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Intro & Data

Lesson 15 Budgeting

TermDefinition
Two Primary Budgets Operating budget Capitol budget
Operating Budget Includes everyday expenditures of the organizational; such as supplies, personnel, and maintenance of office space
Capital Includes long-term purchases, such as a new building, recreation center, water main, or major equipment
Purposes for creating a budget Resource allocation Financial control Management control and to help improve efficiency and effectiveness is an organization Communication tool Planning tool
Line-Item Budgeting Emphasis is on projecting the budget for the next year while adding in inflationary costs Only looks one year into the future and is not linked with strategic, comprehensive, or capitol improvement plans
Line-Item Budgeting Pros Does not require any evaluation of existing services Easy to prepare and justify Easy for public officials to understand
Line-Item Budgeting Cons Lack of flexibility Lack of relationship between budget requests and the objectives of an organization
Planning, Programming, Budgeting Systems (PPBS) Focused on planning through accomplishing goals set by a department
PPBS Pros Helps departments place their programs is perspective Evaluates efforts and accomplishments
PPBS Cons Time consuming to prepare Requires that goals and objects be slated in measurable terms
PPBS Components Organized by program areas Long-range planning of goals, programs, and required resources Policy analysis, cost-benefit analysis, program evaluation
Zero-Base Budgeting (ZBB) Expenses have to be justified for each new period With every new budgeting cycle there is a zero base
ZBB Pros Emphasizes planning and fosters understanding within all units of an organization Requires a department to consider every aspect of its operation and concentrate on why it does things the way it does
ZBB Cons Can be time consuming to justify every activity Limited success because of its intensive information requirements and limited benefits to manage
ZBB Components Efficiency and effectiveness of programs to be re-evaluated on a regular basis Agencies prepare "decision packages" for each program Decision packages of all programs are ranked
Performance-Based Budget Focused on linking funding to performance measures
Performance-Based Budget Pros Helps departments develop and evaluate performance standards
Performance-Based Budget Cons Time consuming to prepare and requires that goals and objectives be stated in measurable terms
Performance-Based Budget Components Use of traditional function/object budget Performance information on workload, productivity output and outcomes Performance and spending may be linked through cost analysis, and program evaluation
Financing Alternatives Pay-As-You-Go Reserved Funds General Obligation Bonds Revenue Bonds
Pay-As-You-Go Uses current funds to pay for capitol improvements projects
Reserved Funds Are ones that have been saved for the purchase of future capitol improvements
General Obligation Bonds Voter-approved bonds for capital improvements GO bond use the tax revenue of the government to pay back the department
Revenue Bonds Use a fixed source of revenue to pay back the department
TIF how does it work? (1) Occurs in area with substantial blight Designated area receives targeted investment, such as infrastructure and reinvestment in that area
TIF how does it work? (2) Anticipated increase in real estate tax revenue resulting from increase property value is used to pay off bonds that are sold to finance redevelopment
Special Assessments Allows a particular group of people to assess the cost of a public improvements
Lease-Purchases Allows a government to "rent-to-own" The benefit is that the government does not have to borrow money to finance the acquisition of a major capitol improvements
Grants (1) Allow for all or a portion of the cost of a public facility to be paid for by someone other than the local Grants are available from all levels of governments, private sector and foundations
Grants (2) Grants typically require a match from the local government
Three Types of Taxes Progressive Proportional Regressive
Progressive Tax should be fairly applied Takes larger percentage from high income earners
Proportional The tax rate is the same regardless of income
Regressive Tax rate decreases as income rises Takes larger percentage of income from low income earners that high income earners
When considering the implementation of a tax Fairness Certainty Convenience Efficiency Productivity Neutrality
Intergovernmental Transfers State taxes can be shared with local governments
Property Taxes Primary mechanism for local governments have generated revenue
Local-Option Taxes In addition to property taxes Local governments can levy a local options sales tax or individual corporate income taxes
Regulatory Fees Permits, etc.
Development Exaction's & Special Assessments Impact fee
Effects of revenue structure on land development Sales Tax Income No sales or income tax
Sales Tax Retail near boundaries
Income Employment - intensive uses, such as office park development
No Sales or Income Tax Burdened by vacant land - prioritized policies that maximize property value
Community Benefits Agreements (CBA) Contract signed by community groups and a real estate developer that requires the developer to provide specific amenities and/or mitigation to the local community or neighborhood.
Methods of Finance Bonds Special Districts Realestate Investment Trust
Realestate Investment Trust Private financing Company that owns realestate and trust are bought and sold on wallstreet
Bonds General Obligation Bonds Revenue Bonds Bond Ratings
General Obligation Bonds Backed by the credit of the issuer including the power of city to tax its citizens
Revenue Bond Backed by specific stream of revenue (e.g. stadium)
Bond Ratings Linked to a communities department Assessment of investment risk
Special Districts Business Improvement Districts (BID) Tax Increment Financing (TIF)
Tax Increment Financing (TIF) Tool that is used to finance certain kinds of development Real estate development technique
Business Improvement Districts (BID) Business group bands together and funnels money (tax themselves) into the improvement of their business district
Program Budgeting Budgets are created around specific programs Easier for staff working on a specific program
Annuality Budget has to be prepared every year covering only one year If you have left over fund you don't carry that over to the next years budget Return unspent money to general fund
Participatory Budgeting People from the community deciding what should be spent Small approach to budgeting
Capitol Improvements Programming Plan to fund infrastructure and building improvements over a fixed period of time Uses population projections and a schedule for making improvements Projects are listed in construction priority
Net Operating Income Calculation used to analyze realestate investments
Created by: amshinn18