8.1. SR 04-21-2003MEMORANDUM
Item 8. I.
TO:
FROM:
DATE:
SUBJECT:
Mayor and City Council
Pat Klaers, City Administrator
April 2 I, 2003
Updates on State Legislative Session, City Budget, and Public
Safety/City Hall Project
The last update on (1) the legislative session, (2) the budget, and (3) the Public Safety-City
Hall project was on March 24, 2003. The next update is scheduled for May 12, 2003.
Legislative Session
There is not too much new to report regarding action taken at the State Legislature that has
a direct impact on municipalities. The state budget is still the main issue at the Legislature. A
fairly wide range of budget related proposals continue to be introduced and debated.
Attached for your information are the latest League of Minnesota Cities updates on the tax bills
that have been proposed. The legislative session is scheduled to end on Monday, May 19,
2003.
City Budu_et
The most severe municipal aids proposal that is being discussed at the Legislature is the
Governor's plan. At this point, staff is assuming that the Governor's proposal will be
approved and if something "better" gets signed into law then the city will respond
accordingly. Department head staff meetings, both as a group and individually, have been
held over the last month or so to discuss the budget. Additionally, I have sat in on
department staff meetings to answer questions and to provide these departmental employees
with the latest information.
The approach to making a $644,000 adjustment in the 2003 budget and responding to a $1.3
million dollar reduction in aids in 2004 is to use city reserves, increase some fee based
revenues, make some cuts/reductions in services and programs, and to reduce or limit the
increases in the personal services category. We know that some reduction in state aids is
going to take place, so likewise we have been making some minor changes in the budget as
the year progresses. The proposal for all the budget changes will not be completed until after
the Legislative session ends. Overall, it looks like the city will be able to address and manage
City Coundl Page 2 of 4
April21, 2003
the 2003 adjustment without impacting many employees and services or programs but the
situation in 2004 is still vegy much unknown until the State Legislature makes a
determination on levy limits and the amount of cuts in state aids.
.~eserve$
I will be recommending to the City Council the use of some reserves to balance the
2003 budget and to address the 2004 shortage. The "working" number for 2003 has
been about one-third (or $215,000) of the anticipated reduction. Hopefully the final
amount will be much lower. Approximately one-half of the reserves to be used in
2003 could come from the liquor store and the other one-half could come from the
fund balance in the general fund. The city must be careful in its use of reserves as
they are limited and as the use of reserves needs to be replaced with reoccurring
revenues in future years. At this time the only known source of additional general
fund revenues is taxes.
Fee Based Revenues
When a budget challenge such as what we are experiencing surfaces, it requires
everyone to closely evaluate the fees that are being charged for the services that are
being provided. In this regard, some of the recreation fees have been adjusted
(increased slightly) to help cover the expenses for providing the programs.
Additionally, based on information in a state required report on building and
planning expenses and revenues, it has become much more apparent that the city has
been subsidizing the planning process. In this regard the City Council will soon see a
request to amend the city fee resolution to increase some of the charges for planning
applications so that they come closer to covering the publication expenses and staff
time involved in reviewing and processing the requests.
Cuts/Reductions in Services and Pro_grams
No significant impact to city services and programs are anticipated in 2003. There
will be some reductions and delayed maintenance but the impact should not be
dramatic. For example, the cycle for mowing parks may get a day or two longer; it
may take an extra hour or two to plow snow; it will take longer to get to the plowing
of the sidewalks and ice rinks; snow in the downtown may not be hauled away until a
day later; the sealcoatmg and overlay street maintenance program may be downsized;
etc. At this time it looks like the capital outlay program will be similar to past years
provided that equipment certificates remain outside of the levy limits. The city will
also continue to use its equipment reserves for some capital purchases.
Emplo yees
Ways to save money within the personal services category, provided it doesn't
significantly impact city programs or services, include not filling some vacancies
when they occur, consider contracts for services, and reduce part-time hours. For
example, the assistant cable TV producer position is not being filled; a police officer
position may remain vacant for awhile; the fzre chief is not planning to add additional
firefighters until everyone sees how the new station operates; the street department
assigned an employee to building maintenance (as we did not replace Sue Herrboldt
when she left) and the building custodial position was reduced to one-half time
because the city contracted out for building cleaning services; fewer summer park
COUNCIL\Pat\update. doc
Page 3 of 4
maintenance employees will be hired; and fewer hours will be authorized for the part
time rite inspector.
