HomeMy WebLinkAbout08-24-09 WSIn attendance:
Staff:
The meeting was called to order at 6:00 pm.
Minutes
Lakeville City Council Work Session
August 24, 2009
Mayor Holly Dahl
Council Member Mark Bellows
Council Member Laurie Rieb
Council Member Kerrin Swecker
Council Member Kevin Miller
Steve Mielke, City Administrator
Dennis Feller, Finance Director
Judi Hawkins, Deputy City Clerk
ITEM #1 Presentation of proposed budget and tax levy
City Administrator Steve Mielke introduced the agenda items. Budgeting has become a year-
long activity for cities, and staff has been working hard to balance the budget for 2009 and
put together a 2010 budget, following direction received from Council in April. For the
2010 budget, staff requests for expenditures were $1.6 million more than projected
revenues. These requests have been trimmed and a preliminary budget prepared for
Council review and adoption. The preliminary budget being proposed represents the
maximum budget and the maximum tax levy that the Council can adopt in December. Staff
will also be asking for Council's direction on some new revenue initiatives. August 31st has
been set aside for an additional budget work session if needed; September 14t has been
reserved for a special Council meeting to adopt the preliminary budget and tax levy.
Finance Director Dennis Feller provided the Council with an historical perspective of what
has transpired in the economy during the last several months. Beginning in May 2008 the
economy was starting to show signs of weakening. About that time the proposal for the
transit service expansion was brought forward and Council agreed to the extra tax of
$743,000 by Metro Transit on the condition that the City taxes would go down
proportionally. There was a $370,000 tax reduction in 2009, which was offset with State
Aid Street Funds, and in 2010 there will be a $373,000 tax reduction.
In September, due to the slowdown in the economy, the City entered into a number of
budget reductions including the elimination of 8.5 positions. As the economy continued to
deteriorate, Governor Pawlenty unallotted the remainder of Lakeville's 2009 Market Value
Homestead Credit (MVHC) of $305,000. In April, Lakeville was one of the first cities to go
through budget reductions and cut $1.4 million, from several different areas of the budget.
Because the legislature was faced with such an enormous deficit, City staff was confident
that the loss of MVHC would be inevitable.
City of Lakeville
Council Work Session August 24, 2009 Page -2-
A $1.4 million decrease in revenues can be attributed to tax delinquencies, reduction in
building permits and development fees, and diminished interest on investments. In April
2009 there were an additional 9.4 full -time positions eliminated and two positions which
had hours reduced. In addition, furloughs were implemented as well as management fees
for Lakeville arenas, reduced community development marketing endeavors, reduction in
the number of ice rinks, reduced contract mowing of parks, and elimination of major
maintenance projects. Snow plowing of trails was also reduced. Tax levies from the Benefit
Accrual Fund have been re- appropriated to the General Fund. In June 2009 Governor
Pawlenty unalloted all of Lakeville's 2009 MVHC ($630,000).
The three elements that have the highest impact on the City's 2010 budget: the economy,
the State of Minnesota laws and policies, and City initiatives.
Economy: The State depends on income tax and sales tax as its main revenue sources. The
current unemployment rate is nearly 9% and retail sales are slow, which have a great impact
on the State's budget and indirectly on the City's budget through the MVHC. The City's
general fund is highly dependent on development fees and the issuance of building permits,
which finance Inspections, Engineering and Community Development Departments. When
growth resumes, the State levy limit laws will come into play which restrict the City's ability
to increase the levy limit base to only half the growth which will cause the debt to
compound and make it increasingly difficult to serve the existing residents. Residential
property values have dropped and commercial/ industrial markets have increased, causing
the tax burden to shift to commercial /industrial property. Interest rates remain flat, resulting
in low return on the City's investments.
State of Minnesota: The state governs the ability of the City to tax and dictates the property
value for the MVHC. For six of the last eight years the City has lost most or all of their
MVHC. Mr. Feller predicts the MVHC will not be reinstated for at least four more years
unless there is a significant improvement in income tax and sales tax collections. Council
has a one -time opportunity through 2011 to levy back for the loss of MVHC from 2008 and
2009.
Transportation has been one of the largest City initiatives. Major costs have included the
Metro Transit levy of $370,000 in 2009 and an additional $373,000 in 2010, and the
completion of I -35 /County Road 70 project. The City of Lakeville is working with Dakota
County on other BRT and transit improvement projects.
Council has three basic areas from which to make policy decisions to balance the budget:
taxes, user fees, or services. Policy decisions to increase or decrease each area have an
impact on the other areas.
The largest category of the budget is the General Fund which includes: Public Safety
($9.5M), General Government ($4.5M), Parks and Recreation ($3.2M), and Public Works
($3M). Personnel costs are the largest expenditures, making up about 65% of the budget.
City of Lakeville
Council Work Session August 24, 2009 Page -3-
There are no wage increases proposed for the coming year with the exception of step
increases. Depending on Council's direction, conversations will need to be held with
employees and unions regarding wage freezes and COLA. Mr. Feller highlighted several
trends and major elements within each of the budget categories.
