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WS — Item 1 WORK SESSION STAFF REPORT Special Work Session Item 1 Date: July 14, 2014 To: City Council From: Al Rolek Re: 2015 Draft Budget and Tax Levy Background Transmitted for your review and discussion is the first draft of the 2015 Budget and tax levy proposal. 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. The draft also incorporates the priorities and initiatives identified by the City Council. Draft Budget. The 2015 draft budget is balanced with resources and expenditures of $10,190,811, a 14.2% increase from the 2014 adopted budget. Included in the draft are resources needed to continue the City services at their present levels and continue the City's efforts toward street maintenance; startup costs for a Lino Lakes fire department; and additional staff, capital outlay and other requests as identified by the City Administrator and Department Directors. It assumes staff wage adjustments at 2% as well as PERA contribution increases and adjustments in the City's contribution toward estimated health insurance premiums. New personnel needed to continue the process of initiating a new fire department, as well as staff positions in the administration and public safety areas, have been incorporated into the draft. Other recognized professional service and contractual needs, as well as increases for fuel costs and electric rates, are reflected in the draft. Expenditure estimates in all areas continue to represent what is needed to continue services at their current levels. Construction and development activities have improved over the last year, and other revenue areas, such as MSA and police state aid, have also shown some improvement. Interest income and other revenues continue to lag, increasing reliance on property taxes. The 2014 budget included the use of $165,947 in general fund reserves to reduce the strain on property tax levels. The 2015 draft presented for discussion does not include the use of reserves. If the 2014 budget uses the full amount of budgeted reserves, the current general fund reserve balance would continue to be maintained at a level approximately 51% of annual expenditures. This would make $113,880 available for use in 2015 and would maintain the reserve balance and the Council policy level of 50%. The one-time use of drug forfeiture funds to fund a police sergeant position funding for the 2014 budget is not available in 2015. Preliminary Tax Levy. Overall property values have increased by 12.69% overall, a vast improvement from prior years. The improvement in property values increases the City's tax capacity by $1,052,577 at the current tax rate. The preliminary operating levy would increase 18.87% given the needs and requests included within this draft budget. Included in the preliminary levy is a voter -approved levy to service the debt of $179,563 for the signalization projects at Lake/Main and Birch/Ware