TO:Honorable Mayor and Village Council

COUNCIL MEMORANDUM

TO:Honorable Mayor and Village Council

FROM:Jorge M. Gonzalez, Village Manager

DATE:September 26, 2017

SUBJECT:A RESOLUTION OF THE VILLAGE COUNCIL OF BAL HARBOUR, VILLAGE, FLORIDA, APPROVING AND ADOPTING THE FINAL BUDGET AND CAPITAL IMPROVEMENT PLAN FOR BAL HARBOUR VILLAGE FOR FISCAL YEAR 2017-18; PROVIDING FOR EXPENDITURE OF FUNDS; PROVIDING FOR CONFLICTS; PROVIDING FOR SEVERABILITY; AND PROVIDING FOR AN EFFECTIVE DATE.

ADMINISTRATIVE RECOMMENDATION

It is recommended that the Council approve the Proposed FY 2017-18 Operating and Capital Budget as presented and adopt the proposed millage rate of 1.9654 mills, amillage rate which is the same as the current fiscal year. The Proposed Budget was adopted by the Village Council at the September 18, 2017 First Budget Hearing.

BACKGROUND

I am pleased to present to you the Proposed Operating and Capital Budget for Fiscal Year (FY) 2017-18 which commences on October 1, 2017 and ends on September 30, 2018 for Bal Harbour Village. This document outlines the fourth budget I have developed since becoming your Village Manager and, as in years past, provides you and our community as much information as possible about our Village’s plans and expected accomplishments during the next fiscal year. Reviewed together with our Comprehensive Annual Financial Reports (CAFR’s), one can get a very good and clear understanding of our financial position as well as past accomplishments and future plans for our community.

As you know, Bal Harbour Village has three (3) primary funds used to operate the Village: (1) General Fund (GF), (2) Resort Tax (RTF), and (3) Water and Wastewater Utility Fund (WWUF). The total Proposed Budget for all funds is $ 26,133,000 (including a Capital Improvement Program allocation of $3,866,400). In addition, we continue to provide management and operational services to the Gated Community Area. You will recall that last year, the Village Council agreed to extend this arrangement for three (3) additional years. The allocation of approximately $570,000

for next fiscal year (year two of the extension), is not included in the above total, but is part of our overall activity. Through careful management practices and conservative financial policies, the Village continues to maintain a very strong financial position in all of our funds.

The FY 2017-18 Proposed Budget includes my recommendation to keep the current millage rate of 1.9654 unchanged. This would be the third consecutive year with our millage at this historically low level, which is a reduction of 4.6% since 2014 and a cumulative reduction of 32.27% since 2004. This year, our assessed property values grew substantially as a result of the completion of the new Oceana Bal Harbour condominium project. This infusion of value is reflected in the projected ad valorem revenues for next year. Another significant accomplishment, which affects our finances going forward, is the approval of the Development Agreement between the Village and the Bal Harbour Shops. This Development Agreement includes various elements of public and financial benefits to the Village which will come on line over the next several years. This Proposed Budget accounts for those activities and their corresponding financial impacts. You will see, however, that we have attempted to limit growth in the recurring expenses of the Village to those of standard inflationary costs and/or personnel expenses. The most significant investments of new funding for FY 2017-18 are found in various capital improvement investments to our public spaces and infrastructure with nearly $1.6 million in the General Fund and a total of approximately $3.9 million allocated across all funds.

BUDGET DEVELOPMENT GOALS

In developing the proposed budget, we continue to focus on the following five (5) key goals, which have guided my Administration since I became your Village Manager:

• Enhance community policing strategies and accountability;
• Improve and beautify our public spaces;
• Invest in our Information Technology;
• Enhance community engagement through public events and expanded communications with our residents and visitors (this goal was formerly titled: Expand our communication with our residents and visitors); and,
• Establish sustainable fiscal policies and plan for future capital investments.

