10.4 SR 07-01-2013 City of
EW REQUEST FOR ACTION
River
TO ITEM NUMBER
Mayor and City Council 10.4
AGENDA SECTION MEETING DATE PREPARED BY
Work Session July 1, 2013 Tim Simon, Finance Director
ITEM DESCRIPTION REVIEWED By
2014 Budget Discussion Cal Portner, City Administrator
REVIEWED BY
ACTION REQUESTED
Discuss 2014 budget process and provide feedback.
BACKGROUND/DISCUSSION
Staff began developing the Preliminary 2014 budget in June. Budget meetings were held with directors
and division managers as the preliminary requested budgets were compiled.
This work session will discuss the 2014 budget parameters and tax levy. As you know, the Council must
adopt a Preliminary (maximum) Tax Levy before September 15, 2013. The Preliminary Levy may be
reduced on final approval,but shall not be increased. The final budget will not be adopted until
December. The majority of the budgets will be discussed at meetings in July and August.
Proposed Budget Timeline
• July 1 Council work session—Discuss 2014 budget and process.
• July&August work sessions —Present proposed budget&goals to Council with department
directors and division managers in attendance (may schedule work sessions following regular
meetings as needed).
• September 3 regular meeting—Approve maximum tax levy.
• October& November—Continue budget, Capital Improvement Plan and tax levy discussion.
• December 2 regular meeting—Present final proposed budget; take additional public input; adopt
final budget and tax levy.
Levy Limits
Levy limits were not in place for taxes payable 2013;however, there is a levy limit for taxes payable 2014.
We are working through the instructions released from the Minnesota Department of Revenue and will
review an estimate during the meeting.
Tax Levy
The tax levy accounts for approximately 71% of General Fund Revenue. The levy discussion will be very
general since other revenues and expenditures are still at the preliminary discussion level. The chart
below is a summary of the 2013 tax levy and the other levies that will need to be levied in 2014. Also
included is an estimate of the levy limit max (only an estimate at this time).
POWERED By
N:APublic Bodies\Agenda Packets\7-01-2013\Final\x10.4 Budget Overview.docx INAMIRE1
The 2013 levy and the 2014 levy illustration for all the funds assuming no change in General Fund in the
total levy is shown below:
Actual Estimate Levy Limit
2013 2014 Difference 2014
General Fund 9,203,085 9,203,085 - 9,256,689
Li bra ry 63,100 63,100 - 63,100
Surface Water Management 50,000 50,000 - 50,000
Debt Service 643,497 371,459 (272,038) 371,459
Economic Development Tax Abatement 216,083 202,824 (13,259) 202,824
Total 10,175,765 9,890,468 (285,297) 9,944,072
• Tax abatements decrease due to United Health abatement being fulfilled in 2013.
• Surface Water Management levy could change based on upcoming storm water fee discussion.
• Debt Service levies are adjusted for principal and interest payments on the special assessment
bonds and the reduction of the street reconstruction bonds with the new pavement management
program.
Consumer Price Index (CPI)
The CPI for the Midwest region is currently trending at about a 1.8%increase (as of May) for 2013.
Change in Net Tax Capacity
Last year, the city Net Tax Capacity (NTC) decreased 6.45%. The County Assessor estimates a zero
percent change in NTC for taxes payable 2014. He indicated residential values increased about$32
million,but commercial / industrial (C/I) decreased about$16 million. Based on the tax capacity rates
for the different property types (1% res vs. 1.5%-2% C/I), these should cancel each other out. This may
change as more accurate numbers will be available before the final levy is adopted. For planning
purposes,we anticipate using the 0% NTC as the starting point for the budget process. Trends appear to
be moving upward over the next couple of budgets.
Pay and Benefits
Pay and benefits will follow other labor agreements with cost of living adjustments.
State Aid
For the first time in several years we are certified to receive Local Government Aid (LGA). The
preliminary amount is $225,882. We propose to budget LGA in the Equipment Replacement Fund and
increase the ERMU transfer in to the General Fund by a corresponding amount. As you may recall, the
transfer from ERMU is allocated to the General Fund and Equipment Replacement Fund. If future
LGA is eliminated or reduced,it is easier to adjust equipment needs and reprioritize the replacements
than make immediate General Fund operational changes.
