HomeMy WebLinkAboutSECTION 4-FINANCIAL PLAN
2003 Final Budaet
Financial Plan
SECTION IV: FINANCIAL PLAN
Introduction
A budget is a plan that develops and allocates the City's financial resources to meet community needs in
both the present and future. The development and allocation of these resources is accomplished on the
basis of the foregoing policies, goals and objectives addressing the requirements and needs of the City of
Auburn. While the other sections of this document will present the budget in detail, this section provides an
overview of the budget as a Financial Plan. As such, this section will particularly focus on the City's
strategies to maintain its financial strength and the basis for the expectation for future revenues. Since any
financial plan has a structure, this section also describes the financial structure of the City as a full service
City.
An important part of a financial plan is the City's Capital Improvement Program. While the City of Auburn's
Capital Facilities Plan is discussed in some detail in a separate section, this section does discuss the City's
debt capacity.
This section describes the fund structure of the City, analyzes the 2003 revenues and expenditures,
Citywide, and explains the revenue sources and trends for the different fund types of the City. A six-year
forecast and analysis of General Fund revenue, expenditure, and fund balance is presented along with
the current debt capacity. This section concludes with an analysis of working capital balances in the City's
proprietary funds.
Financial Structure
Auburn's accounting and budget structure is based upon Governmental Fund Accounting to ensure legal
compliance and financial management for various restricted revenues and program expenditures. Fund
Accounting segregates certain functions and activities in to separate self-balancing 'funds' created and
maintained for specific purposes, (as described below). Resources from one fund used to offset
expenditures in a different fund are budgeted as either a 'transfer to' or 'transfer from'.
The following describes the types of funds used as part of the City's accounting and budget structure:
Governmental Fund Types: This group of funds accounts for the activities of the City, which are of a
governmental character. These funds are budgeted on the modified accrual basis of accounting.
Briefly, this means that obligations of the City are budgeted as expenditures and revenues are
recognized when they are susceptible to accrual; i.e., both measurable and available within the
current period or soon enough thereafter to pay current liabilities.
. General Fund - is the general operating fund of the City. The General Fund exists to
account for the resources devoted to finance the services traditionally associated with
local government. Included in these services are police and fire protection, parks and
recreation, planning and economic development, general administration of the City,
and any other activity for which a special fund has not been created.
. Special Revenue Funds - are used to account for the proceeds of specific revenue
sources that are legally restricted to expenditures for specified purposes. Examples of
restricted revenues that must be spent on specific purposes are Gas Tax revenues,
federal and state grants for transportation, Community Development Block Grants,
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Financial Plan
forfeited drug funds, Business Improvement Assessments, recreation trails, hotel/motel
tax and mitigation fees.
· Debt Service Funds - are used to account for the accumulation of resources for, and
the payment of, general long-term debt principal and interest not serviced by the
enterprise funds. These funds do not include contractual obligations accounted for in
the individual funds.
· Capital Project Funds - are used to account for the financial resources to be used for
the acquisition or construction of major capital facilities, except those financed by
enterprise funds.
· Permanent Funds - are a new classification of fund type per the new GASB 34 reporting
structure. These funds report resources that are legally restricted to the extent that only
earnings, and not principal, may be used for purposes that support the programs. The
City has one permanent fund, Cemetery Endowed Care.
Proprietary Fund: These funds account for the activities of the City that are of a proprietary or
"business" type in nature. These funds are budgeted on an accrual basis. Under the accrual basis,
revenues are recognized when earned and expenses are recorded when incurred.
· Enterprise Funds - are used to account for operations, including debt service, which
are financed and operated similar to private businesses where the intent is that costs of
services are entirely or predominantly supported by user charges. The City maintains
Seven Enterprise funds to account for Water, Sewer, Storm, Solid Waste, Airport,
Cemetery and Golf Course operations.
· Internal Service Funds - are used to account for the financing, on a cost
reimbursement basis, of commodities or services provided by one department for
the benefit of other departments within the City. The City maintains two Internal
Services funds to account for fleet management and self-insurance activities.
Fiduciary Funds: These funds are used to report assets held in a trustee or agency capacity for
others and therefore cannot be used to support the City's own programs. These include pension
trust, investment trust, private-purpose trust, and agency funds. The City's pension trust fund is the
Fire Relief and Pension Fund and is budgeted on the accrual basis of accounting where revenues
are recognized when earned and expenses are recorded when incurred. The City's agency fund
is custodial in nature and is not budgeted. The City does not have any investment trust funds or
private purpose trust funds.
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Financial Plan
Summary of Financial Structure
Mayor & Council Mayor Budgets Mayor & Council Expenses
Human Resources Human Resources Budgets general government employment, safety
Director
Finance Finance Director Budgets general government finance and admin
City Attorney City Attorney Budgets general government legal costs
Planning Planning Director Budgets planning, social service, building permits,
and City building maintenance costs
Police Police Chief Budgets direct police costs
Fire Fire Chief Budgets direct fire and EMS costs
Public Works Public Works Director Budgets general government engineering costs
Parks & Rec. Parks Director Budgets park maintenance, senior programs, arts
and recreation programs
Street Public Works Director Budgets street maintenance costs and street
const. Funded by general taxes
Non-Departmental Finance Director Budgets fund transfers, fund balance and one
time
101 City Street Public Works Director Gas tax maintenance; transferred to General Fund
102 Arterial Street Public Works Director Gas tax for Arterial St., including grants
104 Hotel Motel Tax Finance Director Lodging tax for promotion of tourism
117 Drug Forfeiture Fund Police Chief Forfeited drug money for drug enforcement
118 Local Law Enf. Blk. Grnt Finance Director Police Overtime
119 CDBG Planning Director Budgets Community Development Block Grants
120 Rec. Trails Parks Director Dedicated funds for recreational trails
121 BIA Planning Director Budgets rev and exp of downtown area
122 Cumulative Res Finance Director Governmental Reserves
123 1986 Prks & Strt Impr Finance Director Tax for Park & Street Improvement
124 Mitigation/Impact Finance Director Collects Mitigation/Impact Fees
125 Parks Finance Director To account for donations and related
Finance Director To pay principal and interest on 1998 bonds.
Finance Director Reserves for security of LIDs
Parks Director Misc. revenues specifically for parks
Finance Director Funds capital improvements
430 Water Public Works Director Operating fund for water utility
431 Sewer Public Works Director Operating fund for sewer utility
432 Storm Drainage Public Works Director Operating fund for storm water utility
434 Solid Waste Public Works Director Operating fund for solid waste utility
435 Airport Planning Director Operating fund for City airport
436 Cemetery Parks Director Operating fund for City cemetery
437 Golf Course Parks Director fund for course
501 Insurance Finance Director Self -insurance reserves
550 Rental Public Works Director fund for rental
611 Fire Pensions Finance Director Pension fund for old retirement
701 Cemetery Endw Finance Director Long-term reserves for cemetery operation
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Financial Plan
Analysis of 2003 Revenues by Source for All Funds
The opposite page presents an analysis of total new revenues (excluding fund balances and revenue
received during previous years) that are anticipated to be available to support City programs during
2003. The table also details the revenue by fund. The revenues received by the City are derived from a
diverse range of sources, and the types of revenues received by each fund vary significantly.
The largest source of revenue to the City is taxes and represents 40% of all revenue. Almost all of these
funds are received in the General Fund. Other tax receipts are in funds that are restricted for defined
construction and infrastructure improvements. The City does not have any excess levies at this time. The
next largest source of funding is service revenue, or user fees from services, at 39%. Most of this revenue
consists of fees for services in the City's four utilities. Federal and State grants, along with other
governmental contributions, are 10% of total revenue and fund the scheduled construction of street
projects. Other revenue sources are 5% of total revenue. Almost all of this type of revenue is in the Utility
Funds and consists of system development charges. Other revenue sources in the General, Street, Debt
Service, ClP, and proprietary funds are interfund operating transfers. The City's interfund revenue is
primarily payments to the Insurance and Equipment Rental Funds and is included in the miscellaneous
category. Interest is the largest component of miscellaneous revenue.
Total New Revenue: 2003
other
Sources
5%
Misc 5%
Lic Pmt 1%
Fines 1 %
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Financial Plan
2003 Revenues by Source for all Funds
(Thousands of Dollars)
Lic. & Inter- Other Total %
# Fund Taxes Permits gov't Services Fines Misc Sources Revenue Share
001 General $ 31,082 $ 914 $ 1,425 $ 1,597 $ 653 $ 680 $ 997 $ 37,348 46.41%
101 street 639 200 839 1.04%
102 Arterial street 4,595 20 592 5,207 6.47%
104 Hotel Motel Tax 45 45 0.06%
11 7 Drug Forfeiture 11 11 0.01%
118 Low Enf. Block Grant 1 5 6 0.01%
119 HCDA 483 483 0.60%
120 Recreational Trails 1 1 0.00%
121 Business Impr Area 51 2 53 0.07%
122 Cum Reserve 100 100 0.12%
123 Prks & Strt Imp 0.00%
124 Mitigation Fund 189 6 50 245 0.30%
125 Special Parks 10 10 0.01%
229 Bond Debt 304 304 0.38%
249 LID Guarantee 35 35 0.04%
321 Municipal Pk 22 1 23 0.03%
328 Capitol Impr Projects 1,600 209 300 2,109 2.62%
430 Water 6,311 85 565 6,961 8.65%
431 Sewer 9,689 130 380 10,199 12.67%
432 Storm Drain 2,815 60 300 3,175 3.95%
434 Solid Waste 8,330 40 28 8,398 10.44%
435 Airport 298 530 828 1.03%
436 Cemetery 585 3 30 618 0.77%
437 Golf Course 990 10 1,000 1.24%
501 Insurance 55 55 0.07%
550 Equipment Rental 155 1,965 15 2,135 2.65%
611 Fire Relief 45 180 225 0.28%
701 Cemetery Endow 40 15 55 0.07%
TOTAL $ 32,778 $ 914 $ 7,188 $ 31,041 $ 653 $ 4,128 $ 3,7 66 $ 80,468 100.00%
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Analysis of 2003 Budgeted Expenditures by Fund and Type
The page opposite presents an analysis of the budgeted expenditures of the City by fund and type.
