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HomeMy WebLinkAboutFSC 2024-03-05 Agenda PacketCITY OF TUKWILA FINANCIAL SUSTAINABILITY PLAN FINANCIAL SUSTAINABILITY COMMITTEE MEETING #5 I MARCH 5, 2024 :111 MEETING AGENDA • Welcome and Recap of Meeting 4 (10 mins) • Questions or Comments on Background and Context (20 mins) • Financial Forecasts Overview (15 mins) • Discussion of Draft Committee Guidance (60 mins) • Meeting Recap and Close (15 mins) 2 PROJECT ARC Meeting 1 Meeting 2 Meeting 3 Meeting 4 Meeting 5 Meeting 6 Community Context Who lives here? What kind of businesses? What is the composition of the Tukwila economy? Community Values and Priorities 1 Revenue Mix General Spending What does the community desire? What are the City's biggest costs? How do City revenue tools compare to others? City Programs and Services Gather Potential Principles and Recommendations in meetings 1-4 Identify themes and preferred strategies What are the City's greatest needs? How might efficiencies be gained? What programs and services best align with community priorities? Full Set of Recommendations How can we best balance the City's financial sustainability, the provision of City services that meet community expectations, and equity in costs and services? MEETING 4 RECAP POTENTIAL COMMITTEE GUIDANCE ON CAPITAL PROJECTS AND ENTERPRISE FUNDS ■ Consider the community return on investment when evaluating the need, purpose, and design for new facilities. ■ Consider the fiscal sustainability of ongoing maintenance needs when evaluating potential capital investments. ■ Calibrate user fees and program revenue goals with ability to pay and social return on investment. �1 5 COST AND REVENUE OPTIONS These are the cost levers we can adjust. Cost Tool Options Emit growth in baseline costs "Wind efficiencies, such as streamlining processes Change levels of service • Add programs or eliminate programs • Increase or decrease levels of service Deliver services differently • Partner with other entities to provide services • Identify opportunities for the private/non-profit sectors to deliver services 6 COST AND REVENUE OPTIONS These are the revenue levers we can adjust. 11 Revenue Tool 1 Property tax revenue Dedicated funding for infrastructure MUser fee revenue Sales tax revenue Business taxes/fees Grant revenue • Adjust the levy rate • Use banked levy capacity • Encourage new development to expand the tax base • Establish a dedicated funding stream for transportation or parks • Establish cost recovery principles • Adjust the tax rate • Encourage commercial growth to expand the tax base • Adjust the business tax rate or business license fee • Encourage business growth • Seek to increase grant revenues FINANCIAL PLAN OVERVIEW ■ The City develops a six -year financial plan for the General Fund to see the impact of financial policies and budget decisions. It helps answer questions such as: ■ What impact will this year's budget decisions have on the future? ■ What is the future impact of a potential policy decision? ■ Revenues and expenditures are projected based on economic factors, past trends, and known program or policy changes including: ■ Property tax growth limit ■ Debt service obligations ■ Contractually obligated cost increases ■ Trends in sales tax revenue 11 BACKGROUND AND CONTEXT 11 THINGS TO KEEP IN MIND ■ Service level adjustments. The City reduced service levels and expenditures to align with reduced revenues. The City restored some services using new revenue and some one-time funding in the 2023-2024 "bridge budget." • Staffing and services over time. ■ Total FTE positions in the City has grown more slowly than the City's population between 2016 and 2023. ■ Over the same period, demand has varied for different services. For many services, demand decreased during the pandemic but has rebounded or begun to rebound. 11 10 THINGS TO KEEP IN MIND ■ Compensation. Compensation is guided by City policies and labor agreements. Third parties conduct reviews of salaries or assist with labor negotiations. A 2023 salary study of non -represented positions found that Tukwila salaries were competitive with the average market. The study includes these recommendations: ■ Adjust some positions to better align with the market. ■ Follow the compensation philosophy of market average compensation to ensure the City can stay competitive in retaining its personnel as long as possible. ■ Consider looking at comparable cities based on geography instead of assessed value. ■ Complete market studies every three to four years and include a total compensation review. ■ Evaluate moving to merit/performance-based pay for higher steps. 11 11 FINANCIAL FORECASTS OVERVIEW :111 CURRENT GENERAL FUND FINANCIAL PLAN ■ The City's six -year plan restores $80,000,000 services to pre-COVID levels and $ 75,000,000 funds positions that had been frozen or funded by one-time revenues. $70,000,000 ■ The plan adds a B&O tax and uses $65,000,000 some property tax capacity created by fire annexation. $60,000,000 ■ Overall, the City's property tax rate $55,000,000 decreases. $ 50,000,000 ■ The projected variance between revenues and expenditures is $45,000,000 approximately 1% of total revenues. $ 40,000,000 2023 2024 2025 2026 2027 2028 Total Revenues Total Expenditures Sources: City of Tukwila, 2023; BERK, 2024. 13 GENERAL FUND FINANCIAL PLAN WITH DRAFT GUIDANCE • The City's six -year plan restores $so,000,000 services to pre-COVID levels and $75,000,000 funds positions that had been frozen or funded by one-time revenues. $70,000,000 • The plan adds a B&O tax and uses $65,000,000 some property tax capacity created by fire annexation. $60,000,000 • Overall, the City's property tax rate $55,000,000 decreases. $50,000,000 • Funding is included for strategic investments. $45,000,000 • The projected variance between $40,000,000 Budget Projected revenues and expenditures is less 2023 2024 2025 2026 2027 2028 than 1 % of total revenues. Revenues Expenditures -Adopted --- Expenditures -Committee Sources: City of Tukwila, 2023; BERK, 2024. 