HomeMy WebLinkAbout07-24-2023 Council Work Session PacketCouncil Work Session
Monday, July 24, 2023
5:00 P.M.
Orono Council Chambers,
2780 Kelley Parkway, Orono, MN 55356
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WORK SESSION
AGENDA
1. General Fund Budget Update
2023 Budget – Page 1
MEMORANDUM
To: Mayor Walsh and Orono City Council
From: Ron Olson, Finance Director
Subject: 2023 Budget
Date: July 24, 2023
Attachments: 2024 General Fund Budget and Tax Levy
Work is continuing on the 2024 budget and tax levy. Individual departments requests have been
entered into our accounting software, and department heads have discussed their requests with
the City Administrator and Finance Director. Tax levy required to fund the General Fund,
Capital Funds, and Debt Service Funds has been calculated and is sufficient to fund all of the
needs without an increase in the Tax Capacity Rate. Summary budget information and levy
requirements are included with this memo. Staff continues to meet with the Budget Committee
and this information is being provided as an update of the budget process to the rest of the
council.
There are a couple of variables that could still impact the budget and the tax base.
• Health Insurance – The budget has been created with an assumption that the city
contribution for employee health insurance will increase by $100 per month. We will not
the actual amount of any rate increase until the end of September.
• Property Values – The final property values will not be received from the Hennepin
County Assessor until December. The tax rate calculations are based on the most recent
numbers available and generally do not change significantly in either direction between
now and the final.
There were additional changes made to the General Fund structure that you should be aware of
when reviewing the budgeted numbers.
• Golf Course – The accounting for the Golf Course was removed from the General Fund
and moved back to an Enterprise Fund. This change was approved by the Council last
year and is the preferred method of accounting for a golf course.
• Communications Department – This is a newly created department within the General
Fund. This will allow for better tracking of expenditures related to newsletters, social
media, and other communication related costs.
2023 Budget – Page 2
• Minutes and Agenda Management Costs – These costs are being budgeted in the
departments that have public meetings (Council, Planning, Parks) This is part of a plan
to remove department specific costs from the Central Services department to the
responsible departments
As discussed at a work session in June, some one-time money is being utilized to allow needed
levy increases to be phased while the overall tax rate is held steady. A copy of the June 26th
work session memo is attached highlighting the levy amounts were set .
Attachments
1) 2024 Draft Tax Levy
2) 2024 Draft Tax Rate Calculation
3) 2024 Draft GF Revenue Summary
4) 2024 Draft Summary Department Exp
5) 2024 Draft Expenditures by Category
6) June 26th Work Session Memo
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%Working CopyAttachment #1
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
Working CopyAttachment #2
Revenue Source
2022
Actual
Y-T-D
Jun 30,2023
2023
Budget
2024
Budget
Increase
(Decrease)
Percentage
Increase
(Decrease)
Property Taxes 4,971,707 2,840,769 5,664,500 6,568,600 904,100 16.0%
Total Licenses 15,020 3,339 18,700 18,700 0 0.0%
Total Permits 746,882 316,947 566,500 566,500 0 0.0%
Total Intergovernmental 493,370 135,675 403,000 290,000 -113,000 -28.0%
Total Gen Govt Service Charges 976,893 298,416 798,100 859,900 61,800 7.7%
Total Public Safety Service Charges 2,687,737 2,365,469 2,875,980 2,850,670 -25,310 -0.9%
Total Fines and Forfeits 66,570 30,273 80,000 85,000 5,000 6.3%
Total Investment Revenue 100,692 152 160,900 160,900 0 0.0%
Total Golf Course Receipts 382,324 194,857 377,000 0 -377,000 -100.0%
Total Miscellaneous Revenue 29,677 11,445 48,590 46,590 -2,000 -4.1%
Total Revenue 10,470,872 6,197,343 10,993,270 11,446,860 453,590 4.1%
City of Orono
2024 Revenue Budget Summary
Working CopyAttachment #3
2022
Actual
Y-T-D
Jun 30,2023
2023
Budget
2024
Dept
Request
Dollar
Increase
(Decrease)
%
Increase
(Decrease)
Mayor & Council 47,735 25,488 42,750 60,400 17,650 41.29%
Administration 383,060 236,051 493,600 521,250 27,650 5.60%
Elections 62,277 15,847 38,800 80,400 41,600 107.22%
Communications - - - 49,300 49,300 N/A
Assessing 234,000 127,000 260,000 270,000 10,000 3.85%
Finance 303,516 189,721 334,000 335,300 1,300 0.39%
Law/Legal Services 132,017 100,890 125,000 128,000 3,000 2.40%
Central Services 300,064 102,255 317,200 354,400 37,200 11.73%
Human Services - 9,500 12,400 12,000 (400) -3.23%
Police 4,995,992 2,469,325 5,592,400 5,802,710 210,310 3.76%
Fire Protection Services - LL 471,462 317,992 544,000 665,641 121,641 22.36%
Fire Protection Services - OR 1,335 80,770 174,800 681,900 507,100 290.10%
Building & Zoning 748,156 385,263 820,970 885,200 64,230 7.82%
Engineering 33,633 39,434 20,000 25,000 5,000 25.00%
Street Maintenance 654,817 246,230 609,500 673,550 64,050 10.51%
Public Works - Spring Park 85,227 65,563 98,500 100,800 2,300 2.34%
Brush Site 40,190 10,678 43,300 45,675 2,375 5.48%
Parks 324,389 143,277 419,950 421,150 1,200 0.29%
Golf Course 363,089 158,633 364,800 - (364,800) -100.00%
Special Services 266,170 149,186 251,300 101,200 (150,100) -59.73%
General Fund - Special Projects-Conting 14,256 - 30,000 30,000 - 0.00%
Transfers to Other Funds 400,000 - 400,000 200,000 (200,000) -50.00%
Total General Fund Expenditures 9,861,385 4,873,101 10,993,270 11,443,876 450,606 4.10%
City of Orono
2024 General Fund Budget
Departmental Budgets
Working CopyAttachment #5
2022
Actual
2023
Budget
2024
Draft Budget
Dollar
Increase
(Decrease)
%
Increase
(Decrease)
Personal Services 6,277,385 7,182,400 7,646,000 463,600 6.45%
Supplies & Maintenance 648,241 726,270 791,700 65,430 9.01%
Insurances 178,660 188,600 182,900 (5,700) -3.02%
Professional Services 1,534,131 1,650,500 1,903,701 253,201 15.34%
Other Expenses 593,131 561,100 468,075 (93,025) -16.58%
Capital Outlay 191,140 241,000 221,500 (19,500) -8.09%
Transfers to Other Funds 404,250 400,000 200,000 (200,000) -50.00%
Contingencies 14,256 30,000 30,000 - 0%
Purchases for Resale 20,962 13,400 - (13,400) -100.00%
Total 9,862,156 10,993,270 11,443,876 450,606 4.10%
2024 General Fund Budget
Major Expenditure Categories
City of Orono
Working CopyAttachment #4
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 charges 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 attachedWorking CopyAttachment #6
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 that 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 need levy
amounts will be eliminated. The need for the levy portion paying for LL Fire will be eliminated
in the 2026 levy. The final payment of the 2014 GO Improvement Bonds is eliminated from the
levy in 2029. This will allow 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. Working CopyAttachment #7