HomeMy WebLinkAbout01(A) - Ten-Year Financial Plan DevelopmentCity of Prior Lake | 4646 Dakota Street SE | Prior Lake MN 55372
CITY COUNCIL AGENDA REPORT ITEM: 1
MEETING DATE: February 27, 2024
PREPARED BY: Cathy Erickson, Finance Director Nicole Klekner, Assistant Finance Director Andy Brotzler, Public Works Director/City Engineer
PRESENTED BY: Cathy Erickson and Andy Brotzler
AGENDA ITEM: Ten-Year Financial Plan Development
STRATEGIC PRIORITY: FINANCIAL SUSTAINABILITY 3. Adequate funding to meet Overall Condition Index (OCI) target.
STABLE & SUSTAINABLE INFRASTRUCTURE 1. Maintain average OCI 70.
RECOMMENDED ACTION: As part of its strategic planning process, staff identified initiatives to help the City maintain financial stability including develop infrastructure funding scenarios and establish a financial plan that reflects infrastructure needs. The City engaged Northland to assist the City with a
study for development of the scenarios for funding future planned capital improvements, including related debt and debt service on planned bond issuance to support the planned capital improvements.
This work session will focus on pavement management funding in the 10-year plan.
Staff is looking for Council feedback and direction on pavement management funding options. The focus will be on debt issuance in the Sewer and Stormwater funds in 2024 to support the planned pavement management capital projects and maintain the utility rate increases at an
average increase of 3.5% over the upcoming 10-year period.
ATTACHMENTS: 1. Ten-Year Financial Plan PowerPoint Presentation
10-Year Financial Plan Study
Part 1: October 16, 2023 –10-Year Financial Plan Study Overview
Part 2: February 27, 2024 –Pavement Management Plan Funding Implications
Part 3: March 26, 2024 –Park Plan Funding Implications
Part 4: May 16, 2024 –Personnel Plan
Part 5: July 23, 2024 –Financial Plan including proposed 2025 budget
PriorLakeMN.gov
Discussion Items
2
Scenario A
2/27/2023 Work Session Topic:
Proposed Tax Levy and Tax Rate Changes that reflect Pavement Management Plan
Council Direction - Proposed Annual Debt Issuance in Utility Funds to support
Pavement Management Plan
PriorLakeMN.gov
Strategic Plan Initiatives
3
Strategic Priorities:
Financial Sustainability
Stable & Sustainable Infrastructure
High Quality Parks & Trails
Three initiatives to help the city maintain financial stability:
1.Develop infrastructure funding scenarios
2.Establish Financial Plan that reflects infrastructure needs
3.Develop strategy to increase bond rating
PriorLakeMN.gov
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.
4
Study Objectives for Ten-Year Planning Period
Study
Objectives:
Revenue Sufficiency
Levy and Rate
Calculations
Executive Summary SCENARIO A
5
10-year average annual change does not
exceed:
•Tax levy – 6.9%
•Tax rate – 3%
•Utility bill – 3.6%
Total bond issuance:
2024-2028: $41.225m
2029-2033: $51.10m
CITY PROPERTY TAX PROJECTION - SCENARIO A
2024 2025 2026 2027 2028 2029 2030 2031 2032 2033
Total Tax Levies 18,715,290 20,502,933 22,352,804 24,125,924 25,767,905 27,063,176 28,509,380 29,923,876 31,136,793 32,822,073
Annual $ Change 1,851,334 1,787,643 1,849,871 1,773,120 1,641,981 1,295,270 1,446,204 1,414,496 1,212,917 1,685,280
TOTAL % CHANGE IN TAX LEVIES 11.0%9.6%9.1%8.0%6.9%5.1%5.4%5.1%5.0%5.4%
CITY TAX CAPACITY TAX RATE 30.27%31.67%33.62%35.14%36.26%36.65%36.86%37.09%37.37%37.50%
Annual % Change 7.68%4.63%6.14%4.51%3.22%1.06%0.56%0.63%0.75%0.36%
Ten Year Planning Period
6
Streets –Project Funding Summary
7
TIME PERIOD CITY COST
FRANCHISE
FEES FUNDING
BOND
FUNDING
