7. 2015 Budget Part 1t d
SCANDIA
City of Scandia
2015 Budget
DRAFT
FOR
CITY COUNCIL DISCUSSION
August 6 & 20, September 3, 2014
Budget Work Sessions
CONTENTS
Budget Overview (Part 1)
Budget Process and Timeline ......................
Budget Format .............................................
Revenue Budget Assumptions
Property Taxes .................................
Other Revenues ................................
Expense Budget Assumptions
Wages and Benefits .........................
Other Expenses ................................
Capital Projects ............................................
Overview, General Fund ..............................
...........................1
...........................2
...............3
...............4
Overview, Other Funds........................................................................................8
Enterprise Funds..........................................................................9
Summary Tables
2015 Draft Expenditure Budget, Summary by Fund and Department ....10
Expenditure Budget History, 2011 through 2015 Proposed....................11
2015 Draft Revenue Budget, Summary by Fund and Department .......... 12
2015 Employee FTE's .......
General Fund Department Budgets (Part 2)
Administration & Finance ....................
City Council ..........................................
Elections ........................................
Planning & Building ......................
Police.............................................
Fire.................................................
Public Works .................................
Parks and Recreation .....................
Community Center .........................
Budgets for Other Funds (Part 3)
Debt Service Funds .............
...............13
14
...........................20
........................... 21
...........................22
...............23
Capital Improvement Fund..................................................................................24
Park Capital Improvement Fund..........................................................................25
Equipment Replacement Fund.............................................................................26
Local Road Improvement Fund.........................................................27
201 Sewer Project Fund.......................................................................................28
UptownSewer Fund............................................................................................29
Economic Development Authority......................................................30
Appendices:
Draft Capital Improvement Program (CIP) 2015 to 2019 (Part 4)
CIP Appendix (Part 5)
BUDGET OVERVIEW
Budget Process and Timeline
This document contains a draft budget for the period of January 1 through December 31, 2015
for the City of Scandia. The budget is preliminary and has been prepared for discussion by the
Scandia City Council at their budget workshops. Year to date (YTD) data is, unless otherwise
stated, as of June 30, 2014.
The timeline for developing the 2015 City budget is shown below. While the final budget will
not be adopted until December, the City is required to certify its proposed maximum property tax
levy to the county auditor not later than September 30, 2014 (still September 150' for special
levies such as the EDA). The city may continue to refine the budget, but after that date the levy
cannot be increased. Notices to property owners will be based on the maximum levy.
The schedule for review of the 2015 budget is as follows:
City of Scandia
2015 Budget/ Capital Improvement Plan Calendar
Dates Action
Tuesday, May 6 Planning Commission CIP
Wednesday, June 4 Council work session(s) on Capital Improvement Program (CIP)
Wednesday, July 2
June/July Staff prepares draft budget
Wednesday, August 6 City Council budget workshop (regular work session)
Wednesday, August 20 City Council budget workshop (special meeting)
Wednesday, September 3 Regular work session date; special Council meeting to adopt proposed
budget by resolution and certify proposed levy to county auditor; set
date for public meeting on levy and budget
Tuesday, September 30 Last date to certify proposed (maximum) tax levy to county auditor,
September 15 for EDA levy
October 1 (approximate) Include information on proposed budget in City newsletter
Wednesday, October 1 or City Council budget workshop (regular work session or special meeting)
15
Tuesday, October 28 City Council budget workshop (special meeting, optional)
Wednesday, November 5 Planning Commission hearing on Capital Improvement Program (CIP)
Wednesday, December 3 Public meeting on budget and tax levy
Tuesday, December 16
Friday, December 26
January, 2015
Budget Format
Budget hearing/ adopt final property tax levy and budget
(last regular Council meeting of 2014)
Last date to certify final tax levy to county auditor
Publish summary budget in legal newspaper
The draft 2015 budget is divided into the following fund and departmental budgets:
Fund Type
2015 Budget Funds
General Fund (101)
Departments within General Fund:
• Administration & Finance (41000)
• City Council (41110)
• Elections (41410)
General Fund
• Planning & Building (41910)
• Police (42000)
• Fire (42200)
• Public Works (43000)
• Parks (45000)
• Community Center (45180)
2007 Blacktop Project(307)
Fire HaIV Public Works (310)
2010 Equipment Certificate (311)
Debt Service Funds
2011 Equipment Certificate (312)
2013 Equipment Certificate (313)
Capital Improvement Fund (401)
Parks Capital Improvement Fund (404)
Capital Funds
Equipment Replacement Fund (405)
Local Road Improvement Fund (408)
Enterprise Funds
201 Sewer Project Fund (602)
Uptown Sewer Fund (612)
2 7/29/2014
Fund Type 2015 Budget Funds
Special Fund
1
The major expenditure categories in the budget are:
Personnel Services (100) Costs related to employees including wages, salaries,
retirement contributions and all other benefits.
