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Home My WebLink About08232011 City Council Work Session Notes - Budget Kickoff WORK SESSION NOTES ON BU � 1 ri (t SOV K ; DY) Purpose: _ ACV OK' tnis ( BWdF1 Present: Ki Ili•• chIY1qC,1', cohnci Members r s : I , VI a Fl 1 i Oa: Cs CO I,U�� ,Na J1 4 . ; ( l en& e • . / t4 i�I • < V/, 'and a rt-r - C_Torn) Called by: 00+C.5 ''ime `1 GU Date ****************************** ********************** u1:31Meet uire`f biCtOtA )1(Q9fi61 t r(h ply (aha crud) August 22, 2011 Discussion Outline City of Seward • Budget Policies • Budget Goals 2012/2013 Biennial Budget Budget Assumptions Policy Discussion & Administration Questions Council Direction Council Comments& Direction ❖ Appendix <Vx 14111.\ 1 - GF Fund Balance Policy: The City should maintain a level of undesignated fund Budget Policies balance equal to at least 3-6 months' of expenditures and transfers-out, in order to cover unanticipated revenue statramottegungemyr shortfalls,and to provide an adequate level of reserves to cover unforeseen needs and emergencies,as well as to cover the potential shortfall of all other City funds. (no proposed change) 1 August 22, 2011 0 IA - GF Fund Balance Policy: Status of Current Fund Balance Levels 1. When the level of undesignated fund balance is not within o Policy requires 3-6 months expenditures the desired range,a plan should be developed to bring fund and transfers out in reserves balance within the desired range within three years. (no proposed change. Proposed budget will ensure fund balance is within policy band.) o Policy level: $2.8M to $5.7M 2. When the level of undesignated fund balance is below the desired range,withdrawals from undesignated fund balance should be limited to emergency purposes. a Current balance: "$2.5M (2.7 months) (no proposed change) o May need $300K additional reserves; goal in budget is to bring within bands 1B - One-time Revenue Policy P4-N Status of One-Time Revenues One-time revenues(such as grant administration fees,sales of 0 The City has not transferred one-time revenues to the fixed assets,legal settlements,etc.)should not be utilized to fund Capital Acquisition Fund in more than ten years,due ongoing expenditures,but should be used to fund capital repairs to failure to meet General Fund 3-6 months'reserve and replacement. The use of one-time revenues to fund annual levels(except revenue sharing) budgets promotes structural budget deficits in future years. To the extent that the General Fund fund balance has reached 6 O Propose to transfer one-time Revenue Sharing to months'of expenditures and transfers-out,one-time revenues will CAF in 2012/2013 as was done in 2011. be allocated annually to the Capital Acquisition Fund. Note:Revenue sharing from 2010 was used to begin repay Electric Fund for (no proposed change) prior years'transfers to SMIC,etc. 2 • • August 22, 2011 lc- Revenue Stabilization Account Police Status of Revenue Stabilization Acco10. . The City has established a revenue stabilization account to O This account is currently not funded maintain a prudent level of financial resources to protect against u the need to reduce service levels or raise taxes or fees due to D 10/o of annual revenue is goal=$925,737 temporary revenue shortfalls or unpredicted one-time expenditures. The balance in this account should be equal to ten percent of the General Fund's annual revenues. This level of reserve is based on the City's increasing dependence on the visitor industry for the generation of sales taxes,bed taxes,and camping fees,as well as on State funding to fund general government services. (no proposed change) Note: Purpose of this account is to provide revenue stability so that we do not have to be as conservative in our revenue budget estimates. ra 411i. 2 - Debt Service Fund: Status of SMH Debt Fund • Debt service funds are used to account for the accumulation of o Funded by transfers to City from LTC facility resources for the payment of capital repairs and replacement, a Used solely to pay bond debt general long-term principal and interest,and related debt costs. The City's hospital debt servicefund consists primarily of O Initial years anticipate surplus due to rebasing proceeds from a 1%sales tax which are intended to cover methodology(may not materialize if State cuts to hospital-related costs,including debt related to the hospital reimbursement rates persist) construction bonds.The Seward Mountain Haven debt service fund accounts for debt related to the issuance of revenue bonds a Crucial to retain surplus for out-years when for the long-term care facility. reimbursement methodology does not pay for capital a Balance 12/31/10=$1,925,681 (no proposed change) a Balance 8/20/11=$1,583,373 a Annual debt payments approx.$1.97 million „ 3 August 22, 2011 Status of Hospital Debt Fund 2A- Hospital Capital Funding Policy: o Utilizes 1%sales tax=$900K/yr. The City will transfer 5%of the previous full years' Fund Balance Reserved for debt service to the hospital to fund 0 Cash Balance 12/31/10=$546,695 their annual capital budget. This transfer takes place only in o Cash Balance 8/20/11=435,457 years where the debt service reserve fund maintains a balance at least equal to the single years' highest debt 0 Principal payment due next in April,2012 service payments. o Bond debt matures 4/1/2013(2012=$879K;2013= $722K) (no proposed change) O Using$134,704/yr.to repay SGH PERS (Status: No funding currently going to PSMC for capital needs since fund balance not sufficient. Significant capital needs in 2013 and 0 SGH PERS Debt Balance 12/31/11=$1,374,859; ; beyond due to delays in funding capital--e.g.CT scanner,facility matures 2026 • repairs and upgrades,bed expansion needs) n Revenues pledged for SMH debt payments „ • 2B- Hospital PERS Payment Policy, , •\ 2C-Hospital Debt Service Reserve Policy: The City made loan payments to PERS from this fund The City will maintain a minimum level of fund balance reserved and then borrowed from the Motor Pool and Electric for hospital bond debt service(equal to the highest years' MRRF to repay this debt,and in years when there are principal and interest $879K)prior to utilizing reserves to repay sufficient reserves in this fund, they may be used to PERS debt service or to fund the annual hospital capital budget from this fund.Given that the hospital bonds will be paid off in repay a portion of those loans. 