries are 14.8% more than they were in FY11. A wage freeze was in effect in FY11 for all employees. In all following years merit and step increases were included the budget and in FY13 through FY19 an increase in employee pay ranges were included in all years except FY14. The FY20 budget increased 12.43% from the FY19 budget due to the results of the compensation and benefits study which included the addition of 3 firefighters in order to add a Kelly Day. On the chart on the following page, FY20 shows a large increase over the actual FY19 amount. This is due to a reduction in expenses paid out in FY19 due to retirements and vacancies that occurred during the year. At the beginning of the fiscal year, there were 30 vacant positions, 12 were frozen and 18 were vacant but not frozen positions. The FY19 actual for salaries was $891,148 less than the FY19 budget due to these vacancies.

The lowest point in the trend (2013) shows that the actual salary amount is $5,060,627 (18.1%) less than the FY20 budget. The FY20 budget has 1.56 more positions than 2013. In 2013, there was reduction of 8.7 FTEs in the budget and a significant amount of turnover (42 positions). This caused the actual amount paid out for salaries to be $1,520,955 less than the amount budgeted for 2013. There are currently, as of April 30, 2020, 30 vacation positions of which 10 are frozen and 20 are vacant and not frozen. We expect the FY20 year-end salary amount to be much less than the budget amount due to these vacancies.

Employee Benefits

For purposes of this analysis, we have broken employee benefits into retirement benefit trends and other employee benefit trends. On May 1, 2012, pension reform measures to decrease the level of benefits and reduce the long term cost were implemented. The first year savings was $5,369,248. The pension benefit at that time was a hybrid plan with a defined benefit and defined contribution component for all employees. Increases in FY13 and FY14 were due to modifications to the plan and more retirements than anticipated. The actuarial assumptions for investment returns and wage inflation were reduced and employee contribution rates were modified. In FY14, the Town Council approved a discretionary 4% employer contribution to the defined contribution plan. During FY16, the Town Council adopted changes to the police and non-union firefighters pension plan, and in FY17, changes were made to the union firefighters pension plan. These changes eliminated the DC portion of the benefit and improved the multiplier and age benefit for a pure DB plan. Also in FY17, the Town Council adopted changes to the General Employees pension plan. The changes included modifications to both the DC and DB benefits and kept the hybrid DB/DC system. In FY18, costs increased due to the change in mortality table and the smoothing of investment losses in FY15. The Town Council approved a policy to transfer additional funds to the retirement system to lower the unfunded liability. In FY17 the Town transferred $2,800,000, FY18 the town transferred

$4,759,016 for this funding and in FY19 the Town transferred $5,420,000. In addition, $1,440,000 was added to the budget to fund a reduction in the amortization of the UAAL from 25 years to 15 years. Also at the end of FY19, as a result of the compensation and benefits study, an additional

$2,641,699 was contributed to pre-fund UAAL increase associated with the benefit and compenation changes.

Other employee benefits include health insurance, FICA, bonuses, allowances, incentives, and uniform maintenance. Since FY11, other employee benefits have increased 2.76% over the 10-year period. Since FY13, health insurance costs have been maintained through changes in the program, cost shifting to employees, wellness programs, and having fewer employees in the plan due to the reduction in full time staff positions. In FY18, health insurance costs increased but the increase was funded from the Health Insurance reserves. In FY19, the health insurance costs decreased due to improved claims performance and fewer employees. In FY20, health insurance costs remained flat. Included in the other employees benefits category is the transfer to the OPEB Trust. The transfer decreased by $524,617 in FY19, due to the improved funding level of the plan. Also over the 10- year period, the longevity /bonus program costs decreased due to the phasing out of the longevity program accomplished through retirements and freezing the benefit at FY18 levels. The cell phone allowance also decreased due to the reductions in the stipend provided to the employee. In FY20, FICA costs increased due to the increase in salaries.

Contractual Services

Contractual services include legal advice, lobbyists, consulting services, sewage treatment, solid waste disposal costs, building maintenance, landscape contracting and software maintenance.

Contractual services have increased 53.42% since FY11. Much of the increase since FY11 is due to increases the use of contractual services for duties that were once done in house like contracting with Palm Beach County for Fire-Rescue mechanic services and landscape contracting. Other contractual cost increases were due to increases in sewage treatment and disposal costs, legal services, lobbying, landmark preservation consulting, credit card fees for payment of building permits, landfill maintenance, employee recruiting, and digital scanning. In FY17, costs increased due to the post storm clean-up efforts for hurricanes Mathew and Irma. A significant portion of the increase was caused by increased costs from West Palm Beach for sewer treatment and disposal. In FY20, funding was appropriated for code reform, and increases for landscape maintenance, recreation contracts, and software maintenance.

