HomeMy WebLinkAbout4. FY 2004 Budget
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CITY OF SHAKOPEE
Memorandum
TO: Mayor and City Council
FROM: Mark McNeill, City Administrator
SUBJECT: FY 04 Budget
DATE: June 10, 2003
INTRODUCTION:
The Council is asked to give general direction as to what staff should do while preparing
their requests for the FY 04 City operating budget.
BACKGROUND:
As part ofthe Legislative Conference Committee agreement between the House and
Senate late in the session, cities were given direction that there will be levy limits only
for 2004 (for cities over 2500 population), and that there would be no reverse referendum
proposal as had been offered in the Governor's original proposal.
Although the levy limits are in place only for 2004, they are very strict. The law allows
cities to replace up to 60% of the State Aids loss through taxes, or $429,000 ofthe
$715,000 in LGA and market value credit that Shakopee had been receiving. That is to
be added to the amount ofthe levy that was certified by the City in 2002. Note that it is
actual dollars, not the rate of taxation.
In addition, it excludes the traditional levy growth adjustments for inflation, household
growth, and commercial/industrial growth. This exclusion of growth factors from the
levy limit calculation will have a very negative impact on rapidly growing cities such as
Shakopee. (Whether this was intended by the Legislature or not, we do not know). In
other words, the City will have only $434,000 more in levied taxes (an increase of 5.8%)
for FY 04. The budget increase for taxes last year was 15%. The average annual
population growth since the 2000 census has been 5.8%. The General Fund expenditure
has increased 41 % over the same time frame (the majority of which has been do to
development-related fees).
IMPACT:
So that the Council and staffhave an understanding as to what the impact ofthis would
be, we have provided the following estimates as to what extra costs would normally be
expected between 2003 and 2004 for the General Fund only:
1. Salary Adjustments - Each 1 % increase for union and non-union employees
(including PERA, etc.) adds $52,000.
2. Employee Health Insurance Premiums - The City is fortunate in that it
actually received a slight decrease in health insurance premiums for FY 03.
However, ifFY 04 rates return to normal, it could mean $70,000 in additional
premiums (assuming a 15% increase).
3. Building rental/operating costs - FY 04 will have an entire year of the new
library and new police building to operate. Even though both buildings will
be under warranty through Fall, 2004, the added square footage will result in
at minimum larger utility bills and cleaning costs for the City.
In addition, based on the formula that has been used by the City to determine
building rental charges, the police and library buildings will add
approximately $300,000 for those rental charges alone.
The above are in addition to the normal inflationary adjustments needed in cost of doing
business.
OPTIONS:
The City will have its choice of a number of options, or combinations thereof; in order to
meet the budget constraints:
1. Cut services - Even if the City is able to retain the same number of
employees, by virtue of the fact that there will be more homes and businesses
to serve, there will be a reduction in the level of services. For example, it may
take longer to completely plow all the streets in the community; some
recreation programs may need to be cut; and some equipment not be able to be
replaced in the short term.
If the Council has preferences now as to how programs might be prioritized, it
should so indicate. Because building inspection and engineering can generate
revenues, it may not be cost effective to reduce those on an across the board
basis. There may be other programs or services that the City will have to
prioritize in terms of determining whether or not to fund.
2. Draw down fund balances -We believe that the City has done a good job of
providing for its finances -the City has consistently underspent the budget,
and because revenues have been relatively strong, we have been able to
increase the General Fund - Fund Balance, so that it now runs about 31.2% of
expenditures. 25% to 35% is the amount that Council has set for a target fund
balance and is a reasonable amount based on input from the State Auditor and
the City's auditor. Reducing it to 25% frees up $ 176,000 for use in the 2004
budget.
