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WS – Item 1 WORK SESSION STAFF REPORT Special Work Session Item No. 1 Date: July 31, 2017 To: Mayor and City Council From: Sarah Cotton, Finance Director Re: 2018 Draft Budget & Tax Levy Background Transmitted for your review and discussion is the first draft of the 2018 Budget and Tax Levy. The draft was prepared by department directors and reviewed by the City Administrator with the intention of providing the resources needed to continue city services at their current levels. A Special Budget Work Session has been scheduled for Monday, July 31st. The 2018 draft budget is balanced with resources and expenditures of $10,481,405, which is a 2.04% increase over the 2017 adopted budget. Included in the draft are resources needed in order to continue to provide City services at their current levels. The draft budget assumes a COLA of 2.0%, as well as a 7.5% increase in the City’s contribution towards estimated health insurance premiums, and a 3% increase in dental premiums. A summary of adjustments to the 2018 Base Budget is provided on pages 10- 12 of the 2018 Budget document. The total increase to the base budget of $111,191 includes an increase in contingencies for unknowns of $50,000, an increase in pavement management funding of $27,100, and capital outlay of $17,602 and $25,843 in police and fire, respectively. Construction and development activities have improved over the last year, while other revenue areas, such as intergovernmental and municipal fines have declined. Other miscellaneous revenues have remained relatively flat. The 2017 budget included the use of $518,000 in general fund reserves to reduce the strain on property tax levels, in addition to $317,717 from the Closed Bond Fund. The amount transferred from the Closed Bond Fund was utilized to cover the second year of debt service on the 2015 EDA Lease Revenue bonds. The 2018 draft presented for discussion does not include the use of general fund or closed bond fund reserves. If the 2017 budget uses the full amount of budgeted reserves, the current general fund reserve balance would continue to be maintained at a level approximately 54% of annual expenditures. This would make $325,000 available for use in 2018 and would maintain the reserve balance and the Council policy level of 50%. Preliminary 2018 Taxable Market Values have increased 8.78%. The increase in property values is estimated to increase the City’s Net Tax Capacity Value by $1,724,996, or approximately $778,839 at the Current Tax Capacity Rate. The