HomeMy WebLinkAbout08 20 2018 Preliminary 2019 Budget - Tax Levy Discussion
4646 Dakota Street SE
Prior Lake, MN 55372
CITY COUNCIL WORKSHOP AGENDA REPORT
MEETING DATE:
AGENDA #:
AUGUST 20, 2019
A1
PREPARED BY: CATHY ERICKSON, FINANCE DIRECTOR
JASON ETTER, ACCOUNTING MANAGER
PRESENTER: FRANK BOYLES, CITY MANAGER
CATHY ERICKSON, FINANCE DIRECTOR
WORK SESSION
TOPIC:
PRELIMINARY 2019 BUDGET/TAX LEVY DISCUSSION
DISCUSSION: Introduction
State statutes require that each taxing authority adopt a preliminary budget
and certify a preliminary tax levy for payable 201 9 to the County on or
before September 30, 2018.
The preliminary tax levy establishes the maximum that the City can levy
against properties in 2019. The Council will consider the final tax levy in
December at which time the levy can be either be reduced or maintained at
the amount established in September. The Council will not be able to
increase the tax levy.
The purpose of today’s workshop is to continue the discussion started
earlier this year and receive direction on the preliminary 2019 budget and
tax levy. Additional meetings/workshops are currently scheduled to discuss
and adopt 2019 property tax levies and budgets:
September 17, 7:00 pm Adopt maximum tax levy and
preliminary budget
November 5, 5:00 pm Budget work session
November 6-8 Virtual Town Hall budget meeting
(tentative)
December 3, 7:00 pm Public budget meeting
December 3, 7:00 pm Adopt final budget and tax levy
History
In July, Staff presented the 2019 projects that are part of the 2019 -2023
CIP. The impact of these updated and new plans on the debt balance, tax
levy, fund balance reserves and utility rates were a part of the Council and
Staff discussion.
Current Circumstances
Budget Overview
A budget overview has been attached to this agenda report. It reflects
proposed amounts for the 2019 budget for the following funds:
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• General Fund
• Debt Service Funds
• Cable Fund
• Capital Park Fund
• Revolving Equipment Fund
• Revolving Park Equipment Fund
• Permanent Improvement Revolving Fund
• Facilities Management Fund
• Economic Development Authority
• Water Fund
• Sewer Fund
• Water Quality Fund
The second page shows tax levy and budgetary comparisons from the 2018
adopted budget to the proposed 2019 figures.
Budget Requests
This year, the development of the 2019 budget began in April when Staff
presented to the Council a summary of the 2017 financial results, the long -
range plan and a debt overview. Two CIP workshops presentations were
also completed in the summer. The overall tax levy proposed includes the
CIP impacts on the levy which has been part of the CIP discussions.
Currently, the department budgets have been prepared taking into
consideration Council comments as well as City Manager and Finance
department direction.
The 2019 budget and long-range plan were revised to provide funding to
accomplish the following things:
Mandatory Items:
• Wage/COLA and Benefits per Contracts ($318k)
• Department over-time pay adjustments to reflect workload and prior
years historical/actuals ($73k)
• Statutory PERA Contribution for Police/Fire for a rate change from
16.20% to 16.95% ($20k)
• Workers Compensation premium adjustment based on updated
experience modifier and proposed rate changes from the League of
MN Cities ($22k)
• Salt/Ice Management replenishment due to significant 2017 -2018
snow events ($60k)
• Fuel increase in unleaded and d iesel prices ($40k)
• Other current expenditure increases for cost inflation, etc. ($49k)
comprised of Utilities-$16k, Police Lexipol police - $12k, Small
equipment for Central Garage and Bldg. Dept - $14k, and debt
transfer for FS#2 MV -$7k
• Debt service ($127k) for Council approved 2018 projects and bond
issue
• Offsetting revenue for development related fees ($127k)
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CIP tax levy components:
• Trail replacement funding ($50k): The Revolving Park Plan
proposes an increase in the tax levy for trails of $100,000 annually
until 2024 when the levy is proposed at $425,000. Each year the
trail replacement funding has been cut to zero. Based on Council
feedback, we have reduced the 2019 trail replacement funding to
50k to begin to “catch up” on the deferred trail replacement.
