HomeMy WebLinkAbout01(B) - Work session Financial Planning Update ReportCity of Prior Lake | 4646 Dakota Street SE | Prior Lake MN 55372
CITY COUNCIL AGENDA REPORT ITEM: 1 B
MEETING DATE: June 06, 2022
PREPARED BY: Cathy Erickson, Finance Director
PRESENTED BY: Cathy Erickson
AGENDA ITEM: Work session Financial Planning Update
GOAL AREA
OBJECTIVE:
High-Value City Services
1. Establish financial stability for all funds.
2. Design a comprehensive funding strategy for capital needs.
3. Ensure sufficient resources and staffing to meet service
demands.
4. Attract, retain, and train a high caliber workforce to ensure high-
quality services.
RECOMMENDED ACTION:
Staff is working to identify and address funding needs for the city to maintain service levels,
address the needs of a growing city, and provide budget stability by minimizing annual variation
in the tax levy. The primary city service priorities to be funded include personnel, equipment
replacement, park and facilities replacement/improvement, pavement management, and EDA
funding. The financial plan also incorporates the implementation of a full-time firefighter staffing
model for the Fire department. Based on the community expectation and service levels, staff has
prepared a five-year financial plan. Staff is looking for Council feedback and direction on the
following items:
Does Council support transition to full-time fire staffing through a phased tax levy increase
over four years?
Does Council support the financial planning assumptions that are driving the 2023-2027
tax levy and tax rates?
BACKGROUND:
The purpose of this workshop item is to provide an update on the following items:
Property Tax Projection
Discuss funding for the transition to Full-time Fire department staff
Debt and Debt Levy Impacts
FINANCIAL IMPACT:
Estimated market value and tax capacity:
Estimated market value has increased $939 million (18.4%) from 2022 to 2023.
Preliminary tax capacity has increased 22.5% from 2022 to 2023. Based on the 2022 tax rate,
new construction will conservatively generate an estimated $328,000 in property taxes. This
equates to about 2.0% of the 2023 property tax levy.
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Base tax levy considerations:
The following chart provides base considerations for establishing the 2023 tax levy based on
factors that impact the Prior Lake community:
Growth (New Construction) 2.0%
CPI-U (MSP) 8.2%
Debt Service * -0.3%
Base Property Tax Levy
Considerations
9.9%
*The debt service % change is estimated based on the 2023 planned debt issuance. The annual debt
service of the existing debt service rolling off is slightly higher than the proposed 2023 bond issue debt
service.
2023 Budget Tax Levy Impacts:
2023 draft budgets will be entered in the financial system by mid-June. Known impacts to the
2023 budget are shown below:
Priorities and Funding:
The following plans and priorities have been included in the five-year plan:
Funding for staffing needs per the 2023-2027 Personnel Plan to reflect the impact of
community growth and to maintain existing levels of service. Staffing priorities are
determined by the City Manager and brought to the Council on an annual basis via a
Personnel Plan work session. See Attachment 2 for Personnel Plan presented to the
Council on April 18, 2022, for justification for position adds.
Commitments to long-term capital plans (CIP)
Debt obligations (existing and proposed)
Funding to support the rise in costs for goods and service based on current inflation
indicators.
Estimated annual building permits of 150/year
Estimates for revenues/expenditures to maintain the General fund balance between 40%-
50%
EDA funding
Transition to full-time firefighter staffing model
Highlighted tax levy impacts by year are summarized on Attachment 1
Transition to full-time firefighter staffing model:
The most significant staffing impact proposed in the five-year plan is the addition of twelve (12)
Firefighters to support the transition to full-time fire fighter staffing model. The current PLFD
staffing model relies on Paid-On-Call (POC) firefighters to respond to calls for service via
pager/phone which is a challenging deployment model due to most POC firefighters not working
within the city during the day. Recruitment and retention are also problems for PLFD as class
sizes have decreased significantly over the years. From 2017-2021, 27 firefighters resigned from
PLFD which is more than half the total budgeted positions for PLFD. During that same time, PLFD
was only able to hire nineteen firefighters to fill the vacancies. The time commitment for POC
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firefighters is significant which is difficult on POC firefighters with full-time employment and
families.