Transfer In
Transfers are made each year to the General Fund from the Waste Water,Liquor, Garbage, FDA, and
HRA Funds to cover costs associated with providing services to those funds. We will review the
transfers to ensure they cover services used. The exception is the Liquor Fund transfer,which is
significantly higher to offset other operating expenditures.
N:APublic Bodies\Agenda Packets\7-01-2013\Final\x10.4 Budget Overview.docx
Levels of Service
The preliminary budget is drafted to continue the same levels of service as in 2013.
Estimated General Fund Revenues
Several revenue sources, such as development fees, are beginning to trend upward. The allocation of the
transfer from the electric utility is annually reviewed with the amount going to the Equipment
Replacement Fund. We are updating the equipment replacement needs for the 10-year forecast.
Other Items
• Fuel price per gallon will start at$3.25 —we fully intend to use state contract pricing again.
• Council Contingency—We anticipate starting with $50,000 (same as 2013) and a 1% employee
turnover rate.
• With the approved 2012 reorganization, some prior year actuals will not trend,but the 2013
budget amounts will allow for comparisons. For example, the payroll clerk was moved from the
HR to finance. The finance budget will not have part-time pay history to compare as it will be in
the HR budget.
Use of Fund Balance
Fund balance is still an option in 2014 to balance the budget. As you recall, Governmental Accounting
Standards Board (GASB #54) stated that fund balance for future years may no longer be held in the
General Fund, so fund balance will be transferred in from the Capital Outlay Reserve Fund as needed.
FINANCIAL IMPACT
N/A
ATTACHMENTS
■ 2014 Budget Calendar
■ Tax Rate Calculation Worksheet
N:APublic Bodies\Agenda Packets\7-01-2013\Final\x10.4 Budget Overview.docx
CITY OF ELK RIVER
2014 BUDGET SCHEDULE
May 6, 2013 Budget forms and instructions to department directors
June 3, 2013 Department Director proposed budgets due to finance department
June 2013 Staff budget meetings with City Administrator and Finance
Director
July 1, 2013 General budget discussion on tax levy, goals, staffing and other
policy items.
July 15, 2013 Presentation of Community Development and Operations, Landfill,
Information Technology, and Building Maintenance budgets to
Council
August 5, 2013 Presentation of Administration, Cable TV, Mayor & Council,
Police, Finance, Legal, Human Resources, and Library budgets to
Council
August 12, 2013 Presentation of Parks and Recreation, Environmental budgets and
Equipment Replacement Fund budgets to Council
August 19, 2013 Presentation of Fire and Building Safety budgets to Council
September 3, 2013 Council adopts maximum property tax levy
September 9, 2013 Presentation of the Liquor, Garbage and Wastewater budgets
September 15, 2013 Certify maximum property tax levy to Sherburne County
October/November 2013 Final adjustments/budget revisions and review Capital
Improvement Plan (CIP) funds/projects
December 2, 2013 City Council adopts the final 2014 budget and property tax levy
December 16, 2013 City Council adopts the 2014-2018 CIP
Tax Rate Calculation worksheet
Levy uk
Actual Estimate(l) Estimate(2) Estimate(3)
Taxes Payable 2013 2014 2014 2014
Increase
Net Tax Capacity 20,323,367 a 20,323,367 a 20,526,601 a 20,323,367 v |
Less Captured T|p b b b b
Tax Rate Net Tax Capacity(a-b) 20,200,719 c 20,200,719 c 20,403,953 c 20,200,719 c
Total Taxes Levied $ 10,175,765 d $ 9,890,468 d $ 9,890,468 d $ 9,944,072 d
Tax Rate(d/c)
County
School
County Rail Authority
nnx/sox
Total Sherburne County
State Tax<cvmm/Vproperties 52.52% Levy Limit
City%of Tax Bill(nesidenhaV 31s%
City%of Tax Bill([omm/|nd.) 23.7%
Notes:
These are estimates only
crr. of
River
2014 Budget Overview
� July 1 , 2013
1
- 1
• Balanced revenue/expenditure
• Maintains 2013 Service Levels
• New org structure in place
• Budget reflects historical
• Focus continues on identifying / maintaining
infrastructure
• State-mandate levy limit - 2014
• No further change from MVHC or MV
Exclusion
• Local Government Aid (LGA)
• Sales Tax Exemption
• No across-the-board inflationary increases
•
• Property values appear to be increasing
• Council goals reviewed in May/June
• Focus continues on Strategic Planning
• Mining Area Study
• Park & Rec Plan Update
• Direct existing resources to maintain/preserve
• Code enforcement
• Building safety (rental)
•
July 1 Council Work Session — General budget discussion
2014 budget and process.
