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HomeMy WebLinkAbout2.c. 2007 BudgetAGENDA ITEM: 2007 Budget AGENDA SECTION: Discussion PREPARED BY: Jamie Verbrugge, City Administrator AGENDA NO. 2c ATTACHMENTS: 1. 2007 Budget Instructions 2 Preliminary Budget Summary Spreadsheets APPROVED BY: RECOMMENDED ACTION: Discussion 4 ROSEMOLINT CITY COUNCIL City Council Work Session July 12, 2006 EXECUTIVE SUMMARY ISSUE Staff has begun the process of compiling the preliminary budget for all City operations m 2007. The requirements of the City Council are to certify a maximum preliminary levy for 2007 to Dakota County by September 15, 2006 That action is likely to be requested at the regular meeting of the City Council on September 5, 2006 Adoption of the 2007 budgets and final levy is then usually done at the first meeting m December 2006. BACKGROUND Staff and Council have been aware since early this year that the 2007 budget would be challenging for two specific reasons. The first challenge relates to increased public safety costs as a result of the county -wide' migration to a consolidated Joint dispatch center and implementation of the 800 MHz radio systems. The second challenge is created by the declining number of new residential permits being issued Even before the market for new residential development began to soften, staff had anticipated a significant decline in new housing starts m 2007 and into 2008 as a result of the neat build -out of our current available MUSA land. The Metropolitan Council approved amendments to the City's Comprehensive Guide Plan that will create more opportunity for new residential development However, the delay in producing those new starts is delayed while utilities and infrastructure are extended. Budget mstructions issued to department heads in May directed staff to litrut budget requests to only known or anticipated cost increases for maintaining services at existing levels Requests for new staff or new imttatives were submitted as separate budget considerations that may or may not be factored into the budget as discussions with Council continue this summer and fall. Those new items are not contained in the summary spreadsheets attached The largest known and mostly unavoidable cost increases for 2007 include the following: Bonded Indebtedness An increase of approximately $220,000 as a result of debt issued for capital equipment ($87,955) and the new fire station ($275,081) The new debt is offset by the retirement of Port Authority G O. Bonds 2000B. Joint Dispatch The City currently contracts with the City of Eagan for dispatch services at an annual cost of approximately $76,000. The financial obligations to be incurred by the City as part of the Dakota Communications Center in 2007 total roughly $306,000 That is an increase of about $230,000 over the current dispatch contract The actual cost increase is about $210,000 because there are transitional costs of about $20,000 in the 2006 budget for participation in DCC plannmg. Personal Services The cost increases for salaries vary depending on the negotiated settlements with each of the respective bargaining units, but are generally m the 3% range The preliminary estimate of cost increases for health and other insurances for budgeting purposes is 12 Staff is hopeful that this number is higher than what will actually be required based on excellent expenence ratings over the past year. The 2006 increase for health insurance was only 1 Ice Arena Operating Subsidy The City subsidizes operating costs for the Ice Arena at about $100,000 per year The subsidy is the gap between revenues for facility use and the actual cost for maintenance and operations This subsidy has largely been off the books as Ice Arena reserves have covered the subsidy for a number of years. The reserve account is exhausted and the subsidy has been reflected as a levy expense (currently m the Council budget to highlight this issue, but likely to be moved to another line item m the final budget). The shifting of the cost to the levy is necessary because governmental standards for accounting of enterprise funds, which the Ice Arena is considered, does not allow for a negative cash balance to be carried. Declining Revenues Staff is expecting a third consecutive year of dechnmg permits for new residential construction. Since a high watermark of 550 housing starts m 2004, new starts have declined to