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HomeMy WebLinkAboutItem 31 City of Lakeville Finance Department Memorandum To: Mayor and Council From: Justin Miller, City Administrator Jerilyn Erickson, Finance Director Date: September 10, 2018 Subject: 2019 Preliminary Budget & Property Tax Levy The purpose of this report is to provide the City Council with an update on the impact of adding the police body-worn cameras and in-car video upgrade and personnel to manage the additional video/data requests. The following costs reflect an October 1, 2019 implementation date: General Fund (Operations): Storage/Support - $30,750 (annual cost will be approximately $123,000) Personnel – addition of Records Technician position - $30,000 The addition of these costs was offset by reductions recommended by the Police Chief and Deputy Chief within the Police Department proposed operating budget. Equipment Fund: Moved the $130,000 acquisition of hardware/software from 2020 to 2019. Funding for the hardware/software will be provided by a transfer from General Fund. This will reduce the estimated fund balance ratio as of 12/31/2019 from 46.1% to 45.7%. Property Tax Levy The changes noted above do not change the proposed property tax levy. As previously discussed, the proposed 2019 property tax levy is comprised of the following components: 2 Fund Proposed 2019 Levy Change from 2018 ($) General Fund $21,332,000 $1,252,618 Street Reconstruction 0 (50,000) Pavement Management Fund 1,100,000 (91,550) Building Fund 0 (400,000) Equipment Fund 525,000 0 Park Improvement Fund 175,000 0 Trail Improvement Fund 0 (111,200) Debt Service Funds 7,109,820 1,640,402 TOTAL LEVY $30,241,820 $2,240,270 Future Challenges As we discussed at the 08/27/2018 workshop, many challenges remain:  As a growing city, additional resources will be needed to provide services for a growing population, to maintain more streets and parks, etc. in addition to maintaining our current assets on an ongoing basis.  The Equipment Plan has historically been underfunded. The City should strive to fund the Equipment Plan on an annual basis at a level consistent with scheduled replacements, avoiding the need to issue debt and incur added interest costs. The Equipment Plan currently requires the use of short-term equipment certificates every year (but one) starting in 2020.  Park Improvement Fund and Trail Improvement Fund will both need additional resources to maintain our current assets. The City should strive to fund these improvements on an annual basis rather than rely on random one-time funds from other sources.  The City will be considering some large projects that will require the issuance of debt. This will impact the City’s ability to provide resources for the current level of services as well as addressing the needs of a growing population.  Future tax levies. Based on the proposed Capital Improvement Program (projects, issuance of debt, etc.) as well as a 3% inflationary factor for the General Fund levy, the following increases in tax levies are projected: 2019 2020 2021 2022 2023 8.00% 9.20% 6.71% 11.30% 3.59% These projections do not reflect any positions or services being added to address the needs of a growing community. Any reduction in the proposed 2019 tax levy puts added pressure on future levies. 3 Resolution Staff will be preparing a resolution for adopting the preliminary property tax levy and budget by the City Council at the September 17, 2018 council meeting. In addition, a resolution will be prepared authorizing the following transfers that were discussed: 1) Park Dedication Fee Fund to the Trail Improvement Fund (remaining funds from sale of land adjacent to police station-$743,000) to replace the needed tax levy in 2019 and offset some of the tax levy needed in 2020 and 2021. 2) General Fund to the Park Improvement Fund ($125,000) to offset some of the tax levy needed in 2019. Budget & CIP Schedule Aug 27 Workshop – Review Preliminary Tax Levy and Budget; Final CIP Review / Debt Analysis Sept 6 Planning Commission – Review CIP for compliance with Comp Plan Sept 10 Workshop – Review Preliminary Tax Levy and Budget Sept 17 Meeting – Adopt Preliminary Tax Levy & Budget; Announce Public Budget Meeting Date Oct 15 Meeting – Public Hearing on CIP/Street Reconstruction Plan; Adopt CIP & Street Reconstruction Plan. Oct 22 Workshop – Budget Review – Utility Funds and Liquor Fund; Review proposed Fee Schedule. Nov 26 Workshop – Final 2019 Budget Review / 2018 Yearend Preview Dec 3 Meeting – Public Budget Meeting (Truth in Taxation); Adopt 2019 Budget & Tax Levy; Adopt Fee Schedule Council Direction Staff is seeking direction regarding the 2019 property tax levy and budget. Attachments: 1) Updated General Fund Summary; 2) Updated 2019-2028 Equipment Plan; 3) August 27, 2018 Memo – 2019 Preliminary Budget & Property Tax Levy; CIP-Equipment & Facilities Plans 2018 2019 Percent 2017 Amended 2018 Working of Actual Budget Estimate Budget Total Revenues (Amount) (Percent) (Amount) (Percent) General property taxes 18,967,562$ 20,055,586$ 20,060,167$ 21,315,407$ 76.4% 1,259,821$ 6.3% 1,255,240$ 6.3% Licenses and permits 3,306,526 2,356,882 2,722,585 2,390,498 8.6% 33,616 1.4% (332,087) -12.2% Intergovernmental 1,143,174 1,005,921 1,086,495 961,519 3.4% (44,402) -4.4% (124,976) -11.5% Charges for services 2,733,938 2,926,300 2,929,739 2,731,549 9.8% (194,751) -6.7% (198,190) -6.8% Court fines 392,514 425,000 346,000 346,000 1.2% (79,000) -18.6% - 0.0% Investment income 116,686 90,071 