Loading...
HomeMy WebLinkAbout1E - 2009 Budget Discussion W orksession Item Prepared By: Sue Iyerson Council Meeting Date: May 19, 2008 2009 Preliminary Budget Discussion Budgeted Amount: $0.00 Actual Amount: $0.00 Funding Source: Source Staff is seeking direction from the Council as it continues with the 2009 budgeting process Supporting Documents: 1. Memo, Sue Iverson May 13, 2008 2. Utility Rate Study, Water and Sanitary Sewer prepared by Ehlers & Associates, Inc ~ ~HILLS MEMORANDUM DATE: May 13, 2008 TO: Honorable Mayor and City Council Sue Iverson, Finance Director ~ 2009 Preliminary Budget Discussion FROM: SUBJECT: BACKGROUND: The City staff is in the process of developing a Preliminary 2009 Budget. As we progress forward and take the necessary steps, staff needs general direction and guidance from the Council with regards to changes for the coming year, As of this time, there are no levy limits for 2009, but they are being discussed as part of the tax bill. The City is not under any legislatiye restrictions with regards to establishing a levy. As you may recall, there were no leyy limits for 2005,2006,2007 and 2008. A number of Ramsey County cities opted for double digit increases. A number of cities took advantage of the "no levy limit" to make up for the loss ofLGA and to undertake new projects. The Arden Hills City Council was prudent and limited the levy increase to 4% from prior years as they established levies for 2005,2006, and 2007. The City Council set a 4.6% levy increase in 2008 which resulted in a 3.5% decrease in the local tax rate. This allowed for some contingency reserves to be budgeted in 2008. In 2006 during the legislative session, there was discussion about "Turbo Tax" that would have restricted the cities from increasing the levy amount from prior year. Ifthis was to become law, cities would not have been able to increase the levy, unless a vote was taken, Fortunately, this discussion did not re-appear this year. Levy limits are again being talked about and current proposals haye them impacting cities with populations over 2,500 and beginning with the year 2010. There are stipulations in the House bill which would trigger leyy limits. Under these provisions, if leyy limits are triggered, levy limits would be calculated in a manner similar to previous levy limits. Levy limits are dependent on your previous year's levy, so in being prudent and conservative with setting your levy limit, you may limit yourself in subsequent years. The Council might want to consider looking at stabilizing the tax rate instead of levy limits for 2009. Memo 2009 Budget Memo 2 DISCUSSION: Preliminarily, staff has identified a number of factors that will influence the 2009 Budget. Some are identified as follows: . Tax Levy - what is the Council's comfort level? Last year was a 4.6% increase. Al % levy increase translates to approximately $25,000. Council may wish to consider a higher percent increase from prior years in the eyent there are levy limits. It may be more prudent to look at our tax rate instead ofthe levy. Excess funds can be contributed to contingency reserves, Parks, Public Safety Capital, or Utility Funds. . In talking with the financial advisors, staff, and looking at the current asset and equipment list, one of the areas which we need to address is setting up reserves for equipment replacement. Weare currently setting aside reserves for public safety equipment, but none has been set aside for public works equipment replacement, technology - such as computers, etc, Staff would recommend that we set up some funding source for reserves for equipment replacement and major building repairs. Council did authorize a new fund for this purpose last year and did authorize a transfer to this fund, but no dedicated fund sources have been established. . Another area where staff sees a need is in park funding, Park dedication fees are generally limited to capital improvements not general repair and maintenance items and they are not a steady stream of income. In looking at the [mancial plan, staff sees a need to set up a reserve for park improyements. This fund would then be a funding source for items which are included in the CIP. . Personnel- these issues will be addressed with the Council when we are further into the budget process. The new City Administrator will need time to evaluate the organization and propose any changes to the Council. . Oyerall budget increases - preferences/limits? . Salaries and Benefits. Last year, the Council authorized a market study which was implemented in December 2007. Future COLA increases will determine if we stay current with the market or fall behind. The union's labor agreement calls for a 3.0% in steps/COLA. · Increase in employee benefits costs (health and dental). We do not yet have preliminary numbers for these costs yet, but will be getting these in the next few months, Our insurance broker is going out to market to price rates and get quotes. We will compare this information to our current coverage and discuss with council at a future date, Until we get the actual numbers, a 15% increase will be used. The current City contribution towards health and dental is $648 per month. Over the past few years, the Council had approved budgeting for 50% of the increase in premium. In other words, the City equally shared the rate increase with the employees, Last year the Council approved budgeting for 50% of the increase, but also added an additional plan with a deductible at a lower cost (HSA). This plan was available to employees with the same City contribution as the co-pay plan, as they were taking on more of the risk, but participation in the plan would reduce city overall costs. Additionally, only those who took the new HSA plan are receiving the full City contribution ifthere is any remaining after health insurance premiums, this provided an incentive to employees to convert to the new plan. All but Memo 2009 Budget Memo 3 two employee have taken advantage ofthe plan to date, Would this be an appropriate formula to continue to use for budget purposes? . Update the five year CIP. The Council reviewed this in January and staff will update and bring to the Council at a later work session, . As a step in creating a quality budget document, performance measures/service indicators need to be established for each department. Some ofthese may come about as a result of the community survey as areas that the Council would like to improve. Goals and objectives also need to be established for each department. These would need to be established in 2009, then in subsequent years actual performance can be tracked to show progress against these goals. This would provide Council and the public another tool to eyaluate city services. Staff would appreciate input from the Council on this matter. RECOMMENDED ACTION: Staff is seeking direction from the Council as it continues with the 2009 Budgeting process.