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HomeMy WebLinkAboutCity of Independence - Public Financial Report Popular Annual Financial Report Fiscal Year Ending June 30, 2021 Table of Contents Message from the Mayor 1 Independence Leadership 2 About Independence 3 Letter from the City Manager 4 Balance Sheet 5 Income Statement 6 Overview of Revenue 7 Overview of Expenses 8-9 Demographics 10 Vision 2040 Priorities 11 Budget 12 Looking to the Future 13-16 Message from the Mayor Dear Independence Residents, The City Council and I are pleased to present the 2021 Popular Annual Financial Report (PAFR) to the residents of Independence. This report is a shorter version of the Annual Comprehensive Financial Report (ACFR), which includes the auditor’s report that is required by the State of Oregon. The PAFR is designed to offer a snapshot of important financial information and is easy to understand for those who are not experts in government finance. We believe this report helps provide transparency, accountability and is paramount to responsible government. We are proud that our independent, outside auditors again found that our annual financial report received a “clean opinion”. This means that you can be assured the budget for Independence is balanced, that your tax dollars are being spent in a legal manner and are fully accounted for. The City received the Government Finance Officers (GFOA) Award of Excellence in Financial Reporting for the 2020 ACFR. In addition, this PAFR will be submitted for the first time to the GFOA award program. The entire organization contributes to an effective budget outcome. The City Council and I receive quarterly financial reports that update us on specific spending actions and budget analysis. The results of these reports highlight how effective strategic planning by the community and governing body, partnered with the excellent financial and project management of the City’s leadership staff has put Independence on the map as a leader in economic and community development. Independence remains stable, in spite of the economic uncertainties caused by the COVID-19 pandemic. It is my pleasure to offer you this review of the City’s financial position and an honor to serve as your Mayor. Sincerely, John McArdle, Mayor 1. Independence Leadership The City of Independence operates under the council-manager form of government. Policy- making and legislative authority are vested in a City Council consisting of the mayor and six other members. The City Council is responsible, among other things, for passing ordinances, adopting the budget, appointing committees, and hiring the city manager, city recorder and the municipal judge. The City Manager is responsible for carrying out the policies and ordinances of the City Council, for overseeing the day-to-day operations of the government, and for appointing the heads of various departments. The Council is elected on a non-partisan basis. Council members serve four-year staggered terms, with three council members elected every two years. The mayor is elected to serve a two- year term. The City’s administration is committed to professionalism and efficiency in the provision of excellent customer service. The City provides a full range of services, including police protection, library services, a museum and historical preservation services, parks and recreational activities, land use planning, economic development, building inspection services, and a municipal court. The City also operates municipal water, sanitary sewer and storm drain utilities. These utilities function as departments of the City of Independence. John McArdle Mayor Term Expires: 12/31/2022 Shannon Corr Position #1 Term Expires: 12/31/2022 Marilyn Morton Position #2 Term Expires: 12/31/2022 Dawn Roden Position #3 Term Expires: 12/31/2024 Tom Takacs Position #4 Term Expires: 12/31/2022 Sarah Jobe Position #5 Term Expires: 12/31/2024 Kathy Martin-Willis Position #6 Term Expires: 12/31/2024 Elected Officials: The Mayor is elected for a two-year term; councilors are elected at large, by position number, and serve four-year terms. Appointed Officials: Tom Pessemier, City Manager Karin Johnson, City Recorder Stan Butterfield, Municipal Judge 2. Our City of Independence The City of Independence, founded in 1845 and incorporated in 1874, is in the Mid-Willamette Valley, just southwest of Salem, the state’s capitol. Independence is the 4th fastest growing City in Oregon. Our economic development efforts strive to make us an excellent place to live and travel. Our community values are: The City of Independence sponsors many opportunities for citizens to gather as well as to generate interest in Independence as a travel destination. The City maintains the annual River’s Edge Summer Series which includes Thursday night “Movie in the Park” and Friday night “Concert Series” both of which are held in the beautiful downtown amphitheater nestled along the Willamette River in the Independence Riverview Park. There is also the annual Independence Days celebration which is held during the 4th of July holiday, Community Fiesta in September and the Hops & Heritage Festival, also held in September. The City police department, in partnership with the public works department and the Monmouth police and public works departments, host an annual “Clean-Up Day” event in May that gives citizens the opportunity to dispose of yard debris and other garbage and litter that has accumulated during the winter. These are just a highlight of events that enjoy high attendance. The City also works with local promoters and organizations to host additional events such as car shows, bike rides, raft races and more. • Friendly Hometown Feeling • Unique Historic Flavor • Family Friendly Atmosphere • Entrepreneurial Spirit • Pride of Ownership 3. • Engaged Multicultural Community • A Welcoming City Accessible to All • Good Stewardship of Resources • Successful Local Economy • Live Work Play Locally Dear Citizens of Independence, I am pleased to present the City's first Popular Annual Financial Report (PAFR) for the fiscal year ended June 30, 2021. Many financial reports are complicated to read and understand. This report is designed to simplify information and provide transparency and accountability of City financial information, which is a key organizational goal. The PAFR is designed to provide a summary view of financial activities of the City. It is a high-level report for citizens who wish to learn more about Independence’s finances. All information in this report can be found in greater detail in the Annual Comprehensive Financial Report (ACFR) for the City, which can be found on the City’s website at: https://www.ci.independence.or.us/finance/audits This report will be submitted to the Government Finance Officers Association (GFOA) award program for review. Participation in GFOA award programs, and attaining these awards demonstrates our belief that sharing financial information in formats consistent with the highest standards in governmental financial reporting is the best way to achieve financial transparency. Throughout the year, the Finance Department works on budgets, audits, financial policies, financial forecasts, and financial management. As always, the City of Independence invites citizens to share their thoughts and opinions with us. Being good stewards of the taxpayers' monies is the primary focus of the Finance Department, but that alone is not enough. We strive to develop healthy partnerships with the community; we strive to be transparent with the City's finances; and we always look for efficiencies in City operations. If you have questions about this document, please email Finance Director, Gloria Butsch at butsch.gloria@ci.independence.or.us. Sincerely, Robert Mason, Interim City Manager 4. Balance Sheet The Statement of Net Position reflects a healthy financial condition as of June 30, 2021. The assets and deferred outflows of resources of the City exceeded its liabilities and deferred inflow of resources by $20.8 million at the close of the fiscal year 2021. The balance sheet is presented as a high-level summary overview of the City’s financial position. For greater detail, see the City’s Annual Comprehensive Financial Report. 5. Income Statement The Statement of Activities reports all financial activity for the fiscal year ended June 30. This statement presents a high-level summary of information about how the City’s net position changed during the fiscal year as a result of all financial activity (i.e. revenues and expenses). The City’s net position increased by $219,529 during the current fiscal year. The key elements of the change in the comparison of City’s net position for the year ended June 30, 2021 over the prior year are as follows: • Charges for services were $545,554 less than the previous year. The decrease is primarily due to the lingering affects of the COVID-19 pandemic. This is seen in the utility funds as well as a slowing in building and development. • Grants and miscellaneous revenue decreased by $759,952. Most of this was CARES and related funds received in the prior year. • Disbursements for general government increased by $1,062,089, of which $225,000 was in the General Fund for reimbursement to the developer of old city hall. The remainder of the increase is for pass- through housing grants and business support grants and programs in the Grants Fund. • Public safety expenses increased by $204,077 for personnel services. • Transportation expenditures decreased by $268,761, as there were no large project expenditures. • Disbursements for business activities did not increase or decrease significantly. Governmental Business-type Governmental Business-type Activities Activities Activities Activities Revenues 8,262,984$ 5,831,501$ 9,105,954$ 5,969,925$ Expenses 11,450,234 2,424,722 10,492,017 2,422,771 Transfers 2,748,302 (2,748,302) 3,113,149 (3,113,149) Change in Net Position (438,948) 658,477 1,727,086 434,005 Net Position, beginning of year 8,458,047 12,575,164 4,470,961 12,141,159 Change in account principals and estimates (480,000) - 2,260,000 - Net Position, end of year 7,539,099$ 13,233,641$ 8,458,047$ 12,575,164$ 2021 2020 6. Overview of Revenue The City maintains 24 distinct, self-balancing funds in which to account for the government services it provides. The financial statements of the City are divided into two categories – governmental activities and business-type activities. Governmental activities include the basic services provided by the City including public safety, parks and recreation, transportation, library, museum, economic and community development and general administration. Most of these services are funded by property taxes, franchise fees, state revenue sharing, state and federal grants and charges for services. Business-type activities include water, sewer, and storm drainage. The City charges fees to customers to help cover the cost of these services. 