Loading...
HomeMy WebLinkAbout04 01 11 city council work session - financial mgmt policyCITY COUNCIL WORKSHOP AGENDA REPORT MEETING DATE: APRIL 4, 2011 PREPARED BY: JERILYN ERICKSON, FINANCE DIRECTOR PRESENTER: JERILYN ERICKSON TOPICS: 1. COMPREHENSIVE FINANCIAL MANAGEMENT POLICY 2. TIMING AND AVAILABILITY OF FINANCIAL INFORMATION 3. FISCAL DISPARITIES DISCUSSION: Introduction The City's 2030 Vision and Strategic Plan calls for the establishment of a Comprehensive Financial Management Policy (CFMP) as one of the goals under the vision element "Strong Financial Management." The policy should address the City's approach to fund balances, revenues, expenditures and debt. The discussion today will cover fund balance reserves, the first component of the Comprehensive Financial Management Policy. The City Council has requested staff to prepare a report which identifies the timing and availability of financial information. The City Manager has requested that staff offer some clarification on the Fiscal Disparities program and how it impacts the City of Prior Lake. History The City of Prior Lake currently does not have a formal Fund Balance Reserve policy for any of its funds. In 2007, the City Council adopted resolution 07 -087 which approved the revised 2030 Vision and Strategic Plan. Contained within this revised Plan was a goal which established the Finance Performance Gold Standards. One of the objectives of this goal was to "Maintain a 45% General Fund reserve balance — OSA (Office of State Auditor) and City Auditor recommended reserve to provide adequate cash flow, offset revenue shortfalls, provide for one -time purchases and insurance for unforeseen catastrophic events." The Office of the State Auditor (OSA) has recommended that each city establish a formal policy on the level of unreserved fund balance that should be maintained in the General Fund. The OSA also encourages the adoption of similar policies for all other special revenue funds. The State Auditor has taken a position on the level of unreserved fund balance only in the general and special revenue funds, because the nature of other governmental funds (capital projects and debt service) is such that the fund balance is restricted for the purpose of the fund. A workshop was held on March 15, 2010 to discuss the various issues related to fund balance reserves: fund balance classifications, preliminary minimum fund balance calculations for the General Fund, defining and quantifying the emergency component, and the impact of a lower reserve on the City's bond rating. A workshop was held on July 19, 2010 to discuss the initial draft of the Comprehensive Financial Management Policy. C. IDOCUME- ncgreenlLOCALS- 11Temp1ELF20110401 _1650341Workshop Report - CFMP - 2011.04.04. doc Current Circumstances The attached draft CFMP is more comprehensive compared to what was presented during the workshop on July 19, 2010 in that it also addresses reserves for the Economic Development Authority, Other Special Revenue Funds, Debt Service Funds and Capital Project Funds. A chart has been included with this agenda report that reflects the components outlined in the CFMP related to the General Fund. A 1990 -2010 history of the General Fund reserves was distributed at the March 21, 2011 workshop. A copy of that report has been attached to this agenda report, as well. Conclusion The draft CMFP was reviewed by a consultant at Ehlers & Associates whose previous work experience included being a ratings analyst for Moody's Investor Services. He recommended some language changes to provide greater clarity. Those language changes were incorporated in this draft version. Overall, the consultant thought the draft CMFP was an excellent document. His comments included: "thorough but yet specific when it needed to be and it left some discretion for future actions; the appropriateness, rationale and defensibility of the recommendation are all sound; the progression of information in the policy is informative and structured in arriving at the conclusion (targeted fund balance)." The primary focus of the workshop is to receive direction on any changes that the Council would like Staff to make to finalize the CFMP. Staff anticipates bringing the final Comprehensive Financial Management Policy (Reserves section only) to the Council on April 18, 2011. NOTE: Due to the City's auditors being on site all week and the required audit preparation, the following information is not available for distribution with the agenda report but will be provided to council members at the beginning of the workshop: 1) A chart that reflects the reserve components for the Water Fund, Sewer Fund and Water Quality Fund; 2) A report which identifies the timing and availability of