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HomeMy WebLinkAboutItem 07Date December 2, 2013 Item No. Public Hearing: Truth in Taxation Proposed Action Conduct a'Truth in Taxation" public hearing. Minnesota Statutes require a public hearing prior to adoption of the 2014 budget and tax levy. Overview The purpose of the hearing is to present the proposed 2014 budget and tax levy and provide taxpayers the opportunity to ask questions and present comments. At the hearing, a succinct overview of the budget and tax levy will be presented. After all persons have had an opportunity to speak, the City Council should close the hearing. Adoption of the budget and tax levy will be at the regularly scheduled meeting on Monday, December 16, 2013. Primary Issues to Consider (Refer to responses starting on page 2) • Adjustments to the Preliminary Tax Levy • Budget Adjustments Supporting Information • City Administrator Letter of Transmittal • Budget overview Dennis a er, Finance 3WCtor Tax Levy Financial Impact: $23.657,996 Budgeted: Yes Source: Various funds Related Documents (CIP, ERP, etc.): Notes: Primary Issues to Consider Adjustments to Preliminary Tax Levy There a number of proposed adjustments to the preliminary tax levy as shown below. Total Incr. Expenditure reductions Contingency (personnel) (238,257) Police - Lexipol risk management (8,950) Street - Overtime (2,700) Insurance premium adjustment (21,808) Heritage Center- capital outlay (delete) (24,263) Heritage Center- operations (net) (3,565 (299,543) Expenditure additions Street Dept: Round -about landscaping 1,870 Parks - Tree Trust /Eagle Scout projects materials 10,000 Parks - Tree Trust labor 1,500 Parks - floor replacements 5,700 Tree Plantings 12,000 31,070 Revenue Enhancements Code enforcement - reinspection fees (2,800 Transfer from the Communications Fund (55,000 Net changes in tax levy (326,273) Preliminary 2014 tax levy $ 23,984,269 Proposed Revised tax levy $ 23,657,996 3.9 j 2122 2 Proposed Budget Adjustments General Fund A. Property Taxes. The City Council has indicated a desire to reduce the property tax levy. A discussion of the potential property tax levy adjustments are provided in the previous agenda item. If approved by the City Council, the tax levy would be reduced by $326,273. The corresponding expenditure reductions and /or revenue enhancements are shown below. B. Transfers from Communications Fund. Authorize the transfer of $55,000 from the Communications Fund to finance the 2014 election process. This is a one -time tax levy reduction as there are no elections in 2015. C. Fire Department - Target Solutions. The 2014 Fire Department provide appropriations for Target Solutions ($4,000) which is a web based system that provides a wide range of firefighting training such as Hazmat, pumping operations, operating guidelines, and medical response. The objective is to increase training hours as noted in the ISO rating while enabling the fire fighter to establish their training schedule based on their availability. The actual cost of the training is $8,380; the increased cost ($4,380) will be financed with revenues received from the Minnesota Board of Firefighting Training and Education (MBFTE). D. Heritage Center - operations (net). Revenues from facility rentals, memberships and punch cards continue to exceed budget estimates. The preliminary budget for Recreation and Heritage Center as well as the tax levy can be reduced by $3,565. An overview of Recreation and Heritage Center programs is discussed and provided with the previous agenda item related to property tax adjustments. The net adjustment also takes into consideration an adjustment for fund raising with a $24,263 reduction in revenues and a corresponding decrease of expenditures. E. Police Department: Lexipol risk management program. The proposed 2014 budget include appropriations ($8,950) for the Lexipol risk management program to assist with training police officers and identification of risk management issues. The Police Department has implemented a regular in -house risk management training initiatives and therefore is recommending removal of the Lexipol program. F. Liability Insurance premiums. The preliminary budget provided $83,463 of appropriations in anticipation of liability insurance premium increases. LMCIT 2014 rebates can be appropriated to reduction ($21,808) of the premium increases. G. Street Department: round -about landscaping and overtime. Staff is recommending the budget be amended to provide appropriations for contract landscape maintenance of the newly constructed round -about at Dodd Blvd /Highview Avenue and 205th /Kenrick Avenue. The financing would be derived from other expenditure reductions such as Contingency as noted below. The street department overtime budget reduced by $2,700 due to the new Fleet Supervisor position. 