The largest expenditure categories in the 2003 budget are Salaries and Benefits at $36.5 million or 40.0%.
Approximately 79 .0% of these costs are in the General Fund, while 21.0% are in other funds. $14.0 million is
allocated for capital improvement and projects. Most of the projects planned are in the Arterial Street
Fund. The Capital projects fund is funding $1.4 million in new apparatus for the Fire Department and the
second of three $700,000 payments to Sound Transit for the new parking garage and retail space. The
balance of capital expenditures is primarily in the utility funds. This category fluctuates from year to year
and is dependent on available funding from grants, loans, one-time revenues, and service fees.
Supplies and other services make up approximately 27% of the budget. A contractual service for the
disposal of solid waste is the largest service charge for the City. The largest single such intergovernmental
charge is the contractual cost for sewerage to Metro, who provides sewage treatment for Auburn and
much of the region. In 2003, the cost of the sewerage treatment is not expected to increase except for
additional costs due to new customers coming on line. Metro had a large rate increase in 2002, which will
sustain the system for the next couple of years. Debt service accounts for 2.9% of budgeted expenditures.
Most debt service is in the City's utilities, primarily to retire recently issued bonds and loans to finance
projects identified in the City's Comprehensive Water and Storm Drainage Plans.
Expenditures by Object: 2003
All Funds
Interest
1.0%
Intergovn
12.2%
Prin
1.9%
Supplies
3.0%
Interfund
2.3%
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Financial Plan
2003 Expenditures by Object for all Funds
(Thousands of Dollars)
10 20 30 40 50 60 70 80 90 Total %
# Fund Name Salaries Benefits Supplies Services Intergov Capital Prin Int Interfd Exp Share
001 General $ 22,576 $ 6,226 $ 1,586 $ 8,530 $ 1,964 $ 1,311 $ 134 $ 117 $1,090 $ 43,534 47.8%
101 street 839 839 0.9%
102 Arterial st 221 64 50 4,864 5,199 5.7%
104 Hotel Motel Tax 70 70 0.1%
117 Drug Forfeiture 46 46 0.1%
118 Local Low Enf. 58 58 0.1%
119 CDBG 46 13 448 507 0.6%
120 Rec. Trails 0.0%
121 BIA 39 7 2 33 81 0.1%
122 Cum Reserve 0.0%
123 Parks & strt Impr. 0.0%
124 Mitigation/Impact 241 241 0.3%
125 Spec Pork 6 20 26 0.0%
229 GO Libr Bond Debt 150 154 304 0.3%
249 LID Guarantee 10 1 11 0.0%
321 Muni Constr. 0.0%
328 Capitallmpr Proj 494 645 2,363 3,502 3.8%
430 Water 1,450 430 168 2,163 17 1,309 1,092 417 345 7,391 8.1%
431 Sewer 1,026 299 43 1,010 7,106 588 165 10,237 11.2%
432 Storm Drainage 1,157 335 38 584 52 1,785 298 150 303 4,702 5.2%
434 Solid Waste 424 122 11 8,114 213 75 8,959 9.8%
435 Airport 191 56 245 185 30 88 21 816 0.9%
436 Cemetery 354 101 111 51 30 13 660 0.7%
437 Golf Course 334 94 105 252 250 10 1,045 1.1%
501 Insurance 60 8 68 0.1%
550 Equip Rental 408 119 339 438 1,094 64 2,462 2.7%
611 Fire Relief 113 129 44 286 0.3%
701 Cem Endowed 30 30 0%
Total $ 28,397 $ 8,055 $ 2,700 $ 22,046 $ 11,117 $ 14,042 $ 1,704 $ 927 $ 2,086 $ 91,074 100.0%
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Budget Allocations by Fund
The opposite page presents the budget of the City as it is allocated to the various funds. The amounts
listed in the table are the total allocation to each fund or sub-category, including reserves.
Consequently, the total budget exceeds the amount of money that will be spent by the City (as
presented on the previous page). In the City Operations Section, two other perspectives on how the
operations of the City can be viewed are presented: by its administrative structure and by the services it
provides. These different views of the budget separate reserves from the actual expenditure of funds.
While various budgets fluctuate for a variety of reasons, one of the main influences is that of capital
projects. These projects increase expenses while they are under construction, although the construction
expenses subside as the capital project is completed. However, completed projects often result in
additional maintenance and operating expenses.
Budget by Fund Type: 2003
Internal Service
6% Permanent
Fiduciary
3%
other Enterprise
2%
General Fund
36%
utilities
32%
Construction
9%
Debt Service
2%
other Gov
Funds
9%
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Financial Plan
Budget Allocations by Fund
2000 2001 2002 2002 2003 %
Actual Actual Budget Projected Budget Share
General $ 49,335,584 $ 55,355,795 $ 50,714,753 $ 54,051,075 $ 50,030,080 35.7%
Departments:
Mayor & Council 239,290 258,280 329,800 403,200 596,147 0.4%
Human Resources 1,233,647 1,420,595 2,164,900 1,890,900 2,177,940 1.6%
Finance 1,225,059 1,173,708 1,971,400 1,805,500 2,698,750 1.9%
City Attorney 743,026 878,373 1,036,600 1,036,600 1,085,850 0.8%
Planning 1,208,108 1,240,495 1,725,000 3,304,270 3,525,296 2.5%
Police 10,660,521 11,286,023 12,451,900 12,754,200 13,287,789 9.5%
Fire 6,976,304 7,309,648 8,005,700 7,925,700 8,247,703 5.9%
Public Works 2,898,200 3,185,137 3,700,000 2,046,320 2,619,900 1.9%
Parks & Rec 3,316,109 3,404,447 4,158,100 4,299,145 4,304,600 3.1%
street 1,534,649 1,501,269 1,761,800 1,867,300 2,008,300 1.4%
Non-Departmental 19,300,671 23,697,820 13,409,553 16,717,940 9,477,805 6.8%
City streets 611,363 635,783 639,000 624,000 839,000 0.6%
Arterial street 14,115,926 18,877,247 9,612,100 11,688,445 5,740,945 4.1%
Hotel Motel Tax 2,521 55,000 47,521 87,521 0.1%
Drug Forfeiture 124,435 107,527 31,500 104,841 49,841 0.0%
Local Low Enforcement Blk Grnt 114,350 106,497 59,149 110,981 58,386 0.0%
CDBG 722,012 547,704 478,784 483,219 524,535 0.4%
Recreational Trails 20,104 20,128 4,800 12,551 14,151 0.0%
Business Improvement Area 188,058 174,079 156,400 157,098 125,798 0.1%
Cumulative Reserve 3,940,272 4,166,351 4,340,200 4,260,351 4,360,351 3.1%
Park & street Improvement 56,825 59,176 60,276 300 0.0%
Mitigation Fund 430,718 1,066,816 2,281 ,300 1,316,816 1,028,816 0.7%
Parks & Rec Special Projects 129,900 104,392 54,949 70,848 69,348 0.0%
1998 G.O Library Bond 363,942 370,450 367,400 310,660 307,860 0.2%
LID Guarantee 2,230,632 1,797,259 1,817,600 1,817,236 1 ,841 ,236 1.3%
Mun Park Const 2,196,874 2,471,752 110,400 253,058 55,500 0.0%
Capitol Improvement 13,252,938 12,991,592 15,976,800 16,908,338 12,812,374 9.1%
Water 12,789,495 16,868,987 10,586,826 12,827,807 10,115,090 7.2%
Sewer 16,121,037 17,345,960 16,885,300 18,105,388 17,119,048 12.2%
Storm Drainage 9,138,489 8,151,043 5,913,300 7,293,961 6,720,623 4.8%
Solid Waste 11 ,451,1 66 12,100,069 12,151,510 11,401,395 11,651,235 8.3%
Airport 2,193,608 1,247,150 2,340,168 1,052,390 970,720 0.7%
Cemetery 1,017,708 970,117 1,1 00,000 935,541 896,641 0.6%
Golf Course 1,220,514 1,174,738 1,216,379 1,199,754 1,243,264 0.9%
Insurance 2,897,435 2,948,830 2,997,600 2,965,106 2,947,106 2.1%
Equipment Rental 5,650,263 5,397,672 5,261,540 5,444,099 5,649,519 4.0%
Cemetery Endowed 1,156,179 1,185,832 1,265,179 1,235,532 1,243,832 0.9%
Fire Pension 3,7 60,500 3,7 64,033 3,795,570 3,856,870 3,795,570 2.7%
Total All Funds $ 155,230,327 $ 170,009,500 $ 150,213,507 $ 158,595,157 $ 140,298,690 100%
Expenditure figures include fund balances.
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Revenue Analysis
General Fund:
The City's General Fund receives a wide variety of revenue. This section of the budget will discuss the key
factors that affect revenue for the next year.