financial information. C. IDOCUME- 1lcgreenlLOCALS- 11Temp1ELF20110401 _1650341Workshop Report - CFMP-2011 04.04.doc Page 2 n COMPREHENSIVE FINANCIAL MANAGEMENT POLICY ORIGIN — The City's 2030 Vision and Strategic Plan calls for the establishment of a Comprehensive Financial Management Policy in its Vision, as one of ten Vision Elements and as a Goal. The Vision: "STRONG FINANCIAL MANAGEMENT - The people of Prior Lake have a powerful vision and great hopes for the community's future. For the 2030 Vision to become a reality, the City must ensure that there is financial confidence in the City and that financial resources are available, in the amount and within appropriate time frames, to fund the operating and capital costs associated with implementing the Strategic Plan regardless of the pace of development. Financial strength includes always assuring that financial resources are used to achieve maximum value for the lowest reasonable expenditure needed to achieve the 2030 Vision " — 2030 Vision and Strategic Plan, adopted November 9. 2009 Vision Element. "Strong Financial Management, " one of the ten vision elements of the 2030 Vision and Strategic Plan (2030 VSP), represents an area of strategic importance that must be addressed to make the 2030 VSP a reality. Goal: "Establish a comprehensive financial management policy which addresses the City's approach to fund balances, revenues, expenditures and debt." PURPOSE The Comprehensive Financial Management Policy serves three main purposes: 1) To draw together in a single document the City's major financial policies; 2) To establish principles to guide both staff and Council members to make consistent and informed financial decisions. 3) To inform the citizenry that the City is a prudent steward of their resources. POLICY AREAS The Comprehensive Financial Management Policy establishes City policy in the following areas: 1) Reserves 2) Revenues (to be added in the future) 3) Expenditures (to be added in the future) 4) Debt (to be added in the future) 5) Financial Planning & Reporting (to be added in the future) [Financial Performance Standards; interim reporting] COMPREHENSIVE FINANCIAL MANAGEMENT POLICY - CITY OF PRIOR LAKE (DRAFT) - 2011.04.04 Page 1 OBJECTIVES OF THIS POLICY • To provide both short -term and long -term financial stability to city government by ensuring adequate funding for providing services and protecting infrastructure needed by the community today and for years to come; • To protect the City Council's policy- making ability by ensuring that important policy decisions are not constrained by financial problems or local, state, regional or national emergencies; • To provide sound financial principles to guide the decisions of the City Council and City management; • To create a document that City management and City Council members can refer to when engaged in financial planning, day to day decision making, budget preparation and other financial management endeavors. 1. RESERVES The goal of the City Council in establishing a Reserve Policy is to ensure the long -term economic stability of the organization by providing sufficient funds for cash flow purposes, to accumulate savings for projects (one -time and grant- matching opportunities), and to have reserves for unexpected revenue shortfalls or emergencies, while providing a specific plan for increasing or decreasing the level of fund balance as appropriate. In creating this policy, the City Council expressly acknowledges that a key element in sound financial management is having a reserve at all times. This policy seeks to establish parameters for the reserves so it is neither larger than needed nor less than desirable and based upon financial and management analysis and principles. A. GENERAL FUND The City will maintain a General Fund reserve balance at a level which that takes into consideration the following: ■ Cash Flow o Six months of projected operating expenditures recognizing that an increasingly larger share of the General Fund is dependent upon property taxes and that this trend is likely to continue; • [recognizing that a portion of the expenditures is funded by non - property tax revenues] o Debt service for market referenda debt obligations; • [Fire Station 1 & 2, park and library improvements] ■ Contingency o Potentially volatile revenue sources recognizing that the City is dependent upon others in large funding categories of state aid, township fire agreements and SMSC contributions; • (property tax collections; • state aids such as Market Value Homestead Credit; • voluntary contribution from SMSC; COMPREHENSIVE FINANCIAL MANAGEMENT POLICY- CITY OF PRIOR LAKE (DRAFT) - 2011.04.04 Page 2 • agreements with other entities such as Township Fire