1. Call to Order. The budget workshop session of the Council of the City of Rogers was called to order by Acting Mayor Davis on Tuesday, July 28, 2009 at 5:37 p.m. at the Rogers Community Room, 21201 Memorial Drive, Rogers, MN, 55374.
Council present: Acting Mayor Jamie Davis, Jay Bunting, Rob Bell, and Steve Rauenhorst.
Council excused: Mayor Grimm.
Staff present: Gary Buysse, Liquor Manager; Stacy Doboszenski, Assistant City Administrator/Clerk; Brad Feist, Fire Chief; Jeff Luther, Police Chief; John Seifert, Public Works Supt.; Steve Stahmer, City Administrator; and Lisa Wieland, Finance Director.
2. Presentation of budget reduction options
Council discussed starting the workshop session with the options presented in the packet.
Finance Director Wieland provided the excel spreadsheet on an overhead illustrating the various options.
Administrator Stahmer arrived at this time (5:40 p.m.) and announced that Councilor Bell will be late or possibly absent from the meeting.
Wieland highlighted the five areas that are included in each budget option presented in the memo.
Wieland then when through option #1 on the excel spreadsheet.
Wieland and Stahmer explained that every month, new information is provided from Hennepin County regarding tax capacity for 2010, this will be a moving target.
Stahmer stated one of the biggest problems in the budgeting process is the tax capacity numbers continue to change from Hennepin County beyond the deadline of the preliminary levy (Sept. 15th).
Staff explained if net levy tax stays flat, but the tax capacity changes, the tax rate will change.
Wieland reported a 7.65% on overall valuation decrease.
Wieland stated that it is tempting to use spend down of fund balance; however, it could be a double edged sword (addressing the future projected fund balance).
Bunting questioned, under first scenario, what would be the net impact dollar-wise to the homeowners.
Wieland stated you can’t find that unless you have the rate. Without having the net tax capacity, you can’t get to the rate. Wieland stated she can tell the individual reductions on individual homes, but without knowing the rate, you can’t get at the net dollar impact on the individual home. Wieland then provided the example of a 40% tax rate with a 5% market valuation reduction results in a zero tax increase to the homeowner. More than a 5% valuation reduction would have a decrease in their taxes, and a 13% loss at 40% tax rate is approximately a $100 savings.
Staff and Council discussed backing into a tax rate; Wieland stated this is not advisable.
Wieland continued through the options presented in the budget packet.
Option #2 presents no staffing cuts, except not filling the planner position, includes $160,000 in fund balance, $100,000 of which is excess rate TIF which will result in $240,000 in 2011 use of fund balance.
Davis asked Wieland to go back to option one – doesn’t see anything coming from Hassan as a fund balance; Staff and Council discussed what can be expected from Hassan for fund balance. Council had staff change the expected amount from Hassan to zero which under option #1 makes the general fund reserves at 39%.
There was continued discussion on any fund balance or negative balance that may be received from Hassan Township at the time of the merger.
Bell arrived at 5:55 p.m.
Also discussed was how much the bond rating is tied to the fund balance and whether or not a one year drop in fund balance would affect the bond rating.
Davis stated based on the capital needs within the budget, going forward the general fund reserve never gets above 40%.
Stahmer stated at that point it does not become a realistic model, but a conservative model.
Bunting stated he has valid concerns over what we inherit from Hassan.
Wieland stated the goal is not to be at 60%; however staff is trying to cut back on use of fund balance this year so that we have fund balance to fall back on over the next two years.
Davis commented on the spend-down of fund balance by Hassan and stated he doesn’t think we should count on anything coming from Hassan.
Davis asked Wieland to remove Hassan fund balance from all options to see what the percentage of fund balance would be. Option #3 indicates a 36% fund balance without Hassan.
Stahmer stated what was included in the option 3 assumptions: a zero change in levy includes elimination of Engineering Tech IV position, no other position cuts, $109,000 use of fund balance in 2010 and $200,000 in 2011, to maintain a flat levy, and to keep some of the positions previously discussed.
Stahmer then discussed option #4 including the assumptions: a levy increase of $109K with net affected levy is a 3.27% increase in 2010 over 2009; part of that is the unallotment levy, no use of fund balance in 2010 but does have the City levying the limit in 2011; Engineering Tech IV and planner would be eliminated under this option, and levying to the limit in 2011 with an extra $100,000 use of fund balance. This results in a 39% general fund reserve balance without a Hassan contribution.
Stahmer stated that staff would be in favor of something in the area of Option #4.
Staff stated reasonable use of fund balance is fine and a valid discussion can be made regarding fund balance policy with the annexation of Hassan. We would be at the bottom the policy.
Davis asked what the state auditor’s recommendation for fund balance is.
Wieland stated 35 – 50%; and 45-50% in growing city. There was continued discussion regarding fund balance percentage and bond rating.
Stahmer stated, at minimum, you need 25 to 30% in reserve balance to cash flow the first half of the year.
Staff proceeded to option #5. Stahmer stated this is the opposite of option #1. An increase of 5% net levy or $160,000, levy the limit in 2011, includes zero staffing cuts other than not filling the planner, and use of $146,000 of fund balance in 2011 to stay under the levy limits.
Stahmer stated these are the five options based on the information received last Friday. Keep in mind, some things will continue to change even if pointed into a specific direction. 60% of undesignated fund balance is too high, but if we are assuming much less coming from Hassan, then we need to prepare for that accordingly.
Stahmer discussed his concerns related to the opening in the Planning position.
Choices involving staffing levels seem to be dependent upon whether or not incumbents are in those positions. Stahmer stated he is looking for direction from council on the comfort level with use of fund balance and levy.
Staff would ask that you go into a September 15th preliminary levy with a number above where you ultimately want to be.
