HomeMy WebLinkAboutItem 08Memorandum
To: Mayor and City Council
From: Steve Mielke, City Administrator
Dennis Feller, Finance Director
Date: September 6, 2013
Subject: 2014 Budget and Tax Levy Recommendations
City of Lakeville
The 2014 budget and 2014 tax levy as proposed and discussed at the July 24 and August 28
City Council work sessions have been revised and adjusted. Attached to this memorandum is
the Proposed 2014 Budget Tax Levy Overview which provides a summary of the revised
recommendations.
In summary, we are recommending the City Council adopt a preliminary 2014 general fund
budget of $22.556 million and a preliminary 2014 tax levy of $24.072 million at its September
16 meeting. If adopted, the tax levy represents the maximum levy the Council can adopt in
December. We recommend the City Council continue to review and consider additional
adjustments to the budget and tax levy in the coming months.
The preliminary 2014 levy is an increase of 4.3% over the 2013 levy but due to growth of the
tax base has the net effect of a 2.1% increase across the tax base. For the median valued
home ($225,000) that experienced a 3.7% valuation increase in estimated market value this
proposed tax levy will result in an increase of $35 (less than $3 per month) in the City portion
of the tax bill in 2014. The City tax rate will remain virtually unchanged.
Note: The actual impact on individual properties will vary based upon a number of factors
including but not limited to the estimated market value, property type, market value exclusion
credit and the change in valuation from the prior year.
Of the 2.1% effective increase, 1.2% is due to increased debt expenditures necessary to pay
for the City's street reconstruction program. The remainder (0.9 %) will finance the payments
for existing debt on facilities and general operating expenses relating to inflationary impacts,
increased personnel costs and facilities improvements.
8
In order to achieve the revised recommendation, a number of adjustments to the July 24 draft
budget and tax levy are proposed. They are detailed as follows:
✓ Tax Levy.
Tax Levy
General Fund (150,793)
Pavement Management Fund (30,800)
Debt - Police Station (100,000)
Net change (281,593)
✓ General Fund - Operations.
The budget expenditures and tax levy to finance the expenditures are reduced as a
result of deferring the start date for newly authorized employee positions, deferred
maintenance, and eliminate expenditures for future long range planning such as the
County Road 50 traffic study.
General Fund
Revenues
Property taxes
✓ Pavement Management.
Purpose 2014
Purpose 2014
Expenditures
Parks Major maintenance (35,650)
Engineering - CSAH 50 study - phase 2 (45,000)
Police investigator (start 7 -1 -2014) (43,781)
Street Fleet Supervisor (start 8 -1 -2014) (15,077)
Police seasonal CSO (7,085)
Laminate countertops (1,600)
Controls for generator (2,600)
Net change - expenditures (150,793)
2
(150,793)
Street lighting replacement will be financed from the Street Light Fund. Street
Lighting fees will be increased by $1.34 /year per residential unit to finance the project.
✓ Equipment Fund
✓ Debt Service - Police Station
✓ Street Light Fund
Purpose 2014
Pavement Management Fund
Revenues
Property taxes (30,800)
Expenditures
Street light replacement (61,600)
The $100,000 transfer from the Liquor Fund will be re- appropriated to the Debt
Service Fund. Acquisition of the Police squad video system is deleted as a result of the
financing adjustment.
Purpose 2014
Equipment Fund
Revenues
Liquor Fund Transfer (100,000)
Expenditures
Police - squad video (175,000)
The $100,000 transfer from the Liquor Fund is being re- appropriated to the Debt
Service Fund for the Police Station debt.
Purpose 2014
Debt Service Fund
Revenues
Liquor Fund Transfer 100,000
Property Tax Levy (100,000)
3
Street lighting replacement will be financed from the Street Light Fund. Street
Lighting fees will be increased by $1.34 /year per residential unit to finance the project.
Purpose 2014
Street Light Fund
Revenues
Street light fees 30,800
Expenditures
Street light replacement 61,600
4
Proposed
2014 Budget
And
2014 Tax Levy
Overview
The General Fund of a government unit serves as the primary reporting vehicle for current
government operations. The General Fund, by definition, accounts for all current financial
resources not required by law or administrative action to be accounted for in another fund.
2012 General Fund Review
General Fund revenues in 2012 exceeded budget estimates primarily due to reduced tax
delinquencies, increased building permits and FEMA grant awards. Revenues related to
charges for services such as those for police security, and engineering also significantly
exceeded budget estimates.