• July & Aug. Work Sessions — Presentation of proposed
budget & goals to Council with department directors and
division managers in attendance (may schedule Work
Sessions following Regular Meetings as needed).
• Sept. 3 Regular Meeting — Approve maximum tax levy.
• Oct. & Nov. — Continue budget, Capital Improvement Plan
y and tax levy discussion.
• Dec. 2 Regular Meeting — Present final proposed budget;
,,take additional public input; adopt final budget and tax levy.
Revenue
❖ Overall, stable from 2013 with slight increases
❖ Transfers-in — increase due to LGA and use of fund
balance
•'• Building Permit revenue held relatively constant
•'• New revenue — fire inspections
Expenditures:
❖ Personal Services
o General wage/benefit adjustment
y o Personal requests
•'• Overall preliminary
•'• CPI is 1.8% as of May
I I
General Fund Expenditures by
Revenues by Category Category
Other Revenue
1°% Other
Charges for Fines Services& Transfer
Services 1% Charges Out
5% \ 1 Transfers In 18% � 0%
12%
IGR
4% 8%
8%
License/
Permits Taxes Personal
5°% 72% Services
74%
Tax Levy History
2004-2013
12,000,000 10,761,311 11,112,391 10,275,815
10,175,765
10,000,000
8,823,793
8,000,000
6,564,803
6,000,000
4,000,000
2,000,000
04 2005 2006 2007 2008 2009 2010 2011 2012 2013
I Actmasti mate 11 Levy Limit
2013E 2014 Difference 2014
eneral Fund 9,203,085 9,203,085iM - 9,256,689
Library - . 100 6 ■ - 63,100
Surface Water Management ,000 5r - 50,000
Debt Service 111 643,497 378272,038) 371,459
Economic Development Tax Abatement I ' 216,083 202, (13,259) 202,824
Total k10,175,765 9,8901468'W(285,297) 9,944,072
• , . Ah
Market Value History
2,500,000,000
2,000,000,000
1,500,000,000 ❑Other
■Comm/Ind
❑Apartments
1,000,000,000 - ■Residential
■Ag.
I
500,000,000
2009 2010 2011 2012 2013
1
„�.� i�• �--- -� „_i`�t��a» Source: Sherburne County Assessor
oil
$240,000 $231,619
$220,000 $213,811
$202,493
$200,000 $189,462
$180,000 $175,919
$169,412
$160,000
$140,000
$120,000
$100,000
2009 2010 2011 2012 2013 2014
Source: Sherburne County Assessor
Property Tax Dollar - 2013
Residential Homestead Property
ISD 728 Sherburne County
38% 30%
Other
4%
City of Elk River
28%
Property Tax Dollar - 2013
Commercial/Industrial Property
State of MN
24% Sherburne County
24
Other
3%
ISD 728 City of Elk River
26% 23%
Tax Rate History County
4
45 ,
40
'35 -
30
2008 2009 2010 2011 2012 2013
Sherbune County Becker Big Lake Clear Lake Elk River Princeton East St. Cloud Zimmerman
ti
Direct Net Debt • • • • 1
$3,500
$1,329
$1,103
a.
Big L e Elk River Monticello Otsego Princeton Rogers St. Cloud St. Michael
W h a t s N ext
• Review Draft Budge numbers
• Review department/division goals
• Get updated tax capacity numbers
• Firm up revenue and expenditure
estimates
• Review Council goals and align w/budget
• Set Preliminary tax levy and budgets
• Further refine budget until final approval
in December
Questmions