Tax Revenue
Current estimates indicate that the City will receive approximately $30.2 million in tax revenue during
2002. This is 8.0% below the $32.8 million received in 2001. Revenues from taxes are anticipated to
increase in 2003 to an estimated $31 million. The decline in growth from the previous years has been due
to decreases in sales tax revenue, initiative limits on property tax levies, and utility tax revenue from
energy use. It is now expected that economic growth will remain stagnant through 2002 and most of
2003. Low interest rates have sustained the housing market in the region. New construction is ongoing,
but not at the pace experienced in the late 90's. The terrorist attack on September 1Ph and the
economic slowdown have had a significant financial impact on General Fund revenue. Revenues were
revised downward for 2002 at midyear. If the economy remains consistent with 2002, General Fund
revenue may not need to be revised downward in 2003.
Property Taxes: Over the past several years' voters of the State of Washington have changed the
property tax levying process through referenda and initiatives. Referendum 47, passed in 1997, changed
the 106% limit to the lesser of six percent or inflation. There was a provision, however, that with a finding of
substantial need, a majority plus one vote of the city council could raise revenue to the 106% limit. In
2001. the citizens voted on and passed Initiate 747, which limits the increase in property taxes to the lesser
of 1 % or inflation. New construction, annexations and refund levies are additional. This budget allows for
an increase of the regular levy at the rate of 1% and an estimated levy rate of $2.90. This legislation has
significantly impacted the City as labor contracts increase at CPI and the tax authority that assists in the
payment of those contracts is limited to 1 %. The 2002 assessed property values for 2003 collection are
anticipated to increase approximately 4.5%. Property tax for 2003 has been budgeted at approximately
4.5% above the 2002 level in the general fund. The increase is based upon the 1 % increase on the regular
levy and new construction. The 2003 levy rate is anticipated to be $.04 lower than the 2002 levy rate of
$2.94 due to assessed valuations increasing at a greater rate than the dollars levied. Property taxes
constitute about 32% of total budgeted revenue in 2003.
Sales Tax: The City tax rate is 1 % (of which the County receives a 15% share) on all retail sales. This
leaves a net rate of .0085% for the City. Sales tax receipts have fluctuated in Auburn because, historically,
a large proportion of the receipts have been derived from automobile sales and new construction, two
sectors that are particularly sensitive to changes in economic conditions. Sales taxes have generally
been budgeted conservatively. In the recession years of 1991 and 1992, sales tax revenue was flat,
contrasted with 15% annual growth between 1987 and 1990. 1993 revenues were 13% above 1992 due to
a surge in automobile sales, and a one-time audit settlement with the Boeing Co. Revenues in 1994 were
up by 11.4% over 1993 because of the continued strong economy and the SuperMall construction. 1995
sales tax was up 11.4% above 1994 due to significant revenues, again, from both the construction of the
SuperMall and the initial opening late in 1995 of the SuperMall itself. Sales tax revenue growth decreased
in 1996 and 1997 to 3.3% and 5.7% respectively because significant legislation exempting manufacturing
activities from sale tax became effective in mid 1995. Exemptions for the retooling of manufacturing
equipment and for research and development became effective mid 1996. These exemptions have
impacted the City heavily because the City's largest employer, the Boeing Co., has a large
manufacturing plant in our community. Without these exemptions, growth would have been significantly
higher. 1998 and 1999 revenue growth surged 18% and 23% respectively with 2000 revenue growth
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slowing to a 7% increase over 1999. Analysis of the large increases in 1998 and 1999 revealed a large
utility construction service center and warehouse is located in Auburn. The utility had spent the latter half
of 1998, 1999 and 2000 recabling the area using supplies and equipment housed in Auburn. 2001 sales
tax receipts were flat, increasing less than .5% in 2001. The impacts of the recession became evident in
2002 when sales tax revenue took a sudden decline. The interest rate decreases over the course of
2001 and 2002 have had a positive effect on sales tax, but not enough to overcome the lack of consumer
confidence and climbing unemployment rate. The City expects to see no increase in sales tax revenue in
2003. Year 2003 sales tax revenue is estimated to be slightly higher than 2002 projected revenue.
Declining orders for commercial airliners have impacted the Boeing Company who announced
approximately 1,900 layoffs over 18 months in the Fabrication Division. Of the 12,000 workers employed in
that division, 6,500 are employed at the Auburn site. Economists expected a short and shallow recession
for the Puget Sound region beginning in the fourth quarter of 2001. The recession and the Boeing
downturn reduced the region's employment by 1.9 percentage points in 2002. Gross Domestic Product
was anticipated to accelerate rapidly in 2003. After a small increase during the first quarter of 2002, the
recovery slumped and did not sustain itself. Economists in the Puget Sound region are anticipating a
double dip recession with the earliest turn around late 2003. The downturn is longer and deeper than
originally expected. The City will continue to remain cautious estimating sales tax growth and identifying
large one-time transactions. This revenue will be closely monitored early in 2003 and may be adjusted.
Sales tax remains the largest single source of General Fund revenue for the City and in 2003 will constitute
41 % of tax revenue and 34% of total budgeted revenue.
Other Taxes: This category includes utility taxes, which are taxes applied to utilities providing services in
the City, including City-owned and private utilities. 24% of this tax revenue is derived from electric
services. Utility taxes, as a whole, have been considered to be very stable from year-to-year, not only in
the amount received, but also in terms of consistent growth rates. During 1996, Federal legislation was
passed deregulating the electric industry, allowing companies to seek power out of the area instead of
relying on existing local providers. During 2001 tax received from electric services rose significantly. The
increase was from commercial customers who did not have long-term contracts with Puget Sound Energy
and were forced to pay spot prices on the open market. The subsequent decrease in electric utility taxes
in late 2001 and early 2002 is attributed to declining energy costs and out of state brokering of energy by
some larger industries in Auburn. In late 2002 the City Council passed an ordinance raising the utility taxes
on the major four city utilities: Water, Sewer, Storm, and Solid Waste. In the Other Taxes category, an
overall increase of 6.4% is anticipated for 2003.
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2003 General Fund Tax Revenue
$14,000,000
$12,000,000
$10,000,000
$8,000,000
$6,000,000
$4,000,000
$2,000,000
-+- Property Taxes
Sales Tax
-.- Other Tax
$-
1998 1999 2000 2001 2002 2003
Other Revenue
Licenses and Permits: License and permit activities are user fees that are derived from various regulatory
activities of the City. The bulk of the revenue is derived from building permit activities. Since this activity is
dependent on new construction, it can fluctuate greatly depending on the economy, interest rates and
available land. One of the City's large housing developments was put on hold in early 1999. After several
months of negotiation, the project was sold and building resumed at a brisk rate late in 1999 and through
2001. 2002 budgeted permit revenue will be 4% less than originally estimated. 2003 permit revenue is
anticipated to be less than the 2002 budget amount but constant with actual 2002 receipts. New
construction and development are anticipated to continue, but at a slower rate. Interest rates are at a
30-year low, however, the regional economy and employment outlook are guarded for the next 12
months. This revenue will require close monitoring and may have to be adjusted downward in 2003. 2003
revenue is estimated to be approximately the same as 2002 actual. Licenses and permits constitute 2.5%
of 2003 estimated revenue.
Intergovernmental: Various state-shared tax revenues, including liquor taxes and liquor profits,
dominate this category. All of these revenues are provided on the basis of a state prescribed formula
that is based on population. As such, these revenues tend to be rather predictable. However, since
grants are also included in this category, the total amount is variable. State shared revenues have been
flat in recent years, largely due to lower revenue from liquor, a change in sharing of revenue based on
crime rates, and city incorporation's. The revenue the City receives from the Muckleshoot Casino has
been reclassified from general taxes to this area because this revenue is received from another local
agency and also, to comply with federal audit requirements. This revenue is based on the profits from the
Casino. Every year the City negotiates with Muckleshoot Tribe for the amount to be received. State
shared revenues are budgeted at the same level, except for vehicle excise tax. In November 1999, the
voters of Washington State passed Initiative 695, reducing the motor vehicle excise tax to a flat $30 fee.
The estimated impact on the City's general fund in 2001 was $650,000 and $675,000 in 2002. Furthermore,
the State had provided backfill funding to partially "makeup" for the excise tax revenue loss. Due to
significant budget constraints at the State level, this funding is no longer being provided. The City
received approximately $200,000 in 2001 and 2002. Grants aside, intergovernmental revenues are
budgeted at the same level as 2002, less the State backfill for motor vehicle excise tax.
Charges for Services: This category consists of user fees that are derived from a variety of activities.
Revenue from recreational services tends to gradually increase with community growth and demand.
Recreational fees support about 50% of the costs of the related services. Arts revenue is similar to grants,
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and additional revenue may be received, but expenses would offset such revenue. Another relatively
large type of fee category is a plan check fee derived from the review of private construction plans. Plan
checks are likely to remained constant in 2003 as they follow the new construction and permitting activity.
Charges for services constitute 4.3% of total 2003 revenue.
General Fund Revenue
Licenses, Permits, Intergov't, Service
2,500,000
1,500,000
2,000,000
1,000,000
-+- Licenses & Permits
-'-Intergovernmental
-!IE- Charges for Service
500,000
1998 1999 2000 2001 2002 2003
Fines and Forfeits: Fines and forfeits consist mainly of fines from law enforcement related activities. In
recent years this has been a fairly consistent source of revenue and has not increased significantly. It is
budgeted to reflect modest growth for 2003.
