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07-08-13 CC WS Mtg AgendaP CITY OF SHOREWOOD 5755 COUNTRY CLUB ROAD CITY COUNCIL WORK SESSION COUNCIL CHAMBERS MONDAY, 8 JULY 2013 6:30 P.M. AGENDA 1. CONVENE CITY COUNCIL WORK SESSION A. Roll Call Mayor Zerby _____ Hotvet _____ Siakel _____ Sundberg _____ Woodruff _____ B. Review Agenda ATTACHMENTS 2. 2014 BUDGET OVERVIEW Administrator’s memo 3. ADJOURN #2 MEETING TYPE City of Shorewood Council Meeting Item Work Session Title / Subject: 2014 Budget Overview Meeting Date: July 8, 2013 Prepared by: Bill Joynes, City Administrator Bruce DeJong, Finance Director Attachment: Budget Calendar Policy Consideration: How should the City of Shorewood prepare its budget for 2014? Background: Staff has begun to prepare a General Fund budget that continues to reflect our sensitivity to the economic conditions that residents face. The City of Shorewood has not adopted an increase in the general tax levy for the last several years. The City has budgeted use of about $103,000 of general fund reserves to balance the budget for 2013, which is similar to the $87,000 budgeted deficit for 2012. However, we have reached a point where leaving the levy flat, keeping line item expenditure budgets the same, and relying on minimal expenditures may have run its course. The odds of being over budget in any particular expenditure item is approaching 50% which means we are as likely to be over budget as under budget in almost any department. In fact, the financial report showed that many departments had expenditures that exceeded their budget. The City is now under levy limits for 2014. The levy limit passed by the legislature will not allow the City to be exempt because they are under a different statute than those waived by our participation in the performance measure program through the Office of the State Auditor (OSA). The levy limit looks to be at 3% of the 2013 certified levy, which will provide for a levy increase of up to $142,899. Not many of the agencies that we support are keeping their budget increases much below the 3% level. However, these are preliminary numbers and may be reduced before we have to adopt our final budget.  Lake Minnetonka Conservation District – 4.6% levy increase for Shorewood  South Lake Minnetonka Police Department – 3.4% increase  League of Minnesota Cities – 3% increase  Excelsior Fire District – 2.8% increase This year the budget conversation may be more challenging, given some of the themes highlighted in the City Council retreat in March. Several funds are either in current deficit or facing deficit situations in the near future. Many of those deficits will need to be partially addressed through cash transfers, some of which would most likely come from the general fund through a tax levy increase. Several actions have occurred, since the retreat, that tend to make those budgets even tighter. We have chosen to fund several trail segments this year that are higher cost than was projected in the budget. This is probably somewhat natural as staff did not have extensive experience with trail construction. We have also chosen to replace a street sweeper that was scheduled for 2020 in the Capital Improvement Plan (CIP) and purchase financial software that exceeded the estimated cost. That is not to say that these are unwise decisions, but they will limit our flexibility in future years. Some decisions have helped the situation. We were fortunate to be able to save money on several of the items related to sewer improvements in conjunction with the Metropolitan Council sewer interceptor project. We have also made some design changes to Badger Park that will reduce future CIP costs. Those changes will be revisited at upcoming Park Commission meetings in July and August with the recommendations coming back to the City Council for consideration prior to adopting the CIP. Staff is in process with putting the 5795 Country Club Road house up for sale. Clean up and repairs are proceeding in order to get the house in shape for a reasonable sale price. A decision will need to be made as to which fund will receive the proceeds of the sale. Staff has contacted several financial advisory firms regarding the utility rate studies. That process is on track to present proposals for Council consideration at the July 22 meeting. The tentative schedule is to have results of the rate studies back to the City Council at the end of September to assist with the enterprise budget discussion in October and November. We do not yet know the extent of savings that will be accruing to the City based on the sales tax exemption that the Legislature passed this spring. Staff will review 2012 & 2013 purchases to get an estimate of the amount of saving that might be expected from the implementation of that law on January 1, 2014. Staff has not had an opportunity to review detail budgets or talk to all departments about their budget requests yet. When staff has reviewed the budgets together, we will present a more detailed picture of potential 2014 scenarios. Financial or Budget Considerations: The challenge again this year is how to fund the operations of the city long-term without relying on non- recurring or one-time revenues. The City Council needs to determine if it will continue to use one-time monies from fund balance to keep the budget in balance. The levy situation needs to be revisited to determine how much may be needed to support on-going capital needs and to support the Southshore Center in whatever staffing configuration is ultimately determined. Options: The City Council may discuss any budget and CIP changes with staff and begin exploring potential modifications to the long-term funding arrangements. Recommendation / Action Requested: Staff recommends that the City Council suggest funding and operational changes to be reviewed and brought back with options along with detailed budget numbers at the budget work session on July 22. Next Steps and Timelines: The City Administrator and Finance Director intend to have budget discussions at each regularly scheduled meeting date through the summer and others as deemed necessary. Connection to Vision / Mission: Adopting a prudent budget contributes to sound financial management. CITY OF SHOREWOOD Proposed Budget Schedule for the 2014 Budget, 2014-2023 Capital Improvement Plan, and Taxes Levied in 2013, Payable in 2014 Date Description 06/17/13 Budget worksheets distributed to department heads. 07/03/13 Completed budget worksheets due back to Finance. 07/08/13 Budget discussion – Council philosophy and direction (Council and Staff) (no hard numbers) 07/22/13 Work-session: General Fund departments discussion (Council and Staff) 08/12/13 Work-session: Public Safety budget discussions (Council, Staff, Police & Fire Chiefs) 08/26/13 Work-session: Public Works budget discussions (Council and Staff) 09/09/13 Regular Council meeting. Council adopts 2014 proposed budget, tax levy, and Truth-in-Taxation public hearing date. 09/15/13 Proposed budget and levy must be certified to County Auditor by this date. State PT Form 280 also to be submitted. 10/14/13 Work-session: Enterprise Budget session (Council and staff) 10/28/13 Work-session: Capital Improvement Plan session (Council and staff) 11/12/13 Work-session: Enterprise Budget Final Review (Council and staff) 11/18-11/23/13 Hennepin County to mail Notice of Proposed Property Tax by this date. 11/25/13 Work-session: Final General Fund Budget Review 12/02/13 Truth-In-Taxation Budget Public Hearing. 12/09/13 Regular Council meeting. Final 2014 budgets and levy to be adopted. 12/26/13 Final levy and budgets must be certified to the County Auditor by this date. State forms Payable 2014 Property Tax Levy Report and PT Form TNT 2014 also due.