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Memo_2014 operating budgetsI CITY 0F 0 ot e MINNESOTA DATE: 9 January 2014 TO: Lori Johnson, city Administrator FROM: Dan Jordet, Administrative Services Director RE: 2014 operating Budgets Streets and Fleet Mana ement At the 9 December 2013 city council meeting the council requested additional information on the Streets budget for 2014 and the Fleet Management budget for 2014. Brad Belair has prepared detailed review of these divisions which are attached to this memorandum. They may be reviewed with the City council on Monday, 13 January 2014 prior to proposing a final 2014 operating budget for adoption. 2014 operating_ Budget for General Fund At the 9 December 2013 city council meeting, the council adopted a property tax levy for all purposes totaling $ 4,500,000. This levy included $ 23,000 of tax abatement, $ 475,285 of debt service levies, special fund reserve levies of $ 728,000 and a General Fund operating levy of $ 3,273,715. This final levy as adopted was $ 39,285 less than the preliminary levy adopted in September 2013. All of the reduction came from the General Fund levy. In order to rebalance revenues and expenditures in the General Fund staff followed a multi --step process to find expenditure reductions. First, budget administrators were requested to find reductions in line items that did not involve compensation or dedicated contractual services (such as engineering,. assessing and legal) equal to 5.0% of that amount. This would be the equivalent of about $ 55,000. The rationale of asking for 5.0% in recommendations was to allow choice among several alternatives to arrive at a net budget reduction that would meet financial goals but also provide for the best mix of services. Not all recommended or offered reductions were used in arriving at the final proposals. Next, the city Administrator and Administrative Services Director reviewed the lists and attempted to determine the reductions that would produce two different outcomes. The first outcome was simply to balance General Fund revenues to General Fund expenditures with no surplus budgeted. The second outcome was to reduce expenditures by an amount equal to the reduction in the property tax levy, $ 39,285. The steps taken to reach each of those outcomes are included on the sheet with the colored rectangles around sections of the spreadsheet. The pink rectangle at the top shows the originally presented revenue and expense scenario as was considered on 9 December 2013. It produced a surplus of $ 34,917 which was to be transferred to the debt service fund for the 2003A improvement Bonds. The red rectangle, second down, shows the result of the reduced levy adopted by the council. It reduces revenues to $ 4,044,812 with no change in expenditures. The result is a deficit of $ 4,308. This amount is, at a minimum, what would have to be reduced to reach a balanced budget. The yellow rectangle, third down on the page, indicates that the next step in the budget process was to take the $ 25,088 of expected sales tax exemption savings and spread it back across the expenditure budget against all of the individual accounts. An additional spreadsheet is attached showing how that $ 25,085 was distributed among the benefitting General Fund accounts. The blue rectangle addresses the first of two objectives. It reduces expenditures enough to bring the General Fund expenditures to the same level as General Fund revenues and balances the budget. In this scenario, it is implied that the surplus from the original proposal is applied to the property tax reduction. Any money transferred to debt service funds would have to be authorized at a later time and be taken from fund balance reserves. The consequences of the blue box reductions are less economic development marketing, postponement of some street sign replacements and a reduction in training for Administration. The green box, last box on the sheet, shows additional cuts suggested to arrive at an expense reduction equal to the property tax reduction made on the revenue side of the budget. The first $ 41308 is added to $ 34,917 in other cuts to reach the $ 39,285 in reduced property tax revenue. The consequences of these reductions are listed in the right hand column. Finally, I have attached two possible resolutions for adoption of the 2014 operating budgets. The first resolution uses the "blue box" method of balancing the budget and allowing general fund operations to proceed at an expenditure level of $ 4,044,812, equal to revenues expected. The second resolution uses the "green box" appropriation method producing the same surplus as the original budget of $ 34,917. This will require additional cuts in services and postponement of activities but will produce the surplus for the debt service fund that was originally considered. If there are additional questions, concerns or scenarios to be developed, please let me know. attachments Budget