04-01-2024 WS - Laserfiche WebLink

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Key 2025 Budget Issues: The February state budget forecast projects a surplus of $3.7 billion for the current biennium (July 1, 2023 thru June 30, 2025), but spending is projected to exceed revenue through fiscal year 2027. Local Government Aid did increase for the City. Our 2024 allocation is 19.8% greater ($169,610) than 2023. The City Council budgeted for 90% of anticipated LGA for 2024 to guard against any legislative cuts or economic weakness associated with the state budget. Staff would recommend that we continue to decrease reliance on LGA and look at allocating more of this revenue source to capital projects. The state has unalloted LGA in the past and if this happens again, we would want to mitigate the impact to City daily operations. Inflation still remains high and has increased slightly over the past two months. The City’s charter cap was recently amended to give the City Council more flexibility to respond to the growing challenges the City faces. The charter cap excludes debt service levies, voter approved levies, and capital project levies from inclusion in the cap calculation. A 1% levy increase would generate an additional $68,847 in tax revenue. Property taxes account for 68.3% of General Fund revenues and operating transfers in. Ramsey County will provide preliminary 2025 values and projections in late August. The City has settled contracts with the two police unions and the public works bargaining group through 2025. The Police Patrol contract provides for a 3.0% cost of living adjustment (COLA) in 2025, the Police Sergeants contract provides for a 3.0% COLA and a market adjustment in 2025, and the public works bargaining group will now be following the newly implemented pay grade and step program that became effective in 2024 for all non- union employees. Due to the new grade and step program, the majority of employees are not at the top of their range and will receive a minimum step increase of 2.75% in 2025, in addition to any COLA the council may approve. The estimated impact on the General Fund with the approved Police contracts and assuming a 3% COLA for the new grade and step program would be $136,330. Health insurance premium increases are unknown at this time and are based on our experience (experience rated premiums). We will receive our rate notice in September/October. The impact to the budget will depend upon the size of the unknown rate increase. The City’s insurance contribution for 2024 was $1,245 per month compared with $1,200 for 2023, which includes a $200 per month HSA contribution for employees claiming single insurance. The City makes an additional $225 per month HSA contribution for families. As far as we know, the employer’s share of PERA will remain at 7.50% for General plan members and 17.7% for Police plan members. The PERA General rate has increased from 5.53% in 2005 to 7.50% in 2015 and the Police PERA rate has increased from 9.3% in 2005 to 17.7% in 2020. The state legislature controls the resolution of the underfunded pensions. There are requests for increased staffing from departments for 2025. City Administration is looking to increase their part time employee to 30 hours per week. This would make the position eligible for prorated insurance benefits and could increase the General Fund budget by $33,500 or more. The Public Works department is also looking to increase the hours of their part time Administrative Assistant and hire an intern in the engineering division with the goal of this intern becoming a full time Storm Water Technician. Costs for this have not yet been calculated. It is anticipated that the Fire department will have an increase in operating costs and a higher capital outlay expense for 2025. Our share has been mitigated somewhat by a switch to a fixed percentage formula going forward and retirement of the SLP Equipment Note. (2023 – 15.5%, 2022 – 15.5%, 2021 – 15.5%, 2020 – 15.998%, 2019 – 16.373%, 2018 – 16.158%, 2017 – 15.819%)