Budget/Financing

Budget

A process consisting of activities that include development, implementation and evaluation of a plan for the provision of services and capital assets

CLAWBACK

It is a provision in a contract that limits or reverses a payment or distribution for specified reasons, such as failure to meet required hired employee quotas in a economic development grant.

Community Development Corporations (CDCs)

Non profits established for specific purpose (business incubator, affordable housing)

Revenue Sources

Taxes User fees and charges Licenses and permits Grants Other revenues

New Performance Budgeting (1990s):

This is a results oriented (or objectives oriented) budgeting. The effort is to link resource allocation with managerial performance and strategic plans, along with annual performance plans. Includes BFO (Budgeting for Outcomes) and Performance-based budgeting.

PERFORMANCE BOND

a bond issued to one party of a contract as a guarantee against the failure of the other party to meet obligations in the contract, such as failure to complete highway improvements by a specified date.

SBA - Small Business Administration

•Agency of Federal government that assists & protects interest of small business. •Loan programs - SBA guarantees loans made by private lenders •Funds can be used for start up & working capital, acquisition of land and buildings, machinery & equipment, etc

Empowerment Zones

•Economically distressed rural & urban zones designated by USDA & HUD •Businesses in zone can avail themselves of Federal grants and federal tax incentives •Businesses get credits for hiring people within the zone •Includes substantial training funds & social services funds •Requires community participation/input into the plans

Business Recruitment & Attraction through 2 strategies

(1) Entice businesses to locate or relocate to an area (2) Precent companies from leaving by identifying problems & helping to resolve them

Sales Tax

- A prime revenue for most state and local governments - Impacted by a variety of economic factors: inflation, population, tourism, technological change, demographic change, the shift to a services-based economy.

Pay as you go

- Annual revenue as it is raised. - Capital reserves financed with annual revenues. - Charges to property: Special assessments Impact, facility, or capital recovery fees - Grants, participation by other governments or private sector

Capital Improvements Program (CIP)

- Covers a multiyear period (Typically a 5- to 6-year plan) - Organizes and summarizes major capital projects and plans for the full forecast period (the capital improvements "program") - Forecasts the larger budgetary impact of capital expenditures, both project related costs, estimated operating impacts and available v. required revenues - Budgets for the upcoming year as well (Capital Budget) - Recurs and is updated annually or bi-annually Introduces projects in the later years of the program (the budgeting of future expenditures) - May be standard-driven, or reflect patronage/usage, or be revenue driven - May reflect long-term financing or may reflect pay as you go strategy - May use special assessments, taxes, or fees not available for the operating budget

Property Tax

- Largest revenue for most local governments Impacted by community "wealth" - Subject to taxpayer revolts - Impacts land development: urban "sprawl" and "blight"

Industrial Revenue Bonds

- Loan to company to build or buy facility, land or equipment - Local govt. issues bonds - investors purchase bonds, funds used to make loan. Interest on bond repayment generally tax free to investor - Company repays bond, City typically retains ownership of land/facility during repayment period - company pays minimal taxes - At end of repayment period ownership transfers to company

User Fees

- Popular response to tax limitation measures - Fees may recover "full cost" or be set lower and require tax subsidy of services - Revenue subject to demand

Income Tax

- Primary source for federal government and for many state and local governments. - Local taxes may vary for non-residents. State and local rates tend to be less progressive.

Purpose of Capital Budgeting

- Stakes are High - Decisions Extend for Years - Spending Varies Tremendously Year by Year - Capital Project Needs Vary Tremendously Year by Year - Implementation Can Take a Long Time - Debt Financing is Used

Business Incubator Programs

- Support business start-ups by providing services such as: •inexpensive or free office space •technical assistance (ie business plan) •administrative support •marketing assistance •access to capital •environment that fosters collaboration

Impact Fees

- Used as a condition for approving development by requiring that developers pay fees to offset project impacts on capital infrastructure/improvements needed because of new development such as schools, roads, parks, fire/police/ EMS services, and libraries. - Rational nexus Public improvements may be off-site, & they do not necessarily finance improvements that serve the specific new development paying the fees. - Paid when development is approved - Authorization by general statute authorizing fees with local legislation needed - Supplemental sources of financing

Special Assessment District Imposes

- a levy on property, individual lots, or all property in a designated neighborhood or district to pay for improvements. Special assessments are - Charge to property for public improvements that benefit that property Improvements are on-site or near-by - Generally, not paid until project is done and improvement cost is known - Authorized by general statute for water-sewer, streets, beach erosion, storm water, etc.

Tax Increment Financing

- is issued to provide public facilities needed to support new, private development - Secured by increased tax revenue produced by the new, private development. This tax revenue and the new development are removed from the general tax base and are legally set aside to secure and pay the tax increment debt for as long as it is outstanding - A TIF program must be established under the guidelines of state authorizing legislation, and typically works as follows: - A TIF district is established around a blighted area. - TIF bonds are issued to redevelop this area. - After the area is redeveloped, the additional property tax revenues earned by the reassessed district (i.e., the "tax increment") are used to retire the TIF bonds. Thus, these additional revenues cannot be used by the involved municipalities, school districts, and special taxing authorities until the TIF bonds are retired

What are the general three types of categories allowed in permitted land uses?