Agreement.] o Unforeseen natural or man -made disasters and emergencies which will require advance payment by the City without any guarantee of repayment by the federal government or an insurer; • [snow & ice control, oak wilt, emerald ash borer, flooding, etc.] ■ Savings o Planned one -time expenditures and grant matching opportunities which become available but require immediate liquidity to take advantage of; • [Technology Plan F Facilities Management Plan; Economic D46 ment seed money.] ■ Other Factors • Impact on City's bond rating; • Status of public retirement systems and understanding that as an employer the City has a statutory obligation to fund unforeseen deficits. Reserve Amount Based on the above criteria, the goal would be to maintain a minimum General Fund balance of 45% (of projected expenditures for the subsequent year); however, this need could fluctuate with each year's budget objectives and appropriations such as large capital expenditures, and variations in the collections of revenues. This amount meets the financial needs of the City and is also consistent with the expertise and official opinion of the Minnesota State Auditor and the City's independent auditing firm. Reserve Expenditure Criteria The City Council may consider the judicious use of reserve balances in the following situations: • to fund an expenditure of significant long -term benefit or legacy to the community • to fund a one -time (non- recurring) expenditure or grant matching opportunity • to fund a one -time unplanned revenue shortfall • to fund an unplanned expenditure due to an emergency or disaster • to moderate a property tax increase Reserve minimum: In no case will the reserve be allowed to fall below 40 %. The City Council recognizes that any such funds may be appropriated for non - recurring expenditures as they represent prior year surpluses that may or may not materialize in subsequent fiscal years. This should only be considered after reviewing the long -term financial plan to ensure that short -term decisions are not compromising the long -term viability of the Fund. The City Council also recognizes that the use of reserves to moderate property tax increases is a temporary situation such that a future funding source will be needed to replace it; therefore, the City Council should evaluate the use of reserves for this purpose during the budget process and in conjunction with the long -term financial plan. COMPREHENSIVE FINANCIAL MANAGEMENT POLICY -CITY OF PRIOR LAKE (DRAFT) - 2011.04.04 Page 3 Replenishment of Reserve In the event that the yearend reserve balance is projected to be less than the target level due to the use of reserve balances for purposes identified above, a plan must be presented at the time the reserve funds are appropriated that will reestablish the target level within 12 months. Should the Fund Balance Reserve amount fall below the 45% targeted level, the City Council must approve and adopt a plan to restore this balance to the target level within 12 months. If restoration of the reserve cannot be accomplished within such period without severe hardship to the City, then the City Council will establish a different time period. B. ENTERPRISE FUNDS The City will maintain reserves in Enterprise Funds at levels sufficient to provide adequate working capital for current expenditure needs, for the replacement of capital assets within the Fund over their estimated useful life and to pay for future capital projects. Future capital projects must be identified and quantified in a written finance plan for the fund which shall be included in the City's annual Capital Improvement Program. The City will maintain a reserve balance at a level which that takes into consideration the following: • Cash Flow • Three months of projected operating expenditures. • [re KO M generated on a bimonthly basis] • Debt service obligations * 1 iVoter Treatment Facility & Maintenance Facility] • Contingency • Potentially volatile revenue sources. emption is dependent on weather conditions] • Unforeseen natural or man -made disasters and emergencies. • [watermain or sewer repairs; contamination in lakes] • Cost of watermain break was about $800,000 • We have 800' of interceptors located under the lake plus other interceptor pipe near the lake • Savings o Planned one -time expenditures and grant matching opportunities. • [Reconstruction opportunities with County, State or Federal funding] • Other Factors • Impact on City's bond rating; • Requirements by external funding source (i.e. Metropolitan Council) Included for discussion purposes only (Enterprise Funds): • Water Fund • Sewer Fund • Water Quality Fund • Transit Fund COMPREHENSIVE FINANCIAL MANAGEMENT POLICY -CITY OF PRIOR LAKE (DRAFT) - 2011.04.04 