HomeMy WebLinkAbout06-26-2023 Council Work Session PacketCouncil Work Session
Monday, June 26, 2023
5:00 P.M.
Orono Council Chambers,
2780 Kelley Parkway, Orono, MN 55356
w
WORK SESSION
AGENDA
1. THC Legislation Update
2. Preliminary Budget Guidance
2023 Budget – Page 1
MEMORANDUM
To: Mayor Walsh and Orono City Council
From: Ron Olson, Finance Director
Subject: 2023 Budget
Date: June 26, 2023
Attachments: 2024 Budget
Work on the 2024 budget has begun. Individual departments are currently preparing their budget
requests. The City Administrator and Finance Director have begun to meet with the General
Fund departments to discuss and refine the department budget requests.
This will be the second year of utilizing the budget committee in the budget process. A chart
illustrating the budget process is attached to this memo. In brief, department heads provide their
budget requests to the Finance Department. These requests are reviewed and adjusted during
meetings between the Department Heads, the City Administrator, and the Finance Director. The
budget committee is meeting once per month to review and provide guidance to the development
of the Preliminary Budget and Tax Levy. The full Council will be updated at monthly work
sessions. The Preliminary Budget and Levy will be publicly presented at the first council
meeting of September. Adoption of the Preliminary Budget and Tax Levy will be at the second
meeting in September. Major expenditures that are driving increases include:
• Inflation has slowed from the previous year but continues to be a factor in building the
2024 budget. The current annual (May to May) CPI-U is 4.0%. The CPI includes a wide
variety of items in its calculation so it does not mean all budget lines are equally
impacted. For example, energy has decreased by 11.7% over the same time frame.
• Wages and benefits. The city has four labor unions that cover most of the city’s
employees. There contract all have a 3% increase for 2024. Wages and Benefits make
up approximately 65% of General Fund expenditures; it is expected that this expenditure
category will have the greatest impact on the budget. It is expected that health insurance
premiums will increase by approximately 10% for next year.
• Insurance – Liability and Workers’ Comp. Information provided by the League of
Minnesota Insurance Trust (LMCIT), suggests that the upward pressure on rates is
lessening. Recent changes made by the 2023 legislature should reduce the increase in
Worker’s Compensation due to PTSD retirements among Public Safety Personnel.
• Tax Levy/Tax Capacity Rate. The City’s property tax base continued to increase during
the 2023 assessment period. While the County numbers are not final, the tax base has
increased to $4,912,740,729 this is an increase of $579,292,385 (13.37%). The attached
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.
Annual
Budget
Process
Preliminary
Budget and
Levy
Discussion
(WS)
Staff
Develops
Department
General Fund
Budgets
Budget
Review-
General Fund
Budgets and
Levy
(WS)Staff Develops
Enterprise and
Internal Service
Budgets
Adopt
Budgets,
Levy, CIP &
Fee Schedule
Budget
Review –
Enterprise
and Internal
Service
Budgets
(WS)
June
July
August
September
Capital
Improvement
Plan Review
(WS)
October
November
December
Final
Budget
Prep
Fee Schedule
Review (WS)
Budget
and Levy
Update
(WS)
Truth in
Taxation held
at Council
Meeting
Adopt
Preliminary
Levy
Finance
initial
Levy and
Budget
prep
Staff Updates
Fee Schedule
Staff Develops
CIP and Utility
Rate Study Budget and
Levy Updates
Page 1 of 6
Staff Council
May
5/1 Staff Starts Preparing 2024 Budget
5/1 - 5/12 Finance updates budget documents - (Wages, IT,Fleet, Insurance, Fire Needs)
5/12 Budget Committee Meeting
5/16 Budget Worksheets to Departments
5/16 - 5/26 Department identify major requests (Staff, Equip, Software etc.)
