5.5. SR 08-09-2004TO:
FROM:
DATE:
SUBJECT:
MEMORANDUM
Mayor and City Council
Pat Klaers, City Administrator
August 9, 2004
2005 Budget
Item 5.5.
Introduction
It is early in the process of developing the 2005 municipal budget but at this August 9
worksession I want to provide a general overview of the 2005 financial situation and receive
some feedback from the City Council. The most important issues to discuss are staff
additions and taxes (the tax levy increase and the tax rate change). This feedback from the
City Council will help staff in putting together material for a Council budget worksession on
August 23, 2004.
2004 Budget Status
Before beginning a discussion on 2005 issues, a brief review of the 2004 budget and financial
status is in order.
Regarding 2004 revenues, the growth related programs need to be discussed. These are the
building permits, the plumbing/heating permits, and the plan check fees. The 2004 budgeted
amount for growth related revenues was approved at the exact level as the actual revenues
received in 2002. The budget amount for these three revenues for 2004 is $888,400.
Through June, the 2004 revenues for the building permits, plumbing/heating permits, and
plan check fees have already exceeded the budgeted amount for the entire year. The pace in
2004 for residential growth is exceeding the record year we experienced in 2003.
The 2004 revenue year end totals will exceed the budgeted amount; and this is good as it
appears that 2004 expenditures will also exceed the budgeted amount. However, the
expenditures will not exceed the budget by as much as the revenues will exceed the budget.
We know that we will have a positive year end balance and this is why it has been "easy" for
the City Council to hire a building inspector that was not budgeted and to use its' Council
Contingency on such items as the Fire Department grant, the Natural Resources Inventory,
and hiring a consulting f~rm to complete the apartment inspections. Overall, the 2004 budget
is in very good shape.
~lugust 9, 2004 Page 2 of 6
Budget Memo
2005 Revenues
In an ideal world, the city would look at expenditures first and identify the level necessary in
order to provide adequate services. However, we are not living in an ideal world and
revenues to fund expenditures are limited; especially as it relates to additional tax revenues.
Last year the city Net Tax Capacity 0NTC) increased by 12%. I__f for next year the growth in
the city NTC is about 10% and there is not a substantial increase in the city tax levy for
non-general fund activities, then the city should be able to increase taxes for general fund
activities by about $500,000 with a very minimal impact on the city tax rate. This general
fund tax amount is one which could vary sigmficanfly; depending on the levy for non-general
fund activities such as equipment and the pavement management program; depending on
the level of expenditures for personal services, supplies, capital outlay, and other
services/charges; and depending on where the City Council comfort level is with the city tax
rate.
The city needs to certify the proposed maximum levy to the county by September 15, 2004,
and hopefully the city will know its growth in NTC by this date. This information on the
NTC is provided by the county. We need both the NTC and tax amount figures in order to
determine whether or not the city tax rate goes up or down. For 2005 there is no state
imposed levy limits placed on municipalities. Accordingly, the City Council can establish the
tax amount (and rate) at any level that is deemed best in order to provide necessary
municipal services.
Per legislative intent, Local Government Aid (LGA) is increasing. The city will receive a total
of $686,820 in LGA in 2005. This is a $393,696 increase from our 2004 LGA allotment.
(The 2005 LGA amount is still about approximately $250,000 below the city LGA amount
that was received in 2002.) All in all, this 2005 LGA figure is clearly good news.
The city experienced record residential growth in 2003. Staff is projecting 2005 growth
related revenues at 75% of the actual amounts received in 2003. Comparing the 2004
adopted budget with the 2005 proposed budget shows an increase of $226,400 or 25.5% in
building permits, plumbing/heating permits, and plan check fees. This is a substantial
increase and we are always watching the residential market for any trends that may show a
slowing down in housing starts.
Overall, with the increases in LGA, growth related activities, and taxes, we can guesstimate
that the 2005 revenues will be in the neighborhood of $9 million, which would be an
increase of approximately $1.1 million or 14%.