• Equipment replacement funding ($50k): The Equipment
Replacement Plan proposes an annual tax levy of $50 in 2019 to get
to our annual funding of $600k.
• Street Overlay funding ($95k): The plan reflects four miles of street
overlay annually. We anticipate that the City will bond for the special
assessment portion of the cost and fund the remainder with
prepayments of special assessments collected from prior year(s)
improvements and an annual tax levy. The fund will be reviewed
annually, to monitor cash flow and determine the tax levy needed.
The 2019 project currently includes Pike Lake Trail from CSAH 42 to
Carriage Hills Parkway and streets in the Wilds neighborhood. A
feasibility report will be completed this fall.
Personnel: The staff has adjusted the personnel plan as follows:
• Added a full-time police officer starting 7/1/2019 ($40k)
• Added a full-time city clerk starting 7/1/2019 ($60k)
• Removed the budget for the City Engineer position. The
responsibility for Public Works and City Engineer (previously two
positions) is now staffed by one person. ($85k)
• Severance funding ($0 2019 budget impact; $100k use of reserves)
City staff recommends the addition of 2 full-time positions as part of the
FY19 budget: one police officer and one city clerk. Staff conducted an
analysis of similar sized cities in the metro area and discovered that the city
of Prior Lake is far below average in the number of FTEs. Of metro area
cities (population 20,000-30,000) the average number of FTEs is 113; Prior
Lake has 94 FTEs. Staffing levels in the city have not kept pace with growth
for years. Of all the metro area cities (population 20,000 -30,000), Prior Lake
is the third most populous but has the second fewest FTEs and has 34.5
FTEs less than average of the two most populous cities and 19.5 less than
the average of all cities in this catagory.
Staff recommends a full-time city clerk whose duties include:
• City Council Support. Primary staff support for City Council
meetings, including preparing the agenda, verifying legal notices
have been posted or published and recording meeting minutes,
scheduling meetings, handling questions, correspondence and
mail.
• Records Manager. Oversees the preservation and protection of
the public record and is a city’s Data Practices Responsible
Authority (required by State law).
• Elections Official. Administers the procedures for all federal,
state, and local elections a responsibility which will e xpand
dramatically in 2019 with the addition of primaries.
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• Licensing. Issues licenses and some permits for cities, several of
which require significant background checks, coordination with
other state agencies, and verification of information.
Currently, the city manager is the official city clerk, but the actual duties are
scattered among departments, which is inefficient and pulls staff off their
core job functions. Prior Lake is the only city in the metro area without a full -
time city clerk.
Staff also recommends adding a police officer. Although Prior Lake has had
the highest crime rate index in Scott County for two years straight, Prior
Lake has the fewest sworn officers (27). Savage has 34 sworn officers, and
Shakopee has 50. Call volume has increased from 17,312 calls for service
in 2016 to 18,323 in 2017. That is over 1,000 more calls in one year, and
overtime hours are increasing significantly. The city is on pace in 2018 to
have so much overtime that it equates to 3.5 FTEs worth of work. Due to
this high demand and low staffing every police officer is being forced to add
an additional 10-hour shift per week per officer or 52-shifts per year.
Technology Expenditures: Based on Council feedback, staff has included
the following items in the 2019 budget request:
• Phone System replacement ($5k 2019 budget impact; $70k use of
reserves)
• IT managed services contract: The city currently has one IT full-time
staff person. The managed services contract would provide cyber
security and virtual helpdesk services. ($23k)
• IT network support for projects that require additional technical
resources. ($5k)
• The city has deferred several technology needs to a future year to
minimize the 2019 tax levy impact. (deferred the website redesign,
Citizens Online Portal, and storage area network controller)
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The tax levy impact of the 2019 operating budget, EDA and CIP are shown
on the chart below.
