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2017 BudgetTable of Contents Table of Contents Directory of Public Officials Distinguished Budget Presentation Award Budget Message Community, Demographic, and Statistical Information Map Strategic Planning: Vision, Mission and Goals Core Values Planning Process Finanical Policies Budget Development & Administration Revenue Collection Expenditures and Payments Debt Administration Reserves and Fund Balances Financial Reporting and Accounting Cash Management and Investment Financial Structure Matrix of Funds and Budget Units Operating Fund Crosswalk The Budget Process (and Calendar) Organization Chart All Funds Summary By Fund Type All Funds Summary by Year Changes in Fund Balance/Working Capital Fund Balance History Balance Budgets Capital Expenditures (Recurring vs Nonrecurring) Tax Levy History Tax Capacity History Revenue Sources by Fund Long Range Financial Plans Long-Term Fiscal Objectives Capital Investments and Operating Budgets Legal Debt Limit and Bond Rating Bond Rating Scales Debt Service Levy History G.O. Debt Service G.O. Debt Levels 5 6 7 20 23 24 26 27 33 33 35 35 37 38 39 40 44 47 48 49 53 54 55 56 57 58 59 60 61 62 64 69 72 75 76 77 78 79 Effect of Debt Levels on Government Operations Debt Levels by Fund Types Interfund Transfers Staffing Summary Revenue Treands & Analysis Appropriations by Category and Fund-Type General Fund Summary Mayor and City Council City Administration City Clerk Finance Audit Assessing Legal Human Resources Planning, Zoning & Community Development City Hall Prairie Center Building Law Enforcement Fire & Rescue Fire Relief Building Inspections Civil Defense Animal Control National Guard Public Works - Administration Public Works - Engineering Public Works - Inspections Public Works - Streets, Alleys & Parking Lots Public Works - Ice & Snow Removal Public Works - Shop & Garage Public Works - Stormwater Public Works - Street Lighting Public Works - Refuse Collection Transit Senior Center Park Operations Park Ballfields Shade Tree Library Insurance Special Revenue Funds - Summary Economic Development Authority Fund 80 81 82 83 84 94 97 100 101 103 104 106 107 108 109 111 114 116 117 119 121 122 124 125 127 128 130 132 134 136 137 139 141 142 143 144 146 148 149 151 152 153 154 Cemetery Fund Minnesota Investment Fund Community Center Fund Debt Service Funds (aggregate of sub-funds) - Summary 2007A G.O. Improvement Bond Sub-Fund 2008B G.O. Sewer Revenue Refunding Bond Sub-Fund 2010A G.O. Improvement Bond Sub-Fund 2011A G.O. Refunding Bond Sub-Fund 2014A G.O. Judgment Bond Sub-Fund 2015B G.O. Street Reconstruction and Improvement Bond Sub-Fund 2016A G.O. Street Reconstruction and Improvment Bond Sub-Fund Closed Debt Service Funds Capital Project Funds - Summary Capital Project Fund Closed Bond Fund Park & Pathway Dedication Fund Stormwater Access Fund Street Lighting Improvement Fund Street Reconstruction Fund Closed Capital Project Funds Enterprise Funds - Summary Water Fund Sewage Fund Liquor Fund Deputy Registrar Fund Fiber Optics Fund Internal Service Funds - Summary IT Services Fund Central Equipment Fund Benefit Accrual Fund Capital Improvement Program Capital Improvement Program Introduction Capital Improvement Plan - Funding Source Summary Capital Improvement Plan - Projects & Funding Sources by Department CIP Projects Appendix Property Tax Basics Truth-in-Taxation Debt Guide Minnesota Statutes Utility Rates Capitalization Thresholds Useful Terms (Glossary) 156 158 160 163 164 166 168 170 172 174 176 178 179 180 182 184 186 188 190 192 193 194 196 200 202 204 207 208 210 213 215 215 222 223 229 237 237 239 240 248 252 253 254 4 DIRECTORY OF PUBLIC OFFICIALS MAYOR & CITY COUNCIL Position Name Term Expires Mayor......................................................................Brian Stumpf 12/31/2016 Council.....................................................................Glen Posusta 12/31/2016 Council.....................................................................Tom Perrault 12/31/2016 Council......................................................................Lloyd Hilgart 12/31/2018 Council............................................................... Charlotte Gabler 12/31/2018 CITY STAFF City Administrator.......................................................Jeff O’Neill Finance Director.....................................................Wayne Oberg Public Works Director ............................................Wayne Oberg Community Development Director................. Angela Schumann Community Center Director..................................... Ann Mosack Economic Development Manager...............................Jim Thares City Clerk .........................................................Jennifer Schreiber Human Resource Manager........................................ Tracy Ergen Chief Building Official...................................................John Rued City Engineer .....................................................................Vacant Fire Chief ....................................................................Daryl Gilles Deputy Registrar Manager.................................Carolyn Granger Liquor Store Manager ........................................Randall Johnsen Finance Manager...........................................Sarah Rathlisberger Street Superintendent..............................................Tom Moores Parks Superintendent................................................Tom Pawelk Water & Sewage Superintendent ...........................Matt Theisen JOINT CITY/COUNTY/OUTSIDE STAFFING Wright County Sheriff................................................Joe Hagerty WSB Engineering Consultant.................................Shibani Bisson Veolia Environmental Services.................................Chuck Keyes 5 DISTINGUISHED BUDGET PRESENTATION AWARD The Government Finance Officers Association of the United States and Canada (GFOA) presented an award of Distinguished Budget Presentation to the City of Monticello for its annual budget for the fiscalyearbeginningJanuary1,2016.Thecityhasreceivedthisawardforeachbudgetithasprepared for the past five years. In order to receive this award, a governmental unit must publish a budget document that meets program criteriaasa policydocument,asanoperationsguide,asafinancialplanandasacommunicationsdevice. This award is valid for a period of one year only. We believe our current budget continues to conform to programrequirements,andwearesubmittingittoGFOAtodetermineitseligibilityforanotheraward. GOVERNMENT FINANCE OFFICERS ASSOCIATION D istinguished B udget Presentation Award PRESENTED TO City of Monticello Minnesota For the Fiscal Year Beginning January 1, 2016 Executive Director 6 BUDGET MESSAGE INTRODUCTION The budget is a tool. How this versatile tool is used depends on the stakeholder. Policy makers use the budget to provide direction on service levels and place limits on spending. For managers, the budget offers benchmarks for measuring performance and stewardship. To community advocates and activists, the budget conveys visibility as to whether their concerns are being addressed. Universally, the budget is an essential tool for communicating the city's plans, policies, procedures, and objectives regarding the services to be delivered and the assets to be acquired in the upcoming and future fiscal years. Indeed, the budget’s effectiveness is meaningfully influenced by the conviction of the various stakeholders using this dynamic tool. BUDGET POLICY AND STRATEGY This budget document was prepared after analyzing and evaluating requests from various departments and budget units. The content represents the requested financial support for the operation of the city of Monticello for the upcoming fiscal year. Revenue estimates are conservative and realistic. The importance of a sound revenue picture cannot be overstated. Revenue estimates are based on historical trends with greater weight placed on the most current years. The city of Monticello provides a range of services to the community, including police (contracted) and fire protection, street and park maintenance, snow and ice removal, water and sewer utility services, and administrative and planning services. In addition the city owns and operates a community center (MCC), department of motor vehicles (DMV), municipal off-sale liquor store, and a fiber optic network (FiberNet Monticello). The level of service provided by the proposed budget is similar to that currently enjoyed by the community. KEY INITIATIVES The city of Monticello provides a full range of municipal services, as listed in the previous paragraph and as authorized by state statute. Monticello is blessed with many assets, including a beautiful setting, an excellent location, a rich heritage, and a talented population. The city seeks to use, preserve and enhance these assets in building a great, affordable place to live, work and do business. The city will fulfill the goals below to achieve this mission: 1.Continue to maintain the lowest possible tax rate while providing the best possible service. While the 2017 property tax levy exceeded inflation, the city’s tax levy (capacity) rate declined slightly from 2016. 2017 Budget: $225,000 (2.5%) city levy increase and no increase to the $280,000 Housing and Redevelopment levy. Combined (city + HRA) tax levy increase: $225,000 (2.4%). The tax levy rate is still nearly 10% less than the next lowest rate for cities in Wright County. 7 2.Continue to develop and provide an unequaled system of parks, trails, and recreational facilities, including the unique assets of the Monticello Community Center, the Mississippi River, and conversion of the Bertram Chain of Lakes (BCOL) property into a regional park. In partnership with the county, the city acquired park land with state grants and local contributions. The city and county evenly split the local contribution, which is roughly 50% for land designated for non-athletic purposes and 50% for land designated for athletic purposes. 2017 Budget: $288,000 2018 Budget: $2,500,000 buildout of BCOL. 3.Continue to maintain the city streets by following an annual seal coat and crack seal program and by overlaying streets before they are beyond repair and need replacing. The city’s pavement management program identifies varying condition levels of every street. The 2017 General Fund includes a robust amount for chip/seal maintenance. This higher maintenance level began in 2014. 2017 Budget: $176,000 4.Develop and adopt a long-range transportation plan which will improve traffic flow around and through the city. Monticello is one of three cities (along with two counties) taking part in a study to identify an interstate interchange site on the west-end of the city. The city is also an active, due paying member of the I-94 Coalition. 2017 Budget: $25,000 – study; $ 6,600 - membership 5.Implement the downtown redevelopment plan which will maintain a downtown area that combines a successful commercial district, community identity and heritage, and connection with the Mississippi River. The Economic Development Authority Fund includes a tax increment financing (TIF 1-22) district that accumulates resources for downtown redevelopment expenditures. The city continues to modify TIF 1-22 parameters to spur development. The EDA has hired a firm to do a small area study encompassing property located in TIF 1-22. 2017 Budget: $50,000 6.Seek to expand the supply of "move up" housing that allows people to upgrade their home without leaving the community. The city facilitated the transition of forfeited land back into development. The property can be purchased for construction of residential homes by individuals or developers. The average $20,000 lot sale price includes special assessments. Revenues from lot sales will be used for developing residential infrastructure and amenities. 7.Seek to develop and attract a wide range of employment opportunities with a growing emphasis on higher-paying jobs. This concept promotes the city’s competitive advantages (i.e. low taxes, property availability, transportation access, etc.) to businesses looking to move or grow. 2017 Budget for non-study redevelopment activity: $91,600 8 8.Continue to maintain high quality water and sewage treatment facilities. With the some of the lowest water and sewage rates in Minnesota, the city provides excellent services from these two utilities to residents and businesses. The budget includes funds for wastewater treatment facility improvements along with sufficient amounts for additional, ongoing system improvements in each fund. Our water is rated as one of the best tasting in Minnesota. 2017 Budget: Water - $250,000; Sewage - $270,000 and $700,000 wastewater facility control systems 9.Provide unequaled access to information with high speed internet, phone and television through the city-owned fiber optic network. The Fiber Optics Fund will receive a transfer from the Liquor Fund to continue operations in 2017. With settlement of the bondholder’s 2014 class-action lawsuit, the mission of the city’s telecommunications utility will continue to adapt to competitive market conditions. The city hired a third party to run FiberNet in July 2016. 2017 Budget: $230,000 Transfer City council and staff used the goals set during the strategic planning process to direct the development of the 2017 budget. TOTAL BUDGET The 2017 budget includes all the funds maintained by the city. Each fund is responsible to account for a particular activity or activities. Each fund-type will be discussed within this message and in the budget document. The following compares the adopted 2016 and 2017 budgets: Fund-type 2016 2017 2016 2017 General Fund 7,596,000$7,802,000$7,596,000$7,802,000$ Special Revenue Funds 2,928,036 2,964,539 2,744,235 2,699,590 Debt Service Funds 4,995,039 3,732,728 5,898,276 4,396,961 Capital Project Funds 9,139,720 5,588,900 11,500,000 7,477,069 Enterprise Funds 13,318,709 12,116,002 15,250,060 11,841,744 Internal Service Funds 508,844 303,719 881,240 810,030 Total 38,486,348$32,507,888$43,869,811$35,027,394$ Revenues Expenditures Total Budget Total revenues and expenditures decreased 15% and 20%, respectively. General Fund revenues and expenditures increased 2.7%. The decrease in debt service expenditures reflects the rapid amortization of existing debt. Capital project funds will incur lower expenditures as the 2016 Core Street Reconstruction project winds down. Financed by state grants and loans and started in 2015, improvements to the wastewater treatment plant were substantially complete by the end of 2016. 9 One major project is budgeted for the Sewage Fund. No other enterprise fund has a significant project planned for 2017. The following graphs display the revenues and expenditures attributable to each fund-type in the 2017 Budget: General Fund 24% Special Revenue Funds 9% Debt Service Funds 11%Internal Service Funds 2% Capital Project Funds 17% Enterprise Funds 37% 2017 Revenues by Fund-Type GeneralFund 22% Special Revenue Funds 8%DebtService Funds 13% Internal Service Funds 2% Capital ProjectFunds 21% Enterprise Funds 34% 2017 Expendituresby Fund-Type 10 PROPERTY TAXES The state of Minnesota has granted local municipalities the authority to levy taxes to fund operations and debt payments. For the city of Monticello, the property tax levy accounts for over 80% of revenues in the General Fund and over 30% in the special revenue funds. In 2017, debt services funds will receive $2,437,000 in property taxes for principal and interest payments on general obligation debt, which is 17% higher than the prior year. Supplemented with transfers from utility funds, reserves in debt service funds will also contribute to the city's debt payments. For 2017, the city's general (operations and debt) property tax levy will increase to $9,150,000, an increase of $225,000 (2.5%). For the second straight year, the city imposed a Housing and Redevelopment Authority (HRA) special benefit levy of $280,000. The special benefit levy is receipted in the Economic Development Authority Fund. When added together, the two levies represent a 2.4% increase in property taxes. The following table provides a historical view of the tax capacity value, tax capacity rate and tax levy without the HRA levy: Tax Capacity Capacity Tax Capacity Rate Tax Levy Year Value % Change Rate % Change Levy % Change 2007 15,257,996$28.9%51.040 -18.3%6,500,000$-6.6% 2008 16,190,597 6.1%42.601 -16.5%7,600,000 16.9% 2009 16,783,843 3.7%46.942 10.2%7,750,000 2.0% 2010 16,691,266 -0.6%46.191 -1.6%7,648,272 -1.3% 2011 16,429,431 -1.6%46.729 1.2%7,677,309 0.4% 2012 15,771,688 -4.0%49.773 6.5%7,850,000 2.6% 2013 18,692,762 18.5%42.262 -15.1%7,900,000 0.6% 2014 18,244,090 18.6%42.262 -15.1%8,150,000 0.6% 2015 23,882,689 30.9%35.737 -15.4%8,535,000 4.7% 2016 25,891,898 8.4%34.470 -3.5%8,925,000 4.6% 2017 27,584,038 6.5%33.171 -3.8%9,150,000 2.5% Under contract, the Wright County assessor values all properties located within the city’s corporate limits. This market value is applied to the class rates assigned by the state to determine a property's tax capacity. The county estimates the city's tax capacity for taxes payable in 2017 at $27,584,038 which is a 6.5% increase. The Xcel Energy nuclear power plant taxable market valued grew 5 percent in 2016 to $714 million. The value of the plant has risen nearly 2.4 times from its 2012 value of $213 million. The Xcel plant alone accounts for over ½ of the city’s tax capacity. The city's property tax levy is divided by the tax capacity to determine the city's tax capacity rate. The tax capacity rate is applied to each property's tax capacity to determine the tax the city will collect before any credits are applied. For 2017, the city's combined (city + HRA) tax capacity rate is expected to change from 35.552% to 34.186%, a 3.8% decrease. The city at this time does not have the authority to levy or collect local sales taxes or other types of taxes under the state's tax system. 11 PERSONNEL SERVICES The city's 2017 budget does not include any new positions. The budget does include a step increase for employees still moving up in the pay scale system and a 3% wage adjustment (2% in January and 1% in July) for all employees. In 2013, the city re-instituted the step-pay scale plan discontinued in 2010. Public Works employees belong to a union. The union’s collective bargaining agreement expires March 31, 2017. The city will participate in the union’s health insurance plan in 2017. The union’s plan requires a flat premium for union and non-union full-time employees regardless of participation. Monthly health insurance plan costs increase $75 per employee, with employees paying $42. Staff will continue to explore ways to reduce future premium increases to both the city and its employees. While there are no new positions in the 2017 budget, the city continues to experiment with different staffing scenarios. One such experiment has merged the duties and responsibilities of the finance director and the public works director. The contribution rates to the Public Employees Retirement Association (PERA) will remain the same in 2017 for both employer and employees. Effective 2017 PERA rates: 7.50% of wages for employer and 6.50% for employee. The budget also estimates FICA and Medicare taxes at 6.20% and 1.45% respectively for 2017. The remainder of this section will describe the major initiatives for 2016 for each of the fund types and their activities. GENERAL FUND Expenditures The 2017 budget increased 2.7% over the 2016 budget. The wage and benefits increase comprised about 1% of the total increase. The following schedule displays 2017 budgeted General Fund expenditures by department compared with the prior years: Department 2016 2017 % Change General Government 1,552,077$1,623,981$4.6% Public Safety 2,077,441 2,154,769 3.7% Public Works 2,860,439 2,883,792 0.8% Transit 40,000 5,000 -87.5% Recreation & Culture 1,058,022 1,125,946 6.4% Unallocated 8,021 8,512 6.1% Operating Transfers ----- Total 7,596,000$7,802,000$2.7% 2017 General Fund Expenditures and Other Uses 12 General Government 21% Public Safety 28% Public Works 37% Recreation 14% General Fund Expenditures - 2017 The Public Works Department is the largest department in terms of budgeted expenditures and the street and alleys activity budget is the largest activity within the department. The 2017 budget for the Public Works increased .8%. Streets and alleys (+1.7%), Ice and snow (+2.1%), refuse collection (+.3%), shop and garage (+1.1%), public works inspections (+22.55) are largely responsible for the overall increase. Public works administration declined 24.3% with the elimination of the public works director position. As with all departments, personnel services increased with wage and benefit inflation. The second largest department based on expenditures is the Public Safety Department. The 2017 Public Safety Department budget increased 3.7%. The fire and rescue activity budget increased 6.6% with the demand for those services. Public safety activities include law enforcement, fire, building inspections, civil defense, National Guard, and animal control. The city contracts with the Wright County Sheriff's department for law enforcement. The 2017 contract includes a $2.50 increase in the hourly rate at a service level, which remains four hours less per day than what it was in 2013. The budget for general government activities increased 4.6% for the upcoming year. The city clerk activity increased significantly with the purchase of election equipment. The increase in planning and zoning (+5.9%) is a budget adjustment to prior year actual amounts. Finance increased with wages and benefits. The Prairie Center drop is in line with historical trends and removal from the tax rolls after the loss of a private tenant. As a side note, IT (information technology) services costs are distributed to each budget. The IT Services Fund centralizes IT costs into one reporting unit and allocates them to each budget unit based on use. The IT Services Fund started in the latter half of 2013. 13 Recreation and culture increased by 6.4% in 2017. Park operation activities (+8.1%) increased because of wage and benefit inflation and additional Bertram costs. The higher shade tree (+4.2%) activity budget demonstrates a desire to improve Monticello’s livability and more accurately reflect actual costs. Including services for police, assessor, and legal services, other services and charges account for 48% of General Fund appropriations. Appropriations for personnel services follow with 40% of the total and rises with wage and benefit inflation plus the new positions. Capital outlays include the internal rent payments to the Central Equipment Fund. Additional equipment purchases will translate into higher rent payments. A capitalization threshold of $10,000 resulted in higher supplies costs. The following table and graph provide perspective on expenditures and other uses for the various General Fund classifications in the 2017 budget: Classification 2016 2017 % Change Personnel Services 2,979,264$3,096,654$3.9% Supplies 662,900 730,225 10.2% Other Services & Charges 3,723,736 3,728,621 0.1% Capital Outlay 230,100 246,500 7.1% Operating Transfers ----- Total 7,596,000$7,802,000$2.7% 2017 General Fund Appropriations Personnel Services 40% Supplies 9% Capital Outlay 3% Other Services & Charges 48% Expendituresand OtherUses - 2017 14 Revenues The revenues and other sources to support General Fund expenditures and other uses are classified as follows: Classification 2016 2017 % Change Property Taxes 6,177,000$6,291,000$1.8% Franchise & Other Taxes 283,900 283,900 0.0% Licenses & Permits 338,900 379,400 12.0% Intergovernmental Revenues 301,177 306,440 1.7% Charges for Services 267,664 320,470 19.7% Fines & Forfeits 42,100 42,300 0.5% Special Assessments 300 300 0.0% Miscellaneous 184,959 178,190 -3.7% Operating Transfers ----- Total 7,596,000$7,802,000$2.7% 2017 General Fund Revenues and Other Sources The General Funds tax levy increases by 1.8%, while the General Fund’s portion of the combined levy decreases slightly from 67.1% to 66.7%. Licenses & permits reflect a modest uptick in residential and commercial development, which rebounded in 2013 and has continued through 2016. Intergovernmental revenues are recovering slightly along with the state’s finances. Charges for services reflect the prior year adjustment to garbage and recycling rates for multiple unit residential services. The property tax levy generates 80% of the General Fund revenues. Other than franchise fees, the city does not have the ability to impose other taxes, such as local sales taxes or income taxes. Therefore, the city will continue to be dependent on property tax revenue as its major source of future revenues. SPECIAL REVENUE FUNDS The city of Monticello currently operates special revenue funds for economic development, cemetery, and community center activities. Special revenue funds also include the Minnesota Investment Fund, but it will likely see very little activity in 2017. Like the General Fund, the special revenue fund budgets are set at a level to maintain services. The tax levy supports community center operations ($372,000) and Economic Development Authority ($280,000). Tax increments support economic development activities but their use is generally restricted to specific areas. Beginning in 2016, operating transfers (in) decreased to zero with initiation of the $280,000 Housing and Redevelopment special benefit levy. 15 The following tables display the change in revenues and other sources and the change in expenditures and other uses for special revenue funds in 2017: Classification 2016 2017 % Change Property Taxes 644,000$652,000$1.2% Tax Increments 675,994 653,564 -3.3% Charges for Services 1,413,110 1,496,725 5.9% Miscellaneous 194,932 162,250 -16.8% Operating Transfers ----- Total 2,928,036$2,964,539$1.2% 2017 Special Revenue Fund Revenues & Other Sources Classification 2016 2017 % Change Personnel Services 1,159,115$1,223,132$5.5% Supplies 202,428 198,635 -1.9% Other Services & Charges 723,772 800,904 10.7% Capital Outlay 458,920 276,919 -39.7% Operating Transfers 200,000 200,000 0.0% Total 2,744,235$2,699,590$-1.6% 2017 Special Revenue Fund Appropriations DEBT SERVICE FUND (Aggregate of Sub-Funds) The city's debt service for 2017 is $4,396,961 or $712,523 less than the prior year. Funding for debt service comes from special assessments, tax increments, property taxes and transfers from the stormwater access, water, and sewage funds. Additional resources may be needed in one debt service fund because two parcels with $1.7 million in special assessments received a Green Acres deferral. The reserve in the affected fund were drawn down to make debt service payments. Further transfers from utility funds supplanted transfers from depleted and closed access funds. Outstanding debt: debt service funds - $20,116,000; enterprise funds - $2,460,000; internal service funds - $665,000. The city's bond rating from Moody’s Investors Services is an "A2". CAPITAL PROJECT FUNDS The budget for capital project funds are based on the 2017 project expenditures listed in the city's five-year capital improvement plan. The city's five-year capital improvement plan is included in a later section of this report. The city has three major projects moving forward in 2017: TH25/7th Street, Fallon Avenue overpass, and a bundled mix of improvements to outlying roads and in-town roads. ENTERPRISE FUNDS Total enterprise revenues and other sources are estimated at $12,116,002 for 2017. The 2017 budget includes $700,000 in debt proceeds, down from the $2 million in 2016. Operating transfers 16 from other funds include $230,000 from another enterprise fund: Liquor Fund to Fiber Optics Fund. The change in Sale of Goods represents a conservative budget policy of estimating future municipal liquor sales at 99% actual sales for the prior year. Classification 2016 2017 % Change Sale of Goods 5,367,710$5,435,194$1.3% Licenses & Permits 3,700 200 -94.6% Charges for Services 5,241,070 5,414,861 3.3% Special Assessments 30,000 30,000 0.0% Miscellaneous 185,779 165,297 -11.0% Contributed Capital 140,450 140,450 0.0% Operating Transfers 350,000 230,000 -34.3% Debt Proceeds 2,000,000 700,000 -65.0% Total 13,318,709$12,116,002$-9.0% 2017 Enterprise Fund Revenues & Other Sources Classification 2016 2017 % Change Personnel Services 2,097,728$1,555,441$-25.9% Supplies 4,385,536 4,414,130 0.7% Other Services & Charges 3,083,464 3,422,406 11.0% Capital Outlay 2,766,000 1,760,900 -36.3% Debt Service 492,198 373,574 -24.1% Operating Transfers 2,425,134 315,293 -87.0% Total 15,250,060$11,841,744$-22.3% 2017 Enterprise Fund Appropriations Personnel services decrease with the elimination of FiberNet employees. That decline is buffeted by higher wages and benefits. Other services and charges increase because Fibernet’s operations were outsourced. Debt service decreases with early bond redemptions in the Sewage Fund. Lower operating transfers from utility funds are needed supplant the depletion of impact fees from the Sanitary Sewer and Water Access funds. INTERNAL SERVICE FUNDS Two internal service funds were initiated in 2013: IT (Information Technologies) Services Fund and Central Equipment Fund. These funds operate on a cost-recovery basis but the time horizon for the basis differs greatly. The IT Services Fund is relatively less capital intensive with annual capital outlays in the $20,000 to $30,000 range. IT equipment usually has a shorter replacement cycle. The Central Equipment Fund has incurred debt to make major purchases. Annual rental charges to benefitting budget units recover the equipment purchase costs over 7-10 year periods. Annual depreciation and inflation for each capital asset will be used in calculating annual rental payments, which will provide funds for major equipment replacement through annual operating budgets. Internal service fund charges are recorded as expenditures in other funds. 17 A third internal service fund (Benefit Accrual Fund) was started at the end of 2015. This internal service fund accumulates resources from governmental funds to match the city’s paid leave (paid- time-off, sick leave, and vacation) liability for governmental fund employees. Except for debt proceeds, internal service fund revenues are recorded as expenditures in other funds. FUND BALANCES For the most part, fund balances in the General Fund and Monticello Community Center Fund are expected to be stable for 2017. The fund balance in the Debt Service Fund declines nearly $700,000 with the early redemption of one debt issue. The Debt Service Fund is the aggregation of the sub- funds for each debt issue. Typically, the city accumulates money in the debt service sub-funds for debt service payments in the following year. Additionally, the fund balance for the group of capital projects funds declines $1.9 million with the expenditure of prior year debt proceeds. The fund balances in all other funds and fund groups should finish the year where they started. The city adopted balanced budgets for both the General Fund and the Monticello Community Center Fund for 2017. CHALLENGES IN CONTEXT The preparation of this budget reflects the collision of both short-term and long-term challenges. First, slow residential housing growth and an anemic recovery from a prolonged recession continues to have a significant impact on the city’s finances. Indeed, recent tax base additions will not generate property taxes until 2018 or 2019. Low impact fee revenue caused the city to look at other financing options, such as using utility fund revenues, to make debt service payments. The council’s goal of maintaining the lowest tax capacity rates in Wright County makes this an even greater challenge. The crush on debt service funds supported by impact fees abated in 2016 with transfers from utility funds and early assessment payoffs. Second, the city will realize a significant drop in the tax levy needed to support debt service in 2018. The drop will be approximately $1 million. A significant portion of that drop will be absorbed by the issuance of additional debt in 2017. Third, the 2014 settlement of the telecommunication bondholder’s class-action lawsuit provided certainty and allowed city leaders to focus on other concerns such as day-to-day operations at Fibernet. Consequently, the city hired a third party to manage the telecommunications utility starting July 1, 2016. The city is moving ahead with larger capital projects for 2017 and thereafter. All large projects have reimbursement resolutions, meaning the city will likely recover their temporary draw on reserves with debt proceeds. Two of the larger projects include the TH25/7th Avenue intersection improvements and the Fallon Avenue Bridge. 18 Fourth, new leadership took over in 2015 (first budget – 2016). The long-time mayor chose not to run for re-election and a serving councilmember was elected to the role. In addition, one new councilor was seated in 2015. Further, two new councilors were elected the term starting in 2017. The 2017 budget will be subject to minor modification as priorities change as that year progresses. Growth themes and emphasis on public safety will likely dominate in drafting the 2018 budget. In summary, modest economic improvement, debt amortization, stabilization in Fibernet operations, and new leadership impacted the decisions made in drafting the 2017 budget. DISTINGUISHED BUDGET PRESENTATION AWARD The Government Finance Officers Association of the United States and Canada (GFOA) presented a Distinguished Budget Presentation Award to the City of Monticello, Minnesota for its annual budget for the fiscal year beginning January 1, 2016. In order to receive this award, a governmental unit must publish a budget document that meets program criteria as a policy document, as an operations guide, as a financial plan, and as a communications device. This award is valid for a period of one year only. We believe our current budget continues to conform to program requirements, and we are submitting it to GFOA to determine its eligibility for another award. CONCLUSION Conservation of city financial resources continues to be a very important objective. The budget is the prime tool in making sure limited resources are wisely utilized. It is our belief that the 2017 budget allows the city to deliver excellent municipal services in a cost effective and efficient manner at current levels. The 2017 budget is a product of collective efforts by the city council, staff and various other stakeholders. Their commitment, good judgment and expertise are invaluable to the budget process. Sincerely, Wayne W. Oberg Sarah K. Rathlisberger Finance Director Finance Manager 19 COMMUNITY, DEMOGRAPHIC, AND STATISTICAL INFORMATION Classifieda501(a)entityundertheInternalRevenueCode,thecityofMonticellowasorganizedasa municipalityin1856.Monticelloislocatedapproximately45milesnorthwestoftheMinneapolis-St.Paul metropolitanareaalongtheI-94corridorinWrightCounty.The2010U.S.CensusestimatedMonticello's populationat12,759andthecityencompassesanareaof8.94squaremiles.Thecityoperatesundera statutoryformofgovernment.Themayorandfourcouncilors(togetherknownas"citycouncil")governthe city.Thecouncilorsareeachelectedtostaggered,four-yeartermsandthemayoratwo-yearterm.The mayorpresidesoverandisavotingmemberoftheCityCouncil.Themayoristhechiefauthorityfor administeringcitygovernmentandappointsdepartmentheads,variousboardmembersandcommission members.TheCityCouncilisthelegislativebodyandmeetsregularlytwiceamonth.TheCouncil'smain responsibilitiesaretoappropriatefunds,setsalaries,adoptordinances,andapprovebudgets. Monticellohasavariedbusinesscommunitywithahealthymixofretailandmanufacturing.Thecitywashit hardbytherecessionandhasslowlyrecovered. Cityunemploymentratesaresimilartothatofthestate, butthestate’sratehasbeenslightlybetterlately,asshownbelow. Average Employment Year Wright County Wright County State of Minnesota 2007 62,767 5.1%4.6% 2008 63,324 6.1%5.4% 2009 62,001 8.9%7.8% 2010 64,462 8.0%7.4% 2011 65,454 6.8%6.5% 2012 66,382 5.8%5.6% 2013 67,180 5.0%4.9% 2014 68,190 4.1%4.1% 2015 69,853 3.7%3.6% 2016 68,732 4.2%4.0% HISTORICAL EMPLOYMENT/UNEMPLOYMENT DATA (Rates are not compiled for individual communities within counties) Average Unemployment Hometooneofthetwostatenucleargenerationplants,Monticello’slargestemployerisXcelEnergy. Agri- giantCargillalsomaintainsastrongpresenceinthecity.Thefollowingtableliststhetoptenemployersinthe community. Employer Employees Xcel Energy (Northern States)700 ISD No. 882 (Monticello)544 CentraCare Medical Center 500 Cargill Kitchen Sol. (Sunny Fresh)450 Walmart Supercenter 325 Cub Foods 180 Ultra Machine Corporation 173 Home Depot 160 City of Monticello 100 Hoglund Bus 88 TOP TEN CITY EMPLOYERS 20 Monticello’spopulationandhouseholdsare.2%ofstate’stotalforbothmeasures.WithaWal-Mart,Target, andHomeDepot,itisnosurprisethatretailsalesperpersonarehigherthanthestateaverage. Thefollowing tablecontainsselectedfactsonthecity: People QuickFacts Monticello Minnesota Population, 2016 estimate July 1 13,299 5,519,952 Population, 2010 12,759 5,303,925 Population, percent change, April 1, 2010 to July 1, 2016 4.2%4.1% Persons under 5 years, percent, 2010 10.1%6.7% Persons under 18 years, percent, 2010 30.8%24.2% Persons 65 years and over, percent, 2010 9.5%12.9% Female persons, percent, 2010 50.8%50.4% White persons, percent, 2010 (a)92.6%85.3% Total number of firms, 2007 1,258 496,657 Retail sales per capita, 2007 $26,337 $13,751 Land area in square miles, 2010 8.94 79,626.74 Persons per square mile, 2010 1,427.2 66.6 Housing units, 2010 4,973 2,347,201 Homeownership rate, 2011-2015 71.3%71.7% Median value of owner-occupied housing units, 2011-2015 $165,400 $186,200 Households, 2011-2015 4,838 2,124,745 Persons per household, 2010-2014 2.66 2.49 Per capita money income in the past 12 months (2015 dollars)$27,795 $32,157 Median household income, 2011-2015 $70,254 $61,492 Thenuclearplantaccountsforapproximately60%ofcity’snettaxcapacity. Xcel’staxcapacityandthe council’sconservativetaxlevyphilosophyaremainreasonsthecitytaxcapacityrateisthesecondlowestin WrightCounty.Indeed,upgradestotheXcelplantin2011contributedto15%declineinthe2013tax capacityrate.Likewise,Xcelupgradesin2013produceda20percentdeclineinthe2015taxrate.Thetax baseisaboutone-thirdresidentialandtwo-thirdscommercial.Thefollowingtableliststhetaxratesforeach cityinWrightCounty,Minnesota: 2013 2014 2015 2016 2017 2016-17 2016-17 City Tax Rate Tax Rate Tax Rate Tax Rate Tax Rate Change Change % City of Monticello 42.234 44.709 35.737 34.471 33.172 -1.299 -3.8% City of St. Michael 43.917 41.843 38.476 37.772 37.484 -0.288 -0.8% City of Otsego 46.160 44.575 41.162 37.921 37.973 0.052 0.1% City of Albertville 51.924 51.092 51.273 52.370 51.566 -0.804 -1.5% City of Hanover 52.398 52.141 48.207 48.395 51.928 3.533 7.3% City of Delano 59.746 56.681 54.081 53.520 53.895 0.375 0.7% City of Dayton 63.921 65.600 56.945 57.150 55.047 -2.103 -3.7% City of Montrose 67.204 60.204 57.218 53.365 55.141 1.776 3.3% City of Rockford 59.487 59.032 57.335 56.620 56.746 0.126 0.2% City of Buffalo 51.834 49.893 52.456 54.838 59.604 4.766 8.7% City of Annandale 73.113 71.525 69.012 67.921 63.884 -4.037 -5.9% City of Maple Lake 56.283 57.733 59.139 59.304 65.441 6.137 10.3% City of Howard Lake 74.718 76.180 72.093 71.649 65.941 -5.708 -8.0% City of Clearwater 87.552 87.259 75.294 75.857 75.189 -0.668 -0.9% City of Cokato 80.941 74.684 80.426 77.853 80.740 2.887 3.7% City of Waverly 90.842 93.137 87.064 83.349 83.676 0.327 0.4% City of South Haven 130.981 137.657 130.381 134.401 148.770 14.369 10.7% CITY TAX RATES IN WRIGHT COUNTY, MINNESOTA 21 Monticellogrewbyapproximately20%inthelasttenyears.Thecityhasampleundevelopedcommercial andresidentialrealestateandispositionedwelltobenefitfrommoreurbanflightfromtheTwinCities. Accesstomajortransportationcorridorsmakesthecityanideallocationforfuturegrowth. Thefollowing tableincludespopulationstatisticsoverthelasttenyears: Year Polulation Change 2007 11,253 591 2008 11,366 113 2009 11,476 110 2010 11,501 25 2011 12,759 1,258 2012 12,840 81 2013 12,901 61 2014 12,993 92 2015 13,125 132 2016 13,311 186 TheabovestatisticsreflectamoreaccurateCensuscount,whichisthe2011total.Theothercountsare fromthestatedemographer. 22 MAP FOR MONTICELLO, MINNESOTA 23 STRATEGIC PLANNING: VISION, MISSION AND GOALS Strategic Planning Various city staff members continue to meet regularly to identify, review, and refine tasks that help meet previously established Goals and Action steps for Monticello. The vision statement and goals identified below were provided by staff and incorporated into the budget approved by council. City staff worked on the creation of a plan, comprised of action steps and tasks to be completed to assist in meeting the goals. This framework highlighted key initiatives that are included in the budget message. Vision:Monticello,Minnesota:Monticellowilluse, preserve and enhance its assets to build a thriving community in which to live, work, shop and play. Mission: Toenhancethequalityoflifethroughexcellenceinpublicservice. GoalsandActionSteps: 1.Provideprofessional,transparent,andethicalpublicservices whichareresponsivetothecommunityandwithinavailable resources. –Fostercollaborativeopportunities –Enhancecommunication –Exploreanddevelopnewprogramsandservices –Acceptresponsibilitytodomore –Holdemployeesaccountable 2.Buildastrongteamofelectedofficials,staffandcitizens. –Evaluate,enhanceandexpandcommunication –Enhance,expandanddiversifypubliceducationandoutreach –Buildcommunityspirit –Promotecommunitybrand –Increasevolunteerism 24 3.Supportthedevelopmentofabusinessandfamily-friendly communitythatissafe,sustainable,andconnected. – Facilitate development and redevelopment to support a rapidly changing world – Promote and amend existing programs and services – Address the housing needs of current and future Monticello residents – Maintain competitive advantage with tax and utility rates – Position land for development 4.Committoastrongfinancialposition. –Preservationofassets –Financialpositioningtoimproveservicesandvaluetocommunity –Adoptsustainablespendingpatterns –Recovercostbymatchingcurrentandfutureresidentswithserviceuse 5.Approachtoday’schallengeswithasenseofurgencyand“can- do”attitude. –Provideleadership –Definevaluesandculture –Employeeselectionanddevelopment –Tailorwageandbenefitprogramstoattractandretaintalent 6.Strivetodoourbestwhenencounteringandrespondingto futurechallenges. --Evaluateexistingprogramsandservices –Redefininggovernmentascustomerservice –Positioning to improve services and value to community 25 CORE VALUES This documentis preparedbythecity’s finance department.Thecorevaluesofthedepartmentservea guide forthewaywe deliverinternalandexternalcustomerservices.Thesecore valuesarehowwe conductourselvesandwhatcreatethecultureofourdepartment. Competent (How well we do our jobs) Be open, hardworking, reliable, innovative, safe, and accountable to the public. Courteous (How well we treat others) Work unselfishly in a positive, polite and professional manner for our community and its citizens. Cooperative (How well we work together) Lead by example and work together to achieve the best result. 26 PLANNING PROCESSES The city plans for the long-term needs of our community through a number of efforts and studies. These documents are usually developed by consultants and staff, with numerous public hearings and advisory board meetings prior to their formal adoption by the City Council. Once adopted, we work diligently to implement the recommendations and changes outlined in the plans. Here is the status of our primary planning documents: Plans for service provision, facility expansion & maintenance: 1.Monticello Comprehensive Plan - Adopted 2008. The Comprehensive Plan is a tool for guiding the growth, redevelopment and improvement of Monticello. The Comprehensive Plan outlines the vision for the community. The current plan update was adopted in 2008. Various chapters of the Comprehensive Plan have been amended in part or full since adoption. The professional services line item, under the 2017 planning and zoning budget, includes funds for interpreting and implementing the comprehensive plan. It is anticipated that amendments to the plan will occur as conditions affecting the plan evolve, including those related to Downtown and the Interchange Planning Area. 2.Transportation Plan - Adopted 2011. The city’s Transportation Plan is a guide that; identifies and characterizes the city’s existing transportation system; identifies and discusses general planning factors pertaining to future transportation needs for the city; identifies potential future roadway deficiencies and assesses improvement options to address the deficiencies; provides an overall plan addressing capital improvement needs, functional classification, jurisdiction, right-of-way issues, bicycle/pedestrian considerations and transit. The Transportation Plan document will be updated as necessary as growth increases. Ongoing major transportation efforts include: TH 25/CSAH 75 Intersection improvements completed in 2016, Fallon Avenue Overpass- right of way acquisition and design anticipated in 2017, Regional transportation planning to address the TH 25 corridor, TH 25/7th Street intersection improvements-- planned for 2017. 3.Parks & Pathways Plan - Adopted 2011. Chapter 4 – Parks of the Monticello Comprehensive Plan was amended in 2011 for the adoption of an updated Park and Pathway Plan. The Monticello Parks and Pathways Plan identifies the City’s objectives for Parks and Pathways planning and development, building on the existing parks infrastructure, and provides context for the City’s participation in the 27 acquisition and development of the Bertram Chain of Lakes Regional Park. The 2017 Park and Pathway Dedication Fund budget includes $85,000 for a Spirit Hills pathway connection and $65,000 for Rolling Wood Park play structure enhancements. Major Bertram Chain of Lakes improvements are planned for 2019. The General Fund includes $40,000 for annual improvements to existing pathways, which were previously financed by the Park and Pathway Dedication Fund. The City is currently working on a planning document related to pathway connections within the larger system in direct response to the objectives identified within the plan. 4.Embracing Downtown Plan – Adopted 2012 Chapter 3 – Land Use of the Monticello Comprehensive Plan was amended in 2012 for the adoption of the Embracing Downtown Plan. The Embracing Downtown Plan is an implementation plan which integrates market, transportation, land use, and finance considerations for the purpose of creating a vibrant downtown district. The 2017 Economic Development Fund budget includes $50,000 for a small-area study of downtown Monticello. This update to the Embracing Downtown Plan is currently underway and is anticipated to be considered for adoption as an amendment to the Comprehensive Plan in mid-2017. 5.Economic Development Strategic Plan In 2016, the city implemented a Housing and Redevelopment Authority property tax levy for $280,000. The same amount was levied for 2017. The levy is used for EDA redevelopment activities. The EDA has adopted a strategic work plan for 2017, which has been ratified by the City Council. 6.Natural Resource Inventory & Assessment - Adopted 2008. The purpose of the Natural Resource Inventory and Assessment (NRI/A), adopted in 2008, is to identify existing natural resources within the City of Monticello and its growth area (the Monticello Orderly Annexation Area), inventory these resources, and assess the resource quality. These resources are then considered and evaluated during growth/development. 7.Bertram Chain of Lakes Recreation Plan – Adopted 2016. The 2008 Comprehensive Plan and 2011 Park & Pathway Plan recognize the Bertram Chain of Lakes Regional Park as a significant component of the community’s quality of life initiatives. The concept plan for the full regional park and athletic complex was adopted in 2011 as part of the Park and Pathway plan. City Council authorized consideration of a 28 portion of the bio-solids farm (southern 27 acres) for athletic complex recreational plan. A Master Plan for the Bertram Chain of Lakes Regional Athletic Complex was approved in 2016. Land acquisition is complete and major improvements are planned to begin in 2019. 8.Storm Water Pollution Prevention Program - Adopted 2007. In 2005 the City of Monticello was designated as a regulated small municipal separate storm sewer system (MS4) under Minnesota Rules, Chapter 7090. This required the City to obtain a National Pollutant Discharge Elimination System/State Disposal System (NPDES/SDS) storm water permit, and to develop and implement a Storm Water Pollution Prevention (SWPPP) to reduce the discharge of pollutants, including sediments, from our storm sewer system to the maximum extent practicable. The City is continuing to implement the required six minimum control measures (MCM’s) as follows: A.Public Education and Outreach, B.Public Participation and Involvement, C.Illicit Discharge Detection and Elimination, D.Construction Site Stormwater Runoff Control, E.Post-Construction Stormwater Management Measures; and, F.Pollution Prevention/Good Housekeeping Measures. Zoning, subdivision and illicit discharge ordinances were adopted in 2014 related to grading, drainage, erosion control, and storm water management to meet current MPCA requirements per the city’s new MS4 permit. Issued on January 16, 2014, the permit expires July 31, 2018. 9.Comprehensive Water Resource Management Plan - Updated 2006. The Comprehensive Water Resource Management Plan was developed to meet local watershed management planning requirements of the Metropolitan Surface Water Management Act and Board of Water and Soil Resources Rules 8410. It was developed to be in conformance with the requirements of Metropolitan Council requirements, and applicable State and Federal laws. The plan and its referenced literature is intended to provide a comprehensive inventory of pertinent water resource related information that affects the City and management of those resources. It is anticipated to update the hydraulic model and plan to conform with new stormwater ponding design requirements as a result of the new NOAAA Atlas 14 standard released by the National Weather Service Hydrometeorlogical Design Studies for rainfall frequency estimates. 29 10.Plan Requirements and Design Guidelines (“Design Manual”) - Updated 2008. These guidelines were developed for developers of property within the City of Monticello. The guidelines provide design standards, specifications, and detail plates for the design of infrastructure improvements, street, utility, and site work construction. These guidelines are now referenced in the city’s zoning and subdivision ordinances were adopted in 2014 related to grading, drainage, erosion control, and storm water management.The Design Manual is anticipated to be updated in 2017. 11.General Specifications and Standard Detail Plates for Street and Utility Construction - Updated 2015. These specifications represent the City’s requirements for construction of public street and utility systems. This document is anticipated to be updated in 2017 with minor modifications. 12.Water System Plan – Adopted in 2004. Awaterdistributionsystemmodelwascreatedin2004toevaluatetheexistingwatersystem. The water system plan was then developed using this model to identify water system capital improvements necessary to serve future land use designations in accordance with the City’s ComprehensivePlan.Theupdateofthisplanisscheduledin2017,estimatedcostof$50,000. 13.Sanitary Sewer Comprehensive Plan – Adopted in 1995. The sanitary sewer comprehensive plans was adopted in 1995 and identified the existing sanitary sewer system and also projected future wastewater flows and service areas based future land use designations in accordance with the City’s Comprehensive Plan. Several individual sanitary sewer studies were developed after the adoption of this plan in response to development. The 2017 budget includes $50,000 for updating this plan and creating a system model. 14.Interchange Planning Study – Pending (2017/2018). The Interchange planning study will determine a reasonable location or locations for a future I-94 Interchange within the City west of TH 25. The 2008 Comprehensive Plan recognizes that the Northwest Monticello, which includes the CSAH39 to Orchard Road 30 corridor, as a primary focus for future development and further cites the Interchange Planning as a critical component of understanding growth potential and land use in the Northwest Area. A land use analysis component related to this study was completed in 2016. The full Interchange Planning study is on hold until the TH 25 area transportation study is complete. 15.Wellhead Protection Plan (Part 1 and 2) - completed 2016. The goal of the Wellhead Protection Plan is to prevent human-caused contaminants from entering the water supply wells and to protect all who use the water supply from adverse health effects associated with groundwater contamination. The preparation of the City’s as required by Minnesota Rules 4720.5100 to 5720.5590. The Water Fund 2015 budget includes $20,000 for completion of this study. Part 1 was completed in 2015 and Part 2 was completed in 2016. 16.TH 25/Regional Transportation Planning Group – Ongoing. A series of meetings have taken place with representatives invited from the City of Big Lake, Big Lake Township, City of Becker, Becker Township, Wright County, Sherburne County, MnDOT District 3 and the City of Monticello to discuss regional transportation planning. A joint power agreement was adopted by the city in December 2015. Plans for Facility and Infrastructure Maintenance: 1.Wastewater Treatment Facility Biosolids Dewatering, Energy Efficiency, Headworks and Site Improvements Feasibility Report – Adopted 2012. Dewatering facility is complete at year-end 2014. The energy-efficient aeration blowers and piping will be completed in 2016. This project is financed by the Sewage Fund. 2.Wastewater Treatment Phosphorus Reduction Facility Plan – Adopted 2014. Construction began in 2015 and the project should be completed by the end of 2017. The facility plan was amended to include replacement of two digester covers. The digester covers are part of the current construction project. The project’s estimated final cost is $3.5 million, financed by a $2.4 million loan and $1.2 million grant, both from the Minnesota Public Facilities Authority. 31 3.Overall Street Reconstruction Program – Adopted 2004, ongoing as part of capital improvement plan. The 2017-2021 Capital Improvement Plan includes projects related to the program, with various projects located through the city slated for start in 2017. The city held a street reconstruction plan public hearing in June 2015. The 2017 projects with infrastructure and amenities is estimated at $2 million. 4.Transportation Projects TH25/7th Street Signal Improvements – This project will include flashing yellow arrows (estimated at $250,000), northbound and southbound right turn lanes on TH25 and a westbound 7th Street right turn lane in 2017 (estimated at $1.5 million). Both projects are in the capital improvement plan. Fallon Avenue Overpass right-of-way acquisition and design will occur in 2017. Financial Plans: 1.Annual Budget - Adopted each December. 2.Capital Improvements Plan - Updated and adopted each year; most recently for 2017 - 2021. 