3 H. Parks Maintenance. The proposed budget and tax levy included appropriations for Tree Trust labor ($1,500), materials for Tree Trust and Eagle Scout projects ($10,000), floor replacements at the Parkview warming house ($5,700) and tree plantings ($12,000). Staff is recommending these items be added back to the budget and financed with expenditure reductions noted above. I. Heritage Center - capital outlay. The preliminary 2014 General Fund budget included appropriations ($24,263) for capital outlay items to enhance the revenue opportunities for the facility. The dishwasher will be replaced in 2013 and financed with increased operating revenues in order to efficiently comply with Minnesota Department of Health regulations. The 50 chairs and 15 tables are needed to accommodate facility rental opportunities; therefore, the acquisition will be financed from the increased 2013 revenues. All other capital items will either not be purchased or financed with donations. I Contingency. The City Council, at its November 4 meeting, approved the 2014 employee health insurance rates and reduced contingency by $39,760. The contingency was reduced by an additional $198,497 at the November 19 work session. rd A summary of proposed 2014 General Fund budget adjustments as discussed above is shown below. General Fund Revenues A Property Taxes B Transfer from Communication Fund C MN Board of Firefighter Education and Training Code Enforcement - reinspection fees D Heritage Center( Fundraising,rentals,advertising) Total revenue adjustments Expenditures E Police Dept: Lexipol (delete) F Insurance premium adjustment Streets Dept: Landscaping for roundabout and G overtime C Fire: Training solutions H Parks: Tree Trust /scouts materials H Parks: Tree Trust labor H Parks: warming house floor replacements H Parks: Tree plantings D Heritage Center: operating exp D,I Heritage Center: Capital outlay J Contingency Total expenditure adjustments Communications Fund Proposed 2014 Budget Revisions (326,273) 55,000 4,380 2,800 ( 20,140 (284,233 (8,950) (21,808) (830) 4,380 10,000 1,500 5 12,000 (23,705) (24,263) (238,257 (284,233 K. Transfers from Communications Fund. Authorize the transfer of $55,000 from the Communications Fund to finance the 2014 election process. The transfer is a one- time tax levy reduction as there are no elections in 2015. L. Community Survey. The Communications Fund appropriated $20,000 for the community survey. The survey is proposed to be removed from the 2014 budget for possible inclusion in future budgets. 5 Proposed 2014 Budget Communicaitons Fund Revisions Revenues (55, 000 K. Transfers to General Fund Expenditures L. Community Survey (20,000 Net Change in Fund Balance (35,000 Capital Projects Fund M. Equipment Fund - Servers. The Preliminary 2014 Equipment Fund budget provided appropriations ($218,828). Recently, several of the servers scheduled for replacement were having very significant performance issues, including those dedicated for Police and Liquor Departments. HP assisted with the diagnostics and determined that the systems were at high risk of failure. Due to the high importance of the servers, the purchase was placed to replace immediately rather than risk failure in the coming months. The actual cost was $157,817 (almost $61,000 less than budget). N. Equipment Fund - Squad video cameras. The squad video cameras were initially removed from the preliminary 2014 budget. The video cameras are a risk management tool which is proposed to be re- instated with financing derived from the reduced cost of server replacement project, elimination of the voice activated dictation system and existing fund balances. O. Municipal State Aid Fund - Dakota County has increased their cost estimates for the County Road 50/ County Road 60 improvements and round - about, and Dodd Blvd County Road 70 to County Road 46/2. The City share of costs will be financed with Municipal State Aid funds. P. Improvement Construction Fund. The 2014 Street Reconstruction project has been increased by $977,283 consistent with the feasibility report. The project costs are financed with the issuance of general obligation improvement bonds of which 60% is repaid with property taxes and 40% repaid with special assessments to benefitted properties. Q. Pavement Management. Dakota County repairs the storm sewer appurtenances adjacent to county roads. Cities are responsible for a portion of the storm sewer repairs. The proposed budget amendment for storm sewer repairs is based on maintenance projects contemplated by Dakota County for the coming year. 2 R. Water Trunk Fund. Water system improvements such as water tower construction are proposed to be advanced one year to meet service demands. The improvements will be financed with a Water Revenue Bond which is repaid with water connection fees. A summary of the proposed 2014 Capital Project Fund adjustments is as follows: VA Proposed 2014 Budget Capital Projects Funds Revisions