E. Rey Garcia, MPA Candidate

Original Date: 10/11/2015

Local Government & Public Budgeting

The University of Texas-Rio Grande Valley (UTRGV) College of Liberal Arts Master of Public Affairs-Administration PAFF 6304: Public Budgeting & Finance Fall 2015, Module One Dr. Aziza Zemrani

The Budgetary Framework of the City of Weslaco’s Municipal Budget FY2010, with Highlights from 2011-2015

An MPA Graduate Term Paper

Revision 2, October 13, 2015

LOCAL GOVERNMENT & PUBLIC BUDGETING 1

Intentionally Left Blank

2 LOCAL GOVERNMENT & PUBLIC BUDGETING

An MPA Graduate Term Paper

LOCAL GOVERNMENT & PUBLIC BUDGETING The Budgetary Framework of the City of Weslaco’s Municipal Budget FY2010,

with Highlights from 2011-2015

E. Rey Garcia, MPA Candidate

October 11, 2015

The University of Texas – Rio Grande Valley (UTRGV)

www.utrgv.edu

College of Liberal Arts

Master of Public Affairs-Administration

PAFF 6304: Public Budgeting & Finance

Fall 2015, Module One

Dr. Aziza Zemrani

LOCAL GOVERNMENT & PUBLIC BUDGETING 3

Intentionally Left Blank

4 LOCAL GOVERNMENT & PUBLIC BUDGETING

Table of Contents

I. Abstract 6

II. Organizational Environment 7

Public Budgeting 7

Political Environment 8

Economic & Social Culture 9

Demographics 9

III. Budget Process – Agendas and Minutes 12

The Four Phases of Public Budgeting 12

Citizen Engagement 13

Open Government / E-Government / Gov. 2.0 13

City Council Meetings, Budgets Workshops, & Public Hearings 15

Agendas, Agenda Packets, & Minutes 15

City Council Video-Recorded Meetings 17

City Council Districts, Relations & Issues 17

IV. Budget Trends 18

Economic Growth 18

Economic Decline 18

Revenue Sources and Prospects 19

Expenditures 19

Tax Structure 19

V. Capital Budgeting 20

Project Rankings 20

Factors Promoting or Compromising Capital Development 21

VI. Financial Oversight for 2010 22

Governmental Funds 22

Proprietary Funds 22

Fiduciary Funds 23

Government-wide Financial Analysis 23

LOCAL GOVERNMENT & PUBLIC BUDGETING 5

VII. Comprehensive Annual Financial Report (CAFR) & Audits 24

Financial Highlights 24

General Fund 24

Adopted Budget 2010-2011 25

Volunteer Separation (VSP I) 25

CAFR’s and Audits (from 2011-2014) 26

Adopted Budgets (from 2011-2014) 26

Revenues and Expenditures for 2010 GAAP Accounting Procedures) 26

Bond Ratings 27

VIII. Understanding Budgeting in the City of Weslaco 28

Reform Efforts 28

Transparency Efforts 28

Performance Measurement 29

Result-Oriented Budgeting 29

IX. Summary and Concluding Recommendations 30

X. References List 31

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Abstract

This research study examines the practices and methods of public budgeting for the City of

Weslaco, Texas’ Municipal Budget Process from 2010, with highlights through 2015. It analyzes

the budget trends, capital investments, financial oversight and accountability, reform, e-

Government and transparency efforts, citizen engagement methods, and the city’s budgetary

responses and future challenges.

LOCAL GOVERNMENT & PUBLIC BUDGETING 7

Local Government & Public Budgeting The Budgetary Framework of the City of Weslaco’s Municipal Budget FY2010,

with Highlight from 2011-2015

E. Rey Garcia, MPA Candidate

October 11, 2015

Organizational Environment

The framework that makes-up the budgetary process for the City of Weslaco, consists of

three key factors that constitute an organizational culture with a political environment comprised

of the status-quo group, who are members of the local community opposing change, and the

reform group, who are members of the community promoting change. The framework also

consists of both economic and social cultures and their effects on the budgeting process.

Weslaco’s demographics plays a key role in the realm of economic development and

investments as noted in the budget process. This term paper attempts to define the budgetary

trends, capital budgeting, and the financial oversight and auditing practices implemented by the

City Council. This study also takes a closer look at the reform and transparency efforts adopted

by the City of Weslaco. Finally, it seeks to explain what performance measurement policies are

adopted by the city, and if such measurements have created a results-oriented budgeting practice.

Public Budgeting is defined by Robert D. Lee, Public Budgeting Systems, 9th edition, as

a process of “selection of ends and the means to reach those ends.” Budgeting is about

information, budget systems help governments gather the best information, helping the decision-

makers in the making of both technical and political decisions and the allocation of resources to

propose.

8 LOCAL GOVERNMENT & PUBLIC BUDGETING

Political Environment

The political environment of the City of Weslaco has recently been split between two

groups. The Status-Quo Group, are those who want to keep the system as is. The Reform Group,

are those who favor reform and restructuring of the organization.

