Significant Factors Affecting Budget Development

The development of the budget is driven by the Key Initiatives and current and projected growth of the City of Palm Beach Gardens. This growth is a result of several factors, including new development, annexations, the implementation of a County-wide one-cent infrastructure sales surtax, and a new Series 2023 Public Improvement Bond for roadway infrastructure improvements and the Burns Road Community Center Renovation Project. In addition to growth, there are several other considerations that are main drivers of every budget, including repair and maintenance costs, personnel costs, and use of reserves. This year, there is one overarching issue affecting all of these factors: the current inflationary environment. A discussion of each of these items, beginning with inflation, follows.

Inflation

The most significant factor affecting next year's budget is the current historic levels of global inflation the entire country is struggling with. As the markets begin to ease, inflation rates are slow to decline. This permeates throughout the entire budget, as it has impacted all types of expenditures, including labor, fuel and energy, construction costs, and recurring operating supplies.

The current state of the economy and inflationary environment is not only difficult for employers but has also exacerbated the financial difficulties being faced by many of our employees as the cost of rent and homeowners' insurance has risen by historic levels in Palm Beach County and across the entire state.

In response to these unprecedented times, the City is proposing salary adjustments that will raise general employee wages commensurate with the current CPI and fully funding all current collective bargaining agreements.

These adjustments are discussed in more detail in the Personnel Costs discussion later in this section.

We are proposing to reduce the millage from 5.32 to 5.17 mills. This will ensure that most homesteaded properties will see little change in their property taxes for the upcoming year. A further, discussion of this proposed changed can be found in the Significant Factors and the Property Value and Tax Rate sections of the Transmittal Letter.

New Development

The City's ability to weather the current economic environment is made possible by its strong financial position, due in large part to the continued growth and new development ongoing throughout the City. Some of the significant development projects currently underway or recently approved include the following:

Florida Power & Light (fka PGA Office Center)

This project was approved on June 11, 2019, via Resolution 46, 2019, and consists of a 270,000 square foot office building and three-story parking facility on Parcel A. Construction began in 2020 and has been in use since January 2023. The building had obtained its final Certificate of Occupancy before January 1 and contributed approximately $100 million or 19% of the total new construction taxable value.

Florida Power & Light – Phase II

Phase II consistent of a second 249,130 SF Office Building along with a three-story 701-space parking garage. Phase II connects to the Phase 1 office building by two connecting corridors and a central courtyard. The project was approved in December of 2022.

Artistry Neighborhood (fka Alton Parcel G)

This development on 206 acre of the Alton parcel was approved on February 9, 2017, and consists of 469 single-family units, a 3,290 square foot clubhouse, and 61 acres of upland preserve. Construction remains underway and robust.

PGA Station

This project consists of the construction of an 8-story multi-use building with 200,000 square feet of office space, 7,049 square feet of retail space, and 396 multi-family units. This project was approved via Resolution 62, 2021, on November 4, 2021. The 396 multifamily apartment building is currently under construction.

Downtown Palm Beach Gardens

This project consists of realigning the entry drive aisle from Alternate A1A, modifying building elevations, hardscape and landscape plans, relocating the carousel to the lakeside, providing a master signage plan, and updating building square footage and use allocations. This was project was approved via Resolution 43, 2020, on June 25, 2020.

Alton Medical Center

The project consists of a 7-story 300 bed hospital along with two 80,000 square foot medical office buildings. This project was approved in January 2023 and construction is anticipated to start in the 4th quarter of 2023.

PGA Waterfront – Ritz Carlton Residences

The project was annexed into the City in February of 2023 and is approved for 106 luxury condo units and 29 boat slips. The 3 condo buildings have been branded as the Ritz-Carlton Residences. Construction has begun on the project.

PGA National Commerce Park

The project was approved for a 2-story 36,000 SF office building and a 1-story 50,000 SF Warehouse/Industrial/Office building. It was approved in August of 2022 and anticipate to begin construction in 4th quarter of 2023.

Avenir

Construction and sales continue at the Avenir development on the western fringes of the City. This project will consist of 3,250 homes, 2 million square feet of office space, 400,000 square feet of retail space, and 300 hotel rooms. Two of the most recent neighborhoods approved are Pods 13 and 14 in the 391-acre Panther National development. This area consists of 27 single-family lots on 26.82 acreas in Pod 13 and 52-single family lots on 41.68 acres in Pod 14. The lots will be luxury homes ranging in price from $3 million to $12 million.

Avenir Town Center

The project was approved for a two phase 376,739 SF town center. The mix of uses includes grocery store, pharmacy, retail, restaurants, gym, hotel, and professional and medical office. It was approved in August of 2022 and phase I is currently under construction.

