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HomeMy WebLinkAboutItem 07.aE E=%k k 1 w v 1 September 16, 2013 Item No. 7 Resolution Approving the Preliminary 2014 (Property) Tax Levy and Preliminary 2014 Budget Proposed Action Staff recommends adoption of the following motion: Move to approve a resolution approving the Preliminary 2014 Tax Levy and Preliminary 2014 Budget_ Approval of the motion will establish the Preliminary 2014 Tax Levy and Budget Overview Passage of this motion will result in the approval of the 2014 preliminary tax levy of $23,984,269 and preliminary 2014 budget as discussed at the September 9 Council work session. The proposed 2014 City tax levy will result in an estimated $31 increase on the median value home ($225,000). Primary Issues to Consider • The City Council has the ability to adopt a final tax levy in December that is equal to or less than the preliminary tax levy approved on September 16, 2013. The City Council may not, however, adopt a final tax levy that is greater than the preliminary tax levy. Supporting Information • Preliminary 2014 Budget document. 1117: r5fa, 0 _� Financial Impact: $23,984,269 Budgeted Yes Source: Various Related Documents: Preliminary 2014 Budget. Notes: CITY OF LAKEVILLE RESOLUTION No. RESOLUTION APPROVING THE PRELIMINARY 2014 (PROPERTY) TAX LEVY AND PRELIMINARY 2014 BUDGET BE IT RESOLVED by the City Council of the City of Lakeville, Minnesota that the Preliminary 2014 tax levy in the amount of $23,984,269 is hereby approved as shown on Exhibit A attached hereto and Exhibit B - Tax Levy for Debt - attached hereto. BE IT FURTHER RESOLVED by the City Council of the City of Lakeville, Minnesota that the Preliminary 2014 Budget is hereby approved and adopted as shown on Exhibit C thru I attached hereto. APPROVED AND ADOPTED this 16th day of September 2013 by the City Council of the City of Lakeville, Minnesota. CITY OF LAKEVILLE, MINNESOTA By: Matt Little, Mayor ATTEST: Charlene Friedges, City Clerk EXHIBIT A PRELIMINARY 2014 (PROPERTY) TAX LEVY General Fund Public Works Reserve - Pavement Mgmt. Trails Fund Debt Service Park Refunding Bonds 2011B Capital Improvement Bonds 2004A Ice Arena Lease Revenue Bonds 2006 Capital Improvement Bonds 2007D G. O. Improvement Bonds 2009 G. O. Improvement Bonds 2011 G. O. Improvement Bonds 2012 G. O. Improvement Bonds 2013 Street Reconstruction Bonds 2003A Street Reconstruction Bonds 2005A Street Reconstruction Bonds 2007H Street Reconstruction Bonds 2009A Total Total $ 17,129,137 1,205,350 45,200 350,175 932,906 315,325 977,113 278,415 157,855 534,776 322,269 950,578 182,809 231,467 370,894 $ 23,984,269 EXHIBIT B PROPERTY TAX LEVY FOR DEBT The following is a schedule of all debt which, at the time of issuance, included certification of future property tax levy. The following schedule - column B - provides list of debt listing actual tax levies for taxes payable 2014. The difference betwe( certification and actual is due to changes in funding sources such as interest c investments, liquor fund contributions, special assessments, General Fund (operatic levies) and other contributing factors. Bond D+escriptlon Debt Schedule Certified Levy (A) (B) Capital Improvement Bonds 2004A Ice Arena Lease Revenue Bonds 2006 Capital Improvement Bonds 2007D Improvement Bonds 2007B Improvement Bonds 2008A Improvement Refunding Bonds 2009B Improvement Bonds 2011A Improvement Bonds 2012A Improvement Bonds 2013A Street Reconstruction Bonds 2003A Street Reconstruction Bonds 2005A Street Reconstruction Bonds 2007H Street Reconstruction Bonds 2009A Refunding Bonds 2011B Refunding Bonds 2012B Debt Service Total ** $ 320,000 $ 932,906 - 315,325 1,143,306 977,113 93,210 - 150,068 - 455,451 278,415 157,855 157,855 534,776 534,776 - 322,269 1,122,776 950,578 240,242 182,809 231,467 231,467 432,156 370,894 521,228 350,175 1,412,565 - $ 6,815,100 $ 5,604,582 EXHIBIT C CITY OF LAKEVILLE, MINNESOTA General Fund Schedule of Revenues, Expenditures and Changes in Fund Balances For the Years Ending December 31, 2014 Revenues General property taxes Licenses and permits Intergovernmental Charges for services Court fines Investment income Miscellaneous Transfer from other funds Total revenues and transfers Expenditures Mayor and Council Committees and Commissions City administration City Clerk Legal counsel Planning Community and econ. development Inspections General government facilities Finance Information systems Human resources Insurance Police Fire Engineering Streets Parks Recreation Heritage Center Arts Center Other Total expenditures Net change in fund balance Fund balance, January 1 Fund balance, December 31 Total $ 17,120,640 1,947,676 604,021 2,173,377 274,590 44,413 61,461 704,814 22,930,992 97,021 62,794 403,228 184,724 82,351 427,787 295,953 851,202 417,452 626,703 490,633 351,013 310,883 8,930,800 1,427,235 904,728 2,739,532 2,206,475 585,451 125,531 405,068 541,754 22,468,318 462,674 8,634,300 $ 9,096,974 EXHIBIT D CITY OF LAKEVILLE, MINNESOTA Budgetary Summary for All Special Revenue Funds Combined Schedule of Revenues, Expenditures, and Changes in Fund Balances For the Years Ending December 31, 2014 Revenues Licenses Intergovernmental Charges for services Investment income Total revenues Expenditures General government Capital outlay Total expenditures Total $ 610,915 516 2,500 9,313 623,244 474,046 70,564 544,610 Excess (deficiency) of revenues over expenditures Other financing sources (uses) Transfer to other funds Net change in fund balance Fund balance, January 1 Fund balance, December 31 78,634 (67,924 10,710 860,835 $ 871,545 EXHIBIT E CITY OF LAKEVILLE, MINNESOTA Budgetary Summary for All Debt Service Funds Combined Schedule of Revenues, Expenditures, and Changes in Fund Balances For the Years Ending December 31, 2014 Net change in fund balance Total Revenues 32,420,234 General property taxes $ 5,604,582 Tax increment 691,447 Intergovernmental 904,639 Charges for services 403,951 Special assessments 765,271 Investment income 39,818 Donations 95,000 Miscellaneous 480 Total revenues 8,505,188 Expenditures - debt service Principal maturities 5,295,000 Interest on debt 3,700,592 Fiscal charges 23,939 Total expenditures 9,019,531 Excess (deficiency) of revenues over expenditures (514,343 Other financing sources (uses) Transfer from other funds 1,281,800 Transfer to other funds (63,600) Refunding bonds issued - Payment on refunded bonds called (10,735,000) Premium on bonds issued - Discount on bonds issued Total other financing sources (uses) (9,516,800 Net change in fund balance (10,031,143) Fund balance, January 1 32,420,234 Fund balance, December 31 $ 22,389,091 EXHIBIT F CITY OF LAKEVQ.LE, MU04ESOTA Budgetary Summary for Capital Projects Funds Combined Schedule of Revenues, Expenditures, and Changes in Fund Balances For the Year Ending December 31, 2014 1 (continued on following page) 2014 Proposed Budget Municipal Pavement Improvement Storm Sanitary State -aid Manaeement Construction Sewer Water Sewer Revenues General property taxes $ - $ 1,205,350 $ - $ - $ $ - Tax increment - - - - - Intergovernmental 3,057,000 374,335 - - - Charges for services - - - 1,069,877 1,452,750 294,500 Special assessments - - 880 5,000 20,930 Investment income - - - - - Miscellaneous - - - 279,340 - Total revenues 3,057,000 1,579,685 1,070,757 1,737,090 315,430 Expenditures - Capital out]ay General government - - - - - Public safety Police - - Fire - - - - - Public works 5,962,515 1,992,469 9,151,826 834,939 1,948,000 302,000 Parks and recreation - - - - - - Total expenditures 5,962,515 1,992,469 9,151,826 834,939 1,948,000 302,000 Excess (deficiency) of revenues over expenditures (2,905,515 (412,784 (9,151,826 235,818 (210,910 13,430 Other financing sources (uses) Transfer from other funds - 63,600 - - Transfer to other funds - - (81,000) (1,122,893) Issuance of debt - 9,151,826 - - - Total other financing sources (uses) - 9,151,826 (17,400 (1,122,893 - Net