From 2010 through 2014, the Status-Quo Group, consisted of a minority City Council

members and a very-vocal constituency in support of Unions, which includes the Weslaco Police

Department and the Weslaco Fire Department. The status-quo group strongly opposes change

and reform, which constitutes the elimination of 50 plus jobs and the re-visiting of contracts.

From 2010 through 2014, the Reform Group consisted of an administration headed by

City Manager, Leonardo Olivares, and Mayor Miguel D. Wise, with a City Council that was

majority in favor of reform and organizational and budgetary restructure. It called for the

elimination of mid-management and to delegate more job responsibilities to the Directors and

staff. It called for the modernizing the overall culture of the organization, which included

performance measuring, budget training for Directors, re-defining job descriptions and salary

grade levels, emphasis on employee evaluations and job performance. This also included the

hiring of more qualified department heads and re-negotiating contracts with suppliers and

vendors, and creating a modern virtual Information Communications Technology (ICT) network

that connects all employees and public to the organization’s administration, via a secure

Intranet, consisting of the internal fiber network, connecting employees to the main information

data servers at city hall; and an Extranet, consisting of an external network, via the Internet,

connecting citizens, public, and other governments to the administration, and therefore,

promoting citizen engagement, or instant interaction between the city and the community via the

city’s portal website, mobile web, and social media network.

LOCAL GOVERNMENT & PUBLIC BUDGETING 9

Economic & Social Culture

The City of Weslaco has experienced a boost of economic growth and it is noticeable

with the 2014 high-ratings from the budget auditors, Standard & Poor’s and Moody’s as reported

in the city’s 2014 Comprehensive Annual Financial Report (CAFR). Weslaco is centrally located

in the mid-Rio Grande Valley, making it an ideal place for cultural events, travel, lodging, dining,

shopping, education, medical needs, and economic development.

Weslaco is minutes away Mexico and South Padre Island. It is home to the Onion Fest, a

joint-venture by the City of Weslaco and the Weslaco Area Chamber of Commerce, who funds

the event, and the Alfresco Weslaco, Music and Art on the Street, a joint venture by the City of

Weslaco and the Weslaco Economic Development Corporation. It is also home to three nature

centers, Estero Llano Grande State Park (A World Birding Center), Frontera Audubon, and the

Valley Nature Center. The Mid-Valley Airport, caters to private planes and business travelers.

The South Texas College division provides higher education within reach of mid-Valley

residents. Knapp Medical Center, a Level III Trauma hospital, providing medical services to

residents of the mid-Valley. The Weslaco Museum, which provides cultural-rich exhibits and the

Tower Theater, providing an intimate setting, where acts and plays, often involve the spectator.

Shopping is just minutes away from the Rio Grande Valley Premium Outlets. All of these

establishments help generate economic-growth for the city’s budget.

Demographics

The following demographics are from the City of Weslaco, including population,

transportation, utilities, electricity, natural gas, Internet, phone and cable, and recycling

information, are provided via the Weslaco Area Chamber of Commerce at:

Website: http://www.weslaco.com/pages/Demographics.

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Population: Is based on the most recent Census at www.cenus.gov.

Year Population

1990 21,877

2000 26,935

2010 35,770

2013 (est). 37,093

Transportation: Methods of transportation include air, bus, and automobile.

Air Travel:

Mid-Valley Airport - Is located in Weslaco, a facility for private aircrafts that

features on-call Customs and Border Protection inspections Monday – Saturday, 8 am to

5 pm. (Must provide a 2-hour notice). Website: http://www.weslacoairport.com/

McAllen International Airport – Is located approximately 20 miles to the west

of Weslaco, in McAllen, Texas. Website: http://www.mcallenairport.com/

Valley International Airport – Is located approximately 25 miles to the east of

Weslaco, in Harlingen, Texas. Website: http://www.flythevalley.com/

Brownsville-South Padre Island International Airport – Is located

approximately 41 miles east of Weslaco, in Brownsville, Texas.

Website: http://www.flybrownsville.com/

McAllen, Harlingen, and Brownsville-South Padre Island airports all serve the

Rio Grande Valley’s air-traveling needs via the following airlines: United Airlines,

American Airlines, U.S Airways, Allegiant Air, Aeromar, Southwest Airlines, Sun

Country Airlines and Delta Airlines.

Bus

The Lower Rio Grande Valley Development Council provides public

transportation through the Valley Metro bus system. The routes travel primarily through

LOCAL GOVERNMENT & PUBLIC BUDGETING 11

Hidalgo and Cameron counties, with service hours that are typically Monday – Saturday,

6 am to 8 pm. The Weslaco stop is located at South Texas College, 400 W. Border.

