HomeMy WebLinkAbout13.F.3. Set Budget Work Session for May 29, 2008 i 3. 3 -
CITY OF SHAKOPEE
Memorandum
TO: Mayor and Council
Mark McNeill, City Administrator
FROM: Gregg Voxland, Finance Director
SUBJ: Budget Work Session 5/29/08
DATE: May 8, 2008
Introduction & Background
Council is requested to consider scheduling a work session for May 29th
to discuss 2009 budget priorities and guidance for staff in preparing
the 2009 budget requests.
Springsted was contacted to see what services they could provide in
facilitating the meeting and prioritizing services. Conceptually, it
was envisioned something like electronic voting by participants to
prioritize services/budget. Attached is the response which is a more
comprehensive approach to long term financial planning than just
prioritizing services. Staff will clarify this before 5/20.
Action
Move to set a work session for May 29th, 2008 at 7:00 PM.
Give staff direction on using Springsted or another facilitator for the
meeting of 5/29/08.
Gr~oxland
Finance Director
H:\Finance\docs\
Springsted fncorparated '
380 Jackson Street, Suite 300
Saint Paul, ~1N 55101-2887
1" 1 S Teo: 851.223.300fl
Fax: 65 1.223.3002
www.springsted.cam
LETTER OF TRANSMITTAL
May 15, 2008
Mr. Gregg Voxland, Finance Director
City of Shakopee
129 South Holmes Street
Shakopee, Minnesota 55379-1376
Re: Work Plan for Proposed Long Term Structural Budget Balance
Dear Mr. Voxland:
From our discussion, we have prepared a draft Work Plan for a City process to develop a dynamic plan
for long-term operating budget sustainability. The draft Work Plan reflects our discussion and is put forth
in order for the City to gain an appreciation for the steps involved to develop such a plan, and to comment
on what approach is the best for the City of Shakopee. Springsted anticipates this plan would be
`dynamic,' in that at its conclusion the City would have a computer model to conduct its own future
analyses as facts become known over time and the plan must be adaptable to future conditions.
We hope and expect the City will modify our draft Work Plan to ensure what we interpreted from our
discussion is adjusted to exactly meet the City's expected result. A cost estimate has not been provided at
this point, but will be developed after the City has reviewed and changed the draft Work Plan.
We would then provide a cost proposal which is a platform to reach a mutually agreeable final pricing.
Springsted has a long history of working with the City on some of its most challenging issues.
As always, we are prepared to assist the City in anyway possible in this endeavor.
We appreciate the opportunity to again be of service to the City of Shakopee.
Respectfully, !7~~ k
David N. MacGillivray, Chairman
Client Representative
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Attachment
P!~b?ir Sector Advisors
City of Shakopee, Minnesota
Proposal for Long-Term Structural Budget Balance Process
Objective The City wants to develop a plan for long-term operating budget sustainability.
Introduction Given the City's request we assume if current trends continue the operating
budget situation will lead to some or all of the following: disruptions in the
provision of services, unacceptable tax impacts, and reductions in the City's
overall financial position.
The operating budget is an implementation document for decisions on services,
revenue sources and positioning the City for the future. sustainability is the
proper mix over time of revenues and expenditures to provide appropriate
services with stability in property tax impacts and adequate levels of fund
balances. Along-term plan must bring together quantifiable and subjective
components: financial components, service definition components, and
governance -management components. It is the interaction of these three types
of components which results in ongoing budget positioning.
To get to a plan each of the three types of components must be brought into
the process.
It requires:
1. Policy makers and management to gain consensus as to if a problem
exists, its relative degree of magnitude, and a willingness to make the
decisions to address the problem.
2. Analysis to provide easily understandable financial impacts of the overall
budget, specific service funding requirements, future financial exposures
and the trade-offs of decisions.
3. Flexible plan that the City can use moving forward as facts evolve and
differ from the current expected future conditions.
4. A framework and tools for decision-making to that the City can see how
exercising current options now lead to varying future results.
5. An implementation and monitoring program providing initial steps and
then an easy way to adapt the plan as conditions change.
Springsted can participate in all or just some of these steps as conditions and
other City resources dictate. Our goal is to assist the City in this process where
we can complement the City's task in addressing the objective.
This work plan shou}d be viewed as preliminary for the City's review and
consideration. If the City decides to proceed we would first meet with the City
to listen to their objectives and ideas as to approach. After that meeting we
would refine our work plan and provide the City with a cost proposal. The cost
proposal would be discussed to reach a mutually agreed upon conclusion.
i° ~ ~5 City of Shakopee, Minnesota. Proposal to Provide along-Term Structural Budget Ba{ance Process
2
Approach and Methodology Springsted Incorporated will work with the City to develop along-term
sustainable funding plan that will address the City's expected ongoing
operating and maintenance expenses, profile revenue sources, and provide
sufficient reserves to withstand major revenue fluctuations in order to ensure
continuation of city services during economic downturns. In addition, the
long-term financial plan will enable the City to better establish processes to
understand the financial implications before decisions are made and to
recognize and disclose fiscal impacts.
This plan will be for the property tax supported operating funds only, at
minimum the General Fund and those funds relating to municipal services
exclusive of the enterprise funds. We make this distinction based on a
preliminary discussion with the City. We are capable of expanding this
process to other operating funds and to the capital and debt areas at
the City's direction.
The approach and process Springsted would use in assisting the City in
the development of a long-term sustainable funding plan is as follows.
