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HomeMy WebLinkAboutSeptember 13, 2016 To: Mayor and City Council From: Darin Nelson, Finance Director cc: Bill Reynolds, City Administrator Date: September 9, 2016 Re: Preliminary Levy and Budget Background Eachyear the city must prepare a budget and property tax levy for the following year. Staff has been analyzing revenue, expenditure information and initiatives in order to prepare a preliminary budget and levy for your consideration. Earlier this summer, staff kicked off the 2017 budget process by reviewing with Council a preliminary Capital Improvement Plan for 2017-2021. An updated final version will be presented to Council later this fall. Just as Administrator Reynolds has been reiterating over the past year, the budget process will experience significant changes over the course of the next couple years in order to provide complete transparency and accountability for city-wide operations and to ensure future sustainability. Not all the changes will happen this year, but there are some changes taking place this year to better position ourselves for future changes. For example, the budget calendar has been modified to condense the budget process and move it closer to yearend. In the past, the detail budget document has been completed in the summer, which makes forecasting difficult since the new year is six months away. Also this year, departments were tasked with estimating their own revenues. In the past, revenue estimates were mainly derived from the finance department. Finance did assist with the process this year, but each department took ownership in estimating revenue projections. Individual departments have a better sense of future revenues, compared to finance estimating revenues based off of historical information. This change will help ensure revenue are more accurately estimated in the future. To put this budget in context, we have lots to be thankful for. The city continues to grow with construction permits strong. Our tax capacity is high in comparison to our tax levy. We have some flexibility in our overall budget due to past variances (the differences between revenue and expenditures). And we have had completed several bond initiatives. COMMUNITY PRIDE SINCE 1857 129 Holmes Street South · Shakopee, Minnesota · 55379-1351 · 952-233-9300 · FAX 952-233-3801 · www.ShakopeeMN.gov That does not mean that we do not have significant challenges this year. With the stalling of our annexation discussions with Jackson Township, we can expect a future lull in growth. The effect of the school district tax increase was more than many of our citizens anticipated leading to some distrust of what we will bring to the table this year. The filling of many of our open positions and the tightening of our budget will decrease future options as we decrease variances. We have a sizable bond for $29.5 million added to our balance sheet. And finally, we have significant operational expense increases ahead for the community center (pool and employees). Schedule for budget and property tax levy development DateWhoWhat July 25, 2016Council/StaffPreliminary CIP Review September 13, 2016Council/StaffReview Maximum Levy, review initiatives and requests September 20, 2016CouncilAdopt proposed maximum tax September 30, 2106StaffCertify maximum tax levy to the County which will be used for proposed property tax notices NovemberCountyProposed tax notices sent to owners NovemberCouncil/StaffWork session to review budget document December 6, 2016CouncilHold public meeting to discuss levy and budget December 20, 2016CouncilAdopt final tax levy and budget December 29, 2016StaffCertify final tax levy and budget to County and State Budget Impact Issues Wages and benefits Union contracts expire on December 31, 2016. The preliminary budget has been built with an assumption of a 3 percent increase in wages. Comparable cities are indicating that cost of living adjustments are averaging closer to 2.50 to 2.75 percent. Union negotiations are likely to begin later this fall. The General Fund impact of a 3 percent COLA is approximately $387,000 Health insurance has been budgetedat a 10 percent increase. Actual renewal rates will be known later this fall. The city did experience a reduction in health insurance last year. A ten percent increase in health insurance is approximately $86,000. No other benefit changes are anticipated or legislated for the upcoming year. Four new staff positions have been requested for 2017, one by the Police Department and three by the Parks and Recreation Department. The three new positions requested by Parks and Recreation are due to the expansion of the community center and ice arena. Department directors will be available at the budget work session to discuss in further detail. Below is breakdown of the budget impact for 2017. COMMUNITY PRIDE SINCE 1857 129 Holmes Street South · Shakopee, Minnesota · 55379-1351 · 952-233-9300 · FAX 952-233-3801 · www.ci.shakopee.mn.us Total 2017 Estimated Wages and DeptTitle/ DescriptionStart DateBenefits 3/1/2017$ 55,925.66 PoliceInvestigative Aide/Crime Analyst 6/1/2017 29,255.38 RecFacilities Manager 1/1/2017 49,317.35 