In the recent past, and moving forward, the fourth goal above has evolved to include public events and programming for our residents and visitors, in addition to expanded communications. This includes events such as the 70th Anniversary celebrations; the expanded July 4th fireworks festivities; the Museum Access program; the Bal Harbour Unscripted art events; and the movies on the beach, just to name a few. We continue to receive outstanding feedback and are encouraged with the positive response from our community regarding these events. Therefore, we have amended the goal to more properly reflect our comprehensive community engagement efforts.

In addition, the Proposed Budget is the culmination of an evaluation and assessment process we undertake each year. We carefully evaluate the existing programs, determine where the Village would benefit from additional investment and ensure that we establish appropriate levels of service and identify efficiencies or enhancements for each operational activity. It remains my goal to provide you as much information as possible for you to make informed decisions. The following is a breakdown of the allocations proposed for FY 2017-18 for each distinct Fund:

• General Fund $16,106,600
• Resort Tax Fund $3,442,900
• Water and Wastewater Fund $6,013,500
• Security & Landscape Fund $570,000

These funds combined total $26,133,000.

Factors Affecting FY 2017-18 Budget

In developing a budget, we must look at available revenues, expected expenses, potential enhancements, and opportunities for cost savings or efficiencies. By setting an appropriate millage ceiling, we established the first parameter in the development of the FY 2017-18 Operating Budget. It is important to set a level that offers appropriate opportunities to make prudent choices leading to the adoption of the final budget.

The Miami-Dade County Property Appraiser provides municipalities with a certification of Assessment Roll Values for the upcoming fiscal year on July 1 of each year. Pursuant to Florida Statutes (F.S.) 200.065, within thirty-five (35) days of certification of value, each taxing authority shall advise the Property Appraiser of its proposed millage rate, of its rolled-back rate, and of the date, time, and place at which its first public budget hearing will be held to consider the proposed millage rate and tentative budget.

This requires the setting of the preliminary millage rate, and establishing the date and time for the budget hearing at the July Village Council meeting. It should be noted that setting the preliminary millage rate is simply an initial step in our budget process. At the July 18, 2017 Village Council meeting, the Council set the tentative millage rate, the first step to formally adopting a budget, at 1.9654 mills, consistent with the current fiscal year rate. The Public Budget Hearing Dates were set for Tuesday, September 12, 2017 and the second public hearing for Monday, September 18, 2017.

The setting of the tentative millage rate, provided for budget development, which incorporated $1,447,300 in increased expenses, and $1,053,800 in decreased budgeted expenses from FY 2017, and the inclusion of capital enhancements in the amount of $1,589,400.

Tax Roll, Millage Rate, and Ad Valorem Revenue

The tax roll certified by the Miami-Dade County Property Appraiser on July 1, 2017 was $5,314,206,510, which includes an addition of $810,208,807 in new construction and improvements. At the current and proposed tentative millage rate of 1.9654 mills, and calculated at 95% of the adjusted taxable value certified as required per F.S. 200.065(1)(a)1, the ad valorem revenue generated is $9,922,314, resulting in an increase of approximately $1,643,900, of tax revenue village wide over current year ad valorem budgeted revenue.

The rolled-back rate for FY 2017-18 would be 1.8933 mills. The rolled-back rate, calculated as required by the Florida State Department of Revenue will provide the same ad valorem tax revenue as levied during the prior year exclusive of new construction and improvements. The preliminary proposed millage rate of 1.9654 mills is 3.81% higher than the current year aggregate roll-back rate. The state required methodology for calculating the rolled back rate requires the use of the current year gross roll value.

