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Record of Proceedings

Kansas City Council Business Session: Special Revenue Funds Report (Oct 3, 2024)

City Council Business Session — Thursday, October 3, 2024
BodyKansas City, Missouri
SessionCity Council Business Session
DateThursday, October 3, 2024
StatusFILED
Video Record
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Transcript — Verbatim
0:01

Welcome to business session today.

0:04

We're excited once again to see Director Queen and Director Morrison.

0:09

We enjoy these presentations.

0:12

The first item on our agenda is approval of minutes of business session of second.

0:19

All right, so we moved in second.

0:20

All in favor to go by saying aye.

0:22

Aye.

0:22

All opposed.

0:23

All right.

0:24

You're the only actual thing on our docket, so that is both exciting and daunting at the same time.

0:30

Thank you very much.

0:31

Thank you, Mr.

0:32

Mayor, members of the council, Tammy Queen, Finance Director for the City.

0:37

I am joined by Krista Morrison, our budget officer in the finance department.

0:41

And we are here to continue our series on year-end results for fiscal year 24.

0:48

We provided you a few weeks ago when we talked about the general fund.

0:51

We provided you a copy of the uh year-end monthly financial report that uh hopefully you can reference.

0:59

We will not go through that in detail.

1:01

We're here today to talk about special revenue funds, as they have both reliance on the general fund at times and uh other times have excess fund balance.

1:10

So we are going to walk through those today with an emphasis on walking you through the sources and uses for each of the funds as well as um talking about select funds relative to the five-year financial plan.

1:24

So we will start again when we talk about governmental finance, we talk about fund accounting, and we classify revenues and expenditures into funds for a very distinct purpose, and that's both to separate them into business type activities and governmental activities, but also to keep things separate from one another so that we can keep track of uses of those funds.

1:46

So we don't just pile everything into the general fund, we have special revenue funds, which is our topic today, to uh keep things like sales taxes, um, different different types of taxes that the city collects separated one from another so that we can make sure that we stick to their appropriate use and uh don't commingle funds together that should not be.

2:10

So our financial results, you've seen this slide before.

2:14

We have fund balances that are continuing to improve, mostly because revenues are higher than anticipated, and expenditures came in a little lower than uh anticipated as well.

2:24

We still want to talk about that structural imbalance that exists uh in across the five-year planning window uh in the general fund, and uh more to come on that, but we kind of covered that a few weeks ago.

2:38

So this is a listing of select funds, uh, and this was in your monthly financial report.

2:44

It's Schedule A in the monthly financial report, and it basically lays out the activity for each fund and its every funds associated ending unreserved fund balance.

2:56

We are going to talk about most of the the items in green on this page.

3:00

We've already talked about the general fund and its balance, and uh we talked about capital with and debt with the finance committee.

3:08

Uh we will not talk about business type activities today.

3:11

Uh we can certainly bring that back as as the council elects.

3:16

So we're going to start again with special revenue funds, and as I mentioned, we use these to keep track of individual revenue sources so that we ensure that we are not spending money on things we should not be spending money on.

3:28

We're not using the public safety sales tax for something that parks sales tax should pay for because voters approve taxes for particular purposes, and we want to we have to honor that as well as state statutes sometimes uh makes those requirements of us.

3:44

When we talked about the general fund, we went through the special revenue funds that are supported by the general fund, and this is a another graphical look at that.

3:54

Uh and we the big ones that are here are here by design.

3:58

So the 24.8 million dollars that's that the general fund contributed to the street maintenance fund is because there is a code provision that says that 7.5% of the earnings tax will be moved to the street maintenance fund for the purpose of street preservation.

4:16

So that is by design.

4:17

That is not because the street maintenance fund needed help this year.

4:21

The $8.3 million dollars for the performing arts center garage is also by design because we collect the gaming tax revenues into the general fund and we move them to the performing arts center garage fund to pay that debt service.

4:35

Uh that is uh uh the way that we support that particular garage.

4:40

There are other funds listed here.

4:42

We did go through a lot of these when we talked about the general fund.

4:45

We're happy to answer questions about individual supplements.

4:49

I want to reiterate, and we talked about this before, that having excess balances and and supplement or and or having to supplement from the general fund into a special revenue fund.

5:02

The XX balances is kind of a new concept for us.

5:06

It's new post-COVID, really.

5:09

We spent a lot of times trying to time pre-COVID and during COVID, trying to figure out how in the world are we going to support these special revenue funds and make sure they can keep doing the programs that they're doing.

5:19

So this is a it was a new problem for us to have fund balance in some of these special revenue funds.

5:27

So we're going to go fund by fund, and we can take this as quick as you want or as slow as you want.

5:34

So we will provide, as I said, uh overview of the sources and uses of the fund, how the fund ended up, and then Crystal will walk us through the five-year financial plan for certain of the funds.

5:46

We do not model every single fund of the city.