Rec FacilitiesArena Lead Worker 1/1/2017 49,317.35 Rec FacilitiesArena Lead Worker Total New Positions:$ 183,815.74 Internal Charges As was discussed at the CIP work session in July, staff is proposing restoring building, park, and fleet rents to full funding. Rents were decreased by 20 percent back in 2014. There is a need to restore the rents to full funding in order to ensure long-term financial sustainability. The rent reduction doesn’t have an immediate impact on sustainability, but over the long-term financing becomes problematic. Restoring rents to full funding and accounting for new equipment and buildings has a $663,000 budget impact to the General Fund. Other Services & Charges Other than personnel, internal charges, and liability insurance departments within the General Fund will be held to a zero percent increase on all other line items within their department/division budgets. Economic Development Authority An appropriation of $500,000 for the downtown has been included in the budget. 2017 is the third year of the originally anticipated transfer of $2 million over the course of four years. The exterior grant program has a balance of $264,000 as of August 31, 2016. Rather than transfer an additional $200,000 to this program from the General Fund, staff is allocating $130,000 from the Revolving Loan Fund that has been inactive for the last several years. There is approximately $260,000 in this fund. This fund wascreated with a transfer of $100,000 from the EDA fund back in 2004. Interest of $60,000 and the repayment of DEED loan accounts for the remaining $100,000. It’s been determined that half of the $260,000 in cash belongs to DEED and the other half belongsto the City/EDA. Since the exterior grant program has a substantial beginning balance, the $130,000 transfer should be sufficient for funding needs over the next year. A topic worth discussing between now and this time next year is the implementation of a dedicated EDA levy. EDA’s have the statutory authority to levy a small percentage (up to 0.01813%) of the city’s estimated market value, which for 2017 would have been a maximum of $697,000. The levy cap is a maximum levy; EDA’s/City Council have theability to set the levy at any amount up to this cap. We cannot implement an EDA levy this year, but for next year this may be an opportunity for us to be more transparent on where tax dollars are being dedicated. COMMUNITY PRIDE SINCE 1857 129 Holmes Street South · Shakopee, Minnesota · 55379-1351 · 952-233-9300 · FAX 952-233-3801 · www.ci.shakopee.mn.us Debt Service The issuance of communitycenter/ice arena tax abatement bonds in January of this year does have a substantial impact on the levy. Debt service payments are approximately $2.1 million annually. Due to available fund balances in existing debt service funds and the structuring of the tax abatement bonds, the annual impact of all existing debt service funds will hold steady at about $2.1 million annually. Staff th will need the Council to approve debt service reduction resolutions on September 20. A breakdown and comparison of the individual debt levies can be viewed on the next page. Levy Request & Impact Staff is recommending an overall 7.47% levy increase or an increase of $1,316,146. The breakdown and comparison to the 2016 levy is a follows: City of Shakopee Preliminary Levy Analysis September 13, 2016 2016 Final2017 ProposedVariance% Variance General Fund$16,825,900$ 16,175,900$ (650,000)-3.86% Abatements Emerson 52,400 Datacard 35,900 Shutterfly 86,615 Total Abatements 174,915 174,915100.00% Capital Improvement Fund 1,300,000 Less Franchise Fee Revenue (915,000) Total Capital Improvement Levy 385,000 385,000100.00% Debt Service 2004 B 238,027 - 2006 B 315,390 - 2007 B Improve 94,992 92,471 2008 A Improve - 148,800 2010 A Improve 88,500 107,145 2012 A Refunding 47,386 - 2016 Abatement - 1,842,110 Total Debt Service 784,295 2,190,526 1,406,231179.30% Total Levy$17,610,195$ 18,926,341$ 1,316,1467.47% COMMUNITY PRIDE SINCE 1857 129 Holmes Street South · Shakopee, Minnesota · 55379-1351 · 952-233-9300 · FAX 952-233-3801 · www.ci.shakopee.mn.us Items to note with the 2017 preliminary levy include: The Capital Improvement Fund now has a dedicated levy of $385,000. Franchise fee revenue is th estimated at $915,000, which is higher than anticipated after the September 6council meeting. Adjustments to the CIP will be made to account for the reduction in revenue. Staff is anticipating no changes to the levy amount dedicated to the Capital Improvement Fund. Abatement levies have been isolated. In prior years, private development abatements have been included in the General Fundlevy. Isolating these abatements provides for increased transparency. Scott County has provided staff with tax impact estimates for residential homestead properties. Residential property values held virtually steady from January 1, 2015 to January 1, 2016. The value of an average market value home in Shakopee actually decreased slightly from $229,700 to $229,100. In the meantime, the City experienced an eight percent increase in tax capacity for taxes payable in 2017. This increased tax capacity will provide the average