Revenue from property taxes represents about $16M of the 2010 budget. Other revenues
are licenses and permits, intergovernmental revenues, charges for services, court fines and
interest income. New franchise fees for gas and electric companies are being proposed as a
funding mechanism that will generate a reliable and steady source of revenue. Growth of
this revenue would be proportionate with the population growth. Three of the four energy
companies already have contracts with the city which allow for franchise fees. The
remaining company's contract will be renegotiated to provide for a franchise fee. Council
Member Swecker asked about a franchise fee structure. Mr. Feller stated that it had yet to be
determined. It would probably be mid -year of 2010 before the fee could be implemented.
Mr. Mielke added that there were some assumptions being made regarding projected
revenues from these proposed fees. A flat fee per meter across all classes seems to be an
equitable fee structure.
The overall tax base is $65M which is a decrease of $2.7M from 2009 as a result of
residential market conditions. On the average residential home valued at $250K there will
be an estimated decrease in City taxes of .4 This is the second consecutive year that
residential properties have had a decrease in City taxes. Mr. Feller described the calculation
of the Market Value Homestead Credit reduction and the shift in the tax burden.
The total proposed levy is $24,214,743, an increase of 2.9 Mr. Feller detailed the
distribution breakdown and proposed increases /decreases. The maximum tax levy which
would be allowed under state law would be $25,162,743. Once the preliminary tax levy
has been set, Council has the ability to adopt a final levy amount that is equal to or less than
that amount but not greater. Mr. Mielke stated that the goal of the budget is to try to preserve
the level of services at what was set in April 2009. Preserving the current jobs will allow the
level of service to also be preserved. The proposed budget does not cut nor add services.
Council Member Bellows expressed his appreciation for the time spent on this budget and
suggested that more than one work session might be needed. He is interested in meeting
with Chamber members to get their input. Council Member Miller asked when staff
expected to begin working with the labor unions. Mr. Mielke stated that they will be letting
the unions know that they are interested in discussions with them.
Council Member Miller asked if there was a prioritized list of public services which could be
cut if funding is unavailable. Mr. Mielke stated that Council would have discussions
regarding prioritization between now and December. Council Member Miller asked if the
Parks and Recreation Department is considering establishing user fees for youth sports
teams. Major components which were cut in 2009 in order to balance the budget have
been put back in for 2010, including seal coating and major trail repairs.
City of Lakeville
Council Work Session August 24, 2009 Page -4-
Miller asked how the budget is determined for such variables as salt, fuel and the severity of
the winter. Feller stated that stable prices are assumed through the end of this year, and a
10% increase is built into next year. Council Members discussed the energy company
franchise fees and the process of public hearings, negotiation of an agreement, and approval
of an ordinance that needs to be followed. There is some risk in assuming the revenues will
be there, as it is not a guarantee. Council Members felt the franchise fees are worthy of
further study.
Bellows suggested budget work sessions be held with the department directors to get a clear
view of possible fee increases and where services might be cut if necessary. As Council
members study the budget documents they can make recommendations based on what they
feel are essential services vs. quality of life. Council members felt the information they had
been provided was sufficient to move forward with the preliminary budget with a tax levy
ceiling of 2.9
ITEM #2 Capital Improvement Program: 2009 2014
Finance Director Dennis Feller provided an overview of the five -year Capital Improvement
Program and highlighted proposed CIP expenditures. Staff has re- evaluated and prioritized
equipment replacements, etc. The CIP includes a 3% increase over the previous year for
street reconstruction projects and pavement management. WSB Engineering is studying
pavement conditions in the entire city to determine where repairs and reclamations will be
necessary and what those costs might be in the foreseeable future. For those projects 40% is
assessed to the property owner and 60% is paid for by taxes.
Two major street reconstruction projects that are included are the I -35 /CR 70 and the Dodd
Blvd. /185t Street to Hayes project. City Engineer Keith Nelson described the projects and
the recommended funding sources. For the Dodd Blvd. project Council can choose to issue
bonds, delay the project until it's known whether the federal grant funds are available, or
pay for the project with MSA funds in 2013. Stimulus grant funds will be used for the
Highview /Holyoke Avenue project which will be bid for 2010 construction.
ITEM #3 Meeting schedule to approve budget and tax levy
A time line of work sessions, public presentations, and Council meetings was discussed
which would facilitate adoption of the final budget on December 21, 2009. Council
directed staff to schedule a meeting for September 14 to consider adoption of the
preliminary budget.
Council asked staff to explore various franchise fee options and provide the information to
Council prior to the September 14t special meeting. Council also asked that all
departments' budgets be reviewed for possible reductions and /or fee increases.
At their September 14, 2009 meeting Council will:
City of Lakeville
Council Work Session August 24, 2009 Page
1) adopt the Preliminary Budget;
2) set the Tax Levy; and
3) set the date for the Truth in Taxation hearing.
Following that meeting, the Planning Commission will hold a public hearing at their
September 17, 2009 meeting and refer the budget back to Council for final adoption.
ITEM #4 Other
There was no other business.
ITEM #5 Adjourn
The meeting adjourned at 9:10 pm.
Respectfully submitted,