2013,the necessity of this level of reserves is less critical over time. (no proposed change) (Status: This Fund making annual payments of$134,704;balance (no proposed change) owed 12/31/11=$1,374,859) a 16 4 • • August 22, 2011 I 2D-SMH Debt Service Reserve Policy: , 2E-Accrued Annual Leave Funding Policy: The City will maintain a minimum level of fund balance reserved The City created an internal service fund for the purpose of for long-term care facility debt service(equal to the highest accumulating cash to pay for the accrued but unused portion years'principal and interest-$1.97M). Due to the frequent rebasing of reimbursement rates,as well as the potential for of annual leave for governmental fund employees. This changes in the reimbursement methodology,the City finds it account is to be designated solely for the payment of prudent to accumulate as much reserve in this account as possible. This will hedge against future declines in accumulated leave. reimbursement,as well as mitigate timing differences between depreciation and debt lifecycles. The City will therefore not spend these reserves on anything other than debt repayment. (no proposed change) (no proposed change) v u 3- Capital Acquisition Fund Policy:_ 3A- Limit on Allocation of Surplus: The City will designate 50%of the previous years'annual The allocation of surplus funds from the General Fund to the surplus(defined as the difference between revenues and Capital Acquisition Fund should occur only when the General transfers-in,and expenditures and transfers-out)into the Capital Acquisition Fund for the purpose of financingmajor capital Fund undesignated fund balance will continue to exceeds 3 maintenance and repairs(defined as items in xc ss of$20,000), months'reserves after the transfer is made. in any year where the General Fund fund balance is within the band of established polic levels. (Propose to strike-out above sentence. See policy 3D-slide #22-which specifies that 1))capital items are defined as (The purpose of this proposed change is to ensure that expenditures in excess of$20K•and 2)Council authorization for expenditures is at the$50K level,per General Fund reserves do not fall outside of the policy band purchasing Code.) in order to make this transfer to the Capital Fund) 5 August 22, 2011 3B- Sales of General Fixed Assets: 3C- Recurring Fund Source for Capita -� Revenues from the sales of general fixed assets The City should seek recurring funding sources to fund (including land)should be added to the Capital capital so that capital spending is not given last priority Acquisition Fund. in competing for limited financial resources. (no proposed change) (Status: the City has not identified a source of funds to fund capital. State Revenue Sharing has been allocated to capital (Proposed change also moves land sales revenue to the fund in 2011 and proposed for 20122013.) reserved for Capital purchases.) General Fixed Assets historic cost Q 12/31/10=$121 million • ® 4A-Motor Pool Appropriation Control Pol : 3D—Cap.Acq.Fund Appropriation Control Policy: Capital replacement funds are to be Motor Pool reserves should be preserved for the sole intended purpose of replacing City heavy equipment and vehicles,based restricted and distributed only for major on the established goals of minimizing fluctuations to annual capital outlay expenses. S-ifiteCapital operating budgets,and exercising fiscal prudence in saving for expenses are defined as those in excess of replacement of the City's fleet. $20,000.;All expenditures from these funds (no proposed change) in excess of$50,000 require approval by the City Council. Status: Cash balance 820/11=$787,363 Debt balance 8/20/11=$605,224 (The purpose of this proposed change is to make the dollar thresholds Asset historic cost=$5.3 million consistent with the city manager's spending authority for items up to Loans receivable=$1.1 million $50,000.) Upcoming need=$450K fire engine Note: In 2010,discussed replacing word"should"with"will". No apparent consensusto change. 6 August 22, 2011 0 4B-Loans from Motor Pool to other Funds: 4C-Equipment Replacement Schedule: Loans from Motor Pool to the other funds will be The City has established a Fleet Replacement Policy repaid with interest to the Motor Pool in order to to be approved by the City Council which allows for safeguard the viability of the long-range vehicle the routine and timely replacement of City vehicles and heavy equipment replacement plan. at a certain mileage interval per vehicle type, with the primary goals of maximizing safety and trade-in (no proposed change) values. Status: Loan repayments are current. Loans receivable$1.1 (no proposed change) million from SGH PERS($1.006M)and 50-ton boat lift ($125K). Status-Fleet Replacement Policy established as part of Bird's enterprise fund rate review,and has yet to be brought forward to the City Council for approval 35 36 5 Enterprise Funds: J•' 5A-Annual Rate Review Policy The City'senterprisefundsareusedtoaccountforoperations Rates should be reviewed annually to •-- that are financed and operated inamannersimilartobusiness- determine if they are adequate to cover like entities. It is the intent of the City Council that the cost of annual operating and capital costs, plus the providing goods and services through an enterprise fund be financed or recovered primarily through user fees. The City annual cost of depreciation. maintains the following enterprise funds: Small Boat Harbor, Recommendations for annual rate Seward Marine lndustnal Center,Parking,Electric,Water,and adjustments should be made biennially to Wastewater. the City Council. (Purpose of change is due to rate reviews being done now at the time of biennial budget preparation. Previously stated that "recommendations for rate adjustments should be made annually to the City Council.") 3) 36 7 August 22, 2011 Status of annual rate reviews 5B—Enterprise Fund Depreciation Reserve Funds o City has been reviewing rates biennially prior to budget The City has established a major repair and replacement process fund(MRRF)for each of its major enterprise funds o Annual rate changes included in budget (Small Boat Harbor,Electric,Water,and Wastewater). o Reviews are now standard process o CPI increase added to tariffs was critical (no proposed change) o Rates insufficient to address critical and high-risk needs but progress being made a Last formal(third-party)rate review 1993,was not implemented due to lack of political will o Lack of support for full-blown rate reviews due to cost,but needed Status of Depreciation Funding 5C—Ent.Fund Depreciation Funding Policy: „.A. Status: The policy of the City shall be to fund a minimum of 100%of the • Harbor=$206,246 cash vs assets of$27 million(*a) annual rate of depreciation,recognizing that failure to establish Annual contribution s/b min.SI.IM pa policy adequate reserves for the replacement of plant and equipment shifts the financial burden of such major repairs and replacement, • Electric=$423,889 cash vs assets of$56.3 million Annual contribution s/b min.$1.4M pa policy to future generations,creating an imbalance of inter-generational equity. • Water=$4,019 cash vs assets of$9.1 million• Annual contribution sib min.5204K pa policy Note: This policy was changed from 50%to 100%in 2010 • Sewer=$112,115 cash vs assets of$12.1 million' Annual contribution s/b min.5276K pa policy •Ase vela.are at historic ci t;significantly low value than what it would catst to repins asses,and elude s u slgraiable asses log haul). (a)Hard,r capital renewal fa plus raw fish has ding eannarkul for harbor-related capital beginning 2011. 