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Estimated Tax Levy
The following chart shows the proposed change in the 2019 property tax
levy based on the preliminary budgets.
Tax Levy Impacts
There is a preliminary estimated market value increase of 5% and a
preliminary taxable market value increase of about 6%. 1.8% of taxable
market value increase is from new construction.
Residential Impact of the City tax levy
The table below shows the estimated annual increase in the City portion of
property tax for an Average, $600,000 and $900,000 valued home . About
21% of city homeowners had a market value increase of .01 -5.00%. For
those home owners, they would see a 3.6% increase in the city portion of
their taxes.
CITY OF PRIOR LAKE
PROPERTY TAX PROJECTION SUMMARY
Council Workshop 8.20.2018
Adopted Budget Proposed Budget
2018 2019
Tax Levies:
General 7,779,182 8,281,427
Equipment Revolving Fund 550,000 600,000
Revolving Park Equip Fund 238,184 289,292
Facilities Management Fund - -
PIR Fund - 95,000
EDA Fund 140,000 140,000
Debt Service 3,370,172 3,497,188
12,077,538 12,902,907
Breakdown of Change in Levies:
General 586,390 502,245
Equipment Revolving Fund 175,000 50,000
Revolving Park Equip Fund 24,778 51,108
Facilities Management Fund - -
PIR Fund - 95,000
EDA Fund - -
Debt (276,784) 127,016
Total Change 509,384 825,369
General 8.15%6.46%
Equipment Revolving Fund 46.67%9.09%
Revolving Park Equip Fund 11.61%21.46%
Facilities Management Fund n/a n/a
PIR Fund n/a n/a
EDA Fund 0.00%0.00%
Debt -7.59%3.77%
Total Change 4.40%6.83%
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General Fund Reserve
The 2018 General Fund reserve calculation is currently at 47% based on
the 2018 Council approved budget amendments. Based on the proposed
2019 use of reserves of $170,000 (severance and phone system
replacement), the General Fund reserve percentage would be 45%. This
estimate does not take into consideration 2018 revenue/expenditure activity
in relation to budget. To date we have experienced a robust year from a
revenue perspective and it is anticipated that this activity will positively
impact our year end reserve balance.
Staff recommends the funding of one time expenses but does not
recommend reliance on excess net revenues to fund ongoing operations.
Issues
For staff to continue preparation of the 2019 budget, city council direction on
the following items would be helpful:
• Preliminary Levy Amount: Is the city council comfortable with
submitting the maximum tax levy at 6.83% (September 17 meeting)
recognizing that it can be reduced, but not increased, when we
submit the final tax levy on December 3th?
Mandatory items: Personnel related expenses are the most significant.
Overall wage and benefit adjustments are the single largest category
of expenditure drivers and reflect the city council approved labor
contracts.
• CIP Tax Levy Components: Does the city council suppo rt the trail
replacement, equipment replacement and street overlay funding as
proposed? If not, staff needs direction on proposed adjustments .
