10.4 SR SR 07-07-2014 City of
Elk Request for Action
River
To Item Number
Mayor and City Council 10.4
Agenda Section Meeting Date Prepared by
Work Session July 7, 2014 Tim Simon, Finance Director
Item Description Reviewed by
2015 Budget Discussion Cal Portner, City Administrator
Reviewed by
Action Requested
Discuss 2015 budget process and provide feedback.
Background/Discussion
Staff has begun developing the Preliminary 2015 Budget with meetings being held with departments or
division managers to review budget requests.
At this work session,we will discuss the budget parameters and 2015 tax levy. State law has changed the
city's Preli minary (maximum) Levy approval to September 30. The EDA and HRA levy approval dates
are still before September 15. The final budget will be adopted in December. The majority of the
budgets will be discussed at meetings in July and August.
Proposed Budget Timeline
• July 7 Council Work Session—General budget discussion 2015 budget and process.
• July&August 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).
• September 2 Regular Meeting—Approve EDA and HRA max tax levy
• September 16 Regular Meeting—Approve city maximum tax levy.
• October&November—Continue budget, CIP and tax levy discussion.
• December 1 Regular Meeting—Present final proposed budget;take additional public input;
adopt final budget and tax levy.
Levy Limits
There are no levy limits for taxes payable 2015.
Consumer Price Index (CPI)
The CPI for the Midwest region is currently trending at about a 1.98%increase (as of May) for 2014.
Change in Net Tax Capacity
Last year the, city's Net Tax Capacity (NTC) increased 0.49% after several years of decreasing. The
county assessor estimates a 4-5%NTC increase for pay 2015. He has indicated residential values
increased approximately 8% and commercial/industrial moved from zero to about negative 2%. Based
on the tax capacity rates for the different property types (1%res vs. 1.5%-2% C/I,this adjusts the NTC
P a w E R E U 6 Y
NaA f RE]
percentage. This may and will likely change as more accurate estimates will be available later in the year
before the final levy is adopted. The county is still waiting on state utility assessment values. For
planning purposes we anticipate using the 5% NTC as the starting point as we move forward with the
budget process. It appears the trend will continue 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
We are expected to receive Local Government Aid (LGA). The preliminary amount for 2015 is $255,596.
We propose to continue to budget the LGA in the Equipment Replacement Fund with the offsetting
amount from ERMU (transfer-in) in the General Fund just like in 2014. As the Council may recall, the
transfer from ERMU is allocated to the General Fund and Equipment Replacement Fund. If LGA is
eliminated or reduced in the future it will be easier to adjust our equipment needs and reprioritize the
replacements versus immediate operational changes in the General Fund.
Transfers In
Transfers are made each year to the General Fund from the Waste Water,Liquor, Garbage, EDA 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.
Levels of Service
The preliminary budget will be drafted based on continuing the same level of service as in 2014 except for
any additional requests presented during the budget review (ie., fireworks or personal requests) based on
Council direction and feedback.
Estimated General Fund Revenues
There are a few additional revenue sources in 2015. The Tri-CAP agreement will increase revenues by
$24,000. Spectrum's Payment In Lieu Of Fees (PILOF) for the recent building acquisition will add
$14,600 for four years,the previous PILOF of$48,600 will end after 2015. Development-related
revenues (building permits) will increase slightly based on projections.
Other Items
• Fuel price per gallon will start at$3.50—we intend to continue state contract pricing.
• Council Contingency—We anticipate starting with$47,500, the same amount as 2014 and a 1%
employee turnover rate.
• With the approved 2012 reorganization, some actuals from prior years will not trend over all the
years presented,but the 2014&2015 budget amounts will allow for comparisons. For example
one of the items was moving the payroll clerk from the HR budget to finance budget. The finance
budget will not have any history of part-time pay to compare against it will be in the HR budget.
Multi-year budgeting
Earlier this year, Council discussed creating a two-year budget. We should clarify if the Council would
Eke to see the budget presented over two years (2015/2016). 2016 would only be a concept budget and
need formal levy and budget approval each year. Recommended budget changes would also be presented
for review (typically anything over $10,000).
The Cities of Brooklyn Park and Eden Prairie provided some feedback on the pros and cons of doing a
multi-year budget and below is the summarized responses:
Pros.
• Staff time savings as the GFOA budget award document is compiled every other year.
• Helps with long term planning,looking out two years instead of one.
• Brings multi-year plans into goals and the budget document.
• Can concentrate on strategic planning and the CIP in the off year.
• Can move expenses between years to accomplish goals or moderate cost increases in a particular
year.
• Council can discuss timing on personal and service levels over multi-years.
• Strong support from bond rating companies.
Cons.
• Developing reasonable assumptions for the forecast years (being conservative with forecasts).
• Continued education during the first years of implementation.
• Having all departments think far ahead about personnel and technology (we already do this).
• Still need to complete the final process every year due to requirement to set levy and budget
annually.
• If economic circumstances change,more substantial budget work could be needed in off year.
Financial Impact
N/A
Attachments
■ 2015 Budget schedule
City of Elk River
2015 Budget Schedule
May 8, 2014 Budget forms and instructions to department directors
June 2, 2014 Department Director proposed budgets due to finance department
June 2014 Staff budget meetings with City Administrator and Finance Director
July 7, 2014 General budget discussion on tax levy,goals, staffing and other
Policy items.
July 21, 2014 Presentation of Community Development and Operations (Planning,
COD, Environmental, Energy City,Landfill), Finance, Information
Technology,and Building Maintenance budgets to Council
August 4, 2014 Presentation of Administration, Cable TV,Mayor&Council, Police,
Legal, Human Resources, Streets, Parks Maintenance and Library
budgets to Council
August 11, 2014 Presentation of Parks and Recreation,Engineering, and Equipment
Replacement Fund budgets to Council
August 18, 2014 Presentation of Fire and Building Safety budgets to Council
September 2 or 15, 2014 Council adopts maximum property tax levy
September 8, 2014 Presentation of the Liquor, Garbage and Wastewater budgets
September 15, 2014 Certify property tax levy for EDA/HRA to Sherburne County
September 30, 2014 Certify city maximum property tax levy to Sherburne County
October/November 2014 Final adjustments/budget revisions and review Capital Improvement
Plan (CIP) funds/projects
December 1, 2014 City Council adopts the final 2015 budget and property tax levy
December 15, 2014 City Council adopts the 2015-2019 CIP