108,000 120,000 0.4% 29,929 33.2% 12,000 11.1% Miscellaneous 75,639 47,303 58,333 47,164 0.2%(139) -0.3%(11,169) -19.1% Total revenues 26,736,039 26,907,063 27,311,319 27,912,137 100.0%1,005,074 3.7%600,818 2.2% Expenditures General government Mayor and Council 97,636 107,230 99,467 113,250 0.4% 6,020 5.6% 13,783 13.9% Committees and Commissions 93,156 87,600 83,718 68,218 0.2% (19,382) -22.1% (15,500) -18.5% City administration 407,945 478,570 478,413 477,506 1.7% (1,064) -0.2% (907) -0.2% City Clerk 136,540 201,157 208,412 148,586 0.5% (52,571) -26.1% (59,826) -28.7% Legal counsel 77,936 80,000 78,296 81,000 0.3% 1,000 1.3% 2,704 3.5% Planning 504,577 585,768 584,833 580,515 2.0% (5,253) -0.9% (4,318) -0.7% Community and econ. development 318,925 366,222 380,724 375,237 1.3% 9,015 2.5% (5,487) -1.4% Inspections 1,166,972 1,225,953 1,233,038 1,273,544 4.4% 47,591 3.9% 40,506 3.3% General government facilities 512,854 557,962 572,346 607,324 2.1% 49,362 8.8% 34,978 6.1% Finance 738,472 781,534 776,690 803,479 2.8% 21,945 2.8% 26,789 3.4% Information systems 541,210 673,236 667,261 756,545 2.6% 83,309 12.4% 89,284 13.4% Human resources 460,502 511,685 527,906 527,997 1.8% 16,312 3.2% 91 0.0% Insurance 285,000 285,000 285,000 285,000 1.0% - 0.0% - 0.0% Public safety - 0% Police 10,398,139 11,259,374 11,052,602 11,628,288 40.5%368,914 3.3%575,686 5.2% Fire 1,817,520 1,855,127 1,867,218 2,020,871 7.0%165,744 8.9%153,653 8.2% Public works - 0% Engineering 802,194 974,588 889,029 881,757 3.1% (92,831) -9.5% (7,272) -0.8% Construction Services 473,480 587,152 497,083 573,870 2.0% (13,282) -2.3% 76,787 15.4% Streets 2,994,968 3,194,298 3,306,350 3,288,617 11.5% 94,319 3.0% (17,733) -0.5% Parks and recreation - 0% Parks 2,471,209 2,643,982 2,644,756 2,699,763 9.4% 55,781 2.1% 55,007 2.1% Recreation 653,443 700,028 709,786 745,137 2.6% 45,109 6.4% 35,351 5.0% Heritage Center 114,983 129,549 128,307 138,674 0.5% 9,125 7.0% 10,367 8.1% Arts Center 539,879 510,370 518,362 550,049 1.9% 39,679 7.8% 31,687 6.1% Other - (43,090) - 79,466 0.3%122,556 -284.4%79,466 0% Total expenditures 25,607,540 27,753,295 27,589,597 28,704,693 100.0%951,398 3.4%1,115,096 4.0% Excess (deficiency) of revenues over expenditures 1,128,499 (846,232) (278,278) (792,556) 53,676 -6.3%(514,278) 184.8% Other financing sources (uses) Transfer from other funds 782,654 765,232 761,997 759,556 (5,676) -0.7% (2,441) -0.3% Transfer to other funds (1,858,730) (660,864) (785,864) (380,000) 280,864 -42.5%405,864 -51.6% Total other financing sources (uses) (1,076,076) 104,368 (23,867) 379,556 275,188 263.7%403,423 -1690.3% Net change in fund balance 52,423 (741,864) (302,145) (413,000) 328,864 -44.3% (110,855) 36.7% Fund balance, January 1 15,076,500 14,288,353 15,128,923 14,826,778 538,425 3.8%(302,145) -2.0% Committed Fund Balance - - - - - 0%- 0% Fund balance, December 31 15,128,923$ 13,546,489$ 14,826,778$ 14,413,778$ 867,289$ 6.4%(413,000) -2.8% Adj Fund Balance, Dec 31 (net of restricted)14,214,548$ 12,850,659$ 13,912,403$ 13,499,403$ Ratio: Fund balance to CY expenditures 54.8%46.3%50.4%47.0% Ratio: Fund balance to NY expenditures 51.5%44.8%48.5%45.7% 2018 Amended Budget 2018 Estimate CITY OF LAKEVILLE, MINNESOTA General Fund Schedule of Revenues, Expenditures and Changes in Fund Balances For the Year Ending December 31, 2019 Change from Change from CITY OF LAKEVILLE 2019 - 2028 EQUIPMENT PLAN2018 2017 CF +2019 - 2028ADOPTED2018 Est'd 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 TotalsUse of Funds:Elections 44,112$ 28,400$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Information Systems 491,283 417,530 134,580 223,109 118,355 313,029 494,730 73,713 301,426 192,216 400,209 323,933 2,575,300 Administration - - - 26,500 - - - 23,600 30,250 - - - 80,350 Facilities - - - - - - 30,094 34,506 - - - - 64,600 Planning - - - - - - - - - - - - - Inspections - - - 26,500 27,250 28,000 28,750 - - 31,000 - - 141,500 Police 542,902 777,448 763,831 819,304 392,825 514,612 413,685 541,798 759,464 396,221 656,717 852,364 6,110,821 Fire 178,152 188,408 - 678,400 803,991 - 29,900 94,400 753,353 192,726 - 84,500 2,637,270 Engineering - - - 21,705 - - - - - - - 32,869 54,574 Construction Services 28,559 27,460 - - - - 31,050 31,860 - - 31,750 - 94,660 Streets 579,646 567,457 579,064 1,306,528 353,878 855,896 1,217,076 949,646 1,041,701 157,778 1,610,747 2,245,780 10,318,095 Parks 261,210 266,149 171,290 570,672 544,564 186,816 156,055 192,340 569,539 473,680 486,791 716,203 4,067,950 Environmental Resources57,118 29,559 - - - - - - - - - - - Forestry- - - 22,083 - - - - - - - 22,083 Communications49,530 47,000 66,500 69,000 64,500 37,500 50,000 62,500 10,000 79,500 21,000 50,000 510,500 Utilities106,182 104,678 65,022 62,898 503,310 235,107 68,239 164,907 227,363 572,572 73,186 327,249 2,299,853 Liquor- - - - - - - - - - - - - - - - - - - - - - - - - - Total Use of Funds 2,338,693$ 2,454,089$ 1,780,287$ 3,804,616$ 2,830,756$ 2,170,960$ 2,519,579$ 2,169,270$ 3,693,097$ 2,095,693$ 3,280,401$ 4,632,897$ 28,977,556$ Source of Funds:Interest Earnings (2%) 36,404$ 36,404$ 18,331$ 9,866$ 1,668$ 3,606$ 11,191$ 12,208$ 25,334$ 7,563$ 16,216$ 22,165$ 128,148$ Annual Levy 525,000 525,000 525,000 675,000 675,000 675,000 750,000 850,000 950,000 1,050,000 1,150,000 1,150,000 8,450,000 General Fund Contribution - - 130,000 - - - - - - - - - 130,000 Liquor Fund Contribution 250,000 250,000 400,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 4,900,000 Pavement Mgmt Fund Contribution 85,000 85,000 - - - - - - - - - - - Environmental Res Fund Contribution 31,000 31,000 31,000 31,000 31,000 31,000 31,000 31,000 31,000 - - - 217,000 Funding outside Equipment FundGeneral Fund31,344 31,077 17,488 61,308 41,820 79,795 56,037 10,383 7,006 56,257 37,465 39,465 407,024 Communications Fund49,530 47,000 66,500 69,262 68,627 41,027 50,286 64,406 10,000 84,598 25,089 50,000 529,795 Utility Fund212,189 191,829 69,804 77,047 538,418 264,365 81,917 173,484 235,085 580,294 96,348 337,793 2,454,554 Liquor Fund6,303 6,303 - 61,224 469 12,596 46,099 7,961 70,029 20,007 13,483 - 231,869 Lakeville Arenas2,750 2,750 4,660 - 5,660 7,811 13,881 11,130 1,123 4,576 14,251 3,568 66,659 Auction/Sale Proceeds 225,000 196,951 94,300 225,000 225,000 225,000 225,000 225,000 225,000 225,000 225,000 225,000 2,119,300 Bond Proceeds - - - 1,685,000 840,000 710,000 805,000 940,000 750,000 - 1,500,000 1,500,000 8,730,000 Total Source of Funds 1,454,520$ 1,403,314$ 1,357,083$ 3,394,707$ 2,927,662$ 2,550,200$ 2,570,411$ 2,825,572$ 2,804,577$ 2,528,295$ 3,577,851$ 3,827,991$ 28,364,349$ Change in Fund Balance(884,173)$ (1,050,775)$ (423,204)$ (409,909)$ 96,906$ 379,240$ 50,832$ 656,302$ (888,520)$ 432,602$ 297,450$ (804,907)$ (613,207)$ Beginning Fund Balance$1,820,207 $1,967,301 $916,526 $493,322 $83,413 $180,319 $559,559 $610,391 $1,266,693 $378,173 $810,775 $1,108,226Ending Fund Balance$936,034 $916,526 $493,322 $83,413 $180,319 $559,559 $610,391 $1,266,693 $378,173 $810,775 $1,108,226 $303,3192018-2022 CIP Adopted 2,492,980 3,390,606 3,001,109 2,279,446 2,320,118 3,183,634 3,191,925 4,099,930 2,526,220 3,688,584 30,174,552 Variance (38,891) (1,610,319) 803,507 551,310 (149,158) (664,055) (1,022,655) (406,833) (430,527) (408,183) (1,196,996) 1 City of Lakeville Finance Department Memorandum To: Mayor and Council From: Justin Miller, City Administrator Jerilyn Erickson, Finance Director Date: August 27, 2018 Subject: 2019 Preliminary Budget & Property Tax Levy; CIP-Equipment & Facilities Plans The purpose of this report is to provide the City Council with an overview of community growth, proposed 2019 property tax levy, property tax supported-funds, primary drivers of the revenues and expenditure changes in the General Fund as well as the impact of such on the median valued home, commercial property and fund balance reserves. City staff has been preparing their 2019 budget requests over the past few months. The proposed budgets reflect some of additional resources needed because of community growth, increased costs for personnel, commodities, replacement of existing vehicles and equipment, and maintenance of facilities. Community Growth The City of Lakeville has experienced significant growth during these past ten years. Since 2009, growth from new construction has added $1.15 billion to the taxable market value of which $802 million or 70% of the growth has occurred in the past five years. The following chart provides a breakdown of that growth: Type 10-Yr Growth 5-Yr Growth Residential $ 973,971,900 84.7% $ 695,265,200 86.6% Commercial/Industrial 114,202,700 9.9% 79,900,000 10.0% Apartments 56,513,900 4.9% 26,469,000 3.3% Other 5,304,500 0.5% 617,100 0.1% Total $1,149,993,000 100.0% $ 802,251,300 100.0% The population has grown from 55,954 in 2010 (U.S. Federal Census) to approximately 63,000, or 12-13%. As we add commercial and industrial businesses, this also increases the amount of traffic and number of people requiring services from the City (i.e. streets, parks, police, fire, etc). Preliminary taxable market values have increased $685 million or 10.2% from 2018 to 2019, of which approximately $207 million or 3.1% is from new construction. Based on the 2018 tax 2 rate, new construction will generate about $877,000 in property taxes. This equates to about 3.1% of the 2018 property tax levy. City Tax Rate The City has been fortunate to keep its tax rate relatively low. Since 2013, the tax rate has declined primarily due to significant new construction growth. Proposed Property Tax Levy The following chart provides a guide for establishing the 2019 tax levy based on factors that impact the Lakeville community: Growth (New Construction) 3.10% CPI-U (MSP)# 3.00% Debt Service* 5.86% Total 11.96% # Dec 2017 to July 2018 *Larger due to one-time adjustments in 2018 The 2019 debt service levy was projected to increase 7.26% due to one-time adjustment of $1 million in 2018 as well as estimates for 2018 bond issuance. If the $1 million adjustment had NOT been made, the increase in 2019 debt service levy was projected to be 3.51%. The actual change is 5.86%. 0.33973 0.41234 0.35755 0.00000 0.05000 0.10000 0.15000 0.20000 0.25000 0.30000 0.35000 0.40000 0.45000 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Est City of Lakeville Tax Capacity Rates 3 The proposed 2019 property tax levy is comprised of the following components: Fund Proposed 2019 Levy Change from 2018 ($) General Fund $21,332,000 $1,252,618 Street Reconstruction 0 (50,000) Pavement Management Fund 1,100,000 (91,550) Building Fund 0 (400,000) Equipment Fund 525,000 0 Park Improvement Fund 175,000 0 Trail Improvement Fund 0 (111,200) Debt Service Funds 7,109,820 1,640,402 TOTAL LEVY $30,241,820 $2,240,270 The proposed 2019 tax levy is an 8.0% increase over the 2018 tax levy. The estimated tax capacity rate is 35.755%, which equates to a 1.8% decrease from the 2018 tax rate of 36.419%. The estimated 2019 tax rate is the lowest since 2010. The 2018 tax levy took advantage of some one-time funds available from