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HomeMy WebLinkAbout08-26-2004 Council Work SessionCITY OF ORONO NOTICE OF PUBLIC MEETING NOTICE is hereby given that the Orono City Council will meet in a work session at 5:30 p.m. on Thursday, August 26, 2004 in the Orono City Council Chambers, 2780 Kelley Parkway, Orono, Minnesota. The purpose of the w ork session is to review the proposed 2005 budget, and to discuss other issues of current interest. Isl Linda S. Vee Citv Clerk Posted at: City Hall Navarre Post Office Long Lake Post Office Crystal Bay Post Office c c c TO: FROM: DA'IE: Mayor I’etcrson and Council Members Ron Moorsc, City Administrator August 20,2004 SUBJECT: 2005 Budget Tax Levy Alternatives Tax Levy Alternative l.evels At the August 3 budget worksession, the proposed 2005 budget and tax levy were reviewed. The budget reflects an effort to address a number of deferred needs, as well as to fund a number of special projects, while managing the impact of the tax levy on property owners. The budget rellects a tax levy increase of 8.25%. The Council requested that stalTprioritize the deferred needs and special projects, and provide recommendations regarding alternative tax levy increa.ses (8%, 6%, and 4%). The tax levy alternatives, and staffs recommendations regarding expenditure reductions related to each levy alternative, are shown on the attached table titled Tax Levy Alternatives and Ilxpenditurc Levels. Staff Recomme nds Maintaining Initially Prop os ed Levy It is the strong consensus and recommendation of the management team that the levy' be maintained at the initially proposed level. Tliere are three key factors driving this recommendation, f irst, both the part-time rinance/l.T. position and the additional police investigator position were approved in the 2003 budget. The filling of these positions was delayed while the Legislature dealt with the State budget deficit. When the legislature cut State Aids to cities and enacted strict levy limits, which would have made it very difficult or impossible to fund the positions in 2004, the positions were left unfilled. 'I'hc expiration of levy limits now enables the flexibility to provide the necessary funding for these |H>sitions. Second, there are a number of additional deferred and upcoming needs, both short-term and long-tenn, that are only partially addre.s.sed, or not addressed at all, in the propo.scd budget. Prior to a proposed budget being presented to the Council, the budget requests from all departments are prioritized and winnowed down to those that are essential. A number of initiatives and needs that merit funding were excluded from tlie budget in an ctlbrt to hold the levy increase to a level that would be acceptable to the Council and the citi/ens. Additional long term funding of necessary' public improvements, such as major street rehabilitation and stormwater drainage improvements, additional funding for vehicle and equipment replacement, as well as additional police staffing needs, will need to be addressed in future budgets. It is important that the C'ity takes a substantial step towiu-d increased funding at this time, both to address a substantial portion of the deferred needs, and to put itself into a position to be able to continue to address the remainder of the defeiTcd and upcoming needs in fufac budgets. niird, the propo.scd budget is providing a v cry substantial bang for the buck, fhe budget eiubles major progress to be made in meeting stalling r eeds, training needs, equipment replacement needs, and street *- a '.iU i i ill c c .r1 rehabilitation needs. Although the proposed levy is a significant percentage increase, it provides substantial benefits while having a relatively small impact on homeowners. Tax Levy and Tax Rate Trends Attached are tables showing the tax lev>’ and tax rate levels over the past ten years. As the tables demonstrate, the tax levy has been held to conservative increases, which has resulted in a trend of significant tax rate reductions (i.e. from 16.25% in 1994 to 13.71% in 2001) In 2002, the State tax reform legislation, that provided State funding for schools