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HomeMy WebLinkAbout09-13-04 CITY OF LAKEVILLE SPECIAL COUNCIL MEETING SEPTEMBER 13, 2004 Mayor Johnson called the meeting to order at 7:00 p.m. The pledge of allegiance to the flag was given. Roll call was taken. Present: Council Members Bellows, Wulff, Rieb, Luick and Mayor Johnson. Also present: Steve Mielke, City Administrator; B. Kempa, Accountant, B. Anderson, Assistant to City Administrator; D. Olson, Community & Economic Development Director; C. Friedges, City Clerk. City Administrator Steve Mielke asked the City Council to consider the proposed 2005 budget and tax levy. He explained that if the Council adopts the tax levy as proposed, taxpayers will receive parcel-specific notices in November informing them of the estimated taxes by taxing jurisdiction. The Council has the ability to adopt a final tax levy in December that is equal to or less than the preliminary tax levy. • Finance Director Dennis Feller outlined, in apre-recorded presentation, the proposed preliminary 2005 budget and tax levy. (See attached) 04.118 Motion was made by Wulff, seconded by Rieb to approve the following: ? Resolution No. 04-173 adopting the preliminary 2005. General Fund Budget ? Resolution No. 04-174 adopting the preliminary 2005 Cable TV Fund Budget ? Resolution No. 04-175 adopting the preliminary 2005 Environmental Recycling Fund Budget ? Resolution No. 04-176 adopting the preliminary 2005 Employee Benefit Fund Budget ? Resolution No. 04-177 adopting the .preliminary 2005 Surface Water Management Utility Fund Budget ? Resolution No. 04-178 adopting the preliminary 2005 Oak Wilt Suppression Grant Fund Budget ? Resolution No. 04-179 adopting the preliminary 2005 Economic Development Revolving Loan Fund Budget ? Resolution No. 04-180 adopting the preliminary 2005 Municipal Reserves Fund Budget ? Resolution No. 04-181 adopting the preliminary 2005 Building Fund Budget ? Resolution No. 04-182 adopting the preliminary 2005 Liquor Fund Budget ? Resolution No. 04-183 adopting the preliminary 2005 Water Operating Fund Budget i CITY OF LAKEVILLE SPECIAL COUNCIL MEETING SEPTEMBER 13, 2004 ? Resolution No. 04-184 adopting .the preliminary 2005 Sanitary Sewer Operating Fund Budget ? Resolution No. 04-185 adopting the preliminary 2005 payable tax levy Roll call was taken on the motion. Ayes, Bellows, Johnson, Wulff, Rieb, Luick. 04.119 Motion was made by Luick, seconded by Rieb to approve Resolution No. 04- 186 setting the budget hearing date. Roll call was taken on the motion. Ayes, Johnson, Wulff, Rieb, Luick, Bellows. Mayor Johnson adjourned the meeting at 7:24 p.m. Respectfully submitted, Charlene Fried s, City erk • Robert D. Johnson, ayor PRELIMIANRY 2005 BUDGET PRESENTATION BY FINANCE DIRECTOR DENNIS FELLER SEPTEMBER 13, 2004 Before the City Council tonight is the preliminary 2005 budget and tax levy. The City' operating plan grants the City Council full authority over the financial affairs of the City. The City Administrator is charged with the responsibility of proposing the budget and for the enforcement of the provisions, which you adopt by resolution. 2005 provides an opportunity for the City to establish the financial course for its future. The City of Lakeville and other Minnesota Cities have weathered two years of fiscal challenges. The Governor and the 2003 Legislature, in their endeavor to address the State's $4 billion budget crisis, imposed severe fiscal constraints on cities. Lakeville lost all of its LGA ($499,158) and most of its Market Value Homestead Credit ($656,230) in both years. On July 22, of this year, Governor Pawlenty announced that he would certify the 2005 LGA based on the Legislative intent to redistribute the state aid utilizing a new formula. As such, the City of Lakeville will receive no LGA in 2005 or future years. The permanent loss of $499,000 of LGA will result in an increase in taxes for Lakeville residents. • According to the Minnesota Deparhnent of Finance, the State of Minnesota is projected to have an approximate $1 billion deficit in the coming biennium. There is therefore a possibility for further cutbacks of state aids-such as the Market Value Homestead Credit - in future years. Revenues are projected to be $17.3 million in the coming year. Property taxes and state aids for property tax relief continue to provide the greatest share of revenues (65%) to support General Fund operations. The property tax revenue estimates for 2005 includes. the state aid derived from the Market value homestead credit. Permits and user fees derived from development continue to provide significant revenue from our high growth community. General Fund functions include General Government service, public safety, public works and parks and recreation. The