In addition, current response times to structure fires meet the National Fire Prevention Association
(NFPA) 1720 Standard only 9% of the time. At the same time, PLFD call volume has grown by
55% in five years from 440 in 2016 to 682 in 2021. This number will continue to increase due to
the rapid growth of the area. With a seventy-four square mile service area and a population of
40,000 when looking at our combined service area with Credit River and Spring Lake
Township, transitioning to a full-time fire department is a logical evolution for PLFD.
In 2022, the city applied for a federal Staffing for Adequate Fire and Emergency Response
(SAFER) Grant to transition to a full-time fire department. The grant would pay for three years of
salary/benefits for newly hired full-time firefighters. The grant application requested three full-time
fire captains and nine full-time firefighters to provide round the clock service to the PLFD service
area beginning in 2023. The full-time firefighters will allow PLFD to:
1. Establish a 24x7x 365 staffed engine and station:
1 Captain and 3 Firefighters per shift provide an effective reaction force for PLFD’s call
volume.
Improve response times for the first due truck. Current turn-out time averages 6
minutes per call.
Full-time crews would reduce turn-out time by 4-5 minutes.
Limit fire spread. Increase the survivability of a medical patient.
2. Deliver high performing public education:
Most public education requests go unfulfilled due to limited staffing.
3. Perform life safety inspections and code compliance:
Due to inadequate staffing, life safety and code compliance inspections are not
happening.
Full-time firefighters will perform regular inspections of target hazards and high-volume
occupancies as the growth of the area will increase the number of these types of
structures.
4. Conduct and create pre-plans:
Pre-planning on target hazards is not occurring due to staffing limitations, which means
PLFD responds to hazardous structures with limited information.
Full-time staff will develop a pre-plan program, which will increase the safety of
residents and responders alike.
5. Meet NFPA 1720 standards.
6. Improve medical response as full-time firefighters are required to be certified EMTs.
PLFD will still require POC firefighters to supplement ‘all calls’ and backfill absences of the full-
time crews. The current PLFD POC firefighter roster will be reduced through attrition/retirement.
PLFD will evaluate the POC staffing needs on an ongoing basis.
Staff has discussed several funding options for the full-time firefighter staffing model. The options
depend on grant funding, tax levy increase and additional Fire & Rescue Aid revenue:
Option 1 with SAFER grant award: The city has applied for the federal SAFER grant that would
fund 100% of the new full-time fire personnel wages and benefits for three years (2023-2025).
The firefighter grant funding will only be available for three years, so staff is proposing to
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incrementally increase the tax levy to prepare for the city fully funding the firefighters in 2026. This
would be done through an annual transfer out of the General Fund. Since this funding is in
preparation of our 2026 needs, it will be used for capital project debt reduction until needed in
2026 for personnel funding. By doing this, the city will pay for capital purchases on a pay go basis,
instead of issuing debt. This will help us minimize future bond issues. The phased tax levy
increase is shown in the table below:
Fire & Rescue Services Revenue: The costs for the firefighters are included in the cost calculation
for the Fire & Rescue Services with the City of Credit River and Spring Lake Township. However,
since the city anticipates 100% grant funding in 2023-2025, there will be no incremental fire
service revenue received for these years. Fire agreement revenue would increase by
approximately $500k in 2026.
Option 2 -no SAFER grant award: If the city does not receive the federal SAFER grant, the city
could still incrementally increase the tax levy by $400k/year, like Option 1, to prepare for full-time
firefighters in 2026. This is the same tax levy impact as Option 1. However, the firefighters would
not be hired until 2026.
Staff discussed incrementally hiring three firefighters per year to reach twelve full-time
firefighters by 2026, however, the Fire Chief indicated that this will not address the deficient
emergency response time and non-emergency service level issues the Fire Department is
presently experiencing. Additionally, 3-4 paid on-call (POC) fire staff would be needed for each
shift, on a daily basis, to provide adequate emergency and non-emergency coverage. Currently
the Fire Department is finding it very difficult to hire and retain POC staff. The Fire Department
is set to lose an additional 3-4 POC Firefighters in 2022 bringing the total POC staff to 33
Firefighters. The authorized POC staff number is 50. Asking the current POC staff to schedule
shift work along with other Department responsibilities, while balancing their personal lives, is
unrealistic and a set-up for further failure of the POC model.
