11-28-23 Workshop (Enterprise Fund Budgets)HUTCHINSON CITY COUNCIL
REVIEW OF 2024 ENTERPRISE FUND BUDGETS
MINUTES
TUESDAY, NOVEMBER 28, 2023, 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 Chad
Czmowski, Pat May, Tim Burley and Dave Sebesta. Others present were: Matt Jaunich, City
Administrator; Mike Stifter, Public Works Director; Andy Reid, Finance Director; Andy Kosek,
Creekside Manager; Candice Woods, Liquor Hutch Manager
REVIEW OF 2024 ENTERPRISE FUND BUDGETS
Matt Jaunich, City Administrator, spoke before the Council. Mr. Jaunich noted that a review of
the following budgets will be held at today's workshop: Liquor Hutch, Creekside,
Refuse/Garbage, Water/Wastewater/Storm Water. In addition, there will be a review of the local
sales tax option and the enterprise fund transfers to the general fund. Lastly, an update will be
given on the 2024 budget and tax levy and CIP.
2. Liquor Hutch Budget
Matt Jaunich, City Administrator, presented before the Council. Mr. Jaunich reviewed the
proposed budget for 2024 which sees a 5.9% increase in sales revenue over the 2023 forecasted
sales. This is due to 2023 forecasted sales beating the budget by 3.8%. Additionally, THC
products are being budgeted for the first time ever since sales began in June of 2023. Proposed
expenses for 2024 have increased 6.2%. Capital projects include renovations to the checkout
counters and a new refrigeration system for the import beer cooler. Andy Reid, Finance Director,
commented on credit card fees that are beginning to be a large expense and need to be considered
in 2025. Mr. Jaunich also provided a 10-year liquor fund forecast.
Creekside Budget
Mr. Jaunich explained that Creekside's 2024 budget includes a -9.8% decrease in revenue. Sales
revenue for bagged product is budgeted at a -15.8% decrease due to the loss of a major customer
late in 2022. Bulk product sales revenue is up over 100% due to the availability of bitcon
inventory for the year. Total expenses are budgeted at a decrease of-15.2%. Capital projects
include cold storage expansion, pallet inverter, portable shrink-wrapping machine and bagging
line improvements. The transfer to the general fund is budgeted at $120,000. The ending cash
balance for Creekside is budgeted at $2,206,728. Mr. Jaunich also provided a 10-year compost
fund forecast.
Refuse/Garbage Budget
Mr. Jaunich noted that the refuse/garbage budget sees an increase in revenue of 6.8% from 2023.
This includes a 5% rate increase for all refuse rates, which is the first increase since 2008.
Expenses for the refuse/garbage budget will see a decrease of -5.6% for 2024. There is a $55,000
transfer that goes out to the tree disease infestation/mitigation fund. The capital outlay
assumption for 2024 is based on planned improvements to the source separated operating model.
This was originally planned in 2021, but was put on hold due to permitting delays with the
MPCA. Projects included are investment in new SSOM operations, a roll -off truck chassis, an
and airlift separator. Mr. Jaunich provided a 10-year refuse fund forecast.
Water Fund Budget
Mr. Jaunich explained that the Water Fund budget shows a 10.0% increase in total revenue for
2024. The 2024 budget does not include any increase in water rates, but does include some
adjustments to sales revenue based on the new rate structure that was effective 1/1/23. Water
fund expenses are budgeted at a 5.3% increase. Projects included are water meter replacements,
Well 4 rehabilitation and recovery treatment, water treatment facility roadway and parking lot
improvements, bulk tank and containment pit lining, plat optimization study, permeate flush
pump VFDs, and roadway infrastructure improvements. Transfer to the general fund will remain
at $70,000 for 2024. The ending cash balance for the water fund budget is budgeted at
$4,708,033. Mr. Jaunich provided a 10-year water fund forecast and noted that 2026 is the last
year of the local sales tax.
Wastewater Fund Budget
Mr. Jaunich explained that the wastewater fund budget sees a 16.5% increase in revenues for
2024. The 2024 budget does not include any increase in sewer rates, but does include some
adjustments to sales revenue based on the new rate structure that was effective 1/1/23. Total
expenses have a budgeted increase of 15.4%. Projects included are digester aeration and
mixation rehabilitation, belt press thickener 2 overhaul/replacement, main lift station pump 2 & 4
VFD replacement, EQ basin liner replacement, lift station repairs/upgrades at the Elementary
School, Our Saviors Church and 5th Avenue locations, roadway and parking lot improvements,
replace vactor truck and jetting trailer, half -ton extended cab 4x4 pickup truck, and roadway
infrastructure improvements. The wastewater fund budget has an ending cash balance budgeted
at $6,256,437. Mr. Jaunich provided a 10-year wastewater fund forecast.