Proposed Millage Rate History & Analysis

Since FY 2007 the millage rate for the Village has dropped significantly, by 32.27% from 2.9020 mills to 1.9654 mills for the current and proposed tentative millage rate for FY 2017-18. The following chart reflects the millage rates from FY 2006 through FY 2017, and the continuation of the existing rate for FY 2018:

Currently, the FY 2016-17 adopted millage rate for Bal Harbour Village is the third lowest millage rate in Miami-Dade County as compared to other municipal rates. It is the only long established municipality within the grouping of the lowest eight millage rates for Miami-Dade County cities. The following chart reflects the 2017 adopted millage rates for Miami-Dade County municipalities:

It is recommended that Village Council re-affirm their action taken at the July 18, 2017 Council meeting and set the millage rate for FY 2017-18, at 1.9654 mills, a rate which is $1.9654 per $1,000 of assessed property value. The proposed tentative millage rate, calculated at 95% for budget purposes, and based upon the July 1, 2017 estimated adjusted Taxable Value as provided by the Miami-Dade County Property Appraiser is anticipated to yield $9.922 million, respectively for FY 2017-18.

The recommended FY 2017-18 proposed tentative millage rate outlined for consideration by the Village Council allows the Village to retain a historically very low rate, while providing for funding of inflationary impacts to maintain existing service levels, reduced budgeted expenses in key activities, and enhancements toward Village capital projects as summarized below.

By setting an appropriate millage rate we establish the primary parameter in the development of the FY 2017-18 Operating Budget. It is important to set a millage rate that allows for the continued advancement of our five (5) budget development goals and allocating resources in a strategic manner with an emphasis on results-oriented management practices. The FY 2017-18 Proposed Operating and Capital Budget does just that, by building on the foundation we established together in the last few years.

Impact of Proposed Millage to Village Homestead Exempt Property Owners

For the 2017 Tax Roll, the median assessed homestead exempt property value for the Village is $624,553. This is a value at which there are as many properties with an assessed value above this amount as there are below it. The impact of the preliminary proposed millage rate of 1.9654 mills to the median assessed property value for the Village is approximately $1,229 per year per homeowner. For the Village, the value of the average homestead exempt property is approximately $1,017,079; the impact of the proposed millage rate is approximately $1,999 per year per home with the average assessed value.

Other Factors Affecting FY 2017-18 Budget:

General Fund Expense

In developing the Proposed Budget, we assessed available revenues, expected expenses, potential enhancements, and opportunities for cost savings or efficiencies.

The Proposed General Fund Budget incorporates the funding for operating departments and activities within the proposed FY 2017-18 Base Budget expenditures of $14,517,200, after expense reductions of $1,054,000, at the proposed millage rate of 1.9654 mills. This provides funding for existing service levels the Village residents have become accustomed to and enhanced investments toward Village capital projects of $1,589,400 totaling $16,106,600.

Inflationary Impacts

The Proposed Budget incorporates cost escalations for employee and retirement expenses based on the actuarial valuations of our two retirement (pension) plans, anticipated payouts for retiring employees, and salary shifts inclusive of a cost of living adjustment within the FY 2017-18 Proposed Budget. In addition, the Proposed Budget includes increased expenses for retirement $257,500, police off-duty and overtime $190,975, and increased costs associated with improved maintenance $104,000. In addition, additional expense was added for special events $71,500. The impact of these increases were offset by reductions resulting in a total net change from the FY 2016-17 Adopted Budget to the FY 2017-18 Proposed Base Budget is $443,500, as summarized in the table below:

The Proposed Enhancements to the FY 2017-18 Base Budget include the budget stabilization reserve ($250,000) to protect against potential adverse effects from property tax appeals as the Oceana Bal Harbour project is occupied by owners and our significant investment toward future year, capital projects totaling $1,589,400. These investments will build upon the more than $6.5 million in recent years toward capital projects that improved the aesthetics, safety, and image of the Village and will put us on the path toward achieving the physical improvements for our community.

Water & Wastewater Utility Fund and Rates

Water and Wastewater services within the Village are provided as an enterprise operation, services are funded as payments for measurable water and wastewater services are consumed. Rates established as charges for services should sustain its operations and satisfy any related debt. For the Village utility operations, water is purchased at a wholesale rate from the Miami-Dade County Water and Sewer Department (Miami-Dade WASD) and the City of Miami Beach (CMB) applies a wholesale rate for Wastewater or sewer services which travels through their system for treatment at to the Miami-Dade WASD Virginia Key plant. Wholesale water service is paid directly to Miami-Dade WASD, and wholesale sewer services are paid directly to the City of Miami Beach by the Village, for this reason their rates directly affect the rates the Village charges to our customers.