Option 3 -no SAFER grant award: If the city does not receive the federal SAFER grant, the tax
levy could be adjusted to hire the twelve firefighters in 2023. This would result in an estimated tax
levy of 12%. (Under this scenario, the city would also increase the fire contract revenue it receives
from the City of Credit River and Spring Lake Township, which is reflected in the 12% tax levy
impact.) This option has not been discussed with the City of Credit River or Spring Lake Township
yet. Based on Council direction, it would be discussed at our annual summer budget discussion
meeting.
City Tax Levy and Tax Rate Projections:
Based upon the factors noted above and summarized on Attachment 1, the projected tax levies
and tax rates are shown below: The full-time fire portion of the projected tax levy by year is as
follows:
2023 2024 2025 2026
Year 1Transfer Out Expenditure for Street Project ‐ Marsh Drive NE Ext.400,000
Year 2Transfer Out Expenditure for Facilities Capital Maintenance 500,000
Year 3Transfer Out Expenditure for Equipment ‐ Fire Ladder Truck ‐ 300,000 1,200,000
Year 4Firefighter personnel costs 1,600,000
Total Expenditures 400,000 800,000 1,200,000 1,600,000
Phased Tax Levy Increase to fund firefighters by 2026 400,000 400,000 400,000 400,000
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2023: 2.6%
2024: 2.2%
2025: 1.9%
2026 (.69%) (reduction in tax levy as increase in Fire Agreement revenue begins in 2026)
As mentioned above, estimated market value has increased 18.4% from 2022 to 2023. The
estimated increase in market value for 2024-2026 is 6% per year. For financial planning
purposes, this is reflected in the calculation of estimated taxes.
The tax rate is planned to decrease as the proposed levy change is less than the estimated
change in tax capacity. This is good news, and it will minimize the impact on an individual property
owner. The 2023 impact on a property owner for a sample of property types and values is shown
below:
PROPERTY TAX PROJECTION SUMMARY
2022 2023 2024 2025 2026 2027
SUMMARY OF CHANGE IN TAX LEVIES
GENERAL FUND 1,217,000 1,516,000 1,287,000 955,000 983,000
DEBT SERVICE FUNDS (57,000) (22,000) 176,000 469,000 414,000
OTHER FUNDS
CIP Funding 135,000 145,000 150,000 160,000 160,000
EDA Fund 11,000 12,000 11,000 12,000 12,000
OTHER FUNDS 146,000 157,000 161,000 172,000 172,000
TOTAL CHANGE IN TAX LEVIES 1,306,000 1,651,000 1,624,000 1,596,000 1,569,000
TOTAL TAX LEVY 15,253,000 16,521,000 18,135,000 19,578,000 21,394,000 23,213,000
CHANGE IN TAX LEVY FOR FT FIRE TRANSITION- % 2.62% 2.23% 1.89% -0.69% 0.08%
CHANGE IN TAX LEVY - ALL OTHER NEEDS -% 5.94% 7.74% 7.04% 8.74% 7.24%
TOTAL CHANGE IN TAX LEVY - % 6.55% 8.56% 9.97% 8.92% 8.05% 7.32%
TAX CAPACITY TAX RATE - CITY 30.47% 26.88% 28.02% 29.02% 29.68% 30.46%
Annual % Change -11.77% 4.25% 3.55% 2.27% 2.64%
TAX CAPACITY TAX RATE - EDA 0.74% 0.62% 0.60% 0.58% 0.57% 0.56%
Annual % Change -16.75% -2.95% -2.53% -2.90% -1.77%
2022 Valuation 2023 2023
Median Valued - Residential $375,000 5.4% $62
Residential $600,000 7.6% $148
Residential $1,000,000 6.2% $216
Residential $1,500,000 5.6% $302
Commercial $1,000,000 4.4% $273
Commercial $2,000,000 4.4% $547
Commercial $3,000,000 4.4% $820
Commercial $4,000,000 4.4% $1,094Annual $ Change in Total Taxes
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Projected Tax Rate:
The chart below shows the projected tax rate based on the assumptions in the financial plan. The
tax rate is projected to increase as we save for the implementation of full-time firefighters in 2026.
