1. Call to Order. The workshop session of the Council of the City of Rogers was called to order by Mayor Bunting on Thursday, September 11, 2012 6:00 p.m. at Rogers Community Center, 21201 Memorial Drive, Rogers, MN, 55374.
Council present: Rob Bell, Jay Bunting, Don Hall, Rick Ihli, and Maureen Stanley.
Staff present: Jeffrey Beahen, Police Chief; Gary Buysse, Liquor Operations Manager; Stacy Doboszenski, Assistant City Administrator; Brad Feist, Fire Chief; Jason Greninger, IS Director; Steve Stahmer, City Administrator; John Seifert, Public Works Supt.; Bret Weiss, City Engineer; and Lisa Wieland, Finance Director.
2. 2013 Budget Work Session
Finance Director Wieland addressed the Council regarding the proposed preliminary levy. Wieland stated at the regular meeting Council will be setting the preliminary levy. Over the next couple months we will be taking a more in depth look at the budget prior to setting a final levy in December.
Stahmer stated the memo distributed for the Workshop is largely the same memo as is in the Council packet, just in more detail.
Wieland proceeded through the following key points:
Overall assumptions and analysis
• Increased overall tax capacity (annexation capacity, TIF#1 2011 decertification and development growth)
• Economies of scale – consolidation savings
• Effects of tax rate due to fiscal disparities contribution
• Effects of levy amount as it relates to potential future levy limits if State Legislature reinstates them
• Effects of fluctuating tax rates to property taxpayers financial planning abilities
• Incorporation of Public Works Building debt 2006-2011 Interfund Loan Repayment to RSAC Fund
• No intentional use of Fund Balance to balance the 2013 budget (budgeted use of Fund Balance for 2013 is a result of MSAS Street Maintenance budget carryover)
• Net decrease in special debt levy of $71,146 related to the addition of the 2012A equipment certificates and 2011 CIP Bonds but offset by refinancing and prepayment of bonds; and a reduction in the calculation of the economic development tax abatement amount due to valuation reductions
• Continued reference to Financial Management Plan and – 5 year planning goals
• Establishment of CIP Sinking Funds for buildings, equipment, streets and parks
Key elements of the preliminary budget and levy as discussed and directed by Council in the August 16, 2012, budget work session include:
• Continued $200,000 of Liquor transfer to General Fund
• Reallocation of various staff position splits affecting salaries and benefits to reflect accurate work assignments
• Council goal of reducing the tax rate for 2013, while protecting fund balance, levels of service, and beginning to plan for future capital needs
• Senior Programming and service level increases
• Fire Contract revenue loss due to valuation reductions
• Results of Police Union salary/COLA negotiations
• Equalizing Police Union salary/COLA increase across other non-union staff
• 1 ½% increase to health insurance contributions by the City (monthly premium contribution benefit was last increased in 2009)
• Workers Compensation expense estimated increase of 9 ½%, until final information is available from the League of MN Cities Insurance Trust (LMCIT)
• Property/Casualty Insurance estimated increase 8% until final information is available from the LMCIT
• Review of position splits and proposed new hires in 2013; bringing some staffing levels back to pre-2009
• Discussion of how new hires are offset by previously budgeted Hassan hours
• Purchase of police fingerprinting equipment (offset by reduction in contractual booking services provided by Hennepin County and reduced overtime for transporting)
• Additional Police Reserve clothing as a result of restoring membership
• Fire Station #3, former Hassan Township public works garage, capital dollars placed in building sinking fund
• Addition of pavement management program costs and increased maintenance expenditures, additional dollars placed into Paved Streets sinking fund.
• Addition of RAC building sinking fund and increased inflationary costs resulting in increased levy contribution
Any additions noted above remain subject to final levy adoption in December, as well as, actual approvals to hire must be approved by City Council. Budgeting for the expenditure does not constitute payment approval authority. Per the City's purchasing policy, all expenditures over $5,000 require City Council approval prior to purchase, and all non-contractual, non-repetitive service, non-emergency repair expenditures over $1,000 require purchase orders approved by the Department Supervisor, City Administrator and Finance Director prior to purchase. All invoices/claims to be paid are approved at each City Council meeting prior to release of the payment.