8 • August 22, 2011 5C(1)-Depreciation Funding Policy,contd 1 5C(2)-Depreciation Funding Policy,contd "Funding depreciation"is defined as either placing equivalent Exception: Where Council determines that a specific cash into the MRRF Fund,or spending on capital repairs valued enterprise fund asset will not be replaced at ratepayer or greater than$20,000,such that the total amount invested in major taxpayer cost,but will be replaced through grants,or not maintenance and repair is at least 100%of the annual depreciation. Investments in new infrastructure are not be replaced at all,it may be prudent not to fund considered investments in capital for the purpose of depreciation depreciation on that item. funding,since they do not replace existing infrastructure. (no proposed change) (no proposed change) 33 6A-General Policies(Tax Cap Policy): 5', -�, Continue to support an increase in the Kenai ' Peninsula Borough sales tax cap above Budget Preparation $500. (no proposed change) 35 36 9 , August 22, 2011 Previous Council suggestions implemented` Previous Council o Motor Pool—developed priority list for replacing Direction Accomplished vehes/egro o Energy improvements O Developed plan to repay electric fund a Customer service improvements (job descriptions revised, online bill pay,new economic development position with UA) Budget Goals -� O Maintain current service levels and add new library/museum facility Budget Goals 0 Present Council with balanced budget 0 Achieve General Fund reserves within policy band IISMOMMAINOPUSift 0 Address growing deferred maintenance O Address capital infrastructure needs O Become self-sufficient in anticipation of declining federal/state funding o Protect long-term financial health of City ❑ Strengthen health of enterprise funds and meet critical and high-risk capital needs;begin funding depreciation at achievable levels ❑ Restore motor pool contributions to maintain plan to replace existing vehicles and heavy equipment 10 , August 22, 2011 iRevenue Assumptions ,� C Anticipate revenue levels for sales tax,camping,bed tax consistent with 2010 actual levels Budget Assumptions ❑ Be conservative in revenue assumptions given lack of safety net ❑ Assume State revenue sharing of$228,933;one-time revenues to Capital Acquisition Fund a Continue search for ways to assess entities receiving services but not paying ❑ During year-2 of biennial budget,identify potential revenue sources to fund general government infrastructure and finalize Motor Pool equipment and vehicle replacement policy ❑ New alcohol/tobacco tax will not be built into budget until after election a Raw fish tax transferred from GF to Harbor as in 2010/2011 o Enterprise fund tariffs—CPI 5-yr.avg in 2012=2.8%;in 2013=$2.6% o Implement rate review recommendations for enterprise funds o Increase some recreation program and misc.General Fund fees :1 411. 1 Cost Assumptions o Non-discretionary cost increases don't exceed 1.8% ❑ Fill budget gap to fund library/museum capital and operating costs Cost Assumptions a Storage needed for parking electric cars ❑ City pays costs of existing library and existing museum facilities(utilities, etc.)pending alternative uses o Purchase of fire truck thru 7-year capital lease o Resume funding hospital capital budget when debt matures 2013 o New library/museum bonds begin in 2012 o New library/museum operating costs in 2012—personnel a New library/museum operating costs in 2013—facility o Chamber of commerce—50%of bed tax,per policy a Same level of support to Senior Center as in 2011 budget o Pass credit card convenience fees on to customers ❑ New accounting system and software 11 August 22, 2011 Administration Questions, Personnel Assumptions a Move harbor lease management to General Fund(Comm. Council Comments and Development),and a portion of revenues to offset a Business development position$25K in Comm.Develop. Direction a Comm.Development Director position remains vacant a New operator in Elec Fund paid with grant;train to replace retiring operator a Increase part-time library staff to full-time to assume museum tasks a Assume 1.8%cola for 2012;2.5%for 2013 a Health insurance cost increases—10%;maintain current cost-share split between employer/employee o State continues to pay PERS rate>22% a If budget gap can't be filled with projected revenues consider eliminating or consolidating positions(results in reduction of services) 4s Administration Questions: Administration Questions: o How does Council intend to pay for library/museum bonds if a Do you want us to sell old library building and land? alcohol/tobacco tax fails? a Are there any City facilities you don't want to replace when a Are you willing to consider reduced library hours or service they fail? levels to pay increased operating costs? a Should we attempt to outsource operations at SMIC(250- o Are there specific categories of services we must protect? ton lift,boat storage)? o Are there specific services you do not want to continue to o 250-ton lift is at end of useful life;should we attempt to provide? RFP operations and/or consider capital lease to buy new? o Do you want us to consider sale of the electric utility? o If budget gap exists,should we contribute to Boys&Girls o Do you want us to consider converting LTC bonds from Club and/or other non-profits? non-taxable to taxable to open possibility of future sale of a Does Council want to assume ownership of Legends LTC and hospital? Building assuming it is made available by Park Service? o Should we reconsider special contract subsidies for ASLC (electric)and Seward Fisheries(elec,water,harbor lease)? o Should we consider optional ways to subsidize ASLC or Seward Fisheries such as from General Fund rather than enterprise funds? 47 12 August 22, 2011 Council Comments & Direction Appendix: Historical Info & Trends .9 5° III ,0._ Revenue History— sales tax -� Mill Rate History—property taxes o Sales taximplemented March,1982 I%for hospital operations; i r p general government if any left over — - p I= o Rate increased from I%to 3%June,1986 to fund general "m— — — — —1 ''' °—•'5.• _ ® ® U government o Oct 1998 advisory vote to increase from 3%to 4%was not `m approved. Stated purpose of increase:to establish Capital — Improvement Trust Fund. I 0 2003 advisory vote to increase sales tax rate from 3%to 4%was 4.03 approved by voters. Voter education clearly stated purpose was to - — — address increased costs rather than capital. m• �'a�'a� �,.°� �'.o�>.:�.:�."�.�� O 2010 advisory vote to increase sales tax by 0.5%to fund library/museum capital was not approved. o.m °S.r Pani flood 5.5,4e 9ch of Hal 13 • August 22, 2011 Why Reserves? 0 General Fund fund balance hist \ o City has no depreciation fund to cover 1 replacement of$75M governmental assets A `m°a°° '° o General Fund must cover deficits in all other .