HomeMy WebLinkAbout1B 2020 Budget Work Session Report
Phone 952.447.9800 / Fax 952.447.4245 / www.cityofpriorlake.com
4646 Dakota Street SE
Prior Lake, MN 55372
CITY COUNCIL WORK SESSION REPORT
MEETING DATE: NOVEMBER 4, 2019
AGENDA #: 1A
PREPARED BY: CATHY ERICKSON, FINANCE DIRECTOR
JASON ETTER, ACCOUNTING MANAGER
PRESENTED
BY:
JASON WEDEL, CITY MANAGER
CATHY ERICKSON, FINANCE DIRECTOR
AGENDA ITEM: 2020 BUDGET/TAX LEVY DISCUSSION
ACTION
REQUESTED:
The purpose of this workshop is to discuss the proposed 2020 budget with the
Council which will be the subject of the December 2 truth in taxation hearing.
Staff is looking for Council direction regarding any proposed budget changes and
proposed tax levy change prior to the December 2 truth in taxation hearing.
INTRODUCTION:
History
The following budget development meetings have been held. The impact of these
updated plans and budget on the debt balance, tax levy, fund balance reserves
and utility rates were a part of the Council and staff discussion at these meetings.
May 20 Long Range Financial Plan work session
June17 & July 15 CIP work session
August 5 & Sept.3 Budget work session
August 12 & Sept. 9 EDA meeting budget discussions
September 16 Preliminary 2020 budgets and certification
of preliminary 2020 city tax levy
On September 16, staff presented Council with a proposed preliminary tax levy
increase of 7.98%. Council directed staff to reduce the preliminary tax levy
increase to 6.99% and adjust the preliminary budget accordingly. To achieve this,
staff removed components of strategic initiative funding that were included in the
budget for the following purposes:
• Removed $90,000 for one-time trail replacement funding. The Revolving
Park Plan proposes an increase in the tax levy for trail/sidewalk
replacement of $100,000 annually until 2023 when the levy is proposed at
$300,000. Trail replacement is not adequately funded under the current
plan to maintain the city’s current trail system. One mile of trail replacement
costs about $425,000. The 9/16 proposed tax levy included one-time
funding of $90,000 to work toward meeting trail and sidewalk maintenance
and repair needs which was removed to meet the tax levy target.
• Removed $36,500 of EDA tax levy planned for professional services for
Economic Development Authority (EDA) initiatives. The 9/16 proposed
budget included the EDA request for a funding increase of $322,500 for
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economic development initiatives to assist with commercial development
and expansion funded as follows:
o $161,250-Transfer from the General Fund (planned use of
reserves/no tax levy impact)
o $161,250-Increase in EDA tax levy
Since the Transfer from the General Fund is funded from reserves (no tax
levy impact), an adjustment to the EDA tax levy of $36,500 was made to
meet the tax levy target.
The Council adopted preliminary 2020 budgets in the amount of $30,952,378 and
a preliminary 2020 tax levy of $13,671,137 which is a 6.99% increase from the
previous year. This action set the maximum tax levy for 2020. This levy amount
can be reduced but cannot be increased for 2020.
FINANCIAL
IMPACT:
Current Circumstances
At the September 16 Council Meeting, the Council indicated that additional work
needed to be done to potentially lower the tax levy change below 6.99%. Staff is
looking for Council direction regarding any proposed tax levy and budget changes
prior to the December 2 truth in taxation hearing.
Estimated Tax Levy:
As a reminder, the 2020 proposed tax levy change has been summarized by the
changes needed to maintain current service levels and the changes needed to
enhance current service levels. See attachment 2 for specific details of the
components of the proposed 2020 tax levy change.
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ISSUES:
The total proposed preliminary tax levy change is a 6.99% increase from the prior
year.
As shown in the following table, the city tax rate (tax capacity) shows a
planned reduction in 2020 based on the preliminary tax levy proposed.
The reduction in tax rate occurs because the tax levy is spread across a larger
base due to the city’s growth in tax capacity and market value.
Based on the proposed tax levy, the city tax rate would be reduced from 33.02%
in 2019 to 32.52% in 2020. This is a 1.5% reduction in the rate. The tax rate is
applied against a home’s market value to arrive at the city tax rate (tax capacity).