change in fund balance (2,905,515) (412,784) - 218,418 (1,333,803) 13,430 Fund balance, January 1 2,980,712 1,673,296 730,530 1,149,652 1,960,639 3,598,532 Fund balance, December 31 $ 75,197 $ 1,260,512 $ 730,530 $ 1,368,070 $ 626,836 $ 3,611,962 1 EXHIBIT F CITY OF LAKEVILLE, MINNESOTA Budgetary Summary for Capital Projects Funds Combined Schedule of Revenues, Expenditures, and Changes in Fund Balances For the Year Ending December 31, 2014 (continued from previous page) 2014 Proposed Budget Park Trail Tax Dedication Improvement Increment Building Equipment Total Revenues General property taxes Tax increment Intergovernmental Charges for services Special assessments Investment income Miscellaneous Total revenues Expenditures - Capital outlay General government Public safety Police Fire Public works Parks and recreation Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses) Transfer from other funds Transfer to other funds Issuance of debt Total other financing sources (uses Net change in fund balance Fund balance, January 1 Fund balance, December 31 A W ICI W W A M W M h+�l O $ 45,200 $ - $ - $ $ 1,250,550 - 189,667 - 189,667 - - 19,814 3,451,149 - - 2,817,127 - - - - 26,810 4,000 342 - - 4,342 - - - 240,500 519,840 49,200 190,009 - 260,314 8,259,485 1,113 150,712 330,397 482,222 - 17,100 638,523 655,623 - - 48,500 832,805 881,305 - - 55,000 861,827 21,108,576 286,596 - 106,513 485,212 878,321 286,596 1,113 377,825 3,148,764 24,006,047 (237,396 188,896 (377,825 (2,888,450 (15,746,562 960 1,100,000 1,164,560 - - (1,203,893) - - 9,151,826 960 1,100,000 9,112,493 (237,396) 188,896 (376,865) (1,788,450) (6,634,069) 2,108,392 759,340 74,594 1,400,812 3,963,446 20,399,945 $ 2,108,392 $ 521,944 $ 263,490 $ 1,023,947 $ 2,174,996 $ 13,765,876 2 EXHIBIT G CITY OF LAKEVILLE, MINNESOTA Enterprise - Liquor Fund Schedule of Revenues, Expenses and Changes in Net Position For the Years Ending December 31, 2014 Total Sales and cost of sales Sales $ 15,829,693 Cost of sales 11,853,712 Gross profit 3,975,981 Owratine expenses Personnel services 1,344,654 Commodities 65,786 Other charges and services 874,430 Total operating expenses 2,284,870 Operating income 1,691,111 Non- operatine revenue (expense Intergovernmental 3,900 Investment income 23,673 Miscellaneous 3,600 Disposal of assets - Total non - operating (net) 31,173 Income before transfers, bond expense, and depreciation 1,722,284 Transfers to other funds Bond expense Depreciation Total transfers, bond expense and depreciation Change in net position Net position, January 1 Net position, December 31 (1,360,523) (153,055) (118,997 (1,632,575 89,709 5,549,981 $ 5,639,690 Capital outlay acquisitions $ 40,233 EXHIBIT H CITY OF LAKEVILLE, MINNESOTA Enterprise - Utility Fund Schedule of Revenues, Expenses and Changes in Net Position For the Years Ending December 31, 2014 Total Operating revenues User charges for services $ 8,935,004 Other 180,322 Total operating revenue 9,115,326 Operatine expenses Personnel services 1,964,758 Commodities 459,953 Other charges and services 2,663,259 Disposal charges 3,297,982 Major maintenance 2,091,157 Total operating expenses 10,477,109 Operating income (expense) (1,361,783 Non - operating revenue Net position, January 1 Intergovernmental 50,256 Investment income 41,749 Disposal of assets 9,000 Total non - operating revenue 101,005 Income (loss) before contributions, transfers, and depreciation (1,260,778 Contributed capital 1,073,224 Transfers from other funds 20,245 Transfers to other funds (449,017) Depreciation (3,408,984 Total contributions, transfers, and depreciation (net) (2,764,532 Change in net position (4,025,310) Net position, January 1 107,603,878 Net position, December 31 103,578,568 Capital outlay acquisitions $ 388,148 EXHIBIT I CITY OF LAKEVILLE, MINNESOTA Internal Service - Municipal Reserves Fund Schedule of Revenues, Expenses and Changes in Net Position For the Years Ending December 31, 2014 Total _Operating revenues Charges for services $ 403,133 Other 74,150 Total operating revenues 477,283 Operating expenses Other charges and services 428,727 Operating income 48,556 Non - operating revenue (expense) Intergovernmental - Investment income 3,150 Transfer to General Fund (48,555 Total non - operating (net) (45,405 Change in net assets 3,151 Net position, January 1 831,991 Net position, December 31 $ 835,142 2014 Prfliminar Y dg BU et For the Fiscal Year Beginning January 1, 2014 City of Lakeville, Minnesota CITY OF LAKEVILLE, MINNESOTA 2014 Preliminary Budget Table of Contents Introduction City Administrator's Budget Message Budget Overview General Fund Special Revenue Funds Debt Service Funds Capital Project Funds Enterprise Funds Liquor Fund Utility Fund Internal Service Fund Page 1 12 26 27 28 29 31 32 33 City of Lakeville Positioned to Thrive September 16, 2013 To the Honorable Mayor, Members of the City Council and the Citizens of Lakeville: It is our pleasure to present the Preliminary 2014 Budget. The City budget is a policy document which reflects the programs and services deemed important and necessary for the health, safety and welfare of the community by the City Council. The document provides a financial framework for all of the programs and services the City provides. The budget represents the financial plan of the City and serves as the financial policy document, operations guide and financial communications device. The document is an important tool for sound fiscal management. As the City emerges from the Great Recession and post- recession era, there are a number of pressures and issues confronting the City that emerged as themes which affect the community. The themes identified and addressed within the preliminary budget including legislative changes, resumption of growth, aging infrastructure, inflationary pressures, emerging trends, innovation and efficiencies, entrepreneurial efforts and preparing for the future. Economics Factors Legislative Resumption Addressing Changes of Growth Aging Infrastructure Initiatives Innovation and 11 Entrepreneurial Efficiencies Efforts Inflationary Emerging Pressures Trends Preparing for the Future 1 20195 Holyoke Avenue, Lakeville, MN 55044 952 - 985 -4400 • 952- 985 -4499 fax www.lakeviflemn.gov Themes The budget identifies and focuses on a number of initiatives for the near and intermediate term in response to the themes. Legislative Changes Recent Legislative changes regarding (limited) sales tax exemption, police pension financing and property tax levy limits as well as Federal Environmental Protection Agency storm water regulations and sequestering are having or will have financial implications for our City. Sales Tax Reduction. Cities will be exempt from paying sales tax for most goods and services starting in 2014; however this exemption does not apply to the purchase of motor vehicles or Liquor Store operations. As a result, the 2014 budget reflects a reduction in operating costs ($140,866), non -motor vehicle equipment ($63,086) and utility operations ($94,394) such as water, sanitary sewer and street lights due to the exemption. Minnesota Department of Revenue has not provided guidance as to whether the Arts Center or Heritage Center will be exempt. Levy Limits. The 2013 legislature enacted a one -year (2014) levy limit of 3 percent for non - debt purposes; property tax levies for debt are exempt from levy limits. Police PERA (pension) contributions. In an effort to stabilize the Police and Fire Public Employee Retirement (PERA) Plan, the legislature governor signed into law requiring an increase in contributions from both employees and employers over the next two years. The employer contribution rate of 14.4 percent of salary will increase to 15.3 percent of salary paid on or after January 1, 2014 and to 16.2 percent on January 1, 2015 (General Fund $41,722 - 2014, $40,670 - 2015). There were no changes made in contribution rates for the General Employees Plan or