VII.2. Financial Management Plan Update; Bishop CITY OF HOPKINS
Memorandum
To:
From:
Date:
Subject:
Honorable Mayor and Council Members
Mike Mornson, City Manager
Nick Bishop, Finance Director
October 6, 2020
Financial Management Plan Update
_____________________________________________________________________
PURPOSE
The presentation will be broken down into two parts. The first part is informational. It
will describe our Financial Management Plan (FMP) and how it has been used. The
second portion will review the FMP in the context of the 2021 and 2022 tax levies. The
preliminary 2021 tax levy was passed on September 15, 2020, but has not been
finalized. Any draft versions of the 2022 tax levy incorporated herein are staff
projections. We are seeking guidance and input for the 2021 tax levy.
INFORMATION
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. Hopkins began to use long term planning
for large expenditures such as construction projects and large pieces of equipment in
the 1980s. One year operating budgets were used by the City through 2014.
Beginning with the 2015 Budget, the City decided to take a long term view of financing
its operations through the use of a Financial Management Plan (FMP). The FMP is a
multi-year fiscal plan for all tax-supported funds. It integrates existing debt, Capital
Improvement Plans, Equipment Replacement Plans, future debt, tax base growth and
future operating expenses. The FMP is used to level out expenditures and bond costs
to smooth tax increases, ensure funding is available to carry out the City’s vision and as
a tool to better understand effects of budget decisions.
Finance Department
On March 13, 2020, Governor Tim Walz declared a Peacetime State of Emergency due
to the COVID-19 pandemic. COVID-19 has impacted both businesses and individuals in
Hopkins in unprecedented ways. The financial and economic impacts in Hopkins will
continue to be felt in 2021 and 2022. The FMP has not been updated since the start of
the COVID-19 pandemic.
The initial 2021 draft tax levy presented was $18,544,408, which was a $1,014,724 or
5.79% increase from 2020. The 2021 preliminary tax levy was lowered to $18,023,384,
a $493,700 or 2.82% increase from 2020. Based on preliminary tax capacity
information, city taxes on a median value home ($291,000) will be $1,877, a $49 or
2.68% increase from 2020. This levy will meet the needs of the Community in 2021, but
it does so at a lower level of service than in years past.
The preliminary tax levy can be reduced between now and December 28, 2020 and City
Council has instructed staff to continue to investigate further reductions. The following
two scenarios forecast the effect further reductions could have on the 2022 tax levy. In
Scenario 1, the preliminary levy is adopted as the final levy. In Scenario 2, the final levy
adopted has no increases from the 2020 levy.
Scenario 1- 2.68% Increase in 2021
In this scenario the Final 2021 levy would be set at the same level as the Preliminary
levy. The 2022 levy would be set at $19,009,905, a $986,521 or 5.47% increase from
2021. Based on estimates, city taxes on a median value home would be $2,000, a
$124 or 6.60% increase from 2021.
General Fund Levy: In 2021 budgets for training, memberships, crack sealing, striping,
pole painting, supplies and deferred maintenance accounts were reduced. All budgets
were restored to their previous service levels consistent with the 2020 budget.
Capital Levy: The capital levy would be set at $175,000 in 2021 and $200,000 in 2022.
These levy amounts would allow the completion of all proposed projects in the Capital
Improvement Fund or could be used as a contingency budget for unknown effects of
COVID-19. Projects scheduled in 2021 and 2022 include: Activity Center-Facility
Improvements, Activity Center-Roof Replacement, Public Works Building-Overhead
Doors and Fire Station-Boilers.
Equipment Replacement Levy: The equipment replacement levy would be set at
$250,000 in 2021 and $50,000 in 2022. These levy amounts would allow for the
purchase of all equipment in the Equipment Replacement Fund or could be used as a
contingency budget for unknown effects of COVID-19. The City would not need to fund
purchases through the issuance of equipment certificates or other types of debt.
Debt Levy: The debt levy would be set at $4,118,650 in 2021 and $4,290,850 in 2022.
The reduction to the debt levy for Burnes Park is one-time. The City could continue
funding needed park maintenance projects after a one year delay.