Another possible way to save some funds in the personal services category is to offer
a limited voluntary leave program for select positions. The city would be offering
these employees the opportunity to "buy vacation time" so that they can retain full
benefits. Guidelines need to be established for thisprogram. This program would be only
available for positions which the department head feels that they can temporarily
make do with fewer hours. For example, we don't want to incur overtime expense
for some employees because other employees took voluntary leave without pay.
A big impact to the budget and to employees are adjustments in wages and benefits.
For 2004, the city should offer some increase but not the typical increases that we
have seen over the past five to ten years. Options and a recommendation on what to
consider in 2004 will come at a later date.
The biggest impact to employees with this budget crunch may be the fact that few or
no additional employees are likely to be hired by the city until sometime around
2006. This will create a pent-up demand with increased workloads so when funds do
become available there will be many requests. In this regard, it looks like reserves will
have to be used in 2004 and that these reserves will need to be replaced with
additional tax revenues in 2005; and therefore funds (additional tax revenues) may
not be available for additional employees until 2006.
Overall the key to balancing the 2003 and 2004 and future budgets is identifying reoccurring
additional revenue sources and program reductions or cuts.
Public Safety- City Hall
One comment that has been heard a few times regarding the city budget relates to the Public
Safety and City Hall project. The comment centers on how the city can afford these building
projects and then have to make cuts and reductions in services and employees. The city
needs to explain how the Public Safety facility and the City Hall project are being funded and
that the building project is a one-time capital expense, while the general fund budget is for
ongoing operating expenses. Information on this issue can be given to the StarNetvs, put in
the city newsletter, put on the city website, and a brief cable TV show can be produced. The
Mayor would be the likely spokesperson for the city to present the information to the public
with technical support from the finance director.
A recent StarNetvs article provided a good update to the public on where the city is at with
the Public Safety and City Hall project. This article noted that the city offices were scheduled
to be closed on June 13, 2003. This information is also being provided in the upcoming
(May) city newsletter. At this point everything is still on schedule for the official move to
take place on June 13. In this regard, a motion from the City Coundl to close d(y hall mould be
appropffate.
S:\ COUNCIL\PaAupdate. doc
City Coundl Page 4 of 4
April21, 2003
Since the last City Council update, informational meetings were held with all the office staff
and tours of the Utilities office were provided. Frequent "moving" meetings with the
department heads have been held and the city has had its monthly I~aus-Anderson, Tushie-
Montgomery meeting to review the project. At this time the move of the city staff to the
Utilities building and the police staff to the Public Safety building has been our main focus.
In general, the staff move to the Utilities should be somewhat smooth i_f the Utilities project
is done on time and the furniture is installed on schedule. The police move is dependent on
the city move taking place on time as they need to take down and reinstall our furniture into
their facility. A proposal from a furniture moving fn-m for this police project will be
forthcoming to the City Council.
Coming up on April 24 and 25 are the city office "Purge Days." Staff hopes to get rid of old
material that is no longer needed and this will be beneficial to our operation in more ways
than one.
An issue that staff has been concentrating on with the move to the Utilities is the storage
items that are currently upstairs of city hall. These items are going to be relocated to the
basement of utilities for the long-term. A storage layout is being considered and shelving will
be purchased.
Another issue that has not been highlighted much is the new phone numbers for all of the
city departments. With the new phone system we are getting a new "bank" of numbers. At
this time the numbers are unknown but as soon as they are available we will publicize them
anyway and everyway that is possible.
The Lions Park Center facility being used for city meetings has also been the topic of
extensive discussion by city staff. Various room layouts have been reviewed and a
microphone system is being evaluated. The street department will assist with the setup and
takedown for the five monthly meetings and this assistance is very much appreciated. As an
aside, I would like to note that the street department throughout the public safety and city
hall project has really stepped forward and helped us in every way possible. This is not a
surprise but certainly they are going outside their typical job duties in many respects to help
during this transition and over the course of this 20 month project.