Defined Contribution Plan. Federal sequestering. The Federal government's across - the -board spending cuts also known as sequestration resulted in reduction of subsidy payments on the 2009 "Build America Bonds" issued by the City. The City property tax levy increase as a result of sequestering is $14,654 and $7,015 in 2014 and 2015 respectively. MS4 Permit Requirements. Polluted storm water runoff is most commonly transported through Municipal Separate Storm Sewer Systems (MS4s); storm water is often discharged untreated into local water bodies. To prevent harmful pollutants from being washed or dumped into an MS4, operators must obtain a NPDES permit and develop a storm water management program. The City has completed phase 2 of the NPDES permit application process. The cost implications of future requirements are unknown at this time. 2 Resumption of Growth New residential housing construction is at pre- recession levels due in large part to improving economic conditions. The resumption of growth will result in increased demands for infrastructure enhancements as well as service delivery such as inspections, code enforcement, police, fire, streets and parks. Economic improvements can be found in a number of key indicators including but not limited to the following: Indicator Unemployment Rate - Lakeville (1) Unemployment Rate - Minnesota((1) Gross Domestic Product (GDP) (2) Inflation (CPI) (2) Sources: (1) Minnesota Dept. of Economic Development (2) Wall StreetJoumal The improvements in economic conditions, as well as other factors, have resulted in increasing housing values and new residential construction. Indicator Median Home Value - Lakeville (3) Foreclosures- Sheriff sales (Dakota Cty) (4) Mortgage Rates - 30yearfixed (FMAC) (5) New Construction - Lakeville ($ millions) (6) Sources: (3) Dakota County Assessor- Assessed valuation (4) Dakota County Community DevelopmentAgency (5) Freddie Mac (6) Lakeville Inspections Department Trends Favorable ( +) 2012 2011 Unfavorable (-1 4.5% 4.9% + 5.4% 5.8% + 1.5% 1.6% + 1.7% 3.0% + The improvements in economic conditions, as well as other factors, have resulted in increasing housing values and new residential construction. Indicator Median Home Value - Lakeville (3) Foreclosures- Sheriff sales (Dakota Cty) (4) Mortgage Rates - 30yearfixed (FMAC) (5) New Construction - Lakeville ($ millions) (6) Sources: (3) Dakota County Assessor- Assessed valuation (4) Dakota County Community DevelopmentAgency (5) Freddie Mac (6) Lakeville Inspections Department As of June 30, most of the indicators continue to move in a positive direction. Although Interest rates on 30 year mortgages, for example, have increased since January 1, they still remain below 2010 -11 levels. Residential growth has been subdued in recent years due to the economic slowdown; however, single family building permit activity is back to the pre- recession levels of 2006. Based on overall economic activity, projections of leading economists, the actual Lakeville new residential construction permit activity of the last 12 months, inventory of existing 3 Trends Favorable ( +) 2012 2011 Unfavorable (-1 $ 225,000 $ 216,900 + 1,525 1,985 + 3.66% 4.45% + $ 129.3 $ 87.6 + As of June 30, most of the indicators continue to move in a positive direction. Although Interest rates on 30 year mortgages, for example, have increased since January 1, they still remain below 2010 -11 levels. Residential growth has been subdued in recent years due to the economic slowdown; however, single family building permit activity is back to the pre- recession levels of 2006. Based on overall economic activity, projections of leading economists, the actual Lakeville new residential construction permit activity of the last 12 months, inventory of existing 3 vacant lots and developer activity for anticipated new plats, the 2014 Budget and 2014 - 2018 Capital Improvement Plan are premised on 315, 345 and 370 single family building permits in 2013, 2014 and 2015 respectively. RESIDENTIAL PERMITS 500 400 300 - -- - - - og 200 .. - - - - LU --A � a 100 - - - 0 - - - - 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 YEAR --w--Total Residential Units RL Single Family Actual Residential Units Estimated Residential Units Actual Single Family Estimated Single Family There are certain City services and infrastructure requirements which are directly related to the number of residents and changes in population. In other words, as the City grows the demand for resources increases accordingly. Based on the projected new construction of single family dwellings, the population will increase by 950 -1,100 people per year for each of the next three years. Growth by its nature requires investment in infrastructure such as roads, parks, water and sanitary sewer systems. Current projects include Dodd Boulevard improvements from 183rd Street to Hayes Avenue, Kenrick Avenue round -about at 205th Street, Kenrick Avenue Trail construction from the Park and Ride to 205th Street. Initiatives to adequately address the near term infrastructure needs include: o Round -about at County Roads 50 and 60. Project includes construction of a round- about as well as improvements to County Roads 50 and 60 in 2014. (City share of cost - Municipal State Aid Fund - $2,189,000). Improvements to County roads will have no impact on City operating costs. o County Road 50 expansion from County Road 60 (185th Street) to County Road 9 (Dodd Boulevard). Dakota County will include the project in their Capital Improvement Plan; the City share of cost ($7.0 million) will be financed with Municipal State Aid funds. The project is tentatively anticipated for 2017. Improvements to County roads will have no impact on City operating costs. o County Road 9 (Dodd Boulevard) from County Road 60 (185th Street) to 194th Street. New residential development community -wide as well as properties adjacent N to Dodd Boulevard will elevate the need to address road capacity and safety. As such, Dodd Boulevard is proposed to be improved to a four lane road (in 2018) financed with County Advance Funding (until 2022) and Municipal State Aid Funds. Improvements to County roads will have no impact on City operating costs. o Water system expansion. Wells, water storage facilities and trunk watermains will need to be constructed in the next 5 years to meet the growth demands. From an operational perspective, certain services such as police, fire, streets, and parks require more resources as our community grows. Initiatives to address the changes in service demands are as follows. Police Officers - Investigators. The increase in population will have a corresponding impact on police case load activity. Lakeville has one Police Officer per 1,077 residents; based on projected population increases, therefore, it is recommended to add one additional officer (or investigator) and equipment for that officer each year for the next two years. The need for additional staff is evidenced based on police activity. The number of cases assigned to the Police Investigations unit has increased by 14.6% in the past year with the largest increases occurring in burglaries and fraud. The Patrol Division has focused on proactive police measures to reduce crime activity and future patrol officer activity by creating special assignment units including street crime, traffic and Community Liaison /Crime Prevention. Code enforcement. The duties related to code enforcement are currently being addressed by the Inspections, Public Works, Planning and Police personnel; however, increased growth has resulted in the work load exceeding the capacity of current staff resources. A part -time Code Enforcement Officer position is proposed in the 2014 budget and will be responsible for issues such as noise complaints, property maintenance, signs, and junk vehicle storage, grass and weeds violations. Engineering. The Capital Improvement Plan contemplates an aggressive street reconstruction program ($40 million) during the next five years. An Engineering Technician is proposed to support department services such as assisting with preparation of project plans, review building permit grading and drainage issues as well as reduce the reliance on construction contract inspections. Project fees are sufficient to fund this position. Restructuring and replacement of aging departmental work stations ($16,152) is also proposed to improve project coordination and communications. Fleet Management. The Street Department fleet management function is responsible for the organization wide maintenance of more than 400 vehicles and equipment. The City's rolling stock continues to grow as demands require. A Fleet Supervisor position is proposed in 2014 that will be responsible for inventory control systems, fleet division supervision and work flow management. This will allow the current Fleet Lead position to return to maintenance and coordination of technician duties. 