32 FINANCIAL POLICIES Theoverallgoalofthecity'sfinancialpoliciesistoestablishandmaintaineffectivemanagementofthecity's financialresources.Formalpolicystatementsandmajorobjectivesprovidethefoundationforachievingthis goal.Accordingly,this sectionoutlines the policies usedinguidingthe preparation andmanagementofthe city'soverallbudgetandthemajorobjectivestobeaccomplished.Inaddition,therationalewhichledtothe establishmentofthefiscalpolicystatementsisalsoidentified. Budget Development & Administration 1.Acomprehensiveannualbudgetwillbepreparedforallfundsexpendedbythecity. Thecitycouncil shall have full authority over the financial affairs of the city and shall provide for the collection of all revenue and other assets, the auditing and settlement of accounts, and the safekeeping and disbursement of public monies and in the exercise of a sound discretion shall make appropriations for the payment of all liabilities and expenses. Inclusionofallfundsinthebudget enablesthecouncil,theadministration,andthepublictoconsiderallfinancialaspectsofcitygovernment whenpreparing,modifying,andmonitoringthebudget,ratherthandealwiththecity'sfinancesona "piecemeal"basis. 2.The budget will be prepared in such a manner as to facilitate its understanding by citizens and elected officials. Oneofthestatedpurposesofthebudgetistopresentapictureofcitygovernmentoperationsand intentionsfortheyeartothecitizensofMonticello.Presentingabudgetdocumentthatisunderstandable tothecitizensfurthersthegoalofeffectivelycommunicatinglocalgovernmentfinanceissuestoboth electedofficialsandthepublic. 3.Budgetaryemphasiswillfocusonprovidingthosebasicmunicipalserviceswhichprovidethe maximumlevelofservices,tothemostcitizens,inthemostcosteffectivemanner,withdue considerationbeinggiventoallcosts--economic,fiscal,andsocial. Adherence to this basic philosophy provides the citizens of Monticello assurance that their governmentandelectedofficialsareresponsivetothebasicneedsofthecitizensandthatitscitygovernment isoperatedinaneconomicalandefficientmanner. 4.The budget will provide for adequate maintenance of capital, plant, and equipment and for their orderly replacement. Allgovernmentalentitiesexperienceprosperoustimesaswellasperiodsofeconomicdecline.In periodsofeconomicdecline,propermaintenanceandreplacementofcapital,plant,andequipmentis generallypostponedoreliminatedasafirstmeansofbalancingthebudget.Recognitionoftheneedfor adequatemaintenanceandreplacementofcapital,plant,andequipment,regardlessoftheeconomic conditions,willassistinmaintainingthegovernment'sequipmentandinfrastructureingoodoperating condition. 33 5.The city will avoid budgetary practices that balance current expenditures at the expense of meeting future year expenditures. Budgetarypracticessuchaspostponingcapitalexpenditures,accruingfutureyears'revenues,or rollingovershort-termdebtarebudgetarypracticeswhichcansolveshort-termfinancialproblems. However,theycancreatemuchlargerfinancialproblemsforfutureadministrationsandcouncils. Avoidanceofthesebudgetarypracticeswillassurecitizensthatcurrentproblemsarenotsimplybeing delayedtoafutureyear. 6.The city will give highest priority in the use of one-time revenues to the funding of capital assets or other non-recurring expenditures. Utilizing one-time revenues to fund on-going expenditures results in incurring annual expenditure obligations, which may be unfunded in future years. Using one-time revenues to fund capital assets or other non-recurring expenditures better enables future administrations and councils to cope with the financial problems when these revenue sources are discontinued, since these types of expenditures can more easily be eliminated. 7.The citywill maintain abudgetary control systemto helpit adhereto the established budget. Thebudgetpassedbythecouncilestablishesthelegalspendinglimitsforthecity.A budgetarycontrolsystem isessentialinordertoensurelegalcompliancewiththecity'sbudget. 8.The city will exercise budgetary control (maximum spending authority) through city council approval of appropriation authority for each appropriated budget unit. Exercisingbudgetarycontrolforeachappropriatedbudgetunitsatisfies requirementsofstate law.Italsoassiststhecouncilinmonitoringcurrentyearoperationsandactsasanearlywarning mechanismwhendepartments deviate inanysubstantivewayfromtheoriginalbudget. 9.Reports comparing actual revenues and expenditures to budgeted amounts will be prepared monthly. Thecity'sbudgetisineffectivewithoutasystem toregularlymonitoractualspendingand revenuecollectionswiththoseanticipatedatthe beginningofthe year.Monthlyreportscomparing actualrevenuesandexpendituresto budgetamounts providethemechanismforthecouncilandthe administrationto regularlymonitorcompliancewiththeadoptedbudget. 10.State Requirement: Truth-in-Taxation The Truth in Taxation (TNT) law requires the city to hold a series of public hearings in order to present the proposed levy and budget, and to provide an opportunity for the public to comment and make recommendations. The city’s proposed general levy has to be certified to the county auditor by September 30th. The city’s proposed HRA (housing and redevelopment levy) must be certified by September 15th. The final levies for both have to be certified by December 29th. 34 Revenue Collection 1.Thecitywillseektomaintainadiversifiedandstablerevenuebase. Acitydependentuponafewvolatile revenuesources isfrequentlyforcedtosuddenlyadjust taxratesoralterexpenditurelevelstocoincidewithrevenuecollections.Establishmentofadiversified andstable revenue base,however,servestoprotectthecityfromshort-termfluctuationsinanyone majorrevenuesource. 2.The city will estimate revenues in a realistic and conservative manner. Aggressive revenue estimates significantly increase the chances of budgetary shortfalls occurringduringtheyear--resultingineitherdeficitspendingorrequiredspendingreductions. Realisticandconservativerevenueestimates,ontheotherhand,willservetominimizetheadverse impactofrevenueshortfallsandwillalsoreducetheneedformid-yearspendingreductions. 3.Thecitywillpursueanaggressivepolicyofcollectingrevenues. Anaggressive policyofcollectingrevenueswillhelpto ensurethecity's revenue estimatesare met,alltaxpayersare treatedfairlyandconsistently,anddelinquenciesarekepttoaminimum. 4.Thecitywillaggressivelypursueopportunitiesforfederalorstategrantfunding. Anaggressivepolicyofpursuingopportunitiesforfederalorstategrantfundingprovidescitizens assurancethatthecityisstrivingtoobtainallstateandfederalfundstowhichitisentitled--thereby reducingdependenceuponlocaltaxpayersforthesupportoflocalpublicservices. 5.User fees and charges will be used, as opposed to general taxes, when distinct beneficiary populations or interest groups can be identified. Userfeesandchargesarepreferabletogeneraltaxesbecauseuserchargescanprovideclear demandsignalswhichassistindeterminingwhatservicestooffer,theirquantity,andtheirquality.User chargesarealsomoreequitable,sinceonlythosewhousetheservicemustpay--therebyeliminatingthe subsidyprovidedbynonuserstousers,whichisinherentingeneraltaxfinancing. 6.Userfeeswillbecollectedonlyifitiscost-effectiveandadministrativelyfeasibletodoso. User fees are often times costly to administer. Prior to establishing user fees, the costs to establish and administer the fees will be considered in order to provide assurance that the city's collection mechanisms are being operated in an efficient manner. Expenditures and Payments 1.On-goingexpenditureswillbelimitedtolevelswhichcanbesupportedbycurrentrevenues. Utilizationofreservestofundon-goingexpenditureswillproduceabalancedbudget,however, thispracticewilleventuallycauseseverefinancialproblems.Oncereservelevelsaredepleted,thecity wouldfaceeliminationofon-goingcostsinordertobalancethebudget.Therefore,thefundingofon- goingexpenditureswillbelimitedtocurrentrevenues. 35 2.Minor capital projects or recurring capital projects, which primarily benefit current residents, will be financed from current revenues. Minorcapitalprojectsorrecurringcapitalprojectsrepresentrelativelysmallcostsofanon-going nature,andtherefore,shouldbefinancedwithcurrentrevenuesratherthanutilizingdebtfinancing.This policyalsoreflectstheviewthatthosewhobenefitfromacapitalprojectshouldpayfortheproject. 3.Major capital projects, which benefit future as well as current residents, will be financed with current revenues as well as other financing sources (e.g. debt financing). This policy reflects the view that those who benefit from a capital project should pay for the project. 4.Major capital projects, which benefit future residents, will be financed with other financing sources (e.g. debt financing). Majorcapitalprojectsrepresentlargeexpendituresofanon-recurringnaturewhichprimarily benefitfutureresidents.Debtfinancingprovidesameansofgeneratingsufficientfundstopayforthecosts ofmajorprojects.Debtfinancingalsoenablesthecostsoftheprojecttobesupportedbythosewho benefitfromtheproject,sincedebtservicepaymentswillbefundedthroughchargestofutureresidents. 5.Constructionprojectsandcapitalexpendituresof$10,000ormorewillbeincludedinthe CapitalImprovementProgram(CIP);minorcapitaloutlaysoflessthan$10,000willbeincludedin theregularoperatingbudgetassmalltoolsandequipmentorrepairsandmaintenance. TheCapitalImprovementProgram(CIP)differentiatesthefinancingofhighcostlong-livedphysical improvementsfromlowcost"consumable"equipmentitemscontainedintheoperatingbudget.CIPitems maybefundedthroughdebtfinancingorcurrentrevenueswhileoperatingbudgetitemsareannualor routineinnatureandshouldonlybefinancedfromcurrentrevenues. 6.SpendingPolicy:Thecitywillspenditsresourcesinthefollowingorder.Resourceswillbe categorizedaccordingtoGenerallyAcceptedAccountingPrinciples(GAAP)forstateandlocal governments,withthefollowinggeneraldefinitions: •Restricted -- Amounts constrained to specific purposes by their providers (such as grantors, bondholders, and higher levels of government) through constitutional provisions or by enabling legislation. •Committed--Amountsconstrainedtospecificpurposesbythecitycouncil; tobe reported ascommitted,amountscannotbe usedforanyotherpurposeunlessthecitycouncil takesactionto removeorchange theconstraint. •Assigned -- Amounts the city intends to use for a specific purpose; intent can be expressed by the council or by an official or body to which the council delegates the authority. The city council can delegate this authority to the city administrator. •Unassigned -- Amounts that are available for any purpose; these amounts are reported only in the General Fund. 36 When both restricted and unrestricted resources are available, spending will occur in the following order, for the identified fund types: FundType Orderof Spending GeneralFund 1.Restricted 2.Committed 3.Assigned 4.Unassigned ThecitycouncilhastheauthoritytoexpressassignmentsintheGeneralFund. Special Revenue Funds 1.Restricted 2.Committed 3.Assigned Thecitycouncilhastheauthoritytoexpressassignmentsinspecial revenue funds. Debt Service Funds 1.Assigned 2.Committed 3.Restricted Thecitycouncilhastheauthoritytoexpressassignmentsindebt service funds. Capital Projects Funds 1.Restricted 2.Committed 3.Assigned Thecitycouncilhastheauthoritytoexpressassignmentsincapital project funds. Debt Administration 1.The city will limit long-term debt to capital improvements which cannot be financed from current revenues. Incurringlong-termdebtservestoobligatefuturetaxpayers.Excessrelianceonlong-termdebt cancausedebtlevelstoreachorexceedthegovernment'sabilitytopay.Therefore,conscientioususeof long-termdebtwillprovideassurancethatfutureresidentswillbeabletoservicethedebtobligationsleft byformerresidents. 2.The city will repay borrowed funds, used for capital projects, within a period not to exceed the expected useful life of the project. Thispolicyreflectstheviewthatthoseresidentswhobenefitfromaprojectshouldpayforthe project.Adherencetothispolicywillalsohelppreventthegovernmentfromover-extendingitselfwith regardtotheincurrenceoffuturedebt. 37 3.Thecitywillnotuselong-termdebtforfinancingcurrentoperations. Thispolicyreflectstheviewthatthoseresidentswhobenefitfromaserviceshouldpayforthe service.Utilizationoflong-termdebttosupportcurrentoperationswouldresultinfutureresidents supportingservicesprovidedtocurrentresidents. 4.ThecityofMonticellowilladheretoapolicyoffullpublicdisclosurewithregardtotheissuanceof debt. Fullpublicdisclosurewithregardtotheissuanceofdebtprovidesassurancethattheincurrenceof debt, for which the public is responsible, is based upon a genuine need and is consistent with underwriter guidelines. Reserves and Fund Balances 1.ReservesandFundBalanceswillbeproperlydesignatedintothefollowingcategories: •Nonspendable fundbalance--Amountsthatare notinaspendable form (suchas inventory)orare requiredtobemaintainedintact(suchasthecorpusofan endowmentfund). •Restricted fund balance -- Amounts constrained to specific purposes by their providers (such as grantors, bondholders, and higher levels of government) through constitutional provisions or by enabling legislation. •Committed fund balance -- Amounts constrained to specific purposes by the city council; to be reported as committed, amounts cannot be used for any other purpose unless the city council takes action to remove or change the constraint. •Assigned fund balance -- Amounts the city intends to use for a specific purpose; intent can be expressed by the council or by an official (city administrator or finance director) or body to which the council delegates the authority. •Unassigned fund balance -- Amounts that are available for any purpose; these amounts are reported only in the General Fund or a deficit in other fund types. 2. Aminimumlevelofgeneralfundreserveequalto45%ofannualoperatingexpendituresornoless thanfivemonthsofoperatingexpenditureswillbemaintainedbythecity.Thisreserveiscommittedto beusedfor:cashflowpurposes,accruedemployeepayrollbenefitswhicharenotshownasaliability, unanticipatedequipmentacquisitionandreplacement,andtoenablethecitytomeetunexpected expendituredemandsorrevenueshortfalls. Propertytaxesrepresentthecity'sprimarysourceofgeneralfundrevenue.Propertytaxesare collectedinJuneandDecemberofeachfiscalyear.Sincethecity'sfiscalyearbeginsonJanuary1st,thecity mustmaintainanadequatecashbalanceinordertomeetitsexpenditureobligationsbetweensemi- annualcollectionsofpropertytaxes. Accrued employee payroll benefits, such as sick leave, vacation or paid-time off, represent a significant obligation of the city. The city will maintain sufficient reserves to meet its annual expenditure obligations. 38 Thecityrecognizestheneedtomaintainadequateequipmentinordertocarryoutrequiredpublic services.Equipmentacquisitionandreplacementrepresenton-goingcostsofarelativelyminornature,as comparedtomajorcapitalpurchases.ThecityplansforequipmentreplacementwithintheCapital ImprovementProgram.However,unforeseenequipmentproblemswillarise.Thereservewillprovide resourcesfortheimmediate,unanticipatedreplacementofcriticalequipment. Thecityissubjecttorevenueshortfallsandunexpectedexpendituredemandsduringthefiscalyear. Anunassignedgeneralfundreservewillbemaintainedtobeabletooffsettheserevenueshortfallsormeet unexpecteddemandsoccurringduringtheyear,withoutsuddenlyadjustingtaxratesorreducing expenditures. Financial Reporting & Accounting 1.ThecitywillmanageandaccountforitsfinancialactivityinaccordancewithGenerallyAccepted AccountingPrinciples(GAAP)assetforthbytheGovernmentalAccountingStandardsBoard(GASB). GASBisrecognizedastheauthoritywithrespecttogovernmentalaccounting.Managingthe city'sfinancesinaccordancewithGAAPandinaccordancewiththerulessetforthbyGASB,providesthe Monticellocitizensassurancethattheirpublicfundsarebeingaccountedforinapropermanner. 2.Thecitywillmaintainitsaccountingrecordsforgeneralgovernmentaloperationsonamodified accrualbasis,withrevenuesrecordedwhenavailableandmeasurable,andexpendituresrecordedwhen servicesorgoodsarereceivedandliabilitiesincurred.Accountingrecordsforproprietaryfundtypesand similartrustfundswillbemaintainedonanaccrualbasis,withallrevenuesrecordedwhenearnedand expensesrecordedatthetimeliabilitiesareincurred,withoutregardtoreceiptorpaymentofcash. Adherencetothispolicywillenablethecitytoprepareitsfinancialstatementsinaccordancewith GenerallyAcceptedAccountingPrinciplesassetforthbytheGovernmentalAccountingStandardsBoard. 3.ThecityofMonticellowillprepareaComprehensiveAnnualFinancialReport(CAFR)inconformity withGenerallyAcceptedAccountingPrinciples(GAAP).Thereportwillbemadeavailabletothegeneral public.TheCAFRshallbepreparedinaccordancewiththestandardsestablishedbytheGFOAforthe CertificateofAchievementforExcellenceinFinancialReportingProgram TheCertificateofAchievementrepresentsasignificantaccomplishmentforagovernmentandits financialleadership.Theprogramencouragesgovernmentstoprepareandpublishaneasilyreadableand understandablecomprehensiveannualfinancialreportcoveringallfundsandfinancialtransactionsofthe governmentduringtheyear.TheCAFRprovidesuserswithawidevarietyofinformationusefulin evaluatingthefinancialconditionofagovernment.Theprogramalsoencouragescontinuedimprovement inthecity'sfinancialreportingpractices. 4.The city will ensure the conduct of timely, effective, and annual audit coverage of all financial records in compliance the Local, State, and Federal law. Auditsofthecity'sfinancialrecordsprovidethepublicassurancethatitsfundsarebeingexpended inaccordancewithLocal,State,andFederallawandinaccordancewithGenerallyAcceptedAccounting 39 Principles.Auditsalsoprovidemanagementandthecitycouncilwithsuggestionsforimprovementinits financialoperationsfromindependentexpertsintheaccountingfield. 5.ThecityofMonticellowillmaintainapolicyoffullandopenpublicdisclosureofallfinancialactivity. Fullandopenpublicdisclosureofallfinancialactivityprovidesthepublicwithassurancethatits electedofficialsandadministratorscommunicatefullyallfinancialmattersaffectingthepublic. 6.Themodifiedaccrualbasisofaccountingandbudgetingisusedforthegovernmentalfunds.Under themodifiedaccrualbasisofaccounting,revenuesarerecordedwhensusceptibletoaccrual,i.e.,both measurableandavailable.Availablemeanscollectiblewithinthecurrentperiodorsoonenough thereaftertobeusedtopayliabilitiesofthecurrentperiod.Expendituresarerecordedwhentherelated liabilityisincurred.Employeecompensatedabsencesandprincipalandinterestonlong-termdebt expendituresarerecordedwhendueinthecurrentperiod.Theaccrualbasisofaccountingisusedfor ProprietaryFunds.Underthismethod,revenuesarerecordedwhenearnedandexpensesarerecorded whentherelatedliabilityisincurred.Forbudgetpreparationandpresentation,theproprietaryfunds’ expensesareconvertedtoexpendituresandfollowthesamebudgetformatasthegovernmentfund types.Capitaloutlaysintheenterprisefundsarepresentedasexpensesforbudgetbasis,butare recordedasassetsalongwithassociateddepreciationexpenseontheGAAPbasis.Debtserviceprincipal paymentsintheenterprisefundsareaccountedforasexpensesforbudgetpurposes,butarereportedas reductionoflong-termdebtliabilityontheGAAPbasis. Recording capital outlays and principal payments on long-term debt as expenditures for budget purposes, presents a clearer picture of the city’s financial operations, is easier to administer for cash flow purposes, and is easier for the lay person to understand. Cash Management & Investment POLICY STATEMENT The investment program shall be operated in conformance with the city charter, state law, and local ordinances and resolutions. SCOPE The policy shall apply to the investment of all general and special funds of the city of Monticello over which it exercises financial control. Proceeds from certain bond issues, as well as separate foundation assets, may be covered by a separate policy. POOLING OF FUNDS Except for cash in certain restricted and special funds, the city will consolidate cash and reserve balances from all funds to maximize investment earnings and to increase efficiencies with regard to investment pricing, safekeeping and administration. Investment income will be allocated to the various funds based on their respective participation and in accordance with generally accepted accounting principles. Pooling also maximizes the amount of funds available for investment. 40 OBJECTIVES In order of priority, the primary objectives of investment activities shall be safety, liquidity and yield. a.Safety Safety of principal is the foremost objective of the investment program. Investments shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio. The objective will be to mitigate credit risk and interest rate risk. 1.Credit Risk The city will minimize credit risk, which is the risk of loss due to the failure of the security issuer or backer, by 1) limiting investments to certain types of securities (government agencies, certificates of deposits, and collateralized investment contracts), and 2) diversifying the investment portfolio so that the impact of potential losses from any one type of security or from any individual issuer will be minimized. 2.Interest Rate Risk The city will minimize interest rate risk, which is the risk that the market value of portfolio will fall due to changes in market interest rates by 1) structuring the investment portfolio so that securities mature to meet cash requirements for ongoing operations, thereby avoiding the need to sell securities on the open market prior to maturity, and 2) investing operating funds primarily in shorter-term securities, money market mutual funds, or similar investment pools, thereby limiting the average maturity of the portfolio in accordance with this policy. b.Liquidity The investment portfolio shall remain sufficiently liquid to meet all operating requirements that may be reasonably anticipated. This is accomplished by structuring the portfolio so that securities mature concurrent with cash needs to meet anticipated demands (static liquidity). Furthermore, since all possible cash demands cannot be anticipated, the portfolio should consist largely of securities with active secondary or resale markets (dynamic liquidity). Alternatively, a portion of the portfolio may be placed in money market mutual funds or local government investment pools which offer same- day liquidity for short-term funds. c.Yield The investment portfolio shall be designed with the objective of attaining a market rate of return throughout budgetary and economic cycles, taking into account the investment risk constraints and liquidity needs. Return on investment is of secondary importance compared to the safety and liquidity needs. The core investments are limited to relatively low risk securities in anticipation of earning a fair return relative to the risk being assumed. Securities shall generally be held until maturity with the following exceptions: 1) a security with declining credit may be sold early to minimize the loss of principal, 2) a security swap that would improve the quality, yield, or target duration in the portfolio, and 3) liquidity needs of the portfolio require that the security be sold. PRUDENCE The standard of prudence to be used by investment officials shall be the "prudent person" standard and shall be applied in the context of managing an overall portfolio. Investment officers acting in accordance with written procedures and this investment policy and exercising due diligence shall be 41 relieved of personal responsibility for an individual security's credit risk or market price changes, provided deviations from expectations are reported in a timely fashion and the liquidity and the sale of securities are carried out in accordance with the terms of this policy. The "prudent person" standard states that, "investments shall be made with judgment and care, under circumstances then prevailing, which persons of prudence, discretion and intelligence exercise in the management of their own affairs, not for speculation, but for investment, considering the probable safety of their capital as well as the probable income to be derived." Pursuant to state statute, the city is required to secure annually a completed “Notification to Broker and Certification by Broker” form. This form states that investments must meet state requirements and city policy restrictions. ELIGIBLE INVESTMENTS a.Deposits In accordance with Minnesota Statutes, the city maintains deposits at those depository banks authorized by the city council, all of which are members of the Federal Reserve System. Minnesota Statutes require that all city deposits be protected by insurance, surety bond, or collateral. The market value of the collateral must be a minimum of 110% of the deposits not covered by insurance, bonds, or irrevocable standby letters of credit (140% in the case of mortgage backed collateral). Authorized collateral includes the legal investments eligible investments (below), as well as certain first mortgage notes, and certain other state or local government obligations. Minnesota Statutes require that securities pledged as collateral be held in safekeeping by the city clerk or in a financial institution other than that furnishing the collateral. b. Investments The city is authorized by Minnesota statutes to invest in the following: 1.Direct obligations or obligations guaranteed by the United States or its agencies, its instrumentalities, or organizations created by an act of congress, excluding mortgage backed securities defined as high risk. 2. Shares of investment companies registered under the Federal Investment Company Act of 1940 and whose only investments are in securities described in (a) above, general obligation tax-exempt securities, or repurchase or reverse repurchase agreements. 3. General obligations of the state of Minnesota or any of its municipalities (“A” rating for G.O, or “AA” for revenue bonds). 4. Bankers acceptance of United States banks eligible for purchase by the Federal Reserve System. 5. Commercial paper issued by United States corporations or their Canadian subsidiaries, rated of the highest quality by two nationally recognized rating agencies, and maturing in 270 days or less. 42 6. Repurchase or reserve repurchase agreements with banks that are members of the Federal Reserve System with capitalization exceeding $10,000,000, a primary reporting dealer in U.S. government securities to the Federal Reserve Bank of New York, or certain Minnesota securities broker dealers. 7. Future contracts sold under authority of Minnesota Statutes 471.56, Subd. 5. 8. General obligation debt of the Minnesota Housing Finance Agency (MHFA) rated “A” or better. 9. Obligations of an independent school district (ISD) with an original maturity not exceeding 13 months and rated in the highest category by national rating agencies or enrolled in a credit enhancement program. ETHICS AND CONFLICTS OF INTEREST Officers and employees involved in the investment process shall refrain from personal business activity that could conflict with the proper execution and management of the investment program, or that could impair their ability to make impartial decisions. Employees and investment officials shall disclose any material interests in financial institutions with which they conduct business. They shall further disclose any personal financial/investment positions that could be related to the performance of the investment portfolio. Employees and officers shall refrain from undertaking personal investment transactions with the same individual with whom business is conducted on behalf of the city. POLICY REVISIONS The cash management and investment policy will be reviewed periodically by the city administrator, city clerk and finance director and may be amended by city council action as conditions warrant. 43 FINANCIAL STRUCTURE To better understand this budget document, a basic understanding of the structure, often-used terms, and fund types is helpful. The city’s operating expenditures are organized in to the following hierarchical categories: fund department, activity, and budget units. Fund:Funds (specific or general purpose) represents the highest level of summarization used in the city’s financial structure. This level is primarily used for entity-wide financial reporting and for summarization in this budget document. Department: Department is the second level of summarization used in the city’s financial structure. The function classification represents a grouping of related operations and programs aimed at accomplishing a broad goal or providing a major service. Departments (Functions) General Government PublicSafety PublicWorks RecreationandCulture Other Activity:Departmentscanbefurthersplitintodivisionswhichareusuallyassociatedwithfunctioningwork groupsthathavemorelimitedsetsofworkresponsibilities.Theirprimarypurposeisorganizationaland budgetaryaccountability. Budget Unit: Activities may be further subdivided into budget units. A budget unit is used to account for a specific service performed within an activity in the pursuit of individual goals and objectives. A budget unit is aimed at accomplishing a specific service or regulatory program for which a government is responsible. GOVERNMENTAL FUND TYPES General Fund:The general fund is used to account for all financial resources of the city, except for those required to be accounted for in another fund. The general fund supports such basic services as the legislative branch, judicial branch, general administration, police, fire, finance, streets, engineering, recreation, and library services. RevenueSources:Thecity'sGeneralFundisfinancedprimarilybypropertytaxeswhichprovideover 80% of the general fund revenue. Other revenue sources include: licenses and permits, intergovernmental revenue, charges for services, fines and forfeitures, interest on investments, operating transfers, and miscellaneousrevenues. 44 Special Revenue Funds:Special revenue funds are used to account for the proceeds of specific revenue sources (other than special assessments, expendable trusts, or for major capital projects) that are legally restricted or committed to expenditure for specific purposes. Special revenue funds support economic developmentprograms,designateduserfee basedcommunityactivities,insurance costs,retirementcosts, planningfunctions,andotherserviceslegallyrestrictedforspecificpurposes. Revenue Sources: Special revenue funds are supported either through property taxes or through grants or other restricted revenue sources. An example of a special revenue fund supported by property taxes includes the Monticello Community Center. An examples of a special revenue fund supported by grantsorotherrestrictedrevenuesourcesincludetheEconomicDevelopmentAuthorityFund. DebtServiceFunds:Debtservicefundsare usedtoaccountforthe accumulationofresourcesfor,andthe paymentof,generallong-termdebtprincipalandinterest.Debtservicefundsprovidefinancingforavariety ofthecity'sgeneralobligationimprovementandrevenuebonds. Revenue Sources: Debt service funds are supported with special assessments, access and utility fund transfers, propertytaxes,andinterestoninvestments. Capital Project Funds:Capital project funds are used to account for financial resources to be used for the acquisitionorconstructionofmajorcapitalfacilities(otherthanthosefinancedbyproprietaryfunds). Revenue Sources: Capital project funds are supported by long-term debt proceeds, special assessments, donations, state and federal grants, operating transfers from other funds, and impact fees. PROPRIETARY FUND TYPES Enterprise Funds:Enterprise funds are used to account for operations that are financed and operated in a manner similar to private business enterprises--where the intent of the governing body is that the costs (expenses,includingdepreciation)ofprovidinggoodsorservicestothegeneralpubliconacontinuingbasis be financed or recovered primarily through user charges. Enterprise funds account for the city's water, sewage,liquorstore,DMV,andfiberopticsservices. Revenue Sources: Enterprise funds are supported through user charges, sale of goods, penalties, and interest income. InternalServiceFunds:Internalservicefundsareusedtoaccountforthefinancingofgoodsorservices provided by one department to other departments on a cost-reimbursement basis. Internal service funds will account for the city's capital equipment internal leasing program and IT Service. These funds were authorized for implementation in 2013. Revenue Sources: Internalservicefunds are supportedthroughcharges tootherbudgetunits based on lease payments or level of provided services. 45 FUND BALANCESINEACHFUND TYPE In governmental funds, fund balance is typically defined as current assets less current liabilities. Unlike governmentalfunds,enterprisefundsfocusonthedeterminationofoperatingincome,changesinnetposition (or cost recovery), financial position, and cash flows. Enterprise funds use an accrual basis of accounting for financial reporting purposes. A modified accrual basis will be used for budgeting purposes in this report. Consequently,thebottomlineforeachenterprisefundislabeledfundbalanceratherthannetposition,which includescapitalassets,long-termdebtandothernoncurrentitems.Fundbalanceinenterprisefundsisroughly thesameasworkingcapital. USEFULTERMS To better assist readers in understanding the budget document, a basic knowledge of the following terms is useful: A FUND isafiscalandaccountingentitywithaself-balancingsetofaccountsrecordingcashandother financialresources,togetherwithallrelatedliabilitiesandresidualequitiesorbalances,andchanges therein.Fundsaresegregatedforthepurposeofcarryingonspecificactivitiesorattainingcertain objectivesinaccordancewithspecialregulations,restrictions,orlimitations.Fundsinthegovernment modelareclassifiedintothreebroadcategories:governmental,proprietary,andfiduciary. The most common reason for establishing a fund is to separately account for restricted-use revenue or to comply with state or federal law. A DEPARTMENT is an organizational or budgetary breakdown which is found within city funds. Each department serves a specific function as a distinct organizational unit of government within the given fund. Its primary purpose is to facilitate organizational and budgetary accountability. An OBJECT OF EXPENDITURE refers to specific, detailed expenditure classification. It relates to a specific typeofitempurchasedorserviceobtained.Examplesofobjectsofexpenditureincludesalaries,supplies, contractedservice,travel,etc. Thecity’sfinancialoperationsandfundstructureconformwithGenerallyAcceptedAccountingPrinciples (GAAP).Thefundsaregroupedbyfundtype(General,SpecialRevenue,DebtService,CapitalProjects, Enterprise,andInternalService).Allofthecity’sfundsarebudgeted. A CAPITALEXPENDITURE occurswhenacapitalassetispurchased.CAPITALASSETS areusedinoperations andhaveinitialusefullivesextendingbeyondasinglereportingperiod.Theseassetsmustalsomeet capitalizationthresholds,whichvarybyassetclassificationandtypicallycostsmorethan$10,000.Land, improvementstoland,vehicles,machinery,equipment,infrastructureandothertangibleandintangible assetsusedinoperationsareexamplesofcapitalassets.Expendituresthatdonotbenefitmorethanone reportingperiodormeetthecapitalizationthresholdsareclassifieda CURRENTEXPENDITURE. 46 MATRIX OF FUNDS AND BUDGET UNITS Allcapitalprojectfundswerecombinedforthis presentation.Parkoperationsis responsible forthe CemeteryFund,whichisnotincludedintheMatrix.Principalandinterestpaymentsondebtoccurin theDebtServiceFund(comprisedofsubfunds),SewageFund,andCentralEquipmentFund. Community Capital Park &Liquor Deputy Water &Fiber IT Central Benefit EXPENDITURES General Center EDA Projects Pathway Store Registrar Sewage Optics Services Equipment Accrual GENERAL GOVERNMENT Mayor and Council ●●● City Administration ●●●●● City Clerk ●●● Finance ●●●●●●●● Audit ● City Assessing ● Legal ● Human Resources ●●● Planning & Zoning ●●●●● City Hall ●●● Prairie Center Building ●● Economic Development ●●● PUBLIC SAFETY Law Enforcement ● Fire & Rescue ●●●● Fire Relief ● Building Inspections ●●● Civil Defense ●●● Animal Control ● National Guard ● PUBLIC WORKS PW Administration ●●●● Engineering ●●●●● PW Inspecitons ●●●● Streets & Alleys ●●●● Ice & Snow ●● Shop & Garage ●●●● Stormwater ●●● Street Lighting ●●● Refuse Collection ● Water Utility ●● Sewage Utility ●● TRANSIT Bus ● RECREATION AND CULTURE Senior Center ● Park Operations ●●●●● Park Improvements ●● Park Ballfields ●● Shade Tree ●● Library ● Fiber Optics ●● Community Center ●● OTHER FINANCING USES ●●●●●● FUND 47 OPERATING FUND CROSSWALK OperatingFundCrosswalk Thismatrixshowstherelationshipbetweenfunctionalunitsandfunds.Forexample,thePublic Works DepartmenthassomeauthorizedappropriationsintheGeneralFund,fivecapitalprojectfundsandtwo enterprisefunds.Public Worksisalso responsibleforthecity’sparks. The city contracts with Wright County for law enforcement services and maintains a volunteer Fire Department. Administration and Finance provide staff support for both functions. Community Development provides staff for building inspections. Public Community Community Operating Fund Administration Finance Works Center Development General Fund x x x x Special Revenue Funds Economic Development x x Cemetery x Minnesota Investment x Monticello Community Center x Debt Service Funds x Capital Project Funds Capital Project x x x x Closed Bond Fund x Park & Pathway Dedication x x Stormwater Access x Street Lighting Improvement x Street Construction x Enterprise Funds Water x Sewage x Liquor x Deputy Registrar x Fiber Optics x Internal Service Funds IT Services x Central Equipment x Benefit Accrual x Administration of Fund 48 THE BUDGET PROCESS ThecityofMonticellobudgetservesseveralpurposes. •For the citizens of the city of Monticello, it presents a picture of the city government operations and intentions for the year. •Forthe citycouncil,itservesasapolicytoolandasanexpressionofgoalsandobjectives. •For citymanagement,itis usedasanoperatingguideandacontrolmechanism. The city'sbudgetencompassesboththeoperatingbudgetandthe capitalimprovementbudget.Each budget unit includes amounts appropriated for both operating expenses and capital items. Accompanying narrative for each budget unit/find briefly explains the items included in the budget. BASISOFBUDGETING Thecity’saccountsareorganizedonthebasisoffunds,eachofwhichisconsideredaseparateentity.The operationsofeachfundareaccountedforwithaseparatesetofself-balancingaccountsthatcompriseits assets,deferredinflow/outflows,liabilities,fundequity,revenuesandexpenditures/expenses. Governmentalfunds(theGeneralFundandspecialrevenue,debtservice,andcapitalprojectfunds)use themodifiedaccrualbasisforbudgetingandaccounting.Revenuesarerecognizedintheaccountingperiod inwhichtheybecomeavailableandmeasurable.Expendituresarerecognizedwhenliabilitiesareincurred. Proprietaryfunds(EnterpriseandInternalServicefunds)usethemodifiedaccrualbasisforbudgetingand theaccrualbasisforaccounting. Forexample,accrualbasisaccountingdifferswiththemodifiedaccrual basisbyrecordingexpensesfordepreciationandcompensatedabsencesbutnotdebtprincipalpayments. Eachproprietaryfund’sfinancialstatements,locatedinthecity’sComprehensiveAnnualFinancialReport (CAFR),arereportedonthefullaccrualbasis.Intheaccrualbasisofaccounting,revenuesarerecognizedin theaccountingperiodinwhichtheyareearned.Expensesarerecognizedintheaccountingperiodinwhich theyareincurred. BUDGET DEVELOPMENT PROCESS AftersubmittingtheCityAdministrator-FinanceDirectorRecommendedBudgetto thecitycouncil,public work sessions are held by the councilors. At this time the city administrator, finance director, and departmentheadsexplainthebudgetrecommendationsandunderlyingjustificationfortherequests.The councilalsoreviewsdepartmentalrequestswhichcouldnotbefunded,as anindicationofun-metneeds. During or following the work sessions, the councilors may make adjustments to the proposed budget. Followinganyadjustmentsto therecommendedbudget,atentativeappropriationresolutionis prepared and a public hearing is held. The Council may again make adjustments to the budget following the public hearing,afterwhichtime,theCouncilpassestheappropriationresolutioninfinalform. Appropriationsareestablishedbybudgetunit.Theaccountingsystem,budgetingsystem,andthebudget document itself, however, break these classes into subclasses--thereby providing more detailed information.Asanexample,operatingsupplies,gasandoil,andsubscriptionsareallclassifiedasoperating expenses. The accounting and budgeting systems provide detail for these specific sub-classes. However, appropriationcontrolisexercisedonlyatthebudgetunitlevel. 49 BUDGET CALENDAR/PROCEDURES The following budget timeline outlines the process the city customarily follows for creation and adoption of the annual budget. Date Activity June16, 2016 2017-2021 capitalequipment/projects (CIP) worksheets and budget worksheets to departmentheads. July 8, 2016 2017-2021 CIP and budgetworksheets dueto financedepartment July 11, 2016 Workshop with city counciland staff to set2017 goals and priorities. July, 2016 Departmentheads meetwith various advisory boards and commissions for inputinto 2017 preliminary budgetand CIP. July, 2016 Departmentheads meetwith city administrator, and financestaff to develop 2017 preliminary budgetand CIP. July 25, 2016 Workshop with city councilworkshop to review draftdepartmentbudgets and set2017 goals and priorities. Middleof August, 2016 Financedepartmentdevelops revenueestimates and 2017 preliminary property tax levy. August22, 2016 Councilworkshop to review various departments’ goals, budgets, and CIP continued. September 12, 2016 Budgetworkshop with city counciland staff. September 12, 2016 Counciladopts 2017 preliminary HRA and city property tax levy. (See September 26) September 26, 2016 Lastregular meeting for city councilto consider adopting the2017 preliminary city property taxlevy. September 30, 2016 2017 preliminary property taxlevy certified to WrightCounty auditor. October/November, 2016 Departmentheads meetwith city administrator and financestaff to develop 2017 proposed Budgetand finalproperty tax levy. December 12, 2016 Counciladopts 2017 budgetand property taxlevy. December 28, 2016 City certifies final2017 property taxlevy to WrightCounty auditor. January 1, 2017 2017 fiscalyear begins. 50 WORKLOAD/PERFORMANCEBUDGETING Beginning with the fiscal year 2010 budget, the city of Monticello started the development of a workload/performance budget. The move to this type of budgeting resulted in a shift in emphasis away from describing what will be purchased (inputs) towards describing what will be accomplished (outputs and outcomes). While this budgeting process faces numerous structural and cultural hurdles, this work-in-progress continues today with both an organization-wide and budget-unit specific focus on outcomes. PRESENTATION Thetextofthebudgetdocumentcustomarilycontainssixsectionsofinformationforeachactivity. Someactivitiesalsoincludehighlightsoraccomplishmentsfortheprioryearand/orthecomingyear. •The first section provides a description of the activity. •The second section describes its major objectives to be accomplished. •The third section identifies issues/challenges the activity/division faces. •The fourth section lists the workload/performance indicators for the division. •The fifth section provides budget commentary. •The sixth section provides detailed financial information. Thefinancialinformationincludesexpenditureinformationforthelastcompletedfiscalyear,the appropriatedamountsforthecurrentyear,andtherecommendedamountscoveredbythebudget. Costsaresegregatedintosixbasicclassifications:personnelservices(wage&benefits);supplyexpenses; otherservicesandcharges;capitaloutlay;debtservice;andoperatingtransfers.Appropriationcontrolis exercisedonlyattheactivityunitlevelandnotattheindividualobjectofexpenditurelevel. The narrative information is presented together with the financial detail to assist readers in understanding the planned outcomes for each activity/division, the purpose of each budget unit, and major changes or expenditures for the coming year. MONITORING AND REPORTING PROCESS As the budget year proceeds, individual departments and the finance department have dual responsibility formonitoringthestatusofeachbudgetunit.Departmentstaffhasprimaryresponsibilityformonitoringthe statusofexpendituresagainsttheirbudget.ThisresponsibilityincludesinformingtheFinanceDepartmentof anysignificantdeparturesfromtheplansanticipatedinthebudget. The finance department has overall responsibility for monitoring the status of all departments and funds. This is accomplished primarily through analysis of computerized budget performance reports which compare appropriationamounts onaline-item basis withactualexpenditures throughoutthe year.These reports aid department staff in controlling costs and act as an early warning system for the finance department. Department staff may exercise their judgment in exceeding expenditures by object code, as longastheydonotexceedthetotalamountappropriatedforthebudgetunit. The Finance Department reviews the budget reports on a monthly basis and discusses any variances from expected performance with the department staff. The finance department conducts in-depth quarterly budget reviews of all expenditures and revenues. 51 Significantchangesineitherexpendituresorrevenuesrequireabudgetrevision.Recommendationsarealso madebythefinancedirectorforanycorrectiveactionsthatarebelievednecessary. BUDGET AMENDMENT PROCESS State statute provides a number of different ways to amend the budget. The first involves a reallocationof existingappropriationsamongthelineitemswithinaspecificfund. Theseconddefinesaseriesofscenarios where the governing body has authority to amend the budget without a hearing for donations, land sales, and fee based budgets. All other increases in appropriation authority that are not specifically permitted by statutemustbeapprovedthroughapublicprocess. Thefinancedirectorisresponsibleforinsuringcompliancewithspendinglimitationsimposedbythebudget. Accordingly,thefinancedirectorsubmitsaBudgetStatusReporttothecitycouncilafterthree,six,nine,and twelve month periods. The budget reviews evaluate overall revenues and expenditures in comparison to thebudgetedamounts.Incaseswhereitappearstheoriginalspendingauthorityauthorizedwillnotprove sufficient, transfers of spending authority or additional spending authority are requested together with explanationsfortherequests.Thepublicapprovalprocessforbudgetamendmentsisheldifnecessary. 52 ORGANIZATION CHART CITY OF MONTICELLO Citizens of ORGANIZATIONAL CHART Monticello City Commissions Council & Boards City Administrator Human Finance Community City Public Community Deputy Fire Contracted Resource Director Development Engineer Works Center City Chief Services Director Director Director Director Clerk Finance Economic Construction Streets Community Elections Fire City Department Development Inspectors Department Center Department Attorney Data Building Consulting Parks Sheriffs Processing Inspections Engineer Department Department Audit Receptionist Utilities Animal Department Control Department Consulting Refuse County of Motor Planner Collection Assessor Vehicles Liquor FiberNet Operations Operation 53 ALL FUNDS SUMMARY BY FUND TYPE Special Debt Capital Internal 2017 General Revenue Service Project Enterprise Service Total Fund Funds Funds Funds Funds Funds Budget Fund Balance/Working Capital - Jan. 1 5,021,796$8,513,424$3,640,213$7,700,482$7,833,632$855,375$33,564,922$ Revenues and Other Sources Property Taxes 6,291,000$652,000$2,437,000$50,000$-$-$9,430,000$ Tax Increments -653,564 ----653,564 Franchise & Other Taxes 283,900 --116,000 --399,900 Sale of Goods ----5,435,194 -5,435,194 Licenses & Permits 379,400 ---200 -379,600 Intergovernmental Revenues 306,440 --250,000 --556,440 Charges for Services 320,470 1,496,725 -50,000 5,414,861 502,066 7,784,122 Fines & Forfeits 42,300 -----42,300 Special Assessments 300 -480,466 65,900 30,000 -576,666 Miscellaneous 178,190 162,250 215,900 57,000 165,297 8,153 786,790 Contributed Capital ----140,450 -140,450 Operating Transfers In --599,362 -230,000 -829,362 Debt Proceeds ---5,000,000 700,000 -5,700,000 Total Revenues and Other Sources 7,802,000$2,964,539$3,732,728$5,588,900$12,116,002$510,219$32,714,388$ Expenditures and Other Uses Personnel Services 3,096,654 1,223,132 --1,555,441 -5,875,227 Supplies 730,225 198,635 --4,414,130 32,200 5,375,190 Other Services & Charges 3,935,121 800,904 --3,422,406 256,780 8,415,211 Capital Outlay 40,000 276,919 -7,163,000 1,760,900 386,000 9,626,819 Debt Service --4,396,961 -373,574 135,050 4,905,585 Operating Transfers Out -200,000 -314,069 315,293 -829,362 Total Expenditures and Other Uses 7,802,000 2,699,590 4,396,961 7,477,069 11,841,744 810,030 35,027,394 Net Change in Fund Balance/Working Capital -$264,949$(664,233)$(1,888,169)$274,258$(299,811)$(2,313,006)$ Fund Balance/Working Capital - Dec. 31 5,021,796$8,778,373$2,975,980$5,812,313$8,107,890$555,564$31,251,916$ All FUNDS SUMMARY - BY FUND TYPE Annually, the city adopts a balanced budget for the General Fund and the Monticello Community Center Fund (special revenue fund). A budget is balanced when revenues and other sources equals (or exceeds) expenditures and other uses. In the other funds, fund balances/working capital increase or decrease with surpluses or deficits, respectively. Capital Project Funds commonly accumulate resources in one budget period and expend those resources over multiple budget periods. Prior year debt proceeds will be used to finish a project in 2017. Early redemption of a debt issue will lead to a significant decline in fund balance for the Debt Service Fund. Multiple debt service sub-funds are aggregated into one debt service fund for reporting purposes. Internal service funds provide services to other funds and typically function on a cost recovery basis. The city has three: IT Services Fund, Central Equipment Fund, and Benefit Accrual Fund. The Central Equipment Fund equipment purchases will exceed lease revenue in 2017. The Benefit Accrual Fund is the only one of the three that will not be used for capital asset acquisitons. 54 ALL FUNDS SUMMARY - BY YEAR TOTAL ALL FUNDS 2013 2014 2015 2016 2016 2017 % REVENUES ACTUAL ACTUAL ACTUAL BUDGET PROJECTED BUDGET CHANGE Property Taxes 7,961,030$8,386,953$8,619,812$9,205,000$9,205,000$9,430,000$2.4% Tax Increments 991,339 836,750 727,617 675,994 653,564 653,564 -3.3% Franchise & Other Taxes 327,667 334,726 352,073 363,900 399,900 399,900 9.9% Sale of Goods 5,085,925 5,165,737 5,489,430 5,367,710 5,367,710 5,435,194 1.3% Licenses & Permits 333,056 381,544 465,469 342,600 377,600 379,600 10.8% Intergovernmental Revenues 1,283,769 733,566 1,413,360 1,348,177 1,511,177 556,440 -58.7% Charges for Services 7,234,947 7,312,509 7,873,890 7,475,425 7,557,000 7,784,122 4.1% Fines & Forfeits 41,124 48,744 42,474 42,100 42,100 42,300 0.5% Special Assessments 2,110,283 1,953,370 3,331,901 818,525 644,625 576,666 -29.5% Miscellaneous 938,729 1,831,290 1,130,061 848,833 846,183 786,790 -7.3% Contributed Capital -966,494 1,435,870 140,450 840,450 140,450 0.0% Operating Transfers 7,159,545 11,298,117 4,937,975 4,125,134 2,734,136 829,362 -79.9% Debt Proceeds 3,503,224 6,467,106 2,651,898 7,000,000 7,000,000 5,700,000 -18.6% TOTAL REVENUES 36,970,638$45,716,906$38,471,830$37,753,848$37,179,445$32,714,388$-13.3% EXPENDITURES Personnel Services 5,196,072$5,150,066$5,476,611$6,236,107$6,236,107$5,875,227$-5.8% Supplies 4,926,625 4,963,314 5,026,226 5,283,064 5,283,064 5,375,190 1.7% Other Services & Charges 7,223,024 8,305,180 7,740,494 7,977,852 8,074,141 8,415,211 5.5% Capital Outlay 6,144,229 3,364,566 4,113,998 13,725,920 11,499,105 9,626,819 -29.9% Debt Service 17,900,483 12,075,241 6,032,959 5,732,942 7,013,030 4,905,585 -14.4% Operating Transfers 9,302,323 11,298,117 4,937,975 4,125,134 2,734,136 829,362 -79.9% TOTAL EXPENDITURES 50,692,756$45,156,484$33,328,263$43,081,019$40,839,583$35,027,394$-18.7% FUND BALANCE - JANUARY 1 45,243,189$31,521,071$32,081,493$37,225,060$37,225,060$33,564,922$ Excess (Deficiency) of Revenues over Expenditures (13,722,118)560,422 5,143,567 (5,327,171)(3,660,138)(2,313,006) FUND BALANCE - DECEMBER 31 31,521,071$32,081,493$37,225,060$31,897,889$33,564,922$31,251,916$ Intergovernmental revenues are projected to decrease in 2017 as the city receives less state/federal aid for street and sewage treatment plant projects. License and permits are anticipated to increase with construction activity. Special assessments will decline because of 2015 prepayments and normal amortization. Operating transfers are lower in 2017 because debt service need less funding from other funds. Funding multiple projects, one debt issuance is planned for 2017. Personal services decrease because FiberNet operations were outsourced in July 2016. A 3% wage and health benefit increase is budgeted for 2017. Capital expenditures (outlay) decline in 2017 with the completion of the 2016 Core Street Project. Lower spending for Sewage Fund treatment plant upgrades also contributed to the decrease. Capital expenditures reflect disbursements for acquisition or replacement of assets with long-lives (benefit two or more accounting periods) and usually have significant price tags. In contrast, current expenditures only benefit the current or next accounting period and usually have smaller price tags. Capital expenditures can be recurring or non-recurring in nature. The wastewater treatment plant upgrade would be an example of non-recurring capital expenditure. On the other hand, the city budgets annually $200,000-$500,000 to replace or repair streets. This would be an example of a recurring capital expenditure. Recurring capital expenditures usually have a pay-as-you-go funding source (enterprise funds) and non-recurring capital expenditures typically include debt as a funding component. 55 CHANGES IN FUND BALANCE/WORKING CAPITAL Projected Beginning Projected Ending Fund Balance/Estimated Fund Balance/ Working Capital Revenues Appropriations Working Capital General Fund 5,021,796$7,802,000$7,802,000$5,021,796$ Special Revenue Funds Economic Development 6,704,921 1,050,814 805,865 6,949,870 Cemetery 33,651 27,325 27,325 33,651 Minnesota Investment 1,145,404 20,000 -1,165,404 Monticello Community Center 629,448 1,866,400 1,866,400 629,448 Total Special Revenue Funds 8,513,424 2,964,539 2,699,590 8,778,373 Debt Service Funds 2007A G.O. Improvement Bond 3,793 714,088 536,000 181,881 2008B G.O. Sewer Refunding 1,051,562 505,000 1,521,832 34,730 2010A G.O. Improvement Bond 1,015,837 219,005 305,117 929,725 2011A G.O. Refunding Bond 1,470,836 979,418 784,150 1,666,104 2014A G.O. Judgment Bonds 36,988 537,929 511,862 63,055 2015B G.O. Street/Improvement 61,197 222,288 208,000 75,485 2016A G.O. Street/Improvement -555,000 530,000 25,000 Total Debt Service Funds 3,640,213 3,732,728 4,396,961 2,975,980 Capital Project Funds Capital Project 3,466,818 5,336,000 6,800,000 2,002,818 Closed Bond Fund 54,527 70,900 -125,427 Park & Pathway Dedication 648,660 2,000 288,000 362,660 Stormwater Access 1,003,482 65,000 268,376 800,106 Street Lighting Improvement 771,660 90,000 75,000 786,660 Street Construction 1,755,335 25,000 45,693 1,734,642 Total Capital Project Funds 7,700,482 5,588,900 7,477,069 5,812,313 Enterprise Funds Water 3,877,184 1,283,499 1,246,254 3,914,429 Sewage 2,150,145 2,918,342 3,045,242 2,023,245 Liquor 1,151,487 5,440,194 5,208,603 1,383,078 Deputy Registrar 649,671 476,100 383,936 741,835 Fiber Optics 5,145 1,997,867 1,957,709 45,303 Total Enterprise Funds 7,833,632 12,116,002 11,841,744 8,107,890 Internal Service Funds IT Services 119,501 274,519 298,980 95,040 Central Equipment 500,141 215,700 511,050 204,791 Benefit Accrual 235,733 20,000 -255,733 Total Internal Service Funds 855,375 510,219 810,030 555,564 Total All Funds 33,564,922$32,714,388$35,027,394$31,251,916$ Fiscal Year 2017 CHANGES IN FUND BALANCE/WORKING CAPITAL The fund balances/working capital for the city’s major operating funds are expected to remain stable with balanced (revenues equal expenditures) or nearly-balanced budgets. However, draws on reserves for debt amortization and early redemptions in various debt service sub-funds and completion of a debt- funded project in the Capital Project Fund will decrease fund balances. 