Commissioner Questions on 2018 Budget
as of 7/6/17
Answers are provided below to questions from City Commissioners about the 2018 Budget received as of July 6, 2017. Please note as Bryan commented during the June 13 presentation, since the budget document was prepared earlier than normal, line-items are still being adjusted. As a result, some of the numbers in the budget document have changed. For example, a reduction was made to the cost of healthcare in one place for each fund. The latest numbers now reflect the lower cost impact to each department.
Q. How much revenue will be generated by the 6% growth in assessed valuation?
A. The table below shows the breakdown by fund of the additional revenue generated by the increase in the assessed valuation.
|
Assessed valuation for 2018 budget |
$985,461,101 |
|
|
Assessed valuation for 2017 budget |
$928,947,354 |
|
|
Increased Assessed Valuation |
$56,513,747 |
|
|
Fund Name |
mill levy |
increased |
|
General Operating |
19.475 |
$1,100,605 |
|
Bond and Interest |
8.504 |
480,593 |
|
Public Library |
4.039 |
228,259 |
|
Total |
32.018 |
$1,809,457 |
Q. If assessed valuation is increasing so much, why is still necessary to increase the mill levy?
A. The mill levy increase recommended for 2018 is to provide additional resources in the City’s Bond and Interest Fund. The table below shows the 2018 budget for revenue and expenditures for that fund with and without the recommended increase of 1.25 mills. As shown, the recommended mill levy rate increase is projected to provide $480,593 of additional revenue. However, even with the recommended mill levy increase, expenditures will exceed revenues. It will be necessary to spend down fund balance each year to make bond and interest payments on existing debt. Without the increase in the mill levy rate, the fund balance would be depleted sooner and there would not be sufficient revenue to fund the City’s five-year Capital Improvement Plan (CIP). One large project included in the CIP is a phased construction of a new police facility. The estimated debt service for a $17 million facility is $1,624,000 per year for 15 years. The revenue generated by the growth in assessed valuation is not sufficient to fund the increased bond and interest payments for that facility.
|
Bond and Interest Fund |
without mill levy increase |
With mill levy increase |
|
Revenues |
$11,417,700 |
$12,616,700 |
|
Expenditures |
14,066,000 |
14,066,000 |
|
revenue over expenditures |
($2,648,300) |
($1,449,300) |
Q. Please provide additional information on the scope of the $17M phased construction of the policy facility?
A: The current proposal is for a phased-in campus approach for police facilities. The concept calls for the utilization of current City owned property or property purchased at a de minimis cost (i.e. a tax forfeiture sale) for a building site that will ensure proper program relationships for future phases of construction.
Additional information will be available after the site selection and Facility Needs Assessment updates are completed but the project included in the 2018-2022 CIP assumed two phases, with potential for a third phase. Phase 1, estimated to cost approximately $17M, would include the services of Patrol, Animal Control, Evidence, Administration, Records, Information Technology and the Crisis Intervention Team. Phase 2 would include Investigations and Community Services / Training. The cost of Phase 2, which is not in the current five-year CIP, could be in the range of $11M, however a better estimate will be part of the planning and design process. An optional third and final phase would be a shared firing range and training facility with the Douglas County Sherriff’s Office, assuming a mutually agreed upon site and financing arrangement could be achieved.
Additional information on Site Selection and the Facility Master Plan was presented at the worksession on April 11, 2017.
Q. The 2018 recommended budget in the General Operating Fund for the City Commission of $129,000 is more than double the 2016 actual of $63,479. What explains this significant increase?
A. The line items for the City Commission are shown below. The majority of the increase ($49,000) is due to budgeting health care for City Commissioners in this division as opposed to the general overhead division in 2016. Other significant increases are for travel expenses (transportation, meals and lodging) budgeted for Commissioners to travel to National League of Cities and other conferences and trainings.