capital project funds that were being closed out. The funds were unspent bond proceeds that could only be transferred to the corresponding debt service funds; therefore, the debt service levy was reduced. This tax capacity enabled us to increase the funding that was needed in the Equipment Fund and the Building Fund for replacement of capital assets, technology improvements and major facility improvements. These two funds have historically been underfunded from a long-term planning perspective and should be increased to provide a stable funding source. As we projected, the debt service levy has increased significantly in 2019 because one-time funds were utilized in 2018 that would not be available in 2019. In addition, the City issued bonds for the 2018 street improvement projects and the first levy comes online in 2019. Impact on Median Valued Home and Commercial Property The median valued home value increased 8.97% from $282,100 to $307,400. An 8.00% increase in the property tax levy would result in the city portion of the property taxes increasing by approximately $81. The additional $81 will provide resources for the following Funds: Fund General Fund $45.30 Street Reconstruction (1.80) Pavement Mgmt Fund (3.30) Building Fund (14.50) Trail Imp Fund (4.00) Debt Service Funds 59.30 Total $81.00 4 Existing commercial properties in Lakeville, in the aggregate, decreased in market value by 14.6%. The proposed 2018 City tax levy will result in an estimated $1,179 decrease on a commercial property valued at $1 million with a 14.6% decrease in value. Primary Drivers of Revenue Changes in the General Fund The primary drivers of the change in revenues for the preliminary 2019 General Fund budget are as follows: General Fund Revenues Totals Property Taxes (New) 1,240,000$ Other Tax 20,000 Licenses & Permits 33,000 Permits* 33,000 Intergovernmental (44,000) Post Board Training Grant 36,000 Federal DUI Officer Grant (49,000) Downtown Development Guide (27,000) Comp Plan Grant (16,000) Other Grants (Traffic Safety/Met Council) 12,000 Charges for Services (195,000) General Governement 34,000 Public Safety (43,000) Public Works (236,000) Recreation 50,000 Court Fines (79,000) Investment income 30,000 Total 1,005,000 *Single family building permits are budgeted at 350 for 2019. Primary Drivers of Expenditure Changes in the General Fund The primary drivers of the change in expenditure levels for the preliminary 2019 General Fund budget are as follows: 5 General Fund Expenditures Totals Personnel:907,649$ 2018 New Positions-Transition to Full Year for 2019 107,000 2019 New Positions 12,650 2019 Fire Department Transition to Pay-Per-Hour 63,800 2019 Council Salary Change (Including additional meetings 12,798 2019 COLA 425,627 2019 Step Increases 107,287 2019 Compensation Study Impact 140,000 Workers Compensation 122,164 Health Insurance 39,097 Change in Benefits-FICA, Medicare, PERA, etc. 138,117 Budget for 2019 Vacancies (75,000) Other (Transitions) (185,891) Commodities:53,409 De-icing Chemicals 34,800 Police Clothing 14,500 Other Departments 4,109 Other Charges/Services: 29,699 Community Survey & Envision Lakeville Update (30,000) Association of Metro. Municipalities Membership (6,000) Elections (47,600) Planning-Comprehensive Plan Update (50,000) Planning-Zoning Ordinance 25,550 Community Development-Downtown Development Guide (34,500) Community Development-Strategic Plan Update 6,000 Community Development-Darts 22,800 Inspections-Contractual Electrical Inspector 20,000 City Wide - HVAC Preventative Maintenance Contract Expansion 27,300 Information Systems - Maintenance Contracts 68,000 Human Resources-Market Study (7,500) Police DCC Operations 64,500 Police-Schools and Conferences 20,000 Police - Tuition Reimbursements 14,500 Engineering Fees - Trans Plan Update/CR70 Study/Etc. (55,000) Engineering - GIS Consultant (60,000) Parks-Major Maintenance Projects (15,000) Recreation-Youth Activities 16,000 Recreation-Active Adults 10,300 Art Center - Contracted Performers and Renters 24,000 Other Departments 16,349 Capital Outlay:(39,359) New Construction Services Vehicle in 2018 (28,600) Other Departments (10,759) Total 951,398$ 6 Personnel Requests  New positions or position changes included in the 2019 proposed budget (in order of priority): o General Fund:  Police Dept - Sergeant - effective 01/01/2019 (full-time) – this replaces one full- time police officer position  Arts Center –Administrative Assistant – effective 01/01/2019 (part-time) – grant funded  Fire Dept – Firefighters - Convert from pay-per-call to pay-per-hour compensation – effective 01/01/2019 o Environmental Resources Fund:  Forestry Technician – effective 04/01/2019 (fulltime)  New positions/reclassifications requested but NOT included in the 2019 proposed budget: o Fire Dept – Administrative Assistant (change from part-time to full-time) o Police Dept – Records Technician o Police Dept – Police Officer (to backfill vacancy due to addition of Sergeant position) o Police Dept – Police Officer (additional position) o Street Dept – Maintenance II o Parks – Maintenance III o Engineering Dept - GIS Technician The financial impact of the new positions included the General Fund budget is approximately $12,650 (personnel and other commodity costs). The impact of changing from pay-per-call to pay-per-hour for firefighters is approximately $63,800. Preliminary Yearend 2018 Estimates The following chart provides a summary of the anticipated changes in revenues and expenditures for 2018 and the impact on the fund balance: 2018 2018 Variance Budget YE Estimate Positive (Negative) Revenues 26,907,063 27,311,319 404,256 Expenditures 27,753,295 27,589,597 163,698 Excess (deficiency) of revenues over expenditures (846,232) (278,278) 567,954 Transfers from other funds 765,232 761,997 (3,235) Transfers to other funds (660,864) (785,864) (125,000) Net change in fund balance (741,864) (302,145) 439,719 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. 