Description
Culminating Project Part II
This team has been tasked, via two Interdepartment Memorandums from the Mayor of the Town of Hadleyville, Arizona, with reviewing the Town’s finances in light of the recent economic downturn. This memo transmits the influence the current financial crisis is expected to have on the Town’s budget, and discusses several ways to minimize the impact on critical services.
Analysis Of Financial Statements
Upon reviewing the Town’s budget briefing books, we identified several factors impacting the budget. While revenues have fallen over the past three years, over the next three years the Town’s economic forecast is expected to improve slightly (Town of Hadleyville Department of Finance, n.d.). The Town currently spends beyond its available revenue but has no debt (Town of Hadleyville Department of Finance, n.d.). Lastly, the Town has identified three infrastructure projects key to supporting the Town’s mission of being a desirable place to live, but has not identified funding sources and does not have a timeline for completing them (Town of Hadleyville Department of Finance, n.d.). Overall, despite recently declining revenues, we find the Town to be in a strong financial position.
Analysis Of Impact Of Financial Crisis On Town Budget
Many residents left town due to the shuttering of a major employer which has reduced revenues for the Town (Town of Hadleyville Department of Finance, n.d.). The implication of this loss in revenue is a necessary reduction of expenses in order to remain financially solvent and maintain a positive credit rating. Despite the need to reduce expenditures, it is imperative to the long-term success of the Town to continue to be seen as a desirable place to live. Any budget reductions will need to reduce costs immediately without jeopardizing the Town’s future.
Recommendations
According to the Interdepartment Memorandum dated October 5, Town management wants Economic Security Department (ESD) expenditures to equal revenues while providing quality customer service and increasing the amount of grant funds received (Town of Hadleyville, 2010b). In order to do this, we propose reducing the full-time workforce in ESD by half, and replacing each cut position with 2.25 part-time employees, reducing benefit costs by half and eliminating the need for overtime pay. We also propose that ESD review current grant rules and use grant funds to cover administrative and operating expenses where at all possible. Finally, given the current fiscal crisis, we feel that travel costs should be eliminated entirely. With all of the aforementioned savings proposals, the ESD budget would still be underfunded by $286,000. However, given how many people are reliant on these services, we feel this is acceptable.
Town management has determined that the Town is in need of a new senior center, elementary school, and water treatment plant and reservoir (Town of Hadleyville Department of Finance, n.d.). We propose using Water and Sewage Department (WSD) revenues to fund these projects. The most recent budget briefing book identifies $9,692,000 in net revenue for WSD in FY 10 and $9,794,500 in FY 11, and we do not anticipate yearly net revenue to significantly deviate from current forecasts. We anticipate construction of the senior center to cost $7,100,000 (Drane, 2016), the new elementary school to cost $16,300,000 (School Planning & Management, 2015), and the water treatment plant to cost $18,933,600, spread out over four fiscal years (Town of Hadleyville Department of Finance, n.d.). Based on WSD yearly net revenues and these anticipated costs, we propose utilizing a sinking fund to construct the senior center in FY 11 and the elementary school in FY 12, and to begin construction of the water treatment plant in FY 12 with the project being completed in FY 15.
Capital Improvement Projects
FY 10 FY 11 FY 12 FY 13 FY 14 FY 15
Beginning Fund Balance Unknown $9,692,000 $12,386,500 $2,988,500 $5,158,500 $7,542,900
Revenue Added to Fund Unknown $9,794,500 $9,000,000 $9,000,000 $9,000,000 $9,000,000
Funds Used None $7,100,000 $18,398,000 $6,830,000 $6,615,600 $3,390,000
Ending Fund Balance $9,692,000 $12,386,500 $2,988,500 $5,158,500 $7,542,900 $13,152,900
Project Constructed None Senior Center School & WTP Year 1 WTP Year 2 WTP Year 3 WTP Year 4
Conclusion
Given the declining revenues over the past three years it is imperative that the Town of Hadleyville eliminate deficit spending (Town of Hadleyville, 2010a). However, in order to fulfill the Town’s mission of being a place where “people want to live and raise their children,” it is also necessary to adequately fund Town operations as well as capital improvements (Town of Hadleyville Department of Finance, n.d.). Per the Town Manager’s direction, we have focused on reducing operating costs in ESD and funding construction of a water treatment plant and reservoir in a responsible manner (Town of Hadleyville, 2010b). We also created a capital improvement timeline that allows the Town to fund the construction of a senior center and elementary school without acquiring debt. We believe following these recommendations will minimize the impact of the financial crisis on the Town’s budget while continuing to provide critical services.
References
Centers for Disease Control and Prevention.(2015). Intervention fact sheets. Retrieved from
https://www.cdc.gov/motorvehiclesafety/calculator/factsheet/speed.html
Drane, A. (2016). Cost estimates to build new senior center in Hadley double, will likely come
down. Retrieved from http://www.gazettenet.com/Cost-for-proposed-Hadley-senior-center-adjusted-5638517
Town of Hadleyville Department of Finance.(n.d.)Budget briefing books. Retrieved from
file:///C:/Users/034800/Downloads/BudgetBriefingBooks_student%20(5).pdf
Town of Hadleyville.(2010a). Interdepartment memorandum September 14, 2010. Retrieved
from file:///C:/Users/034800/Downloads/ADM626.v1R_M1Memo%20One_student%20(7).pdf
Town of Hadleyville.(2010b). Interdepartment memorandum October 5, 2010. Retrieved from
file:///C:/Users/034800/Downloads/ADM626.v1R_M4Memo%20Two_student%20(9).pdf
School Planning & Management. (2015). School costs: Did you know… Retrieved from
https://webspm.com/Articles/2015/07/01/School-Costs.aspx
REQUIREMENTS: POSSIBLE ACTUAL
Summary Analysis of Financial Statements
- a) Summarizes all relevant information.
- b) Evaluates town’s financial position.
10 09
Analysis of Impact of Financial Crisis on Town Budget
- c) Identifies stated effects of financial crisis on town budget.
- d) Identifies implied effects of financial crisis on town budget.
15 13
Recommendations
- e) Makes suggestions for lessening impact of financial crisis on town budget.
- f) Rationale for suggestions is well supported through application of course concepts.
15 15
Mechanics of Writing
- g) Student is clearly in control of standard, written academic English.
- h) All work includes correct spelling, punctuation, and grammar.
5 3
TOTAL 45 40 (80)