HomeMy WebLinkAbout06 27 2016 Long Range Financial Planning Report
4646 Dakota Street SE
Prior Lake, MN 55372
CITY COUNCIL WORKSHOP REPORT
MEETING
DATE:
JUNE 27, 2016
PREPARED
BY:
FRANK BOYLES, CITY MANAGER
DON URAM, FINANCE DIRECTOR
PRESENTED
BY:
FRANK BOYLES & DON URAM
TOPICS: TOPIC 3 – 2017 PRELIMINARY BUDGET AND LONG-RANGE PLANNING
DISCUSSION: Introduction
The purpose of this meeting is to discuss and receive City Council direction with respect
to:
1) 5-year property tax projections;
2) The 2017 preliminary budget;
3) The 2017 – 2021 CIP;
4) Service impacts as they relate to community growth
History
The City Council was provided with a revised Budget/CIP Adoption Schedule with last
week’s Update. The revised schedule became necessary when the computer virus made
it impossible for us to access our computers for the June 13 meeting. The new schedule
calls for Budget/ CIP related work sessions on: June 27(budget), July 11(CIP I) and July
25 (CIP II). Attached is a copy of the revised schedule for your information.
In the past, the budget process began with a review of a 5-year tax projection and a
discussion of the factors which impact the property tax levy. This discussion will focus
on the preliminary 2017 budget and the assumptions used in projecting the later years.
Current Circumstances
This report is organized as outlined above. Within each item, the following plans and
priorities have been included:
Commitments to long-term plans (i.e. 2016 – 2020 CIP adopted on August 10, 2015)
o Transportation Plan,
o Equipment Replacement Plan,
o Park Equipment Replacement Plan
o Technology Plan
o Facilities Management Plan
Debt obligations (existing and proposed);
Increases/decreases in revenues and expenditures (based on historical information
as well as current activity);
The projections do not reflect the impact of community growth (number of street miles,
police and fire service calls, parks, population, etc.) or an unanticipated increase in
operating costs which will require additional resources to maintain service levels. It also
does not include any additional staff within the 5-year projection period. In accordance
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with Council direction, staff has included phased plans for increasing funding levels in
the Revolving Equipment Fund and funding for sidewalk/trail maintenance and/or
replacement.
1. Property Tax Levy Projections
Based upon the factors noted above, the projected tax levies and the corresponding
breakdowns are shown in the following table:
Prior to examining the 2017 budget, we thought it would be useful to outline the factors
affecting budgets in 2018 through 2021.
A summary of the factors driving the changes for 2018-2021:
Primary drivers for virtually every year of the 2018-2021 budget increases are:
Debt service obligations
Trail replacement
Equipment Revolving Fund
Revolving Park Equipment Fund
Facilities Management Fund
If the city council wishes to reduce one or more of these budgets and the associated tax
levies, then we must reduce one or more of these expenditure areas.
2. 2017 Preliminary Budget
Focusing on 2017 only, the primary drivers of the increase are as follows and correlate
to the numbers shown on the table above.