7 Staff is recommending the following additional transfer in 2018 of General Fund reserves (from 2018 operations) which will result in an estimated reserve balance of 48.5% at 12/31/2018: Use of Funds Park Improvement Fund $125,000 TOTAL $125,000 The preliminary 2019 budget includes the use of reserves for one-time or long-term purchases as follows: Use of Funds Building Fund-Facility Improvements $200,000 Park Improvement Fund 50,000 Ordinance Updates 33,000 TOTAL $283,000 The following table shows the estimated impact on the General Fund reserve balance at year ending 12/31/2019: Levy Proposed Change ($) Change (%) FB/Est 2020 Exp* $30,241,820 $2,240,270 8.00% 46.1% *2020 Expenses include 3% growth 25.0% 30.0% 35.0% 40.0% 45.0% 50.0% 55.0% YE 2015 YE 2016 YE 2017 Projected YE 2018 Projected YE 2019 General Fund Fund Balance Target Range 8 Street Reconstruction Due to the many demands on the property tax levy, the levy designated for funding a portion of the City’s share of the street reconstruction projects was eliminated for 2019. Pavement Management Fund The proposed tax levy includes $1,100,000 to be designated for funding the City’s pavement management program. This is a reduction from prior years due to sufficient fund reserves. Facilities Plan A Facilities Plan has been established to determine what the long-term funding needs are for maintaining the City’s buildings. The Facilities Plan summary shows the uses of funds by facility and the various funding sources. The primary funding source is the property tax levy although staff will seek other funding sources when appropriate such as energy rebates. The Facilities Plan strives to provide a stable funding source recognizing that the expenditures will fluctuate from year to year. Historical funding has been significantly less than the projected expenditures. Staff is proposing two major changes in funding the Facilities Plan: 1) antenna revenue received from cellular carriers will be recorded in the Building Fund rather than the Water Trunk Fund; 2) eliminate the property tax levy. The antenna revenue will provide a stable funding source based on contracts in place with cellular carriers. The antenna revenue would replace the property tax levy. Major facility improvements planned in 2019 include:  Arts Center o New stage drapes; o Electronic monument sign replacement; o Security cameras; o Workstations/furniture for administration offices; o LED retrofit for walkway, ground floods and interior;  Central Maintenance Facility o Administrative/office & conference room carpet replacement; o Gas pump/island replace, paint tanks & columns; o Reception counter/wall modifications and furniture replacement; o Truck bay re-lamp and ballasts; o ADA door operators; o Ceiling fan - Fleet Shop; o Pallet racking;  City Hall o Parking lot, bollard & ext. lights LED retro-fit; o Mother's privacy room; o Key management program; 9  Fire Department o FS#1 – Sidewalk leveling & perimeter sealing; o FS#2, #3 & #4 – Building/monument sign LED retro-fits;  Heritage Center o LED lighting retrofits; o Rooftop units 3 & 4 replacement;  Police Department o Building display monitor replacements; o Reconfigure administration & reception area; o Administration workstation addition; o Sit/stand additions and modifications; o Flooring replacement - Administration, locker rooms, lunchroom; o Office chair replacements;  Public Works Storage Facility o Mold/asbestos remediation; o HVAC ventilation repairs/RTU/Unit heater replacement Major facility improvements requested but not included in 2019:  Arts Center o Exterior masonry repairs ($85,000) – Delayed to 2020; o Exterior ramp to stage area ($10,000) – Delayed to 2020; o Window sheet metal flashing replacement ($9,000) – Delayed to 2021;  Central Maintenance Facility o Truck garage interior painting ($80,000) – Delayed to 2020; o Truck garage floor recoating ($160,000) – Delayed to 2021; o Trench drain replacement ($41,000) – Delayed to 2020;  City Hall o Lobby remodel and reception desk upgrade ($110,000) – Delayed to 2020; o Restroom remodel to ADA compliant ($250,000) – Delayed to 2020; o Card access system ($58,500) – Delayed to 2020; o 500KW generator ($350,000) – Delayed to 2020;  Heritage Center o Accordion room dividers for Heritage Room ($35,000) – Removed from CIP; Equipment Plan The Equipment Plan has been established to determine what the long-term funding needs are for replacement of the City’s vehicles and equipment at the end of their useful lives as well as the addition of new equipment as the City continues to grow. The Equipment Plan summary shows the use of funds by department and the various funding sources. The primary funding sources have been contributions from the Liquor Fund, property tax levies and auction proceeds. Occasional contributions from other funds have been utilized when available and appropriate such as General Fund, Pavement Management Fund, and Communications Fund. Last year, staff initiated a process of evaluation based upon a point system developed by Dakota County. Metrics