° funds; SMIC annual deficit— $82K after debt dec. _° paid off • I CI 030 t — — Economic uncertainty 30. 1 „1 o Used to leverage grant dollars(matching) 2030°°° ' o Cover unforeseen needs/emergencies (flooding, t''t avalanches,healthcare,ASLC,critical/high risk 1 .1: . �. .1. i ' unfunded needs in enterprise funds) 2000 2�' �' �° �°° °°° 2002000 °'° 20 "" o No capital fund to cover deferred maintenance (roads, buildings,equip)or new capital CPI Information: Cash Balances in all funds s CONSUMER 00(5 i.AEXNFORMA00N 1\ General Fond f 544Fj094 ten{a..Is 0.55r 30n.*t.nw6ew1955155 • Available 2,881,811 COe3.43VSAO Harbor Fund 605,477 i • Not Seasons:.,.2us0l.0000,.00.*K,u nems eau Perna ee2.191a.10 Harbor Capital Projects 2,458,113 ay ma,.a SMIC Fund (44,321) A,,,1, 0..113. Parking Fund 373,092 CR CR mu ..i • ..1.1 ea Electric Fund 192,157 2000 1080 'M. 0.203% 205. ,'tn% MO' Ie0ZOO 21502, 310:3% 001 1'Nl Electric Capital Projects 1,056,999 mm 1020 'pia 1191011 000% 1'N. Water Fund 1,693,156 203 10300 2'100 .now 1.01. 1100• 2300 191 000 21{5% 2122 C. 0* 0000 13 0 Wares Capital Projects 121,504 2000 In... 3°011 213.1 000• 1300. Sewer Fund 605,642 2000 1110 32011. 0001. 200• 1500. Sewer Capital Projects 112,115 x11 1N Zee 2231* 531101. 30011 ,1100.• 1 2001 191 M. 951251. 3 D 2''0• Motor Pool Fund 787,363 2000 194- 511* tato to•.. '-0% ee200% 000. 3500. Capital Projects(grants) (291,685) 20,1 2011 20 91• Special Revenue Funds(grants) (89,764) Hospital Debt Service (35,457) Enwpm.ruNI'r'Annual CMime.* ilinsr300�viaLTC Debt Service 1,583,373 atel 200.2001001 % TYC Agency Fund 39,980 21312.38d on 2016a0m CPO 2816 213 101110 00 2006-2010 CPU 201 Compensated Absences 457,188 ss ss Total Cash Balance at 820/11 S 15,073,026 •0000101355 14 1,0(41-,ssioy, tc t1- kick,off:) CITY OF SEWARD 20'0/�z 2012/2013 BUDGET POLICIES 1. General Fund: The general fund is the general operating fund of the City of Seward, funded primarily through taxes, intergovernmental revenues, and user fees. This fund accounts for the current financial resources of the City which are not required by law or administration action,to be accounted for in another fund. A) Fund Balance Policy: The City should maintain a level of undesignated fund balance equal to at least 3-6 months' of expenditures and transfers-out, in order to cover unanticipated revenue shortfalls, and to provide an adequate level of reserves to cover unforeseen needs and emergencies, as well as to cover the potential shortfall of all other City funds. 1. When the level of undesignated fund balance is not within the desired range, a plan should be developed to bring fund balance within the desired range within three years. 2. When the level of undesignated fund balance is below the desired range, withdrawals from undesignated fund balance should be limited to emergency purposes. B)One-time Revenue Policy:One-time revenues(such as grant administration fees,sales of fixed assets, legal settlements,etc.)should not be utilized to fund ongoing expenditures, but should be used to fund capital repairs and replacement. The use of one-time revenues to fund annual budgets promotes structural budget deficits in future years. To the extent that the General Fund fund balance has reached 6 months' of expenditures and transfers- out,one-time revenues will be allocated annually to the Capital Acquisition Fund. C) Revenue Stabilization Account: The City has established a revenue stabilization account to maintain a prudent level of financial resources to protect against the need to reduce service levels or raise taxes or fees due to temporary revenue shortfalls or unpredicted one-time expenditures. The balance in this account should be equal to ten percent of the General Fund's annual revenues. This level of reserve is based on the City's increasing dependence on the visitor industry for the generation of sales taxes, bed taxes, and camping fees,as well as on State funding to fund general government services. 2. Debt Service Fund: Debt service funds are used to account for the accumulation of resources for the payment of capital repairs and replacement,general long-term principal_ and interest,and related debt costs. The City's Hospital Debt Service Fund consists primarily of proceeds from a 1%sales tax which is intended to cover hospital-related costs,including debt related to the hospital construction bonds.The new Seward Mountain Haven Debt Service Fund will account for debt related to the issuance of revenue bonds for the long-term care facility. __- Formatted:None,Indent:Left: 0",Hanging: 0.5",Tab stops: 0.5",Left r CITY OF SEWARD 20x01-1201'7/2013 BUDGET POLICIES A) Hospital Capital Funding Policy: The City will transfer 5% of the previous full years' Fund Balance Reserved for Debt Service to the hospital to fund their annual capital budget. This transfer takes place only in years where the debt service reserve fund maintains a balance at least equal to the single years'highest debt service payments. B) Hospital PERS Payment Policy: The City made loan payments to PERS from this fund and then borrowed from the Motor Pool and Electric MRRF to repay this debt, and in years when there are sufficient reserves in this fund,they may be used to repay a portion of those loans. C)Hospital Debt Service Fund-Recommended Fund Balance Reserve Policy: The City will maintain a minimum level of fund balance reserved for hospital bond debt service (equal to the highest years'principal and interest—$878,500)prior to utilizing reserves to repay PERS debt service or to fund the annual hospital capital budget from this fund. Given that the hospital bonds will be paid off in 2013,the necessity of this level of reserves is less critical over time. D) Seward Mountain Haven Debt Service Fund— Fund Balance Reserve Policy: The City will maintain a minimum level of fund balance reserved for long-term care facility debt service(equal to the highest years'principal and interest-$1,973,360). Due to the frequent rebasing of reimbursement rates,as well as the potential for changes in the reimbursement methodology,the City finds it prudent to accumulate as much reserve in this account as possible. This will hedge against future declines in reimbursement,as well as mitigate timing differences between depreciation and debt lifecycles. The City will therefore not spend these reserves on anything other than debt repayment. E) Accrued Annual Leave Funding Policy: The City created an internal service fund for the purpose of accumulating cash to pay for the accrued but unused portion of annual leave for governmental fund employees. This account is to be designated solely for the payment of accumulated leave. . 