Page 4 C. ECONOMIC DEVELOPMENT AUTHORITY FUND The City will strive to maintain a fund balance within the EDA Fund, a Special Revenue Fund, in order to meet both anticipated and unanticipated future economic development needs. The City will maintain a reserve balance at a level which that takes into consideration the following: • professional services needed to conduct market surveys; • significant funding which may be required for acquisition of land for development opportunities; • potential relocation costs or legal costs attributable to economic development actions; • anticipated or unanticipated environmental concerns or impacts. [soil contamination] Included for discussion purposes only: ■ EDA Special Revenue D. OTHER SPECIAL REVENUE FUNDS The City will maintain reserves in the Special Revenue Funds at levels sufficient to provide working capital for current expenditure needs plus an amount that is estimated to be needed to meet legal restrictions, requirements by external funding sources and /or pay for future capital projects. Future capital projects must be identified and quantified in a written finance plan for the Fund, which shall be included in the City's annual Capital Improvement Program. Included for discussion purposes only: • Cable Franchise Fund • Capital Park Fund ,Verance Compensation ■ ° - n Dev Federal Revolving Loan Fund ■ L am : ev MN Revolving Loan Fund ■ Dev ° ;,.Agreement Fund E. DEBT SERVICE FUNDS The City will maintain reserves in the Debt Service Funds at levels sufficient to provide working capital for current expenditure needs plus an amount that is estimated to be needed to meet legal restrictions and requirements by external funding sources COMPREHENSIVE FINANCIAL MANAGEMENT POLICY -CITY OF PRIOR LAKE (DRAFT) - 2011.04.04 Page 5 F. CAPITAL PROJECT FUNDS The City will maintain reserves in the Capital Project Funds at levels sufficient to provide working capital for current expenditure needs plus an amount that is estimated to be needed to meet legal restrictions, requirements by external funding sources and /or pay for future capital projects. Future capital projects must be identified and quantified in a written finance plan for the Fund, which shall be included in the City's annual Capital Improvement Program. Included for discussion purposes only (Capital Funds): • Downtown Revolving Fund • Tax Increment • TIF 13 • TIF 3 1 • TIF 41 10'P, • TIF 5 1 ��� • TIF 6 1 • Revolving Equipment Fund • Building Fund • Revolving Park Equipment F • Construction Fund I t ' � • Trunk Reserve Fund • Street Oversize Fund • Water Storage Fund -, G. MONITORING AND REPORTING The City Manager and Finance Director shall annually prepare a report documenting the status of the fund balance with this policy and present it to the City Council in conjunction with the development of the annual budget and /or other long -term financial planning documents. Should the report disclose that there are unreserved, undesignated funds available, a recommendation for use of said funds shall be presented to the City Council. The City will annually review the adequacy of the reserve balances. The City will periodically review updates to Rating Agency methodologies and medians to make sure that the reserve policy is consistent to ensure maintaining its existing rating or that it positions itself for an upgrade. COMPREHENSIVE FINANCIAL MANAGEMENT POLICY -CITY OF PRIOR LAKE (DRAFT) - 2011.04.04 Page 6 CALCULATIONS FOR FUND BALANCE RESERVE - GENERAL FUND (w /o 2% Proo Tax) 1 2 3 4 5 BREAKDOWN OF TARGET FUND BALANCE: 7,075,000 7,075,000 7,075,000 7,075,000 6,375,000 6,375,000 6,375,000 Planned use of FB: EOY 2015 Cashflow $ 4,214,203 $ 4 $ 4,340,629 $ 4 $ 4,604,973 $ 4,743,122 $ 4,885,416 Volatile Revenues $ 448,994 $ 364 $ 455,067 $ 461,306 $ 467 $ 474 $ 481,061 Contingency - Catastrophes $ 300,000 $ 300,000 $ 307,500 $ 315,225 $ 323,182 $ 331,377 $ 339,819 Planned One -time Uses $ 1,050,000 $ 1,050,000 $ 1,068,000 $ 636,540 $ 655,636 $ 675,305 $ 695,564 Debt Service $ - $ - $ - $ - $ - $ - $ - Target Fund Balance $ 6,013 $ 5,928,368 $ 6,171,196 $ 5,883,918 $ 6,051,505 $ 6,224,102 $ 6,401,860 Cashflow (26,860) 70% 71% 58.0% 70% 76% 76% 76% 76% Volatile Revenues 8.7% 7% 6% 3.8% 7% 8% 8% 8% 8% Contingency - Catastrophes $ 5% 5% $ 5% 5% 5% 5% 5% Planned One -time Uses $ 17% 18% $ 17% 11% 11% 11% 11% Debt Service 0% 0% 0% 0% 0% 0% 0% Target Fund Balance 100% 100% 100% 100% 100% 100% 100% Target Fund Balance as % of Projected Expenditures for Following Year Cashflow - 35% 35% 448,994 35% 35% 36% 37% 38% Volatile Revenues $ 481,061 4% 3% 50% 4% 4% 4% 4% 4% Contingency - Catastrophes 2% 2% 2% 2% 2% 3% 3% Planned One -time Uses $ 9% 9% $ 9% 5% 5% 5% 5% Debt Service 0% 0% 0% 0% 0% 0% 0% Target