include miles driven, engine hours, vehicle or equipment usage (daily 10 use vs. periodic use; snowplowing vs. hauling), cost of maintenance and repairs, and maintenance hours vs. operational hours. The Equipment Plan strives to provide a stable funding source recognizing that the expenditures will fluctuate from year to year. Historical funding has been significantly less than the projected expenditures. Due to the many demands on the property tax levy, staff is proposing that the property tax levy remain at the 2018 level. The use of short-term equipment certificates will be necessary every year (but one) starting in 2020. The Equipment Plan continues the phasing in of the Liquor Fund transfer, as recommended in 2018. The City has approximately $27.7 million in vehicles and equipment as of 12/31/2017 of which $24.0 million is for governmental activities (property-tax supported). The useful life will range from three (3) to 25 years, depending on the vehicle or piece of equipment. 2017 depreciation on the governmental assets ($24.0 million) was $1.67 million which equates to an approximate 15-year amortization. This amount is based on historical cost and does not reflect the impacts of inflation. The City should strive to funding the Equipment Plan at a level consistent with this estimate on an annual basis using property taxes and other funding sources such as the Liquor Fund and estimated auction/sale proceeds. The current Equipment Plan does not achieve this level of funding until 2025 and, therefore, requires delays in replacement and/or issuance of debt. Staff recommends increasing the annual funding to stabilize the position of the Fund. Major equipment/software purchases planned in 2019 include:  Information Systems o Replacement computers and printers;  Police o Replace (3) 2014 and (1) 2015 squad vehicles; o Replace (2) 2008 investigations vehicles’ o Replace (1) 2012 CSO pickup; o Replace (11) mobile radios; o Replace (32) in-car computers;  Fire o None;  Streets o Replace (1) 2005 and (1) 2006 Sterling dump trucks; o Replace (1) one-ton truck with plow; o New mobile truck scales; o Replace 2008 tilt-bed trailer;  Parks o Replace 2011 Bobcat Toolcat; o Replace 2011 Toro Groundsmaster; 11 Major equipment requested but not included in 2019:  Police o Replace (5) 2015 squad vehicles ($197,000) – replacement deferred to 2020; o Body worn cameras ($74,000) – deferred until 2020; o In-car video upgrade ($56,000) – deferred until 2020;  Fire o Rescue pumper ($592,000) – replacement deferred to 2020;  Streets o Fleet maintenance service truck ($132,000) – replacement deferred to 2020; o Skid loader ($66,000) – replacement deferred to 2020; o High rise jack ($6,000) – deferred new purchase to 2020;  Parks o Refuse compactor truck ($195,000) – deferred new purchase to 2020; Park Improvement Fund Preliminary 2019-2023 Capital Improvement Program discussions included funding and expenditures associated with the replacement of park amenities. Trail Improvement Fund Preliminary 2019-2023 Capital Improvement Program discussions included funding and expenditures associated with the replacement of trail segments. Staff is recommending that remaining sales proceeds ($743k) from the sale of land adjacent to the police station be transferred to the Trail Improvement Fund. These funds will replace the needed tax levy in 2019 and will offset some of the tax levy needed in 2020 and 2021. Debt Service Funds The 2019 property tax levy takes into account new debt issued in 2018, cash balances in the debt funds and excess bond proceeds that are restricted for certain uses (debt service is a qualified use). Staff will continue to review cash balances but is not anticipating any further reductions for 2019. Other Considerations The Utility Funds and Liquor Fund are not being presented for your review and feedback today. They will be presented at a subsequent budget workshop. Financial Sustainability The Finance Committee has had preliminary discussions regarding the importance of long- term planning and financial sustainability, recognizing that as a growing community, additional resources will be needed to provide services for a larger population, to maintain more streets and parks, etc. in addition to maintaining our current assets on an ongoing basis. The Committee plans to make a recommendation to the City Council in the coming months. 12 Projected Future Tax Levies Based on the proposed Capital Improvement Program (projects, issuance of debt, etc.) as well as a 3% inflationary factor for the General Fund levy, the following increases in tax levies are projected: 2019 2020 2021 2022 2023 8.00% 9.20% 6.71% 11.30% 3.59% Budget & CIP Schedule Aug 27 Workshop – Review Preliminary Tax Levy and Budget; Final CIP Review / Debt Analysis Sept 10 Workshop – IF NEEDED – Review Preliminary Tax Levy and Budget Sept 17 Meeting – Adopt Preliminary Tax Levy & Budget; Announce Public Budget Meeting Date Sept 24 Workshop – IF NEEDED - CIP Review / Debt Analysis Sept 6 or Oct 4 Planning Commission – Review CIP for compliance with Comp Plan Oct 1 or 15 Meeting – Public Hearing on CIP/Street Reconstruction Plan; Adopt CIP & Street Reconstruction Plan. Oct 22 Workshop – Budget Review – Utility Funds and Liquor Fund Nov 26 Workshop – Final 2019 Budget Review / 2018 Yearend Preview Dec 3 Meeting – Public Budget Meeting (Truth in Taxation); Adopt 2019 Budget & Tax Levy; Adopt Fee Schedule Council Direction Staff is seeking direction regarding the 2019 property tax