3. Scale back rentals and transfers to Building fund - Related to #2 above, the
City has tried to pay cash for large capital expenditures such as the library and
police building. Because payments for bond sales are outside of the levy
limits, and because it appears that the city can now issue bonds without a
referendum for specific purposes, the City could issue bonds for major
expenditures (for example, purchase ofthe existing SPUC building, or add to
the Public Works building or new city hall building). This specific language
ofthe law is summarized as "Includes authority for cities to establish a capital
improvement program and fund it with general obligation bonds. The bonds
can be issued without referendum but there is a reverse referendum
provision."
4. Increase reliance on development fees - Over the past three years, the City has
reduced its reliance on development fees (as a percentage of the overall
budget) from 33%, to 23%, to the current 18% for FY 03. By having more of
that be retained for general operating purposes, it would reduce reliance upon
the general tax levy. This is not advised as a long-term position but Council
may want to consider this for only a one-year patch.
5. Charge more fees for services - as part of the budget reduction discussion in
early 2003, some slight changes were made in fees. While it may be possible
to more adequately charge for plan review when dealing with developers, we
feel that other options to increase fees are limited. However, we will review,
and would welcome any suggestions by the Council.
SCHEDULE:
Based on the above information, we anticipate the following as the schedule for the
Council as it reviews the budget:
2004 BUDGET CALENDAR - TENTATIVE
Date Who What
June 16 Staff Budget request worksheets to departments
June 30 Council Joint meeting with Planning
Commission and Park Board for CIP
Discussion
July 14 Council CIP continued. 5 Year Equipment List
July 14 Staff Budget worksheets due back to
Finance from departments.
Aug 1 ? State Receive Local Government Aid state
aid figures.
Aug7 Council W orksession
Aug 14 Council W orksession
Aug 21 Council W orksession.
Aug 28 Council W orksession & meeting?
Adopt proposed maximum tax levy
Sept ? State Receive Homestead! Agricultural Aid
state aid figures.
County Receive tax capacity numbers (?)
Sept 2 Staff Certify maximum property tax levy
to county which will be used for
proposed property tax notices.
Oct 21 Council Public hearing at Reg. Council
Meeting to discuss Tax Rates.
Nov 1 County Proposed tax notices sent to
property owners
Dec 1 Council Hold actual property tax levy
hearing (date reserved for cities).
Dec 16 Council Adopt final tax levy and budget
Dec 29 Staff Certify final tax levy.
* Council can schedule additional dates for worksessions as needed.
RECOMMENDATION:
We ask that the Council give direction as to how it wishes to deal with the budget.
Overall options include:
. Have staff prepare the FY 04 budget, adding no staff positions, and not fill
currently vacant positions.
. Have departments reduce their 2002 budget by an "across the board" amount -
note that the 2003 reduction earlier this year already has gleaned many of the less
critical items.
. Give direction as to any programs that Council sees should be either exempted
from reduction, or eliminated at this time.
ACTION REQUIRED:
The Council should give direction as it sees fit on the FY 04 budget.
Mark McNeill
City Administrator
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CITY OF SHAKOPEE
Memorandum
TO: Scott County Commissioners
Scott County Administrator David Unmacht
Mayors and City Administrators/Managers
FROM: Mark McNeill, City Administrator
SUBJECT: Shakopee Budget Reduction
DATE: March 18, 2003
SUMMARY:
Shakopee received notice from the State Auditor that it will be losing 100% of its Local
Government Aid (LGA), and Market Value Credit Aid (MVC). The total amOlUlt of the
reduction is $652,471 for both 2003, and 2004.
Of a $10.9 million operating budget, this amolUlts to approximately 6% ofthe budget;
using the State Auditor's method of determining the aid reduction, the reduction amOlUlts
to 4.1 %.
PROCESS:
. The City anticipated full loss of the $165,000 in LGA, and did not figure that into
the FY 03 bu4get. Amount of $487,500.
. December 18th - Hiring freeze enacted. Staff recommends no COLA for non-
contract employees for 2003, until Legislative impacts known. Council adopts
1.5% increase.
