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08-25-2015 CCM WORKSHOPHUTCHINSON CITY COUNCIL REVIEW OF 2016 PRELIMINARY BUDGET MINUTES TUESDAY, AUGUST 25, 2015 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, Bill Arndt, Chad Czmowski and John Lofdahl. Others present were: Matt Jaunich, City Administrator, Marc Sebora, City Attorney and Kent Exner, City Engineer REVIEW OF 2016 PRELIMINARY BUDGET 2. 2016 Preliminary Budget Matt Jaunich, City Administrator, presented before the Council. Mr. Jaunich noted that today's agenda will include a review of state budget impact, preliminary levy and past levies, general fund revenue and expenses, proposed staff changes, enterprise funds revenue and expenses report on "public events" and Mayor/Council salaries and next steps that need to be taken. Mr. Jaunich also reviewed the City's mission statement, the six core areas of focus 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 first regular meeting in September and state law requires it by September 30. After the 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 and the budget will be adopted in mid -late December. Mr. Jaunich reported that there were no significant changes imposed by the State Legislature that should affect the City's 2016 budget. The State is expected to add to its budget surplus having revenues exceeding forecasts by $555 million. The city is expected to see a slight increase in LGA in 2016 with unallotments and levy limits not expected to be in place in the near future. Staff is proposing to increase the tax levy by 2.4% which would average a 1.5% increase since 2010. Mr. Jaunich provided an overview of past tax levies with percent change breakdowns and changes. Mr. Jaunich and Andy Reid, Finance Director, provided the Council three 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 1%; the third option would increase the general fund levy by 5% and the debt levy by 1%. All of these options show annual dollar increases from $18-$48 per year on a median home value of $135,000. Mr. Jaunich reviewed general fund revenues and how they are proposed to be increased and decreased, again with an average of a 2.4% increase. The general fund revenues do not include any "new" revenue outside of the 3% tax levy increase; the general fund revenues include the restoration of the transfer from HUC; expecting most of the other revenue sources to remain relatively flat; no significant change in transfer -ins from enterprise funds; the 2016 budget does include a $119,000 transfer from the City's self-insurance fund to help cover HSA contribution costs; a I% tax levy increase is equivalent to $44,794. General fund expenses are proposed to increase 2.9%. The largest impact on the city's general fund expenses is associated with wages and benefits (includes costs for HSA contributions and policy holiday pay which were previously not budgeted, includes costs to have Rec Center open five days a week, includes costs for a new park maintenance equipment operator — moving forestry to public works, includes a 5% vacancy factor in the police department). The general fund expenses also include costs for a job compensation study with inflation, elections, GIS expenses and miscellaneous making up the rest. The preliminary budget is not balanced by 1.5%. Mr. Jaunich explained that the current natural resource specialist has resigned and the City is proposing to make some changes. Dolf Moon, PRCE Director, presented before the Council. Staff is proposing to reinstitute the Forester position that was eliminated three years ago when the City's Forester retired. However, over those three years, it has become apparent that a Forester is a necessity to the City. Mr. Moon outlined the various reasons for the recommendation to reinstitute the Forester position. This scenario has been discussed for well over a year, however the timing seems right at this time with a vacancy in the department. Mr. Jaunich also noted that staff is proposing to create a Facilities Supervisor position. This position would be responsible for the management and supervision of the day-to-day building functions of all sites. The position would be responsible for the overall maintenance, repair and custodial care of 20 facilities. The position would be paid for by enterprise funds and a portion of the $750,000 earmarked facilities money. Andy Reid, Finance Director, reviewed the enterprise funds and their proposed increases/reductions. Mr. Jaunich noted that the liquor fund continues to do well. Creekside assumes a reduced production model focusing on higher margin products. There will be no rate changes in refuse fund. There will be no rate increases in water and sewer funds. There will be a slight rate increase in the stormwater fund. There will be no significant changes in transfers to the general fund from the enterprise funds. Mr. Jaunich reminded the Council of the Capital Improvement Plan which includes $9.42 million for 2016 and includes money for the aquatic center. There are no significant staffing cuts and/or changes in services. There are no new programs/services proposing to be added. Staffing costs and capital needs are the biggest "driver" of the City's budget. Fund balances continue to remain healthy. Mr. Jaunich reviewed staffing levels over the last 10 years and also reviewed the debt management plan and the projected debt levy. Mr. Jaunich provided a report of city costs for "public events". Staff s best estimate is the City spends approximately $30,000 per year assisting with various public events — ranging from the Water Carnival, RiverSong, Arts & Crafts, parades, Chamber events, etc. Lastly, Mr. Jaunich provided a report on Mayor/Council salaries and how they relate to other regional centers. Hutchinson's Council/Mayor salaries are the low end amongst other regional centers. Council asked staff to include a salary increase for the Council in the 2016 budget somewhere in the mid-range of what other regional centers offer their Councils. Council Member Czmowski asked staff to look at the costs associated with bringing ice back to Park Elementary. Council Member Arndt asked about costs associated with having motor vehicle being open five days per week as opposed to four days per week. Mayor Forcier asked staff to look at duplicate services between the City and the County. Mr. Jaunich asked the Council their comfort level with the preliminary budget proposal of a 2.4% tax levy increase. General discussion was held regarding the Council's salaries and other boards/commissions members. Council Member Arndt asked if perhaps the City Council and the McLeod County Board of Commissioners should meet to discuss any potential partnerships. Mr. Jaunich agreed, however he felt perhaps the city should have the best idea on its financial position and the frame of its 2016 general fund budget. Mr. Jaunich will continue to try to arrange a meeting. General discussion was held regarding funding options for large equipment/vehicles. Mr. Jaunich noted that a plan will be put together on how to fund large equipment/vehicles. Council Member Lofdahl suggested putting more money into street improvement projects. Discussion was held on the rising costs of construction. Currently, the City spends approximately $3-4 million per year. 3. Adj ournment Motion by Arndt, second by Lofdahl, to adjourn the workshop at 5:15 p.m. Motion carried unanimously. ATTEST: Gary T. Forcier Mayor Matthew Jaunich City Administrator