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Item 1 2022 Budget, Tax Levy and Capital Improvement Plan ReviewCity 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:   September 13, 2021  SUBJECT:  Budget Meeting #7  On Monday, Council and staff will resume review of the draft 2022 General Fund budget. This  meeting is the fourth and final of the 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.  I have developed an outline of discussion topics below.   Pay Plan Assumptions  At the May 24, 2021 budget meeting, the City Council concurred that the preliminary budget  should include a 3.00% cost of living adjustment (COLA). This percentage is applied to the City’s  Pay Plan for full‐time employees.  City staff has surveyed neighboring cities, with an average COLA of 3.09%, a high of 3.50% and a  low of 3.00%. City staff will discuss with the City Council how this data compares with data from  the Bureau of Labor and Statistics Consumer Price Index.  Benefit Assumptions  The preliminary budget includes inflationary estimates for the costs of employer provided  benefits, with assumptions as follows:  ‐ Health Insurance: 10% increase in premiums  ‐ Dental Insurance: 5% increase in premiums  ‐ Disability/Life Insurance: 3% increase in premiums  City staff is currently working to finalize the renewals of the City’s policies with the respective  insurance providers. The estimates above are considered to be conservative. The final budget to  be adopted in December 2021, should reflect the actual increases in premiums.  City staff can discuss the City’s benefit package in more detail during this meeting if the City  Council has any additional questions.  Item 1 City of Otsego│13400 90th Street NE, Otsego, MN 55330│Tel. (763) 441‐4414 Fax (763) 441‐9163  Staffing  The preliminary budget includes the following staffing changes when compared to the 2021  budget:  ‐ Administrative Internship  ‐ Part‐Time Finance Assistant  ‐ Full‐Time Street Maintenance I  ‐ Full‐Time Parks & Recreation Operations Coordinator    The requested positions have been reviewed in detail during prior budget meetings, but City staff  will provide additional overview and discuss hiring timelines and budget impacts.    Contracted Services  There are a number of services that the City contracts with other governmental/private entities  for, with the preliminary budget reflecting the increased service costs for:  ‐ Assessor: Provided by Wright County; increase of $12,628.  ‐ Building Official & Inspections: Provided by Metro West; increase of $58,500.  ‐ Law Enforcement: Provided by Wright County; increase of $42,924.  ‐ Fire Protection: Provided by Albertville, Elk River & Rogers; increase of $150,650.    The four individual items above account for 35% of the preliminary budget increase.    Unique Drivers  There are a handful of other unique items included within the preliminary budget:  ‐ Elections: Since elections do not occur on an annual basis, the budget is cyclical causing  every‐other year impacts.   ‐ Information Security: The preliminary budget includes additional professional services  within the IT Department to complete a comprehensive information security analysis. This  service will provide an assessment of risk, identify strengths and weaknesses, and develop  a roadmap to improve information security.  ‐ Comprehensive Plan: The City last updated its Comprehensive Plan in 2012. The  preliminary budget includes funding to update this document in 2022.    Budget Summary  City staff will provide a review of a number of summary budget documents included in the City  Council packet.    Property Tax Levy  Attached with the packet for this meeting, is an updated summary. Staff will review and explain  any changes that have occurred since the last budget meeting.     City staff will also review the impacts of the preliminary tax levy on the City’s tax rate and provide  an estimate of City taxes on a median value home.          City of Otsego│13400 90th Street NE, Otsego, MN 55330│Tel. (763) 441‐4414 Fax (763) 441‐9163  Council Roundtable  This is an opportunity for the Council to express their current view on the budgets as presented  thus far and to discuss any recommended changes to the preliminary budgets and tax levies.    Next Steps  The Council will need to adopt the preliminary property tax levy, which is the maximum amount  the City can levy for taxes payable 2022. This action will take place at a regular Council meeting, on  the 27th of September.    It should be noted that the preliminary property tax levy is the amount used for truth‐in‐taxation  notices that are sent to the taxpayers by Wright County.    The final budget and property tax levy will not be adopted by the City Council until December.  Changes to the budget can still be made between now and then, but increases to expenditures  become difficult because the primary revenue source to pay for those increases is property taxes.  The property tax levy can be decreased between now and then, but the levy cannot be increased.    Staff is seeking direction from the City Council on how they would like to proceed.    Materials Attached for Discussion  1) General Fund Budget – Revenue & Expenditure Summary  2) General Fund Budget – Summary of Expenditures by Function  3) Property Tax Levy Summary    City of OtsegoGeneral Fund Budget ‐ 2022Requested BudgetRevenue & Expenditure SummaryRequested PreliminaryActual Actual Year‐to‐Date Budget Budget Budget2019 2020 2021 2021 2022 2022 $ Change % ChangeRevenuesTaxes 4,192,198$        4,497,724$        2,543,576$        4,646,632$         4,973,035$        5,010,985$        364,353$           7.84%Cable Franchise Fees 137,510             132,137            96,191              135,000             129,000            129,000            (6,000)               ‐4.44%Licenses & Permits 1,699,879          2,532,789         1,903,097         1,200,810          1,510,639         1,510,639         309,829            25.80%Intergovernmental 88,328               1,396,214         960,832            87,500               87,500              87,500              ‐                         0.00%Charges for Services 308,290             255,598            296,292            198,915             238,871            238,871            39,956              20.09%Special Assessments 5,703                  5,434                 3,728                 3,500                  3,400                 3,400                 (100)                   ‐2.86%Fines & Forfeitures 26,488               19,959              17,427              24,000               24,000              