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HomeMy WebLinkAboutItem 01 - FY 2002-2003 BudgetMEMO TO: HONORABLE MAYOR AND MEMBERS OF HE CITY COUNCIL FROM: ROGER NELSON, CITY MANAGER MEETING DATE SUBJECT: RECOMMENDATION: SEPTEMBER 10, 2002 FY 2002-2003 BUDGET ORDINANCE Staff recommends Council consider an ordinance adopting the FY 2002-2003 City of Grapevine Annual Budget. The budget includes the programs discussed at the City Council workshop held on August 21, 2002 and the public hearing on September 3, 2002, and contains fund expenditures in the following amounts: General Fund $38,396,414 Utility Fund 16,361,088 Debt Service Fund 11,809,510 Convention & Visitors Bureau Fund 5,371,177 Lake Enterprise Fund 2,368,429 General Government Capital Projects Fund 12,600,619 Permanent Street Maintenance Fund 860,000 Permanent Capital Maintenance Fund - General 170,900 Utility & Lake Enterprise Capital Projects Fund 4,917,048 Utility Permanent Capital Maintenance Fund 826,612 Stormwater Drainage Utility Fund 1,270,457 BACKGROUND INFORMATION: The FY 2002-2003 budget, as proposed, is presented for your consideration. The budget presented requires a tax rate of $0.3660. The required public hearing to solicit input was held on September 3, 2002 as required by the City Charter. WAG/cjc Kbudge=02.agm September 3, 2002 9:55AM a, Global Credit Research 0 New Issue Aft~$ tAft sonfto 19 AUG 2002 New Issue: Grapevine (City of) TX MOODY'S ASSIGNS AN A3 RATING TO CITY OF GRAPEVINE [TX] $6.16 MILLION WATERWORKS AND SEWER SYSTEM REVENUE REFUNDING BONDS, SERIES 2002 RATING AFFECTS $31.3 MILLION IN OUTSTANDING REVENUE DEBT Water/Sewer TX Moody's Rating ISSUE RATING Waterworks and Sewer System Revenue Refunding Bonds, Series 2002 A3 Sale Amount Expected Sale Date Rating Description Opinion $6,160,000 08/19/02 Water and Sewer Revenue NEW YORK, Aug 19, 2002 -- Moody's Investors Service has assigned an A3 rating to the upcoming sale of the City of Grapevine's [TX] $6.16 million Waterworks and Sewer System Revenue Refunding Bonds, Series 2002. Concurrently, Moody's has affirmed the A3 rating on the City's outstanding revenue bonds. The rating assignment reflects the City's well-maintained financial operations, consistent debt service coverage, and manageable debt levels. Bond proceeds will be used to refund certain outstanding revenue bond obligations for a net present value savings of 5.2% of the refunded principle. Bondholder security is provided by a first lien on and pledge of the New Revenues of the City's Waterworks and Sewer System and a fully funded debt service reserve fund upon closing. Located adjacent to the Dallas Fort Worth International Airport in Tarrant County (Moody's rated Aaa), the City of Grapevine is strategically located in the heart of the Dallas/Fort Worth metropolitan area. Water supply is provided by two sources, Lake Grapevine, which supplies the northern portion of the City and Trinity River Authority, which is contractually obligated to provide service under a 35 -year contract that began in 1981. The City's water and wastewater customer base has historically grown at an average annual rate of 2% over the past five years. Beginning in 2001, the number of wastewater accounts declined to 11,924 from 12,501. Although management indicates the decrease is not due to any particular event, officials speculate that it may be a result of a decelerated rate of construction within the City. Although the customer base has decreased slightly, the City's assessed valuation has continued to increase at a rate of 8.7% annually over the past five years. In addition, the per capita income of individuals living in Grapevine increased 61.6% between 1990 and 2000 to $31,549 from $19,526, which was significantly more than the 52% the State experienced during the same time period. System financial operations have historically been maintained to provide debt service coverage that consistently exceeds the additional bonds test of 1.25x average annual debt service on parity debt and new issuance. During fiscal year 2001, coverage was 1.75x debt service expenditures and revenues provide for maximum annual debt service coverage of 1.50x. Coverage in 2001 was a decrease from fiscal year 2000 as a result of a decline in revenues related to wet weather that occurred during the calendar year. City officials report that revenues continue to be down from budget in fiscal year 2002 due to excessively wet weather, which is uncharacteristic of the Texas climate. However, officials have pro -actively implemented a policy to review budgeted projects to determine if they can be delayed and review personnel costs to reduce expenditures in the event revenues do not rebound prior to the end of the year. The last