HomeMy WebLinkAbout2014 08-11 City Council Workshop PacketPPLLEEAASSEE NNOOTTEE SSTTAARRTT TTIIMMEE
AGENDA
MAPLEWOOD CITY COUNCIL
MANAGER WORKSHOP
6:00 P.M. Monday, August 11, 2014
City Hall, Council Chambers
A. CALL TO ORDER
B. ROLL CALL
C. APPROVAL OF AGENDA
D. UNFINISHED BUSINESS
None
E. NEW BUSINESS
1. 2015 Budget Preview
F. ADJOURNMENT
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MEMORANDUM
TO: City Council
FROM: Melinda Coleman, Interim City Manager
Gayle Bauman, Finance Director
DATE: August 6, 2014
SUBJECT: 2015 Budget Preview
Introduction
The maximum tax levy for 2015 needs to be adopted and filed with the County by the end of
September 2014. The City Manager, Finance staff, and department heads have been actively
engaged in planning and preparing the 2015 budget, which funds all City operations and
functions. Like most units of local government, Maplewood is facing very challenging budget
circumstances. Some may wonder why budgets would be tight now given the generally
positive economic recovery overall. Maplewood, like many largely developed communities,
faces some unique circumstances. Maplewood has very few areas within its boundaries that
offer tax generating development opportunities. In fact, the City’s emphasis on economic
development is really an effort at redevelopment.
The City’s Budget
The budget is composed of a number of different funds, the largest of which is the General
Fund. The General Fund is the primary operating fund of the City and includes services such as
police, fire, public works, parks maintenance, community development, citizen services and
administration. The overall budget for the City of Maplewood’s General Fund in 2014 is $18.6
million dollars. Between 2009 and 2014, the City’s General Fund budget went from $16.9
million in 2009 to $18.6 million in 2014, an increase of $1.7 million dollars. The biggest growth
in expenditures during this period came from personnel costs ($1.3 million dollars). There are
essentially two sources of revenue that fund the General Fund budget – the property tax levy
and revenues from other sources, such as fees, licenses, permits, fines, charges for services,
etc.
Trend Data – revenue from sources other than property taxes
A review of some basic economic trend data demonstrates the impact of stagnant or little
growth in city revenue. The following represents a snap shot of City revenues OTHER THAN
property taxes (fees, licenses, permits, fines, charges for services, etc.):
2009 - $5.8 million
2010 - $5.9 million
2011 - $6.2 million
2012 - $6.4 million
2013 - $6.4 million
2014 - $6.0 million (Budgeted)
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2015 - $5.8 million (Projected)
As you can see, revenues generated for sources other than the City’s property tax levy are
generally flat. It can be quickly realized from this trend data that non-tax revenues from other
sources are not increasing commensurate with increases in City expenditures. This shows that
our General Fund is reliant on property tax increases to fund any growth in the operating budget
which limits the amount of tax revenue available for debt and capital projects.
Bonding Debt
As part of the City’s effort toward redevelopment and the desire to maintain infrastructure, such
as roads, and sewer systems, Maplewood invested heavily in bonded improvement projects
over the past 7 years. This was a strategic decision to buy needed infrastructure improvements
during a time of economic downturn, when the City could benefit from getting more for the
investment because of the competitive environment in construction.
In addition, because Maplewood has an excellent bond rating, the City has been able to borrow
money at very favorable interest rates. At present, Maplewood has bonded debt of slightly more
than $80 million, an increase of about $20 million since 2006. A current priority is the reduction
of debt over the next 5 years, but in the meantime, the annual property tax levy needed to pay
annual debt service costs has increased from $3.1 million in 2007 to $4.6 million in 2014.
Tax Levy
The property tax levy for the City has increased by $3.0 million since 2007, from $15.5 million in
2007 to $18.5 million in 2014. This is a 19.2% increase over 7 years or about 2.7% per year.
Half of that increase has been dedicated to debt service costs while only $1.0 million has been
applied to General Fund operations. Tax levy increases have not been able to keep up with the
growth in operational costs due to the need for infrastructure improvements and redevelopment.
Based on requests made during the preparation of our Capital Improvement Plan, we continue
to have a need for capital projects such as street improvements, parks, redevelopment and
investment in city facilities.
Fund Balance/Reserves
In keeping with City Council established priorities, Maplewood has a healthy fund balance of
40% or approximately $7.5 million. This level of a fund balance is crucial to the economic health
and viability of local units of government. A City’s bond rating is, in part, based on the fund
balance or reserves. The fund balance also helps a City manage cash flow and emergency
needs.
Budget Planning
Based on the above data, Department Heads, along with the City Manager and Finance
Director have been focused on the following:
• The need to control and/or reduce costs
• Assessment and consideration of new sources of revenue
• Review of all existing City services for possible service delivery changes
• Analysis of inter-departmental and inter-governmental service and/or resource sharing
• Identification of critical needs in City-owned buildings and facilities
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The City Manager has directed Department Heads to prepare and refine both operational and
capital budgets in a balanced manner using the philosophy of:
1. Responsible stewardship of the public’s resources
2. Providing services and programs that will reflect a commitment to excellence; and
3. Recognizing and valuing the high quality of service and innovation of city employees
through fair and equitable compensation.
Department Heads are looking at methods of addressing structural budget challenges in a way
that is sustainable and makes increases in the City property tax levy based upon need and
responsible decision-making.
The tax levy increase needed to fund initial departmental requests was between 9%-10%. Staff
is still actively engaged in the budget planning process and has already agreed on some
reductions in operating expenditures, changes to capital requests, and further deferment of
building maintenance issues. As we continue to look for program efficiencies prior to the
adoption of the final budget in December, input is needed on what the ultimate objective of the
council is. Do we fund based on business case or set the lowest possible levy with the potential
need for significant cuts in services?
Governmental units of all sizes and circumstances face serious challenges, but for largely
developed and established communities like Maplewood, the challenges are somewhat unique.
Maplewood is in a solid economic position overall, but to ensure the future will require bold
leadership to face the on-going challenges. We believe innovation presents opportunity.
Recommendation
It is recommended that the City Council support and direct that City staff at every level become
engaged in an effort to make the City of Maplewood a local and regional center for innovation in
government service delivery and effective stewardship of public resources.
It is further recommended that the City Council direct the establishment of a series of
mechanisms and opportunities for members of the public with questions about the City’s budget
and/or services to get questions answered or provide input, feedback, or suggestions.
Information received from Maplewood residents, business owners, and staff shall be
summarized and provided to the Council for the purposes of guiding and informing the City’s
budget development now and into the immediate future.
To that end, the new email address budget.ideas@ci.maplewood.mn.us is now available and
will be regularly monitored.
Finally, staff seeks Council guidance around priorities and considerations for the “maximum tax
levy” for 2015. In full recognition of the range of implications, department heads will continue
final preparation of a “maximum levy” recommendation based on the framework or guidance as
provided by the Council. With some budget cuts and deferrals already identified, the final staff
recommendation will be based upon feedback from the Council. Staff will continue to work with
Council to present a “maximum levy” recommendation and implications assessment for your
consideration and adoption on September 22, 2014.
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