After reviewing the "alphabet soup" budgets of 2009, as a resident, I concluded that we needed some sort of consolidated view of them. So I generated one. Now I am sharing the experience with you and maybe you will have an easier time getting acquainted with this subject also. It is my hope that I can get more residents interested in this year's budget process. Later this month, the township will be providing us with information, but it may not provide an easy-to-assimilate view. So embedded in this article are several tools to help - a summary, several spreadsheets and some text of what I have learned. Also is a simple "what if" scenario on taxation. In late August, the township must complete its budget and establish a tax rate. Tom Campbell issued this communique just recently: "There are so many things to work on to complete the establishment of our new government that The Township will have six meetings on each Wednesday at 9 AM from July 22 through August. July 22 will be a regular business meeting. July 29 through August 19 will be budget work. August 26 will be a regular business meeting and the setting of the first property tax rate. Of Course, there will be public hearings announced on the proposed property tax before it is approved. However, you will have your chance to influence the development of this budget at the July 29 Town Hall Meeting."
Summary - Budget 101
This year, the budget process is earlier because of the taxing process. In past years, we operated independently and could schedule everything on a calendar year. Now we must account for the county's process and fit into their schedule. The township has to develop a budget now to set an assessment rate for 2010, in order for the county to administer the assessment process and collect taxes. Remember, we will receive a tax bill this year from the county, not from The Woodlands Association. That bill will contain the normal county and school taxes plus our assessment taxes.
The Woodlands Township will conduct a town hall meeting at the end of this month to present the budget and strategic plan. This will give residents an opportunity to give our feedback. I expect the township to link strategies to budget line items in order to place financial value on the strategic plan or value on the strategic plan, which is composed of community values. How that will be accomplished is unclear to me now. My guess it will be presented in a broad view of the plan. I am positioned to attempt doing the same and may do it in a separate article, just as a exercise to understand the fit and personally share with others.
For now, all I want to do is get the information to my readers and enable you to start formulating your own opinions on what needs to be done, on what tax rates are acceptable and what questions you want answered. I will share some of my own opinions as we go along.
According to my calculations, the consolidated 2009 budget totaled $63.9 million. The consolidated 2009 revenue from all sources was predicted to be $58.4 million. The deficit was made up with reserves as the associations began to execute their plans to dissolve themselves. The TWA had a budget carryover from 2008 and that was not included.
As most of you probably know, an expense budget is composed of two parts - (1) Capital - that which is an asset investment, adding value to the asset, and (2) Operations - that which is required to finance the operation of the asset. To levy a tax for required expenses, a taxing authority must establish what is needed to operate and what can be deferred. In our case, the revenue will be generated by a state sales tax and by an assessed value property tax. Other revenue is generated, just like it is for a resident, including fee collections, bank interest, and other sources. The business of running a municipal government is, in a single breath, to provide value to residents and businesses, to control expenses through leveraged service contracts & process management, and to provide services for safety and to preserve property value. It exists to provide a safe, economical and prosperous haven to live, play and work.
This last year of transition to a new government will bring four operations together under one umbrella operation. Today, the associations have a service company, The Woodlands Operating Company, which they share together, under contract. Service costs are proportionately allocated for the service company to recover its costs to administer the service programs under its contract umbrella. This accounts for the majority of expenditures in each association, but there are also direct costs. I will not go into this aspect of the budget at this time. You can look at the published budget sheets to review what is direct and what is not.