Equipment Fund Expenditures M Server replacement (218,828) N Police Squad video system 175,000 Municipal State Aid Fund Revenues O MSA Advance 943,000 Expenditures O CSAH 50/60 Roundabout and Expansion 1,155,600 O Dodd Blvd: CSAH 70 to CSAH 46/2 13,800 Improvement Construction Revenues P Debt issuance 977,283 Expenditures P 2014 Street Reconstruction 977,283 Pavement Management Q County Road Utility Improvements 25,000 Water Trunk Fund Revenues R Debt Issuance 9,000,000 Expenditures R Well site acquisition 160,000 R Water Tower Land acquisition 100,000 R Water Tower Engineering and design 300,000 R WTF Improvements - Chemical storage /feed equip 90,000 R WTF Improvements - 600 HP High Service Pump 450,000 R WTF Improvements - Backwash Pump 171,000 R WTF Improvements - Backwash Air Blower 126,000 Total expenditures 1,397,000 VA Park Dedication Fund The Preliminary 2014 Budget did not include the Park Dedication Fund. Staff is recommending City Council approval of the Park Dedication Fund as shown below: Park Dedication Fund Statement of Revenue, Expenditures and Changes in Fund Balance Revenues Park Development Fees 2014 1,130,240 Valley Park antenna 20,260 Dakota County - Trails 80,685 Escrows 9,948 Donations /Other 50,000 Total Revenues $ 1,291,133 Parks King Park Pave parking lot 255,000 New playground 150,000 Summerlyn Park 32,500 Aronson parking lot safety netting 40,000 Veteran Memorial irrigation 12,000 Trails Dodd: 208th to Hwy 50 146,700 Northcreek Greenway Trail 100,000 Planning and design 20,000 Developers Credit 339,000 Total Expenditures 1,095,200 Net Increase /(Decrease) 195,933 Fund Balance, Jan 1 921,960 Fund Balance, Dec 31 $ 1,117,893 Proposed park construction projects for the coming year include King Park parking lot ($225,000) and playground ($150,000) as well as Summerlyn Park ($32,500). Safety netting is proposed for Aronson Park parking lot to reduce the risk of injury and property damage as well as irrigation at the Veterans Memorial. The County is anticipated to complete the trail adjacent to Dodd Boulevard from 208th Street to Highway 50; the net cost to the City is approximately $66,000. Dakota County will use federal funding to construct a trail adjacent to the Northcreek Greenway. In order for the project to proceed, the City is required to finance the design ($100,000) in 2014 and construction administration in 2015. 9 Proprietary Funds S. Servers Replacement. As stated in the Equipment Fund, recently, several of the servers scheduled for replacement were having very significant performance which necessitated immediate replacement. The Utility and Liquor Funds are each responsible for $8,400. T. Water main replacement and sanitary sewer repairs. The water main project to be replaced in conjunction with the 2014 Street Reconstruction project increased by $705,803 as a result of the corrosive soils discovered at the project area. The costs will be financed with the issuance of water revenue bonds which will be repaid with utility fees. U. Utility Rate Study. As growth continues there are improvements needed for the water system infrastructure as outlined in the 2014 -2018 Capital Improvement Plan provided to Council at their November 12 work session. Based on Springsted's recommendation in their Utility Rate Study these improvements will be financed with a combination of user charges increases for water (4.25 %) and sewer (6.35 %), in addition to debt financing of $4.8 million in 2014. V. Forester. As discussed at the November 12th work session the Forester position has been removed along with related equipment and training costs. W. LMCIT Premiums. The LMCIT workers compensation rebate received in 2013 is proposed to be appropriated to reduction in service fees charged to other funds. 0 Proposed 2014 Budget Proprietary Funds Revisions Utility Fund Revenues U Water user charges $ 143,266 U Sewer user charges 281,198 Total revenue adjustments 424,464 Expenditures 5 Server replacement in 2013 (8,400) T Watermain replacement (2014 Street Reconstruction) 705,803 T Sanitary sewer rehabilitation (2014 Street Reconstruction) (90,370) V Forester position (includes benefits, equipment, training) (120,165 Total expenditure adjustments $ 486,868 Net Change in Fund Balance (62,404 Liquor Fund 5 Server replacement in 2013 (8,400 Municipal Reserves W Charges for Services - General Fund (21,808 10 City of Lakeville PnCiflnNO/1 fn "rivo December 2, 2013 To the Honorable Mayor, Members of the City Council and the Citizens of Lakeville: It is our pleasure to present the Proposed 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 proposed budget including legislative changes, resumption of growth, aging infrastructure, inflationary pressures, emerging trends, innovation and efficiencies, entrepreneurial efforts and preparing for the future. Fconcir' cs Factors Initiatives Legislative Resumption Addressing Changes of Growth Aging Infrastructure Inflationary Emerging Pressures Trends Innovation and II Entrepreneurial Efficiencies I Efforts Preparing for the Future 11 20195 Holyoke Avenue, Lakeville, MN 55044 952- 985 - 4400.952- 985 -4499 fax www.lakeviRemn.gov Themes The budget identifies and focuses on a number of initiatives for the near and intermediate term in response to the themes. 