Materials and Supplies (200) All of the "things" that the city purchases, such as
office supplies, parts, fuel, sand & gravel, etc.
Contractual Services and Charges All types of services and functions performed by or
(300-400) provided by those other than employees.
Capital Outlay (500) Projects, equipment or furnishings with a useful life of
three years or longer and cost greater than $500.
(Capital outlay items with a life of five years or longer
and cost $10,000 or greater would also be listed in the
CIP.)
Debt Service (600)
Transfers (700)
Revenue Budget Assumptions
Properly Tines
Principal and interest payments on short- or long-term
debt.
Transfers from one fund to another.
Property taxes are the city's largest revenue source, representing 80% of revenues to the General
Fund. Some years, Minnesota cities over 2,500 in population have been subject to property tax
levy limits established by the state legislature. For 2014, there are no levy limits in place.
The following table shows the total tax levy of the City of Scandia in recent years with the
percentage increases from the previous year. The 2015 preliminary maximum levy, which is
what would be required to fund the draft budget presented by staff, is shown for illustration only.
It may change based on decisions the City Council makes about the budget. The draft budget
assumes a 3.4% levy increase in 2015.
Year
Property Tax Levy History
Total Levy
Increast
2007
$1,533,930
3.40%
2008
$1,703,589
11.06%
2009
$1,860,893
9.23%
2010
$1,918,647
3.10%
2011
$2,013,651
4.95%
/7�7L�T17[!
2012
$2,055,174
2.06%
2013
$2,171,074
5.64%
2014
$2,171,074
0%
2015
$2,244,974
3.19%
How changes in the city budget and levy will impact individual property tax payers is a complex
question. The amount of the tax levy is only one of many factors. Preliminary data from
Washington County indicates that the city's tax capacity may increase by 19% for the pay 2015
tax year. All other things being equal, the same tax levy would result in a lower tax rate. The
city will have more information available before the final budget and levy are adopted.
Other Revenues
The following assumptions were made about other revenue sources for 2015:
• Other taxes (gravel tax revenue) —increase consistent with projections in the EIS for
Zavoral Mine Project.
• License and permits —similar revenue to 2014, with exception of building permit revenue
which was adjusted down slightly from 2013 to account for the flurry of activity that
came in during the winter months and Liquor License increased in anticipation of a new
liquor license being applied for now that the ordinance has been changed.
• Intergovernmental revenues —the only revenues assumed in the General Fund is the
recycling grant in the Administration Department and the Fire Relief Aid from the State
and other state grants for the Fire Department. (Scandia receives no Local Government
Aid (LGA).)
• Charges for services —After consulting with our new auditors, staff is proposing the show
the net revenues charges related to planning and zoning as opposed to the gross revenues
and expenses. This gives the taxpayer a clearer picture of the services their tax dollars
support and also increases efficiency by not requiring so many accounting adjustments.
• Fines and forfeitures —decreased based on 2013 actual and 2014 estimates
• Interest— interest earnings will continue to be low; similar rates to 2014.
In November 2012 the Council approved an update to the Fund Balance Policy that if the
unassigned fund balance in the General Fund rises above 50% at the end of the fiscal year, the
amount above 50% would be applied to the following year's operating budget or transferred to a
capital improvement fund. Per the December 31, 2013 audit report, the unassigned, unrestricted
fund balance was $1,460,133, which is equal to about 70% of the general fund expenses included
in the draft 2015 budget. Therefore, staff is proposing that $200,000 be transferred from the
General Fund to the recently created Local Road Improvement Fund.