and eliminated $300,000 of State HACA Aid, caused the City tax rate to increase when the levy was increased to recover the lost HACA Aid revenue. The tax rate increased to 20.97%. However, the tax rate has been declining since then. The tax rate for 2004 is 17.64%. The tax rate for 2005 is expected to be somewhat less than the 2004 rate. Tax l.evy. Tax Capacity Rate, and Impact of the Tax Levy on Property Owners In the initial budget overview information, staff took a conservative approach to estimating the City’s tax capacity and tax rate, which resulted in an estimated slight reduction in the tax rate. Prior to the budget workscssion, the actual tax capacity numbers will be available. It is expected that the tax capacity will be higher than the initial estimate, which will result in a reduction in the tax rate. This would cause the impacts on homeowners to be less than tho.se reflected in the initial budget overview memo. Certified Levy can be Reduced but not Increased The maximum levy must be certified by September 15. The final levy is adopted after the Truth-in- 1 axation hearing in late November or early December. Prior to the final levy adoption, the lc\7 can be reduced, but it cannot be increased. Street Rehabilitation and Equipment Replacement Funding The attached table titled “Funding Level Detail-Equipment Replacement and Street Rehab ” show^thc current underfunding of both Street Rehabilitation and Equipment Replacement needs. Street Rehabilitation Although most of the City’s local streets do not require significant rehabilitation work, there are a number of higher-traffic streets that will require major rehabilitation work in the coming years. Two of these streets are Orono Orchard Road and Casco Point Road. The cost of the major rc'iabilitation of each of these roadways will exceed $1 million. In the early ‘90 ’s, the city began an effort to increase funding for street rehabilitation. 'I'he annual funding level was increased from $70,000 to $132,450. For 2004, in order to fund general city operations within the lev^ limit and reduced State Aid, the annual funding level was reduced to $65,450. I he proposed 2005 budget reflects a funding level of $114.950, which is still $17,500 less than the 2003 annual funding level. jlafeilr ». t i i I I 1 r C, c Equipment Replacement As the attached table shows, the level of funding needed to meet current equipment replacement needs is $173,000. Equipment needs are funded through the Improvement and Equipment Outlay (lEO) Fund. This ftind has a current balance of $400,000. However, with the cost of one plow truck replacement exceeding $ 100,000, and the cost of a fire pumper exceeding $200,000, it is important that this fund be adequately funded over the long term. In 2004, the amount of funds transferred to the lEO Fund was reduced from $105,00 to $45,000, again based on the limited tax levy available. The 2005 budget reflects a transfer of $125,000, which is still lower than the amount required to meet needs over the long term. Police Staftinc The Police Department has identified the need for three additional officers. These include a second investigator, a narcotics investigator, and a patrol officer. The proposed 2005 budget reflects the addition of the investigator position. The joint drug task force with Hennepin County, Medina. Mound, and West Hennepin Public Safety requires a full-time narcotics in'. estigator. A current full time patrol officer has been assigned to the narcotics investigator position. Initially, the patrol position will be back-filled by a part-time officer. A private fundraising effort is planned to provide transition funding for the narcotics investigator for one year. The City will then need to fund this position. This funding will need to be included in the 2006 budget. Tlie Department is currently staffed with two otTicers during the night shift. Whenever a night shift officer calls in sick, filling the shift requires overtime. In many cases, the shift can only be tilled by someone who has already worked eight hours that day. Asking officers to work for 16 hours, especially if there is no break between