Valley Transit is a full-service bus operation with intercity, airport shuttle, charter

and package express service. The main route runs from Mission to Harlingen and

Brownsville and Harlingen with daily service. Additional service points include Roma,

South Padre Island, San Antonio and Houston. The Weslaco stop is located at the Stripes

Convenient Store, 1919 W. Business 83.

Automobile

Driver’s licenses are issued and renewed at the Texas Department of Public Safety

Driver and Motor Vehicle office located on 1015 and Sugarcane Dr. The phone number is

956-565-7200. Vehicles are registered at the Auto License Department/Hidalgo County

Tax Office, located at 1902 Joe Stephens Ave, #201. The phone number is 956-973-7825

Utilities

Water

Supplier: Hidalgo County Water District #9

Water Source: Rio Grande River

Plant Capacity: 8.12 mgd, Avg. Daily Use: 4.744

Peak Use: 6.688 mgd

Basic Rate: $10.06

Cost/1,000 gallons over Basic Rate: $1.79

Elevated Storage: 1.3 mgal;Ground Storage: 1.085 mgal

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Budgetary Process – Agendas & Meetings

The budget cycle and process is made up of four phases of public budgeting, the

development, approval, execution, and evaluation of the budget. It provides financial reporting to

its constituents with detailed, itemized descriptions of the agency’s yearly expenses, and

promotes the organization’s initiatives on transparency, open government, and e-Government.

The Four Phases of Public Budgeting

1. Development - Propose departmental items are presented to City Manager and Finance

Director. This includes much planning and research by the Department Heads and Mid-

Management or Senior Staff.

2. Approval – The proposed items go through countless revisions and compromising before

it is approved by the Mayor and City Council. The City Manager and Finance Director

meet with Department Heads to review and justify the proposed budget and eliminate

unnecessary expenses or items not justified.

3. Execution – This is done through a series of budget meetings and budget workshops

involving the City Manager, the Mayor and City Council, and all Department Heads. It

allows the opportunity for the public to question or comment on the public budget. It

allows the vendors the opportunity to explain their services and address any comments or

questions about their contracts or the renewal of their service and possible bidding

process. Any other key participants, such as the Weslaco Museum, the Boys and Girls

Club, the Valley Nature Center, Estero Llano Grande World Birding Center, Frontera

Audubon, the Tower Theater, and any other nonprofit organizations receiving charitable

contributions from the city.

LOCAL GOVERNMENT & PUBLIC BUDGETING 13

4. Evaluation – Yearly audits evaluate of all year-end financial expenses and reports. After

the audit is complete the auditor will address the city and council at the public meeting

and report on the city’s current financial ratings based on the General Fund and the

Reserve. Auditors performing the evaluation are sometimes local or national, such as

Standards & Poor’s or Moody’s. The city is presented with the Comprehensive Annual

Financial Report (CAFR), a financial report that complies with the accounting

requirements promulgated by the Governmental Accounting Standards Board (GASB).

Citizen Engagement

The participation of the community is evident in the City of Weslaco’s city council

meetings, budget workshops, and public hearings. Citizens are encouraged to engage during

regular meetings by completing a City Records Request - Public Forum to speak form, prior to

the regular meeting. Citizens can address the City Council directly during public comments of

the regular council meeting, however, the council cannot respond to the citizens, they can only

listen.

Open Government / E-Government / Gov. 2.0

Open Government is defined by the OECD (Organization for Economic Cooperation

and Development) as “the transparency of government actions, the accessibility of government

services and information, and the responsiveness of government to new ideas, demands and

needs” (Harper, L., 2013).

14 LOCAL GOVERNMENT & PUBLIC BUDGETING

E-Government is defined by the World Bank as “the use by government agencies of

information technologies that have the ability to transform relations with citizens, businesses,

and other arms of government. These technologies can serve a variety of different ends: better

delivery of government services to citizens, improved interactions with business and industry,

citizen empowerment through access to information, or more efficient government management.

The resulting benefits can be less corruption, increased transparency, greater convenience,

revenue growth, and/or cost reductions” (Harper, L., 2013).

Government 2.0 is defined by Gartner Research as “the use of Web 2.0 technologies,

both internally and externally, to increase collaboration and transparency and potentially

transform the way government agencies relate to citizens and operate” (Harper, L., 2013).

As part of the transparency initiatives, the City of Weslaco keeps the community

informed of all budgetary-related governmental actions, by delivering information to the public

and transforming relations with the community, using Open Government, E-Government, and

Gov. 2.0, as the foundation that sets the building blocks of a truly transparency government.

LOCAL GOVERNMENT & PUBLIC BUDGETING 15

City Council Meetings, Budget Workshops, & Public Hearings

City Council Meetings are formal and must not stray from the agenda items. Under the

Texas Open Meetings Act (the Act), the general rule is that every regular, special, or called

meeting of a governmental body, including a city council and most boards and commissions

(depending on membership and authority), must be open to the public and comply with all the

requirements of the Act. The Act does not apply to purely social gatherings or conventions and

workshops, as long as any discussion of city business is incidental to the purpose of the gathering

(TML, 2015). An Executive Session, a private closed-door meeting, where the Mayor and City

Council, City Manager, City Attorney and any other required participant(s) discuss and

deliberate extensively over unresolved agenda items, some examples are lawsuits, and supplier

and vendor contracts, all which may affect the city’s budget.