value home in Shakopee with a small reduction of $9.49 or 1.2 percent in city taxes. The chart below provides a comparison of the 2016 levy and the proposed preliminary 20176 levy for an average valued home. Avg Market Avg Market Taxable % NetNetNetNet ValueValueChange PayablePayableInc/DecDifference 2016201716 vs 172016201716 vs 17% Change Shakopee$ 229,700$229,100-0.31%$ 821.71$ 812.23$ (9.49)-1.2% Late this summer,staff did research to determine if the set of cities that Shakopee has considered comparable in the past were still comparable today. Shakopee has experienced significant growth over the past decade and has a large commercial and industrial base. A comparison of cities based on various attributes such as population, fiscal disparity contributions and net fiscal disparities, employees, and General Fund expenditures were analyzed to determine a set of comparable cities. Directors and key leaders reviewed the analytical results and narrowed the list to ten based off of subject understanding of comparable cities. Below is a comparison of the preliminary levy increases for this new set of comparable cities. It should be noted that Golden Valley’s preliminary levy includes funding for a bond issuance for the building of a $18.2 million community center. Although not in our list of comparable cities, I learned Chaska is estimating a 9% increase. COMMUNITY PRIDE SINCE 1857 129 Holmes Street South · Shakopee, Minnesota · 55379-1351 · 952-233-9300 · FAX 952-233-3801 · www.ci.shakopee.mn.us Lastly, it is always interesting to see the breakdown of a property tax statement and how tax dollars are distributed. Below is chart, based on an average valued home for taxes payable in 2016 within the Shakopee School District. A good rule of thumb is that the city, county and school typically account for about a third of the total tax bill. For average valued homes within the Shakopee School District that rule doesn’t necessarily hold true for 2016. Taxing districts included in the “Other” section include Scott County CDA, Mosquito Control, Metro Transit, Met Council, Watersheds, etc. COMMUNITY PRIDE SINCE 1857 129 Holmes Street South · Shakopee, Minnesota · 55379-1351 · 952-233-9300 · FAX 952-233-3801 · www.ci.shakopee.mn.us Summary Attached is a preliminary General Fund Summary Budget that includes all the items discussed above, including a tax levy of 7.47 percent. This preliminary budget has a deficit of $399,320. The 2016 budget utilizes $449,000 of fund balance in balancing thebudget. Utilizing fund balance for the 2017 budget is notrecommended due to the intentions of tightening the budget. In prior years, surpluses were able to cover any potential deficit, that will not be the case for 2017. COMMUNITY PRIDE SINCE 1857 129 Holmes Street South · Shakopee, Minnesota · 55379-1351 · 952-233-9300 · FAX 952-233-3801 · www.ci.shakopee.mn.us City of Shakopee AdditionalPersonnel Request 2017Budget Department: PolicePrepared by: Chief Tate One full-time, non-sworn staff Request for: (Police Investigative Assistant) Pay Grade Estimate: Grade 5 Date of Change: January 1, 2017 Description Details: The Police Investigative Assistant position request is made after careful consideration and an internal staffing needs assessment. This request ties directly to the City Council’s over-riding focus: Provide a quality of life for Shakopee residents by enhancing livability and provide no less than the highest levels of customer service. This position would perform administrative, clerical and analytical support services for the investigative division. In doing so, the position will work with investigators and other police and support staff membersto ensure an accurate, consistent and collaborative workflow process. The current investigations unit has four full-time investigators. They presently average 30 cases each. Traditionally, higher caseloads negatively impact case clearance ratesand quality of service. Additionally, because the caseload is so high, other duties in the department are either not completed timely or go unfinished. Cases are not being dealt with as quickly as they should be. To address our shortfall, the police department is requesting a full-time, non-sworn staff position to serve as an Investigative Assistant in 2017. Our initial assessment is that this position would be Grade 5 of the City’s current pay plan. This would result in a starting salary of approximately $52,322, plus benefits, and already assumes a 3% COLA for 2017. This position, if filled,will greatly enhance our services to the community in the following areas: -Frauds andfinancial crimes continue to increase and dominate officers’time. Frauds in Shakopee are up over 350 % in the last threeyears. Frauds are extremely time consuming and require extensive work tocomplete. Frauds also represent approximately half of all active cases assigned to patrol officersand over half of the active cases assigned to investigations. This position would assist in gathering evidence such as bank statements and draft subpoenas. Much of the paperwork collection and follow-up can be completed by non-sworn personnel. -Due to the large number of subpoenas our department