proposed budgeted expenditures for the coming year are $17.3 million which is a $674,000 decrease compared to the current year. Personnel costs account for approximately 70% of the proposed General Fund budget. With the exception of the Electrical Inspector (which was offset by new revenues) and certain police positions, there were no new employee positions in 2003 and 2004. During the past two years, approximately 1500 new homes have been construction and as 3000 residents have moved into our community. In order maintain service levels for our • residents and business, the several new positions are proposed in the 2005 budget including two police officers, a fire inspector, street maintenance position and a park maintenance position Lakeville budget and tax levy ranks far below that of other Cities primarily due to its prudent fiscal management and the fact that Lakeville will continue to have a 3.2 employees per thousand population. Some of the significant budget items are: • Pavement Management $414,426 • Voice over IP (telephone) $ 255,766 • Salt-only snowplow routes $ 182,437 • 15 Rookie firefighters $ 60,854 • Warming house attendants $ 41,918 • Community Survey $ 20,711 • Central Maintenance Facility -Sept 2005 • Street Lights -rate increase The proposed General Fund budget will result in revenues exceeding expenditures by $19,718 in 2005. As such the fund balance will be approximately $7,640,956, which is 44.2% of expenditures. The designated fund balance represents the amount required to operate during the first six months of the year. The City's most significant revenues sources-taxes and intergovernmental revenues-do not provide appreciable revenue until the second half of the year. The year-end fund balance is adequate and sufficient to support operations. It is also important that the City maintain adequate fund balances in order to insure adequate reserves for cash flows and minimize potential adverse impacts due to future budget cuts. Special Revenue Funds are used to account for the proceeds from specific revenue sources that are legally restricted to expenditures for specific purposes. Establishment of such funds also enables the City to more effectively manage its resources and minimize tax levies. Revenues from Cable TV franchise fees finance the Cable TV fund operations, which of course provides services for Channel 16 and the live cable casting of City Council and planning Commission meetings. The Public Communications budget was financed entirely by transfers from the Cable TV Fund in 2004. The proposed 2005 Cable TV budget provides for financing only 50% of the Public Communications budget in 2005 and future years. Establishment of a 50/50 financing policy would enable the Cable TV Fund to be self-supporting and have adequate financing for future equipment replacement. The Environmental Recycling Fund accounts for grants that the City receives from Dakota County for the citywide recycling efforts. • The Employee Benefit Fund accounts for severance pay for city employees. The Surface Water Management Fund was created several years ago to help manage the City's water sources Fees are collected with the quarterly utility bills. There are no proposed increases in the surface water management fee. The Oak Wilt Suppression Grant Fund was created to account for grants received from the Minnesota Department of Natural Resources. The grant proceeds .will reimburse Lakeville residents for 50% of their disbursements for oak wilt suppression. A $10,000 grant approved in 2001. has been extended to June 2003. The Economic Development Revolving Loan Fund was created to account for loans to businesses that are either expanding or building with the City of Lakeville. The Municipal Reserves (Internal Service) Fund accounts for the City's general liability, excess liability, property, and casualty insurance costs. The City's primary insurance carrier is the League of Minnesota Cities Insurance Trust (LMCIT). Revenues are derived primarily by transfers from benefited funds and .insurance rebates. Lakeville has an experience modification ratio of .77 for worker compensation insurance and .81 for liability property and casualty insurance. The very favorable .experience modification ratios are due to the safety consciences efforts of city employees. Capital Project Funds account for financial resources used in the acquisition of capital facilities and equipment, except those financed by Enterprise Funds. The Equipment Fund accounts for the purchase of public safety, street and park maintenance equipment. • In March 2003, the City issued General Obligation Equipment Certificates of Indebtedness to finance the. acquisition of the 2004 and 2005 equipment acquisitions. The long term objective is to reduce or eliminate