Budget Process Sub-Committee Report BACKGROUND The Budget Process sub-committee (BPSC) was formed to review and make

recommendations about the effectiveness of the process and methodology employed by the City Manager and City Council in developing and managing the annual municipal budget, which is subsequently submitted to the voters for approval on the March City Meeting ballot. The BPSC was formed at the main committee meeting of July 26, 2012 with two members, David Beatty and Susan Zeller. The BPSC members held their initially planning meeting on August 2, 2012. SOURCES OF INFORMATION BPSC members met with and interviewed City Manager Bill Fraser and Finance Director Sandy Gallup, and separately with City Councilor Tom Golonka. To the extent possible, the Budget Process, Debt Service/Capital, and Finance & Administration sub-committees coordinated and attended these meetings jointly. A BPSC member spoke several times with the Vermont League of Cities & Towns (VLCT). While the VLCT provides material and seminars about municipal budgeting, it provides no guidance on how to control or contain budget growth. The BPSC also downloaded numerous articles, publication and reports on municipal budgeting from the web including: Fundamentals of Sound State Budget Practice - National Conference of State Legislatures (NCSL). Recommended Budget Practices; A Framework for Improved State and Local Government Budgeting National Advisory Council on State and Local Budgeting, Government Finance Officers Association (GFOA). Anatomy of a Priority-Driven Budget Process - , Government Finance Officers Association (GFOA). Budget Methodologies Study [prepared for State of Washington Joint Transportation Committee] Cambridge Systematic, Inc. Budget Methods and Practices [PowerPoint] Willamette University (Salem, OR) lecture series. Choosing a Budget Method by Kathleen Allen, Phd and Peter Economy Dummies Books series

There are several types of budget methodologies, each with their own merits and challenges, such as incremental, zero-based, performance based and priority based. The traditional incremental budget method persists in state and local governments despite the push toward performance based budget or priority based budgets. Incremental budgeting is common because it meets the expectations developed over time. CURRENT PROCESS The City Budget Process begins in the early fall and a timeline is followed to meet the deadline of the Annual City Meeting in March. 1. City Manager provides background and detail financial information to the Council and seeks City Councils input, asking three questions: 1) New programs or expended services? 2) If necessary, what cuts should there be? and 3) Does the Council have a property tax rate target?

 2. Subsequent to City Council input, City Manager prepares and sends memo to department heads providing information and instruction for entering each departments operating budget request into the Citys BudgetSense software program. 3. Department heads submit operating expense budget requests to City Manager, including requests for staffing changes. 4. Finance Director prepares cost estimates for proposed staffing changes and enters personnel changes in BudgetSense as approved by the City manager. City Manager and Finance Director also enter all allocated cost estimates for employee benefits, insurances and copier costs in BudgetSense. 5. The City Manager reviews submissions, concludes discussions and budget submissions with department heads and finalizes the overall city budget, including debt service, capital improvement budget and resulting impact on tax rate and fees. 6. The City Manager presents this budget in detail, including the use of PowerPoint presentations to the City Council for discussion. 7. The City Council approves the budget for inclusion on the annual city meeting ballot (# of line items differ annually). RECOMMENDATIONS A. The BPSC recommends that the Council require the City Manager to provide a written, summary level (not line item) chart (sample attached) of anticipated revenue and expenditure changes from the current budget year, at the beginning of the budget process. Supporting documentation should be provided. The chart should provide the Council with sufficient, but not overwhelming information from which to work on the City Budget, in accordance with 2012-2013 City Council Goal #1. B. The BPSC recommends additional education on budgeting methods and processes for City department heads (available through VLTC). C. The City Council may wish to develop goals around the use of unspent prior budget year funding and adopt methodologies for budget shortfalls. Such item could be incorporated into the ballot language. D. Matrix recommendations 7.1(2) (5) should be periodically reviewed by the City Council to establish and maintain budgeting/finance Best Practices.

APPENDICES 1. FY2013 Budget Instructions to Department Heads and related budget forms. 2. Sample budgeting chart 3. VLCT Budget Training/Resources 4.