Fy 2010 Proposed Budget Message

1ST. BERNARD PARISH GOVERNMENT

FY2010 OPERATING AND CAPITAL BUDGET SUBMISSION MESSAGE The proposed FY2010 Annual Operating and Capital Budget is hereby submitted to the Parish Council for consideration and approval, according to the Parish Charter, Article V. Financial Procedures. A comprehensive analysis of revenues and expenditures was completed in order to compile the FY2010 proposed budget. This submission of the budget maintains all previous year departments and personnel as well as a focus on the identified personnel specifically related to the recovery and recovery close out process. In anticipation of budget hearings and discussions, the final submission will most certainly contain some deviation to the initial submission in order to achieve the requirement of a balanced operational budget for the upcoming fiscal year. Several management interventions are proposed and will be implemented to further build on the basic level of financial monitoring and tracking which will allow the St. Bernard Parish Council and Administration the ability to closely monitor one of the most challenging fiscal years in recent parish government history. Quarterly budget amendments and monitoring has allowed the 2009 fiscal year to reach its fourth quarter with an ability to end this year in a balanced state and possibly move into the 2010 fiscal year with a fund balance of nearly 1 million dollars. While the Recovery and Growth of St. Bernard Parish continues a rather positive trend, it is noted that, as predicted, 2010 will present a very difficult financial challenge in terms of providing an acceptable level of services to the public while experiencing severe shortfalls in revenue streams. St. Bernard Parish Government is not alone in these troubling uncertainties of a global economy. Rest assured that the continuation of St. Bernard Parish’s recovery will be maintained. However, an acute awareness of loss revenues is the foundation of the building of the current 1

budget process. We have been successful in managing to retain many experienced employees and have filled several much needed vacancies. This is not without ongoing costs as we have placed a premium on keeping our employee pay-scale competitive with the surrounding areas. While this budget firmly addresses compensation issues for the employee base of St. Bernard Parish Government, it is not without clear financial growing pains. Mandated expenses such as payroll longevity, retirement contributions, health insurance, court costs, jail expenses, and mosquito control continued to escalate throughout fiscal year 2009. And despite controlling the costs associated with sanitation which is projected to show negligible increases, the shortfall in sales tax revenues creates a unique challenge. Additionally, the struggle to maintain adequate numbers of fire personnel in an effort to manage the fire protection rating for the citizens of St. Bernard Parish prompts an additional shortfall in dedicated revenues to cover the related Fire Department budgetary needs. Together, the cost of sanitation and fire protection creates a 5.1 million dollar deficit, 1.7 million dollars and 3.4 million dollars, respectively. This deficit does not include the upside down cost of another 2.3 million dollars for additional service oriented departments funded by the general funds from parish government. With a conservative approach to the 2010 anticipated sales tax revenue projected to realize a 5% increase and the stabilization of the property assessments, the 2010 fiscal certainty is absorbed in the proposed conservative estimates. The Parish Council’s willingness to educate and request the citizenry as a whole to formally partner with parish government as a means to bolster the traditional service lines provided to residents is an essential piece to the recovery puzzle. The dependence on the passage of the $20.00 per month fee from residents is critical. The dedicated $10.00 per month for sanitation would cover the shortfall anticipated in that department. The additional dedicated $10.00 per month fire protection fee would cut the shortfall in half for fire protection and place the parish government’s 2010 fiscal position closer to stable. To put it plainly, without the passage of the $20.00 per month fee, many traditional services enjoyed by residents of St. Bernard Parish stand to be reduced or eliminated. It is not possible for our current projected revenue streams to keep pace with even the conservative levels of inflation on the expense side of the budget. It is imperative that the Parish Council and administration take the necessary steps to increase the government’s revenues through the passage of the proposed fee and continuing to establish new opportunities for economic development through 2

partnerships with the business community, the recreation department, and the promotion of local business support. A basic economic principle is at play for 2010: cut spending where possible, maintain and improve services, raise revenues, or achieve a combination of all of the above. Decreasing personnel at this point would sacrifice our overall focus to be responsive to the increased need of residents’ concerns and sought after support from parish government. The conservative use of overtime in providing critical coverage such as fire protection as new stations are put into service will be judiciously tapped to balance between the pursuit of new fire personnel and the use of off duty firefighters to fill the void created as a result of several retirements and the time invested to bring new recruits to the status of firefighters. Likewise as the effort to provide services to address blighted and abandoned properties continues to be a priority, it will require that financial resources be appropriately allotted to personnel to address these needs. Again, the pattern of an increased desire to maintain momentum in the recovery by addressing the various and serious needs requires funding. There is a critical decision to be made- fund the essential recovery related response activity and keep the most basic of recovery activities in motion or restrict funding and risk feeding a growing concern of the ability to meet the needs of the community. Through the use of FEMA related funding for many of our street and drainage repairs, sewer improvements, and other critical public infrastructure much of our shortfall in the usual operation and maintenance budget in these areas is somewhat stayed for the initial part of 2010 as many of these projects will be new and in need of less than usual financial support. While this is a temporary reprieve, it is nonetheless an important break. During the 2009 fiscal year, we were able to utilize a community disaster loan to balance the decreased revenues that were experienced. Using the shift in the availability of general funds to stretch to meet the basic services of the parish will be most effective if coupled with the passage of the proposition. The composition of the 2010 proposed budget is a reflection of a rather conservative approach in anticipating increased revenues despite several new business openings such as Lowes, The Mall, and WalMart, as well as the introduction of several industry opportunities. A yet unknown variable will be the impact of a much larger than historical customer area for the local buying opportunities. Focused Chamber activities to bring awareness to the surrounding 3

