HomeMy WebLinkAbout2019 Budget Memo Council 8.28.18
STAFF REPORT
DATE: August 28, 2018
TO: Honorable Mayor and City Council
FROM: Sue Iverson – Finance Director
AGENDA ITEM: 2019 Budget Information – General Fund, Utility Funds, EDA and Tax
Levy
REVIEWED BY: Kristina Handt – City Administrator
INTRODUCTION:
In preparation for adoption of the preliminary tax levy in September, this memo addresses the following
information: discussion on preliminary levy, assumptions being used to prepare the preliminary budget,
tax levy, and a discussion on capital improvement funding. The Finance Committee has met both in July
and August and has reviewed this information.
ISSUE BEFORE THE COUNCIL:
1) What changes, if any, should be made to the draft budgets?
2) What Preliminary Property Tax Levy would the City Council like to set for certification in
September?
PRELIMINARY LEVY
At the July 17, 2018 Finance Committee meeting, staff presented the draft 2019 budget and the 10 year
Financial Management Plan projections. Previously, the committee had expressed setting the budget at no
change in the tax rate or a change equal to inflation, however at the July meeting the committee asked staff
to look at scenarios using a 1%, 2% and 3% increase in the tax rate to better control the fluctuations of the
rate in the 10 year plan. Staff has prepared a budget that would keep the tax rate at the same level as 2018.
While the information used in this assumption is preliminary, Washington County has provided staff with
the estimates which are needed to project the tax capacity and fiscal disparities components.
On the next page is an estimate of these numbers. As you can see from the table on the next page, the Pay
2018 rate was 22.4442% with an overall levy of $3,596,601. To achieve this same tax rate for Pay 2019,
using the estimated taxable value of $17,429,500 the overall levy would increase by $514,181 to
$4,110,782.
***PLEASE NOTE THESE ARE ESTIMATES USING NUMBERS FROM THE COUNTY***
Below shows the impact to the average valued home of $382,800. Please note there is not an impact to the
annual taxes as a result of the levy increase since the tax rate has remained the same. The increase is due
to the estimated increase in market value of 1.5% and Fiscal Disparities.
The overall City levy is made up of the General
Fund Operating Levy and the Debt Levies. The
table to the left shows the Actual 2018 levy and
the Proposed 2019 levy if the tax rate were to
remain the same.
Actual Proposed %
Item Pay 2018 Pay 2019 Change
(A)(B)(C)
1.Levy before reduction for state aids $3,596,601 $4,110,782 14.3%
2.State Aids - $0 $0 0.0%
3.Certifed Property Tax Levy = $3,596,601 $4,110,782 14.3%
4.Fiscal Disparity Portion of Levy - $149,615 $199,200 33.1%
5.Local Portion of Levy = $3,446,986 $3,911,582 13.5%
6.Local Taxable Value ÷ 15,359,350 17,429,500 13.5%
7.Local Tax Rate = 22.442%22.442%0.0%
8.Market Value Referenda Levy $0 $0 0.0%
9.Fiscal Disparity Portion of Levy (SDs only)- $0 $0 0.0%
10.Local Levy = $0 $0 0.0%
11.Referenda Market Value ÷ 1,452,554,500 1,649,748,600 13.6%
12.Market Value Referenda Rate = 0.00000%0.00000%0.0%
Taxable Taxing
Market Homestead Taxable District
Value Exclusion Market Tax Net
B/4 Credit Credit Value Capacity Tax
Proposed Pay 2019
Pay 2019 MV 76,000@.40%500,000@1.0%(B7 x G) +
X 0.988 - rem up to 413799 @.09%(D - E)rem @ 1.25%(B12 x D)Annual Increase Monthly incr.
Estimated Tax District rate as % of total rate:
150,000 23,740 126,260 1,263 $283.44 $5.38 0.45$
382,800 2,788 380,012 3,800 $852.80 $13.92 1.16$
350,000 5,740 344,260 3,443 $772.68 $12.79 1.07$
500,000 - 500,000 5,000 $1,122.10 $16.61 1.38$
750,000 - 750,000 8,125 $1,823.41 $31.19 2.60$
Total Change
2018 2019
GO 2009B $50,911 $43,580
GO 2010A 61,206 59,356
GO 2010B 204,519 205,989
GO 2011A 73,254 76,719
GO 2012A
GO 2012B 61,141 65,275
GO 2013A
GO 2014A 203,045 203,885
GO 2015A 28,683 25,113
GO 2016A 189,419 189,419
GO 2017A 341,610 346,598
Total Debt Levies $1,213,788 $1,215,932
General Fund $2,382,813 $2,894,850
Total Levy $3,596,601 $4,110,782
OPERATING BUDGETS
Attachment #1 includes the entire General Fund Operating Budget, the Utility Operating Budgets,
and the EDA Budget.