levy and the Equipment and Facility Plans. Attachments: 1) General Fund Summary; 2) Equipment Plan 2019-2028; 3) Facilities Plan 2019-2028; 2018 2019 Percent 2017 Amended 2018 Working of Actual Budget Estimate Budget Total Revenues (Amount) (Percent) (Amount) (Percent) General property taxes 18,967,562$ 20,055,586$ 20,060,167$ 21,315,407$ 76.4% 1,259,821$ 6.3% 1,255,240$ 6.3% Licenses and permits 3,306,526 2,356,882 2,722,585 2,390,498 8.6% 33,616 1.4% (332,087) -12.2% Intergovernmental 1,143,174 1,005,921 1,086,495 961,519 3.4% (44,402) -4.4% (124,976) -11.5% Charges for services 2,733,938 2,926,300 2,929,739 2,731,549 9.8% (194,751) -6.7% (198,190) -6.8% Court fines 392,514 425,000 346,000 346,000 1.2% (79,000) -18.6% - 0.0% Investment income 116,686 90,071 108,000 120,000 0.4% 29,929 33.2% 12,000 11.1% Miscellaneous 75,639 47,303 58,333 47,164 0.2%(139) -0.3%(11,169) -19.1% Total revenues 26,736,039 26,907,063 27,311,319 27,912,137 100.0%1,005,074 3.7%600,818 2.2% Expenditures General government Mayor and Council 97,636 107,230 99,467 113,250 0.4% 6,020 5.6% 13,783 13.9% Committees and Commissions 93,156 87,600 83,718 68,218 0.2% (19,382) -22.1% (15,500) -18.5% City administration 407,945 478,570 478,413 477,506 1.7% (1,064) -0.2% (907) -0.2% City Clerk 136,540 201,157 208,412 148,586 0.5% (52,571) -26.1% (59,826) -28.7% Legal counsel 77,936 80,000 78,296 81,000 0.3% 1,000 1.3% 2,704 3.5% Planning 504,577 585,768 584,833 580,515 2.0% (5,253) -0.9% (4,318) -0.7% Community and econ. development 318,925 366,222 380,724 375,237 1.3% 9,015 2.5% (5,487) -1.4% Inspections 1,166,972 1,225,953 1,233,038 1,273,544 4.4% 47,591 3.9% 40,506 3.3% General government facilities 512,854 557,962 572,346 607,324 2.1% 49,362 8.8% 34,978 6.1% Finance 738,472 781,534 776,690 803,479 2.8% 21,945 2.8% 26,789 3.4% Information systems 541,210 673,236 667,261 756,545 2.6% 83,309 12.4% 89,284 13.4% Human resources 460,502 511,685 527,906 527,997 1.8% 16,312 3.2% 91 0.0% Insurance 285,000 285,000 285,000 285,000 1.0% - 0.0% - 0.0% Public safety - 0% Police 10,398,139 11,259,374 11,052,602 11,628,288 40.5%368,914 3.3%575,686 5.2% Fire 1,817,520 1,855,127 1,867,218 2,020,871 7.0%165,744 8.9%153,653 8.2% Public works - 0% Engineering 802,194 974,588 889,029 881,757 3.1% (92,831) -9.5% (7,272) -0.8% Construction Services 473,480 587,152 497,083 573,870 2.0% (13,282) -2.3% 76,787 15.4% Streets 2,994,968 3,194,298 3,306,350 3,288,617 11.5% 94,319 3.0% (17,733) -0.5% Parks and recreation - 0% Parks 2,471,209 2,643,982 2,644,756 2,699,763 9.4% 55,781 2.1% 55,007 2.1% Recreation 653,443 700,028 709,786 745,137 2.6% 45,109 6.4% 35,351 5.0% Heritage Center 114,983 129,549 128,307 138,674 0.5% 9,125 7.0% 10,367 8.1% Arts Center 539,879 510,370 518,362 550,049 1.9% 39,679 7.8% 31,687 6.1% Other - (43,090) - 79,466 0.3%122,556 -284.4%79,466 0% Total expenditures 25,607,540 27,753,295 27,589,597 28,704,693 100.0%951,398 3.4%1,115,096 4.0% Excess (deficiency) of revenues over expenditures 1,128,499 (846,232) (278,278) (792,556) 53,676 -6.3%(514,278) 184.8% Other financing sources (uses) Transfer from other funds 782,654 765,232 761,997 759,556 (5,676) -0.7% (2,441) -0.3% Transfer to other funds (1,858,730) (660,864) (785,864) (250,000) 410,864 -62.2%535,864 -68.2% Total other financing sources (uses) (1,076,076) 104,368 (23,867) 509,556 405,188 388.2%533,423 -2235.0% Net change in fund balance 52,423 (741,864) (302,145) (283,000) 458,864 -61.9% 19,145 -6.3% Fund balance, January 1 15,076,500 14,288,353 15,128,923 14,826,778 538,425 3.8%(302,145) -2.0% Committed Fund Balance - - - - - 0%- 0% Fund balance, December 31 15,128,923$ 13,546,489$ 14,826,778$ 14,543,778$ 997,289$ 7.4%(283,000) -1.9% Adj Fund Balance, Dec 31 (net of restricted)14,214,548$ 12,850,659$ 13,912,403$ 13,629,403$ Ratio: Fund balance to CY expenditures 54.8%46.3%50.4%47.5% Ratio: Fund balance to NY expenditures 51.5%44.8%48.5%46.1% 2018 Amended Budget 2018 Estimate CITY OF LAKEVILLE, MINNESOTA General Fund Schedule of Revenues, Expenditures and Changes in Fund Balances For the Year Ending December 31, 2019 Change from Change from CITY OF LAKEVILLE 2019 - 2028 EQUIPMENT PLAN2018 2017 CF +2019 - 2028ADOPTED2018 Est'd 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 TotalsUse of Funds:Elections 44,112$ 28,400$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Information Systems 491,283 390,480 134,580 223,109 118,355 313,029 494,730 73,713 301,426 192,216 400,209 323,933 2,575,300 Administration - - - 26,500 - - - 23,600 30,250 - - - 80,350 Facilities - - - - - - 30,094 34,506 - - - - 64,600 Planning - - - - - - - - - - - - - Inspections - - - 26,500 27,250 28,000 28,750 - - 31,000 - - 141,500 Police 542,902 777,448 634,078 949,269 392,825 514,612 237,560 496,618 1,046,376 435,419 413,588 751,890 5,872,234 Fire 178,152 175,079 - 678,400 803,991 - 29,900 94,400 753,353 192,726 - 84,500 2,637,270 Engineering - - - 21,705 - - - - - - - 32,869 54,574 Construction Services 28,559 27,460 - - - - 31,050 31,860 - - 31,750 - 94,660 Streets 579,646 579,646 579,064 1,306,528 353,878 855,896 1,217,076 949,646 1,041,701 157,778 1,610,747 2,245,780 10,318,095 Parks 261,210 266,149 171,290 570,672 544,564 186,816 156,055 192,340 569,539 473,680 486,791 716,203 4,067,950 Environmental Resources57,118 29,559 - - - - - - - - - - - Forestry- - - 22,083 - - - - - - - 22,083 Communications49,530 47,000 66,500 69,000 64,500 37,500 50,000 62,500 10,000 79,500 21,000 50,000 510,500 Utilities106,182 104,678 65,022 62,898 503,310 