HomeMy WebLinkAbout08.23.10 Work Session Packet
City of Farmington
430 Third Street
Farmington, MN 55024
Mission Statement
Through teamwork and cooperation,
the City of Farmington provides quality
services that preserve our proud past and
foster a promising future.
AGENDA
CITY COUNCIL WORKSHOP
August 23,2010
6:30 P.M.
CITY COUNCIL CHAMBERS
1. CALL TO ORDER
2. APPROVE AGENDA
3. 2011 BUDGET DISCUSSION
4. ADJOURN
PUBLIC INFORMATION STATEMENT
Council workshops are conducted as an informal work session. all discussions shall be consideredfact-finding, hypothetical and unofficial critical thinking exercises,
which do not reflect an official public position.
Council work session outcomes should not be construed by the attending public and/or reporting media as the articulation of aformal City policy position. Only
official Council action normally taken at a regularly scheduled Council meeting should be considered as aformal expression of the City's position on arry given matter.
City of Farmington
430 Third Street
Farmington, Minnesota
651.280.6800 . Fax 651.280.6899
www.ci.farmington.mn.us
TO: Mayor and Council Members
FROM: Peter Herlofsky, City Administrator
Teresa Walters, Finance Director
SUBJECT: Budget Work Session - Preliminary Levy
DATE: August 23,2010
PURPOSE:
This City is required to set the Public Budget Hearing Date and the Preliminary Property Tax
Levy to the County by September 15,2010. To allow sufficient time to prepare the paperwork
needed for the County, staff recommends the City Council set the levy on Tuesday, September
7th at 7:00 PM with an alternate date of Monday, September 13th at 6:00 PM. Once the levy is
set it can be reduced but it cannot be increased. Staff recommends setting the hearing date as
December 6, 2010 at 7:00 PM.
UPDATE:
Since the last City Council Budget workshop, the City received updated information on the
Fiscal Disparity Distribution. The County has informed us that we will be receiving $1,537,976.
The budget documents previously sent to you showed us receiving $1,304,003. This is a
difference of$233,973.
At the last council workshop the Council decided to each individually submit their requests for
cuts to the budget. Staff would then prepare a summary of the reductions and provide them at
the August 23,2010 meeting. Only three council members submitted their requests. They are
shown below:
Fire Dept: Do not replace 2 positions. Keep staffing level to 50 members. ($33,375)
[1 council member]
Reduce Staffing level to 47 members [1 council member].
Police Dept: Cut down on police overtime ($10,000?), Reduce vehicle to one ($27,000)
Legislative: Eliminate the Metro Cities Dues ($6,340) [2 council members]
Administration: Mileage ($1,500)
City Hall: Turn off lights ($1,250)
Communications: Solid Waste ($1,000), Reduce postage ($500)
Legal: City Attorney ($3,000)
IT: Data processing ($2,400)
Engineering: Reduce services. Results = Slower lines. ($14,382) [3 council members]
Planning: Reduce services. Results = slower service ($12,703) [2 council members]
Natural resources: ($2,459)
Building Inspection: Reduce inspections. ($6,169)
Park & Rec: Cut down on subscriptions
Municipal Services: Reduce PT employee ($14,993) [3 council members]
See if there is a way to use more comp time in the summer to cover the
snowplowing overtime in the winter. I know at the county there are employees
who take weeks off in the summer because of all the comp time they accumulate
in the winter snowplowing season. I think we should not fill the part time
position.
Reduce by $2,500.
Eliminate Staff position - ($86,949 - Includes benefits) [1 council member]
Reorganize Staff position - [1 council member].
General:
OTHER COUNCIL REQUESTED INFORMATION:
The budget as shown below does not include retirements since we have not received official
notification
Council member Donnelly asked about the 195th Street project. The 195th Street project is a
cooperative venture of the City, Dakota County, and Astra Genstar (the developer). Debt service
from these bonds comes from Dakota County and special assessments on the properties in the
Fairhill Development. The County will be reimbursing the City a total of $4.5 million. As of
August 2010, we have received $3,484,624.59. This is another debt service fund where
assessments were based on anticipated assessments. The County's portion will most likely end
in 2012.
DEBT SERVICE OPTIONS:
Three options were provided to pay the debt payments. 1 Council member chose option 1. The
other two council members did not comment on this. The three options are shown on the
attached sheets. Option 1 shows a levy increase of 11.02%. Option 2 shows a levy increase of
7.77%. Option 3 shows a levy increase of 5.43%. '
OTHER:
The Deputy Registrar will require start-up funds.
