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City Council Agenda Packet 08-24-2009 SpecialAGENDA SPECIAL MEETING – MONTICELLO CITY COUNCIL August 24, 2009 – 5:00 p.m. Mayor: Clint Herbst Council Members: Tom Perrault, Glen Posusta, Brian Stumpf, Susie Wojchouski 1. Call to Order. 2. 2010 Budget Workshop. 3. Adjourn. Special Council Agenda: 8/24/09 1 2010 PRELIMINARY BUDGET & TAX LEVY Attached are the City’s preliminary budget sheets and the resulting preliminary tax levy for 2010. The proposed preliminary levy is $8,321,865, which is a 7.38% increase over the 2009 levy of $7,750,000. The City’s property tax levy is still restricted by levy limits for 2010, but the City can levy outside its limit for any debt levies and for loss of State Aids in 2008 and 2009. As in years past, a significant effort was made by the Department Heads, Finance Director and Department Heads to uncover ways to maintain a flat or reduced expenditure budget without a reductions in service. The reason for the tax levy increase despite the decrease in expenditure budgets is due to a decrease in the utility transition aid and a decrease in building permit revenues. The City’s Utility Transition Aid for 2010 is $67,767 compared to $355,729 in 2009. The decrease is due to increased market value at the utility plants around the State. However this does shift $287,962 back into the City’s property tax levy in order to generate the same revenues as in 2009. Another factor for 2010 is that the City’s estimated tax capacity decreased to 16,548,236, however the EDA approved decertifying three TIF districts for pay 2010 which will add about 110,000 in tax capacity. So the City’s 2010 estimated tax capacity is 16,648,236 which is down from 16,783,843 for 2009. The tax capacity and proposed preliminary tax levy would generate a City tax rate of 49.986% compared to the 2009 rate of 46.191%. Below is how the staff arrived at the tax levy. Staff is proposing to decrease the debt levy slightly and to use reserves from the Consolidated Bond Fund for the City’s 2010 debt payments. The levies and reserves required are as follows: Tax Levy Reserves Used 2008 Sewer Refunding $446,368 $0 2002 Improvement Bond 24,798 50,000 2005 Improvement Bond 173,587 75,137 2007 Improvement Bond 183,780 231,000 Total Levy $828,533 $356,137 The City lost State Aid in the form of market value homestead credit in the amounts of $247,566 in 2009 and $133,528 in 2008. Staff does not propose levying for the past loss of State Aid in 2010. It should also be noted the City’s market value homestead credit will be reduced by $257,815 for 2010. So what ever the City levies for property taxes in 2010, the State will reduce that by $257,815. However in 2011 the City could levy property taxes for that amount outside its levy limit for 2011. Special Council Agenda: 8/24/09 2 The funds that levy property taxes that are within the levy limit include the General Fund, Library Fund, Shade Tree Fund, Street Reconstruction Fund, and Community Center Fund. An expenditure the affects various funds are wages and benefits. For 2010 the only wage increase used in the budget are the step increases due to employees who are not on step 8 of their pay range. We used a zero percent increase for cost of living for 2010. Also for benefits we used a 10% increase in cost with no change to employee/City share allocation. Library Fund: The Library Fund expenditure budget is proposed at $37,343, which is a 2.31% decrease from the 2009 budget. The decrease was the result of minor adjustment to various line items (either up or down) to reflect past expenditure levels. On the revenue side, staff is proposing to decrease the property tax levy required to support the library by $1,617, but this will require a transfer of liquor store reserves of $10,000 to balance the fund and provide the fund with some cash reserves. Shade Tree Fund: The Shade Tree Fund expenditure budget is proposed at $80,157, which is an increase from the 2009 expenditure budget of $50,134. The largest reason for the increase is for the replacement of the City’s brush chipper at an estimated cost of $30,000. The other expenditure increase is for miscellaneous professional services, which is for tree removal services which may be needed to fight the ash bore issue the Metro area is experiencing. On the revenue side the property tax levy is proposed to decrease $807 which results in the use of $40,158 reserves to balance the budget. Of course one of the reasons to build up reserves is so when large equipment purchases are required, the City has funds available, but this would leave just over $10,000 of reserves being used for operations. Street Reconstruction Fund: The budget for the Street Reconstruction Fund is based on the City’s five-year CIP for street projects. For 2010 the only street project projected to be funded from this fund is the extension of 7th Street at an estimated cost of $700,000. However, the City has tried to maintain a revenue budget of around $500,000 or more each year in order to build reserves for future street projects. The 2010 revenue budget includes a property tax levy proposed at $247,987, which is a decrease of $38,847 from 2009 and an operating transfer from the Liquor Fund of $200,000, which is an increase of $50,000 from 2009. Special Council Agenda: 8/24/09 3 Community Center Fund: The Community Center budget for expenditures increased 1.92% with the largest increase for part-time wages due to the increase in the minimum wage. There are also increases to repair maintenance items as the MCC is now 10 years old and needs more repairs then in the past. In addition there are funds to replace the pool heater, energy management software, which will result in reduced energy costs in the future, some funds for roof repairs, and replacement of partitions in the women’s locker room and restrooms. Revenues for the MCC are decreased for 2010 due to a decrease in room rentals (due to City use). Along with the tax levy decrease of $11,633, results