Miscellaneous and Other Sources: Miscellaneous revenue consists primarily of interest revenue on idle
treasurers' cash and investments. The 2003 estimate for interest was decreased to reflect current interest
rate earnings and the decreased balance available for short-term investment. Interest rates on
investments have decreased over 60% in the past two years. Other revenue is the unrestricted portion of
gas tax transferred from the Street Fund for street operations funded out of the General Fund, and in 2003,
a one time $142,000 reimbursement from AT&T for TV broadcast equipment, and interest earnings from
the capital projects fund which will be used for street preservation projects. These sources of revenue
constitute 4.5% of total revenue for 2003.
General Fund Revenue
Fines, Misc., Other
1,400,000
1,200,000
1,000,000
800,000
600,000
400,000
200,000
-+-Fines
-.- Miscellaneous
-!IE- Other
1998 1999 2000 2001
2002 2003
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2003 Final Budoet
Financial Plan
Summary: Total General Fund revenue, including fund balance reserves, for 2003 is budgeted at
approximately 7.4% below the 2002 projected revenue. 2002 projected revenue is anticipated to be
consistent with the 2002 amended budget.
General Fund Revenue
By Funding Source
1998 1999 2000 2001 2002 2003
Actual Actual Actual Actual Projected Budget
Beginning Fund Balances:
Reserved $ - $ 15,637 $ 17,978 $ 17,978 $ 18,743 $
Designated for Retirements 727,311 814,000 668.672 574,315 574,315 587,600
Undesignated 7,187,212 10,311,752 10,916,143 14,696,059 16,686,269 12,093,660
Total Fund Balances 7,914,523 11,141,389 11,602,793 15,288,352 17,279,327 12,681,260
Taxes:
Property Taxes 9,105,645 9,222,439 10,209,181 11,016,171 11,198,840 11,700,000
Soles Tax 10,932,486 12,262,818 13,208,764 13,264,608 12,500,000 12,480,000
Other Tax 4,882,832 5,337,038 6,695,195 8,531,898 6,483,300 6,902,020
Licenses & Permits 1, 100, 121 879,343 1,183,990 1,120,433 940,700 914,100
Intergovernmental 2,082,150 2,152,169 1,743,071 2,059,441 2,078,928 1,425,300
Charges for Service 1,689,833 1,658,507 1,770,058 1 ,502,1 99 1,457,500 1,597,500
Fines 529,168 535,106 578,838 623,427 590,300 652,800
Miscellaneous 888,507 933,172 1,096,931 1,1 01,953 734,100 680,100
Other 585,933 671,972 1,246,7 63 847,313 788,080 997,000
Total General Fund $ 39,711,198 $ 44,793,953 $ 49,335,584 $ 55,355,795 $ 54,051,075 $ 50,030,080
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2003 Final Budoet
Financial Plan
Special Revenue Funds:
The City has 12 special revenue funds presented in this budget. These funds account for the proceeds of
specific revenue sources and are legally restricted to expenditures for specific purposes.
Special Revenue Funds
Revenue By Funding Source
1998 1999 2000 2001 2002 2003
Actual Actual Actual Actual Projected Budget
Beginning Fund Balances $ 3,860,772 $ 5,273,584 $ 4,440,699 $ 7,627,062 $ 7,975,268 $ 5,900,187
Taxes 68,502 86,254 78,384 47,271 94,000 96,200
Intergovernmental 5,171,141 6,517,070 12,556,080 15,085,567 8,980,364 5,717,400
Charges for Services 141,848 73,106 391,727 785,971 482,000 209,000
Miscellaneous 342,889 212,769 281,215 469,896 145,600 130,300
Operating Transfers In 1,139,099 452,224 2,705,859 1,852,454 1,259,715 845,905
Total Resources $ 10,724,251 $ 12,615,007 $ 20,453,964 $ 25,868,221 $ 18,936,947 $ 12,898,992
1,400,000
1,200,000
1,000,000
800,000
600,000
400,000
200,000
Special Revenue Fund Revenue
(Intergovernm ental not Included)
-+-Taxes
_Charges for Services
-.-Miscellaneous
1998
1999
2000
2001
2002
2003
Special Revenue Fund
(Intergovernmental only)
20,000,000
15,000,000
10,000,000
5,000,000
I-+- Intergovernmental I
1998
1999
2000
2001
2002
2003
Page 63
2003 Final Budoet
Financial Plan
Operating Transfers In
3,000,000
2,500,000
2,000,000
1,500,000
1,000,000
500,000
-+-Operafing
Transfers In
1998 1999 2000 2001 2002 2003
Taxes: The City levies a tax on all business within the downtown core area. Retail businesses are levied
$0.15 per square foot and service businesses are levied $0.05 per square foot, up to a maximum of one
thousand square feet. These funds are then administered by the Auburn Downtown Association to
promote the central business area. There is approximately 288,840 square feet of service businesses and
238,083 square feet of retail space assessed annually. 2003 revenues have been budgeted to reflect
anticipated collections.
Intergovernmental: This funding source has traditionally been the largest of all categories in the Special
Revenue Funds. The Arterial Street fund is anticipating approximately $4.3 million of state, federal, and
local funding. Major projects include design for M Street project and land widening in conjunction with
the 277th Street grade separations. Two large projects that have been on going at the City for several
years were completed in 2002. The 3rd Street overpass project was completed in the summer of 2002. The
277th project had been transferred to a neighboring jurisdiction for the construction phase and was
completed in the fall of 2002. Other intergovernmental revenues include the Local Option Motor Vehicle
Excise Tax, the Motor Vehicle Fuel Tax, the Local Law Enforcement grant (received since 1997), and
Community Development Block Grant Funds. Block Grant revenue is a direct pass through. The 2003
budget provides the funding for several programs for low income, including community service programs,
urban renewal and housing repair projects.
There is concern over continued funding from the Local Option Motor Vehicle Tax. Initiative 1-776, which
was approved by the voters in November 2002, repealed this tax that was voted on locally and adopted
by three counties in the state. There is currently a court challenge to the constitutionality of this initiative.
King County will continue to collect and hold the funds until the constitutionality of 1-776 is decided. The
City will lose approximately $400,000 annually if the initiative stands. This revenue is used for street and
road construction projects.
Intergovernmental Revenue
1998 1999 2000 2001 2002 2003
Actual Actual Actual Actual Projected Budget
street Grants $ 3,440,263 $ 4,895,207 $ 10,469,598 $ 13,165,914 $ 7,144,145 $ 3,909,000
County MV Tax 568,311 344,699 370,739 388,510 390,000 395,000
Motor Vehicle Fuel Tax 582,828 845,754 897,215 933,054 924,400 930,400
Local Law Enforcement 46,345 40,000 1 09,882 51 ,434 44,135
Block Grant 533,395 391,410 708,646 546,655 477,684 483,000
Total Resources $ 5,171,142 $ 6,517,070 $ 12,556,080 $ 15,085,567 $ 8,980,364 $ 5,717,400
Page 64
2003 Final Budoet
Financial Plan
Charges for Service: This revenue is miscellaneous service fees and mitigation fees paid by developers.
The increase for 2001 reflects the transportation impact fee adopted on July 1, 2001. The revenue
decreased in 2002 and is projected to decrease more in 2003 as developers are delaying projects until
the economy strengthens. The City continues to receive mitigation fees for transportation and fire on
each building permit issued for a large housing community development on the southern edge of the
City. It is anticipated the development will be at build out by 2006. These fees have decreased in 2002
and 2003 as building has slowed.
Miscellaneous: Miscellaneous revenues consist primarily of interest income. Fluctuation of revenue
is a direct result of the current interest rate and idle fund resources available for investment. Investment
revenue is showing a decrease in 2002. The upswing in 2003 is the additional interest income earned in
the Capital Project Fund and transferred to the City Street Fund for pavement preservation projects. In
2002, the average interest rate on investments was lower than 2001.
Other Sources: This category is interfund operating transfers from the general fund to the arterial street
fund. Transfers in 2002 and 2003 have decreased as large street construction projects were completed in
2002. 2003 transfers are for continued support of street projects identified in the Transportation
Improvement Plan and are from the Capital Projects Fund (Real Estate Excise Tax) and impact fee fund.
Capital Project Funds:
The City budgets for major non-proprietary capital acquisitions and construction separately from
operations in the Capital Project funds.
Capital Project Fund Revenue
By Funding Source
1998 1999 2000 2001 2002 2003
Actual Actual Actual Actual Projected Budget
Beginning Fund Balance $ 2,908,172 $ 8,062.428 $ 8.725.482 $ 9,978,160 $ 11,856,614 $ 10.735,638
Taxes 1,175,699 1,278,645 1,787,325 1.483,368 1,880,000 1,600,000
Intergovernmental 23,200 97,908 637,565 93,326 150,000
Charges for Service 21,100 19,525 19,534 25,320 22,000 22,000
Miscellaneous 230,127 418,713 765,706 575,170 159,239 210,236
Other Sources 4,966,054 3,350,000 3,514,200 3,308,000 3,093,543 300,000
$ 9,324,352 $ 13,227,219 $ 15,449,812 $ 15,463,344 $ 17,161,396 $ 12,867,874
Capital Project Fund Revenues
6,000,000
5,000,000
4,000,000
3,000,000
2,000,000
1,000,000
-+-Taxes
-!lE-1 nfergovernmenfal
-.- Charges for Service
~Miscellaneous
-!IE- Of her Sources
1998
1999
2000
2001
2002
2003
Page 65
2003 Final Budoet
Financial Plan
Taxes: The City is authorized to levy Real Estate Excise Tax (REET) up to lJ2% on all real property sales
transactions within the City. The tax is divided into quarter of percents; the City levied the first lj,¡% several
years ago. Early in 1997 the City levied the additionaI1j,¡%, raising the levy to the allowable lJ2%. Revenues
from this tax must be used for financing capital facilities specified in the city's Capital Facility Plan.
