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HomeMy WebLinkAbout3.B. Discussion of Shakopee Budget 3.b. CITY OF SHAXOPEE Memorandum TO: Mayor and Council Mark McNeill, City Administrator FROM: Gregg Voxland, Finance Director SUBJ: 2010 Budget Items DATE: February 6, 2009 Introduction Staff requests that Council set some parameters for development of the 2010 budget. Attached are financial policies from the 2009 budget document. The one's pertinent to the discussion are marked for council and staff to keep in mind during the budget process. The questions listed below for discussion are items that typically arise during the budget process and most impact more than one division and/or fund. From a policy standpoint, how does Council want to proceed on these items so staff can start assembling 2010 budget numbers? Background TAX LEVY. Property values have decreased and there is reduced new construction, unemployment is increasing and poor economic conditions persist. The debt service levy should remain about the same. Does Council want to decrease, freeze or increase the operating tax levy? EQUIPMENT IS FUND. For the 2009 budget, council reduced the money going into the fund by $200,000. This was based on the projection of fund status after the removal of additional equipment needed to serve the growth of' the city. Funding level is close to the target level. Council could consider another $100,000 reduction. Does Council want to decrease the charges for the Equipment IS Fund? BUILDING IS FUND. This fund was started in 1998. Its purpose is to accumulate funds to pay for replacement, construction/alteration, maintenance for the lack of which would make the building unusable for its intended purpose, or significant energy savings projects. The 2009 budget has a funding level of $1,079,680. This fund paid for the aquatic building and water slide replacement. The Public Works building bonds are being paid for from this fund. There is currently about $1.78 million in the fund while there should be more than $6M. The next building project scheduled is a fire ,t . .,. .. station. Council will probably need to issue bonds to pay for the project. Does Council want to decrease, freeze or increase the charges for the Building IS Fund? PARK ASSET IS FUND. This fund was just started in 2008. Its purpose is to accumulate funds to pay for replacement of park assets. 2009 funding level is $71,680 while closer to $350,000 is needed to fund future replacements. The Park Reserve funds will not have adequate funding to pay for replacement of assets and bonding generally would require voter approval. Council should consider an increase of $100,000 in conjunction with the equipment rent decrease. Does Council want to decrease, freeze or increase the charges for the Park IS Fund? UMBRELLA LIABILITY INSURANCE. The premium for this coverage is $63,748 of which $45,545 is the city's share. The limit of liability for the basic insurance has increased from $1,000,000 to $1,500,000 over the past couple of years to match the liability limit set by statute. There was a bill introduced in the legislature to remove the liability limit. The city has had this coverage for the past couple of years - does council want to keep it? Dqes Council want to drop the umbrella liability insurance? PARK PROPERTY INSURANCE. This covers items "in the open" such as fencing, playground equipment, shelters, lighting, etc. For this "property in the open", not including the warming houses or rest rooms, the insured value is $1,378,000 and the premium is $14,300. Does Council want to continue to insure these items given the individual value of most items and the level of risk of damage? Once the Park Asset Fund has sufficient funding, Council could self insure these items. Does Council want to drop the park property insurance? PAVEMENT PRESERVATION. The city has an active pavement preservation program in place to preserve the investment in and maximize the life of the roads. The current funding level is slightly below the optimum level. Does Council want to decrease, freeze or increase the expenditures for pavement preservation? Gregg voxland Finance Director H,\Finance\budgetlO\parameters CITY OF SHAKOPEE FINANCIAL MANAGEMENTP;OLlCIES The City of Shakopee has an important responsibility to its citizens to plan the adequate funding of services desired by the public, including the provision and maintenance of public facilities, to manage municipal finances and resources wisely, and to carefully account for public funds. The City strives to ensure that it is capable of adequately funding and providing local government services needed by the community. The City will maintain or improve its infrastructure on a systematic basis to maintain quality neighborhoods. These policies provide the framework for fiscal management and guide the decision making process. The policies operate independently of changing circumstances and conditions. Objectives -? 1. To protect the Council's policy-making ability by ensuring that important decisions are not controlled by financial problems or emergencies. 2. To enhance the Council's policy-making ability by providing accurate information on the cost of various authority or service levels. 