Budget Workshops are less-formal “round-table style” meetings where staff, city

council, vendors and suppliers, media, and the public discuss the budget in greater detail,

allowing a two-way communication between the staff and the community. The city promotes

accountability by encouraging public comments and participation, and earns both trust and

credibility from the community.

Public Hearings are a type of public meeting, containing detailed literature, however,

with the distinctive aspects that make a hearing different. Abigail Williamson and Archon Fung

define a public hearing as “an open gathering of officials and citizens, in which citizens are

permitted to offer comments, but officials are not obliged to act on them or, typically, even to

respond publicly.” The purpose public hearings is to allow citizens the chance to voice their

opinions and concerns over a decision facing a legislature, agency, or organization, which may

reflect items on the budget process (Williamson, A., & Fung, A., 2004).

16 LOCAL GOVERNMENT & PUBLIC BUDGETING

Agendas, Agenda Packets, & Minutes

Agendas are an outline of what is to be discussed at a City Council Meeting and must be

posted seventy-two hours prior to the meeting. They must be approved and signed by the City

Manager and often contain much feedback from City Council members, before they are

approved. With the agendas, Agenda Packets are also posted and contain a detailed copy of

reports and supporting documents for each agenda item. The Minutes are protocols that serve as

the instant written record of the meeting and contain details and informational notes about the

agenda items discussed at the City Council meeting(s).

The posting of Agendas, Agenda Packets, and Minutes is the responsibility of the Office

of the City Secretary, and the Information Technology Department (IT). The City Secretary posts

approved agendas and approved minutes to the city’s bulletin board, located outside of city hall.

An electronic format of both the agendas, agenda packets, and minutes is forwarded to the IT

Department to post to the city’s portal website, mobile web, and to promote via social media.

Budgeting information may be dedicated to an entire agenda or may be an item within the

agenda. Agendas may include such budget-related items, as the approval from the Mayor and

City Council of supplier-vendor contracts, the awarding of bids, proposed capital expenditures,

and the awarding chartable monies to nonprofits as a public purpose. Currently, agendas,

packets, and minutes are posted to the following:

Current Agendas & Packets (July 2012 – Current Date): Are posted to the following

website: http://www.weslacotx.gov/Agendas.html.

Historical Agendas & Packets: Are not available online and must be requested by

completing a City Records Request Form and submitting it to the Office of the City Secretary,

Ms. Elizabeth Walker and wait until approved and ready for pick-up.

LOCAL GOVERNMENT & PUBLIC BUDGETING 17

Current Minutes (July 2010 – Current Date): Are posted to the following website:

http://www.weslacotx.gov/Minutes.html.

Historical Minutes: Are not available online and must be requested by completing a

City Records Request Form and submitting it to the Office of the City Secretary, Ms. Elizabeth

Walker and wait until approved and ready for pick-up at City Hall.

City Council Video-Recorded Meetings

The City of Weslaco’s Information Technology Department is responsible for recording

and editing approved video meetings of the City Council and posting to the city’s YouTube site

and broadcasting it via the PEG Channel or the Local Access Channel.

YouTube City Council Video Archives: Video archives of approved recordings are

located at: https://www.youtube.com/user/CityOfWeslaco.

City Council Districts, Relations & Issues

Overall, the City of Weslaco’s City Council is divided by Districts, which are divided by

each City Council member’s represented territory, marked off for administrative, electoral, or

other purposes. City Council members build strong relations with their constituents and

supporters. The relations with the constituents and supports are based on issues that represent

each district or the city as a whole. Depending on how the issues affect the district, it may or may

not curtail the approval of agenda items proposing new or budgeted expenditures.

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Budget Trends

When organizational conditions are changing, developing a budget that expects where the

trend is going is both sagacious and appropriate. The budget manager or analyst review historical

empirical data, and draw conclusions based on those facts and balance that knowledge with

current market conditions and what is believed to happen in the future.

Economic Growth

Before 2010, the City of Weslaco had experienced the rewards of the economy’s financial

growth that also affected the growth of the municipal budget; and it reflected on the spending

measures. The city was generous with department head salaries, rewarding costly, yet local

vendor contracts, and the support for generous donations to other non-for-profit organizations.

The unions, Weslaco Fire and Weslaco Police, were salaried plentiful monies.