. January 6th _13th - four meetings were held with City employees to review the
impact of the Governor's proposal, and to seek ideas as to help the City address
the shortfall.
. January 16th - Budget Reduction Workshop held by City C01UlCil; $551,000 in
cuts were tentatively approved, along with $128,500 in new revenues (including
$88,000 of a grant reimbursement which had not been factored into the FY 03
budget).
. February 4th - Council approves fully budgeted 3% increase for non-contract
employees.
. February lzth - Governor Pawlentyunveils his plan, and official notice of
Shakopee's aid reduction amount received in the days following.
. February 25th - Department heads met to review changes considered at January
16th workshop, and recommended the following changes to City Council:
Expenditure Reductions $498,000
Revenue Increases $128,500
Total $626,500
. March 4th - City Council considers formal adoption, and approves spending
reductions of $506,440, plus revenue increases $128,500, for a total of$634,940.
A summary of the changes approved by the Council are attached.
Note that the recommended budget reductions/increases exceed the $487,500 by
$147,500. This is to provide an additional cushion, as staff feels the MVC credit
reduction is based on tax capacity figures which are too low.
'lAAQ 1h\/JuiJ
Mark McNeill
City Administrator
M:tv1:th
FY 2003 Budget Reduction Options
Target--$652,471
Net Chng
Mayor and Council
Combine Hometown Messenger with P & R Catalog 4,400
Derby Days contribution 2,000
6400
Administration
City Admin salary step 1810
Website Material 400
Furniture 3,500
National Conference 1,500
Chamber Dues 80
7290
Legal
SJPA Savings 11,000
Specialized Legal Fees 10,000
21000
Government Buildings
Library Start Up Costs 3,000
3000
Natural Resources
Consulting fees 3,050
Lake monitoring program 1 ,400
Printing 1,000
National Conference 1,500
Travel 500
Dues 200
7650
Finance
Prof. Fees--Audit 3,000
Telephone 1,000
Expense Charge Back 8,000
PIT Wages Benefits 16,980
28980
Police
Drug Task Force 8,400
Delete 1 CD Siren 19,500
Provide New Officers Starting 4/1; 5/1; 7/1 111500
Travel 1,500
140900
Fire
Misc Equipment 15,000
Hurst Tool Equipment 15,300
30300
Public Works-Engineering
PT Wages 5,900
Supplies 5,000
Prof Services 8,000
Telephone 1,000
Rentals 2,000
21900
Public Works--Street
PT Wages 5,000
Prof Services 37,000
Pavement Preservation 30,000
72000
Public Works--Parks
PT Wages 5,000
Supplies 2,500
Pavement Preservation 10,000
Prof Services 7,000
Capital Expenditures (Tahpah Well) 15,000
39500
Public Works--Shop
Third Mechanic (Assumes seasonal all year) 25,000
25000
Comm Development:"-Plng and MIS
Supplies 8,000
Prof Services 1 0,000
Printing 2,000
Training 1,500
Dues 2,200
23700
Comm Development--Inspections
PT Wages 5,000
Supplies 13,000
Prof Services 8,000
Travel 2,000
28000
Parks and Recreation--Rec Fund
Utilities 15,000
CC Carpet/Lobby Furniture 9,500
Ice Arena Compressor and Boards 11 ,300
Travel 1,900
Education 3,000
Motor Fuels 1,000
Rec Supplies 1,000
Aquatic Center Opening Time delay 8,120
50820
Total 506,440
Revenue Increases
Reinspection Fees* 7500
Plan Review Fees Not currently Charged* 30000
School Resource Officer Grant 88000
Charge Sales Tax on Comm Center/Parks Sales 3000
*assumes 4/1 implementation date 128,500
Grand Total 634,940
Items Recommended for Cutting at January Workshop, but returned to FY'03 Budget:
Recognition Picnic/Employee Appre Lunch (Council) 1200
Oues--Coalition Utility Cities (Council) 3000
Staff Training (Administration) 5000
Electronic Imaging (City Clerk) 17000
Finance PT Wages 16980
Additional CO Siren (Police) 19500
Drug Task Force--from forfeitures (Police) 8400
Police Officer Hiring Delays 47930
Misc. Fire Equipment 15200
Haz-Mat Equipment 15000
Prof Services (Engineering) 8000
PT Wages (Parks) 5000
Prof Services (CO--Planning) 5000
Prof Services (CO--Inspections) 8255
Fitness Equipment (Parks) 2130
Total 177,595
Page 10f3
Mark McNeill
From: matthew lehman [MLEHMAN@mn.rr.com]
Sent: Thursday, July 03, 20038:17 PM
To: Wpmars@aol.com; terryjoos@hotmail.com; Joe
Cc: Mark McNeill
Subject: Fw: State Aid Cuts
please forward to clete. I wanted to refresh our memories during the upcoming budget session. I would caution
against expecting state money in the next few years.