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 $14,654. MS4 Permit Requirements. Polluted storm water runoff is most commonly transported through Municipal Separate Storm Sewer Systems (MS4s); storm water is often discharged untreated into local water bodies. To prevent harmful pollutants from being washed or dumped into an MS4, operators must obtain a NPDES permit and develop a storm water management program. The City has completed phase 2 of the NPDES permit application process. The cost implications of future requirements are unknown at this time. 12 of Growth New residential housing construction is at pre- recession levels due in large part to improving economic conditions. The resumption of growth will result in increased demands for infrastructure enhancements as well as service delivery such as inspections, code enforcement police, fire, streets and parks. Economic improvements can be found in a number of key indicators including but not limited to the following: Indicator Unemployment Rate - La keviIIe (1) Unemployment Rate- Minnesota( (1) Gross Domestic Product (GDP) (2) Inflation (CPI) (2) Sou rces , (1) Minnesota Dept. of Economic Development (2) Wall Streetlournal The improvements in economic conditions, as well as other factors, have resulted in increasing housing values and new residential construction. Indicator Median Home Value - Lakeville (3) Foreclosures- Sheriff sales (Dakota Cty) (4) Mortgage Rates -30 year fixed (FMAC) (5) New Construction - Lakeville ($ millions) (6) Sources' (3) Dakota CountyAssessor- Assessed valuation (4) Dakota County Community DevelopmentAgency (5) Freddie Mac (6) Lakeville Inspections Department Trends Trends Favorable ( +) 2012 Favorable (+) 2012 2011 Unfavorable (-) 4.5% 4.9% 4.45% 5.4% 5.8% + 1.5% 1.6% I' 1.7% 3.0% I' Sou rces , (1) Minnesota Dept. of Economic Development (2) Wall Streetlournal 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 -30 year fixed (FMAC) (5) New Construction - Lakeville ($ millions) (6) Sources' (3) Dakota CountyAssessor- 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 13 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 13 vacant lots and developer activity for anticipated new plats, the 2014 Budget and 2014 - 2018 Capital Improvement Plan are premised on 315 and 345 single family building permits in 2013 and 2014, respectively. 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 - $3,344,600). Improvements to County roads will have no impact on City operating costs. o County Road 50 expansion from County Road 60 (185 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 194 Street. New residential development community -wide as well as properties adjacent 14 RESIDENTIAL PERMITS 500 400 300 n % n 200 •�� UJ 100 �! CL 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 Y , —0—Total Residential Units — ir 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 - $3,344,600). Improvements to County roads will have no impact on City operating costs. o County Road 50 expansion from County Road 60 (185 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 194 Street. New residential development community -wide as well as properties adjacent 14 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, Hire, 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. 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 ($41 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. 15 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 2014 -2018 Capital Improvement Plan provided to Council at their November 12 work session accelerates the Street Reconstruction Plan ($8.0 million annually) for the next five years. 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 $8.3 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. Based on Springsted's recommendation in their Utility Rate Study these improvements will be financed with a combination of user charges increases for water (4.25 %) and sewer (6.35 %), in addition to debt financing which will be repaid with utility fees. 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. 16 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 $625,200 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 $1.7 million in 2015) depending on the timing of the equipment replacement. Total estimated equipment acquisitions - not including Liquor or Utility Fund equipment - is approximately $12.1 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 $300,000 tax levy for equipment acquisitions in 2014 with annual increases in subsequent years. 