Fund Balance $ 49% 49% $ 49% 46% 47% 48% 50% CURRENT FUND BALANCE 7,075,000 7,075,000 7,075,000 7,075,000 6,375,000 6,375,000 6,375,000 Planned use of FB: EOY 2015 Cash Flow 1) Budget - (250,000) - - - 2) Technology Plan 8,681,257 8,941,695 - (350,000) - - - 3) Facilities Management Plan 50% - (100,000) - - - 4) Economic Development $ 4,214,203 - - - - - Planned increase in FB - - - - - - - Adjusted balance 7,075,000 7,075,000 7,075,000 6,375,000 6,375,000 6,375,000 6,375,000 VARIANCE FROM TARGET FUND BALANCE 1,061,803 1 903,804 491,082 323,495 150,898 (26,860) FB as % of Projected Expenditures for following year 58.0% 58.0% 56.4% 49.3% 49.3% 49.3% 49.3% VARIANCE FROM TARGET FUND BALANCE 8.7% 9.4% 7.2% 3.8% 2.5% 1.2% -0.2% COUNCIL WORKSHOP 04.04.2011 Growth 3.00% 1.00% 0.00% 3.00% 3.00% 0.00% 0.00% 0.00% 0.00% 0.00% 3.00% 0.00% 0.00% 3.00% 0.00% 3.00% 0.00% 0.00% 3.00% C:�D000ME 1�cgreen�LOCALS - 1 �Temp�ELF20110401 _164934 2011.04.04 Workshop -Prior Lake - General Fund Cash Balances 2007 -2009 (2): FB Calc -GF 41112011 EOY 2010 EOY 2010 EOY 2011 EOY 2012 EOY 2013 EOY 2014 EOY 2015 Cash Flow Property Taxes $ 8,428,405 $ 8,428,405 8,681,257 8,941,695 9,209,946 9,486,244 9,770,831 x 50% (2 settlements per year) 50% 50% 50% 50% 50% 50% 50% Exp portion of FB $ 4,214,203 $ 4 $ 4,340,629 $ 4 $ 4,604,973 $ 4,743,122 $ 4,885,416 *includes debt service Potentially volatile revenues: 2% of property tax collections $ 84,829 $ - $ 85,677 $ 86,534 $ 87,399 $ 88,273 $ 89,156 SMSC Contribution $ 190,000 $ 190,000 $ 190,000 $ 190,000 $ 190,000 $ 190,000 $ 190,000 Fire - Spring Lake Township $ 68,185 $ 68,185 $ 70,230 $ 72,337 $ 74,507 $ 76,742 $ 79,045 Fire - Credit River Township $ 105,981 $ 105,981 $ 109,160 $ 112 $ 115,808 $ 119,283 $ 122,861 State Police Aid - State Fire Aid - Municipal State Aid - Maintenance - Subtotal volatile revenues $ 448,994 $ 364 $ 455,067 $ 461,306 $ 467 $ 474 $ 481,061 Risk of Volatility 50% Contingency for Unforeseen Disasters /Catastrophes /Other Expenditures: Oak Wilt (example) $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 Pension Deficits - Estimate for Disaster Cleanup $ 250,000 $ 250,000 $ 257,500 $ 265,225 $ 273,182 $ 281,377 $ 289,819 Subtotal contingencies $ 300,000 $ 300,000 $ 307,500 $ 315,225 $ 323,182 $ 331,377 $ 339,819 Planned one -time uses: Technology Plan $ 350,000 $ 350,000 $ 350,000 - Facilities Management Plan $ 100,000 $ 100 $ 100,000 - Grant Matching Opportunities $ 100,000 $ 100 $ 103,000 $ 106,090 $ 109,273 $ 112,551 $ 115,927 Economic Development Efforts - Budget - Mitigate Impact of Property Tax Incr $ 500,000 $ 500 $ 515,000 $ 530,450 $ 546,364 $ 562 $ 579,637 Budget - Levy Limits - Other - Subtotal one -time uses $ 1,050,000 $ 1,050,000 $ 1,068,000 $ 636,540 $ 655,636 $ 675,305 $ 695,564 Debt Service - legal requirements Total $ 6 $ 5 $ 6 $ 5 $ 6 $ 6 $ 6 Projected Expenditures for following year $ 12,188,313 $ 12 $ 12,553,962 $ 12,930,581 $ 12,930,581 $ 12,930,581 $ 12,930,581 FB as % of Projected Expenditures for following year 49.3% 48.6% 49.2% 45.5% 46.8% 48.1% 49.5% Growth 3.00% 1.00% 0.00% 3.00% 3.00% 0.00% 0.00% 0.00% 0.00% 0.00% 3.00% 0.00% 0.00% 3.00% 0.00% 3.00% 0.00% 0.00% 3.00% C:�D000ME 1�cgreen�LOCALS - 1 �Temp�ELF20110401 _164934 2011.04.04 Workshop -Prior Lake - General Fund Cash Balances 2007 -2009 (2): FB Calc -GF 41112011 GENERAL FUND RESERVE HISTORY Year Fund Balance % Change FB % of Next Year's Budget Beginning Ending Total Change Cumm Change 1990 1 1 81 81 5.8% 43.1% 1991 1 1,516,096 19,738 101 1.3% 42.5% 1992 1,516,096 1,346,047 (170,049) (68,590) -11.2% 33.9% 1993 1,346,047 1 385,728 317 28.7% 36.3% 1994 1 1 (246,760) 70,378 -14.2% 28.9% 1995 1 1,968,019 483,004 553,382 32.5% 36.1% 1996 1,968,019 2,039,480 71 624,843 3.6% 33.1% 1997 2,039,480 1,815,122 (224,358) 400,485 -11.0% 26.6% 1998 1,815,122 2 439,431 839,916 24.2% 31.6% 1999 2 2 195,435 1,035,351 8.7% 33.4% 2000 2 3 1,031,273 2,066,624 42.1% 46.3% 2001 3,481,261 4,354,441 873,180 2,939,804 25.1% 56.8% 2002 4,354,441 4,840,126 485,685 3,425,489 11.2% 56.0% 2003 4,840,126 4,088,907 (751,219) 2,674,270 -15.5% 44.8% 2004 4,088,907 4 281,922 2,956,192 6.9% 45.0% 2005 4,370,829 4 (73,459) 2,882,733 -1.7% 39.6% 2006 4 5,276,400 979,030 3,861,763 22.8% 45.2% 2007 5,276,400 5,020,666 (255,734) 3,606,029 -4.8% 40.4% 2008 5,020,666 5,489,435 468,769 4,074,798 9.3% 43.6% 2009 5,489,435 6,036,756 547,321 4,622,119 10.0% 49.8% 2010 Est 6,036,756 7,016,014 979,258 5,601,377 16.2% 57.6% Average (1990 - 2010 Estimate) 266,732 9.04% 41.47% Source: 1994 - 2009 Annual Financial Reports; 2010 based on preliminary numbers as of 02/20/2011 Note: 2002 FB was restated in 2003; 2010 numbers are preliminary as of 02/20/2011. Reduction to Fund Balance: 6 of last 21 years