The above tax amount figure and the following expenditure estimates are my rough ballpark
figures and have not been reviewed by the Finance Department. These estimates are for
discussion purposes only. Estimates that you can rely on from the Finance Department will
be available for the August 23, 2004 worksession.
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~ugust 9, 2004 Page 3 of 6
Budget Memo
2005 Expenditures
In terms of providing municipal services, most everyone at the staff level feels like they are
playing "catch-up" due to the 2003 and 2004 LGA cuts. At this time the budget requests are
still being assembled but it is safe to say that the increase in proposed expenditures will
exceed $1.1 million. It is likely that we will see requests for the combined categories of
supplies, other services/charges, and transfer/capital outlay increase by about 25% or
$500,000. The remaining budget category, personal services, is the key category which the
City Council needs to discuss. If the above figures are "in the ballpark," then about
$600,000 is available for increases in the personal services area.
In 2004 the City Council hired two police officers and a building inspector that were not in
the budget. Also, the second half of the parks and recreation director wages need to be
incorporated in the 2005 budget. Finally, the city moved away from contracted cleaning
services to the hiring of part time employees and these expenses need to be added to the
personal services budget category.. (This increase for cleaning is offset by a decrease in
contractual services.) Another factor that needs to be put into the equation is wage and pay
plan step increases for employees.
For 2005, department heads have requested an additional 12 full-time and 2 part-time
employees. I am guessing at this point that we will not be able to fund anymore than the
equivalent of 8 full-time positions and this guess may be a few positions too high. These
requested positions are identified in the attached list as provided by the finance director.
I support the first 7 full-me and the 2 part-time positions listed below for being included in
the draft 2005 budget. This priority order also takes into consideration the short-term and
long-term needs for staffing in various departments and the "sharing of the wealth"
approach in terms of which departments got what most recently and which departments did
not. All of the requests from the department heads are reasonable but we have to make a
distinction between needs and wants and what we can afford. A number of the department
heads will be at the August 9, 2004, worksession to answer questions from the Council.
All of the staff increases can't just be for core services, such as for public safety or streets. It
is clear that these are high priority areas but park services are also important for quality of
life issues. Additionally, the city could not function adequately without staff to provide
admimstrafive and financial services. Also, public information, such as cable TV, is
important but is not a core service that is essential. Finally, the Council has been seriously
considering some staff reorganization options. It is not easy to decide and to tell some
department heads that they need to wait until next year for their request to be met; as we all
know that "next year" sometimes never comes.
The following comments are offered on the requested positions:
Street Maintenance and Park Maintenance-Both requests are due to a lack of staff increases in the
past few years and the growth that we are experiencing.
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August 9, 2004 Page 4 of 6
Budget Memo
Po/ice Clerical-The department has fallen behind in meeting its clerical support needs. There
has been no addition in this area for a number of years but the case load continues to
increase.
Finance Accountant-This department has been understaffed for years (and we now have office
space to accommodate an addition).
t%ance Payroll Clerk (part timO-TbSs allows a shift of the current payroll clerk Lauren Wipper,
who spends about half of her time working with Lori Johnson on human resources
activities, to move into a full time human resources position. Human resources xvas
highlighted as a significant need by the City Council in the work that was done with Mr.
Brimeyer, both in the Executive Sessions last winter and in the worksessions that were held
this spring. (Lori will continue to supervise Lauren.)
Communi~ Development Director-This position was a top priority with the City Council during
the same Brimeyer Executive Sessions held last winter, and the spring worksessions on city
goals and strategic planning, and during the discussions on reorganization of the city staff. A
great deal of the spring worksessions related to growth and development issues.
Cable TI/Assistant-While this is not a core function, the providing of public information is a
very high priority. When the second position for this department was cut in 2003, services
decreased and the staffing level is currently not adequate.
