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V.2. Approve Proposed 2015 Levy, Proposed 2015 General Budget and SEt Budget Meeting Date-4ca September 2, 2014 City offlopkims Council Report 2014-092 APPROVE PROPOSED 2015 LEVY, PROPOSED 2015 GENERAL FUND BUDGET AND SET BUDGET MEETING DATE Proposed Action Staff recommends adoption of the following motions: Move to approve Resolution 2014-047 "Approving proposed 2015 tax levy, debt service levies at levels under those required in the bond covenants, proposed 2015 general fund budget, and setting budget meeting dates". Adoption of resolution 2014-047 will set a maximum tax levy for 2015, will set debt levies at amounts sufficient to pay debt service requirements taking into consideration other revenue sources and fund reserves, and approve a proposed 2015 general fund budget. Actual budget and tax levy adoption will not occur until December 2014. Overview The City is required to certify a proposed tax levy and submit it to the county by September 30"'. There is also a requirement to hold a public meeting on the budget where public comments are taken. Staff is suggesting December 2, 2014 as an appropriate date to discuss the budget. This will allow us to take into consideration comments from the public prior to adopting the budget. If there are no changes to the proposed budget if can be approved at that same meeting. A proposed general fund budget has been established and is attached for your review. Adoption of the actual budget will occur in December 2014 following the public comment meeting, and at that time, the final levy may not exceed the approved proposed levy. The city council is charged with the authority to establish a budget for 2015 and set the preliminary levy. Levy limits were once again removed for 2015, however the Financial Management Plan adopted by the Council in February 2014 was the basis for establishing the levy and budget. Staff is recommending that council approve the resolution setting the proposed levy for general fund operations; approve the levy adequate for the payment of debt, and to set budget meeting dates as set forth in the resolution. Primary Issues to Consider • Legislative impacts • 2015 budget concerns Supporting Information • Power point presentation • 2015 proposed general fund budget 0 Resolution 2014-047 0 Financial Management Plan overview Christine M. Harkess. CPA, CGFM Finance Director Financial Impact: $ 11,346,716 Budgeted: Y/N X N Source: Taxes and other revenues Related Documents (CIP, ERP, etc.): 2015 bud et Notes: Staff Analysis • 2013/14 Legislative Actions Local government aid (LGA), a property tax relief program to cities, that ensures residents have access to basic services, regardless of where in Minnesota they live, was been reinstated for 2014. Our allocation was increased for 2015 by $98,702. We will be receiving $388,602 for 2015 with all of it going to the General Fund. The market value exclusion program that replaced the previous MVHC that homestead properties qualify for remains in place. Levy limits last repealed for 2005 were reinstated for the years 2009-2011, were repealed for 2012 and 2013 were reinstated for 2014 and once again removed for 2015. The option for a special PERA levy to cover state mandated employer PERA increases was removed for 2014 and once again allowed in 2015. • 2015 Levy The tax levy proposed totals $11,044,958 which includes levies for the General Fund, Arts Center, Pavilion and bonded debt. Details are included in the attached summary of tax levy. The Housing and Redevelopment Authority levy for 2015 is a continuation of the reinstatement of their past levy authority. The HRA levy is a separate levy that is shown separately on the tax statements under "Other Taxing Districts". • 2015 Budget Analysis The 2015 general fund budget, and the 2015 general operating tax is proposed at $11,346,716 and $11,044,958 respectively. The proposed levy based on the budget and FMP and can only be reduced from this point forward. The general fund budget is currently proposed to increase by 3.66% over the 2014 budget and is balanced. Expenditures include wage increase for employees, pension increases along with normal inflationary increases. Because we are a service related operation, salaries