|
Object |
2016 |
2017 |
2017 |
2018 |
|
|
Personal Services |
Salaries |
46,177 |
46,000 |
46,000 |
46,000 |
|
Personal Services |
(1221) FICA |
3,036 |
3,500 |
4,000 |
4,000 |
|
Personal Services |
(1222) Unemployment |
60 |
200 |
- |
- |
|
Personal Services |
(1223) KPERS |
2,543 |
4,100 |
4,000 |
4,000 |
|
Personal Services |
(1225) Health Insurance |
- |
46,800 |
47,000 |
49,000 |
|
Personal Services |
(1226) Life Insurance |
91 |
100 |
- |
- |
|
Personal Services |
(1229) Other Administrative Cost |
- |
200 |
- |
- |
|
Personal Services Total |
51,907 |
100,900 |
101,000 |
103,000 |
|
|
Contractual Services |
(2021) Travel / Mileage Reimbursement |
59 |
- |
- |
- |
|
Contractual Services |
(2022) Travel / Other Transportation |
1,365 |
10,000 |
10,000 |
10,000 |
|
Contractual Services |
(2023) Travel / Meals & Lodging |
466 |
6,000 |
6,000 |
6,000 |
|
Contractual Services |
Educational |
3,315 |
2,300 |
3,000 |
3,000 |
|
Contractual Services |
Public Relations |
5,586 |
2,700 |
3,000 |
3,000 |
|
Contractual Services |
Printing & Publications |
500 |
- |
- |
- |
|
Contractual Services |
Professional Services |
44 |
- |
- |
- |
|
Contractual Services |
Other |
- |
200 |
- |
- |
|
Contractual Services Total |
11,335 |
21,200 |
22,000 |
22,000 |
|
|
Commodities |
Supplies |
237 |
600 |
1,000 |
1,000 |
|
Commodities Total |
237 |
600 |
1,000 |
1,000 |
|
|
Grand Total |
63,479 |
122,700 |
124,000 |
126,000 |
|
Q. The 2018 Budget recommended for the City Manager’s office on pg. 49 is $918,000, this is a significant increase over the 2016 actual of $737,526. What is driving this increase?
A. The line items are shown below. Most of this increase can be attributed to salaries and benefits. Health insurance, which was not included in this division budget in 2016, accounts for $60,000 of the increase over 2016. Other increases include funding for a full-year of a temporary management assistant position (this position was only occupied for 8 months of 2016 and paid at a lower hourly rate) and a full-year of a part-time undergrad intern (this position was only occupied for 8 months in 2016); merit increases for eligible employees in 2017 and 2018, and increased compensation for a full-year of the City Manager (this position was paid for 9 months of 2016. The amount of contribution to the Manager’s 457 account is also greater in 2018 than it was in 2016.) The cost of the City’s share of the Sustainability Coordinator position (other contractual services) is greater in 2018 than in 2016, and additional funds for office supplies are also budgeted.
