HomeMy WebLinkAbout2010 08-30 CCP Joint Work Session with Financial Commission i
Joint Budget Meeting
Monday, August 30, 2010
6:30 p.m.
City Council and Financial Commission
Council Chambers
1. Call to Order
2. General Fund Report and Review
a. Expected outcome
i. Review and provide direction regarding options to
eliminate the estimated General Fund budget gap
ii. Policy direction regarding establishing maximum levy
3. Review Next Steps
a. September 13, 2010, consideration of Preliminary Tax levy and
Preliminary General Fund Budget Resolution
b. October 18, 2010, Utility Funds, Rates, Enterprise Funds
c. November 22, 2010, Adopt Utility Rates, Pay Plan and Cafeteria
Contribution
d. November 29, 2010, 2011 Budget and Taxation Presentation and
Hearing
e. December 13, 2010, Adopt Final Tax Levy and Final Budgets
4. Adjournment
City Brooklyn y f n Center y
A Millennium Community
MEMORANDUM
TO: City Council and Financial Commission
FROM: Curt Boganey, City Managzr j
DATE: August 27, 2010
SUBJECT: General fund budget gap and alternatives
At the last budget review on August 16 2010, (minutes attached) we provided a draft
budget estimate $16,260,483 in total revenue and total expenditures of $16,778,644. This
of course resulted in a revenue short fall $518,181.
At the meeting I agreed to continue to look for further expenditure reductions and
additional ways to provide a balanced budget.
To date staff has identified ways to conservatively increase estimated Revenues by
$40,000 and to reduce expenditures by $50,000. With other minor corrections to our
original budget plan, we are left with a revenue shortfall of $ 423, 841.
To resolve the budget imbalance I have developed the follow options for your
consideration. These options are not listed in order of preference. And there are many
combinations that may be used.
Option 1
Increase the property tax levy by $ 423,841. This would result in an overall levy increase
of 3.12% from 2010 to 2011, compared to the 1.80% discussed earlier. The impact of
this levy change would vary between taxpayers depending on classification and valuation
change. The City tax resulting from the addition of $ 423,841 to the 1.80% levy increase
already iscussed would be $ 645.65 on the median valued home in 2011 compared with
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$ 637.84 in 2010; an increase of $ 7.81 or 1.2%. An overall levy increase of 3.12 /o
would exceed the rate of inflation, which would surpass the City Council's strategic goal
for property taxes.
Option 2
Eliminate the six vacant positions. Currently we have six vacant positions the cost of
these positions is estimated at $453,000. Removing these positions from the budget
would eliminate the gap. Unfortunately, this option would reduce service levels and the
achievement of high City priorities of public safety, code enforcement and
redevelopment.
6301 Shingle Creek Parkway Recreation and Community Center Phone & TDD Number
Brooklyn Center, MN 55430 -2199 (763) 569 -3400
City Hall & TDD Number (763) 569 -3300 FAX (763) 569 -3434
FAX (763) 569 -3494
www.cityofbrooklyncenter.org
Option 3
Use excess undesignated general fund reserves. Your policy (copy attached) allows for
the use of undesignated general fund reserves in excess of cash flow requirements (50 %-
52%) As general good fiscal policy the use of fund balance reserves to the extent possible
should be limited to non recurring operating expenses. For this reason I would
recommend that this approach should be limited to funding no more than the contingency
appropriation. In that past several years we have rarely had to use the contingency and
the most significant use was last year when the State reduced funding. Of course the State
may reduce funding again next year but we have been somewhat buffered against this by
limiting State General Revenue to 4.5% of revenue or $ 731,000.
If the undesignated fund balance is used for this purpose it would be unavailable for the
typical uses i.e. transfer to the Building Maintenance Program, Street Reconstruction
Fund, or Technology Fund
If undesignated fund balance is limited to $250,000 there would still be a
$ 173,841 revenue gap would remain. Filling this gap with a levy increase of $173,841
would result in a City property tax bill of $ 629.20 for the median residential home in
2011 compared to a $637.84 tax in 2010.
Option 4 — City Manager preferred option
I believe that the best option would be a combination that would resemble the following:
Use a vacancy factor of $ 226,000. This approach would allow filling three of the current
most critical vacant positions. 1 Police Officer, 1 Planning Official, 1 Code Enforcement
staff support position. This would leave three positions, 1 Patrol Officer, I Housing
Standards Inspector and 1 Maintenance II position vacant. During any given year we will
experience vacancies that result in budget savings which is what the vacancy factor
represents. As new vacancies arise the most mission critical positions will be filled first.
At the same time during 2010 we will identify at least one regular full time position to be
eliminated, ideally through attrition if possible up to three positions will be identified and
removed from future budgets.