Economic Decline

In 2010, the City of Weslaco experienced the reality of downsizing. The city had to

reorganize its budgeting practices and spending methods. The city was headed for bankruptcy if

measures were not implemented immediately, which included the elimination of 50-plus jobs, via

Voluntary Separation Plan (VSP), (City of Weslaco. CAFR, 2010, p. 5). The cancellation and/or

renegotiation of costly vendor contracts. New procurement measures included re-visiting

existing contracts, comparative research on possible new suppliers and vendors, new fair and

equitable bidding techniques, and the request for vendor qualifications posted to solicit new

contracts that would not exceed the budgetary policies, and were equitably selected to provide

services to the city.

LOCAL GOVERNMENT & PUBLIC BUDGETING 19

Revenue Sources and Prospects

The City of Weslaco’s revenue sources are in the form of taxes, licenses and permits,

services for Vital Statistics, fines and forfeits, miscellaneous, and intergovernmental.

Expenditures

Expenditure are in the form of departmental operating costs, public safety, public works,

Vital Statistics, Parks and Recreation, and cultural. Another form of expenditures are charitable

contributions to non-profit organizations.

Tax Structure

A good tax structure is one that is both equitable and efficient. According to Johnson,

Linda, M. “An equitable tax system is one that fairly distributes the tax burden. An efficient tax

system, is one that minimizes both the compliance costs to the taxpayer and the administrative

costs to the government.”

The City of Weslaco uses the progressive or reformist approach, similar to the efficient

approach, on sales tax and hotel-occupancy tax, and a regressive or reverting approach, which is

an unfair to those of a lower-income bracket. Property taxes are a combination of progressive

and regressive and depends on the market value of the property, which is usually based on

location.

20 LOCAL GOVERNMENT & PUBLIC BUDGETING

Capital Budgeting

Capital budgeting is defined by Google Online Dictionary as “the planning process used

to determine whether an organization's long term investments such as new machinery,

replacement machinery, new plants, new products, and research development projects are worth

the funding of cash through the firm's capitalization structure.” Often capital budgeting involves

ranking of capital projects, and promoting based on need, and compromising from within the

organization and the Mayor and City Council members.

Project Rankings

Little ranking information is available online from 2010 through 2015. Capital projects

included: IT and computer equipment (thin-clients, computers, network equipment and servers

for city hall and police), fiber network, Online Bill Pay System for Utilities, Water Treatment

Plant, new police units, and mobile laptops for both police and fire units. Rankings were done

via spreadsheets by the Department Heads and forwarded for approval to the City Manager and

Finance Director, who would prioritize and rank based on need-basis and budgetary limits.

LOCAL GOVERNMENT & PUBLIC BUDGETING 21

Factors Promoting or Compromising Capital Investment

Factors promoting capital investments, have been implemented because the city was or is

in need of such equipment. For example, in 2010, the computers and servers at city hall had

reached end of life and were nearly 10 years old. The IT Department had to assess the needs of

the organization and phase out the old equipment and gradually transition to new technology.

This capital expense required the approval from the Mayor and City Council. Other capital

investments that included a procurement process of bidding and qualifications from prospective

vendors, were the building of a new fiber network, the new Water Treatment Plant, and the

Online Bill Pay system, which was an add-on to an existing system and contract with existing

vendor.

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Financial Oversight for 2010

The financial oversight for the City of Weslaco’s Municipal Budget is under the direction

the City Manager, Finance Director and Mayor and City Council. A fund is a grouping of related

accounts that is used to maintain control over resources that have been segregated for specific

activities or objectives. The City of Weslaco, like other state and local governments, uses fund

accounting to ensure and demonstrate compliance with finance-related legal requirements. All of

the funds of the City of Weslaco can be divided into three categories: governmental funds,

proprietary funds, and fiduciary funds (City of Weslaco. CAFR, 2010, p. 5).

Governmental funds. The City of Weslaco uses governmental funds to account for

essentially the same functions reported as governmental activities in the government-wide

financial statements.

As of the end of the current fiscal year, the City of Weslaco’s governmental funds

reported combined ending fund balances of $4,242,611. Approximately 64.52% of this total

amount $2,737,153 constitutes unreserved fund balance, which is available for spending at the

government's discretion. The remainder of fund balance is reserved to indicate that it is not

available for new spending because it has already been committed 1) to liquidate contracts and

purchase orders of the prior period, or 2) to pay debt service

(City of Weslaco. CAFR, 2010, p. 5).

Proprietary funds. The City of Weslaco maintains two different types of proprietary

funds, enterprise and internal service. Enterprise funds are used to report the same functions

presented as business-type activities in the government-wide financial statements. The City of

Weslaco uses enterprise funds to account for its water and sewer fund, for its sanitation fund and

for its airport fund. Internal service funds are an accounting device used to accumulate and

LOCAL GOVERNMENT & PUBLIC BUDGETING 23

allocate costs internally among the City of Weslaco’s various functions. Because these services

predominantly benefit governmental rather than business-type functions, they have been

included within governmental activities in the government-wide financial. (City of Weslaco.

CAFR, 2010, p. 6).