City of Farmington
430 Third Street
Farmington, Minnesota
651.280.6800 . Fax 651.280.6899
www.ci.farmington.mn.us
TO: Mayor and Council Members
FROM: Peter Herlofsky, City Administrator
Teresa Walters, Finance Director
SUBJECT: Budget Work Session - Debt Service Levy
DATE: July 26,2010
GENERAL OBLIGATION IMPROVEMENT BOND 2006A:
On June 19,2006 the City council authorized the issuance of$5.5 million in bonds to cover the
Vermilion River Crossing Development (Spruce Street) and the Hill Dee project. The project
did not develop as anticipated leaving the City with a bond payment that exceeded the revenue
sources (levy and assessments). This caused the bond fund to have a deficit balance in 2009.
The deficit balance is expected to increase to $269,000 in 2010. In addition to this, the bond
payment is anticipated to increase from $359,941 in 2010 to $534,091 in 2011. In 2010 we
anticipate receiving approximately $100,000 in special assessments. The 2010 levy was
$77,200.
The bond documents state that "Should the revenues pledged for payment of the bonds be
insufficient to pay the principal and interest as the same shall become due, the City is required 0
pay maturing principal and interest from moneys on hand in any other fund of the City not
pledged for another purpose and/or to levy additional taxes for this purpose upon all the taxable
property ofthe City, without limitation as to rate or amount." See page 3 and section 6: Pledge
of taxing powers on page 4.
The Principal and interest payment schedule is shown on page 5 of this document.
The projected special assessments are shown on page 6.
The actual special assessments and levy are shown below:
2006 2007 2008 2009 2010
Actual Actual Actual Actual Budget
Revenue
Taxes 97,580 23,307 21,098 77,200
Spruce St
Assessment 56,343 51,131 49,627 48,123
Hill Dee
Assessment 119,100 83,113 50,012 13.486 51,877
Bond proceeds 283,559
Interest 6,155 8,904 1,011 187
Total Revenue 408,814 245,940 125.461 84,398 177,200
Expenses
Principal 140,000 145,000 150,000
Interest - 233,374 218,968 213,525 209,941
Total Expenses - 233,374 358,968 358,525 359,941
Revenue less
expense 408,814 12,56S (233,507) (274,127) (182,741)
Beginning Bal - 408,814 421,380 187,873 (86,254)
Ending Balance 408,814 421,380 187,873 (86,254) (268,995)
UPDATED INFORMATION: WHAT HAPPENED SINCE OUR MEETING
(Review from Previous memo)
1. The Minnesota Department of Revenue calculated our Market Value Homestead Credit
(MVC) Reduction for 2010 at $415,051. In 2010 we levied $350,000 as a special levy to
make up for the reduction in 2009. This levy was described as a "Capital Special Levy"
and placed into the Capital Acquisition fund budget. In 2011, we anticipate the same
reduction to our MVC; therefore, we will be increasing our "Capital Special Levy" from
$350,000 to $415,051.
2. The proposed transfer of $300,000 needed to cover the deficit in the debt service fund
was recommended to come from the Capital Acquisition fund. In our attempt to reduce
the General Fund levy, we recommended paying for the police vehicles out of the Capital
Acquisition fund. This is no longer possible since there are limited funds in the Capital
Acquisition fund. The following options are shown below:
a. Levy for the $269,000 deficit and the increase in the debt payment.
b. Levy for the increase in the debt payment, borrow the $269,000 from another
fund, and levy to pay back the $269,000 at 3% interest over 10 years.
c. Levy for a portion of the increase in the debt payment, borrow the deficit and the
remaining portion of the payment from another fund. Levy to pay back the higher
debt balance owed to the other fund.