Both the first and second lj,¡% may be used for: Streets; Sidewalks; Street lighting systems; Traffic signals;
Bridges; Domestic water systems; and storm and sanitary sewer systems. In addition, the first lj,¡% may be
used to purchase park and recreational facilities; law enforcement facilities; fire protection facilities; trails;
libraries; and administrative and judicial facilities. Due to strong construction activity and low interest
rates, this revenue source has increased each year. In this preliminary budget, REET revenue is presented
at the same level budget level as 2002. Actual 2002 revenue will be higher than originally anticipated, as
several large commercial transactions have occurred during the year. This revenue will be monitored
closely in 2003 and adjusted downward if necessary.
Intergovernmental: The 2002 budget included $100,000 funding from the 1989 King County Open
Space Bond to complete construction of the White River Trail. There is no intergovernmental revenue
anticipated for 2003.
Charges for Services: Portions of all adult team sport fees are put into the capital facility program. These
funds are then used to construct facilities at City parks to benefit the users of the parks and fields. This
revenue is fairly consistent from year to year as class fees have not increased.
Miscellaneous: Miscellaneous revenue is interest earnings on idle fund resources. Decreases in 2002 and
2003 reflect the low interest rates in the market.
Other Funding Sources: Other funding sources are interfund operating transfers in from the general fund.
These transfers are used to fund the purchase of capital, such as fire engines, computer systems and other
capital projects to be determined by Council. In previous years, one-time revenues were transferred to
this fund from the General Fund. In 2003 there are limited transfers. These revenues will be required in the
General Fund for continued operation
Enterprise Funds:
The City has seven enterprise funds presented in this budget used for the purpose of accounting for the
revenues derived from services provided. The City enterprise funds include the following services: Water,
Sanitary Sewer, Storm Drainage, Solid Waste, Golf Course, Airport, and Cemetery. The graph presented
below depicts the amount of revenues received by source.
Enterprise Funds
Revenue By Funding Source
1998 1999 2000 2001 2002 2003
Adual Adual Adual Adual Projeded Budget
Beg. Fund Balance $ 15,665,856 $ 12,125,398 $ 21,626,384 $ 19,835,205 $ 19,177.463 $ 17,537,532
Charges for Services 24,190,983 26,039,325 26,941,117 28,119,311 28,167,873 29,017,289
Miscellaneous 1,000,343 717,293 1.488,854 1,357,232 801 ,000 858,600
Other Sources 7,900,736 12,814,822 3,688,256 8.408,823 4,669,900 1,303 ,200
Intergovern. Revenue 844,643 906,092 187,405 137.493
Total Resources $ 49,602,561 $ 52,602,930 $ 53,932,016 $ 57,858,064 $ 52,816,236 $ 48,716,621
Page 66
2003 Final Budoet
40,000,000
30,000,000
20,000,000
10,000,000
14,000,000
12,000,000
10,000,000
8,000,000
6,000,000
4,000,000
2,000,000
Financial Plan
Charges for Services
.....
I-+- Charges for Services I
1998
1999
2000
2001
2002
2003
Enterprise Fund Revenues
-+- Miscellaneous
other Financing
Sources
--à-Intergovernmental
Revenue
1998
1999
2000
2XJl
'XfJ2
2003
Charges for Services: This revenue source represents fees charged by the City's enterprise funds in return
for a public service. A breakdown of these revenues is shown in the graph labeled "Charges for Service."
62% of the City's charges for services are collected in the sewer and solid waste funds. Approximately
80% of the sewer revenues are related to pass through charges from King County for Metro services,
which is for the treatment and disposal of the City of Auburn's sewage. The Solid Waste collection is
contracted through Waste Management Disposal Company. The City started curbside recycling in 2002.
Garbage rates are structured in a way that encourages participation in the recycling program All of the
above funds account for city-operated utilities provided to citizens of Auburn and the outlying areas. The
utility revenues are directly affected by growth factors and rate increases. In 2003 utility rates, except for
sewer, are not scheduled for increases at the time this budget is being prepared. The Sewer utility will
increase the City's portion of the rate by approximately 3% on January 1, 2003. The City normally reviews
the fees charged for utilities on a yearly basis to ensure the fees charged cover the costs associated with
providing the services. The Storm Water fund implemented a one-time rate increase late in 2000. All fees
and charges are adopted through the public process of an ordinance.
The Golf Course charges for services consist of green fees for the 18-hole championship course. Over the
last several years the city has done major renovations to many of the holes. Golf course revenue has
remained fairly constant over the past few years. The City projects fees to continue in the same trend in
2002 and 2003. Revenues are also dependent on seasonal weather trends.
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2003 Final Budoet
Financial Plan
The Airport charges for services consist of fuel sales and hangar rentals. The Airport recently completed
new hangar buildings that provided 49 new enclosed spaces. In 2001. the City installed a new card
fueling system that allows patrons of the airport to self-service their airplanes at any time during the day.
The City also entered into several ground leases with developers who in turn will build hangars and other
facitlities. With the completion of new hangars, the new ground leases and the 24-hour fueling station;
the airport revenues increased by 14.2% in 2001 and are expected to increase 4.3% and 5.2% respectively,
in 2002 and 2003. Once again, this revenue will be closely monitored in 2003.
The City of Auburn Cemetery is one of the most beautiful in the county, over-looking the Auburn valley
and majestic Mount Rainier. Charges for services in the Cemetery fund are for lot sales and retail sales for
burial related products. In 2002 the City aggressively marketed the cemetery to sustain revenue growth.
Charges for services were anticipated to decrease by 8.8% in 2002 to $552,800 and then increase in 2003
by 5.4%. The new Veterans Cemetery in Maple Valley has had a negative impact on lot sales and burial
services.
Other Financing Sources: This revenue source represents the resources available from Public Works
Trust Fund loans (PWTF) and developer contributions. The City anticipates $250,000 of PWTF loans
available for construction in 2003. The loan will be used to pay final costs on the corrosion control facility
that was completed in 2002. Developer contributions will be used for capital purposes. There is an entire
section of this budget that describes the capital projects along with their prospective budget, time frame,
and impact on operations.
Miscellaneous Revenues: The majority of miscellaneous revenues are comprised of investment
income earned on idle cash.
Intergovernmental Revenue: This revenue represents grants received in the Airport Fund from the FAA for
airport improvements to the runways and hangars. The City did not receive any grants in 2002 and is not
anticipating any in 2003.
Internal Service Funds:
The City's Internal Service Funds are used to budget for the financing of goods and services provided by
one department of operation to other funds and departments on a cost of reimbursement basis. The City
has two internal service funds: Insurance and Equipment Rental.
Internal Service Funds
By Funding Source
1998 1999 2000 2001 2002 2003
Actual Actual Actual Actual Projected Budget
Beginning Fund Balance $ 5,173,786 $ 5,314,232 $ 5,906,400 $ 6,210,703 $ 6,778,205 $ 6,406,755
Charges for Service 1,631,696 1,681,184 1,812,787 1,631,11 3 1,430,400 2,019,470
Miscellaneous 336,625 283,249 378,125 280,375 150,600 155,000
Other Sources 10,653 44,313 450,386 224,311 50,000 15,400
Total Revenue $ 7,152,760 $ 7,322,978 $ 8,547,698 $ 8,346,502 $ 8,409,205 $ 8,596,625
Page 68
2003 Final Budoet
Financial Plan
Internal Service Fund Revenue
2,500,000
2,000,000
1,500,000
1,000,000
500,000
Charges for Service
-.- Miscellaneous
~ other Sources
1998
1999 2000 2001
2002 2003
Charges for Service: This revenue is in the Equipment Rental Fund and consists of interfund fuels sales
and rental rates of equipment and other assets. Equipment rental rates were increased in 2003 for all
funds. A study was performed on the fund in 2002 and capital replacement was under funded by
$900,000. To replenish the funding, rates will be increased over the next 4 years to bring balances back in
line with requirements.
Miscellaneous Revenue: This is investment income on idle cash and investments. This revenue has
decreased from prior years due to declining interest rates.
Other Sources: This is the gain on the sale of surplused equipment and contributed capital from other
funds for equipment purchase and other improvements at the facility.
Fiduciary Funds:
In the past the City budgeted three trust funds: the Cemetery Endowed Care Fund; the Fire Relief and
Pension Fund; and the Special Parks and Recreation Trust Fund. With the implementation of
Governmental Accounting Standards Board (GAS B) Statement 34, the reporting type and structure of
these funds have been changed. The Cemetery Endowed Care fund is now classified as a "Permanent
Fund" which is a new fund type under GASB 34. The Special Parks and Recreation Trust Fund has been
reclassified and will be reported as a special revenue fund. That leaves the City with two fiduciary type
funds, the Fire Relief and Pension Fund and one Agency Fund. The balances reflected below for 2000
and beyond do not include the Cemetery Endowed Care or the Special Parks and Recreation funds.