Furthermore, expenditures were less than budget estimates primarily the result of
insignificant savings in most departments. The largest of these savings came in the areas of
reduced training and hiring costs, the vacant Parks Director position, and project materials
being less than anticipated. As a result, the beginning 2013 fund balance is $1,036,534 more
than anticipated.
2013 General Fund Budget Review
Operations for 2013 are projected to result in a $466,268 increase in fund balance for reasons
similar to 2012 - increased building permit revenues due to increased housing development,
police security charges, and engineering fees. Expenditures are exceeding budget primarily
as a result of severe winter weather conditions.
General Fund
Revenues and other financing sources
Expenditures
Net changes
General Fund
Budget
$ 20,626,178
21,246,903
$ (620,725)
The Fund Balance Policy states "The City will endeavor to maintain an unrestricted (committed,
assigned and unassigned) fund balance in the General Fund of an amount not less than 40% and
not greater than 50% of the next year's budgeted expenditures of the General Fund" During the
past 5 years, the objective was to budget for a 45% fund balance to mitigate the risks and
uncertainties of the recession.
With the improvements in economic conditions, the proposed budget is therefore based on a
fund balance to the 40% level. As such, $943,805 of the 2013 balance is available for other
purposes.
6
2013
Estimate Variance
$ 21,381,130 $ 754,952
21,535,587 288,684
$ (154,457) $ 466,268
The proposed budget for the coming year is premised on a recommendation that the
favorable results of the 2012 and 2013 operations ($1,036,534 and $466,268 respectfully) as
well as the unassigned 2013 estimated ending fund balance in excess of 40% ($943,805) be
appropriated as follows:
(a) $1,811,607 to the Equipment Fund for equipment acquisitions resulting in a
reduction in the 2014 - 2018 tax levies.
(b) $590,000 to the Building Fund to finance the five year major maintenance projects.
(c) $45,000 "Committed" General Fund balance for offset, at least in part, the City share
of cost in the first year of Emerald Ash Borer invasion.
Sources
2012 unencumbered balances
2013 unencumbered balances
Fund balance reduced from 45% to 40%
Total sources
7
1,036,534
466,268
943,805
$ 2,446,607
Uses
Equipment Fund 1,811,607
Building Fund 590,000
General Fund (Committed) - EAB 45,000
Total uses $ 2,446,607
2014 Proposed Budget
A summary of the General Fund 2014 proposed budget is as follows:
Revenues
General property taxes
Licenses and permits
Intergovernmental
Charges for services
Court fines
Investment income
Miscellaneous
Other financing sources
Total revenues
Expenditures
General government
Public safety
Public works
Parks and recreation
Other
Total expenditures
Transfers to other funds
Net changes in fund balance
Fund balance, January 1
Fund balance, December 31
Fund Balance as a % of
expenditures
General Fund
8
$ 17,208,475
1,947,676
604,021
2,173,377
274,590
44,413
61,461
704,814
$
2014
Proposed
Budget
23,018,827
4,601,744
10,365,120
3,644,260
3,403,275
541,754
22,556,153
462,674
8,634,300
9,096,974
40%
Increase/
(decrease)
$ 1,285,833
142,341
(40,384)
223,554
(3,635)
14,923
1,622,632
252,930
93,114
78,876
93,892
501,754
1,020,566
(2,446,607)
3,048,673
(2,600,999)
$ 447,674
The proposed General Fund budget is premised on a return to residential and business
growth for the coming year. Building permits are anticipated to be issued for approximately
345 single family dwellings for 2014.
General Fund expenditures are anticipated to increase by $1,020,566. The significant factors
affecting the budget include:
➢ General government. Elections, insurance rates, development planning and
personnel costs are the primary factors affecting the increase in 2014 proposed
budget. Insurance costs are based on an experience modifier rate which is expected
to increase from its current extremely low rate. Personnel costs will increase due to
the new Administrative Services Manager's transition costs as well as the proposed
addition of a part -time Code Enforcement Officer and cost of living increase.
➢ Public safety. Personnel costs are the primary factors for increases in the 2014
proposed budget. As the city grows so does the need for public safety services. The
police department is proposing the addition of a sworn officer and one seasonal staff
member to monitor the parks and boat launch. Changes to the collective bargaining
agreements and mandated changes to PERA rates for police and fire also factor into
the proposed increases. The fire department is proposing rate changes for Pay for Call
and Pay for Training.