about 460 in 2005, anticipation of 300 -350 in 2006, and projections of 250 -300 permits in 2007 As a result, projected revenues for permitting fees and administrative charges are down by approximately $457,000. Not including personal service costs (which will increase 4 5 the affect of declining revenues and increased obhganons is nearly $1 million The preliminary city -wide tax base increase, provided earlier this year by Dakota County, is approximately 13.7% higher for Pay 2006. The ptehriunary funding requirements for 2007, based on the issues identified above plus departmental increases for operations and capital requirements would result in a levy increase of approximately 15 The net result is an zncreare in the City's tax rate of approximately 1 5% from the current 0 43755 to a rate of 0 4435 in 2007. Understanding that it is Council's desire to continue making progress on reducing the overall City tax rate, it would be necessary to trim the 2007 tax levy by approximately $200,000 to mazntazn the current rate and a greater levy reduction to continue drawing the tax rate down. Dunng the budget preparation process in 2005, staff began the process by presenting a budget that met the Council's expectation of continued tax rate reduction. The final 2006 levy represented a 4.9% reduction in the tax rate This year, because of the significant challenges posed by declinng permits and increased public safety dispatching costs, there are going to be some significant policy decisions required. To reiterate, it is not staff's intent to present a budget that shows a tax rate increase even for setting the preliminary levy m September. This initial presentation also varies from previous years in that a line item budget of departmental requests has not accompanied the preliminary overview. This has been done for two reasons. First, administration has continued to have discussions with department heads on a number of issues pertaining to the operating and capital budgets, and wishes to spend more time clanfymg these items before presenting the details to Council. The second is that the City Admuustrator wishes to get direction from Council on a target for the preliminary levy figure before bringing the details back for more in-depth discussion m August. The initial target will help me make decisions for line item presentation, and will hopefully 2 eliminate confusion for the Council as we go through various iterations and drafts in a constantly changing document over the next several months. (As an example, there were 13 versions of the DCC budget before a final budget was presented to the Board of Directors. It became very difficult to track the many changes that occurred during the budget preparation process from one version to the next. To the greatest extent possible, I want to prevent this type of confusion from occurring as we continue our review.) SUMMARY Staff requests that Council discuss a target for a preliminary tax levy. Following that direction, staff would hke to proceed on the following schedule: August 9 City Council Work Session Present line item detail of departmental budgets Update of year -to -date budget Continue discussion of preliminary levy certification August 23 Special City Council Work Session (tentative) Continue preliminary levy discussion, dependent on progress at the August 9 meeting September 5 City Council Meeting Certify preliminary levy October 11 Council Work Session Update year -to -date and year -end fiscal forecast Update key financial strategies Review capital improvement plan October 25 Special Work Session Departmental review November 8 Special Work Session Departmental review November 15 Regular Work Session Final budget discussion December 4 Special Council Meeting Truth in taxation hearing December 5 City Council Meeting Final budget and levy adoption Staff requests that Council bring a calendar to the work session to make sure that proposed dates are acceptable 3 4 ROSEMOUNT ADMINISTRATION MEMORANDUM TO: Scott Aker, Fire Chief Andy Brotzler, City Engineer Rick Cook, Operations Superintendent Gary Kalstabakken, Police Chief Kim Lindquist, Community Development Director Jeff May, Finance Director Dan Schultz, Parks Recreation Director Dawn Weitzel, Assistant City Administrator FROM: Jamie Verbrugge, City Administrator DATE: May 22, 2006 RE: 2007 Budget Instructions Introduction It is time to begin the annual