For a home with no change in market value, the preliminary levy increase
will result in an estimated tax decrease of about 1.6% for the city portion of
property tax.
Based on Council feedback, staff has identified areas where additional funding is
needed to increase our current level of service.
EDA: As mentioned above, the EDA has requested additional funding of $322,500
to help achieve economic development initiatives including loans and incentives
to assist with commercial development and expansion. The proposed increase
in the EDA funding in the budget is at $286,000 which does not meet the EDA
funding request. The funding is comprised of the following:
• $161,250-Transfer from the General Fund (planned use of reserves/no tax
levy impact)
• $124,750-Increase in EDA tax levy (reduced by $36,250 from original
request to meet levy target)
Use of General Fund Reserves: The City’s comprehensive financial management
plan calls for maintaining a fund balance between 40-50% to ensure adequate
PROPERTY TAX PROJECTION SUMMARY
2019 2020
Adopted
Budget 2019
Proposed
Budget 2020
TOTAL % CHANGE IN TAX LEVIES 5.80%6.99%
TAX CAPACITY TAX RATE 33.020%32.520%
Annual % Change -0.06%-1.51%
Net Net Net Net Net Net
Inc/Dec Difference Inc/Dec Difference Inc/Dec Difference
19 vs 20 % Change 19 vs 20 % Change 19 vs 20 % Change
(18.20)$ -1.6%(32.98)$ -1.6%(52.60)$ -1.6%
RESIDENTIAL IMPACTS
AVG MV- $349,600 $600,000 HOME $900,000 HOME
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ATTACHMENTS:
reserves for cash flow, unplanned expenditures, and to maintain the city’s credit
worthiness (AA+ credit rating). The 2019 and 2020 reserve estimates are shown
below.
• 2019 Year End Estimate: 47- 48%
• 2020 Year End Projection: 44- 45%
Staff will update the reserve estimates when we close the 2020 year for financial
purposes.
The impact of the 2020 planned use of reserves is a 1.3% reduction of the 2020
reserve projection. Staff recommends annual monitoring of fund balance and
reserve replenishment, if needed, otherwise, the fund balance could drop below
the level stated in the comprehensive financial management plan over time.
Enterprise Funds
The budget summaries of the three enterprise funds (Water, Sewer and
Stormwater) that the City operates are included on Attachment 1. An annual rate
increase is reflected in the water, sewer and storm water budgets and will be
presented to the Council for approval as part of the final budget and 2020 fee
schedule adoption in December. The proposed rate increases are 5% for water,
11% for sanitary sewer, and 10% for stormwater as summarized in the Capital
Improvement Program adopted by the Council on August 5. The proposed 2020
utility rate increases will also be discussed as part of the November 4 Utility Study
work session item.
1) Budget Overview
2) Components of 2020 Proposed Tax Levy Change
3) Revenue and Expenditure Summaries
1
2020 Proposed Tax Levy Components
Attachment 2
LEVY CHANGE TO MAINTAIN CURRENT SERVICE LEVELS – 6.02%
Mandatory Items – 5.8 %
Staffing
Wage/COLA and Benefits - $484,000
Labor agreements negotiated through 2020 include 3% cost of living adjustment and health insurance premium
contribution increase. Includes seasonal salaries.
Part-time (.7FTE) IT Support Specialist -$54,000 The city has over 192 computer devices (work stations, lap tops, tough books), 14 servers, mobile devices, the phone
system, printers/copiers, and seven city buildings with technology infrastructure that need to be managed. This is in
addition to software contracts, license agreements, device accounts, IT policies and procedures, long -term planning
and critical cyber security monitoring and training. At the same time, the technology needs of the police department
continue to expand, including body cameras, squad car cameras, ticket printers, transcription software, evidence/jail
cameras, etc. The volume of the workload is too much for one individual to manage and requires regular weekend
and over-night work. To meet the needs of the city, and in particular the police department, the budget includes the
addition of a part-time IT Support Specialist. This position would primarily serve the police department and provide
help-desk back up to the IT Coordinator.
Workers Compensation - $47,000
Premium adjustment based on updated experience modifier and rate changes from the League of MN Cities.