5/31 Estimate Levy needs Tax Rate, Impact,
June
6/5 Budget Committee Meeting
6/12 Council Work Session - Tax Levy and General Fund Overview
6/26 - 6/30 Department budget meetings with Administrator (Finance first)
6/28 General Fund Updates based on Council Guidance
July
6/28 – 7/7 Departments Work Detail Budgets as Needed
7/1 - 7/31 Staff Works on Enterprise and internal Service Budgets
Wk of 7/17 Budget Committee Meeting - Detailed General Fund
7/24 Council Work Session - Update on Detailed General Fund
7/24-7/28 Update Budget to Reflect Council Input
7/31 Enterprise Fund deadline (Utilities) & Internal Service Fund deadline
August
Wk of 8/7 Enterprise Budgets Meetings
Wk of 8/21 Budget Committee Meeting - Enterprise Funds
8/28 Council Work Session - Enterprise Funds
8/23 – 9/22 Refine Budget Information – Packet to Council by 9/7
September
9/1 - 9/30 CIP forms distributed
Utility rate study starts
9/11 Council Work Session - Preliminary Budget & Tax Levy
9/25 Adopt preliminary tax levy and GF budget at council meeting
9/26 Deadline to Submit Preliminary Levy to Hennepin County
9/30 Preliminary budget/TNT date on website
9/30 Utility rate study Complete
9/30 CIP updates due
City of Orono
2024 Budget Timeline (Draft)
Task
Page 2 of 6
City of Orono
2024 Budget Timeline (Draft)
October
10/2 Fee Schedule Updates Start
Wk of 10/16 Budget Committee - CIP & Utility Rates
10/23 Council Work Session - CIP
November
11/1 - 11/21 Staff Updates Fee Schedule
Staff Finalizes Budgets and Levy Documents
Wk of 11/13 Budget Committee - Fee Schedule & any Other Outstanding Items
11/27 Fee Schedule and Other Open Budget Items Discussed at Work Session
11/27 TNT Hearing - Public Input Allowed
December
12/11 Adopt Final Levy, Budgets, Fee Schedule and CIP
12/15 Deadline to Certify Levy to Hennepin County
12/29 Final Budget information on website
12/29 Deadline to Submit Budget to the State
Page 3 of 6
City of Orono
2024 Annual Budget
Local Levy
2023 Over / Under 2022
2023 2024 Amount Percent
TAX LEVIES
General Fund $5,641,000 $6,545,100 $904,100 16.03%
Facilities Fund 375,000 375,000 0 0.00%
Fire Capital Fund 0 275,000 275,000 N/A
Pavement Management 1,000,000 1,000,000 0 0.00%
Parks 150,000 200,000 50,000 33.33%
Community Investment 219,000 200,000 -19,000 -8.68%
GO Improvement 2014 242,000 60,000 -182,000 -75.21%
GO Improvement 2021 760,000 760,000 0 0.00%
Total Local Tax Levy $8,387,000 $9,415,100 $1,028,100 12.26%
Page 4 of 6
City of Orono
Tax Rate
2024 Over / Under 2023
Actual Estimated
TAX CAPACITY 2023 2024 Amount Percent
Net Tax Capacity (Adj Net Tax Capacity) $50,742,986 $57,000,000 $6,257,014 12.33%
LOCAL LEVY
Total levy all funds $8,387,000 $9,415,100 $1,028,100 12.26%
TAX CAPACITY RATES
General Fund 11.12%11.48%0.37
Facilities Fund 0.74%0.66%-0.08
Fire Capital Fund 0.00%0.48%0.48
Pavement Management 1.97%1.75%-0.22
Parks 0.30%0.35%0.06
Community Investment 0.43%0.35%-0.08
GO Improvement 2014 0.48%0.11%-0.37
GO Improvement 2021 1.50%1.33%-0.16
Orono Fire Department 0.00%0.00%0.00
Total Local Tax Capacity Rate 16.53%16.52%-0.01
Page 5 of 6
City of Orono
2024 Annual Budget
Local Levy by Use
2023 Over / Under 2022
2023 2024 Amount Percent
TAX LEVIES
General Fund
Police $2,348,420 $2,516,192 $167,772 7.14%
Public Works (Streets)$624,058 $644,353 $20,295 3.25%
Community Dev $192,863 $199,437 $6,574 3.41%
Administration $896,319 $937,100 $40,781 4.55%
Parks $479,540 $503,998 $24,458 5.10%
Transfers $400,000 $200,000 * -$200,000 -50.00%
Fire - LL $544,000 544,000 $0 0.00%
Fire - Orono $174,800 1,000,020 $825,220 472.09%
$5,660,000 $6,545,100 $885,100
General Fund - Total $5,660,000 $6,545,100 $885,100 15.64%
Facilities Fund 375,000 375,000 0 0.00%
Fire Capital Fund 0 275,000 275,000 N/A
Pavement Management 1,000,000 1,000,000 0 0.00%
Parks 150,000 200,000 **50,000 33.33%
Community Investment 219,000 200,000 -19,000 -8.68%
GO Improvement 2014 242,000 60,000 *** -182,000 -75.21%
GO Improvement 2021 760,000 760,000 0 0.00%
Total Local Tax Levy $8,406,000 $9,415,100 $1,009,100 12.00%
* Levy moved to the Fire Capital Fund
** Staff recomends keeping at $150,000 and adding $50,000 to the Fire Capital Fund
*** One-time reduction to help offset increased fire expenditures
Page 6 of 6