Scenario 1 - Projected Tax Levy Preliminary Draft
2021 2022 % Increase
General Operations
General Fund 12,808,552 13,787,678 7.64%
Capital Levy 175,000 200,000 14.29%
Arts Center 331,182 341,377 3.08%
Pavilion 340,000 340,000 0.00%
Equipment Replacement 250,000 50,000 -80.00%
Total General Operations Levy 13,904,734 14,719,055 5.86%
Debt Levy
2017B - Burnes Park 4,040 154,040 100.00%
2020A - 1/2 Interlachen & Equipment - 165,536 100.00%
All other debt 4,114,610 3,971,274 -3.48%
Total Debt Levy 4,118,650 4,290,850 4.18%
Total Levy 18,023,384 19,009,905 5.47%
Scenario 2 – No Increase in 2021
In this scenario the Final 2021 levy would have no increases compared to 2020. Based
on preliminary tax capacity information, city taxes on a median value home ($291,000)
would be $1,818, a $9 or 0.49% decrease from 2020. The 2022 levy would be set at
$18,884,905, a $1,355,221 or 7.73% increase from 2021. Based on estimates, city
taxes on a median value home would be $1,994, a $176 or 9.70% increase from 2021.
General Fund Levy: In 2021 budgets for training, memberships, crack sealing, striping,
pole painting, supplies and deferred maintenance accounts were reduced. A flat levy
would require additional reductions to the 2021 budget of $70,000. All budgets were
restored to their previous service levels consistent with the 2020 budget.
Capital Levy: The Capital levy would be set at $0 in 2021 and $200,000 in 2022. These
levy amounts would allow the completion of most proposed projects in the Capital
Improvement Fund.
• Projects included: Activity Center-Roof Replacement, Public Works Building-
Overhead Doors and Fire Station-Boilers.
• Project Cancelled or Delayed: Activity Center-Facility Improvements
Equipment Replacement Levy: The equipment replacement levy would be set at $0 in
2021 and $75,000 in 2022. These levy amounts would allow for the purchase of all
equipment in the Equipment Replacement Fund. However, the City would need to fund
$225,000 of equipment through the issuance of equipment certificates or other type of
debt.
Debt Levy: The debt levy would be set at $4,118,650 in 2021 and $4,140,850 in 2022.
The reduction to the debt levy for Burnes Park is would continue in 2022. The City could
continue funding needed park maintenance projects after a two year delay.
Scenario 2 - Projected Tax Levy Draft Draft
2021 2022 % Increase
General Operations
General Fund 12,739,852 13,787,678 8.22%
Capital Levy - 200,000 100.00%
Arts Center 331,182 341,377 3.08%
Pavilion 340,000 340,000 0.00%
Equipment Replacement - 75,000 100.00%
13,411,034 14,744,055 9.94%
Debt Levy
2017B - Burnes Park 4,040 4,040 100.00%
2020A - 1st 1/2 Interlachen & Equipment - 165,536 100.00%
All other debt 4,114,610 3,971,274 -3.48%
4,118,650 4,140,850 0.54%
Total Levy 17,529,684 18,884,905 7.73%
FUTURE ACTION: 2021 Budget Preparation Schedule
The following table outlines the tentative schedule for discussions on important aspects of the City’s Budget.
