09-10-2019 CCM Workshop (Budget)HUTCHINSON CITY COUNCIL
REVIEW OF 2020 PRELIMINARY BUDGET
MINUTES
TUESDAY, SEPTEMBER 10, 2019, AT 4:00 PM
CITY CENTER — COUNCIL CHAMBERS
1. Call to Order
Mayor Forcier called the workshop to order at 4:00 p.m. Members present included Mary
Christensen, Steve Cook, Chad Czmowski and Dave Sebesta. Others present were: Matt
Jaunich, City Administrator, and other City directors
REVIEW OF 2020 PRELIMINARY BUDGET
2. 2020 Preliminary Budget
Matt Jaunich, City Administrator, presented before the Council. Mr. Jaunich noted that today's
agenda will include a review and reminders, the state budget impact, preliminary levy and past
levies, general fund revenue and expenses, proposed staff changes, enterprise funds revenue and
expenses, debt management plan and next steps. Mr. Jaunich also reviewed the City's mission
statement, vision statement, the six core areas of focus, items included to be completed by 2023
in the strategic plan and five long-term goals the Council should consider every budget season.
Those goals include: 1. What should future tax levies look like? 2. What levels of services
should the City perform and provide in the future? 3. What is an acceptable level of debt? 4.
What is our level of investment in technology and equipment, and what period of payback is
acceptable? 5. What are our future infrastructure needs (roads, utilities, buildings, etc.) and how
are we going to pay for them?
Mr. Jaunich reminded the Council that the City Charter requires staff to submit an annual budget
by September 1st. The City Charter also requires the Council to act on the preliminary budget by
the second regular meeting in September. After the preliminary levy is set, it can only be
lowered, not raised. The Council will need to set the date and time of its Truth -in -Taxation
hearing at the second meeting in September and provide a phone number and mailing address that
taxpayers may call/contact if they have questions related to the City's property tax levy/budget.
The hearing is usually held in early December. The budget will be adopted in mid -late
December. Mr. Jaunich commented on the State budget situation and reported that while the
State's economy has slowed, the State's finances remain sound. Positive balances are expected
this biennium and the next. The 2020-21 State budget (February forecast) began with a surplus of
$1.052 billion. July's forecast had state revenue collections exceeding the forecast by $636
million. The State's budget reserve continues to be healthy. The next full budget forecast is
expected in December. Unallotment and levy limits don't expect to be in place in the near future.
The state's budget situation shouldn't have an impact on the City's 2020 budget.
Staff is proposing to increase the general tax levy by 3.3%, with a 3.7% increase in the EDA tax
levy and a 3.7% increase in the HRA tax levy, with a total tax impact of 3.3%. This includes a
3.9% increase in the general fund and a 0% increase in the debt funds. There is a $45,000 tax
abatement allotted for the Uponor project. Mr. Jaunich provided an overview of past tax levies
from 2012 to the present. Mr. Jaunich provided the Council four options for the Council to
consider for the preliminary tax level. The first option would hold both levies flat; the second
option would increase the general fund levy by 3% and the debt levy by 0%; the third option
would increase the general fund levy by 4.0% and the debt levy by 0%; and the fourth option
would increase the general fund levy by 4.8% and the debt levy by 0%. Mr. Jaunich spoke about
a 10-year tax rate trend.
Mr. Jaunich provided a market value history which is a 3.7% increase from 2018 to 2019. Mr.
Jaunich reviewed general fund revenues and how they are proposed to be increased and
decreased, with an average of a 3.9% increase. Property taxes see an increase of 4.7%; other
taxes increase 0.0%; licenses & permits decrease 5.2%; intergovernmental revenue increase
11.2%; charges for service decrease of 0.5%; no increase in fines & forfeitures, decrease of
12.8% in miscellaneous revenue, and an increase of 6.8% in transfers -in. The general fund
revenues include a 4.7% tax levy increase. $45,000 of this increase is due to the Uponor tax
abatement. Without this tax abatement, there would be a3.9% tax levy increase. The general
fund revenues include an increase of the transfer from the HUC in the amount of $192,016 or
7.7%. This includes a renegotiated PILOT payment from 2.75% of operating revenue to 4.50 %
with a three-year phase in. Next year's payment will be 4.5%. Budgeting all of the LGA
increase is in the general fund. The City is in Year 2 of 5 of phasing out HSA funding from the
self insurance fund. Permit fees are budgeted to have a slight reduction. Mr. Jaunich noted that a
1% tax levy increase in the general fund is equivalent to $51,100. Mr. Jaunich then spoke about
local government aid and explained that 49% of the City's LGA in 2020 has been allocated to the
general fund with 5 1 % going to the capital fund. The split in 2018 & 2019 was 46%/54% and in
2017 was 44%/56%. Originally when LGA was split out of the general fund in 2011 it was split
40%/60%. The 2020 LGA is $168,221 higher than 2019 and is fully "restored" minus inflation.
