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HomeMy WebLinkAboutItem 51 City of Lakeville Finance Department Memorandum To: Mayor and Council From: Justin Miller, City Administrator Jerilyn Erickson, Finance Director Date: November 26, 2018 Subject: 2018 Year End Preview & Final 2019 Budget/Tax Levy Discussion The purpose of this report is to provide the City Council with information regarding financial projections for 2018, the 2019 proposed General Fund budget and the property tax levy to support general services. The proposed changes achieve the following goals:  Reduce the property tax increase from 8.00% to 7.75%;  Maintain 2019 fund balance ratio at 44.2% which is in the middle of the required range of 40-50%;  Maintain personnel changes that were included in the preliminary budget. Challenges for 2020:  Personnel o union contracts expire 12/31/2019; o impacts from compensation study for union personnel; o new positions needed due to community growth;  Equipment Fund o need to issue debt (approximately $1,685,000) for equipment replacement in 2020; o continue to issue debt each year through 2025;  Park Improvement Fund – significant increase in levy to fund parking lot repairs for area parks;  Estimated increase in 2020 tax levy of 9.60% does not include any additional positions. GENERAL FUND 2018 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: 2 2018 Amended Budget 2018 Year End Estimate Net Change in Fund Balance - (use of reserves) ($866,864) ($170,805) Ratio: Fund Balance to Next Year (2019) Expenditures 44.2% 48.1% The 2018 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: Assumption Risk Opportunity Building Permit 425 SF Units Currently at 397 SF 450 SF Units $35,000 Investment Income $108,000 Rates Increase; Negative Fair Value Adj Rates Decrease; Positive Fair Value Adj Snowplowing Normal Levels for Nov & Dec Increased number of snow events Less than normal levels for Nov & Dec The 2018 year-end estimate reflects a reduction in reserves of $171k which is about $696k less than was anticipated in the 2018 amended budget. 2018 Amended Budget 2018 YE Estimates Variance Revenues $26,917,063 $27,894,712 $977,649 Expenditures ($27,763,295) ($27,860,531) ($97,236) Transfers In $765,232 $765,232 $0 Transfers Out ($785,864) ($970,218) ($184,354) NET ($866,864) ($170,805) $696,059 Revenues generated approximately $977k more than budgeted, primarily in two areas: licenses and permits ($580k) and charges for services ($250k). Charges for services includes $195k for providing police security services for Samaritan’s Purse. Expenditures will exceed budget by about $97k. Savings which occurred across many departments, were offset by a $195k increase in the police overtime budget for providing police security services for Samaritan’s Purse and a $140k increase in the insurance allocation to the General Fund for property/liability coverage, resulting in a net overage. The insurance allocation can fluctuate depending on the actual premium charged, dividends received, insurance reimbursements from other insurance companies, etc. Staff has recommended using surplus funds rather than increasing the tax levy to fund the difference in the allocation for both 2017 and 2018 as well as the 2019 proposed budget. 3 Transfers Out reflect a $150k transfer that Staff is recommending to fund some of the upfront design and planning costs that are incurred with the street reconstruction projects. This will facilitate the cashflow for these projects (since we typically don’t bond for the projects until mid-year when the construction occurs) as well as reduce the amount of debt that we will need to issue. Also included in the Transfers Out is an updated amount for the Fiber project and additional funding for the police department building display project. These three transfers will be reflected in the proposed 2018 budget amendments item presented at the December 3rd council meeting. 