Meeting Date Meeting Type Subject Details
October 6 Regular Meeting Financial Management Plan (FMP)
Update
-Overview of the FMP, prior tax increases and
debt
October 13 Work Session Review Capital Improvement Plan
(CIP) and Equipment Replacement
Plan (ERP)
-Park Dedication Fund
-Capital Improvement Levy (City Buildings)
-Permanent Improvement Revolving Fund
(Street Projects)
-Equipment Replacement Levy
October 20 Regular Meeting Quarterly Financial Report
November 4
(Wednesday)
Regular Meeting Budget Review -TBD
November 10 Work Session Review Special Revenue Budgets,
Activity Center Budget, Enterprise
Fund Budgets and Utility Rates
-Chemical Assessment -Activity Center
-Economic Development -Sewer
-Parking -Storm Sewer
-Communications -Refuse
-Depot -Pavilion
-Arts Center -Water
November 17 Regular Meeting Approve CIP, ERP & Utility Rates
November 30
(Monday)
Regular Meeting Truth in Taxation Hearing -Overview of 2021 Budget and Tax Levy
-Public Comment
December 1 Regular Meeting Budget Review -Final Comments from Council on Budget
December 15 Regular Meeting Approve Final Budget & Tax Levy -Last scheduled meeting to approve
Financial Management Plan
October 6, 2020
Financial Management Plan
Long range fiscal plan for tax supported funds
Levels expenditures and bond costs
Ensures money is available to fund road
construction, capital equipment and maintenance
of City owned facilities
Better understanding of effects of budget
decisions
Implemented with the 2015 Budget
Financial Management Plan
Completed $56 million of projects since 2015
Use Year Amount
City Parking Lots 2015 $1,385,000
Pavilion 2018 $3,285,000
8th Avenue 2017 $3,555,000
Mainstreet 2015 $4,190,000
City Hall 2019 $4,375,000
Parks 2015-2017 $4,915,000
Blake Road 2017-2019 $4,229,000
Annual Road Projects 2016,2018, 2019, 2020 $29,785,000
What is it?
Completed $56 million of projects since 2015
Use Amount Percentage
City Parking Lots $1,385,000 2.5%
Parks $4,915,000 8.8%
City Facilities $7,660,000 13.8%
Roads/Streets $41,759,000 74.9%
Street Reconstruction
The City is in the middle of a plan to
reconstruct all streets within the City paid for
with:
Debt
Special Assessments
User charges for water, sewer and storm sewer
Street Reconstruction
On track to complete reconstruction of all city
streets by 2030
The city has also made significant investments
that prepare the City to take full advantage of
Southwest Light Rail
8th Avenue Artery
Blake Road
Street Reconstruction
2020-2021 Interlachen Park Reconstruction Project
2022 6th Ave South/7th Ave South
2023 Central Avenues Reconstruction (West)
2024 17th Avenue
2025-2027 Central Avenues Reconstruction (East)
Existing Debt -All Sources of Revenue
Approximately $79.5 million
Existing Debt –Paid by Tax Levy
Approximately $53.5 million
Levy Increases by Year
Average increase of
5.94% over 10 years
Year % Increase
2011 2.14%
2012 0.49%
2013 0.63%
2014 1.60%
2015 5.39%
2016 7.46%
2017 9.73%
2018 9.86%
2019 12.35%
2020 9.71%
City Taxes on Median Value Home
Average increase
of 6.21% or $81
over 10 years
Year Taxes $ Increase
% Increase
/Decrease
2011 1,050.00$ 31.00$ 3.04%
2012 1,048.00$ (2.00)$ -0.19%
2013 1,067.00$ 19.00$ 1.81%
2014 1,015.00$ (52.00)$ -4.87%
2015 1,143.00$ 128.00$ 12.61%
2016 1,206.00$ 63.00$ 5.51%
2017 1,296.00$ 90.00$ 7.46%
2018 1,509.00$ 213.00$ 16.44%
2019 1,735.00$ 226.00$ 14.98%
2020 1,827.00$ 92.00$ 5.30%
2021 & 2022 (Scenario 1)
Assumptions
Adopt Preliminary Levy as Final
2021 Levy Increases by 2.82%
2021 & 2022 (Scenario 1)
General Fund Levy
In 2021 budgeted amounts for training,
memberships, crack sealing, striping, pole
painting, supplies and deferred maintenance have
already been reduced
Restored to previous levels in 2022
Eliminated Public Works Superintendent position
continues into 2022