At the August 16, 2012, budget work session, based on the draft budget and levy recommendations, Council directed staff to draft a preliminary proposed levy certification that reflects a reduced tax rate while incorporating future sinking funds for capital. Staff's recommendation, rather than additional $100,000 "cushion" for the preliminary levy as we have done in the past, staff intends to use the sinking funds as an element that could be adjusted for an additional year if additional changes resulted between the preliminary and final levies due to unforeseen circumstances. The public should note, as Council is aware, that the final levy may be lower than the preliminary levy certified in September, but cannot be higher. Given that no cushion will be included in the preliminary levy, staff would not expect substantial changes this year between the preliminary and final levies. As always, however, staff and Council will continue to refine line item budgets in order to identify any additional efficiencies in service delivery.
Wieland then reviewed the following with Council:
Recommended Preliminary Proposed Levy:
General Fund Operating Levy $3,991,605
Special Revenue Fund (RAC) Operating Levy $ 375,000
Wieland discussed this increase stating the debt cannot be levied for, they need to be paid from ice revenues.
Capital Improvement Sinking Fund Levy $ 583,600
Wieland discussed the items within the capital improvement sinking fund
Public Works Building Interfund Loan Levy $ 110,000
General Levy $5,060,205
Special Levies (Debt, Abatement, PERA) $ 863,242
Total Tax Capacity Based Levy $5,923,447
Based upon the current draft budget discussed at budget workshops and Council direction, staff recommends Council adopt a preliminary total levy of $5,923,447. This figure would result in an estimated 2013 tax rate of 38.260% as compared to the 2012 rate of 41.183%. Using the preliminary proposed levy number, the overall levy increase amounts to approximately 27.75%. It is extremely important to note that this increase is due primarily to:
• Effects of full annexation, with economies of scale built in
• Incorporation of Public Works Building debt 2006-2011 Interfund Loan Repayment
• Capital Improvement Sinking Funds for major capital repairs and replacement including paved and unpaved roads, buildings, vehicles & equipment and parks
It is also important to note that while the proposed levy increase would be approximately 27.75%, the General Fund Operating Expenditures are proposed to increase 7.81% over the 2012 Amended General Fund Operating Expenditure Budget. The total levy increase is primarily attributable to the addition of the Sinking Funds and Repayment of Interfund Loan ($693,600) beyond the cost of merged service levels post annexation.
Wieland explained a number of Hassan items were pre-paid at the end of 2011 which decreased the 2012 amended budget that included Hassan's expenditures.
Wieland stated the full line item budget and Financial Management Plan documentation will be provided at future budget work sessions for review prior to final levy and budget adoption.
Stahmer stated it will be a 7% reduction in the tax rate, and will be the lowest tax rate Roger's has hand in the last 5 years.
Bunting stated he does not have any questions. One thing he stated he is very happy about is getting the sinking funds started. It's one of the things you see with cities that are larger and more fiscally sound. These are the kinds of things to ensure a steady ongoing financial management plan. This is a big step forward for our City. I am not implying in the past we have done a poor job, we are just at a point that we can be proactive.
Stahmer stated over the last few years, the borrowing costs have been low. We are now starting to be able to save for some of those items, so when interest rates do double, we are able to pay with cash instead of borrowing.
Stanley asked were Hassan's rate was prior to the annexation?
Staff stated in the 27-28% range. Staff estimated their rate would have been in the lower 30% if they would have continued to levy consistently.
Bunting stated this has to be well communicated to former Hassan, that this is close to where they would have been if not for their one year zero levy.
Administrator Stahmer asked Council if there is any area where we should be looking at something more, new, or different?
Hall stated being this is a maximum levy, he would assume everything is covered. Hall asked the total levy for Rogers in 2012. Staff communicated that number stating that with combining the Hassan levy, it is almost equal to what the proposed 2013 levy is.
Staff stated the tax rate number can fluctuate slightly based on final market value numbers from Hennepin County, sometimes going into January.
Ihli asked if this information will be communicated to the former Hassan residents so they can see it.
Hall asked for a fact sheet so everyone is talking about the same numbers and the same story. Council consensus was to have a fact sheet prepared.
Stanley asked how many employees we currently have. Staff responded.
Council thanked staff.
Ihli moved, Stanley seconded a motion to adjourn the budget workshop at 6:34 p.m.
Assistant City Administrator/Clerk