Budget for 2010
Currently, the township is preparing a budget for review by residents and businesses. Village associations are being queried for needed improvements in the villages, so that capital requirements can be determined and projects prioritized. This is the same procedure that has been followed for years. It is also preparing operational scenarios to determine tax rates. I want to be able to correlate the old to the new. As a reminder, we will go back to the original proposal in 2006 to form a township and remind ourselves what tax structure was "promised". Most of us knew at the time that there were some unknowns, and all we had were some rough estimates. Nevertheless, we developed expectations of how we could survive financially with a taxing authority. Many people were nervous about that. Nothing has changed as of this particular moment, but details are being collected and readied for presentation. We should expect government entity consolidation to create a number of opportunities for operational efficiencies within the next two years. I will refer to my original article which supported the formation of the township as the premise for bringing this up now.6 There is a need to hold our leaders to a responsible position on their promises. Our leaders include our precinct commissioner, our state representative, our state senator, our county tax assessor and others who helped to formulate the financial view of the proposed township and means to fund its operation. We wrote based on statements made, that we would realize a 31% direct + indirect reduction of assessments through this new organization. Right now, I doubt that we will realize this, based on what I have seen and heard, but from the numbers produced below, that realization seems feasible to me. We will be able to claim our assessment taxes to the IRS, but if you have already been doing that, you obviously will not realize any additional saving from that change in collection. I expect a 32% taxation rate, but hope for less. That will be about the same as before the township was formed. Now to present the spreadsheet.
| Consolidated
Budgets |
WCA |
TWA |
WCOA |
Town |
Totals |
|
$mm |
$mm |
$mm |
$mm |
$mm |
| Operating
Budget 2009 |
12.72 |
14.78 |
2.00 |
26.00 |
53.04 |
| Parks
Care and Administration |
3.605 |
4.214 |
0.458 |
0.994 |
9.271 |
| Solid
Waste pickup/disposal |
2.520 |
2.493 |
0.044 |
|
5.056 |
| Streetscape
Maintenance |
1.070 |
0.918 |
0.289 |
|
2.277 |
| Public
Safety |
1.069 |
1.415 |
0.247 |
4.675 |
7.406 |
| Covenant
administration |
1.016 |
1.150 |
0.190 |
|
2.357 |
| Firefighting
and rescue |
0.475 |
0.721 |
0.138 |
14.725 |
16.059 |
| Streetlights
Power/Maintenance |
0.473 |
0.500 |
0.077 |
|
1.050 |
| Other
allocated |
0.442 |
0.617 |
0.111 |
|
1.171 |
| Neighborhood
services |
0.258 |
0.332 |
0.058 |
|
0.648 |
| Community
relations |
0.201 |
0.258 |
0.043 |
|
0.502 |
| Other
expenses |
0.053 |
0.056 |
0.001 |
0.045 |
0.155 |
| Payments
to Conroe, Houston |
|
|
|
0.959 |
0.959 |
| Transition
to new govt |
|
|
|
0.600 |
0.600 |
| Marketing
&economic development |
|
|
|
0.933 |
0.933 |
| Community&Environmental
Svcs |
0.218 |
0.284 |
0.050 |
|
|
| General
Administration |
0.893 |
1.122 |
0.199 |
2.383 |
4.597 |
| Other
associations (Carlton) |
|
0.186 |
|
|
|
| Transportation
(trolleys_etc) |
|
|
|
|
0.00 |
| Other_Operations&staff |
0.429 |
0.517 |
0.094 |
0.685 |
|
|
|
|
|
|
|
| Capital_Budget_2009 |
1.80 |
2.10 |
1.90 |
2.54 |
8.34 |
| Park
projects |
0.702 |
0.808 |
1.891 |
|
3.400 |
| Pathway
Projects |
0.750 |
0.578 |
|
|
1.328 |
| Pathway
improvements |
0.000 |
0.335 |
0.008 |
|
0.343 |
| Landscape
improvements |
|
0.080 |
|
|
0.080 |
| Aquatics
Facility Improvements |
0.226 |
0.097 |
|
|
0.323 |
| Signs/StoneWalls/Landscape
|
0.078 |
0.123 |
|
|
0.201 |
| Athletic
Facility Improvements |
0.038 |
0.073 |
|
|
0.110 |
| Other |
0.003 |
0.003 |
0.004 |
|
0.010 |
| Transfers
and Capital |
|
|
|
2.540 |
2.540 |
|
|
|
|
|
|
| Total
Budget 2009 |
14.52 |
16.88 |
3.90 |
31.08 |
63.92 |
Discussion
There are several assumptions made to produce this table. It is only created to put together the numbers from the published 2009 budgets1,2,3,4 and provide a means to assimilate all of them in one concise view. I encourage all interested parties to review those documents as well, but this should be the quickest way to get your feet wet. Different account models are used in the association and the township. The association uses an older self-developed model, while the township uses a method known as the GASB method.5. In doing so, the township does not present the information in the same way, so I have chosen to do that as close as I practically could without losing information. The Chart of Accounts of all merging entities are being merged into one Chart of Accounts as part of the transition, so I hope to see this same information in a more readable format from the accounting system in the near future.
