2015 Preliminary Budget and LevyCITY OF HOPKINS FINANCE DEPARTMENT
MEMORANDUM
Date: August 5, 2014
To: Mayor & City Council
From: Christine Harkess, Finance Director
Subject: 2015 Budget
Staff has been working to put together a 2015 budget based on the needs of the community and
the services they have come to expect. The 2015 budget is prepared using the Financial
Management Plan approved in February 2014; it includes an estimated 2% salary increase that
will need to be negotiated as all five union contracts are open this year and minimal increases in
general operating support.
2015 Budget Info
The budget as it is currently presented is a 3.66% increase over 2014. As a comparison
2014 had a 3.46% increase.
o The increase is consistent with the FMP
Tax Levy
o We are not subject to a levy limit in 2015
o We are receiving $388,602 in LGA which is a $98,702 increase over 2014
o Arts Center and Pavilion levies added per FMP
o Debt service levies adjusted per FMP
Attached are the following:
1. 2015 Budget — items impacting the budget
2. 2015 preliminary Budget power point slides
3. 2014 Preliminary Tax Levy
4. Summary of Financial Management Plan — talking points
Items that impact the 2015 budget
Revenues
• The City will receive LGA and $388,602 has been budgeted.
• City Clerk — revenues from local elections has been added
• Police — Federal participation in the COPS grant is completed.A
• Police — Police Aid for police pensions increased
• Fire — Fire Aid for fire pensions increased.. These funds once received are turned over to
the Fire Relief Association.
Expenditures
0 General
o All five union contracts are open. We have tentatively budgeted 2% as that seems
to be what many cities are budgeting
o Health insurance premiums are increasing
o PERA for all but police & fire increases by 0.25% for both employer and
employee contributions
• IT — replacement parts for existing equipment has outstripped the budget so it was
adjusted upwards.
• Finance — Audit costs were increased
• Legal — increased prosecutions decreased legal services.
• Receptionist — salaries & benefits
• Assessing — Hennepin County assessing contract increased by $9,000.
• City Clerk — salaries & adjusted budget to account for a local election in 2015
• Fire — Increased payment to Relief Association as an offset to increased revenues.
• Public Works
o Building — increased electricity expense.
o Equipment Services — property insurance increased
o Streets & Alley's — PT salaries increased $6,500, street material & supplies
increased due to increased cost of materials
o Snow Removal — motor fuels.
o Parks — PT personnel increased $9,500, contractual services for Excelsior Blvd
maintenance, STS contract, irrigation, property insurance
Recreation — Joint recreation was increased by $1,400.
o Joint Rec continues to provide $15,000 in support to the Depot.
o Personnel costs adjusted
Activity Center — heating fuel costs.
Contingency — increased due to uncertainty with regards to union contracts
Other Items of Note:
0 Personnel related costs comprise 77% of the budget with no adjustments for health
insurance.
Health insurance for retirees is currently at 16 retirees. Two aged out in 2014 and two
new came on in 2014. The cost is again decreasing as some of the older retirees on the
full benefit plan age out. Currently we will save $3,820 over 2014.
8/5/2014 Paget
2015 Preliminary Budget and Levy
• 2015 Preliminary General Fund Budget
— Prepared according to Financial Management
Plan
• 8-13-13 Kick off Meeting to discuss FMP concepts
• 10-8-13 Draft FMP presented
• 1-14-14 Updated FMP presented
• 2-18-14 Final FMP presented and approved
• 2015 Preliminary General Fund Budget -
continued
— LGA totals $388,602, a $98,702 increase
— Police & Fire aid increased
— General Fund budget increase of 3.66%
— Levy is in line with the Financial Management
Plan adopted in 2014
• 2015 Budget Impacts
— Salary adjustments including state mandated
increases in PERA
— Health insurance
— COPS grant is completed
—All five union contracts are open
• 2015 General Fund Expenditures
General Government
Community Services
Public Safety
Public Works
Recreation
Comm Dev & Planning
Other
50,200 175,200 249.00%
$10,946,129 $11,346,716 3.66%
• 2015 General Fund Expenditures
2014
2015
Change
$1,319,927
$1,371,752
3.93%
945,429
981,780
3.84%
5,439,659
5,497,877
1.07%
2,384,144
2,503,936
5.02%
586,329
589,560
0.55%
220,441
226,611
2.80%
50,200 175,200 249.00%
$10,946,129 $11,346,716 3.66%
• 2015 General Fund Expenditures
• 2015 General Fund Revenues
• 2015 General Fund Revenues
General Fund
2014
2015
Change
Property Taxes
$8,952,774
$9,307,729
3.96%
Intergo\/fl Revenue
813,410
843,112
3.65%
License, Permits & Fin,
564,395
569,975
0.99%
Charges for Service
201,250
209,300
4.00%
Miscellaneous
399,300
401,600
0.58%
Interest
15,000
15,000
0.00%
Total
$10,946,129
$11,346,716
3.66%
• 2015 General Fund Revenues
• 2015
$9,224,729
9,295,873
Purpose
$53,000
General Operations