2019 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) – 09/17/2018 28,671,693 Property Taxes 12,020 Intergovernmental: 28,000 State Police Aid 14,000 State Fire Aid 14,000 Miscellaneous 9,696 Total $28,721,409 2019 Expenditure Changes in the General Fund The following changes have been incorporated into the current budget presented to you today: Expenditures Totals Preliminary (Includes Transfers Out) – 09/17/2018 $29,084,693 Fire Dept - State Fire Aid – Fire Relief Association 14,000 Parks Dept – Major Maintenance projects from 2018* 42,500 Information Technology – Increase in County Broadband 32,000 Transfer to Equipment Fund – Equipment Replacement* 150,000 Transfer to Park Improvement Fund (increase) – Parking Lot Repairs* 100,000 Other 3,716 Total $29,426,909 *Use Fund Balance Reserves (See Summary Below) 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. 4 The proposed 2019 budget includes the use of reserves for one-time or long-term purchases: 2019 Use of Funds Building Fund - Facility Improvements $200,000 Equipment Fund 280,000 In Squad Video $ 74,000 Body Worn Cameras 56,000 Equipment Replacement 150,000 Park Improvement Fund 150,000 Ordinance Updates 33,000 Park Maintenance – 2018 Projects carried over 42,500 Total $705,500 The following table shows the estimated impact on the General Fund reserve balance at year ending 12/31/2019: Change ($) FB/CY Exp FB/Est 2020 Exp* ($705,500) 45.6% 44.2% *2020 expenses include 3% growth plus transitional costs for new personnel ($52k) The General Fund reserve includes approximately $200,000 of restricted forfeiture funds. The fund balance ratio above reflects the adjustment for restricted funds. Staff is recommending that these funds be moved to a separate fund to ensure compliance with state statutes regarding the use of those funds. Prior to completion of the 2018 audit, staff will bring forward an item to establish this new fund and transfer the forfeiture funds. PROPERTY TAX LEVY Impact of Growth, Inflation and Other Factors The following chart provides a guide for establishing the 2018 tax levy based on factors that impact the Lakeville community: Low Growth (New Construction) 3.10% CPI-U (MSP) # 3.30% Debt Service * 5.86% Total 11.96% # Dec 2017 to September 2018 *Larger due to one-time adjustments in 2018 5 Proposed Property Tax Levy The proposed 2019 property tax levy is comprised of the following components: Fund Preliminary 2019 Levy 9/17/18 Proposed 2019 Levy 11/26/18 Change from Preliminary to Proposed Change from 2018 Adopted Levy General Fund $21,332,000 $21,344,070 $12,070 $1,264,688 Street Reconstruction 0 0 0 (50,000) Pavement Management Fund 1,100,000 1,100,000 0 (91,550) Building Fund 0 0 0 (400,000) Equipment Fund 525,000 475,000 (50,000) (50,000) Park Improvement Fund 175,000 175,000 0 0 Trail Improvement Fund 0 0 0 (111,200) Debt Service Funds 7,109,820 7,077,820 (32,000) 1,608,402 TOTAL LEVY $30,241,820 $30,171,890 ($69,930) $2,170,340 The preliminary property tax levy was adopted in September at $30,241,820 which was an increase of $2,240,270 or 8.00% from the 2018 tax levy. The proposed tax levy is $69,930 less than the preliminary tax levy and results in a 7.75% increase from 2018 to 2019. The proposed property tax levy reflects a decrease of $50k in the Equipment Fund. This reduction is being funded with a transfer from General Fund. The debt service levy is also being reduced due to prepayments of special assessments. The reduction also provides an opportunity to levy for the first interest payment of the 2019 bonds, which results in lower amount of debt being issued for the 2019 projects. The City tax capacity rate is anticipated to decrease from 37.510% (2018) to 35.913% (2019). Market Valuation Preliminary taxable market values have increased $685 million or 10.24% from 2018 to 2019, of which approximately $207 million or 3.1% is from new construction. Based on the 2018 tax rate, new construction will generate about $877,000 in property taxes. This equates to about 3.1% of the 2018 property tax levy. Impact on Median Valued Home and Commercial Property The proposed 2019 City tax levy will result in an estimated $85 increase on the median value home ($307,400) due to both a levy increase as well as a market value increase as determined by the Dakota County Assessor. Existing commercial properties in Lakeville, in the aggregate, decreased in market value by 14.6%. The proposed 2019 City tax levy will result in an estimated $1,213 decrease on a commercial property valued at $1 million with a 14.6% decrease in value. 