Expense Budget Assumptions
Wages and Benefits
4 7/29/2014
The draft budget assumes a 1.5% cost of living adjustment (COLA) is applied to the step plan
adopted by the Council in July 2013. This is consistent with the increase in the Consumer Price
Index for last year. The COLA would be effective January 1, 2015. The draft budget assumes
that step increase will be given when an employee is eligible.
As provided by Ordinance No. 132, the salary of the Mayor and Council shall be adjusted
following the 2014 election to become effective January 1 in a percentage equal to the
change in the United States Department of Labor Consumer Price Index (November report) for
all urban consumers U.S. city average since the last salary adjustment. The last increase was in
January 2009. CPI has increased 12.67% through May 2014. The final increase would be
determined once the November report is available unless the Council repeals the ordinance.
For health insurance, a 10% increase was estimated for 2015. Actual renewal rates will be
available later this fall. Because the city's health insurance plan is a high -deductible plan (to
keep premium costs down) the City has been contributing to Health Savings Accounts (HSAs)
for eligible employees. The draft budget assumes continuing city contributions to the HSAs at
the same level as in the last 4 years.
Other Expenses
The draft expense budgets include the following assumptions for costs in 2015 compared to
2014:
• PERA & FICA—PERA increase to 7.5% per state statute, effective January 1, 2015
• Insurance (Property & Auto, Liability and Worker's Compensation—+ 10% Actual costs
will be available in December for the policy year beginning January 1.
• Fuel and utilities —assumes 5% and 3% increases respectively
7/29/2014
Capital Projects
The following projects in the draft Capital Improvement Plan (CIP) update are included in the
draft 2015 budget. Detailed descriptions are included in the CIP and/or the department budget
narratives.
Proj # CIP Project Name
CC-004 Community Center Parking Lot
F-011 Tanker 5177 Replacement
PR-001 Lilleskogen Park Improvements
Cost
Funding
$12,000
Capital Improvement Fund
$230,000
Equipment Replacement Fund
$36,000
Funds to come from grant revenue or
donations not yet secured
PR-019 Log House Landing Improvements $400,000 Capital Improvement Fund ($100,000),
CMSCWD Grant/Cost Share ($100,000),
DNR Grant ($200,000)
PW-002 Street Maintenance Program
PW-024 Utility Truck w/Crane
PW-027 Quinell Ave
$300,000 General Fund, Public Works Budget
(43000)
$76,500 Capital Improvement Fund ($44,000)
201 Sewer($32,175)
Uptown Sewer ($325)
$550,000 Local Road Improvement Fund ($425,000)
County Tumback Funds ($125,000)
In addition to the projects in the CIP these other capital expenditures are included in the draft
2015 budget. (These projects do not meet the $10,000 threshold for inclusion in the CIP.)
Administration &Finance
City Council
City Council
Fire Department
Fire Department
Equipment (570)
Furniture and Fixtures (560)
$1,200
Office Equipment (570)
$5,500
Furniture and Fixtures (580)
$1,000
Office Equipment (570) $2,000
6 7/29/2014
Overview, General Fund
The draft 2015 General Fund expense budgets total $2,069,806, down approximately 3.23%
from the 2014 budget. Departmental budgets with increases include Administration and Finance
(4.25%, codification
services), City Council
(47.85%, chamber audio and
chair improvements and salary
adjustment), and Parks (11.09%,
year —round maintenance position).
Departmental budgets with decreases
are Elections (-92.31% no election in
2015), Planning and Zoning (-
56.86% due to netting expenses),
Police (-0.88%), Fire
(-0.30%, no state retirement
contribution required), Public Works
(-0.13%), and Community Center
(-0.57%). More information on
these changes is included in the
department worksheets and narratives.
The pie chart to the right
shows revenues to the
General Fund, which are
largely from property taxes (89%)
and Licenses and Permits (4%)
with the remainder from other
sources.
The second pie chart, to the left,
shows proposed General Fund
expenses by type. Forty percent of
the budget would go for
Contractual Services, with
Personnel Services being the next
highest category (26%).