Status After Tax Reduction: 6 Revenues 7 Gross Expenditures 8 Iess: expected sales tax exemption 9 Net Expenditures 10 Net Operations Modification: 41044,812 cut tax levy by $ 39,285 4,075,265 410491180 beginning botom line (4,368) deficit, implies no transfer to Debt Service 11 Spread sales tax exemption savings among accounts on attached schedule Expenditure Reductions: 12 Economic Development - Marketing 13 Finance: - Audit Costs 14 Streets -Sign Materials 15 Administration - Training 16 Total Reductions from Line 7 17 Net General Fund Operations (Line 10 + Line 16) 1,000 less ED marketing, leaves $ 3,000 2,000 have actual RFP cost 500 postpone sign upgrades to 2015 868 eliminate a training meeting or conference implies no transfer to Debt Service from Operations Further Reductions to Equal Property Tax Reduction: ($ 39,285 cut in Line 6) 8 Cuts from Balancing Actions (Line 16) 4,368 F9,Parks - Contact Services 4,000 staff will spread fertilizer, reduced maintenance 20 Budget Originally Proposed: 100 Notes: 1 Revenues 4,084,097 12/9/2013 Resolution 2 Gross Expenditures 4,075,265 12/9/2013 Resolution 3 less: expected sales tax exemption 26,085 original estimate 4 Net Expenditures 4,049,180 take as comp time i 5 Net Operations 34,917 to be transferred to Debt Service Budget Status After Tax Reduction: 6 Revenues 7 Gross Expenditures 8 Iess: expected sales tax exemption 9 Net Expenditures 10 Net Operations Modification: 41044,812 cut tax levy by $ 39,285 4,075,265 410491180 beginning botom line (4,368) deficit, implies no transfer to Debt Service 11 Spread sales tax exemption savings among accounts on attached schedule Expenditure Reductions: 12 Economic Development - Marketing 13 Finance: - Audit Costs 14 Streets -Sign Materials 15 Administration - Training 16 Total Reductions from Line 7 17 Net General Fund Operations (Line 10 + Line 16) 1,000 less ED marketing, leaves $ 3,000 2,000 have actual RFP cost 500 postpone sign upgrades to 2015 868 eliminate a training meeting or conference implies no transfer to Debt Service from Operations Further Reductions to Equal Property Tax Reduction: ($ 39,285 cut in Line 6) 8 Cuts from Balancing Actions (Line 16) 4,368 F9,Parks - Contact Services 4,000 staff will spread fertilizer, reduced maintenance 20 Police Commission - Supplies 100 leaves $ 500 for activity 21 Recreation - Publishing 1,000 newsletter 22 Finance - Office Supplies 200 make do with less 23 Finance - Training 500 limit data processing training 24 Streets - Overtime 21,000 take as comp time 25 Streets - Sand and Gravel 3,000 forego gravel storage area behind salt shed 26 Emergency Managerment - Training 11000 reduce to $ 4,000 27 Economic Development - Marketing 2,000 additional reduction, leaves $ 1,000 28 Streets - Sign Materials 2,000 postpone a portion of sign upgrades to 2015 29 Economic Development - Consultant Services 40000 leaves $ 1,000 for studies & planning 30 Administration - PT Intern 6,000 postpones Laserfiche implementation 31 Recration - Programming 11000 raise fees or reduce programs 32 Streets - Operating Supplies 11-000 mow roadside weeds rather than spray chemicals 33 Fleet - Fuel 2,700 average cost to $ 3.70/gallon 34 Prairie Center - Supplies 2,717 reduce growth in supplies use 35 IT - Suppies 300 reduce backup parts supplies 36 City Council -Training 400 reduce conference attendance 37 Recreation - Community Events 1,000 smaller increase in budget 38 Additional Reductions 34,917 (lines 19 through 37) 39 Total Reductions (matches Property Tax Reduction) 39,285 (Line 18 + Line 38) City of Otsego 493950 511273 62,950 74,547 74,147 General Fund Budget 295,869 367,582 3551290 391,002 3851002 for the year ending 31 december 2014 390 241334 585 26,200 261200 Actual Actual Budget Cuts to Cuts to 701300 2011 2012 2013 Balance Sur lus Revenues: Information Technology - 35,108 46,850 461628 Ad Valorem Property Tax 313431665 331391131 31213,145 31273,715 3,273,715 Licenses and Permits 23,450 33,915 281040 40,100 401100 Intergovernmental Revenue 1991053 2081822 202,875 316,611 3161611 Charges for Service 967204 60,253 57,000 651650 651650 Interest Revenue 118,186 923134 100,000 100,000 1001000 Cable Franchise Fees 100,176 1061547 100,000 1053000 1051000 Other Revenues 2321613 35,164 500 143,736 1431736 TOTAL Revenues: 40113,347 31675,966 31701,520 4,044,812 4,044,812 Expenditures: General Government City Council 493950 511273 62,950 74,547 74,147 Administration 295,869 367,582 3551290 391,002 3851002 Elections 390 241334 585 26,200 261200 Assessor 671935 67,904 681250 701300 701300 Finance 1761950 2391680 2431945 321,187 3201487 Information Technology - 35,108 46,850 461628 461328 Legal 951239 71,305 70,000 751000 751000 City Hall -- - 78,685 81,255 811255 Old Town Site 721 715 - - - Planning 91,213 851126 80,000 739400 731400 Planning Commission 540 11230 11680 - - Subtotal. General Government: 7781807 944,258 130081235 111591519 11152,119 Public Safety: Police 8611410 