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HomeMy WebLinkAbout04.20.11 Work Session Minutes City Council Workshop Finance Department Budget April 20, 2011 Mayor Larson called the workshop to order at 3: 1 0 p.m. Present: Larson, Bartholomay, Donnelly, Fogarty, May (arrived at 3:55 p.m.) Also Present: Teresa Walters, Finance Director; Cynthia Muller, Executive Assistant MOTION by Fogarty, second by Bartholomay to approve the agenda. APIF, MOTION CARRIED. Finance Director Walters gave Council a list of duties performed in the Finance Department. There are 1.5 people doing utility billing. The half person is doing accounts payable. With the Accountant position being eliminated, the half person also does accounts receivable. So the half person does accounts receivable, accounts payable and utility billing. Other than these three areas, all the rest ofthe duties are completed by two people. It was planned the accountant would leave at the end of February, but stayed until the end of March to help with the audit. That additional month cost an additional $6,773 for salary and benefIts. Professional services has $4,950 for auditors to do the accountant work. An audit costs $33,000 and is split between the departments. Normally, professional services only contains the amount of the audit the Finance Department pays. Staffwill be going out for RFP for audit services. Regarding the HRA fund, KDV was not aware there was an HRA fund; they thought everything under the HRA was TIF only, but that does not make sense, because you cannot combine HRA and TIF money. There have also been other issues with KDV as far as the Fire Relief Association. The $6,950 is made up of$2,000 for the truth-in-taxation charges for Dakota County. Staff thought we did not have to pay that because they no longer hold hearings, but the county still sends out notices to residents advising when the meetings are held. This had to be paid last year and will have to be paid going forward and is not part of the budget, so that had to be added in. The other $4,950 is for audit services and will not be needed because the Accountant was here during March. This will help to offset her pay for the additional month. Also $2,000 was added into the budget last year for overtime because of losing the Accountant and there are no exempt employees. The budget for January and February does include the salary and benefIts paid for the Accountant which is $13,546. Finance Director Walters proposed four options for staffmg for 2012. Option 1 is to add the Accountant position back into the budget at a cost to the City of$51,911. Option 2 is to promote an Accounting Technician to Accountant and make that position exempt which will allow her to work extra hours which would be an increase of$12,061, but would mean there is an additional $9,416 that could go back into the budget for some other use. Even with option 2 extra help may still be needed. Option 3 is to add a part-time staff person at a cost of $4,729. Option 4 is to do both; add a part-time staff person and promote the Accounting Technician to an Accountant. This would add $11,809 to the budget. Finance is requesting this because of losing the accountant and still having the work to do and the need of segregation of duties. Mayor Larson asked what staff recommends because he is concerned with departments being at the point of 18 Council Budget Workshop April 20, 2011 Page 2 diminishing return. He wants the City to be staffed to the point where we can get the most done, but not over or under staffed. Finance Director Walters would prefer option 4 as option 1 is not realistic and a lot of money. She does not want someone to lose their job because we choose option 1 when we can get by with option 4. Council reached a consensus for option 4 for 2012. Council was provided with a comparison ofthe 2011 levy versus the 2012 levy. Under levies allowed above legislative limits are all the debt service payments. This was brought to Council as the former road and bridge fund, now the project fund. This shows how things will be shifted around to be able to pay the bonds and still do the projects. The levies in 2011 came to $1,034,490. Proposed for 2012 is $1,033,950, but it is shifted into different areas. The Walnut Street project is not included in this amount. Some bonds need to have a levy that did not have a levy in the past. This means bonds payments were paid from transfers from the road and bridge fund, however the road and bridge fund should not have paid for this; we should have levied for it. Staff is adding in some of the bonds that needed to have a levy that did not have a levy in the past. As far as Walnut Street, it came in below the estimated cost. That money will go to the debt service fund. Staff also anticipates assessments that will cover the Walnut Street project until 2015. The overage was $256,000 that will be transferred. We may not have to levy for Walnut Street until 2015. There is an equipment certificate that is coming due at the end of 2011. This amounts to $162,600. With this certificate coming due, we have the ice arena covered; so we do not have to levy for the ice arena. However, staff strongly recommends levying for the arena and placing the $162,600 into an equipment plan to start replacing equipment. Staff had planned on increasing the levy for the arena. We are not increasing the levy for Walnut Street. Staff added $40,446 to the levy for Police Sergeant salaries because they are going up an additional 1.75% this year. The Fire Relieflevy also needs to increase by $48,825. With no other increases and everything else staying the same we are at a .98% increase in the levy. Staff gave an example of starting from this point adding the equipment levy of$162,600, and an EDA levy of