08-28-2017 Council Work Session Packet

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Revenues As discussed in at the last work session, revenue line items are projected to be relatively flat for 2018. Of the revenue amounts that are increasing, the largest is an increase of $25,330 for contracted police services. As well as a $13,000 increase to Police Training Reimbursement, as discussed above. Conditional UseNariance/Development fees are being decreased by $30,000 in anticipation of a revenue drop due to decreased fees approved by Council. To fund the current expenditure budget, the property tax levy for the General Fund would require an increase of $207,307 (4.9%). This increase puts the tax rate at 17.062%. Historical information on the General Fund and the Tax levy can be found in attachment C. Tax Lew The City's tax levy is made up of three parts: General Fund Operating, Debt Service, and the Pavement Management levy. As presented, the current budget would increase the tax levy $410,321. The increase is split between the General Fund ($207,311) and the Pavement Management Fund ($247,000). This levy increase would result in a tax rate of 17.062%. They levy presented at the August 10' work session was at 17.204% and the 2017 levy was 16.804%. Health Insurance At the last work session Council requested a breakdown of the Health Insurance costs to the City and what the employees pay. Please find details in attachment B. Fund Balance At the prior work session Council had some questions regarding Fund Balance, find attachment H for fund balance. In the past excess fund balance has been transferred to another Fund approved by Council. Fund Balance simply put is difference between assets and liabilities at a point in time. The Office of State Auditor recommends that local governments maintain an unreserved fund balance in the general and special revenue funds of approximately 35-50% of fund operating revenues or no less than five months of operating expenditures. The current City of Orono Fund balance policy states that the City will maintain a minimum unreserved general fund balance of 45% of the fund's annual operating budget. Also the policy states any fund balances in excess of 50% will be transferred to the Community Investment Construction Fund or a transfer approved by Council. Fund balance is measured on 12/31 after the City has received its second property tax settlement, the timing is equivalent to measuring your personal wealth the day after you have received a paycheck without paying your mortgage and car loan. Tax settlements are distributed twice a year, typically in June and December. Therefore following the 5 to 6 months from the last tax settlement, fund balance plays important role in cash flow in funding City operations. The City's expenditures thru June 2017 were $3,418,930. Finally, currently the City of Orono has a AAA Bond rating. Our latest Bond rating report from Moody's (attachment G) identifies a healthy reserve as a strength and that a material decline in fund balance and liquidity is a factor that could lead to a downgrade. Non -Union Wages As indicated above, the draft budget has been prepared with a 2.5% COLA included. As well as eligible Step increases. Also included is the Police Chief and Deputy Chief requested increases 2018 Budget — Page 2