14 DRAFT COMMITTEE GUIDANCE DISCUSSION .11 COMMITTEE GUIDANCE 1) Performance and Resource Efficiency 2) Budget Priorities 3) Accountability and Customer Service 4) Strategic Investments What changes, if any, might you suggest to this structure and why? What changes would you suggest to the draft recommendations on the document? ■ Anything you'd add? Delete? Modify? Anything you can't live with? What changes would you suggest to the phased implementation approach? 11 1) PERFORMANCE AND RESOURCE EFFICIENCY a. Implement continuous improvement efforts and policies. $ b. Seek the most efficient and effective service delivery models. Seek to use contracting, collaboration, and alternative staffing approaches to deliver quality municipal services as efficiently as possible. $ c. Calibrate management staffing with the transition of fire services and staff to the Puget Sound Regional Fire Authority. Take advantage of this reduction in City staffing and management complexity by looking for opportunities to more fully use or consolidate existing executive level staff. d. Calibrate staff positions and compensation. $ e. Closely manage the City's capital investments. $ f. Update the City's financial policies. 17 2) BUDGET PRIORITIES .11 a. Use a lens of the expected return on investment for the Tukwila community to evaluate City service and capital expenditures. Consider Tukwila's unique community makeup when prioritizing and tailoring City services and capital investments, recognizing that return on investment may not always be quantifiable. b. When considering revenue sources and rates, review the balance of the burden between residential and commercial payors. c. Establish a Tukwila -specific definition of "public safety." Determine what we mean by the term and what kinds of investments in preventative and reactive policing, as well as other public services (such as recreation programming), infrastructure, and maintenance, will advance public safety. d. In the next budget cycle, review programs and services that were reduced during the pandemic and determine what to restore based on community priorities, demand for service, and City resources. e. Prioritize investments in maintaining existing assets, including our people and physical infrastructure. See "Strategic Investments," below. 18 3) ACCOUNTABILITY AND CUSTOMER SERVICE a. Implement innovative and cost-efficient ways of providing customer service. * b. Publish full quarterly financial reports of all funds and quarterly cash and investment reports. This will provide the community with valuable information without their need to submit a Public Records Request. For easy access, request that reports be stored online in the digital records center under Departments/Finance. c. Routinize an annual administrative report assessing the City's cost containment strategies and making recommendations. These reports should be presented to the City Council. d. Utilize tools such as See -Click -Fix to effectively monitor and respond to community requests or needs. Analyze the data received to identify and proactively address trends and patterns. Assess community satisfaction of service delivered. 19 4) STRATEGIC INVESTMENTS a. Consider fiscal impacts when setting policy or making decisions that affect future land uses. Increase growth and development in a targeted way to create new revenue and create future revenue streams. b. Encourage business growth and investment. $ Foster opportunities for business and take care of established businesses to create a healthy economy which will ultimately generate revenues for the City. c. Invest in existing assets: Tukwila's staff and infrastructure. $ Embrace an understanding that we make the most efficient use of existing resources and avoid long-term costs by maintaining physical assets in a state of good repair and investing in the success of our team. d. Invest in the City's expertise and capacity in functions that are critical for financial sustainability. $ 11 20 PHASED IMPLEMENTATION First, make targeted investment in strategies that advance the City's financial management, resource effectiveness, and cost containment abilities. Second, return LOS and make deeper investments in efficiency and effectiveness. Over the Tong -term, continue to communicate to the Tukwila community and consider whether a request for additional resources to support City service delivery is warranted. 21 ADDITIONAL DISCUSSION QUESTIONS: TODAY OR MEETING 6 ■ What principles should guide the City's approach to addressing potential capacity in the budget? ■ What guidance would the Committee share on achieving a smart balance between cost containment and investments designed to enhance the effectiveness and efficiency of City services? ■ How should the City plan for growth in terms of program delivery? ■ How should tax and fee burdens be shared among Tukwila residents and businesses? ■ What are your observations in reviewing our Evaluative Criteria (next slide) side -by -side with the Committee's draft recommendations? 11 ADDITIONAL DISCUSSION QUESTIONS: TODAY OR MEETING 6 ■ Equity ■ Cost ■ Magnitude and Growth ■ Stability ■ Sustainability ■ Alignment with Priorities ■ Feasibility ■ Impact to Other Services 11 MEETING CLOSE UPCOMING MEETINGS • Meeting 6: Recommendations Discussion (April 2, Tuesday) ■ Final delivery of recommendations to City Council (April) The City is developing strategies for community engagement for the upcoming budget development process. 25 ROUNDTABLE CLOSING COMMENTS Forecast Scenarios and DRAFT Recommendations Tukwila Financial Sustainability Plan j DRAFT March 2, 2024 Overview and Structure of this Document The information in this overview is intended to help the Committee understand how its draft guidance could impact the City's financial forecast and long-term financial sustainability. This document provides some additional context and information in response to questions or comments raised by Committee members in prior meetings. Contents A. Additional Background and Context 2 Service Level Adjustments 2 Staffing and Services Over Time 4 City Staff Compensation 7 B. Financial Forecasts 8 1) Adopted Financial Plan 8 2) With Draft Committee Recommendations 10 C. DRAFT Guidance from the Committee 12 Structure 12 Draft Recommendations 12 Phased Implementation 18 1 A. Additional Background and Context Service Level Adjustments In response to the COVID-1 9 pandemic, the City reduced service levels and expenditures