9. SR 08-28-1995,. ) ,.~ ITEM 9 .
`~
'ty of ~ MEMORANDUM
River TO: Mayor & City Council
lk •
FROM: Pat Klaers, City Ad i i ro~r~/
Ate" "
DATE: August 28, 1995
SUBJECT: 1996 Budget Worksession
The first City Council worksession on the 1996 budget is scheduled for
Monday, August 28, 1995, at approximately 7 p.m. in the Training Room.
The proposed maximum levy and budget need to be approved by the City
Council and certified to the county prior to September 15, 1995. Also, by
September 15, 1995, the City Council must establish its December, 1995,
public hearing dates for the 1996 budget and tax levy.
The worksession agenda looks something like the following:
• 1996 Proposed Expenditures (General Fund and Special Levies)
• • 1996 Proposed Revenues
• Status of the City Levy
• Options for Closing the 1996 Budget Gap
• Discuss 1996 Personnel and Capital Outlay Goals
• City Council Action Before September 15, 1995
• Discuss Some Miscellaneous Financial Issues/Projects
For the proposed 1996 budget, I have made a number of minor adjustments
in the requests from department heads and I have also made a number of
revenue and expenditure assumptions so that this August we are dealing
with a 1996 "budget gap" of $51,850. These adjustments and assumptions
need to be reviewed by the Council. Attached for your review is a summary
of the "budget gap" adjustments that have already been made. The notes on
this attachment need some explanations so that the Council can understand
the adjustments, but nonetheless, this page is offered for your review. Please
note the tax levy increase. This additional tax revenue means that the
proposed General Fund budget now includes additional tax revenues in the
amount of $388,750, which is a 2 percent increase in the city tax rate (from
approximately 24 to approximately 24.5).
The City Council has indicated its desire to "hold the line" on the tax rate.
• Taxes are the number one General Fund financial resource (52.7 percent of
13065 Orono Parkway • P.O. Box 490 • Elk River, MN 55330 • (612) 441-7420 • Fax: (612) 441-7425
the total) and, more importantly, are the major source of additional revenues
. for the General Fund. Typically the tax revenue increase mirrors the total
increase in the General Fund. This again is the situation for 1996.
In putting together the 1996 proposed budget, staff assumed a 15 percent
increase in the net tax capacity (NTC). In a telephone conversation with the
county auditor, this increase has been verified as being an accurate
assumption. Accordingly, if the tax rate remains the same, the city will see a
General Fund tax revenue increase of approximately $334,000. However,
this is sill $54,7501ess than what is in the proposed budget.
Tax revenues increase without a tax rate increase due to additional tax base
being added to the community through new development and the
reassessment of existing properties to reflect the current market. The
reassessment of the value of existing property is a state law requirement and
the county provides our assessment services. If the total tax rate for the city,
county, and school district does not change in 1996, property owners would
see no change in their taxes only if their valuation also did not change. On
the other hand, if the tax rate for the city, county, and school district did not
change and property owners saw a 5 percent increase in their property
valuation, then they would see an increase in their taxes.
• It should be noted that the city share of the total tax burden is about 23
percent (23.985 out of a total of 104.247). Accordingly, if the city tax rate
changed from approximately 24 to 24.5, then this is a 2 percent change and,
if the county and school districts had no tax rate change, then the total
impact on the tax rate would be less than a 1/2 percent increase. Again, this
is in reference to the tax rate and does not take into consideration any
increase in valuation that an individual may see in the property that they
own.
The city is facing the same General Fund budget issue in 1996 that it has
had to deal with for the past few years. This issue is how to have the
increases in annual operating expenditures equal available increases in
annual operating revenues. The city must not become dependent on reserves
as the city reserves are finite in nature and are limited. This is not our 1996
situation, but the City Council should consider the following scenario...
Personal Services amount to 66 percent of the total General Fund
expenditures. Personal Services in the General Fund are approaching
$2.8 million. If Personal Services go up 8 percent due to cost of living
adjustments, increases in benefits and wage step increases, then the
$4.1 million budget goes up $224,000 or about 5.5 percent.