areas that St. Bernard is returning to pre-Katrina shopping experiences will also be part of the overall plan to capitalize in a competitive market for limited dollars. The retention of established businesses and the concerted effort to assist the commercial fishing industry and the sports fishing and hunting lodging opportunities will also aid in an otherwise slow economic market. Embedded in the slow economic forecast is the anticipated minimum housing growth and construction within St. Bernard Parish. Should the housing market stabilize and begin an upswing, unexpected purchasing activity may spur increased revenues across the board in terms of permitting, building supplies, and home furnishings. The primary expenditures within the budget are consistent with previous years in that the payroll component makes up the largest percentage of the budget, and within the budget is included the commitment to the annual minimal 2% longevity raise for all employees, a reconciliation of hours worked, and maintaining the provision of the employee healthcare benefit. It is noted that the pension contribution for parish government employees increased from 13.25% to 15.75%, costing an additional 250,000.00 dollars to the payroll budget. Administration must reiterate that completing a balanced budget for 2009 is a relatively easy task in comparison to ending FY2010 balanced. Furthermore, it is nearly impossible for parish government to maintain the same budget for 2010 without replacing the funds from the Community Disaster Loan. As the revenue projections fell off nearly 20% for 2009, the Parish Council and Administration have worked to deliver a package of services offered in the 2009 Budget and implemented precautionary measures in preparation for FY2010. Despite the dismal economic conditions experienced in 2009, together we were able to carry forward a 1,000,000.00 positive balance for 2010. Even in these difficult financial experiences, parish government has remained committed to supporting the completion of a hospital complex and has foregone use of over 600,000.00 in CDBG and general funds for the Hospital Service District. An ongoing challenge but positive outcome to date has been the unique balance between recovery related projects and the timeliness of funding such work. In addition to the long-standing category A & B funding reimbursement issues, the dedication of bond related funding for permanent repairs will diminish in 2010 as the capital project of the Munster Treatment Facility. Continued FEMA support and an ongoing evaluation of the funding process are anticipated to offer a coordinated process to alleviate the need for operational revenues to supplant capital initiatives. 4

REVENUES SALES TAX ESTIMATE Sales tax revenue is the largest revenue source for general operations of the Parish. The FY2010 projections are based on actual collections for the past 12 months and calculated by a computer model using time series projections. The time series approach is verified and compared to the estimates made by the Finance Department to reach final projections. Given the major effect sales tax has on daily operations, the budget will be closely monitored throughout the year. When fluctuations from budget occur, Administration will present the Council with budget amendments when necessary. The continuation of work in all areas of the parish, the school system improvements, levee construction work, and roadway repairs will continue to provide an artificial infusion of tax dollars to offset some of the decreases in the financial picture overall. The analysis and estimates for the 2009 Budget have led to increase sales tax revenues projections for the upcoming FY2010 at a cautious 5%. AD VALOREM TAX Ad Valorem taxes for all funds except debt service have been rolled back for 2010. The roll back will reduce the Parish’s revenues by approximately $352,000.00 based on the assessed values of the current tax roll millage rates. Administration has calculated the Ad-valorem projections to indicate a more stable property market from value stabilization. This slight increase is subject to several economic conditions in the housing market and will be closely monitored for any unanticipated dips in the property value trends. The 2010 Ad Valorem projections are anticipated at be 5,661,434.00. PUBLIC WORKS REVENUE Road Royalty funds have continued to provide less revenue than past years and 2010 is no exception. 2010 Road Royalties is cautiously anticipated at $1,631,705.00 as compared to 2009 of $1,483,369.00. FY2008 Road Royalties 5

generated over 2.9 million dollars. The practical experience of this situation results in more limited public works projects. A saving grace to the decreased trend of royalty funds is the presence of FEMA related projects that provide some buffer to the decreased revenue stream. The State Treasury has indicated no significant changes based on the oil market for the FY2010 Budget and we have adjusted our projections accordingly. USER FEES The FY2010 Budget includes an assumption of the passage of the $20.00 fee. The anticipated revenue from said fee is 3.6 million dollars based on 15,000 users. Recognizing that the revenues anticipated from this proposition are not automatic, it is anticipated that the subsequent budget hearings will certainly include alternate budget strategies should the proposition fail. The Administration supports the implementation of a waiver for senior citizens relative to such fee and will adjust accordingly. PUBLIC WORKS, WATER AND SEWER DIVISION. By year end 2009, the completion of the Water and Sewer Division meter upgrade program should be complete. With this completion, it is anticipated that a significant level of increased revenues in water fees from $1,535,676.00 in 2009 to $2,909,186.00 for 2010 and sewer fees in 2009 from $1,025,993.00 to $1,958,846.00 for 2010. Although the increases are the most ambitious in all of the 2010 budget calculations, it is believed that the system improvements will capture a much more accurate house count and billing level for water and sewer customers. The 2009 goal of a 30% increase in revenues due to meter improvements will be slightly late in the fiscal year of 2009 but will be achieved and certainly sets 2010 as a breakthrough year for water and sewer revenues with anticipated increases in revenue in the 55% range. The FY2009 budget experienced a need to pull debt service obligations from the general fund and the FY2010 debt service shortfall will be remedied through the use of I&I funds, which will also serve to bolster the general fund revenues. The 50 million dollar bond balance has remained steady throughout 2009 and the remaining 23 million dollars is dedicated to compliment the over 20 million dollars 6

