The City of Glendale designed the Annual Budget to offer citizens and staff an understandable and meaningful budget document. We hope the following frequently asked questions and answers will provide assistance to those unfamiliar with Glendale's budgeting and financial planning processes.
What is a “Fiscal Year (FY)” and when does it begin and end?
The City of Glendale and State of Arizona follow a Fiscal Year (FY) that starts July 1 and ends June 30. A Fiscal Year is the period designated by the city for the beginning and ending of financial transactions or a budget cycle. The 2004 Annual Budget or Fiscal Year 2003-04 (FY 2004) refer to the period that begins July 1, 2003 and concludes on June 30, 2004.
What does it mean to “adopt the budget?”
Budget adoption is a formal action taken by the City Council that sets the city’s priorities and spending limits for the next year. The Fiscal Year budget is formally adopted by the City Council at a public meeting in June, though city staff has been preparing the budget for months in advance.
How do I get involved or learn about the budget before it’s adopted?
At any time of the year, citizens can view the city’s budget online, in city libraries or at City Hall. Residents can discuss it with neighbors, city staff or Councilmembers. In addition, the City Council has several special budget workshops every April that citizens can attend, watch on
Glendale 11 TV
or borrow on videotape from Glendale’s libraries.
What is meant by “budget appropriation?”
Budget appropriation refers to authorizations made by the City Council that permit the city to incur obligations and expend resources. When the City Council appropriates funds, they are saying the community should, for example, spend its money on public safety or make investments that improve the quality of life in Glendale. The city cannot collect or spend money unless it is appropriated, and this ensures the public’s money is spent according the public’s needs as expressed by the democratically elected City Council.
What are municipal bonds?
A municipality, such as the City of Glendale, will sell (issue) bonds primarily to finance capital projects. This is similar to a family taking out a mortgage in order to finance a house. Just like a family, the city has basic necessities (infrastructure) like roads and office buildings but usually does not have cash available for such major purchases. Municipal bonds are like loans that help make large, important purchases affordable. Bonds also effectively spread out the costs of major projects across their useful life, so all those citizens who utilize them can help pay for them.
What is the difference between the capital budget and the operating budget?
The capital budget, or capital improvement plan, is an appropriation of bonds or operating revenue for improvements to city facilities that may include buildings, parks, streets and water and sewer lines. The operating budget covers the costs of the city’s day-to-day operations, such as employee salaries, supplies and contracts.
What is carryover?
Carryover refers to year-end savings that can be carried forward into the next fiscal year to cover any one-time expenses such as supplies, equipment or special contracts.
What is a debt ratio?
The debt ratio is total debt divided by total assets. This is one measurement of fiscal health. If the city, or a family, owes substantially more money than the value of the things it owns or its ability to generate revenue, a dangerous financial situation exists. The lower the debt ratio, the better interest rates the city can receive when it wants to sell more bonds to finance additional capital improvements for Glendale.
What is debt service?
A family’s debt service is the payments they make on loans, such as a mortgage and credit cards. Principal and interest payments on outstanding bonds are referred to as debt service. Just like a family cannot skip on mortgage or credit card payments, the city must always keep up on its debt service, so this will always be a part of the city’s budget.
What is an encumbrance?
An encumbrance refers to the formal accounting recognition of commitments to expend resources in the future. For example, when a purchase order is issued for equipment, that funding is encumbered until delivery. Once the equipment is received, the invoice is paid and the encumbrance becomes an expense.
What is an expenditure?
Expenditures represent a decrease in fund resources or, stated simply, a recorded expense.
What is an expenditure limitation or permanent base adjustment?
Arizona municipalities can only spend funds up to a level specified by the State or local voters via Home Rule (see Glendale’s City Charter at www.glendaleaz.com/CodeBook). This is meant to ensure local government budgets are balanced. Glendale’s voters approved Home Rule that required voters to approve a four-year expenditure limit based on actual revenues the city has received. However, in the spring of 2000, Glendale voters approved a permanent base adjustment, eliminating the need for further expenditure limitation elections.
What is a full-time equivalent position (FTE)?
An FTE refers to one or more employees working 40 hours per week, or 2,080 hours per year. For example, a part-time employee working 20 hours per week would be considered a 0.5 FTE.
What is the definition of a budget fund?
Glendale has 85 budget funds to help keep track of and focus resources. These include the General Fund, Transportation Fund and Water and Sewer Fund, to name just a few. A family might use several funds, too, in order to help manage their finances and determine how close they are to reaching certain goals. For instance, a family might have a children’s college fund, a retirement fund, vacation fund and household expenses fund (such as an IRA, savings and checking account). A budget fund, then, is a fiscal and accounting entity with a self-balancing set of accounts recording cash and other financial resources. Glendale uses separate funds in order to correctly and legally track revenues and expenditures by program.