• Additionally, if the NTC increases by 10 percent and no tax rate
• change is authorized by the City Council, then the property tax for the
General Fund goes up approximately $237,000.
With the above scenario, there are no additional monies available for typical
inflationary increases in expenditures, new employees, new programs or new
capital outlay purchases above what is typically financed. Additionally, we
may not, as a city, see 10 percent increases in our NTC on an annual basis.
Therefore, our main challenge for the next few years is how to finance
increasing operating expenses with limited additional annual revenues.
When the City Council says "hold the line" on the tax rate, they are also
saying hold the line on employee expenses. The city budget issues are
getting more complex each year. There are no magic answers for how to
balance the desire for low taxes with need for more employees to provide
better services, along with the city treating its employees fair in wages and
benefits.
The City Council has discussed the police budget a number of times in the
past. The police budget typically is a focal point of our budget discussions as
it is the biggest single department in the city. A previously distributed fact
sheet showed the police department as being 33 percent of the total of the
1987 budget and this amount increasing to over 37 percent of the total in
1994. Additionally, as the Council knows, about 85 percent of the police
• budget is personnel. Police Personal Services is over $1.1 million in 1996.
Accordingly, when we talk about controlling expenses, we are talking about
personnel and, mainly, the police department personnel. This certainly is an
oversimplification of the issue, but police personnel is a major factor in our
annual budget consideration.
If the City Council wants to keep the tax rate unchanged and allow the city
tax base catch up to the growth of city government, then we should limit
additional new employees for a year or so. This may be difficult when we are
talking about a rental inspection program, a fire inspection program, a COPS
FAST program, a mechanic or laborer in the street department, and clerical
support staff for the police and other departments. All city departments can
do a better job with additional employees. However, sometimes departments
can't always get what they want and departments must do the best they can
with the resources that are allocated. Additionally, there are other
efficiencies that can be realized within departments based on new technology.
The Council will see this in the 1996 budget proposal whereby $20,000 is
being requested by the police department to put personal computers into the
police vehicles. These "one time" type of expenditures (or financed over a few
years) improve the efficiency within the department and sometimes need to
be financed in lieu of additional personnel.
C7
On Monday, the City .Council will have the typical issues to review and
• examine that they see every year. These issues include determining the
highest priority for new employees and determining what type of capital
outlay items should be purchased. Funds for new employees are included in
the City Council contingency fund. Also, it should be noted that we are
approving the proposed maximum budget and levy in September and that
this amount can always be reduced during the December public hearings.
In addition to the budget gap page, attached for your review are the Source of
Funds page, the Appropriations Summary page, and some taxes payable in
1996 information. The detail pages for the General Fund and special levies
will be distributed at the budget worksession on Monday, August 28, 1995.
The summary pages don't tell the whole story, especially when some budget
organizational changes are taking place, but the pages are offered for
background information in preparation for Monday's meeting. On Monday,
staff will be prepared to discuss the revenues and expenditures and tax levy
in as much detail as desired by the Council.
C]
•
GAP
1996 GENERAL FUND BUDGET
• Proposed Revenues
Proposed Expenditures
BUDGET SHORTFALL
August 15 Changes
Recreation -Personal Service (Teen Spec ~ Programmer)
Contingency
Police -Personal Service
Streets -Personal Service (Mechanic changes to Laborer)
Rental Program Revenue
Police -Computers - moved to Equip. Reserve
Fire -Pumper Reserve -moved to Equip Reserve.