56 FUND BALANCE HISTORY Amended Adopted Actual Actual Actual Budget Projected Budget 2013 2014 2015 2016 2016 2017 General Fund 3,914,563$4,331,058$4,986,796$4,986,796$5,021,796$5,021,796$ Special Revenue Funds Economic Development 7,115,305 6,911,667 6,512,174 6,670,975 6,704,921 6,949,870 Cemetery 15,709 32,047 33,651 33,651 33,651 33,651 Minnesota Investment 1,051,218 1,104,689 1,120,404 1,145,404 1,145,404 1,165,404 Monticello Community Center 271,204 440,828 629,448 629,448 629,448 629,448 Total Special Revenue Funds 8,453,436 8,489,231 8,295,677 8,479,478 8,513,424 8,778,373 Debt Service Funds 2007A G.O. Improvement Bond 260,902 548,982 470,615 367,097 3,793 181,881 2008A G.O. Revenue (Closed)(1,403)1,631 ---- 2008B G.O. Sewer Refunding 550,948 880,308 1,429,004 1,224,750 1,051,562 34,730 2010A G.O. Improvement Bond 619,760 586,511 646,252 685,335 1,015,837 929,725 2011A G.O. Refunding Bond (2005A)1,317,306 1,730,084 2,825,758 2,157,332 1,470,836 1,666,104 2014A G.O. Judgment Bonds -169,152 7,350 36,988 36,988 63,055 2015B G.O. Street/Improvement --665 61,197 61,197 75,485 2016A G.O. Street/Improvement -----25,000 Total Debt Service Funds 2,747,513 3,916,668 5,379,644 4,532,699 3,640,213 2,975,980 Capital Project Funds Capital Project 303,583 89,766 2,722,818 2,392,818 3,466,818 2,002,818 Closed Bond Fund 1,373,823 1,018,764 882,307 988,027 54,527 125,427 Park & Pathway Dedication 973,433 738,333 1,236,660 415,660 648,660 362,660 Stormwater Access 1,122,181 873,721 1,174,049 1,244,049 1,003,482 800,106 Street Lighting Improvement 792,284 922,880 681,660 771,660 771,660 786,660 Street Construction 1,666,105 1,751,033 1,775,943 300,943 1,755,335 1,734,642 Total Capital Project Funds 6,231,409 5,394,497 8,473,437 6,113,157 7,700,482 5,812,313 Enterprise Funds Water 4,567,498 4,751,413 4,785,819 3,326,511 3,877,184 3,914,429 Sewage 3,767,385 3,142,903 2,641,553 2,001,145 2,150,145 2,023,245 Liquor 667,538 722,643 1,017,443 1,151,487 1,151,487 1,383,078 Deputy Registrar 174,102 333,114 544,987 574,671 649,671 741,835 Fiber Optics 77,057 29,962 508 5,145 5,145 45,303 Total Enterprise Funds 9,253,580 8,980,035 8,990,310 7,058,959 7,833,632 8,107,890 Internal Service Funds IT Services 21,962 58,814 119,347 119,501 119,501 95,040 Central Equipment 898,608 911,190 753,691 381,141 500,141 204,791 Benefit Accrual --226,158 226,158 235,733 255,733 Total Internal Service Funds 920,570 970,004 1,099,196 726,800 855,375 555,564 Total All Funds 31,521,071$32,081,493$37,225,060$31,897,889$33,564,922$31,251,916$ FUND BALANCE/WORKING CAPITAL HISTORY Fiscal Year Ended December 31, 57 BALANCED BUDGETS A BALANCEDBUDGET canbedefinedasasituationwheretotalrevenuesandotherfinancingsourcesis equalto(orgreaterthan)totalexpendituresandotheruses.Revenuesandotherfinancingsourcesincrease financialresources.Expendituresandotherusesdecreasefinancialresources.Operatingtransfersinand debtissueproceedsareconsideredotherfinancingsources.Operatingtransfersoutareconsideredother financinguses. Abalancedbudgetdoesnotdipintoreservesorfundbalances.However,anunbalancedbudget(deficit)is notnecessarilypoorfinancialmanagement.Forexample,debtservicefundsoftenaccumulateresourcesin theyearpriortoexpenditure.Further,debt-financedcapitalprojectsfrequentlystretchovermultipleyears. Thecityhasneveruseddebttofinancecurrentorongoingexpenditures. Itisthecity’spolicytoadoptbalancedbudgetsfortheGeneralFundandtheCommunityCenterFund. Indeed,bothfundsaresupportedbypropertytaxes.ExceptfortheFiberOpticsFund,ongoingrevenues exceedongoingexpendituresinallthecity’smainoperatingfunds. $(1,600) $(1,400) $(1,200) $(1,000) $(800) $(600) $(400) $(200)$-$200 $400 Benefit Accrual Central Equipment IT Services Fiber Optics DeputyRegistrar Liquor Sewage Water Street Construction Street LightingImprovement Stormwater Access Park &PathwayDedication Closed Bond Fund Capital Project 2015B G.O.Street/Improvement 2014A G.O.Judgment Bonds 2011A G.O.Refunding Bond 2010A G.O. Improvement Bond 2008B G.O.SewerRefunding 2007A G.O. Improvement Bond Monticello Community Center Minnesota Investment Cemetery EconomicDevelopment General Fund Thousands Change in Fund Balances/Working Capital 58 CAPITAL EXPENDITURES (Recurring vs Nonrecurring) A CAPITALEXPENDITURE occurswhenacapitalassetispurchased.Capitalassetsareusedinoperations andhaveinitialusefullivesextendingbeyondasinglereportingperiod.Theseassetsmustalsomeet capitalizationthresholds(seeAppendix),whichvarybyassetclassificationandtypicallycostsmorethan $10,000.Land,improvementstoland,vehicles,machinery,equipment,infrastructureandothertangible andintangibleassetsusedinoperationsareexamplesofcapitalassets. Capitalexpenditures(alsocalledcapitaloutlays)canbeclassifiedaseitherrecurringornon-recurring.Fleet equipmentreplacementisanexampleofrecurringcapitalexpendituresbyassetclass.Thecitybudgetsto replaceaportionofthefleeteveryyearonapay-as-you-gobasis.Thecityalsobudgetstoreplaceasmall fractionofitswaterandsewerinfrastructureonanannualbasis.Largeprojectsaddingtoorreplacing infrastructureareusuallynon-recurringinnature.Forexample,the2016corestreetreconstructionproject wasnon-recurringinnature.In2017,avarietyofprojectstotalabouthalfthe2016corestreetproject. However,therewerefourpriorreconstructionprojectsspreadover15years.Othernonrecurringprojects includetheintersectionimprovementsoccurringatthecornerofTH25/7th Street.Themulti-yearFallon Avenuebridgestartswithlandacquisitionanddesignworkin2017.Nearlyregularlandpurchasesat BertramChainofLakeParkmayhavelookedrecurring,butallthelandneededfortheparkwasacquiredby theendof2016.Largenon-recurringprojectsaretypicallyfinancedbydebt,intergovernmentalrevenue (state/federalgrantsandaids),anddrawsonreservesaccumulatedinanticipationoftheproject. Recurring - current revenues 18% Nonrecurring - new debt 49% Nonrecurring - prior debt 17% Nonrecurring - state/federal aid 16% Capital Expenditures 59 TAX LEVY HISTORY 2013 2014 2015 2016 2017 GeneralFund 5,540,000$5,497,000$5,882,000$6,177,000$6,291,000$ Percent Change 1.5%-0.8%7.0%5.0%1.8% SpecialRevenue Funds Economic Development (HRA Levy)---280,000 280,000 Monticello Community Center*1,170,000 1,390,000 1,363,000 364,000 372,000 TotalSpecial Revenue Funds 1,170,000 1,390,000 1,363,000 644,000 652,000 Percent Change 1.7%18.8%-1.9%-52.8%1.2% Debt Service Funds 2011AGO Refunding Bonds (2005A)245,000 223,000 330,000 330,000 139,783 2007AGO Improvement Bond 425,000 540,000 420,000 420,000 610,000 2008B GO Sewer Refunding 500,000 500,000 500,000 500,000 500,000 2010AGO Improvement Bond 20,000 -40,000 40,000 40,000 2014AGO Judgement Bond ---544,000 536,929 2015B GO SR&I Bond ---250,000 195,288 2016AGO SR&I Bond ----415,000 TotalDebt Service Funds**1,190,000 1,263,000 1,290,000 2,084,000 2,437,000 Percent Change -2.4%6.1%2.1%61.6%16.9% CapitalProject Funds Capital Projects Fund ---300,000 50,000 TotalCapitalProject Funds ---300,000 50,000 Percent Change -------------83.3% TotalAllFunds 7,900,000$8,150,000$8,535,000$9,205,000$9,430,000$ Percent Change 1.0%3.2%4.7%7.9%2.4% Levy Summary City General and Debt Levies 7,900,000$8,150,000$8,535,000$8,925,000$9,150,000$ Percent Change 1.0%3.2%4.7%4.6%2.5% HRALevy -$-$-$280,000$280,000$ Percent Change ------------0.0% * MCC levy for debt 890,000$890,000$1,040,000$-$-$ **Total debt levy with MCC debt 2,080,000$2,153,000$2,330,000$2,084,000$2,437,000$ Percent Change 6.2%3.5%8.2%-10.6%16.9% TAX LEVY HISTORY 60 TAX CAPACITY HISTORY 2013 2014 2015 2016 2017 Tax Capacity 18,692,762$18,289,491$23,882,689$25,891,898$27,584,038$ Percent Change 18.5%-2.2%30.6%8.4%6.5% City Levy - Tax Capacity Rate 42.262 44.709 35.737 34.470 33.171 Percent Change -15.1%5.8%-20.1%-3.5%-3.8% HRA Levy - Tax Capacity Rate ---1.081 1.015 TAX CAPACITY HISTORY The Housing Redevelopment Authority (HRA) special benefit levy is capped at .0185% (or .000185) of the city’s taxable market value. The city’s taxable market value for taxes collected in 2016 totaled $1,631,446,700. HRA levyproceeds canonlybe usedforpurposes includedin the HRA Act(Minnesota Statutes, Section 469.033, subd. 6). Those purposes include redevelopment to correct or prevent blight, and development of or assistance to housing for low or moderate income persons. The city’s tax capacity increased significantly with improvements at the nuclear power plant. The impact of those uprates on the tax base and tax collections is provided in table below: 2012 2013 2014 2015 2016 2017 Taxable Market Value 213,300,800$377,028,900$346,559,800$597,753,900$680,037,200$714,047,000$ Change over prior year $163,728,100$(30,469,100)$251,194,100$82,283,300$34,009,800$ Change over prior year %77%-8%72%14%5% Tax Capacity*4,266,016$7,540,578$6,931,196$11,955,078$13,600,744$14,280,940$ Change over prior year $3,274,562$(609,382)$5,023,882$1,645,666$680,196$ Change over prior year %77%-8%72%14%5% *Tax capacity is calculated at 2% of taxable market value for utility properties and most commercial properties. Residential properties typically have a tax class rate of 1%. Percent of Total Tax Capacity 27%40%38%50%53%52% Tax Impact on the City City of Monticello 2,123,324$3,186,799$3,099,226$4,272,386$4,688,312$4,737,273$ Change over prior year $1,063,475$(87,573)$1,173,160$415,926$48,961$ Change over prior year %50%-3%38%10%1% Monticello HRA -$-$-$-$147,024$144,952$ Northern States Power Company (dba Xcel Energy) 61 REVENUE SOURCES BY FUND Revenue Classifications Property Franchise Tax Licenses/ Intergovern- Charges for Taxes & Other Increments Permits mental Services General Fund 6,291,000$283,900$-$379,400$306,440$320,470$ Special Revenue Funds Economic Development 280,000 -653,564 --- Cemetery -----26,325 Minnesota Investment ------ Monticello Community Center 372,000 ----1,470,400 Total Special Revenue Funds 652,000 -653,564 --1,496,725 Debt Service Funds 2007A G.O. Improvement Bond 610,000 ----- 2008A G.O. Sewer Refunding 500,000 ----- 2010A G.O. Improvement Bond 40,000 ----- 2011A G.O. Refunding Bond 139,783 ----- 2014A G.O. Judgment Bond 536,929 ----- 2015B G.O. Street/Improvement 195,288 ----- 2016A G.O. Street/Improvement 415,000 Total Debt Service Funds 2,437,000 ----- Capital Project Funds Capital Project 50,000 36,000 --250,000 - Closed Bond Fund ------ Park & Pathway Dedication ------ Stormwater Access -----50,000 Street Lighting Improvement -80,000 ---- Street Construction ------ Total Capital Project Funds 50,000 116,000 --250,000 50,000 Enterprise Funds Water ---200 -1,122,299 Sewage -----2,095,892 Liquor ------ Deputy Registrar -----475,100 Fiber Optics -----1,721,570 Total Enterprise Funds ---200 -5,414,861 Internal Service Funds IT Services -----274,366 Central Equipment -----210,700 Benefit Accrual -----17,000 Total Internal Service Funds -----502,066 Total All Funds 9,430,000$399,900$653,564$379,600$556,440$7,784,122$ 62 Revenue Classifications Fines &Special Miscell-Sale of Debt Contributed Operating Forfiets Assess aneous Goods Proceeds Capital Transfers Total 42,300$300$178,190$-$-$-$-$7,802,000$ --117,250 ----1,050,814 --1,000 ----27,325 --20,000 ----20,000 --24,000 ----1,866,400 --162,250 ----2,964,539 -104,088 -----714,088 --5,000 ----505,000 -48,019 ----130,986 219,005 -162,359 208,900 ---468,376 979,418 --1,000 ----537,929 -26,000 1,000 ----222,288 140,000 555,000 -480,466 215,900 ---599,362 3,732,728 ----5,000,000 --5,336,000 -65,900 5,000 ----70,900 --2,000 ----2,000 --15,000 ----65,000 --10,000 ----90,000 --25,000 ----25,000 -65,900 57,000 -5,000,000 --5,588,900 -30,000 51,000 --80,000 -1,283,499 --62,000 -700,000 60,450 -2,918,342 --5,000 5,435,194 ---5,440,194 --1,000 ----476,100 --46,297 ---230,000 1,997,867 -30,000 165,297 5,435,194 700,000 140,450 230,000 12,116,002 --153 ----274,519 --5,000 ----215,700 --3,000 ----20,000 --8,153 ----510,219 42,300$576,666$786,790$5,435,194$5,700,000$140,450$829,362$32,714,388$ 63 LONG RANGE FINANCIAL PLANS General Fund Community Center EDA Capital Projects Routine Expenditures Expected to rise at the pace of inflation but mitigated by gains in productivity. Some capital expenditures are incorporated as routine through rental charges by internal service funds. Expected to rise at the pace of inflation. Routine capital expenditures are set at $50,000 per year. Non-TIF expenditures are expected to rise at the pace of inflation. The city annually appropriates for replacement of road surfaces and street lights. Franchise fees provide funding for streetlight improvements. Road surface improvements are funded by reserves, state aid and tranfers from the Liquor Fund. Non-routine Expenditures Basic level of non-routine items are included in overall budget but vary within each budget unit from year-to-year. Large repair and maintence items and total capital expenditures exceeding $50,000 could be supported by transfers from other funds. 2017: $40,000 pool resurface and $60,000 mechanical upgrades. Tax increment financing (TIF) expenditures will vary considerabley from year-to- year in each district as development occurs. Large capital projects usually receive funding from debt issuance. The city usually covers initial project costs with reserves or other revenue sources and reimburses itself with debt proceeds. 2017: TH25/7th Street intersection $1.35M, outlying and street reconstruction $2M, 2018: Fallon overpass - $7.75M (start in 2017). 2019: Area 6 streets - $1.5M; Area 7 streets - $1.3M. Revenues Property taxes provide over 80% of the revenue for General Fund. Consequently, spending is constrained by growth in the tax levy. The city has resisted developing other revenue sources such as fees for residential refuse collection or stormwater. With the last payment on community center debt service coming in 2015, the property tax levy for this debt declined by $1M in 2016. User fees should cover 85% on-going expenditures. Tax increment revenues widely vary from district to district but not much from year-to- year. Often reserves, accumulation of prior year increments, are used to fund projects. Transfers from the General Fund were eliminated in 2016 with the initiation of an HRA levy of $280,000. Fallon Overpass and TH25/7th Street will receive some federal and state aid. Reconstruction bonds in 2017 for other street projects. Debt None: Indirectly supports Central Equipment Fund debt service through annual rental payments. No debt issues are anticipated over next five years. Further, debt for recreational projects either requires voter approval or must be incurred as part of a lease-purchase agreement with the EDA. Intrafund loans from the EDA General Fund sub-fund will finance some TIF activities. No external debt issuance is planned. 2017: $5 million in tax abatement/reconstruction bonds. The debt service for these bonds will be structured to take advantage of the decline in other tax supported debt. 64 Water Sewage Liquor Fiber Optics Central Equipment Expected to rise at the pace of inflation but mitigated by reinvestment in plant and equipment. Annual capital expenditures financed on a pay-as-you-go basis range between $150,000 to $300,000. Expected to rise at the pace of inflation but mitigated by reinvestment in plant and equipment. Annual capital outlays financed on a pay- as-you-go basis range between $150,000 to $300,000. 2018: Phosphorus reduction O&M will increase annual operating costs by $73,000. Expected to rise at the pace of inflation and increases in demand. Cost of sales are typically passed onto customers through higher prices. The Liquor Store maintains a consistent gross profit margin of 25%-27%. Expected to rise at a pace greater than inflation. Operating revenues are not sufficient to cover expenditures for operations, rountine and non-routine items. City has hired a management firm to run day-to-day operations. Capital equipment purchases will vary widely every year. A debt service schedule is contained in the Internal Service section of this report. All expenditures in this fund are either for capital equipment purchases or debt service. 2017: $130,000 booster station upgrade and $100k Hart Blvd main. 2019: $1.2M Well 6. Because sewer access fees have declined with development, transfers to debt service funds, with sewer improvement components, will continue for several years. 2017: $700k supervisory controls. 2018: $1.8M phase 2 WWTF, $2.5M Fallon trunk line. 2019: solid waste handling $1.4M. The Liquor Fund has $25,000 and $75,000 budgeted for cooler replacement and parking lot improvements in 2017. Annual operations provides sufficient funds for both. Operating revenues are not adequate to support non- routine expenditures. Consequently, Liquor Fund transfers will provide funding for fund operations. Anticipated future expenditure by year: 2017: $311,000; 2018: $803,000; 2019: $690,000; 2020: $397,000; 2021: $400,000. A purchase of a $1M ladder truck will be purchased outside of this fund. User rates are high enough to cover planned expenditures for the next five years. However, the base charge for water and sewage services will increase in advance of going to monthly billing. User rates are expected to rise to provide for pay-as- you-go routine system replacement and debt finance upgrades to meet new environmental regulations. A phased ten percent rate increase is needed for the phophorus reduction wastewater treatment plant project. Sales have increased steadly for the last five years. Going forward, sales are expected to level out because of space limitations. 2017: $230,000 transfer from the Liquor Fund. Transfers from Liquor Fund could decline with further operational changes. Rental revenues (expenditures in other funds and budget units) will rise with equipment purchases. Therefore, revenue sources in other funds become the revenue source for this internal service fund. No debt issues are anticipated over next five years. The Minnesota Public Facilities Authority (MPFA) may provide funding for the 2018 and other future projects. No debt issues are anticipated over next five years. In 2014, a resolution was reached with telcom bond holders, the city issued $6 million in settlement bonds in 2014. The city levies property taxes for debt service on these bonds. Debt service is not recorded in this fund. No new debt is contemplated for the future. The fund is expected to become self-sustaining. The city issued $515,000 in bonds to finance future purchase of a plow truck and the 2014 purchase of a fire tender. Future debt issues may be needed to make all the acquistions listed in the CIP. 65 LONG RANGE FINANCIAL PLANS (continued) Prior to the start of the budget process, council and staff review service needs, growth trends and capital investment requirements. A long-range financial model is developed for the city’s four main operating funds: General, Monticello Community Center, Water, and Sewage. This is done in conjunction with the Capital Improvement Plan (CIP) which is a five-year forecast that includes funding sources. Financial planning is segregated into two components: operations for the four main operating funds and capital investments (CIP). The Municipal Liquor Fund, Deputy Registrar Fund and Fiber Optic Fund are excluded from long range financial plan. The liquor store and DMV are largely retail operations with no major forecasted capital investment needs. The Fiber Optic Fund presents interesting challenges in a dynamic and competitive market where strategies and a business plan need refinement. Items impacting long range financial planning: Current financial position (fund balances) Debt burden Regulatory environment Condition of existing capital assets Growth trends, inflation and aspirations ThecityannuallyadoptsabalancedbudgetfortheGeneralFund.Consequently,therevenues/sourceslineand theexpenditures/useslinewilloverlapforthe2017budgetandforfutureyearprojections.After2017,annual expendituresareprojectedtoincreaseat2%peryear.Thepropertytaxlevyandallotherrevenuesare projectedtoincreaseatthesamerateasexpenditures/uses.In2012,theGeneralFundtransferredover$2 milliontootherfundstoeliminateinterfundreceivables.Accordingtopolicy,thecityshallmaintainafund balanceof45%ofexpendituresandrecurringuses.Thefollowingchartassumesthecitywillcontinueto providethesamecurrentlevelsofservice. $- $2 $4 $6 $8 $10 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022MillionsGeneral Fund 2013-2022 Fund Balance Revenues/Sources Expenditures/Uses 66 LiketheGeneralFund,theMonticelloCommunityCenterFundannuallyadoptsabalancedbudget. Consequently,therevenues/sourceslineandtheexpenditures/useslinewilloverlapforthe2017budgetand forfutureyearprojections.After2017,annualexpendituresareprojectedtoincreaseat2%peryear.In2012, thefundbalancedeclinedtoreflectcapitaloutlayexpendituresontheNatatoriumprojects.Transfersintothe fundalsosupportedtheproject.Thelastpayment($1,001,000)onpropertytaxsupporteddebtservice,related totheinitialconstructionofthecommunitycenter,occurredin2015. $- $1 $2 $3 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022MillionsMonticello Community Center 2013-2022 Fund Balance Revenues/Sources Expenditures/Uses The Water Fund is the city’s most self-sustained utility fund. The fund has no direct debt and adequate reserves to cover almost any expenditure for major capital projects, of which none are planned in the next couple years. In 2019, transfers to other debt service funds for water related improvements cease. These transfers supplement water access fees which all but dried up as a result of slower commercial and residential development. Expenditures in 2013 included water improvements along 7th Street and the aforementioned transfers. The peak in 2016 expenditures reflect the nearly $1 million in water improvements as part of the 2016 Core Street Project. $- $1 $2 $3 $4 $5 $6 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022MillionsWater Fund 2013-2022 WorkingCapital Revenues/Sources Expenditures/Uses 67 Unlike the Water Fund, the Sewage Fund represents funding challenges. First, sanitary sewer access fees declined significantly with the lack of development. Transfers to other debt service funds supplementing these access fees are expected to drop significantly in 2017 and to cease altogether in 2018. Second, environmental regulatory changes require large investments in the wastewater treatment plant. In 2013, the fund incurred $3 million in debt to improve treatment plant capacity. The city incurred nearly $2.5 million in debt for the wastewater treatment plant phosphorous reduction project and for replacement of two digester covers, both in 2016. $- $1 $2 $3 $4 $5 $6 $7 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022MillionsSewage Fund 2013-2022 WorkingCapital Revenues/Sources Expenditures/Uses 68 LONG-TERM FISCAL OBJECTIVES The city council and staff are committed to expending public resources in the most cost-effective and economical manner possible to ensure the stability of the city property tax levy. In light of changes to tax policy, state aid reductions for various purposes, state imposed levy limits in prior years, and the potential of future levy limits, fiscal strategies will need to be constantly monitored to ensure a balanced approach in providing sufficient revenues to fund services: 1.Employ a strategy aimed at reducing the city’s reliance on the property tax levy to fund basic services through “sustainable” revenue sources such as franchise fees, special revenues, user fees, and charges for services. The city’s property tax levy generates over 80% of the General Fund’s revenue. This overdependence is largely attributable to a healthy tax base, which includes a nuclear power plant. In prior years, the city’s tax levy had not kept pace with inflation. The current council philosophy seems to indicate a willingness to take advantage of the growth in the tax base. While a growth plus inflation tax levy formula would not reduce the dependence on property taxes, it would alleviate the strain placed on city finances by inflation. City services will continue to be evaluated in terms of identifying all relevant funding sources to underwrite specific service expenditures, promoting alternatives to traditional funding methodologies and encouraging public-private partnerships in service delivery systems. 2.The development and use of appropriate cost accounting structure that will lead to creation of individualcostcentersforallcitydepartmentactivitiestoaccuratelyreflectthetruecostofproviding specific services. The city employees a cost accounting system that is department specific and attempts to accurately reflect service delivery costs at the department and division levels. By including all supplemental services as they relate to personnel, charges and services, supplies, and capital outlays the city will further distinguish the total cost of service provided. The city has the ability to analyze these costs at the sub-category detail levels in support of overall policy goals. 3.The adoption of a financial philosophy that seeks to spread the cost of significant capital outlay expenditures over an extended period of time to ensure that current and future taxpayers share equally in underwriting those costs. The city continues to capitalize the cost of significant capital expenditures over several years to ensure that both existing and future taxpayers share equally in the cost. In addition, the city has dedicated a portion of the tax levy to underwrite the cost of selected capital projects and equipment, avoiding a fiscal environment based on reactive tax and spend policies. The five year capital improvement planning process is critical in achieving these results. 69 4.The development of a long-term financial model (proforma) that identifies anticipated trends in community growth and establishes a link between fiscal targets and budgetary expenditures. The cityisintheprocessofdevelopingandmaintainingafinancialmodelto determine thelong- term impacts of present day expenditures and financing decisions. Fiscal assumptions are based upon a complex set of financial data including growth factors, tax capacity valuations, per capita spending, anddebt ratios.The proformais utilizedas atoolas partofthe budget planningprocess toensure that key short-term fiscal targets are in line with long-term fiscal projections. The city will continually updatethe proformatoensure thatkeyshort-termtargets are inlinewithlong-term fiscalprojections. The city will continually update the proforma to ensure that long-term fiscal outcomes remain consistent with council budgetary policies. 5.Thedevelopmentofworkperformancegoalsforeachdepartmenttoascertainandmeasurehow each operating division contributes to the city’s overall public service mission. Each department is responsible for identifying relevant performance data to allow for an independent analysis ofspecific service outcomes.Data is reviewed to provide the counciland general public with a better understanding of the operational demands, resource inputs and performance outcomes associated with a specific service delivery system. 6.The aggressive and appropriate investment of idle city funds to maximize the generation of interest income, while ensuring adequate cash flow requirements. Investment ofcity funds is controlledby statestatute and managed by the finance director. Idle funds are invested in a variety of financial instruments such as certificates of deposit, federal agencies (FHLMC, FNMA, etc.) and appropriately rated bonds. Long-term investing is designed to achieve the best yield in the current market, following a strategy that structures long-term investments in ladder format and reinvests short-term investment in rotating terms of up two years. 7.Greater reliance on technology to enhance employee productivity in all areas of city operations and improve customer communications. The city has taken steps to invest additional time and energy on labor saving technology, such as software programming and electronic file storage. Staff has discussed the need to look at optic imagingsolutions.Imagingcityrecordswillenable the cityto reducestorageareas presentlydedicated to paper files and look at more economical and efficient systems of data retrieval. 8.Involving all employees in the process of re-engineering the work environment by encouraging cross-training opportunities, reducing and eliminating bureaucratic barriers, streamlining public process requirements, and adopting private sector customer service business values in city operations. 70 City staff is encouraged to identify work practice issues that are inefficient or overly bureaucratic. The management team is committed to involving their employees and fostering an environment that challenges the status quo of city operations. 9.Continuously reviewing opportunities to form partnerships with neighboring communities to share services and equipment, jointlypurchase equipment, and develop strategies to deal withlocal issues using a regional approach. The city has established several equipment and service delivery sharing arrangements with neighboring communities and has several joint powers agreements in place on a variety of local and regional issues in the area of public safety and public works initiatives. Recent steps taken to achieve long-term fiscal objectives The city will begin monthly billing of water and sewage services in 2017. Monthly bills will allow the city to bill customers for other services, such as residential garbage, recycling, and storm water. There are benefits to the customers: lower monthly bills instead of larger quarterly bills, a payment cycle in line with other customer bills, timely consumption information, and earlier alert to service problems. The Monticello Community Center Fund will have a new chart of accounts in 2017. This change breaks the fund’s accounts into major costs centers: administration, buildings, aquatics, guest services, and fitness programs. The 2018 budget will reflect the new chart of accounts. 71 CAPITAL INVESTMENTS AND OPERATING BUDGETS Capitalinvestments(outlays)toreplaceorimproveexistingassetscanhavesignificantimpactsonoperating budgets.Forexample,capitalinvestmentsreplacingagingequipmentcanreduceannualrepairsand maintenanceexpendituresandpersonnelservicescosts.Indeed,equipmentnearingtheendofitsusefullife oftenrequiresexpensiverepairswithhardtofindreplacementparts.Further,personalservicecostsare impactedintwoways:thecostofthepeoplerepairingtheequipmentandthelossofproductivity.In2013,the cityinitiatedtheCentralEquipmentFundforthepurposeofcreatingarevolvingfundforfutureequipment purchases.Thisfundpurchasesequipmentandleasesitbacktothebenefitingbudgetunits.Theleasepayments assurethatequipmentpurchaseswillreceiveannualfunding,gettingthesamepriorityasotheroperating expenditures.Lastly,newequipmentmaybemoreproductiveandlessexpensivetooperate. Anothertypeofcapitalinvestmentincludesbetterments,whichareimprovementsthatprolonganasset’slifeor increaseitsefficiencyorcapacity.Agreatexample,thecommunitycenterreplacedtheroofovertheaquatics portionofthebuilding,loweringannualenergycosts.Still,thesavingscanbeelusivewhentheenergyproviders consistentlyraisetheirprices. Thecityannuallybudgetsforreplacementofwaterandsewagemainsthrougheach’srespectiveenterprise fund. Forpublicutilities,customersatisfactionisdifficulttoquantifyindollars.However,agenerallysatisfied customermaybelesslikelytocomplainabouttherateincreasesneededtosupportthoseservices.Annually, thecitybudgetsmoreforwaterandsewermainreplacementthanitdoesforrepairsandmaintenance. Finally,nearly70milesinlength,thestreetsystemisthecity’slargestcapitalasset.In2014,thecityincreased thesealcoatbudgetforroadstoover$180,000. Additionally,thecityannuallybudgetsover$200,000fora moredurablemillandoverlayintheStreetConstructionFund. Theseoperatingandcapitalexpenditureswork intandemtoforestallenormouslymoreexpensivestreetreconstructionprojects. 72 CAPITAL INVESTMENTS AND OPERATING BUDGETS Department - Operating Fund Fund Amount Year Amount Comment Public Works - General Fund Blacktop roller Central Equip.30,000$2017 3,700$CE lease and R&M (-) Street sweeper Central Equip.190,000$2017 18,400$CE lease and R&M (-) Electronic sign reader Central Equip.12,000$2017 2,120$CE lease and R&M (+) V-Box sander Central Equip.15,000$2017 2,650$CE lease and R&M (+) Fallon Avenue overpass Capital Project 7,800,000$2018 5,500$R&M Overlay rural outlying streets Capital Project 800,000$2017 (20,000)$R&M Street reconstruction Capital Project 1,100,000$2017 (15,000)$R&M Gilard/CR 39 Capital Project 250,000$2018 500$R&M Recreation Culture - General Fund Ellison Park Shelter Park & Pathway 58,000$2017 580$Until developed Rolling Woods playground Park & Pathway 65,000$2017 650$R&M Rolling Woods sidewalk Park & Pathway 40,000$2017 400$R&M Tot Lot play equipment Park & Pathway 15,000$2017 150$R&M Monti-view bike traill Street Light Imp 10,000$2017 500$Electricity and R&M Toro Polar Trac Central Equip.50,000$2017 8,300$CE lease, Gas, R&M (+) Recreation - Community Center Diamond Brite pool resurface Community Ctr.40,000$2017 -$No impact on expenses Security camera upgrade Community Ctr.12,000$2017 -$No impact on expenses Mechanical improvements Community Ctr.60,000$2017 (1,000)$Electricity and R&M Public Works - Sewage Fund WWTP phosphorous reduction Sewage 2,300,000$2017 75,000$Chemicals Digester cover replacement Sewage 800,000$2017 (15,000)$R&M SCADA Sewage 700,000$2018 20,000$R&M, software support Public Works - Water Fund Meter upgrades Water 65,000$2017 (5,600)$Reduce manual reading Hart Boulevard watermain Water 100,000$2018 1,500$R&M Booster station Water 130,000$2018 1,300$R&M Liquor Fund Coolers Liquor 25,000$2017 (2,000)$Electricity and R&M Parking lot improvements Liquor 75,000$2017 (750)$R&M Investment Operating Expense Central Equipment Fund (CE) leases are set at rates to recover depreciation plus inflation. The lease amounts do not include operating costs such as repairs and maintenance (R&M), gas, or insurance. These expenses are borne by benefiting fund and budget unit. Generally, R&M expenses on old equipment are generally higher than that of newer equipment. Less work is done on equipment that is scheduled for replacement. Items with a (+) are additional equipment, incurring additional R&M. Items with a (-) are replacement equipment with lower R&M in the near term. R&M expenses for roads include estimates for snow removal, boulevard maintenance, street sweeping, crack sealing, and striping. Listed amounts are for expenses in excess of those already being incurred. With no impact on expenses, some are replaced for obsolesces or aesthetics reasons. In reality, some of these amounts may or may not be close to those actually realized. 73 Major Capital Investment Effect on Operating Expenses (Examples) The wastewater treatment plant phosphorous reduction project was undertaken to meet state and federal regulation. Two treatment approaches (natural and chemical) were studied for cost-benefit. Ultimately, the chemical treatment approach was selected. The city’s engineer estimated the additional cost to run the plant at $73,000 starting midway through 2017. The city employees two basic types of street sweepers, one relying mainly on mechanical brooms and the other on vacuums. Vacuum sweepers suck the material off the ground through a large nozzle and into the hopper much like a standard home vacuum. Generally, the vacuum sweeper goes to the area where it is needed before it starts sweeping. The broom sweeper usually starts sweeping shortly after exiting the gate at the public works yard. Both have strengths and weaknesses. A big weakness of vacuum sweepers: the debris-laden, swirling wind created by the vacuum wears on the inside walls of the hopper. The vendor will allow the city to trade the old vacuum sweeper in on new sweeper. Training for the new sweeper includes instruction on use maximization and how to avoid situations causing excessive damage. The sweeper will be purchased by the Central Equipment Fund with an annual lease payments from the streets and alleys activity of $23,400. The city will have lower maintenance costs estimated at $5,000, which was expected to mushroom with the eventual replacement of the hopper. Development in 2016 at Bertram Chain of Lakes (BCOL) park included a pathway, parking lot, and 20 plus acres of playing fields. Some residual work needs to be done in 2017. Maintenance of the area requires people, equipment, and supplies. The area will need regular mowing (depending on weather conditions), seeding, fertilizing, and watering. The city purchased an additional large deck mower to specifically maintain the area. The mower should take about four hours to cut BCOL park grass each time--once a week. The park operations activity makes an annual $10,500 lease payment to the Central Equipment Fund for the mower. There are hard to measure activity gains throughout the parks system because the bigger, faster mower can be used for other mowing needs. Consequently, a vehicle was withheld from trade-in and an additional trailer was purchased. Supplies—seeds, fertilizer, and weed control—are estimated at $11,500 per year. The new Ellison Park shelter compliments the park’s other existing shelters. The new shelter will have electrical outlets to provide a power source for shelter users and maintenance workers. In the near term, additional rental revenues should offset shelter operating expenses—supplies, electricity, and custodial activities. A shelter is funded with a $12,000 donation from the local Lions club and $10,000 from the park’s namesake family. 74 LEGAL DEBT LIMIT AND BOND RATING DebtLimit:Minnesota citiesmaynotincurdebtinexcessofthreepercentofthemarketvalueoftaxable propertyinthecity(thelimitis2percentinFirstClasscitiesunlessacharterprovidesahigherrate,butevenso thishigherrateiscappedbylawat32/3percent).Butexceptedfromthisoverallthreepercentlimitarealmost alldebtobligationsforwhichsomeothersourceofrevenueispledgedassecurity.Thus,improvement assessmentbonds,taxincrementbonds,utilityrevenuebonds,purerevenuebonds,capitalimprovement bondsunderanapprovedcapitalimprovementplan,judgmentbondsandsimilarbondsmaybeissued withoutregardtothestatutorydebtlimit.(Theremaybeotherrequirementsforbondsthatareexemptfrom thedebtlimit;forexample,capitalimprovementbondsmustbeapprovedbyanaffirmativevoteofthree- fifthsofthemembersofafive-membergoverningbody.)Theresultisthat,withonlyafewexceptions,the onlyobligationssubjecttothedebtlimitaregeneralobligationbondspayablesolelyfromadvaloremproperty taxes.Thelegaldebtlimithasnothingtodowiththepracticaldebtlimitofacity,whichisthedebtburden beyondwhichthecredit-worthinessofthecityisputintoquestion.(SeeMinnesotaStatutes,Section475.53) AnticipatedBorrowingthisFiscalYear:ThecityisexpectedtoissueG.O.bondstoreimburseitselffor expendituresonstreetreconstruction,FallonAvenuebridgeconstruction,andotherimprovementsinlate 2017. The2017reimbursementamountiscurrentlyestimatedat$5,000,000. Further,thecityanticipates issuingdebtforasimilaramountin2018asworkontheFallonAvenueoverpassprogresses. BondRatings:Thecity’sgeneralobligationbondratingwasreviewedinOctober2016withthesaleofthe streetreconstructionandimprovementbonds.Moody’saffirmedthecity’spriorG.O.debtratingof“A2”.The “A2”ratingisan“uppermediumgrade”.Thisisgenerallydescribedas“strong,investmentgrade”creditby Moody’s. Market value (payable 2017)1,712,125,200$ Debt limit (3% of market value)51,363,756$ Debt applicable to limit General obligationdebt 23,241,000 Less general obligationbonds not subject to the limit (14,620,000)$ Total net debt applicable to limit 8,621,000$ Legal debt margin 42,742,756$ Legal Debt MarginCalculation for Fiscal Year 2017 75 BOND RATING SCALES Moody’sMonticellorating: A2forGeneralObligationDebt Moody's S&P Fitch Long- term Short- term Long- term Short- term Long- term Short- term Aaa P-1 AAA A-1+ AAA F1+ Prime Aa1 AA+AA+ High gradeAa2AAAA Aa3 AA-AA- A1 A+A-1 A+F1 Upper medium gradeA2AA A3 P-2 A-A-2 A-F2Baa1BBB+BBB+ Lower medium gradeBaa2P-3 BBB A-3 BBB F3Baa3BBB-BBB- Ba1 Not prime BB+ B BB+ B Non-investment grade speculativeBa2BBBB Ba3 BB-BB- B1 B+B+ Highly speculativeB2BB B3 B-B- Caa1 CCC+ C CCC C Substantial risks Caa2 CCC Extremely speculative Caa3 CCC-Default imminent with little prospect for recoveryCaCC C C D / DDD /In default/DD /D 76 DEBT SERVICE LEVY HISTORY Most of the city’s debt issues are supported on some level by property taxes. The 2013B Wastewater Treatment Bonds and 2015A Minnesota Public Facilities Authority G.O. Note Payable are both supported directly by Sewage Fund revenues. The city issued $6,595,000 in general obligation bonds in 2014. This dual purpose issue had two portions: judgment - $6,080,000 and capital equipment - $515,000. The capital equipment debt is carried in an internal service fund; lease payments from the General Fund provide money for the debt service. In 2015, the city issued $2,605,000 in street reconstruction and improvement bonds. The 2016 tax levy included $300,000 for debt service on future debt. In October 2016, the city issued $4,900,000 in street reconstruction and improvement bonds. Year 2010A Imp 2011A Imp 2007A Imp. 2008 Sewer 2008A MCC 2014A J&E 2015B SR&I2016A SR&I Total 2013 20,000$245,000$425,000$500,000$875,000$-$-$-$ 2,065,000$ 2014 -223,000 540,000 500,000 1,040,000 ---2,303,000 2015 40,000 330,000 420,000 500,000 1,005,000 ---2,295,000 2016 40,000 330,000 420,000 500,000 -544,000 250,000 300,000 2,384,000 2017 40,000 139,783 610,000 500,000 -536,929 195,288 404,273 2,426,273 2018 25,000 215,000 ---537,586 203,425 407,768 1,388,779 2019 25,000 185,000 ---537,244 200,905 409,133 1,357,282 2020 25,000 185,000 ---535,501 198,385 405,038 1,348,924 2021 25,000 183,000 ---537,570 201,325 406,089 1,352,984 2022 25,000 187,000 ---538,226 197,651 406,929 1,354,806 2023 -185,000 ---537,609 199,436 407,558 1,329,603 2024 -----536,081 200,223 407,979 1,144,283 2025 -----538,861 200,879 408,190 1,147,930 2026 -----540,499 223,990 408,189 1,172,678 2027 -----535,698 219,135 70,298 825,131 $- $500,000 $1,000,000 $1,500,000 $2,000,000 $2,500,000 $3,000,000 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 Debt Service Levy (2013 - 2027) 2010A Imp 2011A Imp 2007A Imp.2008 Sewer 2008A MCC 2014A J&E 2015B SR&I 2016A SR&I 77 G.O. DEBT SERVICE Early redemption and normal amortization causes annual general obligation (G.O) debt service to decline sharply in 2017 and 2018. Two issues were partially redeemed in 2016 with the call of 2018 maturities. One issue will be totally redeemed with the February 2017 call of a 2018 maturity. In 2014, the city issued $6,595,000 in G.O. bonds: judgment ($6,080,000) and capital equipment ($515,000). In 2015, the city issued $2,605,000 in G.O. bonds: street reconstruction ($1,885,000) and improvements ($720,000). In 2016, the city issued $4,900,000 in G.O. bonds: street reconstruction ($770,000) and improvements ($4,130,000). The Minnesota Public Facilities Authority $2.3 million loan is excluded from the schedule and graph below. Draws on the PFA loan will occur as construction at the wastewater treatment plant progresses. The PFA debt is recorded in the Sewage Fund, an enterprise fund. Year 2010A Imp 2011A Imp 2007A Imp 2008 Swr 2008A MCC 2013 COI 2013 WWT 2014A JE 2015B SRI2016A SRI Total 2013 447,725$3,011,413$734,900$1,049,782$1,074,120$58,788$-$-$-$-$ 6,376,728$ 2014 360,150 2,880,150 735,600 1,049,841 1,037,360 66,120 254,198 ---6,383,419 2015 302,399 2,460,250 730,400 1,049,193 1,000,760 65,760 250,598 174,406 --6,033,766 2016 304,050 2,423,950 1,482,967 1,566,998 -65,250 246,998 580,872 211,969 -6,883,054 2017 304,618 783,650 535,500 1,521,432 -69,590 243,398 576,821 207,500 523,821 4,766,330 2018 299,324 779,350 ---68,713 244,798 576,759 215,250 527,150 2,711,344 2019 298,355 428,350 ---67,673 241,098 575,608 212,850 528,450 2,352,384 2020 301,653 430,650 ---71,470 242,398 572,931 210,450 524,550 2,354,102 2021 304,050 425,825 ----243,598 578,691 213,050 525,550 2,290,764 2022 -428,750 ----244,406 577,816 209,750 526,350 1,987,072 2023 -426,300 ----244,706 575,578 211,450 526,950 1,984,984 2024 ------244,376 572,384 212,200 527,350 1,556,310 2025 ------243,600 513,201 212,825 527,550 1,497,176 2026 ------247,150 514,761 213,325 527,550 1,502,786 2027 ------245,400 510,189 208,700 67,350 1,031,639 $- $1,000,000 $2,000,000 $3,000,000 $4,000,000 $5,000,000 $6,000,000 $7,000,000 $8,000,000 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 G.O.Debt Service Paid/Due (2013 - 2027) 2010A Imp 2011A Imp 2007A Imp 2008 Swr 2008A MCC 2013 COI 2013 WWT 2014A JE 2015B SRI 2016A SRI 78 G.O. DEBT LEVELS Even with additional debt issues in 2015 and 2016, the overall general obligation (G.O) debt level continues to decline. Normal debt amortization and a couple early redemptions have more than offset the addition of new debt. The trend will likely subside in 2017 when new debt surpasses redemptions and maturities. Rapid amortization of debt reflects an opportunity for financing new projects included in the capital improvement program (CIP). The schedule below reflects the refinancing of 2005A improvement bonds with 2011A bonds—the two are combined on the schedule less the redemption bond payment. With the final draw in 2017, the Minnesota Public Facilities Authority $2.3 million loan is excluded from the schedule and graph below. Year 2010A Imp. 2011A Imp. 2007A Imp. 2008 Sewer 2008A MCC 2013 COI 2013 WWT 2014A JE 2015B SRI 2016A SRI Outstanding 2013 2,275,000$10,735,000$2,550,000$4,270,000$1,975,000$445,000$3,000,000$-$-$-$ 25,250,000$ 2014 1,955,000 8,055,000 1,930,000 3,376,000 985,000 385,000 2,820,000 6,595,000 --26,101,000 2015 1,690,000 5,745,000 1,290,000 2,452,000 -325,000 2,640,000 6,595,000 2,605,000 -23,342,000 2016 1,420,000 3,425,000 625,000 1,496,000 -265,000 2,460,000 6,190,000 2,460,000 4,900,000 23,241,000 2017 1,145,000 2,715,000 ---200,000 2,280,000 5,785,000 2,310,000 4,485,000 18,920,000 2018 870,000 1,995,000 ---135,000 2,095,000 5,375,000 2,150,000 4,050,000 16,670,000 2019 590,000 1,615,000 ---70,000 1,910,000 4,960,000 1,990,000 3,605,000 14,740,000 2020 300,000 1,225,000 ----1,720,000 4,540,000 1,830,000 3,155,000 12,770,000 2021 -830,000 ----1,525,000 4,105,000 1,665,000 2,695,000 10,820,000 2022 -420,000 ----1,325,000 3,660,000 1,500,000 2,225,000 9,130,000 2023 ------1,120,000 3,205,000 1,330,000 1,745,000 7,400,000 2024 ------910,000 2,740,000 1,155,000 1,255,000 6,060,000 2025 ------695,000 2,320,000 975,000 755,000 4,745,000 2026 ------470,000 1,885,000 790,000 245,000 3,390,000 2027 ------240,000 1,440,000 605,000 185,000 2,470,000 $- $5 $10 $15 $20 $25 $30 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027MillionsG.O. Debt Outstanding (2013 - 2027) 2010AImp.2011AImp.2007AImp.2008 Sewer 2008AMCC 2013 COI 2013 WWT 2014AJE 2015B SRI 2016ASRI 79 EFFECT OF DEBT LEVELS ON GOVERNMENT OPERATIONS Debt is carried in three fund types: Governmental Funds, Enterprise Funds and Internal Service Funds. Consequently, debt has a different impact on the operations of each fund type. Indeed, debt service is a fixed cost that does not vary with activity levels. Debt amortization and redemption reduces fixed costs, freeing resources for other purposes. Governmental Funds Governmental fund debt service is provided through debt service funds, which accumulate money from various sources for principal and interest payments. Those sources include property taxes, special assessments, transfers from enterprise funds, and transfers from capital project funds collecting impact fees. The debt effect on services delivered through governmental funds with current plant and equipment is somewhat diminished because the city is not constrained by state-imposed levy limits for property taxes. When levy limits have been in place, statutes have allowed for special levies for debt service. While there are limits to what taxpayers can bear, Monticello has the lowest tax capacity rate in Wright County because of its large commercial tax base—including the nuclear power plant. In a stable market value environment, the power plant absorbs over half of any tax increase. The General Fund is primarily supported (over 80%) by property taxes and the Monticello Community Center (MCC) Fund is primarily supported by charges for services. The General Fund has other underutilized revenue sources and the MCC Fund can adjust its fee schedule and reduce costs. Still, one negative consequence of using impact fees for debt services is the city’s reduced ability to finance water and sewer trunk improvements with money on hand. High debt levels lower the city’s ability (debt limit and debt rating) to issue new debt for capital assets, which may improve efficiency or meet a growing need. Enterprise Funds The Sewage Fund is the only enterprise fund with debt. All utility rates are reviewed annually and adjusted to cover operating, capital and debt service expenditures. Transfers support principal and interest payments in debt service funds where water and sewer impact fees have been deficient. This drain on resources means new debt will need to be issued for Sewage Fund wastewater treatment plant upgrades and trunk improvements. According to an AE2S survey, Monticello has some of the lowest water and sewage rates in the Minnesota. However, the council is aware that the city needs to maintain its competitive position with taxes and utility charges to attract economic development. Internal Service Funds Two debt issues have provided capital for creating a Central Equipment internal service fund. This fund finances governmental fund equipment purchases over $10,000. The equipment is then leased back to the benefitting budget unit for a fixed duration. The lease payments provide for additional future equipment purchases. Currently, the General Fund is the only governmental fund internally leasing equipment. The debt serves as mechanism for maintaining the fund and its equipment purchases. With over 80% of the General Fund revenue comprised of property taxes, the Central Equipment Fund debt and the related lease payments have a direct effect on the amount of resources available for other uses. Again, this is mitigated by city’s low tax capacity rate and the lack of a levy limit. In summary, debt is a valid way to match customers with the cost of providing a service. Current service customers pay for current service delivery with annual debt service payments supported by user fees and taxes. Future service customers make future debt service payments through future taxes and user fees. 80 DEBT LEVELS BY FUND TYPE The following schedule and chart separate debt by fund type. Governmental funds typically have varying sources of revenue: property taxes, special assessments, impact fees, etc. Enterprise fund debt is usually supported by charges for services. Internal service funds are supported by charges for services to budget units within other funds, which have their own revenue sources (taxes, licenses and permits, charges for services, etc.). Year Governmental Enterprise Internal Service Total 2013 21,330,000$3,475,000$445,000$25,250,000$ 2014 22,051,000 3,210,000 840,000 26,101,000 2015 19,622,000 2,940,000 780,000 23,342,000 2016 20,116,000 2,460,000 665,000 23,241,000 2017 16,095,000 2,280,000 545,000 18,920,000 2018 14,150,000 2,095,000 425,000 16,670,000 2019 12,525,000 1,910,000 305,000 14,740,000 2020 10,760,000 1,720,000 290,000 12,770,000 2021 9,060,000 1,525,000 235,000 10,820,000 2022 7,625,000 1,325,000 180,000 9,130,000 2023 6,160,000 1,120,000 120,000 7,400,000 2024 5,090,000 910,000 60,000 6,060,000 2025 4,050,000 695,000 -4,745,000 2026 2,920,000 470,000 -3,390,000 2027 2,230,000 240,000 -2,470,000 $- $5 $10 $15 $20 $25 $30 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027MillionsDebt Levels by Fund Type Governmental Enterprise Internal Service 81 INTERFUND TRANSFERS INTERFUND TRANSFERS Operatingtransfers support theoperations ofotherfunds, provide forspecialprojects,and contribute to debtservice payments. The followingschedule provides theoperatingtransfers inthe 2017 Budget: Fund No.Transfer In Fund Amount Fund No.TransferOut Fund Amount 312 2011A GO Improvement Bond 468,376$213 Economic Development 200,000$ 402 Stormwater Access 268,376 317 2010A GO Improvement Bond 130,986 602 Sewage 85,293 Street Reconstruction 45,693 656 Fiber Optics 230,000 609 Liquor 230,000 Total Transfers In 829,362$Total Transfers Out 829,362$ SCHEDULE OF OPERATINGTRANSFERS Debt Service 72% Enterprise 28% 2017 TransfersIn Fund-Type Enterprise 38% Special Revenue 24% Capital Projects 38% 2017 TransfersOut Fund-Type 82 STAFFING SUMMARY STAFFING HISTORY Staffing,as measuredby full-time equivalents, has been relativelystable for thelast five years.Many employees perform across multiple activities/divisions and funds.The table below does not reflect the part-time communitycenteremployees.There are no new full-time positions budgetedfor2017. Alltheemployees forFiber Optics Fundwere eliminatedwhentheservice was outsourced. Amended Adopted Actual Actual Actual Budget Projected Budget 2013 2014 2015 2016 2016 2017 General Fund City Administration 1.85 1.85 1.85 2.18 2.18 3.60 Finance 4.00 4.00 4.00 3.80 3.80 4.00 City Clerk 0.35 0.35 0.35 0.35 0.35 1.00 Human Resources 1.00 1.00 1.00 1.00 1.00 1.00 Planning & Zoning 1.30 1.30 1.30 1.30 1.30 1.30 City Hall 1.40 1.40 1.40 1.90 1.90 0.10 Building Inspections 3.00 3.00 3.00 3.50 3.50 4.00 Public Works Administration 2.50 2.00 2.00 1.50 1.50 1.40 Engineering 1.60 1.60 1.60 --- Public Works Inspections 1.30 1.30 1.30 0.80 0.80 1.00 Shop & Garage 1.50 1.50 1.50 1.50 1.50 1.50 Streets & Alleys 10.30 10.30 10.30 10.05 10.05 9.80 Ice & Snow 2.20 2.20 2.20 1.70 1.70 1.70 Park Operations 6.85 6.85 6.85 6.85 6.85 6.85 Shade Tree 0.40 0.40 0.40 0.50 0.50 0.50 Economic Development ------ Total General Fund 39.55 39.05 39.05 36.93 36.93 37.75 Special Revenue Funds Economic Development 0.20 0.20 0.20 0.20 0.20 1.20 Monticello Community Center 8.40 8.40 8.40 8.40 8.40 8.65 Total Special Revenue Funds 8.60 8.60 8.60 8.60 8.60 9.85 Enterprise Funds Water 3.15 3.15 3.15 3.80 3.80 3.80 Sewage 3.15 3.15 3.15 3.80 3.80 3.80 Liquor 10.00 10.00 10.00 10.00 10.00 10.40 Deputy Registrar 6.00 6.00 6.00 6.10 6.10 6.20 Fiber Optics 7.45 7.45 7.45 7.45 7.45 - Total Enterprise Funds 29.75 29.75 29.75 31.15 31.15 24.20 Total All Funds 77.90 77.40 77.40 76.68 76.68 71.80 NUMBER OF FULL-TIME EQUIVALENTS Fiscal Year Ended December 31, 83 REVENUE TRENDS & ANALYSIS Revenuesareestimatedforeveryfundofthecityeachyear.Thissummaryofrevenueestimatesis supportedbydetailedrevenueestimatesforeachfundinlatersections.This sectionofthe budget highlights majorrevenue sources forallthecity funds as combinedand formajor governmentaland enterprise funds: GeneralFund andMonticello Community Center Fund(governmental funds),along withthe Water,Sewage,Liquor,DeputyRegistrarand FiberOptics funds (enterprise funds).Trends for these funds andindividualrevenues areshowntogetherwithestimates forthecomingyear. TOTAL CITY REVENUES AND OTHER SOURCES 2013 2014 2015 2016 2016 2017 % TOTAL ALL FUNDS ACTUAL ACTUAL ACTUAL BUDGET PROJECTED BUDGET CHANGE Property Taxes 7,961,030$8,386,953$8,619,812$9,205,000$9,205,000$9,430,000$2.4% Tax Increments 991,339 836,750 727,617 675,994 653,564 653,564 -3.3% Franchise & Other Taxes 327,667 334,726 352,073 363,900 399,900 399,900 9.9% Sale of Goods 5,085,925 5,165,737 5,489,430 5,367,710 5,367,710 5,435,194 1.3% Licenses & Permits 333,056 381,544 465,469 342,600 377,600 379,600 10.8% Intergovernmental Revenues 1,283,769 733,566 1,413,360 1,348,177 1,511,177 556,440 -58.7% Charges for Services 7,234,947 7,312,509 7,873,890 7,475,425 7,557,000 7,784,122 4.1% Fines & Forfeits 41,124 48,744 42,474 42,100 42,100 42,300 0.5% Special Assessments 2,110,283 1,953,370 3,331,901 818,525 644,625 576,666 -29.5% Miscellaneous 938,729 1,831,290 1,130,061 848,833 846,183 786,790 -7.3% Contributed Capital -966,494 1,435,870 140,450 840,450 140,450 0.0% Operating Transfers 7,159,545 11,298,117 4,937,975 4,125,134 2,734,136 829,362 -79.9% Debt Proceeds 3,503,224 6,467,106 2,651,898 7,000,000 7,000,000 5,700,000 -18.6% TOTAL REVENUES 36,970,638$45,716,906$38,471,830$37,753,848$37,179,445$32,714,388$-13.3% Property taxes account for the single largest revenue source for the city. Other sources such as operating transfers (in) and debt proceeds occasionally surpass property taxes, but they generally do not support day-to-day operations. Tax Increments are the main source of revenue for the Economic Development Fund. This fund accounts for the city’s tax increment financing (TIF) districts and other general economic development activities. No TIF districts were decertified in 2016 and one will be in 2017. Licenses & permits are comprised primarily of building permits, which are conservatively estimated at 2014 levels to smooth the cyclical nature of this revenue category. Intergovernmental revenues are expected to decrease as state aid for some capital projects (Fallon overpass, TH25/CSAH75 improvements, etc.) is distributed over multiple accounting periods. With a strong commercial tax base, the city generally does not qualify for much state aid that is not project specific. Special assessments primarily support debt service funds. Prepayment of future certified assessments in 2015 and 2016 has affected collections in subsequent years. Charges for services do not reflect changes to the fee schedule occurring after adoption of the budget. The city uses conservative revenue budgeting practices to ensure revenues will be sufficient to meet operating needs. 