Commodities

Commodity costs include fuel, electric, water, office supplies and equipment, building and vehicle maintenance supplies, publications and subscriptions, membership dues, medical supplies, and uniform services.

The total cost of commodities in FY20 is 18.1% higher than it was in FY11. The increase for FY12 related to increases in fuel costs. The decreases in FY15 are due to decreases in fuel costs and supplies. FY16 actual amounts reflect lower fuel expenditures during the year and other savings during the year amounting to total savings of $336,017 versus the budgeted amount. The FY17 costs increases were due to increased costs for fuel and other operational supplies. FY18 expenditures included additional uniforms for the new firefighter positions, telecommunication lockers and patrol equipment. In addition, travel and per diem costs were moved from the contractual category to commodities for a more accurate costs for training. This category has remained flat for the past few years.

Capital Outlay/Equipment Replacement

Capital Outlay expenses include depreciation on the Town’s fixed assets, purchases of new equipment that are not purchased through the Equipment Replacement Fund, and purchases of equipment through grant funding.

The total cost of capital equipment in FY20 is 4.91% lower than it was in FY11. The Town utilizes an Equipment Replacement Fund (ERF). Transfers are made to the ERF based on the annual depreciation based on the replacement cost of each asset. In FY12, the depreciation transfer decreased by $344,271. The reduction is the result of a thorough analysis by staff of the useful lives of the equipment, which resulted in extension of useful lives for some items and elimination of some other items. The increases since FY12 were due to increases in depreciation on new equipment purchased. In FY16, an Opticom system was purchased and in FY16 and FY17 there was a specific increase in the estimated depreciation for 3 fire rescue pumpers due to the higher than anticipated increases in the cost of these vehicles. In FY19, the budget decreased due to purchases that were made in FY18 versus FY19. In addition, Recreation and Tennis equipment was added to the General Fund and depreciation on this equipment is now included in this category. FY20 decreased due to a study of the equipment which extended the useful life in many cases.

Transfer to the Capital Improvement Fund and Coastal Protection Fund

Historically, the Town funded capital projects on a pay-as-you-go basis. If additional funding was necessary for larger projects, transfers from fund balance were used to supplement the funding.

In FY10 and FY13 the Town issued bonds to fund the costs of the 20 year Accelerated Capital Improvement Program. The trend in the transfer to the Capital Improvement Program and the Coastal Protection fund is shown on the chart below.

The coastal transfer since FY11 has increased $3,430,211, and the CIP transfer has increased

$1,920,000. In FY11, a total of $3,090,000 was transferred to the Coastal Protection Fund for projects and $500,000 was budgeted for the pay-as-you-go portion of the Capital Improvement Program. In FY12, $3,960,000 was transferred to the Coastal Protection Fund and the transfer to the Capital Improvement Program was increased to $1,000,000. In FY13, $4,765,099 was transferred to the Coastal Protection Fund and in FY14 an additional $7,200,000 was transferred to

build reserves for the Mid-Town and Phipps beach renourishment projects. In FY15, $6,600,000 was transferred to the coastal fund from various town reserves, in addition, a property tax increase of $4,777,000 was established to begin to fund the coastal protection fund through property taxes. In FY16 the annual transfer to coastal was increased to $8,015,220 due to higher than expected costs of the Mid-Town and Phipps beach renourishment projects. In FY17, the coastal transfer was decreased due to the reduction in the funding for the Reach 8 restoration project. Also in FY17, the transfer to the CIP fund was increased to begin to build up the reserves for capital projects once the ACIP bond funds have been spent and to fund a portion of the underground utility project costs for the Lake Worth section and to hire a project coordinator. For FY18, the coastal transfer was increased by 3%, and the CIP transfer was decreased by $172,176 due to the transfer of projects to the ACIP fund. In FY20, the coastal transfer was decreased due to the receipt of Federal and State Funding for beach renourishment projects.