an estimated $50,000. There are funds left over in a municipal fund from building the City Hall and the amount is close to the EDA deficit. We need to close the fund and it is Council's decision what to do with the money. The EDA is part of the City, but it is separate. If Council decides to have the EDA as a separate entity and not have the Council on the EDA, it becomes even more separate and needs to have its own fmancials and have everything segregated. The EDA still needs a levy in order to operate. Staff presented fmancial statements showing the EDA deficit of$242,241, and negative balances in the recreation fund and the ice arena. There is somewhat of a plan to reduce these balances, but it will not completely wipe out the deficit. One of the options for next year is there is a new GASB rule in place that cities have to do their fund balances differently. Cities have to show fund balances that are designated for certain purposes, designated by Council, by outside entities, designate internally, there will have to be all these lines in the fund balances to show what the fund balances are for. This is not for enterprise funds; it is for governmental funds. Certain things cannot go in the line item unless approved by Council, etc. GASB also says in order to have a special revenue account you have to have a designated revenue source. That source cannot be from the general fund. We have the Rambling River Center, and recreation where we 19 Council Budget Workshop April 20, 2011 Page 3 transfer quite a bit into those funds. We transfer $155,000 in order for the senior center to operate. That is the majority of their revenue source. The senior center may have to go into the general fund. Staff also proposed putting the recreation fund into the general fund, not including the ice arena. We can look at the arena next year and see if the new sheet of ice increases revenue. (Councilmember May arrived at 3:55 p.m.) Starting with the .98% increase in the levy, the $162,600 equipment levy could be used for an equipment fund, an EDA levy for $50,000, staff raises of$59,000 (2% raise), roll the deficit of $150,000 (the senior center renovations, Rambling River Center, and the pool deficits amount to $150,000). In 2011 staff is proposing to not transfer as much from the liquor store and utilize about $45,000 ofthe fund balance for the pool. With the new GASB rules, transfers from the liquor store could be made at year end. Council asked about the $159,000 deficit for the Rambling River Center and where the money came from. It came from pooled cash. Council stated the total financial picture of the City right now, with the deficits, ifwe put all the deficits into the general fund, the fmancial picture is the same. Staff explained if you looked at the City's fmancial position right now, you would see the general fund is negative. The EDA is negative. The recreation funds are negative. The arena is negative. We are sitting with a lot of negative cash. Looking at the cash poo~ someone is offsetting it. Looking at what is left, you have the road and bridge fund which has money, but that money is designated for a specific purpose to pay bond payments. Council stated the funds we have been borrowing from are no longer sustainable. Staff explained the general fund stays negative until we receive the tax money in June. That is why it is recommended to have a 40% - 50% of your general fund balance so you don't go negative throughout the year. Back to levy increases, in addition to the above, there would be a Finance staff change of $11,809. Reductions include a contingency of $45,000 left in the budget, and a one time transfer of$233,973 transferred to the Vermillion River Crossing bond in order to cover the deficit in the bond which will not be needed this year. That money is in the budget that was levied for and is sitting there. That was taken from fiscal disparities. Doing all ofthese and using the fiscal disparities and contingency we could keep the levy at 2.83%. Council stated it looks like with the $150,000 roll deficit we are taxing people to cover past things that we already paid for. It's like we used a credit card. The 2012 levy is a clean-up levy. We renovated the Rambling River Center and received pledges, but we don't have the money yet. The levy would clear up the books and as the money comes in it would go to the general fund. Staff will obtain the amount left to come in for the Rambling River Center renovations. Council noted on the tax statement the school and county go down and the City goes up. Next year the City will be up again. The fiscal disparities for 2011 are $1.5 million. Council noted that number fluctuates depending on the state. In 2012, rather than do a park or an EDA levy, budget for $1.3 million in fiscal disparities and anything above that is split between the two funds until the EDA is paid off and we build up the park fund. 20 Council Budget Workshop April 20, 2011 Page 4 Seal coating needs to be done. Council noted we cannot raise the levy $1 million, but we cannot skip seal coating another year. Council can implement a franchise fee at any time to cover seal coating~ Council could ask taxpayers for money to fIx their roads, but to pay for past actions is hard to do. IfEDA property was sold it would go to reduce the defIcit, but we could not eliminate it. CDBG grants have been very effective, but the rules have made it very diffIcult to obtain the money. Council would like to take any leftover money from proceeds and apply it to the budget and not increase the levy and let the EDA fIgure its own way out to reduce the burden on the taxpayer. MOTION by Bartholomay, second by May to adjourn at 5 :00 p.m. APIF, MOTION CARRIED. Respectfully submitted, Cynthia Muller Executive Assistant 21