Local Option Sales Tax
Mr. Jaunich reviewed the local option sales tax program and the purpose of it which is dedicated
solely to retiring the debt in water and sewer funds. Mr. Jaunich provided quick facts in reference
to local option sales tax, which included: local sales tax on a $100 purchase amounts to $.050;
local sales tax is applicable to the same retail purchases, subject to Minnesota sales tax; sale of
vehicles by dealers are exempt and instead are subject to an excise fee of $20 per vehicle sold;
local sales tax is applicable to any sale made within city limits as determined by the last four
digits of your zip code; point of possession determines taxability; purchases item/service
received/performed within city limits is subject to the local sales tax; purchased items/service is
received/performed outside city limits is exempt from local sales tax; organizations exempt from
paying state sales tax are also exempt from the local sales tax. Mr. Jaunich noted that the use tax
process is applicable so if a purchase is taxable but the vendor did not charge sales tax, then use
tax must be reported and paid to the State. Mr. Jaunich also reviewed other nearby cities with
local option sales tax. Mr. Jaunich explained that early retirement of debt is an option if cash
reserves are sufficient. While the main purpose of the tax is to retire existing debt, it also allows
the City to build healthy cash reserves to help with annual street projects with water & sewer
infrastructure improvements, improvements that may be needed in each facility, other projects
that create efficiencies and stable water/sewer rates. Mr. Jaunich noted that during the past
November elections, seven cities put forward 11 ballot questions for local sales tax and of those
11, 10 were approved by voters. Mr. Jaunich then reviewed the outstanding debt.
Stormwater Fund Budget
Mr. Jaunich explained that total revenue in the stormwater fund budget is seeing an increase of
3.9%. There is a planned rate increase of 3% over nine classifications. Expenses are budgeted at
a 13.2% increase. City's leaf vacuuming program is accounted for in this fund and street
sweeping is also funded by this account. Projects included for 2024 include pond improvements
in the developments of Fairway Estates, Summerset, Southfork, and Bridgewater and other
roadway infrastructure improvements. The ending cash balance in the stormwater fund is
budgeted at $1,036,481 for 2024. Mr. Jaunich provided a 10-year stormwater fund forecast.
Lastly, Mr. Jaunich provided an overview on enterprise fund transfers to the general fund. Mr.
Jaunich noted that the liquor fund continues to do well. 2024 sees the first rate increase in
garbage rates since 2008. 2024 is the second year of a new rate structure for water and sewer
users. There is a slight increase in the stormwater fees. Enterprise fund transfers into the general
fund account for about 5.8% of general fund revenue. Cash balances continue to remain healthy.
Capital needs continue to increase especially in the Creekside/Water/Sewer funds. In addition,
regulatory agencies have and likely will impact future needs.
Mr. Jaunich provided an update on the general fund budget. Mr. Jaunich noted that there have
been significant changes made to the preliminary budget and tax levy from September. Staff has
increased some revenues and cut expenditures from the budget based on departmental meetings
over the past couple of months that has resulted in the tax levy being lowered by $178,382.
September's preliminary general fund tax levy increase of 12% has been reduced to an increase
of 9%. September's preliminary overall city tax levy increase of 9.3% has been reduced to an
increase of 7.2%. Cuts include the elimination of a position that was being considered for an
addition in public works and includes the elimination of the Hospital Security Program as
Hutchinson Health will be having that program in-house. In addition, there were several other
line -item reductions. Minor changes were made to the Capital Improvement Plan. With the
adjustments made, the proposed total levy increase from 2023 is 7.2%. All of this information
will be presented at the Truth in Taxation hearing next week.
The Council had favorable comments on the change in the proposed levy increase.
3. Adjournment
Motion by May, second by Czmowski, to adjourn the workshop at 5:00 p.m. Motion carried
unanimously.
ATTEST:
Gary T. Forcier
Mayor
Matthew Jaunich
City Administrator