SPECIAL
ASSESSMENTS
SEWER
UTILITY
WATER
UTILITY
STORM
UTILITY
Historical 2014-2023 40,202,972 18,956,852 8,367,243 5,036,623 6,435,131 1,407,123
Proposed 2024-2023 70,134,270 11,473,000 28,419,333 5,750,667 10,442,863 9,306,033 4,742,374
10 Year Increase/(Decrease)29,931,298 11,473,000 9,462,481 (2,616,576) 5,406,240 2,870,902 3,335,251
TAX LEVY
Planned Capital Projects –Utility Funds
8
Water Fund:
Sewer Fund:
Project Description 2024 2025 2026 2027 2028 2029
Capital OutlayTransportation Plan 166,937 25,800 1,150,000 650,000 2,025,000 1,060,000 Meter Replacement Program - Software Upgrade - - 105,000 105,000 105,000 105,000 Wells 55,000 57,500 60,000 50,000 52,000 65,000 Misc projects 20,000 15,000 75,000 - 10,000 7,500 Current Year Projects - Facilities 40,500 150,000 - 300,000 487,500 61,500 Water Storage & Tower Reconditioning - - 1,810,000 - - - Current year projects - Equipment 50,000 60,000 300,000 300,000 - - WTF Rehabs & Equipment 20,000 20,000 - - - 25,000 Total Capital Outlay 352,437 328,300 3,500,000 1,405,000 2,679,500 1,324,000
Project Description 2024 2025 2026 2027 2028 2029
Capital Outlay
Transportation Plan 461,903 65,000 1,020,000 700,000 1,890,000 1,600,000
Sewer Lining - Inflow/Infiltration Prevention 1,500,000 454,500 468,000 482,000 496,000 511,000
Lift Station Rehabilitation 440,000 909,000 412,000 327,000 429,000 345,000
Technology Plan - - 595,000 595,000 595,000 595,000
Generator/Equipment - 175,000 - - 225,000 250,000
Total Capital Outlay 2,401,903 1,603,500 2,495,000 2,104,000 3,635,000 3,301,000
Planned Capital Projects –Utility Funds
9
Stormwater Fund:
Project Description 2024 2025 2026 2027 2028 2029
Capital OutlayTransportation Plan 239,601 630,000 693,000 360,000 350,000 620,000 Pond Maintenance & Retrofit 206,000 212,000 218,000 225,000 232,000 239,000
Stormwater Improvements 150,000 150,000 150,000 150,000 150,000 150,000
Stormwater Pond Planning 32,000 33,000 34,000 35,000 36,000 37,000
Prior Lake Outlet Channel (PLOC) Lining Project 260,000 - - - - -
Misc projects 110,000 150,000 - 30,000 40,000 40,000
Regional Water Quality Pond Project 950,000 - - - - -
Total Capital Outlay 1,947,601 1,175,000 1,095,000 800,000 808,000 1,136,000
Decision Points:
10
Proceed
with CIP
planned
projects?
Change planned
projectsUse cash?
Yes No
Issue
debt
Adjust tax levy
(gov funds) or
rate (utility
funds)
Yes No
Utilities –Funding Summary
11
•Historically, rate increases were higher as debt issuance was
minimized.
•Previous 10 years included 13.7% increase in water rates in 2015,
and double digit increases in sewer rates in 2016, 2019, and 2020
(24.8%/15.3%/14.7%)
•The financial plan study proposes sewer and stormwater debt
issuance to moderate the overall utility rate increase to an average
annual increase of 3.5%
Water Sewer Stormwater Water Sewer Stormwater
Historical 2014-2023 4.7%9.0%5.5%1,320,000 1,320,000
Proposed 2024-2033 3.1%4.4%3.9%22,707,530 7,492,470
10-Year Avg Annual Rate Increases 10-Year Debt Issuance
Debt Issuance by Year
12
PROPOSED BONDING BY YEAR BY FUND
Fund Name 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033
Revolving Equip Fund F410 - 3,605,000 - - - - 1,545,000 - - -
Revolving Park Equip Fund F430 - - - - 2,575,000 - - - - -
Facilities Mgmt Fund F440 1,135,000 - - - 2,575,000 - - - 16,480,000 -
PIR Revolving Fund F450 1,680,000 - - 1,020,000 - - - - - 315,000
Construction Fund F501 - 5,195,000 5,515,000 2,770,000 965,000 3,105,000 2,480,000 5,745,000 5,420,000 -
Governmental Funds Subtotal 2,815,000 8,800,000 5,515,000 3,790,000 6,115,000 3,105,000 4,025,000 5,745,000 21,900,000 315,000