and benefits compose 78% of current general fund expenditures and any labor negotiations have a tremendous impact on the budget. The council and staff will continue to work on a final budget that will allow for essential programs and services to be accomplished. Attached to this report is a summary of 2015 general fund budget revenues by revenue type and expenditures by department. • 2014 Budget Meeting for the 2015 Budget and 2015 Tax Levy The 2009 Legislature made significant changes to the truth -in -taxation (TNT) requirements, essentially abolishing the old scheme. The new law now requires that on or before September 30th at a regularly scheduled meeting at which the city council adopts a proposed tax levy, the city council must also announce: The time and place of the council's next regularly scheduled meetings at which the budget and levy will be discussed and must not be held before 6 pm. The date and time of the regularly scheduled meeting at which a final budget and levy will be determined. That the public will be allowed to speak at these subsequent meetings. On or before September 30"', the time as place of regularly scheduled meetings dealing with the budget and levies must be included in the minutes. Therefore, staff is recommending the City Council budget meeting be set for December 2, 2014 with possible adoption of the final budget at that same meeting. CITY OF HOPKINS Hennepin County, Minnesota RESOLUTION NO. 2014-047 RESOLUTION APPROVING THE PROPOSED 2015 TAX LEVY, SETTING DEBT SERVICES LEVIES AT LEVELS UNDER THOSE REQUIRED IN THE BOND COVENANTS, APPROVINGTHE PROPOSED 2015 BUDGET, AND SETTING BUDGET MEETING DATE BE IT RESOLVED BY THE COUNCIL OF THE CITY OF HOPKINS, MINNESOTA, That the following sums be levied for 2015 upon the taxable property in the City of Hopkins, for the following purposes. General Lev General Fund $9,427,729 Special Levies PERA Levy 35,500 Debt Levies 2007A GO Capital Improvement Bonds 765,808 2007B GO Improvement Bonds 183,971 2010A GO Improvement Bonds 82,194 2012A GO Capital Improvement Bonds 220,000 2012B GO Bonds 70,000 2012B Equipment Certificates 96,285 2013A GO Improvement Bonds 75,000 2014A GO Bonds 88,471 Subtotal Special Levies 1,617,229 Total Levy 11.044.958 HRA/EDA Levv Housing & Redevelopment Authority Levy 272,572 That based upon staff analysis of specials assessments currently levied for Permanent Improvement Bonds, alternative revenue sources for the Capital Improvement Bonds and Equipment Certificates, and available reserves within all debt service funds listed below, that the debt service levies for 2015 for the following issues be levied at amounts less than that provided by the bond covenants. Net Debt Bond Issue Service Levv $9,920.000 G.O. Capital Improvement Bonds of 2007A (132213) $765,808 $5,505,000 G.O. Bonds — Equipment Certificates of 2012B (132833) S 97,965 $5,505,000 G.O. Bonds of 2012B (132833) S 70,000 $3,650,000 G.O. Improvement Bonds of 2013A (132883) S 75,000 $1,895,000 G.O. Improvement Bonds of 2014A (2964) S 88,471 That the Proposed 2015 General Fund Budget be set at $11,346,716. That the budget meeting to discuss the 2015 budget and tax levy be set for December 2, 2013 at 7:00 pm in the City Council Chambers. BE IT FURTHER RESOLVED that the City Clerk is hereby ordered and directed to transmit a certified copy of this resolution to the County Auditor of Hennepin County, Minnesota. Adopted by the City Council of the City of Hopkins this 2nd day of September 2014. Eugene Maxwell, Mayor ATTEST: Amy Domeier, City Clerk 2015 Preliminary Levy and Budget Truth in Taxation Process • Council adopts proposed levy and budget by Sept 30th • Council sets budget meeting date to discuss budget and receive public comments • Budget Meeting — Tuesday, December 2nd • Budget Approval — at that same meeting or next scheduled council meeting • Parcel specific notices are mailed by County Legislative Changes • Local Government Aid increased for 2015 • Levy Limits for 2015 were removed City Planning • Priority — balanced budget • Equipment Replacement Plan (ERP) • Capital Improvement Plan (CIP) • Financial Management Plan (FMP) • Utility Rate Study 2015 Proposed General Fund Budget Prepared according to Financial Management Plan 0 