water and sewer rate increase occurred in October 2000 and plans at that time were to institute additional increases in fiscal year 2002 and 2003. Currently the City has decided to forgo those increases and will continue to re-evaluate the need for rate adjustments on an annual basis. Moody's believes that City officials are committed to undertaking appropriate actions to assure the maintenance of adequate coverage of existing and future debt obligations of the system consistent with this rating category. The system's debt ratio increased in fiscal year 2001 to 34.6% from 29.9% in fiscal year 2000. Although the increase is attributed to a larger debt service payment, Moody's believes that this ratio will return to the fiscal year 2000 level after the maximum annual debt service payment is paid during 2002 and debt service requirements begin to decline on an annual basis thereafter. The principle rate of retirement is above average with 58.4% retired in ten years. Officials allocate approximately $500,000 annually for rehabilitation and maintenance for the system infrastructure, which limits future borrowing needs. Moody's believes that debt levels will remain manageable given management's commitment to utilize pay-as-you-go capital financing for annual maintenance of the system and above average rate of principle retirement. KEY STATISTICS: Number of water accounts: 12,920 Number of wastewater accounts: 11,947 Fiscal 2001 debt service coverage: 1.75x Fiscal 2001 debt service coverage net of connection fees: 1.30x Debt Ratio: 34.6% Payout of Principle in 10 Years: 58.4% Fiscal 2001 Operating Ratio: 67.4% Analysts Nora Wittstruck Analyst Public Finance Group Moody's Investors Service Kristin Button Backup Analyst Public Finance Group Moody's Investors Service Douglas Benton Senior Credit Officer Public Finance Group Moody's Investors Service Contacts Journalists: (212) 553-0376 Research Clients: (212) 553-1625 © Copyright 2002 by Moody's Investors Service, 99 Church Street, New York, NY 10007. All rights reserved. ALL INFORMATION CONTAINED HEREIN IS COPYRIGHTED IN THE NAME OF MOODY'S INVESTORS SERVICE, INC. ("MOODY'S"), AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY'S PRIOR WRITTEN CONSENT. All information contained herein is obtained by MOODY'S from sources believed by it to be accurate and reliable. Because of the possibility of human and mechanical error as well as other factors, however, such information is provided "as is" without warranty of any kind and MOODY'S, in particular, makes no representation or warranty, express or implied, as to the accuracy, timeliness, completeness, merchantability or fitness for any particular purpose of any such information. Under no circumstance shall MOODY'S have any liability to any person or entity for (a) any loss or damage in whole or in part caused by, resulting from, or relating to any error (negligent or otherwise) or other circumstance or contingency within or outside the 4 control of MOODY'S or any of its directors, officers, employees or agents in connection with the procurement, collection, c compilation, interpretation, communication, publication or delivery of any such information, or (b) any direct, indirect, special, consequential, compensatory or incidental damages whatsoever (including without limitation, lost profits), even if MOODY'S is advised in advance of the possibility of such damages, resulting from the use of, or Inability to use, any such information. The credit ratings, if any, constituting part of the information contained herein are, and must be construed solely as, statements of opinion and not statements of fact or recommendations to purchase, sell or hold any securities. NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY'S IN ANY FORM OR MANNER WHATSOEVER. Each rating or other opinion must be weighed solely as one factor in any investment decision made by or on behalf of any user of the information contained herein, and each such user must accordingly make its own study and evaluation of each security and of each issuer and guarantor of, and each provider of credit support for, each security that it may consider purchasing, holding or selling. Pursuant to Section 17(b) of the Securities Act of 1933, MOODY'S hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MOODY'S have, prior to assignment of any rating, agreed to pay MOODY'S for the appraisal and rating services rendered by it fees ranging from $1,000 to $1,500,000. Publication date: 29 -Aug -2002 Reprinted from RatingsDirect n City or Grapevine, Texas, Waterworks and Sewer System Revenue Refunding Bonds, Series 2002 Credit Analyst: Wendy Wipperman, Dallas (1) 214-871-1421; James Breeding, Dallas (1) 214-871-1407 Rationale The 'A' rating on