However, the projected tax rates are still lower than the current tax rate of 30.465%
Projected General Fund Reserve
Based upon the assumptions in the planning model, the projected General Fund ending fund
balance as a % of Expenditures (reserve %) will average 45% over the five-year planning period
of 2023-2027. The financial plan conservatively anticipates the reduction in fund balance to 45%
with the addition of the full-time fire staffing model. This is within the city guideline of 40%-50%
stated in the Comprehensive Financial Management Plan. The projected fund balance will be
updated as the fire staffing is finalized. Additionally, based on city growth we anticipate we will
outperform our budgeted revenue projections which would result in an add to fund balance.
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Debt and Debt Levy Impacts:
Based on the proposed projects in the CIP, debt is projected to decrease from $33.8M at the end
of 2021 to $31.1M at the end of 2027. As mentioned above, staff is proposing a phased tax levy
increase to prepare for full-time firefighters by 2026. Since this funding is in preparation of our
2026 needs, it will be used for capital project debt reduction until needed in 2026 for personnel
funding. By doing this, the city will pay for capital purchases of $2.4M on a pay go basis, instead
of issuing debt. This minimizes the need for future bond issues (debt).
The chart below shows the projected annual tax levy for debt service. The chart illustrates that
debt service remains constant from 2021-2025 at about $3,600,000. Based on the proposed
projects in the CIP, debt service increases significantly in 2026 and 2027 due to bonding (debt
issuance) for two street projects in 2025 (Wilds Pkwy Reclamation and Martindale Area Street
projects) and the 2026 bonding for facility work at City Hall and the Police Station. Both buildings
were built in 2006. The significant facility project costs are replacement of VAV Boxes, Chillers,
Air Handlers, and Carpet.
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Over the next five years, debt per capita decreases as the city manages its debt load and as the
city continues to grow.
Future Funding Needs
The financial plan presented does not address future funding needs identified in the DRAFT Parks
and Trails Master Plan. The estimated annual funding shortfall in the 10-year Park Plan for
neighborhood park renovations, major equipment replacement, and trail maintenance is $450,000
to $500,000 per year. It is anticipated that following the adoption of the DRAFT Parks and Trails
Master Plan, and as part of the Council’s 2023 Strategic Planning work, strategies for the future
funding of park needs will begin to be developed.
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The financial plan presented does not address funding of the Marsh Drive NE road extension.
With the recent construction of the Pike Lake Landing development north of CH 42 and east of
CH 21, Marsh Drive is constructed from CH 21 east approximately 0.30 miles. As a collector road
within the city’s transportation plan, Marsh Drive is planned to connect to the existing segment at
Pike Lake Trail, ultimately continuing east through the Vierling property to CH 18. The developer
of the Pike Lake Landing development has expressed interest in developing additional property
that provides an opportunity for the city to complete the connection to Pike Lake Trail. The
completion of this connection requires an estimated $800,000 in city funding for the portion of
Marsh Drive that would be constructed through city property. Currently city funding in the amount
of $400,000 from the General Fund is identified and funding sources for the remaining $400,000
are being evaluated. As a supporting road to CH 42 as a principal arterial, the county has indicated
a willingness to evaluate some level of county funding to facilitate the completion of this road
connection as a vital part of the long-term overall transportation network in this area.
Conclusion
There is a strong need to implement a Fire department full-time firefighter staffing model. As noted
above, the current PLFD staffing model relies on Paid-On-Call (POC) firefighters to respond to
calls for service via pager/phone which is an increasingly challenging deployment model.
Recruitment and retention are problems for PLFD as class sizes have decreased significantly
over the years. Current response times to structure fires meet the National Fire Prevention
Association (NFPA) 1720 Standard only 9% of the time. Lastly, PLFD call volume has grown by
55% in five years from 440 in 2016 to 682 in 2021. This number will continue to increase due to
the rapid growth of the area.
The financial model addresses funding for the primary city service priorities including full-time fire
department staffing, personnel, equipment replacement, facilities replacement/improvement,
pavement management, and EDA funding.
Does Council support staff recommendation to transition to full-time fire staffing through a
phased tax levy increase over four years?
Does Council support the financial planning assumptions that are driving the 2023-2027
tax levy and tax rates?
ATTACHMENTS:
1. Property Tax Projection – Change in Tax Levy Components by Year
2. 2023-2027 Personnel Plan
ATTACHMENT 1
PROPERTY TAX PROJECTION SUMMARY
2022 2023 2024 2025 2026 2027
Key Funding Assumptions Increase/(Decrease):
General Fund Non Tax Revenues:
FT Fire SAFER Grant Revenue - The city has applied for the federal SAFER grant that would fund 100%
of the new full-time fire personnel wages and benefits for three years (2023-2025). 1,316,000 96,000 108,000 (1,520,000) -
Township Fire and Rescue Aid - The costs for the firefighters are included in the cost calculation for
the Fire & Rescue Services with the City of Credit River and Spring Lake Township. However, since
the city anticipates 100% grant funding for 2023-2025, there will be no incremental revenue received
from the townships for these years.(42,000) (16,000) (61,000) 499,000 4,000 MSA - Maintenance - The upcoming Fish Point Rd Phase II street reconstruction project will utilize
MSA Bonds.. Repayment for the bond principal comes from the MSA construction funds and
repayment of the bond interest comes from the MSA maintenance funds. The use of MSA
maintenance funds for construction project bond interest payments instead of General Fund street
maintenance funding has been reflected in the financial plan.- (146,000) 106,000 21,000 22,000
SMSC Police Aid - The total SMSC police aid contribution for 2023 is $1M. The financial plan
includes an incremental increase in SMSC aid for Policing which will be adjusted, as needed, based
on the agreement between the SMSC Business Council and the City Council. - 51,000 32,000 32,000 33,000
All Other (74,000) 26,000 75,000 58,000 52,000
Subtotal Change in Non Tax Revenues 1,200,000 11,000 260,000 (910,000) 111,000
General Fund Personnel:
2023 Staff Adds: -
12 Firefighters 1,314,000
Property Room Manager 93,000
Financial Analyst - midyear hire 68,000
Mechanic (0.3)41,000
Recreation Programmer (0.6)41,000
Subtotal Staff Adds 1,557,000 365,000 385,000 334,000 322,000
Existing personnel:
COLA/STEP/Taxes/Benefits 528,000 518,000 532,000 554,000 580,000
Change in positions filled at lower salaries,, decrease in Paid on Call fire personnel costs due to
transition to FT firefighters, PD restructure to remove one CSO position, and decrease in election
judge wage costs since it’s not an election year. (468,000)
Subtotal Change in General Fund Personnel 1,617,000 883,000 917,000 888,000 902,000
ATTACHMENT 1
PROPERTY TAX PROJECTION SUMMARY
2022 2023 2024 2025 2026 2027
General Fund All Other Expenditures/Capital Outlay - Year over year inflation is at 8.2%. The plan
has reflected a 5% increase in costs due to inflation 346,000 197,000 221,000 203,000 84,000
General Fund Change in Fund Balance - For recurring expenditures: in 2023 $44k for Central Garage
fuel costs funded from reserves in 2022. This is an ongoing expenditure items (not one-time), so it
needs an ongoing funding source (tax levy).44,000 - - 150,000 100,000
General Fund Transfer Out to DS Fund 10,000 47,000 9,000 4,000 -
General Fund Transfer Out to Other Funds for Capital Projects to reduce future bonding - The
firefighter grant funding will only be available for three years, so staff has incrementally increased
the tax levy to prepare for city funding of the firefighters in 2026. This is being done through an
annual transfer out of the General Fund. Since this funding is in preparation of our 2026 needs, it
will be used for capital project debt reduction until needed in 2026 for personnel funding. By doing
this, the city will pay for capital purchases on a pay go basis, instead of issuing debt. This will help us
minimize future bond issues (debt) to finance capital purchases.400,000 400,000 400,000 (1,200,000) 8,000
Debt Service:
Annual change in debt service - Staff has worked to maintain the annual debt service tax levy at
approximately $3.6M per year from 2020-projected 2024. The addition of gas & electric franchise
fees dedicated to pavement management has provided a pay go funding source that helps minimize
our bonding/debt financing needs. The transportation plan has the largest impact on the tax levy
due to the issuance of debt. (57,000) (22,000) 176,000 469,000 414,000
Capital Improvement Program (CIP) - Funding for our long-term plans (Equipment, Park
Equipment, Facilities and Transportation) in accordance with 2023-2027 Capital Improvement
Program (CIP).135,000 145,000 150,000 160,000 160,000
EDA funding - incremental increase for wages and expenditures 11,000 12,000 11,000 12,000 12,000
Total Tax Levy $ Change 1,306,000$ 1,651,000$ 1,624,000$ 1,596,000$ 1,569,000$
Total Tax Levy % Change 6.65%8.56%9.97%8.92%8.05%7.32%
Proposed Staff Adds 2024-2027:
2024 – 2 FTE add for a deputy city clerk and public works GIS coordinator
2025 – 2 FTE for police officer and public works maintenance worker
2026 – 2 FTE add for a communications specialist and recreation programmer
2027 – 1 FTE for police officer
Financial Planning UpdateJune 6, 2022
PriorLakeMN.govAgendaFive-Year Property Tax Projection ScenariosDebt and Debt Levy ImpactsCouncil Direction on Planning AssumptionsNext Steps:Begin 2023 budget processProceed with financial planning process for full-time fire staffing based on Council direction2
PriorLakeMN.gov5- Year Projection Assumptions32023 Base Tax Levy Considerations:Growth (New Construction) 2.0% CPI-U (MSP) 8.2% Debt Service * -0.3% Base Property Tax Levy Considerations 9.9% *The debt service % change is estimated based on the 2023 planned debt issuance.
PriorLakeMN.gov5- Year Projection Assumptions4Growth in tax capacity and market value assumptions from 2022 to 2023Estimated market value has increased 18.4%. Estimated tax capacity has increased 22.5%.Financial plan assumes growth for 2024‐2026 of 6% per year.Revenue Assumptions:Building permits of 150/yearSMSC aid for Policing –no proposed increase for 2023 budgetSAFER Grant revenue for 2023‐2025 implementation of Full‐time Fire staffing modelFire service contract with townships – incorporates financial impact of Full‐time Fire model in 2026
PriorLakeMN.gov5- Year Projection Assumptions5Staffing Changes per Personnel Plan2023:•Police Property Room Manager converted from open CSO role (FTE & budget neutral with retirement savings and conversion of CSO role)•Financial Analyst –midyear hire•Mechanic converting from part‐time to full‐time (.3 FTE)•Recreation Programmer (.6 FTE)•Transition to full‐time firefighter staffing model (12 FTE)2024‐2027:•Administration: Deputy City Clerk and Communications Specialist (2 FTEs)•Police: Patrol Officers (2 FTEs)•Public Works: Maintenance, GIS Coordinator, and Recreation Programmer (combined 3 FTEs)
PriorLakeMN.gov5- Year Projection Assumptions6Funding to support rising costs of goods and serviceCommitments to long‐term plans (CIP) Debt obligations (existing and proposed)EDA Funding
PriorLakeMN.govFull-time Fire staffing model7Recruitment and retention: Current response times meet the standard only 9% of the time. Not meeting standards for life safety inspections, pre‐planning and public education.Fire call volume has grown by 55% in five years from 440 in 2016 to 682 in 2021. Need to plan for continued increase due to rapid growth.Paid‐On‐Call (POC) firefighters respond to calls for service via pager/phone‐challenging deployment model
PriorLakeMN.govFull-time Fire staffing model8Funding Options:Option 1:2023‐2025 (3‐year) SAFER grant award Phased tax levy increase from 2023‐2026 to fund firefighters by 2026 Since phased tax levy increase is in preparation of our 2026 needs, the city can utilize the funds to pay for capital purchases on a pay go basis, instead of issuing debt.
PriorLakeMN.govFull-time Fire staffing model9Funding Options:Option 2:No SAFER grant award/Fire fighters are not hired until 2026Phased tax levy increase from 2023‐2026 to fund firefighters by 2026 Since phased tax levy increase is in preparation of our 2026 needs, the city will utilize the funds to pay for capital purchases on a pay go basis, instead of issuing debt.
PriorLakeMN.govFull-time Fire staffing model10Funding Options:Option 3:No SAFER grant award/Fire fighters are hired in 2023Fire contract revenue from the City of Credit River and Spring Lake Township.No transfers to funding for capital projects Estimated tax levy increase of 12% in 2023 (3.5% more than Option 1/Option 2)Funding Option 1 is modeled in the financial plan
PriorLakeMN.govProperty Tax Projection Summary –Option 1 Fire Funding11
PriorLakeMN.govProperty Tax Projection•Property owner estimated tax impact•Assumes 18.4% increase in estimated market value12
PriorLakeMN.govProperty Tax Projection13•The 2023 tax rate is projected to decrease due to growth in the tax base•The tax rate is projected to increase over time due to phased levy increase for full‐time firefighters in 2026. •Projected tax rates are still lower than the current tax rate of 30.465%
PriorLakeMN.gov5-Year Debt Per Capita Projection14Seven County Metro Area Average Tax Capacity Rate:City Levy/Tax Capacity = Tax Rate
PriorLakeMN.gov5-Year Debt Per Capita Projection15Scott County Tax Capacity Rate by City:City Levy/Tax Capacity = Tax RateCity 2021 2022Belle Plaine 84.38% 92.42%Credit River 15.04% 15.56%Elko New Market 45.99% 47.73%Jordan 73.92% 73.83%New Prague 51.38% 52.22%Prior Lake 30.27% 30. 47%Savage 42.25% 40.33%Shakopee 32.10% 32.11%
PriorLakeMN.gov5-Year Debt Projection16Debt is projected to decrease from $33.8M at the end of 2021 to $31.1M at the end of 2027. City will utilize the General Fund phased levy increase to pay for capital purchases totaling $2.4M on a pay go basis, instead of issuing debt.Planned new debt in 2026 and 2027 is for two street projects in 2025 (Wilds Pkwy Reclamation and Martindale Area Street projects) and the 2026 bonding for facility work at City Hall and the Police Station
PriorLakeMN.gov5-Year Tax Levy for Debt Service17Debt service remains constant from 2021‐2025 at about $3.6M.Proposed debt service increases significantly in 2026 and 2027 due two street projects in 2025 (Wilds Pkwy Reclamation and Martindale Area Street projects) and the 2026 bonding for facility work at City Hall and the Police Station. Both buildings were built in 2006. The significant facility project costs are replacement of VAV Boxes, Chillers, Air Handlers, and Carpet.
PriorLakeMN.gov5-Year Tax Levy for Debt Service18Debt service is the annual principal and interest payments on the city’s debtFunding sources are how we pay for the annual debt service. The timing, mix of project types, and pledge of revenue affect the portion of debt service that is tax supported.