Transfers to the Debt Service Fund, OPEB Trust Fund and Risk Insurance Fund Debt Service

Debt service costs have increased 71% since FY11. In 2010, the 2000 revenue bond for coastal projects was paid in full and the Town issued a bond for the 20 year accelerated capital improvement program and refinanced the 2006 bond and the 2008 revenue note. The payoff of the 2000 bond and the issuance of the new bond resulted in lower annual debt service payments in FY11. In 2013, the Town issued bonds for the second phase of the accelerated capital improvement program. The FY14 increase reflects the additional debt service for the new bonds. In FY16, the Town refunded the 2010 bonds, which lowered the debt service for the Town’s bonds reflected in the subsequent budgets. In FY19, the Town refinanced the 2013 bonds which lowered the debt service for FY20 and beyond.

Retiree Health Benefits (OPEB Trust)

For many years, the Town accumulated reserves in the Health Insurance Fund in anticipation of the implementation of GASB 43, which required governments to begin to fund their retiree health benefits in the same manner as retirement benefits. In FY07, the Town established the Health Insurance Trust with a transfer of $16 million from the health insurance fund. Prior to the implementation of GASB 43, the Town paid retiree health benefits on as pay-as-you-go basis. The new pronouncement required an actuarial study to determine the amount of the Town’s total liability and the amount of the annual contribution. The Town’s total OPEB Liability as of October 1, 2019 was calculated to be $30,440,027. The actuarial value of assets in the trust are $32,682,812. The resulting OPEB asset is $2,242,785. The funded ratio for the plan is 107.4% for FY19. The annual budgeted contribution for FY20 is $423,014, which is $12,369 less than FY19.

Risk Insurance Fund

The Town funds the Risk Insurance Program with a transfer from the General Fund. The Risk Insurance program includes insurance for property, liability and worker’s compensation insurance.

Since FY11, the transfer to the Risk Fund has remained relatively flat with an overall increase of only

$4,593 over the 10-year period. The Town’s risk insurance costs have been maintained over the past

decade, due to the changes in carriers and other cost-saving measures in the overall insurance program and healthy reserves.

Town of Palm Beach Revenue Trend Analysis FY11 - FY20

Town of Palm Beach Expenditure Trend Analysis FY11 - FY20

General Fund Long Term Financial Plan Forecast

Financial forecasts are the foundation of a long term financial plan. These forecasts provide the Mayor, Town Council and staff with information they need to more effectively determine future levels of service and methods of funding. We typically use the current year budget to prepare the forecast but due to the delay caused by the COViD-19 pandemic, we prepared this forecast of General Fund revenues and expenditures to include the FY21 proposed budget and an 8-year forecast through FY29.

Assumptions

The forecast for the first 2 - 4 years is based upon recent trends and specific expectations. The forecast for the remaining years is less tactical and more mathematical, and is based primarily upon estimates by actuaries and long term inflation expectations.

The major assumptions that were used to prepare the forecast are as follows:

Revenue forecasts are based upon historical trends and recent activity. The forecast was prepared using property tax to balance the budget. The percentage increases for ad valorem taxes are shown in the table above. This will not be the ultimate result in future years. The forecast for all revenue categories are described in greater detail later in this section.

The assumption for inflation for FY22 is 1.6% and 2.0% for all years thereafter is based upon the forecast in the Livingston Survey issued by the Federal Reserve Bank of Philadelphia. The salary and wage assumption is based upon the most recent compensation and benefits study in FY20 and average annual increases for all employee groups and forecasted retirements from FY22 through FY29. The health insurance forecast assumption is based upon input from our health consultant’s actuary. The pension forecast assumptions were updated by the Town’s pension actuary to include

the results of the compensation study results. The other employee benefit assumptions have been calculated based upon anticipated retirements and other inflation factors and does not include health insurance. Property, Liability and Workmen’s Compensation insurance assumptions are based upon information received from our brokers regarding potential increases.

2020 Forecast

The forecast charts shown on the following pages include actual results for 2016-2019 shown in dark blue, the FY20 budget, shown in medium blue and the proposed FY21 budget shown in violet, and then forecasts through FY29 shown in light blue. The forecast maintains service levels, funds the additional contribution of $5,420,000 for the retirement program, and contains the results of the compensation and benefits study.

General Fund Revenue Forecast

The forecast for revenues is conservative and should allow for minor fluctuations in various revenue sources. The forecast details for each major revenue category are included in this analysis. The forecast chart below contains the property tax increases based on the assumptions shown on the table at the beginning of the document.