> Public works. Growth in the city creates a need for understanding traffic flow. Thus,
an increase in professional services for traffic studies is proposed in the budget.
Personnel costs are another primary factor increasing the proposed public works
budget. Increase in personnel costs are due to transition costs for the Assistant City
Engineer and Design Engineer. Also proposed in 2014 are the additions of an
Engineering Tech and Fleet Supervisor.
Parks and recreation. The budget for parks and recreation is anticipated to increase
in 2014 primarily due to changes in staffing and entrepreneurial efforts. The 2014
budget also provides funding for park major maintenance projects. The proposed
acquisition of additional amenities for the Heritage Center in 2014 is anticipated to
enhance the number of rentals.
9
As a service based organization, the majority of the City's budget, especially in the General
Fund, is related to personnel costs and related services.
Classification
Personnel
Commodities
Other charges and services
Capital outlay
Other
Total expenditures
2014
Proposed
Budget
$ 16,212,109
1,635,452
4,470,766
132,826
105,000
$ 22,556,153
Increase/
(decrease)
$ 834,686
(224,550)
238,532
106,898
65,000
$ 1,020,566
Since mid - 2008, the City has adjusted its budget as a result of economic conditions. Services
and costs are primarily derived from personnel services; therefore, there has been a
corresponding reduction in the City staffing levels in the last several years. As the City
returns to growth so does the need for additional services.
The following table illustrates the changes in General and Special Revenue Fund employees
since 2007.
General Fund
Number of Employees
(Full Time Equivalent)
2008 2009 2010 2011 2012 2013 2014
General government 43.2 383 36.2 36.2 35.8 36.2 37.4
Public safety 69.8 66.7 66.9 67.8 69.8 69.4 70.3
Public works 31.9 28.7 26.0 25.8 26.3 27.0 28.4
Parks and recreation 23.9 23.1 23.4 23.4 23.4 243 24.3
Total General Fund 168.8 156.8 152.5 153.2 155.3 156.9 160.4
Comparedto2007 (2.2) (14.2) (18.5) (17.8) (15.7) (14.1) (10.6)
The proposed budget reflects a continuance of service levels in spite of the 10% reduction in
personnel which occurred in 2009. As a result of the 2008 and 2009 budget adjustments, the
staff levels decreased to and remain at 2.7 employees per thousand populations.
10
3.2
3.1
en
W 3.0
0 - 29
a
2.6
2.5
EMPLOYEES PER THOUSAND RESIDENTS
2008 2009 2010 2011 2012 2013 2014
Special Revenue Funds
The City has two special revenue funds whereby the revenues are either legally restricted or
committed by the City Council for specific purposes. The cable TV franchise fees are
appropriated to finance the Communications Fund functions including cable TV channel 16
and channel 12 public access as well as the weekly Messages publications, the City web -site,
other forms of public communications, and long -term replacement of equipment. The
administrative fees received from the 2008 issuance of conduit debt are committed to the
Economic Development Fund for community economic development. Cable TV franchise
fees are the predominant source of revenue for the Special Revenue Funds.
SPECIAL REVENUE FUNDS REVENUES
r 98%
41
2%
M Franchise Fees
Conduit fees /other
11
SPECIAL REVENUE FUNDS EXPENDITURES
65%
15% r Personnel
13%
■ Other charges and
services
7% iv Administrative support
Capital Projects Funds
The 2014- 2018 Capital Improvement Plan identifies the projects anticipated to be completed
in the coming years. The capital projects outlined in the Capital Improvement Plan are
budgeted in a variety of City funds, depending on the revenue source.
