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HomeMy WebLinkAbout08-19-1999 Council Work Session MinutesSUMMARY OF 2000 BUDGET WORK SESSIONS T'he following is a summary of Year 2000 budget information reflecting the Council discussion and direction at the August 5 and August 18 budget work sessions: General Fund Expenditures The proposed General Fund expenditures are $4,053,480. This is an increase of$203,480 or 5.28% over the 1999 budget. The main items causing the expenditure increase are as follows: A. Annual compensation adjustments (pay and benefits) 76,470 B. Market-based pay adjustments to bring the City's pay levels 30,000 in line with those of comparable cities C. The costs of hiring a police chief by October l, 2000 to 20,000 provide a three-month overlap period prior to Chief Cheswick's retirement D. New expenditures related to the hiring af an additional 52,000 police officer E. Increased funding for fire equipment replacement 10,000 F.Increased operating costs related to upgrading to the LOGIS 14,500 police records system General Fund Revenues The General Fund revenues by major category are as follows: Revenue Category Revenue of Total General Amount Fund Revenues Tax levy 1,858,410.00 45.8% Licenses & permits 264,000.00 6.5% Intergovernmental revenue 563,780.00 13.9% Charges for services 1,108,390.00 27.4% Fines & forfeitures 84,000.00 2.1% Miscellaneous revenue 129,900.00 3.2% Fund balance* 45,000.00 1.1% Summary of 2000 Budget Work Sessions Page 2 The 2000 budget uses $45,000 of General Fund reserves that are specific to two expenditure items: A. $20,000 of reserves will be used to fund the one-time costs of hiring a new police chief to be on board three months prior to Chief Cheswick's retirement. B. $25,000 of reserves is unused COPS grant funds that will be used to offset a portion of the first year costs of hiring an additional police officer. Tax Levy, Tax Capacity Rate, and Impact on Property Owners The total tax levy required to fund the proposed 2000 budget is $2,363,560. This is an increase of 71,680 or 3.13% over the 1999 levy. The proposed levy amount is at the City's levy limit. The estimated tax capacity for taxes payable in the year 2000 is $15,750,937. This is an increase of 1,035,895(?) or 7.04% over the 1999 tax capacity. Based on the City's tax capacity and the proposed ta}c levy, the tax capacity rate would be 14.637%. This is a 3.55% reduction from the 1999 tax capacity rate. Based on the reduction in the City's tax capacity rate, and assuming no change in property value, the City's share of the property tax bill on a home valued at $100,000 would decrease by $9.19 or 5.1%. For a home valued at $400,000, the City's share of the property tax bill would decrease by $59.09 or 6.1%. Medium and Long-Term Needs Because of the levy limit and the need to address higher priority needs, the 2000 budget does not include increased funding for street overlays, stormwater projects, or parks development. The Council discussed possible funding options for these needs. The Council directed that the funding for street overlays be used for collector roads versus neighborhood streets, and that staff develop a policy regarding assessments for overlays on neighborhood streets. Council also directed staff to provide information regarding the City's overlay bids to the presidents of the homeowners' associations of subdivisions with private roads. It was discussed that an option for funding smaller stormwater improvement projects is a stormwater utility. With a stormwater utility, all properties pay a user fee, similar to a water or sewer fee, based on the amount of stormwater runoff produced by their property. The Council also agreed that the City needs to be proactive in bringing ponding projects to the Minnehaha Creek Watershed District for funding rather than waiting for the Watershed District to bring projects to the City. A specific suggested site for a future pond is upstream of Stubbs Bay. The Council discussed that the 1999 General Fund surplus should be used to fund a priority special project. The Council directed staff to contact Ehlers Associates, the City's bond consultant, to determine if Orono could sell bonds for the new Long Lake Fire Station. Summary of 2000 Budget Work Sessions Page 3 Enterprise Fund Budgets 1. Rate increases. The 2000 water and sewer fund budgets reflect rate increases of 2.7% and 3.2%, respectively. This provides sufficient revenue to fund operating expenses and depreciation. 2. Enterprise fund questions. The Council had a number of questions regarding the Enterprise funds. The questions, and staffs answers, are as follows: A. What caused the sewer fund operating expenditures to be reduced substantially from 1996 to 1998? Three factors caused the expenditure reduction. The first was a reduction in MWCC sewer treatment charges due to lower flows related to reduced infiltration and inflow of surface water into the system. The second related factor was that the lower sewer flows resulted in a credit from the MWCC due to the MWCC's over estimate of the City's sewer flows. The third factor was a reduction in depreciation expense based on increasing the expected life of the City's sewer lines from 50 years to 75 years. The magnitude of each of these factors is as follows: 1) Reduced NIWCC charges 34,938 2) MWCC credit for prior year 52,283 final cost allocation 3) Reduced depreciation expense 51,348 B. What is the total loan amount to the tivater fund to fund the irpgrade of the Navarre water treatment plant, and what is the term of the loan? The total loan amount is $475,000. The term of the loan is 15 years at an interest rate of 5.5%. The annual debt service amount on the water plant loan is $51,650. C. What is the outstanding special crssessment amount related to the water plant project? The outstanding special assessment amount is $215,600. The special assessments will be paid over a 5-year period at an interest rate of 6.5%. The City received prepayments of$73,150 during 1998. The Council indicated the City should be showing liabilities in the water and sewer funds to reflect the tax levy being used to fund the debt service on the 1989 sewer and water bond. Summary of 2000 Budget Work Sessions Page 4 Preliminary Adoption of Proposed Budget and Tax Levy The proposed budget and tax levy will be brought to the Council for preliminary adoption at the September 13 Council meeting. The tax levy must be certified to the County by September 15. The final budget and t levy will be adopted after the Truth in Taxation hearing in early December. New Requirement: Public Hearing Regarding Tax Rate A new law passed in the 1999 State legislative session requires that all cities over 500 population and all counties must hold a public hearing and pass a resolution if the levy for the upcoming year increases such that, in the absence of an increase in tax capacity, the tax capacity rate would need to be increased. Very simply, what this means is that if a city is increasing its tax levy, it needs to hold this public hearing. The requirement is based on a Missouri law and was passed due to a concern that cities and counties were claiming they were freezing taxes; when in fact the levy was increasing but the tax rate was frozen due to tax base growth. Under the law, the local government calculates what its tax rate would be in the coming year if the levy was held constant. Essentially, a baseline tax rate is calculated based on the prior year's levy and the current year tax base. If the levy will result in an increase in the t rate over the baseline t rate, the City Council must adopt a resolution at a public hearing. This resolution must be filed with the County Auditor by October 20 of each year. The information necessary to calculate the baseline tax rate will not be provided by the County Auditor until October 1. Based on this timeline, staff would suggest holding the public hearing and adopting a resolution at the October 11 Council meeting.