OPTIONS FOR COUNCIL CONSIDERATION
1. Levy for the increase in the bond payment and the deficit in the fund balance. This will
result in a 10.96% increase to the overall levy.
a. Advantage: Does not take on any new debt since we are not borrowing from
another source for the deficit or increase in bond payment.
b. Disadvantage: 10.96% levy increase (see the breakdown on the next page)
Levy Use
2010 Levy 2011 Levy Difference
General Fund $ 5,694,448 $ 5,840,396 $ 145,948 2.56%
MVC - State Levy 350,000 415,051 65,051 18.59%
Fire Relief Levy 195,584 126,000 (69,584) -35.58%
General Levy Total $ 6,240,032 $ 6,381,447 $ 141,415 2.27%
Levies Allowed Above
Legislative Limits
G.O. Improvement - 2003A $ 249,918 $ 249,918 $ 0.00%
G.O. Improvement - 2005B 200,000 200,000 0.00%
G.O. Improvement - 2006A 77 ,200 713,545 636,345 824.28%
Equipment Certificate - 2005D 167,900 162,600 (5,300) -3.16%
Wastewater Treatment - 1995 60,000 60,000 0.00%
Public Project Revenue - 2001A 350,000 (350,000) -100.00%
Public Project Revenue - 201 OA 390,000 390,000 100.00%
G.O. Capital Improvement - 2005C 144,120 144,120 0.00%
G.O. Capital Improvement - 2007A 733,700 733,700 0.00%
Public Safety Revenue Bonds -2007 (DCC) 59,450 59,450 0.00%
Street Reconstruction - 201 OC 75,000 75,000 100.00%
Ice Arena Equipment Certificate - 201 OD 20,000 20,000 100.00%
Total Levies Above the General Levy $ 2,042,288 $ 2,808,333 $ 766,045 37.51%
Grand Total Levies $ 8,282,320 $ 9,189,780 $ 907,460 10.96%
c. Future Impact of 10.96% overall increase:
Option 1: Levy for Debt and deficit
Futnre Impact
Loan Estimated
Levy Bond Equip Note (3%) Total percent of total
Year Levy Levy Levy Levy tax increase
2011 713,545 713,545 7.68%
2012 300,000 162,600 462,600 -4.99%
2013 320,000 162,600 482,600 0.24%
2014 330,000 162,600 492,600 0.12%
2015 340,000 162,600 502,600 0.12%
2016 350,000 162,600 512,600 0.12%
2017 360,000 162,600 522,600 0.12%
2018 370,000 162,600 532,600 0.12%
2019 380,000 162,600 542,600 0.12%
2020 390,000 162,600 552,600 0.12%
2021 400,000 400,000 0.12%
2022 244,095 244,095 -1.88%
2. Levy for the increase in bond payment and borrow the funds to cover the deficit
($269,000). The funds will need to be paid back and the levy will need to be increased
for this additional payment as well. This will result in a 7.71 % increase in the overall
levy.
a. Advantage: Does not include utilizing the equipment note levy set to end in 2011.
Minimal impact in future years.
Levy Use
2010 Levy 2011 Levy Difference
General Fund $ 5,694,448 $ 5,840,396 $ 145,948 2.56%
MVC - State Levy 350,000 415,051 65,051 18.59%
Fire Relief Levy 195,584 126,000 (69,584) -35.58%
General Levy Total $ 6,240,032 $ 6,381,447 $ 141,415 2.27%
Levies Allowed Above
Legislative Limits
G.O. Improvement - 2003A $ 249,918 $ 249,918 $ 0.00%
G.O. Improvement - 2005B 200,000 200,000 0.00%
G.O. Improvement - 2006A 77,200 444,545 367,345 475.84%
Equipment Certificate - 2005D 167,900 162,600 (5,300) -3.16%
Wastewater Treatment - 1995 60,000 60,000 0.00%
Public Project Revenue - 2001 A 350,000 (350,000) -100.00%
Public Project Revenue - 201 OA 390,000 390,000 100.00%
G.O. Capital Improvement - 2005C 144,120 144,120 0.00%
G.O. Capital Improvement - 2007A 733,700 733,700 0.00%
Public Safety Revenue Bonds -2007 (DCC) 59,450 59,450 0.00%
Street Reconstruction - 201 OC 75,000 75,000 100.00%
Ice Arena Equipment Certificate - 201 on 20,000 20,000 100.00%
Total Levies Above the General Levy $ 2,042,288 $ 2,539,333 $ 497,045 24.34%
Grand Total Levies $ 8,282,320 $ 8,920,780 $ 638,460 7.71%
b. Disadvantage: New debt issue: $269,000 (Borrow from other funds).
