Lesson 15 Budgeting
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| Two Primary Budgets | Operating budget
Capitol budget
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| Operating Budget | Includes everyday expenditures of the organizational; such as supplies, personnel, and maintenance of office space
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| Capital | Includes long-term purchases, such as a new building, recreation center, water main, or major equipment
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| 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
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| 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
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| Line-Item Budgeting Pros | Does not require any evaluation of existing services
Easy to prepare and justify
Easy for public officials to understand
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| Line-Item Budgeting Cons | Lack of flexibility
Lack of relationship between budget requests and the objectives of an organization
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| Planning, Programming, Budgeting Systems (PPBS) | Focused on planning through accomplishing goals set by a department
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| PPBS Pros | Helps departments place their programs is perspective
Evaluates efforts and accomplishments
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| PPBS Cons | Time consuming to prepare
Requires that goals and objects be slated in measurable terms
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| PPBS Components | Organized by program areas
Long-range planning of goals, programs, and required resources
Policy analysis, cost-benefit analysis, program evaluation
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| Zero-Base Budgeting (ZBB) | Expenses have to be justified for each new period
With every new budgeting cycle there is a zero base
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| 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
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| ZBB Cons | Can be time consuming to justify every activity
Limited success because of its intensive information requirements and limited benefits to manage
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| 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
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| Performance-Based Budget | Focused on linking funding to performance measures
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| Performance-Based Budget Pros | Helps departments develop and evaluate performance standards
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| Performance-Based Budget Cons | Time consuming to prepare and requires that goals and objectives be stated in measurable terms
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| 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
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| Financing Alternatives | Pay-As-You-Go
Reserved Funds
General Obligation Bonds
Revenue Bonds
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| Pay-As-You-Go | Uses current funds to pay for capitol improvements projects
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| Reserved Funds | Are ones that have been saved for the purchase of future capitol improvements
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| General Obligation Bonds | Voter-approved bonds for capital improvements
GO bond use the tax revenue of the government to pay back the department
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| Revenue Bonds | Use a fixed source of revenue to pay back the department
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| 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
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| 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
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| Special Assessments | Allows a particular group of people to assess the cost of a public improvements
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| 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
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| 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
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| Grants (2) |
Grants typically require a match from the local government
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| Three Types of Taxes | Progressive
Proportional
Regressive
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| Progressive | Tax should be fairly applied
Takes larger percentage from high income earners
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| Proportional | The tax rate is the same regardless of income
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| Regressive | Tax rate decreases as income rises
Takes larger percentage of income from low income earners that high income earners
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| When considering the implementation of a tax | Fairness
Certainty
Convenience
Efficiency
Productivity
Neutrality
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| Intergovernmental Transfers | State taxes can be shared with local governments
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| Property Taxes | Primary mechanism for local governments have generated revenue
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| Local-Option Taxes | In addition to property taxes
Local governments can levy a local options sales tax or individual corporate income taxes
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| Regulatory Fees | Permits, etc.
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| Development Exaction's & Special Assessments | Impact fee
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| Effects of revenue structure on land development | Sales Tax
Income
No sales or income tax
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| Sales Tax | Retail near boundaries
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| Income | Employment - intensive uses, such as office park development
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| No Sales or Income Tax | Burdened by vacant land - prioritized policies that maximize property value
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| 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.
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| Methods of Finance | Bonds
Special Districts
Realestate Investment Trust
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| Realestate Investment Trust | Private financing
Company that owns realestate and trust are bought and sold on wallstreet
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| Bonds | General Obligation Bonds
Revenue Bonds
Bond Ratings
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| General Obligation Bonds | Backed by the credit of the issuer including the power of city to tax its citizens
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| Revenue Bond | Backed by specific stream of revenue (e.g. stadium)
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| Bond Ratings | Linked to a communities department
Assessment of investment risk
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| Special Districts | Business Improvement Districts (BID)
Tax Increment Financing (TIF)
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| Tax Increment Financing (TIF) | Tool that is used to finance certain kinds of development
Real estate development technique
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| Business Improvement Districts (BID) | Business group bands together and funnels money (tax themselves) into the improvement of their business district
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| Program Budgeting | Budgets are created around specific programs
Easier for staff working on a specific program
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| 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
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| Participatory Budgeting | People from the community deciding what should be spent
Small approach to budgeting
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| 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
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| Net Operating Income | Calculation used to analyze realestate investments
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