ITEM 2 Budget meeting #4
City of Otsego│13400 90th Street NE, Otsego, MN 55330│Tel. (763) 441-4414 Fax (763) 441-9163
TO: Mayor and City Council
FROM: Adam Flaherty, City Administrator & Finance Director
DATE: July 30, 2018
SUBJECT: Budget Meeting #4
On Monday, Council and staff will begin reviewing the draft 2019 General Fund budget, which was
distributed to the Council on July 23rd. The draft budget is developed using a combination of
historical data and future projections based on anticipated operations for 2019. Each department
was responsible for submitting their respective budget requests. The City Administrator / Finance
Director held meetings with each respective department staff to thoroughly review the requested
budget prior to being included in the draft budget document.
There have been three special meetings scheduled for budget and tax levy review. Please note that
staff is seeking Council input during these budget review meetings in order to effectively and
efficiently move the budgeting process forward. These review meetings lead into September, where
the Council will need to adopt the preliminary property tax levy, which is the maximum amount the
City can levy for taxes payable 2019. This action will take place at a regular Council meeting, either
on the 10th or the 24th of September, depending upon Council direction.
I have developed an outline of discussion topics below.
Property Tax Levy
The Council and staff reviewed the debt service, tax abatements and capital reserve components of
the property tax levy during two June special City Council budget meetings. Attached with the
packet for this meeting, is an updated summary. Staff will review and explain any changes that have
occurred since the June reviews. Staff would be seeking Council consensus at each meeting
regarding the direction of the preliminary property tax levy amount.
Confirm Assumptions
The draft budget document assumes a 2.50% cost of living adjustment to the City’s pay plan for
2019. This assumption was reviewed at previous budget meetings and the Council concurred on
May 29th to include this assumption for the budget review process.
City of Otsego│13400 90th Street NE, Otsego, MN 55330│Tel. (763) 441-4414 Fax (763) 441-9163
Fund Summary
The draft budget is being presented as a balanced budget, with both revenues and expenditures
totaling $5,823,345, which is an 8.28% increase from the prior year.
The unassigned fund balance from year-end 2017 is $3,368,191, or 58% of the draft general fund
budget for 2019. The City’s fund balance policy outlines that the ending fund balance in the General
Fund should be 45% of the subsequent years budget. The policy further outlines that any balance in
excess of the defined 45% minimum, can be transferred to a capital reserve fund at the Council’s
discretion. This transfer calculated to be $948,076 and was approved by the City Council on June
11th.
The new net fund balance after the transfer is $2,420,115, or 42% of the draft general fund budget
for 2019. Analysis of year-to-date information for 2018 indicates that revenues will exceed
expenditures, and that an increase in fund balance is expected.
Revenues
The primary source of revenue within the General fund is property tax dollars which accounts for
72% of budgeted revenues. An increase of $235,000 (5.90%) in property tax levy is being proposed
within the draft budget.
License and permit revenue is being increased $125,788 (14%), and Charges for Services are being
increased $51,245 (46%) within the draft budget. These increases are to better align the revenue
budgets with prior year actuals and current year-to-date amounts. These two categories are very
dependent upon development activity, which is expected to continue in 2019.
The remaining revenue source budgets are consistent with prior years.
Expenditures
Total expenditures within the draft budget increased $445,311 (8.28%) from the prior year budget.
Operations and expenditures of the General fund are broken down into five functions:
- The General Government function budget is largely the same, increasing $10,789 (1%).
- The Public Safety function had the largest increase, $242,971 (11%), and is spread among
police services, fire protection and building inspections.
- The Public Works function budget increased $102,851 (9%) and is mostly driven by the
proposed addition of a street maintenance position.
- The Culture & Recreation function budget increased $90,300 (15%) and is mostly driven by
the proposed addition of a parks maintenance position.
- The Economic Development function budget is largely the same, decreasing by $1,600
(1%).
Attached with the packet for this meeting is a proposed schedule to review each of the department
budgets over the course of the three scheduled budget review meetings.
Materials Attached for Discussion
1) Property Tax Levy Summary
2) Department Expenditure Review Schedule
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