3. Capital Acquisition Fund Policy:The City will designate 50%of the previous years' annual surplus(defined as the difference between revenues and transfers-in,and expenditures and transfers-out)into the Capital Acquisition Fund for the purpose of financing major capital maintenance and repairs(defined as items in excess of$20,000), • CITY OF SEWARD 204012044 1012/2013 BUD('LFT POT I1IFS in any year where the General Fund fund balance is within the band of established policy levels. •-- - - •• • _ -.--. - . .. A) Limit on Allocation of Surplus-The allocation of surplus funds from the General Fund to the Capital Acquisition Fund should occur only when the General Fund undesignated fund balance will continue to exceeds 3 months'reserves after the transfer is made. B) Sales of General Fixed Assets—Revenues from the sales of general fixed assets (including land)should be added to the Capital Acquisition Fund. C) Recurring Fund Source for Capital—The City should seek recurring funding sources to fund capital so that capital spending is not given last priority in competing for limited financial resources. D)Capital Acquisition Fund Appropriation Control-Capital replacement funds are to be restricted and distributed only for major capital outlay expenses. Since-eCapital expenses are defined as those in excess of$20,000.,aAll expenditures from these funds in excess of$50.000 require approval by the City CounciL 4. Motor Pool Internal Service Fund:The purpose of this fund is to establish a consistent funding mechanism for the replacement of the City's fleet of heavy equipment,mobile equipment,and vehicles. This mechanism minimizes the fluctuations to the annual operating budget when purchasing replacement equipment,and recognizes the annual cost of this equipment in each department's budget. The intent is to eventually fund all City vehicles and heavy equipment through this fund. A)Motor Pool Appropriation Control Policy:Motor Pool reserves should be preserved for the sole intended purpose of replacing City heavy equipment and vehicles,based on the established goals of minimizing fluctuations to annual operating budgets,and exercising fiscal prudence in saving for replacement of the City's fleet. B)Loans from the Motor Pool to other Funds will be repaid with interest to the Motor Pool in order to safeguard the viability of the long-range vehicle and heavy equipment replacement plan. C. Equipment Replacement Schedule: The City has established a Fleet Replacement Policy to be approved by the City Council,which will allow for the routine and timely replacement of City vehicles at a certain mileage interval per vehicle type,with the primary goals of maximizing safety and trade-in values. A CITY OF SEWARD 20-1440-14'111''/2013 BUDfcT POT I1'IES 5. Enterprise Funds: The City's Enterprise Funds are used to account for operations that are financed and operated in a manner similar to business-lilce entities. It is the intent of the City Council that the cost of providing goods and/or services through an enterprise fund be financed or recovered primarily through user fees. The City maintains the following enterprise funds:Small Boat Harbor,Seward Marine Industrial Center,Parking, Electric,Water,and Wastewater. A)Annual Rate Review Policy:Rates should be reviewed annually to determine if they are adequate to cover annual operating and capital costs,plus the annual cost of depreciation. Recommendations for annual rate adjustments should be made annually biennially to the City Council B) Enterprise Fund Depreciation Reserve Funds(Major Repair and Replacement Funds): The City has established a major repair and replacement fund(MRRF)for each of its major enterprise funds(Small Boat Harbor, Electric,Water,and Wastewater). C) Depreciation Funding Policy:The policy of the City shall be to fund a minimum of 100%of the annual rate of depreciation,recognizing that failure to establish adequate reserves for the replacement of plant and equipment shifts the financial burden of such major repairs and replacement,to future generations,creating an imbalance of inter- generational equity. 1) `Funding depreciation'is defined as either placing equivalent cash into the MRRF Fund,or spending on capital repairs valued greater than$20,000, such that the total amount invested in major maintenance and repair is at least 100%of the annual depreciation. Investments in new infrastructure are not considered investments in capital for the purpose of depreciation funding,since they do not replace existing infrastructure. 2) Exception: Where Council determines that a specific enterprise fund asset will not be replaced at ratepayer or taxpayer cost,but will be replaced through grants,or not be replaced at all,it may be prudent not to fund depreciation on that item. 6. General Policies: A)Tax Cap Policy: Continue to support an increase in the Kenai Peninsula Borough sales tax cap above$500. August 22, 2011 City of Seward 2012/2013 Biennial Budget Policy Discussion & Council Direction Discussion Outline •:• Budget Policies • Budget Goals • Budget Assumptions • Administration Questions • Council Comments & Direction • Appendix z 1 August 22, 2011 Budget Policies 1 - GF Fund Balance Policy: Y The City should maintain a level of undesignated fund balance equal to at least 3-6 months' of expenditures and transfers-out, in order to cover unanticipated revenue shortfalls, and to provide an adequate level of reserves to cover unforeseen needs and emergencies, as well as to cover the potential shortfall of all other City funds. (no proposed change) 4 2 August 22, 2011 1A - GF Fund Balance Policy:Y 1. When the level of undesignated fund balance is not within the desired range, a plan should be developed to bring fund balance within the desired range within three years. (no proposed change. Proposed budget will ensure fund balance is within policy band.) 2. When the level of undesignated fund balance is below the desired range, withdrawals from undesignated fund balance should be limited to emergency purposes. (no proposed change) s Ct Status of Current Fund Balance Levels. Policy requires 3-6 months expenditures and transfers-out in reserves Policy level: $2.8M to $5.7M Current balance: N$2.5M (2.7 months) May need $300K additional reserves; goal in budget is to bring within bands 3 r , August 22, 2011 1B - One-time Revenue Policy: Y One-time revenues (such as grant administration fees, sales of fixed assets, legal settlements, etc.)should not be utilized to fund ongoing expenditures, but should be used to fund capital repairs and replacement. The use of one-time revenues to fund annual budgets promotes structural budget deficits in future years. To the extent that the General Fund fund balance has reached 6 months' of expenditures and transfers-out, one-time revenues will be allocated annually to the Capital Acquisition Fund. (no proposed change) Status of One-Time Revenue; 9 The City has not transferred one-time revenues to the Capital Acquisition Fund in more than ten years, due to failure to meet General Fund 3-6 months' reserve levels (except revenue sharing) o Propose to transfer one-time Revenue Sharing to CAF in 2012/2013 as was done in 2011. Note: Revenue sharing from 2010 was used to begin repay Electric Fund for prior years'transfers to SMIC,etc. a s 8 4 August 22, 2011 1C - Revenue Stabilization Account Poli ` The City has established a revenue stabilization account to maintain a prudent level of financial resources to protect against the need to reduce service levels or raise taxes or fees due to temporary revenue shortfalls or unpredicted one-time expenditures. The balance in this account should be equal to ten percent of the General Fund's annual revenues. This level of reserve is based on the City's increasing dependence on the visitor industry for the generation of sales taxes,bed taxes, and camping fees, as well as on State funding to fund general government services. (no proposed change) Note: Purpose of this account is to provide revenue stability so that we do not have to be as conservative in our revenue budget estimates. 