There are one time and ongoing expenses which are expected once again to be in the township budget. In 2009, we had a line item for $600,000 in the township budget as a one time expense. I did not back that out in my 2010 "guestimate". I did back out interest accumulated by the WCA financial reserves, since they no longer will exist. WCA had a low assessment rate for 2008 and 2009 because of their strategy to spend down the reserves before dissolving as a governing body. Therefore, to obtain an idea of what the income would be under normal circumstances, I normalized the income to an assessment rate of 32 cents per $100 assessment. I did that for WCA and WCOA. I also added in a guess for property value increases into the equation, as well as a guess for sales tax revenue growth.
| Scenario I |
WCA |
TWA |
WCOA |
Town |
Totals |
| ............................................... |
$mm |
$mm |
$mm |
$mm |
$mm |
| Normalization
for 2010 |
|
|
|
|
|
| Normalize
WCA @ 0.032/100 |
13.62 |
|
|
|
|
| Normalize
WCOA @ 0.032/100 |
|
|
2.83 |
|
|
| Reduce incomes from banks |
(0.24) |
|
|
|
|
| Added assessments guess |
0.68 |
2.47 |
0.21 |
|
3.36 |
| Added
sales taxes guess (5%) |
|
|
|
13.08 |
|
| Guestimate income
change |
0.45 |
2.47 |
0.21 |
13.08 |
16.21 |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
| 2010 guestimate
Operating Budget |
|
|
|
|
58.35 |
| 2010 guestimate Income |
|
|
|
|
71.01 |
| 2010 guestimate reserve build |
|
|
|
|
3.00 |
| 2010 guestimate available for capital |
|
|
|
|
9.66 |
The scenario presented here has a large increase in operating budget for the first year of operation. That is, the consolidated budget is increased by 10% in the spreadsheet, yielding a generous $58.35 million operating budget, increased by more than $5 million. The scenario assumes a 10% increase over the 2009 normalized budget in revenue. There are certain complications in the changes that are to take place, so here we are just showing that income should be increasing by more than just sales taxes, but it is unclear how much, therefore the scenario assumption. An assumption is made that $3 million is sufficient for establishing a first year operational reserve. That will supplement the existing reserve. Then a capital budget exceeding 2009 is placed into the budget. If cuts are to be made at this time, it would likely be in the capital budget. As you will notice, I have not included a municipal office building for the government and will likely be part of the budget proposal. Another significant expected increase in service that will be costly will be the additional police protection likely to be proposed. I do assume we can become more efficient by this merger, so in 2010, I would expect to see contracts leveraged better and township operating costs reduced per household to begin the process of becoming more efficient.
So this is my current take on the budget, just to get my and hopefully your feet on the ground, to have a reference point for the coming discussions. I have not run additional scenarios but may do so soon. To expedite this information into the hands of residents, I will go ahead and publish this as it is.
Resources
1WCA 2009 Budget
2TWA 2009 Budget
3WCOA 2009 Budget
4WoodlandsTownship 2009 Budget
5GASB Model of accounting
6Commentary Article on expectations of a new government - Tuesday Elections 2007
7My Decision and what I considered in reaching it
Let me know if you want more or have feedback on this subject. Most of you know how to reach me and if not, it is in my profile. If you want to post notes in Facebook, you are welcome to do so in The Woodlands Commentary. Just look it up in Facebook.