24,000              ‐                         0.00%Investment Interest 147,940             170,477            30,907              72,000               78,000              78,000              6,000                 8.33%Miscellaneous 49,309               23,984              10,804              ‐                         ‐                         ‐                         ‐                        Interfund Transfers 171,900             201,796            ‐                         243,100             286,800            286,800            43,700              17.98%Subtotal6,827,546          9,236,110         5,862,854         6,611,457          7,331,245         7,369,195         757,738            11.46%ExpendituresGeneral Government 1,215,969          1,419,636         944,240            1,540,869          1,765,033         1,765,033         224,164            14.55%Public Safety 2,379,438          2,667,435         1,855,598         2,714,553          2,993,027         2,993,027         278,474            10.26%Public Works 1,250,720          1,204,666         874,743            1,429,909          1,556,316         1,556,316         126,407            8.84%Culture & Recreation 707,699             697,455            510,612            796,416             892,909            892,909            96,493              12.12%Economic Development 114,142             665,798            59,740              129,710             123,960            161,910            32,200              24.82%Interfund Transfers 971,726             932,244            ‐                         ‐                         ‐                         ‐                         ‐                        Subtotal6,639,694          7,587,233         4,244,932         6,611,457          7,331,245         7,369,195         757,738            11.46%Net Change in Fund Balance187,852$           1,648,877$        1,617,921$        ‐$                        (0)$                      (0)$                     Description City of OtsegoGeneral Fund Budget ‐ 2022Expenditures by Function SummaryRequested AmountsRequested PreliminaryActual Actual Year‐to‐Date Budget Budget Budget2019 2020 2021 2021 2022 2022 $ Change % ChangeGeneral Government41100 City Council 77,002$              86,113$             67,490$             157,739$           149,967$           149,967$           41320 City Administrator 161,597              171,207            115,211            185,333            202,438            202,438             41400 Administration 310,385              274,719            201,436            306,079            326,018            326,018             41410 Elections 2,547                  34,185              ‐                         1,600                69,776              69,776               41550 Assessing 112,976              125,118            139,898            137,374            150,002            150,002             41600 Finance 213,731              248,740            187,318            275,188            320,943            320,943             41650 Information Technology 76,089                150,916            60,098              102,840            127,630            127,630             41700 Legal 95,478                83,558              26,131              99,000              93,150              93,150               41800 Human Resources 292                      89,169              38,556              75,063              126,110            126,110             41940 Prairie Center 43,452                39,525              25,227              48,506              54,070              54,070               41945 City Hall & Public Works Building 119,505              113,397            80,588              148,847            141,529            141,529             41950 Old Township Site 2,916                  2,990                2,287                3,300                3,400                3,400                 Subtotal1,215,969           1,419,636         944,240            1,540,869         1,765,033         1,765,033           224,164            14.55%Public Safety42100 Police Services 1,326,668           1,391,755         970,867            1,456,260         1,499,184         1,499,184          42150 Public Safety Commission 670                      390                    ‐                         2,960                2,960                2,960                 42200 Fire Protection 633,384              723,016            552,146            769,299            919,949            919,949             42410 Building Safety 399,931              535,092            311,039            467,734            545,334            545,334             42500 Emergency Management 2,549                  2,391                10,400              2,600                8,900                8,900                 42710 Animal Control 16,237                14,790              11,145              15,700              16,700              16,700               Subtotal2,379,438           2,667,435         1,855,598         2,714,553         2,993,027         2,993,027           278,474            10.26%Public Works43100 Streets 781,889              778,343            593,791            928,278            1,025,341         1,025,341          43150 Engineering 90,784                52,253              34,461              92,400              87,500              87,500               43160 Street Lights 144,594              153,058            102,738            158,920            167,080            167,080             43240 Fleet Management 233,453              221,012            143,754            250,311            276,395            276,395             Subtotal1,250,720           1,204,666         874,743            1,429,909         1,556,316         1,556,316           126,407            8.84%Culture & Recreation45200 Park Maintenance 478,537              502,867            363,111            550,097            619,109            619,109             45250 Recreation 228,882              194,288            147,501            243,839            268,500            268,500             45300 Heritage Preservation Commission 280                      300                    ‐                         2,480                2,840                2,840                 45350 Parks & Recreation Commission ‐                          ‐                         ‐                         ‐                         2,460                2,460                 Subtotal707,699              697,455            510,612            796,416            892,909            892,909              96,493              12.12%Economic