Increase in firefighter hourly wage -$38,000 The 2020 preliminary budget includes a pay increase for Prior Lake’s paid on-call (POC) Firefighters from $12.20 to
$14.10 per hour. The last wage increase occurred in 2016. Recruitment and retention are serious issues for paid on-
call Fire Departments throughout Minnesota. Calls occur 24 hours a day, 7 days a week, often at inconvenient times,
which is especially difficult on firefighters with regular full-time jobs. In addition, training requirements are significant
and demand more time away from home and work. The average wage of metro area POC firefighters was $14.06 in
2019. The rationale behind a pay increase includes: 1) offering an hourly wage comparable to other area Fire
Departments, 2) recruiting new firefighters, and 3) incentivizing current firefighters to stay. Also included is a yearly
salary increase for Fire officers, including $2,000 to $3,000 for Fire Captains, $5,000 to $6,000 for two Assistant
Chiefs, and $6,000 to $8,000 for one Assistant Chief of Training.
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Pension Contribution Increase - $20,000
Mandated by the state legislature to meet unfunded pension obligations, cities are required to increase Statutory
Public Employees Retirement Association (PERA) Contribution for Police/Fire contributions (rate change from 16.95%
to 17.7%).
Public Safety
Police Department - $86,000 The Police Department has requested a total of $86,000 to fund public safety needs, including:
• Police evidence room camera/video equipment upgrade - $37,000
• Police costs for personnel testing, recruiting, and training/education – $26,000
• Replacement costs for expired police vests and training suits - $23,000
Contracted Services Increases
Assessing Services - $14,000 The City of Prior Lake contracts with Scott County to provide property assessment services. The increase for 2020
includes increasing assessment workloads such as parcel creations, new home construction, and annexation activities.
Central Garage - $14,000 Increased funding for contracted repairs and maintenance including body repairs, windshield replacement, front -end
alignments, and diagnostics that cannot be completed in-house.
Facilities Cleaning Contract - $17,000
The contract rates for the services to clean City buildings increased during this year’s bid process from the previous
contract.
IT Software service contracts - $14,000
Increases for annual software service and licensing costs for Blue Beam plan review software, CIP reporting software,
and new phone system software.
Park trail and sidewalk maintenance - $25,000
The cost for materials related to trail and sidewalk maintenance has increased, primarily for sealing coating.
Joint Powers Agreement (JPA) for street
management - $60,000
Street pavement management cost increases for the JPA contract for chip seal/crack seal/striping and for salt/ice
management materials
Other
Elections Administration - $34,000 In 2020, the State of Minnesota will hold a presidential primary for the first time which will be administered by the
city for Prior Lake citizens. In addition, the city will take over absentee voting from Scott County. Both these changes
require additional election judge staffing and supplies to execute.
Debt Service - $64,000
For council approved 2019 projects, including Fish Point Road, CR21 and fire tanker.
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Capital Improvement Program (CIP) Tax Levy Components - .94%
Street Overlay funding -$35,000
The CIP reflects 3 to 4 miles of street overlay annually. 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.
Facilities Management Plan funding -$30,000
The Facility Management Plan (FMP) was developed to plan for major repairs, replacements and upgrades for all city
facilities on a long-term basis (25 years). It does not cover minor expenses for repairs and maintenance. Those will
continue to be funded through the operating budgets. 2020 expenditures include the library and Club Prior carpet
replacement.
Trail Replacement funding -$30,000 The Revolving Park Plan proposes an increase in the tax levy for trail/sidewalk replacement of $100,000 annually until
2023 when the levy is proposed at $300,000. Trail replacement is not adequately funded under the current plan to
maintain the city’s current trail system. One mile of trail replacement costs about $425,000. A Master Parks Plan
study is underway and will include trail replacement needs and funding alternatives. The Revolving Park Plan does not
cover minor expenses for repairs and maintenance. Those will continue to be funded through the Parks operating
budget.
Equipment Replacement funding - $25,000 The Equipment Replacement Plan (ERP) utilizes general tax levies to support replacement of the City’s equipment and
vehicle fleet. Prior CIP plans reflected incremental annual increases over the program’s 12-year term. The ten-year
annualized cost for the plan is about $1M. The financing plan has been revised to reflect a gradual increase in the tax
levy until the annual levy reaches $1M by the year 2032. The proposed total levy for 2020 is $625k. Since the
proposed levy increase is gradual, bonding may be required for the plan to meet our funding needs.
