HomeMy WebLinkAbout2023 Budget Memo
STAFF REPORT
DATE: August 23, 2022
TO: Mayor and City Council
FROM: Kristina Handt, City Administrator
AGENDA ITEM: 2023 Budget Information – General Fund, EDA, Utility Funds and Tax
Levy
BACKGROUND:
In preparation for adoption of the preliminary tax levy in September, this memo addresses the following
information: discussion on preliminary levy, and assumptions being used to prepare the preliminary
budget.
ISSUE BEFORE THE COUNCIL:
1) What changes, if any, should be made to the draft budgets?
OPERATING BUDGETS:
Attachment #1 includes the entire General Fund Operating Budget (including a place holder for the
EDA) and Utility Operating Budgets.
Salary and Benefits
The 2023 preliminary budget is currently being prepared with assumptions of moving staff to the
next step of the new pay plan on January 1, 2023. For new or vacant positions, they are budgeted at
the midpoint of the range. Medical benefits are budgeted to increase by 10% as we won’t get final
numbers until late Sept/early Oct so a contingency has been included at this point. Staff would
expect the contingency may be reduced or removed by the time of final adoption in December.
General Fund
Revenue increases are proposed across all categories (except Fines and Investments) with Licenses
and Charges for Services seeing the largest increases at nearly 20%. This is due to staff aligning
budget projections for building permits, zoning permits and plan reviews more closely to past
actuals. We’ve still only budgeted for residential since commercial projects are less certain but
have now reflected the increase in values we’ve been experiencing. Total taxes for the operating
budget are planned to increase just over 4% compared to over 31% this year.
All general government expense budgets are proposed to increase mainly due to staffing changes
(new/reclassified positions, class and comp implementation 1/1/23, etc.). The administration
department increases are due to the new administrative services director position, increase in
assessing fees from the county due to growth in number and values of properties, and training and
IT needs. The city council budget is up slightly because of new computer reimbursements
following an election year and increased membership and training costs. Elections is down due to
there being no planned election in 2023. Communications is up due to the new administrative
services director position and growth in households and postage costs for the newsletters. The
finance department increase is due to the new finance coordinator position as well as a significant
increase in the finance director compensation. The planning department increases are due to the
addition of a new senior planner position as recommended in last year’s department audit. The
position would not be filled until quarter three when staff is in the new city center. Also at that
time, it’s proposed to move to a community development director to replace the planning director
position. The community development director would oversee both divisions-planning and
building- in order to bring a more cohesive approach and eliminate some uncertainties about where
to go in the development process. The community development director would also be the main
staff contact for the EDA as it is in cities of similar size such as Hugo thereby relieving the city
administrator of those operational duties to focus on more organizational strategic initiatives as
discussed at the August work session. Planning department increases then also include the
associated IT, software and training needs of the growing department as well as an increase in fuel
costs for the code enforcement official. Lastly, we’ve planned for increases in the new city center
building that are largely unknown at this time with a new building.
The sheriff’s contract is increasing almost 11% next year. Per the Sheriff’s Office these rates
reflect bargaining agreement settlements in relation to salary and benefits package, to include the
following increases:
• COLA: 2.5%
• Range: 3.5%
• Retention: 6.0%
• Medical insurance: 3.2%
• Flex credits: $0.40/hour added to base pay for deputies, $0.43/hour added to base pay for
sergeants in lieu of receiving flex benefit credits
• Uniform allowance: $395 for deputies, $310 for sergeants
The rising cost of fuel has also impacted the fleet budget, with an increase of $1.40/gallon, or 56%.
This has a direct impact on the mileage rate calculation, with an increase of $0.126/mile, or 22.5%
These calculations are evaluated in detail each year to arrive at a cost figure that the Sheriff’s Office
believes to be reflective of the true cost to provide police services to the city.
The fire department is seeing an increase of about 40% to allow for the hiring of four new fulltime
firefighters beginning in quarter 2 of 2023. This budget also plans for 53 hour work weeks for all 6
full time firefighters. Under FLSA laws, firefighters are allowed to work up to 212 hours in a 28
day period (53 hours a week) before being eligible for overtime. Paid on call firefighters would
serve as the third person on the crew. Once the full time positions are established, the city would
eliminate the part time firefighter positions. The fire department is also planning for the increased
fuel costs and software costs for the new station. There is a one-time CIP cost of $205,000 for new
radios.