Water Fund - - - - - - - - - -
Stormwater Fund 2,474,529 - - - 2,001,671 - 1,555,000 - - 1,461,270
Sanitary Sewer Fund 4,565,471 - - - 5,148,329 - - 6,815,000 - 6,178,730
Utility Funds Subtotal 7,040,000 - - - 7,150,000 - 1,555,000 6,815,000 - 7,640,000
City total Debt Issuance - All funds Scenario A 9,855,000 8,800,000 5,515,000 3,790,000 13,265,000 3,105,000 5,580,000 12,560,000 21,900,000 7,955,000
Stormwater 10-year Fund Projections
13
Stormwater Fund with debt issuance:
Stormwater Fund without 2024 debt issuance:
Stormwater Fund 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033
Cash by Purpose
For future capital improvements 1,737,706 1,120,711 1,010,968 1,700,110 2,059,893 2,766,845 2,275,354 1,872,676 2,563,316 2,704,498
For following year pay-go capital 1,175,000 1,095,000 800,000 - 1,136,000 - 1,512,000 1,067,000 - 1,419,000
For 3-months of operating cash 195,278 232,214 206,592 212,387 268,082 224,494 241,568 237,329 244,034 261,505
For following year debt service 219,427 177,505 177,725 177,813 355,615 321,472 461,164 433,873 436,085 564,122
Ending Cash 3,327,410 2,625,431 2,195,285 2,090,309 3,819,590 3,312,810 4,490,086 3,610,877 3,243,435 4,949,125
Stormwater Fund 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033
Cash by Purpose
For future capital improvements (736,824) (1,353,818) (1,463,561) (774,420) (414,637) 292,315 (199,175) (601,854) 88,786 229,969
For following year pay-go capital 1,175,000 1,095,000 800,000 - 1,136,000 - 1,512,000 1,067,000 - 1,419,000
For 3-months of operating cash 195,278 232,214 206,592 212,387 268,082 224,494 241,568 237,329 244,034 261,505
For following year debt service 219,427 177,505 177,725 177,813 355,615 321,472 461,164 433,873 436,085 564,122
Ending Cash 852,881 150,901 (279,244) (384,220) 1,345,061 838,281 2,015,556 1,136,348 768,906 2,474,595
Utilities –Funding Summary
14
•The financial plan study proposes sewer and stormwater debt issuance to
moderate the overall utility rate increase to an average annual increase of
3.5%
•To avoid 2024 Sewer debt issuance, city could adjust sewer rates as follows:
Sewer increase: 11.9% in 2025, 8.4% in 2026, 2.9% in 2027
Proposed 2024-2033:Water Sewer Stormwater Water Sewer Stormwater
Sewer Debt per Study to Moderate Rate Increases 3.1%4.4%3.9%22,707,530 7,492,470
No Sewer Debt in 2024 3.1%6.0%3.9%18,142,000 7,492,470
10-Year Avg Annual Rate Increases 10-Year Debt Issuance
Debt Issuance in 2024 (Sewer and Storm)to achieve avg. annual change in city utility bill of 3.5%
15
•Water increase: 3%
•Sewer increase: 4.3%
•Stormwater increase: 3%
•Debt Issuance – Sewer: $4,565,000
•Debt Issuance – Stormwater: $2,475,000
No Sewer Debt Issuance in 2024 (Storm only) Rate increases (outside of study parameters) only in Sewer Fund
16
•Water increase: 3%
•Sewer increase: 11.9% in 2025, 8.4% in 2026, 2.9% in 2027
•Stormwater increase: 3%
•Debt Issuance – Stormwater: $2,475,000
•Eliminates Sewer Debt Issuance in 2024 of $4,565,000
Total per Year 2024 2025 2026 2027
High User 5,873$ 6,257$ 6,588$ 6,778$
Medium User 1,244$ 1,330$ 1,403$ 1,441$
Low User 800$ 858$ 907$ 929$
Annual Increase
High User 265$ 384$ 330$ 191$
Medium User 64$ 86$ 73$ 38$
Low User 44$ 58$ 49$ 22$
Annual Percentage Increase
High User 4.7%6.5%5.3%2.9%
Medium User 5.4%6.9%5.5%2.7%
Low User 5.8%7.2%5.7%2.4%
Average 5.3%6.9%5.5%2.7%
Sewer Fund cash by purpose
17
Sewer Fund 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033
Cash by Purpose
For future capital improvements 4,914,501 3,417,163 2,534,758 3,776,839 2,844,867 461,533 1,800,301 2,603,909 1,276,344 512,950