Streets - Sealcoat cut
Street Reserve Transfer In
Equipment Reserve Transfer In
Liquor Store Transfer In
Tax Levy Increase
HACA Decrease
•
•
8/24/95 1.2:26 PM
MISC.XLS
3,994,650
4,289,900
295,250
(1, 900)
30, 000
(58,000)
(16,000)
(20,000)
(20,000)
(24, 000)
{10, 000)
(15,000)
(10,000)
(10,000)
(90,700)
2,200
51,850
~,
SOURCE OF FUNDS
•
1993 1994 1995 1996
ACTUAL ACTUAL ADOPTED PROPOSED
GENERAL PROPERTY TAX 51,340,216 51,520,021 51,791,100 52,179,850
INTERGOVERNMENTAL REVENUES 878,882 924,685 902,550 936,850
CHARGES FOR SERVICES 394,652 375,878 386,300. 389,650
FINES & FORFEITS 77,555 76,370 80,000 75,000
LICENSES & PERMITS 205,783 244,018 197,950 226,150
OTHER REVENUES 125,946 148,799 106,700 111,700
TRANSFERS 201,920 258,650 267,650 218,950
TOTAL 53,224,954 53,548,421 53,732,250 54,138,150
GENERAL PROPERTY TAX
Ad Valorem Tax
INTERGOVERNMENTAL REVENUES
Local Government Aid
HACA
Police Relief
Gravel Tax
Landfill Surcharge
Urban Street Maintenance
Cops Fast Grant
Police Training Reimbursement
CHARGES FOR SERVICES
•
GENERAL GOVERNMENT
Administrative Project Fees
Plan Check Fees
Planning & Zoning Fees
Sewer Inspection Fees
Miscellaneous Sales
Assessment Searches
PUBLIC SAFETY
School Liaison
Police Contract.
Police Contribution (NSP & Landfill)
Impound Fees
Fire Calls & Contracts
PUBLIC WORKS
Street Services
RECREATIONT
Recreation Fees
........................................ 52,179.850 52,179,850
253,550
493,.050
83,500
34, 000
10, 000
27,500
30,250
5,000
50, 000
82,350
12, 800
1, 500
1,300
5, 500
75,000
0
39,500
1,300
58,000
2, 000
51, 400
936,850
10:20 AM 8/24/95
SOURCE OF FUNDS
Softball League Fees ......................................... 9,000 389,650
•
FINES & FORFEITS
Court Fines ......................................... 75,000 75,000
LICENSES & PERMITS
PERMITS
Building Permits ......................................... 135,000
Building Permit Surcharge ......................................... 800
Plumbing & Heating Permits ......................................... 27,000
Contractor License Surcharge ......................................... 2,200
LICENSES
Dog ......................................... 800
Cigarette ......................................... 300
Liquor ......................................... 24,500
Amusement ~' ......................................... 1, 850
Gas Fitters ......................................... 1,250
Garbage Haulers ......................................... 550
Mineral Extraction ......................................... 9,800
Apartment Licenses ......................................... 20,000
Other Business ......................................... 2,100 226,150
OTHER REVENUE
Interest ......................................... 35,000
Contribution-Munigipal Utilities ......................................... 72,000
Contribution-Guardian Angels ......................................... 3,700
Refunds & Reimbursements ......................................... 1,000 111,700
TRANSFERS
Liquor ......................................... 123,450
Landfill ......................................... 0
Equipment Reserve-Elections ......................................... 7,500
Equipment Reserve ......................................... 40,500
Street Reserve ......................................... 40,000
Secondary DARE ......................................... 0
Sewer ......................................... 6,000
Economic Developmerit Authority ......................................... 1,000
Housing & Redevelopment Authority .......................................... 500
