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ITEM 1 Budget, Tax Levy, and CIP ReviewITEM y TO: Mayor and City Council FROM: Lori Johnson, City Administrator DATE: November 19, 2015 SUBJECT: 2016 Budget, Tax Levy, and CIP Review The 2016 tax levy, budget, and CIP will be on the December 14 agenda for adoption. Prior to adoption, several CIP items need follow-up and one last review of the tax levy and budgets is prudent. This will ensure that all of the Council's adjustments are included in the documents drafted for adoption in December. Capital Improvement Plan: Revised CIP summary documents are attached including projects by funding source and projects by department reports. These include the Council's input from the past CIP meetings and adjustments for the siren and signal painting projects. Below is additional information on outstanding items: • Siren - There was question about the need for the siren previously programmed for 70th Street. Attached is a map with existing and future the siren locations with the yellow circles indicating future sirens including the 701h Street siren. As you can see, this area long 70th is the largest area in the City that is not currently covered by a siren. There are smaller areas that may fall between the coverage circles on the map, but those areas are typically small strips with very little density. Also, keep in mind that the circles indicating coverage on the map are conservative and coverage probably extends beyond the area indicated on the map thus filling many of the small gaps. There was also question about the need for a siren at the new E-8 school. The school area is covered by one and possible two sirens already. The light yellow circle shows the overlap created if an additional siren is added at the new school. Staff recommends installation of the 70th Street siren as previously discussed. The cost in the attached CIP has been revised to reflect current pricing of $20,429. • Signal Painting - This item came up at the end of the meeting and it was determined that the painting costs needed to be added to the CIP. Attached is a quote from 2013 when this project was first identified. Street Operations Manager Kevin Lamson has spoken to the vendor and received confirmation that the price has not changed since 2013. Inspection of each signal system was conducted this week to determine exactly which intersections need repainting in 2016. The Street Operations Manager's recommendation is as follows: 2016: • CSAH 39/HWY 101 $10,420 • CSAH 39/CSAH 42 $ 7,900 • CSAH 42/ 851h St. $ 7,500 • CSAH 42/ 87th St. $ 7,500 Total for 2016= $33,320 2018: • CSAH 42/HWY 101W $ 7,300 • CSAH 42/HWY 101E $ 5,750 • CSAH 37/Quam/HWY 101W $ 5,750 • CSAH 36/HWY 101E $ 7,300 • CSAH 36/HWY 101W $ 7,300 Total for 2018= $33,400, plus inflation factor. The signal painting costs are listed as unfunded in the draft CIP. Possible funding sources include the Revolving Capital Improvements Fund for 2016 and increasing future tax levies to fund the 2018 cost. • Prairie Center Parking Lot —The Council agreed to keep the Prairie Center Parking Lot improvements in the CIP. A funding source needs to be approved for the $87,600 project. A possible funding source is the Capital Improvements Revolving Fund. • Public Works Storage Building —The request for additional public works and park storage received considerable discussion at the Council meeting; good questions were asked by the Council about the types and value of equipment and vehicles that would be stored in the building and how this facility would create operating efficiencies. This option was included in the CIP as an interim step to expansion of the existing public works bay that has a cost of around $3,000,000 (rough estimate including repairs and updates needed to existing building) in comparison to $350,000 for this interim option. Another option is to acknowledge that equipment will be stored outside thus the useful life may be reduced slightly and, in some cases, certain functions may require slightly more staff time. This building request was discussed at length before inclusion in the CIP; the cost is significant and there had to be an overwhelming need for the space in order to justify that cost. Staffs intent was to maximize the life of equipment by storing it inside. If the Council is in support of storing equipment and vehicles outside, which is what the Council indicated at the last meeting, staffs preference is to eliminate this interim option and focus on expansion of the existing building in the next few years. In addition, if the ordinance requires a higher level of construction than was proposed, this interim option becomes too costly. If the Council concurs, this item will be removed from the CIP and discussion of the building expansion will continue. Street Operations Manager Kevin Lamson and Park and Recreation Director Ross Demant will have additional equipment/vehicle storage information for the Council at the meeting. 2016 Tax LevV and Budgets: Adoption of the final 2016 tax levy and 2016 budget is scheduled for December 14, 2015. At that meeting, public input must be taken and considered before adoption of the levy and budget. This item is on the agenda now to give the Council another opportunity to review of the data prior to the December 14 meeting. Attached are updated budget summaries for the General, Water and Sewer fund budgets. The General Fund summary indicates a balanced budget of $4,880,262. The expenditure portion of the budget has been adjusted to include: 1. Changes previously requested by Council. 2. Two budget additions - $7,500 for three 800mhz radios for emergency management and $1,000 for GB data switches. 3. Several personal service budgets were adjusted based on employee changes and updated estimates for insurance costs, mainly worker's compensation. 4. Lastly, the Administration and Finance departments' reorganization resulted in a savings that was combined with other adjustments totaling a revenue over expenditure balance of $19,438. This was added to the Council Contingency to produce a balanced budget. if the Council prefers, it could be added to a reserve fund levy to cover future CIP funding shortfalls as discussed at the last work session or the levy could be reduced. If the levy is reduced, the resulting tax savings for a median value house is $3. The attached Water and Sewer fund budgets were adjusted based on the proposed rate increases as discussed during the previous budget meeting. The expenditure budgets are consistent with the previously discussed amounts with the addition of another Utilities Operator position. Next, attached is the draft levy resolution for a $5,020,206 levy. Wright County provided an updated tax capacity and Finance Director Adam Flaherty has calculated the tax rate and tax increase based on the new estimate. His updated Tax Levy Calculations spreadsheet dated November 17 is attached. The estimated tax capacity decreased slightly, .10%. The result is that the estimated tax rate goes from 37.854 to 37.890. This compares to a 2015 tax rate of 41.138. The tax rate has dropped significantly because of the 16.5% increase in tax capacity. As we all know, the actual tax impact on property that is more important to focus on and compare than the tax rate. The 2016 City tax on a median value home in Otego will decrease by 3.93% based on the proposed levy. The value of a median house as determined by Wright County dropped from the earlier 2016 estimate of 201,891 to 191,500. The 2015 estimate was 185,000. Finally, the Wright County Tax Rates list used for the parcel specific notices and tax meetings is attached to your information. Please keep in mind when reviewing this data that many surrounding cities have franchise fees in addition to their tax levy, which understates the true tax impact because the tax rate represents only part of the equation. Further, some cities have special taxing district levies for an EDA or HRA.