to align with reduced revenues. The City restored some services using new revenue and some one-time funding in the 2023-2024 "bridge budget." A description of those service level adjustments is provided in Exhibit 1 below. The City's adopted 6-year Financial Plan assumes that services reduced in the pandemic will be restored to pre -pandemic levels. Exhibit 1: Summary of Tukwila's Recent Service Level Adjustments Category 2021-2022 Adopted Budget 2023-2024 Adopted Budget Community and Economic Development ■ Longer response time to customer inquiries (1-2 days to 4+ days) and longer processing time for permits (4- 6 weeks to 8-12 weeks). Less staff time spent on housing and regional planning issues. ■ Restored funding for 2 positions with Federal American Rescue Plan Act (ARPA) funds. Community Engagement • • Elimination of the Community Connections program. Prohibitions on public gatherings impeded the ability to adequately gather public input on City initiatives. • The Community Connectors Program, renamed the Tukwila Community Leadership Initiative, has been restored with ARPA funds. Culture and Recreation Reduction in the number of recreation programs and services offered. Reduction in funding for seasonal staff. Reductions in park maintenance service levels: longer intervals between mowing, tree trimming, and weed removal; longer response times for graffiti removal and emergency repairs; and scheduled maintenance items, like painting benches are delayed or eliminated. • Restored funding for part-time labor and program supplies for teen and youth programs with ARPA funds. • Restored 2 part-time positions for Parks with ARPA funds. General Government Reductions in travel and training budgets. Elimination of the SeeClickFix contract, Commute Trip Reduction incentives (including ORCA cards), and Employee Recognition Program. ■ The SeeClickFix contract was restored with the use of Federal American Rescue Plan Act (ARPA) funds, as well as partial restoration of the Commute Trip Reduction and Employee Recognition programs. a111 DRAFT March 2, 2024 Tukwila Financial Sustainability Plan I Forecast Scenarios and DRAFT Recommendations 2 Category 2021-2022 Adopted Budget 2023-2024 Adopted Budget ■ Reductions in City Attorney contract hours. ■ Longer response time to review contracts and internal documents and provide support on financial tasks. ■ The City Clerk's extra labor position that works on public records requests was restored. ■ The Human Resources Director position in the previous biennium was changed to a Deputy Director Admin. Services & Chief People Officer. ■ Addition of 2 FTEs to support implementation and management of the new B&O tax program. Infrastructure Maintenance/ Improvement Deferred maintenance on various City facilities. Elimination of street sweeping and sidewalk cleaning. Deferred maintenance for traffic signals and signal cable upgrades. Rather than frontloading snow and ice response material purchases, if a snow and/or ice event occurs, staff will purchase required materials and maintain the roads. Such expenditures will be covered via a budget amendment later in the year ■ Restored funding for 2 positions with Federal American Rescue Plan Act (ARPA) funds. ■ The City hired a contract Project Manager to lead the Environmental Impact Statement for the Allentown Neighborhood Truck Reroute Project. Public Safety ■ Reductions in Court staffing but ability to maintain service levels due to increased use of technology. ■ Reductions in Police staff time on refugee/homeless outreach, drug and human trafficking investigations, and felony investigations. ■ Freezing of K9 Program. ■ Temporary re -assignment of School Resource Officers. ■ Increase in Court overtime budget to respond to new state requirements and manage traffic filings associated with red light cameras. ■ Police positions that were frozen were fully funded through the B&O tax. ■ Police created new positions: a Community Engagement Coordinator, an Emergency Management Coordinator, and a Public Disclosure Records Specialist. Sources: City of Tukwila 2021-2022 Adopted Budget and 2023-2024 Adopted Budget; BERK 2024. ▪ 111 DRAFT March 2, 2024 Tukwila Financial Sustainability Plan I Forecast Scenarios and DRAFT Recommendations 3 Staffing and Services Over Time As shared in Committee meeting 2, the number of total FTE positions in the City has grown more slowly than the City's population between 2016 and 2023 (Exhibit 2 and Exhibit 3). Over the same period, demand has varied for different services. For many services, demand decreased during the pandemic but has rebounded or begun to rebound. Exhibit 2: Number of FTE Positions in All Funds, without Fire, 2016-2023 350 300 280.9 280.1 279.6 280.4 280.4 276.2 276.2 Total Number of FTEs 250 200 150 100 50 0 293.9 2016 2017 2018 2019 2020 2021 2022 2023 Sources: City of Tukwila, 2023; BERK, 2023. Exhibit 3: Cumulative Percent Change in FTEs and Population, 2016-2023 16% Population: 15% 14% 1 2% 10% Cumulative percent change since 2016 8% 6% 4% 2% 0% - 2% - 4% Sources: City of Tukwila, 2023; BERK, 2023. Total FTEs (without Fire), 5% 2023 Since 2016, the City's population has increased by 15% while staffing (without Fire) has increased 5%. .111 DRAFT March 2, 2024 Tukwila Financial Sustainability Plan I Forecast Scenarios and DRAFT Recommendations 4 Exhibit 4: Police Calls for Service, 2016-2022 35,000 34,000 33,000 32,000 31,000 30,000 29,000 28,000 27,000 33,288 2016 2017 2018 2019 2020 2021 34,345 2022 Sources: City of Tukwila, 2023; BERK, 2023. Exhibit 5: Number of Records Requests and Number of Staff Hours Annually, 2016-2021 1,800 1,689 1,600 1,400 1,200 1,000 800 600 400 1,139 200 131 131 112 155 118 2016 2017 2018 2019 2020 2021 Number of Records Requests Number of Staff Hours 0 Sources: City of Tukwila, 2023; BERK, 2023. 