in the MCC using $73,004 of MCC Fund reserves which pays for some of the capital equipment purchases. General Fund: General Fund budget is proposed to decrease 1.55% to $7,046,395 for 2010. However the tax levy to support General Fund expenditures is proposed to increase 12.02% to $5,889,171. The following adjustments were made to the General Fund expenditures: One item that affects a number of activity budgets is a new line item for city equipment rental fee. Currently the City when it comes to equipment needs places the estimated cost of the equipment into the current year’s budget, or in cases of large equipment, staff places it in the budget several years. This can create wide budget swings both up and down. Also when equipment is budget over several years it appears that staff under spent the budget in the year the equipment wasn’t purchased and over spent the budget in the year the equipment is purchased. Also in years like 2010, it is difficult to include equipment purchases when funds are so tight. The equipment rental fee is designed to smooth out these budget fluctuations and make it easier to budget for equipment. The rental fee is based on the depreciation of that activities equipment plus 5%. This money is then transferred to the Capital Revolving Fund to be used when the equipment is approved for replacement. The depreciation is a more stable figure from year to year and the added 5% should cover any inflation and/or any new pieces of equipment that could be need in the future. Equipment still must be approved by council and still would only be replaced when needed. Used equipment could still be purchased. So it would not affect the purchasing process, but just the way the City set funds aside for equipment (making it more manageable from a budget and tax levy perspective). City Council budget increased 0.18% due to PERA increase. Special Council Agenda: 8/24/09 4 Administration decreased 20.50% due to no equipment being purchased compared to 2009 and not filling the city clerk position. Elections increase due to holding an election in 2010 compared to not holding one in 2009. Finance decreased part-time wages due to payroll clerk being moved to full-time in 2009 and shifting some of the accounting clerk’s time to the Water and Sewer Funds for her activities being performed there. Also the project coordinator’s time was moved out of Finance Activity since she is taking over city clerk duties and will no longer work in the finance area. Also decrease conference and schools based on past expenditure levels. One item added is $2,500 for an intern which would only be hired if we are awarded a matching grant from GFOA. The intern would help finance with several tasks but main function would be to help with the audit so that we can bring the report document in- house saving the City around $1,500 per year. This position would only be filled if the City received the grant. Audit activity increased 1.69% based on current contract. Assessing activity decreased 2.10% based on the fact of little new development and contract with the county. Legal activity decreased 9.52% based on current level of expenditures and decreased membership cost to Coalition of Utility Cities. Human Resources increased 46.70% or $25,959. This is due to two factors. First there is the mandatory OSHA training estimated at $5,000 and second calculating the HR manager’s wages as a full-time employee. Planning and zoning decreased due to no administrative assistant, which was budgeted in 2009 but not in 2010. Also decreased professional services and other line items based on projected needs. Data Processing budget increased $4,755 due to more of project coordinator’s time being allocated to this activity. City hall budget increased 3.73% due to moving expenses for the garage/storage building to this activity from the building inspection activity. Decreased the number of newsletters produced and mailed from 3 down to 2. Law enforcement activity increased 2.81% based on 18,980 hours of service at $57.50 per hour and some costs for use of the speed trailer. The fire department budget is decreased 0.07% and includes an increase for custodial services from $920 to $1,200. This is the first increase in at least four years plus she pays Special Council Agenda: 8/24/09 5 the sales tax which eats into her earnings. The big decrease is for motor vehicles where in 2009 the City had funds for the fire truck and a duty vehicle, where as 2010 there is only the balance of the duty vehicle. Other equipment purchases include $14,000 to retrofit scba packs and $12,500 for 5 more 800 MHz portable radios. Fire Relief Contribution (offset by Fire State Aid) reduced to $80,000 based on projections. Building inspection activity decreased 12.06% for adjustment to various line items and removal of the licenses & permits which was the payment of state surcharges. This was recorded as revenue and then shown as an expense here. Beginning in 2009 the revenue and expense will be netted and no longer shown as a revenue or expenditure. Finally, the budget amount for vehicle replacement was dropped from $18,000 to $5,000 based on funds already available for the vehicle replacement. Civil defense decrease due to the 2009 budget having $3,500 budgeted for furniture, which is not being budgeted in 2010. Animal control and National Guard activities adjusted based on current expenditures. PW Administration decreased 2.16% due to various line time adjustments and the wages of the new public works director. PW Engineering decreased to reflect a decrease in consulting engineering time and other outside consultants. Also there is a decrease in the purchase of software as the City Engineer has pushed some of the purchases out into future years. PW Inspections was increased due to the equipment rental charges. PW Streets and alleys was decreased $4,265 which is in part due to the equipment purchases scheduled between 2009 and 2010. Purchases in 2010 include a ditch mower, mid-size tractor/loader, an air