Property Tax Revenue

As mentioned earlier, we used ad valorem property taxes as the plug to balance the budget for the forecast years of FY22 through FY29. Over the past 5 years, taxable value has increased by 32.66% an average of 6.53% per year. The taxable value increase for FY21 was 4.68%. Over the past five years, the Town portion of the property tax bill for a $1,000,000 homesteaded property has decreased by $116. As of FY20, the total ad valorem tax bill including all taxing districts declined by

$7.32 per million of taxable value over the same five year period. In FY20, the school district millage increased based on a voter approved tax increase which caused the overall tax bill for a $1

million homestead property owner to increase by $1,123 in FY20. Prior to FY20, the total bill had decreased $1,131 since 2016.

Non Ad Valorem Taxes

Non ad valorem taxes include local option gas taxes, franchise fees and utility service taxes. The forecast has increased because recent revenue collections have improved. The forecast and trend chart is shown below:

License and Permit Revenue

License and permit revenue includes business licenses, building permit revenues and parking permits.

The chart on the following page shows record years for these revenues sources in FY16, FY18 and FY19. In FY20, revenues are expected to be lower due to the COVID-19 shutdown. For FY21 through 29, the building permit related revenues have been transferred to the Building Enterprise Fund. The forecast below is for the remaining non-building permit revenues.

Intergovernmental Revenue

Intergovernmental revenue includes revenue received from Federal, State, County and local government sources. Revenues from the State of Florida include State revenue sharing, local government sales tax and alcoholic beverage licenses. Local revenues include County occupational license revenue, and the 911 reimbursement from Palm Beach County. Federal and State grants are also included in this category.

The forecast for intergovernmental revenues has decreased for FY21 and FY22 based on revenues received from the State of Florida for sales tax and revenue sharing. FY18 contained grant funds from FEMA and the Federal Government. The updated forecast for all other revenues anticipates a small inflationary increase per year.

Charges for Services

Charges for services include public safety fees, solid waste fees, parking meter collections and other small fees such as copy charges and lien searches. The updated forecast reflects the increase in special assignment overtime for two new large contracts. This revenue source offsets increased expenditures in the salary and wage budget in the police department. If the contracts were not renewed and the revenue was lost, the expenditures would also decline by approximately the same amount. This category also includes the estimates for the revenue for the new Recreation Center beginning in FY20. The forecast for these revenue sources reflect small inflationary increases.

Fines and Forfeitures

Fine and Forfeiture revenue includes traffic violation fines and penalties, parking fines and penalties and code enforcement violation fines.

Revenues from these sources have been variable and have declined in recent years. There have been several recent vacancies in parking enforcement and officers have been pulled from their duties to handle traffic duty during presidential visits. In addition, the new parking meter system allows a customer to update their meter time on their mobile device, so fewer tickets are being issued for parking meters. The downward forecast in these revenues from FY20 reflect the current status.

Investment Income

Investment returns started to increase due to rising interest rates. The Federal Reserve cut interest rates in response to the COVID-19 pandemic recession, so we have lowered our FY21 budget and future forecast for lower rates for the near term. The Investment Advisory Committee and our investment consultants are monitoring the situation closely and will adjust the duration of the portfolios as required.

Miscellaneous and Transfers

Miscellaneous revenue includes rents and royalties, the sale of fixed assets and other revenue. The increase in the FY20 budget and future forecast is due to new revenue from the p-card rebate program, and higher than anticipated DC forfeiture funds.

Total General Fund Expenditures

The 2020 forecast contains the results of the compensation and benefit study and additional funding of $5,420,000 annually for the pension fund. In addition, the forecast reflects the expenditure increase assumptions outlined earlier in this section. The charts in this section include four years of actual data from 2016-2019 in dark blue, the FY20 budget in medium blue, the proposed FY21 budget in violet and the forecast through FY29 in light blue. The forecast has been updated to reflect the transfer of the Building Permit related expenses to the new Building Enterprise Fund beginning in FY21.

Salary and Wages

The forecasted salary and wage increases are based upon the employee pay policies and replacements of retirees at lower salaries through the forecast period. The salary and wage assumption is based upon the compensation study results and the change to the merit system and new step program including COLA on October 1st of each year. In recent years expenditures have come in well below budget due to vacancies from retirements and turnover. We expect the FY20 actual costs to be below the budget amount. For FY21, a COLA increase was not included due to the negative CPI. The chart on the following page shows the forecast and past trends.

Reduced staffing has improved the salary forecast over recent years. The 2020 forecast contains the personnel cuts that have been made in FY21 and the reductions planed through attrition in future years. The average increase throughout the forecast period is 4.4% for total salary and wages.