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 Proposed General Fund Budget • Revenues & Expenditures - $11,346,716 • Budget is balanced • Local Government Aid totals $388,602, a $98,702 increase • Other state aid increases • Levy is in line with the Financial Management Plan adopted in 2014 2015 Proposed General Fund Budget • 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 Qev & Planning Other 50,200 175,200 249,00% $10,946,129 $11,346,716 3.66% pyo 20144 2015Change $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 Q`a General Fund) 2014 2015Change Property Taxes $8,952,774 $9,307,729 3.96% lntergcwt"l 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 Preliminary 2015 Levy 2015 Net Levy Purpose 2014 Proposed General Operations General Fund $8,869,774 $9,224,729 Capital Levy 125,000 $53,000 Arts Center Levy 0 $85,000 Pavilion Levy 0 $65,000 PERA Levy 0 $35,500 Subtotal 8,994,774 9,463,229 Special Levies: Debt Levies 1,421,461 1,581,729 TOTAL LEVY $10,416,235 $11,044,958 Preliminary 2015 Levy • New — Arts Center Levy — Needed to eliminate deficit — Helps with obtaining grant funds • New —Pavilion Levy — To be used for fund capital needs • Reduced —Capital Levy — To balance levy needs • Reinstated — PERA Levy Why the new Levies? • Arts Center & Pavilion — Visitors stimulate local economy — Make Hopkins a more desirable place to live — Needed to keep Pavilion building current — Needed to restore Arts Center to sound financial status — Strengthens position when requesting grant funds • Bond Rating increased from AA to AA+ — Direct result of implementing the FMP Tax Impact on Average Home ($225k) • Original FMP scheduled a $100 increase • The adopted FMP scheduled the levy increase at $89 • Further reduced levy from FMP recommendation • Levy increase is now at $78 on an average home What this budget/levygets us: • Funding for general city operations • Funding for road projects • Funding to reduce Arts Center deficit • Funding for Pavilion capital needs • Funding for debt service payments Next Steps • Adopt proposed budget and levy at September 2nd Council meeting and certify to County • Parcel specific notices mailed by County • Hold the Public Meeting on the budget and levy at the December 2nd Council meeting • Approve levy & budget by December 29th CITY OF HOPKINS PROPOSED GENERAL FUND REVENUE BUDGET 2014 2015 % Department Budget Budget Incr/(Decr) Property Taxes 8,952,774 9,307,7291 3.96% Intergovernmental Revenue PERA Aid 20,510 20,510 0.00% Local Government Aid 289,900 388,602 34.05% Police - Federal Grant 82,000 0 -100.00% Police - State Aid 177,000 180,000 1.69% Police - POST Reimbursement 9,000 9,000 0.00% Police - Misc Grants 15,000 15,000 0.00% Fire - State Aid 90,000 95,000 5.56% PW - State Aid 130,000 135,000 3.85% Total Intergovernmental Revenue 813,410 843,112 3.65% Licenses, Permits & Fees Court Fines 168,000 170,000 1.19% Building Permit & Inspection Fees 272,480 274,460 0.73% Administrative Citations 8,000 8,000 0.00% Business Licenses 5,000 6,000 20.00% Liquor, Animal Licenses & Penalties 97,000 97,500 0.52% Fire Licenses & Permits 3,500 3,600 2.86% PW - Licenses & Permits 9,415 9,415 0.00% P&Z - License & Permits 1,000 1,000 0.00% Total Licenses, Permits & Fines 564,395 569,975 0.99% Charges for Service Finance Department 10,150 10,150 0.00% Assessing 2,000 2,000 0.00% City Clerk 0 20,000 -- Inspections 73,850 74,900 1.42% Police 48,000 33,000 -31.25% Fire 3,000 3,000 0.00% Public Works 2,750 2,750 0.00% Activity Center 59,500 61,500 3.36% Planning & Zoning 2,000 2,000 0.00% Total Charges for Service 201,250 209,3001 4.00% Miscellaneous Revenue Franchise Fees 290,000 290,000 0.00% Miscellaneous 100 250 150.00% Finance Department 4,800 4,800 0.00% Police 1,500 1,500 0.00% Public Works 4,600 4,600 0.00% Acitivty Center 10,000 9,000 -10.00% Community Development 88,300 91,450 3.57% Total Miscellaneous Revenue 399,300 401,6001 0.58% Interest Earnings 15,000 15,000 0.00% Total Revenues $10,946,129 $11,346,716 3.66% CITY OF HOPKINS PROPOSED GENERAL FUND EXPENDITURE BUDGET Department 2014 Budget 2015 Budget Budget % Incr/(Decr) City Council 69,872 70,417 0.78% Administrative Services 36,675 39,245 7.01% Administration 196,685 209,591 6.56% Personnel 40,599 42,049 3.57% Wellness 2,000 2,000 0.00% Information Services 