84 Miscellaneous revenues are conservatively estimated to decrease but the investment earnings— the largest portion of this revenue classification—are expected to hold steady. The amount of investible funds is expected to decline with fund balances. Overall revenues and other sources lag expenditures and other uses. Operating transfers (In) are expected to decline because capital projects and debt service will receive less support from internal sources. In 2016 and 2017, operating transfers are largely going to debt service funds for annual principal and interest payments on bonded debt. In 2017, debt proceeds are estimated at $5.7 million for sewage treatment plant improvements, TH25 and 7th intersection improvements, Fallon Bridge construction, and other 2017 street reconstruction projects. The Minnesota Public Facilities Authority is providing a low interest (1.06% for 30 years) loan for the plant project. The chart below provides an overall picture of the city’s revenues and other sources. Property Taxes 29% Sale of Goods 16% Charges for Services 24% Operating Transfers 3% Debt 17% All Other 11% Revenue and Other Sources (All Funds) PROPERTY TAXES The city relies on property taxes to support such functions as general government, public safety, public works, recreation and culture, and debt service. For 2017, the council adopted a general levy of $9.15 million, which is $225,000 (2.5%) more than the prior year. For the second time, the council also adopted a Housing and Redevelopment Authority (HRA) special benefit levy of $280,000. The entire HRA levy will be recorded as revenue in the Economic Development Authority (EDA) Fund. The General Fund discontinued operating transfers—annually about $90,000--to the EDA Fund with the HRA levy adoption in 2016. Both levies will be combined for 85 graphical and contextual purposes. The tax levy has risen ahead of inflation the last four years. The following chart reflects the changes in the tax levy over the last ten years: $9,205,000 $9,430,000 $- $2,000,000 $4,000,000 $6,000,000 $8,000,000 $10,000,000 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Property TaxLevy History Accounting for a variety of activities, the General Fund will receive less than 70% of the 2016 property tax levy. However, property taxes provide approximately 80% of the General Fund’s revenue. In prior years, the levy for the Monticello Community Center had two components: operations and debt service. The Center’s debt service levy portion dropped off in 2015. The operations component increased $8,000 (2.2%) to $372,000. The following chart represents the distribution of the tax levy for 2017. GeneralFund, $6,291,000,67% MCC Operations, 372,000, 4% HRA Levy, $280,000,3% Debt Service, 2,487,000,26% PropertyTax Levy (Adopted - 2017) 86 When determining the property tax levy, the city council and staff consider the impact the levy will have on various property owners. This impact is then balanced against services provided and service levels. The city has been able to fund services at current levels with a relatively flat levy. The growing economy and increased property values have led to a drop in the tax capacity rate. Still, from 2008 through 2012, property values declined as a result of a weaker national and local economy. Estimated market values are converted to tax capacity by using specific state formulas for various types of properties. In 2013, the tax capacity grew a healthy $2.9 million (18.6%) to $18.7 million. Why? The nuclear power plant located within the city limits added over $160 million in new taxable value with capital equipment upgrades. Consequently, equipment retirements related to the same uprate caused a slight decline in 2014. History repeating itself, the tax capacity for 2015 grew by $5.7 million (31%) to $23.9 million with another uprate at the nuclear power plant. Further, the benefits from the last uprate extended into 2016, adding $80 million in tax market value and nearly $2 million in tax capacity. The tax capacity for 2017 taxes payable is $27.6 million or 6.5% higher than 2016. This time, increases in residential market values added to tax capacity gains. In a stable levy environment, tax capacity and tax capacity rates will typically have an inverse relationship. With city and HRA tax capacity rates added together, the following chart demonstrates that relationship over the last 15 years: $9.6M $23.9M $25.9M $27.6M 67.645 35.737 35.552 34.177 0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 $- $5 $10 $15 $20 $25 $30 TaxCapacityRateTaxCapacityValue(millions)Tax Capacity Values and TaxCapacity Rates (City + HRA) Tax Capacity Tax Capacity GENERAL FUND The GeneralFund is used to account forallfinancial resources ofthecity,except forthose requiredto be accountedforinanother fund. Majorfunctions supportedby generalfund revenues include:city and finance administration, police andfireservices, public works,and recreation andculture. 87 Revenue is estimatedto be $7,802,000 (+2.7%) forthe 2017 budget year. TheprimaryGeneral Fund sourceof revenue is property taxes at$6,291,000 (+1.8%),whichaccounts for80%of the total.No othersingle categoryof revenues exceeds 5% oftotalrevenues. The General Fund is notsupported by any transfers (othersources)from other funds. The followingchartdepicts GeneralFund revenues as represented inthe2017 adoptedbudget: Property Taxes, 80% General Fund Revenues - 2017 Property Taxes Franchise& Other Taxes Licenses & Permits Intergovernmental Revenues Charges for Services All Other GeneralFund revenues peaked in2008 alongwithpropertytaxes andlicenses and permits. Since 2008,licenses andpermits have compriseda relatively less significantportionofthe overall revenues. Licenses andpermits consistmostlyofbuilding-type permits and have greatlydeclinedalongwith the economyandcommercialand residentialconstruction. Peakingin2008 above $1 million,licenses & permits areconservativelyestimatedat$315,000 for2016. The chartbelow represents GeneralFund revenues over the lasttenyears,with2016 projectedand2017 budgeted: $- $1 $2 $3 $4 $5 $6 $7 $8 $9 2008 2009 2010 2011 2011 2013 2014 2015 2016 2017MillionsGeneral Fund Revenues PropertyTaxes Licenses &Permits All Other 88 WATER AND SEWAGE FUNDS Waterandsewagecharges forservices are primarilycomprisedof providingMonticello residents and businesses withwaterandsewage services.Based partiallyonthe levelofconsumption,these utility funds each have separatecharges for deliveredservices.The citysetrates to coveroperatingcosts,a portionof depreciation,and debtservice.As new developmentslowed, the burdenon infrastructure replacementcostsshiftedto utilityrates from impact(access)charges.Thewater andsewage funds are expected to provide some levelof future supportfor debtservice incurredto make waterand sewage system improvements. Waterandsewage revenue grew from 2008 to 2011as consumptiondropped and rates increased. After peakingin2012 (a dry year),waterconsumption again declinedas waterand sewage rates climbed, pushingup bothwaterandsewage revenues. With2016 projectedand2017 budgeted,the followingchartplots revenues forwater andsewageserviceson the primaryaxis (left)againstwater sales onthe secondary axis (right): - 100 200 300 400 500 600 700 $- $0.5 $1.0 $1.5 $2.0 $2.5 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 GallonsSold(Millions)Revenues(Millions)Water & Sewage Revenue Water Revenue Sewage Revenue H2O Sold (Gals) Waterservice charges have two components: base charge withaminimum usage amountand consumptioncharge for usage above theminimum amount. Bothcharges have increasedsteadily overthe lastnine years: average base andconsumptioncharge increaseswere 6.6% and7.4%, respectively. For2017,no rate increases were included inthe budget. However,subsequentto budget adoption,thecouncilraised the base charge by $0.50 (2.7%)the usage charge by2.5%. Sewage charges,similar towatercharges, have twocomponents: base charge withaminimum usage amountandconsumptioncharge for usage above the minimum amount.Bothcharges have increasedsteadilyoverthe years: average base andconsumptioncharge increaseswere 7.4% and 6.8%,respectively. For2017,no rate increases were includedinthe budget.However,subsequentto budget adoption,thecouncilraised the base charge by $1.46 (6.4%)andthe usage charges by3.3%. 89 The followingchartreflects the waterandsewage base rates overthe lastten years: $- $5 $10 $15 $20 $25 $30 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017QuarterlyChargeSewage and Water Base Rates Sewage Water DEPUTY REGISTRAR (DMV) The city is authorized bythe State ofMinnesotato operate aDMV. Fees collected from issuanceof motorvehicle and DNRlicenses are the DMV’s main revenuesource. Fees are regulatedby the state. A state approvedfee increase alongwithbettereconomicconditions has resulted inhigher revenues, starting in2012. The followingchartshows the historyofDMVtransactions over afive-yearperiod. Motorvehicle licenses (new and renewals)as percentage oftotaltransactions remains relativelyconstantat88% to 89%. Totaltransactions surpassedtwomilestoneswith over70,000 transactions in2015 andover 75,000 in2016. Indeed, the Monticello DMVprocesses1.13% ofthestate’s totalmotorvehicle transactions with .24% ofthe state’s population,aratio of4.7. 89.2%88.6%88.4%89.5%89.0% 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 2012 2013 2014 2015 2016 DMVTransactions by Type Motor Veh.($6-$10)DNR ($2-$7)Game &Fish ($1)DriversLic. ($8) 90 With darkershades ofgreen representing higher(better) numbers,the followingchartshows the monthly DMV revenues over the last five years.The chart also provides informationonannual revenues,annual transactions,and revenues pertransaction. DMV Revenue by Month Month 2012 2013 2014 2015 2016 Jan 37,534$39,765$40,164$46,375$44,033$ Feb 42,748 40,770 38,911 44,030 48,449 Mar 50,459 36,276 46,503 58,146 51,587 Apr 44,251 44,208 49,621 50,202 48,811 May 37,751 48,814 47,105 45,042 51,480 Jun 43,378 37,904 43,703 47,721 45,794 Jul 38,589 40,822 44,600 46,171 42,991 Aug 39,507 38,530 43,821 42,362 57,346 Sep 31,890 36,622 35,072 40,759 44,186 Oct 36,491 32,969 38,840 37,245 44,178 Nov 29,241 27,357 33,506 32,457 37,700 Dec 27,109 32,140 35,647 40,608 44,803 Total 458,948$456,178$497,493$531,118$561,357$ % Change 25.7%-0.6%9.1%6.8%5.7% Transactions 62,999 62,420 67,462 72,135 75,891 % Change 8.1%-0.9%8.1%6.9%5.2% Revenue per Transaction 7.29$7.31$7.37$7.36$7.40$ MONTICELLO COMMUNITY CENTER The Monticello Community Center (MCC)provides afacilitywithspace for avarietyofrecreational, professional,andeducationalopportunities. Aside from its portionofthe property tax levy,the MCC is supportedby avarietyoffees formemberships,activities,rental,andconcessions.Council passeda revenue recoverypolicyalongwithbudgetadoptionthat now requires the MCCtocover85%ofits operatingcosts—includingequipment—with fees and charges. In the followingchart,2013 through2015 are actualamounts2016 and2017 are estimates. The 2017 budget reflects further implementationof the revenue recoverypolicy. $- $100,000 $200,000 $300,000 $400,000 $500,000 $600,000 $700,000 $800,000 $900,000 $1,000,000 User Fees Rental Activities Concessions MCC Major Revenues 2013 2014 2015 2016 2017 91 LIQUORFUND With total2016 sales ofnearly$5.5 million,Monticello’s municipal liquorstore ranks nearthe topof Minnesotacities withonlyonestore.However, revenue growth is expectedtoslow because ofstore size limitations.Totalsaleshave climbedan average of 3% forthe lastfive years;liquoris the fastest growthcategory averagingnearly4%overfive years. Liquorsales have increased over the last five years and the budgetreflects thistrend. The Liquor Fund hasone retailoutlet: Hi-Way Liquors. This fund provides vitalresources for manycommunity projects includingcommunity center andstreetimprovements.Conservative revenue estimates are usedforbudgeting purposes. However,2016 netcash flow from operations should top$600,000.In prior years,interestearnings contributedsignificantlyto netcashflows. A large operatingtransfer outin2012 depletedcashand subsequentongoingtransfers have curtailedinvestmentearnings. $- $1 $2 $3 $4 $5 $6 2012 2013 2014 2015 2016MillionsHi-Way Sales by Category Wine Liquor Beer Beeraccounts forapproximately50% oftotalsales; liquorandwine follow at30% and16%.Non- alcoholitems contribute 4%. Beer typically has the lowestgross marginat26%and wine the highest at32%.Liquor is in the middle atabout30%.The chart below providessales information bycategory: Liquor Store Revenue by Category Category 2012 2013 2014 2015 2016 5 Yr Chg Beer 2,483,194$2,539,167$2,604,942$2,764,583$2,768,394$19% % Change 6.6%2.3%2.6%6.1%0.1% Liquor 1,396,521$1,506,776$1,546,118$1,634,069$1,624,908$21% % Change 4.0%7.9%2.6%5.7%-0.6% Wine 812,832$860,817$868,779$927,778$889,082$19% % Change 8.5%5.9%0.9%6.8%-4.2% Other 153,234$138,855$145,902$165,631$171,420$-26% % Change -34.0%-9.4%5.1%13.5%3.5% Total Sales 4,845,781$5,045,615$5,165,741$5,492,061$5,453,804$17% % Change 4.1%4.1%2.4%6.3%-0.7% 92 FIBER OPTICS FUND (FiberNet) Monticello’s telecommunications utility, FiberNetMonticello, provides internet, telephone (voice) and video (TV)services. City residentialandcommercialcustomerscansubscribe toone, two orall three services.FiberNetcontinues to face competition from two large private providers with deep pockets. As aresult,subscribercounts forvoice andTV have declinedinrecentyears. Internetis showingsome growthwith morecustomers streaming video services. Still,commercialand residentialcustomers are benefitting from lowerbills withFiberNet’s presencein themarketplace eveniftheyare not FiberNetcustomers. Historical dataforyears prior to 2015 are skewedby the waytelephone customers werecounted. The datainthe graphs belowshow astable competitive environment forFiberNetin2016. 1424 1427 1423 1418 1418 1416 1407 1411 1445 1452 1456 1487 714 701 684 673 665 658 649 646 646 647 641 641 518 514 506 500 496 493 480 478 474 471 465 461 0 500 1000 1500 2000 2500 3000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2016 Total Subscribed Services Total Phone Total Television Total Internet 1437 1436 1434 1427 1430 1426 1421 1426 1454 1463 1469 1504 137 137 135 135 128 130 129 127 126 126 127 126 0 200 400 600 800 1000 1200 1400 1600 1800 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2016 Residential and Business Customer Counts Business Residential The2017budgetincludesrateincreasesforvariousservices.InJuly2016,thecitycontractedwithArvig tomanageFiberNet.AllFiberNetemployeesarenowArvigemployees.Throughleaneroperationsand sharedresources,thecityexpectstohaveapositivecashflowin2018.Arvigwillcontinuetoassessthe marketplace and service delivery costs and will raise prices as conditions warrant. The 2017 budgeted subsidy to FiberNetfrom other funds (Liquor)is $230,000. 93 APPROPRIATIONS BY CATEGORY AND FUND-TYPE Expenditures, often called appropriations, are classified under one of six major categories: personnel services (wages & benefits), supplies, other services & charges (professional fees, utilities, etc), capital outlay, debt service, and operating transfers (other financing uses). The graph below shows the relative percentage of FY17 budgeted expenditures for these six major categories for all funds, combined. Personnel Services 17% Supplies 15% Capital Outlay 28%Operating Transfers 2% Other Services &Charges 24% Debt Service 14% 2017 Appropriations by Category - All Funds APPROPRIATIONS BY TYPE, GENERAL FUND ONLY— Using those same categories of expenditure type, the relative percentages of budgeted expenditures for the General Fund are shown below. As you can see, the General Fund is comprised of a much higher percentage of personnel services costs compared to all funds, as a whole. The General Fund supports very little capital improvements and no debt service compared to all funds, as a whole. Personnel Services 40% Supplies 9% Capital Outlay 3% Other Services & Charges 48% Expendituresand OtherUses - 2017 94 In governmental agencies, salaries, wages and benefits (personnel services) normally represent the largest of these categories. However, due to the significant investment in infrastructure, cities have a much higher percentage of the budget devoted to operating and capital costs, including debt service, than most other governmental entities. One other factor is that the city contracts (other services and charges) for law enforcement, legal and assessing services. As shown, the General Fund, Debt Service Fund (aggregation of debt service sub-funds) and enterprise funds account for 69% of the total expenditures of the city. The General Fund is the city’s primary operating account for general government operations. Debt service funds include only non-enterprise and non-internal service fund debt. These funds are supported with property taxes, special assessments, tax increments, and access fund transfers. Enterprise funds consist of water, sewage, liquor, deputy registrar (DMV), and fiber optics funds. These funds operate on a self-supporting basis. Special revenue funds, totaling 8% of appropriations, include a variety of fee supported funds including the community center and cemetery. Capital project funds, totaling 21% of appropriations, include improvement funds for street reconstruction and street lighting, and other capital asset acquisition funds, excluding those purchased through enterprise and internal service funds. General Fund 22% Special Revenue Funds 8%Debt Service Funds 13% Internal Service Funds 2% Capital Project Funds 21% Enterprise Funds 34% 2017 Expenditures by Fund-Type 95 This page intentionally left blank 96 ENTERPRISE FUNDS For Fiscal Year 2013 Adopted 2017 GENERAL FUND GENERAL FUND - SUMMARY FUND DESCRIPTION One of five governmental fund types, the General Fund serves as the chief operating fund of the city. The General Fund is used to account for all financial resources not accounted for in some other fund. The fund uses the modified accrual basis of accounting for budgeting and financial reporting purposes. This means expenditures are recorded when the liability is incurred and revenues are recorded when they become measurable and available. The adopted General Fund budget is a balanced budget--current revenues and other sources equal expenditures and other uses. ISSUES The General Fund’s largest revenue source is property taxes. In 2017 the General Fund’s portion of the levy grew by 1.8% as the city and HRA combined levy grew by 2.4% The Public Works Department has the largest appropriation for 2017. GENERAL FUND 2013 2014 2015 2016 2016 2017 % REVENUES ACTUAL ACTUAL ACTUAL BUDGET PROJECTED BUDGET CHANGE Property Taxes 5,580,437$5,507,285$5,887,666$6,177,000$6,177,000$6,291,000$1.8% Franchise & Other Taxes 241,664 237,173 235,089 283,900 283,900 283,900 0.0% Licenses & Permits 331,136 378,809 460,834 338,900 373,900 379,400 12.0% Intergovernmental Revenues 373,482 321,891 355,729 301,177 301,177 306,440 1.7% Charges for Services 280,288 318,278 366,926 267,664 267,664 320,470 19.7% Fines & Forfiets 41,124 48,744 42,474 42,100 42,100 42,300 0.5% Special Assessments 22,351 22,808 1,330 300 300 300 0.0% Miscellaneous 117,863 330,858 318,071 184,959 184,959 178,190 -3.7% Operating Transfers --------- TOTAL REVENUES 6,988,345$7,165,846$7,668,119$7,596,000$7,631,000$7,802,000$2.7% EXPENDITURES BY DEPARTMENT GENERAL GOVERNMENT Mayor and Council 53,696$52,182$52,572$53,925$53,925$57,350$6.4% City Administration 266,689 281,033 314,719 268,441 268,441 444,313 65.5% City Clerk 38,740 75,594 29,658 104,162 104,162 115,092 10.5% Finance 326,510 385,662 377,867 428,980 428,980 445,375 3.8% Audit 47,823 53,541 37,798 45,000 45,000 42,000 -6.7% City Assessing 49,664 49,832 50,466 52,115 52,115 52,115 0.0% Legal 46,905 29,303 36,946 37,000 37,000 38,000 2.7% Human Resources 93,067 90,565 117,249 118,688 118,688 124,288 4.7% Planning & Zoning 182,753 220,080 244,976 218,023 218,023 230,848 5.9% Information Technology Services 59,257 --10,900 10,900 --100.0% City Hall 210,326 186,833 183,997 200,723 200,723 61,759 -69.2% Prairie Center Building 15,355 14,409 13,327 14,120 14,120 12,841 -9.1% TOTAL GENERAL GOVERNMENT 1,390,785$1,439,034$1,459,575$1,552,077$1,552,077$1,623,981$4.6% Continued… 97 GENERAL FUND 2013 2014 2015 2016 2016 2017 % (Continued)ACTUAL ACTUAL ACTUAL BUDGET PROJECTED BUDGET CHANGE PUBLIC SAFETY Law Enforcement 1,190,441$1,145,247$1,174,439$1,222,627$1,222,627$1,263,948$3.4% Fire & Rescue 222,141 306,779 309,970 333,823 333,823 355,810 6.6% Fire Relief 109,594 108,186 120,027 80,000 80,000 80,000 0.0% Building Inspections 251,007 266,545 304,858 369,663 369,663 384,627 4.0% Civil Defense 9,707 1,661 1,500 3,930 3,930 3,564 -9.3% Animal Control 47,426 49,439 48,754 51,348 51,348 51,520 0.3% National Guard 14,517 14,061 13,438 16,050 16,050 15,300 -4.7% TOTAL PUBLIC SAFETY 1,844,833$1,891,918$1,972,986$2,077,441$2,077,441$2,154,769$3.7% PUBLIC WORKS Public Works Administration 113,882$122,151$124,504$194,771$194,771$147,431$-24.3% Engineering 224,028 195,841 110,555 160,058 160,058 174,900 9.3% Public Works Inspecitons 54,878 36,867 32,084 88,809 88,809 108,766 22.5% Streets & Alleys 692,011 739,443 739,866 976,962 976,962 994,001 1.7% Ice & Snow 210,552 308,387 263,020 284,280 284,280 290,156 2.1% Shop & Garage 186,741 177,644 185,837 204,101 204,101 206,353 1.1% Stormwater 12,064 16,842 26,712 73,121 73,121 72,048 -1.5% Street Lighting 206,005 195,695 226,485 263,900 263,900 273,900 3.8% Refuse Collection 505,996 517,955 563,477 614,437 614,437 616,237 0.3% TOTAL PUBLIC WORKS 2,206,157$2,310,825$2,272,540$2,860,439$2,860,439$2,883,792$0.8% TRANSIT Bus -10,000 40,000 40,000 40,000 5,000 -87.5% TOTAL TRANSIT -10,000 40,000 40,000 40,000 5,000 -87.5% RECREATION AND CULTURE Senior Center 90,219 97,547 97,115 101,672 101,672 102,572 0.9% Ice Arena 75,000 -------- Park Operations 572,985 570,639 706,934 824,997 824,997 891,848 8.1% Park Ballfields 25,517 18,149 16,971 27,300 27,300 27,300 0.0% Shade Tree 53,475 68,891 104,990 63,527 63,527 66,226 4.2% Library 35,395 36,764 36,176 40,526 40,526 38,000 -6.2% TOTAL RECREATION AND CULTURE 852,591$791,990$962,186$1,058,022$1,058,022$1,125,946$6.4% UNALLOCATED Insurance 127,710 12,584 8,082 8,021 8,021 8,512 6.1% TOTAL UNALLOCATED 127,710$12,584$8,082$8,021$8,021$8,512$6.1% OTHER USES --- Operating Tranfers 130,213$293,000$297,012$-$-$-$--- TOTAL OTHER USES 130,213$293,000$297,012$-$-$-$--- TOTAL EXPENDITURES 6,552,289$6,749,351$7,012,381$7,596,000$7,596,000$7,802,000$2.7% FUND BALANCE - JANUARY 1 3,478,507$3,914,563$4,331,058$4,986,796$4,986,796$5,021,796$ Excess (Deficiency) of Revenues over Expenditures 436,056 416,495 655,738 -35,000 - FUND BALANCE - DECEMBER 31 3,914,563$4,331,058$4,986,796$4,986,796$5,021,796$5,021,796$ 98 The previous table summarizes General Fund revenues by classifications and expenditures by activities/divisions and departments. The table below summarizes both revenues and expenditures by classifications. GENERAL FUND 2013 2014 2015 2016 2016 2017 % REVENUES ACTUAL ACTUAL ACTUAL BUDGET PROJECTED BUDGET CHANGE Property Taxes 5,580,437$5,507,285$5,887,666$6,177,000$6,177,000$6,291,000$1.8% Tax Increments --------- Franchise & Other Taxes 241,664 237,173 235,089 283,900 283,900 283,900 0.0% Licenses & Permits 331,136 378,809 460,834 338,900 373,900 379,400 12.0% Intergovernmental Revenues 373,482 321,891 355,729 301,177 301,177 306,440 1.7% Charges for Services 280,288 318,278 366,926 267,664 267,664 320,470 19.7% Fines & Forfeits 41,124 48,744 42,474 42,100 42,100 42,300 0.5% Special Assessments 22,351 22,808 1,330 300 300 300 0.0% Miscellaneous 117,863 330,858 318,071 184,959 184,959 178,190 -3.7% Operating Transfers --------- TOTAL REVENUES 6,988,345$7,165,846$7,668,119$7,596,000$7,631,000$7,802,000$2.7% EXPENDITURES Personnel Services 2,589,353$2,555,898$2,624,076$2,979,264$2,979,264$3,096,654$3.9% Supplies 520,346 534,655 502,030 662,900 662,900 730,225 10.2% Other Services & Charges 3,291,055 3,256,898 3,418,181 3,723,736 3,723,736 3,728,621 0.1% Capital Outlay 59,535 108,900 171,082 230,100 230,100 246,500 7.1% Operating Transfers 92,000 293,000 297,012 ------ TOTAL EXPENDITURES 6,552,289$6,749,351$7,012,381$7,596,000$7,596,000$7,802,000$2.7% FUND BALANCE - JANUARY 1 3,478,507$3,914,563$4,331,058$4,986,796$4,986,796$5,021,796$ Excess (Deficiency) of Revenues over Expenditures 436,056 416,495 655,738 -35,000 - FUND BALANCE - DECEMBER 31 3,914,563$4,331,058$4,986,796$4,986,796$5,021,796$5,021,796$ BUDGET COMMENTARY: Revenues For 2017, budgeted revenues are estimated to increase by 2.7%. The General Fund’s portion of the tax levy is budgeted to increase by 1.8%, which is greater than the overall levy increase of 4.6%. Property taxes account for over 80% of General Fund revenues. The General Fund’s allocation of franchise and other taxes is level and largely matches related expenditures (street lighting). The charges for services increase reflects higher residential multi-unit garbage charges. Permits and fees will increase with additional development. Miscellaneous revenues are estimated to fall slightly. Expenditures Expenditures are budgeted to increase 2.7%. Most of the capital outlay amount reflects Capital Equipment Fund purchases, which are charged back through lease payments. The personnel services budget includes a full step increase and a 3% (2% in January and 1% in July) market rate wage increase. The operating transfer to the Economic Development Authority Fund for $94,900 was eliminated with the implementation of the HRA Levy in 2016. 99 MAYOR AND CITY COUNCIL DEPARTMENT: General Government SUPERVISOR: Mayor & Council FUND #:101 ACTIVITY #: 41110 ACTIVITY SCOPE: The mayor and council provide elected representation to the community with control over policy goals, budget, administration, and operations. Members participate in various committees and direct staff through the city administrator. OBJECTIVES: 1.Adopt policies and ordinances consistent with the council’s positions on growth, zoning, and financial strategies. 2.Examine city facility needs to meet future city operations. ISSUES: 1.Capitalize on the city’s uniqueness by developing a comprehensive vision statement and setting achievable goals. 2.Succession planning of city staff. MEASURABLE WORKLOAD DATA: Measurement 2013 2014 2015 2016 2017 Council meetings 24 24 24 24 24 Special meetings/workshops 26 25 22 19 20 Council resolutions 101 100 92 94 100 BUDGET COMMENTARY: The council’s budget remains consistent with previous years. The mayor earns $700 per month and each councilor earns $600 per month. BUDGET: GENERAL FUND 2013 2014 2015 2016 2016 2017 % MAYOR & COUNCIL Actual Actual Actual Budget Projected Budget Change Personnel Services 39,685$39,835$39,922$40,500$40,500$40,500$0.0% Supplies --------- Other Services & Charges 14,011 12,347 12,650 13,425 13,425 16,850 25.5% Capital Outlay --------- TOTAL EXPENDITURES 53,696$52,182$52,572$53,925$53,925$57,350$6.4% 100 CITY ADMINISTRATION DEPARTMENT: General Government SUPERVISOR: City Administrator FUND #:101 ACTIVITY #: 41310 ACTIVITY SCOPE: City administration provides the overall direction of the city, as determined by the council and mayor. The city administrator serves as the chief administrative officer, ensuring that laws, ordinances, and resolutions are implemented and enforced. The administrator is also responsible for managing the operations of all city departments and providing customer service for general city hall activities, such as reception and meeting room management. OBJECTIVES: 1.Assist city council in setting policies and procedures in accordance with council's position. 2.Provide direction and leadership on major city projects, budget management; oversee performance evaluation and long-range planning. 3.Continue with proactive succession planning regarding key staffing rolls within the city's organization. 4.To provide friendly, knowledgeable customer service to the public. 5.Provide adequate and consistent hours of business throughout the year. ISSUES: 1.Long-range comprehensive planning. 2.Long-range comprehensive traffic planning. 3.Leading and focusing council on policy matters. 4.Operation of the city's fiber optic network. 5.Continuing to improve internal and external communication systems 6.Management of Citizen Service Desk with continued growth of inquiries and need to improve response times. 7.Assistance with phone system upgrade and training. 8.Maintaining current, accurate information for all public sources 101 MEASURABLE WORKLOAD DATA: Measurement 2013 2014 2015 2016 2017 Council meetings agendas 49 41 49 42 43 Records digitally converted 75%75%75%75%75% Ordinances processed 8 18 30 27 15 Council minutes approved 49 41 49 42 43 Newsletters published 2 2 2 2 2 Utility inserts published 2 2 2 2 2 Park inserts published 4 4 4 4 4 Service desk data entry 332 280 379 499 400 BUDGET COMMENTARY: In 2017, many of the expenditures charged to the city hall budgetary unit will be re-allocated to the city administration budgetary unit. The city hall activity is now limited to expenditures for providing the facility, not internal or external services. The 2017 personnel services budget includes a full step increase and a 3% (2% in January and 1% in July) market rate wage increase. BUDGET: GENERAL FUND 2013 2014 2015 2016 2016 2017 % ADMINISTRATION Actual Actual Actual Budget Projected Budget Change Personnel Services 214,818$214,085$242,064$198,487$198,487$339,721$71.2% Supplies 298 30 234 300 300 14,300 4666.7% Other Services & Charges 51,573 66,918 72,421 69,654 69,654 90,292 29.6% Capital Outlay --------- TOTAL EXPENDITURES 266,689$281,033$314,719$268,441$268,441$444,313$65.5% 102 CITY CLERK DEPARTMENT: General Government SUPERVISOR: Deputy City Clerk FUND #:101 ACTIVITY #: 41410 ACTIVITY SCOPE: The city clerk activity is responsible for administering elections, maintaining official records and the city code, records management and data practices and serves as the data practices compliance officer and responsible authority. OBJECTIVES: 1.Recruit and train judges for future elections. 2.Improve data storage practices, with digital storage through laser fiche. ISSUES: 1.Antiquated city code. 2.Storage space. MEASURABLE WORKLOAD DATA: Measurement 2013 2014 2015 2016 2017 Voters, number of 0 3,714 0 6,161 0 Register voters, number of 6,164 6,394 6,394 7,923 7,923 Pollingplaces 1 1 1 1 1 Elections judges 0 50 0 46 0 BUDGET COMMENTARY: Elections are held in even number years. In 2016, there were primary and general elections for president and a full slate of federal (including president), state, and local offices. Off-year election expenditures are for maintenance contracts on voting equipment. BUDGET: 2013 2014 2015 2016 2016 2017 % CITY CLERK Actual Actual Actual Budget Projected Budget Change Personnel Services 36,002$56,372$26,200$84,108$84,108$90,546$7.7% Supplies -632 ---12,000 --- Other Services & Charges 2,738 18,590 3,458 20,054 20,054 12,546 -37.4% Capital Outlay --------- TOTAL EXPENDITURES 38,740$75,594$29,658$104,162$104,162$115,092$10.5% 103 FINANCE DEPARTMENT: General Government SUPERVISOR: Finance Director FUND #:101 ACTIVITY #: 41520 ACTIVITY SCOPE: The Finance Department conducts the financial affairs of the city of Monticello in accordance with the Government Accounting Standards Board (GASB) and Generally Accepted Accounting Principles (GAAP). This includes protecting the assets of the city, the initiation of financial plans, investment and debt management, review and implementation of internal controls, and accounting for every financial transaction of the city including accounts payable, accounts receivable, payroll, and accounting control. The preparation of the annual audited financial report and annual budget document are also facilitated through finance. OBJECTIVES: 1.Continue working to develop a financial management plan for the city. 2.Develop financial documents in a format to be eligible for review and award of GFOA’s award programs. 3.Provide meaningful and timely financial reports and information to council, commissions and other city departments. 4.Complete financial, payroll and utility billing software conversions. 5.Coordinate a central purchasing system including developing the use of purchase orders. ISSUES: 1.Complete implementation of new software systems for financial, payroll, and utility billing with integration of new processes for purchase orders, web based applications, and remote time card entry. 2.Implement improved reporting procedures to inform council, commissions, and departments. 3.Develop methods for simplifying data analysis for various stakeholders. 4.Work with other departments to find ways to reduce costs of city operations. 5.Construct a work environment that provides growth through learning, self-determination through autonomy, and relatedness through the creation of enduring work products. 6.Cross-training of finance team members in core functions (payroll, AP, utility billing and accounts receivable). 104 MEASURABLE WORKLOAD DATA: Measurement 2013 2014 2015 2016 2017 Outcome/Effectiveness: GFOA Budget Award Yes Yes Yes Yes Yes GFOA Certificate of Achievement Yes Yes Yes Yes Yes GFOA Popular Annual Financial Report Yes Yes Bond Rating A2 A2 A2 A2 A2 ACHs as % of total AP activity 39%45%43%41%43% Efficiency: AP & ACHs per FTE (1.5)1,938 2,121 2,016 1,998 2,000 Work Load: AP checks, number of 1,783 1,744 1,731 1,755 1,700 ACH's 1,124 1,437 1,293 1,242 1,300 W-2s 269 273 290 294 300 1099's 35 56 49 53 50 Journal entries 3,106 3,003 2,889 2,484 2,500 BUDGET COMMENTARY: The Finance budget includes funds to handle the financial transactions of the city, in an efficient manner, while maintaining the highest level of internal controls and segregation of duties. The prior year increase in other services and charges reflects the re-allocation of expenses for IT services and insurances (property, liability and vehicle). The 2017 personnel services budget includes a full step increase and a 3% (2% in January and 1% in July) market rate wage increase. In 2013, one full-time position was returned to part-time status. Other budget items are expected to remain close to prior year levels. BUDGET: GENERAL FUND 2013 2014 2015 2016 2016 2017 % FINANCE Actual Actual Actual Budget Projected Budget Change Personnel Services 282,224$317,249$313,900$355,097$355,097$369,646$4.1% Supplies 2,540 3,222 1,777 3,300 3,300 3,300 0.0% Other Services & Charges 41,746 65,191 62,190 70,583 70,583 72,429 2.6% Capital Outlay --------- TOTAL EXPENDITURES 326,510$385,662$377,867$428,980$428,980$445,375$3.8% 105 AUDIT DEPARTMENT: General Government SUPERVISOR: Finance Director FUND #:101 ACTIVITY #: 41540 ACTIVITY SCOPE: An audit of city finances must be completed on an annual basis for the city to remain in compliance with federal and state accounting practices. OBJECTIVES: 1.Complete the financial audit in a timely fashion. 2.Continue to reduce the number of audit findings and adjustments. ISSUES: 1.Changing reporting requirements and auditing standards. MEASURABLE WORKLOAD DATA: Measurement 2013 2014 2015 2016 2017 Audit submittal date 6/26 6/30 6/25 6/27 6/15 Audit findings 2 2 2 0 0 Opinion Unqualified Unmodified Unmodified Unmodified Unmodified GFOA Award Yes Yes Yes Yes Yes BUDGET COMMENTARY: The budget for auditing consists entirely of the expenses associated with the required audit process. In late 2007, a request for proposal (RFP) for audit services was sent to several firms. The RFP guaranteed the cost for audit services for the years ended 2007 through 2009 and resulted in a cost decrease from previous years. This contract was extended for 2017 fiscal year. The finance department prepared the entire financial report for the first time in 2015. BUDGET: GENERAL FUND 2013 2014 2015 2016 2016 2017 % AUDIT Actual Actual Actual Budget Projected Budget Change Personnel Services -$-$-$-$-$-$--- Supplies --------- Other Services & Charges 47,823 53,541 37,798 45,000 45,000 42,000 -6.7% Capital Outlay --------- TOTAL EXPENDITURES 47,823$53,541$37,798$45,000$45,000$42,000$-6.7% 106 ASSESSING DEPARTMENT: General Government SUPERVISOR: Finance Director FUND #:101 ACTIVITY #: 41550 ACTIVITY SCOPE: Property tax assessing requirements are provided through a contract with the Wright County assessor. There are no plans to alter this activity. OBJECTIVES: 1.To assess new and existing parcels within the city as required. ISSUES: 1.Meeting state requirements in appraising properties. MEASURABLE WORKLOAD DATA: Measurement 2013 2014 2015 2016 2017 New residential properties 22 52 73 44 50 New commercial properties 1 2 2 2 5 Parcels assessed 4,668 4,603 4,611 4,633 4,700 BUDGET COMMENTARY: Assessing services are contracted with the Wright County assessor. The estimated costs for assessments are based on number of existing and new parcels. The city pays $10.50 per parcel for assessment services and $25 for each new permit with an estimated construction value under $499,999 and $100 for values over $500,000. Those rates climb to $11.50, $50.00, and $150 in 2018. BUDGET: GENERAL FUND 2013 2014 2015 2016 2016 2017 % ASSESSING Actual Actual Actual Budget Projected Budget Change Personnel Services -$-$-$-$-$-$--- Supplies --------- Other Services & Charges 49,664 49,832 50,466 52,115 52,115 52,115 0.0% Capital Outlay --------- TOTAL EXPENDITURES 49,664$49,832$50,466$52,115$52,115$52,115$0.0% 107 LEGAL DEPARTMENT: General Government SUPERVISOR: City Administrator FUND #:101 ACTIVITY #: 41601 ACTIVITY SCOPE: Private legal firms provide all the city’s legal services. Activities included are the issuance of legal opinions, preparation of ordinances, resolutions, contracts, and agreements, and the conduct of civil litigation. Additional legal expenditures, such as publications, fees and other costs, are accounted for in the legal budget. OBJECTIVES: 1.Continue to realize savings by contracting legal services. ISSUES: 1.Rising costs associated with the need for existing and new legal services. MEASURABLE WORKLOAD DATA: Measurement 2013 2014 2015 2016 2017 Billedhours: Administration 269.5 280.5 344.7 222.3 300.0 Code enforcement 3.9 21.9 14.8 9.0 20.0 Fiber optics 153.5 116.5 56.0 36.5 50.0 All other 41.2 86.9 48.6 105.9 50.0 Total 468.1 505.8 464.1 373.7 420.0 BUDGET COMMENTARY: The city continues to realize savings from not having full-time counsel. Legal services provided to FiberNet are charged to the Fiber Optics Fund. BUDGET: GENERAL FUND 2013 2014 2015 2016 2016 2017 % LEGAL Actual Actual Actual Budget Projected Budget Change Personnel Services -$-$-$-$-$-$--- Supplies --------- Other Services & Charges 46,905 29,303 36,946 37,000 37,000 38,000 2.7% Capital Outlay --------- TOTAL EXPENDITURES 46,905$29,303$36,946$37,000$37,000$38,000$2.7% 108 HUMAN RESOURCES DEPARTMENT: General Government SUPERVISOR: City Administrator FUND #:101 ACTIVITY #: 41801 ACTIVITY SCOPE: Human Resources activities support the primary mission of the city through the effective recruitment, selection, development, training and assessment of appropriate human resource needs. Employee benefits and compensation administration, implementation of, and compliance with Federal and State employment laws, labor negotiations, processing of employee grievances, and development of personnel policies are major human resource functions. OBJECTIVES: 1.Provide recruiting, interviewing, and other personnel services for all city departments. 2.Administer classification and compensation system for all employees in compliance with pay equity. 3.Plan and coordinate in-house training programs for city staff 4.Administer city benefit plans. ISSUES: 1.Develop city personnel handbook. 2.Develop various personnel policies. 3.Develop and implement city drug and alcohol testing program. 4.Negotiate new union contract for public works employees. MEASURABLE WORKLOAD DATA: Measurement 2013 2014 2015 2016 2017 Workers compensation experience modification 76%71%69%93%93% Full-time positions 55 55 55 52 52 Part-time positions 95 100 103 111 111 Full-time positions filled 3 7 5 6 5 Other positions filled 77 79 89 92 92 Avg, number of employess 150 155 158 163 163 109 BUDGET COMMENTARY: In 2010 the human resource position was changed to a full-time position. The 2017 budget reflects estimated costs for setting up training, providing city staff with benefit and compensation information, and other expenses based on past experience. The 2014 increase in other services and charges reflects the re-allocation of expenses for IT services and insurances (property, liability and vehicle). The current year increase in other services represents the addition of city-wide leadership training. The 2017 personnel services budget includes a full step increase and a 3% (2% in January and 1% in July) market rate wage increase. Other budget items are expected to remain close to prior year levels. BUDGET: GENERAL FUND 2013 2014 2015 2016 2016 2017 % HUMAN RESOURCES Actual Actual Actual Budget Projected Budget Change Personnel Services 78,362$70,988$92,213$92,449$92,449$99,826$8.0% Supplies 328 356 500 600 600 600 0.0% Other Services & Charges 14,377 19,221 24,536 25,639 25,639 23,862 -6.9% Capital Outlay --------- TOTAL EXPENDITURES 93,067$90,565$117,249$118,688$118,688$124,288$4.7% 110 PLANNING, ZONING & COMMUNITY DEVELOPMENT DEPARTMENT: General Government SUPERVISOR: Community Development Director FUND #:101 ACTIVITY #: 41910 ACTIVITY SCOPE: The Community Development and Planning Department is responsible for long-range and current planning efforts for Monticello. The department is responsible for regulating development and use standards as outlined in the zoning and subdivision ordinance; these standards are aimed at protecting and promoting public health, safety, and welfare. The department oversees coordination with regional planning and service providers including Monticello Township Board, Monticello Orderly Annexation Board, Wright County Planning & Zoning, Sherburne County Planning & Zoning and regional transit entities. The department also provides citizens, business owners, and developers with current, easily accessible information about Monticello's planning process and projects happening in their community. OBJECTIVES: 1.Implementation of Comprehensive Plan objectives. 2.Completion of subdivision ordinance amendments consistent with the “Next Steps” outlined by the Comprehensive Plan. 3.Support for downtown redevelopment and revitalization, including the Embracing Downtown Monticello Project. 4.Involvement in regional transportation planning and its impact on land use and growth objectives. 5.Bertram Chain of Lakes acquisition and master planning. 6.Continued implementation and training on the city's GIS. 7.Continued improvements of the city's development and planning process. 8.Increased support for neighborhood organizations and involvement. ISSUES: 1.Zoning compliance and enforcement. 2.Records management and integration for planning and zoning. 3.Land use and transportation relationships. 4.Emerging technology and land use impacts. 111 MEASURABLE WORKLOAD DATA: Measurement 2013 2014 2015 2016 2017 Outcome/Effectiveness: Grants awarded 2 Grant awards $1,163,248 Administrative applications (total)10 16 20 16 5 processed within 5 workingdays 2 7 5 5 5 Site Plan reviews processed within 14 workingdays 3 3 4 Change inUse forms 3 15 reviewedwithing5 workingdays 3 15 Sign Permit zoningreviews 5 25 processed within 5 workingdays 3 24 Land Use applications processed 23 20 within 60 workingdays 19 32 31 23 20 Reconciliations processedwithin 60 days of the decision 12 18 15 14 15 Annexationpetitions 1 1 Efficiency: Applications processed per FTE 35 47 56 49 51 Work Load: PlanningApplications: Variances 3 2 1 2 2 CUPs 4 8 5 17 5 PUD/Amendments to PUD 3 6 3 8 2 InterimUse permits 2 1 Comp Plan amendments 2 1 1 Map amendments 4 3 3 8 2 Non-city zoningtext amendments 1 10 8 2 Plats/adminstrative subdivisions 4 3 7 7 2 Administrative permits 10 16 20 15 15 Site plan reviews 3 3 5 5 Appeals 1 Vacations 2 1 1 2 Sign permit application review 5 25 Change inUse review 3 15 Total applications 35 47 56 74 77 Planningreconciliations 12 18 15 14 15 PlanningCommissionmeetings 13 15 12 17 12 EDAMeetings 12 12 12 11 11 IEDC Meetings 11 11 11 7 4 Grant applications 2 1 1 1 112 BUDGET COMMENTARY: The 2014 increase in other services and charges reflects the re-allocation of expenses for IT services and insurances (property, liability and vehicle). The 2017 personnel services budget includes a full step increase and a 3% (2% in January and 1% in July) market rate wage increase. This department leads in securing grants for development of the Bertram Chain of Lakes Park. BUDGET: GENERAL FUND 2013 2014 2015 2016 2016 2017 % PLANNING & ZONING Actual Actual Actual Budget Projected Budget Change Personnel Services 108,269$115,757$132,710$125,803$125,803$135,221$7.5% Supplies 143 16 345 200 200 200 0.0% Other Services & Charges 74,341 104,307 111,921 92,020 92,020 95,427 3.7% Capital Outlay --------- TOTAL EXPENDITURES 182,753$220,080$244,976$218,023$218,023$230,848$5.9% 113 CITY HALL DEPARTMENT: General Government SUPERVISOR: City Administrator FUND #:101 ACTIVITY #: 41940 ACTIVITY SCOPE: The activity for this department consists of maintenance and upkeep for the building housing city hall. OBJECTIVES: 1.Provide adequate and consistent hours of business throughout the year. 2.Maintain a clean, inviting facility to house meetings and staff. ISSUES: 1.Depreciation of facility and work platforms. 2.Reconfiguring layout to accommodate work flow. 3.Timely maintenance. 4.Utility costs. 5.Building and office security. 6.Re-purposing storage area. MEASURABLE WORKLOAD DATA: Measurement 2013 2014 2015 2016 2017 Number of times cleaned 104 104 104 104 104 Utility expenses $31,598 $28,616 $26,717 $25,073 $33,000 BUDGET COMMENTARY: Items budgeted for the city hall activity are commonly shared among all departments operating out of city hall. Much of the costs associated with this activity will be transferred to the administration activity in 2017. The 2017 personnel services budget includes a full step increase and a 3% (2% in January and 1% in July) market rate wage increase. Personnel services is now limited to just custodial staff. Utilities and repairs and maintenance are the main expenditures in other services and charges. 114 BUDGET: GENERAL FUND 2013 2014 2015 2016 2016 2017 % CITY HALL Actual Actual Actual Budget Projected Budget Change Personnel Services 111,633$114,071$119,954$119,117$119,117$7,801$-93.5% Supplies 12,218 12,308 13,140 16,000 16,000 --100.0% Other Services & Charges 86,475 60,454 50,903 65,606 65,606 53,958 -17.8% Capital Outlay --------- TOTAL EXPENDITURES 210,326$186,833$183,997$200,723$200,723$61,759$-69.2% 115 PRAIRIE CENTER BUILDING DEPARTMENT: General Government SUPERVISOR: City Administrator FUND #:101 ACTIVITY #: 41941 ACTIVITY SCOPE: The city-owned Prairie Center Building leases space to its FiberNet operations. Further, the Wright County Sheriff's Department occupies non-rent paying space in the building. This activity is for the operations of the facility. OBJECTIVES: 1.To provide a well maintained building. ISSUES: 1.Maintain facility with current staff and available funds. 2.Tenant retention. MEASURABLE WORKLOAD DATA: Measurement 2013 2014 2015 2016 2017 Tenants 3 3 2 1 1 BUDGET COMMENTARY: The Prairie Center Building was purchased in 2009 to provide FiberNet Monticello with business office space. The 2014 decrease in other services and charges reflects the allocation of insurance expenses (liability, property and vehicle). The 2017 decrease in other services and charges is the effect from losing a private tenant and the subsequent removal of the Center from the property tax roll. BUDGET: GENERAL FUND 2013 2014 2015 2016 2016 2017 % PRAIRIE CENTER BLDG Actual Actual Actual Budget Projected Budget Change Personnel Services -$-$-$-$-$-$--- Supplies 452 114 60 1,000 1,000 750 -25.0% Other Services & Charges 14,903 14,295 13,267 13,120 13,120 12,091 -7.8% Capital Outlay --------- TOTAL EXPENDITURES 15,355$14,409$13,327$14,120$14,120$12,841$-9.1% 116 LAW ENFORCEMENT DEPARTMENT: Public Safety SUPERVISOR: City Administrator FUND #:101 ACTIVITY #: 42100 ACTIVITY SCOPE: All law enforcement services are contracted with the Wright County Sheriff's Department. The Sheriff’s Department maintains a local office in the Prairie Center building. The Sheriff sets the hourly rate and the city contracts for the number of hours, typically 17,000 to 19,000 hours annually. Contracted hours change in 4 hour increments. OBJECTIVES: 1.Continue contracting for law enforcement services from Wright County. ISSUES: 1.Concerns from residents regarding having our own police force. MEASURABLE WORKLOAD DATA: Measurement 2013 2014 2015 2016 2017 Outcome/Effectiveness: Arrests 172 200 Arrests to crimes ratio 0.19 0.22 Efficiency: Hours contracted 17,568 17,520 Calls per hour contracted 0.44 0.44 Costs per workloadunit $141.66 $145.81 Work Load: Life quality calls, number of 3,511 3,500 Traffic calls, number of 2,981 3,000 Vehicle crashes, number of 334 350 Crimes, number of 904 900 *In 2016 the county sheriff implemented a new reporting format making annual comparison difficult. 117 BUDGET COMMENTARY: Law enforcement services are contracted in four-hour increments from the Wright County Sheriff’s Department. Past hourly rates are as follow: 2016 - $67.00; 2015 - $64.50; 2014 - $62.50; 2013 - $60.50; 2012 - $59.75; 2011 - $59.00. The hourly rate for 2017 will be $69.50. The city contracted for 17,520 hours in 2014 and 2015, which is 4 (52 to 48 hours) per day lower than the 18,980 hours contracted for in 2013. A leap year, 2016 included $3,216 for the extra day. BUDGET: GENERAL FUND 2013 2014 2015 2016 2016 2017 % LAW ENFORCEMENT Actual Actual Actual Budget Projected Budget Change Personnel Services -$-$-$-$-$-$--- Supplies --------- Other Services & Charges 1,190,441 1,145,247 1,174,439 1,222,627 1,222,627 1,263,948 3.4% Capital Outlay --------- TOTAL EXPENDITURES 1,190,441$1,145,247$1,174,439$1,222,627$1,222,627$1,263,948$3.4% 118 FIRE & RESCUE DEPARTMENT: Public Safety SUPERVISOR: City Administrator FUND #:101 ACTIVITY #: 42200 ACTIVITY SCOPE: The Fire Department responds to fire, rescue, hazardous materials, medical, and accident incidents within the city and the surrounding townships. The department also provides fire inspection services. Paid-on-call volunteers provide the department’s staffing. OBJECTIVES: 1.Assemble a confined space entry team with personnel and equipment. 2.Develop NIMS training for all city departments. ISSUES: 1.Improve response times. 2.Develop and implement NIMS training for all staff and council. BUDGET COMMENTARY: The Fire Department is staffed with paid-on-call volunteers. Firefighter pay increased $2.00 per hour to $12.00 per hour per response in 2016. The 2014 increase in capital outlay reflects the acquisition of a fire truck through the Central Equipment Fund. Uniforms and gear contributed to the sharp rise in 2017 supplies. BUDGET: GENERAL FUND 2013 2014 2015 2016 2016 2017 % FIRE Actual Actual Actual Budget Projected Budget Change Personnel Services 118,073$142,331$132,349$149,674$149,674$162,088$8.3% Supplies 42,317 50,291 54,040 49,650 49,650 69,900 40.8% Other Services & Charges 61,751 72,857 82,281 93,199 93,199 82,522 -11.5% Capital Outlay -41,300 41,300 41,300 41,300 41,300 0.0% TOTAL EXPENDITURES 222,141$306,779$309,970$333,823$333,823$355,810$6.6% 119 MEASURABLE WORKLOAD DATA: Measurement 2013 2014 2015 2016 2017 Outcome/Effectiveness: Respondents to fire calls: City 2,887 2,918 2,552 2,603 2,550 Monticello Township 1,121 1,318 1,273 1,161 1,300 Silver Creek Township 428 509 674 537 650 Otsego 15 ---- Mutual Aid 463 486 758 393 750 Drills & Maintenance 1,596 2,888 2,687 2,410 2,650 Total 6,510 8,119 7,944 7,104 7,900 Efficiency: Average respondents per call City 16 15 15 15 14 Monticello Township 19 20 21 18 22 Silver Creek Township 16 18 20 18 22 Otsego --------------- Mutual Aid 26 29 28 13 38 Drills & Maintenance 31 49 40 47 44 Total 19 22 23 20 23 Work Load: Numberof fire calls: City 183 190 165 175 180 Monticello Township 60 67 60 65 60 Silver Creek Township 27 29 33 30 30 Otsego ----- Mutual Aid 18 17 27 31 20 Drills & Maintenance 52 59 67 51 60 Total 340 362 352 352 350 Firefighters, number of 30 30 30 30 30 120 FIRE RELIEF DEPARTMENT: Public Safety SUPERVISOR: City Administrator FUND #:101 ACTIVITY #: 42202 ACTIVITY SCOPE: Providing a retirement benefit to paid-on-call volunteers, the fire relief activity is specifically designed to track the city’s contribution to the Monticello Fire Relief Association. OBJECTIVES: 1.Provide pension funds for the Monticello Fire Relief Association. ISSUES: 1.Pension assets greater than pension liabilities. MEASURABLE WORKLOAD DATA: Measurement 2013 2014 2015 2016 2017 Pension assets 1,114,949$1,053,739$1,026,460$1,198,328$1,300,000$ Pension liabilities 965,425$924,403$1,017,135$1,187,000$1,293,000$ Assets-liabilities ratio 1.15 1.14 1.01 1.01 1.01 Pension per service year $2,850 $3,100 $3,300 $3,600 $3,800 Fire state aid $109,594 $108,186 $120,026 $123,656 $124,000 State aid per employee $3,914 $4,007 $4,287 $4,756 $4,769 Active firefighters 28 27 28 26 26 Deferred firefighters 4 4 3 2 2 BUDGET COMMENTARY: The fire relief budget is basically a conduit for distribution of state fire aid to the pension fund for volunteer firefighters. State aid revenue equals the contribution to the relief association and it is conservatively estimated for budgetary purposes. BUDGET: GENERAL FUND 2013 2014 2015 2016 2016 2017 % FIRE RELIEF Actual Actual Actual Budget Projected Budget Change Personnel Services -$-$-$-$-$-$--- Supplies --------- Other Services & Charges 109,594 108,186 120,027 80,000 80,000 80,000 0.0% Capital Outlay --------- TOTAL EXPENDITURES 109,594$108,186$120,027$80,000$80,000$80,000$0.0% 121 BUILDING INSPECTIONS DEPARTMENT: Public Safety SUPERVISOR: Community Development Director FUND #:101 ACTIVITY #: 42401 ACTIVITY SCOPE: The Building Department inspects all new and remodeled construction within the city by a state certified building inspector. The department initiates all building permits and oversees the enforcement of all public nuisance and ordinance issues. OBJECTIVES: 1.Continue implementation of the rental licensing program. 2.Continue implementation of zoning ordinance changes. 3.Continue sign ordinance update. 4.Implement yearly contractor, realtor, and rental property owner workshops. 5.Continue public relations contact. Improve city's public perception image. 