The building inspections department is projecting a reduction in overall expenses in 2023 due to the
addition of an in house plan reviewer and investment in mobile technology to improve efficiencies
in service delivery. There is also a proposed increase for fuel and a shared fuel tracking system at
the public works facility. Currently, we have no system in place to track fuel usage expect for the
honor system on a hand written sheet. As more people, and more departments, are making use of
the bulk fuel at public works it is important, and a good practice, to invest in a system to track and
bill the usage properly.
Public Works is comprised of Streets (General Fund), Parks (General Fund), Water, Sewer, and
Storm Water. For the last few years, public works hourly staff have submitted their timecards and
identified which of the above departments they worked in each day. This has given us historical
data to use in projecting where they will spend time in the future. Allocation changes for public
works staff across all departments has been adjusted for 2023 based off of 2021 actual data. This
resulted in more personnel expenses in Parks rather than Streets. The increases in Water and Sewer
personnel expenses are largely related to the new/reclassified staff positions mentioned in other
departments above who have some of their time allocated to utilities. Materials and supplies
subcategory is up due to fuel and a new fuel tracking system as mentioned previously.
Charges for services is down due to a decrease in seal coating and crack filling from 2022 when the
city played catch up. Going forward staff is proposing to create a local street improvement fund.
Much like the vehicle replacement fund, the city could levy a set amount each year and have those
funds restricted for road projects. This will allow us to better manage the ups and downs by
keeping a fairly consistent contribution from the tax levy but allow the flexibility to tackle road seal
coating, mill and overlays, crack filling as needed. As you know, mill and overlays are
significantly more expensive so those years that include a mill and overlay would need to see a
significant increase in the tax levy if we didn’t average it out over a few years. Over the next five
years, engineering estimates we need about $500,000 on average each year to maintain our streets.
Ideally, we’d like to work toward a ten year average. I’ve increased the 2023 budget for street
maintenance to $600,000 from this estimate since it only looks at the next 5 years and in order to
cover any remaining costs to the county for CSAH 15/TH36 which they don’t expect to have final
billed to us before the end of this year.
If council didn’t want to follow the proposal to average the costs and create a local street
improvement fund, then you can see from the chart below how the costs would fluctuate and greatly
increase in the years a mill and overlay is needed.
The parks department is proposing an increase due to more staff time spent in parks, increased fuel
costs, more weed control, more porta potties, and the $15,000 contribution to the Friends of Sunfish
Lake Park for their DNR grant.
Transfers include a request by the EDA for $85,000 to hire a consultant to staff the EDA, community
development and promoting activities in the city. They began brainstorming other items for an RFP at their
August 16th meeting which might include the creation of a marketing piece, branding or EDA specific
webpage. Staff did not support this request when discussed at the EDA in May. Hiring a community
development director (at a cost of only about $20,000 more than a planning director) helps with the EDA
items and also addresses other areas of need in the development process. If council decided to fund the
request for a consultant, the contract would be managed by the Planning/Community Development
Director.
There is also an additional transfer of $250,000 to the vehicle replacement fund in order to address the
anticipated deficit in the fund in 2027. See more details in 2023-2027 CIP. This is in addition to the
$175,000 already proposed from the building, fire, streets and parks departments.
Lastly, as mentioned above the preliminary budget draft does include a contingency of $35,000 to cover
some of the HR related items that have not yet been finalized but are expected to be by the time the final
budget is adopted in December. Remember when setting the preliminary levy in September, you may
reduce that amount in December but cannot increase it.