compressor, and sign lab (sign making machine and software) for making street signs and other City signs. PW Ice and snow decreased 4.96% due to reduction of equipment purchases. However the cost of sand and salt has increased significantly over the past year. PW Shop and garage increased $10,114 for the remodeling of the shop and garage area to comply with OSHA regulations and to make the area more efficient. The budgets for PW Parking lots and street lights were decreased 0.36% and 0.59% respectively. PW Parks administration is decreased 8.16% which is due to the delaying of equipment purchases. Some of the equipment will be needed for the new Bertram Chain of Lakes Park so it is not needed at this time. Equipment purchase pushed out include a truck and Special Council Agenda: 8/24/09 6 large mower. In addition the parks department is recommending that the City wait until 2012 to install an irrigation system at Groveland Park, which not only saves the expense of installing the system, but could save on time spent mowing the park. Equipment left in the budget is a mule utility vehicle and trailer for the skid loader for the parks department. Park improvements for 2010 include the construction of shelter at Sunset Ponds Park, a band shell at Pioneer Park, playground equipment replacement, a portable gazebo, lighting improvements on Front Street, some improvements to Bertram Park and some grave stone restoration at Hillside Cemetery. The NSP ball field was decreased slightly, but does include the purchase of ATV type machine to groom the fields. This purchase will add to efficiency of operation. The refuse collection budget was increased for the purchase of replacement bins for recycling and a small adjustment for contract costs. Community celebrations adjusted down to reflect past expenditures. The budgets for the Senior Center, Community Education, Y.M.C.A., Transit – River Rider, Swan River, and Community Ice Arena left unchanged form 2009 for the most part. Economic development activity increased for additional marketing and providing more public information. Finally, the insurance – unallocated was increased to reflect insurance coverage on all City property. One of the issues the City had with the hail storm in 2008 was when staff and the insurance adjuster reviewed the damage to building and property, it was discovered that some of the building had never been added to the insurance coverage. The insurance company still covered the repairs and now that the property is covered the premiums now reflect the additional buildings. On the revenue side of things, staff is decreasing the revenues for building permits to a more realistic $230,000 compared to $525,000 in 2009. Other development related fees such as engineering and developer reimbursements are also being decreased. Then there is the decrease to the utility valuation aid discussed earlier. This results in a preliminary levy for the General Fund of $5,889,171, which is a 12.02% increase. Other options to decrease the levy further would be to use a portion of the electric surcharge fees on hand (Approx $400,000) pay for the street lighting expenses ($168,500). In addition, grant funds can be used to supplement the electric surcharge fees if shifted to cover street lighting expnses. Other items, delay the zoning code update ($25,000), delay more equipment purchases or not construct some of the various improvements. Reduce salaries or require employee furloughs (saves about $11,877 per day) or have employees contribute more towards benefits. Special Council Agenda: 8/24/09 7 Other Funds without a tax levy: DMV Fund: The largest change to the DMV Fund is the addition of the third full-time position and the need to purchase two computers and possibly credit card processing equipment. These three items increase the expenditures of the DMV by 21.93%. Revenues for the DMV are expected to exceed expenditures by $2,263 for 2010. Water Fund: The water fund expenditures include the replacement of 425 residential water meters to the new radio read meters. The City has been changing meters over the last few years to the radio reads to save staff time of reading meters. If the City is able to change out these 425 meters it will allow the City to reallocate (eliminate) one of the utility employees time from reading meters each quarter. Currently takes three employees about three days to read meters. Once all meter have been changed to the radio reads it will take one employee less than a day to read all meters. Once again to support the expenditures of the water fund staff would recommend a 5% increase to the water rates. This would mean the City is not funding about $151,000 of the depreciation of assets in the water fund. Sewer Fund: The sewer fund expenditures are proposed to decrease for 2010 which is due to $104,200 being transfer to pay off bonds in 2009. This transfer is not required in 2010. Similar to the water fund, staff is recommending a 5% rate increase for the sewer fund which would leave $217,443 of depreciation uncovered by rates. Liquor Fund: Expenditures for the liquor fund also increased but the increase is due to the need to purchase more products (due to increased demand) and the increased transfer to other funds to lower the property tax levy. Liquor Fund should still show a profit for 2010. Conclusion: Based on the proposed 2010 budgets the City’s property tax levy would increase by $575,865 and the City would use over $600,000 in City reserves including liquor fund transfers to balance the budget. At current tax capacity estimates the City would have a 2010 tax rate of 50.343% compared to 46.191% in 2009. The actual impact of the change in tax rate on the bottom line will be greater for the utility company that other properties because the utility company value represents a greater percentage of the tax capacity in Special Council Agenda: 8/24/09 8 2010. It is hoped that the impact of this shift on the average household can be quantified soon to assist you in your decision making.