Unrestricted net assets of the Water and Sewer Fund at the end of the year amounted to

$731,156, the unrestricted assets for the Sanitation Fund amounted to $791,238 and those for the

Airport Fund amounted to $(42,644). Other factors concerning the finances of these two funds

have already been addressed in the discussion of the City of Weslaco’s business-type activities

(City of Weslaco. CAFR, 2010).

Fiduciary funds. The City of Weslaco uses fiduciary funds to account for resources held

for the benefit of parties outside the government. Fiduciary funds are not reflected in the

government-wide financial statement because the resources of those funds are not available to

support the City of Weslaco’s own programs. The accounting used for fiduciary funds is much

like that used for proprietary funds (City of Weslaco. CAFR, 2010, p. 6).

Government-wide Financial Analysis. In the case of the City of Weslaco, assets

exceeded liabilities by $48,041,208 at the close of the most recent fiscal year. The City of

Weslaco’s net assets available for capital projects acquisition is $4,069,728, which reflect 8.88%

of total net assets. On September 30, 2010, the City had an outstanding bonds balance of

$56,205,000 and had $4,669,338 in cash to be used for completing the 2007 bond issues projects.

Furthermore, the City of Weslaco’s net assets (3 percent) represents other resources that are

subject to external restrictions on how they may be used. The remaining balance of unrestricted

net assets is a $3,071,422. This amount may be used to meet the government's ongoing

obligations to citizens and creditors (City of Weslaco. CAFR, 2010).

24 LOCAL GOVERNMENT & PUBLIC BUDGETING

Comprehensive Annual Financial Reports (CAFR) & Audits for 2010

Governmental funds are used to account for essentially the same functions reported as

governmental activities in the government-wide financial statements. However, unlike the

government-wide financial statements, governmental fund financial statements focus on near-

term inflows and outflows of spendable resources, as well as on balances of spendable resources

available at the end of the fiscal year. Such information may be useful in evaluating a

government's near-term financing requirements.

Financial Highlights

The financial highlights are based on the assets of the City of Weslaco, which exceeded its

liabilities at the close of the most recent fiscal year by $48,041,208 (net assets). Of this amount,

$3,071,422 represents unrestricted net assets. This amount may be used to meet the government’s

ongoing obligations to citizens and creditors. As of the close of the current fiscal year, the City of

Weslaco’s governmental funds reported combined ending fund balances of $4,242,611.

Approximately 55.94% of this total amount, $2,737,153 is available for spending at the

government’s discretion (undesignated fund balance) (City of Weslaco. CAFR, 2010, p. 4).

General Fund

The general fund is the chief operating fund of the City of Weslaco. At the end of the current

fiscal year, the general fund’s deficit unreserved fund balance was $(616,131), the total fund

balance reached $(34,679). As a measure of the general fund's liquidity, it may be useful to

compare both unreserved fund balance and total fund balance to total fund expenditures.

Unreserved fund balance represents 2.6 percent of total general fund expenditures, while total

fund balance represents 4.5 percent of that same amount. While it is recommended that the

General Fund should have an unreserved fund balance of no less than 5 to 15% of operating

LOCAL GOVERNMENT & PUBLIC BUDGETING 25

expenditures, the City has placed the target for unreserved fund balance in the General Fund at

25%. The City has implemented a fiscal forecast model that is designed to increase the fund

balance in the General Fund to 25% by the year 2015 (City of Weslaco. CAFR, 2010, p. 4).

Link: http://www.weslacotx.gov/fin/CAFR2010.pdf

Adopted Budget 2010-2011 – The budget was adopted on September 2010.

Link: http://www.weslacotx.gov/fin/ABFY2010-2011.pdf

Volunteer Separation – The new budget included the reduction of workforce, as recommended

by the City Manager and the Finance Director. On August 5, 2010, the City of Weslaco offered a

Volunteer Separation Plan I (VSP I) to all fulltime employees. VSP I benefits included:

Employees with five (5) complete years of full- time employment or less shall receive the

equivalent of five (5) weeks of base salary in one (1) installment. . Employees with more than

five (5) complete years of full-time employment will receive one (1) week's base salary for every

year of employment, to a maximum of 20 weeks, payable in a maximum of five (5) equal

monthly installments, and the separation benefits will be calculated as of September 3, 2010.

In addition under the VSP I employees shall receive payment of accrued vacation and sick leave

as allowable per: (1) The City of Weslaco Personnel Policies and Procedures Manual; (2) The

Collective Bargaining Agreement with the Weslaco Municipal Police Union; (3) The Collective

Bargaining Agreement with the Weslaco Fire Fighters Association, IAFF, Local #3207,

whichever is applicable. As of September 30, 2010, 39 employees signed the VSP I. Total VSP I

payable at September 30, 2010 was $790,405. Prior to the end of the fiscal year 12 employees

had separated; accrued salaries payable was $116,347. The remaining 27 employees separated

after September 30, 2010, the Volunteer Separation Plan Payable was $674,058 (City of Weslaco,

CAFR, 2010, p. 66).