2021 & 2022 (Scenario 1)
Capital Levy
All proposed projects could be completed or used
as contingency budget for COVID-19
Scheduled Projects in 2021 & 2022
Activity Center -Facility Improvements
Activity Center -Roof Replacement
Public Work Building -Over Head Doors
Fire Station -Boiler Replacement
2021 & 2022 (Scenario 1)
Equipment Replacement Levy
All proposed equipment could be purchased or
used as contingency budget for COVID-19
Does not require issuance of debt in either year
2021 & 2022 (Scenario 1)
Debt Levy
Reduction to debt levy for Burnes Park is one-time
in 2021
City continues park projects in 2022
2021 & 2022 (Scenario 1)
2021
Taxes increase by 2.82%
Taxes on median value home are $1,877, a $49 or
2.68% increase from 2020
2022
Taxes increase by 5.47%
Taxes on median value home are $2,000, a $124
or 6.60% increase from 2021
2021 & 2022 (Scenario 2)
Assumptions
Adopt a flat levy for 2021
2021 Levy Increases by 0%
2021 & 2022 (Scenario 2)
General Fund Levy
In 2021 budgeted amounts for training, memberships,
crack sealing, striping, pole painting, supplies and
deferred maintenance have already been reduced
Additional $70,000 is reduced in 2021
All restored to previous levels in 2022
Eliminated Public Works Superintendent position
continues into 2022
2021 & 2022 (Scenario 2)
Capital Levy
Some proposed projects could be completed
Scheduled Projects in 2021 & 2022
Activity Center -Roof Replacement
Public Work Building -Over Head Doors
Fire Station -Boiler Replacement
Cancelled or Delayed Project
Activity Center -Facility Improvements
2021 & 2022 (Scenario 2)
Equipment Replacement Levy
All proposed equipment could be purchased
City would issue $225,000 in equipment
certificates or other financing in 2022
2021 & 2022 (Scenario 2)
Debt Levy
Reduction to debt levy for Burnes Park is done in
both 2021 and 2022
At least a 2 year delay of park projects
2021 & 2022 (Scenario 2)
2021
Taxes do not increase
Taxes on median value home are $1,818, a $9 or
0.49% decrease from 2020
2022
Taxes increase by 7.73%
Taxes on median value home are $1,994, a $176
or 9.7% increase from 2021
2021 City Taxes -Projected
Scenario 1
Taxes Increase 2.82%
Taxes on Median Value
Home -$1,877
Increase of $49 or 2.68%
Scenario 2
Taxes Do Not Increase
Taxes on Median Value
Home -$1,818
Decrease of $9 or 0.49%
2022 City Taxes -Projected
Scenario 1
Taxes Increase 5.47%
Taxes on Median Value
Home -$2,000
Increase of $124 or 6.60%
Scenario 2
Taxes Increase 9.70%
Taxes on Median Value
Home -$1,994
Increase of $176 or 9.70%
Next Steps
Meeting Date Meeting
Type
Subject Details
October 6 Regular
Meeting
Financial Management
Plan (FMP) Update
-Overview of the FMP, prior tax
increases and debt
October 13 Work
Session
Review Capital
Improvement Plan (CIP)
and Equipment
Replacement Plan (ERP)
-Equipment Replacement Levy
-Park Dedication Fund
-Capital Improvement Levy (City
Buildings)
-Permanent Improvement Revolving
Fund (Street Projects)
October 20 Regular
Meeting
Quarterly Financial Report
Next Steps
Meeting Date Meeting
Type
Subject Details
November 4
(Wednesday)
Regular
Meeting
Budget Review -TBD
November 10 Work
Session
Review Special Revenue
Budgets,Activity Center
Budget, Enterprise Fund
Budgets and Utility Rates
-Chemical
Assessment
-Economic
Development
-Parking
-Communications
-Depot
-Arts Center
-Activity
Center
-Water
-Sewer
-Storm Sewer
-Refuse
-Pavilion
November 17 Regular
Meeting
Approve CIP, ERP & Utility
Rates
November 30
(Monday)
Regular
Meeting
Truth in Taxation Hearing -Overview of 2021 Budget & Tax Levy
-Public Comment
Next Steps
Meeting Date Meeting
Type
Subject Details
December 1 Regular
Meeting
Budget Review -Final Comments from Council on
Budget
December 15 Regular
Meeting
Approve Final Budget &
Tax Levy
-Last scheduled meeting to approve