#1 - Increase in tax levy for the General Fund - $303,324
o Expenditures:
2016 2017 2018 2019 2020 2021
Tax Levies:
General 7,172,793 7,476,117 7,977,646 8,358,494 8,830,012 9,301,193
Equipment Revolving Fund 325,000 400,000 475,000 550,000 600,000 600,000
Revolving Park Equip Fund - - 125,000 150,000 175,000 200,000
Facilities Management Fund - - - 30,000 30,000 80,000
EDA Fund 155,000 140,000 140,000 140,000 140,000 140,000
Debt Service 3,425,569 3,834,101 3,692,913 3,865,447 4,160,572 4,524,091
11,078,362 11,850,218 12,410,559 13,093,941 13,935,584 14,845,284
Change from Previous Year 684,276 771,856 560,341 683,382 841,643 909,700
Subtotals from above; should match line above 684,276 771,856 560,341 683,382 841,643 909,700
Breakdown of Change in Levies:
General 101,063 303,324 501,529 380,848 471,518 471,181
Equipment Revolving Fund 75,000 75,000 75,000 75,000 50,000 -
Revolving Park Equip Fund - - 125,000 25,000 25,000 25,000
Facilities Management Fund - - - 30,000 - 50,000
EDA Fund (4,000) (15,000) - - - -
Debt 512,213 408,532 (141,188) 172,534 295,125 363,519
Total Change 684,276 771,856 560,341 683,382 841,643 909,700
General 1.43%4.23%6.71%4.77%5.64%5.34%
Equipment Revolving Fund 30.00%23.08%18.75%15.79%9.09%0.00%
Revolving Park Equip Fund n/a n/a n/a 20.00%16.67%14.29%
Facilities Management Fund n/a n/a n/a n/a 0.00%166.67%
EDA Fund -2.52%-9.68%0.00%0.00%0.00%0.00%
Debt 17.58%11.93%-3.68%4.67%7.63%8.74%
Total Change 6.58%6.97%4.73%5.51%6.43%6.53%
Projected
1
2
3
4
5
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o Personnel Costs
o Current Expenditures
o Capital Outlay
o Revenues:
o Increase in non-property tax revenues (primarily special assessments
for overlays)
o LMCIT dividends transferred to new Insurance Fund ($70,000)
o Reduction in building permit related revenue
#2 - Increase in tax levy for the Equipment Revolving Fund - $75,000
#3 - No tax levy for the Facilities Management Fund - $0
#4 - Reduction in the tax levy for the EDA Fund – ($15,000)
#5 - Increase in tax levy for debt service obligations - $408,532
Expenditure increases are due in part to estimated adjustments to personnel costs.
Personnel costs comprise about $8.3 million or 68% of the General Fund operating
expenditure budget; therefore, wage and benefit cost increases have a direct impact on
the tax levy. In addition, current expenditures are proposed to increase about $250,000
in part due to new expenditures including:
Assessing Contract - $17,500
Police Body Cams - $35,000
EAB - $25,000
Vehicle Repairs (Major) - $10,000
2040 Comp Plan - $6,000
Utilities (Park Lighting) - $20,300
Maintenance Agreements (City Hall) - $17,475
Other modest cost increases for such things as supplies, materials, etc. contribute to the
total.
Significant changes in anticipated revenues other than property taxes include:
Building Permit Revenue – ($76,400)
Interest Earnings – ($34,250)
LMCIT Dividends – ($70,000)
Transfers In – $67,300
Bond Proceeds – $300,000
Additional detail is available regarding revenue and expenditure changes in the
General Fund. Please send me an email to request this information.
The Equipment Replacement Plan calls for an annual increase in the tax levy for the
Revolving Equipment Replacement Fund. The proposed phasing plan calls for a
$75,000 increase annually until 2019 and a $50,000 increase in 2020. At that time,
annual funding will remain at $600,000.
The Revolving Park Equipment Fund was established to provide for the replacement of
park equipment. An initial general tax levy of $125,000 is scheduled to begin in 2018.
The Facilities Management Plan (FMP) is supported by the Facilities Management Fund
and includes funding from Enterprise Fund transfers and a dedicated general tax levy
that is scheduled to start in 2019. The initial amount is currently projected to be
$30,000.
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A property tax levy was authorized for the Economic Development Authority (EDA) in
2013. The EDA’s 2017 preliminary budget reflects a decrease in the tax levy from
$155,000 to $140,000. No tax levy increase is projected in the future.
Increases are in the levy for debt service due to planned reconstruction projects, etc. in
the approved CIP 2016 - 2020. The debt service levies have not been adjusted to reflect
savings from the implementation of the amended special assessment policy allowing for
the assessment of street rehabilitation projects. The projections will be updated once
the 2017-2021 CIP is approved. In addition, an on-going analysis of the cash balances
in each of the Debt Service Funds may allow for tax levies to be adjusted.
3. 2017 – 2021 Capital Improvements Plan
As described above, the property tax projections include the projects that were included
in the approved 2016 – 2020 CIP. The plan is amended on an annual basis which the
staff is currently doing in preparation for council workshops on July 11th and 25th. It also
includes a phasing plan for increasing funding levels in the Revolving Equipment Fund
and funding for sidewalk/trail maintenance and/or replacement. Since the transportation
plan has the largest impact on the tax levy due to the issuance of debt, Staff would like
confirmation that we should continue planning on the reconstruction of 2 miles of streets
annually. If not, specific direction should be given to help ensure that the plan
presented on the 25th meets Council expectations.
