City Manager's Minute: 2020 Budgeting Processes
Published: Saturday, September 21, 2019
From the City Manager’s Office:
It has been busy at the City of Newcastle since the last informational post on September 12th. I hope everyone enjoyed the summer and you're ready for the fall season. It’s my favorite time of the year!
I would like to share some information with you regarding budgeting. But first, let me say, it is my belief we are commanded to be good and faithful stewards of those things which we have received or have been given charge over. This is especially true of the revenues received from the citizens we serve, and how those funds are expended.
The budget for the City is based on a fiscal year which begins on July 1st and ends on June 30th each year. Most statutory cities follow this format as does the State of Oklahoma. Other cities may begin their budget year on January 1st to coincide with the calendar year, while the Federal budget year begins on October 1st.
Beginning in early March each year, the City Manager, Department Heads, and the Treasurer begin preparing for the upcoming budget year. Numerous meetings are held between March and May to create budgets that will be submitted to the City Council for review and approval before the end of the fiscal year. The process is labor intensive which includes creating one budget for the Newcastle Public Works Authority and one for the City of Newcastle. To begin the process, past and current trends of revenue collections are examined to determine projected revenues for the upcoming year. Economic factors must also be considered when projecting revenues. It is important to approach this part of the process with a conservative attitude so as not to overestimate revenues. It is equally important to remember that underestimating revenues may negatively affect operational budgets. Once projected revenues are determined, projected expenditures can then be made.
Each department, police, fire, communications, general government, planning, vehicle maintenance, water, and wastewater has its own budget. Just as with revenues, past and current trends of expenditures within each department, and economic factors are reviewed each year. Each departmental budget is broken down into three categories: salaries/benefits, operations/maintenance, and capital expenditures. Newcastle is blessed to have qualified, experienced people working in every department of the City. Ensuring employee retention and satisfaction is important to the City of Newcastle. The City strives to provide salaries and benefits comparable with other similar cities. Strong budgetary consideration is given to salaries each year to determine if cost of living adjustments (COLA) are possible. Within the operations/maintenance category of each departmental budget, there are multiple line items such as office supplies, training, fuel/oil, etc. Every line item within each departmental budget is reviewed with Department Heads to determine allocations for the upcoming fiscal year. Capital expenditures include items such as vehicles, computers, and other equipment purchases. The Local Planning Advisory Committee (LPAC) along with City staff prepared and presented a five-year capital improvement plan during the past year which was subsequently approved by City Council. This plan delineates immediate and long-term capital item needs in each department. The plan is reviewed and revised on an annual basis to maintain a list of those needs and to assist management in the budgeting process.
The budget process consists of many projections and estimates. The key is balance, which is also required by State law. Expenditures cannot exceed revenues. The fund balance cannot fall below zero. Most cities maintain a reserve fund balance for emergencies. The percentage of the reserve fund balance varies from city to city. The State of Oklahoma recommends municipalities maintain 15 to 20 percent of emergency reserves. Economic conditions and budgetary constraints are two factors that affect reserve fund levels. Newcastle’s reserve fund balance has fluctuated between 5 and 10 percent during the past several years. Increased sales and use tax revenues allowed the City to budget 25 percent for emergency reserve funds for the current fiscal year.
This informational post provides a high-level explanation of budgeting within the City of Newcastle. The City Council, management, and staff diligently work to be good and faithful stewards of that which we have been given charge over, especially the revenues received from the citizens we serve.
Have a wonderful weekend!