What is a fund balance?
Fund balance refers to the remainder or carryover that occurs when actual revenues exceed budgeted revenues and/or when actual expenditures are less than budgeted expenditures at the end of the fiscal year (June 30). If the city budgets (plans to spend) $15 million on roads next year but only spends $14 million, there is a $1 million fund balance.
What does the word "group" in Glendale's budget mean?
Every department belongs to an administrative group led by a Deputy City Manager or the City Manager. These groups include Administrative Services, Appointed Officials, City Manager, Community Development, Community Services, Public Works and Public Safety.
What are infrastructure and capital improvements?
Infrastructure and capital improvements refer to facilities that need to be in place in order to support the basic needs of residents and businesses in the community. Examples include roads, water lines, sewers, public buildings, parks and airports.
What are Strategic Priorities and benchmarks? Why does Glendale use them?
Strategic Priorities, developed by the City Council, are statements of community values that direct the city's operations and help demonstrate progress towards a shared vision. City staff uses these priorities to assist in program development, creating annual budget requests, and building department business plans.
Benchmarks are established for each activity listed in business plans and represent a desired level of performance that demonstrates the efficient use of city resources to do the most good. City staff measures actual performance throughout the year, makes comparisons to established benchmarks, determines the causes for deviation and evaluates alternative courses of action.
What exactly is a “program” in the city budget?
A program is a group of related activities performed by one or more organizational units for the purpose of accomplishing a city responsibility. For example, one program in the Field Operations Department is Street Cleaning. Based on staff’s assessment of costs and needs, the desires of citizens and the priorities of the City Council, the Field Operations Department is budgeted a set amount of money to accomplish street cleaning.
What is “assessed valuation” and how does it relate to my taxes and the city’s budget?
Each year the Maricopa County Assessor’s Office determines the value of all property within the county, including city buildings and individual homes. These assessment values are then used as a basis for levying property taxes. The City of Glendale charges $1.72 in property tax per $100 of assessed valuation (0.3396 primary rate and 1.3804 secondary rate). The median home value, according to the Maricopa County Assessor’s Office, in Glendale is $133,500, and the average amount of property tax collected by Glendale for that home is $230.
How much does the city receive from my property tax bill, and how is it used?
Primary Property tax revenue represents three percent of the city’s General Fund revenue, which is estimated at $3,491,000 in this year’s budget. Secondary Property Tax will generate approximately $14,908,540, which will be used to pay off General Obligation bonds. The City of Glendale is one of several entities that receive a portion of the property taxes residents pay, with school districts typically receiving the majority. Each year the Glendale City Council levies the property tax one week after final budget adoption. Glendale’s total property tax rate is $1.72 per $100 of assessed valuation. Arizona’s municipal property tax system is divided into a primary and secondary rate.
Primary Tax: Arizona law limits the primary property tax levy amount and municipalities may use revenue from this tax for any lawful purpose. Glendale’s FY 2004 primary property tax rate is $0.3396 per $100 of assessed valuation.
Secondary Tax: Arizona does not limit the secondary tax levy amount and municipalities may only use this levy to retire the principal and interest or redemption charges on bond debt. Glendale’s FY 2004 secondary tax rate is $1.3804 per $100 of assessed valuation.
Where does the city’s revenue come from?
Glendale's revenue comes from a variety of sources, including sales tax, property tax, user charges and other levels of government.
What is state-shared revenue?
The state of Arizona shares a portion of its tax revenues (from sales, income and motor vehicle in-lieu taxes) with Arizona cities and towns. This funding is divided among the cities and towns using population formulas supplied by state law. These state-shared revenues comprise a large portion of most city and town budgets, including 40 percent of Glendale's General Fund.
State-shared revenue enables local governments to continue providing basic services, such as police and fire protection, without burdening the residents with additional local taxes. All cities receive a proportional amount of funding based on population. Since cities and towns are not equally wealthy, state shared revenue is of great assistance, especially to cities with lesser wealth or greater service needs. Because state-shared revenue distribution is a specified percentage of state revenue collections, as state revenue declines, city revenue declines.
Consequently, in difficult economic times, cities 'feel the pinch' just as the State does.
What is meant by “supplemental increase?”
When a department cannot support its increased service needs or lacks the necessary resources required within their budget, the department would submit a request for a supplemental increase. This allowance provides funding for additional personnel, equipment and related expenses that enhance the service level of a program.
What is a budget transfer?
A budget transfer moves budget appropriation between programs or funds. Transfers within funds may be done on the City Manager's authority; the City Manager is appointed by the City Council to act as the city’s chief executive officer. Transfers between funds require City Council approval.
What are user charges?
User charges are fees paid in direct receipt of a public service by the party who benefits from the service. Fees paid for recreation classes or leagues are examples of user charges. These make up approximately 2 percent of the city’s budget.