6 Summary of Changes Preliminary 9/17/18 Proposed 11/26/18 Total Levy $30,241,820 $30,171,890 Increase in Levy (from 2018): $ $2,240,270 $2,170,340 Increase in Levy (from 2018): % 8.00% 7.75% Estimated Tax Rate 35.939% 35.913% Impact on City portion of property taxes: Median Valued Home* $86.00 $85.00 Commercial Property ($1 million value)* ($1,149.00) ($1,153.00) *Original preliminary estimates were $81.00 and ($1,179.00) Fund and Department Nomenclature As previously discussed during the development of the 2019-2023 CIP, staff recommended changing the name of the Storm Sewer Trunk Fund to the Storm Water Infrastructure Fund, to better reflect the nature of the activity accounted for by the fund. Staff also recommends changing the Information Systems Department (General Fund) to Information Technology. These changes will be incorporated into the final 2019 budget documents. BUDGET SCHEDULE Nov 26 Workshop – Budget Review Dec 3 Meeting – Public Budget Meeting (Truth in Taxation) / Adopt 2019 Budget and 2019 Tax Levy; Adopt 2019 Fee Schedule COUNCIL DIRECTION Staff is seeking direction regarding the final 2019 property tax levy and budgets to prepare the resolutions for the December 3, 2018 council meeting. Attachments: 1) General Fund Budget Summary 2) Equipment Plan 3) Facilities Plan 2018 2018 2019 Percent 2017 Adopted Amended 2018 Preliminary of Actual Budget Budget Estimate Budget Total Revenues (Amount) (Percent) (Amount) (Percent) General property taxes 18,967,562$ 20,055,586$ 20,055,586$ 20,060,167$ 21,327,427$ 76.3% 1,271,841$ 6.3% 1,267,260$ 6.3% Licenses and permits 3,306,526 2,356,882 2,356,882 2,939,597 2,390,498 8.6% 33,616 1.4% (549,099) -18.7% Intergovernmental 1,143,174 1,005,921 1,005,921 1,114,566 989,590 3.5% (16,331) -1.6% (124,976) -11.2% Charges for services 2,733,938 2,926,300 2,926,300 3,273,049 2,734,249 9.8% (192,051) -6.6% (538,800) -16.5% Court fines 392,514 425,000 425,000 331,000 346,000 1.2% (79,000) -18.6% 15,000 4.5% Investment income 116,686 90,071 90,071 108,000 120,000 0.4% 29,929 33.2% 12,000 11.1% Miscellaneous 75,639 47,303 57,303 68,333 47,163 0.2%(10,140) -17.7%(21,170) -31.0% Total revenues 26,736,039 26,907,063 26,917,063 27,894,712 27,954,927 100.0%1,037,864 3.9%60,215 0.2% Expenditures General government Mayor and Council 97,636 107,230 107,230 99,467 113,250 0.4% 6,020 5.6% 13,783 13.9% Committees and Commissions 93,156 87,600 97,600 93,718 68,218 0.2% (29,382) -30.1% (25,500) -27.2% City administration 407,945 478,570 478,570 478,413 477,506 1.7% (1,064) -0.2% (907) -0.2% City Clerk 136,540 201,157 201,157 208,412 148,586 0.5% (52,571) -26.1% (59,826) -28.7% Legal counsel 77,936 80,000 80,000 78,296 81,000 0.3% 1,000 1.3% 2,704 3.5% Planning 504,577 585,768 585,768 584,833 580,515 2.0% (5,253) -0.9% (4,318) -0.7% Community and econ. development 318,925 366,222 366,222 380,724 375,237 1.3% 9,015 2.5% (5,487) -1.4% Inspections 1,166,972 1,225,953 1,225,953 1,233,038 1,273,544 4.4% 47,591 3.9% 40,506 3.3% General government facilities 512,854 557,962 557,962 572,346 607,324 2.1% 49,362 8.8% 34,978 6.1% Finance 738,472 781,534 781,534 780,120 804,429 2.8% 22,895 2.9% 24,309 3.1% Information systems 541,210 673,236 673,236 667,261 788,545 2.7%115,309 17.1%121,284 18.2% Human resources 460,502 511,685 511,685 527,906 527,997 1.8% 16,312 3.2% 91 0.0% Insurance 285,000 285,000 285,000 425,000 285,000 1.0% - 0.0% (140,000) -32.9% Public safety - 0% Police 10,398,139 11,259,374 11,259,374 11,225,440 11,628,288 40.4%368,914 3.3%402,848 3.6% Fire 1,817,520 1,855,127 1,855,127 1,881,284 2,034,937 7.1%179,810 9.7%153,653 8.2% Public works - 0% Engineering 802,194 974,588 974,588 859,429 881,757 3.1% (92,831) -9.5% 22,328 2.6% Construction Services 473,480 587,152 587,152 497,083 573,870 2.0% (13,282) -2.3% 76,787 15.4% Streets 2,994,968 3,194,298 3,194,298 3,306,350 3,288,617 11.4% 94,319 3.0% (17,733) -0.5% Parks and recreation - 0% Parks 2,471,209 2,643,982 2,643,982 2,604,956 2,744,963 9.5%100,981 