Fund Balance Reserved for Cash Flow ......................................... 0 218,950
TOTAL 54,138,150
•
10:20 AM 8/24/95
APPROPRIATIONS SUMMARY
1993 1994 1995 1996
• Actual Actual Adopted Proposed
MAYOR & COUNCIL 60,879 62,983 63,250 76,250
ADMINISTRATION & FINANCE 337,077 382,008 416,100 467,950
ECONOMIC DEVELOPMENT 50,426 38,371 34,350 34,800
ELECTIONS 7,000 11,287 7,500 23,800
LEGAL 36,218 42,404 40,000 48,000
ENGINEERING 28,827 26,131 30,000 30,000
BUILDING & ZONING 239,112 237,233 242,500 273,700
PLANNING 6,390 114,709 127,300 145,950
PLANNING COMMISSION 1,373 3,139 6,450 6,450
DATA PROCESSING 16,174 19,889 21,650 21,300
-~
GOVERNMENT BUILDINGS 83,435 95,962 94,200 102,150
POLICE 1,147,276 1,299,970 1,318,600. 1,474,200
. .POLICE RESERVE 25,490 16,696 25,000 33,650
FIRE 201,806 301,624 242,500 249,450
EMERGENCY PREPAREDNESS 17,672 10,731 7,450 8,400
STREETS 413,647 438,570 430,550 432,450
EQUIPMENT REPAIR & MAINT. 73,982 78,957 66,100 96,400
SNOW REMOVAL 54,039 60,445 90,150 83,050
STREET LIGHTING 894 890 1,500 1,500
SHADE TREE 19,016 5,585 9,550 11,600
PARKS 104,413 104,625 88,800 150,250
-r-
RECREATION
123,336
118,050
152,650
168,200
SR. CITIZEN PROGRAMS 29,521 31,387 32,600 37,000
CONTINGENCY 13,100 7,442 183,500 213,500
TOTAL 3,091,103 3,509,088 3,732,250 4,190,000
~~
10:50 AM 8/24/95
•
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M
1996 CAPITAL OUTLAY
i D
rt
t It
m Amount Funded B
epa
men e y
Mayor 8 Council Listening Device (ADA) 1,200 GF
Elections Reserve for Optical Scanner 6,000 GF "~
AdminlFinance Laser Printers 2,500 E RlUn
Planning Planemeter 1,000 E R/Un
Govemment Bldg. Building Debt 37,200 GF
Police Mobii Digital Computers 20,000 E R/ERMU -~
{ 2 Mobil Radios 4,000 E R/Un
1 Portable Radio 1,300 E R/Un
4 Squad Setups 6,000 GF
PC & Printer 3,500 GF I~
1 Light Bar 1,000 E R/Un
1 Radar 2,000 E R/Un
Siren, Controls, Squad VCR & Oxygen Kit 6,050 E R/Un
Siren, Controls, Squad VCR & Oxygen Kit 2,950 GF
Fire Van Payment 13,000 GF
Reserve for Pumper 24,000 E R/ERMU
Building Debt 28,400 GF -Liquor Trans
Police Reserve 1 ATV 5,900 GF
1 ATV 6,000 E R/Un ,
Streets Air Compressor 5,000 E R/Strts •-
Metal Detector 1,100 E R/Strts
• Parks Roadside Mower 5,550 E R/Parks
Turt Aerator 5,000 E R/Parks
Reserve for Future 3,000 GF
Recreation Ice Arena Reserve 10,000 GF
TOTAL IN ORIGINAL GF BUDGET 201,650
Other Capital Outlav
Police 4 Squads 76,000 Certificate
Parks Front Mounted Mower 31,950 Certificate
Streets One Ton Dump 29,000 E R/ERMU
Emerg Prep. Siren 12,500 Certificate
TOTAL OTHER 149,450
TOTAL CAPITAL OUTLAY BY CATEGORY
General Government 47,900
Public Safety 206,600
Public Works 67,050
Culture & Recreation 23,550
345,100
Key: GF =General Fund
E R =Equipment Reserve
ERMU =Annual Payment from Municipal Utilities
Strts =Designated for Streets
Parks =Designated for Parks
Un = Undesignated
Certificate = 1996 Equipment Certificate
• EQU/PMENT RESERVE
Revenues
1.993 1994 1995 1996
ACTUAL ACTUAL ADOPTED PROPOSED
TRANSFER FROM UTILITIES n/a n/a n/a 5 73,000
OTHER REVENUES n/a n/a n/a -
TOTAL $ - 5 - S - 5 73,000
TRANSFER IN
Elk River Municipal Utilities .............................
.EXPENDITURE ANALYSIS
573,000 5 73,000
73,000
1993 1994 1995 1996
ACTUAL ACTUAL ADOPTED PROPOSED
GENERAL GOVERNMENT n/a n/a n/a 50
• PUBLIC SAFETY n/a n/a n/a 44,000
.PUBLIC WORKS n/a n/a n/a 29,000
CULTURE ~ RECREATION n/a n/a n/a 0
TOTAL 50 50 50 S73,000
CAPITAL OUTLAY
Police
Mobil Digital Computers ............................. 520,000
Fire
Reserve for Pumper ............................. 24,000
Streets
One Ton Dump Truck ............................. 29,000 $73,000
•