HomeMy WebLinkAboutItem 051
City of Lakeville
Finance Department
Memorandum
To: Mayor and Council
From: Justin Miller, City Administrator
Jerilyn Erickson, Finance Director
Date: November 28, 2016
Subject: 2016 Yearend Preview & Final 2017 Budget/Tax Levy Discussion
The purpose of this report is to provide the City Council with information regarding the 2017
proposed budgets for the Liquor Fund and General Fund and the property tax levy to support
general services.
The proposed changes achieve the following goals:
Reduce the property tax Increase from 4.95% to 3.89%;
Maintain fund balance ratio at 46.2% which is the middle of the required range of 40-
50%;
Eliminate the need to issue debt in 2017 for equipment by using available General
Fund reserves.
GENERAL FUND
2016 Year End Estimates
Staff has prepared year end revenue and expenditure estimates for the General Fund. The
following chart summarizes the impact of those estimates:
2016 Original
Budget
2016 Year End
Estimate
Net Change in Fund Balance $ 312,534 $1,746,856
Ratio: Fund Balance to Next
Year Expenditures*
44.8% 53.4%
The 2016 year end estimate includes assumptions that Staff believe are reasonable. Staff
recognizes that actual activity will differ from the assumptions by varying degrees. A few
areas that may have greater risk or opportunity from the assumptions are shown below:
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Assumption
Risk Opportunity
Building Permit 350 SF / 70TH
Units
342 SF / 65TH Units
($28,000)
360 SF / 75TH Units
$32,500
Investment
Income
$40,000 Rates Increase; Negative
Fair Value Adjustment
Rates Decrease; Positive
Fair Value Adjustment
Snowplowing Normal Levels for
November &
December
Increased number of
snow events
Less than normal levels for
November & December
Fuel Based on current
contract prices
Increased cost of fuel
and usage
Decreased usage
2017 Revenue Changes in the General Fund
The following changes have been incorporated into the current budget presented to you
today:
Revenues Totals
Preliminary (includes Transfers In) – 09/19/2016 26,447,295
Licenses & Permits – Apartment Permits 145,804
Intergovernmental: (18,947)
State Police Aid 39,000
DUI Grant (61,800)
Other Grants 3,853
Charges for Services – Engineering Project Fees (600,175)
Court Fines 91,000
Investment Income 40,000
Miscellaneous ( 3,500)
Total $26,101,477
*Single family building permits are budgeted at 300 for 2017.
2017 Expenditure Changes in the General Fund
The following changes have been incorporated into the current budget presented to you
today:
Expenditure Totals
Preliminary (Includes Transfers Out) – 09/19/2016 $27,027,295
Adjustments: 552,704
Personnel – Adjust for Employee Turnover/Changes (111,000)
Insurance Allocation – Leave at 2016 Amount (80,625)
Motor Fuel – Reduce Cost/Gallon (24,500)
O & M Vehicle 27,500
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Carry Forward CR70 Arterial Study 45,000
Other 1,329
Transfers Out – Equipment Fund – Replace Bonding 695,000
Total $27,579,999
Fund Balance
The Fund Balance Policy states that the City will endeavor to maintain an unrestricted fund
balance in the General Fund of an amount not less than 40% and not greater than 50% of the
next year’s budgeted expenditures of the General Fund.
The proposed 2017 budget includes the use of reserves for one-time or long-term purchases
as well as some items carried forward from 2016, grant-related expenses and equipment
transitions:
Comp Plan Updates $ 130,000
Facility Improvements $ 200,000
Equipment Replacement $ 945,000*
Carry Forward Items $ 123,805
DUI Grant Expenses $ 61,800
Equipment Transition, Etc. $ 17,917
Total $ 1,478,522
*This will eliminate the need to issue debt for equipment replacement.
The following table shows the estimated impact on the General Fund reserve balance at year
ending 12/31/2017:
Change ($) FB/CY Exp FB/Est 2018 Exp
(3% growth)
($1,478,522) 47.8% 46.4%
PROPERTY TAX LEVY
Impact of Growth, Inflation and Other Factors
The following chart provides a guide for establishing the 2017 tax levy based on factors that
impact the Lakeville community:
Low
Community Growth 2.60%
Consumer Price Index (CPI-U) 1.00%
Debt – Street Projects 1.38%
Total 4.98%
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Proposed Property Tax Levy
The proposed 2017 property tax levy is comprised of the following components:
Fund Proposed
2017 Levy
9/19/16
Proposed
2017 Levy
11/28/16
Change
from 2016
Adopted
Levy
General Fund $18,842,000 $18,842,000 $288,205
Street Reconstruction 50,000 50,000 0
Pavement Management Fund 1,210,000 1,191,550 0
Building Fund 150,000 150,000 99,000
Equipment Fund 350,000 350,000 100,000
Park Improvement Fund 175,000 175,000 125,000
Trail Improvement Fund 111,200 111,200 33,000
Debt Service Funds 6,062,747 5,809,864 354,790
TOTAL LEVY $26,950,947 $26,679,614 $999,995
The preliminary property tax levy was adopted in September at $26,950,947 which was an
increase of $1,271,328 or 4.95% from the 2016 tax levy. The proposed tax levy is $271,333 less
than the preliminary tax levy and results in a 3.89% increase from 2016 to 2017.