Grapevine, Texas' water and sewer system revenue bonds reflects the system's: • Inclusion in the diverse Dallas -Fort Worth consolidated MSA, • Strong economic growth and an expanding customer base, • High income and wealth levels, and • Strong debt service coverage (DSC) at more than 2 times (x) maximum annual debt service requirements. Mitigating credit factors include the system's: • Escalating operating and debt service costs; and • Increasing, although still competitive, rates, providing flexibility to meet future capital needs. The city's pledge of net system revenues secures the bonds. Grapevine's development has been greatly influenced by the presence of Dallas -Fort Worth International Airport, which is largely within city limits. Tax base growth has been rapid, increasing 49% between 1998 and 2002. The city's utility system has experienced healthy customer base growth of 10% between 1997 and 2001. Median household income levels are high at 169% and 161 % of state and national levels, respectively. The customer base is diverse with the 10 leading customers accounting for less than 10% of water consumption. Grapevine provides water and sewer service from city -owned facilities and through a contract with Trinity River Authority (TRA). Expectations of growth in northern Grapevine have required additional water and wastewater purchases from TRA, increasing contract expenses to $4.700 million in fiscal 2001 from $2.668 million in fiscal 1997. Historically, revenues had not risen sufficiently to keep pace with increased operating costs associated with TRA purchases. The city council adopted an 8% water and rate increase that became effective on Sept. 30, 2001. The combined water and sewer monthly residential bill of $47.38 for 7,500 gallons of consumption is still competitive with neighboring systems. The city council also adopted a policy of annual rate reviews. Fiscal 2001 net system revenues, including connection charges, provided strong 2.39x annual DSC and 2.05x maximum annual DSC. In fiscal 2001, total annual fixed -charge coverage, including payments to TRA, was still strong at 1.6x. The city has reduced its net transfers to the general fund to $26,000 in fiscal 2001 from $142,000 in fiscal 1999. System liquidity is strong and increasing; liquidity was 236 days' unrestricted cash on hand at fiscal year-end 2001. Legal provisions are adequate, including a 1.25x average annual debt service additional bonds test. Bond proceeds will refund system debt outstanding. The city expects to issue about $3 million in revenue bonds within the next two years for water and sewer distribution and collection improvements. The stable outlook reflects the system's stable and expanding customer base and the expectation that the city will continue to enact the necessary rate increases to maintain strong future DSC. Service Area Economy Grapevine's economy has been experiencing rapid development, which is evidenced by the 49% increase in property values since 1998. Dallas -Fort Forth International Airport's presence in Grapevine is a major factor in the city's economic growth; the airport employs an estimated 33,000. American Airlines Inc. and, to a lesser extent, Delta Air Lines have experienced significant layoffs since September 11; the two airlines also account for nearly 18% of 2002 assessed value (AV) combined. Certified AV for fiscal 2003 reflects a 2% decrease compared to fiscal 2002 AV due to reductions in airline personal property values. In 2001, state legislation was adopted that limits Grapevine's share of future airport property tax base growth to one- third of any incremental growth over fiscal 2000 levels. Dallas, Texas and Fort Worth, Texas, joint owners of the airport, will each receive one-third of incremental property tax revenues. Commercial property continues to account for nearly 60% of taxable AV, as well as most new development. SAM'S West Inc. (Sam's Club) and Wal-Mart Stores Inc. are expected to open locations in late 2002. Opryland Texas, a resort theme park, hotel, and conference center, should open in time for summer 2004, giving the city's retail base an added boost. Finances System liquidity is enhanced by $3.68 million of capital recovery charges held in restricted assets for future capital projects. In 1990, Grapevine instituted a capital recovery fee to be assessed on new construction in the city. An impact fee study was completed in 1990, which identified $7.13 million in future debt service costs that could be attributed to plant expansion to meet growth -related demand. Impact fees were increased by 45.0% in 1998 and another 27.5% over the next two years. The capital recovery reserve was $3.68 million at fiscal year-end 2001, or an increase of $1 million