12% 28% 22% 3% 35% Intergovernmental $2,345,916 Taxes $3,377,098 Beginning Fund Balances $10,001,012 Services, Fees & Fines $8,055,396 Miscellaneous $826,956 Property Taxes Charges for Services, Franchise Fees, Licenses, Permits, Fines, Assessments & Other Service Charges Federal, State & All Other Grants, Gifts, Allocations & Donations Beginning Fund Balances/ Net Working Capital Refunds, Sale of Surpluses, Other Miscellaneous WHERE IS THE MONEY COMING FROM? Major Revenues by Types 7. Overview of Expenses 23% 22% 1%3%8% 14% 10% 19% General Government $4,173,961 Public Safety $3,838,448 Highways and Streets $222,645 Community & Economic Development $500,698 Culture and Recreation $1,370,051 Utilities $2,424,722 Administration, Court, Information Technology Police Transportation Economic Development, Planning, Building Dept. Parks, Tourism & Events, Library, Museum Water, Sewer, Storm Drain WHERE IS THE MONEY GOING? Capital Projects $3,419,011 Capital Outlay for Infrastructure, Buildings, and Equipment Debt Services $1,753,219 Payments on Bonds and Loans 8. MORE ABOUT EXPENSES Governmental Activity Functions General Government- This function includes expenses incurred by the City Council, City Manager, Finance, Human Resources, Information Technology, and Municipal Court. Public Safety- This function includes expenses incurred by the police department. Highways and Streets- This function includes expenses of the public works department for the maintenance and repairs of streets under the City’s jurisdiction. Highway 51 for instance, passes through the City of Independence; however, it is owned by the State of Oregon, and the city cannot do maintenance on a state- owned highway. Community Development - This function includes expenses related to planning, permitting, and economic development activities. Culture and Recreation - This function includes expenses for parks and recreation, tourism and events, library, and museum. Business-Type Activities Water, Sewer, and Storm Drain - These activities include expenses for the operation and maintenance of the utility’s systems. Other Expenses Capital Projects - This category includes all capital projects and capital outlay for infrastructure, buildings, utility systems, vehicles, and equipment for both governmental and business-type-activities. Debt Service - This category includes principal and interest payments of bonds and loans for both governmental and business-type activities. The City of Independence, as for all municipalities, is in the business of providing services. The operating costs of providing services are in two categories, personnel services and materials and services. Personnel services costs for FY2021 were $6,206,397 and materials and services costs were $4,191,297. The chart below shows the percentage of personnel costs by service. 9. DEMOGRAPHICS Population: 9,828 Police Arrests: 366 Traffic Violations: 568 Municipal Court Cases: 428 Permits Issued: 97 Estimated Value: $10,983,030 Planning Applications: 14 Library Circulation: 51,075 Miles of Streets Maintained: 38.09 Water Connections: 2652 Sewer Connections: 2575 Central School District13J FCR Call Center CabinetWorks Forest River Cargo Trailers Marquis Spa WareMart City of Independence Roth’s Robert Lloyd Sheet Metal Siletz Trucking The Independence Hotel Independence Health and Rehabilitation Annual Independence Day Celebration Hops and Heritage Festival Community Fiesta River’s Edge Summer Series Independence Landing Park Independence Landing Infrastructure project Replacement of F street bridge Sunset Meadows Park Mt. Fir Park Improvements Sewer Rehabilitation and Improvements Riverview Park Improvements New Museum Location Wayfinding Project City Highlights Works In Progress Completed Projects Major Employers Operating Statistics 10. VISION 2040 PRIORITIES 2040 VISION PLAN STRATEGIC GOALS CITIZENS OF INDEPENDENCE DYNAMIC LOCAL ECONOMY •Year-End Community Events •Center For Entrepreneurship VIBRANT, LIVABLE PLACES •Monmouth Street Revitalization •Central Plaza Redevelopment •Small Neighborhood Centers •Riverview Park Extension •Independence Sustainablility Plan SAFE, HEALTHY PEOPLE •Mental Health Services •Homelessness Prevention & Services Coordination THRIVING SCHOOLS & YOUTH •Alignment with School District Goals •Technical High School Feasibility •Safety & Security of Students INCLUSIVE, INVOLVED COMMUNITY •Partnership with Monmouth, Western Oregon University and Other Local Agencies •Communication & Outreach Channel •Diversity in Leadership •Bilingual Wayfinding Signage 11. BUDGET PROCESS Most local governments in Oregon must prepare and adopt an annual budget. Oregon Local Budget Law sets specific steps that must be followed during this process. The budget process must begin far enough in advance that all steps can be followed, and the budget adopted before June 30. Without an adopted budget for the new fiscal year in place by July 1, the City’s authority to spend money expires and the ability to impose a property tax is gone. The budget is the City’s financial plan that contains estimates of revenues and expenses for the budgeted period. An adopted budget gives the City its authority to spend public money. City staff prepares the budget for presentation to the Budget Committee. The proposed budget is prepared with guidance from the Vision 2040 goals and the Capital Improvement Plan (CIP). The FY2021 budget was approved by the 14-member Budget Committee on May 20, 2020 and adopted by City Council