Regarding the trail replacement funding, during the July CIP
workshop, staff presented an option for 2019 trail replacement
funding. As noted in the July workshop report, upon further review of
the Revolving Park Equipment Fund, staff is projecting adequate
fund balance to cover one mile ($100,000 cost) of trail replacement
in 2019. Based on this, Council could consider funding one mile of
RESIDENTIAL IMPACTS
% Net Net Net
of Inc/Dec Inc/Dec Inc/Dec
Inc/Dec Total 18 vs 19 18 vs 19 18 vs 19
+15.01+%1,513 17%195.40$ 395.65$ 595.06$
+10.01-15.00%1,121 12%164.15$ 332.20$ 499.90$
+5.01-10.00%1,594 18%101.65$ 205.32$ 309.57$
+0.01-5.00%1,897 21%39.16$ 78.43$ 119.24$
No Change 21 0%7.91$ 14.99$ 24.08$
-0.01-5.00%1,469 16%(23.33)$ (48.45)$ (71.08)$
-5.01 - 10.00%808 9%(85.83)$ (175.34)$ (261.41)$
-10.00 - 15.00%363 4%(148.32)$ (302.23)$ (451.74)$
-15.01% +195 2%(179.57)$ (365.67)$ (546.91)$
8,981 100%
% EMV Value Range
# of
affected
Properties
AVG MV-
$338,100
$600,000
HOME
$900,000
HOME
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trail replacement in 2019 with Revolving Park Equipment Fund
reserve. This will allow us to begin the annual process of trail
replacement without impacting the tax levy in 2019. Based on
Council feedback, we have already reduced the 2019 trail
replacement funding by 50k. If we use reserves, we could reduce
the trail replacement funding by another 50k which brings the 2019
tax levy impact to zero.
It should be noted that the Revolving Park Plan proposes an
increase in the tax levy for trails, etc. of $100,000 annually until 2024
when the levy is proposed at $425,000. By using fund reserves, we
are not building the trail replacement program as planned and will
not be able to sustain our trail replacement.
• Personnel: This is the highest staff funding priority. Does the city
council support the police officer and city clerk add ition and the
elimination of the funding previously carried over from the city
engineer position? The 2019 tax levy impact of these staffing
changes is a net of $15,000. Future tax impact will depend on the
labor contracts approved by the city council.
• Personnel: Does the city council support the severance funding from
general fund reserves?
• Technology Expenditures: Does the city council support the
following technology related expenditures and funding sources?
1. Phone system replacement ($70k funded from use of
reserves)
2. IT Managed Services Contract ($23k)
3. IT Network Support ($5k)
• Revenue Enhancement: As part of the 2017 budget process, staff
proposed adding a field use fee as an additional revenue source to
help offset our Parks field maintenance costs. At that time, the per
player field use was projected to generate revenue that would cover
a portion of our field maintenance costs. Another approach is to
increase certain revenue categories based upon the appropriate cost
of living metrics. Staff believes that revenue enhancement deserves
further discussion. With city council support, staff would move
forward with this initiative and report its recommendations for city
council consideration.
Conclusion
Direction in these areas, and any other areas as determined by the council,
will assist the staff in preparing the budget agenda item for the second