The City tax capacity rate is anticipated to decrease from 38.669% to 37.487%.
Market Valuation
Preliminary taxable market values have increased $386 million or 6.6% from 2016 to 2017, of
which approximately $147 million or 2.5% is from new construction. Based on the 2016 tax
rate, new construction will generate about $664,000 in property taxes. This equates to about
2.6% of the 2016 property tax levy.
Impact on Median Valued Home and Commercial Property
The proposed 2017 City tax levy will result in an estimated $13 increase on the median value
home ($268,400) due to both a levy increase as well as a market value increase as determined
by the Dakota County Assessor. The proposed 2017 City tax levy will result in an estimated
$227 decrease on a commercial property valued at $1 million.
LIQUOR FUND
The Liquor Fund budget reflects a lower net operating income for 2017 as compared to 2016.
Net profits from the Liquor Operation have been used to pay for administrative and
technology support from the General Fund, police station bonds, as well as capital
replacement in the Equipment Fund.
The level of reserves has been declining in recent years due to the continued transfers
exceeding the net income generated by the operation. The transfer to the Equipment Fund
is eliminated and the transfer for the police station bond reduced in 2017 to avoid any further
decline in the reserves.
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BUDGET SCHEDULE
Nov 28 Workshop – Budget Review
Dec 5 Meeting – Public Budget Meeting (Truth in Taxation) / Adopt 2017 Budget
and 2017 Tax Levy; Adopt 2017 Fee Schedule
COUNCIL DIRECTION
Staff is seeking direction regarding the final 2017 property tax levy and budgets in order to
prepare the resolutions for the December 5, 2016 council meeting.
Attachments:
1) Budget for General Fund
2) Budget for Liquor Fund
2016 201720142015Adopted2016DepartmentActualActualBudgetEstimateRequestRevenues (Amount) (Percent) (Amount) (Percent)General property taxes 16,844,083$ 17,857,368$ 18,553,538$ 18,558,250$ 18,833,557$ 280,019$ 1.5%275,307$ 1.5%Licenses and permits 2,159,364 2,655,873 1,855,528 2,714,492 2,202,952 347,424 18.7%(511,540) -18.8%Intergovernmental 809,596 978,596 988,816 996,652 1,021,685 32,869 3.3%25,033 2.5%Charges for services 2,499,340 3,388,546 3,149,629 3,421,571 2,666,697 (482,932) -15.3%(754,874) -22.1%Court fines 223,642 369,356 315,000 466,000 466,000 151,000 47.9%- 0.0%Investment income 99,179 55,883 40,376 40,000 90,071 49,695 123.1%50,071 125.2%Miscellaneous 71,484 67,495 41,645 38,145 37,860 (3,785) -9.1%(285) -0.7% Total revenues 22,706,688 25,373,117 24,944,532 26,235,110 25,318,822 374,290 1.5%(916,288) -3.5%Expenditures - General governmentMayor and Council 93,122 95,965 99,866 98,983 101,090 1,224 1.2%2,107 2.1%Committees and Commissions 70,622 73,175 71,284 84,840 75,660 4,376 6.1%(9,180) -10.8%City administration 386,351 393,910 413,336 425,602 423,147 9,811 2.4%(2,455) -0.6%City Clerk 183,285 139,779 195,441 193,826 139,774 (55,667) -28.5%(54,052) -27.9%Legal counsel 53,495 68,990 78,178 55,340 57,000 (21,178) -27.1%1,660 3.0%Planning 418,192 427,404 458,036 465,616 564,262 106,226 23.2%98,646 21.2%Community and econ. development 272,594 288,720 297,952 304,927 358,272 60,320 20.2%53,345 17.5%Inspections 893,563 943,737 1,000,761 1,110,440 1,061,584 60,823 6.1%(48,856) -4.4%General government facilities 392,356 396,713 427,117 482,236 529,611 102,494 24.0%47,375 9.8%Finance 639,522 684,386 718,826 690,181 759,615 40,789 5.7%69,434 10.1%Information systems 472,685 537,181 543,979 601,749 620,742 76,763 14.1%18,993 3.2%Human resources 344,028 433,294 490,511 528,370 520,626 30,115 6.1%(7,744) -1.5%Insurance 289,075 322,100 182,180 182,180 182,180 - 0.0%- 0.0% Public safety - 0%Police 8,790,329 9,310,676 9,693,385 9,805,833 10,493,244 799,859 8.3%687,411 7.0%Fire 1,519,138 1,649,260 1,753,089 1,722,947 1,788,770 35,681 