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7.1. SR 08-15-2011~~ Item # 7_1. City of Elk MEMORANDUM .~, River TO: Mayor and City Council FROM: Tim Simon, Finance Director DATE: August 15, 201 I SUBJECT: 2012 Budget Discussions Equipment Replacement CIP (2012-2016 At tonight's meeting we will review the equipment replacement fund which is a section of the CIP. The equipment replacement fund covers replacement of wheeled equipment and vehicles. The fund is replenished on an annual basis through charges paid by each general fund department through their operating budgets. The amount charged to each department is allocated on the estimated replacements over the next 10 years and updated yearly. In addition, the fund receives a portion of the payment in lieu of tax (PILOT) from Elk River Municipal Utilities, interest earnings, and auction proceeds. This fund maintains a significant fund balance, but that is necessary given the sufficient variability as we utilize cash reserves when several costly vehicles are replaced in the same year. The replacement cycle is continuously evaluated, based on costs and benefits over the next several years, to determine the optimal time to replace vehicles. If the Council would like the equipment evaluation forms on an~piece of equipment being requested please let Bob Thistle or I know. The City's fleet committee is actively involved in the long-range planning of the replacement of the City's fleet and financial condition of the equipment replacement fund. Mark Thompson is the current chair of the committee. Storm Water Management See attached memo from Rebecca on the storm water budget and the NPDES requirements. This is a follow up from the July 11, 2011 budget review of the storm water budget. Other Items I have attached the last ten years of Council contingency. It appears the budget percentage has ranged from .5% to 1 % of the budget. N:APublic Bodies\City Council\Council RCA\Agenda Packet\OS-15-20ll\2012-2016equipmentxeplacementfund[l~.docs Contingency Adopted Amended Year Budget Budget Actual 2011 $75,000 $2,698 2010 $113,100 $113,100 $10,766 2009 $70,050 $70,050 $6,434 2008 $60,000 $58,400 $1,573 2007 $89,000 $14,000 $3,315 2006 $110,000 $82,400 $17,305 2005 $100,000 $24,800 $0 2004 $75,000 $75,000 $156,704 2003 $75,000 $75,000 $5,463 2002 $95,000 $95,000 $27,527 2001 $130,000 $130,000 $140,882 I have attached the three levy scenario's we have been modeling. We expect to get updated Net Tax Capacity information prior to adopting the maximum levy on September 12. In addition, more information will be available on the Market Value Homestead Credit change. From now until final budget adoption in December we will work on balancing the budget with the final tax levy for taxes payable in 2012. Percentage Change (NTC) -6.0% -6.0% -6.0% 2011 2012 2012 2012 NTC 24,303,844 22,845,613 22,845,613 22,845,613 Tax Rate 45.72% 45.72% 47.18% 48.6% Levy General Fund 9,665,436 9,064,409 9,398,098 9,731,786 PERA 93,077 - Libra ry 63,100 63,100 63,100 63,100 Storm Water 50,000 50,000 50,000 50,000 Debt 813,525 839,001 839,001 839,001 Tax abatement 427,253 428,504 428,504 428,504 $ 11,112,391 $ 10,445,014 $ 10,778,703 $ 11,112,391 Attachments: • Cash flow analysis of the equipment fund • 2012 detail equipment listing (as recommended by the fleet committee) • August 8`" Budget adjustments summary • 2012 Summary Budget worksheet • 2012 Personnel requests N:APublic Bodies\City Council\Council RCA\Agenda Packet\08-15-2011\2012-2016equipmentmplacementfund[1J.docs CITY OF ELK RIVER EQUIPMENT REPLACEMENT PLAN 2012-2016 INTRODUCTION AND PURPOSE BACKGROUND The Equipment Replacement Plan is a ten year forecast of equipment replacements in the City of Elk River. It is intended to inform and plan for the equipment needs in the next ten years, with a primary focus on the next five years to align with our capital improvement plan (CIP). The first year of the plan becomes an adopted equipment budget and will be funded out of the equipment replacement fund. The remaining nine years represent an estimate of equipment needs and funding capabilities of the City and are adjusted accordingly. Funding requirements vary from year to year. In order to maintain a fairly consistent levy, the ten year plan is projected with a 3% inflation factor. The cash flow requirements to fund the equipment needs in the equipment fund will experience some ups and downs over the next ten years given the projected equipment needs and a 3% inflation rate. The goal for the equipment plan is to reevaluate at least annually the requested or needed equipment and maintain financial viability of the equipment fund over the long-term. 