130 � i'1 DRAFT March 2, 2024 Tukwila Financial Sustainability Plan I Forecast Scenarios and DRAFT Recommendations 5 Exhibit 6: Number of Recreation Class Participants and Community Center Admissions, 2016-2022 200,000 1 80,000 160,000 140,000 1 20,000 100,000 80,000 60,000 40,000 20,000 0 2016 2017 2018 2019 2020 2021 38,407 38,507 2022 Recreation Class Participants Community Center Admissions Sources: City of Tukwila, 2023; BERK, 2023. Exhibit 7: Number and Total Value of Permits Issued by Community Development, 2018-2023 2,000 1,800 1,600 1 ,400 1,200 1,000 800 600 400 200 0 ,757 2018 1,664 2019 2020 2021 1,840 1,489 2022 2023 Total Number of Permits TotaI Value of Permits Sources: City of Tukwila, 2023; BERK, 2023. Note: Includes building, mechanical, electrical, and plumbing permits. $300 0 $250 $200 $150 $100 $50 $0 .111 DRAFT March 2, 2024 Tukwila Financial Sustainability Plan I Forecast Scenarios and DRAFT Recommendations 6 City Staff Compensation As noted in Committee meetings 2 and 3, the bulk of the City's activities are in service provision. These services are principally delivered by City staff and labor costs make up nearly 70% of the City's General Fund budget. As this is such a large cost driver, additional information is provided on compensation to support the Committee's considerations. Salaries and benefits are guided by a City Council -adopted compensation policy and philosophy. The policy was adopted to address issues such as parity between represented and non -represented employees, internal equity between functions, salary compression, and how compensation can support recruitment and retention of employees in the local labor market. The policy guides compensation by identifying comparable cities. It states that the City will seek to set salaries at the market average for non -represented positions and at a "competitive" level for represented employees. It grants adjustments when salaries are outside of the market range. The policy also states that when economic conditions allow, the City should provide benefits to represented and non - represented employees that are slightly above average of comparable jurisdictions. The City aims for cost -of -living adjustments (COLA) based on 90% of Consumer Price Index- Clerical Workers (CPI-W) and parity between represented and non -represented employees' COLA and benefits. Represented Employees 87% of the City's workforce is represented by a union. Salaries and benefits for represented employees are negotiated through agreements between cities and their labor organizations and dictated by collective bargaining rules as well as federal and state labor laws. Collective bargaining agreements are contracts ratified by labor groups and approved by City Council that govern specific aspects of employment. Non -represented Employees The McGrath Human Resources Group completed a market study of non -represented positions in 2023 which found that salaries for non -represented Tukwila staff were competitive with the market average. The study includes recommendations for position movement to better align with the market and the following additional recommendations: • Maintain the compensation philosophy of market average compensation. Consider looking at comparable cities based on geography instead of assessed value. • Complete market studies every three to four years and include a total compensation review. • Evaluate moving to merit/performance-based pay for higher steps. McGrath also noted that following the pandemic, all industries, both public and private, are competing for already limited staff. In addition, state minimum wage laws are pushing non -skilled wages higher and bargained agreements around compensation among represented workers often lead to upward pressure on compensation for non -represented staff as well. These forces have caused many employers to increase wages to help recruit and retain talent, with nearly every employer in both the public and private sector experiencing recruitment and retention challenges. .mill DRAFT March 2, 2024 Tukwila Financial Sustainability Plan I Forecast Scenarios and DRAFT Recommendations 7 B. Financial Forecasts As a reminder, the City develops a six -year financial plan for the General Fund to see the impact of financial policies and budget decisions. Revenues and expenditures are projected based on economic factors, past trends, and known program or policy changes. This section first presents the City's adopted Financial Plan and then a financial forecast that incorporates the Committee's draft guidance. For the financial forecast with draft committee guidance, the expenditure estimates represent a range of potential costs and have been prepared by the BERK team. These estimates can be further refined with City staff based on the Committee's draft recommendations. 1) Adopted Financial Plan The City's adopted 6-year Financial Plan (Exhibit 8) (found within the City's budget document) funds current programs and services, as well as those programs and services that were reduced during the pandemic and have not yet been restored. The 6-year plan calls for restoring all remaining reductions from the pandemic and using ongoing revenue to support these programs beginning in 2025. The adopted Financial Plan includes the following revenue assumptions: • Use of about half of the property tax capacity created with annexation into the Puget Sound Regional Fire Authority (PSRFA), starting in 2025. • Addition of the Business & Occupation Tax starting in 2024. • Reduction in some fire department revenues, as they will transfer to PSRFA, starting in 2025. The Plan includes the following expenditure assumptions: • Reduction in contract expenditures with PSRFA, starting in 2025. • Funding of 8 FTE positions that were frozen in the 2023-2024 budget, starting in 2025. • No other increase in staffing. • Less than 2% annual increase in budgets for salaries and benefits. • No increase in budgets for operational expenses like supplies, technology, and professional development. • Funding of planned debt service payments. Reserves In the adopted 6-year Financial Plan, the General Fund meets minimum fund balance requirements. The City's reserve policy, as revised in 2015, requires a General Fund minimum fund balance of 18% as calculated on the prior year ongoing General Fund revenue. A new discretionary reserve was added to the policy. Under this section, 10% of one-time revenue realized in the previous year will be set aside as a one-time revenue reserve, to the extent doing so does not negatively impact compliance with the General Fund minimum fund balance requirement. Reserve funds are set aside to mitigate current and