shifts, raises both officer safety and public safety concerns. Alst», when there are only two ofticers on the street, neither of them can do proactive enforcement (i.e. follow-up on cases, DWI’s, etc,) liccause those activities can take them off the street for extended periods of time. The Department is receiving increased requests for service in Long Lake, especially related to the Highway 12 construction project. The Department does not have enough officers to respond to these additional service requests. The daytime service problem could be corrected by adding an officer for traffic enforcement Monday to Friday from 8:00 a.m. to 5:00 p.m. Navarre Streetscapinc and Hiahwav 12 Turnback Consultant Both of these special projects could be eligible for funding through the Heiuiepin County Community Works program. A request for funding for the Highway 12 Turnback Project is in process. Although it may be difficult to obtain funding for both of the projects, a request for funding for the Navarre Streetscaping project will also be made. ^ -ji 6tt> Jut ^i i i i i c Seasuiial Paik. Mainteiumce Position It was the consensus of the management team that the seasonal parks maintenance position was the lowest priority expenditure item. c c MkiaiiaHAs c c c Tax Levy Alternative Levels Difference 8.25% 53,461,670 8.0% 53,453,181 5 8,489 6.0% 533894105 S63376 subtotal reductions 571,865 4.0% 53325,847 total reductions 563.958 5135323 Expenditure Reductions to Achieve Alternative Tax Levy Leveb 8% Lew Increase Eliminate seasonal parks maintenance position $10,200 6% Levy Increase Eliminate PD tuition reimbursement funding Reduce funding for Navarre streetscaping Reduce funding for Hwy 12 turnback consultant Reduce funding for equipment replacement Reduce funding for street rehabilitation $ 6,000 $16,000 $ 9,665 $15,000 $15,000 Subtotal $61,665 4% Levy Increase Eliminate funding for additional police investigator Eliminate funding for Navarre streetscaping $60,000 $ 3.958 $63,958 City of Orono C. c Tax Rates -Ten Year History Fiscal Year Increase (Decrease) Percentage Increase (Decrease) of Total Tax From Prior From Prior Collection Rate Year ___Year 1994 16.25 1995 15.60 (0.65)‘4.00% 1996 14.74 (0.86)-5.51% 1997 14.25 (0.49)-3.32% 1998 14.72 0.47 3.30% 1999 15.38 0.66 4.48% 14.80 (0.58)-3.77% 2001 13.71 (1.09)-7.36% 2002 20.97 7.26 52.95% 2003 19.87 (1.10)-5.25% 2004 17.64 (2.23)-11.22% Tax Levies •Ten Year History Total Increase Percentage Increase Fiscal Year Certified (Decrease)(Decrease) of Tax Levy From Prior From Prior Collection Net of HACA Year Year 1994 $1,976,636 1995 $2,016,170 $39,534 2.00% 1996 $2,080,840 $64,670 321% 1997 $2,161,630 $80,790 3.88% 1998 $2,225,130 $63,500 2.94% 1999 $2,291,880 $66,750 3.00% 2000 $2,363,560 $71,680 3.13% 2001 $2,443,350 $79,790 3.38% 2002 $2,926,335 (a) $482,985 19.77% 2003 $3,098,400 $172,065 588% 2004 $3,197,930 $99,530 3.21% (a) Inciucies a levy to replace the loss of $309,627 in HACA from the State. y»i«we«UCXimiMTu tew A Me Iwi Yr».12) [ c d c Funding Level Detail—Eqnipment Replacement and Street Rehab. Equipment Replacement Funding 2003 Transfer to lEO Fund-$ 105,000 2004 Transfer to lEO Fund-$45,000 2005 Transfer to lEO Fund-$ 125,000 Average level of expenditure- •Long Lake Fire Equipment Replacement- $45,000 -Navarre Fire Station Equipment Replacement- $18,000 -Computer-related equipment replacement- $ 15,000 -Small tools and minor equipment- -Public Works equipment replacement- $ 5,000 $90.000 $173,000 Street Rehab Fundine 2003 Funding Level-$132,450 2004 Funding Level $ 65,450 2005 Funding level $114,950 rp< v - c t c TO; Mayor Peterson and Council Members FROM: Ron Moorse, City Administrator DATE: August 20,2004 '\ SUBJECT: Utility Fund Budgets The City ’s utility funds include the Water, Sewer, and Storm Water Funds. These funds operate without tax levy support. They are supported by user fees. Attached are the proposed operating expenditure budgets for these funds, as well as a six-year Capital Spending Plan that includes the three utility funds, as well as the General Fund (Streets). The following is a summary of the key elements of tlie