09-09-2019 Council Packet (Budget)

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WS – Item 1 WORK SESSION STAFF REPORT Special Work Session Item No. 1 Date: September 9, 2019 To: Mayor and City Council From: Sarah Cotton, Finance Director Re: 2020 Budget Recap Background Preliminary 2020 Taxable Market Values received from the County detailed an increase of 8.37% in values. Including new construction, preliminary 2020 Taxable Market Values have increased 10.49%. The increase in property values is estimated to increase the City’s Net Tax Capacity Value by $2,034,150 or approximately $923,318 at the 2019 City Tax Capacity Rate of 41.817%. The initial draft of the 2020 Budget presented to the City Council on July 29, 2019 resulted in a 13.08% levy increase given the needs and requests included in the draft budget. Two drivers of the significant proposed levy increase were the use of $594,573 in general fund reserves in 2019 and the additional debt service levy of $281,799 required for the 2018 Street Reconstruction Project (West Shadow Lake Dr and LaMotte Areas). At the August 12, 2019 Budget Work Session, the Council expressed a desire to reduce the proposed levy increase to 8%. Based on this direction, staff proposed budget cuts totaling $231,067 and a transfer of $100,000 from the Closed Bond Fund to soften the impact of the additional debt service requirements in 2020 associated with street reconstruction. In addition, $180,000 of General Fund Reserves were identified as available to reduce the levy impact in 2020, due to favorability in the 2019 expenditure budget. Council expressed concern with reducing the transfer of funds for street maintenance proposed by staff, which was included in the $231, 067 of budget cuts. Staff added back $31,500 to the draft 2020 Budget to continue funding the city’s pavement management efforts at a 5% increase over 2019 levels, bringing the total funding of the city’s pavement management plan to $661,500 in 2020. At the September 3rd Work Session, the Council expressed a desire to further reduce the increase in the preliminary levy by $300,000. Staff has prepared an updated Gap Analysis detailing a transfer of an additional $280,000 from the Closed Bond Fund and Use of Reserves in the amount of $20,000 to meet the City Council’s request. The resulting year- over-year increase to the preliminary levy is $535,102, or 5.32% and a reduction to the city’s tax rate from 41.817% in 2019 to 40.115% in 2020.