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HomeMy WebLinkAbout1992 01-06 FTFA• MEETING NOTICE FINANCIAL TASK FORCE MONDAY, JANUARY 6, 1992 7 P.M. CITY COUNCIL CHAMBERS BROOKLYN CENTER CITY HALL 1. Public Works Department Presentation 2. Financial and Service Prioritization Process 3. Financial Management Policy - Fund Balance Section 4. Proposed 1992 Meeting Dates ENCLOSURES: Minutes of December 9, 1991, meeting Public Works Department Information Draft of Financial and Service Prioritization Process Draft of Financial Management Policies • DRAFT 12/11/91 • CITY OF BROOKLYN CENTER FINANCIAL AND SERVICE PRIORITIZATION PROCESS The Brooklyn Center City Council has appointed a Financial Task Force to review the city's financial planning, budget and service provision and report to the City Council. The Financial Task Force has presented to the City Council the attached interim report which was received by the City Council on November 25, 1991. As a part of that report the Task Force recommended the establishment of a financial and service prioritizing process to commence in January or February of 1992, the purpose of which is to establish budgetary priorities to suggest to the City Council should further budget reductions be necessary. While the Task Force is focusing on the financial problems of the city we may also have opportunities come available to us. Present and past City Councils, management and employees should be proud of their track record and look forward to improving upon it. If the City Council is to make informed and intelligent decisions regarding the future of the city's finances and its services they will need a citizen involved priority process which is being suggested in the following document. BACKGROUND The opportunity of challenge facing us is to set a tone and direction for Brooklyn Center city services in the 1990s. As we think about our future we need to keep in mind our past, and understand it thoroughly. Brooklyn Center has always had a positive attitude and we believe we should continue our "can do attitude" as it relates to city services and finances. Whatever problems we encounter the City Council and staff, working with citizens, should be able to figure a way to solve those problems. Over the years Brooklyn Center has enjoyed the availability of necessary resources to take care of citizen's needs. These resources were provided through small tax increases and sustained property tax base growth which created additional revenues for the city. In addition to these sources we have received local government aids from the State of Minnesota. The city's rate of growth peaked in the mid 1980s and has slowly declined since. The decline is not necessarily a result of anything negative but rather was controlled primarily by the fact that the city was beginning to reach full development, both commercially and residentially. The newest comprehensive plan figures indicate Brooklyn Center is 98% developed. Brooklyn Center has basically changed in the 1980s from a "growth" to a "maintenance" mode. Redevelopment rather than development will be our future focus. We are and will be facing issues such as redevelopment, an increased emphasis on maintenance, and changing demands for services. As we enter into the 90s we have trends and issues which will be impacting upon us which may well be beyond our influence and control. However we can choose to react to these trends and issues in a positive and proactive manner. Some of these issues and trends include the following: • -1- DRAFT 12/11/91 1. A leveling of development activity. 2. Continuing inflation. 3. A slowing of the economy on a local, state and national level. 4. Credit restrictions and changes in the banking industry have contributed in a slowed development and redevelopment market. 5. There have been changes in tax incentives for commercial and apartment property owners. 6. State property tax levy limits. 7. Private developers have "overbuilt" office and commercial property in the metro area. 8. Rental apartment market is depressed. 9. Unfunded state and federal mandates. 10. Changing demographics involving population, age and culture. The options facing local government policy makers seem to be to raise taxes, reduce services, create new revenue sources, and provide service at reduced cost. In an effort to bring together the thinking of the City Council, city staff and our citizens it is necessary to develop a financial and service prioritization process. The goal of this process is to provide a plan which allows systematic and phased cost reductions and/or revenue enhancements which result in permanent budget impacts of approximately $1,000,000 for 1993. While it may not be necessary to implement all of the proposed reductions it is prudent to develop a plan given our current financial environment. One of the most difficult aspects of developing cost reduction strategies is the realization there are not always ways to reduce cost and yet maintain the same level of service. The City Councils and staff have traditionally worked very hard over the past years to keep tax increases to a minimum. We now find ourselves at a point where insignificant reduction in the future will impact service levels. PURPOSE AND OBJECTIVE The purpose of this process is to provide options for the City Council to consider as a means to reduce and/or contain costs in 1992 and subsequent budgets. It is further intended to set the direction for service levels throughout the 1990s. The objectives identified for this process are as follows: 1. Opportunity for City Council, staff and community to examine municipal services for the 1990s. 2. Provide information to staff, citizens and Council on why we are facing these challenges and opportunities. • -2- DRAFT 12/11/91 • • • 3. Opportunity to involve employees in the organization to create innovative ideas for service delivery and cost reductions. 