S.'\ COUNCIL\PaAupdate. doc
Cities Bulletin
Number 15
April 16, 2003
A comparison of tax bills
Gary Carlson
With the announcement of the House
DFL tax plan, the Legislature now has
five aid reduction proposals in play:
the governor's plan, the House
Republican target, the Senate DFL
target, the House DFL target, and the
Sen. Langseth/Rep. Dorman proposal.
In addition, the Senate has a property
tax freeze bill awaiting action on the
Senate floor. Aside from the governor's
bill, the Pogemiller freeze, and the
Dorman/Langseth bills, the other
plans are yet to be fully fleshed out in
a bill introduction.
Complicating matters, the House
Republican and Senate DFL targets
will likely take shape within the next
two weeks as the tax committees begin
working with their respective versions
of the tax bill. Nonetheless, the League
has received many calls asking for a
comparison of the components of
each plan.
Cuts to state aid programs. Each
of the plans makes varying degrees of
reductions in local government aid
(LGA) and market value homestead
credit (MVHC) paid to cities. In 2003,
the governor's plan would make
$140 million in cuts first from LGA
and then, to the extent necessary, from
each city's market value homestead
credit. The Dorman/Langseth plan
would take $95 million in 2003, first
from the market value homestead
credit and then, to the extent necessary,
from each city's LGA distribution.
For 2004, the governor's plan
would increase the city aid cut to
$277 million, again first from LGA
and then, to the extent necessary, from
market value homestead credit. The
Dorman/Langseth plan would reduce
city aids by $96 million, again first
from market value homestead credit
and then, to the extent necessary, from
LGA. The governor's plan restores the
market value homestead credit portion
of the city cuts after 2004, while the
Dorman/Langseth plan would
permanently eliminate the city market
value homestead credit reimbursement.
The House Republican and the
Senate Democrat targets do not
currently contain any specifics on how
the cuts would be made. Again, the
details of these plans will be negotiated
in committee over the next two weeks.
The House DFL plan would make
$37 million in cuts in 2003 based on
2.25 percent of each city's revenue
base (property tax levy plus aid).The
cut is limited to 0.9 percent of state
auditor-reported expenditures for
cities under 1,000 population or
larger cities with less than 2 percent
average annual growth in spending
over the last three years. All other
cities would have their cut limited to
2.06 percent of state auditor-reported
spending. The 2004 cuts would be
based entirely on expenditures as
reported to the state auditor.
The House DFL plan includes
one significant difference from the
other plans: the December 2004 aid
payment would be delayed until 2005
with half of the aid paid in April and
the remaining amount distributed in
July, which is after the start of the
state's fiscal year. This accounting delay
allows the House DFL plan to reduce
the governor's cuts while still balanc-
ing the state's 2004-05 budget deficit.
However, the delay will likely cause
significant cash flow problems for
some cities.
Le~ limits. The governor's tax
proposal is the only plan that specifi-
cally reimposes levy limits. Under the
governor's plan, all cities would be
covered by levy limits for taxes payable
in 2004. The levy limits would
provide some modest levy growth to
accommodate inflation, and to adjust
for new households and new com-
mercial and industrial growth. How-
ever, these adjustments would only
make a modest dent in the loss of
revenue due to LGA and MVHC
reductions.
Property tax freeze. The Pogerniller
tax freeze bill would simply freeze
property tax levies of cities at the 2003
level for the next two years. The bill
would only allow a few limited
exceptions to the freeze. Although the
Continued on page 7
Continued from page 1
plan does not include cuts in state aid programs, any cuts that might be coupled with the freeze would auto-matically
translate into local budget cuts.