LEVY CHANGE TO ENHANCE CURRENT SERVICE LEVELS - .97%
Strategic Initiatives: Based on Council feedback, staff has summarized the areas where additional funding is needed to increase our current level of service.
Economic Development Authority - $124,750
$124,750 EDA tax levy
61,000 General Fund transfer to EDA
(61,000) use of reserve
$ 0 tax levy impact
The Economic Development Authority (EDA) has identified a need for additional expenditure budget and funding for
economic development initiatives, including loans and subsidies to assist with commercial development and
expansion. The assistance provided by the City Council and EDA in recent years to support business development,
retention and expansion has helped the city achieve its stated public purpose objectives. The city has added nearly
330,000 square feet of new commercial/industrial property to the city over the past few years in part due to the
support of the Prior Lake City Council and Economic Development Authority. This new commercial and industrial
square footage results in an estimated $120,000+ in annual property tax payments to the City of Prior Lake. That
equates to almost 1% of our tax levy annually that is paid by this new commercial tax base. The city is striving to
increase this commercial tax base and the additional funding request would be used to this end.
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Technology Expenditures: As part of the initial preliminary budget, staff included the redesign of city’s website redesign in the 2020 tax levy budg et request at $40,000.
Council directed staff to fund this expenditure from the General Fund reserves to reduce the 2020 tax levy i mpact.
Website Redesign - $40,000 expenditure
(40,000) use of reserve
$ 0 tax levy impact
The city’s website platform has been in place 12 years ago and is in desperate need of an update. The city’s web
content is outdated and difficult to edit due to hypertext code, which requires City staff to coordinate with an offsite
website designer to make changes. Most cities today are using a content management system (CMS) for a variety of
reasons with cyber security and external hosting being the primary factors. The user -friendly interface of a CMS will
allow staff in each department to edit their page content, rather than with one person. This means the City’s web
information will be timelier and more relevant for users. Finally, the current City website is not Americans with
Disability Act (ADA) compliant, which require that local governments provide qualified individuals with disabilities
equal access to their programs, services, or activities, including access to information on the City’s website. The
updated website will meet ADA requirements.
General Fund Reserve
General fund use of reserves- levy impact
$81,000 comprised of the following items:
$ 282,000 2019 use of reserves
(161,000) 2020 use of reserve to fund EDA
(40,000) 2020 use of reserve to fund website
$ 81,000 Use of reserves – levy impact
The city’s comprehensive financial management plan calls for maintaining a fund balance between 40-50% to ensure
adequate reserves for cash flow, unplanned expenditures, and to maintain the city’s credit worthiness (AA+ credit
rating). Staff recommends replenishment of fund balance for the use of reserves; otherwise, the fund balance could
drop below the level stated in the comprehensive financial management plan over time. The use of reserves in 2019
was for the city’s document center software, funding for street overlay , and a transfer to the EDA. The 2020
preliminary budget includes the use of reserves for a planned transfer to the EDA ($161,000) and for the redesign of
the city’s website ($40,000). Council has provided direction to fund these expenditures from General Fund reserve to
reduce the 2020 tax levy impact. The budget does not include replenishing the reserve for these items.
Revenue Additions
New Revenue - $504,000 Planned revenue increases include contracted services for Police, Fire, and Parks; building and plan check fees; park
shelter rental; dock rental; and tower leases. Based on Council direction, staff proposes to eliminate the overnight
rental of dock slips and increase the total number of seasonal slip rentals from 8 to 16 (eight per be ach) which will
add $31.2k in revenue.