budget preparation for NY 2007 The budget drafting process this year will be very similar to the process used last year. Below are instructions for compiling operating, capital and personal services figures. Whereas in years past much of the budget preparation has begun with an eye on the Legislature, this year is different I've shared with you on several occasions recently that 2007 is going to be dominated from a fiscal standpoint by our migration along with the other cities in Dakota County to a single public safety answering point, also known as joint dispatch The collaborative effort will eventually deliver enhanced emergency response service with total cost efficiencies beyond that currently being experienced However, Rosemount is one of several communities that will experience cost increases as a result of the initiative For 2007, it is likely that our costs wall be more than quadruple what we currently pay for contracted dispatch service from the City of Eagan possibly more than $300,000 additional expense in operating and capital commitments. The consequences from a budgeting perspective are severe The current estimated cost increase would increase the enure 2006 Operating Budget by more than 3.5 When combined with preliminary estimates of salary and benefit mcreases, and if no other conditions were changed, the levy would need to increase by more than 13% to account for the increase in personal service and joint dispatch costs That is before any other operating or capital need of the City is factored. 2007 Budget Preparation May 22,2006 Page 2 of 4 We will be challenged to continue providing our current service levels while our resources are constrained and the community keeps growing And while we focus on 2007, it will be necessary to look forward to 2008 and 2009. The strong absorption of developable land within the MUSA over the past five years has created a situation where new residential permits which have fueled our non -levy revenues on the front end and healthy tax base growth on the back end will be falhng off in the short-term future Even if newly designated lands within the expanded MUSA come on line in 2008, the likelihood of returning to strong housing start numbers is uncertain given the slowdown nationally in new housing starts. This year, our primary objective will be to present a budget for Council discussion that holds the line on services in a manner that controls costs to the greatest extent possible. Operating Budgets Finance Director May will be distributing along with this memo the operating budget worksheets for your respective depaitrnents. Please evaluate the non salary Operating Budget nine items to determine what is necessary to maintain your operations at current levels. Do not include new initiatives, service enhancements, equipment and materials, or other items unless they have been specifically identified as an element of continuing projects or services, or are directly related to the continuation of service delivery Capital Outlays Attached to this memo is a form (which will also be distributed electronically) that requests detailed explanation for capital items Please complete this form for every item m the adopted Capital Improvement Plan that is mtended to be purchased in 2007 For items that are not in the 2007 CIP (either in out -years or newly identified) that you deem necessary or desirable, please complete the form and specifically identify it as a non -CIP item and explain why it is being proposed for inclusion Request for New Staff Additions Attached to this memo are two forms (which will also be distributed electronically) that request detailed explanation for new staff additions one for regular full -tune and part -time additions and one for seasonal, temporary and overtime requests. Please explain m the detail if the request for new staff is related to continuing current service levels, to enhancing service levels, or to new initiatives or programming. In order to provide staffmg cost projections, please work with Assistant City Administrator Weitzel to identify an appropriate salary range for the proposed position and with Finance Director May to determine total personal service costs mcluding benefits (based on the range). 