----- Original Message -----
From: matthew lehman
To: terryjoos@hotmai/.com; JLHENT6@ATT.NET; Wpmars@aol.com
Sent: Thursday, February 20, 2003 1 :05 AM
Subject: Re: State Aid Cuts
I appreciate your fast response to the issue however, prong one is a non issue because we have done this
cut already for not only this year but years to come. Prong two has already been implimented with a new fee
schedule less than 2 months oJd,( we excepted this schedule understanding and thinking all maximun cuts where
coming). Prong 3, We asked dept. how to cut 6% from their budgets in previous open sessions, the response was
open and we all understood those impacts. Prong 4, surpluses are for a purpose and I will fight to maintain a
surplus.
I think you are over reacting to a situation that is not yet made in stone, let's see what the legislators do ,
understanding we already have a plan from the dept heads to cut all $650,000 if need be.
Do you really want my opinion on the worse case scenerio?
First things first, if it aint in the budget (considering the 6% cut exercise we have done) it cant happen without
some serious thought to financing it.
We need to consider a vehicle replacement policy, keeping a cop car one more year or a public works truck an
extra year will save serious dollars long term. we get nothing as it is when we auction the vehicles!
Let me rattle off and take what you will from it, we have most likely a levy limit placed apon us (cant raise taxes
above a mandate). We really dont wish to pass this dollar increase on to the taxpayers anyway do we, J don't!.
The first place I start (staff proposed cuts) and state mandates, I want all city supported state mandates cut and I
am willing to take the issue to court, (no funding, no city paid services). Lets face it, the state is asking us to
perform services at our expense, this should stop without state funding. (your state Rep.Mike Beard agrees with
me). We need to look at cuts as we have already and this it the best time in our cities history to define the
services the city should be providing to the taxpayers, I see the city no longer trimming trees unless its interfering
with a city fuction, its the property owner responsibilty, SPUC/CITY on power line issues. I hear terry and
bill talking fees but, we just raised fees, as I stated above, understanding state cuts where coming. Thats the easy
way out, it harms the average tax payer. lets look at what services we really should be providing, and at what
levels! I am not a fan of $1 million in tax dollars going to park and rec. for trails parks, open spaces, and reduced
fees for services.. I have a plan (we already have a plan) to deal with the full-state aid cut. my plan is long term,
Makes no tax increases (even with the state cuts) funds the existing capital improvement plans with little change.
Mr Mayor, Relax. J really appreciate your fast and sincere approuch to this issue but I see it as an opportunity on
many fronts to better Shakopee long-term. The issues we should be focused on are not our own state losses of
funds but, the fallout of other levels of government and their impacts apon us! We need to direct police to
prioritize services and public works to prioritize services, this stops the need for additional employees. We need to
decide if we want cops stopping crime or looking for code violations, (it needs to be done and enforced during
their free time). Parks should not be mowed until the grass level warrants a cutting. We need to stop the massive
tax dollars into the park and rec for services that cost us money, I am the liaison but, we need police and fire more
than some of the programs we offer that cost money to all tax payers regardless whether they use it or not, ( thats
a possible fee increase area). This is the time to reform government to spend the taxpayer dollars where they
want the dollars spent. My citizen chat on state cuts is about to come forward, I was waiting for the actual cuts to
come forward because now shakopee citizens will seek the opportunity to express input! There is no reason to
7/7/03
Page 20f3
panic, we have many many ways to make this shortfall without raising taxes, raising taxes is an option that is
limited with levy limits.