5 Addressing Aging Infrastructure Our City has more than $300 million of investment in infrastructure such as roads, water mains, parks, trails, facilities, equipment and other assets. The assets have maintenance, and in certain situations, replacement requirements. The 2014 budget addresses the short -term plan while the Capital Improvement Plan addresses the anticipated intermediate and long term needs. Facilities. The City has nine primary facilities including the Central Maintenance Facility, Public Works Storage Facility, Fire Stations, Police Station, Arts Center, Heritage Center and City Hall with an aggregate 292 thousand square feet of floor space. Approximately $1.46 million of maintenance will be required in the next five years to preserve and protect the City investment in facilities. The projects are proposed to be financed with one time revenues including proceeds from the sale of property to Life Time Fitness and General Fund unencumbered balances. ADA improvements. Wold Architects recently provided a report of potential ADA improvements for City facilities. Certain improvements such as City Hall door accessibility will be constructed in the near term with financing provided from CDBG funds. Other ADA improvements will be implemented when the facility is remodeled or expanded. Street Reconstruction. The proposed Capital Improvement Plan dated July 2013 accelerates the Street Reconstruction Plan ($8.0 million annually) for the next five years. The previous Capital Improvement Plan — dated May 2013 — only provided an average of $6.3 million per year for Street Reconstruction projects. If approved, there would be an estimated 5 — 6 miles of streets (2.3% of all streets) with an OCI rating of 35 or less by 2018. Accelerating the reconstruction schedule will take 4 — 6 years to make a substantial impact on the streets which are considered failing after which time the reconstruction program will return to normal. The City share of cost will be financed with debt repaid based on a blended tax levy amortization schedule exceeding 10 years consistent with long term objectives. Water main replacement. Certain watermains within the City have been subject to numerous breaks in recent years. Water main segments which have a propensity for breakage will be replaced in conjunction with the street reconstruction projects. The water main replacements over the next five years (estimated $7.6 million) will be financed from the Water Operating Fund. Previous budgets and capital improvement plans did not contemplate water main replacement at the level currently being recommended. Springsted has therefore been retained for the purpose of preparing a rate study and financing plan for the water utility operating fund. Parks. The City parks system is extensive and aging. In previous years, the Council has discussed issues such as replacement of playgrounds; however, there is no long -term structured program or financing plan for parks other than routine maintenance. The last tax levy for the 1994 Park Bond Referendum is in 2014. The property tax levy for 2015 and future years is proposed to include an annual levy equal to the expired bond levy which would be appropriated for future park facility long -term major maintenance and replacement. 31 The City also has 94 miles of trails which will require $1.2 million of maintenance and replacement over the next five years; financing to be provided by current balances and a $468,100 tax levy over the next five years. Equipment. The City has a long -term plan for equipment replacement; the cost of which may fluctuate significantly from year to year (high of $3.1 million in 2014 to low of $1.8 million in 2015) depending on the timing of the equipment replacement. Total estimated equipment acquisitions — not including Liquor or Utility Fund equipment - is approximately $12.2 million over the five year period. The acquisitions are proposed to be financed from sale of assets, Liquor Fund contribution and General Fund unencumbered balances. There is no tax levy for equipment acquisitions in 2014; the 2015 property tax levy is approximately $375,000 with annual increases in subsequent years. Inflationary Pressures As the economy improves, there will be upward pressure on commodities, services and personnel costs. Although inflation is still relatively benign compared to the decade preceding the recession, the budget anticipates modest price increases in the near term. Wages. As the unemployment rate drops (As of June 30, Minnesota — 5.2 %) the demand for workers and higher wages will increase. The current low inflation environment is anticipated to keep wage increases to levels less than that of pre- recession years. The City needs to monitor wage rates to assure that wages are competitive with the market. Health Care. The Patient Protection and Affordable Care Act, heath care cost trends and utilization rates are anticipated to be factors in 2014 for future health care premiums. The current health insurance is capped with a maximum 12% increase for the coming year. Firefighter compensation. The volunteer firefighters currently receive $10 per call, $20 per day to attend training and $40 per day to attend conferences. The pay- for -call and pay -for- training is proposed to increase for volunteer firefighters. Sanitary Sewer charges. The treatment and disposal of sanitary sewer effluent is primarily the responsibility of the Metropolitan Council Environmental Services (MCES). Sewage disposal costs are estimated to increase 3.5 percent per year. The 2014 MCES costs will be available in September. Emerging Trends There are trends emerging within our community which are influenced at least in part by external factors such as technology related crimes, non - resident visitors to Lakeville parks and the emerald ash borer insects. Currently there is a defined need for our community to react to or be prepared to react to the issues; however, there is little or no financial assistance available from State or federal agencies to react to the trends. 