Average Change from Revenues 331,338 Average Change from Expenditures (64,606) Average Change to Fund Balance 266,732 Change Due to Revenues Change Due to Expenditures Adj Exp Variance Adj Expenditures % Pos (Neg) Var Adj FB Change from Operations - Pos 122 3.7% 81 75,000 % Pos (Neg) Budget Actual Variance (Neg) Var Comments Budget Actual Variance Var Comments Contingency Info 3,309,845 3,269,293 (40,552) -1.2% 4,655,918 3,309,845 3,187,572 122 3.7% 81 241 $100k used $37k 3,469,175 3,401,443 (67,732) -2.0% 2.5% 3,469,175 3,381,705 87 2.5% 19,738 $75k to Capital Park Fund $100k used $74k 6,676,814 153,386 2.2% 439,431 250,000 7 (28,052) -0.4% 445,435 - $85k to Capital Park Fund; $200k to 76,583 3,570,485 3,682,989 112,504 3.2% (363,917) 3,570,485 3,853,038 (282,553) - 7.9% (170,049) establish Sev Comp Fund. $100k; used $160k 1,000,000 8,701,387 (64,855) -0.8% Pmt in lieu of taxes $131k; Dev Agree 250,000 8,595,021 521,955 5.7% 531,922 784,000 9,195,888 3,966,430 4,399,485 433,055 10.9% $331k. 3 ,966,430 4,013,757 (47,327) -1.2% 385,728 No addl transfers. $49k; used $54k 4 4 (66,022) -1.4% 7.0% 4 4,955,918 (180,738) -3.8% (246 ,760) $300k to Rev Equip Fund. $100k; used $144k 5,130,765 5,372,031 241 4.7% 5,130,765 4,889,027 241 4.7% 483,004 No addl transfers. $100k; used $39k $100k to Rev Equip Fund; $100k to Sev Comp Fund; $135k to 5,447,005 5,719,305 272,300 5.0% 5,447,005 5,647,844 (200,839) -3.7% 71 Construction Fund. $140k; used $111k 6,153,718 6,268,231 114,513 1.9% 6,153,718 6,492,589 (338,871) -5.5% (224 ,358) $450k to Rev Equip Fund. $150k; used $152k 6,830,200 7 286,045 4.2% 6,830,200 6,676,814 153,386 2.2% 439,431 No addl transfers. $100k; used $26k $100k to Rev Equip Fund (1998 storm - Chg for Sery $104k (incl FF); Dev equip damage); $150k to Street Agree $66k; Permits $70k; Int $22k; Collector Fund (Hwy 13 Intersection 7 7,601,069 473,487 6.6% Prop Sale $86k. 7 1 127,582 7 (278,052) - 3.9% 195,435 Imp) $50k used $23k Chg for Sery $321k (incl FF); Dev Agree $230k; Permits $125k; Int 7,334,944 8,289,634 954,690 13.0% $135k 7,334,944 7 76,583 1.0% 1,031,273 No addl transfers. $50k; used $16k Chg for Sery $371k; Dev Agree $293k; Permits 341k; Int $134k; Prop 7,517,047 8,754,144 1 16.5% Sale $112k. 7 ,517,047 7,880,964 (363,917) - 4.8% 873,180 No addl transfers. $50k; used $194k $750k to F420 for City Hall /Police Chg for Sery $518k; Dev Agree Station; $100k to Rev Equip Fund; 7,661,883 9,312,561 1,650,678 21.5% $144k; Permits $626k; Int $129k 7,661,883 8,826,876 (1,164,993) -15.2% 485,685 $150k to F230 Sev Comp Fund. $50k; used $143k $1M to F420 for City Hall /Police 8,636,532 8,950,168 313,636 3.6% 8,636,532 9,701,387 (1,064,855) -12.3% (751,219) Station $150k; used $494k $250k to F420 for City Hall /Police 9,116,976 9,126,943 9,967 0.1% 9,116,976 8,845,021 271,955 3.0% 281,922 Station $75k used $92k $784k to F420 for City Hall /Police 9,716,031 9,906,429 190,398 2.0% 9,716,031 9,979,888 (263,857) - 2.7% (73,459) Station $250k used $140k Dev Agree $386k; Int $99k; Prop Sale $415k; Excess TIF Dist $115k; $500k to F420 for City Hall /Police 10,840,734 12,059,159 1 11.2% Franchise $190k Etc 10,840,734 11,080,129 (239,395) - 2.2% 979,030 Station $200k used $142k $150k to F230 Sev Comp Fund; $250k $250k contingency; used 11,685,807 11,748,959 63,152 0.5% 11,685,807 12,004,693 (318,886) -2.7% (255 ,734) for Pike Lake Pk. $143k for dump cleanup 12 12,021,394 (405,037) -3.3% 12 11,552,625 873,806 7.0% 468,769 No addl transfers. $275k; used $90k 12,576,974 12,087,937 (489,037) -3.9% 12,576,974 11,540,616 1,036,358 8.2% 547,321 $100k to Park Equip Fund $300k used $7k PRELIMINARY 2010 RESULTS; NOT 12 12,575,807 455,261 3.8% 12 11,596,549 523,997 4.3% 979,258 FINAL! $69K; used $6K 331,338 4.62% (64,606) -1.39% Additional Transfers, Etc Addl Transfers Deducted from Expenditures Adj Exp Variance Adj Expenditures % Pos (Neg) Var Adj FB Change from Operations - 3,187,572 122 3.7% 81 75,000 3,306,705 162 4.7% 94 285,000 3,568,038 2 0.1% 114,951 - 4,013,757 (47,327) -1.2% 385,728 300,000 4,655,918 119,262 2.5% 53,240 - 4,889,027 241 4.7% 483,004 335,000 5,312,844 134 2.5% 406,461 450,000 6,042,589 111 1.8% 225,642 - 6,676,814 153,386 2.2% 439,431 250,000 7 (28,052) -0.4% 445,435 - 7 76,583 1.0% 1,031,273 - 7,880,964 (363,917) -4.8% 873,180 1,000,000 7,826,876 (164,993) -2.2% 1 1,000,000 8,701,387 (64,855) -0.8% 248,781 250,000 8,595,021 521,955 5.7% 531,922 784,000 9,195,888 520,143 5.4% 710,541 500,000 10,580,129 260,605 2.4% 1 400,000 11,604,693 81 0.7% 144 - 11,552,625 873,806 7.0% 468,769 100,000 11 1 9.0% 647,321 - 11,596,549 523,997 4.3% 979,258 208,204 2.31% 539,542 Average Change from Revenues 331,338 Average Change from Adjusted Expenditures 208,204 Average Change to Fund Balance 539,542 C: �DOCUME - 1 �cgreen�LOCALS - 1 �Temp�ELF20110401 _165014�General Fund Reserve History 1990 - 2010 (2) The Fiscal Disparities Program: Commercial - Industrial Tax Base Sharing - House Research Page 1 of 2 s r , �1�5_ Tt?E!