Recreation C/effca/Position (part time)-Support staff is needed at Lions Park Center for the parks
and recreation director and for the ice arena manager. This will also free up some clerical
staff time at city hall for work for the city engineer, the safety program, and for work on
projects such as records scanmng.
Fire Prevention Specialist-This need is due to growth in the inspections area and for taking over
the apartment inspection program from the Building Department. This expenditure will
allow for a reduction in professional services as we would not contract out for this work in
2005 as we did in 2004.
Environmental Technician Assistant-There is not really a need for a full-time position and it is
very difficult to fred a qualified part-time employee to fulfill our needs.
Po/ice CSO-This is an important position and a high priority but the police already are adding
two officers and a clerical position so it is hard to add another position this year.
Administrative SecretatT-We need to wait and see on this position. Part of this request was a
duplication of the recreation clerical request. This may return as a part time or full time
request in 2006.
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/tugust 9, 2004 Page 5 of 6
Budget Memo
Legal-The department needs to consider a legal secretary intern type of position. We also
need to see how the new law clerk intern is helping to address the department work load.
Building InOec/or-It will be recommended that we add this position, if needed. If this position
is needed, then it means the 2005 revenues will exceed the budgeted amount and we can add
this position by way of a budget amendment.
Engineering Intern-TbSs position is not on the attached list. We may fred that an intern for
inspections saves the city money in its Pavement Management Program (PMP). This will be
considered later when the Council looks at the 2005 PMP.
It should be noted that with the solid 2004 financial position that the city is in, that some
2005 positions could be added at anytime.
Capital Outlay
Capital outlay is not the main topic for this worksession but a general update is appropriate.
The city has been following the 10-year Capital Improvement Program (CIP) that was
adopted by the City Council in late 2002 for the years 2003-2012. (See attached 2003-2007
summary.) There is obviously some flexibility in implementing a long-term budgeting plan.
For example, the Ice Arena Barn floor, the digester cover, and the fzre truck planned for
2005 are actually taking place in 2004. One change to note in the capital outlay category is
that the Street Department has recently substantially increased its annual request for
equipment and vehicles.
With the total capital outlay items that are being proposed, it is likely that the city will be
using equipment reserves for the fncst payment on the fire truck with the balance to be
financed over time by way of equipment certificates. The big 2005 capital requests include a
street sweeper ($165,000), a street dump truck ($151,000), and five police vehicles
($145,000). It should be noted that a requested compost turner for $106,500 can be financed
with landfill waste abatement monies; therefore we will not have to use tax monies or
equipment reserves for this expenditure. Also there is about $30,000 worth of capital outlay
items in the general fund budget and this has not happened for a few years. (Another item to
note is that if some employees are added to the budget, then we will also have to add some
vehicles for these employees, such as the building inspector and the fire prevention
specialist. Vehicles for these employees can be taken out of the 2004 year end fund balance
or out of equipment reserves.)
Excluding the general fund items, the fire truck, and the compost turner, there is still about
$506,000 worth of capital outlay items for equipment and vehicles being requested. These
items will have to be funded with equipment reserves or equipment certificates. In 2004 the
equipment certificate budget was $331,000. Revenues in 2004 could be used to purchase a
few items "in advance" and therefore have these items taken out of the proposed 2005
budget.
Of other 2005 capital improvements listed in the CIP, the only item that is expected to
impact the city tax levy is the Pavement Management Program.
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Budget Memo
Council Action Requested
It is requested that the Council provide some feedback on priorities for which positions to
include in the draft 2005 budget. Council feedback on taxes and other budget issues would
also be helpful in preparation for the upcoming worksession.
It is requested that the Council call a special worksession meeting at __
August 23, 2004 to discuss the 2005 budget and tax levy.
p.m. on Monday,
S:\Council\Pat\Budget~2005\080904wrksn.doc
2OO5 BUDGET
STAFF ADDITIONS
Department
Administration
Cable TV
Finance
Finance
Legal
Community Dev.
Police
Police
Fire
Building & Env.
Building & Env.