generates, tracking becomes very important. It is our intent that this position will draft and track subpoenas to Facebook, Twitter, phone companies and banks,among others. We are finding that more and more of these cases are taking us out of state to track suspects and recover financial losses. Financial crimes are becoming increasingly more technology driven and complex. Many of these cases require an investigator to leave the city limits. -This position will also handle all evidence preservation letters, which are different than subpoenas. This person cango directly to locations to pick up evidence, such as surveillance videos, which is currently done by our CSO. This willfree up our CSO to conduct more code enforcement related activitywithin the city. Furthermore, this position will handle all follow-up on non-discoverablework products from the county attorneyaffecting the investigations unit. Often times this entails weighing narcotics or taking additional photos. -Our intent is to have this position go with investigators to search warrants and assist as a scribe, log in evidence, as well as take photos and help process crime scenes. Doing so will allow a patrol officer or CSO to attend to calls for service or other duties. The current Evidence Technician is part-time and cannot takeon these duties. -State laws have changedwhen it comes to what child protection issues get reported to police. This has caused a significant spike in calls for serviceand caseloads. We anticipate handling almost 450 more child protection notices this year alone. This position would conduct all initial screening of these notices and forward to the appropriate unit, such as a school resource officer or drug task force agent. -All forfeitures are currently handled by the patrol captain. This is very time consuming and a task that we would like to delegate to this position if filled. The Investigative Assistant would take over intake, inventory, notifications via certified mail, take pictures of contents and condition of the vehicle, handle follow-up with the county attorney’s office,as well as manage all records for audits. Last year the department took in approximately 65 vehicles and successfully forfeited 56 of them. The amount of time the patrol captain spends on this is extensive and is better suited for a different position, freeing him up for other supervisory duties. -It is the intent that this position would take over and coordinatethe Automated Pawn System (APS) and pawn shop activity. We have not conducted an audit of our City’s pawn shops in at least 12 years. The Victim Services Coordinator was designated to take this on but the workload the position maintainsleft this task incomplete. In 2015, there were 15,268 pawn transactions in Shakopee. It is essential that we have better coordination and audits of those entities. -Another task that would shift from the Victim Services Coordinator to an Investigative Assistant would be the coordination of the City’s 77 registered predatory offenders. This task is not only a better fit with this positionbut will free up time for the Victim Services Coordinator to work more directly with our crime victims. There is no requirement to have a licensed police officer coordinate this task. The actual checks, which we do quarterly, will still be conducted by patrol staff. -The city continues to grow both in retail and population. Additional retail will increase our call load. The department already saw an increase of over 1,500 calls for service last year. We would use this position as a liaison with area loss prevention personnel and set up a city-wide group, coordinated by the Investigative Assistant. This person would also become our single point of contact for alarm notices. Demands on our department continue to grow both by Statute and by the City’s growth. The department has undergone several restructures over the last few years. We’ve gone from three full-time CSO’s to one CSO and one part-time Evidence Technician. The department added a civilian Crime Prevention Specialist, which put an officer back on the road. The department also hireda Victim Services Coordinator. The school district pays a portion of the threeSRO’s salary andall costs associated with the fourthSRO, which was added a little over a year ago. That addition was the first sworn officer increase since 2007. The department did cut twovacant sworn positions as part of the 2008 budget process. A current staffing analysis based on workload, not population,recommends the department have sixadditional sworn officers.Despite the staffing analysis showing the need for another sworn officer, we feel this service void can be filled better with a civilian staff member. No area of the police department has been more impacted by growth and technology than our investigations unit. An Investigative Assistant would providenecessary help to the overall operationsof the department,while not costing as much as a sworn officer.We believe this position, if filled, will greatly impact our fraud and financial crime investigations. The position follows best practices approaches and will greatly enhance our overall investigations unit.