HomeMy WebLinkAbout10 16 2023 Long Range Financial Planning Study10-Year Financial Plan Study
October 16, 2023
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Agenda
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Introduction – City Manager
Plan Assumptions – Finance Director
Finance Plan Scenarios – Tammy Omdal, Northland Public Finance
Executive Summary – Study Results
Future Challenges
Next Steps
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Strategic Plan Initiatives
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Strategic Priorities:
Financial Sustainability
Stable & Sustainable Infrastructure
High Quality Parks & Trails
Three initiatives to help the city maintain financial stability:
Develop infrastructure funding scenarios
Establish Financial Plan that reflects infrastructure needs
Develop strategy to increase bond rating
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Study Assumptions
Ten-Year Planning Period
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Financial plan assumes an average annual growth in tax capacity for 2024-2033 of approximately 4.3% per year.
City provided assumptions for future housing units and commercial/industrial growth.
- Building permits of 80/year for 2024 & 2025. Ramps up to 125/year between 2026- 2033.
- Apartment units annual average of 35 units
- New commercial square footage annual average of 50,000
City will implement its personnel plans for new staff (FTEs). Salary and wages are assumed to increase by approximately 4.0% annually.
Governmental funds current expenses are assumed to increase by an average of approximately 4.1% annually
Plan reflects tax capacity add for Spring Lake Township annexation of 24.1 and 24.2 areas. Plan also includes revenue adjustment for Fire Service Agreement with Spring Lake Township
due to annexation area moving to city.
and commercial-industrial development to be constructed in the city.
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City provided current budget plans and capital improvement plans.
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Study Assumptions
Ten-Year Planning Period
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Property Tax Rate History
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Study Parameters:
Scenario A is presented as the “base” scenario.
Achieve average annual change in city tax rate of 3% and average annual change in city utility bill of 3.5%.
City will issue debt and structure amortization of debt to achieve the parameters for average annual change in city tax rate and city utility bills, as listed above. This will spread
the financial impact of capital improvements over multiple years and future taxpayers and utility customers.
Scenario B is based on the same assumptions as Scenario A except Scenario B includes future issuance of debt for park and recreation improvements based on the following:
Park Referendum providing for issuance of $60 million of bonds, including $20 million in 2026, $20M in 2028 and $20 million in 2030, to finance park and recreation improvements.
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Study Objectives for Ten-Year Planning Period
Study Objectives:
Revenue Sufficiency
Levy and Rate Calculations
Revenue Sufficiency: Determine the level of revenue needed to fund planned general government operations and services, capital improvements, and debt service while maintaining adequate
reserves for future services and capital needs of the City.
Levy and Rate Calculations: Model projected future annual City tax levy and tax rate changes, and utility rate changes, need to provide revenue sufficiency
Needs identified in the pavement management plan (including utility fund impact for water/sewer replacement as part of street projects), facility projects including expansion of the
maintenance center in 2032
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Results of Scenario A and Scenario B Assumptions
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Results of Scenario A and Scenario B Assumptions
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Results of Scenario A and Scenario B Assumptions
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Note: Comparison of the Prior Lake (PL) Scenario A and Scenario B to 2022 metro area average tax rate, shown at the right, doesn't account for changes that other cities may experience
in debt per capita over the next decade. PL Scenarios take into account projected population growth.
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Results of Scenario A and Scenario B Assumptions
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Results of Scenario A and Scenario B Assumptions
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Results of Scenario A and Scenario B Assumptions
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Results of Scenario A and Scenario B Assumptions
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Results of Scenario A and Scenario B Assumptions
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Results of Scenario A and Scenario B Assumptions
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Results of Scenario A and Scenario B Assumptions
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Results of Scenario A and Scenario B Assumptions
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City will issue debt and structure amortization of debt to achieve the parameters for average annual change in city tax rate and city utility bills.
For Scenario A, this changes the % of debt amortized over 10 years to 86%
For Scenario B, this changes the % of debt amortized over 10 years to 70%
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Results of Scenario A and Scenario B Assumptions
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Results of Scenario A and Scenario B Assumptions
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To provide some context, we have included comp cities data. This data is as of 2022.
As of 2022, Prior Lake is at a debt/capita of $1,332.
Other cities information does not account for changes other cities may experience in debt per capita over the next decade.
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Results of Scenario A and Scenario B Assumptions
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Results of Scenario A and Scenario B Assumptions
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Executive Summary
UNDER BOTH SCENARIOS:
All fund balance and reserve policy parameters met
Utility Funds ending cash balances projected to meet reserve policy parameters
The annual average change in the utility rates is 3.6% for both scenarios
Total bond issuance in years 2029-2033 is the same
The first five years of the plan reflect a higher annual average tax rate change than the 10-year average
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Executive Summary
SCENARIO A
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10-year average annual change does not exceed:
Tax levy – 8%
Tax rate – 2.8%
Utility bill – 3.6%
Total bond issuance:
2024-2028: $41.15m
2029-2033: $51.61m
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Executive Summary
SCENARIO B includes parks and trails funding
Park referendum bonds: $60m
Total bond issuance:
2024-2028: $101.15m
2029-2033: $51.61m
10-year average annual change does not exceed:
Tax levy – 8.2%
Tax rate – 4.3%
Utility bill – 3.6%
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Future Challenges
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General Fund:
Funding for additional staff to maintain city services
Unfunded mandates (ex. Future budget impacts for earned sick and safe time for seasonal staff/Fire POC/Council and 2026 financial impact for paid family medical leave)
Reduction in the rate of development
Wages/Healthcare and commodities – Market conditions and inflation impacts
Capital Project Funding:
Funding for pavement management plan
Funding for parks plan
Funding for future facility improvements, including Maintenance Center expansion in 2032
Exposure for limited ability to assess for street projects
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Ten-Year City
Financial Plan
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Next Steps
Jan/Feb 2024 – Financial Planning Work Session follow-up – Council direction on implementation of Scenario B (Scenario A plus $60M Park Referendum)
Council decision – Park Referendum on November 2025 Ballot
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Council Discussion
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Is there any additional information the council needs prior to the next work session to help inform your decision regarding:
Scenario B of the 10-year financial plan
Park Referendum approval
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