06-26-2023 Council Work Session Packet

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2023 Budget – Page 2 charts include possible levy amounts and their impact on the property tax rate. They are for illustrative purposes only and reflect the Council’s expressed goals of fully funding the City’s pavement infrastructure, increase spending on parks infrastructure, and adequately funding fire operations and capital needs. • Creation of the Orono Fire Department will increase fire expenditures significantly next year. Funding the spike in 2024 costs is discussed below. At the end of the contract (12/31/2025) the amount budgeted for Long Lake fire will be eliminated. It is possible that in the future we will have some contracts with neighboring cities that will offset the costs. If not, the costs will have been able to be absorbed into the General Fund operating budget. Based on the budget Committee’s guidance, the tax information provided with this memo is based on a levy increase of $1,000,000 (12%) and a slight decrease in the rate from 16.53% to 16.52%. Aside from the current operating needs of the General Fund, funding for fire equipment and city facilities are the greatest current need for increases. Current projections indicate that the annual levy for the Facilities fund should be $500,000 and for Fire Capital $560,000. In order to meet these needs, without increasing the overall levy, we will use a combination of transfers and grant money. As part of the recently passed state budget, we will be receiving a Public Safety Grant in the amount of $371,000. It is proposed to use this grant for the purchase of fire equipment. The combination of the $275,000 levy and $371,000 grant exceed the needed annual amount by $85,000 while phasing in the needed levy over the 2024 and 2025 budget years. Staff is also recommending reducing the 2024 levy for the 2014 Debt Service Fund to $60,000 for 2024. The fund has the required level of cash to pay the next year’s debt service. This is a one-year reduction whose purpose is to spread the levy needs for the Fire operating budget over a longer time period. In the near future, the city will see some relief in the pressure on the levy as two required levy amounts will be eliminated. The need for the levy portion paying for LL Fire will be eliminated from the 2026 levy. The 2014 GO Improvement Bonds will be eliminated from the levy in 2029. This will reduce pressure on the levy and is good justification to use some one-time funds in order to phase in the other levy increases. Overall, the 2024 budget process has some challenges, with phasing in the levy increases needed to properly fund the capital and operating need of the fire department. The City’s strong financial reserves and long-term funding identified for the city’s capital plan has the City in a good position to navigate the current situation without increasing the tax rate.