4. Evaluate everything we do and how we do it. 5. Prioritize work functions and services. 6. Provide a variety of options for costs reductions. 7. Review all fees, and determine ranking and market. 8. Position the organization to provide services for the 90s given Brooklyn Center's and the State of Minnesota's financial environment. As a part of this process the City Manager will meet with all department heads and discuss this process. The following will be the directions given to each department head: 1. Develop employee involvement process to generate ideas on cost reductions and revenue enhancements. 2. Review all areas of the budget to reduce total tax dollars and costs. 3. Review how we operate and look at our processes and operation creatively in light of the need to cut costs. 4. Reduce overtime whenever and wherever possible. 5. Review training, schools, and conference costs for possible savings. 6. Charge fees wherever possible and Brooklyn Center fees should be in the third quartile of the market. 7. Recover all costs whenever and wherever possible. 8. Service reductions: a. Only if it results in cost reduction. b. Only if it creates staff time saved to be spent on higher priorities. 9. Departmental strategies will be submitted with prioritized cost reductions and/or revenue enhancements which reduce each department budget by at least 10% (all cost reductions will be accompanied by a service impact statement). METHODOLOGY An important element in this process is that department heads make every effort to involve as many employees as possible in developing strategies to deal with the necessary cost reductions. Once staff ideas are generated, clarified and reviewed they are to be included in department strategies. Strategies developed will be received from each of the city departments and are to be reviewed by the department heads, City Manager and Finance Director. In some instances additional strategies will be identified and added as appropriate. The information will then be placed in a report format. The Financial Task Force will review, comment, make recommendations and monitor the process. The City Manager will, at periodic intervals during the development of departmental strategies, report to the Financial Task Force and City Council. The final report to the City Council shall -3- DRAFT 12/11/91 10 document departmental strategies City Manager's recommendations and Financial Task Force Recommendations. The timing of this process is as follows: 1. Development of Departmental Strategies January 15 - March 15, 1992 2. City Manager Recommendations March 15 - April 15, 1992 3. Advisory Commission Recommendations April 15 - May 15, 1992 4. Financial Task Force Recommendations April 15 - May 15, 1992 5. City Council Consideration June 15 - July 15, 1992 6. Preliminary Budget & Levy Deadline August 31, 1992 7. City Manager's Proposed 1993 Budget to City Council September 15, 1992 8. City Council Budget Work Session October - November 1992 9. Public Hearings on 1993 Proposed Budget December, 1992 Because during the period of January 15 through June 15, 1992, the City staff, Commissions and Financial Task Force should be concentrating as much as possible on this process, the City Council should as much as possible minimize the number of special projects assigned to these groups. • 0 -4- City of BROOKLYN CENTER, MINNESOTA PROPOSED FINANCIAL MANAGEMENT POLICIES 1. PURPOSE DRAFT The City of Brooklyn Center has a responsibility to its citizens to carefully account for public funds, to manage municipal finances wisely, and to plan the adequate funding of services desired by the public, including the provision and maintenance of public facilities. The City also has the responsibility to its citizens to provide both short-term and long-term future financial stability. The City must ensure that it is capable of adequately funding and providing local government services needed by the community. Further, the financial policies set forth herein, provide the basic framework for the overall fiscal management of the City. Operating independently of changing circumstances and conditions, these policies assist the decision making process of the City Council and Administration. Most of the policies represent long standing principles, traditions and practices which have guided the City in the past and have helped maintain financial stability over the past years. These financial policies will be reviewed periodically to ascertain if modifications are necessary. II. OBJECTIVES In order to achieve this purpose, this plan has the following objectives for the City's fiscal performance: 1. To protect the City Council's policy-making ability by ensuring that important policy decisions are not controlled by financial problems or emergencies and to prevent financial difficulties. 2. To provide sound principles to guide the important decisions of the City Council and of management which have significant fiscal impact and to enhance the City Council's policy-making ability by providing accurate information on program costs. I To set forth operational principles which minimize the cost of local government, to the extent consistent with services desired by the public and which minimize financial risk. . 4. To employ revenue policies which prevent undue or unbalanced reliance on certain revenues, especially property taxes; which distribute the costs of municipal services December 9, 1991 -1- DRAFT fairly; and which provide adequate funds to operate desired program and assist sound management of the city government by providing accurate and timely information on financial conditions. 5. To provide essential public facilities and prevent deterioration of the City's public facilities and its capital plant. 6. To protect and enhance the City's credit rating and prevent default on any municipal debts. 