4 2007 Budget Preparation May 22,2006 Page 3 of 4 Summary Memorandum Please provide a. cover memo with your budget materials that summarizes the following elements. General Overview of Services please describe the core functions and services supported through your budget The annual budget book contains descriptions of each department's activities. This section of your memo should be used to either expand upon those descriptions or provide new information. Revenue Enhancements please explain if there are revenue streams beyond those currently used to fund programs and services, and the extent to which those revenues are applicable or reasonable for funding City operations. Budget and Service Volatility please describe any factors that may influence revenues, expenditures or services in an adverse manner and what options would be available to address such circumstances. Efficiencies and Operational Change please describe any efforts your department has made in 2006 or proposes to make in 2007 that are intended to deliver services more efficiently or in a manner that deviates to some extent from the manner m which that service is provided now Please discuss other changes you think are provocative or have the potential for driving efficiencies, and include an explanation of what is necessary to effect this change through the budget or otherwise. New Initiatives please identify any service enhancements or additions that you feel are necessary, m 2007 with a detailed rationale supporting the need and an explanation of budgetary or structural adjustments that will be necessary to implement these additions /enhancements. Please provide detailed cost breakouts associated with new initiatives that can be added to the operating budgets prior to presentation to the City Council Future forecast please spend a beef moment looking into the future and forecast issues that will need to be addressed through the budget or service structures, and what options are available in the 2007 budget to prepare for those issues Final Thoughts The detailed budget information above may seem excessive given the likelihood that this year's budget will be austere However, I believe it is an important exercise to go through at least annually to continue momtormg our progress and making sure that how we deliver services is subject to constant evaluation. 2007 Budget Preparation May 22,2006 Page 4 of 4 Please have your base line item worksheets for the operating budgets to Fmance Director May, and the accompanying forms and worksheets submitted to me no later than Wednesday, June 14 I will be scheduling meetings for Jeff and me to meet with each of you individually to go over your budget materials between June 20 and June 30. The first budget discussion, based on department requests, will take place at the July 12 City Council Work Session. Budget will also be on the agenda at the regular Work Session on August 9. I do not know yet if we will be scheduling other special work sessions pnor to adoption of the prelnnmary levy on Tuesday, September 5. Should you have any questions, please do not hesitate to contact me. July 12, 2006 Departments FUNDING REQUIREMENTS USES (INCLUDING FIRE STATION LEVY) 2006 2007 Adopted Proposed Budget Budget Difference Percentage Council Budget $167,900 $284,100 $116,200 6921% Administration Budget 515,600 500,800 (14,800) -2 87% Elections Budget 38,900 61,000 22,100 56 81% Finance Budget 308,900 324,000 15,100 4 89% General Government Budget 361,700 372,100 10,400 2 88% Community Development Budget 886,000 930,100 44,100 4 98% Police Budget 2,339,700 2,639,900 300200 12 83% Are Budget 283,400 291,600 8,200 2 89% Public Works Operating Budgets Government Buildings Budget 390,500 442,400 51,900 13 29% Fleet Maintenance Budget 478 000 536,500 58,500 12 24% Street Maintenance Budget 1,153,700 1,180,400 26,700 2 31% Parks Maintenance Budget 532 800 601,600 68,800 12 91% Park Rec Budget- General Operating 967,700 1,02Q600 52,900 5.47% Park Rec Budget Special Programs 91,500 102,500 11,000 12 02% Total Operating Budgets General Fund $8,516,300 $9,287,600 $771,300 906% Building CIP Requirements 24,000 24,000 0 0 00% Street CIP Requirements 1,100,000 1,050,000 (50,000) -4 55% Equipment CIP Requirements 250,900 333,000 82,100 32 72% Insurance Budget Requirements 260,000 260,000 0 0 00% Port Authority Operating Levy 60,000 60,000 0 0 00% Bonded Indebtedness 1,599,360 1,820,445 221,085 13 82% Bonded Indebtedness Fire Station Levy 154,308 142527 (11,781) -7 63% Armory Anticipatory Levy (Value 2123/06) 248,422 269,528 21,106 8 50% 