$0�I1lV��S Legislature Home I Links to the World I Help I Advanced Search lioulse :Research House Senate Joint Departments and Commissions I Bill Search and Status I Statutes. Laws. and Rules The Fiscal Disparities Program: Commercial - Industrial Tax Base Sharing • What is the fiscal disparities program? • Why share commercial /industrial tax base? • How does the fiscal disparities program work? • How has the metropolitan area program grown? • How much do fiscal disparities affect tax burdens? • How did the 2001 property tax reform affect fiscal disparities? • What about the Iron Range Program? What is the riscal The fiscal disparities program is a system for the partial sharing of commercial- industrial disparities program? (C /1) property tax base among all jurisdictions within a geographic area. In Minnesota, two programs are used: the primary one was created in 1971 and operates in the seven counties of the Twin Cities metropolitan area; a smaller scaled version was created in 1995 for the Iron Range in northern Minnesota. Why share The main purposes and goals of the program are to: commercial/ industrial tax base? • Support a regional approach to development. Tax -base sharing spreads the fiscal benefit of business development spawned by regional facilities, such as shopping centers, airports, freeway interchanges, and sports stadiums. It also may make communities more willing to accept low- tax -yield regional facilities, such as parks. . Equalize the distribution of fiscal resources. Communities with low tax bases must impose higher tax rates to deliver the same services as communities with higher tax bases. These high tax rates make poor communities less attractive places for businesses to locate or expand in, exacerbating the problem. Sharing C/I tax base can reduce this effect. • Reduce competition for commercial-industrial development. Communities generally believe that some kinds of C/I properties pay more in taxes than it costs to provide services to them. This encourages communities to compete for these properties by providing tax concessions or extra services, which can weaken their fiscal condition. Tax -base sharing reduces the incentive for this competition, thereby discouraging urban sprawl and reducing the cost of providing regional services such as sewage and transportation. How does the fiscal Contributions to the areawide tax base. Each taxing jurisdiction annually contributes disparities program 40 percent of the growth in its C/I tax base since the year of enactment to an abstract work? entity called the "areawide tax base." This contribution value is not available for taxation by the jurisdictions where the property is located. Distributions from the areawide tax base. Each municipality receives a share of the areawide tax base through a formula based on its share of the area's population and its relative property tax wealth (tax base per capita). The municipality is allowed to tax this distribution value at the same rate as the tax rate paid by its residents. All taxing jurisdictions whose boundaries encompass the municipality are also allowed to tax the municipality's distribution value (i.e., counties, school districts, and special taxing districts). Calculating the property tax for each commercial - industrial property. The property tax statement for each C/I property has a local portion and an areawide portion, based on the relative amount of the tax base that is contributed (areawide portion) versus the http: / /www.house.leg.state.mn.us/hrd /pubs /ss /ssfisdis.htm 3/17/2011 The Fiscal Disparities Program: Commercial - Industrial Tax Base Sharing - House Research Page 2 of 2 relative amount that is retained (local portion) for the municipality where the property is located. How has the In the first year of implementation (1975), the areawide tax base included 6.7 percent of metropolitan area the total metro C/I tax base and 2.1 percent of the total metro tax base. For 2004, the program grown? areawide tax base was 32.3 percent of the total metro C/I base and 9.8 percent of the total metro tax base. How much do fiscal A House Research study based on taxes payable in 2004 found that the average disparities affect tax homestead tax in St. Paul, which is one of the largest net beneficiaries of the program, burdens? was 8.8 percent lower because of fiscal disparities. The study also found that the average homestead tax in Bloomington, which is one of the largest net contributors, was 5.5 percent higher. Homestead effects