7 Digital forensics. Digital forensics pertains to obtaining legal evidence found in computers and digital storage media, including cell phones. In criminal and other legal infraction cases, electronic devices provide the evidentiary connection in reconstruction of acts, actions, and events. Since the City's initial investment in resources to perform digital forensics a couple of years ago, the case loads has grown exponentially. The proposed 2014 budget for digital forensics ($11,032) represents the third year of acquiring enhanced software, hardware and training in sophisticated technologies to improve investigative capacities. Emerald Ash Borer (EAB) Infestation. It is not a question of "if' it will happen but rather "when" it will happen. The emerald ash borer beetle which ravages the ash tree population creating expensive cleanup costs for property owners and municipalities is currently in South Eastern Minnesota and the metro area. The proposed budget creates a Forester position who will focus on implementation and administration of the Tree Preservation Ordinance, shade tree disease and infestation control programs, landscaping and reforestation of public lands and parks, maintenance of trees and shrubs and technical assistance to property owners. An initial $45,000 reserve is proposed to be established in the General Fund to finance future boulevard tree removal. Property owners will be responsible for disposal of trees on their own respective parcels. Substantial municipal resources will be required when EAB reaches Lakeville. Innovation and Efficiencies Lakeville has a long standing history of being fiscally conservative and prudent. In spite of the fact that the City of Lakeville receives no state aid for property tax relief, per capita current expenditures for operations are still amongst the lowest in the twin cities according to the Minnesota State Auditor's Office. The proposed budget includes several initiatives which will continue the focus on a commitment to cost effectiveness and efficiencies. Effective application of technology is a major factor in optimizing organizational efficiencies. Police and Fire mobiles and records management systems. The Lakeville Police and Fire staff have been active participants in the LOGIS software selection process to replace the existing mobile computer and records management systems which have exceed their useful life. The new system will greatly enhance information processing, communication and reporting systems as well as providing technology tools for more efficient public safety service delivery. The estimated acquisition cost is approximately $176,964; operating costs are anticipated to increase approximately $22,000 in 2015. Police voice recognition recorders. Police Officers will often dictate reports which are then transcribed by the police records staff. The Department is currently researching the various issues related to voice recognition records as a potential to reduce transcription requirements. If the technology is efficient and cost effective, the system will be acquired in 2015 for approximately $65,134. Water meter modernization. All residential water meters are read by contracted meter readers utilizing a hand held device. Non - residential accounts are read by City staff using a vehicle equipped with radio read technology. The radio read equipment enables the data to be captured more expeditiously and accurately. The radio read process is cost effective because the meter reading process is not subject to inclement weather conditions and therefore results meter reading efficiencies. The radio read technology also results in reduced contract meter reading. The proposed budget provides financing to install radio read equipment for residential customers in the coming years. The cost of a meter for new residential construction will increase to cover the cost of the radio transmitter. Park mowers. The City has historically leased two mowers for seasonal park maintenance. After evaluating leasing costs with that of acquisition, maintenance and resale value, the proposed budget is premised on acquiring the mowers rather than leasing. Entrepreneurial efforts Continued marketing initiatives are proposed to promote economic development. Improving and enhancing communications of community events and activities will be enhanced with the proposed City Hall exterior signage. Heritage Center enhancements as well as steps toward a future new liquor store located in southeastern Lakeville are anticipated to improve revenues and sales opportunities. Liquor Store — New location. The sales at each of Lakeville's liquor stores exceed that of the average private sector store. With Lakeville's growing population and a strategic business objective of trying to secure customer sales from areas south and west of Lakeville, a Liquor Business Plan will be developed in the coming months which will establish a framework for targeting increased market share with the construction of a new store. Marketing Lakeville. Several years ago, the Economic Development Commission recommended, and the City Council concurred, to invest in community marketing initiatives to attract and retain businesses. The marketing efforts ($20,000 annually) continue for the coming years — financing provided by cable TV franchise fees. Heritage Center. The first anniversary of the Heritage Center will be this fall. The inaugural year of operation has seen dramatic increases in membership and attendance at the Historical Society, Senior activities and Yellow Ribbon events. In order to continue the momentum of increased facility rentals to outside groups and facility use, the proposed budget includes appropriations (General Fund approximately $24,363) for audio - visual equipment, ice machine, commercial coffee maker, dish washer upgrade, exterior lighting, chairs and tables. Preparing for the Future As a Community that embraces a high quality of life and a pro- business attitude, Lakeville is "Positioned to Thrive ". It is an objective that embraces a vision for the future and a commitment to preparing for it. D Envision Lakeville. The task force, organizational leadership and community have provided a significant amount of effort into a process that will position our community for the future. The process continues through the summer and early fall 2013 and will identify major initiatives for the coming years. The proposed budget includes appropriations for a City Council strategic planning effort in the coming year. The strategic planning process is intended to provide very specific actions and initiatives needed to achieve the long -range plan. Financing for a bi- annual survey as well as strategic initiatives derived from the strategic planning process are proposed to be financed from the Communications Fund ($35,000 - 2014). Hydrological modeling. The City is participating with Vermillion Watershed District in the hydrological modeling of the North Creek Drainage Area. It is anticipated that the results will establish the framework for future long -term storm water modeling and flood mitigation initiatives. Budget Process In the coming months, the City Council will continue to review the preliminary 2014 budget and tax levy prior to final approval in December. September 16 Approve the Preliminary Budget and Tax Levy September 23 Council Work Session T.B.D. Presentation to Chamber of Commerce October 28 Council work session November 25 Council work session December 2 Truth in Taxation public hearing December 16 Approval of 2014 Budget and Tax Levy The Truth in Taxation public hearing will be conducted on December 2 for the purpose of presenting the 2014 budget and tax levy as well as provide an opportunity for taxpayers and residents the opportunity to ask questions and present comments. Irrespective of the scheduled public meeting events, residents are encouraged to provide their questions, comments, and concerns to City staff and /or City Council Members. Comments or questions can be forwarded to Dennis Feller, Finance Director. Final approval of the tax levy and budget is scheduled for December 16, 2013. The City Council has the ability to adopt a final tax levy in December that is equal to or less than the preliminary tax levy approved on September 16, 2013. The City Council may not, however, adopt a final tax levy that is greater than the preliminary tax levy. Budget and tax levy information is available on the City website at www.lakevillemn.gov 10 The 2014 Budget and tax levy will continue to evolve in the coming months prior to final approval in December. The City staff looks forward to supporting the Council throughout the process. Respectfully submitted, Steven C. Mielke City Administrator 11 Budget Overview Municipalities organize their financial activities into separate "funds" in order to properly manage and account for the services provided. Each fund can be thought of as a separate business organized for a specific purpose. Each of the funds has a different purpose, different constraints on its resources and a different method of accounting for its activities. The City has attempted to allocate resources among its different funds in order to achieve the Council's goals in the most cost - effective manner possible. General Fund 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 Netchanges 2013 Budget Estimate Variance $ 20,626,178 $ 21,381,130 $ 754,952 21,246,903 21,535,587 288,684 $ (620,725) $ (154,457) $ 466,268 12 The Fund Balance Policy states "The City will endeavor to maintain on unrestricted (committed, assigned and unassigned) fund balance in the General Fund of on 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°x6 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. 