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<br />WS – Item 8 <br />WORK SESSION STAFF REPORT <br />Work Session Item No. 8 <br /> <br /> <br />Date: September 5, 2017 <br /> <br />To: City Council <br /> <br />From: Sarah Cotton, Finance Director <br /> <br />Re: 2018 Budget & Tax Levy <br /> <br /> <br />Background <br /> <br />The following adjustments have been made to the 2018 Budget based on Council <br />direction during the August 14, 2017, Special Budget Work Session. <br /> <br />• Increase Use of Reserves to $325,000. This will maintain the City’s General <br />Fund reserve balance at 50% of annual expenditures. <br />• Increase operating transfers by $100,000 for park & trail improvements. <br />• Reduce Personal Services $8,754. <br /> <br />Staff also updated the Net Tax Capacity Rate Calculation for preliminary Fiscal <br />Disparities data received. Based on these updated amounts, the City’s Net Tax Capacity <br />Value is estimated to have increased by $1,633,268, or approximately $813,160 at the <br />current Tax Capacity Rate. The preliminary levy would increase 3.00% given the needs <br />and requests included in the draft budget. The projected Tax Capacity Rate would <br />decrease to 42.474% in 2018 from 45.140% in 2017. <br /> <br />Staff has reviewed 2017 YTD Expenditures and anticipates being under budget by <br />approximately $70,000, primarily because of position vacancies and fewer legal <br />expenditures. In addition, staff is anticipating revenue surpluses of approximately <br />$230,000. <br /> <br />Since the gap to maintain a flat Tax Capacity Rate is negative (no gap), and the City will <br />need to levy approximately $450,000 for debt service associated with the West Shadow <br />Lake/LaMotte Street Reconstruction Project, this provides an excellent opportunity for <br />the Council to consider funding additional projects to avoid a future tax rate spike. <br /> <br />For example, the estimated $300,000 budget surplus this year could fully fund a Phase I <br />development of the rec complex land. In addition, the Council could levy $100,000 for <br />Capital Equipment Replacement and thereby reduce future debt service associated with <br />issuing Capital Equipment Certificates. The Council could also levy $50,000 to fund <br />Municipal Building Maintenance and Repair. The General Fund levy impact would be <br />$150,000, resulting in a projected tax capacity rate of 43.231% in 2018 compared to <br />45.140% in 2017.