meeting in September.
Attachments:
1) Budget Overview (2 pages)
City of Prior Lake Council Workshop 8.20.18
2019 Proposed Budget
Budgeted Funds
Debt Capital Revolving Revolving Park Permanent Facilities Total Total
General Service Cable Park Equipment Equipment Improvement Management EDA Governmental Water Sewer Water Quality Enterprise Budgeted
Fund Funds Fund Fund Fund Fund Revolving Fund Fund Funds Fund Fund Fund Funds Funds
Revenues / Sources
Property Taxes
Levy - Tax Capacity 8,281,427$ 3,262,770$ -$ -$ 600,000$ 289,292$ 95,000$ -$ 140,000$ 12,668,489$ -$ -$ -$ -$ 12,668,489$
Levy - Market Value 234,418 - - - - - - 234,418 - - - - 234,418
Special Assessments - 625,482 - - - 230,089 - - 855,571 - - - - 855,571
Licenses & Permits 613,118 - - - - - - 613,118 - - - - 613,118
Fines & Forfeits - - - - - - - - - - - - -
Intergovernmental 1,776,361 - - - - - - 1,776,361 - - - - 1,776,361
Charges for Services 1,692,170 - 37,133 450,000 - - 6,800 2,186,103 4,173,152 3,821,958 978,674 8,973,784 11,159,887
Other Revenues 344,139 33,703 - 48,000 77,375 7,310 4,231 4,763 3,300 522,821 37,250 18,800 11,690 67,740 590,561
Bond Proceeds - - - - 325,000 490,000 - - 815,000 - .- 815,000
Lease Proceeds - - - - - - - - - -
Transfers From Other Funds - -
General Fund - 234,769 - - - - - 234,769 - - - - 234,769
Debt Service Funds 135,000 135,000 - 135,000
Water Fund 196,220 545,275 - - 70,000 84,000 - 895,495 - - - - 895,495
Sewer Fund 196,220 - - - 70,000 10,927 - 277,147 - - - - 277,147
Water Quality Fund 63,860 - - - 20,000 - - 83,860 - - - - 83,860
Trunk Reserve Fund - 1,900,000 1,900,000 1,900,000
TIF Fund - 29,432 - - - - - 29,432 - - - - 29,432
PIR Fund 186,933 186,933 186,933
Facilities Management Fund - - - - - - - - - - - - -
Capital Park Fund - -
Police Forfeiture Fund 57,600 57,600 57,600
Total Revenues / Sources 13,397,933$ 5,053,364$ 37,133$ 498,000$ 1,162,375$ 296,602$ 819,320$ 99,690$ 150,100$ 21,514,517$ 6,110,402$ 3,840,758$ 990,364$ 10,941,524$ 32,456,041$
Expenditures / Uses
Employee Services 9,359,472$ -$ -$ -$ -$ -$ -$ 122,027$ 9,481,499$ 727,627$ 725,805$ 287,415$ 1,740,847$ 11,222,346$
Current Expenditures 3,788,492 - 2,805 - - - 700,000 - 35,800 4,527,097 1,299,185 1,922,192 245,353 3,466,730 7,993,827
Capital Outlay 85,200 - 15,000 470,000 1,223,951 289,292 - 2,083,443 142,826 81,832 224,658 2,308,101
Capital Improvements - - - - - - 89,963 - 89,963 2,000,000 400,000 385,000 2,785,000 2,874,963
Subtotal 13,233,164$ -$ 17,805$ 470,000$ 1,223,951$ 289,292$ 700,000$ 89,963$ 157,827$ 16,182,002$ 4,169,638$ 3,129,829$ 917,768$ 8,217,235$ 24,399,237$
Transfers To Other Funds
General Fund -$ -$ -$ -$ -$ -$ -$ -$ 196,220$ 196,220$ 63,860$ 456,300$ 456,300$
Treatment Plant (Debt)- - - - - - - - 545,275 - - 545,275 545,275
Equipment Fund - - - - - - - - 70,000 70,000 20,000 160,000 160,000
Park Equipment Fund - - - - - - - - - - - - -
Debt Service Funds 234,769 135,000 - - - 186,933 - - 556,702 - - - - 556,702
PIR Fund - - -
Facilities Management Fund - - - - - - - - 84,000 10,927 - 94,927 94,927
EDA Fund - - - - - - - - - - - - -
Severance Compensation Fund 100,000 100,000 100,000
Contingency - - - - - - - - - - - - -
Debt Service 5,345,327 - - - - - 5,345,327 183,200 183,200 - 366,400 5,711,727