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 1,036,534 2013 unencumbered balances 466,268 Fund balance reduced from 45% to 40% 943,805 Total sources $ 2,446,607 Uses Equipment Fund 1,811,607 Building Fund 590,000 General Fund (Committed Fund Balance) - EAB 45,000 Total uses $ 2,446,607 13 2014 Proposed Budget A summary of the General Fund 2014 proposed budget is as follows: General Fund Expenditures General government 2014 252,930 Public safety Proposed Increase/ Public works Budget (decrease) Revenues 3,322,525 13,142 General property taxes $17,120,640 $ 1,212,998 Licenses and permits 1,947,676 142,341 Intergovernmental 604,021 (40,384) Charges for services 2,173,377 223,554 Court fines 274,590 - Investment income 44,413 - Miscellaneous 61,461 (3,635) Other financing sources 704,814 14,923 Total revenues 22,930,992 1,549,797 Expenditures General government 4,601,744 252,930 Public safety 10,358,035 86,029 Public works 3,644,260 78,876 Parks and recreation 3,322,525 13,142 Other 541,754 501,754 Total expenditures 22,468,318 932,731 Transfers to other funds - (2,446,607) Net changes in fund balance 462,674 3,063,673 Fund balance, January 1 8,634,300 (2,600,999) Fund balance, December 31 $ 9,096,974 $ 462,674 Fund Balance as a % of expenditures 40% 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. 14 General Fund expenditures are anticipated to increase by $932,731. 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 police investigator. 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 requesting increases for Pay for Call and Pay for Training for volunteer firefighters. ➢ Public works. Population growth creates a need for traffic analysis. 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 due to transition costs for the Assistant City Engineer and Design Engineer. Also proposed in 2014 are the additions of an Engineering Technician and Street Department 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. 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 Increase/ Budget (decrease) $ 16,205,024 S 827,601 1,635,452 (224,550) 4,390,016 157,782 132,826 106,898 105,000 65,000 $ 22,468,318 $ 932,731 15 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) Compared to 2007 (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. EMPLOYEES PER THOUSAND RESIDENTS 3.2 3.1 N W 3.0 _ 0 2.9 CL W 2.8 LL 0 2.7 OR 2.5 _ I I - --- 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 16 2008 20009 2010 2011 2012 2013 2014 General government 43.2 38.3 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 24.3 24.3 Total General Fund 168.8 156.8 152.5 153.2 155.3 156.9 160.4 Compared to 2007 (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. EMPLOYEES PER THOUSAND RESIDENTS 3.2 3.1 N W 3.0 _ 0 2.9 CL W 2.8 LL 0 2.7 OR 2.5 _ I I - --- 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 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 98% 40 N Franchise Fees Conduit fees /other 12% SPECIAL REVENUE FUNDS EXPENDITURES 65% i9v5% r personnel ■ Other charges and services 7% u Administrative support 13% Debt As of December 31, 2013, the City of Lakeville will have approximately $108.445 million of debt outstanding. The City issued $22.450 million of (cross -over) refunding debt in July 2012 to refinance the G.O. Street Reconstruction Bonds Series 2003A and G.O. Capital Improvement Bonds series 2004A. The refinancing has resulted in a net present value savings of $2.235 million over the 17 year life of the debt. The refunding bonds, as well as the series 2003A and 2004A bonds, will remain as City obligations until the two refunded bonds are called and fully retired on or before February 1, 2015. LAKEVILLE BOND INDEBTEDNESS COMPARISON WITH DEBT /HOUSEHOLDS $140,000,000 1 - Indebtedness $120,000,000 $100,000,000 an Z $80,000,000 0 m $60,000,000 W 0 Z $40,000,000 $20,000,000 E11 17 $6,000 $4,000 $2,000 $0 ti� ti� ti� l f 1 � ti� ti� -1 AS OF DECEMBER 31 Moody's Credit Rating Aal Moody's Investor Service has assigned the City of Lakeville a very favorable Aal credit rating for its long -term general obligation debt and an Aa3 rating for underlying rating on the City of Lakeville's lease revenue debt. The City's debt is repaid from various revenue sources. Approximately half of the debt is paid for from property taxes, and the remaining generated by other revenue sources such as water connection charges, state aid for street construction, special assessments, tax increments and liquor funds. 2014 Debt Service Revenue Sources Connectinn Charge $1,181,8 Liquor Municipal Revenues State Aid GQnd _f. ?O Tax Increment Financing Other $691,447 S539,249 Special sessments 765,271 18 Capital Proiects 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 $ - $ 4,000 $ 2,570 690 26,040 - 10,290 6,600 960 36,170 - 14,290 9,170 35,900 19,000 15,800 36,000 1,300 55,000 16,700 17,000 29,600 - 150,712 303,836 - 120,000 77,000 17,400 140,800 20,000 - - 17,600 - - 120,850 - 2,500 5,200 - - - 11,000 - - 7,200 - 70,613 81,200 60,050 4,000 7,400 17,100 - - - - 377,825 566,736 112,850 317,650 85,700 (376,865) (530,566) (112,850) (303,360) (76,530) 1,400,812 1,023,947 493,381 380,531 77,171 $ 1,023,947 $ 493,381 $ 380,531 $ 77,171 $ 641 19 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 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 1,160,000 1,160,000 1,160,000 1,160,000 1,360,314 1,698,000 1,803,600 1,793,600 1,778,400 759,340 521,944 365,615 218,390 122,698 26,667 26,667 26,667 - - 832,805 63,332 35,000 666,750 263,750 485,212 448,221 473,325 362,210 174,130 638,523 382,111 590,898 674,164 80,487 861,827 742,626 1,283,675 978,294 626,871 303,730 114,043 93,764 370,256 581,656 3,148,764 1,777,000 2,503,329 3,051,674 1,726,894 (1,788,450) (79,000) (699,729) (1,258,074) 51,506 3,963,446 2,174,996 2,095,996 1,396,267 138,193 $ 2,174,996 $ 2,095,996 $ 1,396,267 $ 138,193 $ 189,699 Trail Imarovement Fund Revenues General property taxes Other Total revenues Expenditures Capital outlay Net change in fund balance Fund balance, January 1 Fund balance, December 31 2014 2015 2016 2017 2018 $ 45,200 $ 98,100 $ 103,000 $ 108,200 $ 113,600 4,000 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 20 Pavement Fund Revenues General property taxes MSA - Maintenance Total Revenues Expenditures Capital improvements Net Increase (Decrease) Fund Balance, January 1 Fund Balance, December 31 2014 2015 2016 2017 2018 $ 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 1,5 85,866 1,591,924 1,598,012 1,604,130 1,992,469 1,182,309 1,842,020 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 Enterprise Funds are self - supporting from retail sales and user fees. Operations are managed in much the same way as private enterprises. Liquor Fund 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. 