4. Service Impacts
In the past, we have updated the Council on some of the challenges the staff is having in
maintaining the level of service provided within the constraints of available resources
including funding and staff levels. Compounding this challenge is the desire to “catch-
up” on deferred maintenance (streets, trails, etc.) and the increasing need to provide
services to a growing community. Below are examples of program areas we believe
should be enhanced but are not because of the constraints we face:
Crime prevention and community partnerships
Traffic Enforcement
Proactive investigations and crime suppression
Updated plans/ordinances (i.e. Public Works Design Manual, Traffic Safety
Guidelines, etc.)
Completing As-built drawings, close out of old projects, organizing and
maintaining project files.
Continued deferred maintenance (street, trails, etc.)
Aging Fleet
Natural Resource Conservation/Maintenance
Enhanced, more routine communication to the public
Employee training
Updates of IT systems
Efficiency improvements (accepting credit card payment, department PCards,
etc.)
Cross-training (payroll, special assessments, etc.)
Strategic Financial management
In general, the inability to accomplish the items identified above can be directly
attributed to a lack of funding and current staffing levels. Recognizing that this condition
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is not going to change immediately, following are some short-term options the City can
consider:
Reduce service standards
Eliminate services
Outsource services
Conclusion
The projections for expenditures and revenues as shown are based on the status quo for
services as well as staff resources.
If the Council is considering a tax levy below what we have projected for 2017, then Staff
is seeking direction regarding the Council’s priorities for cutback in 2017.
The more specific the direction, the better so that we can identify the cuts including each
of the line items affected. Once we have done this we can begin to prepare the public for
these cutbacks prior to actual implementation.
Another option is to decide which areas we will not fund in 2017 so that something else
can be funded. Rather than increase a contribution to a certain fund in a specific year,
we could use those funds for a different purpose. While such a plan may not cut the tax
levy, it has the potential of mitigating against increases.
On the other hand, if there is a desire by the Council to add services in 2017 then
additional resources will be necessary to deliver them.
For the years 2018 to 2021, Staff would like to schedule one or more sessions with the
Council to discuss a multi-year revenue and expenditure strategy. To the extent
possible, the goal of this effort is to align Council priorities with the cities operational and
capital needs as identified by Staff and resident expectations.
4646 Dakota Street SE
Prior Lake, MN 55372
2017 Preliminary Budget & Capital Improvement Program Schedule
NOTE: All Meetings Open to the Public
March 28 Dept. Heads submit large budget item requests to Finance
April 11 Council Workshop – 2017 Budget and Long Range Financial Forecast (establish
2017 levy target)
April 18 Budget and CIP instructions provided to Dept. Heads
April 25 Council Workshop – Personnel Plan
May 6 Dept. Heads submit budget requests to Finance
May 7 – 20 City Manager, Finance and Staff budget review
May 20 Deadline for Staff to complete CIP updates to the following:
1. Transportation Plan
2. Water Operating Plan
3. Sewer Operating Plan
4. Water Quality Operating Plan
5. Equipment Replacement Plan
6. Park Equipment Replacement Plan
7. Facilities Management Plan
8. Technology Plan
9. Personnel Plan
May 23 – June 3 City Manager, Finance and Staff CIP review
June 27 Council Workshop – 2017 Budget Update
July 11 Council Workshop – Review Draft CIP Part 1
July 25 Council Workshop – Review Draft CIP part 2
August 1 Planning Commission Reviews Draft Transportation Plan
August 8 Council Meeting – Public Hearing on CIP/Street Reconstruction Plan
August 22 Council Workshop – Preliminary 2017/Tax Levy Discussion
August 22 Council Meeting – Adopt CIP
September 26 Council Meeting – Adopt Preliminary Tax Levy and announce public budget hearing
date
October 19 Town Hall Meeting (tentative)
November 14 Council Workshop – Yearend Budget Preview and Final 2017 Budget/Tax Levy
Discussion
November 28 Council Meeting – Public Budget Hearing
December 12 Council Meeting – Adopt 2017 Budget and Tax Levy