6.Continue implementation of the building codes. ISSUES: 1.Managing and prioritizing department workloads. 2.Facing the challenges of a growing regional center city and the possible rebound of residential property growth. 3.Keep up with rental license inspections of investor owned residential properties. MEASURABLE WORKLOAD DATA: Measurement 2013 2014 2015 2016 2017 Outcome/Effectiveness: Value of permits issued 15,821,223$19,714,895$36,242,742$59,426,683$20,000,000$ Value of permits perFTE 5,273,741$6,571,632$10,355,069$14,856,671$5,000,000$ Efficiency: Departmental FTEs 3 3 3.5 4 4 Rental inspections per FTE (2)671 692 697 793 850 Permits perFTE 220 240 256 267 214 Work Load: Buildingpermits issued 659 721 768 802 750 Nuisance notices issued 161 156 110 118 100 Rental units,number of 1,341 1,383 1,393 1,586 1,700 122 BUDGET COMMENTARY: The prior year increase in other services and charges reflects the re-allocation of expenses for IT services and insurances (property, liability and vehicle). The 2017 personnel services budget includes a full step increase and a 3% (2% in January and 1% in July) market rate wage increase and the addition of one building inspector.Other budget items are expected to remain close to prior year levels. BUDGET: GENERAL FUND 2013 2014 2015 2016 2016 2017 % BUILDING INSPECTIONS Actual Actual Actual Budget Projected Budget Change Personnel Services 229,817$238,627$275,107$334,776$334,776$347,990$3.9% Supplies 4,659 2,942 4,488 5,800 5,800 5,800 0.0% Other Services & Charges 16,531 24,976 25,263 29,087 29,087 30,837 6.0% Capital Outlay --------- TOTAL EXPENDITURES 251,007$266,545$304,858$369,663$369,663$384,627$4.0% 123 CIVIL DEFENSE DEPARTMENT: Civil Defense SUPERVISOR: Chief Building Official FUND #:101 ACTIVITY #: 42501 ACTIVITY SCOPE: The civil defense department provides constant defense coverage for all weather and power plant related emergency situations within the city. OBJECTIVES: 1.Implement city hall, community center, and National Guard emergency preparedness. ISSUES: 1.Preparedness - little or no warning when an emergency occurs. MEASURABLE WORKLOAD DATA: Measurement 2013 2014 2015 2016 2017 Meetings hours per year 145 60 72 72 72 Sirens,number of 106 106 106 106 106 Tests per year per siren 48 48 48 48 48 BUDGET COMMENTARY: The 2017 budget is based on the 2016 budget. With the retirement of the city's previous building official, much of this activity's responsibilities have been transferred to Wright County. However, the city is an active participant the emergency management team. BUDGET: GENERAL FUND 2013 2014 2015 2016 2016 2017 % CIVIL DEFENSE Actual Actual Actual Budget Projected Budget Change Personnel Services 1,221$-$592$1,612$1,612$1,612$0.0% Supplies 7,246 490 -100 100 100 0.0% Other Services & Charges 1,240 1,171 908 2,218 2,218 1,852 -16.5% Capital Outlay --------- TOTAL EXPENDITURES 9,707$1,661$1,500$3,930$3,930$3,564$-9.3% 124 ANIMAL CONTROL DEPARTMENT: Animal Control SUPERVISOR: Project Coordinator FUND #:101 ACTIVITY #: 42701 ACTIVITY SCOPE: The city contracts with a private individual for animal control services. The city owns and maintains the animal control facility. The city also contracts with nearby communities, allowing them to use our services and facility. OBJECTIVES: 1.To address issues within the city and surrounding communities in a timely and courteous manner. 2.Continue to improve animal control response time. 3.Continue to improve billing procedures for animal control issues. ISSUES: 1.To provide quick response to residents on animal control concerns. 2.Allocations of service costs based on usage by customers (township and cities). MEASURABLE WORKLOAD DATA: Measurement 2013 2014 2015 2016 2017 Stray animal reports 496 535 532 500 Barking dog reports 190 173 180 175 Lost/found reports 1,670 1,568 1,487 1,600 Feral cat trapping 261 301 245 275 Unsanitary condition reports 201 189 223 195 Abuse/neglect reports 171 191 149 195 Impounds 556 572 563 570 Dog bite reports 88 72 78 75 Animal control fees $29,764 $35,169 $38,756 $37,838 $36,000 BUDGET COMMENTARY: The professional service contract to handle all animal control issues is the largest budgeted item at $39,015. The remaining budget items are for supplies and other service charges related to operating the animal control facility. 125 BUDGET: GENERAL FUND 2013 2014 2015 2016 2016 2017 % ANIMAL CONTROL Actual Actual Actual Budget Projected Budget Change Personnel Services -$-$-$-$-$-$--- Supplies 3,362 3,273 1,168 3,300 3,300 3,300 0.0% Other Services & Charges 44,064 46,166 47,586 48,048 48,048 48,220 0.4% Capital Outlay --------- TOTAL EXPENDITURES 47,426$49,439$48,754$51,348$51,348$51,520$0.3% 126 NATIONAL GUARD DEPARTMENT: Public Safety SUPERVISOR: Project Coordinator FUND #:101 ACTIVITY #: 42701 ACTIVITY SCOPE: The National Guard facility is housed in the Monticello Community Center complex. The city will maintain the facility in perpetuity in return for a one-time payment in 1998 that helped fund construction of the community center. The Guard provides no direct services to the city. OBJECTIVES: 1.To maintain a clean, modern facility for use by the National Guard. ISSUES: 1.There are no current issues to maintaining the National Guard facility. MEASURABLE WORKLOAD DATA: Measurement 2013 2014 2015 2016 2017 Not Applicable BUDGET COMMENTARY: The National Guard operates a security division within the Monticello Community Center complex. The city maintains the Guard’s site within the complex. The budget for this activity is relatively static. BUDGET: GENERAL FUND 2013 2014 2015 2016 2016 2017 % NATIONAL GUARD Actual Actual Actual Budget Projected Budget Change Personnel Services -$-$-$-$-$-$--- Supplies -204 -300 300 300 0.0% Other Services & Charges 14,517 13,857 13,438 15,750 15,750 15,000 -4.8% Capital Outlay --------- TOTAL EXPENDITURES 14,517$14,061$13,438$16,050$16,050$15,300$-4.7% 127 PUBLIC WORKS - ADMINISTRATION DEPARTMENT: Public Works SUPERVISOR: Public Works Director FUND #:101 ACTIVITY #: 43110 ACTIVITY SCOPE: Public works (PW) administration activity oversees the daily operations of the street, parks, water, sewer, wastewater treatment plant, and inspection activities. PW administration also manages all large city projects and implements all changes to PW operations and policy. OBJECTIVES: 1.Continue the implementation of a bio-solids management system. 2.Implement the major street lighting project plan. 3.Continue implementing the wellhead protection plan. 4.Manage the development of a new public works facility and expansion of the wastewater treatment plant. 5.Determine location for future wells utilizing information gathered from various sources including grants. 6.Develop a program to lease antenna space on elevated water towers, thus generating a new revenue source. 7.Implement a new SCADA system as budgeted in the water and sewage operating funds. ISSUES: 1.Balance the public works department needs with available funds. 2.Management of city's water and wastewater treatment systems. 3.Implement a capital improvement program for city infrastructure. MEASURABLE WORKLOAD DATA: Measurement 2013 2014 2015 2016 2017 Budget units 15 15 14 14 14 Employees supervised- FT 19 19 19 20 20 128 BUDGET COMMENTARY: Personnel services reflect the subtraction, addition, and subtraction of the public works director position. The increase in other services and charges reflects the re-allocation of insurance (property, liability and vehicle) expenses. The 2017 personnel services budget includes a full step increase and a 3% (2% in January and 1% in July) market rate wage increase but excludes a public works director. The director position is spread over three budgets: General Fund - 60%, Sewage Fund – 20%, Water Fund 20%. The General Fund share of the total for the position is $72,000. While other budget items have large percentage increases, the change in dollar amounts are relatively insignificant. BUDGET: GENERAL FUND 2013 2014 2015 2016 2016 2017 % PW - ADMINISTRATION Actual Actual Actual Budget Projected Budget Change Personnel Services 97,647$96,090$101,190$163,985$163,985$115,330$-29.7% Supplies 2,992 4,337 2,070 6,150 6,150 3,250 -47.2% Other Services & Charges 13,243 21,724 21,244 24,636 24,636 28,851 17.1% Capital Outlay --------- TOTAL EXPENDITURES 113,882$122,151$124,504$194,771$194,771$147,431$-24.3% 129 PUBLIC WORKS - ENGINEERING DEPARTMENT: Public Works SUPERVISOR: City Engineer FUND #:101 ACTIVITY #: 43111 ACTIVITY SCOPE: Engineering assists with the provision, development, and management of the city's street, pathways, public utilities systems, geographic information system (GIS), Storm Water Pollution Prevention Program (SWPPP), improvement projects, and miscellaneous mapping. In addition, engineering responds to residents with issues related to storm water drainage and/or pedestrian, bicycle, and vehicular traffic, and reviews. Engineering updates and supports the city's General Specifications and Standard Detail Plates for Street and Utility Construction and the Plan Requirements and Design Guidelines. Engineering also issues driveway, grading, and right-of-way permits. OBJECTIVES: 1.Improve ability to assist other departments with CADD and GIS related requests. 2.Continue to administer and maintain the city's SWPPP. 3.Continue to implement and improve the city's GIS. 4.Continue toeducatethe public onpurposesandpracticesassociatedwithconservationand drainage easements and storm water ponds. 5.Create a one-stop shop for city driveway, grading and right-of-way permits. 6.Continue to develop an in-house Pavement Management Program. 7.Review development plans and agreements. 8.Continue to work towards improving transportation system and collaborate with MNDOT and Wright County. 9.Prepare capital infrastructure planning and budgeting. 10.Integrate with other departments on public improvement projects and development plans. 11.Apply for grants and track funding for improvement projects. ISSUES: 1.Increasing restrictions by Minnesota Pollution Control Agency (MPCA) for storm water runoff. 2.Lack of public knowledge regarding purposes and practices associated with conservation and drainage easements and storm water ponds. 3.Increasing phosphorus restrictions by MPCA for wastewater effluent. 4.Reduction in available federal and state funding for transportation improvements. 130 MEASURABLE WORKLOAD DATA: Measurement 2013 2014 2015 2016 2017 Service requests 10 10 10 10 10 On-line service requests 7 5 11 17 20 Active improvement projects 10 10 10 10 10 Driveway permits issued 2 1 3 1 3 Right-of-way permits issued 131 116 101 130 130 Development applications 10 10 10 7 10 Gradingpermits issued 3 6 2 11 5 BUDGET COMMENTARY: The engineering activity predominantly consists of engineering and other professional service fees. These expenditures consist of both reimbursable and non-reimbursable expenditures. For 2014, the engineering budget decreased substantially with the elimination of two positions. Consequently, professional services increased to offset much of savings realized by elimination of those positions. The 2017 budget provides for continued improvements and development of the city's GIS system. Finally, the 2017 budget includes $25,000 for a Mississippi river crossing study. BUDGET: GENERAL FUND 2013 2014 2015 2016 2016 2017 % PW - ENGINEERING Actual Actual Actual Budget Projected Budget Change Personnel Services 112,148$38,764$1,500$100$100$-$-100.0% Supplies 899 373 3,167 150 150 --100.0% Other Services & Charges 110,981 156,704 105,888 159,808 159,808 174,900 9.4% Capital Outlay --------- TOTAL EXPENDITURES 224,028$195,841$110,555$160,058$160,058$174,900$9.3% 131 PUBLIC WORKS - INSPECTIONS DEPARTMENT: Public Works SUPERVISOR: City Engineer FUND #:101 ACTIVITY #: 43115 ACTIVITY SCOPE: The public works inspection activity is responsible to design and inspect city infrastructure projects, and to review and approve right-of-way excavation/obstruction permit applications. Personnel are also responsible for managing records retention for plats, city maps, infrastructure data bases, soil borings, development plans, and as-builts. Using various computer software programs including ArcGIS, AutoCADm and CarteGraph, staff provides design and mapping assistance. OBJECTIVES: 1.Improve staff use of the city's GIS system through training. 2.Maintain certifications and attend appropriate classes and workshops for inspections. 3.Provide support for the engineering activity. 4.Improve communication between public works, engineering and inspection activities. 5.Improve knowledge, skills, and ability in using CarteGraph software for development of an in-house Pavement Management and Sign Program. 6.Improve knowledge, skills, and ability in using GIS software for assisting other departments with their mapping needs. 7.Assistothercitydepartments inacquiring utilityinformationnotreadilyavailable from other sources, including GIS. 8.Assist with design and implementation of solutions to drainage issues. 9.Complete cost estimates and design for small improvement projects. 10.Complete cost estimate for budgeting purposes for upcoming improvement projects. 11.Complete inspections and documentation for city’s SWPPP. ISSUES: 1.Access to city vehicles housed in cold storage at public works is difficult, limiting ability to quickly respond to issues. 2.Workload and budget issues created by mandatory MPCA compliance requirements in relation to city SWPPP. 132 MEASURABLE WORKLOAD DATA: Measurement 2013 2014 2015 2016 2017 Inspection sites 21 20 Stormwater inspections 105 100 *Data for 2013 through 2015 is not available. BUDGET COMMENTARY: The 2017 personnel services budget includes a full step increase and a 3% (2% in January and 1% in July) market rate wage increase. The prior year increase in other services and charges reflects the re- allocation of expenses for IT services and insurances (property, liability and vehicle). Other budget items are expected to remain close to prior year levels. BUDGET: GENERAL FUND 2013 2014 2015 2016 2016 2017 % PW - INSPECTIONS Actual Actual Actual Budget Projected Budget Change Personnel Services 43,329$23,021$20,533$67,708$67,708$88,488$30.7% Supplies 1,908 2,416 600 5,100 5,100 4,600 -9.8% Other Services & Charges 9,641 11,430 10,951 16,001 16,001 15,678 -2.0% Capital Outlay --------- TOTAL EXPENDITURES 54,878$36,867$32,084$88,809$88,809$108,766$22.5% 133 PUBLIC WORKS – STREETS, ALLEYS & PARKING LOTS DEPARTMENT: Public Works SUPERVISOR: Street Superintendent FUND #:101 ACTIVITY #: 43120 ACTIVITY SCOPE: The main responsibility of the streets and alleys activity is to perform the necessary tasks to reduce the depreciation of the city streets and uphold desirable standards of appearance, serviceability, and safety. This includes upkeep such as street sweeping, repair of roadway surface areas, medians, sidewalks, boulevards, alleys, catch basins, and storm sewers. OBJECTIVES: 1.Continue street reconstruction of older road surfaces by evaluating road wear. 2.Increase street chip seal coating projects. 3.Maintain and update equipment and vehicles. 4.Help maintain and use City GIS system. 5.Continue street crack sealing program. ISSUES: 1.Educate the public on what the boulevards are to be used for. 2.Educating the public on storm water operations. 3.Increased costs of fuel and street products due to fuel costs. 4.Educate the public on the value of good maintenance programs for our infrastructure. MEASURABLE WORKLOAD DATA: Measurement 2013 2014 2015 2016 2017 Pounds of crack sealer 23,100 23,282 29,580 35,000 35,000 Sq. yards of chipsealing 78,500 82,429 102,204 110,000 110,000 Miles of streets 68.0 68.0 69.0 69.0 69.0 Tons of black top patching 193 190 293 300 300 134 BUDGET COMMENTARY: Much of 2014 increase in other services and charges reflects the re-allocation of expenses for IT services and insurances (property, liability and vehicle). Contracted street repairs and maintenance, under other services and charges, decreased $4,000 to $176,000 for 2017. The renewed emphasis on street maintenance began in 2014. The 2017 personnel services budget includes a full step increase and a 3% (2% in January and 1% in July) market rate wage increase. Increases in street maintenance supplies and small tools and equipment contributed to the 2016 jump in supplies. Gas and Diesel fuel is still budgeted at prior market price highs. Other budget items are expected to remain close to prior year levels. The difference between budget and actual can vary widely because expenditures are liberally estimated. BUDGET: GENERAL FUND 2013 2014 2015 2016 2016 2017 % PW - STREETS & ALLEYS Actual Actual Actual Budget Projected Budget Change Personnel Services 372,892$350,888$354,121$451,874$451,874$470,578$4.1% Supplies 168,150 189,295 152,827 219,050 219,050 226,550 3.4% Other Services & Charges 119,034 164,060 195,418 230,438 230,438 220,073 -4.5% Capital Outlay 31,935 35,200 37,500 75,600 75,600 76,800 1.6% TOTAL EXPENDITURES 692,011$739,443$739,866$976,962$976,962$994,001$1.7% 135 PUBLIC WORKS – ICE & SNOW REMOVAL DEPARTMENT: Public Works SUPERVISOR: Street Superintendent FUND #:101 ACTIVITY #: 43125 ACTIVITY SCOPE: The city's ice and snow removal activity is responsible for the control of ice and snow on city streets, sidewalks and city-owned public parking lots. The activity provides control in a safe and cost effective manner, keeping in mind safety, budget, personnel, and environmental concerns. OBJECTIVES: 1.Maintain and update equipment and vehicles in a timely manner. 2.Learn ways to effectively use the city's GIS system. ISSUES: 1.Staffing and budgeting for unpredictable circumstances. MEASURABLE WORKLOAD DATA: Measurement 2013 2014 2015 2016 2017 Inches of snow 29 79 40 50 50 Plowingevents,number of 7 18 14 16 16 Tons of salt used 325 385 534 525 525 Tons of sand used 370 600 285 300 300 BUDGET COMMENTARY: The 2017 personnel services budget includes a full step increase and a 3% (2% in January and 1% in July) market rate wage increase. Weather variability significantly impacts actual-to-budget comparisons. BUDGET: GENERAL FUND 2013 2014 2015 2016 2016 2017 % PW - ICE & SNOW Actual Actual Actual Budget Projected Budget Change Personnel Services 128,679$224,328$174,038$155,618$155,618$161,993$4.1% Supplies 79,182 81,174 86,658 125,900 125,900 125,400 -0.4% Other Services & Charges 2,691 2,885 2,324 2,762 2,762 2,763 0.0% Capital Outlay --------- TOTAL EXPENDITURES 210,552$308,387$263,020$284,280$284,280$290,156$2.1% 136 PUBLIC WORKS – SHOP & GARAGE DEPARTMENT: Public Works SUPERVISOR: Street Superintendent FUND #:101 ACTIVITY #: 43127 ACTIVITY SCOPE: Shop & Garage maintains all city vehicles and equipment for the streets, ice & snow, parks, water and Sewage activities in a safe and efficient manner. OBJECTIVES: 1.Maintain equipment and vehicles to maximize efficiencies and safety. 2.Update equipmentand vehicles. ISSUES: 1.Aging equipment. 2.Increased safety regulation for equipment and vehicles. MEASURABLE WORKLOAD DATA: Measurement 2013 2014 2015 2016 2017 Service orders 85 85 88 90 90 Service order hours 274 351 362 369 369 Hours per service order 3.2 4.1 4.1 4.1 4.1 Total service order costs $16,204 $21,576 $22,337 $22,844 $23,000 Service cost per order $190.64 $253.84 $253.83 $253.82 $255.56 Repair orders 60 52 87 95 95 Repair hours 156 205 252 272 272 Hours per repair order 2.6 3.9 2.9 2.9 2.9 Total repair order costs $29,818 $28,719 $37,250 $39,250 $39,250 Repair costs per order $496.97 $552.29 $428.16 $413.16 $413.16 137 BUDGET COMMENTARY: The 2017 personnel services budget includes a full step increase and a 3% (2% in January and 1% in July) market rate wage increase. Other budget items are expected to remain close to prior year levels. The city has a wide-variety of talent in the Public Works Department. Most are capable of assisting a true craftsman, the city’s highly-skilled chief mechanic. BUDGET: GENERAL FUND 2013 2014 2015 2016 2016 2017 % PW - SHOP & GARAGE Actual Actual Actual Budget Projected Budget Change Personnel Services 98,445$93,377$95,891$96,475$96,475$99,565$3.2% Supplies 44,180 29,747 45,463 46,000 46,000 46,100 0.2% Other Services & Charges 44,116 54,520 44,483 61,626 61,626 60,688 -1.5% Capital Outlay --------- TOTAL EXPENDITURES 186,741$177,644$185,837$204,101$204,101$206,353$1.1% 138 PUBLIC WORKS – STORMWATER DEPARTMENT: Public Works SUPERVISOR: Public Works Director FUND #:101 ACTIVITY #: 43130 ACTIVITY SCOPE: Stormwater is responsible for expenditures related to the maintenance of the city's stormwater system. This activity includes inspecting, cleaning, and repairing all stormwater trunk lines, ditches, and ponds. OBJECTIVES: 1.Monitor, repair, and clean storm water trunk lines, laterals, structures, ditches, holding ponds and structural pollution control devices. ISSUES: 1.Continued deterioration of storm water system, without proper funding for repairs, replacement, or improvements. MEASURABLE WORKLOAD DATA: Measurement 2013 2014 2015 2016 2017 Stormwater main miles 1/4 city 1/4 city 1/4 city 1/4 city 1/4 city Cleanseptor manholes 4 4 4 4 4 GPS storm structures 1/4 city 1/4 city 1/4 city 1/4 city 1/4 city Stormwater manhole maintenance 1/4 city 1/4 city 1/4 city 1/4 city 1/4 city Stormwater main locates 100 100 100 100 100 BUDGET COMMENTARY: The 2017 budget provides for the general maintenance of the city's stormwater system. Cleaning and restoration of holding ponds, once paid from the Storm Water Access Fund, will be made from this General Fund budget unit for 2015 and beyond. The increase in other services and charges reflects the addition of $40,000 for annual repairs and maintenance. Prior to 2015, such expenditures were made from the Stormwater Access Fund. The 2017 personnel services budget includes a full step increase and a 3% (2% in January and 1% in July) market rate wage increase. Other budget items are expected to remain close to prior year levels. 139 BUDGET: GENERAL FUND 2013 2014 2015 2016 2016 2017 % PW - STORMWATER Actual Actual Actual Budget Projected Budget Change Personnel Services 9,331$9,817$13,882$22,471$22,471$22,748$1.2% Supplies 1,466 5,752 4,908 7,000 7,000 8,500 21.4% Other Services & Charges 1,267 1,273 7,922 43,650 43,650 40,800 -6.5% Capital Outlay --------- TOTAL EXPENDITURES 12,064$16,842$26,712$73,121$73,121$72,048$-1.5% 140 PUBLIC WORKS – STREET LIGHTING DEPARTMENT: Public Works SUPERVISOR: Street Superintendent FUND #:101 ACTIVITY #: 43160 ACTIVITY SCOPE: The street Iighting activity maintains new and existing street lighting within the city. This includes maintaining installed bulbs and fixtures, as well as the electricity used for keeping the lights on. OBJECTIVES: 1.Work with MNDOT to add battery back-up to signals on TH 25. 2.Draft a new street lighting policy. ISSUES: 1.Increasing electricity costs. 2.Verify lamp and fixtures maintenance by utility companies. 3.Maintenance and upgrades on aging signal systems and streetlights. 4.Lack of assistance from Wright County and MNDOT. MEASURABLE WORKLOAD DATA: Measurement 2013 2014 2015 2016 2017 Street lights maintained 150 150 175 185 185 Streetscape lights 50 60 60 60 60 BUDGET COMMENTARY: Electricity for the street lights is the largest expenditure at $178,000. Other services and charges include $30,000 for repainting traffic signals. BUDGET: GENERAL FUND 2013 2014 2015 2016 2016 2017 % PW - STREET LIGHTING Actual Actual Actual Budget Projected Budget Change Personnel Services 2,795$4,354$2,689$-$-$-$--- Supplies 3,195 2,532 1,758 12,000 12,000 12,000 0.0% Other Services & Charges 200,015 188,809 222,038 251,900 251,900 261,900 4.0% Capital Outlay --------- TOTAL EXPENDITURES 206,005$195,695$226,485$263,900$263,900$273,900$3.8% 141 PUBLIC WORKS – REFUSE COLLECTION DEPARTMENT: Public Works SUPERVISOR: Refuse Collection FUND #:101 ACTIVITY #: 43230 ACTIVITY SCOPE: The city contracts with a private company for residential refuse collection and recycling services. OBJECTIVES: 1.Research expanding city haulers contracted service prices to business and determine the percentage of participation to achieve a desirable rate. ISSUES: 1.Wear and tear on city streets. 2.Increasing recycling efficiency and effectiveness. MEASURABLE WORKLOAD DATA: Measurement 2013 2014 2015 2016 2017 Residential refuse collections 52 52 52 52 52 Residential recycling collections 26 26 26 26 26 Residential container base 3,736 3,772 3,759 3,785 3,825 Additional containers 479 603 605 605 600 Recycling containers 4,220 4,277 4,349 4,378 4,418 BUDGET COMMENTARY: Nearly the entire budget is based on the city’s contract obligations with its private refuse hauler. The contract expires on the May 31, 2020. The contract extension raised rates by 14% for the last seven months of 2015. BUDGET: GENERAL FUND 2013 2014 2015 2016 2016 2017 % REFUSE COLLECTION Actual Actual Actual Budget Projected Budget Change Personnel Services -$463$307$1,037$1,037$1,037$0.0% Supplies 197 184 184 200 200 200 0.0% Other Services & Charges 505,799 517,308 562,986 613,200 613,200 615,000 0.3% Capital Outlay --------- TOTAL EXPENDITURES 505,996$517,955$563,477$614,437$614,437$616,237$0.3% 142 TRANSIT DEPARTMENT: Recreation and Culture SUPERVISOR: City Administrator FUND #:101 ACTIVITY #: 45178 ACTIVITY SCOPE: The transit service is provided by contract through a subsidized, regional transit provider. OBJECTIVES: 1.Research other less expensive alternatives to existing provider. 2.Evaluate service enhancements within the context of other transportation options, including the Northstar commuter rail system. 3.Review involvement in study for I-94 commuter service options. ISSUES: 1.Relatively low ridership for a city the size of Monticello. MEASURABLE WORKLOAD DATA: Measurement 2013 2014 2015 2016 2017 Adult rides 1,879 2,000 4,918 5,220 5,300 60+ rides 3,001 3,000 2,331 2,474 2,500 Disable/wheel chair rides 780 600 247 241 250 Student rides 1,481 1,500 2,587 2,746 2,800 Total 7,141 7,100 10,083 10,681 10,850 BUDGET COMMENTARY: The city will change to a regional transit services provider in 2017. The prior provider charged a flat $40,000 regardless of ridership. The new provider receives significant state and federal subsidies. BUDGET: GENERAL FUND 2013 2014 2015 2016 2016 2017 % TRANSIT Actual Actual Actual Budget Projected Budget Change Personnel Services -$-$-$-$-$-$--- Supplies --------- Other Services & Charges -10,000 40,000 40,000 40,000 5,000 -87.5% Capital Outlay --------- TOTAL EXPENDITURES -$10,000$40,000$40,000$40,000$5,000$-87.5% 143 SENIOR CENTER DEPARTMENT: Recreation and Culture SUPERVISOR: City Administrator FUND #:101 ACTIVITY #: 45175 ACTIVITY SCOPE: The senior center facility is housed in the Monticello Community Center complex. The facility is maintained by the city; but senior center management is provided by an outside entity. OBJECTIVES: 1.Maintain a clean, modern facility for use by Monticello’s senior citizens. 2.Provide recreational activities to improve mental and physical health. 3.Engage senior citizen participation in other community center activities. 4.Encourage greater social participation by offering discounted lunches. ISSUES: 1.Decline in revenue from sources other than the city. MEASURABLE WORKLOAD DATA: Measurement 2013 2014 2015 2016 2017 Outcomes/Effectiveness Volunteers hours 7,945 8,022 8,094 7,821 8,000 Noon meals served 4,223 1,988 2,873 3,136 3,100 Efficiency: Duplicatedparticipants per activity 19 19 19 18 20 Unduplicated participants per activity 165 170 170 159 171 Work Load: Unduplicated participants 2,164 2,214 2,298 2,343 2,400 Duplicatedparticipants 18,522 19,325 20,098 20,313 20,500 Receivedphone calls 4,790 4,459 4,507 4,531 4,500 Activities offered 112 114 118 128 120 144 BUDGET COMMENTARY: The senior center rents space within the community center complex. The city maintains and insures the senior center. Additionally, the city gives an annual contribution to the group managing the senior center. The 2017 adopted contribution is $58,560, which $1,800 greater than 2016. The city increased the internal rent paid to the community center by $5,000 (from $30,000 to $35,000) for the space occupied by the senior center in 2015. The increased rent offsets a one-time, $5,000 contribution to the senior center for floor replacement in 2014. BUDGET: GENERAL FUND 2013 2014 2015 2016 2016 2017 % SENIOR CENTER Actual Actual Actual Budget Projected Budget Change Personnel Services 796$1,442$1,416$547$547$547$0.0% Supplies -510 ------- Other Services & Charges 89,423 95,595 95,699 101,125 101,125 102,025 0.9% Capital Outlay --------- TOTAL EXPENDITURES 90,219$97,547$97,115$101,672$101,672$102,572$0.9% 145 PARK OPERATIONS DEPARTMENT: Recreation and Culture SUPERVISOR: Parks Superintendent FUND #:101 ACTIVITY #: 45201 ACTIVITY SCOPE: The park operations activity maintains the parks and trails within the city. This includes maintaining and improving playground and picnic facilities, fertilizing and mowing of grass, maintaining athletic fields, flooding and maintenance of outdoor ice rinks, snow and ice removal, and tree preservation within the parks system. OBJECTIVES: 1.Continue pathways maintenance. 2.Improve efficiencies through use of the city’s GIS. 3.Progress in implementing plan for the Bertram Chain of Lakes regional park. ISSUES: 1.Increase in maintenance costs with acquisition of more park land. 2.Coordination with other entities regarding park use and design. MEASURABLE WORKLOAD DATA: Measurement 2013 2014 2015 2016 2017 Park land acres maintained 180 180 180 185 200 Trail miles maintained 16.5 16.5 17.0 17.5 18.5 Park events held 150 150 150 150 160 Winter skating days 125 125 128 125 125 BUDGET COMMENTARY: The parks budget consists of expenditures needed to maintain city parks and trails. In 2013, capital outlay reflects the acquisition of mowers and other capital equipment through the Central Equipment internal service fund. Additional Central Equipment Fund purchases are planned for 2017. In 2015, financing for annual pathways improvements was shifted to park operations from the Park and Pathway Dedication Fund. The 2015 increase in other services and charges reflects the re- allocation of expenses for IT services and insurances (property, liability and vehicle). The 2017 personnel services budget includes a full step increase and a 3% (2% in January and 1% in July) market rate wage increase. Other budget items are expected to remain close to prior year levels. 146 BUDGET: GENERAL FUND 2013 2014 2015 2016 2016 2017 % PARK - OPERATIONS Actual Actual Actual Budget Projected Budget Change Personnel Services 361,526$351,322$391,007$467,482$467,482$488,950$4.6% Supplies 110,566 111,436 110,433 126,975 126,975 159,600 25.7% Other Services & Charges 73,293 75,481 113,212 117,340 117,340 114,898 -2.1% Capital Outlay 27,600 32,400 92,282 113,200 113,200 128,400 13.4% TOTAL EXPENDITURES 572,985$570,639$706,934$824,997$824,997$891,848$8.1% 147 PARK BALLFIELDS DEPARTMENT: Recreation and Culture SUPERVISOR: Parks Superintendent FUND #:101 ACTIVITY #: 45203 ACTIVITY SCOPE: The park ballfields activity prepares and maintains city athletic fields, including the NSP Ballfield. OBJECTIVES: 1.Prepare and maintain city athletic fields. 2.Improve the structures at the ballfields. 3.Enhance player and visitor experience. ISSUES: 1.Demographic trends. MEASURABLE WORKLOAD DATA: Measurement 2013 2014 2015 2016 2017 Ball games played,number of 600 600 610 615 850 Soccer Fields Maintained 2 2 2 2 10 Lacrosse Fields Maintained 1 1 1 1 3 Ball Fields maintained 7 7 7 7 7 Number of times mowed 50 50 50 50 50 BUDGET COMMENTARY: The 2017 budget reflect past expenditure levels and is similar to the 2016 budget for maintaining the fields and concession activities plus increases in park activities. Other services and charges include items that do not meet the capitalization threshold. BUDGET: GENERAL FUND 2013 2014 2015 2016 2016 2017 % PARK - BALLFIELDS Actual Actual Actual Budget Projected Budget Change Personnel Services -$-$-$-$-$-$--- Supplies 8,829 10,531 6,647 15,800 15,800 15,800 0.0% Other Services & Charges 16,688 7,618 10,324 11,500 11,500 11,500 0.0% Capital Outlay --------- TOTAL EXPENDITURES 25,517$18,149$16,971$27,300$27,300$27,300$0.0% 148 SHADE TREE DEPARTMENT: Recreation and Culture SUPERVISOR: Park Superintendent FUND #:101 ACTIVITY #: 46102 ACTIVITY SCOPE: Shade Tree supports planting and maintaining trees and shrubbery within the city limits. This activity provides for regulating, developing, planting, maintaining, and removing of trees in any street, park, right-of-way or other public place. Shade trees aid the larger goal of soil conservation, climate moderation, air quality, noise reduction, etc. The budget provides the mechanisms for funding a uniform program for the purpose of beautifying the community as a whole, and increasing property values. OBJECTIVES: 1.Provide trees for spring tree planting. 2.Continue with Shade Tree Disease Control Program. 3.Replace dead and diseased trees throughout the City and Parks. 4.Continue chippingprogram. 5.Continue education program. 6.Begin a boulevard tree planting program. ISSUES: 1.Stress on trees caused by weather and diseases. 2.Funding availability. 3.Chipper replacement. MEASURABLE WORKLOAD DATA: Measurement 2013 2014 2015 2016 2017 Trees planted 450 450 257 300 285 Trees removed 200 200 110 100 65 Students in programs 425 425 500 500 550 149 BUDGET COMMENTARY: A portion of the total time of park employees is allocated to the Shade Tree activity. The 2017 personnel services budget includes a full step increase and a 3% (2% in January and 1% in July) market rate wage adjustment increase. Other budget items are expected to remain close to prior year levels. BUDGET: GENERAL FUND 2013 2014 2015 2016 2016 2017 % SHADE TREE Actual Actual Actual Budget Projected Budget Change Personnel Services 41,621$48,099$84,012$41,207$41,207$43,906$6.5% Supplies 9,260 19,907 8,976 16,125 16,125 16,125 0.0% Other Services & Charges 2,594 885 12,002 6,195 6,195 6,195 0.0% Capital Outlay --------- TOTAL EXPENDITURES 53,475$68,891$104,990$63,527$63,527$66,226$4.2% 150 LIBRARY DEPARTMENT: Recreation and Culture SUPERVISOR: City Administrator FUND #:101 ACTIVITY #: 45501 ACTIVITY SCOPE: Library services are contracted through the Great River Regional Library System. The city owns and maintains the library building and provides programs through the library to residents. OBJECTIVES: 1.Provide residents with life-long learning opportunities. 2.Provide access to global information resources. 3.Provide quality programs to all ages. ISSUES: 1.Maintaining a relevant role in the community. MEASURABLE WORKLOAD DATA: Measurement 2013 2014 2015 2016 2017 Checked out items 236,220 199,182 195,235 190,433 185,000 Number of requests placed 11,481 11,168 9,792 8,033 7,000 Summer readingparticipants 840 808 823 744 700 Winter readingparticipants ---257 250 Patrons usingwireless 2,270 3,021 3,582 4,071 4,500 Patrons usinginternet stations 9,193 9,002 8,396 7,487 7,000 Programs offered 173 169 167 212 220 Programparticipants enrolled 3,773 3,788 3,919 4,306 4,400 BUDGET COMMENTARY: This budget represents the Monticello Library. The city contracts with Great River Regional Library System for all information sources and operations. The city owns and maintains the building the library is housed in and funds some youth programs. The 2015 budget is similar to the 2014 budget and past expenditures. By statute, the city must annually expend at least $34,927 for the library. BUDGET: GENERAL FUND 2013 2014 2015 2016 2016 2017 % LIBRARY Actual Actual Actual Budget Projected Budget Change Personnel Services 8,259$4,618$8,479$9,137$9,137$8,561$-6.3% Supplies 2,001 2,583 2,587 1,900 1,900 1,550 -18.4% Other Services & Charges 25,135 29,563 25,110 29,489 29,489 27,889 -5.4% Capital Outlay --------- TOTAL EXPENDITURES 35,395$36,764$36,176$40,526$40,526$38,000$-6.2% 151 INSURANCE DEPARTMENT: Other SUPERVISOR: Finance Director FUND #:101 ACTIVITY #: 49240 ACTIVITY SCOPE: This activity accounts for a variety of undistributed General Fund insurances costs. OBJECTIVES: 1.To accurately distribute insurance costs to all activities by fund. ISSUES: 1.Purchasing the proper level of insurance coverage with the appropriate deductibles at the lowest possible costs. MEASURABLE WORKLOAD DATA: Measurement 2013 2014 2015 2016 2017 Not Applicable BUDGET COMMENTARY: In 2014, other services and charges decreased significantly from the redistribution of insurance costs throughout the various budget units in the General Fund. An effective safety program administered by the human resource manager has resulted in a decline of workers compensation insurance costs. Additionally, liability insurance decreased slightly and property insurance increased slightly. BUDGET: GENERAL FUND 2013 2014 2015 2016 2016 2017 % INSURANCE Actual Actual Actual Budget Projected Budget Change Personnel Services 53,568$-$-$-$-$-$--- Supplies --------- Other Services & Charges 74,142 12,584 8,082 8,021 8,021 8,512 6.1% Capital Outlay --------- TOTAL EXPENDITURES 127,710$12,584$8,082$8,021$8,021$8,512$6.1% 152 ENTERPRISE FUNDS For Fiscal Year 2013 Adopted 2017 SPECIAL REVENUE FUNDS SPECIAL REVENUE FUNDS - SUMMARY DESCRIPTION Thecitycurrentlyhasfouractivespecialrevenuefunds.Specialrevenuefundsareusedtoaccountforthe proceedsofspecificrevenuesourcesthatarerestricted,committedorassignedtoexpendituresforspecific purposesotherthandebtserviceorcapitalprojects.UnliketheGeneralFund,thebudgetsofspecialrevenue fundsdonotalwaysbalance--revenuesequalexpenditures.Specialrevenuefundsusethemodifiedaccrual basisofaccountingforbothfinancialreportingandbudgetingpurposes. BUDGETISSUES Eachspecialrevenuefundhasspecificchallengesthatwillbeaddressedinthenarrativeforeachfund. BUDGETSUMMARY SPECIAL REVENUE FUNDS 2013 2014 2015 2016 2016 2017 % REVENUES ACTUAL ACTUAL ACTUAL BUDGET PROJECTED BUDGET CHANGE Property Taxes 1,181,335$1,388,404$1,363,000$644,000$644,000$652,000$1.2% Tax Increments 991,339 836,750 727,617 675,994 653,564 653,564 -3.3% Licenses & Permits --------- Intergovernmental Revenues --11,875 ------ Charges for Services 1,292,276 1,350,290 1,422,357 1,413,110 1,413,110 1,496,725 5.9% Fines & Forfeits --------- Special Assessments --------- Miscellaneous 124,368 400,096 250,270 194,932 194,282 162,250 -16.8% Operating Transfers 267,000 143,000 94,900 ------ Debt Proceeds --------- TOTAL REVENUES 3,856,318$4,118,540$3,870,019$2,928,036$2,904,956$2,964,539$1.2% EXPENDITURES Personnel Services 975,181$972,801$1,022,382$1,159,115$1,159,115$1,223,132$5.5% Supplies 278,728 183,038 174,943 202,428 202,428 198,635 -1.9% Other Services & Charges 495,870 1,181,247 780,611 723,772 695,061 800,904 10.7% Capital Outlay 785,017 487,306 1,056,591 458,920 430,605 276,919 -39.7% Operating Transfers 1,654,804 1,258,353 1,029,046 200,000 200,000 200,000 0.0% TOTAL EXPENDITURES 4,189,600$4,082,745$4,063,573$2,744,235$2,687,209$2,699,590$-1.6% FUND BALANCE - JANUARY 1 8,786,718$8,453,436$8,489,231$8,295,677$8,295,677$8,513,424$ Excess (Deficiency) of Revenues over Expenditures (333,282)35,795 (193,554)183,801 217,747 264,949 FUND BALANCE - DECEMBER 31 8,453,436$8,489,231$8,295,677$8,479,478$8,513,424$8,778,373$ 153 ECONOMIC DEVELOPMENT AUTHORITY FUND DEPARTMENT: Economic Development SUPERVISOR: Community Development Director FUND #:212 ACTIVITY #: 46301 ACTIVITY SCOPE: The Monticello Economic Development Authority (EDA) is responsible for the on-going redevelopment efforts within the city. This consists of housing and businesses, including all related public improvements and land acquisitions. These programs are administered, based on direction of the EDA committee, and by the Director of Economic Development. In addition, all tax increment financing districts are initiated and administered by the EDA. There are currently 10 active tax increment districts. The EDA also administers loans to city businesses, based on local, state, and federal criteria. These loans are done on the premise that the business will generate higher paying jobs in the community. OBJECTIVES: 1.Explore medical manufacturing, food related, and data center facilities for Monticello. 2.Promote city's fiber optics network to attract and retain businesses. 3.Implement short, intermediate, and long-term objectives outlined in the TIF Analysis and Management Plan. 4.Implement Embracing Downtown Plan. 5.Continue to purchase land that makes sense for redevelopment purposes. 6.Continue to market the Monticello business center. 7.Implement training/education program for existing businesses and future workforce. 8.Utilize Jobz Bill to initiate private development/redevelopment. 9.Work with community development and developers to create upper-end housing in Monticello to attract CEOs 10.Explore options to generate additional electrical supply to industrial areas. 11.Explore options to relocate electrical substation from Cargill's downtown site to create expansion opportunities. 12.Implement recommendations from consultants regarding uses of funds available in TIF District 1-22. 13.Engage in the Greater MSP organization. 14.Implement monitoring/tracking methods for EDA programs. 15.Continue to build a more robust website and marketing brand. ISSUES: 1.Consistent administration of city policies, plans, ordinances, guidelines, statutes, etc. 2.Need for higher wage jobs in the community. 3.Promotion of city's new fiber optic network. 154 MEASURABLE WORKLOAD DATA: Measurement 2013 2014 2015 2016 2017 Tax increments collected 992,339$728,618$729,577$668,352$670,000$ Loans outstanding 2 1 0 0 0 Active TIF districts 12 12 10 10 10 BUDGET COMMENTARY: This budget represents the Monticello Economic Development Authority programs and general administration activities. The detail of each individual tax increment financing district is included in the appendix of this document. The main revenue source for the EDA Fund is tax increments from the various districts. Under Section 469.033, subd. 6, of the HRA Act, the city levied $280,000 special benefit tax for collection in 2016 and 2017. This levy is against all taxable real property within the city and will only support redevelopment activities within the city limits. The special benefit levy is limited to .0185% of the taxable market value. Expenditures include administrative costs, pay-as-you-go payments to various development projects and a transfer to debt service funds for its share of the 2005 (refunded in 2011) improvement bond, which financed an interchange project tax increment district 1-34. The future decline in tax increments is the result of TIF district decertification or individual parcel decertification. BUDGET: EDA FUND 2013 2014 2015 2016 2016 2017 % REVENUES ACTUAL ACTUAL ACTUAL BUDGET PROJECTED BUDGET CHANGE Property Taxes -$-$-$280,000$280,000$280,000$0.0% Tax Increments 991,339 836,750 727,617 675,994 653,564 653,564 -3.3% Licenses & Permits --------- Intergovernmental Revenues --11,875 ------ Charges for Services --------- Fines & Forfeits --------- Special Assessments --------- Miscellaneous 114,821 330,833 197,745 140,716 140,066 117,250 -16.7% Operating Transfers 92,000 93,000 94,900 ------ TOTAL REVENUES 1,198,160$1,260,583$1,032,137$1,096,710$1,073,630$1,050,814$-4.2% EXPENDITURES Personnel Services 3,116$5,932$10,545$94,869$94,869$104,216$9.9% Supplies -36 65 ------ Other Services & Charges 114,190 752,594 364,429 254,120 225,409 271,730 6.9% Capital Outlay 707,552 487,306 1,056,591 388,920 360,605 229,919 -40.9% Operating Transfers 779,804 218,353 -200,000 200,000 200,000 0.0% TOTAL EXPENDITURES 1,604,662$1,464,221$1,431,630$937,909$880,883$805,865$-14.1% FUND BALANCE - JANUARY 1 7,521,807$7,115,305$6,911,667$6,512,174$6,512,174$6,704,921$ Excess (Deficiency) of Revenues over Expenditures (406,502)(203,638)(399,493)158,801 192,747 244,949 FUND BALANCE - DECEMBER 31 7,115,305$6,911,667$6,512,174$6,670,975$6,704,921$6,949,870$ 155 CEMETERY FUND DEPARTMENT: Recreation and Culture SUPERVISOR: Parks Superintendent FUND #:651 ACTIVITY #: 49010 ACTIVITY SCOPE: The Cemetery Fund sustains itself with revenues from plot sales and from services, such as excavations, staking for monuments, memorial programs, and perpetual care. The city maintains two cemeteries: Riverside and Hillside. Staff assists customers/visitors with memorials and perpetual care for both. Hillside cemetery is no longer open to burial and expenditures are recorded through park operations in the General Fund. OBJECTIVES: 1.Serve the public in a courteous, professional manner. 2.Maintain cemetery grounds and grave markers. ISSUES: 1.Increasing maintenance costs. 2.Competition from cremations. MEASURABLE WORKLOAD DATA: Measurement 2013 2014 2015 2016 2017 Plot occupied 3,449 3,470 3,497 3,514 3,530 Plots reserved 765 765 753 745 745 Plots available for sale 1,066 1,048 1,029 1,020 999 Number of plots sold 9 19 17 11 10 Number of internments 15 36 29 18 20 Number of markers staked 13 27 21 14 15 BUDGET COMMENTARY: There are no substantial changes to either revenues or expenditures for 2017. The Cemetery Fund was reported as an enterprise fund in prior year budgets. 156 BUDGET: RIVERSIDE CEMETERY 2013 2014 2015 2016 2016 2017 % REVENUES ACTUAL ACTUAL ACTUAL BUDGET PROJECTED BUDGET CHANGE Property Taxes -$-$-$-$-$-$--- Licenses & Permits --------- Intergovernmental Revenues --------- Charges for Services 12,913 37,465 26,394 26,000 26,000 26,325 1.3% Fines & Forfeits --------- Special Assessments --------- Miscellaneous (314)1,258 465 1,000 1,000 1,000 0.0% Contributed Capital --------- Operating Transfers --------- Debt Proceeds --------- TOTAL REVENUES 12,599$38,723$26,859$27,000$27,000$27,325$1.2% EXPENDITURES Personnel Services 2,197$3,089$3,975$4,073$4,073$4,072$0.0% Supplies 401 96 1,509 775 775 1,135 46.5% Other Services & Charges 13,645 19,200 19,771 22,152 22,152 22,118 -0.2% Capital Outlay --------- Operating Transfers --------- TOTAL EXPENDITURES 16,243$22,385$25,255$27,000$27,000$27,325$1.2% FUND BALANCE - JANUARY 1 19,353$15,709$32,047$33,651$33,651$33,651$ Excess (Deficiency) of Revenues over Expenditures (3,644)16,338 1,604 --- FUND BALANCE - DECEMBER 31 15,709$32,047$33,651$33,651$33,651$33,651$ 157 MINNESOTA INVESTMENT FUND DEPARTMENT: Minnesota Investment Fund SUPERVISOR: Community Development Director FUND #:221 ACTIVITY #: 46526-46528 ACTIVITY SCOPE: Following state and federal guidelines, the Minnesota Investment Fund administers loans to local businesses. OBJECTIVES: 1.To match available funds with qualifying businesses in Monticello. ISSUES: 1.Number of qualified businesses in Monticello. MEASURABLE WORKLOAD DATA: Measurement 2013 2014 2015 2016 2017 Loans outstanding 0 0 0 0 0 BUDGET COMMENTARY: Interest earned on investments, not repayment of loans, is the only activity anticipated in 2016. 158 BUDGET: MINN INVESTMENT FUND 2013 2014 2015 2016 2016 2017 % REVENUES ACTUAL ACTUAL ACTUAL BUDGET PROJECTED BUDGET CHANGE Property Taxes -$-$-$-$-$-$--- Licenses & Permits --------- Intergovernmental Revenues --------- Charges for Services --------- Fines & Forfeits --------- Special Assessments --------- Miscellaneous (14,840)53,471 15,715 25,000 25,000 20,000 -20.0% Operating Transfers --------- TOTAL REVENUES (14,840)$53,471$15,715$25,000$25,000$20,000$-20.0% EXPENDITURES Personnel Services -$-$-$-$-$-$--- Supplies --------- Other Services & Charges --------- Capital Outlay --------- Operating Transfers --------- TOTAL EXPENDITURES -$-$-$-$-$-$--- FUND BALANCE - JANUARY 1 1,066,058$1,051,218$1,104,689$1,120,404$1,120,404$1,145,404$ Excess (Deficiency) of Revenues over Expenditures (14,840)53,471 15,715 25,000 25,000 20,000 FUND BALANCE - DECEMBER 31 1,051,218$1,104,689$1,120,404$1,145,404$1,145,404$1,165,404$ 159 COMMUNITY CENTER FUND DEPARTMENT: Community Center SUPERVISOR: Community Center Director FUND #:226 ACTIVITY #: 45XXX ACTIVITY SCOPE: The Monticello Community Center provides space for a variety of recreational, professional, and educational opportunities. Expenditures for the community center are divided into three activities: administration, programming, and NSP ballfield concessions. OBJECTIVES: 1.Develop a plan for the future use of the area which was used as a wheel park (skateboard, bike, and rollerblade), including design, financing, construction, and marketing. 2.Develop an on-line registration system for program and membership sign up. 3.Provide facility improvements to increase customers. 4.Maintain the community garden. 5.Improve ball fields. ISSUES: 1.Leadership and turnover. 2.Limitations to facility size, space availability, and parking availability. 3.Competition from other fitness facilities. 4.Segregation of revenues and expenditures to various community center activities. MEASURABLE WORKLOAD DATA: Measurement 2013 2014 2015 2016 2017 Customer visits, number of 168,459 170,000 Gross program sales 199,189$200,000$ Annual memberships 486 500 Monthly memberships 8,921 9,000 Three-month memberships 472 500 Ratio of annual memberships other to memberships 0.56 0.57 Rental revenue 163,329$200,964$204,938$198,471$200,000$ 160 BUDGET COMMENTARY: Budgeted community center revenues are not divided by activity. The largest revenue source is memberships ($875,000) and property taxes ($372,000). The 2016 decline in property taxes is offset by the decline in transfers out to support debt service. Other revenues include concession sales, room rentals, and program fees. This activity also includes all personnel service expenditures for the fund. The 2014 increase in other services and charges reflects the re-allocation of expenses for IT services and insurances (property, liability and vehicle). The 2017 personnel services budget includes a full step increase and a 3% (2% in January and 1% in July) market rate wage increase. Other budget items are expected to remain close to prior year levels. Future budgets will segregate revenues and costs to various activities: Administration, guest and concession services, rental and events, aquatics, maintenance, programming, and NSP ballfields. BUDGET: COMMUNITY CENTER 2013 2014 2015 2016 2016 2017 % REVENUES ACTUAL ACTUAL ACTUAL BUDGET PROJECTED BUDGET CHANGE Property Taxes 1,181,335$1,388,404$1,363,000$364,000$364,000$372,000$2.2% Licenses & Permits --------- Intergovernmental Revenues --------- Charges for Services 1,279,363 1,312,825 1,395,963 1,387,110 1,387,110 1,470,400 6.0% Fines & Forfeits --------- Special Assessments --------- Miscellaneous 24,701 14,534 36,345 28,216 28,216 24,000 -14.9% Operating Transfers 175,000 50,000 ------- TOTAL REVENUES 2,660,399$2,765,763$2,795,308$1,779,326$1,779,326$1,866,400$4.9% EXPENDITURES Personnel Services 969,868$963,780$1,007,862$1,060,173$1,060,173$1,114,844$5.2% Supplies 278,327 182,906 173,369 201,653 201,653 197,500 -2.1% Other Services & Charges 368,035 409,453 396,411 447,500 447,500 507,056 13.3% Capital Outlay 77,465 --70,000 70,000 47,000 -32.9% Operating Transfers 875,000 1,040,000 1,029,046 ------ TOTAL EXPENDITURES 2,568,695$2,596,139$2,606,688$1,779,326$1,779,326$1,866,400$4.9% FUND BALANCE - JANUARY 1 179,500$271,204$440,828$629,448$629,448$629,448$ Excess (Deficiency) of Revenues over Expenditures 91,704 169,624 188,620 --- FUND BALANCE - DECEMBER 31 271,204$440,828$629,448$629,448$629,448$629,448$ 161 This page intentionally left blank 162 ENTERPRISE FUNDS For Fiscal Year 2013 Adopted 2017 DEBT SERVICE FUNDS DEBT SERVICE FUNDS - SUMMARY DESCRIPTION Debtservicesfundsareusedtoaccountfortheaccumulationofresourcesforthepaymentofgenerallong- termdebt,excludingdebtissuedforandservicedbyanenterprisefund.Debtservicefundsusethemodified accrualbasisofaccountingforbothfinancialreportingandbudgetingpurposes.Thecityhassevenactivedebt service(sub)funds.The(sub)fundsarecombinedintoonedebtservicefundforfinancialreportingpurposes. BUDGETISSUES Thecity'sbondratingwasdowngradedfromAa3toA2in2012byMoody'sInvestorServices.Thisratingwas affirmedwiththesaleofthecity’ssoledebtissuein2016.This$4,900,000G.O.issuehadtwocomponents: $4,130,000improvementbondportionand$770,000reconstructionbondportion.In2015,thecityissued $2,605,000inG.O.bondsforstreetreconstructionandassessableimprovements.Seeindividual(sub)fundsfor thebudgetissuesfacingeachdebtservice(sub)fund.Fundbalancesinsome(sub)fundsdeclinedwithearly bondredemptions.Additionally,thelastlargepaymentononeserialbondreducedtheneedtoaccumulate cashintheprioryearforthenextFebruarypayment.NewbondissuesarestructuredtohaveDecember,rather thanFebruary,principalpayments. BUDGETSUMMARY DEBT SERVICE FUNDS 2013 2014 2015 2016 2016 2017 % REVENUES ACTUAL ACTUAL ACTUAL BUDGET PROJECTED BUDGET CHANGE Property Taxes 1,196,912$1,262,234$1,290,000$2,084,000$2,084,000$2,437,000$16.9% Licenses & Permits --------- Intergovernmental Revenues --------- Charges for Services --------- Fines & Forfeits --------- Special Assessments 1,016,419 1,489,274 2,233,404 687,505 513,605 480,466 -30.1% Miscellaneous 203,389 296,686 238,318 215,900 215,900 215,900 0.0% Operating Transfers 4,291,481 3,906,885 3,306,045 1,275,134 1,630,636 599,362 -53.0% Debt Proceeds -5,952,106 ------- TOTAL REVENUES 6,708,201$12,907,185$7,067,767$4,262,539$4,444,141$3,732,728$-12.4% EXPENDITURES Personnel Services -$-$-$-$-$-$--- Supplies --------- Other Services & Charges 750 334 225 ------ Capital Outlay --------- Debt Service 17,026,307 5,953,964 5,598,694 5,109,484 6,183,572 4,396,961 -13.9% Operating Transfers -5,783,732 5,872 ------ TOTAL EXPENDITURES 17,027,057$11,738,030$5,604,791$5,109,484$6,183,572$4,396,961$-13.9% FUND BALANCE - JANUARY 1 13,066,369$2,747,513$3,916,668$5,379,644$5,379,644$3,640,213$ Excess (Deficiency) of Revenues over Expenditures (10,318,856)1,169,155 1,462,976 (846,945)(1,739,431)(664,233) FUND BALANCE - DECEMBER 31 2,747,513$3,916,668$5,379,644$4,532,699$3,640,213$2,975,980$ 163 2007A G.O. IMPROVEMENT BOND SUB-FUND DEPARTMENT: Debt Service SUPERVISOR: Finance Director FUND #:313 ACTIVITY #: 47000 ACTIVITY SCOPE: The 2007A G. O.Improvement Bonds financed various infrastructure improvements including street and utilities improvements, a storage building and mixing equipment at the sewage treatment plant, and refunded the 2000A Improvement Bond. The original debt service schedule calls for February principal payments and February and August interest payments through the year 2018, with a call feature of February 2016. The interest rate on the remaining bond coupons is 4.00%. The revenue source is special assessments against benefited properties, sewer revenues and property taxes. OBJECTIVES: 1.Make scheduled debt payments in a timely manner. 2.Certify or collect deferred special assessments when development occurs. 3.Redeem or refund when feasible. ISSUES: 1.Potential short-term fund balance deficit caused by early redemption of 2018 bonds. 2.City-imposed property tax limitations. MEASURABLE WORKLOAD DATA: Measurement 2013 2014 2015 2016 2017 Not Applicable BUDGET COMMENTARY: The main revenue sources for the 2007A G. 0. Improvement Bonds include special assessments, transfers from the city's Sewage Fund, and property taxes. Principal and interest payments are the only expenditures budgeted for this fund in 2017. The 2016 fund balance in this sub-fund is caused by the early redemption of 2018 bonds. Budgeted 2107 revenues will eliminate the deficit. 