21 A summary of Liquor operations is as follows: Liquor Fund 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: Liquor Contributions Equipment Fund (Police, fire, snowplows, trucks, voting equipment) Debt Service - Police Station General operations Community recycling Total Contributions 2014 $ 1,100,000 100,000 159,323 1,200 $ 1,360,523 22 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 (40,233 221,659 Net increase before transfers and depreciation $ 1,363,996 $ 325,631 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: Liquor Contributions Equipment Fund (Police, fire, snowplows, trucks, voting equipment) Debt Service - Police Station General operations Community recycling Total Contributions 2014 $ 1,100,000 100,000 159,323 1,200 $ 1,360,523 22 Utility 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 Revenues Expenditures MCES sewer charges Personnel Commodities Contractual and other sys Major maintenance Total expenditures Operating income Springsted has been retained for the purpose of preparing a rate study and financing plan for the water and sewer utility operating funds. A street light rate increase (a $0.33 /qtr. /residential unit rate increase) is proposed for the coming year. 23 Sanitary Street Environmental Water Sewer Lights Resources $ 3,255,567 $ 4,434,054 $ 742,300 $ 683,410 - 3,297,982 - - 948,019 677,457 17,397 321,885 349,067 84,481 31 26,374 1,147,250 276,999 736,767 502,243 1,716,157 375,000 - - 4,160,493 4,711,919 754,195 850,502 $ (904,926) $ (277,865) $ (11,895) $ (167,092) Springsted has been retained for the purpose of preparing a rate study and financing plan for the water and sewer utility operating funds. A street light rate increase (a $0.33 /qtr. /residential unit rate increase) is proposed for the coming year. 23 Property Taxes Preliminary_ 2014 Tax Levy The preliminary 2014 property tax levy is proposed to be $23.9 million which is a $905,084 increase over the 2013 property tax levy. The increase is primarily the result of debt for street reconstruction projects and increased costs due to growth in the City. The majority of the increased tax levy will be financed from the tax base increase in new residential home construction. 2014 Operations, including equipment Debt- Street improvements Debt - Public facilities Streets pavement management Debt - Parks and arena Trails maintenance Total Tax Levy Property Tax Increase/ Levy (decrease) 17,129,137 659,383 3,029,063 238,043 1,910,019 23,400 1,205,350 (24,650) 665,500 (36,292) 45,200 45,200 $ 23,984,269 $ 905,084 The preliminary 2014 property levy will result in a $31 increase in on the median value home ($225,000). Actual tax impacts on individual properties will vary depending on property class, market value and changes in market value. Homesteaded Residential Taxes Payable Estimated Increase/ 2014 (Decrease) Average Home Value $ 225,000 $ 8,200 Taxes City Taxes $ 867 $ 31 24 Tax Base The tax base will increase by 2.2% as a 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. Real Estate & Personal Properties Values Assessors Market Values Increase /(decrease) due to: Pay Market New USG Class 2014 Total Conditions Construction Totals 5,015,114,235 247,638,914 148,116,314 99,522,600 Percentage Increase 5.2% 3.1% 2.1% Tax Caeacity Values Increase /(decrease) due to: Pay Market New USG Class 2014 Total Conditions Construction 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 Percentage Increase 4.7% 2.4% 2.2% 25 26 CITY OF LAKEVILLE, MINNESOTA General Fund Schedule of Revenues, Expenditures and Changes in Fund Balances For the Years Ending December 31, 2014 2013 2014 2012 Adopted 2013 Budget Actual Budget Estimate Estimate Revenues General property taxes $ 16,532,695 $ 15,920,497 $ 15,907,642 $ 17,120,640 Licenses and permits 1,831,073 1,345,449 1,805,335 1,947,676 Intergovernmental 801,081 621,226 644,405 604,021 Charges for services 1,889,034 1,632,580 1,949,823 2,173,377 Court fines 281,879 294,809 274,590 274,590 Investment income 44,159 32,735 44,413 44,413 Miscellaneous 89,639 63,585 65,096 61,461 Transfer from other funds 665,631 715,297 689,891 704,814 Total revenues and transfers 22,135,191 20,626,178 21,381,195 22,930,992 Expenditures Mayor and Council 93,768 95,275 96,114 97,021 Committees and Commissions 59,594 82,272 61,263 62,794 City administration 319,119 392,969 370,317 403,228 City Clerk 175,847 114,964 116,387 184,724 Legal counsel 79,935 65,132 79,952 82,351 Planning 344,949 392,834 371,916 427,787 Community and econ. development 282,539 300,421 296,638 295,953 Inspections 764,807 794,978 842,905 851,202 General government facilities 409,715 442,807 419,525 417,452 Finance 606,453 610,134 615,914 626,703 Information systems 448,052 481,319 483,916 490,633 Human resources 312,097 363,195 366,547 351,013 Insurance 223,275 227,420 227,420 310,883 Police 8,547,626 8,736,220 8,839,720 8,930,800 Fire 1,307,907 1,444,532 1,432,286 1,427,235 Engineering 634,817 693,354 684,712 904,728 Streets 2,616,025 2,634,403 2,880,672 2,739,532 Parks 2,019,331 2,202,544 2,227,083 2,206,475 Recreation 568,469 578,477 584,510 585,451 Heritage Center 34,545 72,605 101,854 125,531 Arts Center 431,190 416,048 395,936 405,068 Other - 105,000 40,000 541,754 Total expenditures 20,280,060 21,246,903 21,535,587 22,468,318 Excess (deficiency) of revenues over expenditures 1,855,131 (620,725 (154,392 462,674 Other financing sources (uses) Transfer 2012 unencumbered (1,036,534) Transfer 2013 unencumbered (466,268) Fund balance reduced from 45% to 40% (898,805) Committed Fund Balance - EAB (45,000) Transfer to other funds (911,694 - Total other financing sources (uses) (1,168,170 - (2,446,607 - Net change in fund balance 686,961 (620,725) (2,600,999) 462,674 Fund balance, January 1 10,548,338 10,198,765 11,235,299 8,634,300 Fund balance, December 31 $ 11,235,299 $ 9,578,040 $ 8,634,300 $ 9,096,974 26 CITY OF LAKEVILLE, MINNESOTA Budgetary Summary for All Special Revenue Funds Combined Schedule of Revenues, Expenditures, and Changes in Fund Balances For the Years Ending December 31, 2014 2013 2014 2012 Adopted 2013 Proposed Actual Budget Estimate Budget Revenues Licenses Intergovernmental Charges for services Investment income Total revenues Expenditures General government Capital outlay Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses) Transfer to other funds Net change in fund balance Fund balance, January 1 Fund balance, December 31 $ 598,878 $ 593,396 $ 604,866 $ 610,915 96,751 516 78,836 516 2,500 2,500 2,500 2,500 4,858 5,033 9,803 9,313 702,987 601,445 696,005 623,244 532,429 426,958 518,841 474,046 38,992 90,238 93,085 70,564 571,421 517,196 611,926 544,610 131,566 84,249 84,079 78,634 (206,587 (65,237 (72,930 (67,924 (75,021) 19,012 924,707 782,135 $ 849,686 $ 801,147 11,149 10,710 849,686 860,835 $ 860,835 $ 871,545 27 CITY OF LAKEVILLE, MINNESOTA Budgetary Summary for All Debt Service Funds Combined Schedule of Revenues, Expenditures, and Changes in Fund Balances For the Years Ending December 31, 2014 2013 2014 2012 Adopted 2013 Proposed Actual Budget Estimate Budget Revenues General property taxes Tax increment Intergovernmental Charges for services Special assessments Investment income Donations Miscellaneous Total revenues Expenditures - debt service Principal maturities Interest on debt Fiscal charges Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses) Transfer from other funds Transfer to other funds Refunding bonds issued Payment on refunded bonds called Premium on bonds issued Discount on bonds issued Total other financing sources (uses) Net change in fund balance Fund balance, January 1 Fund balance, December 31 5,104,780 667,362 847,070 469,879 1,047,558 47,413 95,000 Q 170 nAl 5,379,431 699,898 922,637 372,696 642,157 46,302 95,000 A2n $ 5,379,431 691,447 919,408 372,696 616,553 49,356 95,000 480 Q11e2'71 5,604,582 691,447 904,639 403,951 765,271 39,818 95,000 non 8,505,188 7,267,027 5,825,000 5,825,000 5,295,000 3,358,324 3,774,702 3,948,106 3,700,592 173,073 18,035 22,902 23,939 10,798,424 9,617,737 9,796,008 9,019,531 $ 32,787,368 $ 32,144,311 (2,519,362 (1,459,136 (1,671,637 (514,343 