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HomeMy WebLinkAbout03.28.16 Work Session Packet City ofFarmington Mission Statement 430 Third Street Through teamwork and Farmington,MN 55024 cooperation,the City of Farmington provides quality services that pmserve our proud past and foster a promising future. AGENDA CITY COUNCIL WORKSHOP March 28, 2016 5:30 PM Farmington City Hall 1. CALL TO ORDER 2. APPROVE AGENDA 3. DISCUSSION ITEMS (a) 20 Year Financial Plan and 2017 Budget (b) Liquor Store Update 4. CITY ADMINISTRATOR UPDATE 5. ADJOURN �o��tRIf, City of Farmington 430 Third Street Farmington, Minnesota 651.280.6800 -Fax 651.280.6899 .,, �"° www ci.farmington.mn.us TO: Mayor,Councilmembers and City Administrator FROM: David McKnight, City Administrator SUBJECT: 20 Year Financial Plan and 2017 Budget DATE: March 28,2016 INTRODUCTION City staff has continued work on a 20 year financial plan over the past year and is ready to update the city council on this issue. The financial plan will be a guiding document for future city budgets, including the 2017 budget. City staff will present the financial plan at the work session. DISCUSSION As you may recall, city staff presented the first version of the financial plan to the city council in 2015. At that time,while the city council liked the idea of developing a long-term plan,you had concerns with some of the potential tax levy increases included in the plan, among other issues. City staff started work on this issue a number of years ago for a variety of reasons. Staff continues to stress the importance of comprehensive financial planning for the following reasons: 1. We need to ensure that we have the resources to continue service delivery for our residents. 2. The city council has expressed the desire to pay down our current debt and to reduce our reliance on debt financing for future projects. 3. The city council has expressed a desire to move to "pay to as we go" (cash)as much as possible when it comes to paying for street projects and large equipment purchases. 4. The city council has demonstrated over a number of years that they are willing to take the necessary steps to become a city of fiscal excellence. 5. The city desires to ensure transparency in all of our CIP plans and how we proposed to fund them. With these goals in mind,capital improvement plans (CIP's)were developed for a number of areas. These CIP's will be explained in this memo and the financial implications are included in the spreadsheets for each plan. A summary sheet for all of this information is included as an attachment for your review. Summary Sheet The summary sheet shows you the cost of our projected operating budgets,the different CIP's, our projected revenues in each year including fiscal disparities, our known and projected debt costs and the estimated levy increase that will be needed each year. Almost all of the costs listed on the summary page are associated with a CIP that is linked to the summary page and attached for your review. We needed a"starting point" for the operating budget. To determine that we took the 2016 expenditures ($14,769,073)and subtracted our 2016 debt($2,970,848)to give us our base 2016 operating levy number of $11,798,225. The operating budget includes all of the people, supplies,utilities, etc. costs that fall outside of the CIP approach used with this plan. To move these costs forward in the plan,the base number was increased 3%for 2017, 3%for 2018 and 5%for 2019. This approach is repeated every three years. These costs are projected to cover increases in costs to labor, etc. with the third year increase of 5%assuming we have growth in staffing. This was the approach we developed;it is not based on science,but rather out best guess as to potential cost increases. I will review the summary sheet in detail at your work session to make sure you understand the plan. Transfers Out Budget Over the past few years you have seen the development and growth of the Transfers Out Budget. This is the line item where we have placed multi-year projects, like sealcoating,that carry over their balance from year to year. In addition, this is the area where we track the projects we fund with our Local Government Aid dollars. All of these transfer dollars are included in the base levy number,but it is important to understand that these projects are included. As you will see from the attached spreadsheet,we have our LGA dollars committed through 2019. In 2020, approximately$150,000 per year will become available for other uses. Assuming LGA funding is not discontinued as it has been in the past,possible uses could include use for the purchase of city equipment, funding for building maintenance or possibly looking at costs associated with projects lice the emerald ash borer issue you recently discussed in a work session. These dollars will remain undesignated at this point,but it is important to remember that we will have unforeseen issues we will need to address. Fire Department Vehicle CIP As the city council is well aware,the