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 6 -7 percent per year. Trends There are trends emerging within our community which are influenced at least in part by external factors such as technology related crimes 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. 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, 17 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. An initial $45,000 reserve is proposed to be committed 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. 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 in 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. M efforts Continued marketing initiatives are proposed to promote economic development. Steps toward a future new liquor store located in southwestern 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. 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. 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 identified 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 strategic initiatives derived from the strategic planning process are proposed to be financed from the Communications Fund ($15,000 - 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. 19 The Truth in Taxation public hearing was 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. Final approval of the tax levy and budget is scheduled for December 16, 2013. Budget and tax levy information is available on the City website at www.lakevillemn.aov The role of government is to provide public services deemed to be of value to the people we serve. Commitment to providing quality and efficient services, developing effective partnerships, promoting comprehensive planning and seeking citizen participation remains a high priority. The proposed budget provides the foundation to providing public services which address the needs, values and desire of our community's residents and businesses. Respectfully submitted, Steven C. Mielke City Administrator 20 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 Net changes 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 21 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 4096 and not greater than 5096 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. 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 22 2014 Proposed Budget A summary of the General Fund 2014 proposed budget is as follows: General Fund Revenues General propertytaxes 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 2014 Proposed Increase/ Budget (decrease) $ 16,794,367 $ 886,725 1,947,676 142,341 608,401 (44,824) 2,156,037 206,214 274,590 - 44,413 639,678 61,461 (3,635) 759,814 69,923 22,646,759 1,256,744 4,579,936 231,122 10,353,465 72,639 3,643,430 78,046 3,303,757 (5,626) 303,497 263,497 22,184,085 639,678 (2,446,607) 462,674 3,063,673 8,634,300 (2,600,999) $ 9,096,974 $ 462,674 41% 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. 23 General Fund expenditures are anticipated to increase by $639,678. 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 requesting 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 requested 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. The 2014 budget also provides funding for park major maintenance projects. 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. 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 24 2014 Proposed Increase/ Classification Budget (decrease) Personnel $ 15,961,067 $ 583,644 Commodities 1,626,533 (233,469) Other charges and services 4,391,930 147,868 Capital outlay 108,563 82,635 Other 105,000 65,000 Total expenditures $ 22,193,093 $ 639,678 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 24 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) (74.1) (10.7) 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 w 3.0 0J 2.9 a W 2.8 LL C 2.7 ik 2.6 2.5 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 25 2008 2009 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 Publicworks 31.9 28.7 26.0 25.8 26.3 27.0 28.3 Parks and recreation 23.9 23.1 23.4 23.4 23.4 24.3 24.3 Total General Fund 168.8 156.8 152.5 153.2 155.3 156.9 160.3 Compared to 2007 (2.2) (14.2) (18.5) (17.8) (15.7) (74.1) (10.7) 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 w 3.0 0J 2.9 a W 2.8 LL C 2.7 ik 2.6 2.5 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 25 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 �99% 1 °k Y FrdnChl# F.e Conduit fees /other SPECIAL REVENUE FUNDS EXPENDITURES 65% 15% ■Personnel •ONerchaBes antl ery ces ]X pptlMPisVatNe suDPOM1 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. $140,000,000 $120,000,000 $100,000,000 $80,000,000 $60,000,000 $40,000,000 $20,000,000 LAKEVILLE BOND INDEBTEDNESS COMPARISON WITH DEBT /HOUSEHOLD I IIIIIIIIIIIIIIIndebtedness btedness $6,000 $4,000 $2,000 $0 26 ti� ti� ti� ti� ti� ti� AS OF DECEMBER 31 Moody's Credit Rating Moody', Investor Service has assigned the City of Lakeville a very Aa 1 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 