Avenir Town Center –Townhomes

Immediately north of the Avenir Town Center are the recently approved Avenir Townhomes. Designed to be integrated into the Town Center, the site is approved for 250 townhome units across 33-acres. The project was approved in November of 2022.

Avenir Pod 15

Approved in May of 2022, this is an expansive residential subdivision that contains 562 single family lots that are divided into 4 different neighborhoods covering a total of 256-acres. Construction has commenced.

The future property valuation of the City looks promising due to the aforementioned development projects. However, it is important to address the increased demand for services that will arise as a result. One area that will require particular attention is the western boundary of the City, where the Avenir development is currently taking place. To cater to this growing area, the FY 2024 budget has incorporated measures to enhance services accordingly.

To ensure sufficient coverage in the expanding western boundary, the budget allocates resources to add 4 Police officers. This addition will help meet the demand for expanded law enforcement services in the area. Additionally, in response to the increased need resulting from new construction, the budget also includes 1 additional code inspector and 1 additional fire inspector. These additional personnel will ensure adequate coverage and support in enforcing building codes and fire safety regulations in the western boundary.

Repair and Maintenance

Seven years ago, staff began developing various Repair and Maintenance plans to address the concerns of additional wear on the City's parks, facilities, storm water, and canal systems caused by increased usage and aging. To address these issues, staff prepared an analysis of all City property to identify, prioritize and calculate the estimated costs of items that needed to be addressed. Using the results of this analysis, a funding plan was developed.

City Parks and Facilities Plan

The areas identified as a part of this plan include major repairs such as roofing, interior and exterior painting of buildings, median maintenance, and parking lot resurfacing. Other areas include replacement of carpeting/flooring, turf replacement, irrigation repairs, playground equipment repairs, plumbing and bathroom repairs.

Some of the significant items contained in the FY 2024 plan are summarized in the table below.

Storm Water System Plan

In FY 2015, staff began the process of developing a storm water repair and renovation plan. Staff identified areas of deterioration in several storm water pipes and anticipated that more deterioration would occur as the system ages. A consultant was hired in FY 2015 to conduct a complete mapping, inspection, and report of the City's storm water system.

The report identified approximately $1,500,000 of renovations that needed immediate attention and have been completed. In addition, the report recommended a ten-year maintenance plan to pump down the system, clean, and video all structures for inspection. The proposed budget includes $250,000 in the Storm Water division's repair and maintenance expenditure account.

Canal System Plan

The City's canals are designed to gather water runoff from the storm water system. A significant renovation of the canal system took place almost two decades ago when $5 million public improvement bond was issued. To avoid the need for future costly renovations, staff developed an annual plan for canal dredging and maintenance. This plan was initiated in FY 2017 and is ongoing. In the proposed budget, $250,000 has been set aside for the Storm Water division's repair and maintenance expenditure account. Additionally, the city was awarded an additional $500,000 in Stormwater Grant funding from the State in the last fiscal year.

Personnel Costs

Personnel costs comprise the majority (61.2%) of the City's General Fund total expenditures, excluding transfers and reserves. Therefore, the factors that influence personnel costs are by far the most significant drivers of the entire budget.

Salaries

The City is divided into two different Employee categories: Bargaining and Non-bargaining. Under the Bargaining category, there are three employee bargaining units that govern various employee contracts:

International Association of Fire Fighters (IAFF)
Police Benevolent Association (PBA)
Service Employees International Union (SEIU)/ Florida Public Services

Union (FPSU)

The current agreement between the City and the IAFF expires September 30, 2024. Per the current collective bargaining agreement, all bargaining unit members will receive a 5% increase in base pay in FY 2024.

The current agreement between the City and the PBA expires September 30, 2025. Per the current collective bargaining agreement, all bargaining unit members will receive a 7% increase in base pay in FY 2024.

The City and the SEIU/FPSU are in the final year of the current agreement for FY 2021- FY 2023 and are currently negotiating a new contract. For initial budgeting purposes, an 7% increase in base salaries has been projected for FY 2024.

In the non-bargaining category, there is one group: General Employees. Based on the most recent Consumer Price Index, the Budget contains an adjustment for general employees of 7%.

New Positions

There are 606 budgeted full-time positions for FY 2024, which is an increase of 10 from the FY 2023 Budget of 596. Below is a summary of the new full-time positions requested in order to keep pace with growth and demand for services.