164 BUDGET: 2007A IMPROVEMENT BOND 2013 2014 2015 2016 2016 2017 % REVENUES ACTUAL ACTUAL ACTUAL BUDGET PROJECTED BUDGET CHANGE Property Taxes 427,447$539,672$420,000$420,000$420,000$610,000$45.2% Licenses & Permits --------- Intergovernmental Revenues --------- Charges for Services --------- Fines & Forfeits --------- Special Assessments 144,881 378,594 120,816 96,082 108,678 104,088 8.3% Miscellaneous (2,872)(4,309)1,882 ------ Operating Transfers ----180,000 ---- Debt Proceeds --------- TOTAL REVENUES 569,456$913,957$542,698$516,082$708,678$714,088$38.4% EXPENDITURES Personnel Services -$-$-$-$-$-$--- Supplies --------- Other Services & Charges 375 167 225 ------ Capital Outlay --------- Debt Service 625,115 625,710 620,840 619,600 1,175,500 536,000 -13.5% Operating Transfers --------- TOTAL EXPENDITURES 625,490$625,877$621,065$619,600$1,175,500$536,000$-13.5% FUND BALANCE - JANUARY 1 316,936$260,902$548,982$470,615$470,615$3,793$ Excess (Deficiency) of Revenues over Expenditures (56,034)288,080 (78,367)(103,518)(466,822)178,088 FUND BALANCE - DECEMBER 31 260,902$548,982$470,615$367,097$3,793$181,881$ REMAINING DEBT SERVICE: Payable Principal Interest Rate Total 2/1/2017 525,000$12,500$4.00%537,500$ Total 525,000$12,500$537,500$ GO Bonds, Series 2007A 165 2008B G.O. SEWER REVENUE REFUNDING BOND SUB-FUND DEPARTMENT: Debt Service SUPERVISOR: Finance Director FUND #:315 ACTIVITY #: 47000 ACTIVITY SCOPE: The 2008B G.O.Sewer Revenue Refunding Bonds refinanced a sewage treatment plant (WWTP) note. The debt service schedule calls for February and August principal payments and February and August interest payments through the year 2018. The bonds were redeemable on February 1, 2016. The interest rate on remaining bonds is 3.40%. Revenue sources include transfers from the Sewage Fund and property taxes. OBJECTIVES: 1.Make scheduled debt payments in a timely manner. 2.Redeem or refund when feasible. ISSUES: 1.Property tax levy limitations (timing, level, etc.) prevented earlier redemption. MEASURABLE WORKLOAD DATA: Measurement 2013 2014 2015 2016 2017 Not Applicable BUDGET COMMENTARY: The main revenue sources for the 2008B G.O. Sewer Revenue Refunding Bonds include a transfer from the city Sewer Access Fund and property taxes. The 2017 expenditures are principal and interest payments on this debt issue. The city redeemed the bonds due on 8/1/2018 in September of 2016. The bonds due on 8/1/2017 and 2/1/2018 will be redeemed on February 1, 2017. 166 BUDGET: 2008B G.O. SEWER REFUNDING 2013 2014 2015 2016 2016 2017 % REVENUES ACTUAL ACTUAL ACTUAL BUDGET PROJECTED BUDGET CHANGE Property Taxes 502,889$499,697$500,000$500,000$500,000$500,000$0.0% Licenses & Permits --------- Intergovernmental Revenues --------- Charges for Services --------- Fines & Forfeits --------- Special Assessments --------- Miscellaneous (12,429)21,686 7,709 5,000 5,000 5,000 0.0% Operating Transfers 450,000 857,337 1,089,754 340,000 685,000 --100.0% Debt Proceeds --------- TOTAL REVENUES 940,460$1,378,720$1,597,463$845,000$1,190,000$505,000$-40.2% EXPENDITURES Personnel Services -$-$-$-$-$-$--- Supplies --------- Other Services & Charges --------- Capital Outlay --------- Debt Service 1,050,216 1,049,360 1,048,767 1,049,254 1,567,442 1,521,832 45.0% Operating Transfers --------- TOTAL EXPENDITURES 1,050,216$1,049,360$1,048,767$1,049,254$1,567,442$1,521,832$45.0% FUND BALANCE - JANUARY 1 660,704$550,948$880,308$1,429,004$1,429,004$1,051,562$ Excess (Deficiency) of Revenues over Expenditures (109,756)329,360 548,696 (204,254)(377,442)(1,016,832) FUND BALANCE - DECEMBER 31 550,948$880,308$1,429,004$1,224,750$1,051,562$34,730$ REMAINING DEBT SERVICE: Payable Principal Interest Rate Total 2/1/2017 490,000$25,432$3.40%515,432$ 8/1/2017 499,000 17,102 3.40%516,102 2/1/2018 507,000 8,619 3.40%515,619 Total 1,496,000$51,153$1,547,153$ Note: The 8/1/2017 and 2/1/2018 bonds will be redeemed on 2/1/2017. GO Sewer Refunding Bonds, Series 2008B 167 2010A G.O. IMPROVEMENT BOND SUB-FUND DEPARTMENT: Debt Service SUPERVISOR: Finance Director FUND #:317 ACTIVITY #: 47000 ACTIVITY SCOPE: The 2010A G.O. Improvement and Refinancing Bond sfinanced capital projects approved and started in 2010 and refinanced the 2002 G.O. Improvement Bonds. The debt service schedule calls for semi- annual payments in February (principal and interest) and August (interest only). The average interest rate is 2.0047%. The revenue sources include a combination of existing city funds, property taxes, and special assessments. The bonds can be called on February 1, 2019. OBJECTIVES: 1.Make scheduled debt payments in a timely manner. 2.Certify or collect deferred special assessments when development occurs. 3.Redeem or refund when feasible. ISSUES: 1.Maintaining sufficient fund balance for early redemption in 2019. 2.City-imposed property tax levy limitations. MEASURABLE WORKLOAD DATA: Measurement 2013 2014 2015 2016 2017 Not Applicable BUDGET COMMENTARY: The city issued the $3,255,000 2010 G.O. Improvement and Refunding Bond to finance the reconstruction of West River Street, intersection improvements on the northeast corners of Highway 25 and Broadway and East River Streets, and to refinance the G.O. Improvement Bonds of 2002. The 2010A G.O. Improvement Bond revenue sources are a combination of existing city funds: Water Fund, Sewage Fund and Economic Development Authority Fund. Property taxes and special assessments also support debt service payments. Expenditures consist solely of debt principal and interest payments. 168 BUDGET: 2010A GO IMPROVEMENT BOND 2013 2014 2015 2016 2016 2017 % REVENUES ACTUAL ACTUAL ACTUAL BUDGET PROJECTED BUDGET CHANGE Property Taxes 20,152$-$40,000$40,000$40,000$40,000$0.0% Licenses & Permits --------- Intergovernmental Revenues --------- Charges for Services --------- Fines & Forfeits --------- Special Assessments 118,480 61,310 70,257 52,299 113,900 48,019 -8.2% Miscellaneous (8,639)26,613 5,775 ------ Operating Transfers 308,195 239,595 246,783 235,134 565,636 130,986 -44.3% Debt Proceeds --------- TOTAL REVENUES 438,188$327,518$362,815$327,433$657,935$219,005$-33.1% EXPENDITURES Personnel Services -$-$-$-$-$-$--- Supplies --------- Other Services & Charges --------- Capital Outlay --------- Debt Service 448,550 360,767 303,074 288,350 288,350 305,117 5.8% Operating Transfers --------- TOTAL EXPENDITURES 448,550$360,767$303,074$288,350$288,350$305,117$5.8% FUND BALANCE - JANUARY 1 630,122$619,760$586,511$646,252$646,252$1,015,837$ Excess (Deficiency) of Revenues over Expenditures (10,362)(33,249)59,741 39,083 369,585 (86,112) FUND BALANCE - DECEMBER 31 619,760$586,511$646,252$685,335$1,015,837$929,725$ REMAINING DEBT SERVICE: Payable Principal Interest Rate Total 2/1/2017 275,000$16,046$1.80%291,046$ 8/1/2017 13,571 13,571 2/1/2018 275,000 13,571 2.05%288,571 8/1/2018 10,753 10,753 2/1/2019 280,000 10,753 2.25%290,753 8/1/2019 7,603 7,603 2/1/2020 290,000 7,603 2.45%297,603 8/1/2020 4,050 4,050 2/1/2021 300,000 4,050 2.70%304,050 Total 1,420,000$87,999$1,507,999$ GO Improvement and Refunding Bonds, Series 2010A 169 2011A G.O. REFUNDING BOND SUB-FUND DEPARTMENT: Debt Service SUPERVISOR: Finance Director FUND #:312 ACTIVITY #: 47000 ACTIVITY SCOPE: The 2011A G.O.Refunding Bonds refinanced the 2005A G.O.Improvement Bonds. The debt service schedule calls for semi-annual payments in February (principal and interest) and August (interest only). The average interest rate is 1.6112%. The revenue sources include a combination of impact fees, property taxes, special assessments, and tax increments. The 2011A bonds can be called on February 1, 2020. OBJECTIVES: 1.Make scheduled debt payments in a timely manner. 2.Certify or collect deferred special assessments when development occurs. 3.Redeem or refund when feasible. ISSUES: 1.Balancing the property tax levy for this bond with the needs of other debt. MEASURABLE WORKLOAD DATA: Measurement 2013 2014 2015 2016 2017 Not Applicable BUDGET COMMENTARY: The city issued $10,735,000 in 2011 G.O. Refunding Bonds to advance refund the 2005A G.O. Improvement Bonds. The 2005A issue was redeemed on February 1, 2013. The 2011A G.O. Refunding Bond's revenue source is a combination of existing city funds, including transfers from three utility access funds and the Economic Development Fund, a property tax levy, and special assessments. Prior year 2005A G.O. revenues and expenditures are included in the schedule presented in the budget section. Escrow payments made in 2013 to redeem the 2005A G.O. Bonds are excluded. The debt is structured to reflect the nature of underlying projects and assessment policy. Consequently, there is large drop in 2017 debt service for this sub fund. 170 BUDGET: 2011A G.O. BOND FUND (2005A)2013 2014 2015 2016 2016 2017 % REVENUES ACTUAL ACTUAL ACTUAL BUDGET PROJECTED BUDGET CHANGE Property Taxes 246,424$222,865$330,000$330,000$330,000$139,783$-57.6% Licenses & Permits --------- Intergovernmental Revenues --------- Charges for Services --------- Fines & Forfeits --------- Special Assessments 753,058 1,049,370 2,042,331 517,124 330,628 162,359 -68.6% Miscellaneous 224,246 251,357 220,210 208,900 208,900 208,900 0.0% Operating Transfers 2,658,286 1,769,953 964,508 700,000 200,000 468,376 -33.1% Debt Proceeds --------- TOTAL REVENUES 3,882,014$3,293,545$3,557,049$1,756,024$1,069,528$979,418$-44.2% EXPENDITURES Personnel Services -$-$-$-$-$-$--- Supplies --------- Other Services & Charges --------- Capital Outlay --------- Debt Service 3,024,831 2,880,767 2,461,375 2,424,450 2,424,450 784,150 -67.7% Operating Transfers --------- TOTAL EXPENDITURES 3,024,831$2,880,767$2,461,375$2,424,450$2,424,450$784,150$-67.7% FUND BALANCE - JANUARY 1 460,123$1,317,306$1,730,084$2,825,758$2,825,758$1,470,836$ Excess (Deficiency) of Revenues over Expenditures 857,183 412,778 1,095,674 (668,426)(1,354,922)195,268 FUND BALANCE - DECEMBER 31 1,317,306$1,730,084$2,825,758$2,157,332$1,470,836$1,666,104$ REMAINING DEBT SERVICE: Payable Principal Interest Rate Total 2/1/2017 710,000$40,375$2.00%750,375$ 8/1/2017 33,275 33,275 2/1/2018 720,000 33,275 2.00%753,275 8/1/2018 26,075 26,075 2/1/2019 380,000 26,075 2.00%406,075 8/1/2019 22,275 22,275 2/1/2020 390,000 22,275 2.00%412,275 8/1/2020 18,375 18,375 2/1/2021 395,000 18,375 3.00%413,375 8/1/2021 12,450 12,450 2/1/2022 410,000 12,450 3.00%422,450 8/1/2022 6,300 6,300 2/1/2023 420,000 6,300 3.00%426,300 Total 3,425,000$277,875$3,702,875$ GO Refunding Bonds, Series 2011A 171 2014A G.O. JUDGMENT BOND SUB-FUND DEPARTMENT: Debt Service SUPERVISOR: Finance Director FUND #:318 ACTIVITY #: 47000 ACTIVITY SCOPE: The 2014A G.O. Judgment Bonds financed the settlement with telecommunications bondholders. The $5,750,000 settlement essentially relieves the city of liability for the $26,445,000 in revenue bonds used to finance its telecommunications utility. The judgment portion of the 2014A bonds totaled $6,080,000. The city borrowed (capitalized interest) the 2015 interest only payments. Thereafter, the city added the annual principal and interest debt service payments to its tax levy. The average interest rate is 3.0696%. The bonds are eligible for ordinary redemption in 2021. OBJECTIVES: 1.Make scheduled debt payments in a timely manner. 2.Redeem or refund when feasible. ISSUES: 1.Maintain adherence to bond covenants and awareness of arbitrage limitations. 2.Balancing the property tax levy for this bond with the needs of other debt. MEASURABLE WORKLOAD DATA: Measurement 2013 2014 2015 2016 2017 Not Applicable BUDGET COMMENTARY: The $6,595,000 2014A G.O. bond issue had two components: $6,080,000 judgment portions and $515,000 capital equipment portion. The capital equipment portion will be accounted for in the Central Equipment Fund. Beginning in 2016, annual debt service payments were added to the property tax levy. The 2015 interest only payments were added to the bond issue. The final payment on the bonds is in December 2030. The bonds are redeemable in 2021. However, an extraordinary optional redemption provision allows the city to redeem the bonds at any time for 101% of par if the fiber optics system is sold or leased. The settlement proceeds were distributed directly to the trustee for the bondholders. 172 BUDGET: 2014A G.O. JUDGMENT BONDS 2013 2014 2015 2016 2016 2017 % REVENUES ACTUAL ACTUAL ACTUAL BUDGET PROJECTED BUDGET CHANGE Property Taxes -$-$-$544,000$544,000$536,929$-1.3% Licenses & Permits --------- Intergovernmental Revenues --------- Charges for Services --------- Fines & Forfeits --------- Special Assessments --------- Miscellaneous -778 2,077 1,000 1,000 1,000 0.0% Operating Transfers --------- Debt Proceeds -5,952,106 ------- TOTAL REVENUES -$5,952,884$2,077$545,000$545,000$537,929$-1.3% EXPENDITURES Personnel Services -$-$-$-$-$-$--- Supplies --------- Other Services & Charges --------- Capital Outlay --------- Debt Service --163,879 515,362 515,362 511,862 -0.7% Operating Transfers -5,783,732 ------- TOTAL EXPENDITURES -$5,783,732$163,879$515,362$515,362$511,862$-0.7% FUND BALANCE - JANUARY 1 -$-$169,152$7,350$7,350$36,988$ Excess (Deficiency) of Revenues over Expenditures -169,152 (161,802)29,638 29,638 26,067 FUND BALANCE - DECEMBER 31 -$169,152$7,350$36,988$36,988$63,055$ REMAINING DEBT SERVICE: Payable Principal Interest Rate Total 6/15/2017 80,680$80,680$ 12/15/2017 350,000$80,680 1.25%430,680 6/15/2018 78,493 78,493 12/15/2018 355,000 78,493 1.50%433,493 6/15/2019 75,831 75,831 12/15/2019 360,000 75,831 1.85%435,831 6/15/2020 72,501 72,501 12/15/2020 365,000 72,501 2.20%437,501 6/15/2021 68,486 68,486 12/15/2021 375,000 68,486 2.50%443,486 6/15/2022 63,798 63,798 12/15/2022 385,000 63,798 2.75%448,798 6/15/2023 58,504 58,504 12/15/2023 395,000 58,504 2.90%453,504 6/15/2024 52,777 52,777 12/15/2024 405,000 52,777 3.05%457,777 6/15/2025 46,600 46,600 12/15/2025 420,000 46,600 3.20%466,600 6/15/2026 39,881 39,881 12/15/2026 435,000 39,881 3.35%474,881 6/15/2027 32,594 32,594 12/15/2027 445,000 32,594 3.40%477,594 6/15/2028 25,029 25,029 12/15/2028 465,000 25,029 3.38%490,029 6/15/2029 17,182 17,182 12/15/2029 480,000 17,182 3.55%497,182 6/15/2030 8,663 8,663 12/15/2030 495,000 8,663 3.50%503,663 Total 5,730,000 1,442,038 7,172,038$ GO Bonds, Series 2014A (Judgment Portion) 173 2015B G.O. STREET RECONSTRUCTION-IMPROVEMENT BOND SUB-FUND DEPARTMENT: Debt Service SUPERVISOR: Finance Director FUND #:319 ACTIVITY #: 47000 ACTIVITY SCOPE: The 2015B G.O. Street Reconstruction and Improvement Bonds provided financing for School Boulevard, Fallon Avenue and 85th Street improvements. This issue also provided financing for street and other infrastructure improvements in the area east of Highway 25 and north of Interstate 94. The $2,605,000 bond issue allocated $1,885,000 for street reconstruction and $720,000 for improvements. The school district was assessed $172,000 for School Boulevard. The city levies for the gap between annual debt service payments and annual assessment collections. The bonds have an average interest rate of 2.5856% and are redeemable in December of 2022. OBJECTIVES: 1.Make scheduled debt payments in a timely manner. 2.Redeem or refund when feasible. ISSUES: 1.Balancing the property tax levy for this bond with the needs of other debt. MEASURABLE WORKLOAD DATA: Measurement 2013 2014 2015 2016 2017 Not Applicable BUDGET COMMENTARY: The $2,605,000 2015B G.O. bond issue has two components: $1,885,000 street reconstruction portion and $720,000 improvement portion. Property taxes support the reconstruction portion of the debt issue. The improvement portion is supported by a single assessment of $175,000 on school district property plus property taxes. Property taxes will be levied for the gap between assessment revenue and debt service payments. The 2016 $250,000 levy exceeded the bond covenant required levy by $50,000. 174 BUDGET: 2015B G.O. Bonds 2013 2014 2015 2016 2016 2017 % REVENUES ACTUAL ACTUAL ACTUAL BUDGET PROJECTED BUDGET CHANGE Property Taxes -$-$-$250,000$250,000$195,288$-21.9% Licenses & Permits --------- Intergovernmental Revenues --------- Charges for Services --------- Fines & Forfeits --------- Special Assessments ---22,000 22,000 26,000 18.2% Miscellaneous --665 1,000 1,000 1,000 0.0% Operating Transfers --------- Debt Proceeds --------- TOTAL REVENUES -$-$665$273,000$273,000$222,288$-18.6% EXPENDITURES Personnel Services -$-$-$-$-$-$--- Supplies --------- Other Services & Charges --------- Capital Outlay --------- Debt Service ---212,468 212,468 208,000 -2.1% Operating Transfers --------- TOTAL EXPENDITURES -$-$-$212,468$212,468$208,000$-2.1% FUND BALANCE - JANUARY 1 -$-$-$665$665$61,197$ Excess (Deficiency) of Revenues over Expenditures --665 60,532 60,532 14,288 FUND BALANCE - DECEMBER 31 -$-$665$61,197$61,197$75,485$ REMAINING DEBT SERVICE: Payable Principal Interest Rate Total 6/15/2017 -$28,750$28,750$ 12/15/2017 150,000 28,750 1.50%178,750 6/15/2018 -27,625 27,625 12/15/2018 160,000 27,625 1.50%187,625 6/15/2019 -26,426 26,426 12/15/2019 160,000 26,426 1.50%186,426 6/15/2020 -25,225 25,225 12/15/2020 160,000 25,225 1.50%185,225 6/15/2021 -24,024 24,024 12/15/2021 165,000 24,024 2.00%189,024 6/15/2022 -22,376 22,376 12/15/2022 165,000 22,376 2.00%187,376 6/15/2023 -20,724 20,724 12/15/2023 170,000 20,724 2.50%190,724 6/15/2024 -18,600 18,600 12/15/2024 175,000 18,600 2.50%193,600 6/15/2025 -16,413 16,413 12/15/2025 180,000 16,413 2.50%196,413 6/15/2026 -14,162 14,162 12/15/2026 185,000 14,162 2.50%199,162 6/15/2027 -11,850 11,850 12/15/2027 185,000 11,850 3.00%196,850 6/15/2028 -9,075 9,075 12/15/2028 195,000 9,075 3.00%204,075 6/15/2029 -6,150 6,150 12/15/2029 200,000 6,150 3.00%206,150 6/15/2030 -3,150 3,150 12/15/2030 210,000 3,150 3.00%213,150 Total 2,460,000$509,100$2,969,100$ GO Bonds, Series 2015B 175 2016A G.O. STREET RECONSTRUCTION-IMPROVEMENT BOND SUB-FUND DEPARTMENT: Debt Service SUPERVISOR: Finance Director FUND #:320 ACTIVITY #: 47000 ACTIVITY SCOPE: The 2016A G.O. Street Reconstruction and Improvement Bonds financed improvements included in the 2016 core street project and at the intersection of Highway 25 and 7th Street. The $4,900,000 bond issue allocated $770,000 for street reconstruction and $4,130,000 for improvements. The city levies for the gap between annual debt service payments and annual assessment collections. The bonds have an average interest rate of 2.1034% and are redeemable in December of 2022. OBJECTIVES: 1.Make scheduled debt payments in a timely manner. 2.Redeem or refund when feasible. ISSUES: 1.Balancing the property tax levy for this bond with the needs of other debt. 2.Investment earnings on assessment prepayments will be less than assessed interest rates. MEASURABLE WORKLOAD DATA: Measurement 2013 2014 2015 2016 2017 Not Applicable BUDGET COMMENTARY: The $4,900,000 2016A G.O. bond issue has two components: $770,000 street reconstruction portion and $4,130,000 improvement portion. Property taxes support the reconstruction portion of the debt issue. The improvement portion is supported by assessments of $1,143,000 in the core street reconstruction area. Property taxes will be levied for the gap between assessment revenue and debt service payments. The bond issue resolution requires a $404,272 property tax levy for collection year 2017. Future levies will be adjusted to reflect assessment prepayments and the interest earned on prepayments. 176 BUDGET: 2016A G.O. Bonds 2013 2014 2015 2016 2016 2017 % REVENUES ACTUAL ACTUAL ACTUAL BUDGET PROJECTED BUDGET CHANGE Property Taxes -$-$-$-$-$415,000$--- Licenses & Permits --------- Intergovernmental Revenues --------- Charges for Services --------- Fines & Forfeits --------- Special Assessments -----140,000 --- Miscellaneous --------- Operating Transfers --------- Debt Proceeds --------- TOTAL REVENUES -$-$-$-$-$555,000$--- EXPENDITURES Personnel Services -$-$-$-$-$-$--- Supplies --------- Other Services & Charges --------- Capital Outlay --------- Debt Service -----530,000 --- Operating Transfers --------- TOTAL EXPENDITURES -$-$-$-$-$530,000$--- FUND BALANCE - JANUARY 1 -$-$-$-$-$-$ Excess (Deficiency) of Revenues over Expenditures -----25,000 FUND BALANCE - DECEMBER 31 -$-$-$-$-$25,000$ REMAINING DEBT SERVICE: Payable Principal Interest Rate Total 6/15/2017 -$58,596$58,596$ 12/15/2017 415,000 50,225 2.00%465,225 6/15/2018 -46,075 46,075 12/15/2018 435,000 46,075 2.00%481,075 6/15/2019 -41,725 41,725 12/15/2019 445,000 41,725 2.00%486,725 6/15/2020 -37,275 37,275 12/15/2020 450,000 37,275 2.00%487,275 6/15/2021 -32,775 32,775 12/15/2021 460,000 32,775 2.00%492,775 6/15/2022 -28,175 28,175 12/15/2022 470,000 28,175 2.00%498,175 6/15/2023 -23,475 23,475 12/15/2023 480,000 23,475 2.00%503,475 6/15/2024 -18,675 18,675 12/15/2024 490,000 18,675 2.00%508,675 6/15/2025 -13,775 13,775 12/15/2025 500,000 13,775 2.00%513,775 6/15/2026 -8,775 8,775 12/15/2026 510,000 8,775 2.00%518,775 6/15/2027 -3,675 3,675 12/15/2027 60,000 3,675 3.00%63,675 6/15/2028 -2,775 2,775 12/15/2028 60,000 2,775 3.00%62,775 6/15/2029 -1,875 1,875 12/15/2029 60,000 1,875 3.00%61,875 6/15/2030 -975 975 12/15/2030 65,000 975 3.00%65,975 Total 4,900,000$628,871$5,528,871$ GO Bonds, Series 2016A 177 CLOSED DEBT SERVICE FUNDS CLOSED FUNDS INCLUDED IN SUMMARY TOTAL: 2011A G.O. Refunding Bond – Escrow Payments 2008A G.O. Revenue Refunding Bond Fund CLOSED FUNDS SUMMARY TOTAL: CLOSED DEBT SERVICE FUNDS 2013 2014 2015 2016 2016 2017 % REVENUES ACTUAL ACTUAL ACTUAL BUDGET PROJECTED BUDGET CHANGE Property Taxes -$-$-$-$-$-$--- Licenses & Permits --------- Intergovernmental Revenues --------- Charges for Services --------- Fines & Forfeits --------- Special Assessments --------- Miscellaneous 3,083 561 ------- Operating Transfers 875,000 1,040,000 1,005,000 ------ Debt Proceeds --------- TOTAL REVENUES 878,083$1,040,561$1,005,000$-$-$-$--- EXPENDITURES Personnel Services -$-$-$-$-$-$--- Supplies --------- Other Services & Charges 375 167 ------- Capital Outlay --------- Debt Service 11,877,595 1,037,360 1,000,759 ------ Operating Transfers --5,872 ------ TOTAL EXPENDITURES 11,877,970$1,037,527$1,006,631$-$-$-$--- FUND BALANCE - JANUARY 1 10,998,484$(1,403)$1,631$-$-$-$ Excess (Deficiency) of Revenues over Expenditures (10,999,887)3,034 (1,631)--- FUND BALANCE - DECEMBER 31 (1,403)$1,631$-$-$-$-$ 178 ENTERPRISE FUNDS For Fiscal Year 2013 Adopted 2017 CAPITAL PROJECT FUNDS CAPITAL PROJECT FUNDS - SUMMARY DESCRIPTION Capitalprojectfundsareusedtoaccountforfinancialresourcesthatarerestricted,committed,orassignedto expenditureforcapitaloutlaysincludingtheacquisitionorconstructionofcapitalfacilitiesandothercapital assets—excludingcapitalassetsfinancedbyproprietaryfunds(enterpriseorinternalservice).Capitalproject fundsusethemodifiedaccrualbasisofaccountingforbothfinancialreportingandbudgetingpurposes.Thecity currentlyhassixactivecapitalprojectfunds. BUDGETISSUES Financingcapitalassetadditionsorreplacementsisanongoingchallenge,especiallyinanenvironmentwhere thefocusisonmaintainingalow,stablepropertytaxlevyandtraditionalresources(LiquorFundtransfers)have beendivertedtootherneeds.Seetheindividualfundsforthebudgetissuesfacingeachcapitalprojectfund. BUDGETSUMMARY TOTAL CAPITAL PROJECT 2013 2014 2015 2016 2016 2017 % REVENUES ACTUAL ACTUAL ACTUAL BUDGET PROJECTED BUDGET CHANGE Property Taxes 2,346$229,030$79,146$300,000$300,000$50,000$-83.3% Tax Increments --------- Franchise & Other Taxes $86,003 $97,553 $116,984 $80,000 $116,000 $116,000 45.0% Licenses & Permits --------- Intergovernmental Revenues 910,287 411,675 1,045,756 1,047,000 1,210,000 250,000 -76.1% Charges for Services 270,319 38,494 393,180 50,000 50,000 50,000 0.0% Fines & Forfeits --------- Special Assessments 1,027,174 400,848 1,084,169 100,720 100,720 65,900 -34.6% Miscellaneous (100,220)333,390 92,863 62,000 57,000 57,000 -8.1% Operating Transfers 1,210,401 864,500 860,872 2,500,000 753,500 --100.0% Debt Proceeds --2,651,898 5,000,000 5,000,000 5,000,000 0.0% TOTAL REVENUES 3,406,310$2,375,490$6,324,868$9,139,720$7,587,220$5,588,900$-38.9% EXPENDITURES Personnel Services -$-$-$-$-$-$--- Supplies 87,499 18,262 7,135 ------ Other Services & Charges 37,167 55,446 145,429 -125,000 ---- Capital Outlay 1,832,953 2,147,894 2,238,364 10,000,000 7,020,500 7,163,000 -28.4% Operating Transfers 4,274,241 990,800 855,000 1,500,000 1,214,675 314,069 -79.1% TOTAL EXPENDITURES 6,231,860$3,212,402$3,245,928$11,500,000$8,360,175$7,477,069$-35.0% FUND BALANCE - JANUARY 1 9,056,959$6,231,409$5,394,497$8,473,437$8,473,437$7,700,482$ Excess (Deficiency) of Revenues over Expenditures (2,825,550)(836,912)3,078,940 (2,360,280)(772,955)(1,888,169) FUND BALANCE - DECEMBER 31 6,231,409$5,394,497$8,473,437$6,113,157$7,700,482$5,812,313$ 179 CAPITAL PROJECT FUND DEPARTMENT: Capital Project Fund SUPERVISOR: City Engineer FUND #:400 ACTIVITY #: 43300 ACTIVITY SCOPE: The Capital Project Fund is a generic fund of the same type used to account for on-going capital asset additions and replacements. Capital assets acquired through this fund include street improvements or other infrastructure and buildings. OBJECTIVES: 1.Improve city infrastructure. 2.Extend city infrastructure to new developments. ISSUES: 1.Finding adequate resources for various projects while maintaining a low, stable property tax levy. MEASURABLE WORKLOAD DATA: Measurement 2013 2014 2015 2016 2017 Projects supported 3 3 4 4 7 BUDGET COMMENTARY: For 2017, notable projects include: Fallon Avenue overpass - $2,000,000; 95th Street extension - $1,000,000; E 7th Street and TH25 intersection improvements - $1,650,000; rural, collector and reconstruction road projects - $1,600,000. Funding sources include: debt proceeds - $5,000,000; fund balance - $1,800,000 (debt proceeds from prior year); state and federal aid - $250,000. Reimbursement resolutions have been passed by council on some of these projects. These resolutions allow the city to reimburse itself with debt issuance proceeds. 180 BUDGET: CAPITAL PROJECT FUND 2013 2014 2015 2016 2016 2017 % REVENUES ACTUAL ACTUAL ACTUAL BUDGET PROJECTED BUDGET CHANGE Property Taxes -$228,854$79,146$300,000$300,000$50,000$-83.3% Franchise & Other Taxes -53,933 36,865 -36,000 36,000 --- Intergovernmental Revenues 892,150 41,962 945,756 1,047,000 1,210,000 250,000 -76.1% Charges for Services --------- Fines & Forfeits --------- Special Assessments -159,038 276,023 ------ Miscellaneous (5,701)21,523 8,176 ------ Operating Transfers 460,401 200,000 -2,500,000 ---100.0% Debt Proceeds --2,651,898 5,000,000 5,000,000 5,000,000 0.0% TOTAL REVENUES 1,346,850$705,310$3,997,864$8,847,000$6,546,000$5,336,000$-39.7% EXPENDITURES Personnel Services -$-$-$-$-$-$--- Supplies -9,497 135 ------ Other Services & Charges 23,737 16,615 96,400 -125,000 ---- Capital Outlay 1,627,483 893,015 1,268,277 9,177,000 5,677,000 6,800,000 -25.9% Operating Transfers 187,500 -------- TOTAL EXPENDITURES 1,838,720$919,127$1,364,812$9,177,000$5,802,000$6,800,000$-25.9% FUND BALANCE - JANUARY 1 795,453$303,583$89,766$2,722,818$2,722,818$3,466,818$ Excess (Deficiency) of Revenues over Expenditures (491,870)(213,817)2,633,052 (330,000)744,000 (1,464,000) FUND BALANCE - DECEMBER 31 303,583$89,766$2,722,818$2,392,818$3,466,818$2,002,818$ 181 CLOSED BOND FUND DEPARTMENT: Closed Bond Fund SUPERVISOR: Finance Director FUND #:300 ACTIVITY #: 47000 ACTIVITY SCOPE: The Closed Bond Fund, formerly accounted for in the debt service section, is the combination of multiple closed debt service funds. The fund has no debt obligation. However, special assessments supporting past debt service continue to provide funding for city projects. OBJECTIVES: 1.Provide funding for various city projects, including Bertram Chain of Lakes improvements. 2.Certifyorcollectdeferredspecialassessmentswhendevelopmentoccursafterrelateddebt has been fully amortized. ISSUES: 1.Declining assessment collections on retired debt. MEASURABLE WORKLOAD DATA: Measurement 2013 2014 2015 2016 2017 Not Applicable BUDGET COMMENTARY: In 2017, special assessments collected on projects with retired debt will provide funding for Bertram Chain of Lakes, pathway, and park improvements. A transfer to the Park & Pathway Dedication Fund at the end of 2016 provided money for such purposes. Similarly, a supplemental transfer may occur in 2017 to finance 2018 projects. Future assessment collections for 2017 and beyond are estimated at $475,000. 182 BUDGET: CLOSED BOND FUND 2013 2014 2015 2016 2016 2017 % REVENUES ACTUAL ACTUAL ACTUAL BUDGET PROJECTED BUDGET CHANGE Property Taxes -$-$-$-$-$-$--- Licenses & Permits --------- Intergovernmental Revenues --------- Charges for Services --------- Fines & Forfeits --------- Special Assessments 1,027,174 241,810 695,738 100,720 100,720 65,900 -34.6% Miscellaneous (19,501)67,631 16,933 5,000 5,000 5,000 0.0% Operating Transfers --5,872 ------ Debt Proceeds --------- TOTAL REVENUES 1,007,673$309,441$718,543$105,720$105,720$70,900$-32.9% EXPENDITURES Personnel Services -$-$-$-$-$-$--- Supplies --------- Other Services & Charges --------- Capital Outlay --------- Operating Transfers 750,000 664,500 855,000 -933,500 ---- TOTAL EXPENDITURES 750,000$664,500$855,000$-$933,500$-$--- FUND BALANCE - JANUARY 1 1,116,150$1,373,823$1,018,764$882,307$882,307$54,527$ Excess (Deficiency) of Revenues over Expenditures 257,673 (355,059)(136,457)105,720 (827,780)70,900 FUND BALANCE - DECEMBER 31 1,373,823$1,018,764$882,307$988,027$54,527$125,427$ 183 PARK & PATHWAY DEDICATION FUND DEPARTMENT: Recreation & Culture SUPERVISOR: Parks Superintendent FUND #:229 ACTIVITY #: 45202 ACTIVITY SCOPE: Activities of the Park and Pathway Dedication Fund include updating and maintaining the city's pathway system, as well as designating funds for future city parks and pathways. OBJECTIVES: 1.Improve pathways system. 2.Plan for integration of funds toward park land purchases. 3.Continue the improvement of Bertram Chain of Lakes (formerly the Y.M.C.A.) property. ISSUES: 1.Economic impact on new development and home construction. 2.Time constraints of other projects. MEASURABLE WORKLOAD DATA: Measurement 2013 2014 2015 2016 2017 LandAcquisition 205,470$1,163,248$609,614$1,083,500$-$ Projects supported 1 3 2 4 7 Dedicationfees -$-$ 107,929$-$-$ BUDGET COMMENTARY: The fund’s major revenue source is normally park dedication fees. However, due to the economic conditions and lack of new development, dedication fees have been an unreliable source. Consequently, the city typically finances projects with transfers from other funds, which are made in the year prior to expenditure. The 2017 budgeted expenditures include the Spirit Hills pathway connection ($90,000), Rolling Woods playground equipment ($65,000), and open-air shelter at Ellison Park ($58,000). Land acquisition at Bertram Chain of Lakes concluded in 2016. 184 BUDGET: PARK & PATHWAY DEDICATION 2013 2014 2015 2016 2016 2017 % REVENUES ACTUAL ACTUAL ACTUAL BUDGET PROJECTED BUDGET CHANGE Property Taxes -$-$-$-$-$-$--- Licenses & Permits --------- Intergovernmental Revenues -369,713 100,000 ------ Charges for Services --107,929 ------ Fines & Forfeits --------- Special Assessments --112,408 ------ Miscellaneous (7,851)32,870 15,225 2,000 2,000 2,000 0.0% Operating Transfers 750,000 664,500 855,000 -753,500 ---- TOTAL REVENUES 742,149$1,067,083$1,190,562$2,000$755,500$2,000$0.0% EXPENDITURES Personnel Services -$-$-$-$-$-$--- Supplies -8,765 7,000 ------ Other Services & Charges 6,000 38,539 48,707 ------ Capital Outlay 205,470 1,254,879 636,528 823,000 1,343,500 288,000 -65.0% Operating Transfers --------- TOTAL EXPENDITURES 211,470$1,302,183$692,235$823,000$1,343,500$288,000$-65.0% FUND BALANCE - JANUARY 1 442,754$973,433$738,333$1,236,660$1,236,660$648,660$ Excess (Deficiency) of Revenues over Expenditures 530,679 (235,100)498,327 (821,000)(588,000)(286,000) FUND BALANCE - DECEMBER 31 973,433$738,333$1,236,660$415,660$648,660$362,660$ 185 STORMWATER ACCESS FUND DEPARTMENT: Public Works SUPERVISOR: City Engineer/Public Works Director FUND #:263 ACTIVITY #: 49201 ACTIVITY SCOPE: The Stormwater Access Fund provides resources for major improvements to the storm sewer system. Impact fees are collected on building permits for new construction and lot development. These fees are also used to retire debt service related to improvements to the sanitary sewer system. OBJECTIVES: 1.Maintain and upgrade storm sewer system. 2.Retire debt service related to system improvements in a timely manner. ISSUES: 1.Building permits for residential and commercial development are increasing. 2.The economy is recovering. MEASURABLE WORKLOAD DATA: Measurement 2013 2014 2015 2016 2017 Not Applicable BUDGET COMMENTARY: The main revenue sources are storm sewer access and trunk fees on new construction or special assessments of past access and trunk fees. The operating transfers are to the 2011A (formerly 2005A) Refunding Improvement Bond--part of the interchange project, and to the 2010A Improvement and Refinancing Bond--its share of the 2010 storm sewer project. For 2016 and beyond, funding for routine pond improvements will come from the General Fund. There are no planned capital outlays for non-routine pond improvements in 2017. The 2016 and 2017 operating transfers support debt service and the 2017 transfer is the last for existing debt issues. 186 BUDGET: STORMWATER ACCESS FUND 2013 2014 2015 2016 2016 2017 % REVENUES ACTUAL ACTUAL ACTUAL BUDGET PROJECTED BUDGET CHANGE Property Taxes -$-$-$-$-$-$--- Licenses & Permits --------- Intergovernmental Revenues --------- Charges for Services -38,494 285,251 50,000 50,000 50,000 0.0% Fines & Forfeits --------- Special Assessments --------- Miscellaneous (17,598)39,638 15,399 20,000 15,000 15,000 -25.0% Operating Transfers --------- Debt Proceeds --------- TOTAL REVENUES (17,598)$78,132$300,650$70,000$65,000$65,000$-7.1% EXPENDITURES Personnel Services -$-$-$-$-$-$--- Supplies --------- Other Services & Charges 7,164 292 322 ------ Capital Outlay --------- Operating Transfers 321,800 326,300 --235,567 268,376 --- TOTAL EXPENDITURES 328,964$326,592$322$-$235,567$268,376$--- FUND BALANCE - JANUARY 1 1,468,743$1,122,181$873,721$1,174,049$1,174,049$1,003,482$ Excess (Deficiency) of Revenues over Expenditures (346,562)(248,460)300,328 70,000 (170,567)(203,376) FUND BALANCE - DECEMBER 31 1,122,181$873,721$1,174,049$1,244,049$1,003,482$800,106$ 187 STREET LIGHTING IMPROVEMENT FUND DEPARTMENT: Public Works SUPERVISOR: City Engineer/Public Works Director FUND #:245 ACTIVITY #: 43162 ACTIVITY SCOPE: The Street Lighting Improvement Fund provides resources for improvements to the street lighting system. Electric franchise fees are the fund’s primary revenue sources. OBJECTIVES: 1.Upgrade traditional lights to colonial style lights. 2.Work with MNDOT to add battery back-up to signals on TH25. 3.Replace and modify lighting system in the downtown area. ISSUES: 1.Project scope and timing. 2.Develop a light replacement program with Wright Hennepin and Xcel Energy. 3.Verify lamp and fixture maintenance by utility companies. MEASURABLE WORKLOAD DATA: Measurement 2013 2014 2015 2016 2017 Projects supported 0 0 2 0 1 BUDGET COMMENTARY: Electric franchise fees provide resources for lighting projects, often in conjunction with other street improvement projects. Capital outlays for 2017 includes $75,000 for various currently unspecified projects. 188 BUDGET: STREET LIGHT IMPROVEMENTS 2013 2014 2015 2016 2016 2017 % REVENUES ACTUAL ACTUAL ACTUAL BUDGET PROJECTED BUDGET CHANGE Property Taxes -$-$-$-$-$-$--- Franchise & Other Taxes 86,003 43,620 80,119 80,000 80,000 80,000 0.0% Licenses & Permits --------- Intergovernmental Revenues --------- Charges for Services --------- Fines & Forfeits --------- Special Assessments --------- Miscellaneous (10,106)86,976 12,220 10,000 10,000 10,000 0.0% Operating Transfers --------- Debt Proceeds --------- TOTAL REVENUES 75,897$130,596$92,339$90,000$90,000$90,000$0.0% EXPENDITURES Personnel Services -$-$-$-$-$-$--- Supplies --------- Other Services & Charges --------- Capital Outlay --333,559 --75,000 --- Operating Transfers --------- TOTAL EXPENDITURES $0 $0 $333,559 $0 $0 $75,000 --- FUND BALANCE - JANUARY 1 716,387$792,284$922,880$681,660$681,660$771,660$ Excess (Deficiency) of Revenues over Expenditures 75,897 130,596 (241,220)90,000 90,000 15,000 FUND BALANCE - DECEMBER 31 792,284$922,880$681,660$771,660$771,660$786,660$ 189 STREET RECONSTRUCTION FUND DEPARTMENT: Public Works SUPERVISOR: City Engineer/Public Works Director FUND #:212 ACTIVITY #: 43121 ACTIVITY SCOPE: The Street Reconstruction Fund was established to track annual improvements to city infrastructure. Improvements are based on an annual reconstruction schedule. OBJECTIVES: 1.Improve city streets in the capital improvement plan. ISSUES: 1.City no longer levies for this fund. 2.Other traditional resources have been diverted to other needs. MEASURABLE WORKLOAD DATA: Measurement 2013 2014 2015 2016 2017 Not Applicable BUDGET COMMENTARY: Past revenue sources have included property taxes and operating transfers from the Liquor Fund. Neither the tax nor transfer has been budgeted for 2017. Reimbursement resolutions have been passed by council on various projects that could be supported by the Street Reconstruction Fund. These resolutions allow the city to reimburse itself with debt proceeds. Staff has not made a final determination of the mix of funding sources for 2017 projects. 190 BUDGET: STREET RECONSTRUCTION 2013 2014 2015 2016 2016 2017 % REVENUES ACTUAL ACTUAL ACTUAL BUDGET PROJECTED BUDGET CHANGE Property Taxes 2,346$176$-$-$-$-$--- Licenses & Permits --------- Intergovernmental Revenues --------- Charges for Services --------- Fines & Forfeits --------- Special Assessments --------- Miscellaneous (24,620)84,752 24,910 25,000 25,000 25,000 0.0% Operating Transfers --------- Debt Proceeds --------- TOTAL REVENUES (22,274)$84,928$24,910$25,000$25,000$25,000$0.0% EXPENDITURES Personnel Services -$-$-$-$-$-$--- Supplies --------- Other Services & Charges --------- Capital Outlay --------- Operating Transfers 219,000 --1,500,000 45,608 45,693 -97.0% TOTAL EXPENDITURES 219,000$-$-$1,500,000$45,608$45,693$-97.0% FUND BALANCE - JANUARY 1 1,907,379$1,666,105$1,751,033$1,775,943$1,775,943$1,755,335$ Excess (Deficiency) of Revenues over Expenditures (241,274)84,928 24,910 (1,475,000)(20,608)(20,693) FUND BALANCE - DECEMBER 31 1,666,105$1,751,033$1,775,943$300,943$1,755,335$1,734,642$ 191 CLOSED CAPITAL PROJECT FUNDS CLOSED FUNDS INCLUDED IN SUMMARY TOTAL: Sanitary Sewer Access Water Access Capital Outlay Revolving CLOSED FUNDS SUMMARY TOTAL: CLOSED CAPITAL PROJECT 2013 2014 2015 2016 2016 2017 % REVENUES ACTUAL ACTUAL ACTUAL BUDGET PROJECTED BUDGET CHANGE Property Taxes -$-$-$-$-$-$--- Intergovernmental Revenues --------- Charges for Services 18,137 -------- Fines & Forfeits 270,319 -------- Special Assessments --------- Miscellaneous --------- Operating Transfers (14,843)-------- Debt Proceeds --------- TOTAL REVENUES 273,613$-$-$-$-$-$--- EXPENDITURES Personnel Services -$-$-$-$-$-$--- Supplies 87,499 -------- Other Services & Charges 266 -------- Capital Outlay --------- Operating Transfers 2,795,941 -------- TOTAL EXPENDITURES 2,883,706$-$-$-$-$-$--- FUND BALANCE - JANUARY 1 2,610,093$-$-$-$-$-$ Excess (Deficiency) of Revenues over Expenditures (2,610,093)----- FUND BALANCE - DECEMBER 31 -$-$-$-$-$-$ 192 ENTERPRISE FUNDS Adopted 2017 ENTERPRISE FUNDS ENTERPRISE FUNDS - SUMMARY DESCRIPTION Enterprisefundsareusedtoreportanactivityforwhichafeeischargedtoexternalusersforgoodsorservices. Unlikegovernmentalfunds,enterprisefundsfocusonthedeterminationofoperatingincome,changesinnet position(orcostrecovery),financialposition,andcashflows.Enterprisefundsuseanaccrualbasisofaccounting forfinancialreportingpurposes.Amodifiedaccrualbasiswillbeusedforbudgetingpurposesinthisreport. Consequently,thebottomlineforeachenterprisefundislabeledfundbalanceratherthannetposition,which includescapitalassets,long-termdebtandothernoncurrentitems.Fundbalanceinenterprisefundsisroughly thesameasworkingcapital. Thecitycurrentlyhasfiveactiveenterprisefunds:Water,Sewage,Liquor(Hi-Way Liquors),DeputyRegistrar(DMV),andFiberOptics(FiberNet). BUDGETISSUES Eachenterprisefundhasspecificchallengesthatwillbeaddressedinthenarrativeforeachfund. BUDGETSUMMARY TOTAL ENTERPRISE FUNDS 2013 2014 2015 2016 2016 2017 % REVENUES ACTUAL ACTUAL ACTUAL BUDGET PROJECTED BUDGET CHANGE Property Taxes -$-$-$-$-$-$--- Sale of Goods 5,085,925 5,165,737 5,489,430 5,367,710 5,367,710 5,435,194 1.3% Licenses & Permits 1,920 2,735 4,635 3,700 3,700 200 -94.6% Intergovernmental Revenues --------- Charges for Services 5,204,529 5,240,839 5,270,527 5,241,070 5,316,070 5,414,861 3.3% Fines & Forfeits --------- Special Assessments 44,339 40,440 12,998 30,000 30,000 30,000 0.0% Miscellaneous 599,191 424,869 213,930 185,779 185,779 165,297 -11.0% Contributed Capital -966,494 1,435,870 140,450 840,450 140,450 0.0% Operating Transfers 860,000 6,383,732 450,000 350,000 350,000 230,000 -34.3% Debt Proceeds 3,003,224 --2,000,000 2,000,000 700,000 -65.0% TOTAL REVENUES 14,799,128$18,224,846$12,877,390$13,318,709$14,093,709$12,116,002$-9.0% EXPENDITURES Personnel Services 1,631,538$1,621,367$1,830,153$2,097,728$2,097,728$1,555,441$-25.9% Supplies 4,032,579 4,204,556 4,320,133 4,385,536 4,385,536 4,414,130 0.7% Other Services & Charges 3,230,231 3,506,438 3,059,414 3,083,464 3,083,464 3,422,406 11.0% Capital Outlay 3,409,679 139,513 548,298 2,766,000 3,666,000 1,760,900 -36.3% Debt Service 814,879 6,054,285 358,072 492,198 698,198 373,574 -24.1% Operating Transfers 3,281,278 2,972,232 2,751,045 2,425,134 1,319,461 315,293 -87.0% TOTAL EXPENDITURES 16,400,184$18,498,391$12,867,115$15,250,060$15,250,387$11,841,744$-22.3% FUND BALANCE - JANUARY 1 10,854,636$9,253,580$8,980,035$8,990,310$8,990,310$7,833,632$ Excess (Deficiency) of Revenues over Expenditures (1,601,056)(273,545)10,275 (1,931,351)(1,156,678)274,258 FUND BALANCE - DECEMBER 31 9,253,580$8,980,035$8,990,310$7,058,959$7,833,632$8,107,890$ 193 WATER FUND DEPARTMENT: Public Works SUPERVISOR: Utilities Superintendent FUND #:601 ACTIVITY #: 49440 ACTIVITY SCOPE: The Water Fund is a self-sustaining city utility fund. The water department manages the water utility, providing a continuous supply of high-quality water to customers at a reasonable cost. The water system is maintained at proper pressure levels and it is bacteria-free. Further, metering equipment is maintained to account for accurate usage and billing. OBJECTIVES: 1.Continue to add GPS data point to GIS system. 2.Improve well head protection program. 3.Advance installation of radio reading devices on water meters. ISSUES: 1.Additional state and federal regulations. 2.Aging water control system (SCADA). 3.Project demands on staff. MEASURABLE WORKLOAD DATA: Measurement 2013 2014 2015 2016 2017 Water customers 3,983 4,112 4,148 4,225 4,275 Meters read*15,815 16,099 16,520 16,800 51,480 Meters replaced 418 47 44 57 125 New meters installed 20 79 49 57 40 Water locates 500 300 300 300 300 Gallons pumped (MG)592 511 514 519 530 Valves maintained 1/4 city 242 436 400 400 Hydrants maintained 1/4 city 201 450 400 400 Times mains flushed 2 2 2 2 2 Mains/wells rebuilt 1 1 0 0 1 Water towers inspections 2 2 1 2 2 Reservoir inspections 1 1 0 0 1 Water samples to sent 250 250 250 250 250 New services inspected 5 76 78 60 40 GPS water system 1/8 city 1/8 city 1/8 city 1/8 city 1/8 city Service shut-offs 100 150 150 150 150 * Monthly utility billing started at the beginning of 2017. 194 BUDGET COMMENTARY: The Water Fund’s main source of revenue is user charges. In 2013 and 2015, water customer user rates were increased by 10% and 5%, respectively. In the 2016, the base rate increased 5.6% and the usage rate increased 2.8%. To encourage conservations and meet state mandates, the city has usage tiers with higher rates at each level. Capital outlays in 2017 include $276,000 for annual upgrades to the distribution system. The 2017 personnel services budget includes a full step increase and a 3% (2% in January and 1% in July) market rate wage adjustment increase. The 2014 decline in personnel services reflected the shifting of duties and responsibilities resulting from the public works director vacancy. In 2016, one new full-time operator position was split between the Water Fund and Sewage Fund. Budgeted versus actual allocations of personnel services account for the remainder of the difference. Similar to prior years, operating transfers out will retire debt service for water system improvements in debt service funds. The other budget items are expected to remain close to prior year levels. BUDGET: WATER FUND 2013 2014 2015 2016 2016 2017 % REVENUES ACTUAL ACTUAL ACTUAL BUDGET PROJECTED BUDGET CHANGE Property Taxes -$-$-$-$-$-$--- Licenses & Permits 1,920 2,735 4,635 3,700 3,700 200 -94.6% Intergovernmental Revenues --------- Charges for Services 1,170,787 1,042,343 1,093,984 1,146,800 1,146,800 1,122,299 -2.1% Fines & Forfeits --------- Special Assessments 44,339 40,440 12,998 30,000 30,000 30,000 0.0% Miscellaneous (36,171)230,817 84,307 71,000 71,000 51,000 -28.2% Contributed Capital -81,362 256,163 80,000 80,000 80,000 0.0% Operating Transfers --------- Debt Proceeds --------- TOTAL REVENUES 1,180,875$1,397,697$1,452,087$1,331,500$1,331,500$1,283,499$-3.6% EXPENDITURES Personnel Services 212,410$188,151$181,810$304,153$304,153$327,954$7.8% Supplies 82,194 160,665 152,257 167,350 167,350 178,150 6.5% Other Services & Charges 195,523 221,750 256,740 311,305 311,305 314,150 0.9% Capital Outlay 247,713 11,656 35,916 358,000 1,258,000 426,000 19.0% Operating Transfers 484,229 631,560 790,958 1,650,000 199,327 --100.0% TOTAL EXPENDITURES 1,222,069$1,213,782$1,417,681$2,790,808$2,240,135$1,246,254$-55.3% FUND BALANCE - JANUARY 1 4,608,692$4,567,498$4,751,413$4,785,819$4,785,819$3,877,184$ Excess (Deficiency) of Revenues over Expenditures (41,194)183,915 34,406 (1,459,308)(908,635)37,245 FUND BALANCE - DECEMBER 31 4,567,498$4,751,413$4,785,819$3,326,511$3,877,184$3,914,429$ 195 SEWAGE FUND DEPARTMENT: Public Works SUPERVISOR: Utilities Superintendent FUND #:602 ACTIVITY #: 49480 ACTIVITY SCOPE: The Sewage Fund is a self-sustaining city utility fund. The Sewage Fund has two divisions: sanitary sewer operations and treatment plant operations. The water department manages the sanitary sewer system and a private vendor provides treatment plant services. OBJECTIVES: 1.Continue to add GPS data points to GIS system. 2.Research alternative waste disposal options, including costs. 3.Advance long-range planning regarding plant capacity and expansion. 4.Monitor infiltration of ground water in to the sanitary sewer system. ISSUES: 1.Treatment plant is nearing capacity. 2.Aging of control system (SCADA) and other assets. 3.Ground water infiltration. 4.Costs of treatment alternatives. MEASURABLE WORKLOAD DATA: Measurement 2013 2014 2015 2016 2017 Collection Sewer mains maintained 1/4 city 17 miles 28 miles 28 miles 20 miles Liftstations 7 7 7 7 7 Sewer mainlocates 300 300 300 300 300 GPS sewer system 1/8 city 1/8 city 1/8 city 1/8 city 1/8 city Manholes maintained 600 356 716 716 500 New service hookups 20 76 100 100 60 Sewer services televised 1/8 city 1/8 city 26 Miles 26 Miles 20 miles Treatment Screw press influent flow (gals)5,345,933 5,117,130 4,430,130 4,500,000 Thickenedsludge (wet tons)1,924 1,549 1,449 1,450 Thickenedsludge (dry tons)264 236 216 215 Dry ton % of wet ton 13.7%15.2%14.9%14.8% Raw influent flow (MG)392 425 417 432 430 MG = million gallons 196 BUDGET COMMENTARY: The Sewage Fund’s main source of revenue is user charges. In 2013 and 2015, sewage customer user rates were increased by 10% and 5%, respectively. In 2016, the sewage base rate increased 4.6% and the usage rate increased 4%. Capital outlays for 2016 included treatment plant upgrades of $2,333,000, including phosphorous reduction and digester cover improvements. The funding mix for plant upgrades includes a loan from the Minnesota Public Facilities Authority. The 2017 personnel services budget includes a full step increase and a 3% (2% in January and 1% in July) market rate wage adjustment increase. The 2014 decline in personnel services reflects the shifting of duties and responsibilities resulting from the public works director vacancy. In 2016, one new full-time operator position will be split between the Water Fund and Sewage Fund. Similar to prior years, operating transfers out were budgeted to retire debt service for system improvements. Other budget items are expected to remain close to prior year levels. BUDGET: SEWAGE FUND 2013 2014 2015 2016 2016 2017 % REVENUES ACTUAL ACTUAL ACTUAL BUDGET PROJECTED BUDGET CHANGE Property taxes -$-$-$-$-$-$--- Licenses & Permits --------- Intergovernmental Revenues --------- Charges for Services 1,981,967 2,047,789 2,052,311 2,050,500 2,050,500 2,095,892 2.2% Fines & Forfeits --------- Special Assessments --------- Miscellaneous (23,047)195,867 61,340 62,000 62,000 62,000 0.0% Contributed Capital -885,132 1,179,707 60,450 760,450 60,450 0.0% Operating Transfers --------- Debt Proceeds 3,003,224 --2,000,000 2,000,000 700,000 -65.0% TOTAL REVENUES 4,962,144$3,128,788$3,293,358$4,172,950$4,872,950$2,918,342$-30.1% EXPENDITURES Personnel Services 263,020$242,621$280,801$307,175$307,175$332,762$8.3% Supplies 16,057 22,132 15,597 24,650 24,650 23,150 -6.1% Other Services & Charges 997,338 1,305,025 1,229,082 1,231,201 1,231,201 1,230,463 -0.1% Capital Outlay 2,935,299 127,857 401,069 2,333,000 2,333,000 1,000,000 -57.1% Debt Service 172,259 364,963 358,072 492,198 698,198 373,574 -24.1% Operating Transfers 2,072,049 1,690,672 1,510,087 425,134 770,134 85,293 -79.9% TOTAL EXPENDITURES 6,456,022$3,753,270$3,794,708$4,813,358$5,364,358$3,045,242$-36.7% FUND BALANCE - JANUARY 1 5,261,263$3,767,385$3,142,903$2,641,553$2,641,553$2,150,145$ Excess (Deficiency) of Revenues over Expenditures (1,493,878)(624,482)(501,350)(640,408)(491,408)(126,900) FUND BALANCE - DECEMBER 31 3,767,385$3,142,903$2,641,553$2,001,145$2,150,145$2,023,245$ 197 SEWAGE TREATMENT PLANT (WWTP) DIVISION: Sewage treatment plant (or wastewater treatment plant) activity provides for the operation of the facility that collects and treats all sewage from the city's sanitary sewer system. The sewage treatment plant is owned by the city, but the operations are contracted out to a private company. The 2017 budget for contracted plant service is $738,576— a 1.49% increase over 2016. The contract has three reimbursable amounts (sludge hauling, repairs & maintenance, and chemicals). Higher budgeted reimbursable amounts reduce the likelihood of significant budget-to-actual reconciliation costs. Capital outlays include replacement of antiquated supervisory control system equipment. BUDGET: SEWAGE FUND 2013 2014 2015 2016 2016 2017 % TREATMENT PLANT Actual Actual Actual Budget Projected Budget Change Personnel Services 400$379$5,470$1,227$1,227$1,227$0.0% Supplies 88 -527 250 250 250 0.0% Other Services & Charges 936,374 1,219,391 1,115,583 1,052,128 1,052,128 1,063,535 1.1% Capital Outlay 2,935,299 127,857 401,069 2,000,000 2,000,000 700,000 -65.0% Debt Service 172,259 364,963 358,072 492,198 698,198 373,574 -24.1% Operating Transfers --------- TOTAL EXPENDITURES 4,044,420$1,712,590$1,880,721$3,545,803$3,751,803$2,138,586$-39.7% SANITARY SEWER OPERATIONS DIVISION: Sanitary sewer operations encompass the operation and maintenance of the sanitary sewer system, which consists of the sewer mains and lift stations that transport waste to the sewage treatment plant (WWTP). Transfers out to debt service funds represent the exhaustion of impact fees formerly accounted for in the Sanitary Sewer Access Fund. Capital outlays include annual trunk improvements. BUDGET: SEWAGE FUND 2013 2014 2015 2016 2016 2017 % SEWER OPERATIONS Actual Actual Actual Budget Projected Budget Change Personnel Services 262,620$242,242$275,331$305,948$305,948$331,535$8.4% Supplies 15,969 22,132 15,070 24,400 24,400 22,900 -6.1% Other Services & Charges 60,964 85,634 113,499 179,073 179,073 166,928 -6.8% Capital Outlay ---333,000 333,000 300,000 -9.9% Debt Service --------- Operating Transfers 2,072,049 1,690,672 1,510,087 425,134 770,134 85,293 -79.9% TOTAL EXPENDITURES 2,411,602$2,040,680$1,913,987$1,267,555$1,612,555$906,656$-28.5% 198 REMAINING DEBT SERVICE: Payable Principal Interest Rate Total 6/1/2017 31,699$31,699$ 12/1/2017 180,000$31,699 2.00%211,699 6/1/2018 29,899 29,899 12/1/2018 185,000 29,899 2.00%214,899 6/1/2019 28,049 28,049 12/1/2019 185,000 28,049 2.00%213,049 6/1/2020 26,199 26,199 12/1/2020 190,000 26,199 2.00%216,199 6/1/2021 24,299 24,299 12/1/2021 195,000 24,299 2.15%219,299 6/1/2022 22,203 22,203 12/1/2022 200,000 22,203 2.35%222,203 6/1/2023 19,853 19,853 12/1/2023 205,000 19,853 2.60%224,853 6/1/2024 17,188 17,188 12/1/2024 210,000 17,188 2.75%227,188 6/1/2025 14,300 14,300 12/1/2025 215,000 14,300 3.00%229,300 6/1/2026 11,075 11,075 12/1/2026 225,000 11,075 3.00%236,075 6/1/2027 7,700 7,700 12/1/2027 230,000 7,700 3.20%237,700 6/1/2028 4,020 4,020 12/1/2028 240,000 4,020 3.35%244,020 Total 2,460,000$472,963$2,932,963$ GO Wastewater Treatment Bonds, Series 2013B 199 LIQUOR FUND DEPARTMENT: Liquor Fund SUPERVISOR: Liquor Store Manager/Finance Director FUND #:609 ACTIVITY #: 49750 ACTIVITY SCOPE: The Liquor Fund provides customers with the opportunity to purchase alcohol and other related products. Profits from store operations are used to support other city funds and activities. OBJECTIVES: 1.Improve product selection. 2.Enhance alcohol training program for all liquor store employees. 3.Elevate store attractiveness through customer focused improvements. 4.Boost sales to existing customer. 5.Increase sales per transaction. 6.Grow customer base and sales by aggressively marketing the store. ISSUES: 1.Promote and control the safe and responsible sale of alcohol. 2.Competitive pricing. 3.Staff turnover. 4.Traffic disruption caused by road construction. MEASURABLE WORKLOAD DATA: Measurement 2013 2014 2015 2016 2017 Gross profit 1,318,276$1,289,040$1,519,843$1,407,360$1,450,000$ Gross profit % of sales 26%25%27%26%26% Sales per square foot $573 $587 $624 $619 $625 Wine tasting tickets sold 400 400 300 195 195 Total number of sales 229,406 229,375 237,535 235,901 240,000 Staff hours worked 21,118 19,385 19,811 20,104 20,000 Sales per hour worked 10.9 11.8 12.0 11.7 12.0 Average sale (includingtax)$24.16 $24.60 $25.24 $25.25 $26.00 200 BUDGET COMMENTARY: Hi-Way Liquors has continued to be a self-supporting city enterprise fund, with profits directed toward special projects or other needs. Consequently, this helps keep property taxes lower. Revenues are generated by sale of alcoholic beverages and merchandise related to the liquor industry. In 2017, the Liquor Fund is slated to provide $230,000 to the Fiber Optics Fund. Additionally, the bulk of the operating transfers from 2013 through 2016 went to the Fiber Optics Fund. The 2017 personnel services budget includes a full step increase and a 3% (2% in January and 1% in July) market rate wage increase. Capital outlays for 2017 include parking lot improvements. Budgeted revenues are conservatively estimated. BUDGET: LIQUOR FUND 2013 2014 2015 2016 2016 2017 % REVENUES ACTUAL ACTUAL ACTUAL BUDGET PROJECTED BUDGET CHANGE Sale of Goods 5,085,925$5,165,737$5,489,430$5,367,710$5,367,710$5,435,194$1.3% Licenses & Permits --------- Intergovernmental Revenues --------- Charges for Services --------- Fines & Forfeits --------- Special Assessments --------- Miscellaneous (7,596)13,709 7,503 5,000 5,000 5,000 0.0% Contributed Capital --------- Operating Transfers --------- Debt Proceeds --------- TOTAL REVENUES 5,078,329$5,179,446$5,496,933$5,372,710$5,372,710$5,440,194$1.3% EXPENDITURES Personnel Services 441,640$455,647$506,042$532,654$532,654$570,584$7.1% Supplies 3,759,667 3,865,883 4,043,820 4,045,798 4,045,798 4,094,774 1.2% Other Services & Charges 209,149 202,811 202,271 235,214 235,214 238,245 1.3% Capital Outlay ---75,000 75,000 75,000 0.0% Operating Transfers 650,000 600,000 450,000 350,000 350,000 230,000 -34.3% TOTAL EXPENDITURES 5,060,456$5,124,341$5,202,133$5,238,666$5,238,666$5,208,603$-0.6% FUND BALANCE - JANUARY 1 649,665$667,538$722,643$1,017,443$1,017,443$1,151,487$ Excess (Deficiency) of Revenues over Expenditures 17,873 55,105 294,800 134,044 134,044 231,591$ FUND BALANCE - DECEMBER 31 667,538$722,643$1,017,443$1,151,487$1,151,487$1,383,078$ 201 DEPUTY REGISTRAR FUND DEPARTMENT: Deputy Registrar (DMV) SUPERVISOR: Finance Director FUND #:217 ACTIVITY #: 41990 ACTIVITY SCOPE: The Deputy Registrar (DMV) is a city-based service entity, which assists customers with the purchase of vehicle license plates/tabs, DNR licenses and other licenses as required by Minnesota state agencies. The DMV is one of four limited driver’s license agents in Wright County. A limited agent can process change of address and lost license applications for driver’s licenses. OBJECTIVES: 1.Market DMV services to public and dealerships. 