on June 9, 2020. The City’s published budget documents can be found online at: https://www.ci.independence.or.us/finance/page/bud gets. 12. LOOKING TO THE FUTURE COVID-19 Recovery Staff has created and developed a separate fund for grants administration. This fund will account for the receipt and expenditure of the many grants we received in FY2021 and in the future; especially grants associated with the economic recovery from the effects of the pandemic on our community and businesses. Staffing resources are a concern to create and implement programs to assist businesses and residents during the recovery. Independence Housing Strategy In 2020-21, we received a pass-through grant in support of housing rehabilitation. We will continue our intergovernmental partnerships relating to the supply of affordable housing. This proposed budget also supports leveraging grant funds from the American Recovery Act to assist in developing a housing strategy. Southern Arterial The completion of the Transportation Plan is anticipated by the end of FY2021. The proposed budget supports the completion of a System Development Charge (SDC) Rate Study. The rate study will help to guide us in developing a multi-modal transportation access strategy to accommodate the growing population, improving connectivity, traffic flow and reducing congestion. Local Medical Facility & Health Services Staff will continue to leverage grant opportunities to assist in promoting establishment of a comprehensive medical facility to serve the Independence and Monmouth communities. Conversations with health providers and Pacific Source are currently underway with the desire to partner on solutions for the community. Communications & Outreach The city has hired a consultant who will finish their work early in FY2022 which will provide the necessary information to sharpen and improve existing communications channels and techniques. The proposed FY2022 budget includes the addition of a full-time communications position to implement the recommended changes and prepare written and video content for city communication platforms. The position is funded in the Administration Department of the General Fund and in the new Grants Fund. The position will be responsible for facilitating a cost effective and efficient communications program and update the City’s website. Please see the Grants Fund section below for more details. Independence Support Network Though not quantified in dollars, the proposed budget allows for staff time to assist in this Council priority, which is to create a platform or clearinghouse for community members to find and provide aid for one another. 13. Expanding Sports Fields The proposed Capital Improvement Plan and budget contains an item to study the development and operations of the sports fields. We hope to issue an RFP to implement those recommendations during the fiscal year. There is also current staffing that will continue the effort to engage the community in support for the sports fields and we hope to host a few tournaments this summer as a springboard to future activities in this area. Budget Summary The General Fund is the largest and most active fund. The total amounts are summarized below. FY 2020-21 Adopted FY 2021-22 Proposed Difference Beginning Fund Balance 1,850,736 2,001,513 150,777 Overhead Allocation 2,498,191 2,644,840 146,649 Total Other Sources 4,702,720 4,701,857 (863) Total Uses 9,051,647 9,348,210 296,563 Sources minus Uses 0 0 0 The General Fund is in balance and financial planning continues to make sure revenues continue to match expenses. Grants Fund The City had to pivot our financial reporting on Grant funding toward the end of the year to ensure that one- time revenues did not impact the overall budget. It is important that the budget is sustainable and the grant funding from the CARES Act was impacting the ability to see the base budget, especially in the General Fund. With the announcement of the American Rescue Plan, it became apparent that the situation would span multiple years and necessitated separate tracking so the base budget could be accurately evaluated, and there could be transparency with grant funds. The City allocation of approximately $2 million in funds from the American Rescue Plan will come half before the beginning of the fiscal year and half towards the end of FY2022. The budget shows expenses for the monies received before the fiscal year in the amount of approximately $1 million. Expenditures for the other half will be in next year’s proposed budget. Expenditures for FY2022 have been evenly split between Economic Development / Resident assistance programs and infrastructure projects. We anticipate most of the other half will go towards infrastructure projects in FY2023. Until we have the guidelines from the Treasury Department and the State and County have determined how they will utilize their funds it is difficult to predict how the monies will be expended. 