Butler County

Office of Management & Budget Resolution: Date: July 12, 2010

General Fund Budget Plan

Historical Background

Beginning in late 2008, the General Fund experienced difficulties due to a decline of revenues and the U.S. .recession. Since 2008, revenues have decreased $15.4 million or 16% causing annual and mid-year budget reductions in 2009 and 2010 and a projected decline of $4.8 million in General Fund reserves since 2009. The 2011 budget is projected to be $78 million, or nearly 18% below the 2008 level of $94.7 million. As the chart below displays, the Butler County Commissioners have historically maintained a General Fund reserve of at least 10%.

Planning for the present and future regardless of the economic climate, the Butler County Board of Commissioners needs to remain committed to fiscal responsibility through balanced budgets, maintaining

at minimum a 10% fiscal year end General Fund balance, maintaining the county's infrastructure, managing debt responsibly through timely and expedited debt reduction and maintaining the County's excellent bond rating.

With a cyclical eC9P,~E1Y~·\}Ve know two things: 1). There will be ~.;t~e wheri revenues will increase and will exce,y~,t~,', dgeted revenues and expenses and 2.) Th~~~';\¥ill C !\It'qre economic declines.

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The 'if~fr£?~irl.g, policies'~~ ss the allocation of

addiit16nafr~venues in the -e 'times as well as the ,a1t6~ation of budget reducti~ r:~hen General Fund

,:-fC~~~Rues. dO')9t. support the ap~F~~;~tibn and debt

11l~~$~'~,e.,.n':"',t.{\~;>}:';:::t.'" j:tj·/

",=: -, - ~ . -,

General Fund Reserve Percentage

25.0%
20.2%
20.0%
15.0%
10.0%
5.0%
0.0%
2001 2002 2003 2004 2005 2006 2007 2008 2009

2010

2011

General Furid);"ei,lf:,,'fnd Reserves '" \,$ 12.9 $1):t:9 $ 10.5 Actual Bxpenseor.Budget for 2010$ 72.3 $P12.9 $ 70.8 Adjusted Total AfteriR¢lF).illding ofDebt ;;.$ 72.3 $ 72.9 $ 70.8

Projected

2011
2004 2005 2006 2007 .. 2008 2009 2010 Projected
$ 10.1 $ 8.1 $ 8.4 $ 9.1 ' $ 11.7 $ 13.5 $ 10.6 $ 8.7
$ 83.0 $ 106.5 $ 80.6 $ 102.2' s 94.7 $ 88.8 $ 85.3 $ 78.0
$ 75.9 $ 75.3 $ 80.6 $ 89.2 $ 94.7 $ 88.8 $ 85.3 $ 78.0 Reserves as a Percentage of Adjusted Expense or Budget

10.2% 12.4% 15.2% 12.5%

11.2%

10.8% 10.4%

$ ~ ill Mil/iolls

20.2% 18.7% 14.9% 13.3%

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Butler County

Office of Management & Budget Resolution: Date: July 12,2010

General Fund Budget Plan

,

General Fund Allocation of Additional Reserves

During the budget process, the Office of Management and Budget (OMB) will review the revenue and expense projections for the current year. If it is projected that revenues will exceed proposed budgeted expenditures, the excess revenues should be allocated during the budget process according to the set forth policy below. After the year has closed, OMB should make budget adjustments based upon the actual revenue and expenditure results.

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Excess revenues should be distributed as follows:

• 20% General Fund Reserves up to maximum reserve level of 20%

• 20% budgeted for Capital Improvements or Expenditures, specific projects and or items must be identified.

• 30% Debt Service for additional or payments on notes or other debts allowable.· ,.

• 30% Consideration for .Jl]f!!:J:.~im2!!!'I2!l~~~:\\ for one-time purchases unless the 30%, revenue ' . is proj ected to become permanent.

General Fund Reserves: Re:(er(~irce;,e)M:B, Level of Reserves Policy, ,.

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capital improvements or expenditure plan develops, multi-year forecasts and budgets will be completed for those projects or items that can be reasonably estimated or projected.

county's been any the Butler'

aosmonai funds are available, payments on the While there have not .avments on debt, the goal of is to reduce their additional principal debt obligation

....... '''~v,uu~ payments oeannz notes. be applied bearing note.

also conversion of

for long-term advantages and

!~r£Ldmzm~~rp§.·:' A budget appropriation is a aU\Ju.LL,IJ\lial budget from departments or .ay.'UH!l"'ll,ct'.l"~''(\'IJ'''I;RULUJ.vL> due to increase in fixed costs . fees, rent, and health insurance. '. salaries or benefits are considered an additional budget request under this category.

requests for additional appropriation for costs or any item that becomes an annual amount may only be considered if future

Otherwise, requests for additional budget will be for one-time items.

Remaining balances in all eligible categories will flow back to the General Fund for further assessment by the County Commissioners.