budgets of each fund. Water Fund Operating Expenditures The main expenditure increases are in utilities (elecU'icity)-$5,000. and maintenance of water mains and water plant-$6,800. Also, the fees paid by the City related to the Gopher State One-Call system have increased by $3,000. Capital Expenditures The 2005 budget includes $350,000 for the reconditioning and painting of the Navarre water tower. The tower has not had any significant maintenance since its construction in 1971 . The interior of the water tower was recently inspected. The report from the inspection will provide an indication of the extent of repair needed, and the cost of the repair. Based on the cost of the repair and repainting currently underway at the Long Lake water tower, the cost could be from $300,000 to $350,000. The water fund has sufficient reserves to fund this expenditure. The annual 3H increase in water rates should provide sufficient revenues to replenish the reserves over time. Sewer Fund Operating Expenditures The two most significant changes in the operating expenditures is the elimination of the $30,000 expenditure for infiltration and inflow (1/1) reduction, (this expenditure amount is now proposed to be used, and accounted for, in the capital expenditure portion of the budget) and the $66,000 increase in fees paid to Metropolitan Council Environmental Services for sewage treatment. The increase in Metro fees expenditures reflects the actual level of fees in recent years. During periods of wet weather, and/or high lake levels, the amount of I/l increases significantly, which causes increased treatment costs. Capital Expenditures ' i r C 1 c The $30,000 related to the i/I reduction had been used for minor repairs and sealing of sewer lines and manholes. It is now proposed to be used for more permanent rehabilitation, such as lining clay tile pipes to address large cracks and structural failures. The capital portion of the sewer fund budget includes $85,000 for lining clay tile pipe. This will provide major improvements to the oldest portions of the sewer system, including significant reductions in I/I.. The capital budget also includes $40,000 for lifi station rehabilitation. This level of expenditure is similar to the level in previous years. Storm Water Fund Operating Expenditures The operating expenditures in this fund are related to the allocation of portions of the pay and benefits costs of public works positions to this fund, as well as an administrative service charge. The Personal Services expenditures have increased by $9,950, or 35.61% due to the allocation of a portion of the new public works maintenance position’s pay to this fund. Capital Expenditures The largest capital item is the replacement of the street sweeper, at a cost of $150,000. The current sweeper is 15 years old. Also, the wet weather in the late spring this year highlighted a large number of stormwater drainage problems. These problem areas were documented, so that they can be addressed through capital improvement projects. The proposed budget includes $50,000 for drainage improvement projects. This will enable a small number of the most significant problem areas to be addressed. It is important that the stormwater fee is increased a minimum of 3% per year, on an annual basis, to provide sufficient funding to address the many problem areas. HMAyU "; _ i:bi\um 2002 ACIUAL 2003 ACLUAL C'ity p‘*^)rono 2005 UpcV^ 1^ Budget 2004 Y-l-D BUDGET 06/30/2004 riJND: WATER FUND DEPARTMENT: WATER OPERATINC Personal Service Supplies Sl Maintenance Professional Serv ices Insurance Other pApcnscs ^ _ TOTAL WATER OPERATING FUND I04JI0 50*416 3*385 11*760 129,461 299J^32 114,855 59,120 5*058 12*130 I36.M8 _ 328,01 \ 109,470 42,850 3,030 12,740 138,420 306.510 64,897 24,617 450 6,145 523355 148*164 # 2005 DEPI Ri QUEST 2005 MGR DOLLAR 2005 INCREASE INCREASE APOPTED (DECREASE) (DECREASE) 105,790 42,850 3,030 12,740 138,420 302,830 105,790 54,1 (K) 3,030 13,120 147,120 323,1W) 0 0 0 0 0 (3*680) 11,250 0 380 ^700 16,650 -3.36% 26.25% 0.00% 2.98% 6.29% 5.43% PRCKiRAM Dl SCRIP! ION & OBJimVriS: Ihe Water Opcniling I und provides fur the fundinp, of the City's water distribution system. These funds are accounted for separately unJ arc designed to be funded primarily through water rotes. OPERATTNG COST ACTTIVITIES: Included in 'Personal Scrv ices* arc the wt^ges and eraplo>mcnt taxes for the Water Department Sta(f A budgeted increase Is included to prov ide StafI with a cost of living increase comparable to the national and local average. •Supplies & Maintenance* includes the operating supplies and maintenance for the water distribution sv-stem. 