5:49

That would be a lot of modeling for us to do.

5:52

So I'm going to begin with the street maintenance fund.

5:54

The sources of funds in this particular fund are the city portion of the motor fuel tax, which has seen an increase by state statute and vote voter approval recently.

6:06

And then seven and a half percent of the earnings tax, as I mentioned, gets transferred by code from the general fund to the street maintenance fund.

6:15

On the uses side, this fund is primarily for deferred maintenance of roads and streets.

6:20

It ended the fiscal year with a balance of about 14 and a half million dollars.

6:26

But the fiscal year 25 budget, in in making that budget, we appropriated $8.6 million of that, leaving, I had it calculated, leaving a balance of about $5.8 million as of right now in this fund.

6:44

So I'll walk through the five-year forecast of the street maintenance fund, and this is on page nine of your packet.

6:50

And this looks very similar to the general fund that you looked at.

Discussion Breakdown — Share of Meeting
Fiscal Sustainability█████████████████████████████████████████████47%
Budget Equity Analysis████████████████████████████29%
Public Engagement██████████10%
Homelessness█████5%
Procedural█████5%
Public Safety████4%
Summary of Proceedings

Kansas City Council Business Session – Special Revenue Funds Report

The Kansas City Council held a Business Session on October 3, 2024, at 1:00 PM in the Council Chamber. The primary agenda item was a presentation by Finance Director Tammy Queen and Budget Officer Krista Morrison on the year-end results for the city's special revenue funds for fiscal year 2024. The council also approved the minutes of the September 19, 2024 Business Session and later voted to enter a closed session for legal and contractual matters.

Consent Calendar

  • Approval of Minutes: The minutes for the Business Session of September 19, 2024, were approved by voice vote with no opposition.

Discussion Items

Special Revenue Funds Year-End Report Finance Director Tammy Queen and Budget Officer Krista Morrison presented the fiscal year 2024 year-end results for the city's special revenue funds, focusing on sources, uses, and fund balances. Key points included:

  • Street Maintenance Fund: Ended FY24 with ~$14.5M balance; FY25 budget appropriated $8.6M, leaving ~$5.8M. Revenue sources include motor fuel tax and 7.5% of earnings tax.
  • Parks Fund: Half-cent parks sales tax; ended FY24 with ~$22.9M. After appropriations (including $5.7M for deferred maintenance and $3.5M for other items), balance ~$13.3M. Council members questioned why a large balance remained alongside significant deferred maintenance backlogs. Director Queen noted a proposed fund balance policy revision and a recommendation for a five-year capital plan.
  • Public Mass Transportation Fund: Half-cent sales tax; ended with ~$9.5M; FY25 budget drew $1.8M, leaving ~$7.7M.
  • KCATA Sales Tax Fund: 3/8-cent sales tax; balance ~$4M, fully passed through to KCATA.
  • Central City Sales Tax: 1/8-cent tax for specific geographic area; balance ~$4.6M; tax expires in 2027, requiring council action on renewal.
  • Fire Sales Tax (Capital): Half-cent tax (half for capital); balance ~$13.8M; FY25 appropriated $1.7M, leaving ~$12.1M.
  • Public Safety Sales Tax Fund: Quarter-cent tax; ended with ~$14.1M; all balance appropriated for downtown booking facility, leaving zero projected balance. Tax will lapse or need renewal in 2026.
  • Health Fund: Property tax levy and fees; balance ~$15M; after appropriations (including $5M for Swope Parkway development), ~$8.5M. Recommended fund balance policy.
  • Convention and Tourism Fund: Hotel/restaurant taxes; balance ~$1.1M; anticipates revenue growth outpacing expenditures.
  • Convention Hotel Catering Fund: Zero balance; general fund supplemented by $3.8M in FY24.
  • Development Services Fund: Permit fees; balance ~$11M; appropriated ~$3.7M for FY25.
  • Violence Prevention and Intervention Fund: One-time $30M general fund transfer; balance ~$25M; FY25 appropriated $7.3M; balance ~$17.7M.
  • Streetcar Fund: Sales tax and assessments; balance ~$37.3M; appropriated $11.5M for track improvements. Fund balance expected to grow until full system costs are known.
  • Liberty Memorial Trust Fund: Balance ~$9.9M; council member noted that such balances should be considered when allocating other resources.
  • Other Funds: Solid waste/houselessness response, economic development, health levy opioid, neighborhood tourist development, arterial street impact fee, GO bond/ARPA, shared success, land bank, and grants were briefly described.

Five-Year Forecasts: For several funds, Morrison presented forecasts showing revenues growing slower than expenditures, eroding fund balances over time. Assumptions included 4% annual wage increases for non-union positions.

Fund Balance Policy: Queen stated the finance department is proposing a fund balance policy for special revenue funds, including a two-month reserve goal for the parks fund and a recommendation for departments to have five-year capital plans before using excess balances.