Overview, Other Funds
2015 Draft Budget
General Fund Revenue by Type
■ Taxes
Licenses &
Permits
lIntergovern-
mental Revenues
a Charges for
Services
Fines &
Forfeitures
■ Other Revenues
2015 Draft Budget
General Fund Expenses by Type
13% 26%
1q40%.10
■ Personnel Services
■ Materials & Supplies
0%
■ Contractual Services
9% ■ Capital Outlays
■ Debt Service
■ Transfers
Debt Service Funds —The total debt service budget will be significantly lower (down 20.13%) in
2015 than in 2014. The property tax levy for debt service is based on principal and interest
payments plus the statutory 5% coverage, less any assessments and interest revenue. An updated
Debt Management Analysis prepared by Northland Securities is included with the budget details
of the Debt Service Funds. There are no new planned expenditures from the Debt Service Fund
in 2015. The Council may want to consider borrowing for the Tanker 5177 replacement as
7 7/29/2014
opposed to using funds from the Equipment Replacement Fund. This would help the cash flow
in the Equipment Replacement Fund.
Capital Funds— The draft budget currently proposes $100,000 of the tax levy as revenue to the
Capital Improvements Fund (401.) There are three proposed expenditures from the Capital
Improvement Fund in 2015, CIP project CC-004, Community Center Parking Lot ($12,000), PR-
019, Log House Landing Improvements ($100,000) and PW-024 Utility Truck with Crane
($44,000).
The budget for the Parks Capital Improvements Fund (404) does not include any expenditure in
2015 unless donations are received. It is assumed that there will be donations of materials and
labor, or grants to cover any expenses related to Lilleskogen Park. Staff is estimating that two of
the subdivisions approved in 2014 or earlier will have to pay Park Dedication fees in 2015.
Revenues to the Equipment Replacement Fund (406) are proposed to be $100,000 in transfers
from operating budgets in 2015. Currently, $230,000 is proposed to be expended from the
Equipment Replacement Fund in 2015 for the Tanker 5177 replacement. With a $100,000 annual
contribution, and assuming proceeds from the sale of equipment are deposited into the fund, the
fund would cash flow for the next three years but begin running a deficit of about $170,000 in
2018 and $165,000 in 2019. Council should discuss allocating more funds to the Equipment
Replacement Fund, borrowing for large equipment needs or eliminating some proposed
expenditures.
The Local Road Improvement Fund is proposed to receive a $200,000 transfer from excess fund
balance over 50% of General Fund operating expenses and $220,000 in new tax levy. One
expenditure is planned in 2015-Quinell Ave. $425,000 from the LRIF and $125,000 in money
the County gave the township when turning the road over to them years ago.
The table on the following page shows the fund balances expected in the three capital funds at
the end of 2014, and the proposed 2015 expenses and revenues (including interest.)
12/31/2014 2015 2015 12/31/2015
Fund Projected Expense Revenue Projected
401
Capital Improvements
404
Parks Capital Improvements
406
Equipment Replacement
$249,500
$456,000
$1,500
$36,000
$428,000
$230,000
$400,000
$193,500
$42,000
$7,500
$100,000
$298,000
408 Local Road Improvement $327,700 $550,000 $540,000 $317,700
Total $1,006,700 $1,272,000 $1,082,000 $816,700
Enterprise Funds —Fund 602 is one of the city's enterprise funds, for the operation of the "201"
community sewer system that serves approximately 100 homes on Big Marine Lake. Fund 612
is an enterprise fund created in 2013 to segregate the revenues and expenses for operation of the
Uptown Sewer System from the General Fund budget.
IAWIN]
201 System (602):
No rate increase is proposed for 2015 as there is still a healthy fund balance anticipated
(—$70,000) by the end of 2014 to cover the capital expenditures in 2015. $32,175 is the 201
systems portion of the utility truck with crane. Personnel Services increases while operation and
maintenance decreases. This is due to staff taking over the maintenance of the system from
EcoCheck, who will remain on retainer for emergencies only. The Public Works Director is
budgeted to spend 12.5% of his time on the 201 System in addition to 11 % for one maintenance
worker and 25% for another. These percentages have also been increased due to the amount of
time staff is spending this year maintaining the system. Also, software costs associated with
utility billing have been budgeted within the sewer funds as opposed to the general fund.
Uptown System (612):
No rate increase is proposed; revenues are expected to slightly outweigh expenses. $325 is the
Uptown Systems share of the utility truck with crane. Similar to the 201 system, personnel
services are increased while operation and maintenance are decreased due to staff taking over
maintenance of the system and EcoCheck being retained for emergencies. The Public Works
Director and two maintenance workers are budgeted to spend about 4% of their time on the
Uptown System.
9 7/29/2014
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