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Yt* ~~ u 6~ ~ C O x ~: .~ L O t o O 4 u O Y 6 `1 ~ i E [ ~ B ` ~ C _ O C N C O ~ d 'L a ~ ~ 3 ~ ~ ~ " F W F E 3 ~ ; C ~ E ~ X ~ ' C C = r s i f ~ y g a C $ w` w` e i ° ~ ° o 5 w ~ w` ~ z° o ~ ~ ~ ~ '~ 5 o u a o' `S ~ ° a° ~ _ ± i c a ~ € ~ ~ ~ r a = y ~ ~ m w O ~ C • ~ a c • C • 0 ~ a G e° w ~ w N • ~ ~ ~ = a ~ _ a o ~ o Z S i' N d m W V LL N Q d 0 r-' y N f' ~' O N O ~ , N ~ Fi O , O ~ .~` O _ ~/ O . N _ ~" ~ ~ ~ d V ~ ~ O Q, N d \ ~ ~~ Q~ ~ r ~ ~ O ~ \ N LL v r ~ , ~ , N o N N r O N O N M O N N O N O O O O O O O O O O O O O O O O O p O O O O O O O O CO ~ N O 0 0 C O 't i' N r r r r .ver MEMORANDUM TO: Mayor & City Council FROM: Rebecca Haug, Environmental Administrator Justin Femrite, City Engineer Tim Simon, Finance Director DATE: August 15, 201 I SUBJECT: Stormwater Budget BACKGROUND The City of Elk River was required by the Minnesota Pollution Control Agency (MPCA) to apply for the National Pollutant Discharge Elimination System (NPDES) General Storm Water Permit in 2003. The reason Elk River was required to apply for this permit is the State designated approximately 30 communities throughout the state as Municipal Separate Storm Sewer Systems (MS4) because of the rapid growth in development within those communities. This was implemented throughout the country and is a Federal and State unfunded mandated program. The permit requires the communities to develop and implement Best Management Practices and achieve measurable goals to satisfy six minimum control measures. The six goals are Public Education and Outreach; Public Participation/Involvement; Illicit Discharge Detection and Elimination; Construction Site Runoff Control; and Pollution Prevention/Good Housekeeping. Staff presented the proposed 2012 Stormwater Budget on July 11, 2011. At that time, staff informed the Council that the MPCA is in the process of issuing a new Stormwater Permit for Municipal Separate Storm Sewer System (MS4) communities. The proposed permit has some costly requirements included in it. The Council directed staff to come back with the best and worst case scenario for funding the City's Stormwater management program. In an effort to determine the best and worst cases, staff has been soliciting information from other communities on projected costs to implement the new requirements of the permit, as well as information on how their current program is funded and how it will be funded if the proposed permit is approved. Currently, Elk River funds its Surface Water Management Fund through a $50,000 tax levy and the remaining funds come through with impact fees for development projects. The current fee schedule is: SURFACE WATER MANAGEMENT IMPACT FEE (3% annual increase per resolution 94-910) $98/residential lot (rural) $196/residential lot (urban) $1,179 /acre (multifamily, commercial, and industrial) FINDINGS There are currently two options being utilized by other communities throughout the State. In researching other communities, a majority of them charge their residents a monthly fee. The fees range from $1.03 (Little Falls) to $11.09 (Minneapolis). These fees are typically billed bi-monthly on the residents' utility bill. Most of these communities also have a fee structure set up for commercial, industrial, and institutional properties. Those fees vary considerably depending on the community. The fees cover the costs to implement the NPDES permit, maintain the existing Stormwater infrastructure, such