1) Principal uses, these are uses that are allowed by right; 2) Accessory uses, these are land uses that are permitted only if they are incidental to the principal use; 3) Special uses, these are land uses allowed only by a special review.

Subdivision regulations control and record the process of subdividing land. A result of subdivision regulations is the preservation of land records by platting and mapping. Another result is that developers design and construct developments properly. They include:

1) land recordation, 2) local design and construction standards for improvements and lots, 3) dedication requirements in the form of land or cash-in-lieu, 4) use of developer's impact fees, 5) the institution of growth management controls.

Traditional (Line Item)

Also called traditional budgeting, the line item budget is still the most widely used budgetary approach and outlines the items on which money will be spent but may not necessarily provide information on what exactly will be done. Generally a line item budget has categories such as personnel, equipment, maintenance, etc. Each line item is given the same weight or importance even though some are more complex. Revenue sources are linked to each item of expenditure, providing a degree of relationship between revenue source and its expenditure. However, line item budgets are not easily used as management tools. ADVANTAGE: Easy to prepare; easy to implement DISADVANTAGE: Lack of priority assignment; fixed and rigid system

Enterprise Zone (State)

An economically depressed area that has been targeted for revitalization by a city or state through tax abatement and other incentives given to companies that locate or expand their operations within the zone

Empowerment Zone (Federal)

An economically distressed rural & urban zones designated by USDA & HUD. Businesses in zone can avail themselves of Federal grants and federal tax incentives. Businesses get credits for hiring people within the zone

Planning-Programming-Budgeting-System (PPBS)

An outgrowth of research undertaken by the defense industry after World War II, PPBS combines a program budgeting model with short and long term planning targets, performance measurements. It serves as a long-term planning tool so that decision makers are made aware of the future implications of their actions. These are typically most useful in capital projects. The planning portion of the approach seeks to link goals to objects or expected outcomes from specific outputs, which are then sorted into programs that convert inputs to outputs; finally, the budgeting of PPBS helps determine how to fund the program. - ADVANTAGE: Helps in the choice of programs/ projects, allocation of resources on them and performance evaluation; can incorporate future budgetary repercussions - DISADVANTAGE: Difficult to acquire necessary information regarding performance evaluation and cost estimation in an uniform way for all governmental activities; emphasizes physical and financial performance, not qualitative performance

Enterprise Zones

Economically distressed urban area targeted for improvement; businesses who locate or expand in zone and create jobs can receive Local & State t

Program Budget

Instead of organized by line items, the program budget is different in considering the purpose (i.e. the program) as a unit, rather considering the separate administrative units. This type of budget includes expenses and revenues related to one specific program. ADVANTAGE: Helps determine program priority; helps identify where funds needed DISADVANTAGE: If program budget incorrect or based on inaccurate info, can be costly

Performance Budget

Performance budget takes program budgeting one step further by tying the budget to specific performance objectives for each program. It classifies expenditures by administrative units, by functions, and by items. It includes outputs as well as inputs to government activity. It involves: (i) formulation and adoption of a plan of activities and programs for a time period; (ii) funding, i.e. relating program costs and performance to resources; and (iii) execution, i.e. achievement of the plan within the time frame . - ADVANTAGE: Improves program performance; tool for reviewing program efficiency - DISADVANTAGE: Focuses on quantitative , not qualitative evaluation; accuracy difficult

Revolving Loan Fund

Seed money established; loans made & repaid; funds re-loaned to next applicant

What is Economic Development?

Set of policies or activities that seek to improve the economic well-being and quality of life, carried out by states, regions, cities, and localities through both the public sector and public and private partnerships, as well as entities such as chambers of commerce, community organizations, etc. Programs & activities that add value to a community such as increased tax base, physical value through infrastructure improvements, societal value through creation/retention of jobs; elimination of blighted conditions, etc. 3 Core Activities: •Business recruitment and attraction (often target areas •Business retention and expansion •Enterprise and small business development (strengthen the market)

Community Redevelopment Agency (CRAs)

Special taxing district created (under FS Chapter 163) based on finding of slum and blight (data and analysis of physical & economic conditions i.e vacant land & buildings, income levels, infrastructure condition, housing costs, property values, etc.). Must adopt Redevelopment Plan and establish Redevelopment Trust fund for deposit of TIF revenues. CRA gets both City and County tax dollars; funds can be used for redevelopment purposes and/or to leverage bonds. Redevelopment Plan includes projects and programs that CRA will expend funds on and must be consistent with local Comprehensive Plan. Examples of CRA activities: •Infrastructure improvements •Grants/loans •Land assembly •Marketing/Promotions •Cultural/Sports Destination

Downtown Development Authorities (DDAs)

Special taxing districts-funds used for improvements; established by vote of residents. Activities include business development/attraction, improving physical environment/residential quality of life, leveraging private investment, marketing & public relations. Board can be municipal governing body or other stakeholders

