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HomeMy WebLinkAbout2.C. FY 2004 Budget Directions - 4' 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 of the 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 commerciaVindustrial 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 staff have an understanding as to what the impact of this 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 detennine 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 Buildin~ 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 of the 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. Nov1 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 ofthe less critical items. . Give direction as to any programs that Council sees should be either exempted from reduction, or eliminated at this time. . ACTION REQillRED: The Council should give direction as it sees fit on the FY 04 budget. Mark McNeill City Administrator MM:th '2.oc/3 ~~~~~L ~ . CITY OF SHAKO PEE 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 Govenunent Aid (LGA), and Market Value Credit Aid (MVC). The total amount ofthe reduction is $652,471 for both 2003, and 2004. Of a $10.9 million operating budget, this amounts to approximately 6% ofthe budget; using the State Auditor's method of determining the aid reduction, the reduction amounts to 4.1 %. PROCESS: . The City anticipated full loss ofthe $165,000 in LGA, and did not figure that into the FY 03 budget. 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 Council; $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 1ih - Governor Pawlenty unveils 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. fLUu21L\llJuil Mark McNeill City Administrator MM: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 10,000 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 1 \ 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 Dues--Coalition Utility Cities (Council) 3000 Staff Training (Administration) 5000 Electronic Imaging (City Clerk) 17000 Finance PT Wages 16980 Additional CD 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 (CD--Planning) 5000 Prof Services (CD--Inspections) 8255 Fitness Equipment (Parks) 2130 Total 177 ,595 CITY OF SHAKOPEE MEMORANDUM To: Mayor and City Council Mark McNeill, City Administrator From: Mark Themig, Facilities and Recreation Director Josh Barrick, Ice Arena Supervisor Subject: Replacement of Ice Arena Compressor Date: June 9, 2003 INTRODUCTION Compressor B2 in the ice arena system failed on Sunday during startup from our annual summer shutdown. City Council is asked to affirm the replacement of a compressor, which staff ordered on June 9. BACKGROUND AND DISCUSSION One of four compressors in the arena refrigeration system failed this weekend during startup from our annual shutdown. According to Josh Barrick, Ice Arena Supervisor, the compressor piston cracked. The compressor that failed is one of two original compressors remaining in the system, and is no longer under warranty. As some of you may recall, we replaced two compressors during the summer of 2000. We believe all of the four original compressors have or will fail prematurely, primarily due to several years of inefficient cooling tower operation. (Continual calcium bUildup in the cooling tower from the City's water limited heat dissipation and caused the compressors to operate at higher head pressure and for more time then they would normally.) The City replaced the cooling tower in 2001 and installed additional water treatment, and the compressors are now operating more efficiently. All four compressors are needed in order to effectively make ice from shutdown, and we have ice rentals scheduled starting again on Sunday. Since our refrigeration technician who is most knowledgeable on this system will be out of the state on another job beginning June 11, moving ahead with replacement was critical. Therefore, we proceeded with replacement of this compressor after consultation with the City Administrator, and request that Council affirm the replacement. BUDGET IMPACT Cost for installation of the replacement compressor from Rink Tech, our refrigeration contractor, is $5,900. In the event one of our two remaining original compressors failed, we included $8,000 in our 2003 operating budget. However, these funds were cut as part of the budget reductions earlier this year. We will attempt to fund the expense from the Recreation Fund by identifying other possible reductions. As a backup, the Recreation Fund has a fund balance from 2002 of approximately $79,000 that Finance Director Gregg Vox/and indicated could be used. ACTION REQUESTED Move to affirm the replacement of compressor B2 at a cost of $5,900 by Rink Tech International, and fund this replacement from the Recreation Fund.