over the prior fiscal year. Future water supply costs are projected to decline to $1.57 per 1,000 gallons in fiscal 2007 from $1.78 per 1,000 gallons in fiscal 2002. Wastewater treatment costs are projected to increase to $1.17 per 1,000 gallons in fiscal 2007 from 94.9 cents per 1,000 gallons in fiscal 2002. Grapevine has identified $16.6 million in utility system capital projects through fiscal 2007: $5.8 million of which is estimated to be funded through future bond issues. a Published by Standard & Poor's, a Division of The McGraw-Hill Companies, Inc. Executive offices: 1221 Avenue of the Americas, New York, NY 10020. Editorial offices: 55 Water Street, New York, NY 10041. Subscriber services: (1) 212-438-7280. Copyright 2002 by The McGraw-Hill Companies, Inc. Reproduction in whole or in part prohibited except by permission. All rights reserved. Information has been obtained by Standard & Poor's from sources believed to be reliable. However, because of the possibility of human or mechanical error by our sources, Standard & Poor's or others, Standard & Poor's does not guarantee the accuracy, adequacy, or completeness of any information and is not responsible for any errors or omissions or the result obtained from the use of such information. Ratings are statements of opinion, not statements of fact or recommendations to buy, hold, or sell any securities. IN 1,1=.1}y�e. 0 ORDINANCE NO. AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF GRAPEVINE, TEXAS ADOPTING THE BUDGET FOR THE CITY OF GRAPEVINE, TEXAS FOR THE FISCAL YEAR BEGINNING OCTOBER 1, 2002 AND ENDING SEPTEMBER 30, 2003; PROVIDING FOR INTRA- AND INTER- DEPARTMENTAL FUND TRANSFERS; PROVIDING FOR INVESTMENT OF CERTAIN FUNDS; DECLARING AN EMERGENCY; AND PROVIDING AN EFFECTIVE DATE WHEREAS, notice of a public hearing on the budget for the City of Grapevine, Texas for the fiscal year 2002-2003 (FY 2003) was heretofore published in accordance with law; and WHEREAS, a public hearing was duly held and all interested persons were given an opportunity to be heard for or against any item therein. NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF GRAPEVINE, TEXAS; Section 1. That the appropriation amounts for the FY 2002-2003 budget for the different funds of the City of Grapevine are hereby fixed as follows: General Fund Utility Fund Debt Service Fund Convention & Visitors Bureau Fund Lake Enterprise Fund General Government Capital Projects Fund Permanent Street Maintenance Fund Permanent Capital Maintenance Fund - General Utility & Lake Enterprise Capital Projects Fund Utility Permanent Capital Maintenance Fund Stormwater Drainage Utility Fund $38,396,414 16,361,088 11,809,510 5,371,177 2,368,429 12,600,619 860,000 170,900 4,917,048 826,612 1,270,457 Section 2. That the City Council hereby adopts the revised budget for the fiscal year ending September 30, 2002 and the proposed Annual Operating Budget for the fiscal year ended September 30, 2003 and appropriates the funds contained therein. Section 3. That a copy of the official adopted 2002-2003 budget document shall be kept on file in the office of the City Secretary and the Grapevine Public Library. Section 4. That the City Manager be and is hereby authorized to make intra- and inter -departmental fund transfers during the fiscal year as becomes necessary in order to avoid over -expenditure of a particular object code. Section 5. That the City Manager is authorized to approve expenditures up to $15,000. Any expenditure over the $15,000 limit requires the approval of the City Council. Each expenditure authorized by the City Manager in Account 100-44701-120-1 in FY 2002 and FY 2003 is approved. Section 6. That the City Manager is authorized to reclassify positions within city service as warranted. Section 7. That the City Manager, and/or Assistant City Manager and/or Director of Administrative Services and/or Managing Director of Financial Services is authorized to invest any funds not needed for current use, whether operating funds or bond funds in Official City Depositories, in any investment instrument authorized by the City's Investment Policy and Investment Strategy and allowed by the Texas Public Funds Investment Act. Section 8. That the reserve requirement for the Convention and Visitors Bureau Fund is suspended for FY 2002 and FY 2003. Section 9. The fact that the fiscal year begins on October 1, 2002 requires that this ordinance be effective upon its passage and adopted to preserve the public peace, property, health, and safety and shall be in full force and effect from and after its passage and adoption, and emergency is hereby declared. PASSED AND APPROVED BY THE CITY COUNCIL OF THE CITY OF GRAPEVINE, TEXAS on this the 10th day of September, 2002. ATTEST: