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Home My WebLink About08 02 2021 1A Budget Work Session Report - 2022 Preliminary Budget and Tax Levy2021 Preliminary Tax Levy and Budget August 2, 2021 1 1 June 7 – Financial Planning June 21 – CIP Work Sessions August 2 – Budget Work Session Sept. 7 – Adopt Preliminary Levy and Budget Nov. 1 – Budget Work Session Dec. 6 – Public Budget meeting Dec. 6 – Adopt Final Tax Levy and Budget Franchise Fees: July 27 - Public Information Meeting Sept. 7 - Public Hearing Tax Levy and Budget Schedule 2 2 Tax Supported Funds General Debt Service Revolving Equipment Revolving Park Equipment Street Overlay/PIR Fund Facilities Economic Development Authority 2022 Proposed Preliminary tax levy of $15.3M 2022 Budgets 3 3 The City proposed tax levy is $14,892,761. This is a levy increase of $927,604 (6.48% of total increase). The EDA proposed tax levy is $360,000. The EDA is requesting a levy increase of $10,250 (.07% of total increase). This has resulted in a total tax levy change of $937,554 which is presented to the Council tonight (6.55% increase). 2022 Proposed Tax Levy Change 4 4 Main drivers of the tax levy change: Staffing: Personnel Adds/New Funding requests: Staffing: Labor agreements with two unions are currently being negotiated for 2022. 2022 Proposed Tax Levy Change 5 5 Main drivers of the tax levy change cont’d: CIP: Incremental increase in tax levy to support the long-term Capital Plans CIP: $120k decrease in PIR Fund (street overlay) tax levy based on proposed franchise fee increase dedicated to pavement management 2022 Proposed Tax Levy Change 6 6 2022 Proposed Budget & Tax Levy Change - At a Glance 7 The 2022 proposed tax levy is $15,252,761. Starting with Staffing: $484K of the levy change is for wages/taxes/benefits per the labor contracts. Labor agreements negotiated through 2020 include a 3% cost of living adjustment and health insurance premium contribution increase The budget request includes a PT IT support specialist. This position would primarily serve the police dept and provide help desk back up to the IT Coordinator. There is a workers comp premium adjustment based on the city’s experience modifier and rate changes proposed by the LMC. The budget includes an increase in the firefighter hourly wage from $12.20/hr to $14.10 per hour. The last wage increase occurred in 2016 and the avg wage of metro area POC firefighters was $14.06 in 2019. There is a statutory pension contribution rate change for Police/Fire. The rate is changing from 16.95% to 17.7% Looking at the next section of Public Safety: The police dept has requested a total of $86k to fund public safety needs including costs for personnel testing, recruiting,/training/education Police evident room equipment upgrade Replacement costs for expired police vests and training suits The next section is contracted services cost increases totaling $144,000. I won’t go through each item here, because the support for the cost increases is detailed in the agenda report. However, I want to mention that the last item of $60,000 is for street pavement management cost increases for the contract for chip seal/crack seal/striping and for salt/ice mgmt. materials. In the next section there are levy increases needed for Election judges and supplies for the 2020 presidential primary which is a first for the state of MN Debt service for council approved 2019 bonded projects including the two street reconstruction projects for Fish Pt Rd and CR21 and replacement of the fire tanker. The levy change also includes replenishment of general fund reserves to stay within our reserve guidelines Lastly, the city is adding budgeted revenue of $504k. Planned revenue increases help us to reduce the levy change. These planned revenue increases included contracted services of police/Fire/parks, building and plan check fees, and dock rental fees. (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 beach) which will add $31.2k in revenue.) Looking at the blue section for the Capital Improvement Program or CIP. The funding request is $120,000 which is a little under 1% of the proposed tax levy change. In August the council approved the five year CIP. The CIP included planned funding increases for equipment replacement, trail & sidewalk replacement, street overlay and facilities management funding. Looking at the box on the upper right hand side of the slide, this is the portion of the levy change to enhance current service levels. This section includes strategic initiatives and technology items. This portion of the tax levy increase is $312,000 or 2.44% of the proposed levy change. Starting with the strategic initiatives, as mentioned earlier, the EDA has identified a need for additional expenditure budget and funding for economic development initiates including loans and subsides to assist with commercial development and expansion. The tax levy change to support this is $222,000. $161k in EDA tax levy and 61k in additional transfer out of the GF as compared to our transfers out in the PY. Staff has also included funding for trail/sidewalk replacement. As detailed in the agenda report, our trail replacement is not adequately funded under the current plan. The one time funding of $90k is to work toward meeting our trail replacement needs. Looking at our technology section, The preliminary budget includes redesign of the city’s website of $40,000. Council directed staff to fund this expenditure from the General Fund reserves to reduce the 2020 tax levy impact. 7 Proposed Tax Levy Impact and Tax Rate Beginning in 2021, the City Tax Rate is shown separately from the EDA Tax Rate on the property tax statement so separate rate information will be provided as part of the financial planning property tax projection. 8 8 CFMP specifies a range between 40% and 50% 2021 Year-End Estimated Reserve Balance - $9.9M (52%) 2022 Year-End Estimated Reserve $8.3M (50%) General Fund Reserve * 9 * Estimated 9 General Fund Reserve Proposed Use of Funds above Recommended Reserve Range 10 Staff to bring 2021 Transfer from General Fund to Facilities Fund as part of 8/16/2021 2022-2026 Capital Improvement Plan resolution. 10 Maintain/Improve Property Tax Rank Scott County Tax Capacity Rate by City: Budget Objectives/ Metrics 11 *City Levy/Tax Capacity = Tax Rate 2021 Combined City of Prior Lake & EDA Proposed tax rate is 31.08% (includes the EDA levy for comparison to 2020 combined tax rate) 2022 Proposed City of Prior Lake tax rate is 30.46% 11 12 Property Taxes/HH that considers growth plus inflation Budget Objectives/ Metrics A budget that considers growth and inflation. The blue line is our expendcted property tax levy per HH considering growth and infoaltion over time. The black line is the acual property tax levy per household. You can see that in 20xx-20xx we were not incorporating growth and inflation into the tax levy. WE are now catching up for those years by incrementatlly increasing our funding ofr our capital improvement program. We have also added funding for the EDA. Which is .55% of or tax levy increase 12 Historical Tax Levy Information 13 The average change in the tax levy since 2012 is 4.62% 13 Budget Objectives/ Metrics 14 General Fund Expenditures/HH that consider growth plus inflation 14 Residential Impact of City Portion of Proposed Tax Levy Change 15 The median valued home increased 5.8% from $328,600 in 2021 to $347,600 in 2022. This is the property market valuation change that was used when estimating the residential impact of the City tax levy. A 6.55% increase in the property tax levy would result in the city portion of the property taxes increasing as follows: 15 Residential Impact of City Portion of Proposed Tax Levy Change 16 A 6.55% increase in the property tax levy for a median valued home = ~$67 increase in City property tax. The additional $67 will provide resources for the following Funds: 16 Enterprise Funds 17 Proposed rate increases per 2022-2026 CIP: Water: 1.5% Sewer: 2.1% Stormwater: 2% Stormwater rate change updated from 1% to 2% since June CIP meeting. The stormwater projects historically included stormwater treatment and retention project costs. Staff is planning to also include the storm sewer portion of street reconstruction projects of ~$300k/year. The storm sewer replacement costs include catch basins, manholes, pipes, etc. Shifts storm sewer replacement costs to Pay Go vs debt issuance. Shifts the storm sewer replacement costs to utility user fee vs. general property tax levy. 17 Stormwater Fund Projected Cash Balances 18 Storm Water Fund Capital Project Summary 19 Combined Utility Services Bi-Monthly Sample Bill 20 Does the city council have any questions? Is the city council comfortable with submitting the maximum tax levy at 6.55% for adoption of the preliminary levy on September 7th? Council Feedback and Direction 21 21 Discussion 22 22