09-11-2013 Council Workshop Minutes

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MINUTES CITY COUNCIL SEPTEMBER 11, 2013 Administrator pointed out that the 2014 Preliminary Budget proposes no levy increase other than a levy associated with debt for the Public Works Garage project. The Administrator reported that for 2014 the General Fund will rely on LGA as a revenue source to a tune of $99,680, approximately $33,000 more than in 2013. The Administrator pointed out that while the City is projected to receive more LGA in 2014 and could utilize more of those dollars in the General Fund and thus reduce the levy, a subsequent loss of LGA dollars would cause long -term problems for the City. The Administrator pointed out that most cities have adopted a policy of minimizing General Fund reliance on LGA due to its historical volatility. The Administrator pointed out that Council budget discussions have focused on a 3% Gross Levy increase, and noted that the entire increase is associated with the debt for a new Public Works garage. The Administrator indicated that while the City has the ability to pay cash for this project, over the long term it is better to finance the project given the current low interest rates and the future ability to earn more return on City dollars once interest rates rise. The Administrator reported that the City has been building dollars its Water & Sewer Capital Improvement Funds through depreciation of just over $300,000 per year. Financing the Public Works Garage for 20 years results in debt service of approximately $190,000 per year. The 3% Gross Levy increase will result in additional revenues to the City of approximately $81,500. He noted this would be a one -time use to help offset levy limits in the future. Payments for this debt would come from the Water and Sewer Capital Replacement Account. The City Administrator pointed out that no one likes to raise taxes, but the City's philosophy has been to have long -term stability in taxes rather than big swings. He noted that given the City will receive more dollars from Fiscal Disparities for 2014, a 3% Gross Levy increase results in a Net Levy increase of 1.84 %. The Administrator then reviewed a report showing the certification rates of nine other Ramsey County cities ranging from a -6.77% to 4.40% Gross Levy increase for an average of 1.42 %. Blesener pointed out that depreciation is already a part of the City's sewer and water rates. The Administrator replied that that was correct and noted that these dollars have been used to pay for such things as the City's share of single - frontage watermain, water and sewer infrastructure maintenance costs, painting of the water tower, etc. There will be no change in sewer and water rates as a result of the debt associated with the Public Works Garage project. The Administrator again noted that the City could pay cash for this project, but a better long term use of City dollars would be to bond for the cost. He indicated that the City's Financial Advisor, Ehlers & Associates, is in agreement with this approach. 2