Streets
Parks & Rec
Parks & Rec
Position
Secretary
Asst. Producer
Accountant
Payroll Clerk
Secretary/Receptionist
Director
Records Clerk
CSO
Fire Prevention Specialist
Environmental/Code Enf.
Building Inspector
Maintenance 1
Maintenance I
Secretary
SUBTOTAL NEW POSITIONS
Requested
Included in
Pay & Benefit Add'l Total Proposed
Costs Costs Cost Budget
FT-Jan 2, 2005 $ 37,379 $ 2,300 $ 39,679
FT -Jan 2,2005 42,147 3,700 45,847
FT -Jan 2, 2005 52,558 2,350 54,908
PT -Jan 2, 2005 19,180 2,350 21,530
FT -Jan 2, 2005 32,472 0 32,472
FT -Jan 2, 2005 92,187 7,500 99,687
FT -Jan 2, 2005 37,452 2,100 39,552
FT -Jan 2, 2005 34,542 0 34,542
FT -Jan 2, 2005 47,720 32,400 80,120
FT -Jan 2,2005 54,783 8,080 62,863
FT -Jan 2,2005 53,989 37,020 91,009
FT -Jan 2,2005 47,612 (3,950) 43,662
FT -Jan 2,2005 48,682 1,050 41,732
PT-Jan 2,2005 17,670 2,600 20,270
$ 61~,373 $ 97,500 $ 707,873 $ $
Included in
Final
Budqet
8/5/2004
Streets
Parks & Rec
Police
Finance
Finance
Community Dev.
Cable TV
Parks & Rec
Fire
Building & Env.
Police
Administration
Legal
Building & Env.
Maintenance 1
Maintenance 1
Records Clerk
Accountant
Payroll Clerk
Director
Asst. Producer
Secretary
Fire Prevention Specialist
Environmental/Code Enf.
CSO
Secretary
Secretary/Receptionist
Building Inspector
2005 STAFF ADDITIONS
Pat's Priority List
FT -Jan 2, 2005
FT-Jan 2, 2005
FT-Jan 2, 2005
FT-Jan 2, 2005
PT-Jan 2,2005
FT-Jan 2,2005
FT-Jan 2, 2005
PT-Jan 2, 2005
FT -Jan 2, 2005
FT-Jan 2,2005
FT-Jan 2,2005
FT-Jan 2,2005
FT-Jan 2, 2005
FT-Jan 2, 2005
Pay & Benefit
Cos~
47,612
40,682
37,452
52,558
19,180
92,187
42,147
17,670
47,720
54,783
34,542
37,379
32,472
53,989
Add'l
Costs
(3,950)
1,050
2,100
2,350
2,350
7,500
3,700
2,600
32,400
8,080
0
2,300
0
37,020
Total
Cost
43,662
41,732
39,552
54,908
21,530
99,687
45,847
20,270
80,120
62,863
34,542
39,679
32,472
91,009
Accumulated
Cost
43,662
85,394
124,946
179,854
201,384
301,071
346,918
367,188
447,308
510,171
544,713
584,392
616,864
707,873
8/5/2004
CAPITAL PLAN
City of Elk River, Minnesota
PROJECTS BY YEAR
2003 thru 2007
Project Name
Department Project
Priority
Project Value
2003
Outdoor Warning Sirens
Shop Equipment
Vehicle Replacement
Dodge Avenue Street Improvements nodh of 5th St.