3,160,618 1,616,403 (59,900) (61,900) 22,450,000 - (2,205,000) - 1 A01 111 1,366,403 1,281,800 (61,900) (63,600) (10,735,000) 24,837,935 1,554,503 1,304,503 (9,516,800 22,318,573 95,367 (367,134) (10,031,143) 10,468,795 32,048,944 32,787,368 32,420,234 $ 32,787,368 $ 32,144,311 $ 32,420,234 $ 22,389,091 28 CITY OF LAKEVILLE, MINNESOTA Budgetary Summary for Capital Projects Funds Combined Schedule of Revenues, Expenditures, and Changes in Fund Balances For the Year Ending December 31, 2014 29 (continued on following page) 2014 Proposed Budget Municipal Pavement Improvement Storm Sanitary State -aid Management Construction Sewer Water Sewer Revenues General property taxes $ $ 1,205,350 $ $ $ $ Tax increment - - Intergovernmental 3,057,000 374,335 - - Charges for services - - 1,069,877 1,452,750 294,500 Special assessments 880 5,000 20,930 Investment income - - - Miscellaneous - - - 279,340 - Total revenues 3,057,000 1,579,685 1,070,757 1,737,090 315,430 Exeenditures - Capital outlay General government - - - - - Public safety Police - - Fire - - - - - Public works 5,962,515 1,992,469 9,151,826 834,939 1,948,000 302,000 Parks and recreation - - - - - - Total expenditures 5,962,515 1,992,469 9,151,826 834,939 1,948,000 302,000 Excess (deficiency) of revenues over expenditures (2,905,515 (412,784 (9,151,826 235,818 (210,910 13,430 Other financing sources (uses) Transfer from other funds 63,600 - Transfer to other funds (81,000) (1,122,893) - Issuance of debt 9,151,826 - Total other financing sources (uses) 9,151,826 (17,400 (1,122,893 Net change in fund balance (2,905,515) (412,784) - 218,418 (1,333,803) 13,430 Fund balance, January 1 2,980,712 1,673,296 730,530 1,149,652 1,960,639 3,598,532 Fund balance, December 31 $ 75,197 $ 1,260,512 $ 730,530 $ 1,368,070 $ 626,836 $ 3,611,962 29 CITY OF LAKEVILLE, MINNESOTA Budgetary Summary for Capital Projects Funds Combined Schedule of Revenues, Expenditures, and Changes in Fund Balances For the Year Ending December 31, 2014 (continued from previous page) Revenues General property taxes Tax increment Intergovernmental Charges for services Special assessments Investment income Miscellaneous Total revenues Expenditures - Capital outlay General government Public safety Police Fire Public works Parks and recreation Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses) Transfer from other funds Transfer to other funds Issuance of debt Total other financing sources (use Net change in fund balance Fund balance, January 1 Fund balance, December 31 2014 Proposed Budget Park Trail Tax Dedication Improvement Increment Building Eauipment Total A W H Fil W F W A M W M F+�1 O $ 45,200 $ - $ - 189,667 4,000 342 49,200 190,009 $ $ 1,250,550 189,667 19,814 3,451,149 - 2,817,127 26,810 - 4,342 240,500 519,840 260,314 8,259,485 - 1,113 150,712 330,397 482,222 - - 17,100 638,523 655,623 - - 48,500 832,805 881,305 - - 55,000 861,827 21,108,576 286,596 - 106,513 485,212 878,321 286,596 1,113 377,825 3,148,764 24,006,047 (237,396 188,896 (377,825 (2,888,450 (15,746,562 $ 2,108,392 $ 521,944 $ 263,490 $ 1,023,947 $ 2,174,996 $ 13,765,876 ka 960 1,100,000 1,164,560 - - (1,203,893) - - - 9,151,826 - 960 1,100,000 9,112,493 (237,396) 188,896 (376,865) (1,788,450) (6,634,069) 2,108,392 759,340 74,594 1,400,812 3,963,446 20,399,945 $ 2,108,392 $ 521,944 $ 263,490 $ 1,023,947 $ 2,174,996 $ 13,765,876 ka CITY OF LAKEVILLE, MINNESOTA Enterprise - Liquor Fund Schedule of Revenues, Expenses and Changes in Net Position For the Years Ending December 31, 2014 Sales and cost of sales Sales Cost of sales Gross profit Operating expenses Personnel services Commodities Other charges and services Total operating expenses Operating income Non - operating revenue (expense) Intergovernmental Investment income Miscellaneous Disposal of assets Total non- operating (net) Income before transfers, bond expense, and depreciation Transfers to other funds Bond expense Depreciation Total transfers, bond expense and depreciation Change in net position Net position, January 1 Net position, December 31 Capital outlay acquisitions 31 2013 2014 2012 Adopted 2013 Proposed Actual Budeet Estimate Bud¢et $ 15,220,064 $ 15,121,789 $ 15,442,791 $ 15,829,693 11,380,341 11,322,738 11,546,862 11,853,712 3,839,723 3,799,051 3,895,929 3,975,981 1,274,805 1,339,361 1,279,559 1,344,654 57,869 65,300 61,122 65,786 776,400 820,249 836,229 874,430 2,109,074 2,224,910 2,176,910 2,284,870 1,730,649 1,574,141 1,719,019 1,691,111 3,762 3,900 3,900 3,900 26,400 44,301 25,839 23,673 10,420 3,600 3,600 3,600 (8,267 - - - 32,315 51,801 33,339 31,173 1,762,964 1,625,942 1,752,358 1,722,284 (2,554,609) (1,741,926) (1,735,568) (1,360,523) (169,362) (165,685) (161,284) (153,055) (117,168 (116,935 (118,997 (118,997 (2,841,139 (2,024,546 (2,015,849 (1,632,575 (1,078,175) (398,604) (263,491) 89,709 6,891,647 6,033,733 5,813,472 5,549,981 $ 5,813,472 $ 5,635,129 $ 5,549,981 $ 5,639,690 $ 4,700 $ 261,892 $ 247,892 $ 40,233 31 CITY OF LAKEVILLE, MINNESOTA Enterprise - Utility Fund Schedule of Revenues, Expenses and Changes in Net Position For the Years Ending December 31, 2014 Operatine expenses Personnel services 2013 1,796,179 2014 2012 Adopted 2013 Proposed Actual Budeet Estimate Budeet Operating revenues 2,531,514 2,663,259 Disposal charges User charges for services $ 9,356,521 $ 8,713,508 $ 8,789,286 $ 8,935,004 Other 180,785 191,143 180,322 180,322 Total operating revenue 9,537,306 8,904,651 8,969,608 9,115,326 Operatine expenses Personnel services 1,711,932 1,796,179 1,793,734 1,964,758 Commodities 387,863 475,541 455,474 459,953 Other charges and services 2,190,734 2,366,380 2,531,514 2,663,259 Disposal charges 2,950,600 3,092,195 3,092,195 3,297,982 Major maintenance 10,530 2,946,000 2,946,000 2,091,157 Total operating expenses 7,251,659 10,676,295 10,818,917 10,477,109 Operating income (expense) 2,285,647 (1,771,644 (1,849,309 (1,361,783 Non - operating revenue Intergovernmental 99,398 79,606 90,731 50,256 Investment income 51,564 60,363 36,394 41,749 Disposal of assets 4,978 9,000 9,000 9,000 Total non - operating revenue 155,940 148,969 136,125 101,005 Income (loss) before contributions, transfers, and depreciation 2,441,587 (1,622,675 (1,713,184 (1,260,778 Contributed capital 2,932,438 1,073,224 1,073,224 1,073,224 Transfers from other funds 21,909 20,948 20,725 20,245 Transfers to other funds (598,045) (459,679) (432,715) (449,017) Depreciation (3,116,774 (3,259,604 (3,315,967 (3,408,984 Total contributions, transfers, and depreciation (net) (760,472 (2,625,111 (2,654,733 (2,764,532 Change in net position 1,681,115 (4,247,786) (4,367,917) (4,025,310) Net position, January 1 110,290,680 107,141,081 111,971,795 107,603,878 Net position, December 31 $ 111,971,795 $ 102,893,295 $ 107,603,878 103,578,568 Capital outlay acquisitions $ 1,774,013 $ 226,096 $ 226,096 $ 388,148 32 CITY OF LAKEVILLE, MINNESOTA Internal Service - Municipal Reserves Fund Schedule of Revenues, Expenses and Changes in Net Position For the Years Ending December 31, 2014 Operating income 55,301 13,599 18,618 48,556 Non - operating revenue (expense Intergovernmental 21,363 2013 - 2014 Investment income 2012 Adopted 2013 Proposed Transfer to General Fund Actual Budget Estimate Budget Operating revenues (21,707 (43,991 (43,991 (45,405 Charges for services $ 293,779 $ 298,427 $ 298,427 $ 403,133 Other 164,456 69,288 74,150 74,150 Total operating revenues 458,235 367,715 372,577 477,283 Operating expenses Other charges and services 402,934 354,116 353,959 428,727 Operating income 55,301 13,599 18,618 48,556 Non - operating revenue (expense Intergovernmental 21,363 - - - Investment income 2,698 3,150 3,150 3,150 Transfer to General Fund (45,768 (47,141 (47,141 (48,555 Total non - operating (net) (21,707 (43,991 (43,991 (45,405 Change in net assets 33,594 (30,392) (25,373) 3,151 Net position, January 1 823,770 846,332 857,364 831,991 Net position, December 31 $ 857,364 $ 815,940 $ 831,991 $ 835,142 33