Salary and Benefits
The 2019 preliminary budget is currently being prepared assuming a 2.5% wage adjustment for non-
union staff and 3.0% for union staff. Medical benefits are estimated to increase by 6%, but a
contingency of $54,892 has been built into the budget for increases that might occur due to Federal
legislation which are unknown at this time. These could have a significant increase on our insurance
rates.
General Fund
Revenues are largely increased due to the
proposed operating levy for the General
Fund. Since the City is in an expansion phase
we have projected a conservative estimate for
building permits, planning, and zoning fees.
Cable franchise revenues are increasing as the
City builds out. State Fire Aid and Municipal
State Aids (MSA) for road maintenance are
based on the current estimates done this year.
Tower Rent has increased as we have two
additional leases and current lease increases.
More detailed information is found in the
attached budget.
Staff worked on budgets to more accurately reflect costs in the proper departments and services, so
the attached budget sheets reflect several allocation changes which are noted. The Mayor and
Council budget remains fairly flat with the exception of some IT expenses and the addition of
Family Means for $30,000. The Finance Committee was split on whether or not to fund the Family
Means request through the General Fund. Two members were ultimately opposed while one
member was supportive of the request. Communications shows a reduction of which $33,700 is
expenditures for IT that are reallocated throughout the budget to the proper departments.
Finance shows changes between categories and line items, but overall is a 14.41% decrease as a
result of hiring a full-time Finance Director as opposed to contracting with a consultant, and
elimination of the one-time software costs in 2018 for the software conversion. The most noteable
change in Planning & Zoning is the decrease of $31,000 as the result of completing the
Comprehensive Plan.
Keats Ave Turn Lane has been added in Engineering. The Sheriff’s contract increased 5.58%.
Building Inspections had an additional Inspector in the 2018 budget, but since that position has not
General Fund Revenues
Property Tax Levy $692,152
Fiscal Disparities 49,585
Building/Mechanical Permits 77,000
State Fire Aid 13,000
MSA Maintenance 16,166
Planning & Zoning Fees 15,005
Cable Franchise Revenue 17,000
Tower Rent 55,148
Miscellaneous -13,857
$921,199
been filled, staff has reevaluated and changed
this for 2019 to reflect a part-time position. A
new vehicle for Building Inspections had
previously been budgeted for 2018 and has
been moved to 2019.
Public Works is comprised of Streets (General
Fund), Parks (General Fund), Water, Sewer,
and Storm Water. An additional employee
has been added to the budget consistent with
the consultant recommendation from 2016,
but has been spread across all funds. Staff
reevaluated the Public Works employees’ time
cards and has changed the allocation of
salaries and benefits to more accurately reflect
costs in the proper departments. $10,000 has
been budgeted for Sunfish Management and
$58,000 has been budgeted for mowing
contracts.
At the June 19, 2018 meeting, the Finance
Committee recommended that a Vehicle
Replacement Fund be established with $100,000 from the General Fund Balance and $75,000 be
transferred from Fire, Streets, and Parks & Recreation. Staff would recommend that any additional
funds available from the tax levy not needed for the operating budget be placed into this fund, thus
reducing the need to bond for equipment in the future. With these preliminary estimates, $326,000
has been placed into the budget at this time. If the Council supports the Finance Committee’s
recommendation of increasing the tax rate by 3%, an additional $122,500 will be transferred to the
fund in 2019 (or about $1.5 million more over the next five years).
FINANCIAL MANAGEMENT PLAN
Per direction from the committee, staff has prepared the forecasts requested looking at keeping the
City’s Tax Rate flat (0%), 1% increase, 2% increase, and 3% increase. The committee was
concerned with the fluctuating rate in the 10 year projections, especially in year 2023 when the new
City Hall/Fire Station costs/debt would be added to the tax rolls. Staff was asked to run various
scenarios to stabilize the increases much like you would do with utility rates.
In looking at the various scenarios (lines 75-79) of the attached Financial Management Plans, you
will see that the 3% Tax Rate increase seems to be the best overall option for several reasons:
1. The rate increase is a steady increase of 3% or about $40-$48 a year on the median valued
home.