Summary of Changes by Category and Function
Changes by Category
Personnel 641,444
Materials and Supplies 83,764
Charges and Services -428,442
Capital Outlay -93,636
Miscellaneous 14,032
Transfers 317,746
Contingency Reserve 35,000
TOTALS: 569,908
Changes by Function
General Government 285,128
Public Safety 332,407
Public Works -369,865
Culture & Recreation 63,127
Capital Outlay -93,636
Contingency 35,000
Transfers 317,746
Total 569,908
As you can see from the above the biggest change is in the personnel category. This is largely due
to the addition of the following new staff positions in 2023:
Finance Coordinator for $67,448 (salary, benefits and taxes for Q3 start) (80% in General fund,
20% in utilities)
4 Full Time Firefighters for $95,583 each (salary, benefits and taxes for Q2 start)
Senior Planner for $67,448 (salary, benefits and taxes for Q3 start)
Plan Reviewer for $57,435 (salary, benefits and taxes for Q3 start)
Debt Service
The total tax levy is comprised of the operating levy as well as the debt levy. The city issued new
debt in 2022 which we will begin paying on in 2023. The 2023 payments for existing debt are as
follows:
2022 2023
GO 2010A $207,076 $206,656
GO 2012B $65,417
GO 2014A $200,394 $200,091
GO 2015A $14,508
GO 2016A $193,934 193,409
GO 2017A $344,104 342,660
GO 2018A Equip Cert $126,404 123,569
GO 2019A $295,301 297,138
GO 2021A $1,008,036 $1,025,930
GO 2022A $287,685
Total Existing Debt Levy $2,455,174 $2,677,138
The combined increase in the tax levy (for operations in the general fund and debt service) is
proposed at 5.72% for 2023.
Utility Funds
Our last utility long range study was updated in November 2020. The projected revenues come
from that study and therefore would also rely on the increases proposed at that time which are 1%
increase for water and sewer and a $10 increase in the annual storm water fee ($2.50 per quarter for
those on the quarterly billing).
Overall water fund expenses show a decrease but that’s mainly due to the 2022 proposal to pay cash
for the water tower and main extension. Since that was bonded for instead you see the increase in
the bonding categories. Charges for services are up due to contracted services including a utility
proforma update, increased fees to the state for water connections based upon the increased number
of water connections occurring and a few other minor areas.
The sewer fund is seeing increased expenses in all categories. Personnel is up due to
new/reclassified staff. Materials and supplies are up for the fuel tracker and skid steer trailer.
Charges for services are up due to the Met Council fees. While the met Council raised their rates
5% we are seeing a bigger increase as we have also added users. Capital outlay is up for anticipated
oversizing costs to developers and the start of the I94 lift station upgrade. Lastly, bonding costs are
up due to bonding for Old Village Phases 5 and 6 and the Tapestry sewer extension.
The Storm Water Fund is projecting a slight increase in expenses mainly due to minor increases in
charges for services such as the utility proforma, credit card fees, postage for quarterly bills, etc.
Tax Impact:
As of the writing of this report, the county has not released the tax impact worksheets so we can see
the impact on the average home. These may be available by the time of the meeting on August 23rd
in which case staff will include in the presentation. If not available by then, they will available
before the preliminary levy is certified in September.
Lake Elmo remains in the bottom half for tax rate compared to other Washington County
communities for tax rates set in 2022.
Rank Taxing Authority 2022
1 Marine on St. Croix 59.002
2 Hastings 58.807
3 Landfall 57.567
4 Newport 55.852
5 Stillwater 52.152
6 Oak Park Height 51.753
7 Willernie 49.194
8 Forest Lake 40.991
9 Lake St. Croix Beach 39.902
10 St. Paul Park 39.726
11 Oakdale 39.533
12 Hugo 39.403
13 Mahtomedi 39.119
14 Cottage Grove 37.251
15 Bayport 33.463
16 Woodbury 32.217
17 Afton 32.007
18 Scandia 30.945
19 Lake Elmo 30.546
20 Lakeland 29.525
21 Birchwood 28.692
22 Lakeland Shores 23.224
23 White Bear Lake 22.271
24 St. Mary's Point 22.034
25 Grey Cloud Island 21.214
26 Stillwater Township 20.105
27 Dellwood 19.248
28 Baytown Township 16.443
29 Denmark Township 14.65
30 Grant 13.426
31 May Township 12.426
32 West Lakeland Twp 12.017
33 Pine Springs 9.427
Preliminary estimates this spring were that the city’s taxable market value increased by 29%. If the
final numbers stay consistent with that and the proposed budget, Lake Elmo’s tax rate would drop
below 25%.
Process for This Evening:
For this evening, staff will discuss the 2023 Proposed Budget, outlining key points and answering
any questions. We are seeking feedback on changes to make before the Council certifies a
preliminary levy at the September 20th meeting.
ATTACHMENTS:
1) 2023 Proposed Master Budget Worksheet – All Budgets