The MDWASD has incorporated a rate increase in their proposed FY 2018 Budget, due to projected operating expenses, increased reserve requirements, and debt service payments for necessary capital projects. The FY 2018 proposed budget Miami-Dade WASD increases are 5.77%, or $0.1000 cent for Water, and 4.95%, or $0.1460 cent for Wastewater rates, per 1,000 gallons.

The wholesale service rates and proposed changes for sewer services incorporate both a dry season rate and a wet season rate, the two are blended to derive a rate for the fiscal year. The City of Miami Beach has incorporated Miami-Dade WASD’s sewer rate increase and added a $0.0014 cent increase to their proposed FY 2018 rate charged to the Village.

For the Village to pass-through the proposed rate increases of our wholesale service providers, the rates to our utility customers would increase by 2.09% to $4.88 per 1,000 gallons of consumed for Water and 1.79% to $8.38 per 1,000 gallons consumed for Sewer services, both with a minimum consumption of 3,000 gallons, as summarized below.

The pass-through Water and Wastewater rate increases from our wholesale service providers to Village customers result in a rate of $4.88 per 1,000 gallons for water and $8.38 per 1,000 gallons for sewer with a minimum consumption of 3,000 gallons per month. The Village Budget Advisory Committee reviewed the proposed pass-through utility rate increases and reached consensus on the recommended rates at their July 24 meeting. These rates as proposed provide for the annual proprietary operations of the Village Utility, coverage of bond payments, and funds toward the advancement of pay-as-you-go improvements to operating capital for the Water and Wastewater Utility and are incorporated into the Proposed Budget. The FY 2017-18 Proposed Operating and Capital Budget for the Utility Fund is $6.013 million, $3.768 million, for operating expense, and $2.245 million for proposed capital projects.

Resort Tax

Bal Harbour Village is one of only three (3) Miami-Dade County municipalities, along with the City of Miami Beach and the Town of Surfside, to levy a resort tax, and in doing so takes advantage of the benefits derived from this revenue source. This includes the reinvestment in the promotion of tourism and enhancing tourist eligible activities throughout the Village as well as efforts related to the beautification and maintenance of the Village in areas visited by tourists.

Bal Harbour Village levies a Resort Tax of four (4) percent of the amount received on the occupancy of a room in any hotel, motel, or apartment house. In addition, it levies a two (2) percent of such retail sales of all items of food or beverages, alcoholic or otherwise, sold at retail for consumption on the premises, at any place of business within the Village. Both these levies are consistent with Part I, Chapter 212, of Florida Statutes.

The FY 2017-18 Proposed Budget for Resort Tax includes $1.989 (57.77%) for Tourism related activities, $296,000 for Special Events and Community Activities (8.60%), and $1,454,100 (42.23%) for Beautification and Greenspace Maintenance and other Resort Tax Eligible expenses. The total proposed fund allocation is $3,442,880, which includes Tourism and Marketing Services, and Landscape and Beautification activities within the public areas of the Village. For the FY 2017-18 Proposed Budget, the Resort Tax Funding allocated for the Beautification Greenspace, and other resort tax eligible activities, such as Special Events and Community Activities is equivalent to approximately 0.35 mills or for the fund as a whole 0.68 mills, if the services and activities were funded within the General Fund through ad valorem revenue.

Budget Advisory Committee Review Process & Recommendation

The Bal Harbour Village Budget Advisory Committee (BAC) was established to assist with the development of the budget and fiscal policy. The new composition of the BAC as appointed by Village Council, began meeting earlier this year to review the development of the Proposed Budget for FY 2017-18, and to provide recommendations for the Village Council’s consideration.