Highland Road Improvements
Annual Stree~ Overlay Program - Not Assessed
Assessable Street Overlay Proiects
Pavement Management Program
Annual SIreet Sealcoat Program
Land Acquisition
Park Development
Park Development. Youth Athletic Complex
Park Landscaping and Grounds Improvements
Trail Development
Playground SIructures and improvements
Marked Squad Replacement & Additions
Unmarked Squad Replacement & Additions
Office Equipment
City Hall Expansion
Small Theater at lSD 728 High School
Jet/Vacuum truck
Scum Pit Covers
Buildings
Vehicle Replacement- pickup trucks
Dump Truck Replacement
Heaw Equipment Replacement
Other Equipment Replacement
Slreet Department Buildings
2004
Vet~icte Replacement
Fire Truck Replacement - Grass Rigs
Main S~reet Intersection Improvements at Hwy 10
Meadowvaie Road (CR 44) Improvement
Annual Street Oveday Program - Not Assessed
Assessable Slreet Oveday Projects
Emergency Preparedness
Equipment Services
Fire
Infrastructure Im
Infrastructure Im
Infrastructure lm
Infrastructure lm
Infrastructure Im
Infrastructure Im
Library
Park Dedication
Park Dedication
Park Dedication
Park Dedication
Park Dedication
Police
Police
Police
Public Buildings
RecreationJCulture
Sewer Department
Sewer Department
Sewer Department
Streets
Streets
Streets
Streets
Streets
3rovements
~rovements
:~rovements
3rovements
3rovements
~rovements
BP.01 3 14,300
EQ-01 3 37,600
FD-01 3 32,000
11-08 4 150,000
11-09 2 50,000
0V-02 3 25,000
0v-03 3 100,(300
PM-01 2 1,000,000
$C-02 3 60,000
LB-01 3 150,000
PF-61 3 10,000
PF.62 5 20,000
PF-63 3 31,200
PF-64 3 9,700
PF-71 3 16,000
P0-01 3 176,400
PD-02 3 23,600
PO-05 3 37,400
EL-02 2 3,500,000
CR-90 3 112,6OO
WW-03 1 250,0(30
WW-04 3 8,000
WW-05 2 20,000
ST-01 3 25,050
ST-02 3 0
$T-03 3 155,650
ST-04 3 0
ST-09 3 50,000
Total for 2003
6,064,5OO
Building & Environmen~ BZ-01 3 21,000
Fire FD-02 3 45,000
Infrastructure Improvements il-07 2 541,81 2
Infrastructure Improvements 11-12 2 0
Infrastructure Improvements OV-02 3 25,000
Infrastructure Improvements 0V-03 3 0
Proje'ct Name Department Project # Priority Project Value
Annual Street Sealcoat Program
Park Development
Perk Development - Youth Athletic Complex
Park Landscaping and Grounds Improvements
Playground Structures and Improvements
Marked Squad Replacement & Additions
Unmarked Squad Replacement & Additions
CSO Vehicle Replacement & Additions
Office Equipment
Small Theater at lSD 728 High School
Lift Station Rehabilitation
Buildings
Vehicle Replacement
Dump Truck Replacement
Heavy Equipment Replacement
Other Equipment Replacement
2005
Fire Truck Replacement - Engines
Replace Arena Ftoor in Earn
Annual Street Overlay Program - Not Assessed
Assessable Street Overlay Projects
Pavement Management Program
Annual Street Sealcoat Program
Park Development
Park Development - Youth Athletic Complex
Trail Development
Playground Structures and Improvements
Park Maintenance Equipment
Marked Squad Replacement & Additions
Unmarked Squad Replacement & Additions
DSO Vehicle Replacement & Additions
Small Theater at lSD 728 High School
Phosphorous Removal
Digester Cover Replacement
Vehicle Replacement - pickup tracks
Heavy Equipment Replacement
2006
Fire Truct< Replacement - Grass Rigs
Annual Street Oveday Program - Not Assessed
Assessable Street Overlay Proiects
Annual Street Sealcoat Program
Westbound liquor Store