the reliance on the Certificates of Indebtedness because of the interest cost. As such the proposed 2005 tax levy includes $350,000 to achieve that objective. The Building Fund accounts for construction or improvement activity related to public buildings. The 2005 Building Fund budget is financed primarily from 2004 General Fund transfers which is derived primarily from building permit revenues which exceeded budget estimates. Transfers from the Liquor Fund also provide a vital revenue source that enables the City to build and maintain its facilities. According to the Minnesota State Auditor, Lakeville has the largest municipal liquor store operation in Minnesota. Sales are projected to increase to $10.7 million in the coming year. As a result, net income before transfers is estimated to attain $855,000 in 2005. The Liquor Fund operation has been a very instrumental in providing the financing for many City improvement projects such as the Fire Station #4 project. The Legislature has for a number of years considered the "wine in grocery" legislation that would have authorized grocery stores to sell wine. Although the bill has not passed, the proposed legislation will likely be reconsidered in future legislative sessions. If this legislation were to pass, the Liquor Fund could experience a $200,000-$300,000 loss of net income. • The .water fund accounts for the .operation of the water system including supply, treatment, storage and distribution for its customers. Lakeville has the second lowest water rates in Dakota County. There are no proposed increases in rate for the coming year. The affordable water rates are due to the financial management foresight of the City Council whereby infrastructure improvements such as wells, towers and the water treatment plant are funded by connection charges rather than water use rates. The sanitary sewer fund accounts for the treatment and disposal of the system effluent. The largest single expenditure is for the Metropolitan Council Environmental Services Division sewage treatment costs in the amount of $2.3 million. MCES is increasing sanitary sewer processing costs by approximately 3.7% for the coming year. The sanitary sewer rate would increase by 7 cents per thousand gallons as a result of the MCES rate adjustment for the coming year. The net changes in the sanitary sewer and street light rates will affect the average utility customers quarterly utility bill by about $1.61 per quarter. The proposed 2005 tax levy is $15,249,473 for various purposes including operations, certificates of indebtedness, voter approved debt and debt issued for improvement projects. The tax capacity rate .30806 which only a 2.5% increase over 2004. This is primarily due to new construction of commercial and residential properties and an approximate 6% increase in appraised market value of homes. Tax levies for bond issues approved by referendum after August 1, 1994, are based on market value rather than tax capacity value. The only City of Lakeville levy based on market value is for repayment of the 1994 Park Bonds, The rate will decrease by 15% due to growth and appreciation of property values. The 2005 taxes for a median value home will increase $ 72 shown. Of the increase $4 is due to the decrease in the Market Value Homestead Credit, $27 is due to the Loss of LGA and 41 is due to the Central Maintenance Facility debt service costs. If the City Council adopts the tax levy as proposed, taxpayers will receive parcel-specific notices in November informing them of the estimated taxes by taxing jurisdiction and of the December Truth in Taxation hearing. The Council has the ability to adopt a final tax levy in December that is equal to or less than the preliminary tax levy approved in September. It may not, however, adopt a final tax levy that is greater than the preliminary tax levy. City councils are also required to certify to the County Treasurer/Auditor the date for. the budget public hearing. City staff is recommending Monday, December 13, 2004 for a public hearing to present the budget. The Truth in Taxation law also requires that the budgets and tax levy must be adopted at a subsequent meeting after the hearing is closed. The City staff recommends that the City Council adopt the budgets and tax .levy at its regular meeting on Monday, December 20. • The City of Lakeville has. navigated a steady course during the past several years in the wake of Minnesota's budget and fiscal challenges.. Even though there may still be a stormy period in the biennium that lies ahead, our community is well positioned for the future. The 2005 budget provides for the continuation of effective service levels and support of our communities high quality of life. Lakeville is a place we are proud to call home.