Zero base budgeting (ZBB)

This was introduced as a rational budget innovation by President Carter in 1976, along with the concept of "Sunset" provisions (where a program or an agency expires after a certain time unless specifically renewed). The concept of ZBB is that existing programs and activities should not automatically be funded, but rather should have to justify their continuation as part of the annual budget cycle. Each program or project is thus vulnerable to zero funding. - ADVANTAGE: Increased prioritization; reduction in redundant/ineffective programs - DISADVANTAGE: Time consuming; labor intensive; training to produce accurate budget needed

DEVELOPMENT AGREEMENT

a voluntary contract between a local jurisdiction and a person who owns or controls property within the jurisdiction, detailing the obligations of both parties and specifying the standards and conditions that will govern development of the property, typically addressing the provision of infrastructure, public spaces, and amenities associated with a development project approval

FIXED COSTS

business costs, such as rent or mortgage, insurance and other overhead costs, that don't change month to month, regardless of the business' sales or production volume.

DIRECT COSTS

costs traceable to the production of a specific project or service, such as the staff time and other costs by a private consulting firm to develop the draft of a municipal comprehensive plan. They are the starting point for any calculation of consulting costs. For a planning consultant, those typically include the following items: 1.Salaries of professional staff 2.Salaries of office staff, technicians, and other support personnel 3.Sick leave, vacation, and holiday pay 4.Group insurance (medical, life, and disability) 5.Subcontractors 6.Project-related travel 7.Project-related materials

Impact Fee

is a fee that is imposed by a local government on a new or proposed development project to pay for all or, more typically, a portion of the costs of providing specific public services to the new development. Most often covered are impacts to roads, sewer, and public water utilities; sometimes impacts on schools, libraries, parks and fire protection are also covered. Impacts fees should not be used to address existing deficiencies. Impact fees are either authorized by state enabling acts or by local government home rule. The courts have derived two major tests for impact fees—the "rational nexus" test (i.e. impact connected to the new development) and the "rough proportionality" test (i.e. cost roughly equal to impact caused), more commonly known together as the Dual Rational Nexus test or standard

Business Improvement District Property

owners pay an additional tax to fund activities that benefit their district - such as increased security, public events, urban design improvements

Revenue Bonds

pledge specific non-ad valorem tax revenues of self-supporting enterprise. •Voter approval not necessary in most states •Issuer must agree to covenants concerning rate setting and operation of enterprise •Coverage: Net earnings to maximum annual debt service •Interest rates higher than on G. O. bonds •Term: up to 30 years but no longer than useful life

General Obligation Bonds

pledge the "full faith and credit" of the jurisdiction, and commit property taxes by voter referendum •Secured by pledge of unlimited taxing power. •Vote of people is usually required. •Interest rate is lower than revenue bonds, certificates of participation, or special or limited obligation bonds. Simpler to issuer than these other debt forms. •Term: typically up to 20 years but no longer than useful life

INDIRECT COSTS

the costs of running the business that are not directly attributable to a specific project. Components of indirect costs include (a few examples, typically fixed %): 1. Office and other supplies; Computer hardware, software and network access 2. Electronic communications ; equipment purchase and rental 3. Occupancy costs for an office, including lease costs or building and utilities 4. Legal services, accounting services; professional dues, training, conferences 5 Insurance (unemployment, workers' compensation, liability, fire, theft, and flood)

What are Capital Projects?

• Any acquisition of land for a public purpose -- Example: Purchase of land for a new park; ROW for road • Any construction of a new facility or a major addition to a facility --- Example: New road; Widening of road; New fire station • A nonrecurring rehabilitation or major repair to all or a part of a facility and its grounds (must be a major rehabilitation: long-lived and expensive) ---- Example: Major renovation to city hall • Purchase of major equipment (again must be major: long-lived and expensive) --- Example: Purchase of a new fire engine; New transit buses • Any expense related to any planning, feasibility, engineering, or design study related to a capital improvement --- Example: Expenses related to studies of roadway extensions expansion

Budgeting Process

•Financial Analysis and Policy Choices •Expenditure Estimates •Review of Expenditure Estimates •Revenue Estimates •Budgeting Forecasting •Budget Document •Budget Review and Adoption •Budget Execution

Microloans

•Small, short term loans for small, usually start-up businesses •Funds used for purchase of inventory & supplies, fixtures, machinery (no land acquisition or conservation)

Venture Capital (Angel Investors)

•Venture Capital (VC) funds --funds made available to invest in in potentially highly profitable business ventures at considerable risk to the investor. •In exchange for investment in a company, venture capitalists receive an equity stake in the company such as preferred shares and options that give the investor part ownership in the company. •Venture capital is considered high risk capital because the investments aren't guaranteed. All other claims must be paid before equity investments are repaid. SEC reports that for every 10 businesses funded through venture capital, 7 or 8 will fail or fail to turn a satisfactory profit. •Rewards can be great. Amazon, Cisco, Compaq, eBay, Federal Express, Starbucks and Staples all received venture capital investment.