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Butler County

Office of Management & Budget Resolution: Date: July 12, 2010

General Fund Budget Plan

s

General Fund Allocation of Budget Reductions

o Example 2 - General Fund reserves = 20% = $16 million but only have $9 million, 25% of $1 million = $250,000, deficit = $1 million, therefore $750,000 must be reduced by departments.

In times of economic down-turns, the General Fund allocations may need to be reduced proportionately with actual or projected reductions that occur in the General Fund revenues. A budget deficit is created when actual or projected revenues fall below the actual or projected expenditures. The Office of Management & Budget analyzes revenues and expenditures monthly maintaining projections and forecasts. Normally, through the annual budget process, budget deficits may be identified for the following budget year. But in the event of a sudden decline in revenues or increase in expenditures, it may be necessary to adjust budgets during the year to lesson the impact of the decline.

• Third consecuti~&E2~Udget deficit: A third

A':"->" "'V

straight acm~k' or projected budget deficit

indicates,~>lij.(j~~, severe budget issue as the economy,inaY~~\'~:xxperiencing a pro-longed recessi6h\ or corre~ti8n. The third reduction u,tilj~~,~,iiie same '2S-<~~>Qf the General Fund

,.{f:gserVes' above the 1 0%1(" ,;~old as in the first /.<?,' and second reductions, b:U., ~erious. discussions

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(Ji;~;;:"';;\.,and coii~i,derations for pe1fmCiii'£mt budget

c'~'\\ji" ction&:;§!1puld be taking p;face with elected

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".~i ,.' d departments. Permanent budget redhptipns can and should be implemented at the

first "ill~~'i*~~ond reductions if forecasts are projectirig!l#'y;x.tenQ,ed period of decline.

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In preparation for difficult economic times, the General Fund reserve policy is to attempt to r~p,h, a

year end balance of 20% of the next annual bul1i¢ft>., i'( The General Fund Reserve policy states, "O~~< .. ~'·":,,,

recommends as a guideline that the General Fung\',,"_.P0urth consed~tive budget deficit: By this time, maintain a reserve level of 15~0%-20.0% of thcl.\ "p~tm~~!1t:><budget reductions should be following year's General FundJw.!i~!t! and not drop' \~\<'6:)" impl'e~~~t~d to balance the budget. General

below 10.0%." It is the ~t~nt~4p?licy of the \,< Fund:~~serves should be maintained above the

Butler County Board of,q~Unty Co~§sioners to . -, end year 10% reserve threshold. Any reserve

achieve and maintain a~sh{t~~erve bal~#cb between \\, balance above the 10% year end budget

10% and 20% ofbudg~r at'§6~~:n.d. ;.'/ Y ) threshold is at the discretion of the Butler

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',,' /.' County Commissioners. At this point, the

-----With-the-lll1d~r§~a11l:~g-:that-;;ii~p~~~i~il,t.4~··; ",'.' Iemaining-reserve-balance-above-the-threshold------!

General FUAd./r~s~rves',j~"mi:njmjze;Jh¢.::"impact on .... " may be utilized as a one-time budget balancer,

services J~):itizens dur:nig:'e,~'Q:i,l~~c ups·,~~~,.~owf1s. but should not be used for budget items that will

The cg~~,¢~a...~ F~d reserveso~JY~~I help <~?,"qffset continue to drive a budget deficit. Further

revenue shi5it~ges in the followi.f),g;::ways: h)' budget deficits should be balanced with a dollar

'~?' ,:\,,"\" for dollar reduction in budgets or additional

• First and"~¢'¢~hd consecuti~K::budget deficits:

Reductions byj~5'%ofthe Ge~~t~l Fund reserves above the 10%<t'!.1;F.eshold. _,.'Pbnding shortages greater than the 6¢h¢t~1 ",FUnd reserve offset must be retrieved thr6gg11' budget reductions by

departments. ,.'

o Example 1 - General Fund reserves 20% = $16 million, 10% = $8 million, 25% of $8 million = $2 million. If fund

balance was only 10 million then 25%

of $2 million = $500,000.

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revenues.

If the General Fund reserve balance reaches the 10% minimum threshold, budget deficits must be balanced by the reduction of expenditures, an increase of revenues or a combination of a reduction of expenditures along with an increase in revenues.

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Butler County

Office of Management & Budget Resolution: Date: July 12, 2010

General Fund Budget Plan

,.

Debt Management - Mfordability

•

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Although Moody'~::~i~h56b~idered our debt to be at a "moderate" lev~J}~·t1ie Butler County Commissioners

• Grants will considef ... ~)d~~1)~tio of anything above 10-12%

• Shared costs / revenues (TIP, RID, JEDD, TID) range to;P<~>a w~g~.and not recommend any

• Pay as-you-go funding further,;g,~bi.4p1igatiort~;~;.q;,u,p-ent General Fund debt

• Capital improvement funds ratio,isiat.12%;~" -,

• Debt funding (notes or bonds) /S;(:w.. .• ~' ."~;':;.\.'.»".