We could hibernate and do few projects this year and have staff do these projects in house with a limited
schedule for 2003-2004, jobs aint lost and we save funds, Tax base growth over 2-5 years, (this might take some
economic incentives to promote growth during the downturn in the economy) increasing tax base for services and
our tax overall tax capacity thus raising our levy limit. The budget is fine without state funds. Its clear that a
referendum is needed if we want a fire station this year or we wait a few years until the building fund builds back
up. All extras need to go out the window, if this is infact the final cuts( which they are not) the flower pots
downtown should be cut and any other small goodwill dollar amounts regardless of who. I hope we realize
that many of the services we provide are merely good gestures, either pay the tax or live without some fat
services. I am repeating myself but, this is a very good time to define the services the city provides with tax dollars
and what services we provide for a fee or cost usually less than the open market yet at a reduces cost to
the resident shopping for the same services. I look forward to talking further on this issue and I respectfully
disagree with portions of the Mayors position. I whole heartedly appreciate the intensions and see merit to many
suggestions, I think a better approuch is a council as a whole workshop to best decide the impacts and direction
in the best interest of the taxpayers of shakopee. I sincerely see this as an opportunity to look at the services we
provide, justify why we provide these services, and whether we should continue to provide these services. I am
open minded and taxpayer focused. I HAVE NOT HEARD OVER WHELMING SUPPORT FOR MASSIVE TAX
INCREASES!
I would also remind everyone that many times has the issue surfaced about using a very small percentage of park
dedication fees for park maintainance thus reducing the $1 million to park and rec. from the general fund, This is
all but a policy decision of council, that can be implimented at any percentage of total park dedication fees we see
fit. It can also be changed back by future councils..The developer seeking abatement (Albinson) Is the only known
opposition to a percentage of park dedication fees going to maintaining parks. Legal staff says it can be done.
We are in good shape and have many options available.. I stated a few and left many out as this letter is longer
than I wanted it to be!
Take care folks. Think small in taxes and large in ideas!!!
~---- Original Message -----
From: Wpmars@aol.com
To: MLEHMANaumn.rr.com ; JLHENT6@ATT.NET; terryioos@hotmail.com
Sent: Wednesday, February 19, 20032:40 PM
Subject: State Aid Cuts
Dear Fellow Council Members,
The Governor has spoken. Check out the city by city spreadsheet at www.lmnc.org. It shows that Shakopee
will be cut by 100% of LGA + MVHC.
It will be my proposal to take a 4 prong approach to this problem. I hope to gain your support for this.
Mayor's
Proposal: 1. Cut LGA for 03..... Done (165k)
2. Increase Rev's by 150k...... In progress (150k)
3. City Dept. Cuts 2 1/2%...... We talked about 6%. But we
need
not go this far Yet. Let Oept heads
cut where they know best. (275k)
4. Use City surplus.... About 200k. (200k)
Total Reduction and Savings = $790,000,00 which is equal to
about 7.2% of our overall budget of 10.9 million
This proposal will = a saving and reduction of about 790,000 for the year and will put us into a stronger position
going forward into 2004.
7/7/03
Page 3 of3
Also this proposal will use a combination of smart choices for us, one planning ahead (LGA), revenue increases,
mild Oept. cuts, and a small use of our projected surplus. I think this well balanced and a reasonable plan.
Thanks for your consideration in regard to this proposal.
Sincerely,
Bill Mars
7/7/03