195,000 (82,187,067,700 x 00798 Water Enterprise Fund 1,258,400 1,258,400 0 0 00% Sewer Enterprise Fund 1,432,000 1,432,000 0 0 00% Storm Water Enterprise Fund 748,000 748 000 0 0 00% Arena Enterpr se Fund 421,200 441,303 20,600 4 89% Total Funding Requirements $16,072 890 $17127,300 $1,054,410 6.56% NOTE Special Levies include (1)Bonded Indebtedness, (2)Fire Station Levy and (3)Armory Anticipatory Levies July 12, 2006 Types FUNDING REQUIREMENTS SOURCES (INCLUDING FIRE STATION LEVY) 2006 2007 Adopted Proposed Budget Budget Difference Percentage Internal Revenue Generated Licenses and Permits 859,700 651,100 (208,600) -24 26% Intergovernmental 525,000 555,300 30,300 5 77% Charges for Services 1,160,700 911,900 (248,800) -21 44% Fines Forfeits 90,000 90,000 0 0 OD% Recreational Fees 236,200 228,000 (8,20D) -3 47% Miscellaneous Revenues 152,000 182,500 30,500 20 07% Transfers In 3,500 3,500 0 0 00% Enterprise Revenues 3,859,600 3,880,200 20,600 053° Total Internal Revenues 6,886,700 6,502,500 (384,200) -5 58% MVHC Cuts Made Later To Include in Levy 350,330 350,330 Levy Sources Special Levies 2,002,090 2232,500 230,410 11 51% General Levy 7,534,430 8,741630 1208 200 16 04% Total Levy $9,536,520 510,975,130 $1,438,610 15.09% Loss of MVHC from State Funding $350,330 $350,330 $0 n/a Total Revenue Sources $16,072,890 $17,127,300 $1,054,410 6 56% NOTE Special Levies include (1)Bonded Indebtedness, (2)Fire Station Levy and (3)Armory Anticipatory Levies 2006 GENERAL PROPERTY TAX LEVY PAYABLE 2007 GENERAL LEVY GENERAL FUND $7,015,630 BUILDING CIP FUND $24,000 STREET CIP FUND $1,050,000 EQUIPMENT CIP FUND $333,000 INSURANCE FUND $260,000 PORT AUTHORITY OPERATING LEVY $60,000 TOTAL GENERAL LEVY $8,742,630 BONDED INDEBTEDNESS G 0 MUNICIPAL BUILDING REFUNDING BONDS 1998A (ICE ARENA) (Authorized $258,957) $258,957 G 0 IMPROVEMENT BONDS 1999B (Authorized $19,533) $19,533 G 0 IMPROVEMENT BONDS 2001A (Authorized $119,604) G 0 PUBLIC FACILITY BONDS 2001C (Port Authority) (Authonzed $168,504) $168,504 G 0 COMMUNITY CENTER REFUNDING BONDS 2001E (Authorized $94,704) $94,704 G 0 IMPROVEMENT BONDS 2002A (Authorized $10,772) $10,772 G 0 PORT AUTHORITY BONDS 2002C (Authorized $258,650) $258,650 G 0 IMPROVEMENT BONDS 2003A (Authorized S86 354) (City Assumed Special Assessments) $86,354 G 0 CAPITAL IMPROVEMENT PLAN (CIP) BONDS 2005A (Authorized $210,737) $210,737 G 0 EQUIPMENT CERTIFICATES 2005B (Authorized $349,198) $349,198 G 0 EQUIPMENT CERTIFICATES 2006A (Authorized $87,955) 587,955 G 0 IMPROVEMENT BONDS 2006B (Authorized $275,081) $275,081 TOTAL BONDED INDEBTEDNESS $1,820,445 MARKET VALUE BASED REFERENDUM 1995 FIRE STATION LEVY G 0 FIRE STATION REFUNDING BONDS, 2005D (Authorized $142,527) TOTAL FIRE STATION LEVY PRINCIPAL AND INTEREST ON ARMORY BONDS ARMORY ANTICIPATORY LEVIES ($95,000 ($2,187,067,700 x 00798 (As of 2/23/06) TOTAL PRINCIPAL AND INTEREST ON ARMORY BONDS GRAND TOTAL 2006 PROPERTY TAX LEVY Last Updated 716/06 $142,527 $142,527 $269,528 $269,528 $10,975,130 County Auditor Adjustments (All Subtractions)• Fiscal Disparities Distributuion Levy (Metro Area) Spread Levy Used to Compute Local Tax Rate Increase from Previous Year in Spread Levy Market Value Based Referendum Levy Fire Station Last Updated 716106 SPREAD LEVY COMPUTATIONAL WORKSHEET (INCLUDING FIRE STATION LEVY) 2004 2005 2006 (Proposed) 2007 Total Funding Requirements 14,088,246 14,809,814 16,072,89D 17,127,300 (4) Less Internal Revenues 6,165,131 6,258,800 6,886,700 6,502 500 Less: Market Value Based Levy Fire Station (See Below) 152,193 153,426 154,308 142,527 (3) Equals. Revenues Needed 7,770,922 8,397,588 9,031,882 10,482,273 Add Back in State MVHC Cuts to Reflect Actual Levy 350,330 nla 350,330 350,330 Levy Certified by City to County Auditor 8,121,252 8,397,588 9,382,212 10,832,603 844,609 804,414 770,288 770,288 (2) 7,276,743 (1) 7 593,174 (1) 8,611,924 (1) 10,062,315 435% 1342% 1684% 152,193 153,426 154,308 142,527 (3) (1) Actual Spread Levy Based on Numbers from Dakota County (2) 2007 Number Provided by Dakota County as of 8/10/05 (No 2007 Number Available at This Time) (4) Market Value Based Levy for Fire Station Based on $142,527 Levy Spread to Taxable Market Value on 12/31/06 Last Update from Dakota County 2123106 Shows the Levy of $142,527 I $2,187,067 700 $.0652 per $1,000 as our Estimate (5) In 2004 Started Including the Water, Sewer, Storm Water Arena Enterprise Funds in These Figures