|
Object |
2016 |
2017 |
2017 |
2018 |
|
|
Personal Services |
(1021) Regular Salaries |
520,689 |
556,400 |
560,000 |
629,000 |
|
Personal Services |
(1026) Parttime Salaries |
27,180 |
29,100 |
29,000 |
29,000 |
|
Personal Services |
(1024) Holiday Pay |
16,847 |
18,700 |
19,000 |
- |
|
Personal Services |
(1023) Longevity Pay |
2,208 |
2,100 |
2,000 |
2,000 |
|
Personal Services |
(1022) Overtime Salaries |
907 |
400 |
- |
- |
|
Personal Services |
(1223) KPERS |
51,956 |
48,400 |
48,000 |
56,000 |
|
Personal Services |
(1221) FICA |
38,334 |
41,300 |
41,000 |
46,000 |
|
Personal Services |
(1225) Health Insurance |
- |
46,800 |
47,000 |
60,000 |
|
Personal Services |
(1222) Unemployment |
739 |
2,200 |
2,000 |
2,000 |
|
Personal Services |
(1235) Supplemental Life Insurance |
- |
1,800 |
2,000 |
2,000 |
|
Personal Services |
(1226) Life Insurance |
252 |
300 |
- |
- |
|
Personal Services |
(1229) Other Administrative Cost |
- |
200 |
- |
- |
|
Personal Services Total |
659,112 |
747,700 |
750,000 |
826,000 |
|
|
Contractual Services |
Other |
36,141 |
54,100 |
54,000 |
57,000 |
|
Contractual Services |
Travel |
16,419 |
9,600 |
15,000 |
10,000 |
|
Contractual Services |
Educational |
10,605 |
3,300 |
9,000 |
3,000 |
|
Contractual Services |
Communications |
3,759 |
3,000 |
3,000 |
3,000 |
|
Contractual Services |
Public Relations |
3,523 |
1,200 |
3,000 |
1,000 |
|
Contractual Services |
Service Contracts |
1,247 |
1,800 |
1,000 |
2,000 |
|
Contractual Services |
Printing & Publications |
1,826 |
100 |
1,000 |
- |
|
Contractual Services |
Professional Services |
354 |
- |
- |
- |
|
Contractual Services |
Insurance |
50 |
- |
- |
- |
|
Contractual Services Total |
73,924 |
73,100 |
86,000 |
76,000 |
|
|
Commodities |
Supplies |
4,490 |
6,300 |
6,000 |
6,000 |
|
Commodities Total |
4,490 |
6,300 |
6,000 |
6,000 |
|
|
Grand Total |
737,526 |
827,100 |
842,000 |
908,000 |
|
Q. What is the recent history of the Library Mill Levy?
A. The table below show the breakdown of the City mill levy rate since 2010. Note, renovation of the Library was funded by an increase to the mill levy rate in 2011 in the City’s Bond and Interest Fund. At that time, a commitment was also made to increase the mill levy rate 0.5 mill for operations of the larger Library facility. As shown below, the operating mill levy rate has been increased by more than 0.5 mill, with increases in 2011, 2013, 2014, and 2016. The current mill levy rate is 4.039 mills, which is below the Library’s mill levy rate is capped at 4.5 mills.
|
Tax Levy |
General Operating Fund |
Bond & Interest Fund |
Library |
Recreation |
Total |
|
2010 |
16.193 |
7.002 |
3.260 |
0.242 |
26.697 |
|
2011 |
16.639 |
8.510 |
3.463 |
28.612 |
|
|
2012 |
17.560 |
8.511 |
3.463 |
29.534 |
|
|
2013 |
18.017 |
8.513 |
3.512 |
30.042 |
|
|
2014 |
19.219 |
8.500 |
3.755 |
31.474 |
|
|
2015 |
19.227 |
8.504 |
3.757 |
31.488 |
|
|
2016 |
19.475 |
8.504 |
4.039 |
32.018 |
|
|
2017 (recommended) |
19.475 |
9.754 |
4.039 |
33.268 |
|
|
*The levy year is the year in which the mill levy is adopted. It is used to levy taxes for the budget for the following year. |
|||||
It should also be noted that in addition to increases in the mill levy rate, the Library has received increased revenues from growth in the assessed valuation. The table below shows Library expenditures since 2010.
|
2010 Actual |
2011 Actual |
2012 Actual |
2013 Actual |
2014 Actual |
2015 Actual |
2016 Actual |
2017 (Projected) |
2018 (Rec) |
|
$3,060,000 |
$3,070,000 |
$3,136,000 |
$3,243,260 |
$3,383,260 |
$3,550,000 |
$3,750,000 |
$4,131,000 |
$4,233,000 |
Q: According to the City’s CAFR, the City’s fund balance is nearly $50M and has been growing. Why is it so high and what it is growing for? If our fund balance policy says it should be between 15% and 30%, why is important to have a 25% fund balance? Could we spend down fund balance instead of increasing taxes?
A: The City’s total governmental fund balance at 12/31/2016 was $50,650,474, which was a reduction from the fund balance the end of 2015 of $50,893,559. Note, most of these funds are restriction in use.
The general operating fund audited fund balance at 12/31/2016 was $20,009,047. This is 29% of expenditures, which is an increase over the funds balance at the end of 2015. However, this increase was due to closing out the sales tax reserve fund and moving the balance from that fund into the General Fund. The 2017 revised budget as well as the proposed 2018 show an ending fund balance of 25% of budgeted expenditures.
The City’s current policy on fund balance only applies to the general operating fund. That policy suggests a 15%-30% fund balance should be maintained. However, as sales tax continues to become a larger percentage of the general fund revenue a good practice to have the fund balance percentage higher in the range. Staff has drafted a new fund balance policy reflecting the increase in sales tax within the general fund and the recommendation is to keep the fund balance percentage in the general fund at 25%. This policy will be presented to the Commission in the fall.
The recommended CIP includes $44M of general obligation debt to be paid from the Bond and Interest Fund. Any reduction in the recommended mill levy rate would require a significant adjustment to the projects in the CIP.