CAL Annual Conference
Library Finance 101
November 21, 2009
Andrew Romero, CGFM, Finance Director, High Plains LD
Chris Brogan, CGFO, Chief Finance Officer, Pueblo LD
Michael Varnet, CPA, Chief Finance Officer, Pikes Peak LD
Steve Wasiecko, MPA, Operations Manager, Aurora Municipal Library
Library Finance
Program Overview
November 21st, 2009 3:30pm – 4:15pm
1 min: Introduction – Andrew Romero
5 min: District Revenue/Issues - Chris Brogan
5 min: Municipal Library Revenue/Issues - Steve Wasiecko
9 min: TABOR – Mike Varnet
5 min: Basic Financial Reports – Chris Brogan
15 min: Annual Fiscal Cycle - Andrew Romero
4 min: Q&A
Library Finance
District Revenue
Property tax – dedicated mill levy
Specific Ownership (SO) tax
Abatements & refunds – certify mill
-Revenue calculations
-5 ½% limit
Library Finance
District Revenue
Property Tax Revenue
GENERAL FUND BUDGET Specific Ownership Tax
REVENUES Interest on Investments
3%
1% 2% Fines, Fees, Miscellaneous
9%
Contracts, Grants, Gifts
85%
Library Finance
Municipal Revenue Sources
Other, 6%
Property Taxes,
10%
Franchise Fees,
6%
Auto Use Tax, 4%
Sales Tax,
Fines/Fees, 5%
65%
Highway User, 4%
Library Finance
Structural Sales Tax Problem
Household Spending Pattern Shift
The Move to a Service Economy
1960 – 60% on taxable goods
2008 – 40% on taxable goods
Internet Sales
Revolving Retail Center Viability
Reliance on Consumer Spending
Library Finance
Municipal General Fund Uses
Capital , 11%
Library, 2%
Admin/Support, 8%
Police, 35%
Parks//Rec, 6%
Public Works,
12%
Fire, 18%
Courts, 7%
Planning/Zoning,
1%
Library Finance
Moral of the Story: Become a District
Library Revenue Per Capita
$160
$140 District Non Dist.
$120
$100
$80
$60
$40
$20
$0
Library Finance
TABOR
Background
Key Issues (not all inclusive)
Tax limit
Property tax revenue limitation
Fiscal year spending limitation
Multi-year financial obligations
Emergency reserves
Library Finance
TABOR Definitions
"District" means the state or any local government, excluding enterprises.
"Emergency" excludes economic conditions, revenue shortfalls, or district salary or
fringe benefit increases.
"Enterprise" means a government-owned business authorized to issue its own revenue
bonds and receiving under 10% of annual revenue in grants from all Colorado state and local
governments combined.
"Fiscal year spending" means all district expenditures and reserve increases except, as
to both, those for refunds made in the current or next fiscal year or those from gifts, federal
Funds, collections for another government, pension contributions by employees and pension
fund earnings, reserve transfers or expenditures, damage awards, or property sales.
"Inflation" means the percentage change in the United States Bureau of Labor Statistics
Consumer Price Index for Denver-Boulder, all items, all urban consumers, or its successor
index.
"Local growth" for a non-school district means a net percentage change in actual value
of all real property in a district from construction of taxable real property improvements, minus
destruction of similar improvements, and additions to, minus deletions from, taxable real
property.