future risks, such as revenue shortfalls or unanticipated expenditures. Examples include responding to weather events or unforeseen human services needs. a111 DRAFT March 2, 2024 Tukwila Financial Sustainability Plan I Forecast Scenarios and DRAFT Recommendations 8 Since revenues will decrease due to the annexation into PSRFA, the reserve policy allows reserves to decrease as well. In the adopted 6-year Financial Plan, the City chose to hold reserves at the current level until such time as revenues rebound. This conservative approach is how the reserve policy was implemented during the COVID-1 9 pandemic, and the recommendation from staff is to continue this approach in the future. Summary Impact In the adopted 6-year Financial Plan, revenue growth is projected to be higher than expenditure growth, which would provide for modest capacity for either additional expenditures or a reduction in revenues (detailed in Exhibit 9). The projected variance between revenues and expenditures is approximately 1 % of total revenues. Exhibit 8. Revenues and Expenditures in Adopted 6-year General Fund Financial Plan, 2023-2028 $ 80,000,000 $75,000,000 $70,000,000 $65,000,000 $60,000,000 $55,000,000 $50,000,000 $45,000,000 $40,000,000 2023 2024 2025 2026 2027 2028 -Total Revenues Total Expenditures Source: City of Tukwila, 2023; BERK 2024. Exhibit 9: Projected Revenues and Expenditures in Adopted 6-Year General Fund Financial Plan, 2025-2028 Projected 2025 Projected Projected Projected 2026 2027 2028 Revenues $66,814,000 $68,258,000 $69,792,000 $71,551,000 Expenditures $66,331,000 $67,696,000 $69,009,000 $70,357,000 Variance $483,000 $562,000 $783,000 $1,194,000 Note: Amounts have been rounded to the nearest $1,000. Source: City of Tukwila, 2023; BERK 2024. 111 DRAFT March 2, 2024 Tukwila Financial Sustainability Plan I Forecast Scenarios and DRAFT Recommendations 9 2) With Draft Committee Recommendations The forecast shown in Exhibit 10 uses the City's adopted 6-year Financial Plan as a baseline and incorporates the Committee's draft guidance to date as summarized in Section C. This forecast includes the following revenue assumptions: • No additional taxes or fees or changes in existing tax or fee rates beyond those summarized on page 8: o Use of about half of the property tax capacity created with annexation into the Puget Sound Regional Fire Authority (PSRFA), starting in 2025. o Addition of the Business & Occupation Tax starting in 2024. • Additional grant revenue to support capital projects, based on the addition of dedicated staff. This revenue will not be shown in the General Fund financial forecast but will increase capacity in the Capital Projects Fund. The forecast includes the following expenditure assumptions to support the recommendation categories presented in more detail in Section C. • Performance and Resource Efficiency ▪ Use performance audits and continuous improvement to achieve efficiency and effectiveness in the City's operations. There may be an initial cost to conduct audits or train staff on process improvement. • Budget Priorities o Prioritize investments in maintaining existing assets, including our people and physical infrastructure. See "Strategic Investments," below. • Accountability and Customer Service o Funding for the City's SeeClickFix program (currently funded with federal funds) ($17,500) o Funding for document scanning in the City Clerk's Office ($10,000). o Restoration of City Hall operating hours (no additional cost). • Strategic Investments o Funding to support capital asset management and maintenance of existing assets (1-2 FTEs, $120,000-$240,000). ▪ Funding for citywide grant application and administration. (1-1.5 FTEs, $90,000-$1 35,000). o Funding for workforce development initiatives (performance management, leadership development, recruitment, and retention). There may be an initial cost to implement a performance management system, including training on its use, or other tools to support staff development. Reserves In this 6-year forecast, the General Fund meets minimum fund balance requirements. a111 DRAFT March 2, 2024 Tukwila Financial Sustainability Plan I Forecast Scenarios and DRAFT Recommendations 10 Summary Impact In this 6-year forecast, revenue growth is still projected to be higher than expenditure growth, which would provide for modest capacity for either additional expenditures or a reduction in revenues. The projected variance between revenues and expenditures is less than 1 % of total revenues. Exhibit 10. Projected Revenues and Expenditures with Committee Input, 2023-2028 $ 80,000,000 $75,000,000 $70,000,000 $65,000,000 $60,000,000 $55,000,000 $50,000,000 $45,000,000 $40,000,000 2023 2024 2025 2026 2027 2028 Revenues Ex penditures-Adopted — — — Expenditures -Committee Source: City of Tukwila, 2023; BERK 2024. Exhibit 11. Projected Revenues and Expenditures with Committee Input, 2025-2028 Projected 2025 Projected Projected Projected 2026 2027 2028 Revenues $66,814,000 $68,258,000 $69,792,000 $71,551,000 Expenditures $66,733,000 $68,107,000 $69,428,000 $70,784,000 Variance $81,000 $151,000 $364,000 $767,000 Note: Amounts have been rounded to the nearest $1,000. The expenditures represent the higher end of the range of costs. Source: City of Tukwila, 2023; BERK 2024. .111 DRAFT March 2, 2024 Tukwila Financial Sustainability Plan 1 Forecast Scenarios and DRAFT Recommendations 11 C. DRAFT Guidance from the Committee Structure Based on discussions and input to date, the guidance from the Committee could fall into the following categories: 1) Performance and Resource Efficiency. Implementing tools to improve the City's efficiency and effectiveness. 2) Budget Priorities. Aligning services with community priorities and managing the tax burden on residents and businesses. 3) Accountability and Customer Service. Ensuring City government is transparent and customer focused. 