Fiduciary Funds
By Funding Source
1998 1999 2000 2001 2002 2003
Actual Actual Actual Actual Projected Budget
Beginning Fund Balance $ 4,754,314 $ 4,797,277 $ 3,542,500 $ 3,497,469 $ 3,631,870 $ 3,570,570
Charges for Service 35,681 42,192
Miscellaneous 352,013 218,240 175,000 229,283 180,000 180,000
Intergovernmental 44,580 52,738 43,000 37,281 45,000 45,000
Total Revenue $ 5,186,588 $ 5,110,447 $ 3,760,500 $ 3,764,033 $ 3,856,870 $ 3,795,570
Page 69
2003 Final Budoet
Financial Plan
Fiduciary Fund Revenues
400,000
300,000
200,000
100,000
-+- Charges for Service
Miscellaneous
-.- Intergovernmental
1998
1999
2000
2001
2002
2003
Miscellaneous: This is investment income on idle cash investments.
Intergovernmental: This is the fire insurance premium tax that goes into the Fire Relief and Pension Fund.
The City receives this revenue from the state and it is allocated based on the number of firefighters
employed by the City. The 2000 State Legislature reduced the fire insurance premium tax. An actuarial
study of the Fire Relief and Pension Fund was updated early 2001. The fund is fully funded and does not
require additional contributions. The fund is scheduled for another actuarial evaluation in 2003.
Permanent Fund:
The City has one permanent fund, the Cemetery Endowed Care fund. This fund is used to account for
resources that are legally restricted to the extent that only earnings, and not principal, may be used to
support cemetery capital improvements.
Permanent Fund
By Funding Source
1998 1999 2000 2001 2002 2003
Actual Actual Actual Actual Projected Budget
Beginning Fund Balance $ $ $ 1,038,477 $ 1,081,180 $ 1,185,832 $ 1,188,832
Charges for Service 43,246 39,432 38,000 40,000
Miscellaneous 74,456 65,220 11,700 15,000
Intergovernmental
Total Revenue $ $ $ 1,156,179 $ 1,185,832 $ 1,235,532 $ 1,243,832
Permanent Fund Revenues
400,000
300,000
200,000
-+- Charges for Service
Miscellaneous
-.- Intergovernmental
100,000
1998
1999
2000
2001
2002
2003
Page 70
2003 Final Budoet
Financial Plan
General Fund Six-Year Forecast
A six-year forecast of the City's General Fund can be found on page 73. The purpose of the forecast is to
highlight issues associated with financial policies and budgetary decisions. It is not intended to be a multi-
year budget.
Revenues and expenditures are projected on the basis of assumed econometric relationships. Revenues
are forecast on the basis of future economic and demographic factors with little dependence on past
trends. Expenditures are forecast based on past trends modified by present and future conditions. Future
conditions are based upon a series of complex assumptions. This model has been used to test a large
range of assumptions and policy options in the course of developing the budget recommendations. This
assumption regarding "real economic growth" is a factor that reflects the approximate rate of tax
generation above the rate of inflation.
The table opposite reflects a moderate set of assumptions regarding revenues and expenditures. The
Auburn economy is cyclical and the City has enjoyed a strong economy for many years from low
unemployment coupled with significant retail and housing development. Revenue losses from the recent
legislative exemptions have been negated by the gains of economic development. However, the
strength of the prior years has begun to erode as the region slips into recession. Decreases in the stock
market, higher unemployment rates, and the war on terrorism are anticipated to have a negative impact
on consumer spending and new construction. Economists expected the regional recession to be short
and turn around by the fourth quarter of 2002. However the recovery has not been as strong and
prolonged as the economists have predicted. It is now estimated that the region will not begin see
sustained economic recovery until late 2003. This is reflected in the revenue forecasts through 2008.
Property assessed values have increased steadily during the past 10 years at an average of 7.6%. 2003
increase in assessed valuation is anticipated to be approximately 4.5%. In the past, the forecast has relied
on increases in assessed value for forecasting. However, with recent legislation and initiative activity, this
forecast is relying on a 1 % increase for property taxes plus an average factor for new construction. While
estimated revenue growth has decreased over the past year, expenditures involving public safety and
public services are expected to increase at a greater rate. New commercial development, several large
residential developments, currently in the permitting process, and newly annexed areas are a few of the
areas expected to increase the demand for public services. Based on the current trends, it is anticipated
that fund balance will decrease over the next five years when revenues begin to subside and
expenditures increase. It is necessary to reflect non-departmental costs in 2003, so estimated ending fund
balances are not overstated. Expenditures in this area generally represent one-time payments or transfers
for capital projects, employee retirements or debt service. The Finance Department will continue to study
revenue options and enhancements to offset the decline in future revenues. Residual budget is unused
budget rolled over to be utilized in the subsequent year.
Forecasting models have been used to assist in fiscal planning since 1989. Models have allowed analysis
of alternative actions in funding programs during the development of the budget. The model accents
the continuing need to control the per capita rate of expenditures reflected in the preceding pages. It is
this model that created cautious funding decisions in spite of an apparent high rate of economic growth
in the late 1990's. Continued caution will be required to anticipate and manage the effects of a slowing
economy or additional legislative actions to avoid service reductions for budgetary reasons should
economic growth continue to be feeble.
Page 71
2003 Final Budoet
Financial Plan
The graph below reflects the six-year planning forecast on the previous page. If current trends continue,
fund balance will decrease to 3.86% by the end of 2005. Revenue has been estimated realistically based
on an anticipated economic growth, planned annexations, and considering the affects of voter
initiatives. Should growth remain feeble, as expected by most economists, in the next 12 months and tax
revenues slow, the adverse affect on fund balance may be greater than anticipated. Revenues from
property taxes are increased at 1 % plus the addition of new construction and annexations. Initiative 747
went before the voters in November 2001 and passed. The initiative limits the increase in property taxes to
the lesser of 1 % or inflation. Assessed valuation for the City is expected to grow by the rate of 4.5% in the
model presented. However, since the City may not increase property taxes greater than 1 %, it is
anticipated that the levy rate will decrease as assessed value increases.
Six Year Planning Forecast
2003-2008
$48,000,000
$8,000,000
IITofal New Revenues
IITofal Expendifures**
o Revised Fund Bal.***
$38,000,000
$28,000,000
$18,000,000
$ (2,000,000)
$( 12,000,000)
2003
2004
2005
2006
2007
2008
YEAR
This analysis reflects the position of the City if no adjustments are made on the expenditure side and other
revenue does not grow at a rate necessary to offset the slower growth rate from property taxes. The City
is addressing the long-term revenue short fall through concerted efforts with other jurisdictions. At this
time, however, the exact adjustments that will be necessary are unknown.
As mentioned, the City has taken into account the recent statewide initiative in forecasting property
taxes. The issue that develops when property tax increases are held to 1 % is that other costs are not.
Costs such as employee benefits, negotiated labor contracts, services and supplies continue to increase
at a greater rate. Fuel, professional services, and healthcare costs are good examples. The shortfall then
has to be made up by increases in sales tax collection and population growth. In this economy, the City
has been able to maintain the existing level of service, in light of legislative action in the mid 1990's,
because the economy has been strong and growing at rates that have astounded economists. Sales tax
revenue growth for 2003 is budgeted equal to the 2002 anticipated collection. Recent world events such
as war, terrorist attacks, fuel costs, edgy stock markets and overall unrest in the Mid East will have an
impact on spending patterns. When sales tax revenues slow down, such that they are unable to make up
the revenues lost from property tax declines, the City will have to make some different choices in the
delivery of basic levels of services.
Page 72
2003 Final Budoet
Financial Plan
General Fund Revenue and Expense Forecast 2003 - 2008
2003 2004 2005 2006 2007 2008
Total Taxes $ 31,082,020 $ 32,531,185 $ 33,391,674 $ 34,406,192 $ 34,994,586 $ 35,962,225
Total Lic & Per 914,100 843,582 878,695 920,570 970,554 1,030,265
Totallntergovt 1,425,300 1,302,290 1,343,794 1,405,559 1,445,967 1,488,118
Total Chg/Serv 1,597,500 1,709,713 1,786,642 1,878,914 1,959,738 1,998,936
Total Fines 652,800 667,226 696,596 727,363 759,592 794,350
Total Misc Rev 680,100 821,656 839,536 858,197 877,676 898,008
Total Other Rev 997,000 667,112 695,131 724,326 754,748 786,447
Total New Revenues $ 37,348,820 $ 38,542,764 $ 39,632,067 $ 40,921,123 $ 41 ,762,862 $ 42,958,349
Mayor & Council $ 596,147 $ 626,600 $ 644,700 $ 663,500 $ 682,800 $ 702,600
Human Resources 2,177,940 2,229,400 2,294,400 2,361,300 2,430,300 2,501,200
Finance 2,698,750 2,767,801 2,847,102 2,928,703 3,012,704 3,098,905
City Attomey 1,085,850 1,111,401 1,144,002 1,1 77,503 1,212,004 1,247,805
Planning 3,525,296 3,606,501 3,711 ,202 3,818,703 3,929,604 4,043,805
Police 13,287,789 13,813,200 14,446,900 15,111,600 15,808,900 16,540,400
Fire 8,247,703 8,516,900 8,925,800 9,354,300 9,803,400 10,274,000
Public Works 2,619,900 2,681, 900 2,759,800 2,839,800 2,922,200 3,007,100
Parks & Rec 4,304,600 4,385,801 4,512,902 4,644,103 4,778,704 4,917,505
Street 2,008,300 2,059,700 2,119,000 2,180,000 2,242,700 2,307,100
Non-Departmental 2,982,105 1,822,200 1,825,700 1,829,302 1,833,005 1,836,808
Total Expenditures** 43,534,380 43,621,404 45,231,508 46,908,814 48,656,321 50,477,228
New Rev. Balance
Residual/Unused Budget
Revised Fund Bal. ***
% Fund Balance
Total
(6,185,560) (5,078,640) (5,599,441) (5,987,691) ( 6,893,459) (7,518,879)
3,000,000 3,000,000 3,000,000 3,000,000 3,000,000
6,495,700 4,4 1 7,060 1,817,619 (1,170,072) (5,063,531 ) (9,582,4 10)
12.98% 9.19% 3.86% -2.56% -11.62% -23.43%
$ 50,030,080 $ 48,038,464 $ 47,049,127 $ 45,738,742 $ 43,592,790 $ 40,894,818
Kev Assumptions:
Inflation Rate
Population Growth Rate
Personnel Increases
PropertyTox Increase
2.80%
4.50%
3%-5%
1 % + new construction
** Excludes estimated ending fund balance
*** Includes Designated Fund Balance of $4,087,600 for cash flow purposes and funding employee
leave balances at retirement.