fire department has had a separate CIP for their vehicles in place since 2013. This plan was put in place to speed up the process of replacing a number of vehicles in the department that had fallen behind their original replacement schedule. The fire department CIP has been updated a number of times over the past few years and will remain separate from the city vehicle CIP until 2020. At that time the fire department vehicle needs will be rolled into the citywide vehicle CIP. After 2016 the only remaining vehicle in this CIP is a new engine that will be purchased in 2019. Dollars for this purchase are being set aside during 2017,2018 and 2019 in order the pay cash for this vehicle. Firefighter Equipment One of the areas that the city has tried to become more proactive in planning for is the purchase and/or replacement of large scale and more costly equipment in our public safety departments. In this case equipment does not include vehicles,those future costs are addressed in different CIP's. The fire department has made progress in this area by being able to include the cost of turnout gear and SCUBA equipment in their operating budget. To incorporate the additional needs they have in this area we initially took the proposed equipment CIP that was developed in 2011 and update it for this financial plan. We added the"additional costs" item to the summary page to begin to account for the cost of this equipment. The fire department has proposed a plan that over the length of the financial plan can be accounted for financially,but has more of the purchases focused towards the beginning of the plan. I have asked the department to rework their plan to fit within the financial framework of the overall financial plan. We will continue to perform this work while the financial plan is discussed. Police Equipment Much like the fire department,the police department has equipment needs that we are planning for. Again, this equipment plan does not include vehicles as those are accounted for in a separate CIP. The equipment in this plan is very straightforward and has a predictable replacement schedule. Some of this equipment is already included in the annual operating budget. The line included on the summary sheet for police equipment reflects the increased costs for this equipment. Trail Maintenance CIP The city council approved the trail maintenance CIP in 2014. The city currently has approximately 44 miles of trail located throughout the city. The trails,much lke our city streets,need to have preventive maintenance in order the extend the life of the investment and keep them in operating condition. The transfers out budget has included$30,000 per year for this work since 2014. Some of the work that is performed includes fog sealing and cracking sealing. The trail maintenance plan calls for increased funding for this plan starting in 2017. The summary sheet includes a line item that includes the"increased" funding amount. The original$30,000 per year funding is included in the transfers out budget. The CIP requires additional funding to pay for some of the larger maintenance projects in the future including overlays and reconstruction. Building CIP The city council has discussed the issue of dollars that are/will be needed to maintain our city facilities. We currently have$30 million in city facilities according to our insurance documents. Starting in 2014 we began setting dollars aside in the transfers out budget for building maintenance needs. The 2016 budget includes $15,000 from the tax levy and$36,607 from LGA for building maintenance needs. Industry standards typically call for 2%of your building value to be set aside each year for building maintenance and replacement needs. If you take this approach we should be setting aside$600,000 per year for our building maintenance and replacement needs. City staff realizes that this number is not realistic,but at the same time we understand that only budgeting$51,000 per year for these needs which started just a few years ago is also not realistic. The summary sheet includes a line item for a building CIP. There is no detail for the work associated with this CIP at this time. It was included in the plan so we start to address this very important issue. The numbers that were included in future years we selected because they fit into the levy that is proposed for those specific years. This is an issue that needs more discussion for a number of reasons. The most important of which is we have needs in our facilities today that need to be addressed. City Vehicle CIP City staff has spent significant time developing a replacement schedule for city vehicles and equipment that are included in the General Fund. This includes the vehicles and related equipment we use in building inspections,engineering,police,fire, streets and parks. The vehicles used in our other funds are not included in this plan since they are not paid for through the tax levy. The city vehicle CIP is not scheduled to start until the year 2020. There are two