Meeting Capital Challenges through Multi-Year Financial Planning

Town of HillsboroughEmily Bradford, Budget & Management

Analystci.hillsborough.nc.us

Before the Multi-Year Financial PlanBudget ordinance and CIP prepared on a

typewriter (late ’90s!).Built forecast from scratch at beginning of

budget season.Spending down fund balance and retained

earnings.18 months from bankruptcy in both funds! Proposed budget:

7-cent tax rate increase 23.5% water and sewer rate increase

Why a Multi-Year Financial Plan?Get out of the weeds! More information to process

which forces everyone to focus on the big picture. Year 1 – 60% Year 2 – 20% Year 3 – 20%

Few surprises because the Board has seen and talked about it for 3 years.

Moves focus beyond just the current fiscal year. Want to know how this year’s decisions will impact years 2 and 3.

Cuts/deferments are easier on staff. They don’t just disappear, they can still see them in the plan. Plan for how to address needs in the short-term, but also plan for

when item/position comes online.

Extended Budget SeasonFY13’s budget didn’t look good:

Declining/flat revenuesNothing left to deferOperational expenses already cut to the bone10% of General Fund staff eliminated in FY12

Started budget process 3 months early. Presented “workbook” to Board in early February rather than May.More time to work on the most pivotal issues.

Capital Improvement Plan10-year plan.Capital projects/items >$100K.Includes both capital and operational cost

estimates.

Wastewater Treatment Plant Upgrade$19.2M WWTP upgrade currently under

construction.$1.46M annual debt service payments, increasing

WWTP’s budget by 2.4 times in FY15.

Need equivalent of 2,736 new homes using 4,500 gpm for debt payments to have no impact customers.Phase I of UNC Hospital = 233 homesFull build out = 1,346

Efland-Cheeks sewer system disconnecting from Hillsborough in FY15 – 7.5% reduction in revenue.

WWTP (continued)Rate Increase Options:

Massive rate increase in FY15 to cover lost revenue and debt service payment (>50%)?

Series of smaller rate increases?8.8% annual rate increases from FY12-18.

Reserve revenues from rate increases to use in early years of debt repayment to cover the difference until rates are sufficient.

Any growth in total water usage likely to be counteracted by customer conservation due to increasing rates.

Water System Enhancements

FY13 – 5% water rate increase, with no increases projected for FY14 & FY15.

FY16-18 – water rate increases anticipated to fund:Construction of phase II of the reservoir.Expansion of Water Treatment Plant.

Fiscal RadarAnnual budget gives little advance notice of

problems looming on the horizon.Multi-year plant helps avoid surprises.

Encourages you to look forward and identify, address and mitigate potential problems while they are still manageable.

See how today’s decisions impact the financial condition of the Town in the future.