11-07-2016 CCM WorkshopHUTCHINSON CITY COUNCIL
REVIEW OF 2017 ENTERPRISE FUND BUDGETS
MINUTES
TUESDAY, NOVEMBER 7, 2016, AT 4:00 PM
CITY CENTER — COUNCIL CHAMBERS
1. Call to Order
Mayor Forcier called the workshop to order at 4:04 p.m. Members present included Mary
Christensen, Chad Czmowski and John Lofdahl. Member absent was Bill Arndt. Others present
were: Matt Jaunich, City Administrator; Kent Exner, City Engineer; Andy Reid, Finance
Director; Andy Kosek, Creekside Manager; Candice Woods, Liquor Hutch Manager; John Olson,
Public Works Manager; John Paulsen, Environmental Specialist and Tim Gratke,
Water/Wastewater Supervisor.
REVIEW OF 2016 ENTERPRISE FUND BUDGETS
2. Liquor Hutch Budget
Matt Jaunich, City Administrator, presented before the Council. Mr. Jaunich reviewed the
proposed budget for 2017 which sees a total revenue increase of 4.4%. Mr. Jaunich noted that
since 2007, total sales have increased at an average annual rate of 3% and the customer count has
increased by an average annual rate of 1.5%. Proposed expenses for 2017 have increased 5.5%.
This includes a budgeted capital item for an upgrade to the video security system and the hiring
of one more fulltime employee. The debt service is related to the 2005 store upgrades and the
loan will be repaid in 2020. The budget includes a proposed 2017 fund balance of $1,087,272.
Bill Arndt arrived at 4:20 p.m.
Creekside Budget
Mr. Jaunich explained that Creekside's 2017 budget is the second year under a reduced
production model, focusing on higher margin products. This model faired better than expected in
its first year. This model lowers Creekside's business risks and extends the life of equipment.
Total revenue is budgeted at an increase of 20.9% with expenses having an increase of 44.2%
which includes a wood grinder replacement. The ending cash balance for Creekside is budgeted
at $1,625,088.
Refuse/Garbage Budget
Mr. Jaunich noted that the refuse/garbage budget sees an increase in revenue of 4.1% from 2016.
The residential rates have held flat with no rate increase since 2008 and will have no increase in
2016. Expenses for the refuse/garbage budget will see an increase of 70.3% for 2017. There is a
transfer out of $55,000 that goes to the tree disease infestation/mitigation fund and an additional
transfer out of $750,000 that is going for an interfund loan for the aquatic center. The final debt
service payment is in 2017. The ending cash balance for Refuse/Garbage is budgeted at
$395,364.
Water Fund Budget
Mr. Jaunich explained that the Water Fund budget shows a 0.8% increase in total revenue for
2017. The 2017 local sales tax has been reduced $60,000 as actual receipts were quite lower in
2015 compared to 2014. Staff believes there is a learning curve in reporting the local sales tax,
especially related to capital equipment. There will be no rate increase in 2017 and hasn't been
since 2011. A brief discussion was held about potentially implementing a meter fee in 2018.
Water fund expenses are budgeted at a 4.2% increase. There is a first increase of transfers to the
general fund since 2008. The ending cash balance for the water fund budget is budgeted at
$3,930,012.
Sewer Fund Budget
Mr. Jaunich explained that the sewer fund budget sees a 1.5% increase in revenues for 2017. The
2017 local sales tax has been reduced $60,000 as actual receipts were quite lower in 2015
compared to 2014. Sewer rates will see no increase in 2017 and haven't since 2011. Total
expenses have a budgeted increase of 1.9%. There is a first increase of transfers to the general
fund since 2008. The sewer fund budget has an ending cash balance budgeted at $5,089,838.
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 5.050;
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 ex exempt from local sales tax; organization exempt from
paying state sales tax are also exempt from the local sales tax. Mr. Jaunich also reviewed other
nearby cities with local sales tax. Mr. Jaunich explained that early retirement of debit 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.
Stormwater Fund Budget
Mr. Jaunich explained that total revenue in the stormwater fund budget is seeing an increase of
3.1%. There is a planned rate increase of 3% over nine classifications. Expenses are budgeted at
a 10.3% increase. City's leaf vacuuming program is accounted for in this fund and street
sweeping is also funded by this account. The ending cash balance in the stormwater fund budget
for 2016 is $1,446,063. A general discussion was held on the South Central Drainage Project
(Linden Park).
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. Creekside assumes a second year of a
reduced production model focusing on higher margin products. There are no rate changes for
garbage, water and sewer users. There is a slight rate increase in the stormwater fees. The
enterprise fund transfers into the general fund account for 6.4% of general fund revenue — fifth
straight year liquor fund will increase their transfer to the general fund and first increase in water
and sewer transfer to the general fund since 2008. Cash balances continue to remain healthy and
the City is borrowing against the healthy balance in the refuse fund to help pay for the aquatic
center.
3. Adjournment
Motion by Christensen, second by Czmowski, to adjourn the workshop at 5:15 p.m. Motion
carried unanimously.
ATTEST:
Gary T. Forcier
Mayor
Matthew Jaunich
City Administrator