2.Expand and improve customer service. 3.Update employee training and certifications. ISSUES: 1.Changes to state licensing regulations. 2.Availability of state equipment during license processing. 3.Providing services with little or no revenue. 4.Competition with other customer options: Other DMVs, on-line, and mail-in. MEASURABLE WORKLOAD DATA: Measurement 2013 2014 2015 2016 2017 Motor vehicle transactions 55,261 60,051 64,927 67,508 70,000 DNR transactions 5,727 5,949 5,914 6,318 6,500 Game & Fishtransactions 445 433 387 600 600 Driver's license transactions 951 1,462 1,294 1,465 1,500 Total transactions 62,384 67,895 72,522 75,891 78,600 Staff hours 10,491 11,606 10,834 9,878 10,000 Transactions per hour 5.9 5.8 6.7 7.7 7.9 Dealerships serviced 19 19 19 21 21 202 BUDGET COMMENTARY: The main revenue source for the DMV is the fees charged for the issuance of various licenses. In 2009, the DMV began partial driver’s license services and this revenue stream continues to grow. The 2013 and 2014 operating transfers represented contributions to community center projects. The 2017 personnel services budget includes a full step increase and a 3% (2% in January and 1% in July) market rate wage adjustment increase. This fund was accounted for as a special revenue fund until 2013. Revenues are always estimated conservatively. BUDGET: DEPUTY REGISTRAR 2013 2014 2015 2016 2016 2017 % REVENUES ACTUAL ACTUAL ACTUAL BUDGET PROJECTED BUDGET CHANGE Property Taxes -$-$-$-$-$-$--- Licenses & Permits --------- Intergovernmental Revenues --------- Charges for Services 456,285 497,709 531,408 400,100 475,100 475,100 18.7% Fines & Forfeits --------- Special Assessments --------- Miscellaneous (2,089)10,825 11,201 1,000 1,000 1,000 0.0% Operating Transfers --------- TOTAL REVENUES 454,196$508,534$542,609$401,100$476,100$476,100$18.7% EXPENDITURES Personnel Services 269,045$254,363$293,179$313,561$313,561$324,141$3.4% Supplies 8,601 10,572 4,294 16,250 16,250 16,550 1.8% Other Services & Charges 38,212 34,587 33,263 41,605 41,605 43,245 3.9% Capital Outlay --------- Operating Transfers 75,000 50,000 ------- TOTAL EXPENDITURES 390,858$349,522$330,736$371,416$371,416$383,936$3.4% FUND BALANCE - JANUARY 1 110,764$174,102$333,114$544,987$544,987$649,671$ Excess (Deficiency) of Revenues over Expenditures 63,338 159,012 211,873 29,684 104,684 92,164 FUND BALANCE - DECEMBER 31 174,102$333,114$544,987$574,671$649,671$741,835$ 203 FIBER OPTICS FUND DEPARTMENT: Fiber Optics Fund SUPERVISOR: City Administrator FUND #:656 ACTIVITY #: 49870-49877 ACTIVITY SCOPE: As with all enterprise funds, the Fiber Optics Fund goal is to become a self-sustaining enterprise. Fiber Optics delivers high speed internet, phone and cable television services to customers within the city. Residential and commercial customers can subscribe to individual or bundled services. OBJECTIVES: 1.Offer a variety of internet speeds and cable packages to customers. 2.Increase subscribers and subscriptions. 3.Minimize subsidy from other funds. ISSUES: 1.Competition from service providers. 2.Industry trends (cord cutting, etc.). 3.Various legal aspects of operating a telecommunication business. MEASURABLE WORKLOAD DATA: Measurement 2013 2014 2015 2016 2017 Internet subscibers 1,289 1,360 1,424 1,487 1,500 Phone subscribers*976 582 518 461 400 Cable TV subscribers 860 813 714 641 625 *Prior to 2014,data includedmultiple lines. BUDGET COMMENTARY: The Fiber Optics Fund began operations in 2009 and construction of the fiber optic network was completed in 2010. Revenues come from charges to subscribers and expenditures are incurred as a result of operating the system and new customer service installations. The city defaulted on the revenue bonds used to finance construction of the system. Judgment bonds were issued to finance the settlement with revenue bondholders. Property taxes are levied to support debt service on judgment bonds. There is no current debt service recorded in the Fiber Optics Fund. 204 In 2012, the city transferred $4,450,000 to the fund, eliminating the interfund loan balance. In 2013, the Liquor Fund and other city funds transferred $860,000 into the Fiber Optics Fund. In years 2014 through 2016, the Liquor Fund provided $1,400,000 for Fiber Optics operations. The 2017 budget includes a $230,000 transfer from the Liquor Fund. Personnel services (employee costs) were eliminated in July of 2016 with the outsourcing of operations to a third party. BUDGET: FIBER OPTICS 2013 2014 2015 2016 2016 2017 % REVENUES ACTUAL ACTUAL ACTUAL BUDGET PROJECTED BUDGET CHANGE Property Taxes -$-$-$-$-$-$--- Licenses & Permits --------- Intergovernmental Revenues --------- Charges for Services 1,595,490 1,652,998 1,592,824 1,643,670 1,643,670 1,721,570 4.7% Fines & Forfeits --------- Special Assessments --------- Miscellaneous 668,094 (26,349)49,579 46,779 46,779 46,297 -1.0% Contributed Capital --------- Operating Transfers 860,000 6,383,732 450,000 350,000 350,000 230,000 -34.3% Debt Proceeds --------- TOTAL REVENUES 3,123,584$8,010,381$2,092,403$2,040,449$2,040,449$1,997,867$-2.1% EXPENDITURES Personnel Services 445,423$480,585$568,321$640,185$640,185$-$ -100.0% Supplies 166,060 145,304 104,165 131,488 131,488 101,506 -22.8% Other Services & Charges 1,790,009 1,742,265 1,338,058 1,264,139 1,264,139 1,596,303 26.3% Capital Outlay 226,667 -111,313 --259,900 --- Operating Transfers 642,620 5,689,322 ------- TOTAL EXPENDITURES 3,270,779$8,057,476$2,121,857$2,035,812$2,035,812$1,957,709$-3.8% FUND BALANCE - JANUARY 1 224,252$77,057$29,962$508$508$5,145$ Excess (Deficiency) of Revenues over Expenditures (147,195)(47,095)(29,454)4,637 4,637 40,158 FUND BALANCE - DECEMBER 31 77,057$29,962$508$5,145$5,145$45,303$ 205 This page intentionally left blank 206 ENTERPRISE FUNDS For Fiscal Year 2013 Adopted 2017 INTERNAL SERVICE FUNDS INTERNAL SERVICE FUNDS - SUMMARY DESCRIPTION Internalservicefundsareaproprietaryfundtypethatmaybeusedtoreportanyactivitythatprovidesgoodsor servicetootherfunds,departments,oragenciesoftheprimarygovernmentanditscomponentunits,orto othergovernments,onacost-reimbursementbasis.Internalservicefundsuseanaccrualbasisofaccountingfor financialreportingpurposes.Amodifiedaccrualbasiswillbeusedforbudgetingpurposesinthisreport. Consequently,thebottomlineforeachinternalservicefundislabeledfundbalanceratherthannetposition, whichincludescapitalassets,long-termdebtandothernoncurrentitems.Fundbalanceinaninternalservice fundisroughlythesameasworkingcapital. Thecitycurrentlyhasthreeactiveinternalservicefunds:IT Services,CentralEquipment,andBenefitAccrual.TheBenefitAccrualFundwasstartedinDecember2015. BUDGETISSUES Eachinternalservicefundhasspecificchallengesthatwillbeaddressedinthenarrativeforeachfund. BUDGETSUMMARY TOTAL INTERNAL SERVICE 2013 2014 2015 2016 2016 2017 % REVENUES ACTUAL ACTUAL ACTUAL BUDGET PROJECTED BUDGET CHANGE Property Taxes -$-$-$-$-$-$--- Licenses & Permits --------- Intergovernmental Revenues --------- Charges for Services 187,535 364,608 420,900 503,581 510,156 502,066 -0.3% Fines & Forfeits --------- Special Assessments --------- Miscellaneous (5,862)45,391 16,609 5,263 8,263 8,153 54.9% Operating Transfers 530,663 -226,158 ------ Debt Proceeds 500,000 515,000 ------- TOTAL REVENUES 1,212,336$924,999$663,667$508,844$518,419$510,219$0.3% EXPENDITURES Personnel Services -$-$-$-$-$-$--- Supplies 7,473 22,803 21,985 32,200 32,200 32,200 0.0% Other Services & Charges 108,416 195,917 196,834 256,780 256,780 256,780 0.0% Capital Outlay 116,580 589,853 239,463 461,000 342,000 386,000 -16.3% Debt Service 59,297 66,992 76,193 131,260 131,260 135,050 2.9% Operating Transfers --------- TOTAL EXPENDITURES 291,766$875,565$534,475$881,240$762,240$810,030$-8.1% FUND BALANCE - JANUARY 1 -$920,570$970,004$1,099,196$1,099,196$855,375$ Excess (Deficiency) of Revenues over Expenditures 920,570 49,434 129,192 (372,396)(243,821)(299,811) FUND BALANCE - DECEMBER 31 920,570$970,004$1,099,196$726,800$855,375$555,564$ 207 IT SERVICES FUND DEPARTMENT: Finance SUPERVISOR: Finance Director FUND #:702 ACTIVITY #: XXXXX ACTIVITY SCOPE: The IT (Information Technology) Services Fund is a self-sustaining internal service fund. The finance department manages the network of servers and peripheral equipment to provide continuity and accountability for IT related services. The fund’s revenues are derived from service charges to each budget unit receiving IT services. Service charges are adjusted annually to cover all current costs plus a portion of capital outlays. OBJECTIVES: 1.Centralize provision of information technology services into one fund. 2.Improve management of IT resources. 3.Distribute capital costs over multiple annual reporting periods. 4.Provide financial management stability to each budget unit. ISSUES: 1.Appropriate costs distribution. 2.Coordination of service delivery to multiple departments and budget units. 3.Demands on staff. MEASURABLE WORKLOAD DATA: Measurement 2013 2014 2015 2016 2017 Outcome/Effectiveness: Network uptime 99%99%99%99%99% Number of closed requests 348 385 370 399 400 Efficiency: Open to closed requests ratio 99%99%100%100%100% Work Load: Number of helpdesk requests 352 389 370 399 400 Number of clients/users 56 70 102 83 83 Number of PC, servers, and network devices 100 131 145 167 167 208 BUDGET COMMENTARY: The IT Services Fund’s main source of revenue is internal user charges. The fund was initiated in the middle of 2013. BUDGET: IT SERVICES 2013 2014 2015 2016 2016 2017 % REVENUES ACTUAL ACTUAL ACTUAL BUDGET PROJECTED BUDGET CHANGE Property Taxes -$-$-$-$-$-$--- Licenses & Permits --------- Intergovernmental Revenues --------- Charges for Services 125,000 252,708 278,100 298,981 298,981 274,366 -8.2% Fines & Forfeits --------- Special Assessments --------- Miscellaneous (136)2,864 1,252 153 153 153 0.0% Operating Transfers 30,000 -------- Debt Proceeds --------- TOTAL REVENUES 154,864$255,572$279,352$299,134$299,134$274,519$-8.2% EXPENDITURES Personnel Services -$-$-$-$-$-$--- Supplies 7,473 22,803 21,985 32,200 32,200 32,200 0.0% Other Services & Charges 108,416 195,917 196,834 256,780 256,780 256,780 0.0% Capital Outlay 17,013 --10,000 10,000 10,000 0.0% Operating Transfers --------- TOTAL EXPENDITURES 132,902$218,720$218,819$298,980$298,980$298,980$0.0% FUND BALANCE - JANUARY 1 -$21,962$58,814$119,347$119,347$119,501$ Excess (Deficiency) of Revenues over Expenditures 21,962 36,852 60,533 154 154 (24,461) FUND BALANCE - DECEMBER 31 21,962$58,814$119,347$119,501$119,501$95,040$ 209 CENTRAL EQUIPMENT FUND DEPARTMENT: Finance SUPERVISOR: Finance Director FUND #:703 ACTIVITY #: XXXXX ACTIVITY SCOPE: The Central Equipment Fund is a self-sustaining internal service fund. The finance department participates along with various department directors and division leaders in the acquisition of capital assets. The acquired capital asset is charged back against the benefitting budget unit through rental charges over a predetermined number of years. The rental charge reflects depreciation plus inflation. Service charges for each asset are fixed for the duration of rental payments. OBJECTIVES: 1.Build mechanism for replacing capital assets into annual budgets. 2.Improve management of capital assets. 3.Distribute capital costs over multiple annual reporting periods. 4.Provide financial management stability to each budget unit. ISSUES: 1.Appropriate cost distribution over multiple accounting periods. 2.Efficient coordination of asset replacement activities. 3.Adequate start-up resources. 4.Demands on staff. MEASURABLE WORKLOAD DATA: Measurement 2013 2014 2015 2016 2017 Outcome/Effectiveness: Annual cost recovery 15,800$111,900$142,800$204,600$210,700$ Total costs of assets acquired 95,000$656,491$822,619$960,855$1,271,855$ Efficiency: Cost recovery as % of acquired assets.17%17%17%21%17% Work Load: Number of assets acquired 3 9 12 17 23 210 BUDGET COMMENTARY: The Central Equipment Fund’s main source of revenue is internal rental charges. The fund was initiated near the beginning of 2013 with the sale of $500,000 in certificates of indebtedness. The city also issued $515,000 in G.O. bonds in 2014 to finance the acquisition of a fire tender and a plow truck. In 2014, the operating transfer resulted from closing the Capital Outlay Revolving Fund. The 2017 budgeted equipment acquisitions: [public works equipment] speed trailer - $14,000; blacktop roller - $30,000; V-box sander - $15,000; electric sign reader - $12,000; street sweeper - $190,000; [recreation equipment] Polar Trac - $50,000. BUDGET: CENTRAL EQUIPMENT FUND 2013 2014 2015 2016 2016 2017 % REVENUES ACTUAL ACTUAL ACTUAL BUDGET PROJECTED BUDGET CHANGE Property Taxes -$-$-$-$-$-$--- Licenses & Permits --------- Intergovernmental Revenues --------- Charges for Services 62,535 111,900 142,800 204,600 204,600 210,700 3.0% Fines & Forfeits --------- Special Assessments --------- Miscellaneous (5,726)42,527 15,357 5,110 5,110 5,000 -2.2% Operating Transfers 500,663 -------- Debt Proceeds 500,000 515,000 ------- TOTAL REVENUES 1,057,472$669,427$158,157$209,710$209,710$215,700$2.9% EXPENDITURES Personnel Services -$-$-$-$-$-$--- Supplies --------- Other Services & Charges --------- Capital Outlay 99,567 589,853 239,463 451,000 332,000 376,000 -16.6% Debt Service 59,297 66,992 76,193 131,260 131,260 135,050 2.9% Operating Transfers --------- TOTAL EXPENDITURES 158,864$656,845$315,656$582,260$463,260$511,050$-12.2% FUND BALANCE - JANUARY 1 -$898,608$911,190$753,691$753,691$500,141$ Excess (Deficiency) of Revenues over Expenditures 898,608 12,582 (157,499)(372,550)(253,550)(295,350) FUND BALANCE - DECEMBER 31 898,608$911,190$753,691$381,141$500,141$204,791$ 211 REMAINING DEBT SERVICE: Payable Principal Interest Rate Total 12/1/2017 65,000$4,590$1.35%69,590$ 12/1/2018 65,000 3,713 1.60%68,713 12/1/2019 65,000 2,673 1.85%67,673 12/1/2020 70,000 1,470 2.10%71,470 Total 265,000$12,445$277,445$ GO Certificates of Indebtedness, Series 2013A Payable Principal Interest Rate Total 6/15/2017 5,230$5,230$ 12/15/2017 55,000$5,230 1.25%60,230 6/15/2018 4,886 4,886 12/15/2018 55,000 4,886 1.50%59,886 6/15/2019 4,474 4,474 12/15/2019 55,000 4,474 1.85%59,474 6/15/2020 3,965 3,965 12/15/2020 55,000 3,965 2.20%58,965 6/15/2021 3,360 3,360 12/15/2021 60,000 3,360 2.50%63,360 6/15/2022 2,610 2,610 12/15/2022 60,000 2,610 2.75%62,610 6/15/2023 1,785 1,785 12/15/2023 60,000 1,785 2.90%61,785 6/15/2024 915 915 12/15/2024 60,000 915 3.05%60,915 Total 460,000$54,450$514,450$ GO Bonds, Series 2014A (Equipment Portion) 212 BENEFIT ACCRUAL FUND DEPARTMENT: Finance SUPERVISOR: Finance Director FUND #:705 ACTIVITY #: XXXXX ACTIVITY SCOPE: The Benefit Accrual Fund is a self-sustaining internal service fund. The finance department participates with various department directors, division leaders and the human resources manager in managing vacation, sick, and paid-time-off (PTO) benefit. The non-enterprise fund liability for this benefit is recorded in the Benefit Accrual Fund. Enterprise funds (Liquor, DMV, Water & Sewer) maintain the liability for employees involved in enterprise operations. Expenditures in each governmental fund budget unit are adjusted annually to reflect changes to the liability caused by the employees of that budget unit. OBJECTIVES: 1.Build mechanism for recording governmental fund liability for paid leaves. 2.Improve management of vacation, sick, and PTO leave. 3.Distribute accumulating paid leave costs to budget units. 4.Provide financial management stability to each budget unit. ISSUES: 1.Increasing cost of paid leave benefits. 2.Stability of liability based accumulation of additional leave. MEASURABLE WORKLOAD DATA: Measurement 2013 2014 2015 2016 2017 Outcome/Effectiveness: Accured PTO hours ---------6,966 7,100 Accrued vacation hours 7,127 6,765 6,846 2,180 2,200 Accrued sick leave hours 5,417 5,261 5,302 1,443 1,443 Efficiency: Hours accrued per employee: PTO ---------145 142 Vacation 108 101 104 136 147 Sick leave 86 84 87 90 96 Work Load: Employees accruing hours: PTO employees ---------48 50 Vacation employees 66 67 66 16 15 Sick leave employees 63 63 61 16 15 City implemented a PTO system in 2016 for non-union employees with fewer than 25 years. 213 BUDGET COMMENTARY: The Benefit Accrual Fund’s main source of revenue is internal charges to personnel services in to the city’s two main governmental funds: General Fund and Monticello Community Center Fund. Personnel services expenditures in each governmental fund budget unit will be adjusted up or down based on the change in liability caused by each unit. This fund was initiated with a $226,158 transfer at the end of 2015. BUDGET: BENEFIT ACCRUAL FUND 2013 2014 2015 2016 2016 2017 % REVENUES ACTUAL ACTUAL ACTUAL BUDGET PROJECTED BUDGET CHANGE Property Taxes -$-$-$-$-$-$--- Licenses & Permits --------- Intergovernmental Revenues --------- Charges for Services ----6,575 17,000 --- Fines & Forfeits --------- Special Assessments --------- Miscellaneous ----3,000 3,000 --- Operating Transfers --226,158 ------ Debt Proceeds --------- TOTAL REVENUES -$-$226,158$-$9,575$20,000$--- EXPENDITURES Personnel Services -$-$-$-$-$-$--- Supplies --------- Other Services & Charges --------- Capital Outlay --------- Operating Transfers --------- TOTAL EXPENDITURES -$-$-$-$-$-$--- FUND BALANCE - JANUARY 1 -$-$-$226,158$226,158$235,733$ Excess (Deficiency) of Revenues over Expenditures --226,158 -9,575 20,000 FUND BALANCE - DECEMBER 31 -$-$226,158$226,158$235,733$255,733$ 214 ENTERPRISE FUNDS For Fiscal Year 2013 Adopted 2017 CAPITAL IMPROVEMENT PROGRAM CAPITAL IMPROVEMENT PROGRAM INTRODUCTION The capital improvements presented in this section comprise the 2017-2021 Capital Improvements Program (CIP). The Monticello CIP integrates capital and major noncapital expenditures into a comprehensive plan for forecasting needed future resources for acquiring and maintaining assets used in municipal operations. By integrating major noncapital expenditures, such as maintenance items or asset purchases not meeting specific dollar thresholds, the city can better plan and prepare for future financial challenges. The Monticello integrative CIP has four expenditure categories: capital improvements, vehicles and equipment (Garage), major repair and maintenance items (First Aid Kit), and small tools and equipment (Tool Box). The Capital Improvements category primarily deals with projects that carry high price tags. In the simplest of terms, capital improvements are expansions of or improvements to the city's physical structure such as buildings, streets, sidewalks, parking facilities, open space, and utility systems (infrastructure). The Garage category contains capital outlays for vehicles and equipment essential to accomplishing work. Generally, these assets have shorter useful lives and must be replaced on a regularly scheduled basis. The First Aid Kit category includes noncapital repair and maintenance expenditures related to the preservation of existing assets, such as painting a water tank. Additionally, expenditures on projects that do not meet certain capitalization thresholds are considered repairs and maintenance. The Tool Box category is comprised of major noncapital small tool and equipment purchases. For example, the purchase of multiple similar items that individually do not exceed the capitalization threshold would be included in this section. Q&A WHAT IS A CAPITAL IMPROVEMENT PROGRAM? A capital improvement program is a five year plan for the evaluation of the city's facility, equipment and infrastructure needs. It serves as a guide for construction, development and maintenance of the city's infrastructure assets--as well as other less expensive assets--in the most cost efficient manner possible. It is the result of systematic review of each project as it relates to the city council goals and the established priority scheme, to maximize the use of all financial resources. 215 While the program serves as a long range plan, it is reviewed annually and revised based on current circumstances and opportunities. Priorities may be changed due to grant opportunities or circumstances that caused a more rapid deterioration of an asset resulting in a liability issue. Projects may be revised for significant costing variances. WHAT ARE THE OBJECTIVES OF A CAPITAL IMPROVEMENT PROGRAM? · To forecast public facilities and improvements that will be needed in the near future. · To anticipate and project financing needs in order to maximize available federal, state, and county funds. · To promote sound financial planning in order to enhance and protect future bond ratings and bonding capacity. · To focus attention on and assist in the implementation of established city council objectives goals as outlined in the “Purpose and Mission”. · To serve as a guide for local officials in making budgetary decisions. · To balance the needs of new development with existing development. · To promote and enhance the economic development of the city of Monticello. · To strike a balance between needed public improvements and the present financial capability of the city to provide for these improvements. · To provide an opportunity for citizens and interest groups to voice opinions on development of city facilities and infrastructure. · To provide for improvements in a timely and systematic manner. Changes have been made to improve the reliability of the capital improvement project estimates and the focus of the funding. Previously the funding effort was focused primarily on the budget year. The new process is intended to change that focus to funding over five years. This will enable decision makers to identify opportunity costs of shifting priorities. It creates a better understanding of the balancing act that is required to allocate scarce resources to the capital improvement effort. WHAT IS THE CAPITAL IMPROVEMENT PROGRAM DEVELOPMENT PROCESS? Assign Project Titles · Make the title descriptive of the work. · TIP: Title the project based on the problem to be solved at a location, rather than titling based on the solution. · Group projects in a meaningful way for your department. A project title of Boomerang Improvements won’t work if it includes everything from the kitchen sink replacement to the cart path overlay. It is a judgment decision. Formulate Project Descriptions · Include the target activities to be completed each year on the project. This should be a brief statement of the work that will be performed and its location. 216 Formulate Project Cost Estimates The costs of each project are broken down into any of the following categories: Land Acquisition Planning/Design/Construction Vehicles/Equipment/Furnishing Assign Priorities Priorities: required on all projects based on the following categories: Priority I: Imperative (MUST-DO)-Projects that cannot reasonably be postponed in order to avoid harmful or otherwise undesirable consequences. _ Corrects a condition dangerous to public health or safety _ Satisfies a legal obligation (law, regulation, court order, contract) _ Alleviates an emergency service disruption or deficiency _ Prevents irreparable damage to a valuable public facility Priority II: Essential (SHOULD-DO)-Projects that address clearly demonstrated needs or objectives. _ Rehabilitates or replaces an obsolete public facility or attachment thereto _ Stimulates economic growth and private capital investment _ Reduces future operating and maintenance costs _ Leverages available State or Federal funding Priority III: Important (COULD-DO)-Projects that benefit the community but may be delayed without detrimental effects to basic services. _ Provides a new or expanded level of service _ Promotes intergovernmental cooperation _ Reduces energy consumption _ Enhances cultural or natural resources Document Project Justifications The following things should be considered: · Reason the project is necessary · Related projects (timing issues) · Coordination efforts required with other agencies (timing issues) · Mandates and deadlines for compliance · Service Impact (number of participants impacted) · New fees that could be generated as a result of the completion of the project (community center-usage fees, program fees) · Community goal references (refer to your budget document) · Safety requirements. 217 Document Operating Impact This is a required field; projects are not accepted without it. Record the costs in the year they will initially occur. It will be assumed that the cost continues from that point on, unless information is provided otherwise. The following possibilities exist: · Maintenance project that doesn’t require any more than is already in the budget for maintenance. · Maintenance project that replaces existing items with a more cost effective material or device that would result in a slight savings in operating dollars. Examples: more energy efficient HVAC unit resulting in an electricity savings. · New project will always have some kind of operating impact. Note Unfunded Projects · All projects not funded are placed on an unfunded list. Present product to the city council for review and final consideration · Five-year funded capital improvements · Ranked list of unfunded needs. HOW DOES THE CAPITAL IMPROVEMENT PROGRAM IMPACT THE OPERATING BUDGET? All capital improvement projects are required to show the operating budget impact at the time the projects are submitted for consideration in the Capital Improvement Program. This includes the number of full time equivalent positions that would be needed or could be eliminated and the cost or savings for salaries/benefits, supplies/services, and equipment. It would not be prudent to make funding decisions in favor of a project the city could not afford to maintain, staff, or provide equipment for. Capital improvements can impact the budget by increasing or decreasing revenues and expenditures. Revenues could be increased if the improvement attracts new businesses (building permits, sales tax, and property tax). The improvement could also increase expenditures. Perhaps an expansion requires new employees, additional maintenance services, or additional utility costs. Construction of a new street may require additional costs for police patrol services, snow and ice removal, or street light utility costs. Perhaps new technology could make the operation of a plant more efficient resulting in a reduction in power costs, utility costs, and personnel costs (reduction in overtime or man-hours). Many projects are associated with prevention of future excessive costs that are difficult to measure. The cost of the maintenance should not exceed the benefit of the asset. The projects may have maintenance costs, but the existing maintenance budgets are sufficient. The priority for available capital project funds has been maintenance of existing facilities and infrastructure. Most of Monticello’s projects fall into this category. 218 HOW IS CITIZEN INPUT INCORPORATED IN THE CIP DEVELOPMENT PROCESS? The citizens are involved in the capital improvements plan through participation at council meetings, and through citizen boards, commissions, and participation in public meetings, work sessions and public hearings. Participation in Citizen Boards and Commissions Several disciplines within the city have a citizen board or commission that helps to identify and prioritize needs within their scope of interest. These priorities are reflected in the department head numeric ranking when the project is initially submitted for consideration. The citizen boards and commissions are particularly influential with regard to the addition of a project to the plan and the priority it has within the scope of needs for the community. Participation in Public Meetings Each year in the spring, a workshop is held to inform the city council and all interested citizens about the proposed budget for the year. A session within this workshop is devoted to capital improvements. Since annual appropriations are required by statute, one required public hearing is held in conjunction with the operating budget each year. Capital improvements typically represent 20% of the total budget and are considered carefully. Beyond participation in boards and public meetings, the city makes a considerable effort to inform the citizens through various publications, news releases, and the website. HOW IS THE CAPITAL IMPROVEMENT PROGRAM FORMULATED? The following time line is a specific listing of the steps used to develop the Capital Improvement Plan: June: The finance department distributes “CIP Budget Request Instructions” along with prior year submissions. December: Existing projects roll forward one year. There is also dialogue reminding departments about the general philosophies mentioned earlier in this discussion. Each project is evaluated by the department head. New projects are then submitted to the Finance Department and entered into the database along with updates or changes to existing projects. April: The budget staff finalizes the plan by shifting funding priorities as necessary and incorporating new projects, particularly in year five. The city administrator determines the overall budget recommendation. October: Work sessions are held to consider budget issues (for operating and for capital improvements). December: The first and second public hearings are held, and the budget is appropriated. 219 HOW IS THE CAPITAL IMPROVEMENT PROGRAM FINANCED? In analyzing the financial viability of the capital improvements in the 2015-2019 CIP the city has three basic choices for methods of financing: pay-as-you-go,joint power agreement development authority capital leasing, and debt financing. The following sources provide revenue for the three financing methods. General Fund revenues, such as property taxes, local government aid, and service charges are current revenues used to finance relatively small capital outlays. An internal service fund (Central Equipment Fund) has been established to accumulate resources for regularly planned equipment purchases through rental charges to various divisions within benefitting funds. This will reduce the impact of large equipment purchases on annual budget unit expenditures by essentially amortizing the cost of such equipment to the division through rental charges. The rental charges include a small inflation factor to provide for the future replacement of that item. This fund will replace the Capital Outlay Revolving Fund. Similarly, a hybrid of the aforementioned fund has been established for IT Services, which will also include equipment purchases. Enterprise fund revenues, which are derived from user charges, are used to finance capital improvements and equipment necessary for delivering a specific service. Additionally, accumulated revenues in enterprise funds can be transferred to other funds to provide financing for capital asset acquisitions. Debt issuance is used to finance large capital improvements. General obligation improvement bonds and general obligation revenue bonds are used to finance improvements to the city’s infrastructure. Many of the items identifying the Capital Project Fund as funding source will need some level of debt issuance to come to fruition. Federal and state grants provide funding for various capital improvement projects. Currently, the city will dedicate over $800,000 of its state-aid street funds toward various projects including the TH25/7th Street intersection and Fallon Avenue overpass. Other sources include grants, donations, reserves, and other governmental units that share boundaries. 220 Items listed on the following pages are typically labeled with prefixes VEQ- for vehicles and equipment, MNC- (major non-capital) repairs & maintenance, STE- for small tools and equipment. All other label prefixes represent capital improvements. The below graph and table provides a breakdown of expenditures within the CIP: $- $4 $8 $12 $16 $20 $24 $28 2017 2018 2019 2020 2021MillionsExpenditures - Integrated CIP for FY 2017 - 2021 Capital Improvements Garage (Capital Equipment)First Aid Kit (Repairs and Maintenance)Tool Box (Small Tools and Equipment) Expenditure Category 2017 2018 2019 2020 2021 Capital Improvements 8,578,000$18,427,200$23,161,200$9,086,200$8,451,200$ Garage (Capital Equipment)1,062,000 938,000 3,675,000 672,600 425,000 First Aid Kit (Repairs and Maintenance)380,000 435,000 262,500 340,000 234,500 Tool Box (Small Tools and Equipment)78,900 76,000 49,200 54,900 35,600 10,098,900$19,876,200$27,147,900$10,153,700$9,146,300$ 221 Capital Improvement Plan City of Monticello, Minnesota FUNDING SOURCE SUMMARY 2017 thru 2021 TotalSource20172018201920202021 Capital Equipment Fund 2,601,000311,000 803,000 690,000 397,000 400,000 Capital Project Fund 18,750,000590,000 5,570,000 8,615,000 2,175,000 1,800,000 Cemetery Fund 40,00040,000 Community Center Fund 2,146,500132,000 1,721,000 236,500 22,500 34,500 Debt Proceeds 37,565,0005,700,000 7,750,000 14,015,000 5,600,000 4,500,000 DMV Fund 20,00020,000 General Fund 1,581,100353,100 311,000 305,000 347,000 265,000 IT Services Fund 151,00029,800 30,000 30,200 30,400 30,600 MN DOT 450,000450,000 Municipal Liquor Fund 1,645,000120,000 1,525,000 Parks & Pathways Fund 407,800238,000 46,200 41,200 41,200 41,200 Sewage Fund 4,780,600395,000 2,775,000 675,000 660,600 275,000 State Aid 1,350,0001,150,000 200,000 Stormwater Access Fund 1,750,00050,000 50,000 1,050,000 550,000 50,000 Street Construction Fund 250,000250,000 Street Lighting Fund 495,000135,000 135,000 75,000 75,000 75,000 Water Fund 2,440,000445,000 215,000 1,415,000 215,000 150,000 10,098,900 19,876,200 27,147,900 10,153,700 9,146,300 76,423,000GRAND TOTAL Produced Using the Plan-It Capital Planning Software 222 Capital Improvement Plan City of Monticello, Minnesota PROJECTS & FUNDING SOURCES BY DEPARTMENT 2017 2021thru Total20172018201920202021DepartmentProject # Priority Community Center 2,146,500132,000 1,721,000 236,500 22,500 34,500Community Center Fund 2,146,500132,000 1,721,000 236,500 22,500 34,500Community Center Total MCC-13-001 25,00025,000Movable Walls 3 MCC-13-002 1,000,0001,000,000Splash Park 3 MCC-13-003 20,00020,000City Council Diaz 3 MCC-13-005 200,000100,000 100,000New Roofs 2 MCC-13-006 65,00065,000Parking Lot Improvements 2 MCC-14-001 50,00050,000Romp & Stomp Additions 3 MCC-17-001 20,00020,000Fitness Center Bathroom 3 MCC-17-002 100,000100,000Play Pool Feature 3 MCC-17-003 30,00030,000East and West Handicap Doors 3 MNC-13-006 55,00045,000 10,000Carpet3 MNC-13-007 12,00012,000Wood Floor - Mississippi Room 3 MNC-13-010 10,00010,000Vanity and Partition Replacement 3 MNC-13-011 7,5002,500 2,500 2,500Facility Door Replacement 2 MNC-13-013 40,00040,000Diamond Brite Pool Resurface 2 MNC-13-014 150,00060,000 90,000Mechanical Improvements 2 MNC-16-005 30,00030,000Restore Walk Track 3 STE-13-013 61,0007,500 36,000 10,000 7,500Recreation Equipment 3 STE-13-014 4,0004,000Table Covers 3 STE-13-015 10,0005,000 5,000Tables3 STE-13-016 4,0004,000Patio Furniture 3 STE-15-001 12,00012,000Security Camera Upgrade 3 VEQ-13-045 21,0006,000 15,000Dishwasher2 VEQ-13-060 220,000100,000 120,000Pool Toy 3 2,146,500132,000 1,721,000 236,500 22,500 34,500Community Center Total DMV - Deputy Registrar 20,00020,000DMV Fund 20,00020,000DMV - Deputy Registrar Total VEQ-13-047 20,00020,000DMV Vehicle 2 20,00020,000DMV - Deputy Registrar Total Fire & Rescue Produced Using the Plan-It Capital Planning Software 223 Total20172018201920202021DepartmentProject # Priority 3,250,0003,250,000Capital Project Fund 1,100,0001,100,000Debt Proceeds 25,0005,000 5,000 5,000 5,000 5,000General Fund 4,375,0005,000 5,000 4,355,000 5,000 5,000Fire & Rescue Total FRD-13-001 250,000250,000Fire Station Addition 2 FRD-13-002 3,000,0003,000,000New Fire Station 2 STE-13-006 25,0005,000 5,000 5,000 5,000 5,000SCBA Packs 2 VEQ-13-006 1,100,0001,100,000Fire Ladder Truck 2 4,375,0005,000 5,000 4,355,000 5,000 5,000Fire & Rescue Total IT Services 151,00029,800 30,000 30,200 30,400 30,600IT Services Fund 151,00029,800 30,000 30,200 30,400 30,600IT Services Total STE-13-001 78,00015,600 15,600 15,600 15,600 15,600Personal Computers 2 STE-13-005 15,0003,000 3,000 3,000 3,000 3,000Laptops2 STE-13-007 40,0008,000 8,000 8,000 8,000 8,000GIS Hardware and Software 2 STE-13-008 18,0003,200 3,400 3,600 3,800 4,000Pavement Management Software 2 151,00029,800 30,000 30,200 30,400 30,600IT Services Total Municipal Liquor 1,645,000120,000 1,525,000Municipal Liquor Fund 1,645,000120,000 1,525,000Municipal Liquor Total LIQ-13-002 75,00075,000Parking Lot Improvements 2 LIQ-13-003 1,500,0001,500,000Liquor Store - #2 3 LIQ-13-046 50,00025,000 25,000Liquor Store Coolers 2 VEQ-13-046 20,00020,000Point of Sale Software 2 1,645,000120,000 1,525,000Municipal Liquor Total Public Works MNC-15-004 120,00040,000 40,000 40,000Stop Light Painting 3 MNC-15-005 16,00016,000Street Banners 4 PWK-13-001 14,000,00011,000,000 3,000,000Public Works Facility 3 PWK-13-002 600,000600,000PW Facility Land Acquisition 3 STE-13-011 7,0007,000Generator2 VEQ-13-010 14,00014,000Speed Trailer 2 VEQ-13-013 65,00065,000One-Ton Truck 2 VEQ-13-014 35,00035,000Truck - Pickup 4X4 2 VEQ-13-015 130,000130,000Bucket Truck 2 VEQ-13-016 80,00080,000Blacktop Paver 2 VEQ-13-019 20,00020,000Concrete Saw 2 Produced Using the Plan-It Capital Planning Software 224 Total20172018201920202021DepartmentProject # Priority 1,993,000261,000 505,000 500,000 327,000 400,000Capital Equipment Fund 600,000600,000Capital Project Fund 14,000,00011,000,000 3,000,000Debt Proceeds 143,00056,000 40,000 40,000 7,000General Fund 16,736,000317,000 1,145,000 11,540,000 3,334,000 400,000Public Works Total VEQ-13-021 95,00095,000Backhoe2 VEQ-13-022 230,000230,000Plow Truck 2 VEQ-13-023 65,00065,000One-Ton Truck and Plow 2 VEQ-13-025 142,000142,000Snow Go Snow Blower 2 VEQ-13-026 65,00065,000Skid Steere Loader 2 VEQ-13-027 35,00035,000Sign Lab System 2 VEQ-13-028 20,00020,000Paver Trailer 2 VEQ-13-030 30,00030,000Blacktop Roller 2 VEQ-14-001 230,000230,000Wheel Loader - 3 yd.3 VEQ-14-002 190,000190,000Street Sweeper 3 VEQ-14-003 80,00080,000Blacktop Hot Box 3 VEQ-16-001 12,00012,000Electronic Sign Reader 3 VEQ-16-004 50,00050,000Hot Rubber Melter - Crack Sealer 2 VEQ-16-005 20,00020,000Mini Tank Tack Trailer 3 VEQ-16-006 70,00070,000Mid Size Loader 2 VEQ-16-007 300,000300,000Grader3 VEQ-17-003 15,00015,000V-Box Sander 3 16,736,000317,000 1,145,000 11,540,000 3,334,000 400,000Public Works Total Recreation & Culture MNC-14-007 204,80040,000 41,200 41,200 41,200 41,200Pathway Maintenance (Annual)2 MNC-16-002 10,00010,000Park Gazebo(s)3 MNC-17-001 3,5003,500Planters3 MNC-17-002 2,0002,000Bike Racks 3 PAR-13-002 80,00080,000Featherstone Park Development 3 PAR-13-003 15,00015,000Sunset Ponds Shelter 3 PAR-13-004 90,00090,000Pioneer Park - Band Shell 3 PAR-13-006 15,00010,000 5,000Monti Hill Park Development 2 PAR-13-012 4,600,0002,500,000 700,000 700,000 700,000BCOL Ball Fields 3 PAR-13-013 250,000250,000Ellison Park Log Shelter 3 PAR-13-014 60,00060,000CSAH 75 Pathway Lighting 3 PAR-15-006 50,00050,000Park Shop Addition 3 PAR-16-001 6,0006,000Ellison Park Memorial Project 3 PAR-17-001 58,00058,000Ellison Park Open Air Shelter 3 PAR-17-003 65,00065,000Rolling Woods Playground 3 PAR-17-005 40,00040,000Rolling Woods Sidewalk 3 PAR-17-006 40,00040,000Riverside Cemetery Columbarium 3 PAR-17-007 25,00025,000Front Street Pier 3 PAR-17-010 15,00015,000Tot Lot Play Equipment - Cardinal Hills 3 PAR-17-011 10,00010,000City-view Mountain Bike Trail 3 Produced Using the Plan-It Capital Planning Software 225 Total20172018201920202021DepartmentProject # Priority 608,00050,000 298,000 190,000 70,000Capital Equipment Fund 5,035,0002,920,000 715,000 700,000 700,000Capital Project Fund 40,00040,000Cemetery Fund 117,10036,100 6,000 75,000General Fund 407,800238,000 46,200 41,200 41,200 41,200Parks & Pathways Fund 60,00060,000Street Lighting Fund 6,267,900324,100 3,330,200 946,200 926,200 741,200Recreation & Culture Total STE-13-012 5,0005,000Sod Cutter 2 STE-17-001 6,0006,000Buggy Hauler 2 STE-17-002 3,6003,600Zero-turn Mower Bagger 3 STE-17-003 6,0006,000Fertilizer Spreader 3 VEQ-13-031 60,00060,000Park Mowers 2 VEQ-13-032 161,00026,000 65,000 70,000Trucks2 VEQ-13-033 140,000140,000MT Trackless Sidewalk Machine 2 VEQ-13-037 25,00025,000Cushman Truckster 2 VEQ-13-038 40,00040,000Tractor2 VEQ-13-039 65,00065,000Skid Loader 2 VEQ-13-041 20,00020,000Toro Infield Pro 5040 2 VEQ-15-001 15,00015,000Mule - Kawaski replacement 2 VEQ-17-001 32,00032,000Trac Vac Sweeper 3 VEQ-17-002 50,00050,000Toro Polar Trac 72"3 6,267,900324,100 3,330,200 946,200 926,200 741,200Recreation & Culture Total Stormwater\Drainage 200,00040,000 40,000 40,000 40,000 40,000General Fund 1,750,00050,000 50,000 1,050,000 550,000 50,000Stormwater Access Fund 1,950,00090,000 90,000 1,090,000 590,000 90,000Stormwater\Drainage Total SWD-13-001 200,00040,000 40,000 40,000 40,000 40,000Stormwater Pond Restoration 2 SWD-13-002 1,000,0001,000,000Stormwater Liftstation (TH 25 Pond)2 SWD-13-004 250,00050,000 50,000 50,000 50,000 50,000Boulevard Drainage Tile 2 SWD-17-001 500,000500,000Fallon Avenue Pond Expansion 3 1,950,00090,000 90,000 1,090,000 590,000 90,000Stormwater\Drainage Total Streets MNC-13-001 200,00040,000 40,000 40,000 40,000 40,000City Street Signs 2 MNC-14-001 896,000176,000 180,000 180,000 180,000 180,000Annual Chip Seal 2 STR-13-001 500,00050,000 450,000School Blvd/Cedar Street Signal System 2 STR-13-002 90,00090,000Parking Lot Reconstruction 3 STR-13-004 1,400,000800,000 600,000Overlay Rural Outlying Streets 2 STR-13-005 1,650,0001,650,000E 7th Street/Hwy 25 Intersection 3 STR-13-006 7,800,0002,000,000 5,250,000 550,000Fallon Avenue Overpass 3 STR-13-007 300,000300,000Street Reconstruction - Area 5 3 STR-13-008 1,500,00050,000 1,300,000 150,000Street Reconstruction - Area 6 3 Produced Using the Plan-It Capital Planning Software 226 Total20172018201920202021DepartmentProject # Priority 9,865,000590,000 2,050,000 4,650,000 1,475,000 1,100,000Capital Project Fund 12,000,0005,000,000 5,950,000 550,000 500,000Debt Proceeds 1,096,000216,000 220,000 220,000 220,000 220,000General Fund 450,000450,000MN DOT 1,350,0001,150,000 200,000State Aid 250,000250,000Street Construction Fund 435,000135,000 75,000 75,000 75,000 75,000Street Lighting Fund 25,446,0007,541,000 8,745,000 5,495,000 2,270,000 1,395,000Streets Total STR-13-009 1,275,00050,000 1,100,000 125,000Street Reconstruction - Area 7B 2 STR-13-010 375,00075,000 75,000 75,000 75,000 75,000Street Light Improvements 2 STR-15-003 150,000150,000Elm Street Sidewalk - 3rd St Pedestrian Blinker 2 STR-15-004 500,000100,000 100,000 100,000 100,000 100,000Sidewalk Gap Improvement Project (TBD)2 STR-16-001 1,100,0001,000,000 100,000Extension of 95th Street w/o Noise Wall 3 STR-16-002 60,00060,000Flashing Yellow Arrow Signal 3 STR-17-001 250,000250,000CR 39/Gillard Ave Intersection 3 STR-17-002 1,500,0001,350,000 150,000Fallon Ave & Trail - Chelsea to School Bvld 3 STR-17-003 1,100,0001,000,000 100,000Chelsea Road Reconst - Fallon to Edmonson 3 STR-17-004 500,000500,0007th St Mill & Overlay & Cedar St Improvements 3 STR-17-005 900,000400,000 500,000Collector Road Mill & Overlay 3 STR-17-006 1,500,000500,000 500,000 500,000Residential Street Mill and Overlay 3 STR-17-007 1,900,000400,000 500,000 500,000 500,000Residential Street Reconstruction Improvements 3 25,446,0007,541,000 8,745,000 5,495,000 2,270,000 1,395,000Streets Total Utility - Sewage 5,965,000700,000 1,800,000 1,365,000 2,100,000Debt Proceeds 4,780,600395,000 2,775,000 675,000 660,600 275,000Sewage Fund 10,745,6001,095,000 4,575,000 2,040,000 2,760,600 275,000Utility - Sewage Total MNC-17-005 110,000110,000Demo Obsolete WWTP Equipmnet 4 UTS-13-001 870,000270,000 150,000 150,000 150,000 150,000Annnual Sewage Trunk Improvements 2 UTS-13-002 275,600275,600Liftstation - Marvin Road 2 UTS-13-005 1,365,0001,365,000WWTP Solids Handling Improvements 2 UTS-13-006 1,800,0001,800,000WWTP Phase 2 Improvements 3 UTS-16-001 625,000125,000 125,000 125,000 125,000 125,000Annual WWTP Upgrades 2 UTS-17-001 2,100,0002,100,000WWTP Headworks Improvements 3 UTS-17-002 2,500,0002,500,000Fallon Avenue Trunk Line Extension 3 VEQ-13-001 400,000400,000Sewer Jetter 2 VEQ-13-004 700,000700,000SCADA System - Sewage 2 10,745,6001,095,000 4,575,000 2,040,000 2,760,600 275,000Utility - Sewage Total Utility - Water UTW-13-001 750,000150,000 150,000 150,000 150,000 150,000Annual Water System Improvements 3 UTW-13-002 4,500,0004,500,000Water Treatment Facility 3 UTW-13-003 1,200,0001,200,000Well #6 3 Produced Using the Plan-It Capital Planning Software 227 Total20172018201920202021DepartmentProject # Priority 4,500,0004,500,000Debt Proceeds 2,440,000445,000 215,000 1,415,000 215,000 150,000Water Fund 6,940,000445,000 215,000 1,415,000 215,000 4,650,000Utility - Water Total UTW-13-005 130,000130,000Booster Station Upgrade 2 UTW-15-001 260,00065,000 65,000 65,000 65,000Water Meter MXUs - System Upgrade 2 UTW-17-001 100,000100,000Hart Boulevard watermain upsize 3 6,940,000445,000 215,000 1,415,000 215,000 4,650,000Utility - Water Total 76,423,00010,098,900 19,876,200 27,147,900 10,153,700 9,146,300Grand Total Produced Using the Plan-It Capital Planning Software 228 CIP PROJECT – FALLON AVENUE OVERPASS (BRIDGE) 229 CIP PROJECT – 95TH STREET EXTENSION 230 CIP PROJECT – TH25/7TH STREET INTERSECTION 231 CIP PROJECT – GILARD/CR 39 INTERSECTION 232 CIP PROJECT – RESIDENTIAL ST. RECONSTRUCTION (MISSISSIPPI DRIVE) 233 CIP PROJECT – HART BOULEVARD WATERMAIN 234 CIP PROJECT – OVERLAY RURAL OUTLYING STREETS 235 CIP PROJECT – VACUUM STREET SWEEPER AND POLAR TRAC 7200 236 ENTERPRISE FUNDS For Fiscal Year 2013 Adopted 2017 APPENDIX PROPERTY TAX BASICS Assessment and classification The property tax system is a continuous cycle, but it effectively begins with the estimation of property market values by local assessors. Assessors attempt to determine the approximate selling price of each parcel of property based on the current market conditions. Along with the market value determination, a property class is ascribed to each parcel of property based on the use of the property. For example, property that is owner-occupied as a personal residence is classified as a residential homestead. The “use class” is important because the Minnesota system, in effect, assigns a weight to each class of property. Generally, properties that are associated with income production (e.g. commercial and industrial properties) have a higher classification weight than other properties. The property classification system defines the tax capacity of each parcel as a percentage of each parcel’s market value. For example, a $75,000 home which is classified as a residential homestead has a class rate of 1.0 percent and therefore has a tax capacity of $75,000 x .01 or $750. (A sample of the class rates is included in the table at the end of this item.) [parcel market value] * [class rate] = [parcel tax capacity] The next step in calculating the tax burden for a parcel involves the determination of each local unit of government’s property tax levy. The city, county, school district and any special property taxing authorities must establish their levy by December 28 of the year preceding the year in which the levy will be paid by taxpayers. The property tax levy is set after the consideration of all other revenues including state aids such as LGA. [city budget] - [all non-property tax revenues] = [city levy] Local tax rates Local governments do not directly set a tax rate. Instead, the tax rate is a function of the levy and the total tax base. To compute the local tax rate, a county must determine the total tax capacity to be used for spreading the levies. The total tax capacity is computed by first aggregating the tax capacities of all parcels within the city. Several adjustments to this total must be made because not all tax capacity is available for general tax purposes. The result of this calculation produces taxable tax capacity. Taxable tax capacity is used to determine the local tax rates. [city levy] / [taxable tax capacity] = [city tax rate] Parcel tax calculations The property tax bill for each parcel of property is determined by multiplying the parcel’s tax capacity by the total local tax rate. The tax statement for each individual parcel itemizes the taxes for the county, municipality, school district, and any special taxing authorities. [parcel tax capacity] * [total local tax rate] = [tax capacity tax bill] 237 Terms Defined Class rates - The percent of market value set by state law that establishes the property’s tax capacity subject to the property tax. See Table A for a sample list of class rates. Local tax rate - The rate used to compute taxes for each parcel of property. Local tax rate is computed by dividing the certified levy (after reduction for fiscal disparities distribution levy and disparity reduction) by the taxable tax capacity. Market value - An assessor’s estimate of what property would be worth on the open market if sold. The market value is set on January 2 of the year before taxes are payable. Homestead Market Value Exclusion (HMVE)– Starting with taxes payable in 2012, eligible homesteads will pay property taxes on only a portion of the value of their homes. The maximum exclusion, 40% of value, occurs at home value of $76,000 and phases out as home value grows Property class - The classification assigned to each parcel of property based on the use of the property. For example, owner-occupied residential property is classified as homestead. Property tax levy - The tax imposed by a local unit of government. The tax is established on or around December 28 of the year preceding the year the levy will be paid by taxpayers. Tax capacity - The valuation of property based on market value and statutory class rates. The property tax for each parcel is based on its tax capacity. Total tax capacity - The amount computed by first totaling the tax capacities of all parcels of property within a city. Adjustments for fiscal disparities, tax increment and a portion of the powerline value are made to this total since not all tax capacity is available for general tax purposes. Truth-in-Taxation - The “taxation and notification law” which requires local governments to set estimated levies, inform taxpayers about the impacts, and announce which of their regularly scheduled council meetings will include a discussion of the budget and levy. Taxpayer input is taken at that meeting. Property Class Local Taxes Payable 2017 State Tax Payable 2017 Residential Homestead: 1st $500,000 1.00%No state tax >$500,000 1.25% Non-homestead Residential: Single unit: 1st $500,000 1.00%>$500,000 1.25%No state tax 2-3 unit buildings 1.25% Market-rate Apartments:1.25%No state tax Commercial/Industrial:Subject to state 1st $150,000 1.50%levy (commercial- >$150,000 2.00%industrial rate) Seasonal Recreational Subject to state1st $500,000 1.00%levy (seasonal- >$500,000 1.25%recreational rate) 238 TRUTH-IN-TAXATION TNT Summary Chart for Taxes Payable 2017 Date Action On or Before Sept. 15 Special taxing districts (EDAs, HRAs, port authorities, etc.) must adopt any proposed property tax levy and certify the proposed levy to the county auditor. On or Before Sept. 30 At one meeting, the city council adopts the proposed property tax levy and announces the time and place of a future city council meeting at which the budget and levy will be discussed and public input allowed, prior to final budget and levy determination. This public input meeting must occur after Nov. 24 and must start at or after 6 p.m. The time and place of the public input meeting must be included in the minutes but newspaper publication of the minutes is not required. On or before Sept. 30 Cities must provide the county auditor with the following information: •The time and place of the meeting at which the budget and levy will be discussed and public input allowed. (Again, meeting must occur after Nov. 24 and must not start before 6 p.m.) •A phone number that city tax payers may call if they have questions related to the auditor’s property tax notice; this does not require listing a private phone number. •An address where comments will be received by mail; this does not require listing a private address. Nov. 11 to Nov. 24 County auditor prepares and sends parcels specific notices. Nov. 25 to Dec.28 City councils hold meeting to discuss the budget and property tax levy and, before a final determination, allows public input. On or before Dec.28 Cities must certify final property tax levy to the county auditor. 239 DEBT GUIDE EquipmentCertificates/CapitalNotes A statutory city may issue certificates of indebtedness or capital notes (Section 412.301)to purchase: Public safety equipment, ambulance and other medical equipment, road construction and main- tenance equipment, and other capital equipment. Computer hardware and software, whether bundled with machinery or equipment or unbundled, together with application development services and training related to the use of the computer hardware or software. The statute does not define “other capital equipment”. Cities seeking to borrow for equipment not specifically listed should work with bond counsel to determine eligibility. The term of the Certificates/Notes cannot exceed 10 years from the dated date of the obligations. This limitation may affect the timing of principal and interest payments.This debt issubjectto thedebtlimit. A reverse referendum provision applies if the amount of the borrowing exceeds 0.25% of the estimated market value of taxable property within the city. An election is required if a petition signed by voters equal to 10% of the voters in the last regular municipal election is submitted to the city clerk within 10 days after publication of the resolution authorizing the issuance of the Certificates/Notes. Different statutory authority exists for home rule charter cities (Section 410.32).Capital Notes issued by charter cities are subject to the same statutory requirements as statutory cities with the following ex- ceptions: The total principal amount of the capital notes issued in a fiscal year shall not exceed 0.03% of the estimated market value of taxable property in the city. No re reverse referendum provision applies, but issuance must be approved by two thirds voteof the city council. Unlessprohibitedbythecharter,thesecitiesmayalsoissueCapitalNotesundertheauthoritygranted to statutory cities. Tax Abatement Bonds Tax Abatement Bonds (Section 469.1814)may be used to finance a variety of development activities and public improvements. The statute allows proceeds of Tax Abatement Bonds be used to (1) pay for public improvements that benefit the property, (2) to acquire and convey land or other property, as provided under this section, (3) to reimburse the property owner for the cost of improvements made to the property, or (4) to pay the costs of issuance of the bonds. Abatement Bonds are often used to facilitate economic development in ways not allowed by tax increment financing. They have also evolved into a tool for financing community recreation and cultural facilities. The statutory authority creates an abatement levy based on the property value of parcels subject to the abatement. The authority to use tax abatement applies separately to each taxing jurisdiction. If other jurisdictions (county and school district) approve an abatement, this revenue may be pledged to bonds issued by the city. 240 The principal amount of the Bonds may not exceed the sum of the authorized abatements. A debt service levymaybe used to pay interest on the Bonds. The annual amount of all abatements cannot exceed the greater of 10% net tax capacity value of the jurisdiction or $200,000. The parameters of the abatement and authorization for the Bonds are set by resolution. The resolution cannot be held until after a public hearing. Street Reconstruction Bonds Street Reconstruction Bonds are an example of debt issuing authority found in unusual places. The statu- toryprovisionsforStreetReconstructionBondsappearintheportionofChapter475dealingwithelection requirements for debt issuance (Section 475.58,Subd. 3b). Street Reconstruction Bonds can be used to finance the reconstruction and bituminous overlay of existing city streets. Eligible improvements may include turn lanes and other improvements having a substantial public safety function, realignments, other modifications to intersect with state and county roads, and the local share of state and county road projects. Except in the case of turn lanes, safety improvements, re- alignments, intersection modifications, and the local share of state and county road projects, street recon- structionandbituminousoverlaysdoesnotincludethe portionofprojectcostallocableto wideningastreet or adding curbs and gutters where none previously existed. The enabling statute sets forth specific requirements for the issuance of Street Reconstruction Bonds: The projects financed under this authority must be described in a street reconstruction plan. The plan mustdescribethestreetreconstructionoroverlaytobefinanced,theestimatedcosts,andanyplanned reconstructionoroverlayofotherstreetsinthemunicipalityoverthenextfiveyears The city must hold a public hearing on the proposed plan and the related issuance of bonds. The plan and the issuance of bonds must be approved by the city council by a vote of all of the members of the governing body present at the meeting. Theissuanceofbondsissubjecttoareversereferendum.Anelectionisrequiredifvotersequalto5% ofthevotescastinthelastmunicipalgeneralelectionfileapetitionwiththecityclerkwithin30days ofthepublichearing.Ifthecitydecidesnottoundertakeanelection,itmaynotproposetheissuance ofStreetReconstructionBondsforthesamepurposeandinthesameamountforaperiodof365days from the date of receipt of the petition. If the question of issuing the bonds is submitted and not approvedbythevoters,the provisionsofsection475.58,subdivision1a,shallapply(noresubmission forsamepurpose/amountfor180days). Street Reconstruction Bonds are subject to the debt limit. Revenue Bonds Oneexceptiontothepreviousstatementistheissuanceofrevenuebonds.Chapter475authorizesbor- rowing for “any utility or other public convenience from which a revenue is or may be derived”. This authorityissufficientwhenthesolesecurityisthepledgeofrevenuefromapublicenterprise.Although thisdebtismostfrequentlyassociatedwithmunicipalutilities,any“publicconvenience” withapledge- ablesourceofrevenuemayusethisauthority.Minnesotacitiesdonotfrequentlyissuerevenuebonds. Most borrowing needs have separate statutory authority that allows a general obligation pledge. The most common revenue bonds are for electric utilities, sales taxes and liquor stores. 