exceptions to this schedule. The first is the fire department CIP that you have separately approved. Second,we have been setting aside some dollars each year as a band aid to cover these vehicles until the start of this plan in 2020. The cost of these vehicles and related equipment is included on the summary sheet under the"plus debt levy" and"plus pay as we go levy." Most of these vehicles are purchased with cash. The exceptions are the five larger fire department purchases proposed starting in 2023. These proposed purchases will need to be discussed with the city council. Current Debt/Future Debt/Street CIP This spreadsheet should be considered the guts of the entire plan. This spreadsheet includes a number of pieces that I will go through at the work session. The first section is a summary of our current debt split between the Road and Bridge Fund and Non-Road and Bridge Fund projects. Our current debt includes 12 debt issues which we are making payments on in 2016. These 12 issues will be paid in full in the year 2027. The second section is a summary of the proposed street CIP projects. As you recall you have already completed the first three street CIP projects over the past three years. The next project is proposed for 2019 and the plan includes nine other projects in addition to "multiple" and "TBD" areas. Below the projects section is the proposed financing plan for these projects. As you will see we are proposing a combination of tax dollars used as cash,bonded debt and individual fund contributions to pay for these projects. The most important thing to remember in this area is that we are moving to pay for a portion and ultimately all of these projects with cash which significantly reduces the cost to taxpayers. The third section of this spreadsheet is a summary of the vehicle CIP by department and the proposed financing of these purchases. Most of the purchases in the vehicle CIP are funded through the tax levy and paid for with cash as we go as previously mentioned. The exception to this approach are the five fire department vehicles that are proposed that we would need to issue debt to purchase, listed as bonded debt in this section. The final section of this spreadsheet is a summary of the dollars needed to fund these projects. The bottom portion of the spreadsheet shows the different dollars we need to collect to both pay our debt payments and collect as cash to pay as we go. This information is transferred to the summary sheet and listed as "plus debt levy" and"plus pay as we go levy." I understand there is a lot of information included in this spreadsheet and it can be very confusing. I am confident that once we present this information to you at the work session you will be able to follow along and understand it better. BUDGET IMPACT TBD ACTION REQUESTED There is a significant amount of information included in the financial plan. City staff will take as much time as is needed to review all of the information and ensure that you all understand what we are discussing. I do not expect any action or direction at your March 14, 2016 work session. I fully anticipate that this issue will be discussed at your April 11, 2016 work session and potentially the April 15,2016 goal setting session. I will have paper copies of all of the spreadsheets available at the work session. Having larger paper copies of this information can make your review of the information a little easier. ATTACHMENTS: Type Description ✓ Backup Material Summary Sheet © Backup Material Transfers Out Budget © Backup Material Fire Department Vehicle CIP o Backup Material Firefighter Equipment o Backup Material Police Equipment CIP D Backup Material Trail Maintenance CIP • Backup Material City Vehicle CIP © Backup Material Current Debt/Future Debt/CIP 1 q § § § § tIklg juifl!1j In . U NN O Nk I i A N t d N IIII1 N °I N ~ I G ~ Ut I L1fljt ui m H a. 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N a N1 M N O ni5t�i O .. , 4 ,4 Nei N iN N N b: u 1` i'i $fig•i �aN.Q1 p� I @� td N N V.�N a 1HI If' Oa�= r�ay} O p M '� i O ` 'Y O K x: a - • a tps P 'gin � e •t 4r4 1 . ^ t Nk s m N'N N W N N op pp a Naa a f'RIaaaa R i a i ; w I J ' O tz2 ° h ..4-1-' Y f W W}� C ,M W . e ° Z l Z �� � � z o i b r Ili ° i s 5I 5i 5i , m 4i t;; City of Farmington • 4 430 Third Street a Farmington,Minnesota o 651.280.6800 -Fax 651.280.6899 't+r,a ,o.,_ www.cifarmington.mn.us TO: Mayor, Councilmembers and City Administrator FROM: David McKnight SUBJECT: Liquor Store Update DATE: March 28, 2016 INTRODUCTION The issue of the location of our downtown liquor store was discussed at your work session on February 22, 2016. We will continue that discussion at your work session on March 28, 2016. DISCUSSION As you are all aware the lease for our downtown liquor store will expire on July 31,2017. Discussion of our options for the downtown store will continue at your work session on March 28,2016. BUDGET IMPACT TBD ACTION REQUESTED Additional information on options for the downtown store will be discussed at your work session.