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Current and Potential Legislative Action
As previously mentioned, there have been several legislative actions at the state level that have
permanently reduced sales tax revenues for the City of Auburn. This legislation and other pending
legislation, including federal legislation, are summarized below, along with potential impacts on Auburn's
revenue picture.
Sales Tax Exemption On Purchase And Lease of Manufacturing Equipment, Retooling Of Manufacturing
Equipment, And General Research And Development: During the 1995 legislative session, legislation
was passed to exempt the purchase and lease of manufacturing equipment from state and local sales
taxes. In the 1996 session, further legislation was enacted exempting sales taxes on research and
development and on the retooling of manufacturing equipment. The impact of this legislation has been
offset by the strong economy and low unemployment rates. Sales tax revenues are anticipated to grow
in spite of the legislative effects. It is anticipated these revenues will grow at 4% 2003 through the year
2007.
Initiative 695: In November 1999, the voters of Washington State approved Initiative 695, which repeals
the state's long standing motor vehicle excise tax (MVET) and requires future voter approval of tax and
fee increases proposed by state, county and local governments. The State Legislature responded to this
initiative during the 2000 legislative session and repealed the MVET. The initiative has been challenged in
court and was found to be unconstitutional and void. The ruling was upheld on appeal at the
Washington State Supreme Court. The loss of the MVET eliminated a $750 million annual funding source
for local governments, transit systems and state transportation projects. The City of Auburn lost an
estimated $600,000 in 2000 and $725,000 in subsequent years of MVET. The loss of MVET revenues is
approximately 2% of total General Fund revenues. During the 2000 State Legislature, state funding was
provided to assist in the revenue losses. The City of Auburn received $195,000 in 2001 and 2002. Due to
the State's fiscal problems, this funding has been eliminated.
Initiative 747: This initiative went before the voters of the state in November of 2001 and was approved.
Property tax increases are now limited to the lesser of one percent or inflation. The impact of this initiative
on the City was estimated to be approximately $100,000 in 2002 and accelerates each year to have an
annual impact of over $1 million by 2007.
Endangered Species Act: On March 24, 1999 National Marine Fisheries Service (NMFS) published the
listing of the Puget Sound Chinook as "threatened." On January 3, 2000 NMFS published in the Federal
Register the draft proposed rule: Governing "Take" of Seven Threatened Evolutionary Significant Units
(ESU) of West Coast Salmonids. Included in this listing was Puget Sound Chinook. Since the initial listing,
Auburn has participated in the Green River Steering Committee to develop a recovery plan for the Green
River. 16 jurisdictions participate and intend to share the costs. To date there are estimates of three cost
categories; Five Year WRIA Planning Costs (approximately $435,000 in 2003), Green River Ecosystem
Restoration Study Costs, and Individual Jurisdictional Costs for 4d Compliance. The total cost of the plan
and the compliance are unknown at this time. The best estimates are $100 million total with the federal
government picking up an estimated $75 million. The balance will be funded locally over a ten-year
period by all the jurisdictions involved.
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Long-Term Debt Obligations and Debt Capacity
Like private citizens, municipalities must sometimes borrow funds to pay for large purchases like capital
equipment and capital projects. As in the private world, the ability to borrow depends upon the
borrower's ability to pay the loan back, as indicated by means of credit ratings, potential future earnings,
etc. Unlike private citizens and companies, public entities have the additional parameters of statutory
limits on borrowing, as measured by set percentages of assessed value and ratios of revenue to operating
expense. Debt incurred by a City is generally issued in the form of bonds, similar to promissory notes,
which investors buy from the City, with the idea that the City will buy the bonds back at some future date
- paying more money than the investor paid for them.
There are three types of bonds issued by the City of Auburn, differentiated by the basis of the guarantee
of payoff to the investor. General Obligation or "GO" Bonds are based on the tax base or the assessed
value of the municipality. When issuing a GO Bond, the City is pledging its future taxing powers to payoff
the debt. GO Bonds can also be issued as a voted "levy" when citizens are willing to pay extra taxes to
pay for a particular project. Another less common type of GO Bond is one that is secured by the City's
tax base, but is actually retired from utility revenues. Revenue Bonds are both guaranteed by and retired
from specific future revenues (usually fees for a particular service). These are generally issued for utility
capital projects, and guaranteed and retired by utility rate revenues. There is no general tax liability for
these obligations. Local Improvement District or "LID" Bonds are issued through the formation of local
improvement districts to provide specific capital improvements. The City has a LID Guarantee Fund; a
reserve fund that guarantees LID Bonds. The City's outstanding LID Bond debt currently amounts to
$658,894.
L.I.D. Bonds
Year Principal Interest Total
2003 $ 92,436 $ 42,979 $ 135,415
2004 122,436 37,249 159,685
2005 42,436 29,7 58 72,194
2006 42,436 26,828 69,264
2007 42,436 23,898 66,334
2008 42,436 20,967 63,403
2009 42,436 18,037 60,473
2010+ 121,852 36,529 158,381
Totals $ 548,904 $ 236,246 $ 785,150
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2003 Final Budoet
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General Obligation Bonds:
The total indebtedness for general purposes with or without a vote of the people cannot exceed 2.5% of
the value of taxable property. Up to 1.5% may be incurred without a vote; however, any indebtedness
available without a vote is proportionately reduced by any indebtedness with a vote in excess of 1 %. The
City may also levy, with a vote of the people, up to 5% of taxable property value for utility or open space
and park facilities purposes. Any excess will proportionately reduce the margin available for general
purposes. Total general obligation debt cannot exceed 7.5% of the value of property.
The City debt obligations are well within the statutory limits for debt capacity. The chart below
summarizes the City's current debt obligations by type of debt and legal limit. The City issued $4 million of
general obligation debt in 1998 to provide funds to pay the cost of constructing a library to be owned
and operated by the King County Library System. The City also issued $1.655 million in general obligation
debt in 1999 to pay the construction cost of hangars at the Auburn Airport. Additional GO debt includes
a bond issue from the Valley Communications Center Development Authority in 2000. The City is
contracted to pay 20% of the debt service over a l5-year period. The City currently has an A 1 rating from
Moody's.
General Obligation Bond Debt
(In Thousands)
Without With utility Open space
a Vote a Vote Purposes & Parks
1.50% 1.00% 2.50% 2.50% Total
Bonding Capacity $ 60,285 $40,190 $100,475 $ 100,475 $ 301,425
Bonds Outstanding 7,402 - - - 7,402
Net Capacity $ 52,883 $40,190 $100,475 $ 100,475 $ 294,023
Revenue Bonds:
The City has approximately $10.190 million of principal in utility revenue bonds outstanding that are being
repaid by revenues from utility funds. In 1996, the Water utility changed the rate structure based on the
outcome of a rate study. Both the Water and Sewer Funds increased rates during 1998 and 2000 to meet
revenue needs for operations as well as financing capital improvements. Water and Sewer increased
rates again in 2001 and 2002 based on a cost of service study. Storm had a one-time increase in 2000.
All proceeds from the sale of bonds were used to improve and extend the existing municipal water and
storm water systems. The water utility has used some of the bond proceeds to assist in the construction of
facilities necessary to sell water to several neighboring communities thus increasing revenues. Other
facilities constructed include, reservoirs, wells, corrosion control facilities and water lines. The Storm
Drainage Fund was created in 1988 and began collecting fees with the intent of creating infrastructure.
With the completion of the Storm Water Comprehensive plan, the City began implementing the plan in
1997. The bond proceeds, along with fund reserves, were used for central storm drainage improvements
identified in the plan.
The City has established a coverage ratio of 1.25 for the utility revenue bonds, where the net utility
operating revenues will exceed 1.25 times the maximum annual utility revenue bond debt service cost.
The annual debt service payment is paid from the utility user or system development fees. During 1999,
Moody's upgraded utility revenue bonds from A2 to A 1.
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2003 Final Budoet
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The following debt payment schedule is for all outstanding debt including utility revenue bonds.