For following year pay-go capital 1,603,500 2,495,000 2,104,000 - 3,301,000 3,694,500 - 2,998,000 - 3,318,650
For 3-months of operating cash 978,008 1,042,652 1,062,835 1,117,120 1,209,184 1,236,004 1,304,314 1,431,825 1,950,932 1,638,980
For following year debt service 569,090 489,995 493,400 496,062 785,405 697,716 697,463 1,306,925 1,190,290 1,734,958
Ending Cash 8,065,099 7,444,810 6,194,993 5,390,021 8,140,457 6,089,753 3,802,078 8,340,659 4,417,566 7,205,537
High Volume Customer (47,000 gallons)5.4%4.2%4.3%4.3%4.3%4.3%4.3%4.4%4.4%4.4%Medium Volume Customer (12,000 gallons)5.4%4.3%4.3%4.4%4.4%4.4%4.4%4.4%4.5%4.5%
Low Volume Customer (7,000 gallons)5.4%4.2%4.2%4.2%4.2%4.2%4.3%4.3%4.3%4.3%
Average Annual % Increase for Fees and Charges 1, 4
Sewer Fund cash by purpose –without 2024 sewer debt
18
Sewer Fund 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033
Cash by Purpose
For future capital improvements 753,870 (62,754) 28,308 2,200,815 3,951,518 2,301,410 4,298,440 6,609,231 5,760,894 5,390,219
For following year pay-go capital 1,603,500 2,495,000 2,104,000 - 3,301,000 3,694,500 - 2,998,000 - 3,318,650
For 3-months of operating cash 978,008 1,042,652 1,062,835 1,117,120 1,224,148 1,236,004 1,304,314 1,439,325 1,950,932 1,638,980
For following year debt service 164,250 162,500 165,500 168,000 639,767 515,276 517,477 1,217,990 1,081,083 1,629,137
Ending Cash 3,499,628 3,637,398 3,360,643 3,485,934 9,116,432 7,747,189 6,120,231 12,264,546 8,792,909 11,976,985
High Volume Customer (47,000 gallons)5.4%11.9%8.4%2.9%3.0%3.0%3.1%3.1%3.2%3.3%
Medium Volume Customer (12,000 gallons)5.4%11.6%8.3%3.0%3.1%3.2%3.2%3.3%3.3%3.4%Low Volume Customer (7,000 gallons)5.4%12.1%8.5%2.8%2.8%2.9%3.0%3.0%3.1%3.1%
Average Annual % Increase for Fees and Charges 1, 4
Water Fund cash by purpose
19
Water Fund 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033
Cash by Purpose
For future capital improvements 6,989,463 4,707,305 5,136,209 4,354,509 5,257,882 6,193,006 6,055,085 8,376,763 9,038,342 10,630,104
For following year pay-go capital 328,300 3,500,000 1,405,000 2,679,500 1,324,000 1,435,500 2,669,500 1,017,000 394,500 2,330,000
For 3-months of operating cash 854,764 882,256 870,197 889,597 907,037 930,619 957,454 990,984 1,510,731 1,101,722
For following year debt service 4 789,000 791,950 801,700 810,450 645,350 652,650 659,200 - - -
Ending Cash 8,961,526 9,881,510 8,213,106 8,734,056 8,134,269 9,211,774 10,341,240 10,384,748 10,943,574 14,061,826
High Volume Customer (78,000 gallons)4.0%3.0%3.0%3.0%3.0%3.0%3.0%3.0%3.0%3.0%Medium Volume Customer (18,000 gallons)4.0%3.0%3.0%3.0%3.0%3.0%3.0%3.0%3.0%3.0%
Low Volume Customer (8,000 gallons)4.0%3.0%3.0%3.0%3.0%3.0%3.0%3.0%3.0%3.0%
Average Annual % Change in Water Bill for Billing Period 1
PriorLakeMN.gov
Future Challenges
20
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 Master Park Plan
•Funding for future facility improvements, including Maintenance Center expansion in
2032
•Exposure for limited ability to assess for street projects
PriorLakeMN.gov
Ten -Year City
Financial Plan
21
October 16, 2023 –Financial Planning Work Session
February 2024–Financial Planning Work Session –Pavement
Management Plan funding
July 2024 –Council Work Session: Present 10-Year financial plan to
Council with preliminary 2025 budget
Summer/Fall 2024–Adopt 10-Year Capital Improvement Program which
follows 10-Year city financial plan
Next Steps
March 2024 – Financial Planning Work Session – Park Plan funding
May 2024– Personnel Plan
PriorLakeMN.gov
Council Discussion
22
•Planned 2024 debt issuance
•10-Year Financial Plan