4) Strategic Investments. Making targeted investments to achieve long-term cost savings and improved outcomes. DISCUSSION QUESTION Draft Recommendations The following draft recommendations have been compiled from the following sources: ■ Committee discussions and dot exercises to date (no symbol). • Email input received from five Committee members (denoted bya^) • Staff and consultant recommendations (identified by a *). • What changes, if any, might you suggest to this structure and why? DISCUSSION QUESTION • What changes would you suggest to the draft recommendations that follow? Anything you'd add? Delete? Modify? Anything you can't live with? In addition, strategies that would require some level of up -front investment are indicated with a $. Draft recommendations are grouped according to the structure suggested above and presented for discussion purposes. They are subject to discussion and refinement during Committee meetings 5 and 6. Initial draft recommendations for implementation phasing are provided on page 1 8. .111 DRAFT March 2, 2024 Tukwila Financial Sustainability Plan I Forecast Scenarios and DRAFT Recommendations 12 1) Performance and Resource Efficiency a. Implement continuous improvement efforts and policies. $ • Cultivate a culture of performance and use consultants or internal capacity to maintain a focus on continuous improvement and quality control. • Conduct rolling performance audits of large or impactful programs. Review programs to identify opportunities for continuous improvement and achieving greater efficiency and effectiveness. Use an outside agency to conduct performance audits in key areas. • Review and streamline processes to maximize resource efficiency and customer outcomes. Seek to keep up with increasing demands for service without adding staff. Examples include increasing procurement limits and reducing the number of approval steps. • Implement program -specific key performance indicators (KPIs) that capture demands for service and performance. Use this information to report on the City's ability to meet community demand and its resource efficiency (costs for delivery) over time. • Implement performance awards for staff who identify ways to enhance effectiveness and/or reduce costs. ^ b. Seek the most efficient and effective service delivery models. Seek to use contracting, collaboration, and alternative staffing approaches to deliver quality municipal services as efficiently as possible. $ • Identify opportunities to increase staff productivity. Instill a service -oriented culture with high expectations for staff. Enhance systems for performance management and accountability. Consider opportunities to shift positions to meet needs and dedicate time to cross -training to help staff meet workload demands with existing resources. Conduct a review of the City's remote -work policies and practices. • Provide staff with the tools they need to do their work effectively. • Ensure leaders have the skills and capacity they need to manage staff effectively. Identify opportunities for "working managers" who bring service delivery capacity as well as managing others. • Evaluate the City's use of consultants. Seek the most efficient and effective balance of staff capacity and costs, consultant costs, and aggressiveness of the city's work plan. Conduct reviews of consultant work. ^ c. Calibrate management staffing with the transition of fire services and staff to the Puget Sound Regional Fire Authority. Take advantage of this reduction in City staffing and management complexity by looking for opportunities to more fully use or consolidate existing executive level staff. A d. Calibrate staff positions and compensation. $ • Conduct a third -party review of the City's employment positions, salaries, and benefits to ensure the City has an optimal staffing structure given its community .mill DRAFT March 2, 2024 Tukwila Financial Sustainability Plan I Forecast Scenarios and DRAFT Recommendations 13 makeup and the services it delivers. Thereafter, continue to conduct total cost of compensation studies on a regular basis. Use robust vetting process and place new hires at appropriate paygrade and position level. ^ • Include consideration of non -salary benefits (insurance, pensions, paid time off, etc.) when benchmarking staff compensation. Recognize that compensation will vary by jurisdiction and choose benchmark cities appropriately. A • Encourage Tukwila residents to apply for open positions. Raise awareness of City job openings in Tukwila media, social media, and other networks. Raise awareness of public sector career paths and employment opportunities at the City among Tukwila high school students. • Explore creative opportunities for efficient staffing within the bounds of labor agreements. Explore ways to deploy non -uniform personnel to deliver some appropriate public safety services. Seek to redeploy employees during off-peak periods to other work areas less affected by seasonal variation or weather impacts. Consider tiered employment positions and apprenticeships that allow newer, lower cost employees to work with seasoned professionals to learn their craft and gain knowledge and experience. e. Closely manage the City's capital investments. • Make capital investments that provide the best ROI and benefits for the community. Include consideration of the City's ability to pay for ongoing maintenance and capital replacement needs associated with potential new capital investments (see Recommendation 4c regarding prioritization of maintenance of existing assets). A • Calibrate facility designs to a Tukwila -appropriate standard. Thoughtfully consider appropriate design, amenities, and likely future use by the community. Consider the use of "generic off the shelf plans" where appropriate. A Implement strong capital project management tools and practices to prevent future cost overruns. Past cost escalation on the public safety bond and Public Works Shops were cited as examples of capital projects with overruns. $ • Sell surplus properties with no future City use identified as expeditiously as possible. f. Update the City's financial policies. • Review and update the City's reserve policy. List specific events for which the reserve funds will be used and give guidance on how much should be used. In future economic downturns, consider using reserves to supplement essential public services rather than reducing services. Consider reducing reserve requirements. .mill DRAFT March 2, 2024 Tukwila Financial Sustainability Plan I Forecast Scenarios and DRAFT Recommendations 14 2) Budget Priorities a. Use a lens of the expected return