'Professional Services' includes a piirtion of tl^c costs related to the City's annual financial audit, und engineering consulting costs related to water projects. 'Other I vpcnscs' include power supply costs, purchased water from the City of W av/ata, and a depreciation charge on the fixed asscsts for the W'atcr [Apartment t Cit)’ o*" ')rono 2005 Op«y^ ig Budget # •/o 2(H)2 ACTUAL 2003 AcruAL 2004 Y-T-0 pUtKiiiT Q6/302004 2(M)5 2005 DOLLAR DEPT MGR 2005 INCREASE INCRIi/XSE RLODLST RI COMMD APQETEP (DECR1:ASE) LDECEEASD FUND: SEWER FUND DEPARTMENT: SEWER OPERATING Pcrsimal Services Supplies & Maintenance Prufcssional Services Insurance Olher Expenscs/rransfers 162,586 57,529 5.729 8,430 533,361 174,837 71,836 5,357 8,680 609,247 193,480 94,200 13,550 9,110 548,160 83,794 7,916 48 4,525 313,422 196,050 94,200 13,550 9.110 614,420 196.050 l(K).200 13,550 9,380 616,420 0 0 0 0 0 2.570 6,000 0 270 68,260 1.33% 6.37% 0.00% 2.%% 12.45% T(_)i Ai si:wi:r opi ra iTno i UNO 767,635 869,957 858,500 409,705 927.330 935^600 77,I(K> i‘Royt/w^ descrii 'Hon & oHJi:n |yr^:__ The Setver Operating lund provides lor the funding of the City’s sewer eollcetion System, l^e funds are accounted for separately and are designed to be funded primarily through sewer unit charges. Ol'ERA I IN(i COS I ACriVl I1ES: Included m ‘Pcrvmal Services' are the wages and employment taxes for the Scwxr Department Stalf. A budgeted increase is included to provide Stall with a cost of living increase comparable to the national and ItKa! aserage. 'Supplies & Maintenance' includes the operating supplies and maintenance lor the sewer colk-ciion system. ■Prolessional Services ’ includes a portion of the costs related to the City’s annual rmaiicial audit, and engineering consulting costs related to sewer projects. Other Expenses' Includes the City's disposal charges with the MCES, and a depreciation charge on the fixed assets for the Sewer Department. j-^r W ri'^ . T-'^'P»-rwi '•-'t^r*?, rrrT^4-^iF) t City r*‘»>rono 2005 Opti^ ig liudgct 2(_X)3 2(M)5 IK)LLAR % 2(M')2 2003 2004 Y-T-D DEPT MGR 2005 INCREASE INCREASE ALIUAL ACIUAL BUIXjET 06/30/2(H)4 KIOUESl KttyMMU ADOPTED (DIXRLASE)(DECRI ASEI KIND: S1URMWATER DEPARTMENT: SI ORMWATEK OPERATING Pcnonal Service H,7%31,526 27,940 0 37,890 37,890 0 9,950 33.61% Professional Services 0 0 460 0 460 460 0 0 0.00% Other Expenses ^ _ _ _ 0 8^4^_____ 8/700_0 8,900 8,900 ___ 0^_ 0 0.00% TO lAI. GOI.F OPF.RATING FUND _ 8,796 _ 3?^86 37.300 T3BT-. raas.-. — 47,250 __ 47,250 0 9,950 26.68% PROGRAM DESCRimON & OUJECHVKS; OPERA I IN(i ( OS r ACI IVmFS i c Capital Spending Plan for Public Services Department Date: August 11, 2004 Year Item Total Cost General Fund Sewer Fund Water Fund Stormwa ter Fund 2005 Replace 1989 Street Sweeper 150,000 150,000 2005 Stormwater Projects 50,000 50,000 2005 PIR Fund-Tax Levy for Street Reconstruction and Rehabilitation 85,000 85,000 2005 Replace 1991 Toro Model 345 Mower/Sidewalk Sweeper 30,000 30,000 2005 Purchase Shop Floor Sweeper to Replace Use of School’s Sweeper 15,000 15,000 2005 Highway 12/ Old Ciystal Bay Road I and I Pipe Lining 85,000 85,000 2005 Lift Station Rehabilitation 40,000 40,000 L 5 Recondition and Paint 1971 Construction Navarre Water Tower 350.000 350,000 Total 2005 130,1 125,000 350,000 200,000 2006 2006 PIR Fund-Tax Levy for Street Reconstruction and Rehabilitation 100,000 100,000 Replace 1979 Tractor Backhoe Loader 90,000 90,000 2006 Installation of Radio Read Water Meters 100,000 100,000 2006 Lilt Station Rehabilitation and I and 1 Projects 130,000 130,000 2006 Total 2006 Stormwater Projects 100,000 190,000 130,1 100,000 100,000 100,( 1.