FIRST AND FINAL CONSIDERATION: Consideration of and action on CITY OF SUGAR LAND ORDINANCE NO. 2113 AN ORDINANCE ADOPTING THE ANNUAL BUDGET FOR THE CITY OF SUGAR LAND, TEXAS, FOR THE FISCAL YEAR BEGINNING OCTOBER 1, 2017 AND ENDING SEPTEMBER 30, 2018; APPROPRIATING THE SUMS AS SET FORTH THEREIN; ADOPTING THE CAPITAL IMPROVEMENTS PROGRAM 2018 - 2022; AND ADOPTING A COMPENSATION PLAN.

The City Charter requires that the City Manager submit a proposed annual budget, a five-year CIP, and an employee compensation plan to the City Council for consideration each year. The Charter states that the budget shall include a letter describing the proposed budget, that the budget be balanced, and that the budget be submitted for City Council review and consideration not later than 60 days prior to the end of the current fiscal year. On July 18, 2017, the proposed budget for FY18 was filed. Pursuant to state law, a public hearing was held on the proposed budget on August 15, 2017.

The proposed budget and five-year CIP were thoroughly reviewed with the City Council over a five-week series of budget workshops. The budget is fiscally conservative and includes savings from both departmental and non-departmental expenditures, but does continue to provide existing services and meet operational service levels. The budget includes funding for merit increases based on a 3% merit pool, effective January 2018. The City does not provide for an across the board cost of living increases; merit increases are awarded based on employee performance.

Since the budget was filed, a few changes have been made to the operating and CIP budget. The changes are detailed in the exhibit at the end of this summary. Based on the certified tax roll received in July, property tax revenues and MUD rebates have been revised to reflect certified values at the effective tax rate plus 3 percent, impacting both the General and Debt Service Funds. The final recommended budget includes no additions or enhancements to services levels, and incorporates the annexation budget, which is fully funded by restricted revenues sources.

The FY18 total budget, excluding transfers, totals $230.9 million as shown below:

The first page of the exhibit summarizes the changes that have been made to the budget (both FY17 and FY18) since it was filed in July.  Some of the FY17 changes affected beginning fund balances for FY18.  An example of such a change is the removal of the acquisition of artwork in the TIRZ No. 4 Plaza and the subsequent $42,000 reduction of the Public Art Program budget in the Sugar Land 4B Corporation budget – which is also reflected in the Capital Improvements Program.

The budget schedules for each fund, including the Sugar Land Development and Sugar Land 4B Corporations, are reflected in Exhibit A. In addition, Exhibit A includes the Fire Depreciation schedule from the FY16 audit, which is used for the FY18 full cost of service fire fee calculations. This schedule is required to be a part of the adopted budget under the strategic partnership agreement with the New Territory MUDs.

Exhibit B reflects the recommended five-year capital improvement program. Funding is incorporated into the budget for all FY18 capital projects as discussed during the budget workshops. Fiscal years 2019 through 2022 projects are for planning purposes only and are subject to change based on priorities, timing and funding needs as future budgets are considered by City Council each year. The five-year CIP totals $130.3 million.

The compensation plan is shown in Exhibit C and reflects the organizational structure and titles as proposed for FY18. There are five compensation plans: Non-Exempt, Exempt, Management & Elected Officials, Police, Detention & Dispatch, and Fire.

The City Charter requires that the budget be adopted by ordinance no later than the 25th day of the last month of the fiscal year. The 2017 tax rate is scheduled for adoption on a separate agenda item and is recommended at $0.32233, which is the effective tax rate plus 3% and funds the budget as recommended.. This is consistent with the City Council Adopted Financial Management Policy Statements, and ensures the long-term financial strength of the City. The budget presented for adoption includes revenues based on the certified tax roll at the proposed tax rate. State law requires that the tax rate be adopted after the budget is adopted.

Since the budget includes more revenues from property taxes than the prior year, the Local Government Code requires a vote to be taken separate from the adoption of the budget and tax rate to ratify the tax revenues that are included in the budget. This vote has been placed on the agenda after the adoption of the budget and tax rate.

It is recommended that the City Council approve Ordinance No. 2113 adopting the FY18 Annual Budget, FY18 - FY22 Capital Improvements Program, and the FY18 Compensation Plans.