14. The City executed numerous programs during FY2021 to assist local businesses and residents and expects to complete numerous programs in FY2022 as well. This creates a significant resource issue for city staff that we were able to manage through last year when normal activities were curtailed due to COVID and staff resources could be shifted to apply, create, and implement programs to help businesses and residents who were significantly impacted by COVID-19. We will not be able to continue to manage through without additional staffing resources this year as staff is fully involved in normal activities. In addition, there will also be significant infrastructure projects that need to be implemented from State matching programs and federal infrastructure programs. This presents a difficult challenge as decisions will have to be made on priorities even with additional resources. To help mitigate the staff resource issues, we are proposing to use one-time monies to bring on temporary positions that will be paid for from the Grant Fund. The City was fortunate enough during the CARES Act to receive additional monies for staffing that we have saved for this purpose. The City is actively looking at ways to leverage American Rescue Funds as matching monies for projects at the State and Federal level and this takes a significant amount of effort. The effort is worth it if we can expand the opportunities for businesses and develop critical infrastructure projects. The proposed budget has the following allocations for additional staffing needs. General Fund Additions (permanent) FTE Grant Fund Additions (temporary) FTE Finance 0.5 Finance 0.5 Communications Specialist 0.5 Communications Specialist 0.5 Grants Coordinator (Contract or 1 FTE) Some of the proposed additional staff positions are permanent and are built into the General Fund. Cuts in the Finance Department last year have caused workflow issues and additional communications support has been identified as a need by Council and the City Manager. The temporary positions will help with the staffing issues we anticipate, but there will still be significantly higher than normal demands on existing staff that will likely require prioritization. If we find that the workload is not as expected, we will not fill or will remove the temporary positions, as necessary. Economic Outlook and Assumptions The City has seen strong growth over the past couple of years, and the resiliency of the market throughout COVID is surprising and welcomed. The hotel was completed and opened in late summer 2019 and transient lodging tax revenue began coming to the City, until it dropped significantly in March 2020 due to COVID-19. However, that has recovered over the past 6 months to expected levels. The budget had anticipated hotel business to start increasing with Spring break and the onset of summer activity; however, the pandemic continues to impact all the local businesses, including the hotel. Phase II of Independence Landing (110 apartments and 14 townhomes) construction is nearly finished, and construction is in full swing on Osprey Point. There remains a couple of development projects that are currently under review and / or pulling permits for construction. The new developers of old City Hall have finished improvements on Monmouth and Second Street and are working on plans for the remainder of the building. 15. Independence Station is moving forward with preliminary planning but revenue from this project is not anticipated in this budget. The City will complete a Transportation System Plan update soon with City and ODOT grant funding, to inform the City on how to deal with existing and upcoming transportation issues and identify gaps in pedestrian and bicycle systems. This plan will help to inform the City on potential changes to System Development Charges and funds necessary to support the existing streets and sidewalks in the City. A transportation SDC methodology and fee study is included in the FY2022 budget. Work will continue to assist our businesses in recovery following the pandemic. The City is strategizing on how to best use American Recovery Act funds to continue to assist local business. Residential development and housing starts promise to continue. We conservatively have used 45 new single-family residential units for budget purposes but expect more. With our steady march towards the inevitable 10,000 plus population point in the coming few years, the City’s budget and planning is attempting to both keep pace and lead the way. Accompanying the budget is the five-year capital improvement plan. Of the $5.22 million for FY 2021-22 approximately $2.5 million is included for the F Street Bridge and Main Street. Another $1 million is for continued water projects including a new water well in the Polk Well field (at the north end of the City). Future Budgetary Challenges The recession caused by the pandemic has impacted the City and the community in slightly different ways than anticipated. City staff have been busier than ever, fueled by continued building and developments, as well as administration of Federal and State economic assistance. Increases in labor costs related to the Public Employee Retirement System (PERS) with the expected increase in FY 2021-22. The City is currently setting aside monies and plans to continue to set aside monies in preparation for that and future increases. Health insurance is also a factor in increased labor costs that all sectors of the economy are facing. Tax revenues will increase as development projects finish but there is a lag of a year or longer before the additional revenue is realized by the City or the Urban Renewal Agency. While utilities largely are self-sustaining with small annual rate-increases, Storm Water and Transportation remain areas of fiscal concern for future fiscal years. Master plans underway or in the next fiscal year will guide the City in creating long-term financial plans to ensure these funds have sufficient operating and capital revenue. 16.