2. The plan shows that existing homeowners would be paying for the normal increases in the
budget and costs due to inflation (as the City is estimating expenses increasing by 4% per
year) while new development would be paying for the increased costs in services and
equipment due to development as these have been worked into the plan as well as current
expenses.
3. The costs of the new City Hall and Fire Station are minimized to current residents as the
impact would be about 5.27% increase or $74 on the median valued home in 2024
(previously the increase was in 2023).
General Fund Expenditures
Family Means $30,000
Assessing Services 28,150
Elections -8,500
Finance Director 103,677
Finance Consultant -105,150
Finance software costs -16,682
Comprehensive Plan -31,000
Keats Ave Turn Lane 70,000
Sheriff's contract 37,093
Building Inspector change -20,604
Sealcoating & Crack Sealing 165,000
Sunfish Management 10,000
Mowing Contracts 58,000
Snow removal sidewalks 10,000
Fund balance to Vehicle Fund 100,000
Budget transfer to Vehicle Fund 75,000
Additional transfer to Vehicle Fund 326,000
Contingency 54,892
Miscellaneous -34,677
$851,199
4. Additional reserves would be accumulating to assist with future equipment expenses, thus
eliminating the need to borrow or bond, thus growing our fund balances to maintain reserve
levels to achieve favorable bond ratings. (The fund balance reserve is calculated using the
percent of the current year’s operating budget less transfers, so as the budget grows so will
the required reserves to meet this level. The reserves can be an accumulation of all
governmental funds excluding the enterprise funds, it is not just the general fund reserves.)
So placing funds in the Vehicle Replacement Fund rather than leaving them in the
Undesignated General Fund Balance does not hurt our chances for a favorable bond rating.
5. In looking at the tax rate in 2014 of 27.761% the forecast
shows that the tax rate in 2024 even with a 3% increase
each year and the City Hall/Fire Station will still not be
at the 2014 level. The City continues to compare
favorably to other cities and taxing jurisdictions in
Washington County when looking at 2018 tax rates.
6. As these forecasts are high level indications of what is
planned at this point, they will constantly be monitored
and changes based on decisions and economic factors as
they occur. They are meant to provide a look into the
future to better assist in making decisions and policy
based on our long-range plans. Out years after 2024 will
need refining to help build reserve funds to pay for
maintaining infrastructure and repairs and minimize the
need for bonding as once development slows, the City
will need to have reserves for these purposes.
Finance Committee Recommendations:
The Finance Committee unanimously recommended the approval of the 2019 General Fund (except for
Family Means), Utility and EDA budgets at their last meeting. Also, at their August 21st meeting by a vote
of 2-1, the Finance Committee recommended a 3% increase in the tax rate in order to even out the increases
related to the city hall and put more funds in the vehicle replacement fund thereby reducing borrowing.
Process for This Evening:
For this evening, staff will answer any questions on the 2019 Proposed Budgets. In addition,
discussion on the 2019 Preliminary Property Tax Levy will ensue, with staff also available to answer
any questions.
Options:
• If Council wishes to see any changes to the proposed budget or levy at the September
meeting, please provide that direction to staff so the documents can be updated before
adoption of the preliminary levy.
ATTACHMENTS:
1) 2019 Proposed Master Budget Worksheet – All Budgets
2) Draft Long-Range Financial Management Plans
Washington County Tax Rates
Rank Taxing Authority 2018
1 Landfall 80.743
2 Hastings 60.964
3 Newport 58.736
4 Marine 55.060
5 Oak Park Heights 54.462
6 Stillwater 53.790
7 Willernie 49.748
8 Lake St. Croix Beach 47.497
9 St. Paul Park 42.591
10 Forest Lake 41.871
11 Cottage Grove 40.583
12 Oakdale 38.544
13 Lakeland 36.540
14 Hugo 36.330
15 Bayport 36.017
16 Scandia 35.058
17 Mahtomedi 33.972
18 Woodbury 33.670
19 Afton 32.255
20 Birchwood 24.904
21 Lakeland Shores 24.653
22 St. Mary's Point 22.517
23 Lake Elmo 22.442
24 Grey Cloud Island 21.834
25 Stillwater Township 21.759
26 White Bear Lake 19.058
27 Dellwood 14.614
28 Grant 13.907
29 Baytown Township 13.730
30 Denmark Township 11.063
31 May Township 10.832
32 Pine Springs 8.730
33 West Lakeland Township 8.157