26 LOCAL GOVERNMENT & PUBLIC BUDGETING

CAFR’s and Audit Reports (from 2011-2014)

CAFR 2011 - http://www.weslacotx.gov/fin/COW-CAFR-2011.pdf

CAFR 2012 - http://www.weslacotx.gov/fin/CAFR-2012.pdf

CAFR 2013 - http://www.weslacotx.gov/fin/CAFR%202013%20FY.pdf

CAFR 2014 - http://www.weslacotx.gov/fin/2014%20CAFR%20City%20of%20Weslaco.pdf

CAFR 2015: Not yet available.

Adopted Budgets (from 2011-2014)

Budget 2011-2012:

http://www.weslacotx.gov/fin/Budget%20As%20of%20Sept%2027%202011%20.pdf

Budget 2013-2014:

http://www.weslacotx.gov/fin/budget/Adopted-BudgetFY2013-2014.pdf

Budget 2014-2015

http://www.weslacotx.gov/fin/ADOPTED%20BUDGET%20As%20of%209-12-14.pdf

Proposed Budget for 2015-2016

http://www.weslacotx.gov/fin/budget/PROPOSEDBUDGETFY201609.01.15.pdf

Revenues and Expenditures for 2010 (GAAP Accounting Procedures)

Revenues (REVs). The amount of money that a company actually receives during a

specific period, including discounts and deductions for returned merchandise. It is the "top line"

or "gross income" figure from which costs are subtracted to determine net income. Revenue is

calculated by multiplying the price at which goods or services are sold by the number of units or

amount sold (Investopedia, 2015).

LOCAL GOVERNMENT & PUBLIC BUDGETING 27

Revenues for 2010, include:

General: 20,663,931

Debt Service: 2,503,370

Economic Development: 2,627,012

Total Expenditures for 2010, include:

General: 28,841,627

Debt Service: 2,284,703

Economic Development: 4,862,028

(City of Weslaco, CAFR, 2010, p. 20).

Bond Ratings

Bond ratings are based on the CAFR’s audit report, and are expressed as letters ranging

from 'AAA', which is the highest grade, to 'C', which is the lowest grade. Rating are based on

services use the same letter grades, but use various combinations of upper- and lower-case letters

to differentiate themselves.

Most Recent Bond Ratings for 2014 & 2015

2014 - The following link is to the most recent bond rating awarded by Standard

& Poor. Weslaco receives an A+ Bond Ratings (City of Weslaco. Press Release, 2014,

Feb. 21).

http://www.weslacotx.gov/documents/Press/140221%20PR%20S&P%20Upgrade.pdf

2015 - The following link is the most recent bond rating awarded by Standard &

Poor is an A+ and Moody’s award Weslaco an A2 and A3. (City of Weslaco. CAFR,

2015, p. 14).

http://www.weslacotx.gov/fin/2014%20CAFR%20City%20of%20Weslaco.pdf

28 LOCAL GOVERNMENT & PUBLIC BUDGETING

Understanding Budgeting in the City of Weslaco

Reform Efforts

The 2010 reduction in force, a reorganization and restructuring initiative was to evaluate

the city’s workforce and the municipal budget. A “Rightsizing” approach, rather than

“Downsizing,” was taken by former City Manager, Leonardo Olivares. Rightsizing is a positive

approach, which is designed to bring strategic direction to the city. Whereas, downsizing is a

negative approach, often seen as a reactive process. It can be depressing and destructive.

(Ambler, 2015).

Transparency Efforts - E-Government, Open Government, Gov. 2.0

The City of Weslaco’s Transparency Efforts are the responsibility of the Information

Technology Department. The city’s departments all work together to deliver content that is as

accurate and up to date as possible, to the public’s computers, laptops, mobile and smart devices,

via the city’s network, Internet, portal website, mobile web, and social media network.

Prior to 2010, the city had the Management Information Systems (MIS) division, a part of

the Finance Department. At the recommendation of City Manager, the Mayor and City Council,

dissolved MIS and created the new Information Technology Department, headed by former IT &

Social Media Director, E. Rey Garcia.

Garcia’s first task was to outline the overall information systems being used by the city to

deliver content to the employees and the public. The city’s ICT and IT infrastructure was beyond

the “end of life”. Servers, computers, monitors, laptops, along with other hardware and software,

had not been updated in nearly 10 years. Through a series of budgetary capital expense

approvals, the IT began its modernization process, which included new equipment that consisted

of virtual computing, thin-clients, a fiber network connecting all remote users and facilities to the

LOCAL GOVERNMENT & PUBLIC BUDGETING 29

main data and information servers at the city hall data center. A revised website, along with a

mobile web was put into place. A social media network that promotes Open Government and

transparency reaches out to the public via Facebook, Twitter, Linked-In, YouTube, Google,

Yahoo, Microsoft, along with cloud computing and apps.

