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City manager, finance director discuss city budget

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City Manager Joe Neeb answers a question from RDR editor John Dilmore (not pictured). Finance Director Monica Garcia listens to the explanation. On the table is her binder of information on the fiscal year 2018-2019 budget. (Alison Penn Photo)

Editor’s note: Roswell Daily Record staff recently conducted an in-depth interview with City Manager Joe Neeb and Finance Director Monica Garcia, asking more than 30 questions — many submitted by the public — about the city’s budgeting process. Today’s story is the first of two articles resulting from the interview.

Neeb and Garcia met with RDR staff to discuss the fiscal year 2018-2019 (FY 19) budget. A final budget summary; final revenue and expenditure worksheets; and a transmittal letter from Neeb to Mayor Dennis Kintigh and the ten city councilors were provided for informational purposes in preparing the article.

Garcia and Neeb confirmed that the city’s $140,729,733 budget was submitted to the New Mexico Department of Finance and Administration (DFA) on July 31, and Garcia estimated the city will hear back within six weeks. The three main budgeted expenditure categories are:

• Capital expenses, $56,851,154

• Operating expenses, $41,517,974

• Personnel, $42,360,605

The city’s “end cash” — funds left over from the previous year — was $80,370,719 as of June 30, and for next fiscal year, it is estimated to be at $16,853,461.

Stating that the city of Roswell is, “not in the money of making business,” Neeb said that governmental finance is different from personal or even industry finance. He said that every dollar collected by the city goes toward a city service and the expense must be justified. Neeb and Garcia agreed that this past year was a challenge for many reasons.

“We’re very proactive in taking care of our people,” Neeb said. “We’re so much more proactive than we used to be. Those dollars are very tight and so it is really a prioritization of what can we get done.”

Garcia and Neeb shared one challenge involved implementing a new process after a former city employee — who ran the budget using a different system for 23 years — left the finance department recently. Garcia said this year was a year of learning and developing a process for the finance department.

Neeb said 46 percent of this year’s budget — $56,851,154 — is for capital projects.

Garcia said an upcoming Tyler Technologies software upgrade will show a bigger picture of the city’s finances. Neeb said the software will help justify the numbers better — since the current Open Government software system is limited.

“Give us a call,” Neeb said. “Staff will spend time with anybody that wants to learn a little bit more … We’ve got to start somewhere in order to help rebuild some of that trust and that perception of what is there. Staff is well aware anybody that has questions, we are going to answer those questions. If we can help with that, that’s our role.”

Gross receipts tax

Neeb said general fund gross receipts tax (GRT) is the primary fund for the budget, and is variable based on the economy. The FY 2018 final GRT amount for the general fund was $33,002,898 and it is budgeted at $33,282,072 for FY 19.

In terms of revenue, Neeb said the city makes educated guesses on GRT annually — and compared it to looking into a crystal ball. When the city receives GRT from the state, he said an excess amount can be allocated to a service, and if less is made the city must look at decreasing expenditures.

Neeb added that said property taxes are about 24 percent of the budget. He added that user fees for citizens have remained the same — except in cases where services or rates change.

Water revenues

The city initiated a $20 million bond to install and implement smart water meters; the bond is set to close out in 2037. Neeb said water revenue is expected to increase thanks to the new water meters. The old meters were estimated to only charge for 80 percent of the water being used. The new meters are more efficient, and will charge for 100 percent of water used.

Neeb said all the desired water department projects were funded this year and the city’s goal remains replacing and improving the water infrastructure with the general fund. Garcia said the water budget remains the same from last year, and she wants to see a full year of operations with the smart meters to see a financial trend develop. Estimated water revenue is $14,477,400, and expenses are at $25,528,465 for FY 19.

City’s bonds

Garcia said the general fund has about $62,000,000 in bonding capacity. Neeb and Garcia said the enterprise fund has a higher bonding limit. Neeb explained that bonding helps with leveraging resources faster and to cover needs.

“This council is a very conservative type council,” Neeb said. “They will not want to bond for everything that’s out there.”

When the city does use bond funding, Neeb said the council is selective and wants the revenues in place to cover the bonds. Garcia and Neeb said the city still holds a AA bond rating and is stable on a broad level financially.

Compensation Plan

Neeb said implementing a new compensation plan, approved in April, was one goal of this year’s budget process. Garcia said with the increases in payroll, the city the city is in a similar range as the rest of the state and compared to neighboring states, according to the city’s compensation studies.

Neeb said during discussions with three unions (Local 51 Utility Workers Union of America, Roswell Police Officers’ Association, and the Roswell Fire Department’s union) there were questions about why large amounts of money borrowed can be used for capital projects — like the recreation center — and not for salaries. He explained those funds are borrowed for a specific purpose and cannot go toward operational funds, like payroll.

Garcia said the city did not have a compensation plan prior to this one — but rather an out-dated grade and step scale for city employees. Garcia said the new compensation plan will move the city and is employees forward.

General Fund

Neeb said the general fund is the part of the budget the city struggles with, since it covers around 26 departments, contains the most personnel, and has many needs. In FY 19’s budget, the revenues are estimated at $41,004,460, and total expenses at $43,528,340. Neeb’s transmittal letter states that the FY 18 revenue was $33,002,898 and the projected revenue is $33,282,072.

Neeb’s transmittal letter also stated that no tax rate increases were included in this year’s budget.

“We’re financially stable but we have cash flow issues because of where the needs are coming from,” Neeb said. “You can see that with this year’s budget … The one that really suffers because there is so much impact, is the general fund.”

Neeb added the prioritization of projects in the general fund is challenging, because it has large departments with expensive needs, like streets and Parks and Recreation.

Reserves

Neeb said in 2016 the GRT was very low and the city decided to keep things as they were instead of reducing expenditures in that year. During this time the city used more of its cash on hand, also called reserves.

Neeb shared that the city council has requested to replenish and protect the cash on hand. At this time, Neeb said the city is moving toward this goal, through analysis of the reserves.

As required by the state, a city must have one-twelfth of its annual income in reserves, and Neeb said Councilor Caleb Grant and the city’s finance committee are adamant that they want to build the reserves to hold the equivalent of three months of the annual budget. Neeb said the city always carried more than one-twelfth in reserves.

“The reason for the reserves is, if no new money comes in, that it doesn’t destroy providing services until new revenue makes it, so the reserves are for that rainy day,” Neeb said.

Garcia said Roswell has to deal with many economic factors and does not depend on oil and gas as much as other municipalities that are able to hold more in the reserves. Neeb added that Roswell has multiple industries to depend on.

“Part of the conversations has been, do we want that much money sitting in the bank — or do we want to put it to work for our people, as to why we took their tax dollars in the first place?” Neeb asked.

Neeb said the enterprise funds — that include sewage, water, and sanitation — are “very strong.” He said that local dollars are generated to support these services.

After the Goliath Storm of 2016, Garcia said the state helped and Roswell got some federal funding from Federal Emergency Management Agency (FEMA). When natural disaster hits, Garcia and Neeb said there is a prioritization to keep funding in the most important areas. Neeb said funding public safety ranks high on that list.

Neeb said the city not allowed to spend the reserves to balance out the budget. He added that using reserves would require city council and DFA approval.

City/RISD reporter Alison Penn can be reached at 575-622-7710, ext. 205, or at reporter04@rdrnews.com.