261,305 273,411 4.63% Total Administrative Services 500,589 527,051 5.29% Finance 107,394 110,085 2.51% Debt Management 0 0 0.00% General Accounting 185,203 198,003 6.91% Payroll 48,516 48,678 0.33% TIF Administration 0 0 0.00% Utility Billing 9,400 9,400 0.00% Total Finance 243,119 256,081 5.33% Legal 143,000 145,000 1.40% Municipal Building 317,414 324,246 2.15% Receptionist 45,933 1 48,957 6.58% Assessing 183,607 1 195,337 6.39% City Clerk City Clerk 54,462 67,572 24.07% Elections 60,808 52,222 -14.12% Total City Clerk 115,270 119,794 3.92% Inspections Building Code Inspections 267,051 273,232 2.31% Fire Inspections 36,675 39,245 7.01% Heating & Plumbing Inspections 91,054 94,077 3.32% Housing Inspections 165,788 171,644 3.53% Misc. Community Inspections 81,265 83,676 2.97% Vacant Property Management 4,719 4,775 1.19% Total Insnections 646.552 666.649 3.11% Police Police Administration 516,611 436,362 -15.53% Patrol 2,780,576 2,877,200 3.47% Heat Team 69,715 76,369 9.54% Reserves 15,586 15,629 0.28% Investigations 550,389 562,389 2.18% Metro Drug Task Force 122,629 120,300 -1.90% Pawn Shop 3,530 3,738 5.89% Outreach 107,394 110,085 2.51% Reception -Records 267,563 258,160 -3.51% 2014 2015 Budget % Department Budget Budget Incr/(Decr) Systems Management 49,501 51,658 4.36% Total Police 4.483.494 4.511.890 0.63% Fire 132,191 135,162 2.25% Fire 953,037 982,859 3.13% Emergency Preparedness 3,128 3,128 0.00% Total Fire 956,165 985,987 3.12% Public Works 10,936,129 1 11,336,716 3.66% PW Building 33,631 39,172 16.48% Equipment Services 98,887 109,953 11.19% Administration 41,280 45,923 11.25% Engineering 140,861 143,830 2.11% Street & Alleys 912,716 929,575 1.85% Snow & Ice Removal 205,553 219,015 6.55% Parks 698,934 761,934 9.01% Forestry 252,282 254,534 0.89% Total Public Works 2,384,144 2,503,936 5.02% Recreation Playground 21,992 21,676 -1.44% Ice Rink 15,295 14,395 -5.88% Park Service 36,975 25,780 -30.28% Joint Recreation 158,900 162,000 1.95% Skate Park 7,394 8,004 8.25% Total Recreation 240,556 231,855 -3.62% Activity Center Act Ctr - Community Use 289,497 298,359 3.06% Act Ctr - Maintenance 56,276 59,346 5.46% Total Activitv Center 345.773 357.705 3.45% Planning & Zoning 132,191 135,162 2.25% Community Development 88,250 91,449 3.62% Tuition Reimbursement 15,200 15,200 0.00% Contingency 25,000 1 150,000 500.00% Total Expenditures 10,936,129 1 11,336,716 3.66% Other Financing Uses Transfers to other funds 10,000 10,000 0.00% Total Other Financina Uses 10.000 10.000 0.00% Grand Total Expenditures $ 10,946,129 $ 11,346,716 3.66% Total Revenues $ 10,946,129 $ 11,346,716 Revenues Over (Under) Expenditures $ - $ CITY OF HOPKINS 2015 TAX LEVY Special Levies - Debt: 2007B GO Improv Revolving Bonds 188,093 2015 2007 Capital Improvement Bonds 766,110 Net Levy Purpose 2014 Proposed General Operations 220,000 220,000 General Fund $8,869,774 $9,224,729 Capital Levy 125,000 53,000 Arts Center Levy 0 85,000 Pavilion Levy 0 65,000 PERA Levy 0 35,500 TOTAL LEVIES 8,994,774 9,463,229 Special Levies - Debt: 2007B GO Improv Revolving Bonds 188,093 183,971 2007 Capital Improvement Bonds 766,110 765,808 2010A GO Improvement Bonds 79,175 82,194 2012A GO CIP Bonds 220,000 220,000 2012B GO Bonds 55,090 70,000 2012B Equipment Certificates 97,965 96,285 2013A GO Improvement Bonds 15,028 75,000 2014A GO Bonds 0 88,471 Subtotal - Debt Levies 1,421,461 1,581,729 TOTAL LEVIES $10,416,235 $11,044,958 HRA Levy $ 273,980 $ 272,572 City of Hopkins 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. Longer term planning is becoming the industry standard. Rating agencies, like 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. Longer term planning can also help the City spot trends that could adversely affect the budget. Standard & Poor's announced in January 2014 that the City of Hopkins' bond rating was upgraded from AA to AA+. Among the factors which Standard & Poors used in making this decision included: "a very strong budgetary flexibility, "strong overall budgetary performance", and "strong financial management practices." 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 by bringing in over 200,000 visitors each year. 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 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.