Financial Management

buttermilkbouncyManagement

Nov 10, 2013 (3 years and 7 months ago)

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Financial Management

by Jon Lang

Financial Management


Why we do it!


“The

difference

between

financial

management

in

the

public

and

private

sectors

is

that

in

public

agencies

you

get

a

bag

full

of

money

at

the

beginning

of

the

year

and

are

told

to

spend

it
.

In

private

enterprise

you

get

an

empty

money

bag

at

the

beginning

of

the

year

and

are

told

to

fill

it!”



Michael

Read


Financial Management


How we do it!


“Public works departments are not
financed by waving a magic wand. They
are created with the money that
government is able to take away from
its citizens.”




Ludwig Von Ostrowski


Financial Management

Who We Do It With!


Finance Officers Qualification Test:

Add

these

numbers
:


$
1
.
00



2
.
00



3
.
00




Financial Management


Budgets


Why We Budget


Preparing Your Budget


Presenting Your Budget


Operating Funds


General Funding


Utility Funding


Capital Financing


Revenue, Debt & Grant Financing


Public Private Partnerships

Budgets

A plan for managing your resources

Budgets


Why We Budget


Preparing Your Budget


Presenting Your Budget

Why We Budget

It’s the Law!


Must have a fiscal year budget


Must be approved by June 30
th


Must be balanced


Can be prepared biannually


Why We Budget

To Manage Our Resources


People


Money


Time


Why We Budget

Local Policy


Policy Influences Budgets


Tax Levy Limits


Utility Rates


Franchise Fees


Policy Gets Established


Public Safety vs. Public Works


Street Cleaning vs. Street Resurfacing

Preparing Your Budget

Establish Your Mission


What is your PW Mission?


Do you have a Strategic Plan to accomplish
it?


Have you prepared Goals and Objectives?


Has your governing body approved these
items?


Preparing Your Budget

Measure Your Mission


Asset management


How many assets do you have?


What condition are they in?


Benchmarking


What should your activities cost?


How many people do you need?

Preparing Your Budget

Put It In Writing


Incremental Budgeting


(Selective increases or cuts from the current year)


Program Budgeting


(A budget for your objectives)


Zero Based Budget


(Establishes your mission, goals and objectives)


Preparing Your Budget

Some Strategies


You don’t get what you don’t ask for


Just in case budgeting


A chicken in every pot

Presenting Your Budget

Know Your Audiences


Elected Officials


Short
-
term view and public desires


Public Works Director


Long
-
term view and infrastructure needs


City Manager and/or Finance Director


Policy and Legal view and an adopted budget


Taxpayers


Personal view and what I want


Presenting Your Budget

The Internal Review


Show “good management”


Follow the rules and be realistic


Don’t surprise the boss!


Make deals ahead of time


Get budget approval


Close the sale now!


Presenting Your Budget

The Public Presentation


Have your supporters present


Use charts and graphs


Focus on:


Meeting needs (The Mission)


Cost
-
efficiency


Political and public benefits


Operating Funds

Operating funds are used for operation and
maintenance activities

Operating Funds


The Funds


The Color of Money


Permission Slips


Generating Revenue


The Funds


Two Types

General Fund


Relies on property &
business taxes


Legal limitations on tax
amount


Competition for funds
among agency
departments


Limited relationship to
cost of service


Utility Funds


Relies on fees charged for
a service


Practical limitations on fee
amount


Limited competition for
funds from other
departments


Usually based on cost for
service


The Funds


Their Uses

General Fund


Parks, Police, Fire,
Planning, Finance, etc.


Special Funds


Transportation


Storm Drainage


Street lighting


Cemetery

Utility Funds


Sewer


Solid Waste


Storm Drain?


Transportation?


The Color of Money


Each fund is a different kind (color) of
money


Fund monies can only be used within that
fund


But, there are permission slips to use one
fund’s money in another fund

Permission Slips

Overhead Allocations


Generally paid by utilities and special funds




Pay for general services


General management & council costs


Finance


Legal


Purchasing


Information Services


Allocation formulas

Based on labor or total revenue


Permission Slips

Interagency Services



Paid by one fund to another fund for providing
services




Why pay another fund for services?


Policy


Efficiency


Politics


The issues


Loss of control


Quality of work


Scheduling


Permission Slips

Franchise Fees


Paid by enterprise funds to the general fund for the
“right to operate” in the public right
-
of
-
way



Cities can charge franchise fees


Public and private utilities pay


Funds go to general fund



Generating Revenue


Utility Rates


Customer service fees


Permit Fees


Non
-
service fees


Providing Services


Interagency agreements


Intergovernmental agreements


Selling Products


Sale of service by
-
products or unneeded items

Generating Revenue

The Art of Setting Utility Rates


Factors


Legal requirements


Political considerations


Public considerations


Strategies


Full cost vs. subsidized cost


Periodic increases


Rate comparisons


Capital Financing


Cash


Debt


Free Money


Private Money


Cash


Current Revenue


System Development Charges


Paid by new development for capacity


Reimbursement Fees


Based on prior investment


Improvement Fees


Based on proposed improvements


Utility Rates


Taxes

Debt

General Obligation Bonds


Used for “public” capital improvements


Require voter approval


Backed by the taxing power and full faith and
credit of the municipality


Usually paid from property tax revenue


Require time to plan, approve, and implement, so
funds are not available on short notice


Debt

Revenue Bonds


Used to finance improvements for which fees are
charged


Backed only by the dedicated revenue source


Higher interest rates because of less guarantee


Usually no vote is required


Funds can be obtained in a shorter time

Debt

Assessment Bonds


Finance local capital improvements through
an LID or Assessment District


Property owners pay assessments in cash or
payments over 10+ years


Used for water, sewer, streets, stormwater


Free Money?


Grants


Strings attached


Eligible


Allowable


Matching funds


Lots of paperwork


The “public” likes them


May not be worth it

Private Money


PPP


Public Private Partnerships (PPP)

are
any scenario in which the private sector
assumes a role greater than the traditional
planning, design and construction for a
fee in a public project.

Public Private Partnerships

Typical Procurement Packages


O & M on a performance basis


Program management with cost and schedule
incentives


Design
-
build for fixed fee in fixed time


Project build
-
operate
-
transfer (BOT)


Design
-
build finance
-
operate transfer (DBFO)


Build
-
own
-
operate (BOO)


Public Private Partnerships

PPP Financing Methods


Shareholder equity


Grant anticipation bonds


General obligation bonds


Revenue bonds


State infrastructure loans/funds


Federal grants


Direct user charges


Public Private Partnerships

Key Benefits


Expedited Project Completion


Project Cost Savings


Innovative Materials and Techniques


Access to Private Capital


Public Private Partnerships

Regional Examples


Portland airport light rail


Bechtel


Portland I
-
5/I
-
405 interchange


Peter Kiewit


Wilsonville water treatment plant


MWH


CH2M


Final Thoughts


Budgeting


Getting your budget approved is an exercise in
understanding people.


Operating Funds


Be creative but realistic in the use of these
funds.


Capital Financing


Keep the tax and utility rates within acceptable
limits.