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<br />Memo <br />Financial Management Plan Update <br />2 <br /> <br />3) Future Cash Flows of Streets and Equipment (PIR Fund) - The preliminary cash flow <br />shows that the balance in the PIR Fund will decline from over $6M to $3M. What is a <br />reasonable minimum balance in this fund? What revenue sources should be utilized in <br />this fund in the future? Does the Council want to budget a transfer to this fund as a <br />regular operating transfer? <br />4) Establishment of a separate Capital Equipment Fund and Park Improvement Fund. Most <br />cities have a separate fund and budget specifically for capital equipment replacement <br />from the general fund. Combining the construction projects for streets, park <br />improvements, and equipment in one fund, makes it unclear what the funds are being <br />used for and makes it difficult to budget. By separating these funds, staff will be better <br />able to manage these funds and answer questions, and it will give the Council a better <br />planning tool in CIP discussions. Once we establish a reserve policy for capital <br />equipment, annual transfers would make certain that we would have the funds when the <br />equipment was needed, thus avoiding the peaks and valleys in the budgets from year to <br />year. Does the Council want to establish these types of capital funds? Staff <br />recommendation is to establish separate funds. <br />5) Conservative estimates were used as assumptions in the model. <br />a. Investment interest - 2% <br />b. Intergovernmental revenues were left flat - no increase <br />c. Fiscal disparities were left flat - no increase <br />d. Revenue inflation rate 3% <br />e. Expenditure inflation rate 5% <br />Is the Council comfortable with these assumptions? <br />6) Policy decisions will need to be made on what to do when the TIF districts are <br />decertified. Does the Council want to let the increment revert back to the general tax <br />rolls as a reduction or do they want to budget that amount for a special purpose? One <br />district will decertify in 2009 and the other will decertify in 2015. Nothing need be done <br />now, but it should be discussed. (These could be possible funding sources for capital <br />reserves or parks.) <br />7) Policy decisions will also have to be made on where the City tax rate should be. <br />Direction from the Council has been that the new Financial Planning and Analysis <br />Committee (FP AC) is to work on this. Does the Council have any direction or <br />parameters for the FP AC? <br />8) Final work to be completed on the plan is in regard to the utility fund analysis. A rate <br />study was completed in 2004; however the financial plan will update and assist us in <br />determining whether additional changes are needed in 2008. An analysis of the current <br />funds and estimates will be provided at the work session. Staff is completing work on the <br />2007 1 st quarter results now that the unaudited 2006 numbers are available. Staff is also <br />studying the impact of the senior citizen discount and the possibility of a tier rate <br />structure. Currently the City does not charge a connection fee for either the water or the <br />sewer on new construction, only the Met Council fees are charged. Staff will bring a <br />comparison of other cities' connections charges to the work session for discussion. Once <br />staff has Council direction, this part of the plan can be completed and a rate study done. <br />