Reverse referendum. The governor's plan replaces levy limits with a reverse referendum process. Under reverse
referendum, taxpayers could challenge a council's levy increase if a petition signed by a number of voters equal to at least
5 percent of those voting in the last general election is presented. A successful challenge would require the city's levy to
be returned to the previous year's level. The effect of a successful challenge on debt levies has not been fully analyzed, but
the reverse referendum could possibly limit the city's ability to increase its levy for debt service. ~
Pogemiller House Senate House Dorman/
Governor's Bill Property Tax Republican Democrat Democrat Langseth Bill
HF 751/SF 748 Freeze SF 330 Targets Targets Targets HF 1502/SF 1421
~,003 City Aid $140.7 million No Restoration of Restoration of $37 million $95.0 million
~eduction $91 million in city $200 million in
and county aid cuts city and county
compared to the aid cuts compared
governor's proposal.~ to the governor's
proposal.*
~004 City Aid $277.3 million None See above See above $75 million $96.5 million
Keduction
Kid Payment No No Unspecified Unspecified Dec. 2004 aid No
Delay/Shift paid the follow-
ingApril and July I
Fransit Aid No No No No No Eliminates
Elimination $125 million in
transit aid, to be
replaced with
property tax
increases.
Levy Limits Apply to all For 2004 and Unspecified Unspecified Unspecified Not included
cities for 2004 2005 taxes,
only; no recovery property taxes
of aid cut would be frozen
at the 2003 level
Debt Prohibits levy Prohibits the Unspecified Unspecified Unspecified Not included
R. estrictions increases to issuance of
cover some any new debt
new debt requiring a levy
starting in 2004
or 2005
Reverse Effective for Not included Unspecified Unspecified Unspecified Not included
Referendum CY 2005 and
beyond. Would
be triggered by
a petition signed
by 5 percent of
those voting in
the last general
election.
New Funding No taxes/some No Taxes from a new New, high New high No new funding
fee increases casino; cigarette income tax income tax
tax increase bracket; cigarette bracket; cigarette
tax increase tax increase
*Plans do not specify how the restoration of the cuts will be implemented or how much will be directed to cities or counties or how the restoration will be
distributed over the two year period.
April 16, 2003 Page 7
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Legislature continues work on budget
and tax bills
Legislators left St. Paul for their districts earlier
than normal this week with a long weekend for
Easter and Passover. There were no hearings
scheduled for Thursday, Friday or Monday. Both
bodies will kick it back into gear on Tuesday with
floor sessions and more hearings. For many
legislators it will be one of the last chances to be
home among constituents and test the political
winds. The scheduled adjournment date is May
19'h.
- Frid ay Fax -
A weekly legislative update from the League of Minnesota Cities
April 17, 2003
Page 1
$30 million for the wastewater infrastructure
program, $12 million for greater Minnesota
business development infrastructure grants, and
$24.5 million for flood recovery in Roseau.
With less than a month to go in the regular session,
the Senate begins crafting together their omnibus
bills next week with the Finance committee
deadline of April 29'h. This is the date by which a
committee's omnibus bill needs to receive a
favorable hearing in Senate Finance. The Senate
Finance committee is the equivalent of the House
Ways & Means committee.
House budget committees spent the week putting
together their various omnibus bills, taking public
testimony and marking up the bills late each night
with amendments. Those bills will go onto Ways &
Means next week. As usual, a number of these bills
have had major policy provisions go into them as
amendments. This is often done to resurrect bills
that are technically dead because they did not
receive a hearing in the other body.
Off the Senate side, the Senate Finance Committee
passed a $418 million bonding bill to the floor.
Much of the spending in this year's proposal was
part of the capital-bonding bill that passed last year,
but that $357 million in projects was vetoed by
Governor Ventura. The bill contains many projects
that benefit local communities, including nearly $7
million for regional parks, $3.6 million for solid
waste capital assistance grants, $20 million for the
local road improvement program, $2 million for
greater Minnesota transit facilities, $10 million for
North Star commuter rail, $13 million for the public
safety radio communication system build-out, over
The Governor's LGA reform proposal is supposed
to be out on Wednesday. The Senate plans to have
a tax bill out off Tuesday that will only be made up
of the non-controversial tax pieces. Those other
pieces will likely come together as the bill is
marked up and amended later in the week. The
House Tax committee will have their TIF hearing
towards the end of the week. Pieces of the House
omnibus tax bill should be out for public reaction
by the end of next week as well.