Pension Benefits

The pension estimate is based upon the actuary’s forecast for pension costs for the annual required contribution and estimates for the General Employee DC contributions. The forecast for annual contributions has been updated to include the compensation study results and the benefit changes for police officers and firefighters.

The forecast reflects the Town’s Retirement Board recommended a change in the investment assumption from 7.0% to 6.0% over a 5-year period, the change in the payroll growth assumption, the increase in the wage growth assumption and the new mortality tables. The actuary forecasts the costs to decline over the 10-year period if all assumptions are met. The FY19 extraordinary contribution includes additional funds paid into the system for the new amortization and the prepayment of the UAAL for the effects of the compensation study.

Other Employee Benefits

Other Employee Benefits includes all other benefits including health insurance. Health insurance costs have remained flat for six years. To be conservative, the health insurance forecast reflects an increase of 6.0% for FY22 – FY24, then reductions through the forecast period to 5.49%. The Town’s actuary for the health plan provided the health insurance forecast. Other employee benefits (including FICA, longevity, incentives, and allowances) are expected to increase at a much lower rate.

Contractual

The contractual costs have increased due to increases in software maintenance agreements, sanitary sewer treatment costs, landscape maintenance and the addition of Recreation Department expenses. Contractual expenditures are forecasted to increase by the rate of inflation.

Commodities

The commodity forecast is based upon the assumed rate of inflation. Commodity budgets include fuel, supplies, dues, software, some computer hardware and vehicle maintenance and uniforms. The reduction in expenses represent an overall town effort to reduce expenses wherever possible.

Equipment Replacement/Capital Outlay

This category includes depreciation on Town vehicles and equipment that is charged to the departments and transferred to the Equipment Replacement Fund. It also includes purchases of new equipment that is not replacement equipment. There were large capital purchases in FY17 in the Police and Fire-Rescue Departments that caused the spike in each year.

Transfers

The Transfers category includes transfers to the Capital Improvement Program, Coastal Protection Fund, Debt Service Fund, Risk Insurance Fund and Retiree Health Insurance Trust. It also includes the annual contingency allocation.

• In FY17, the transfer to the Capital Improvement Program increased by $1,260,200. This transfer is intended to begin to build reserves for capital projects in the pay-as-you-go fund once the ACIP bond funds have been spent at the end of 2019. The forecast assumes a 10% increase per year until 2027 then a 5% increase thereafter. The increases are in anticipation of the need to increase funding in the Capital Improvement fund going forward to move toward pay-as-you-go funding for capital improvement projects.

  
  

• The Town Council approved a 10 year $84 million Coastal Protection program in 2013. The first year funding in FY15 was approved at $4,777,000. The transfer increased to $8,015,220 due to increased beach renourishment project costs. In FY17, the transfer was lowered to

  $7,265,000 due to the reduction in scope of some projects. In FY20 the transfer was reduced by $369,413 and in FY21 the budget was reduced to the original $4,777,000 because of the award of FEMA, Federal and State grant funding. The forecast for FY22 forward assumes a 3% increase per year in funding.

  
  

• Debt service decreased in FY17 due to the refunding of the 2010A bonds at a lower interest rate. The budget for FY21 was reduced due to the refunding of the balance of the 2010A bonds and the 2013 bonds. The forecast includes the debt service on both the 2016 and 2019 bonds which are paid mostly from General Fund revenues.

  
  

• Risk insurance premium increases have been estimated as follows: Property Insurance 5% per year, Liability Insurance 2% per year, and Worker’s Compensation 3% per year throughout the forecast period.

  
  

• Retiree Health Insurance is based upon a forecast for Town Contributions prepared by the Town’s actuary. Due to the over funded status of this trust the transfer has been reduced to

  $423,014 in FY20. The actuary calculated the amounts in the forecast to keep the plan 100% funded if the investment return assumption is set at 6%.

  
  

• The General Fund contingency appropriation has been estimated to be 1% of the forecasted operating expenditures as required by Town policy. The General Fund contingency is funded through a transfer from fund balance rather than through operating revenues. The policy was modified to reduce the appropriation from 1.5% to 1% in FY18.

  
  

• The Town’s contribution to the Four Arts Library is forecasted to increase by CPI capped at 3% per year.

Revenue Forecast FY20 - FY29

Expenditure Forecast FY20- FY29