The remaining gap of $ 197,841 may be filled by either a levy increase, which would
result in a median residential household City Tax of $ 630.83 compared to $637.84 in
2010. Alternative we could use undesignated fund balance or a combination of the two.
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MINUTES OF THE PROCEEDINGS OF THE CITY COUNCIL
OF THE CITY OF BROOKLYN CENTER IN THE COUNTY
OF HENNEPIN AND THE STATE OF MINNESOTA
JOINT WORK SESSION WITH FINANCIAL COMMISSION
AUGUST 16, 2010
CITY HALL - COUNCIL CHAMBERS
CALL TO ORDER
The Brooklyn Center City Council met in Joint Work Session with the Financial Commission and
the session was called to order by Mayor Tim Willson at 6:33 p.m.
ROLL CALL
Mayor Tim Willson and Councilmembers Kay Lasman, Tim Roche, Dan Ryan, and Mark Yelich.
Also present: City Manager Curt Boganey, Fiscal and Support Services Director Dan Jordet, and
Deputy City Clerk Maria Rosenbaum.
Others present were Financial Commissioner Philip Berglin, Rex Newman, and Dan Schueller.
GENERAL FUND REPORT AND REVIEW
City Manager Curt Boganey discussed staff had been developing, at the direction of the Council, a
budget that would proceed with an increase in property taxes of 1.8 percent overall and a 4.5
percent cap on General State Aid in the General Fund. The outcome of the discussions and reviews
with Department Heads has brought the following 2011 General Fund Budget summary as of
p g g g �'
August 12 2010 to the following:
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Total revenue of $16,260,483, a revenue growth of $270,905 (1.69 percent change)
Total expenditures of $16,778,664, an expenditure growth of $789,086 (4.94 percent
change)
Resulting in a ($518,181) budget gap.
Fiscal and Support Services Director Dan Jordet outlined the materials that provided General Fund
Revenue comparisons along with functional and expenditure use comparisons for 2010 and 2011. It
was noted that the increase of $761,728 in taxes was not all property taxes and that approximately
only $302,000 was property taxes which was 2.4 percent more than 2010. The City is expecting
that there will be market value homestead credits coming back and that is included in the increase
for taxes.
08/16/10 -1-
There was discussion regarding some of the line items for both the functional and expenditure uses
and it was noted that it is being proposed to keep operating at current levels and to maintain
services; however, there is the gap that needs to be addressed. It was also noted as part of this
discussion that Project Peace should be contacted about coming before the City Council to provide
an annual report since they do have a significant increase proposed from last year.
City Manager Boganey added that between now and the next budget meeting staff will continue to
look at ways to help with reductions; however, staff needs to get more feedback on how the Council
would like to handle the gap. There were discussions regarding staff reductions, furloughs, and
early retirements and there was consensus staff reductions are not favorable.
Mayor Willson asked for documentation with average and median property tax comparisons for
future discussions.
It was noted there was a typo on page 8 of the agenda materials and the dollar amount for Local
Government Aid should be $200,000, not $0.
ADJOURNMENT
Councilmember Roche moved and Councilmember Ryan seconded to adjourn the Work Session at
8:19 p.m. Motion passed unanimously.
08/16/10 -2-
SECTION H - GENERAL POLICIES
City Council Code of Policies
3. On all projects, at least 50% of the principal shall be retired within ten
years.
4. The City will make every attempt to keep the average maturity of General
Obligation Bonds at or below 20 years.
5. Total debt service payments 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 outstanding 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, official statement, and bond
prospectus.
10. Direct net -debt (gross debt less debt fully supported by non - property tax
revenues) per capita shall not exceed $600 per capita.
11. The City will require Minimum Assessment (Taxable_ Valuation)
Agreements on all projects in which the City is providing development
assistance through tax increment financing or committing its bonding
authority. This will ensure minimal cash flow (increment) to repay
obligations, provide another level of review before commitment (by the
City Assessor), and to the minim value agreed upon, eliminate tax
appeals during the agreement period.
12. For purposes of this section, tax increment revenues are classified as a
non - property tax revenue source.
D. Reserve Policies
1. The City shall manage its cash flow needs by having a target unreserved
and undesignated General Fund balance at the close of each fiscal year of
50 to 52% of the next year's General Fund operating budget.
�L. 2. Undesignated General Fund monies that are not required for cash flow
purposes may be transferred into other funds as may be appropriate or
needed during the fiscal year. It is specifically anticipated that transfers
will be made to the Street Reconstruction Fund, Capital Improvements
City of Brooklyn Center 10/23/06 Page 226
SECTION II - GENERAL POLICIES
City Council Code of Policies
Fund, and the Technology Fund when operating results generate a surplus
of actual revenues over actual expenditures to serve as a recurring source
of funding for those three funds.
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% 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 in conformance with generally accepted accounting principles.
2. The accounting system will maintain records on a basis consistent with
accepted standards for local government accounting using GASB 34 as the
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 as determined by the prior year's
Comprehensive Annual Financial Report.
City of Brooklyn Center 10/23/06 Page 227