Performance Measurement

Performance Management is defined as regular measurement of outcomes and results,

which generates reliable data on the effectiveness and efficiency of programs. Input. Resources

(human resources, employee time, funding) used to conduct activities and provide services.

The former City Manager, Leonardo Olivares added the discussion and possible approval

of Comparative Performance Measurement Program to the agenda of the Regular Meeting of

the Weslaco City Commission, set for Tuesday, April 6, 2010 at 6:00pm. In the Weslaco City

Hall Legislative Chamber. Section IV: The City Manager’s Report, Item “B” (City of Weslaco,

Regular Meeting of the Weslaco City Commission, 2010, April 6).

The Mayor and City Council approved Performance Management training for the city,

however, after one year, the city dropped the program. This training is strongly recommended. It

is a program that should be followed on a yearly-basis to keep the employees and departments

educated on the latest measurements and ongoing program trends.

Result-Oriented Budgeting

Result-Oriented Budgeting is usual linked to Performance Measurement. It ties the

budget expense to the measurement of outcome and results, and therefore, produces an effective,

efficient, and reliable budget. The City of Weslaco has not linked the budget to the measurement

of performance and is not following a Results-Oriented Budgeting.

30 LOCAL GOVERNMENT & PUBLIC BUDGETING

Summary and Concluding Recommendations

The City of Weslaco continues to receive high-level bond ratings and should continue to

follow the best practices measures implemented by the Government Finance Officers Association

(GFOA) for Financial Management, which include, Risk Management, Public Engagement,

and the Role of the Finance Officer/Leadership, Process Management Improvement,

Performance Management, Grants Management, and Outsourcing (General Finance Officers

Association (GFOA).

Recommendations to the City of Weslaco are to re-visit the possibility of re-

implementing the Performance Management program. The city now has new department heads,

along with new City Council members, who never had a chance to experience the benefits of

being part of a performance measurement program that links the budgetary expenses and

therefore, reporting a result-oriented budget.

LOCAL GOVERNMENT & PUBLIC BUDGETING 31

Reference List

Bigelow, L. (1995). How to Budget Based on Trends. Retrieved October 11, 2015, from

http://wiki.fool.com/How_to_Budget_Based_on_Trends.

Comprehensive Annual Financial Report – CAFR. (2010). Retrieved October 10, 2015, from

http://www.weslacotx.gov/fin/CAFR2010.pdf.

Comprehensive Annual Financial Report – CAFR. (2014). Retrieved October 10, 2015, from

http://www.weslacotx.gov/fin/2014%20CAFR%20City%20of%20Weslaco.pdf.

Harper, L. (2013, June 10). A Citizen's Guide to Open Government, E-Government, and Government 2.0.

In UNC School of Government. Retrieved October 10, 2015, from https://onlinempa.unc.edu/a-citizens-

guide-to-open-government-e-government-and-government-2-0/.

Johnson, L. (2009). The Makings of a "Good" Tax. In 2009 The Federal Tax Course (p. 105). Chicago,

IL: CCH Tax Law Editors.

Lee, Robert D. (2012, July), Introduction. In Public Budgeting Systems, 9th edition. Jones & Bartlett

Learning.

Olivares, L. (2014, February 21). Press Release: S&P Raises Weslaco's Bond Ratings to the Highest

Level. Retrieved October 10, 2015, from http://www.weslacotx.gov/documents/Press/140221 PR S&P

Upgrade.pdf.

Public Hearing. (n.d.). In Participedia.net. Retrieved October 8, 2015, from

http://participedia.net/en/methods/public-hearing

Regular Meeting of the Weslaco City Commission. (2010, April 6). Retrieved October 10, 2015, from

http://www.weslacotx.gov/Regular Meeting Agenda 4-6-2010 @ 6PM.pdf.

Revenue. Definition of Revenue, 2015. In Investopedia. Retrieved October 11, 2015, from

http://www.investopedia.com/terms/r/revenue.asp.

Rightsizing vs. Downsizing? Big Difference! | Ambler. (n.d.). Retrieved October 11, 2015, from

http://ambler.com/article-library/rightsizing-vs-downsizing-big-difference/

The Official Site of The City of Weslaco, Texas. (n.d.). Retrieved September 23, 2015, from

http://www.weslacotx.gov.

The Weslaco Area Chamber of Commerce. (n.d.). Retrieved October 10, 2015, from http://weslaco.com.

The Texas Open Meetings Act at a Glance. (2015). In Texas Municipal League-TML. Retrieved October

10, 2015, from http://www.tml.org/p/Texas Open Meetings Act At-a-Glance_2015.pdf

Williamson, A., & Fung, A. (2004). Public Deliberation: Where We Are and Where Can We Go?

National Civic Review, winter 2004. Retrieved October 7, 2015, from

http://www.archonfung.net/papers/FungWilliamsonNCR04.pdf.