c. Future impact of7.71 % increase
Option 2: Levy for Debt and deficit
Future Impact
Loan Estimated
Levy Bond Equip (3%) Total percent of total
Year Levy Note Levy Levy Levy tax increase
2011 444,545 444,545 4.44%
2012 460,000 31,336 491,336 0.19%
2013 465,000 31,336 496,336 0.06%
2014 470,000 31,336 501,336 0.06%
2015 480,000 31,336 511,336 0.12%
2016 490,000 31,336 521,336 0.12%
2017 500,000 31,336 531,336 0.12%
2018 510,000 31,336 541,336 0.12%
2019 520,000 31,336 551,336 0.12%
2020 530,000 31,336 561,336 0.12%
2021 540,000 31,336 571,336 0.12%
2022 300,000 31,336 331,336 -2.90%
3. Keep the debt service schedule as previously proposed, Borrow the $462,600 ($300,000
needed to cover the deficit in 2010 and $162,600 needed to cover the debt payment in
2011), pay it back over 10 years. In 2012, this would utilize the equipment debt levy set
to end in 2011. Future levy increases would include the scheduled increases proposed at
the last meeting as well as an annual payment of$53,889 (10 years at 3%) to cover the
amount borrowed. This would maintain the overall levy at 5.3 7%.
a. Advantage: Lower overall levy increase in 2011. (See the breakdown below).
Levy Use
General Fund
MVC - State Levy
Fire Relief Levy
General Levy Total
G.O. Improvement - 2003A
G.O. Improvement - 2005B
G.O. Improvement - 2006A
Equipment Certificate - 2005D
Wastewater Treatment - 1995
Public Project Revenue - 2001A
Public Project Revenue - 201 OA
G.O. Capital Improvement - 2005C
G.O. Capital Improvement - 2007A
Public Safety Revenue Bonds -2007 (DCC)
Street Reconstruction - 201 OC
Ice Arena Equipment Certificate - 2010D
Total Levies Above the General Levy
Grand Total Levies
2010 Levy
2011 Levy
Difference
2.56%
18.59%
-35.58%
2.27%
0.00%
0.00%
225.13%
-3.16%
0.00%
-100.00%
100.00%
0.00%
0.00%
0.00%
100.00%
100.00%
14.86%
5.3 7%
b. Disadvantage: New debt issue: $462,600. Utilizes the equipment note levy.
Higher amount paid for debt due to interest. This option also increases the levy in
2012. We will also have increases in the Walnut Street and Arena Debt payments
next in 2012.
$ 5,694,448
350,000
195,584
$ 5,840,396
415,051
126,000
$ 145,948
65,051
(69,584)
$ 6,240,032
$ 6,381,447
$ 141,415
$
Levies Allowed Above
Legislative Limits
249,918 $ 249,918
200,000 200,000
77,200 251,000
167,900 162,600
60,000 60,000
350,000
(350,000)
390,000
$
173,800
(5,300)
144,120
733,700
59,450
390,000
144,120
733,700
59,450
75,000
20,000
75,000
20,000
$ 2,042,288
$ 2,345,788
$ 303,500
$ 8,282,320
$ 8,727,235
$ 444,915
c. Future impact of overall 5.37% increase (Shown below)
Option 3: Maintain levy increase
Future Impact
Loan Estimated
Levy Bond Equip Note (3%) Total percent of total
Year Levy Levy Levy Levy tax increase
2011 251,000 251,000 2.10%
2012 300,000 162,600 53,889 516,489 3.21%
2013 320,000 162,600 53,889 536,489 0.24%
2014 330,000 162,600 53,889 546,489 0.12%
,
2015 340,000 162,600 53,889 556,489 0.12%
2016 350,000 162,600 53,889 566,489 0.12%
2017 360,000 162,600 53,889 576,489 0.12%
2018 370,000 162,600 53,889 586,489 0.12%
2019 380,000 162,600 53,889 596,489 0.12%
2020 390,000 162,600 53,889 606,489 0.12%
2021 400,000 53,889 453,889 0.12%
2022 420,000 420,000 0.24%
Disadvantae:es of all options
The options listed above include utilizing cash balances from other funds to pay Vermillion
River, Walnut Street, and Arena debt payments. The cash will be replenished (through taxes),
leaving a positive cash and fund balance at year end.