9 Status of Revenue Stabilization Account This account is currently not funded n 10% of annual revenue is goal = $925,737 I 5 August 22, 2011 2 - Debt Service Fund: Debt service funds are used to account for the accumulation of resources for the payment of capital repairs and replacement, general long-term principal and interest, and related debt costs. The City's hospital debt service fund consists primarily of proceeds from a 1% sales tax which are intended to cover hospital-related costs, including debt related to the hospital construction bonds. The Seward Mountain Haven debt service 4 fund accounts for debt related to the issuance of revenue bonds for the long-term care facility. (no proposed change) 11 I Status of SMH Debt Fund Funded by transfers to City from LTC facility u Used solely to pay bond debt ❑ Initial years anticipate surplus due to rebasing methodology (may not materialize if State cuts to reimbursement rates persist) a Crucial to retain surplus for out-years when reimbursement methodology does not pay for capital ❑ Balance 12/31/10 = $1,925,681 — Balance 8/20/11 = $1,583,373 u Annual debt payments approx. $1.97 million 12 6 August 22, 2011 A-• Status of Hospital Debt Fund ❑ Utilizes 1% sales tax = $900K /yr. ❑ Cash Balance 12/31/10 = $546,695 ❑ Cash Balance 8/20/11 = -$35,457 ❑ Principal payment due next in April, 2012 ❑ Bond debt matures 4/1/2013 (2012 = $879K; 2013 = $722K) Using $134,704/yr. to repay SGH PERS SGH PERS Debt Balance 12/31/11 = $1,374,859; matures 2026 Revenues pledged for SMH debt payments 13 t 2A - Hospital Capital Funding Policy: The City will transfer 5% of the previous full years' Fund Balance Reserved for debt service to the hospital to fund their annual capital budget. This transfer takes place only in years where the debt service reserve fund maintains a balance at least equal to the single years' highest debt service payments. (no proposed change) (Status: No funding currently going to PSMC for capital needs since fund balance not sufficient. Significant capital needs in 2013 and beyond due to delays in funding capital -- e.g. CT scanner, facility repairs and upgrades, bed expansion needs) 14 7 August 22, 2011 2B - Hospital PERS Payment Policy:''" .' The City made loan payments to PERS from this fund and then borrowed from the Motor Pool and Electric MRRF to repay this debt, and in years when there are sufficient reserves in this fund, they may be used to repay a portion of those loans. (no proposed change) (Status: This Fund making annual payments of$134,704; balance owed 12/31/11 = $1,374,859) 15 2C - Hospital Debt Service Reserve Policy: The City will maintain a minimum level of fund balance reserved for hospital bond debt service (equal to the highest years' principal and interest —$879K) prior to utilizing reserves to repay PERS debt service or to fund the annual hospital capital budget from this fund. Given that the hospital bonds will be paid off in 2013,the necessity of this level of reserves is less critical over time. (no proposed change) 16 8 August 22, 2011 2D - SMH Debt Service Reserve Policy: The City will maintain a minimum level of fund balance reserved for long-term care facility debt service (equal to the highest years' principal and interest— $1.97M). Due to the frequent rebasing of reimbursement rates, as well as the potential for changes in the reimbursement methodology, the City finds it prudent to accumulate as much reserve in this account as possible. This will hedge against future declines in reimbursement, as well as mitigate timing differences between depreciation and debt lifecycles. The City will therefore not spend these reserves on anything other than debt repayment. (no proposed change) 17 2E - Accrued Annual Leave Funding Policy: The City created an internal service fund for the purpose of accumulating cash to pay for the accrued but unused portion of annual leave for governmental fund employees. This account is to be designated solely for the payment of accumulated leave. (no proposed change) 9 August 22, 2011 3 - :Capital Acquisition Fund Policy: l' q Y The City will designate 50%of the previous years' annual surplus (defined as the difference between revenues and transfers-in, and expenditures and transfers-out) into the Capital Acquisition Fund for the purpose of financing major capital maintenance and repairs (defined as items in excess of$20,000), in any year where the General Fund fund balance is within the band of established policy levels. . . - - . . - . . (Propose to strike-out above sentence. See policy 3D - slide #22 - which specifies that 1) capital items are defined as expenditures in excess of $20K; and 2) Council authorization for expenditures is at the $50K level, per purchasing Code.) 19 y 3A - Limit on Allocation of Surplus: The allocation of surplus funds from the General Fund to the El Capital Acquisition Fund should occur only when the General Fund undesignated fund balance will continue to exceeds 3 months' reserves after the transfer is made. (The purpose of this proposed change is to ensure that General Fund reserves do not fall outside of the policy band in order to make this transfer to the Capital Fund) 20 i 1 10 August 22, 2011 3B - Sales of General Fixed Assets: Revenues from the sales of general fixed assets (including land) should be added to the Capital Acquisition Fund. (Proposed change also moves land sales revenue to the fund reserved for Capital purchases.) 21 3C - Recurring Fund Source for Capita : The City should seek recurring funding sources to fund capital so that capital spending is not given last priority in competing for limited financial resources. (no proposed change) (Status: the City has not identified a source of funds to fund capital. State Revenue Sharing has been allocated to capital in 2011 and proposed for 2012/2013.) General Fixed Assets historic cost L 12/31/10=$121 million 11 22 11 • August 22, 2011 3D - Cap. Acq. Fund Appropriation Control Policy: Capital replacement funds are to be restricted and distributed only for major capital outlay expenses. Since Capital expenses are defined as those in excess of $20,000.7 All expenditures from these funds in excess of $50,000 require approval by the City Council. (The purpose of this proposed change is to make the dollar thresholds consistent with the city manager's spending authority for items up to $50,000.) 