PriorLakeMN.gov5-Year Tax Levy for Debt Service19Two future street project examples:Fish Pt Rd Ph II Street project –the pledge of revenue to repay debt is assessments/MSA/tax levyWilds Pkwy Reclamation Street project ‐the pledge of revenue to repay debt is assessments/tax levyThe timing, mix of project types, and pledge of revenue affect the portion of debt service that is tax supported.1Purpose:2023 Fish Pt Phase 22Dated:7/1/20233First Interest:6/15/20244First Principal:12/15/20245Par:3,845,0006Term (years):107Average Coupon:4.00%8Debt Limit:100.00%9Debt Ratio:100.00%10Type of Bond:G.O. Municipal State Aid12% 83% 0% 5%Term Fiscal YearPrincipal PaidPrincipal Interest Total 105% of LevyLess: AssessmentsLess: Municipal State AidLess: Other Net Tax LevyTotal Source of Funds2023 7/1/2300 0006/15/240146,96400 00001 2024 12/15/24 320,000 76,900 543,864 571,058 72,624 475,639022,795 571,05806/15/25070,50000000002 2025 12/15/25 335,000 70,500 476,000 499,800 69,900 416,288013,612 499,80006/15/26063,80000000003 2026 12/15/26 345,000 63,800 472,600 496,230 67,177 413,314015,739 496,230006/15/27056,90000000004 2027 12/15/27 360,000 56,900 473,800 497,490 64,454 414,364018,672 497,490Debt Service Payments1Purpose:2025 Wilds Pkwy Reclamation Street Reconstruction 2Dated:7/1/20253First Interest:6/15/20264First Principal:12/15/20265Par:3,915,0006Term (years):107Average Coupon:4.00%8Debt Limit:100.00%9Debt Ratio:100.00%10Type of Bond:G.O. Bonds 11% 89%Term Fiscal YearPrincipal PaidPrincipal Interest Total 105% of LevyLess: AssessmentsNet Tax LevyTotal Source of Funds2025 7/1/2500 0006/15/260149,64000001 2026 12/15/26 325,000 78,300 552,940 580,587 65,937 514,650 580,58706/15/27071,800000002 2027 12/15/27 340,000 71,800 483,600 507,780 63,464 444,316 507,780Debt Service Payments
PriorLakeMN.gov5-Year Tax Levy for Debt Service20Two future Capital Improvement projects:2024 Facilities Improvements at City Hall and Police Station –Membrane roofing2026 Facilities Improvements at City Hall and Police Station. Replacement of VAV Boxes, Chillers, Air Handlers, CarpetThe timing, mix of project types, and pledge of revenue affects the portion of debt service that is tax supported.1Purpose:2024 CIP2Dated:7/1/20243First Interest:6/15/20254First Principal:12/15/20255Par:310,0006Term (years):107Average Coupon:4.00%10Type of Bond:G.O. Bonds 100%Term Fiscal YearPrincipal PaidPrincipalInterest Total105% of LevyNet Tax LevyTotal Source of 2024 7/1/24000006/15/25011,84900001 2025 12/15/25 25,000 6,200 43,049 45,201 45,201 45,20106/15/2605,70000002 2026 12/15/26 25,000 5,700 36,400 38,220 38,220 38,22006/15/2705,20000003 2027 12/15/27 30,000 5,200 40,400 42,420 42,420 42,420Debt Service Payments1Purpose:2026 CIP2Dated:7/1/20263First Interest:6/15/20274First Principal:12/15/20275Par:1,790,0006Term (years):107Average Coupon:4.00%10Type of Bond:G.O. Bonds 100%Term Fiscal YearPrincipal PaidPrincipal Interest Total 105% of Levy Net Tax LevyTotal Source of Funds2026 7/1/2600 0 006/15/27068,41800001 2027 12/15/27 150,000 35,800 254,218 266,929 266,929 266,929Debt Service Payments
PriorLakeMN.gov5-Year Debt Per Capita Projection21
PriorLakeMN.gov5-Year Projection22Future Funding Needs:Parks Master Plan Funding• Funding shortfall of $500k/year in 10 yr. CIP for ongoing Park and Trail replacement • No funding plan for Sand Point Beach and Lakefront Park major improvements• Strategies for the future funding of park needs will be one of the topics at the Council’s 2023 Strategic Planning workMarsh Drive NE road extension• Collector road planned to connect to Pike Lake Trail• Estimated cost of $800k• $400k identified General Fund funding source/$400k unidentified funding source
PriorLakeMN.gov2023 Tax Levy and Budget Schedule23June 6 – Financial Planning Work SessionJune 20 –CIP Work SessionAugust 1– Budget Work SessionAugust 15 –CIP Public HearingSeptember 19 ‐Public Budget Meeting/Adopt Preliminary Tax Levy and Budget Nov. 7 – Budget Work SessionDec. 5 – Public Budget Meeting/Adopt Final Tax Levy and BudgetNext Steps
PriorLakeMN.govCouncil Discussion24Does Council support staff recommendation totransition to full-time fire staffing through a phasedtax levy increase over four years?Does Council support thefinancial planningassumptions that are driving the 2023-2027 tax levyand tax rates?