2.0%65,823 3.8% Public works - 0%Engineering 715,285 659,432 785,343 735,030 1,005,397 220,054 28.0%270,367 36.8%Operations and Maintenance 144,811 531,754 652,545 489,201 664,477 11,932 1.8%175,276 35.8%Streets 3,040,942 2,753,580 3,321,247 3,187,886 3,276,483 (44,764) -1.3%88,597 2.8% Parks and recreation - 0%Parks 2,212,461 2,362,566 2,442,197 2,319,631 2,541,925 99,728 4.1%222,294 9.6%Recreation 602,430 635,489 622,974 629,951 672,981 50,007 8.0%43,030 6.8%Heritage Center 101,236 85,516 98,770 85,399 95,822 (2,948) -3.0%10,423 12.2%Arts Center 425,771 474,266 479,173 499,599 502,337 23,164 4.8%2,738 0.5%Other - - 562,501 - - (562,501) -100.0%- 0% Total expenditures 22,061,293 23,267,893 25,388,691 24,699,767 26,434,999 1,046,308 4.1%1,735,232 7.0%
Excess (deficiency) of revenuesover expenditures 645,395 2,105,224 (444,159) 1,535,343 (1,116,177) (672,018) 151.3%(2,651,520) -172.7%Other financing sources (uses)Transfer from other funds 759,814 809,935 806,513 806,513 782,655 (23,858) -3.0% (23,858) -3.0%Transfer to other funds - (1,612,000) (50,000) (595,000) (1,145,000) (1,095,000) 2190.0%(550,000) 92.4%Total other financing sources (uses) 759,814 (802,065) 756,513 211,513 (362,345) (1,118,858) -147.9%(573,858) -271.3%Net change in fund balance 1,405,209 1,303,159 312,354 1,746,856 (1,478,522) (1,790,876) -573.3%(3,225,378) -184.6%Fund balance, January 1 9,666,560 11,071,769 11,406,277 12,374,928 14,121,784 2,715,507 23.8%1,746,856 14.1%Fund balance, December 31 11,071,769$ 12,374,928$ 11,718,631$ 14,121,784$ 12,643,262$ 924,631$ 7.9%(1,478,522) -10.5%
Ratio: Fund balance to CY expenditures 50.2%53.2%46.2%57.2%47.8%Ratio: Fund balance to NY expenditures 43.6%50.1%44.8%53.4%46.4%
Change from2016Estimate
CITY OF LAKEVILLE, MINNESOTAGeneral FundSchedule of Revenues, Expenditures and Changes in Fund BalancesFor the Year Ending December 31, 2017
Change from2016 AdoptedBudget
11/23/2016
2016 2016 201720142015ADOPTEDDEPARTDEPARTACTUALACTUALBUDGETESTIMATEESTIMATE
RevenuesLiquor sales 14,883,888 13,611,292 13,882,928 13,926,781 14,045,802 Cost of goods sold (11,078,916) (10,322,173) (10,497,922) (10,497,195) (10,605,816) Net revenues 3,804,972 3,289,119 3,385,006 3,429,586 3,439,986
Personnel services 1,317,782 1,308,167 1,358,238 1,360,920 1,443,341 Commodities 52,476 54,971 72,276 63,572 70,710 Contractual services 866,128 918,721 846,686 810,188 857,233 Total expenses 2,236,386 2,281,859 2,277,200 2,234,680 2,371,284
Net operating income/(loss)1,568,586 1,007,260 1,107,806 1,194,906 1,068,702
Other Receipts (Disbursements)Interest income 49,005 5,104 17,115 5,412 3,744 Federal energy grant - - - - - Interest expense (154,513) (145,982) (136,950) (136,950) (127,492) Uncollectible checks - - - - - Capital outlay acquisitions (2,031,320) (105,299) (107,915) (77,510) (205,000) Current portion of bonds payable (175,000) (180,000) (190,000) (190,000) (200,000)
Total other (2,300,805) (373,800) (410,250) (391,548) (521,248)
Net inc(dec) before transfers (732,219) 633,460 697,556 803,358 547,454
Transfer to General Fund (Admin.) (119,652) (124,876) (131,345) (131,345) (145,706) Transfer to Gen Fund (technology) (39,671) (40,297) (41,625) (41,625) (53,113) Transfer to Environmental Resources (2,989) (1,557) (1,967) (1,967) (2,275) Transfer to Equipment Fund (800,000) (831,242) (500,000) (500,000) - Transfer to Building Fund (6,751) - - - - Transfer to Fire Station #4 Bonds - - - - - Transfer to Police Station Bonds (400,000) (400,000) (400,000) (400,000) (346,360)
Total transfers (1,369,063) (1,397,972) (1,074,937) (1,074,937) (547,454)
Net increase/(decrease) (2,101,282) (764,512) (377,381) (271,579) -
Working capital, January 1 4,343,835 2,242,553 1,559,578 1,478,041 1,206,462
Working capital, December 31 2,242,553 1,478,041 1,182,197 1,206,462 1,206,462 - - - - -
LIQUOR FUNDPROJECTED WORKING CAPITAL
G:\Budget\2017 Budget\Budget Adopted\LIQUOR BUDGET : BUDGET Page 6 11/23/2016