Loading...
09-12-2017 CCM BUDGET WORKSHOPHUTCHINSON CITY COUNCIL REVIEW OF 2018 PRELIMINARY BUDGET MINUTES TUESDAY, SEPTEMBER 12, 2017, 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 John Lofdahl. Others present were: Matt Jaunich, City Administrator, and other City directors REVIEW OF 2018 PRELIMINARY BUDGET 2. 2018 Preliminary Budget Matt Jaunich, City Administrator, presented before the Council. Mr. Jaunich noted that today's agenda will include a review of 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, 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 Pt. 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 and the budget will be adopted in mid -late December. Mr. Jaunich reported that the State legislature approved a S 1.44 billion tax bill that will have a positive effect on the City's budget in 2018 including a S15 million permanent increase to LGA. The increase will impact the City's LGA payment in a positive manner by 5100,252. A state surplus exists in the estimated amount of $540 million. The next budget forecast is expected in October but unallotments and levy limits are not expected to be in place in the near future. Staff is proposing to increase the general tax levy by 2.1%, with a 3.8% increase in the EDA and HRA tax levy, with a total tax impact of 2.1 %. Mr. Jaunich provided an overview of past tax levies with percent change breakdowns and changes with an average increase of 2% since 2010. 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 2% and the debt levy by 0%; the third option would increase the general fund levy by 3% and the debt levy by 0%; and the fourth option would increase the general fund levy by 5% and the debt levy by 0%. The third option is the recommendation of staff with an overall total levy percent increase of 2.1%. Mr. Jaunich provided a market value history which is a 3.8% increase from 2017 to 2016. Mr. Jaunich reviewed general fund revenues and how they are proposed to be increased and decreased, with an average of a 4.6% increase. Property taxes see an increase of 3%; other taxes increase 1.7%; licenses & permits increase 12.2%; intergovernmental revenue increase 8.7%; charges for service increase of 2.3%; no increase in fines & forfeitures, decrease of 7.4% in miscellaneous revenue, increase of 9.7% in transfers -in and no increase in the fund balance. The general fund revenues include a 3% tax levy increase. The general fund revenues include an increase of the transfer from the HUC in the amount of $210,520 or 9.2%. This includes a renegotiated PILOT payment from 2.75% of operating revenue to 4.75 % with a three-year phase in. Next year's payment will be 3.25%. The increase in LGA is also included in the general fund of $100,252 which is a 100% increase due to legislative changes. Mr. Jaunich posed the questions whether or not the LGA payment should be split between the general fund and the capital fund. Staff is expecting most of the other revenue sources to remain relatively flat. Mr. Jaunich also noted that a 1% tax levy increase in the general fund is equivalent to $47,518. Mr. Jaunich spoke about the LGA allocation changes. These include 46% of LGA in 2018 being allocated to the general fund and 54% going to the capital fund. The split was 43%/57% in 2017 and the split was 38% and 62% in 2016. Originally, when it was first split out of the general fund in 2011, the split was 40% and 60%. The 2018 LGA amount is $611,054 higher than the 2011 amount. General fund expenses are proposed to increase 5.4%. Wages & benefits are increased 7.2%, supplies increased 2.2%, services & charges increased 2.2%, miscellaneous expenses increased 0.7%, transfers -out remained flat and no increase in capital outlay. Mr. Jaunich then reviewed general fund revenue and expenses. 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 insurance increases/staff timing changes and minor shift. Staff has budgeted for a 15% increase in health insurance, but the increase could be much higher. Additional staff proposed include adding another building inspector, adding another public works employee (.25FTE being paid from general fund and the remaining coming from enterprise funds), increased hours for park staff and shifting the DMV structure from 1FT/4PT to 3FT/2PT. The FT building inspector position is due to the rental inspection program falling behind due to large business of building permits. About half of the cost of the position will be covered by additional revenue from permits due to increase demand. The increased hours of the current PT parks staff is to increase maintenance efforts, customer service and to cover additional programming. The FT position in Public Works will focus on water, sewer & storm sewer maintenance and focus on preventive maintenance on the distribution and collection system. The shift in DMV staffing will help with turnover and additional staff hours are needed to address changes at the State. Mr. Jaunich then reviewed staffing levels over the years. 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 no changes in transfers to the general fund from the enterprise funds. Additional budget factors include a $9.69 million capital improvement plan, no significant staffing cuts and/or changes in service, no new programs/services being added, staffing costs and capital needs are the biggest driver of the city's budget with staffing costs behind the request for a tax levy increase, a budgeted amount of a 15% increase in health insurance costs and fund balances continue to remain healthy. Mr. Jaunich then briefly reviewed the debt management plan. Mr. Jaunich reviewed the following considerations: a 1% levy increase is equal to $69,518, staff is proposing a preliminary City tax levy increase of 2.1%, combined with the EDA and HRA levy increases, the total tax impact to Hutchinson residents will be the equivalent to a 2.1% increase, the current budget is not balanced by $96,267, this would require a preliminary tax levy increase of 3.4% to cover current deficit, the current proposed tax levy increase would have a minimal impact on property taxes due to the increase in value and a 3.4% levy increase would have a minor impact on property taxes. Mr. Jaunich also reviewed the two factors behind a levy increase which include general wage and benefit increases expected to cost the city $397,627 (5.7% overall levy increase with an 8.4% increase to the general fund) and new positions and salary adjustments are expected to cost $187,016. A more significant tax increase is being avoided by a 5100,252 increase in LGA and a $210,520 increase in the PILOT. Council Member Lofdahl suggested considering Option 94, with a 5% levy increase, for the preliminary budget in case the health insurance costs come in higher than budgeted. Again, the levy can always be decreased before final adoption. Council Member Cook suggested perhaps delaying hiring the new positions until later in 2018, however that will still impact the budget and the levy down the road. He also suggested perhaps shifting some of the LGA, especially if a 5% tax levy is considered. Formal action of the preliminary budget will be taken at the September 26, 2017, Council meeting. Mr. Jaunich noted he will bring two options forward for the Council to consider. 3. Adjournment Motion by Cook, second by Czmowski, to adjourn the workshop at 5:10 p.m. Motion carried unanimously. ATTEST: Gary T. Forcier Mayor Matthew Jaunich City Administrator