Long-Term Sustainable Task I: Meet with City elected officials and senior management staff
Funding Plan Process to discuss objectives, areas of concern and willingness to address
the problem, if there is consensus that a problem exists now or in
the immediate future.
Task II: Review Background Information and Develop Work Plan
• Research the City's current fiscal status and environment, budgeting
methods, revenue sources/trends, expenditure allocations/trends, and
financial environment including, but not limited to:
0 2008 Adopted Operating Budget
0 2007 actual revenues and expenditures
0 2004, 2005, and 2006 Comprehensive Annual
o Financial Reports
o City's O.P.E.B. liability
o City Labor Contracts
0 2008 Fees and Charges
o Review historical trends in housing unit development
o Review historical information related to the growth in
the City's tax base
o Review growth assumptions
o Review the City's current development related fees
o Review any current performance measurement data
o Review and current level of service standards
o Review overhead charges
o Inter fund charges
City of Shakopee, Minnesota. Proposal to Provide along-Term Stmctural Budget Balance Process
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o Payments-in-lieu of taxes
o Review current debt management policies
o Review current fiscal policies
o Review current credit rating indicators and their historical trends
o Review the City's Comprehensive Plan
o Review the City's Strategic Plan
o Review any previous studies relevant to the development of the long-
term sustainable funding plan
o Review recent citizen surveys
• Develop historical trends for revenues, expenditures, employees, use of
debt financing, changes in the tax base, and other relevant baseline data
o Revenue per capita
o Revenue growth rates
o Revenue sources and composition
o Levels of inter fund dependency
o Unfunded or under-funded liabilities
o User charge coverage
o Use of debt
o Expenditures per capita
o Expenditure growth rates
¦ Salaries/benefits
¦ Operating
¦ Capital
¦ Debt service
o Operating expenditures over total expenditures
o Fund balances
o Cost structure
o Types of services
¦ Hard mandates
¦ Soft Mandates
¦ Discretionary
• Meet with City to discuss and review background information and
historical trends
Task III: Review Services and Revenue Sources
• Conduct a series of two workshops with the City to discuss and review
current City services and revenue sources
o Review and discuss of current City services
¦ Number and type of services
¦ Current service Level standards
¦ Current service delivery models
¦ Existing excess or deficit service capacity
¦ Expenditure controls/shifts
¦ Future service level preferences, policies, and delivery models
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¦ Priority ranking of services
o Review and discuss current revenue sources
¦ Current revenue sources
¦ New/increased revenue sources
¦ Revenue enhancement
¦ Priority ranking of revenue sources
¦ (Springsted has a variety of resources in facilitating prioritization of
services, revenue source alternatives, and goals.)
Task IV: Develop Short-Term and Long-Term Strategies
• Conduct a workshop with the City to discuss and review short-term and
long-term strategies to achieve along-term sustainable funding plan
including, but not limited to:
o Number and type of services
o Service delivery models
o Service level standards
o Priority ranking of services
o Revenue sources
o Revenue enhancements
o Priority ranking of revenue sources
• Review each strategy against generally accepted practices and principles
of local government operations. This process will include
"brainstorming" sessions among our team to take full advantage of
the experience and perspective of each consultant.
o We will develop a schedule of the various long-term sustainable
funding strategies that will include
• Priority ranking
¦ Description of the strategy and its rationale
¦ Projected service level impacts
¦ Projected fiscal impact
¦ Potential credit rating impacts
¦ Implementation barriers
• Meet with City in a workshop sessions to review and discuss our analysis
and evaluation of the long-term sustainable funding strategies
Task V: Develop Preliminary Financial Forecast
• Using the short-term and long-term strategies developed in Task IV we
will develop a preliminary financial forecast that meets the goals and
objectives of the short-term and long-term strategies
• Meet with the City in a workshop session to review the long-term
financial forecast
o Review the preliminary financial forecast for each fund
o Discuss the impacts of the preliminary financial forecast
o Review the impact of the short-term and long-Term strategies on the
financial forecast
f ' City of Shakopee, Minnesota. Proposal to Provide along-Term Structural Budget Balance Process
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¦ Discuss the need for any adjustments to the short-term and long-
term financial. strategies based on their financial impacts
o Discuss the sensitivity of the assumptions
Task VI: Develop Final Financial Forecast
• Incorporate the results of the workshop in Task V to develop the Final
Financial Forecast
• Springsted will prepare a Final Report that will contain the Financial
Forecast as developed with the City.
• We will provide 20 bound copies of the final report to the City for
distribution as appropriate. In addition, we will provide one electronic
copy in PDF format.
• We will Present the final report to the City Council in a workshop session
• If necessary work with City elected officials and senior management on
initial implementation.
COnCluSiOn As discussed in the introduction this process brings together three components.
This process is only in part a financial process, because at its core is a
governance and organizational process driven by economic conditions.
Springsted has been successful with other entities in going through this process
in part because we bring specialized Practice Groups in Organizational
Management and Financing Planning. These Practice Groups provide
complementary skills in facilitating the organizational topics with the potential
future financial outcomes.
We have a long history on working with the City through many of its most
challenging issues. We have an appreciation for the history and culture of the
City of Shakopee. We have an extensive knowledge of working with local
governments on many similar exercises.
If the City would like to proceed with a process for long-term operating
budget sustainability, we will adapt our approach and cost to best fit
the City's objectives.
~ ~ ~ City of Shakopee, Minnesota. Proposal to Provide along-Term Structural Budget Balance Process