Library Finance
TABOR Limitation Factors
Inflation
Consumer Price Index – Denver/Boulder/Greeley
Growth
Actual valuation information provided by County
Assessor
Library Finance
Tax Limit
Advance voter approval for:
Any new tax
Tax rate increase
Mill levy increase
Tax policy change causing a net tax revenue increase
Library Finance
Property Tax Revenue Limitation
Current year limit – prior year base adjusted for
growth and inflation
Property tax revenue excluded from limit
Refund and abatements
Voter-approved adjustments
Library Finance
Property Tax Revenue Limitation
Example
2009 property tax revenue $5,000,000
Inflation 1%
Growth 2.5%
Total TABOR factors 3.5%
2010 property tax revenue limit $5,175,000
Library Finance
Fiscal Year Spending Limit
Really a revenue limit
Current Year Limit = prior year FYS adjusted for
inflation and growth
All governmental expenditures plus reserve
increases with the exception of:
Gifts/donations
Federal funds
Collections for another government
Pension contributions by employees and pension earnings
Reserve transfers or expenditures
Damage awards
Property sales
Library Finance
Multi-Year Financial Obligations
Prohibited by TABOR except for:
Voter approved
Setting cash aside irrevocably to cover debt service
Non-appropriation clause
Check with Legal Counsel
Library Finance
Emergency Reserves
3% of Fiscal Year Spending
Can’t be used for:
Economic conditions
Revenue shortfalls
Salary or fringe benefit increases
Library Finance
Basic Financial Reports
Monthly reports – internal
Reports for board (balance sheet, cash flow, statement
of revenue & expense)
Reports for departments
Annual reports – external
General Purpose Financial Statements
Comprehensive Annual Financial Report
GFOA award program
Library Finance
Basic Financial Reports
continued
Annual Audit report (statutory requirement)
GASB 34 compliance
1. Fund statements; Government-wide statements
2. Capital assets – including capitalized books
3. Depreciation
Submit report to Division of Local Government
and State Auditor; bond holders; D&B; attorney;
bond insurers; etc…..
Mount on web site
Library Finance
Annual Fiscal Cycle
The Process of Budget Development
Step 1: what the Library hopes to accomplish next
year
Step 2: determine total financial resources necessary
for what the library wants to accomplish in the
coming year
Step 3: securing the funding needed to carry out the
planned service program
Library Finance
Annual Fiscal Cycle
Typical budget calendar
February-March: Review annual report and previous
year’s data
Spring: Review long-range plan and library service
goals in light of trends.
Mid-year:
1. Review expenditures and revenues.
2. Begin budget process, establish budget calendar and guidelines.
3. Review budget guidelines and obtain direction from board or
Finance committee.
Library Finance
Annual Fiscal Cycle
Typical budget calendar (cont.)
Late summer: Prepare draft budget.
Late summer / Early fall: Draft budget to governing
body for approval.
Fall: Adjustments make if necessary, and approval
needed before December 15th to meet deadline for
mill levy certification.
Library Finance
Annual Fiscal Cycle
Available at: www.dola.state.co.us/info_publications.html
Library Finance
Annual Fiscal Cycle
Budget Preparation
The budget preparation process has two significant
categories. These categories can be approached separately
or together when preparing the budget.
Operating budget:
1 Personnel
2 Ongoing expenses
3 Fixed costs
4 Ongoing funding sources (property tax, utility fees, charges for
services)
Capital Budget:
1 Long-term
2 Large projects
3 Equipment
4 Related funding/debt (mineral taxes, capital grant)
Library Finance
Annual Fiscal Cycle
Sample Format of a Minimal Library Budget - FY 2010
2008 2009 2009 2010
Account Actual Budget Estimated Proposed
Revenues
Taxes $ 19,783,000 $ 21,377,000 $ 21,548,000 $ 23,231,000
Intergovernmental 32,500 60,000 90,000 90,000
Fines and Fees 470,000 500,000 475,000 480,000
Interest Income 407,900 410,000 490,000 500,000
Other Revenue 180,600 192,500 158,000 163,000
Total Revenues 20,874,000 22,539,500 22,761,000 24,464,000
Expenditures
Personnel Services 11,260,000 11,990,000 11,985,000 12,375,000
Supplies 395,700 542,700 525,000 520,000
Library Materials 3,108,000 3,200,000 3,300,000 3,238,000
Utilities 444,000 504,400 498,000 521,300
Telecommunication Costs 228,400 496,600 281,700 301,800
Contractual Services 1,853,100 2,100,000 2,095,000 2,300,000
Repairs and Maintenance 265,400 443,800 383,200 452,700
Other Services/Expenditures 768,500 884,000 858,200 971,900
Capital Outlay 1,686,900 1,993,000 1,993,000 1,667,500
Debt Service 48,000 48,000 48,000 20,000
Transfers to Other Funds 67,900 500,000 500,000 600,000
Other Financing Uses - - 178,800 -
Total Expenditures and Other
Financing Uses 20,125,900 22,702,500 22,645,900 22,968,200
Excess(Deficit) Revenues Over Expenditures 748,100 (163,000) 115,100 1,495,800
Fund Balance - Beginning of Year 3,500,000 4,248,100 4,085,100 4,200,200
Fund Balance - End of Year 4,248,100 4,085,100 4,200,200 5,696,000
Library Finance
Appendix
Budget Resources
US!