Council Questions:

  • Councilman O'Neill asked why departments with large fund balances (e.g., parks) still have deferred maintenance backlogs; Queen acknowledged the need for better capital planning.
  • Councilman Ray asked about the long-term performance of the new marijuana sales tax fund; Queen noted limited data but estimated first-year revenue of $4M vs. budgeted $3M.
  • Councilman Curls asked whether special revenue fund balances must be depleted before general fund supplements; Queen confirmed that is the city's practice.
  • Councilman (unspecified) asked for clearer reporting on annual revenues for each fund; Queen acknowledged the suggestion.

Key Outcomes

  • No votes were taken on the finance presentation itself; it was informational.
  • Motion to go into closed session: Councilmember (unknown) moved to enter closed session under §610.021 RSMo subsections (1), (12), (11), and (2) to discuss legal matters, contract negotiations, competitive bidding specifications, and real estate. The motion was seconded, and a roll call vote resulted in 13 ayes (all present), with no nays. The council then adjourned into closed session.

Meeting Transcript

Welcome to business session today. We're excited once again to see Director Queen and Director Morrison. We enjoy these presentations. The first item on our agenda is approval of minutes of business session of second. All right, so we moved in second. All in favor to go by saying aye. Aye. All opposed. All right. You're the only actual thing on our docket, so that is both exciting and daunting at the same time. Thank you very much. Thank you, Mr. Mayor, members of the council, Tammy Queen, Finance Director for the City. I am joined by Krista Morrison, our budget officer in the finance department. And we are here to continue our series on year-end results for fiscal year 24. We provided you a few weeks ago when we talked about the general fund. We provided you a copy of the uh year-end monthly financial report that uh hopefully you can reference. We will not go through that in detail. We're here today to talk about special revenue funds, as they have both reliance on the general fund at times and uh other times have excess fund balance. So we are going to walk through those today with an emphasis on walking you through the sources and uses for each of the funds as well as um talking about select funds relative to the five-year financial plan. So we will start again when we talk about governmental finance, we talk about fund accounting, and we classify revenues and expenditures into funds for a very distinct purpose, and that's both to separate them into business type activities and governmental activities, but also to keep things separate from one another so that we can keep track of uses of those funds. So we don't just pile everything into the general fund, we have special revenue funds, which is our topic today, to uh keep things like sales taxes, um, different different types of taxes that the city collects separated one from another so that we can make sure that we stick to their appropriate use and uh don't commingle funds together that should not be. So our financial results, you've seen this slide before. We have fund balances that are continuing to improve, mostly because revenues are higher than anticipated, and expenditures came in a little lower than uh anticipated as well. We still want to talk about that structural imbalance that exists uh in across the five-year planning window uh in the general fund, and uh more to come on that, but we kind of covered that a few weeks ago. So this is a listing of select funds, uh, and this was in your monthly financial report. It's Schedule A in the monthly financial report, and it basically lays out the activity for each fund and its every funds associated ending unreserved fund balance. We are going to talk about most of the the items in green on this page. We've already talked about the general fund and its balance, and uh we talked about capital with and debt with the finance committee. Uh we will not talk about business type activities today. Uh we can certainly bring that back as as the council elects. So we're going to start again with special revenue funds, and as I mentioned, we use these to keep track of individual revenue sources so that we ensure that we are not spending money on things we should not be spending money on. We're not using the public safety sales tax for something that parks sales tax should pay for because voters approve taxes for particular purposes, and we want to we have to honor that as well as state statutes sometimes uh makes those requirements of us. When we talked about the general fund, we went through the special revenue funds that are supported by the general fund, and this is a another graphical look at that. Uh and we the big ones that are here are here by design. So the 24.8 million dollars that's that the general fund contributed to the street maintenance fund is because there is a code provision that says that 7.5% of the earnings tax will be moved to the street maintenance fund for the purpose of street preservation. So that is by design. That is not because the street maintenance fund needed help this year. The $8.3 million dollars for the performing arts center garage is also by design because we collect the gaming tax revenues into the general fund and we move them to the performing arts center garage fund to pay that debt service. Uh that is uh uh the way that we support that particular garage. There are other funds listed here. We did go through a lot of these when we talked about the general fund. We're happy to answer questions about individual supplements. I want to reiterate, and we talked about this before, that having excess balances and and supplement or and or having to supplement from the general fund into a special revenue fund. The XX balances is kind of a new concept for us. It's new post-COVID, really. We spent a lot of times trying to time pre-COVID and during COVID, trying to figure out how in the world are we going to support these special revenue funds and make sure they can keep doing the programs that they're doing. So this is a it was a new problem for us to have fund balance in some of these special revenue funds. So we're going to go fund by fund, and we can take this as quick as you want or as slow as you want. So we will provide, as I said, uh overview of the sources and uses of the fund, how the fund ended up, and then Crystal will walk us through the five-year financial plan for certain of the funds.

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