Revenue Bonds
General Obligation Bonds
Year Principal Interest Total Principal Interest Total
2003 $ 960,000 $ 523,333 $ 1,483,333 $ 314,000 $ 358,643 $ 672,643
2004 1 ,01 0,000 474,845 1,484,845 334,000 343,897 677,897
2005 1 ,065,000 423,320 1 ,488,320 351,000 327,997 678,997
2006 1,115,000 368,970 1 ,483,970 373,000 310,812 683,812
2007 1,175,000 312,070 1 ,487,070 395,000 292,774 687,774
2008 1 ,235,000 252,095 1,487,095 422,000 273,664 695,664
2009 1 ,300,000 580,897 1 ,880,897 445,000 253,065 698,065
201 0+ 2,330,000 138,070 2,468,070 4,7 68,000 1 ,206,1 98 5,974,1 98
Total $ 10,1 90,000 $ 3,073,599 $ 13,263,599 $ 7,402,000 $ 3,367,050 $ 10,769,050
Public Works Trust Fund Loan Debt
Year Principal Interest Total
2003 $419,990 $62,033 482,023
2004 $455,517 $58,900 514,417
2005 $455,517 $55,420 510,937
2006 $455,517 $51 ,940 507,456
2007 $455,517 $48,459 503,976
2008 $455,517 $44,979 500,496
2009 $455,517 $41,499 497,016
2010+ $5,091,697 $228,928 5,320,625
Total 8,244,788 592,157 8,836,946
Fiscal Capacity: General Fund
The City utilizes a range of strategies to maintain its fiscal security. Several of the financial policies are
based on this strategy. First, the City maintains fund balance sufficient to meet the General Fund cash
flow needs and estimated employee retirement cash outs for the current year. This amounts to about 7%
to 10% of the General Fund. In good economic times, this fund balance can be budgeted higher than
when the economy takes a turn for the worse. This balance serves as the first line of defense against a
sudden and significant economic downturn. However, revenues are forecast moderately. This not only
provides protection from needing to rely on the fund balance, it has provided a higher fund balance
than originally budgeted, augmenting reserves. In recent years the City has added a Cumulative
Reserve Fund for two purposes. First, it allows the City to build funds for needed capital projects without
having to rely exclusively on debt. Secondly, it provides long-term stability to City finances as a counter-
cyclical balance. Money is put aside in good years (from higher than budgeted reserves), as in recent
years, allowing the City a reserve to draw on in poorer years. The City also maintains two special purpose
reserve funds to adequately meet specific and significant potential contingencies: 1) an insurance fund
to augment regular coverage and to provide for insurance independence and/or stability, and 2) a
guarantee fund to adequately secure the City's LID program.
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2003 Final Budoet
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Finally, the City has reserved an amount of taxing and other revenue capacities for worse case
circumstances. These capacities are:
User Fees: There are several categories of user fees that could be increased to capture a larger
share of associated costs.
Utilitv Tax: The City taxes at 4.5% with a maximum of 6% available. This added authority could
yield approximately $1,700,000 per year.
B&O Tax: The City can levy a Business and Occupation Tax on gross business receipts. This
authority applied conservatively would yield about $1,000,000 per year. At higher rates, as much
as $2,000,000 per year could be realistically achieved.
Business Licensinq: Some jurisdictions have used business licensing as a means of generating
additional revenues. A very aggressive program could yield as much as $750,000 per year.
Working Capital
Proprietary funds are managed on a different basis than are general governmental services. The amount
of expenses required for ongoing operation depends on the amount of activity that will be done next
year. Since such activity provides new income to the fund directly in the form of charges for service,
there is additional revenue to support those additional expenses. Therefore, the management of these
funds is not focused on line items of revenue and expenses, but rather the "bottom line" of whether
expenses are supported by revenue. This is measured by the working capital in each fund. In simple
terms, "working capital" is similar to fund balance and is the result of all transactions during the year. An
increase in working capital indicates that expenses are less than earnings.
Since a city cannot make a profit, unlike private sector enterprises, working capital should not grow or
decline and expenses and revenues should balance. However, working capital should accumulate to a
level sufficient for at least three purposes:
1. Provide a cushion or a contingency for unforeseen needs and emergencies.
2. Provide adequate security for long-term debt.
3. Allow for a capital development program to reduce the need for borrowing.
The trend for working capital in each of the City's proprietary funds is found on the following page. It
should be noted that data for 2002 and 2003 are budget figures while the data for previous years are
actual figures.
The Water Fund continues with an aggressive capital program. The increases in 1997 and 1999 working
capital are from bond proceeds received during those years to construct new joint facilities, research
water rights and availability, build new pump stations, drill new wells, update worn out facilities, and
construct a corrosion control facility. The utility also received Public Works Trust Fund Loans in 2001 and
2002 that will fund 90% of the corrosion control facility.
The buildup of working capital in the Strom Drainage Fund between 1991 and 1996 was necessary in
order to finance the five-year capital program planned for that utility. Working capital in 1997 and 1998
began to decrease due to an aggressive capital improvement program. The increase in 1999 is from the
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2003 Final Budoet
Financial Plan
issuance of revenue bonds late in the year. 2002 and 2003 reflect significant decreases as scheduled
projects are completed.
The decreased sewer working capital in 1991 was from the temporary investment and backing of a sewer
LI D. The increase in working capital at the end of 1998 was from the sale of facilities to King County and a
rate increase. The fund sold an estimated $3.8 million in facilities. $1.4 million was received in 1997 and
the balance will be paid for as customers connect to the system over the next several years. Planned
facility improvements in 2001 and 2002 pushed working capital downward. The Sewer Fund increased
rates mid 1998 and in January 2000,2001, 2002 and 2003 at 3% each year. Those increases are reflected
in the ending working capital.
Working capital in the Solid Waste Fund increased in 1992 due to rate restructuring in connection with the
recycling program and also to a change to the accrual basis of accounting in this fund. The fund
increased service rates in both 1997 and 1998. These estimates are reflected in the ending working
capital. The City entered into a new contract for garbage disposal services beginning January 2002.
Rates were set to recover the cost of the service and encourage recycling efforts. There is adequate
fund balance at this time so rates are not expected to increase in 2003.
The increase in Equipment Rental working capital from 1991 through 1996 is due to rate changes and also
to the addition of reserves for those Fire and Police vehicles that were placed in the fund at that time.
During 1997 and 1998 interfund rental rates were decreased 20% and 15% respectively because reserves
were considered to be adequate at that time. Rates were again reduced in 2002 but are raised again in
2003. Further analysis of the working capital balances is needed to correct recently discovered
underfunding of the capital replacement component of the equipment rental rates.
The Golf Course has suffered attendance losses during the last few years due to the opening of new
courses in the area. However, in 1999, revenues began to increase. Many ongoing course improvements
have increased capital costs but improvements to the course are being noted with increased admissions.
The Airport has been experiencing a continuing loss from operations over the pasts few years. The Airport
completed the fueling facility and re-roofing of the hangars in 1999 in efforts to enhance lease and rental
revenues. New hangars were completed in 2000. The large increase in 1999 is from the issuance of
General Obligation debt to construct the hangars. Revenue from the new hangars will service the debt
as well as increase revenue in future years. Working capital is expected to decrease in 2002 due to
planned improvements to older hangars. The Airport entered into several long-term land leases in 2001
that will result in private development and increase revenue from the leases. This fund will be closely
monitored for any sudden downturns in revenue from vacancy or decreased activity.
The Cemetery completed several improvements in 1999 and 2000, including an area with over 1,000
ground burial spaces and a Centennial Niche Wall. Landscaping and irrigation improvements are
ongoing. However, 2002 and 2003 working capital is projected to decrease due to the opening of a
nearby national cemetery.
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2003 Final Budoet
Financial Plan
Working Capital
Proprietary Funds
Water
Sewer
Storm
Drainage
Solid
Waste
Airport Cemetery
Golf
Course
Equipment
Rental
Actual:
1991 $ 801,789 $ 991 ,865 $1,188,716 $ 273,920 $ 261,391 $ 114,439 $ 174,664 $ 171,677
1992 1,162,228 2,523,666 2,051,574 1,030,459 250,191 74,577 118,787 199,733
1993 1,646,231 2,755,476 3,014,433 1,084,902 252,595 150,757 187,950 767,123
1994 1 ,781 ,605 2,403,098 2,894,298 1,061,252 316,610 234,900 284,683 1 ,109,545
1995 1,878,543 2,621,593 3,478,896 1,240,084 349,514 249,610 130,804 1,560,454
1996 899,727 2,892,891 4,249,043 1,565,470 398,953 357,113 210,003 1,956,755
1997 4,172,203 4,850,288 3,940,962 1,839,422 392,046 316,369 134,278 2,389,468
1998 1,217,715 5,319,247 2,958,986 2,162,067 73,968 275,112 118,303 2,597,764
1999 5,270,987 6,532,437 5,188,879 2,782,048 1,342,537 296,208 213,284 2,656,196
2000 3,435,343 7,295,016 4,742,243 3,497,725 357,868 340,948 166,079 3,370,140
2001 2,666,189 8,127,088 4,183,961 3,410,540 260,890 329,041 199,754 3,863,699
Budget:
2002 3,154,153 6,919,998 3,545,423 3,253,133 143,120 278,441 243,264 3,514,649
Budget:
2003 2,724,350 6,881,973 2,019,048 2,692,253 154,430 235,851 198,664 3,187,819
Page 80
2003 Final Budoet
$ 9 ,000 ,000
$8,000,000
$7,000,000
$6,000,000
$5,000,000
$4,000,000
$3,000,000
$2,000,000
$1,000,000
$0
Proprietary Funds - Working Capital
city of Auburn: 1996-2003
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Page 81
111996
111997
01998
01999
02000
112001
112002
112003
Financial Plan
2003 Final Budoet
Financial Plan
Page 82