3. To assist sound management of the City government by providing accurate and timely information on financial condition. --7 4. To provide sound principles to guide the important decisions of the Council and of management which have significant fiscal impact. 5. To set forth operational principals which minimize the cost of local government, to the extent consistent with services desired by the public, and which minimize financial risk. 6. To employ revenue policies and forecasting tools to prevent undue or unbalanced reliance on certain revenues, especially property taxes, which distribute the cost of municipal services fairly, and which provide adequate funds to operate desired programs. '7' 7. To provide essential public facilities and prevent deterioration ofthe City's infrastructure including its various facilities. 8. To protect and enhance the City's credit rating and prevent default on any municipal debts. 9. Ensure the legal use and protection of all City funds through a good system of financial and accounting controls. "7 10. Manage risk through loss awareness, loss prevention, loss control and loss financing. Operating Budget Policy The operating budget policies ensure that the City's annual operating expenditures are consistent with past expenditures and respond to long-term objectives rather than short-term benefits. The policies allow the City to maintain a stable level of service, expenditures and tax levies over time. These policies are most critical to programs funded with property tax revenue because accommodating large fluctuations in this revenue source can be difficult. 1. The City will adopt a balanced operating budget for the General Fund with current revenues equal or greater than current expenditures. It is not the policy to finance ongoing operations with one-time revenues or fund balance. One time revenues and fund balance will only be used for one- time expenditures. 2. The City will not budget to accrue future revenues. 3. An objective analytical process will be used to forecast revenues. 4. Opportunities for other revenue sources will be explored to reduce property tax levels. 7 s. The City will avoid postponing expenditures and provide for the adequate maintenance, replacement and improvement ofthe City's physical assets in order to protect the capital investment and minimize future maintenance and replacement costs. 4 6. To protect against unforeseen events, the City will budget a contingency and maintain fund balances according to the City's policies. 7. The City will apportion its administrative and general government costs to all its funds as appropriate and practical. 8. The City staff will monitor revenues and expenditures to adhere to their budgeted amounts. Monthly reports comparing budget with revenues and expenditures will be prepared. Line items within a division may be over spent as long as the total division budget is not over spent. ~ 9. Appropriations will be included in the operating budgets to keep internal service fund resources at an appropriate level. 10. Appropriations lapse at year end. REVENUE AND EXPENDITURE POLICY The revenue policy is desig~ed to ensure; 1) diversified and stable revenue sources, 2) adequate long-term funding by using specific revenue sources to fund related programs and services, and 3) funding levels to accommodate needed City services and programs equitably. 1. The City will provide long-term financial stability through sound short and long term financial planning. The City will maintain a diversified and stable revenue system in order to avoid short-term fluctuations in a single revenue source. 2. The City will conservatively estimate its annual revenues. All existing and potential revenue sources will be re-examined annually. 3. The City will use one-time or special purpose revenue for capital expenditures or for expenditures required by the revenue, and not to subsidize recurring personnel, operation and maintenance costs. 4. The City will establish all fees and charges at a level related to the cost of providing the services, or as adjusted for particular program goals. The City will review the full cost of activities supported by fees and charges to identify the impact of inflation and other cost increases and will review these fees and charges along with resulting net property tax costs with the Council at budget time. S. The City will seek a balanced tax base through support of a sound mix of residential, commercial, and industrial development. 6. The City will set enterprise fund fees at a level that fully supports the total direct and indirect cost of the activity (net of any grants or similar revenues), including depreciation of capital assets and debt service, to maintain a positive cash flow and provide adequate working capital. Replacement (or bonding for replacement) of enterprise infrastructure will be paid for from accumulated (or annual) earnings of the particular fund. ~ 7. The City will offset reduced revenues with reduced expenditures. 8. The City will budget for 98% of the tax levy to allow for delinquencies and adjustments. 9. The City will avoid nuisance charges as a revenue source. 10. Department heads are responsible to monitor their respective budget and control spending so that the budget is not exceeded. Expenditures over $15,000 will have prior council approval. Any unauthorized expenditure or exceeding the budget shall be a personal obligation of the person incurring the obligation.