Connection Chai $1,203,893 27 Municipal State Aid Liquor $904,639 Tax Increment 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 94 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 28 Equipment Fund Revenues General property taxes ALF Ambulance distribution Sale of assets Transfer from: Liquor Fund Total Revenues Expe nditure s Election equipment Fire Parks Police Streets Technology Total expenditures Net change in fiord balance Fund balance, January 1 Fund balance, December 31 2014 2015 2016 2017 2018 $ 300,000 $ 375,000 $ 408,800 $ 445,600 $ 485,700 19,814 - - - - 240,500 163,000 234,800 188,000 132,700 800,000 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 26,667 26,667 26,667 - - 832,805 63,332 35,000 666,750 263,750 485,212 448,221 473,325 362,210 174,130 813,523 316,977 590,898 674,164 80,487 861,827 742,626 1,283,675 978,294 626,871 84,902 114,043 93,764 370,256 581,656 3,104,936 1,711,866 2,503,329 3,051,674 1,726,894 (1,744,622) (13,866) (699,729) (1,258,074) 51,506 3,805,630 2,061,008 2,047,142 1,347,413 89,339 $ 2,061,008 $ 2,047,142 $ 1,347,413 $ 89,339 $ 140,845 Trail Improvement 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 $ 85,000 $ 125,000 $ 165,000 $ 205,000 4,000 2,600 1,800 1,100 600 49,200 87,600 126,800 166,100 205,600 297,309 257,629 242,512 205,592 237,371 (248,109) (170,029) (115,712) (39,492) (31,771) 759,340 511,231 341,202 225,490 185,998 $ 511,231 $ 341,202 $ 225,490 $ 185,998 $ 154227 M Pavement Fund 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. 30 2014 2015 2016 2017 2018 Revenues General property taxes $ 1,205,350 $ 1,211,531 $ 1217,589 $ 1,223,677 $ 1229,795 MSA - Maintenance 374,335 374,335 374,335 374,335 374,335 Total Revenues 1,579,685 1,585,866 1,591,924 1,598,012 1,604,130 Expenditures Capital improvements 2,017,469 1,207,309 1,867,020 1,723,120 2,029,183 Net Increase (Decrease) (437,784) 378,557 (275,096) (125,108) (425,053) Fund Balance, January 1 1,673296 1,235,512 1,614,069 1,338,973 1213,864 Fund Balance, December 31 $ 1,235,512 $ 1,614,069 $ 1,338,973 $ 1,213,864 $ 788,811 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. 30 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 Streets (snowplows and trucks) Parks Debt Service - Police Station General operations Community recycling Total Contributions 2014 $ 208,657 385,438 205,905 400,000 159,323 1,200 $ 1,360,523 31 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 (31,833 224,828 Net increase before transfers and depreciation $ 1,372,396 $ 328,800 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 Streets (snowplows and trucks) Parks Debt Service - Police Station General operations Community recycling Total Contributions 2014 $ 208,657 385,438 205,905 400,000 159,323 1,200 $ 1,360,523 31 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 Revenues Expenditures MCES sewer charges Personnel Commodities Contractual and other sys Major maintenance Total expenditures Operating income $ (1,467,463) $ 93,703 $ (11,895) $ (76,726) As growth continues there are improvements needed for the water system infrastructure. Based on Springsted's recommendation in their Utility Rate Study these improvements will be financed with a combination of user charges increases for water (4.25%) and sewer (6.35 %), in addition to debt financing of $4.8 million. A street light rate increase (a $0.33 /qtr. /residential unit rate increase) is proposed for the coming year. 32 Sanitary Street Environmental Water Sewer Lights Resources $ 3,398,833 $ 4,715,252 $ 742,300 $ 683,410 - 3,297,982 - - 948,019 677,457 17,397 232,194 349,067 84,481 31 26,374 1,147,250 276,999 736,767 501,568 2,421,960 284,630 - - 4,866,296 4,621,549 754,195 760,136 $ (1,467,463) $ 93,703 $ (11,895) $ (76,726) As growth continues there are improvements needed for the water system infrastructure. Based on Springsted's recommendation in their Utility Rate Study these improvements will be financed with a combination of user charges increases for water (4.25%) and sewer (6.35 %), in addition to debt financing of $4.8 million. A street light rate increase (a $0.33 /qtr. /residential unit rate increase) is proposed for the coming year. 32 Property Taxes Preliminary 2014 Tax Levy The preliminary 2014 property tax levy is proposed to be $23.6 million which is a $578,811 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 Property Tax Le Operations, including equipment Debt - Street improvements Debt- Public facilities Streets pavement management Debt- Parks and arena Trails maintenance Total Tax Levy 17,102,864 3,029,063 1,610,019 1,205,350 665,500 45,200 $ 23,657,996 Increase/ (decrease) 633,110 238,043 (276,600) (24,650) (36,292) 45,200 $ 578,811 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 $ 873 $ 34 33 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 Capacity 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% 34