Colorado Financial Management Manual
http://www.leg.state.co.us/osa/coauditor1.nsf/UID/0E8C123D05928FB687256E9000607525/$file
/2003+FMM+with+NO+appForExempt.pdf?OpenElement
GFOA – Budget Practices
http://www.gfoa.org/services/nacslb/
GFOA Budget Award Winners – budget documents
http://www.gfoa.org/documents/budgetWinners 2004.doc
CGFOA members
http://www.cgfoa.org
CML
http://www.cml.org/info/reach/directory.aspx
Library Finance
Appendix
TABOR Resources
Colorado Financial Management Manual – Section 6
http://www.leg.state.co.us/OSA/coauditor1.nsf/UID/0E8C123D05928FB687256E9000607525/$file/
2003+FMM+with+NO+appForExempt.pdf?OpenElement
Consumer Price Index – Denver/Boulder/Greeley
http://data.bls.gov/PDQ/servlet/SurveyOutputServlet?data_tool=dropmap&series_id=CUURA433S
A0,CUUSA433SA0
Colorado Division of Local Affairs
www.dola.state.co.us
CPI forecasts – Department of Local Affairs
http://www.dola.state.co.us/dlg/ta/budgeting/inflation.html
Library Finance
Appendix
COMMON ACRONYMS
CAFR – Comprehensive Annual Financial Report
CGFM – Certified Government Financial Manager
CGFO – Certified Government Finance Officer
CGFOA – Colorado Government Finance Officers Association
CPA – Certified Public Accountant
FASB – Financial Accounting Standards Board (private sector)
GAO - Governmental Accountability Office
GAAP – Generally Accepted Accounting Principles
GAAS - Generally Accepted Auditing Standards
GAGAS – Generally Accepted Government Auditing Standards
GAS – Government Auditing Standards (the Yellow Book)
GASB – Government Accounting Standards Board (issues statements for implementation)
GFOA – Government Finance Officers Association (professional association – makes
recommendation to GASB)
Library Finance
Appendix
Presenter Bios
Andrew Romero began his appointment as Finance Director for the District on June 5,
2006. Prior to this appointment, he was the Comptroller for the City of Greeley, in
Greeley, Colorado, from 1994 to 2006. Mr. Romero is a graduate of the University of
Arizona and holds a Bachelor of Science degree with a major in Accounting. He is a
member of the Association of Government Accountants and the Government Finance
Officers Association. He is a Certified Government Financial Manager (CGFM). (970) 506-
8566/ aromero@highplains.us
Chris Brogan is currently the Chief Financial Officer for Pueblo City-County Library
District, where she directs all of the budgeting, auditing, investing, and financial
operations for the district. She has worked in public library finance for over thirty years.
Chris holds Bachelor of Science degrees in Accounting and Public Administration from
Regis University, and is certified through the Colorado Government Finance Officers
Association as a Certified Government Finance Officer. She is active in both the local and
national Government Finance Officers Associations, and is a founding member of the
Front Range Library Finance Officers group. (719) 562-5652 /
Chris.Brogan@pueblolibrary.org
Library Finance
Appendix
Presenter Bios
Michael Varnet, CPA has been with the Pikes Peak Library District (El Paso County,
Colorado) for 18 years. He has been the District’s CFO throughout his tenure at PPLD. In
addition, he has served as part of PPLD’s Interim Leadership Team and he has served in the
capacity of Interim Information Technology Officer and Interim Facilities Officer during his
tenure. He has been a licensed Certified Public Accountant since 1981(Colorado, Utah and
New Mexico). He holds a BA in Accountancy from the University of Illinois, and he is
currently working on his Masters in Business Administration from the University of
Colorado. He is also an active member of the Government Finance Officers Association.