Development46530 Planning Commission 1,500                  1,550                ‐                         4,000                3,500                3,500                 46570 Planning 107,637              102,460            48,719              110,250            105,000            142,950             46580 Economic Development 5,004                  561,788            11,021              15,460              15,460              15,460               Subtotal114,142              665,798            59,740              129,710            123,960            161,910              32,200              24.82%Interfund Transfers49300 Interfund Transfers 971,726              932,244            ‐                         ‐                         ‐                         ‐                         Subtotal971,726              932,244            ‐                         ‐                         ‐                         ‐                          ‐                        Grand Total6,639,694$        7,587,233$       4,244,932$       6,611,457$       7,331,245$       7,369,195$        757,738$           11.46%Function & Department City of Otsego Property Tax Levy Calculations Payable 2022 Revised: September 10, 2021 $% $% 2020 2021 2022 Change Change 2022 Change Change Comment General Revenues 4,518,000        4,671,000        4,980,000        309,000          6.62% 5,019,000      348,000          7.45%Reflects Addition of Comp Plan Budget Tax Abatements 56,491              45,874              40,422              (5,452)             ‐11.88% 40,422            (5,452)             ‐11.88% Debt Service Series 2010B 460,000            460,000            ‐                         (460,000)        ‐                       (460,000)        Series 2018A 91,758              94,551              97,187              2,636              97,187            2,636              Series 2020A 195,000            195,000            450,000            255,000          450,000          255,000          **NEW** ‐                         ‐                         ‐                         ‐                       ‐                       ‐                       Sub‐total 746,758            749,551            547,187            (202,364)        ‐27.00% 547,187          (202,364)        ‐27.00% Capital Reserves Pavement Management 950,000            1,050,000        1,100,000        50,000            1,100,000      50,000            Trails Management 33,000              40,000              43,000              3,000              43,000            3,000              Parks Equipment 60,000              62,000              64,000              2,000              64,000            2,000              Capital Equipment Revolving 280,000            300,000            320,000            20,000            320,000          20,000            Fire Reserve 180,000            190,000            200,000            10,000            200,000          10,000            Storm Water 32,000              34,000              36,000              2,000              36,000            2,000              Capital Improvements 318,000            661,000            ‐                         (661,000)        ‐                       (661,000)        City Buildings & Property 20,000              25,000              30,000              5,000              30,000            5,000              Sub‐total 1,873,000        2,362,000        1,793,000        (569,000)        ‐24.09% 1,793,000      (569,000)        ‐24.09% Tax Rate Management (Flexibility) 966,186            1,185,396     Reduction Offsets Increased General Fund Grand Total 7,194,249        7,828,425        8,326,795        498,370          6.37% 8,585,005      756,580          9.66% Growth (%) 7.22% 8.82% Tax Capacity 20,742,285      22,876,221      24,331,856      25,086,375   Per Wright County (9‐9‐2021) Growth (%) 10.95% 10.29% 6.36% 9.66% Net Tax Capacity 20,497,278      22,591,258      24,028,761      24,773,881   98.75% of Tax Capacity (Based on 2021) Growth (%) 10.15% 10.22% 6.36% 9.66% Tax Rate 35.099              34.653              34.653              34.653            Population 17,323              18,130              19,966              19,966            Source = U.S. Census Bureau Tax Levy Per Capita 415                   432                   417                   430                 Taxing 2020 2021 2022 2022 Authority Final Tax Rate Final Tax Rate Estimate Change Estimate Change City of Otsego 35.099              34.653              34.653              0.00% 34.653            0.00% Wright County 44.421              43.719              43.719              0.00% 43.719            0.00% School District 34.371              31.717              31.717              0.00% 31.717            0.00% School District ‐ RMV 29.961              30.598              30.598              0.00% 30.598            0.00% Description 2020 2021 2022 Change 2022 Change Median Appraised Value 247,859            258,455            290,081            12.24% 290,081          12.24% Less: MV Exclusion (14,933)            (13,979)            (11,133)            (11,133)          Taxable Market Value 232,926            244,476            278,948            14.10% 278,948          14.10% Tax Capacity 2,329                2,445                2,789                2,789              2020 2021 2022 2022 Taxing Estimated Estimated Estimated Estimated Authority Tax Tax Tax Change Tax Change City of Otsego 818                   847                   967                   14.17% 967                 14.17% Wright County 1,035                1,069                1,220                14.13% 1,220              14.13% School District 801                   775                   885                   14.19% 885                 14.19% School District ‐ RMV 743                   791                   888                   12.26% 888                 12.26% Total 3,397                3,482                3,960                13.73% 3,960              13.73% Annual Increase 478                   478                 Meeting #6 (8‐30‐2021) Meeting #7 (9‐13‐2021) Levy Description The City rate is calculated by the Finance  Director. County and School District tax rates  were obtained from Wright County, and  represent the tax rate from their respective  preliminary levies and are NOT FINAL. Source = Wright County Assessor These are best estimates calculated by the  Finance Director based upon information  available at the time of presentation. These  should only be considered as estimates, and  should NOT be considered final. X:\Budget\2022\Property Taxes\Tax Levy Calculations 9‐13