Governor's Appointments
Today Gov. Pawlenty made official his
appointments to head three important state
agencies. Tim Mark is the new commissioner for
the MN Housing Finance Agency. Department of
Labor & Industry will be headed up by new
commissioner Scott Bremer. The new
commissioner for the Iron Range Resources and
Rehabilitation Board/Agency will be Sandy
Layman.
Hearings of interest (Lynn put this blurb about the
fluctuating schedules ahead of AF's scheduled
items)
Check the legislative website for the most up-to-
date information. Most of these are loosely
scheduled post-floor sessions and will go later into
the evening.
Senate Tax Committee
(Tuesday 4/22 - Friday 4/25
Chair: Sen. Lawrence Pogemiller
9 a.m. Room 15 Capitol
Agenda: To be announced.
For more informal/on on ¢[ly legislalive issues, conlat'l any member of Ihe League of Minnesota Cities Inlergovernmental Relations learn.
651.281,1200 or 800.925.1122
~pr 17 2009 19:45:91 Via Fax -> 7694417425 ~&ni~is~ra~or Page 002 Of 002
FridayF
- a×"
A weekly legislative update from the League of Minnesota Cities
Fireworks fee provision tucked into
two House bills
Two House committees have inserted provisions
into omnibus funding bills that would cap the fees
cities could impose on vendors selling consumer
fireworks. The proposal began as a bill, HF 800
(Hackbarth, R-Cedar), that was introduced in
response to excessive fees adopted by some cities
after last year's legalization of consumer fireworks
including sparklers, party poppers and snakes. The
most recent version of the bill would cap the
allowable fee at $100 per vendor selling from a
permanent structure and $350 per vendor selling
from a temporary structure. Presently, cities charge
between $0 and $1,100.
The bill was approved by House policy committees
but was never heard in the Senate. By tucking the
provision into the House State Government
omnibus bill (HF 749) and the Economic
Development, Housing, Jobs and State Government
Finance omnibus bill (HF 748), the House will
force the Senate to deal with the measure.
Hearings of interest
April 17, 2003
Page 2
TUESDAY~ April 22~ 2003
Committee: House Capital Investment
Room: Basement Hearing Room, State Office
Building
Time: Meeting Time Note: After Session
Chair: Rep. Phil Krinkie
Agenda: HF 627 (Kuisle) Transportation funding
provided, and money appropriated.
HF 1048 (Penas) Trade and economic development,
housing finance agency, natural resources, and
transportation funding provided, bonds issued, and
money appropriated.
Committee: Senate Transportation Policy and
Budget Division
Room: Room 107 Capitol
Time: 3:30 p.m
Chair: Sen. Dean E. Johnson
Agenda: Presentation of committee omnibus
transportation bill.
S.F. 1103-Moua: Common interest communities'
right of way acquisition.
Cities maintain the fees are needed to cover the
costs associated with compliance checks, education
and inspections relating to the sale of a regulated
product.
Proponents of the measure testified that current law
allows for too much variation between cities, and
that some cities are abusing their authority by using
the fees as a way to discourage retailers from
selling fireworks.
The provision also would restrict cities from
requiring fireworks sellers to purchase additional
liability insurance. Testifiers stated that some cities
have adopted licensing provisions that require
liability coverage of $1 million. The insurance
requirements, coupled with the fees, make selling
fireworks cost prohibitive for retailers.
WEDNESDAY: April 23, 2003
Committee: House Transportation Finance
Room: 200 State Office Building
Time: 8:15 AM
Chair: Rep. William Kuisle
Agenda: HF1071 (Seifert) Paved two-lane highway
speed limits of 65 miles per hour during daytime
and 55 miles per hour during nighttime provided.
HF1233 (Tingelstad) Northstar commuter rail line
funding provided, bonds issued, and money
appropria ted.
HF1129 (Kuisle) Utility relocations necessitated by
design-build transportation projects regulated.
Committee: Senate State Government Budget
Division
Room: Room 118 Capitol
Time: 9 a.m.
Chair: Sen. Jane Ranum
Agenda: Omnibus state government budget bill.
For more/nformalion on oily legislative issues, comae! any member of Ihe l..~ague of M/nne$ola Cities Inlergovetnmenlal Relal/on$ learn.
651.281.1200 or 800.925.1122