Wieland stated her concern is not using fund balance to try to resolve issues. Wieland discussed using option #4 and given some further information received today, the tax rate would be 48%. Wieland stated recommending using very minimal fund balance, if you do.
Bunting commented on the three to four percent increase in expenses and questioned if it is across the board including wages and benefits?
Wieland stated wages and benefits are at zero. There was discussion on where cost increases come from.
Davis asked where the Hassan figures came from. Wieland stated she looked at year end information.
Davis stated in looking at option #1, with the cuts, it makes the rate go up in 2012 due to the RAC.
Bunting asked staff and Council to strongly consider the payoff of inter-fund loans over a period of years to keep the tax rate stable.
Staff then discussed needing to verify new valuation information received from Hennepin County today.
Wieland commented on the tax revenues generated through Stone’s Throw being repaid to Hassan stating we can’t count on the additional tax capacity.
Davis stated, to interpret what is said, even though memo states option #3 or option #4 is the way to go, they use fund balance. Davis stated option #4 uses the least amount along with option #1; #1 is 2.5 FTE and planner cuts and option #4 utilizes a levy increase.
There was discussion on increasing the levy amount.
Stahmer stated if Council is looking to keep the levy flat, then it takes quite a bit of cutting and use of fund balance.
Wieland then discussed the tolerance level for tax payers and asked Council to keep in mind 2/3 of the tax bill is school and county.
Stahmer stated staff has started to see replies from cities on the staffing information and he is hoping to provide a draft of that at the next budget work session and hopefully Lisa will have some luck with Hennepin County to pin down the tax capacity numbers.
Wieland handed out worksheet illustrating a 40% tax rate with a percentage reduction on valuation and the amount of reduction on their property taxes. There was discussion on tax values dropping. Wieland stated at a 40% tax rate, anyone with a 5% reduction remained flat, but with more than a 5% rate then a tax decrease.
Wieland commented we are doing this part of the budget process so early that is the reason the numbers are changing.
Stahmer provided an explanation on why the tabled items from the last Council meeting are back on the main agenda and recommended action on the administrative assistant piece at the regular meeting.
Stahmer further stated the Public Works reorganization will require more discussion moving forward.
Bunting provided staff with his comfort level after listening to the discussion on fund balance. In looking at cuts, but not prepared to say which positions should be cut, he needs to get the information from other cities and take that into account. But, as a general number, option #4 or possibly a higher number is where he is comfortable with for a dollar amount; given that a majority of homes that may be seeing slight increases or decreases.
Rauenhorst stated he made a promise he will not raise taxes and won’t change that. He stated the City should take code enforcement and turn that over to police reserves, service that is nice, but sees codes that are not being enforced already. Rauenhorst stated he sees that as a common sense reduction and turn that over to the police reserves. He stated he can’t support raiding fund balance, but would rather go into fund balance a fraction instead of raising taxes – meaning the tax rate.
Wieland stated that if we are looking at a 38% tax rate, then looking at even more substantial cuts than Option #1.
Rauenhorst stated we directed staff to make structural changes; they came back with structural changes to balance the budget.
Bell stated his thoughts are more leaning toward the idea of option #4. Looking at the cuts presented and considering making those cuts when they represent things we no longer have as big of a need for (the services we had), and would rather not reduce services, but maintain services at a similar level. Levy wise, he stated he is not a fan of raising taxes, but to go back to the artificial cut a couple years ago, which may have been reasonable at that time, but times change and putting them back at what they were pre-2006 isn’t a bad thing. Using fund balance needs to be done wisely and not too dramatically – can’t keep doing that year after year.
Davis stated he stood next to Rauenhorst and said he would not raise taxes. He stated he doesn’t like increasing the levy, he needs level of comfort with the rate and the amount of taxes, if the amount goes down (tax bill), then he is torn on if raising the rate a tax increase. Davis expressed concerns regarding use of fund balance and the affect on fund balance with Hassan coming in.
Rauenhorst suggested doing option #4, with the cuts presented including code enforcement.
Bunting stated he won’t support any police officer of any kind doing code enforcement.
Rauenhorst stated to eliminate the position; it is not accomplishing what is supposed to be done anyway.
Rauenhorst continued to discuss code enforcement stating he has been filling out the proper forms online for issues that should be fixed, and not directly emailing the staff member.
Bunting asked Rauenhorst if he has spoken with the Chief regarding this.
Bunting stated he wants two officers on at all times. Bunting stated he hasn’t seen the issues Rauenhorst is referring to, but not looking for them. Bunting stated this is an area he is not willing to touch. He referenced the cost to citizens can be enormous in regard to re-sale value if code enforcement is not done.
Rauenhorst stated to look at what the City did do before having a code enforcement officer.
Davis stated if he had concrete proof that taxes, with a slight levy increase, would go down for a majority of the residents, then more willing to support it and consider it a tax reduction. He stated right now we don’t have the information and doesn’t know if we will.
Davis asked Chief Luther if the philosophy is to be pro-active or re-active when it comes to code enforcement.
Chief Luther stated a majority of it is complaint based, but asked to pro-actively look for issues. Luther stated part of the issue is the position is more than just code enforcement but also CSO. The Chief provided an example of traffic control. The Chief also stated the call volumes are on par for 2009 compared to 2008 call volumes.
Bunting stated he wants zero call responses by the CSO/CEO to Hassan.
Chief Luther stated he received a resignation of another police officer last Saturday.
In conclusion, Wieland stated she will be getting line item budgets to the Council for the budget workshop at the second meeting in August.
3. Adjourn. There being no further business, motion by Davis, seconded by Bunting to adjourn. Motion carried 4-0. The meeting was adjourned at 6:55 p.m.
Assistant City Administrator/Clerk