7. To ensure the legal use and protection of all City funds through a quality system of financial and internal controls. 8. The City Will maintain a Risk Management Program that will minimize the impact of legal liabilities, natural disasters or other emergencies. III. FINANCIAL MANAGEMENT POLICIES A. Capital Improvement Budget Policies 1. The City will make all capital improvements in accordance with an adopted Capital Improvement Budget. 2. The City will develop a multi-year plan for capital improvements and update it at least biennially. 3. The City will enact an annual Capital Budget based on the multi-year capital improvement plan. Future capital expenditures necessitated by changes in population, changes in real estate development, or changes in economic base will be calculated and included in Capital Budget projections. 4. The City will coordinate development of the Capital Improvement Budget with the development of the operating budget. Future operating costs associated with new capital improvements will be projected and included in operating budget forecasts. 5. The City will use intergovernmental assistance to finance only those capital improvements which are consistent with the adopted capital improvement plan and City priorities, and for which operating and maintenance costs have been included in operating budget forecasts. 6. The City will project its equipment replacement and maintenance needs for the next several years and will update this projection each year. From this projection, • a maintenance and replacement schedule will be developed and followed. December 9, 1991 DRAFT 7. The City staff will identify the estimated costs and potential funding sources for each capital project proposal before it is submitted to the City Council for approval. 8. The City will determine the least costly financing method over the length of all new projects. B. Revenue Policies 1. The City will attempt to maintain a diversified and stable revenue system to shelter it from short-run fluctuations in any one revenue source and to minimize property taxes. 2. The City will estimate its annual revenue by an objective conservative analytical process. 3. The City will project revenues for the next three years and will update this projection annually. Each existing and potential revenue source will be reexamined annually. 4. The City will maintain sound appraisal procedures to keep property values correct. Property will be assessed at the legally mandated market value for each type of property. Reassessments will be made of all property at least every four years. 5. The City will follow an aggressive policy of collecting property tax revenues. The annual level of uncollected property taxes should generally not exceed two percent. 6. Each year the City will recalculate the full costs of activities supported by user fees to identify the impact of inflation and other cost increases. 7. The City staff will recommend revised user fees with review by the City Council on an annual basis, to adjust for the effects of inflation on the City's cost of providing services. 8. The City will set fees and user charges for each Enterprise Fund, such as Water and Sewer, at a level which fully supports the total direct and indirect costs of the activity. Indirect costs include the cost of annual depreciation of capital assets. 9. The City will set fees and user charges for activities, such as recreational services, at a level to support the direct costs of providing the services for all programs, except those oriented to the youth and/or senior citizen population and to realize programmatic expectations. The City will establish user charges and fees at a level related to the full cost of providing the service, including indirect costs, for all other activities. December 9, 1991 -3- • C. Debt Policies DRAFT 1. The City will confine long-term borrowing to capital improvements or projects which cannot be financed from current revenues. 2. When the City finances capital projects by issuing bonds, it will pay back the bonds within a period not to exceed the expected useful life of the project. 3. On all projects, at least 50% of the principal shall be retired within ten years. 4. The City will attempt to keep the average maturity of General Obligation Bonds at or below 20 years. 5. Total debt service for General Obligation debt will not exceed five percent of total annual locally generated operating revenue in the general, special revenue, and proprietary funds. 6. Total General Obligation debt will not exceed two percent of the market valuation . of taxable property. 7. Where possible, the City will use special assessment, revenue or other self-supporting • bonds instead of General Obligation Bonds. 8. The City will not incur debt to support current operations. 9. The City will maintain good communications with bond rating agencies regarding its financial condition. The City will follow a policy of full disclosure in every financial report and bond prospectus. 10. Direct net-debt (gross debt less debt fully supported by revenues) per capita shall not exceed $600 per capita. D. Reserve Policies 1. The City will maintain an undesignated and unreserved General Fund balance in an amount determined by applying the Adequate General Fund Balance Policy Fonnula as established by the City Council. The formula shall be reviewed annually by the City Council. The formula shall be designed to establish a fund balance at a level which is sufficient to avoid issuing debt to meet current operating needs. 