of FEMA funding for the construction of the Munster Wastewater Consolidated Treatment project. GENERAL OPERATING EXPENSES The FY2010 budgeted expenses are indicative of a community that is caught between recovery and growth and a significant national recession. While the verdict is still out regarding the upswing of the economic market, St. Bernard Parish has continued to maintain a steady growth pattern. Services such as sanitation, recreation, fire protection, road repair, water and sewer service, mosquito control, animal control, street lighting, and jail operations all contribute to growth in expenses consistent with the projected consumer price index for 2010. Operational expenses such as hospitalization, payroll, and self-insurance are responsible for additional draws on the limited revenues, however the implementation of the wellness program, budgeted in the 2010 budget has shown positive impacts on employee health, decreased utilization reviews, and fewer claims associated with historically high rate claims of cardiovascular and respiratory illness. 2010 will introduce employees who choose not to participate in the incentive based wellness program to share in rising healthcare benefits within the limits of the law. The non-punitive, participation oriented program rewards employees for participation. Wellness programs are designed to increase healthy lifestyles in order to decrease utilization and eventually decrease premiums paid by parish government. One of 2009’s highlights of achievement was a fully functioning grants department, bringing into the parish coffers over 10 million dollars. The grants department will again be called on to contribute to balancing the scales of expenses to revenues by garnishing grant funds that would otherwise go unused. Through the use of technology in the utility services and following best practices in animal control and recreational programming, underutilized revenue sources will contribute to a move toward self-sustaining programs. While often seen as a luxury to services for the public, the investment in the Recreation Department facilities and programs will be a source of revenue both in direct use funds as well as spin off tax dollars for the overall St. Bernard economy. Related activities to this concept include the implementation of a parks and parkway program which 7

will combine Recreation, Tourism, Public Works, and Grants to provide an undercarriage to the aesthetic focus in our community. The Val Riess Complex and the ballroom will provide sources of revenues to move both complexes to self sufficiency. As discussions continue to explore other cost saving approaches to purchasing, preventative maintenance programs, expedient prisoner disposition processing, and energy conservation, the expense side of the budget equation will continue to be lightened. While it must be remembered that Parish Government must remain financially solvent, the practice of reinvesting revenues into services and projects will present the Parish Council and the Administration with the ongoing charge to maintain fiscal responsibility while providing a standard of excellence to the public and the employee base who serve them.

CAPITAL PROGRAM As Recovery related projects continued to be let at an aggressive pace during FY2009, FY2010 will see the majority of these projects being completed and in service. Close-out activity will become the focus of the recovery projects. A summary of capital projects includes $146,026,863.00 of FEMA funded projects for 2010 and beyond and over 84 million dollars in capital projects funded by CDBG funds. Additional capital funding mechanisms will attempt to capture State Capital Outlay Funding and additional grant funding. The commitment to the rebuilding of St. Bernard Parish is rooted in the infrastructure repair and rehabilitation of our physical environment. Setting our sites on supporting a local hospital and medical office building, continuing to provide a basis for the return of our residents with new streets, gyms, parks, fire stations, drain lines, and lights, and conveying a commitment to the long term success of St. Bernard Parish are all parts of the budget message.

IN CONCLUSION, the Administration has followed the State law and Charter requirements and submitted a balanced budget. It is recognized that the 2010 8

budget preparation process leaves room for improvement. During the course of the FY2010 budget hearings, it is anticipated that an expression of the goals of the current council will result in some adjustments to the operational budget. However, there are few interventions that are as effective as increased revenues. The administration will approach 2010 in a rather conservative operational manner while continuing to push a rather aggressive capital projects pace. There is continued optimism that new revenue sources will be experienced to address the challenges to meet the level of services to which the Parish is accustomed. It is imperative that the Parish Council and Administration seek the support of the public to create additional revenues through the upcoming proposition or, at the very least, communicate clearly that a reduction of the proposed package of services offered in the current budget is inevitable for FY2010. The operating budget for 2010, including the Water and Sewer Division is $40,066,172.00 and the 2010 capital budget is 230,026,863.00.

Respectfully submitted, This 6th day of October, 2009. ________________________ Craig P. Taffaro, Jr. St. Bernard Parish President

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