Item 1. 2024 Budget, Tax Levy and Capital Improvement Plan Review
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: May 22, 2023
SUBJECT: Budget Meeting #1
On Monday, Council and staff will begin the 2024 budgeting discussions. This meeting is intended
to focus on the big-picture and not specific departmental budget requests. I have developed an
outline of discussion topics below, however; the most important aspect of this meeting is to
provide the opportunity for the Council to set priorities, set expectations and to provide direction
to staff for preparation of the draft budget.
Council Roundtable
This is an opportunity for the Council to express their current view on City services and programs.
This would also be the time for the Council to share any comments they have received from the
public regarding City services or programs. Please use this opportunity to outline your priorities
and expectations for the 2024 budget.
Public Safety
The Law Enforcement Contract with the Wright County Sheriff will expire at the end of 2023. City
staff is seeking direction from the City Council on whether they would like to invite Sheriff
Deringer to a future budget meeting to discuss the terms and conditions of the contract.
Property Tax Levy
At this time of the year, much of the information being used is estimates. Based upon the
information currently available from Wright County, the City’s net tax capacity for the 2024 tax
levy will increase approximately 15%.
The City’s tax rate for 2023 is 29.572. Staff will review several charts comparing the Otsego tax
rate with those of surrounding cities in Anoka, Hennepin, Sherburne, and Wright counties. The City
Council should discuss their approach to the tax rate for payable 2024.
City of Otsego│13400 90th Street NE, Otsego, MN 55330│Tel. (763) 441-4414 Fax (763) 441-9163
Staffing Plan
The City’s 2022 Strategic Plan includes a strategic direction of Positioning for Growth, which
includes a specific action item to develop future staffing projections. City staff will review the
2024-2028 Staffing Plan during this meeting.
Assumptions
The most significant assumption within the General fund budgeting process is those in relation to
personnel. It is important for this assumption to be clearly defined at the beginning of the
budgeting process. In past years, assumptions for personnel costs have included a combination of
informal salary surveys obtained by City staff, inflation indices, and employment cost indices.
The City’s pay plan for full-time employees includes 23 grades, each with 9 steps. The percentage
increase for each step within a pay grade is 2.75%. Employees who reach the highest step within
their pay grade do not move to the next grade. There are 13 employees projected at their
maximums for 2024.
City staff, based on analysis of data from the Bureau of Labor Statistics would recommend that the
cost-of-living adjustment for initial budget preparations be 4.25%. This figure is based on the
average 12-month inflation changes issued thus far in 2023.
The City is currently in the midst of a Classification and Compensation Study, which will ultimately
provide better direction on the changes to the City’s pay plan for inclusion in the 2024 budget.
Fund Balance Policy – Calculation of Transfer
The City’s fund balance policy outlines that the ending fund balance in the General Fund should be
45% of the subsequent year’s budget. The policy further outlines that any balance more than the
defined 45% minimum can be transferred to a capital reserve fund at the Council’s discretion.
Next Meetings
City staff has developed a budget calendar that outlines a process based on previous years;
however, there should be discussion on what is preferred by the Council for this year’s process.
Packet Materials
- Tax Rate Comparison Charts
- Consumer Price Index Report
- Calculation of Fund Balance Policy Transfer
- Budget Calendar
City of OtsegoFund Balance Policy General Fund Transfer2023Calculation Comments2023 General Fund Budget 7,976,649 Resolution 2022-98Minimum Fund Balance 3,589,492 The City's Fund Balance states that the minimum General Fund Balance should be 45% of the subsequent year budget.2022 Ending Fund Balance 4,951,443 Per Audited Financial Statements(260,757) Less: Fund Balance from Insurance Reserve Fund (#204) - Grouped with General for Financial Reporting(66,575) Less: Fund Balance from Educational Programming Fund (#215) - Grouped with General for Financial Reporting(121,590) Less: Nonspendable Fund Balance - Financial Reporting Requirement - Funds actually have alredy been expended.(202,200) Less: Nonspendable Fund Balance - Financial Reporting Requirement - Future funds from land for resale proceeds.4,300,321 Fund Balance Available (Unassigned)Transfer 710,829 DRAFT - Presented to City Council on May 22, 2023Y:\Budget\2024\Calculation of Fund Balance Policy Transfers2023
City of Otsego2024 Budget ProcessProposed City Council MeetingsMeeting Meeting ActionsDate Type Objectives NeededMay 22 Special Budget Kickoff (Process / Goals / Objectives / Issues) Direction to StaffJune 12 Special Debt Service & Special Revenue Funds Direction to StaffJune 26 Special Capital Improvement Plan & Levies Direction to StaffAugust 11 N/A Distribute Draft General Fund Budget NoneAugust 14 Special General Fund Review Direction to StaffAugust 28 Special General Fund Review Direction to StaffAugust 29 Special General Fund Review Direction to StaffSeptember 11 Regular Agenda General Fund Summary Review & Tax Levy Review Adopt Preliminary Tax LevyOctober 9 Special Capital Improvement Plan - TBD Direction to StaffOctober 23 Special Capital Improvement Plan - TBD Direction to StaffNovember 13 Special Capital Improvement Plan - TBD Direction to StaffNovember 27 Special Public Utility Operating & Capital Budgets Direction to StaffAdopt Final Property Tax LevyAdopt Final BudgetsAdopte Capital Improvement PlanDecember 11 Regular Agenda Truth-In-Taxation Presenation & Public Input Process