3.8%140,007 5.4% Recreation 653,443 700,028 700,028 709,786 745,137 2.6% 45,109 6.4% 35,351 5.0% Heritage Center 114,983 129,549 129,549 128,307 138,674 0.5% 9,125 7.0% 10,367 8.1% Arts Center 539,879 510,370 510,370 518,362 550,049 1.9% 39,679 7.8% 31,687 6.1% Other - (43,090) (43,090) - 79,466 0.3%122,556 -284.4%79,466 0% Total expenditures 25,607,540 27,753,295 27,763,295 27,860,531 28,796,909 100.0%1,033,614 3.7%936,378 3.4% Excess (deficiency) of revenues over expenditures 1,128,499 (846,232) (846,232) 34,181 (841,982) 4,250 -0.5%(876,163) -2563.3% Other financing sources (uses) Transfer from other funds 782,654 765,232 765,232 765,232 766,482 1,250 0.2% 1,250 0.2% Transfer to other funds (1,858,730) (660,864) (785,864) (970,218) (630,000) 155,864 -19.8%340,218 -35.1% Total other financing sources (uses) (1,076,076) 104,368 (20,632) (204,986) 136,482 157,114 -761.5%341,468 -166.6% Net change in fund balance 52,423 (741,864) (866,864) (170,805) (705,500) 161,364 -18.6% (534,695) 313.0% Fund balance, January 1 15,076,500 14,288,353 14,288,353 15,128,923 14,958,118 669,765 4.7%(170,805) -1.1% Committed Fund Balance - - - - - - 0%- 0% Fund balance, December 31 15,128,923$ 13,546,489$ 13,421,489$ 14,958,118$ 14,252,618$ 831,129$ 6.2%(705,500) -4.7% Adj Fund Balance, Dec 31 (net of restricted)14,214,548$ 12,850,659$ 12,725,659$ 13,843,743$ 13,138,243$ Ratio: Fund balance to CY expenditures 54.8%46.3%45.8%49.7%45.6% Ratio: Fund balance to NY expenditures 51.0%44.6%44.2%48.1%44.2% 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 LAKEVILLECouncil Workshop 2019 - 2028 EQUIPMENT PLAN11/26/20182018 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 - - - 26,552 - - - - - - - 32,869 59,421 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$ 3,809,463$ 2,830,756$ 2,170,960$ 2,519,579$ 2,169,270$ 3,693,097$ 2,095,693$ 3,280,401$ 4,632,897$ 28,982,403$ Source of Funds:Interest Earnings (2%) 36,404$ 36,404$ 18,331$ 11,866$ 3,611$ 5,588$ 13,213$ 14,270$ 27,437$ 9,709$ 18,404$ 24,396$ 146,825$ Annual Levy 525,000 525,000 475,000 675,000 675,000 675,000 750,000 850,000 950,000 1,050,000 1,150,000 1,150,000 8,400,000 General Fund Contribution - - 280,000 - - - - - - - - - 280,000 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$ 1,457,083$ 3,396,707$ 2,929,605$ 2,552,182$ 2,572,433$ 2,827,634$ 2,806,680$ 2,530,441$ 3,580,039$ 3,830,222$ 28,483,026$ Change in Fund Balance(884,173)$ (1,050,775)$ (323,204)$ (412,756)$ 98,849$ 381,222$ 52,854$ 658,364$ (886,417)$ 434,748$ 299,638$ (802,676)$ (499,378)$ Beginning Fund Balance$1,820,207 $1,967,301 $916,526 $593,322 $180,566 $279,415 $660,637 $713,491 $1,371,854 $485,438 $920,186 $1,219,824Ending Fund Balance$936,034 $916,526 $593,322 $180,566 $279,415 $660,637 $713,491 $1,371,854 $485,438 $920,186 $1,219,824 $417,149 CITY OF LAKEVILLECouncil Workshop 2019 - 2028 FACILITY PLAN11/26/20182017 CF +2019 - 20282018 2018 Est'd 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 TotalsUse of Funds:Art Center 384,816$ 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 113,486 127,354 140,935 113,500 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 872,458$ 788,010$ 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$ 25,993$ 7,356$ 2,474$ 9,583$ 16,162$ 25,837$ 25,397$ 33,871$ 43,372$ 214,780$ Annual Levy (Building Fund) 400,000 400,000 - - - - - - - - - - - General Fund Contribution 300,000 322,162 200,000 200,000 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 363,593 363,593 - - - - - - - - - - - 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 63,181 - - - - - - - - - - - Total Source of Funds 1,235,156$ 1,273,177$ 869,716$ 686,135$ 9,225,780$ 465,713$ 830,204$ 483,724$ 510,422$ 23,423,683$ 520,036$ 545,074$ 37,560,489$ Change in Fund Balance362,698$ 485,167$ 101,541$ (931,865)$ (244,095)$ 355,463$ 328,954$ 483,724$ (21,978)$ 423,683$ 475,036$ 545,074$ 1,515,539$ Beginning Fund Balance713,008$ 712,944$ 1,198,111$ 1,299,652$ 367,788$ 123,692$ 479,156$ 808,110$ 1,291,834$ 1,269,856$ 1,693,539$ 2,168,576$ Ending Fund Balance1,075,706$ 1,198,111$ 1,299,652$ 367,788$ 123,692$ 479,156$ 808,110$ 1,291,834$ 1,269,856$ 1,693,539$ 2,168,576$ 2,713,650$