09-14-21 CCM Workshop (Preliminary Budget)HUTCHINSON CITY COUNCIL
REVIEW OF 2022 PRELIMINARY BUDGET
MINUTES
TUESDAY, SEPTEMBER 14, 2021, AT 4:00 PM
CITY CENTER — COUNCIL CHAMBERS
1. Call to Order
Vice President Chad Czmowski called the workshop to order at 4:00 p.m. Members present
included Mary Christensen, Pat May, and Dave Sebesta. Member absent was Mayor Gary
Forcier. Others present were: Matt Jaunich, City Administrator, and other City directors
REVIEW OF 2022 PRELIMINARY BUDGET
2. 2022 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 I". 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 which shows a budget surplus
projected to be at $1.6 billion. July's updated forecast showed revenues were $2.684 billion
higher than projected in February. At this point, nothing is pointing towards any state financial
issues that should impact the City's 2022 budget planning.
Staff is proposing to increase the general fund levy by 3.3% and the debt fund levy by 16.2%
(mainly due to the new police facility), with an 11.2% increase in the EDA tax levy and a 4.0%
increase in the HRA tax levy, with a total tax impact of 7%. Mr. Jaunich provided an overview of
past tax levies from 2013 to the present. Mr. Jaunich provided the Council four options for the
Council to consider for the preliminary tax levy. The first option would hold both levies flat; the
second option would see no increase in the general fund levy and a 16.2% increase to the debt
levy; the third option would increase the general fund levy by 2.0% and the debt levy by 16.2%;
and the fourth option would increase the general fund levy by 3.3% and the debt levy by 16.2%.
Mr. Jaunich spoke about a I0-year tax rate trend and provided information on a tax rate
comparison from 2020 of Hutchinson to other regional centers, state-wide and county -wide cities.
Mr. Jaunich provided a market value history which is an 11.2% increase from 2020 to 2021. Mr.
Jaunich reviewed general fund revenues and how they are proposed to be increased and
decreased, with an average of a 1.7% increase. Property taxes see an increase of 3.3%; other
taxes increase 0.0%; licenses & permits increase 15.3%; intergovernmental revenue increase
1.4%; charges for service increase of 0.9%; no increase in fines & forfeitures, increase of 4.3% in
miscellaneous revenue, and a decrease of 0.8% in transfers -in. The general fund revenues include
a 3.3% tax levy increase. $30,000 of this increase is due to the Uponor tax abatement. There will
be no PILOT payment increase from HUC. Permit fees are budgeted to have an increase of
$50,000. There is an increase in the LGA amount (just over $65,000) to the general fund (going
with a 50150 split). There is a loss of E911 funding of $44,600 due to the closing of the dispatch
center. There are no changes to the "transfer -in" from the city's enterprise funds. There is no
impact from the current pandemic on any departmental programs/functions. The City is in Year 4
of 5 of phasing out HSA funding from the self insurance fund. Mr. Jaunich noted that a 1 % tax
levy increase in the general fund is equivalent to $54,307. Mr. Jaunich then spoke about local
government aid and explained that 50% of the City's LGA in 2022 has been allocated to the
general fund and 50% going to the capital fund. The split in 2020 & 2021 was 49%/51%.
Originally when LGA was split out of the general fund in 2011 it was split 40%/60%. The 2022
LGA is budgeted for a slight increase of $22,000 overall.
General fund expenses are proposed to increase 1.7%. Wages & benefits are increased 1.7%,
supplies increased 4.7%, services & charges increased 1.1%, miscellaneous expenses increased
3.1%, transfers -out increased 2.0% and a 75% decrease 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 5% decrease to health insurance next year. This includes reductions in wages and
benefits due to moving the dispatch center to the county. The DMV personnel was increased by
$37,000 to change its staffing model from two full-time and three part-time employees to three
full-time and two part-time. The temporary/seasonal wages for all departments were increased by
$67,534 mainly due to recent pay scale changes and is likely to go up. There are no additional
new positions proposed in the general fund. The additions also include $30,000 for Uponor tax
abatement, increased funding for fleet, additional funding for elections next year and inflation and
other miscellaneous costs. The preliminary budget is currently balanced. Mr. Jaunich then
reviewed expenditures from 2021 to 2022, historical general fund budget information and staffing
levels.
Mr. Jaunich reviewed the enterprise funds and their proposed increases/decreases. Mr. Jaunich
noted that fund numbers include depreciation. He noted that the liquor fund continues to do
really well and no more debt payments in the Liquor Fund. There are no proposed rate changes
for garbage, water and wastewater. 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 to the
"transfers -in" from the enterprise funds. The enterprise fund balances are healthy.
Additional budget factors include a $17.66 million capital improvement plan, minor changes in
staffing levels and no changes in service outside of the elimination of the dispatch center, staffing
costs and capital needs are the biggest driver of the city's general fund budget with staffing costs
being the biggest reason behind the request of a tax levy increase within the general fund, the
HUC PILOT payment to remain flat, general fund balance continues to remain healthy and the
vehicle/fleet funding was increased by $25,000.
Mr. Jaunich then briefly reviewed the debt management plan with a target debt levy of $2.6
million. The 2022 Debt Management Plan will exceed the target limit of $2.6 million due to the
new financing need of a new police facility. 2022 will include the first tax increase to the debt
levy since 2016. Future years levy impact will be minimal. The City's other project limit
continues to be at $1.9 million but low interest rates in recent years have allowed for higher
project limits.
Mr. Jaunich reviewed the following considerations: a 1% levy increase is equal to $76,307, staff
is proposing a preliminary City tax levy increase of 7.0% (3.3% 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 7.0% increase, the current budget is balanced, the
current proposed tax levy increase would have a small impact on property taxes. Mr. Jaunich
noted that there are still a lot of decisions that need to be made between now and the end of
December. The biggest factors behind the levy increase are the standard wage and benefit
increases ($154,766) and the debt levy increase of $355,797 to account for new debt.
Council Member Czmowski asked questions related to the term of the debt levy, use of ARPA
funds and the backlog of parks equipment. He expressed that he would like to see the overall
levy under 5.0% but he realizes that might not be realistic. Council Members expressed that
everyone needs to understand that the proposed levy is higher because of the debt related to the
new police facility.
Formal action of the preliminary budget will be taken at the September 28, 2021, Council
meeting.
3. Adjournment
Motion by Christensen, second by Sebesta, to adjourn the workshop at 5:05 p.m. Motion carried
unanimously.
ATTEST:
Gary T. Forcier
Mayor
Matthew Jaunich
City Administrator