Building Fund
Revenues
Other financing sources
Transfer from
Special Revenue - Communications
Utility Fund
Total revenues
Expenditures - Capital outlay
Arts Center
Central Maintenance Facility
City Hall
Fire Station #1
Fire Station #2
Fire Station #3
Fire Station #4
Heritage Center
Police Station
Total expenditures
Net change in fund balance
Fund balance, January 1
Fund balance, December 31
2014 2015 2016 2017 2018
$ 270 $ 10,130 $
690 26,040
960 36,170
35,900
55,000
150,712
17,400
17,600
2,500
11,000
70,613
17,100
377,825
(376,865)
1,400,812
$ 1,023,947
12
(530,566)
1,023,947
$ 493,381
19,000 15,800
16,700 17,000
303,836 -
140,800 20,000
5,200 -
81,200 60,050
$ 4,000 $ 2,570
10,290 6,600
14,290 9,170
36,000 1,300
29,600
120,000 77,000
120,850
7,200
4,000 7,400
566,736 112,850 317,650 85,700
(112,850) (303,360) (76,530)
493,381 380,531 77,171
$ 380,531 $ 77,171 $ 641
Equipment Fund
Revenues
General property taxes
ALF Ambulance distribution
Sale of assets
Transfer from:
Liquor Fund
Total Revenues
Expenditures
Election equipment
Fire
Parks
Police
Streets
Technology
Total expenditures
Net change in fund balance
Fund balance, January 1
Fund balance, December 31
Trail Improvement Fund
Revenues
General property taxes
Other
Expenditures
Capital outlay
Total revenues
Net change in fund balance
Fund balance, January 1
Fund balance, December 31
2014
2015
2016
2017 2018
$ - $ 375,000 $ 408,800 $ 445,600 $ 485,700
19,814 - -
240,500 163,000 234,800 188,000 132,700
1,100,000
1,360,314
26,667
832,805
485,212
638,523
861,827
303,730
3,148,764
(1,788,450)
3,963,446
$ 2,174,996
1,160,000
1,698,000
26,667
63,332
448,221
382,111
742,626
114,043
1,777,000
(79,000)
2,174,996
$ 2,095,996
1,160,000
1,803,600
26,667
35,000
473,325
590,898
1,283,675
93,764
2,503,329
(699,729)
2,095,996
$ 1,396,267
1,160,000 1,160,000
1,793,600 1,778,400
666,750 263,750
362,210 174,130
674,164 80,487
978,294 626,871
370,256 581,656
3,051,674 1,726,894
(1,258,074) 51,506
1,396,267 138,193
$ 138,193 $ 189,699
2014 2015 2016 2017 2018
$ 45,400 $ 98,100 $ 103,000 $ 108,200 $ 113,600
3,800 2,600 1,800 1,100 600
49,200 100,700 104,800 109,300 114,200
286,596 257,029 252,025 204,992 236,771
(237,396) (156,329) (147,225) (95,692) (122,571)
759,340 521,944 365,615 218,390 122,698
$ 521,944 $ 365,615 $ 218,390 $ 122,698 $ 127
13
Pavement Fund
Revenue s
General property taxes
MSA - Maintenance
Total Revenues
Expenditures
Capital improvements
Net Increase (Decrease)
Fund Balance, January 1
Fund Balance, December 31
Enterprise Funds are self -
in much the same way as
Liquor Fund
2014 2015 2016
$ 1,205,350 $ 1,211,531 $ 1,217,589 $ 1,223,677 $ 1,229,795
374,335 374,335 374,335 374,335 374,335
1,579,685 1,585,866 1,591,924 1,598,012 1,604,130
1,992,469 1,182,309 1,842,020
2017 2018
1,698,120 2,004,183
(412,784) 403,557 (250,096) (100,108) (400,053)
1,673,296 1,260,512 1,664,069 1,413,973 1,313,864
$ 1,260,512 $ 1,664,069 $ 1,413,973 $ 1,313,864 $ 913,811
Enterprise Funds
supporting from retail sales and user fees. Operations are managed
private enterprises.
The City of Lakeville is well positioned for the future with the most profitable municipal liquor
operation in the State of Minnesota. The strategic location of stores and excellent
management will enable the City to continue to capitalize on its customer base. Net income
from operations continues to be appropriated to projects and purposes which result in lower
property taxes for Lakeville businesses and residents. Liquor Fund sales are anticipated to
continue to increase at a modest pace in spite of intense competition.
14
A summary of Liquor operations is as follows:
Liquor Contributions
Liquor Fund
Increase/
2014 (decrease)
Revenues
Liquor sales $ 15,829,693 $ 707,904
Cost of goods sold 11,853,712 530,974
Gross profit 3,975,981 176,930
Expenditures
Operating expenses 2,284,870 63,054
Operating income 1,691,111 116,970
Non - operating revenue 31,173 (20,628)
Interest expense (153,055) 12,630
Bond principal (165,000) (5,000)
Capital outlay acquistions (32,400) 229,492
Net increase before transfers
and depreciation $ 1,371,829 $ 333,464
The Liquor Fund has made significant contributions to financing capital projects and
equipment acquisitions which would otherwise have been financed with taxes. The
proposed budget provides for the Liquor Fund's continued support ($18,834) of Independent
School District 194's "School - Community Prevention Specialist" position.