235,107 68,239 164,907 227,363 572,572 73,186 327,249 2,299,853 Liquor- - - - - - - - - - - - - - - - - - - - - - - - - - Total Use of Funds 2,338,693$ 2,425,899$ 1,650,534$ 3,934,581$ 2,830,756$ 2,170,960$ 2,343,454$ 2,124,091$ 3,980,008$ 2,134,890$ 3,037,272$ 4,532,423$ 28,738,969$ Source of Funds:Interest Earnings (2%) 36,404$ 36,404$ 19,515$ 11,070$ 296$ 2,207$ 9,764$ 14,275$ 28,346$ 4,897$ 12,712$ 23,453$ 126,535$ Annual Levy 525,000 525,000 525,000 675,000 675,000 675,000 750,000 850,000 950,000 1,050,000 1,150,000 1,150,000 8,450,000 General Fund Contribution - - - - - - - - - - - - - Liquor Fund Contribution 250,000 250,000 400,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 4,900,000 Pavement Mgmt Fund Contribution 85,000 85,000 - - - - - - - - - - - Environmental Res Fund Contribution 31,000 31,000 31,000 31,000 31,000 31,000 31,000 31,000 31,000 - - - 217,000 Funding outside Equipment FundGeneral Fund31,344 31,077 17,488 61,308 41,820 79,795 56,037 10,383 7,006 56,257 37,465 39,465 407,024 Communications Fund49,530 47,000 66,500 69,262 68,627 41,027 50,286 64,406 10,000 84,598 25,089 50,000 529,795 Utility Fund212,189 191,829 69,804 77,047 538,418 264,365 81,917 173,484 235,085 580,294 96,348 337,793 2,454,554 Liquor Fund6,303 6,303 - 61,224 469 12,596 46,099 7,961 70,029 20,007 13,483 - 231,869 Lakeville Arenas2,750 2,750 4,660 - 5,660 7,811 13,881 11,130 1,123 4,576 14,251 3,568 66,659 Auction/Sale Proceeds 225,000 227,995 94,300 225,000 225,000 225,000 225,000 225,000 225,000 225,000 225,000 225,000 2,119,300 Bond Proceeds - - - 1,685,000 840,000 710,000 805,000 940,000 750,000 - 1,500,000 1,500,000 8,730,000 Total Source of Funds 1,454,520$ 1,434,358$ 1,228,267$ 3,395,911$ 2,926,290$ 2,548,801$ 2,568,984$ 2,827,639$ 2,807,589$ 2,525,629$ 3,574,347$ 3,829,279$ 28,232,736$ Change in Fund Balance(884,173)$ (991,541)$ (422,267)$ (538,670)$ 95,534$ 377,841$ 225,530$ 703,548$ (1,172,419)$ 390,739$ 537,075$ (703,144)$ (506,233)$ Beginning Fund Balance$1,820,207 $1,967,301 $975,760 $553,493 $14,823 $110,357 $488,198 $713,729 $1,417,277 $244,858 $635,596 $1,172,671Ending Fund Balance$936,034 $975,760 $553,493 $14,823 $110,357 $488,198 $713,729 $1,417,277 $244,858 $635,596 $1,172,671 $469,5272018-2022 CIP Adopted 2,492,980 3,390,606 3,001,109 2,279,446 2,320,118 3,183,634 3,191,925 4,099,930 2,526,220 3,688,584 30,174,552 Variance (67,081) (1,740,072) 933,472 551,310 (149,158) (840,180) (1,067,834) (119,922) (391,330) (651,312) (1,435,583) CITY OF LAKEVILLE 2019 - 2028 FACILITY PLAN2017 CF +2018 - 20272018 2018 Est'd 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 TotalsUse of Funds:Art Center 321,635$ 319,307$ 63,625$ 118,000$ 9,000$ 50,000$ 8,250$ -$ 210,000$ -$ -$ -$ 458,875$ Central Maintenance Facility 46,000 35,992 179,325 106,000 8,862,875 - 97,000 - 75,000 - - - 9,320,200 City Hall 149,500 139,791 48,245 1,023,500 264,500 2,500 - - 1,500 - - - 1,340,245 Fire Station #1 - - 6,600 31,000 27,000 - 23,500 - - 6,000 - - 94,100 Fire Station #2 10,000 - 2,100 10,000 - 5,500 - - 25,900 13,500 - - 57,000 Fire Station #3 6,850 5,153 2,100 - - 11,000 5,000 - 20,000 - - - 38,100 Fire Station #4 23,500 20,336 4,500 52,500 115,000 - - - - 5,500 - - 177,500 Heritage Center 44,000 29,912 37,905 103,500 22,000 - - - - - - - 163,405 Police Station 113,486 105,192 140,935 113,500 60,000 41,250 - - 200,000 75,000 45,000 - 675,685 Public Works Storage Facility - - 67,000 - - - - - - - - - 67,000 Galaxie Liquor Store- - 79,785 - 65,000 - 60,000 - - - - - 204,785 Kenrick Liquor Store7,300 7,300 - - - - - - - - - - - Radio Communications Building - - - 35,000 - - - - - - - - 35,000 Water Treatment Barn - - - - - - - - - - - - - Water Treatment Facility87,006 102,865 136,055 25,000 44,500 - 307,500 - - 22,900,000 - - 23,413,055 Total Use of Funds 809,277$ 765,848$ 768,175$ 1,618,000$ 9,469,875$ 110,250$ 501,250$ -$ 532,400$ 23,000,000$ 45,000$ -$ 36,044,950$ Source of Funds:Interest Earnings (2%) 14,076$ 14,076$ 24,735$ 26,766$ 8,144$ 3,278$ 10,403$ 16,999$ 26,690$ 26,267$ 34,758$ 44,277$ 222,317$ Annual Levy (Building Fund) 400,000 400,000 - - - - - - - - - - - General Fund Contribution 300,000 300,000 200,000 200,000 75,000 - - - - - - - 475,000 Antenna Rental - - 421,761 435,142 448,924 463,239 453,121 467,562 484,585 498,286 486,165 501,702 4,660,489 Water Trunk Fund Transfer - 402,231 - - - - - - - - - - - Unencumbered 20XX GF - - - - - - - - - - - - - Liquor Fund 7,300 7,300 79,785 - 65,000 - 60,000 - - - - - 204,785 Water Fund/Bonds87,006 102,865 136,055 25,000 44,500 - 307,500 - - 22,900,000 - - 23,413,055 Other/Partnership - - 7,380 - - 7,380 Bond Proceeds - - - - 8,585,000 - - - - - - - 8,585,000 Other - 63,181 - - - - - - - - - - - Total Source of Funds 808,382$ 1,289,653$ 869,716$ 686,908$ 9,226,568$ 466,517$ 831,024$ 484,561$ 511,275$ 23,424,553$ 520,923$ 545,979$ 37,568,026$ Change in Fund Balance(895)$ 523,805$ 101,541$ (931,092)$ (243,307)$ 356,267$ 329,774$ 484,561$ (21,125)$ 424,553$ 475,923$ 545,979$ 1,523,076$ Beginning Fund Balance713,008$ 712,944$ 1,236,749$ 1,338,290$ 407,199$ 163,891$ 520,159$ 849,933$ 1,334,494$ 1,313,369$ 1,737,922$ 2,213,846$ Ending Fund Balance712,113$ 1,236,749$ 1,338,290$ 407,199$ 163,891$ 520,159$ 849,933$ 1,334,494$ 1,313,369$ 1,737,922$ 2,213,846$ 2,759,825$ 2018-2022 CIP Adopted 10.17.2017 711,277 711,277 1,330,420 11,194,123 312,700 61,000 199,250 11,000 342,400 253,500 - - 14,415,670 Variance (562,245) (9,576,123) 9,157,175 49,250 302,000 (11,000) 190,000 22,746,500 45,000 - 21,629,280