IOPTION 11
Levy Use
2010 Levy 2011 Levy Difference
General Fund $ 5,694,448 $ 5,840,396 $ 145,948 2.56%
MVC - State Levy 350,000 415,051 65,051 18.59%
Fire Relief Levy 195,584 131,175 (64,409) -32.93%
General Levy Total $ 6,240,032 $ 6,386,622 $ 146,590 2.35%
Levies Allowed Above
Legislative Limits
G.O. Improvement - 2003A $ 249,918 $ 249,918 $ 0.00%
G.O. Improvement - 2005B 200,000 200,000 0.00%
G.O. Improvement - 2006A 77,200 713,545 636,345 824.28%
Equipment Certificate - 2005D 167,900 162,600 (5,300) -3.16%
Wastewater Treatment - 1995 60,000 60,000 0.00%
Public Project Revenue - 2001A 350,000 (350,000) -100.00%
Public Project Revenue - 2010A 390,000 390,000 100.00%
G.O. Capital Improvement - 2005C 144,120 144,120 0.00%
G.O. Capital Improvement - 2007 A 733,700 733,700 0.00%
Public Safety Revenue Bonds -2007 (DC( 59,450 59,450 0.00%
Street Reconstruction - 201 OC 75,000 75,000 100.00%
Ice Arena Equipment Certificate - 2010D 20,000 20,000 100.00%
Total Levies Above the General Levy $ 2,042,288 $ 2,808,333 $ 766,045 37.51 %
Grand Total Levies $ 8,282,320 $ 9,194,955 $ 912,635 11.02%
IOPTION 21
Levy Use
2010 Levy 2011 Levy Difference
General Fund $ 5,694,448 $ 5,840,396 $ 145,948 2.56%
MVC - State Levy 350,000 415,051 65,051 18.59%
Fire Relief Levy 195,584 131,175 (64,409) -32.93%
General Levy Total $ 6,240,032 $ 6,386,622 $ 146,590 2.35%
Levies Allowed Above
Legislative Limits
G.O. Improvement - 2003A $ 249,918 $ 249,918 $ 0.00%
G.O. Improvement - 2005B 200,000 200,000 0.00%
G.O. Improvement - 2006A 77,200 444,545 367,345 475.84%
Equipment Certificate - 2005D 167,900 162,600 (5,300) -3.16%
Wastewater Treatment - 1995 60,000 60,000 0.00%
Public Project Revenue - 200lA 350,000 (350,000) -100.00%
Public Project Revenue - 2010A 390,000 390,000 100.00%
G.O. Capital Improvement - 2005C 144,120 144,120 0.00%
G.O. Capital Improvement - 2007 A 733,700 733,700 0.00%
Public Safety Revenue Bonds -2007 (DC< 59,450 59,450 0.00%
Street Reconstruction - 201 OC 75,000 75,000 100.00%
Ice Arena Equipment Certificate - 201 OD 20,000 20,000 100.00%
Total Levies Above the General Levy $ 2,042,288 $ 2,539,333 $ 497,045 24.34%
Grand Total Levies $ 8,282,320 $ 8,925,955 $ 643,635 7.77%
IOPT'ON 31
Levy Use
2010 Levy 2011 Levy Difference
General Fund $ 5,694,448 $ 5,840,396 $ 145,948 2.56%
MVC - State Levy 350,000 415,051 65,051 18.59%
Fire Relief Levy 195,584 131,175 (64,409) -32.93%
General Levy Total $ 6,240,032 $ 6,386,622 $ 146,590 2.35%
Levies Allowed Above
Legislative Limits
G.O. Improvement - 2003A $ 249,918 $ 249,918 $ 0.00%
G.O. Improvement - 2005B 200,000 200,000 0.00%
G.O. Improvement - 2006A 77,200 251,000 173,800 225.13%
Equipment Certificate - 2005D 167,900 162,600 (5,300) -3.16%
Wastewater Treatment - 1995 60,000 60,000 0.00%
Public Project Revenue - 2001A 350,000 (350,000) -100.00%
Public Project Revenue - 2010A 390,000 390,000 100.00%
G.O. Capital Improvement - 2005C 144,120 144,120 0.00%
G.O. Capital Improvement - 2007 A 733,700 733,700 0.00%
Public Safety Revenue Bonds -2007 (DC( 59,450 59,450 0.00%
Street Reconstruction - 201 OC 75,000 75,000 100.00%
Ice Arena Equipment Certificate - 2010D 20,000 20,000 100.00%
Total Levies Above the General Levy $ 2,042,288 $ 2,345,788 $ 303,500 14.86%
Grand Total Levies $ 8,282,320 $ 8,732,410 $ 450,090 5.43%