Memorandum
City of
City Manager’s Office
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To: |
Mayor and City
Commission |
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From: |
Dave Corliss Interim City
Manager |
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cc: |
Casey Liebst,
Budget Manager |
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Date: |
August 1, 2006 |
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Re: |
Options for 2007
Budget |
Overview
At the July 25, 2006 City Commission meeting, the Commission authorized the publication of the notice of hearing for the public hearing (to be conducted at the August 8, 2006 Commission meeting) on the proposed 2007 budget. At the July 25th meeting and subsequent to the meeting, Commissioners have posed questions concerning the proposed budget and staff has prepared responses in this memorandum.
Additionally, staff has performed an analysis of 2006 revenues which benefits from more 2006 revenue history than was available when the recommended budget was prepared. Our analysis indicates that we will receive approximately $109,000 in additional revenue in 2006 than was earlier projected. We have applied this additional revenue to our balance forward going into 2007 which means that the recommended budget can be funded with a 0.849 mill levy increase (versus the 0.986 mill levy increase in the published and originally recommended budget). Additional information on this is detailed below along with a report from Springsted analyzing our 2006 sales tax revenues.
During recent budget discussions, Commission discussion has generally focused on the following issues: appropriate funding level for street maintenance activities in 2007; the property tax mill levy to support the general fund; and general fund support for economic development efforts. The options set forth below provide possible paths for the finalization of the budget. Additional alterations to the budget are also possible. In fact, the only option the Commission does not have at this point in budget deliberations is increasing the property tax mill levy above the amount published for the public hearing.
Revenue Projections
Subsequent to the Second Quarter Financial Report, information was requested by Commissioner Rundle regarding revenue projections through the remainder of 2006 as well as information on general contractors for CIP projects. Attached please find a staff memo with additional information for City Commission consideration.
Using our contract with the designated financial consultant to provide additional review and analysis of financial issues, John Moir, senior Vice President with Springsted, Inc. provides an analysis of the sales tax projections for 2006. Note: the adjustments to the 2006 revenue projections based on City staff projections have been incorporated into the options A thru D provided below.
John Moir with Springsted will be at City Hall on the afternoon of
August 8, 2006 and we have planned for an informal study session format meeting
from 5:00 to 6:00 p.m. with the Commissioners and staff. During this meeting, we will be working with
John on additional work items with Springsted and Commissioners should feel
free to attend in order to discuss budget and finance issues with John.
Options for 2007 Budget
The following options have been developed for your consideration for the 2007 Budget:
Option A – for this option:
v street maintenance funding remains at $2,500,000 from the General fund and $6,050,000 from all funds
v the General Fund mill levy is .7 mills higher than the mill levy established for the 2006 budget
v the overall mill levy increase is .849 mills
v the projected General Fund balance as of 12/31/07 is 18.81%.
Option B – includes the following adjustments to the previously recommended General Fund budget:
v street maintenance funding is decreased to $1,900,000 from the General Fund and $5,450,000 from all funds
v the General Fund mill levy is equal to the mill levy established for the 2006 budget
v the overall mill levy increase is 0.149 mills
v the projected General Fund balance as of 12/31/07 is 18.85%
Option C – includes the following adjustments to the previously recommended General Fund budget:
v street maintenance funding is decreased to $1,780,000 from the General Fund and $5,330,000 from all funds
v the mill levy for the General Fund is 0.149 less than the mill levy established for the 2006 budget
v the overall mill levy is equal to the mill levy established for the 2006 budget
v the projected General Fund balance as of 12/31/07 is 18.88%
Option D – includes the following adjustments to the previously recommended General Fund budget:
v street maintenance funding is decreased to $1,500,000 from the General Fund and $5,050,000 from all funds
v the mill levy for the General Fund is 0.417 less than the mill levy established for the 2006 budget
v the overall mill levy is 0.268 less than the mill levy established for the 2006 budget
v the projected General Fund balance as of 12/31/07 is 19.08%
As the City Commission reviews these options, it’s important to remember that the 2007 budget includes revenue projections that are not understated in order to meet the statutory fund balance requirements, as was the practice in the past. Instead, we have provided in the budget what staff has calculated as realistic budget projections to more accurately reflect revenue trends. In order to meet the statutory fund balance requirements (fund balance cannot exceed 5% of expenditures), we have budgeted transfers that will not be made if revenue projections prove to be accurate. If however, actual revenues in 2007 come in significantly higher than projected, some level of transfers could be made (e.g. for street maintenance) to allow for additional expenditures that the City Commission would deem appropriate. This level of flexibility and budget authority is built into the recommended budget.
It is also important to note that the various funding levels for street maintenance ($6 million, $5.45 million, $5.3 million, or $5 million) still represents significant progress toward our street maintenance goals, with all funding levels to include the new three-person/truck street maintenance crew. All of these street maintenance options place additional resources for street maintenance in 2007 versus our current efforts. Reference is made to the information provided by Chuck Soules at the July 25 City Commission meeting concerning the resource impact on the street maintenance program.
Additional Information
Commissioner Schauner requested the following information regarding program improvements for the 2007 Budget:
· reducing the number of sergeants added to the Police Department to one (1) would reduce General Fund expenditures by $60,000
· removing the auditor position (partially funded by the General Fund) would reduce General Fund expenditures by $35,000
· totaled together, these $95,000 in expenditures represent .115 mills
For the City Commission’s review, a spreadsheet showing the General Fund recommended program improvements as well as the outside funding requests for 2007 is attached.
Additionally, the Commission has
discussed the appropriate funding level for our economic development
partnership efforts with
Sales Tax
Mayor Amyx has presented a sales
tax program that the City Commission indicated an interest in discussing further. Staff provides information in the form of a comparison
of
Next Steps in the
Budget Process
Once decisions have been made regarding any adjustments to the 2007 recommended budget, the City Commission can proceed to the budget related items outlined in the attached memo.
Additionally, certain rates for service and fees are under consideration as part of the 2007 budget process. These recommended revenue items are described in the attached memo. The Commission will consider development related fee changes and changes to our charges for cemetery services in the coming weeks. Additionally, the Commission will receive an implementation plan after budget adoption for a number of items in the recommended budget.