23 4A - Motor Pool Appropriation Control Polk Motor Pool reserves should be preserved for the sole intended purpose of replacing City heavy equipment and vehicles, based on the established goals of minimizing fluctuations to annual operating budgets, and exercising fiscal prudence in saving for replacement of the City's fleet. (no proposed change) Status: Cash balance 8/20/11 =$787,363 Debt balance 8/20/11= $605,224 Asset historic cost= $5.3 million Loans receivable=$1.1 million Upcoming need= $450K fire engine Note: In 2010, discussed replacing word "should"with"will". No apparent 24 consensus to change. 12 August 22, 2011 4B - Loans from Motor Pool to other Funds: Loans from Motor Pool to the other funds will be repaid with interest to the Motor Pool in order to safeguard the viability of the long-range vehicle and heavy equipment replacement plan. (no proposed change) Status: Loan repayments are current. Loans receivable $1.1 million from SGH PERS ($1.006M) and 50-ton boat lift ($125K). 4C - Equipment Replacement Schedule: • The City has established a Fleet Replacement Policy to be approved by the City Council which allows for the routine and timely replacement of City vehicles at a certain mileage interval per vehicle type, with the primary goals of maximizing safety and trade-in values. (no proposed change) Status - Fleet Replacement Policy established as part of Bird's enterprise fund rate review, and has yet to be brought forward to the City Council for approval 26 13 August 22, 2011 5 Enterprise Funds: The City's enterprise funds are used to account for operations that are financed and operated in a manner similar to business- like entities. It is the intent of the City Council that the cost of p providing goods and services through an enterprise fund be financed or recovered primarily through user fees. The City maintains the following enterprise funds: Small Boat Harbor, Seward Marine Industrial Center, Parking, Electric, Water, and Wastewater. 27 5A - Annual Rate Review Policy Rates should be reviewed annually to determine if they are adequate to cover annual operating and capital costs, plus the annual cost of depreciation. Recommendations for annual rate adjustments should be made biennially to the City Council. (Purpose of change is due to rate reviews being done now at the time of biennial budget preparation. Previously stated that "recommendations for rate adjustments should be made annually to the City Council.") 28 14 August 22, 2011 Status of annual rate reviews n City has been reviewing rates biennially prior to budget process I ❑ Annual rate changes included in budget ❑ Reviews are now standard process a CPI increase added to tariffs was critical a Rates insufficient to address critical and high-risk needs but 3progress being made , o Last formal (third-party) rate review 1993, was not implemented due to lack of political will o Lack of support for full-blown rate reviews due to cost,but needed 29 iiii 5B — Enterprise Fund Depreciation Reserve Fun The City has established a major repair and replacement fund (MRRF) for each of its major enterprise funds (Small Boat Harbor, Electric, Water, and Wastewater). (no proposed change) 15 • August 22, 2011 5C - Ent. Fund Depreciation Funding l' The policy of the City shall be to fund a minimum of 100%of the annual rate of depreciation, recognizing that failure to establish adequate reserves for the replacement of plant and equipment shifts the financial burden of such major repairs and replacement, to future generations, creating an imbalance of inter-generational equity. Note: This policy was changed from 50% to 100% in 2010 Status of Depreciation Funding Status: ■ Harbor=$206,246 cash vs assets of$27 million(*a) Annual contribution s/b min.$1.1M per policy • Electric=$423,889 cash vs assets of$56.3 million* Annual contribution s/b min.$1.4M per policy • Water=$4,019 cash vs assets of$9.1 million* Annual contribution s/b min.$204K per policy • Sewer=$112,115 cash vs assets of$12.1 million* Annual contribution s/b min.$276K per policy *Asset values are at historic cost;significantly less value than what it would cost to replace assets,and exclude non-depreciable assets(e.g.land). (a)Harbor capital renewal fee plus raw fish tax being earmarked for harbor-related capital beginning 2011. 32 16 August 22, 2011 5C(1) - Depreciation Funding Policy, contd1 "Funding depreciation" is defined as either placing equivalent cash into the MRRF Fund, or spending on capital repairs valued greater than$20,000, such that the total amount invested in major maintenance and repair is at least 100%of the annual depreciation. Investments in new infrastructure are not considered investments in capital for the purpose of depreciation funding, since they do not replace existing infrastructure. i (no proposed change) 33 5C(2) - Depreciation Funding Policy, contd , Exception: Where Council determines that a specific enterprise fund asset will not be replaced at ratepayer or taxpayer cost, but will be replaced through grants, or not be replaced at all, it may be prudent not to fund depreciation on that item. (no proposed change) 34 17 August 22, 2011 6A - General Policies (Tax Cap Policy): Continue to support an increase in the Kenai Peninsula Borough sales tax cap above $500. (no proposed change) 35 Budget Preparation 35 18 August 22, 2011 Previous Council Direction Accomplished 3? b Previous Council suggestions implemented o Motor Pool—developed priority list for replacing vehicles/equip o Energy improvements o Developed plan to repay electric fund o Customer service improvements (job descriptions revised, online bill pay, new economic development position with UA) 19 August 22, 2011 Budget Goals 39 �t. Budget Goals ❑ Maintain current service levels and add new library/museum facility o Present Council with balanced budget ❑ Achieve General Fund reserves within policy band ❑ Address growing deferred maintenance ❑ Address capital infrastructure needs n Become self-sufficient in anticipation of declining federal/state funding u Protect long-term financial health of City o Strengthen health of enterprise funds and meet critical and high-risk capital needs; begin funding depreciation at achievable levels o Restore motor pool contributions to maintain plan to replace existing vehicles and heavy equipment 40 20 August 22, 2011 Budget Assumptions Revenue Assumptions 0 ❑ Anticipate revenue levels for sales tax,camping,bed tax consistent with 2010 actual levels a Be conservative in revenue assumptions given lack of safety net o Assume State revenue