11/4/2019 - Attachment 3
2018 2019 2019 2020 2020 2020
ACTIVITY ORIGINAL AMENDED PROPOSED PROPOSED PROPOSED
DEPT DESCRIPTION BUDGET BUDGET BUDGET AMT CHANGE % CHANGE
Fund 101 - GENERAL FUND
41110.00 MAYOR & COUNCIL 63,173 71,866 71,866 75,507 3,641 5.07
41130.00 ORDINANCE 7,091 7,500 7,500 7,500
41320.00 ADMINISTRATION 442,163 436,935 436,935 333,236 (103,699) (23.73)
41330.00 BOARDS & COMMISSIONS 9,812 11,765 11,765 11,765
41400.00 CITY CLERK FUNCTIONS 60,550 60,550 116,403 55,853 92.24
41410.00 ELECTIONS 20,557 34,231 34,231
41520.00 FINANCE 446,866 480,310 485,705 515,694 29,989 6.17
41540.00 INTERNAL AUDITING 30,615 31,300 31,300 35,475 4,175 13.34
41550.00 ASSESSING 194,716 202,600 202,600 218,704 16,104 7.95
41610.00 LEGAL 162,462 200,000 200,000 200,000
41820.00 HUMAN RESOURCES 194,356 188,830 188,830 302,357 113,527 60.12
41830.00 COMMUNICATIONS 116,934 128,297 128,297 180,451 52,154 40.65
41910.00 COMMUNITY DEVELOPMENT 329,121 348,365 348,365 380,152 31,787 9.12
41920.00 INFORMATION TECHNOLOGY 344,209 394,650 413,540 438,630 25,090 6.07
41940.00 FACILITIES - CITY HALL 453,316 472,924 472,924 505,601 32,677 6.91
42100.00 POLICE 4,172,593 4,586,881 4,616,571 4,826,725 210,154 4.55
42200.00 FIRE 960,919 932,896 932,896 1,033,548 100,652 10.79
42400.00 BUILDING INSPECTION 577,534 599,949 599,949 604,809 4,860 0.81
42500.00 EMERGENCY MANAGEMENT 9,083 11,935 11,935 14,875 2,940 24.63
42700.00 ANIMAL CONTROL 26,400 26,448 26,448 28,800 2,352 8.89
43050.00 ENGINEERING 351,132 373,844 373,844 379,173 5,329 1.43
43100.00 STREET 1,130,274 1,226,903 1,226,903 1,338,504 111,601 9.10
43400.00 CENTRAL GARAGE 401,567 460,031 460,031 483,075 23,044 5.01
45100.00 RECREATION 435,614 416,675 397,475 474,241 76,766 19.31
45200.00 PARKS 1,366,192 1,481,141 1,511,201 1,623,564 112,363 7.44
45500.00 LIBRARIES 48,780 66,955 66,955 69,073 2,118 3.16
80000.00 Transfers to other Funds 819,651 334,769 334,769 403,018 68,249 20.39
TOTAL EXPENDITURES - FUND 101 13,115,130 13,554,319 13,619,154 14,635,111 1,015,957 7.46
BUDGET REPORT
City of Prior Lake
Expenditures
From Amended Budget
11/4/2019 - Attachment 3
2018 2019 2019 2020 2020 2020
ACTIVITY ORIGINAL AMENDED PROPOSED PROPOSED PROPOSED
DEPT DESCRIPTION BUDGET BUDGET BUDGET AMT CHANGE % CHANGE
BUDGET REPORT
City of Prior Lake
Expenditures
From Amended Budget
DEBT SERVICE FUNDS
47000.00 DEBT SERVICE 4,897,616 5,345,327 5,345,327 5,322,317 (23,010) (0.43)
80000.00 Transfers to other Funds 58,024 135,000 135,000 110,000 (25,000) (18.52)
TOTAL EXPENDITURES - DEBT SERVICE FUNDS 4,955,640 5,480,327 5,480,327 5,432,317 (48,010) (0.88)
Fund 210 - CABLE FRANCHISE FUND
41340.00 PUBLIC CABLE ACCESS 65,137 17,805 17,805 9,200 (8,605) (48.33)
TOTAL EXPENDITURES - FUND 210 65,137 17,805 17,805 9,200 (8,605) (48.33)
Fund 225 - CAPITAL PARK FUND
45040.00 PIKE LAKE PARK 7,545
45147.00 MARKLEY LAKE TRAIL 370
45200.00 PARKS 57,003 470,000 470,000 (470,000) (100.00)