875,045 883,300 912,500 9121500 Police Commission 1,191 1,372 1,370 11350 1,250 Fire - 347,922 355,000 375,850 3751850 Emergency Management - 728 6,500 81550 71550 Animal Control 151274 101,915 171500 111000 11,000 Subtotal: Public Safety: 8771875 1,235,982 1,263,670 1$09,250 113081150 Public Works: Streets 1,285,891 7601656 5103240 6291110 6217110 Engineering 1471421 128,713 1171000 851000 851000 Street Lights 971046 1081775 1053000 110,000 1101000 Fleet Maintenance - - 209,460 191,630 1881930 Subtotal. Public Works 115301358 9981144 9411700 1,015,740 110053040 Culture & Recreation Park Maintenance 346,410 195,456 291,655 294,880 290,880 Recreation 37,325 83, 016 1371110 154,075 151,075 Prairie Center 58,888 39,134 43,500 331647 301930 Heritage Preservation Comm. 21400 1,134 1,250 - - Subtotal: Culture & Recreation: 445,023 3181740 4731515 4821602 4721885 Economic Development 121353 21649 141400 113790 5,790 Transfers Out/(In) 5561941 1151000 - 65,911 65,911 TOTAL Expenditures: 4,201 }357 316141773 31701,520 41044,812. 410091895 Sales Tax Exemption Savings - - NET GENERAL FUND: (88,010) 611193 - I - 11 341917 V. _E 'BA-LANC' -D CITY OF OTSEGO COUNTY OF WRIGHT STATE OF MINNESOTA RESOLUTION NO: 2014 - RESOLUTION ADOPTING 2014 OPERATING BUDGETS WHEREAS, on December 9, 2013 the Otsego City Council held a public meeting at which citizens were invited to comment on the proposed property tax levy and resulting operating budgets for the 2014 fiscal year. NOW, T-BEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF OTSEGO, WRIGHT COUNTY, MINNESOTA THAT: the following sums of money be allotted for the operation of City business in the various funds of the City during the 2014 fiscal year as follows: GENERAL FUND: General Fund Revenues Property Taxes $ 3.1273,715 Licenses and Permits 40,100 Intergovernmental Revenue 3165611 Charges for Service 65, 65 Interest Revenue 1001000 Cable Franchise Fee 105,000 Other Revenues 143 73 6 Revenues $450445 812 General Fund Expenditures: General Government $ L15%519 Public Safety 153 0%250 Public Works 13015.5740 Culture & Recreation 482)602 Economic Development 11,790 Transfers 65,911 Expenditures $4.044)812 SPECIAL REVENUE FUNDS: Storm Water In -District Fund Revenues $ 735800 Storm Water In -District Fund Expenditures $ 63,000 Storm Water Out -of -District Fund Revenues $ 25,000 Storm Water Out -of -District Fund Expenditures $ 21,240 Street Light District Fund Revenues Street Light District Fund Expenditures Building Safety Fund Revenues Building Safety Fund Expenditures DEBT SERVICE FUND Debt Service Fund Revenues Debt Service Fund Expenditures ENTERPRISE FUNDS Water Fund Revenues Water Fund Expenditures Sewer Fund Revenues Sewer Fund Expenditures $ 26)700 $ 13,880 $ 517,200 $ 252,796 $ 23705,019 $ 2,705,019 $ 131K875 $ L328)202 112.33,900 2,3935599 ADOPTED by the Otsego City Council this 13t" day of January, 2014. ATTEST: Tarry. Loff, City Clerk MOTION made by Council Member a I_IV OPPOSED: CITY OF OTSEGO Jessica Stockamp, Mayor and SECONDED by Council Member CITY OF OTSEGO COUNTY OF WRIGHT STATE OF MINNESOTA RESOLUTION NO: 2014 - RESOLUTION ADOPTING 2014 OPERATING BUDGETS WHEREAS, on December 9, 2013 the Otsego City Council held a public meeting at which citizens were invited to comment on the proposed property tax levy and resulting operating budgets for the 2014 fiscal year. NOW, TBEREFORE9 BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF OTSEGO, WRIGHT COUNTY, MINNESOTA THAT: the following sums of money be allotted for the operation of City business in the various funds of the City during the 2014 fiscal year as follows.. - GENERAL FLJND: General Fund Revenues: Property Taxes $ 35273.1715 Licenses and Permits 40,100 Intergovernmental Revenue 3165611 Charges for Service 655650 Interest Revenue 10 0- 0 0 0 Cable Franchise Fee 105,000 Other Revenues 143,73 Revenues $ 4,0445812 General Fund Expenditures: General Government $ 1,152JI9 Public Safety 1,308,150 Public Works IP005)040 Culture & Recreation 472,885 Economic Development 5,790 Transfers 65,3911 Expenditures $4.009,895 Surplus $ 34,917 SPECIAL REVENUE FUNDS: Storm Water In -District Fund Revenues Storm Water In -District Fund Expenditures Storm Water Out -of -District Fund Revenues Storm Water Out -of -District Fund Expenditures Street Light District Fund Revenues Street Light District Fund Expenditures Building Safety Fund Revenues Building Safety Fund Expenditures DEBT SERVICE FUND Debt Service Fund Revenues Debt Service Fund Expenditures ENTERPRISE FUNDS S P U, L U 735800 63,000 25.5000 21,240 26,700 $ 13,880 $ 517,200 $ 252,796 $ 25705P0I9 $ 2,7055019 Water Fund Revenues $ 151K875 Water Fund Expenditures $ L328,202 Sewer Fund Revenues $ 1,233,900 Sewer Fund Expenditures $233931599 ADOPTED by the Otsego City Council this 13t` day of January, 2014. ATTEST: Tami Loff, City Clerk MOTION made. by Council Member OPPOSED: CITY OF OTSEGO Jessica Stockamp, Mayor and SECONDED by Council Member