He is also a founding member of the Front Range Library Finance Officers group. (719)
5316333 ext. 1050 / varnet@ppld.org
Steve Wasiecko has been with the City of Aurora, Colorado for 23 years. He has served in
the positions of Financial Analyst, Budget Officer, City Clerk, Manager of Administrative
Services for the City’s Library, Recreation and Cultural Services Department overseeing
Finance, Personnel, Marketing, Computer Systems , Courier Services, Facilities
coordination and contracts. He currently is the Acting Library Operations Manager. He
holds a BA in Economics and Political Science from the University of Colorado, Boulder and
a Masters in Public Administration from Colorado State University. (303) 739-6632 /
swasieck@auroragov.org
Library Finance
Appendix
TABOR MEMO
Prepared by Mike Varnet, Pikes Peak Library District
TABOR Discussion
The purpose of this report is to present an abbreviated discussion about TABOR, and to further discuss its implications on governmental
entities. The majority of the information included in this document comes from the Colorado Municipal League’s (CML) “TABOR – A
Guide to the Taxpayer’s Bill of Rights” 1999 edition.
Overview
Voters in Colorado approved TABOR on November 3, 1992. TABOR became law on January 14, 1993. TABOR has several names:
Amendment 1, The Bruce Amendment, Article X, Section 20, The Taxpayer’s Bill of Rights and of course TABOR. TABOR contains
multiple subjects, most of which are discussed below. The voters of Colorado at any point probably will never repeal TABOR in full in the
future because, primarily as a result of TABOR, a constitutional amendment was added in 1994 that imposes a “single subject rule” on all
statewide ballot issues. TABOR cannot be repealed in one initiated or referred measure.
Ten Things to Understand about TABOR
The CML publication lists ten things that every government official should understand about TABOR to help ensure compliance with its many
provisions:
Understand TABOR as a revenue limitation
Understand what “De-Taboring” is and is not
Understand the broad limitations TABOR places on “tax increases”
Understand the difference between taxes and fees
Understand that TABOR restricts a wide range of multiple fiscal year obligations
Understand TABOR’s strict limitation on election dates and procedures for fiscal ballot questions
Understand the “enterprise” exception
Understand the TABOR defense against unfunded state mandates
Understand the potential liabilities created by TABOR
Understand that elected officials still have an important role to play in controlling governmental finances
Library Finance
Appendix
Applicability to Local Governments
TABOR applies to all state and local governments. TABOR does not apply to “enterprises”.
Fiscal Year Spending Calculations
TABOR includes several limits within its text. The first limit is called the Fiscal Year Spending limit (FYS). By definition, the FYS limit is not
really an expenditure limit, but rather a revenue limit. FYS is defined by TABOR as “total expenditures plus reserve increases less
reserve decreases, less certain exclusions.” From an accounting perspective, this definition equates to revenue and other financing
sources. So, in effect, FYS is really a revenue limit.
Many government entities have adopted was is called the “Black Box” theory. In short, this means all cash sources (inflows of funds – revenues
or otherwise) are included in the FYS calculation, and only those funds that meet the exclusion definitions per TABOR are excluded from
the FYS calculations. Some governments set their strategy to simply prevent funds from being entered into the “black box”.
The following list of items depicts those items that are excluded from FYS calculations (referred to as the base for the FYS limits):
Enterprises
Voter approved revenue changes
Emergency tax revenues
Refunds
Gifts (including grants from private foundations, but not grants from the State or any of its sub-organizations)
Federal funds (including the CMAQ grant funds)
Collections from another government
Pension contributions by employees and pension fund earnings
Reserve transfers or expenditures
Damage awards
Property sales
Lottery receipts
In addition, the courts have now clarified that the proceeds from new debt or other financial obligations that are created with voter approval are
excluded from the FYS base.
Library Finance
Appendix
Revenue Limits and Refunds
There are no provisions in TABOR to implement any “income averaging” or otherwise accounting for cyclical swings in revenue that will occur
over a multi-year period. The base for the current year FYS is simply the prior year FYS, adjusted for CPI and growth (discussed later).
This is also known as the “ratchet effect” of TABOR. Again, if revenue is down in one year, it cannot be recovered in subsequent years
without voter approval. Revenue in the subsequent years can increase only by inflation and growth.
Inflation is defined as the CPI for Denver-Boulder, all items, all urban consumers. Local growth is defined by TABOR as “a net percentage
change in actual value of all real property in a district from construction of taxable real property improvements, minus destruction of
similar improvements, and additions to, minus deletions from, taxable real property.”
TABOR stipulates that excess revenue must be refunded to the district’s taxpayers within the next year unless voter approval is obtained to
keep the excess revenue. There are several methods as how the excess revenue shall be collected. The Pikes Peak Library District has
found that a temporary credit to the mill levy is the most expeditious method to refund excess revenue.