on investment for the Tukwila community to evaluate City service and capital expenditures. Tukwila's population is younger, more mobile, more diverse, lower income, and less healthy than King County overall. Consider Tukwila's unique community makeup when prioritizing and tailoring City services and capital investments, recognizing that return on investment may not always be quantifiable. ■ Regularly conduct a statistically valid survey of Tukwila residents to determine community needs and priorities. Ensure this survey accurately reflects Tukwila's cultural and linguistic diversity. Use this information in budget setting and service design. $ b. When considering revenue sources and rates, review the balance of the burden between residential and commercial payors. c. Establish a Tukwila -specific definition of "public safety." Safety is an essential human need and "public safety" will typically rate very highly in community priority surveys, however additional nuance is needed to determine what we mean by the term and what kinds of investments in preventative and reactive policing, as well as other public services (such as recreation programming), infrastructure, and maintenance, will advance public safety. d. In the next budget cycle, review programs and services that were reduced during the pandemic and determine what to restore based on community priorities, demand for service, and City resources. e. Prioritize investments in maintaining existing assets, including our people and physical infrastructure. See "Strategic Investments," below. .mill DRAFT March 2, 2024 Tukwila Financial Sustainability Plan I Forecast Scenarios and DRAFT Recommendations 15 3) Accountability and Customer Service a. Implement innovative and cost-efficient ways of providing customer service. * • Seek to reduce silos across City departments to enhance customer service and efficiency of service delivery. • Evaluate cost-effective and easily accessible ways to provide in -person and online customer service, including at City Hall, a kiosk at the Tukwila Community Center or along Tukwila International Boulevard, etc. b. Publish full quarterly financial reports of all funds and quarterly cash and investment reports. This will provide the community with valuable information without their need to submit a Public Records Request. For easy access, request that reports be stored online in the digital records center under Departments/Finance. c. Routinize an annual administrative report assessing the City's cost containment strategies and making recommendations. These reports should be presented to the City Council. ^ d. Utilize tools such as See -Click -Fix to effectively monitor and respond to community requests or needs. Analyze the data received to identify and proactively address trends and patterns. Assess community satisfaction of service delivered. .mill DRAFT March 2, 2024 Tukwila Financial Sustainability Plan I Forecast Scenarios and DRAFT Recommendations 16 4) Strategic Investments a. Consider fiscal impacts when setting policy or making decisions that affect future land uses. Increase growth and development in a targeted way to create new revenue and create future revenue streams. b. Encourage business growth and investment. Foster opportunities for business and take care of established businesses to create a healthy economy which will ultimately generate revenues for the City. • Fund the City's economic development function and implement the City's Economic Development Strategy. • Leverage economic development strategies such cis the Multifamily Tax Exemption, Tax Increment Financing, and other tools. • Maintain competitiveness in taxes and fees with neighboring jurisdictions. Consider having either the B&O tax or the business license fee, not both. $ c. Invest in existing assets: Tukwila's staff and infrastructure $. Embrace an understanding that we make the most efficient use of existing resources and avoid long-term costs by maintaining physical assets in a state of good repair and investing in the success of our team. • Develop a robust asset management model, including for City facilities. Invest in ongoing maintenance to minimize lifecycle costs. Evaluate funding mechanisms that are cost-efficient and equitable, with a strong nexus between those who pay and those who benefit from the investment. Maintain street and sidewalk infrastructure in a state of good repair to avoid more expensive long-term costs. • Invest in retaining quality staff, which is less expensive than the cost of turnover and provides more consistent, high -quality services for staff. Retention efforts should be balanced with clear performance requirements and recognition that a healthy level of turnover should be seen as an opportunity to enhance the City's skilled staff and bring into line its compensation structure. d. Invest in the City's expertise and capacity in functions that are critical for financial sustainability. $ • Strengthen the City's financial management, human resources management, and capital project management. • Strengthen grant administration to maximize potential grant revenue. Opportunity areas include infrastructure, parks and recreation, and public safety. .mill DRAFT March 2, 2024 Tukwila Financial Sustainability Plan I Forecast Scenarios and DRAFT Recommendations 17 Phased Implementation The following content is presented as a first draft for the Committee to respond to. The Committee suggests that the City of Tukwila takes the following phased approach to implementing the general guidance included in our recommendations. DISCUSSION QUESTIONS • What changes would you suggest to this approach? First, make targeted investment in strategies that advance the City's financial management, effectiveness, and cost containment abilities. Specific recommendations that fall in this immediate call to action include the following: 1 a) Implement continuous improvement efforts and policies. resource 2d) In the next budget cycle, review programs and services that were reduced during the pandemic and determine what to restore. 3b) Publish full quarterly financial reports of all funds and quarterly cash and investment reports. 3c) Routinize an annual administrative report assessing the City's cost containment strategies and making recommendations. 