Park Development
Park Development - Youth Athletic Complex
Trail Development
Infrastructure Improvements SC-02 3 60,000
Park Dedication PF-61 3 10,000
Park Dedication PF-62 5 20,000
Park Dedication PF.63 3 9,600
Park Dedication PF-71 3 30,000
Police PO-Ol 3 32,000
Police P0-02 3 75,000
Police P0-03 3 26,000
Police PO-05 3 15,000
Recreation/Culture CR-90 3 112,600
Sewer Department WW-02 3 30,000
Sewer Department WW-05 2 25,000
Sewer Department WW-06 2 25,000
Streets $T-02 3 135,000
Streets ST-03 3 90,000
Streets ST-04 3 15,000
Total for 2004
1,343,012
Fire FD-03 3 375,000
Ice Arena P8-06 3 500,000
Infrastructure Improvements OV-O2 3 25,000
Infrastructure Improvements OV-03 3 100,000
Infrastructure Improvements PM-01 2 1,250,000
Infrastructure Improvements S6-02 3 65,000
Park Dedication PF-61 3 10,000
Park Dedication PF-62 5 20,000
Park Dedication PF-64 3 15,000
Park Dedication PF-71 3 30,000
Park Maintenance PK-01 3 55,000
Police PO-01 3 154,000
Police PO-02 3 27,000
Police PO-03 3 26,000
Recreation/Culture CR-90 3 112,600
Sewer Department WW-07 1 150,000
Sewer Department WW-08 1 325,000
Streets ST-01 3 25,000
Streets ST-03 3 150,000
Total for 2005
3,414, 600
4
Fire FD-02 3 45,000
Infrastructure Improvements OV-02 3 25,000
Infrastructure Improvements OV-03 3 0
Infrastructure Improvements SC-02 3 65,000
Liquor Fund LS-02 5 1,500,000
Park Dedication PF-61 3 10,000
Park Dedication PF-82 5 20,000
Park Dedication PF-64 3 7,000
Project Name Department Project # Priority Profect Value
Playground Structures and Improvements
Park Shellers
Land Acquisition
Park Maintenance Equipment
Office Equipment
Marked Squad Replacement & Additions
Lift Station Rehabilitation
Vehicle Replacement
Upgrade Alarm System
Bar Screen Replacement
Dump Truck Replacement
Heavy Equipmenl Replacement
Public Works Building Maintenance
2007
Fire ~'ruck Replacement. Tankem
Annual ..Street Overlay Program- Net Assessed
Assessable Street Overlay Projects
Pavement Management Program
Annual Street Sealcoat Program
Libra¢/Expansion
Park Development
Park 0evelopment - Youth Athletic Complex
Park Landscaping and Grounds Improvements
Trail Development
Unmarked Squad Replacement & Additions
Lift Station Rehabilitation
Vehicle Replacement
Vehicle Replacement - pickup tracks
Oump Truck Replacement
Park Dedication PF-71 3 10,000
Park Dedication PF-81 3 25,000
Park Dedication PF-90 3 200,000
Park Maintenance PK-.01 3 42,000
Planning PN-01 . . 3 8,000
Police PO-01 3 248,000
Sewer Department WW-02 3
Sewer Department WW-06 2 27,000
Sewer Department WW-09 2 80,000
Sewer Department WW-10 2 45,000
Streets ST-02 3 150,000
Streets ST-03 3 20,000
Streets ST-11 3 50,000
Total for 2006
2,832,000
Fire FO-04 3 175,000
Infrastructure Improvements OV-02 3 25,000
Inirastructure Improvements OV-03 3 100,000
Infrastructure Improvements PM-01 2 1,500,000
Infrastructure Improvements SC-02 3 70,000
Library BU05 5 1,000,000
Park Dedication PF-61 3 10,0(30
Park Dedication ' PF42 5 20,000
Park Dedication PF-&3 3 14,500
Park Dedication PF-64 3 15,000
Police PD-02 3 60,000
Sewer Department WW-02 3 50,000
Sewer Department WW-06 2 27,000
Streets S~-01 3 27,0OO
Streets ST-02 3 207,000
Total for 2007
3,300,500
GRAND TOTAL
! Report criteria:
All Project Types
All Departments
All Categories
All Priority Levels
All Enterprise Fund data
All Other Funding Commitment data
16,754,612