Code

One Code Inspector

Geographic Information Systems

One Geographic Information Systems Technician

Police

Four Police Officers

Fire

One Fire Inspector

Recreation

One Recreation Supervisor
One Head Pickleball Professional

*It is important to note that all positions for Recreation are funded by revenues generated from user fees; no tax dollars will be used.

Golf

One Assistant Chef

*As with the Recreation Fund requests, all positions for Golf are funded by revenues generated from user fees; no tax dollars will be used.

Pensions

The City has three pension plans; Police, Fire, and Florida Retirement System (FRS).

Contributions for the Police pension plan for FY 2024 total $5,205,649. This amount is based on the actuarial valuation performed as of October 1, 2022, and reflects a contribution equal to 48.98% of covered payroll, up from the previous year's percentage of 45.94%. The increase is primarily due to a recognized investment loss below the assumed rate 6.15%. Total return on market value of assets (11.3) % and 5.3% based on actuarial value of assets. The required contribution has been discounted for interest on the basis that the contribution is made in full at the beginning of the year. As of October 1, 2022, the funded ratio of the plan was 83.1%.

Contributions for the Fire pension plan for FY 2024 are estimated at $5,973,737. This amount is based on the actuarial valuation performed as of October 1, 2022, and reflects a contribution equal to 51.47% of covered payroll, down from the previous year's percentage of 52.39%. The decrease is primarily due to the reduction in the investment return assumption from 6.95% to 6.85%. Total return on market value of assets was (14.40) % and 3.87% based on actuarial value of assets. Per the plan's actuarial valuation, which does not provide a fixed dollar contribution, the payment to the plan has been estimated by multiplying the City's contribution percentage by the projected covered payroll. As of October 1, 2022, the funded ratio of the plan was 86.3%.

Contributions to the FRS are established by the Florida Legislature. FRS contributions changed July 1, 2023. Regular class increased to 13.57% from 11.91%, senior management increased to 34.52% from 31.57%, and elected officials increased to 58.68% from 57%. The total projected FRS contribution for all funds is $4,396,379. As of July 1, 2022, the funded ratio of the plan was 83.4%, down from 85.3%. The decrease was due to actual plan year investment return of -6.27%, which fell far short of the assumed investment return of 6.8%. At the Florida Retirement System Actuarial Estimating Conference held October 20, 2022, the conference principals agreed to lower the investment return assumption from 6.8% to 6.7%, noting that this expected rate of return is lower than both their financial consultant’s (Aon) long-term projection of 6.87% and their actuary’s (Milliman) projection of 7.21%.

Insurance

One budgetary challenge that will impact next year's budget is the moderate increase in Health Insurance premiums connected to the Self-Insured Medical Insurance Fund. This fund serves the purpose of accumulating resources for covering claims, premiums, and the operational expenses of the on-site employee health-care clinic. For the fiscal year 2024, funding has been raised by 8.25%, aligning with projections made by the City's actuary based on the plan's claims trend. As a result of this adjustment to the funding formula, the estimated end-of-year balance in the Fund is approximately $6.9 million, which is equivalent to around eight months' worth of claims.

The City is in the process of renewing its property and casualty insurance coverage for next year. As of the date of this writing, the renewal has not been received. For initial budgeting purposes, a total of $2,342,707 has been estimated for workers compensation and property/liability for FY 2024. This increase is based upon an estimated 10% increase in rates, due to adjustment to workers compensation premiums to reflect an increase in our experience modification rating due to several large claims last year. These projections will be modified as the renewal numbers become available.

Reserves

The proposed Budget anticipates a $14.7 million decrease in reserves as a result of three allocations at the proposed millage of 5.17. Firstly, there is a $5 million transfer designated for the renovation of the Burns Road Community Center. Secondly, a sum of $7.5 million has been designated for the construction of the new fieldhouse at District Park. Thirdly, a sum of $2.05 million has been assigned to Fire Station 6 to cover unexpected rises in construction expenses. For FY 2024, the unassigned reserve balance of $26 million represents 18.2% of total expenditures and complies with Council's policy of maintaining a minimum reserve balance of 17% of expenditures. Looking to the future, the ten-year financial forecast projects a stable financial picture through FY 2033. This projection reflects the significant increase in property valuations for FY 2024, which has a compounding effect in future years, as well as new development in Avenir coming onto the tax rolls. Unassigned reserves and budget stabilization reserves in FY 2033 are projected at $30 million and $5.8 million, respectively. The $4.4 million increase in unassigned reserves in FY 2033 reflects a required adjustment to maintain a balance of 17% of expenditures. A more detailed discussion and analysis of the City's current and projected reserves can be found in the Ten-Year Financial Forecast section.