A benefit and cost analysis will be provided to the J:iSs:~~~~~service,>;~» -, <..< •• ~ <. ;;;/

Commissioners outlining not only the costs . :B"':~, ountstl's,:;::objectives in ~~~ging its debt

associated with the project, but also the potential risk pro y.·~~;f(): "<, ',,'

. to the General Fund. f;~., .. :".,> .1. pro~~~:ji~~png needed to protect and enhance

For those capital projects that will result in on-g~~&:l;:,";'>, .. ·i·\ the county,t§,·~~asl:IUcture, provide for the needs operational costs, an outside independent review',~t·,·/~.I':'> .. , of the citii~il~;'Bf the county and encourage

the operational costs associated with the capital ass'e~\ <<':,.;::~()lj;momic de,¥~iopment.

should be conducted. The assessment should,,\. / <. '~,;'.' .... , .,<'

include a cost benefit analysi~r.§4~y'ving not only' ",~\ ,,/("'£ A~liief~t1:i.~ lowest, most equitable debt issuance

ongoing expenditures but r~00~hu~'~g~~~~fttion. The \";e:" costs <'>possible for its securities without

analysis should also ~.~+~de the':'<:¥J~~ilityd anI d \ (,;">.. compromising the quality of debt management.

dependability of the rey\j:n.g~·a'R:d the 1lllp~~t an p an

for a decline in revenues. ';r:('.a.(:l~tiona\J;',~mployees '\&~::;:'Maintain a positive relationship with the major are part of the additional expeb::~I~\~:~i~,~~:"~~~~t~)~.,,,.,i.' national rating agencies, bond issuers and the

-----determined-if.~9~pJ.;~'¢J~·~Fot~mp01'a¥yjf~1.?10ye·es~eeql~ ;,:.... municipal-Donn marKet, attaining t1ielfigl'iest~-----i

fulfill the role;.6r'lie'Ms:b~t1r~,operaiiQn.t9Jesson the possible rating on its securities.

budget im/ ... :.;w,.··.C~ct. '<;. . ··'':.,'(·;E?,>:"

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Capit~rili1i1t~y~ment projects '~~~d thro~gh debt financing wI~-',Ii)"~:9udgeted in the'\l?~pt Service Fund 3301. TheG~p:~f,~ Fund wilf\~ppropriate the interest and or PifQ;~~p.~! paymen~~}ccording to the payment schedule. N&t~p~yme~t~:b:lay be subject to the 30% additional reseW'~ P<;*'¢y' as discussed.

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When a request for General Fund debt or potential obligation or responsibility is received, the Office of Management & Budget will provide to the Commissioners with funding sources and options potentially available including:

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During the annual budget process, the following General Fund debt analyses will be completed for review:

General Fund. debt service as a percentage of

General Fund revenues Per capita population

Per capita personal income

• County comparisons using cash basis method

•

•

Butler County's debt management program is conducted in accordance with the Ohio Constitution, the Uniform Bond Law, and other provisions of state and federal law pertaining to the issuance of municipal debt.

The county is responsible for maintaining relationships with rating agencies that assign ratings to the county's various debt obligations. The effort includes providing periodic updates on the county's general financial condition, along with coordinating meetings and presentations in conjunction with new debt issuances.

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Butler County

Office of Management & Budget Resolution: Date: July 12, 2010

General Fund Budget Plan

The Commission believes it is important to. maintain positive working relationships with other elected officials and rating agencies to manage the debt program effectively and efficiently.

In order to comply with disclosure standards set by state and national regulatory bodies, the county provides ongoing disclosure information to established national information repositories. The County Auditor completes the Comprehensive Annual Financial Report (CAFR) describing all the funds and fund balances established as part of any direct debt financing of the county. The CAFR is completed by June 30th of each year for the preceding calendar year. The Annual Information Statement is also completed by the County Auditor, OMB and the' County Bond Counsel. This document meets various disclosure requirements and is completed in July of each year for calendar year.

The County seeks to maintain, and if possible, improve its current general obligation bond ratings so borrowing costs are minimized and access to credit is preserved. The county cannot lawfully borrow to finance operating needs. All bond proceeds should be ]jm.H~d to financing the costs of planning, design,_,c;';;lm1iili~ acquisition, buildings,

permanent s ""'res, attached fixtures, or

equipment an Ie pieces of heavy equipment.

Acceptabl~,(?", proceeds can be viewed as

items t~fl-t c~ll. be capr • and depreciated.

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Tl1:~_e6untY'wi11 be developmi~;i~2,>apital planning and j[lJlancing sYJltem for use in ft-""c _. g ~ multi-year

/$i;;~'@~~ital Impr" ement Plan for" ;~ration and

;,.- it['5Jo,'>: •. n bY_~:,_c . .o~~Rard of County 01 _ • ssioners as

part', .;,\?::9P1lnty's~budget process"

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