as catch basins and storm water pipes, excavating sediment in storm ponds, the installation of water quality projects, and overall maintenance of the storm sewer system. The other option being utilized is through a tax levy. The estimated cost to meet the minimum permit requirements in 2012 has been determined to be $160,350. This amount will cover the costs of the equipment and services needed to do the necessary work to improve the system. For the 2012 budget, if the tax levy remains the same, there is enough money for doing the requirements. However, in 2013, there will not be sufficient funds to meet the requirements of this program. This program has been funded primarily through development but with the lack of development, the funds are diminishing even though the Ciry still needs to maintain its Stormwater system. In order to continue meeting the requirements of the permit, a fee structure would need to be instituted or an increase in the tax levy would be required in 2013. CONSIDERATIONS Two options to be considered are: Set up a rate structure for all property owners (residential, commercial, industrial, institutional, etc). a. Based on conversations with other communities, this will be very labor intensive. Staff would be requesting at a minimum an additional $30,000 to conduct a study in 2012 to determine the impervious surface/acreage for all properties within the City limits. The reason for doing this is to ensure that property owners are being treated fairly and not being charged a fee if they are currently treating all their Stormwater. The other communities allow for fee exemptions to those properties. This would be funded out of the Surface Water Management Fund. The City of Rogers paid approximately $20,000 to have this type of study completed. b. There would be administrative costs associated with Elk River Municipal Utilities doing the billing for the City. c. Ordinance amendment would be required 2. Increase the tax levy in future years to cover the costs of the program Staff is open to further discussing options on how to proceed with funding the City's Stormwater program. r O N r r O 0) (6 t0 T ~, O to N W N N N - O jn N W N f0 ~ - O jn N W N M - O N N W 0) C6 N - O N N W o " o 0 0 0 0 o d' O O O O O O N O O O O O O O O CO O to r r (Q r O r o " o 0 0 0 0 o M O 0 0 0 0 O O O (O t11 ~ ~ ~ In r I~ r 0' 0 0 0 0 0 0 0 0 r ~ O O 0 0 0 0 0 0 1~ N O O 0 0 0 0 0 0 N M 01 1~ 07 1~ r M N r et 0 0 O h r N N ~ O r N ~ r O M N O ~ N N 1p M M 00 0 r O to M 000 O M ~D M r r O d' 111 O N ~ ~ t0 r ~ N O N ~7 Lf) CO 111 O N O CO O~ ~- O r M r N N 0 Cn O M ` - O N N r.+ W d 3 ' m ~"' Z C c ti N O G W a ~, 0) ~' c N a ~ O T Q. ~ O ~ ~ Q m 'D N y N 0 0_ •~ I.L W ~/ ~ ~ .O ~ L. O C ~ E ~ N C IL 01 y O ~ ~- O L N to ~° t0 ~ ~ o~ ~ ~° c a m 3 6 -- ~' a~ ~ rn c `~ c ~ m Y Q mar R ~^"' m ~ In a a~ c " ~ a ~ v> ~ E i c E c a ~p ~QCO~ N1c a` °~ c ca J ~ , L `o ~ O f0 ~ o o . ~~ o ` O N U C (n ~ ~ ~ 't C ~ ~ W W ~ V C 7 ~ 0 Q- ~ E c y d ~ to ~, O. 7 0) 7 0 7 0 ~ O L_ N a(~z(nU wo0~ ~ la m ~ U ~ t~ O ~ Q P ~ C ~ O ~ +_+ ~ to V : to N N ~~ ~ O Q O 'a V N .. ., m fA ~ W ~ W ~ O O ~ D O N ll~ ~ ~ lf) N N N o O O ~ N O N CO r O ~ M O N N O O I~ 1f1 O N (O M O ~ r 00 ~ r O n O M N N 00 O O N O 0 l0 N r N ' ' O O O O O ' O O O O O O O O O O O O O O O N O ~ ~ ~ ~ r (Q r r N r r ' ' O 0 0 0 0 ' O c o 000o O $ O O O O O O N O CO In In r r (p r N r v" o 0 0 0 0 o ~ O O O O O O r O CO ~ ~ r r (p r N r co 0 0 0o ao 0 O 0 0 N CO 0 M ~ ~ N N M N M r r r O O M O M 0 O N ~ h 1A O ~ M 00 M ~ 111 N O O r O O r O ~ r 2012 Budget Adjustments (08/08/11) Park Maintenance on final updated change 101-5110-4101 361,500 337,550 -24,000 101-5110-4103 40,000 58,250 18,250 101-5110-4104 27,650 25,900 -1,750 101-5110-4105 24,900 24,650 -250 101-5110-4107 5,900 5,800 -100 101-5110-4108 50,100 47,100 -3,000 -10,850 Planning 101-1510-4319 50,000 0 -50,000 Transfers 101-7000-4723 96,600 107,450 10,850 Total Change (General Fund) -50,000 Ice Arena 221-0000-3922 96,600 107,450 10,850 221-5400-4101 148,700 164, 300 15, 600 221-5400-4103 73,850 58,850 -15,000 Z 21-5400-4104 14, 300 15,450 1,150 2 21-5400-4105 13, 800 13, 900 100 221-5400-4107 3,250 3,300 50 221-5400-4108 18,000 26,950 8,950 10,850 1 1 1 1 1 1 2 1 1 1 1 1 1 1 1 1=Ice Arena Night Supervisor reallocation due to upcoming retirement 2=Move mining study to trunk fund (CIP) Requested budget analysis snap shot Scenario's 1 2 3 2010 2010 2011 YTD 2012 2012 2012 Adopted Revised Adopted 07/31/2011 Requested Requested Requested General Fund Revenues: Property taxes 9,467,850 9,467,850 9,758,500 4,928,723 9,064,409 9,398,098 9,731,786 MVHC Loss (estimate only) - - (221,100) - (300,000) (300,000) (300,000) All Other Revenues 2,251,950 2,450,411 2,626,050 1,924,564 2,870,450 2,870,450 2,870,450 Total General Revenues 11,719,800 11,918,261 12,163,450 6,853,287 11,634,859 11,968,548 12,302,236 General Fund Expenditures General Government: Mayor & Council 167,650 167,650 177,800 76,378 172,250 172,250 172,250 Cable TV 81,650 81,650 77,800 40,445 85,500 85,500 85,500 Administrative Services 470,500 470,500 473,650 350,164 463,100 463,100 463,100 Human Resources 150,450 150,450 150,750 83,460 164,300 164,300 164,300 Elections 38,100 38,100 - - 38,050 38,050 38,050 Finance 447,400 447,400 454,700 277,700 453,300 453,300 453,300 Information Technology 303,150 303,150 266,600 127,280 243,700 243,700 243,700 Legal 234,000 234,000 240,000 128,499 228,000 228,000 228,000 Community Development 67,150 67,150 67,100 36,804 68,050 68,050 68,050 Planning 299,950 299,950 303,550 158,788 300,600 300,600 300,600 City Hall Maintenance 297,000 297,000 300,850 138,754 302,350 302,350 302,350 Energy City 51,350 95,600 51,650 22,107 56,800 56,800 56,800 Contingency 113,100 113,100 75,000 2,698.00 75,000 75,000 75,000 Total General Government 2,721,450 2,765,700 2,639,450 1,443,077 2,651,000 2,651,000 2,651,000 Public Safety: Police 4,251,350 4,251,350 4,288,650 2,134,532 4,384,700 4,384,700 4,384,700 Fire 680,950 680,950 881,850 505,045 861,900 861,900 861,900 Building Safety 465,550 465,550 465,200 250,460 468,500 468,500 468,500 Environmental 52,200 52,200 56,950 29,422 48,300 48,300 48,300 Total Public Safety 5,450,050 5,450,050 5,692,650 2,919,459 5,763,400 5,763,400 5,763,400 Public Works: Street Maintenance 1,336,950 1,309,400 1,524,450 565,472 1,532,450 1,532,450 1,532,450 Snow Removal 246,550 274,100 262,850 195,531 286,250 286,250 286,250 Equipment Services 246,300 246,300 245,950 117,793 244,550 244,550 244,550 Engineering 178,350 178,350 177,800 63,340 173,100 173,100 173,100 Total Public Works 2,008,150 2,008,150 2,211,050 942,136 2,236,350 2,236,350 2,236,350 Culture & Recreation: Parks Maintenance 767,150 767,150 790,350 413,279 805,300 805,300 805,300 Recreation 730,700 737,800 756,900 386,623 785,600 785,600 785,600 Sr. Citizen Programs 203,250 203,250 204,450 103,768 224,000 224,000 224,000 Total Culture & Recreation 1,701,100 1,708,200 1,751,700 903,670 1,814,900 1,814,900 1,814,900 Transfers Out 164,050 164,050 205,200 - 146,600 146,600 146,600 Total General Fund Expenditures 12,044,800 12,096,150 12,500,050 6,208,342 12,612,250 12,612,250 12,612,250 General Fund Gap Before Adjustments: (325,000) (177,889) (336,600) 644,945 (977,391) (643,702) (310,014) Use of Fund Balance (41.5%) 325,000 177,889 336,600 - 339,630 339,630 339,630 Capital Outlay Reserve -capital items 122,100 122,100 122,100 Reduce contigency $75,000-$50,000 25,000 25,000 25,000 Fuel $3.75 to $3.25 43,000 43,000 43,000 Building Permit Revenue (PW building) 77,000 77,000 77,000 NTC shift from -6% to -5% (Tax Revenue) 0 0 0 Expenditure offsets 0 0 0 Projected Total Budget Gap After Adjustments - - - 644,945 (370,661) (36,972) 296,716 Notes: 1 =assumption of 6% decrease in NTC and same tax rate of 45.72% 2= assumption of 6% decrease in NTC and a tax rate of 47.18% 3=assumption of 6% decrease in NTC and no change in total levy from 2011, tax rate 48.6% No Market Value Homestead Credit No local Government Aid Fuel is starting at $3.75 in department budgets, will be adjusted as we get closer to final budget. 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