241 Improvement Bonds One of the most commonly used tools is General Obligation (G.O.) Improvement Bonds issued pursuant to Chapter 429. Improvement Bonds can be issued for a wide range of public improvements. Eligible Improvements The types of improvements specifically authorized in Chapter 429 can be found in Section 429.021.It is important to read and understand the specific statutory provisions. Some provisions are broader than the basic improvement. For example, a “street improvement” may also include streetscape (beauti- fication), storm sewers and utility connection lines. Other provisions may contain important expansions orlimitationsontheauthority.Sanitaryandstormsewerimprovementsmaybemadeoutsideofthecity limits. The public improvements currently authorized in Chapter 429 include the following: 1.Acquire,open,andwidenanystreet,andtoimprovethesamebyconstructing,reconstructing,and maintaining sidewalks, pavement, gutters, curbs, and vehicle parking strips of any material, or by grading, graveling, oiling, or otherwise improving the same, including the beautification thereof andincludingstormsewersorotherstreetdrainageandconnectionsfromsewer,water,orsimilar mains to curb lines 2.Acquire, develop, construct, reconstruct, extend, and maintain storm and sanitary sewers and sys- tems, including outlets, holding areas and ponds, treatment plants, pumps, lift stations, service connections,andotherappurtenancesofasewersystem,withinandwithoutthecorporatelimits 3.Construct, reconstruct, extend, and maintain steam heating mains 4.Install, replace, extend, and maintain street lights and street lighting systems and special lighting systems 5.Acquire, improve, construct, reconstruct, extend, and maintain water works systems, including mains,valves,hydrants,serviceconnections,wells,pumps,reservoirs,tanks,treatmentplants,and other appurtenances of a water works system, within and without the corporate limits 6.Acquire, improve and equip parks, open space areas, playgrounds, and recreational facilities within or without the corporate limits 7.Plant trees on streets and provide for their trimming, care, and removal 8.Abate nuisances and to drain swamps, marshes, and ponds on public or private property and to fill the same 9.Construct, reconstruct, extend, and maintain dikes and other flood control works 10.Construct, reconstruct, extend, and maintain retaining walls and area walls 11.Acquire, construct, reconstruct, improve, alter, extend, operate, maintain, and promote a pe- destrian skyway system. Such improvement may be made upon a petition pursuant to section 429.031, subdivision 3. 12.Acquire, construct, reconstruct, extend, operate, maintain, and promote underground pedestrian concourses 13.Acquire, construct, improve, alter, extend, operate, maintain, and promote public malls, plazas or courtyards 14.Construct, reconstruct, extend, and maintain district heating systems 15.Construct, reconstruct, alter, extend, operate, maintain, and promote fire protection systems in existing buildings, but only upon a petition pursuant to section 429.031, subdivision 3 16.Acquire, construct, reconstruct, improve, alter, extend, and maintain highway sound barriers 242 17.Improve,construct,reconstruct,extend,andmaintaingasandelectricdistributionfacilitiesownedby a municipal gas or electric utility 18.Purchase,install,andmaintainsigns,posts,andothermarkersforaddressingrelatedto theoperation of enhanced 911 telephone service 19.Improve, construct, extend, and maintain facilities for Internet access and other communications purposes, if the council finds that: (i) the facilities are necessary to make available Internet access or other communications services that are not and will not be available through other providers or the private market in the reasonably foreseeable future; and (ii) the service to be provided by the facilities will not compete with service provided by private entities 20.Assess affected property owners for all or a portion of the costs agreed to with an electric utility, telecommunications carrier, or cable system operator to bury or alter a new or existing distribution system within the public right-of-way that exceeds the utility’s design and construction standards, or those set by law, tariff, or franchise, but only upon petition under section 429.031, subdivision 3 21.Assess affected property owners for repayment of voluntary energy improvement financings under section 216C.436, subdivision 7. Other statutes may also authorized the use of special assessments to pay for improvements. For example, authorizedimprovementswithina HousingImprovement Areamaybepaidwithspecialassessments Minimum Assessment Generalobligationimprovementbondsrequireaminimum20%assessment.Itisimportanttounderstand the method for determining the minimum assessment. A common assumption is that assessments must equalorexceed20%oftheamounttobeborrowed.Whilethiscalculationworksfortaxincrementbonds, the 20% calculation for improvement bonds is different: 1.The assessment calculation is based on the cost of theimprovement to the city. This cost may or may not equal the amount of the improvement bonds. 2.Thecostoftheimprovementdoesnotincludeactivitiesthatwillnotbeassessedtobenefittedproperty owners and not financed with G.O. Improvement Bonds. These improvements can be made without following the procedures of Chapter 429. This exclusion typically applies to utility (sanitary sewer, watermain, and storm sewer) improvements paid from reserves or bonds issued under Minnesota Stattutes, Chapter 444.. 3.The cost to the city excludes all monies contributed by other units of government to pay for the improvement. 4.The up-front use of city non-utility reserves (both General Fund and capital improvement) does not reduce the cost to the city. Oneexceptiontothis20%requirementisimprovementsforautomobileparkingfacilities (Section459.14). Bonds issued to finance the construction or maintenance of automobile parking facilities require special assessments in an amount not less than 50% of the amount of the bonds. Assessment Considerations State Law does not prescribe assessment methodology. Some cities have formal assessment policies. Other cities deal with assessments on a project-by-project basis. A guiding factor in setting assessments is the market value test. The amount assessed to a property cannot exceedtheincreaseinmarketvalueofthepropertyasaresultoftheimprovement.Thereisno requirement tomakethisfindingaspartoftheimprovementprocess.Theissuecomesinto playprimarilyinprojectswith larger assessments and greater risk of appeal. 243 Assessments are also constrained by the notice of hearing for the Improvement. The total amount assessed cannotexceedtheamountstated inthenotice.Thearea assessedcannotbelarger,butcanbesmaller,than theareareceivingnoticeofthisHearing. The special assessment calculation is based on the “improvement”. An improvement may be more than a single project. There are two ways to manage multiple projects into a single improvement for the purposes of Chapter 429.Section429.021, Subd. 2 allows for an improvement on two or more streets or two or more types of improvement in or on the same street or streets or different streets may be included in one proceeding and conducted as one improvement. This combining of improvements is typically spelled out in the engineering feasibility report and considered at the improvement hearing. Projects that are instituted separatelymay besubsequentlycombinedundertheauthorityof Section435.56. Revenues to pay debt service on the portion that is not assessed may come from any legally available source including a property tax levy. Bond Issues Planning for the issuance of Improvement Bonds requires a clear understanding of the special assess- ments. In addition to the total amount assessed, several other factors are important: What is the term of repayment? First levy year payable? Total number of years payable? Will the assessments be repaid with level annual installmentsof principalor levelannual payments of principal and interest? What interest rate will be charged on the unpaid balance? Is it tied to the interest rate on the bonds? Will any of the assessments be deferred? If so, when will they be paid? When is the assessment hearing and when will the assessments be certified to the County? What are the expectations for the initial prepayment of assessments? The timing of the improvement process is another important consideration. Improvement Bonds can be issuedanytimeafterthecitycouncilconductsthe improvement hearingandauthorizestheimprovements. No improvement hearing is needed if the parties that petition for the improvement will be assessed 100% ofthecost.Each pointintime hasdifferent implications forissuingbonds: Bonds issued soon after the improvement hearing will be based on estimated construction costs and assumptions about special assessments. Bonds may be issued immediately after the receipt of bids to provide construction financing. The finance plan will rely on assumptions about special assessments. Bondsmaybeissuedaftercompletionoftheassessmentprocess.Thisallowsthefinanceplantobebased onfinalconstructioncostsand actualassessments.Thisapproachcanalso considertheamountofinitial prepayments. Delaying financing until after the assessment process requires city funds to pay for construction and a reimbursement resolution to allow the repayment of these funds with the proceeds oftax-exempt bonds. Forcontroversialprojectswithahigherriskofassessmentappeals,citieswillconducttheassessmentprocess duringtheperiodbetweenthereceiptandawardofconstructionbids.Thisapproachallowsthecitytoknow theappealriskbeforecommittingto undertaketheimprovement. Improvement Bonds are not subject to the statutory debt limit. 244 UtilityRevenue Bonds Minnesota cities rarely issue pure revenue bonds to finance sanitary sewer, water and storm sewer utility improvements.StateLawallowscitiestoadditsgeneralobligationtothepledgeofnetutilityrevenuesfor these improvements (Section 444.075).G.O. Utility Revenue Bonds may be issued to build, construct, reconstruct,repair,enlarge,improve,orinanyothermannerobtainsanitarysewer,waterandstormsewer facilities, and maintain and operate the facilities inside or outside its corporate limits. TheseBonds aresometimes called“double barreled”.Theyare secured by both utility revenues and the city’s general obligation. The Bondsmay be secured bya single utility or by combined utility funds.Debt service on Utility Revenue Bonds is paid from the net revenues of the utilities pledged to secure the Bonds. Special assessments may also be levied and pledged to the Bonds. Unlike Improvement Bonds, property taxes cannot be a permanent and ongoing source of revenue to pay debt service. Property taxes should only be used on a temporary basis when the other revenues are insufficient to meet the obligations. It is important to understand the nature of the revenues that will be used to support the Bonds. Howmuchoftherevenuecomesfromconnectionchargesandotherfeesassociatedwithgrowth? Are rate increases needed? If so, are there any procedural issues (such as a public hearing or ap- proval by the utilities commission)? Are there any large users that constitute a significant portion of the revenue base? Are there special agreements with large users? There are no special procedural requirements for the issuance of Utility Revenue Bonds. Capital Improvement Plan Bonds CitiesmayissueCapitalImprovementPlanBondsto financetheconstructionand maintenanceofcityhall, townhall,library,publicsafetyfacility,andpublicworksfacility (Section475.521).Thesebondsmaynotbe used to finance any other type of facility or improvement. Expenditures for eligible capital improvements incurred before adoption of the capital improvement plan are allowed if included in a plan approved at or prior to the public hearing on the issuance of bonds. Theprojectsto befinancedmustbeincludedinacapital improvementsplan(CIP)thatmeetsthecriteriaof thestatute.Theplanmustcoveratleastafive-yearperiodbeginningwiththedateofitsadoption.Theplan mustsetforththeestimatedschedule,timing,anddetailsofspecificcapitalimprovementsbyyear,together withtheestimatedcost,theneedfortheimprovement,andsourcesofrevenuetopayfortheimprovement. The CIP should also include information about the factors required by the statute to be considered by the citycouncil.Thesefactorsare: Condition of the municipality’s existing infrastructure, including the projected need for repair or replacement; Likely demand for the improvement; Estimated cost of the improvement; Available public resources; Level of overlapping debt in the municipality; Relative benefits and costs of alternative uses of the funds; Operating costs of the proposed improvements; and 245 Alternatives for providing services most efficiently through shared facilities with other municipali- ties or local government units. The required CIP may be a document prepared specifically for authorizing the issuance of bonds or it may be incorporated into other capital improvement planning by the city. ThemaximumamountofCapitalImprovementPlanBondsislimited.Themaximumprincipalandinterest payablein anyyear for alloutstandingCIP Bonds cannot exceed 0.16%oftheestimatedmarketvalueof taxable property in the city. This calculation is made using the estimated market value for the taxes payableyearinwhichthe bondsareissued andsold. The Bonds are subject to the debt limit for cities with a population of 2,500 or more. BothapprovaloftheCIPandtheissuanceofBondsrequireapublichearing.Asinglepublichearingmay be held to meet these requirements. The Bonds must be authorized by a three-fifths vote of a five- member city council. If the city council has more than five members, two-thirds approval is needed. Issuance of the Bonds is subject to reverse referendum. An election is required for the issuance of the Bondsifapetitionsignedby votersequalto 5%ofthevotescastinthecityinthelastmunicipalgeneral electionisfiledwiththecityclerkwithin30 daysafterthepublic hearing.Ifthecitydoesnotsubmitthe questiontothevoters,itmaynotproposetheissuanceofbondsunderthissectionforthesamepurpose andinthesameamountforaperiodof365daysfromthedateofreceiptofthepetition.Ifthequestion of issuing the bonds is submitted and not approved by the voters, the city must wait 180 days before voting on the samequestion again. Lease RevenueBonds Lease Revenue Bonds are used by cities to finance public facilities. There is no specific statutory authority for Lease Revenue Bonds. This form of financing combines two statutory powers. Economic development authorities (EDA) and housing and redevelopment authorities (HRA) have the authority to issue revenue bonds for their corporate purposes, including the construction of public facilities. The security for the Bonds and the revenue to pay debt service comes from a lease purchase with the city. Not all public facilities are equally suited to the use of Lease Revenue Bonds. As a general rule, the more essential the facility, the better the application of this tool. This is due to the perception of investors that the city is less likelyto not appropriateand walkawayfrom anessential facility. A similar form of financing is Certificates of Participation. The investor receives a certificate secured by a share of the lease payments. The underlying security is the same as Lease Revenue Bonds. The status of the tax levy to make lease payments is another consideration in the use of Lease Revenue Bonds. Under the most recent version of levy limits, the levy for Lease Revenue Bonds can be made of a special levy and outside of levy limits. The special levy authority is to pay debt service of another political subdivisionandtheEDAisapoliticalsubdivision.Leviestomakeleasepaymentsdo notcurrentlyqualify as a special levy and, therefore, are subject to levy limits. The taxing power of the EDA may also be pledged to Lease RevenueBonds. Other Debt Terms Bank Qualified Issuersthatreasonablyexpectto issue$10,000,000orlessintax-exemptbondsduringacalendaryear may designate bondsas“bank qualified”.The name refersto the fact that banksmay deducta portion 246 of the interest cost on the carry purchased for its portfolio. This preferential tax treatment usually results in lower interest rates than bonds that are not bank qualified. The difference between bank qualified and not bank qualified rates varies over time and is typically higher for longer maturities. Both the direct debt of the issuer and any conduit debt count against the issuer’s$10,000,000 annual cap. Arbitrage Arbitrage regulations govern the ability to invest the proceeds of tax-exempt bonds. The basic rule of arbitrage is that the gross proceeds of a bond issue may not be invested at a rate “materially higher” than the yield on the bonds. The complexities of arbitrage calculation and compliance are not discussed in this guide. Instead, this guide focuses on the three basic arbitrage considerations for most Minnesota cities: construction fund, debt service fund and arbitrage rebate. Arbitrage Rebate Issuers must pay (rebate) to the federal government income earned in excess of the bond yield unless subjectto thesmallissueror thespenddownexceptions. Thesmallissuerexceptionapplieswhenthetotalprincipalamountoftaxexempt,non-privateactivity bonds does not exceed $5,000,000 in any calendar year. Current refunding bonds up to the amount of the outstanding principal refunded do not count against this limit. There are three options for meeting the spenddown exception: 1.6-monthexception -grossproceedsandinterestearningsareallocatedto expendituresforgovern- mental or qualified purposes that are incurred within 6 months after the date of issuance. 2.18-month exception - gross proceeds and interest earnings are spent within the following schedule from date of issuance: (1) 15% within 6 months; (2) 60% within 12 months; and (3) 100% within8 months(with a5%reasonableretainagecarryoveramountforanadditional12month period). 3. 2-year spending exception – issue is a “construction issue” (75% of issue is actually spent on construction)andgrossproceedsandinterestearningsarespentwithinthefollowingschedulefrom dateofissuance:(1)10%within6 months;(2)45%within12months;(3)75%within18months;and 4) 100% within 24 months. 247 MINNESOTA STATUTES DEBT LIMIT 475.53 LIMIT ON NET DEBT Subdivision 1.Terms. For the purposes of this chapter, the terms defined in this section shall have the meanings given them. Subd. 2. Municipality. "Municipality" means a city of any class, county, town, or school district. Subd. 3. Obligation. "Obligation" means any promise to pay a stated amount of money at a fixed future date or upon demand of the obligee, regardless of the source of funds to be used for its payment, made for the purpose of incurring debt, including the purchase of property through an installment purchase contract or any other deferred payment agreement, for which funds are not appropriated in the current year's budget. Subd. 4. Net debt. "Net debt" means the amount remaining after deducting from its gross debt the amount of current revenues which are applicable within the current fiscal year to the payment of any debt and the aggregate of the principal of the following: (1) Obligations issued for improvements which are payable wholly or partly from the proceeds of special assessments levied upon property specially benefited thereby, including those which are general obligations of the municipality issuing them, if the municipality is entitled to reimbursement in whole or in part from the proceeds of the special assessments. (2) Warrants or orders having no definite or fixed maturity. (3) Obligations payable wholly from the income from revenue producing conveniences. (4) Obligations issued to create or maintain a permanent improvement revolving fund. (5) Obligations issued for the acquisition, and betterment of public waterworks systems, and public lighting, heating or power systems, and of any combination thereof or for any other public convenience from which a revenue is or may be derived. (6) Debt service loans and capital loans made to a school district under the provisions of sections 126C.68 and 126C.69. (7) Amount of all money and the face value of all securities held as a debt service fund for the extinguishment of obligations other than those deductible under this subdivision. (8) Obligations to repay loans made under section 216C.37. (9) Obligations to repay loans made from money received from litigation or settlement of alleged violations of federal petroleum pricing regulations. 248 (10) Obligations issued to pay pension fund or other postemployment benefit liabilities under section 475.52, subdivision 6, or any charter authority. (11) Obligations issued to pay judgments against the municipality under section 475.52, subdivision 6, or any charter authority. (12) All other obligations which under the provisions of law authorizing their issuance are not to be included in computing the net debt of the municipality. PROPERTY TAX LEVY 275.08 AUDITOR TO FIX RATE. Subdivision 1. Generally. The rate percent of all taxes, except the state tax and taxes the rate of which may be fixed by law, shall be calculated and fixed by the county auditor according to the limitations in this chapter hereinafter prescribed; provided, that if any county, city, town, or school district shall return a greater amount than the prescribed rates will raise, the auditor shall extend only such amount of tax as the limited rate will produce. Subd. 1a. Computation of tax capacity. For taxes payable in 1989, the county auditor shall compute the gross tax capacity for each parcel according to the class rates specified in section 273.13. The gross tax capacity will be the appropriate class rate multiplied by the parcel's market value. For taxes payable in 1990 and subsequent years, the county auditor shall compute the net tax capacity for each parcel according to the class rates specified in section 273.13. The net tax capacity will be the appropriate class rate multiplied by the parcel's market value. Subd. 1b. Computation of tax rates. The amounts certified to be levied against net tax capacity under section 275.07 by an individual local government unit shall be divided by the total net tax capacity of all taxable properties within the local government unit's taxing jurisdiction. The resulting ratio, the local government's local tax rate, multiplied by each property's net tax capacity shall be each property's net tax capacity tax for that local government unit before reduction by any credits. 273.032 MARKET VALUE DEFINITION. For the purpose of determining any property tax levy limitation based on market value, any qualification to receive state aid based on market value, or any state aid amount based on market value, the terms "market value," "taxable market value," and "market valuation," whether equalized or unequalized, mean the total taxable market value of property within the local unit of government before any adjustments for tax increment, fiscal disparity, powerline credit, or wind energy values, but after the limited market adjustments under section 273.11, subdivision 1a, and after the market value exclusions of certain improvements to homestead property under section 273.11, subdivision 16. Unless otherwise provided, "market value," "taxable market value," and "market valuation" for purposes of this paragraph, refer to the taxable market value for the previous assessment year. 249 273.13 CLASSIFICATION OF PROPERTY. Subdivision 1. How classified. All real and personal property subject to a general property tax and not subject to any gross earnings or other in-lieu tax is hereby classified for purposes of taxation as provided by this section. Subd. 21a. Class rate. In this section, wherever the "class rate" of a class of property is specified without qualification as to whether it is the property's "net class rate" or its "gross class rate," the "net class rate" and "gross class rate" of that property are the same as its "class rate." Subd. 21b. Tax capacity. (a) Gross tax capacity means the product of the appropriate gross class rates in this section and market values. (b) Net tax capacity means the product of the appropriate net class rates in this section and market values. Subd. 22. Class 1. (a) Except as provided in subdivision 23 and in paragraphs (b) and (c), real estate which is residential and used for homestead purposes is class 1a. In the case of a duplex or triplex in which one of the units is used for homestead purposes, the entire property is deemed to be used for homestead purposes. The market value of class 1a property must be determined based upon the value of the house, garage, and land. The first $500,000 of market value of class 1a property has a net class rate of one percent of its market value; and the market value of class 1a property that exceeds $500,000 has a class rate of 1.25 percent of its market value. (b) Class 1b property includes homestead real estate or homestead manufactured homes used for the purposes of a homestead by: (1) any person who is blind as defined in section 256D.35, or the blind person and the blind person's spouse; (2) any person who is permanently and totally disabled or by the disabled person and the disabled person's spouse; or (3) the surviving spouse of a permanently and totally disabled veteran homesteading a property classified under this paragraph for taxes payable in 2008. Etc. HOUSING AND REDEVELOPMENT AUTHORITY TAX LEVY 469.033 PUBLIC REDEVELOPMENT COST; PROCEEDS; FINANCING. Subd. 6. Operation area as taxing district, special tax. All of the territory included within the area of operation of any authority shall constitute a taxing district for the purpose of levying and collecting special benefit taxes as provided in this subdivision. All of the taxable property, both real and personal, within that taxing district shall be deemed to be 250 benefited by projects to the extent of the special taxes levied under this subdivision. Subject to the consent by resolution of the governing body of the city in and for which it was created, an authority may levy a tax upon all taxable property within that taxing district. The tax shall be extended, spread, and included with and as a part of the general taxes for state, county, and municipal purposes by the county auditor, to be collected and enforced therewith, together with the penalty, interest, and costs. As the tax, including any penalties, interest, and costs, is collected by the county treasurer it shall be accumulated and kept in a separate fund to be known as the "housing and redevelopment project fund." The money in the fund shall be turned over to the authority at the same time and in the same manner that the tax collections for the city are turned over to the city, and shall be expended only for the purposes of sections 469.001 to 469.047. It shall be paid out upon vouchers signed by the chair of the authority or an authorized representative. The amount of the levy shall be an amount approved by the governing body of the city, but shall not exceed 0.0185 percent of estimated market value. The authority shall each year formulate and file a budget in accordance with the budget procedure of the city in the same manner as required of executive departments of the city or, if no budgets are required to be filed, by August 1. The amount of the tax levy for the following year shall be based on that budget. 469.001 PURPOSES. The purposes of sections 469.001 to 469.047 are: (1) to provide a sufficient supply of adequate, safe, and sanitary dwellings in order to protect the health, safety, morals, and welfare of the citizens of this state; (2) to clear and redevelop blighted areas; (3) to perform those duties according to comprehensive plans; (4) to remedy the shortage of housing for low and moderate income residents, and to redevelop blighted areas, in situations in which private enterprise would not act without government participation or subsidies; and (5) in cities of the first class, to provide housing for persons of all incomes. Public participation in activities intended to meet the purposes of sections 469.001 to 469.047 and the exercise of powers confined by sections 469.001 to 469.047 are public uses and purposes for which private property may be acquired and public money spent. 251 UTILITY RATES Residential Water: 10, 12, 16, 17 0 - 1,000 gallons $6.45 1,001 - 10,000 gallons (9,000 gallons)1.66/1,000 gallons 10,001 - 33,000 gallons (23,000 gallons)1.92/1,000 gallons 33,001 gallons and over 2.09/1,000 gallons Commercial Water: 11, 11NT & 11TX, 13, 90 0 - 1,000 gallons $6.45 1,001 - 10,000 gallons (9,000 gallons)1.66/1,000 gallons 10,001 - 33,000 gallons (23,000 gallons)1.92/1,000 gallons 33,001 gallons and over 2.09/1,000 gallons Sprinklers - Res Twnhm& Commercial: 30, 31, 31NT, 32, 32NT, 91, 91NT 0 - 1,000 gallons $6.45 1,001 - 10,000 gallons (9,000 gallons)1.66/1,000 gallons 10,001 - 33,000 gallons (23,000 gallons)1.92/1,000 gallons 33,001 gallons and over 2.09/1,000 gallons Industrial Water: 14 All Water Usage 1.99/1,000 gallons Sewer Rates - Residential & Commercial: 20, 25, 26 0 - 1,000 gallons $8.05 1,001 gallons and over 5.48/1,000 gallons Sewer Special Cases: SW21, SW22 Has well $28.28 Industrial Sewer Rates: 24 All Sewer Usage 3.298/1,000 gallons BOD5 (Biochemical Oxygen Demand).355/lb. TSS (Total Suspended Solids).489/lb. Testing Actual cost + 10% Sewer Discharge Fee:2% Water On/Off Charge: ON $25 & Off $25 Water AvailabilityCharge: $40.25/year Final Bill Processing Fee: $25.00 Manual Meter Reading Charge: $20.00 Rates for 2017 Utility Billing Increasing Block Rates Monthly Billing Begins 1/1/2017 252 CAPITALIZATION THRESHOLDS Class of Asset Details Useful Life Threshold Land/land improvements N/A Land - $1, Improvements - $50,000 Building/building improvements:$20,000 Floor cover Construction Interior and Roof Cover Heating Ventilation AC and Lighting Electrical Elevators, Fire, Piping and Plumbing Site Preparation Walls Exterior Floor structure, foundation, roof structure, steel frame Primary Infrastructure and Utility $75,000 Paving Systems Water, Sanitary and Storm Sewer Secondary Infrastructure $25,000 Sidewalk, Boardwalk, Pathways Street lights, Signage Equipment $10,000 Vehicles Machinery Equipment Software and non-tangible $10,000 Purchased and Internally developed Construction Work In Progress Upon completion, per above class Equipment expenditures for items between $500 and $10,000 are recorded as small tools and equipment, which is a supply account. Building and improvement expenditures below the thresholds are recorded as repairs and maintenance. Current revenues finance expenditures for supplies and repairs and maintenance. 253 USEFUL TERMS (GLOSSARY) ACCOUNT:An organizational or budgetary breakdown found within city funds. A term used to identify an individual asset, liability, expenditure (and other uses), revenue (and other sources), or fund balance. ACCOUNTS PAYABLE:Amounts owed to others for goods or services received. ACCOUNTS RECEIVABLE:Amounts due from others for goods furnished or services rendered. ACCOUNTING SYSTEM:The total set of records and procedures which are used to record, classify and report information on financial status and operations of an entity. ACCRUAL BASIS OF ACCOUNTING:The method of accounting under which revenues are recorded when they are earned and expenditures are recorded when goods and services are received. ACTIVITY:A specific and distinguishable line of work performed by one or more organizational components of a governmental unit for the purpose of accomplishing a function for which the governmental unit is responsible. For example "Ice & Snow Removal” is an activity performed as part of the "Public Works" function. ADOPTION:Formal action taken by the City Council to authorize or approve the budget. AD VALOREM:In proportion to value. The basis for levying taxes on property. AGENCY FUND:A fiduciary fund used to account for situations where the government’s role is purely custodial. APPROPRIATION:An authorization granted by a legislative body to make expenditures and to incur obligations for specific purposes. An appropriation is limited in amount to the time it may be expended. ASSESSED VALUATION:Value placed upon real estate or other property as a basis for levying taxes. ASSESSMENTS:Charges made to parties for actual services or benefits received. ASSETS:Property owned by a governmental unit, which has a monetary value. ASSIGNED FUND BALANCE:Resources the government intends to use for specific purposes, but are neither restricted nor committed. AUDIT:The examination of documents, records, reports, systems of internal control, accounting and financial procedures, and other evidence for one or more of the following purposes: a) To attest to whether the statements prepared from the accounts present fairly the financial position and the results of financial operations of the constituent funds and balanced account groups of the 254 governmental unit in accordance with generally accepted accounting principles applicable to governmental units and on a basis consistent with that of the preceding year; b) To determine the propriety, legality and mathematical accuracy of a governmental unit's financial transactions; c) To ascertain whether all financial transactions have been properly recorded; d) To evaluate the stewardship of public officials who handle and are responsible for the financial resources of a governmental unit. BALANCED BUDGET:A budget in which estimated revenues and other sources equals estimated expenditures and other uses. A balanced budget does not use reserves or retained earnings to fund expenditures. BOND:A written promise, generally under seal, to pay a specified sum of money, called the face value or principal amount, at a fixed time in the future, called the date of maturity, and carrying interest at a fixed rate, usually payable periodically. BONDED INDEBTEDNESS:Outstanding debt by issues of bonds, which are repaid by ad valorem taxes or other revenue. BUDGET:A plan of financial operation embodying an estimate of proposed expenditures for a given period and the proposed means of financing them. BUDGET DOCUMENT:The official written statement prepared by the city’s Finance Department and adopted by the City Council. BUDGET MESSAGE:A general discussion of the proposed budget presented in writing as a part of the budget document. The budget message explains principal budget issues against the background of financial experience in recent years and presents recommendations made by city staff. BUDGET CALENDAR:The schedule of key dates, which a government follows in the preparation and adoption of the budget. BUDGETARY CONTROL:The control or management of a governmental unit or enterprise in accordance with an approved budget for the purpose of keeping expenditures within the limitation of available appropriations and available revenues. CAPITAL ASSETS:Assets with historical acquisition costs (value if donated) above the capitalization threshold, typically $10,000 or more, and a useful life of more than one reporting period. Capital assetsareusedinoperationsandhaveinitialusefullivesextendingbeyondasinglereportingperiod.These assetsmustalsomeetcapitalizationthresholds,whichvarybyassetclassification.Land,improvementsto land,vehicles,machinery,equipment,infrastructureandothertangibleandintangibleassetsusedin operationsareexamplesofcapitalassetclassifications. CAPITAL EXPENDITURES:Acapitalexpenditure occurswhenacapitalassetispurchased.Expenditures thatdonotbenefitmorethanonereportingperiodormeetthecapitalizationthresholdsareclassifieda currentexpenditure. 255 CAPITAL IMPROVEMENT BUDGET:A plan of proposed capital expenditures and a means of financing them. The capital improvement budget is enacted as part of the complete annual budget. CAPITAL PROGRAM:A plan for capital expenditures to be incurred each year over a fixed period of years to meet capital needs arising from the long-term work program or otherwise. It sets forth each project or other contemplated expenditure in which the government is to have a part and specifies the full resources estimated to be available to finance the projected expenditures. CAPITAL PROJECTS FUNDS:A governmental fund type used to account for financial resources to be expended for the acquisition or construction of major capital assets. CAPITALIZATION THRESHOLD:The level at which an item is considered either a current expenditure or a capital expenditure. The threshold for equipment is $10,000. CASH BASIS:The method of accounting under which revenues are recorded when received in cash and expenditures are recorded when paid. CHARGES FOR SERVICES:Charges for current services rendered to customers. CHART OF ACCOUNTS:The classification system used by a government entity to organize the accounting for various funds and departments. COMMITTED FUND BALANCE:Resources used for specific purposes pursuant to constraints imposed by formal action of the government’s highest level of decision-making authority (i.e. City Council). CONSUMER PRICE INDEX (CPI):A statistical description of price levels provided by the U.S. Department of Labor. The index is used as a measure of the increase in the cost of living (i.e., economic inflation). CONTINGENCY:Budget for expenditures which cannot be placed in departmental budgets, primarily due to uncertainty about the level or timing of expenditures when the budget is adopted. The contingency also serves as a hedge against shortfalls in revenues or unexpected expenditures. CURRENT:A term applied to budgeting and accounting, designating the operations of the present fiscal period as opposed to past or future periods. DEBT:An obligation resulting from borrowing money or purchasing goods and services. DEBT LIMIT:The maximum amount of gross or net debt, which is legally permitted. DEBT MARGIN:The amount of available debt, which may be issued by a governmental unit before reaching its debt limit. DEBT SERVICE FUND:A governmental fund type used to account for the accumulation of resources for the payment of general long-term debt principal and interest. 256 DEPARTMENT:Basic organizational unit of government, responsible for carrying out related functions. Each department serves a specific function as a distinct organizational unit of government within the given fund. Its primary purpose is to facilitate organizational and budgetary accountability. DEPRECIATION:Expiration in the service life of capital assets attributable to wear and tear, deterioration, action of the physical elements, inadequacy or obsolescence. DEPUTY REGISTRAR (DMV):City service of processing state-issued licenses for motor vehicles and equipment, such as license plates and tabs for cars, trucks, trailers, and recreational vehicles. DISTINGUISHED BUDGET PRESENTATION AWARDS PROGRAM:A voluntary awards program administered by the Government Finance Officers Association to encourage governments to prepare effective budget documents. ENTERPRISE FUND:A proprietary fund type used to report an activity for which a fee is charged to external users for goods or services. In theory, these funds operate in a manner similar to private business enterprises, where the intent of the governing body is to recover the cost of delivering services through user fees or charges (Water, Sewage, Liquor, Deputy Registrar, and Fiber Optic funds). ESTIMATED MARKET VALUE:Represents the selling price of a property if it were on the market. Estimated market value is converted to tax capacity before property taxes are levied. EXPENDITURE:For accounts kept on the accrual or modified accrual basis of accounting, the cost of goods received or services rendered whether cash payment have been made or not. Where accounts are kept on a cash basis, expenditures are recognized only when the cash payments for the above purposes are made. FIBERNET MONTICELLO (FNM):The name of the City’s fiber optic network, which provides internet, phone, and cable television to residents and businesses of Monticello as a City run enterprise. FIDUCIARY FUND:A fund classification used to report assets held in a trustee or agency capacity for others and therefore cannot be used in the government’s own programs. FINES:Revenues from penalties imposed for violation of laws or regulations. FISCAL POLICY:A government’s policies with respect to revenues, spending, and debt management as these relate to government services, programs and capital investment. Fiscal Policy provides an agreed-upon set of principles for the planning and programming of budgets and their funding. FISCAL YEAR:The budget and accounting year that begins on the first day of January and ends on the last day of December of each year. 257 FULL TIME EQUIVALENT (FTE):The number of employee hours (2,080) needed to be equal to one full time employee. Several part time employees may be combined to make one FTE. FUNCTION:A group of related activities aimed at accomplishing a major service or regulatory program for which the government unit is responsible. FUND:A fiscally independent accounting entity with a self-balancing set of accounts recording cash and/or other resources together with all related liabilities, obligations, and reserves, which are segregated for the purpose of carrying on specific activities or attaining certain objectives. FUND BALANCE:Governmental fund assets minus liabilities. GENERAL FUND:Accounts for the general operation of the city and all financial resources except those to be accounted for in another fund. GENERAL GOVERNMENT:A set of accounts, to which are charged the expenditures for operating the city. GENERAL OBLIGATION BONDS:Bonds for which the government pledges its full faith and credit to the repayment of the bonds principal, including interest. GOAL:A statement of broad direction, purpose or intent based on the need of a community. A goal is general and timeless; that is, it is not concerned with a specific achievement in a given period. GOVERNMENTAL ACCOUNTING:The composite of analyzing, recording, summarizing, reporting, and interpreting the financial transactions of governmental units and agencies. GOVERNMENTAL FUND TYPES:Funds used to account for the acquisition, use and balances of expendable financial resources and the related current liabilities - except those accounted for in proprietary funds and fiduciary funds. In essence, these funds are accounting segregation of financial resources. Under current GAAP, there are four governmental fund types: general, special revenue, debt service and capital projects. GRANT:A contribution of assets by one governmental unit or other organization to another. Grants are usually made for specified purposes. HOMESTEAD AND AGRICULTURAL CREDIT (HACA):A form of state paid property tax relief for farm property and owner occupied homes. HOUSING AND REDEVELOPMENT ACT – SPECIAL BENEFIT LEVY:Property tax levied against the city’s taxable market value. The HRA levy limit is .0185% of the taxable market value and must be used solely for redevelopment purposes. IMPROVEMENT BONDS:Bonds payable from the proceeds of special assessments from properties benefiting from an improvement. 258 IMPROVEMENTS:Buildings, other structures, and other attachments or annexations to land which are intended to remain so attached or annexed, such as sidewalks, trees, drains, and sewers. INFRASTRUCTURE:The basic physical and organizational structures and facilities (e.g., buildings, roads, bridges) needed for the operation of the city. Infrastructure thus consists of improvements with significant cost to develop or install that return an important value over time to the city. INTERFUND TRANSFERS:See operating transfers. INTERGOVERNMENTAL REVENUES:Revenues from other governments in the form of grants, entitlement, or shared revenues. INTERNAL SERVICE FUNDS:Proprietary fund type that may be used to report any activity that provides goods or services to other funds, departments, or agencies of the primary government and its component units, or to other governments, on a cost-reimbursement basis. INVESTMENTS:Securities held for the production of income in the form of interest. LEVY:(Verb) To impose taxes, special assessments, or service charges for the support of governmental activities. (Noun) Taxes, special assessments, or service charges imposed by a governmental unit. LEVY LIMIT:The city’s maximum property tax levy without special authorization as defined by Minnesota State Statue. LICENSE REVENUES:Revenues received from the sale of business and non-business licenses. LINE ITEM:A specific item or group of similar items defined by detail in a unique account in the financial records. LOCAL GOVERNMENT AID (LGA):Intergovernmental revenue from the state to municipalities to help fund general expenditures. LONG-TERM DEBT:Debt with a maturity of more than one year after the date of issuance. MAINTENANCE:The upkeep of physical properties in condition for use or occupancy. MARKET VALUE:The value a property is worth. MARKET VALUE HOMESTEAD CREDIT (MVHC):State paid property tax reduction on owner occupied homes based on the property’s market value. MARKET VALUE EXCLUSION (MVE):Provision in the state property tax system which exempts or removes a portion of a property’s market value from property taxes. 259 MISCELLANEOUS:Revenues or expenditures not classified in any other revenue or expenditure category. MODIFIED ACCRUAL BASIS:The basis of accounting under which expenditures other than accrued interest on general long-term debt are recorded at the time liabilities are incurred and revenues are recorded when received in cash except for material and/or available revenues, which should be accrued to reflect properly the tax levied and revenue earned. NONSPENDABLE FUND BALANCE:Amounts that cannot be spent because they are either (a) not in spendable form or (b) legally or contractually required to be maintained intact. OBJECT OF EXPENDITURE:Expenditure classifications based upon the types or categories of goods and services purchased. OBJECTIVE:Desired output oriented accomplishments, which can be measured and achieved within a given time frame. OPERATING BUDGET:A financial plan that estimates revenues and expenditures for a specified period. OPERATING EXPENSE:The cost for personnel, material and equipment required for a department to function. OPERATING REVENUE:Monies received from ongoing operations. Operating revenues are used to pay for day-to-day services. OPERATING TRANSFERS:Amounts transferred from one fund to another, shown as expenditure in the originating fund and revenue in the receiving fund. ORDINANCE:A formal legislative enactment by the City Council. PAY-AS-YOU-GO BASIS:A term used to describe a financial policy by which capital outlays are financed from current revenues rather than through borrowing. PERFORMANCE MEASURE:See Service Levels. PERSONAL SERVICES:Expenditures for salaries, wages, and fringe benefits of employees. PROGRAM:A group of related activities performed by one or more organizational units for the purpose of accomplishing a function for which the governmental unit is responsible. PROJECT:A plan of work, job assignment, or task. PROPRIETARY ACCOUNTS:Those accounts which show actual financial position and operation, such as actual assets, liabilities, reserves, fund balances, revenues, and expenditures, as distinguished from budgetary accounts. 260 PUBLIC SAFETY:Expenditures related to the protection of persons and property. PUBLIC WORKS:Expenditures for the maintenance of city property and infrastructure. PURPOSE:A broad statement of the goals, in terms of meeting public service needs, that a department is organized to accomplish. REFUNDING BONDS:Bonds issued to redeem outstanding (unpaid) debt. REIMBURSEMENT:Cash or other assets received as a repayment of the cost of work or services performed or of other expenditures made for or on behalf of another governmental unit or department or for an individual, firm, or corporation. RESERVE:An account which records a portion of the fund balance which must be segregated for some future use and which is, therefore, not available for further appropriation or expenditure. RESOLUTION:A special or temporary order of a legislative body; an order of a legislative body requiring less legal formality than an ordinance or statute. RESOURCES:The actual assets of a governmental unit, such as cash, plus contingent assets such as estimated revenues applying to the current fiscal year not accrued or collected, and bonds authorized and not issued. RESTRICTED FUND BALANCE:Fund balance should be reported as restricted when constraints placed on the use of resources are either: a) externally imposed by creditors (such as through debt covenants), grantors, contributors, or laws or regulations of other governments; or b) Imposed by law through constitutional provisions or enabling legislation. REVENUE:The term designates an increase to a fund's assets which: 1) does not increase a liability; 2) does not represent a repayment of an expenditure already made; 3) does not represent a cancellation of certain liabilities; and 4) does not represent an increase in contributed capital. REVENUE BOND:A bond that is backed by a particular revenue source such as water user fees, typically accounted for in proprietary fund types. SERVICE LEVELS:Data to determine how effective/efficient a program is in achieving its objective. SPECIAL ASSESSMENT:A compulsory levy made by a local government against certain properties to defray part or all of the cost of a specific improvement or service which is presumed to be of general benefit to the public and of special benefit to such properties. SPECIAL REVENUE FUND:A governmental fund type used to account for revenue derived from specific revenue sources that are legally restricted or committed for specific purposes. 261 TAX CAPACITY:The valuation of property based on market value and statutory class rates. The property tax for each parcel is based on its tax capacity. The total tax capacity of all individual parcels is the basis for determining the tax capacity rate. TAX CAPACITY RATE:Tax rate applied to tax capacity to generate property tax revenue. The rate is obtained by dividing the property tax levy by the available tax capacity. TAX INCREMENT FINANCING (TIF):Financing tool originally intended to combat severe blight in areas, which would not be redeveloped without government subsidies derived from locally generated property tax revenues. TAX LEVY:The total amount to be raised by general property taxes for the purpose stated in the resolution certified to the county auditor. See levy also. TAXABLE MARKET VALUE:The market value of a property less the market value exclusion. This is the value used to calculate property taxes on a property. TAXES:Compulsory charges levied by a governmental unit for the purpose of financing services performed for the common benefit. TOTAL TAX CAPACITY:The amount computed by first totaling the tax capacities of all parcels of property within a city. Adjustments for fiscal disparities, tax increment and a portion of the powerline value are made to this total since not all tax capacity is available for general tax purposes. TRUST FUND:A fund consisting of resources received and held by the governmental unit as trustee, to be expended or invested in accordance with the conditions of the trust. UNASSIGNED FUND BALANCE:This is the residual classification for the General Fund. This is fund balance that has not been reported in any other classification. The General Fund is the only fund that can report a positive unassigned fund balance. Other governmental funds would report deficit fund balances as unassigned. UNBALANCED BUDGET:A budget which undesignated fund balance or reserves are used or increased, in order to balance estimated revenues to estimated expenditures or expenses. UNRESTRICTED FUND BALANCE:The portion of a fund’s balance that is not restricted for a specific purpose and is available for general appropriation. USER FEE:The service charge for delivering a specific service to one benefiting party. WORKLOAD DATA:A unit of work to be done. 262 ACRONYMS CAFR Comprehensive Annual Financial Report CD Certificate of Deposit CIP Capital Improvement Plan CP Commercial Paper CPI Consumer Price Index DMV Department of Motor Vehicle or Deputy Registrar EDA Economic Development Authority MVE Market Value Exclusion EMV Estimated Market Value FHLB Federal Home Loan Bank FNM FiberNet Monticello FNMA Federal National Mortgage Association FTE Full Time Equivalent GAAP Generally Accepted Accounting Principles GASB Governmental Accounting Standards Board GFOA Government Finance Officer’s Association GO General Obligation HACA Homestead and Agricultural Credit Aid HRA Housing and Redevelopment Authority LGA Local Government Aid MCC Monticello Community Center MVHC Market Value Homestead Credit SAC Sewer Availability Charge SY Square Yard TIF Tax Increment Financing WAC Water Availability Charge 263 This page intentionally left blank 264 Back Cover