“De-Taboring” and Other Voter-Approved Revenue Changes
TABOR allows voters to approve a revenue change that is not a tax increase. The Supreme Court has recognized three different types of ballot
questions that allows entities to keep revenue in excess of TABOR’s various limitations:
“Where a district proposes any of the forms of revenue increases…. such as a new tax, increased tax rates, or tax policy changes that result in
increased tax revenue;”
“Where revenue actually collected exceeds the dollar amounts of the spending limits;” and
“Where the revenues generated by a specific tax increase exceed the estimated maximum dollar amount included in the election notice and
ballot title under which the voters approved the tax increase.”
“De-Taboring” is sometimes misconstrued that a local government is opting out of TABOR. Local governments have no such options. De-
Taboring applies only to excess revenue. It is a broad form of voter approval that allows the government to keep and spend revenue in
excess of TABOR limits.
In drafting “De-Taboring” ballot questions, the following items must be considered:
Reference to TABOR
Disclaimer of any tax increase
Broad form or dollar specific
Starting year
Time limited or open ended
Revenue sources to be “De-Tabored”
Property tax revenues – reference to the 5.5% limit
Earmarking generally, specifically or not at all
Districts that are successful in such elections still must calculate FYS annually because there are still requirements that FYS apply such as
future election notices in which FYS for the current year and four proceeding years must be presented, emergency reserve balances,
which are calculated at 3% of FYS annually, and so forth. In addition, if the excess revenue issue is sunsetted, the district will need to
know its base all along in order to calculate FYS properly when the term is up.
Library Finance
Appendix
Property Taxes
TABOR includes limits to property tax revenue. Similar to FYS limits, the property tax revenue limit basically equates to the prior year property
tax amount levied plus the same adjustment for inflation and local growth.
In addition, unless voters have approved otherwise, government entities must also comply with the statutory 5.5% property tax revenue
limitation.
TABOR prohibits any mill levy increases from the prior year without voter approval, even if the levy is raised in the face of declining valuations
simply to keep revenue constant.
TABOR flatly prohibits the imposition of any emergency property tax. Governmental entities may be left totally helpless if the need to raise
emergency revenue is needed. In addition, the State can never adopt a statewide property tax.
Enterprises
TABOR defines an enterprise as “a government-owned business authorized to issue its own revenue bonds and receiving under 10% of its
annual revenue from grants from all Colorado state and local governments.” The Colorado Springs Department of Utilities and Memorial
Hospital are two examples of enterprises under TABOR, and their revenue activities are excluded from TABOR limits.
Debt and Other Multiple Fiscal Year Obligations
TABOR does not allow multi-year debt or other financial obligations without voter approval or without adequate cash reserves pledged
irrevocably and held for payment in all future years. The courts have held that obligations with appropriate non-appropriation language
included within the legal documentation do not equate multi-year debt per TABOR requirements.
Emergency Reserves
Government entities are required to keep an “emergency reserve” on hand at all times. This reserve is defined as the amount equal to 3% of
the entities FYS amount. Should the government declare an emergency and taps into this reserve, it needs to be replenished within the
next fiscal year. This reserve cannot be used for economic conditions, revenue shortfalls, or district salary or fringe benefit increases.
Library Finance
Appendix
TABOR Ballot Issues
TABOR requires a vote for 14 distinct types of propositions:
New tax
Tax rate increase
Mill levy above that for the prior year
Assessment ratio increase
Extension of an expiring tax
Tax policy change resulting in a revenue increase
Ratification of an emergency tax
Debt increases
Multiple year obligations
Revenue change not involving a tax increase
Retention of revenue in excess of a projected tax increase
Four year delay in voting
Additions to election notices
Weakening of other limits
The CML publication provides detail as to what each of these issues represent. The CML publication provides detailed explanations for each
item listed above.
TABOR Ballot Issue Elections
TABOR imposes various requirements on elections. This includes the timing of elections, timing of notices, the requirements of such notices,
pro and con statements, fiscal year spending disclosure requirements, and wording of the ballot issue itself. Many governmental entities
participate in County-sponsored coordinated elections. The entity would enter into an Intergovernmental Agreement with the county, and
it will stipulate the district’s share of the cost.