3d) Utilize tools such as See -Click -Fix to effectively monitor and respond to community requests or needs. 4d) Invest in the City's expertise and capacity in functions that are critical for financial sustainability. Funding for these short-term investments should come one-time reserve funds or from the revenue sources identified in the City's existing Financial Plan: implementation of the B&O tax and the dedication of a portion of the property tax capacity created by the transition to the RFA. Second, return LOS and make deeper investments in efficiency and effectiveness. 1 b) Seek the most efficient and effective service delivery models. 1 c) Calibrate management staffing. 1 d) Calibrate staff positions and compensation. 1 e) Closely manage the City's capital investments. 1 f) Update the City's financial policies. 2a) Use a lens of the expected return on investment for the Tukwila community to evaluate City service and capital expenditures. 2c) Establish a Tukwila -specific definition of "public safety." 3a) Implement innovative and cost-efficient ways of providing customer service 4a) Consider fiscal impacts when setting policy or making decisions that affect future land uses. 4b) Encourage business growth and investment. 4c) Invest in existing assets: Tukwila's staff and infrastructure. a111 DRAFT March 2, 2024 Tukwila Financial Sustainability Plan I Forecast Scenarios and DRAFT Recommendations 18 Funding for these services would come from cost savings and the revenue sources identified in the City's existing Financial Plan: implementation of the B&O tax and the dedication of a portion of the property tax capacity created by the transition to the RFA. Over the long-term, continue to communicate to the Tukwila community and consider whether a request for additional resources to support City service delivery is warranted. Communication should include program -specific key performance indicators, including demands for service and achieved service efficiencies. Over time, inflation, increasing demand for services, or other factors will erode the City's ability to provide appropriate services to the Tukwila community. At this point, the City may reconstitute a Financial Sustainability Committee or otherwise strategize for how to communicate its needs to City taxpayers and consumers of City services. Its efforts to achieve cost efficiencies and transparently communicate its KPIs and budgetary information will have placed the City in a trusted position to make this ask. 2b) When considering revenue sources and rates, review the balance of the burden between residential and commercial payors. ADDITIONAL DISCUSSION QUESTIONS FOR MEETING 5 OR 6 • Based on the adopted 6-year financial plan and the forecast incorporating draft guidance from the Committee, there is a small positive variance between projected revenues and expenditures. What principles should guide the City's approach to addressing potential capacity in the budget (e.g. using revenues to invest in priorities like infrastructure or reducing taxes and fees where feasible)? • The Committee has identified cost containment as one priority for the City. Some of these measures will require up -front investment to achieve longer -term savings. What guidance would the Committee share on achieving a smart balance between cost containment and investments designed to enhance the effectiveness and efficiency of City services? • While the City's 20-year growth targets may be aspirational — 1 3,000 or 58% more residents and 16,000 or 34% additional jobs — Tukwila will continue to add residents and jobs and see thousands of daily visitors. How should the City plan for growth in terms of program delivery? If growth has an impact on demand for services, should the City consider adding staff in key departments or adjusting service levels to align with current staffing? • How should tax and fee burdens be shared among Tukwila residents and businesses? • Per its discussion on October 2, 2023, the Tukwila City Council has charged the Financial Sustainability Committee with developing recommendations, options and strategies ensure that final recommendations balance the City's financial sustainability, the provision of City services that meet community expectations, and equity in costs and services. Recommendations are to be evaluated against the criteria outlined below. What are your observations in reviewing these criteria (listed on the next page) side -by -side with the Committee's draft recommendations? How aligned are the recommendations with the evaluative criteria? � i'1 DRAFT March 2, 2024 Tukwila Financial Sustainability Plan I Forecast Scenarios and DRAFT Recommendations 19 Evaluative Criteria Equity. Who will the strategy impact and how will that be different among different residential and business groups? Who would be helped and who would be harmed, and how does that correspond to historical and structural patterns? [this Criterion is informed by the City's Equity Policy] Cost. What is the cumulative impact of costs imposed by the City and other levels of government on these groups? How can impact be best aligned with ability to pay? How can impact be best aligned with benefit received, so there is a direct relationship between contribution and benefit? Magnitude and Growth. How meaningful will the impact of potential strategies be compared to the City's overall budget? How will this magnitude change over time? Stability. Is the strategy firm and steady or is it volatile and subject to large fluctuations? Sustainability. Can the strategy continue into and be counted on in the future? Alignment with Priorities. How well does the strategy align with the community priorities? Can strategies adapt over time cis community priorities change? Feasibility. Can the City practically implement the strategy, with a reasonable level of effort and within a reasonable period of time? How politically feasible is this strategy? What type of approval does it need? Impact to Other Services. If a strategy is implemented, how might it directly or indirectly impact the provision of other services? a111 DRAFT March 2, 2024 Tukwila Financial Sustainability Plan I Forecast Scenarios and DRAFT Recommendations 20