TOTAL EXPENDITURES - FUND 225 64,918 470,000 470,000 - (470,000) (100.00)
Fund 240 - EDA SPECIAL REVENUE FUND
46500.00 ECONOMIC DEVELOPMENT 145,491 145,467 145,467 448,035 302,568 208.00
46503.00 TECH VILLAGE INCUBATOR 4,362 4,350 4,350 5,100 750 17.24
TOTAL EXPENDITURES - FUND 240 149,853 149,817 149,817 453,135 303,318 202.46
Fund 410 - REVOLVING EQUIPMENT FUND
42100.00 POLICE 133,212 207,824 254,174 443,000 188,826 74.29
42200.00 FIRE 300,897 248,960 613,780 115,000 (498,780) (81.26)
42400.00 BUILDING INSPECTION 59,410 59,410 32,000 (27,410) (46.14)
43100.00 STREET 422,882 422,882 257,000 (165,882) (39.23)
43400.00 CENTRAL GARAGE 21,118 20,000 20,000 20,000
45200.00 PARKS 235,768 123,741 123,741 333,000 209,259 169.11
49400.00 WATER 10,464 66,519 66,519 (66,519) (100.00)
49420.00 WATER QUALITY 191,303
TOTAL EXPENDITURES - FUND 410 892,762 1,149,336 1,560,506 1,200,000 (360,506) (23.10)
Fund 430 - REVOLVING PARK EQUIP FUND
45200.00 PARKS 54,134 289,292 355,292 346,000 (9,292) (2.62)
TOTAL EXPENDITURES - FUND 430 54,134 289,292 355,292 346,000 (9,292) (2.62)
11/4/2019 - Attachment 3
2018 2019 2019 2020 2020 2020
ACTIVITY ORIGINAL AMENDED PROPOSED PROPOSED PROPOSED
DEPT DESCRIPTION BUDGET BUDGET BUDGET AMT CHANGE % CHANGE
BUDGET REPORT
City of Prior Lake
Expenditures
From Amended Budget
Fund 440 - FACILITIES MANAGEMENT FUND
41940.00 FACILITIES - CITY HALL 10,048
42200.00 FIRE 743,364 67,998 67,998 20,000 (47,998) (70.59)
45500.00 LIBRARIES 21,965 81,965 84,000 2,035 2.48
49400.00 WATER 23,096 10,000 10,000
TOTAL EXPENDITURES - FUND 440 776,508 89,963 149,963 114,000 (35,963) (23.98)
Fund 450 - PERMANENT IMPROVEMENT REVOLVING FUND
43100.00 STREET 629,962 700,000 700,000 700,000
80000.00 Transfers to other Funds 75,374 186,933 186,933 279,933 93,000 49.75
TOTAL EXPENDITURES - FUND 450 705,336 886,933 886,933 979,933 93,000 10.49
Fund 601 - WATER FUND
41520.00 FINANCE 98,022 94,075 94,075 100,696 6,621 7.04
49400.00 WATER 2,605,076 4,267,461 4,767,181 2,378,324 (2,388,857) (50.11)
80000.00 Transfers to other Funds 1,622,445 895,495 895,495 923,160 27,665 3.09
TOTAL EXPENDITURES - FUND 601 4,325,543 5,257,031 5,756,751 3,402,180 (2,354,571) (40.90)
Fund 602 - STORM WATER UTILITY
49420.00 WATER QUALITY 600,028 917,642 917,642 734,081 (183,561) (20.00)
80000.00 Transfers to other Funds 480,667 83,860 83,860 85,780 1,920 2.29
TOTAL EXPENDITURES - FUND 602 1,080,695 1,001,502 1,001,502 819,861 (181,641) (18.14)
Fund 604 - SEWER FUND
41520.00 FINANCE 97,404 91,341 91,341 100,396 9,055 9.91
49450.00 SEWER 2,819,034 3,229,922 3,729,642 3,166,135 (563,507) (15.11)
80000.00 Transfers to other Funds 1,117,033 277,147 277,147 294,110 16,963 6.12
TOTAL EXPENDITURES - FUND 604 4,033,471 3,598,410 4,098,130 3,560,641 (537,489) (13.12)
TOTAL EXPENDITURES - ALL FUNDS 30,219,127 31,944,735 33,546,180 30,952,378 (2,593,802) (7.73)
2020 2020
PROPOSED PROPOSED
AMT CHANGE % CHANGE
(992,357) (3.11)
From Original Budget