The Liquor Fund 2014 net income will be appropriated to the following purposes:
Equipment Fund (Police, fire, snowplows,
trucks, voting equipment) $ 1,100,000
Debt Service - Police Station 100,000
General operations 159,323
Community recycling 3,122
Total Contributions $ 1,362,445
15
2014
Utility Fund
Each of water, sanitary sewer, street lighting and environmental resources are budgeted and
accounted for as separate entities within the Utility Fund.
Utility Fund Operations
For year ending December 31, 2014
Sanitary Street Environmental
Water Sewer Lights Resources
Revenues $ 3,283,990 $ 4,458,373 $ 743,566 $ 731,602
Expenditures
MCES sewer charges - 3,297,982 -
Personnel 948,019 677,457 17,397 321,885
Commodities 349,067 84,481 31 26,374
Contractual and other sys 1,147,250 276,999 736,767 502,243
Major maintenance 1,716,157 375,000 -
Total expenditures 4,160,493 4,711,919 754,195 850,502
Operating income $ (876,503) $ (253,546) $ (10,629) $ (118,900)
16
Property Taxes
A summary of the proposed 2014 property tax levy is as follows:
Tax Levy - Summary
General Fund and Equipment
Pavement Management
Debt - Street Improvement
Debt - Public facilities
Debt - Parks and arena
Trail Improvement and Park
Capital Reserve Fund
Total
Estimated
Property tax
Increase /
(Decrease)
Decrease
0 - 0.9%
1.0 - 1.9%
2.0- 2.9%
3.0 - 3.9%
4.0- 4.9%
5.0 - 5.9%
Greater than 6.0
17
2014
Levy
17,216,972
1,205,350
3,029,063
1,910,019
665,500
Increase
(decrease)
747,218
(24,650)
238,043
23,400
(36,292)
45,200 45,200
$ 24,072,104 $ 992,919
The proposed property levy will result in a $35 increase in taxes on a median value home
($225,000) that experienced a 3.7% increase in value.
% of
Home
Owners
14.1%
4.1%
6.8%
6.1%
18.5%
21.1%
15.4%
14.0%
14.1%
18.2%
25.0%
31.1%
49.6%
70.7%
86.0%
100.0%
$500
$400
$300
$200
$100
$0
1�
O
1
Taxes Per Capita
•
$ ► .01 0, A
Per Capita 2010 2011 2012 2013 2014
Operations +equipment 318 316 294 284 291
Streets and Street
reconstruction 69 66 64 69 72
Other 43 44 45 45 44
Total S 430 S 425 S 403 S 398 S 408
The tax base will increase by 2.2% as result of new construction of single family residential
properties. The following is a summary of the preliminary payable 2014 assessor's market
values and tax capacity values by property class types.
18
Operations +
equipment
• Streets and Street
reconstruction
• Other
Real Estate & Personal Properties Values
Assessors Market Values
Totals
USG Class
Percentage Increase
USG Class
Pay
2014
Pay
19
Total
5.19%
Tax Capacity Values
Percentage Increase 4.69%
Increase /(decrease) due to:
Market
New
Conditions Construction
5,015,114,235 247,638,914 148,116,314 99,522,600
3.11% 2.09%
Increase /(decrease) due to:
Market New
2014 Total Conditions Constructi on
A - Residential 41,224,444 2,241,043 1,434,743 806,300
B - Commercial 10,117,508 139,101 (103,111) 242,212
C - Industrial 2,741,570 (54,704) (95,174) 40,470
Other 3,343,153 248,010 105,923 142,087
Totals 57,426,675 2,573,450 1,342,381 1,231,069
2.45% 2.24%
The proposed property tax levy will have a slight increase in property tax rate for the coming
year.
Net Tax Capacity
Tax Capacity Value
Tax Increment (estimated)
Fiscal disparaties Contribution
Net Tax Capacity
Tax Capacity Rate
Tax levy
Fiscal disparities
Net tax levy
Net Tax Capacity
Tax Capacity Rate
Market Value Tax Rate
Market Value
Tax levy for Park Bonds
Tax rate based on market value
20
2013
54,853,225
(863,946)
(5,494,207)
48,495,072
2013
22,661,463
(2,665,320)
19,996,143
48,495,072
0.41234
2013
4,955,322,025
417,722
0.0000843
2014
Estimate
57,426,675
(863,946)
(5,439,491)
51,123,238
2014
Estimate
23,721,929
(2,604,370)
21,117,559
51,123,238
0.41307
2014
Estimate
5,170,386,000
350,175
0.0000677