2. The City will annually appropriate a contingency appropriation in the General Fund budget, not to exceed five percent of the total budget, to provide for unanticipated . expenditures of a non-recurring nature. December 9, 1991 -4- DRAFT 3. If the City Council deems it appropriate to reduce fund balances for the portion above the formula amount, such reductions shall not exceed 50% of the excess for one year. 4. The amount of General Fund balance appropriated to the current year budget shall not exceed the estimated excess of revenue over expenditures for the previous year. E. Investment Policies 1. The City will make cash flow analysis of all funds on a regular basis. Disbursement, collection and deposit of all funds will be scheduled to ensure maximum cash availability. 2. When permitted by law, the City will pool cash from several different funds for investment purposes. 3. The City will. invest at least 98 percent of its idle cash on a continuous basis. 4. The City will analyze market conditions and investment securities to determine what yield can be obtained, and attempt to secure the best possible return on all cash • investments. 5. The City's accounting system will provide regular information concerning cash position and investment performance. 6. The City will maintain a formal written investment policy which will contain legal and administrative guidelines necessary to ensure that the City's available funds will be invested to the maximum extent possible, at the highest rates obtainable at the time of the investment, consistent with minimizing credit and market risk and which provides proper safeguards for the keeping of the City's investments F. Accounting, Auditing and Financial Reporting Policies 1. The City will establish and maintain a high standard of accounting practices. 2. The accounting system will maintain records on a basis consistent with accepted standards for local government accounting using a modified accrual basis of accounting for all governmental funds and an accrual basis of accounting for Enterprise and Internal Service Funds. Accounting policies will reflect the principle of charging current taxpayers and/or users for the full cost of providing current services. 3. Regular monthly and annual financial reports will present a summary of financial activity by major types of funds. December 9, 1991 - 5 - DRAFT • 1. Where possible, the reporting system will provide monthly information on the total cost of specified services by type of expenditure and, if necessary, by fund. 5. An independent public accounting firm will perform an annual audit and will publicly issue an opinion concerning the City's finances. G. Risk Management Policies 1. The City Will maintain a Risk Management Program that will minimize the impact of legal liabilities, natural disasters or other emergencies through the following activities: ■ Loss Prevention - Prevent negative occurrences. ■ Loss Control - Reduce or mitigate expenses of a negative occurrence. ■ Loss Financing - Provide a means to finance losses. ■ Loss Information Management - Collect and analyze relevant data to make prudent loss prevention, loss control and loss financing decisions. 2. The City's Risk Management Program will: a. Analyze all of the City's risks. b. Avoid risks whenever possible. • c. Reduce risks whenever possible. d. Transfer risks to other entities when possible. C. Of those risks that must be retained, it shall be the City's policy to fund risks which the City can afford and transfer all other risks to insurers. 3. The City will maintain an active Safety Committee comprised of City employees. 4. The City will periodically conduct educational safety and risk avoidance programs, through its Safety Committee and with the participation of its insurers, within its various departments. 5. The Safety Committee will report to the City Manager, at least annually, on the results and costs of the City's Risk Management Program for the preceding year. The City Manager shall report annually to the City Council. H. Operating Budget Policies 1. The City will pay for all current expenditures with current revenues. The City will avoid budgetary procedures that balance current expenditures at the expense of meeting future year's revenues, or rolling over short-term debt, or that rely on accumulated fund balances to meet current obligations. 2. The budget will provide for adequate maintenance of the capital plant and equipment, and for their orderly replacement. December 9, 1991 -6- { DRAFT • 3. The budget will provide for adequate funding of all retirement systems. 4. The City will maintain a budgetary control system to assist in adhering to the budget. 5. The City administration will prepare regular monthly reports comparing actual revenues and expenditures to the budgeted amount. 6. Each year the City will update expenditure projections for its Enterprise Funds for the next three years. Projections will include estimated operating costs of future capital improvements included in the Capital Budget. 7. The Operating Budget will describe the major goals to be achieved, and the services and programs to be delivered for the level of funding provided. 8. Where possible, the City will integrate performance measurement and productivity indicators with the budget. 9. Enterprise funds shall be budgeted to have positive net income plus a sufficient margin to provide for replacement cost of property, plant, and equipment. • L Ethics Policy The City will maintain, and periodically review, a formal written ethics policy for all City employees and elected officials. J. Role of Auditors The City's independent auditors shall be required, in the course of their audit, in the form of their management letter, to report any conditions that appear to be violations of our financial management policy. • December 9, 1991 -7- 0 FINANCIAL TASK FORCE PROPOSED 1992 MEETING SCHEDULE January 6, 1992 - Monday - 7 p.m. January 22, 1992 - Wednesday - 7 p.m. February 3, 1992 - Monday - 7 p.m. February 19, 1992 - Wednesday - 7 p.m. March 2, 1992 - Monday - 7 p.m. March 16, 1992 - Monday - 7 p.m. March 30, 1992 - Monday - 7 p.m. • 0