Tax
General Fund
85,000
Capital Levy
Levy
Arts Center Levy
0
Pavilion Levy
35,500
PERA Levy
9,463,229
Subtotal
188,093
Special Levies:
183,971
2007B GO ImprovRevolving Bonds
765,808
2007 Capital Improvement Bonds
79,175
2010A GO Improvement Bonds
82,194
2012A GO CIP Bonds
220,000
2012B GO Bonds
55,090
2012B Equipment Certificates
70,000
2013A GO Improvement Bonds
96,285
2014A GO Bonds
15,028
Subtotal Special Levies
2015
Net Levy
2014 Proposed Per FMP
$8,869,774
$9,224,729
9,295,873
125,000
$53,000
53,000
0
$85,000
85,000
0
$65,000
65,000
0
$35,500
35,500
8,994,774
9,463,229
9,534,373
188,093
183,971
183,971
766,110
765,808
765,808
79,175
82,194
82,194
220,000
220,000
220,000
55,090
70,000
70,000
97,965
96,285
97,965
15,028
75,000
75,000
0
88,471
88,471
1,421,461
1,581,729
1,583,409
TOTAL LEVY $10,416,235 $11,044,958 $11 11
,7,782
• Tax Impact on Average Home ($225k)
- FMP originally scheduled at $89 increase
- Reduced levy from FMP recommendation
- Increase now at $78 on an average home
• What this budget/levy gives us:
— Funding for road projects
— Funding to reduce the Arts Center deficit
— Funding for Pavilion operations
— Funding for debt service requirements
— Funding for general city operations
2015 TAX LEVY
Purpose
2014
General Operations
765,808
General Fund
$8,869,774
Capital Levy
125,000
Arts Center Levy
0
Pavilion Levy
0
PERA Levy
0
Subtotal
8,994,774
Special Levies:
2007B GO Improv Revolving Bonds
2007 Capital Improvement Bonds
2010A GO Improvement Bonds
2012A GO CIP Bonds
2012B GO Bonds
2012B Equipment Certificates
2013A GO Improvement Bonds
2014A GO Bonds
Subtotal Special Levies
TOTAL LEVY
2015
Net Levy
Proposed
$9,224,729
$53,000
$85,000
$65,000
$35,500
9,463,229
188,093
183,971
766,110
765,808
79,175
82,194
220,000
220,000
55,090
70,000
97,965
96,285
15,028
75,000
0
88,471
1,421,461 1,581,729
$10,416,235 $11,044,958
Per FMP
9,295,873
53,000
85,000
65,000
35,500
9,534,373
183,971
765,808
82,194
220,000
70,000
97,965
75,000
88,471
1,583,409
$11,117,782
Financial Management Plan
Traditionally cities have taken a short term view for financing city operations. The one year budget is still
the norm for most cities. In the 1980s the City of Hopkins did begin to use more long term planning for
large expenditures such as construction projects and large pieces of equipment. The City, however,
continued to use one year budgets for its day to day operations.
Long term planning is becoming the industry standard. Rating agencies, such as Standard and Poor's, like
multi-year plans when assessing the financial health of a city. A better credit rating can result in lower
borrowing costs. Long term planning can also help the City spot trends that could adversely affect the
budget.
During the preparation of the Financial Management Plan, the City looked at overall tax capacity, the
general fund balance, what the tax levy pays for, historic and projected tax rates, projected tax impacts
on an average home, existing debt and new debt. Two specific issues that needed to be addressed
concerned the Center for the Arts and the Ice Arena/Pavilion.
Historically, the Center for the Arts received a subsidy from the Economic Development Fund. The
reason behind this was that the Center has an impact on the economic health of the City and the
downtown area in particular. However, devoting these funds to the Center meant that there were fewer
resources to devote to other development projects in the City. According to the adopted Financial
Management Plan, this subsidy will be replaced by supplemental funding through the General Fund in a
manner similar to the Activity Center.
The Ice Arena/Pavilion actually pays for its day to day operations through fees which are charged to the
users. The Pavilion, however, will soon be 25 years old. An aging infrastructure and changes to federal
and state rules regarding ice arenas will require significant capital expenditures. General fund dollars
will have to be used to supplement the user fees in order to keep this facility operating into the future.
The Financial Management Plan also maintains a balance in the Capital Equipment Fund of $750,000 and
$300,000 in the Capital Improvements Fund. The Plan also calls for slowly increasing the general fund
balance. While the initial plan shows that the overall financial health of the City is good, annual levy
increases for the next 8 years (2015-2022) will be needed. The planned levy increases should be less
than $100 per year for an average valued home.
The Financial Management Plan will get updated every year and will be a tool to assist the Council and
staff in making decisions at budget time. Having a vision and planning for the future is important in
shaping the direction of the city. The Plan will ensure that money is available to finance needed road
construction, capital equipment and maintenance of City owned facilities. It also provides adequate
reserves/fund balances and it reduces the need for future borrowing.