Subtotal 334,769$ 5,480,327$ -$ -$ -$ -$ 186,933$ -$ -$ 6,002,029$ 1,078,695$ 460,347$ 83,860$ 1,622,902$ 7,624,931$
Total Expenditures / Uses 13,567,933$ 5,480,327$ 17,805$ 470,000$ 1,223,951$ 289,292$ 886,933$ 89,963$ 157,827$ 22,184,031$ 5,248,333$ 3,590,176$ 1,001,628$ 9,840,137$ 32,024,168$
Change in Fund Balance (170,000)$ (426,963)$ 19,328$ 28,000$ (61,576)$ 7,310$ (67,613)$ 9,727$ (7,727)$ (669,514)$ 862,069$ 250,582$ (11,264)$ 1,101,387$ 431,873$
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2019 Property Tax Levy Comparison Council Workshop 8.20.18
Change 18 - 19
Property Taxes 2018 2019 Amount Percent
Levy - Tax Capacity
General Fund - Operating 7,779,182$ 8,281,427$ 502,245$ 6.46%
Debt Service Funds 3,142,620 3,262,770 120,150 3.82%
Revolving Equipment Fund 550,000 600,000 50,000 9.09%
Revolving Park Equipment Fund 238,184 289,292 51,108 21.46%
Permanent Improvement Revolving Fund - 95,000 95,000 n/a
Facilities Management Fund - - - n/a
11,709,986$ 12,528,489$ 818,503$ 6.99%
Levy - Market Value - General Fund 227,552 234,418 6,866 3.02%
Levy - Economic Dev Authority 140,000 140,000 - 0.00%
Total Levy 12,077,538$ 12,902,907$ 825,369$ 6.83%
2019 Budget Expenditure Comparisons (2018 Original Budgets)
Capital Revolving Revolving Park Permanent Facilities Total Total
General Debt Service Cable Park Equipment Equipment Improvement Management EDA Governmental Water Sewer Water Quality Enterprise Budgeted
Fund Funds Fund Fund Fund Fund Revolving Fund Fund Funds Fund Fund Fund Funds Funds
2019 Total Expenditures / Uses 13,567,933$ 5,480,327$ 17,805$ 470,000$ 1,223,951$ 289,292$ 886,933$ 89,963$ 157,827$ 22,184,031$ 5,248,333$ 3,590,176$ 1,001,628$ 9,840,137$ 32,024,168$
2018 Total Expenditures / Uses 12,767,768$ 4,896,000$ 80,000$ 3,700$ 1,394,027$ 238,184$ 725,374$ 873,704$ 153,597$ 21,132,354$ 6,659,524$ 4,742,967$ 998,669$ 12,401,160$ 33,533,514$
Change 2018 to 2019 ($)800,165$ 584,327$ (62,195)$ 466,300$ (170,076)$ 51,108$ 161,559$ (783,741)$ 4,230$ 1,051,677$ (1,411,191)$ (1,152,791)$ 2,959$ (2,561,023)$ (1,509,346)$
Change 2018 to 2019 (%)6.27%11.93%-77.74%n/a -12.20%21.46%n/a -89.70%2.75%4.98%-21.19%-24.31%0.30%-20.65%-4.50%
2019 Budget Expenditure Comparisons (2018 Amended Budgets)
Capital Revolving Revolving Park Permanent Facilities Total Total
General Debt Service Cable Park Equipment Equipment Improvement Management EDA Governmental Water Sewer Water Quality Enterprise Budgeted
Fund Funds Fund Fund Fund Fund Revolving Fund Fund Funds Fund Fund Fund Funds Funds
2019 Total Expenditures / Uses 13,567,933$ 5,480,327$ 17,805$ 470,000$ 1,223,951$ 289,292$ 886,933$ 89,963$ 157,827$ 22,184,031$ 5,248,333$ 3,590,176$ 1,001,628$ 9,840,137$ 32,024,168$
2018 Total Expenditures / Uses 12,767,768$ 4,896,000$ 80,000$ 3,700$ 1,394,027$ 238,184$ 725,374$ 873,704$ 153,597$ 21,132,354$ 6,659,524$ 4,742,967$ 998,669$ 12,401,160$ 33,533,514$
Change 2018 to 2019 ($)800,165$ 584,327$ (62,195)$ 466,300$ (170,076)$ 51,108$ 161,559$ (783,741)$ 4,230$ 1,051,677$ (1,411,191)$ (1,152,791)$ 2,959$ (2,561,023)$ (1,509,346)$
Change 2018 to 2019 (%)6.27%11.93%-77.74%n/a -12.20%n/a n/a -89.70%2.75%4.98%-21.19%-24.31%0.30%-20.65%-4.50%
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