throughout the area generally varied between these extremes. For commercial- industrial properties, average taxes were 2.7 percent lower in St. Paul due to fiscal disparities and 9.7 percent higher in Plymouth, another suburban city that is a large net contributor. Commercial - industrial properties elsewhere in the metro area fall in line between these extremes. The study looked only at the direct effect of fiscal disparities, i.e., the redistribution of tax base, and made no attempt to factor in alternative development patterns that might have occurred without fiscal disparities. How did the 2001 The elimination of the general education levy, imposition of a state property tax levy, and property tax reform reduction in commercial - industrial class rates caused the nominal amount of money affect fiscal redistributed by the fiscal disparities program to decrease. However, based on the disparities? aforementioned House Research study, the net effect of fiscal disparities on tax burdens is similar to what it was before the reform. What about the Iron Tax effects of the Iron Range fiscal disparities program are much smaller in magnitude Range program? since the percentage of tax base being contributed is so low due to the relative infancy of the program. For more information: Contact legislative analyst Steve Hinze at 651- 296 -8956 or Karen Baker at 651- 296 -8959. Also see the House Research publication Minnesota's Fiscal Disparities Programs: Twin Cities Area and Iron Range. January 2005 Retum to Property Tax Return to House Research home Updated on http: / /www.house.leg. state .mn.us /hrd/nubs /ss /ssfisdis.htm 3/17/2011 Fiscal Disparities DRAFT INFORMATION (Estimated #s) 2006 2007 2008 2009 2010 2011 TC Contributed 531,521 641,519 757,425 916,771 1,127,895 1,148,754 TC Distributed 1,892,121 2,026,683 2,232,200 2,565,653 2,710,163 2,676,334 FD Value $ 614,353 $ 634,453 $ 634,726 $ 720,025 $ 757,409.0 $ 787,953.0 Calculation of FD Value: 3000 Tax w/ FD $ 936.77 TC Distributed 1,892,121 2,026,683 2,232,200 2,565,653 2,710,163 2,676,334 x TC Rate (Prev Yr) 0.32469 0.31305 0.28435 0.28064 0.27947 0.29442 FD Value $ 614,353 $ 634,453 $ 634,726 $ 720,025 $ 757,409 $ 787,953 FD Gained $ (60.99) ;Tax Levy. 7 .; ,334,936.' :,.. 7;736,828 ,. ,.:8,365,126 :''. 8 ;941 8,994;287:: ` r 762 TC D TC C = 1 600 1,385,1 64 1 474,775 _:-1,648,882 1 582 268 1 527 580 ' x.TC Rate (PrevYr) TC Rate 0.31305, .r - ; =- `•5:0.28435.,:;, Or2794Z.' „0.29442; 30.903% 41;773 y$',, 433; 626:`''$;''.; ';x4193 $w ' 462 742;;.$:,';,:; ".`442,196. 449,742: WITHOUT FISCAL DISPARITIES, $ 300,000 $ 300,000 $ 300,000 Tax Capacity 22,331 j 262 25 893 700 28657,451 30 582 741 29 705,627 :: ` 28'406 101 -TIF (277 042) (236 148) (354,521) (603.913) `(600;610) (472,422) 3000 3000 Tax w/ FD $ 936.77 Net TaxC60 } 66ity, 22 x25,657,552 ;28; 302, 930 29,978,828. ` °^. ';29;105 ;017tc 27;934,369 Final T6 _Levy 7 ; 334,936 7 736,828 8 365,126 8 841 941 8 994;287 9 008 762 $ 997.76 $ 904.63 $ 886.67 $ 884.82 FD` A Value 927.09 $ 967.49 Difference $ (60.99) ;Tax Levy. 7 .; ,334,936.' :,.. 7;736,828 ,. ,.:8,365,126 :''. 8 ;941 8,994;287:: ` r 762 (46.41) $ (43.84) $ (46.76) TC Rate 33:259 %0 30 154% 29.556% 29:494 % 30.903% 32.250% Difference in TC Rate 2.033% 1.763% 1.492% 1.547% 1.461% 1.559% Impact on $300k home $ 300,000 $ 300,000 $ 300,000 $ 300,000 $ 300,000 $ 300,000 TC of $300k home (1 %) 3000 3000 3000 3000 3000 3000 Tax w/ FD $ 936.77 $ 851.74 $ 841.92 $ 838.40 $ 883.24 $ 920.73 Tax w/o FD $ 997.76 $ 904.63 $ 886.67 $ 884.82 $ 927.09 $ 967.49 Difference $ (60.99) $ (52.89) $ (44.75) $ (46.41) $ (43.84) $ (46.76) Prior Lake property owners benefit from the Fiscal Disparities program. The amount of tax capacity that Prior Lake receives from the areawide tax base is greater than the amount it contributes to it. O:IBUDGETIPROPERTY TAX HISTORYITax Levy History: Fiscal Disparities 41112011 2 0 � 2 � 0 LL z 0 � � � � « 0 2 « c!) 2 s � 2 _ 3' ■� k ` 2 O w « z m 0 £ \ a0 �06 > �k ® f � 2 - o / e t§ a E t $ E §- E E L) c / f vƒ % ƒ 2 E K E E f \ > / ' t Eo% 2% � 7 / f k : 2 2® / c k k ��2f \��-2 2cc2 ) 2 $ «f�tm / Ek o oR k/ �_ 2/ 04 �% % 2 2 E E ��22 7� U) / \ k 04 C \ E @ E o k 0 . � � § 0 k � 0 \ 3 N -0 ƒ 0 3 2 k U) k k k ° ~ / k c \ m § LOP 2 R / (A m (6 E x a) k � E d c m / °§ e > o E o $ » o c m =2 aS D 2 g § 0 k o f 2 D / § cu E k k c E ƒ -0 E km® £ =� ®M \ f 7 e % �k CU Rf�� / \/ b /�� 22 @ \ § c > o / E �/ JCL (?\ (U (D k /k .k § f Cl) E� k \ k( a)§/ �m 2o/ ■� ��22 4- a) o -��m G t� ■_ ■� § ©w =3 O \ a t- g 2 e a I /:x m � C kE g v / �@ o @\:2k ■e J f - 2 CO f 2 �q� / f o? - / x / ® 2 ' 7 7 7 §> /StG /$23 Swo/ k% $ mw£ 7� \E LL CL k - ƒ/ D(�CL / /7U- E 0 3 \\ q dC� C) C) /ddd QQQ d 2 -ngco aa+c -�R� ® �K dddd / n� M o -