General fund expenses are proposed to increase 3.9%. Wages & benefits are increased 3.9%,
supplies increased 3.9%, services & charges increased 3.2%, miscellaneous expenses increased
6.7%, transfers -out increased 3.0% and no increase in capital outlay. Mr. Jaunich noted that the
largest impact on the City's general fund expenses is associated with wages and benefits which
includes costs for general performance increases and staff timing changes and minor shifts.
There will be a 7% increase to health insurance next year. It is also being proposed to include the
addition of a new full-time Parks Maintenance Operator and the exclusion of a building inspector
(not filling a vacancy). This also includes moving the part-time Human
Resources/Administrative Technician to full-time. In addition, additional hours for fire fighters
have been included due to the Main Street project. The additions also include $45,000 for
Uponor tax abatement, $60,000 for software upgrades and additional IT security training and
inflation and other miscellaneous costs. Mr. Jaunich explained that the preliminary budget is
currently balanced. Mr. Jaunich then reviewed expenditures from 2019 to 2020, historical
general fund budget information and staffing levels.
Mr. Jaunich reviewed the enterprise funds and their proposed increases. Mr. Jaunich noted that
fund numbers include depreciation. He noted that the liquor fund continues to do well, as well as
other utility funds. There are no proposed rate changes for garbage, water and sewer. There will
be a slight rate increase in the stormwater rates. There will be a decrease in fund balances due to
capital needs. There will be no changes in transfers to the general fund from the enterprise funds.
Additional budget factors include an $18.41 million capital improvement plan, no significant
staffing cuts and/or changes in service, staffing costs and capital needs are the biggest driver of
the city's budget with staffing costs being the biggest reason behind the request of a tax levy
increase, Uponor tax abatement kicks in next year, this is the last year of HUC increase and fund
balances continue to remain healthy.
Mr. Jaunich then briefly reviewed the debt management plan with a target debt levy of $2.6
million. The 2020 Debt Management Plan includes the changes from May of 2016 which
increased the targeted limit from $2.2 million to $2.6 million. The new project limit is $1.9
million which is up from $1.5 million. After a 5% levy increase in 2015 and a 1% increase in
2016, staff is budgeting for a 0% increase for the fourth straight year and is not expecting a debt
levy increase again until 2023.
Mr. Jaunich reviewed the following considerations: a 1% levy increase is equal to $73,100, staff
is proposing a preliminary City tax levy increase of 3.3% (3.9% increase in general fund),
combined with the EDA, HRA and tax abatement levy increases, the total tax impact to
Hutchinson residents will be the equivalent to a 3.3% increase, the current budget is balanced, the
current proposed tax levy increase would have a small impact on property taxes due to the
increase in value. Mr. Jaunich noted again that the biggest factors behind a levy increase are the
standard wage and benefit increases expected to cost $290,567 and the first year of the Uponor
tax abatement of $45,000.
Council Member Cook raised some concerns with the added expenses in the general fund budget.
Discussion also centered around shopping around for health care insurance. There were some
concerns noted about budget increases year after year. Council Member Cook suggested using
some LGA from this year for next year's capital pro] ects fund.
Formal action of the preliminary budget will be taken at the September 24, 2019, Council
meeting.
Morgan Baum — Ms. Baum asked about sales tax increasing and how that effects years after 2020.
It was noted there are three elections scheduled in 2020 as well.
The consensus of the Council was that they were okay with a 3.3% tax levy increase, but if it
could be lowered that would be good too.
3. Adjournment
Motion by Czmowski, second by Sebesta, to adjourn the workshop at 5:15 p.m. Motion carried
unanimously.
ATTEST:
Gary T. Forcier
Mayor
Matthew Jaunich
City Administrator