sharing of$228,933;one-time revenues to Capital Acquisition Fund a Continue search for ways to assess entities receiving services but not paying During year-2 of biennial budget,identify potential revenue sources to fund general government infrastructure and finalize Motor Pool equipment and vehicle replacement policy o New alcohol/tobacco tax will not be built into budget until after election ❑ Raw fish tax transferred from GF to Harbor as in 2010/2011 a Enterprise fund tariffs—CPI 5-yr.avg in 2012=2.8%;in 2013=$2.6% a Implement rate review recommendations for enterprise funds o Increase some recreation program and misc.General Fund fees 42 (_____ 21 August 22, 2011 Cost Assumptions 9 Cost Assumptions ❑ Non-discretionary cost increases don't exceed 1.8% ❑ Fill budget gap to fund library/museum capital and operating costs o Storage needed for parking electric cars O City pays costs of existing library and existing museum facilities(utilities, etc.)pending alternative uses Purchase of fire truck thru 7-year capital lease Resume funding hospital capital budget when debt matures 2013 1 New library/museum bonds begin in 2012 L New library/museum operating costs in 2012—personnel o New library/museum operating costs in 2013—facility o Chamber of commerce—50%of bed tax,per policy o Same level of support to Senior Center as in 2011 budget o Pass credit card convenience fees on to customers • New accounting system and software 22 August 22, 2011 Personnel Assumptions Move harbor lease management to General Fund (Comm. Development), and a portion of revenues to offset Business development position $25K in Comm. Develop. Comm. Development Director position remains vacant New operator in Elec Fund paid with grant; train to replace retiring operator Increase part-time library staff to full-time to assume museum tasks Assume 1.8% cola for 2012; 2.5% for 2013 Health insurance cost increases — 10%; maintain current cost-share split between employer/employee State continues to pay PERS rate > 22% If budget gap can't be filled with projected revenues, consider eliminating or consolidating positions (results in reduction of services) 45 Administration Questions, Council Comments and Direction 46 23 August 22, 2011 Administration Questions: How does Council intend to pay for library/museum bonds if alcohol/tobacco tax fails? Are you willing to consider reduced library hours or service levels to pay increased operating costs? Are there specific categories of services we must protect? Are there specific services you do not want to continue to provide? Do you want us to consider sale of the electric utility? Do you want us to consider converting LTC bonds from non-taxable to taxable to open possibility of future sale of LTC and hospital? Should we reconsider special contract subsidies for ASLC (electric) and Seward Fisheries (elec, water, harbor lease)? Should we consider optional ways to subsidize ASLC or Seward Fisheries such as from General Fund rather than enterprise funds? 47 Administration Questions: Do you want us to sell old library building and land? Are there any City facilities you don't want to replace when they fail? Should we attempt to outsource operations at SMIC (250- ton lift, boat storage)? 250-ton lift is at end of useful life; should we attempt to RFP operations and/or consider capital lease to buy new? If budget gap exists, should we contribute to Boys & Girls Club and/or other non-profits? Does Council want to assume ownership of Legends Building assuming it is made available by Park Service? 48 24 August 22, 2011 Council Comments & Direction 49 Appendix: Historical Info & Trends 50 25 August 22, 2011 Revenue History — sales tax ❑ Sales tax implemented March, 1982 1%for hospital operations; general government if any left over ❑ Rate increased from 1%to 3%June, 1986 to fund general government ❑ Oct 1998 advisory vote to increase from 3%to 4%was not approved. Stated purpose of increase: to establish Capital Improvement Trust Fund. ❑ 2003 advisory vote to increase sales tax rate from 3%to 4%was approved by voters. Voter education clearly stated purpose was to address increased costs rather than capital. ❑ 2010 advisory vote to increase sales tax by 0.5%to fund library/museum capital was not approved. 51 a._„ Mill Rate History — property tax ; 12.00 18.10117.601 17.101 — 16.60 1 16.601 117.10 17.101 17.101 10.00— — — _ — 6-°° Is.aol 15.001 15*8.00— — — -- I 6.00--- — — 4.00 3.121 3.12 3.12 3.12 3.121 7.12 3.12 3.12 3.12 3.12.1 3.12 3.121- 2.00—. - - __.._ _., —1 0.00 • . , iuw '11111 2002 2003 2004 2005 2006 2007 2008 2009 2010 20118x1 OKenai Peninsula Borough and Flood Svc Area •City of Sewmd 52 26 August 22, 2011 Why Reserves? City has no depreciation fund to cover replacement of $75M governmental assets General Fund must cover deficits in all other funds; SMIC annual deficit N $82K after debt paid off Economic uncertainty Used to leverage grant dollars (matching) Cover unforeseen needs/emergencies (flooding, avalanches, healthcare, ASLC, critical/high risk unfunded needs in enterprise funds) No capital fund to cover deferred maintenance (roads, buildings, equip) or new capital 53 General Fund fund balance history 8,000,000 — - —5.0 7,000,000 - " —4.5 40 6,000,000 r - 35 5,000,000 4,000,000 3,000,000 2000000 - 1000,000 1 2000 7001 2002 2003 2004 2005 2006 200/ 2008 2000 2010 2011Bul �Undesignaled Fund Balance Total Fund Balance . Expend Rurec 8 T.F Out 27 August 22, 2011 Cash Balances in all funds General Fund S 5,4485194 Available 2,881,811 Harbor Fund 605,477 Harbor Capital Projects 2,458,113 SMIC Fund (44,321) Parking Fund 373,092 Electric Fund 192,157 Electric Capital Projects 1,056,999 Water Fund 1,693,156 Water Capital Projects 121,504 Sewer Fund 605,642 Sewer Capital Projects 112,115 Motor Pool Fund 787,363 Capital Projects(grants) (291,685) Special Revenue Funds(grants) (89,764) Hospital Debt Service (35,457) LTC Debt Service 1,583,373 TYC Agency Fund 39,980 Compensated Absences 457.188 55 Total Cash Balance at 8/20/11 $ 15,073,026 CPI Information: CONSUMER PRICE INDEX INFORMATION: htty: data.bls.eov PDQ sen let Sun evOutoutSen let CUUSA427SA0 Not Seasonally Adjusted-Anchorage,AK,All Items Base Period: 1982-1984=100 Cay of Seward Annual Cu ubtive Annual Cunuhttve Year CPI CR COLA COLA• 2000 150.900 1.685% 34203% 2.50% 11.60% 2001 155.200 2.850% 37.053% 0.00% 11.60% 2002 158200 1.933% 38.986% 0.00% 11.60% 2003 162.500 2.718% 41.704% 1.40% 1300% 2004 166.700 2.585% 44288% 0.00% 1300% 2005 171.800 3.059% 47.348% 0.00% 13.00% 2006 177.300 3201% 50549% 2.60% 15.60% 2007 181.237 2221% 52.770% 3.00% 18.60% 2008 189.497 4.558% 57.327% 2.50% 21.10% 2009 191.744 1.186% 58.513% 4.50% 25.60% 2010 195.144 1.773% 60286% 0.00% 25.60% 2011 1.20% 26.80% Enterprise Fund Tariff Annual CPI hcrease: 2010(based on 2003-2007 CPI): 2.8% 2011(based on 2004-2008 CPI): 3.1% 2012(based on 2005-2009 CPI): 2.8% 2013(based on 2006-2010 CPI): 2.6% 56 beginning 1987 28