8.f1 Example Ehlers Presentation 5-18-2020Financial Management Plan
City of Long Prairie, Minnesota
5/14/2020 2
Budgeting is the most important thing you will do as a
Council member annually
•You are setting policy on where you want to spend your
money/what is important to your community
VISION
5/14/2020 3
What is a Financial Management Plan?
•A multi-year fiscal plan for all tax-supported funds
•Integrates:
✓Existing debt
✓Capital Improvement Plans
✓Future debt
✓Tax Base growth
✓Future operating expenses
✓Fund balance policy
What Makes It Practical?
•Helps to manage expectations
✓New spending proposals evaluated against other identified priorities
✓Weigh proposals vs. predefined affordability parameters
•Helps to maintain assets
✓Regular replacements
✓Large periodic repairs
•Reduces stress during budget process
✓Previously agreed spending guidelines
✓Better understanding of the effect decisions have
•Rating Agencies like multi-year planning
•Reduces reactivity amidst an unpredictable fiscal environment and unfunded mandates
Results
1.Council can focus on big picture and policy issues
✓Get away from randomly picking a percent or number increase for the budget
2.Council can focus on long-term financial health of the City
✓Good roads, facilities, services, reinvestment, etc.
✓Not on single-year tax impacts
3.Projects, in the context of multi-year planning, tend to be less controversial
✓Provides background/perspective on issues for discussion
✓Provides framework to make informed decisions
4.If there is a plan, projects get done and the City has a vehicle through which to
inform the residents on the goals of the City
5/14/2020 6
Financial Goals
•Maintain Stable Tax Rate
•Fund capital plan
✓2021 County Street Projects
✓Police/Public Works Garage
✓Vehicles and Equipment
•New Public Works staff person
•Hire EDA Director
•New joint officer with school district
•Maintain General Fund Balance at 40% of next year’s expenses
Fund Balance
•Remember, you are “paid” twice/year
✓Need to cover day to day expenses (salaries, utilities, etc.) and any
unforeseeable expenditures
•Not everything can be planned for
•Reduce budget impact for emergency situations
✓General Fund -GFOA recommends 35% to 50% of the next year’s General
Fund expenditures
✓Goal is 40%
2020 Expenditures
General Government
19%
Debt
20%
Police and Fire
34%
Public Works
23%
Parks
3%
EDA
1%
Airport
0%
2020 Expenditures
2020 Revenues –General Fund
Taxes
21%
LGA
56%
Franchise Fees
4%
Licenses and
Permits
3%
Other
7%
Transfers In
7%Interest
2%
2020 Revenues
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Assumptions in Plan
•Market values increase 1% annually
•Most non-property tax revenues increase 1% annually
•Franchise Fee revenue decreases from $80,000 in 2020 to $48,000
per year thereafter pending further research
•Maintain fund balance at 40% of next year’s expenditures
•$840,000 in Street Project Fund is available to fund projects or pay
outstanding bonds
Financial Pressures on
the City of Long Prairie
History and Future Projection of LGA
900,000
950,000
1,000,000
1,050,000
1,100,000
1,150,000
1,200,000
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029
1% increase/year
assumed
beginning in 2024
If LGA remains “flat”, inflationary increases fall on Property Taxes
Maintaining General Fund Balance at 40% of Next
Year’s Expenditures
-
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029
Ending General Fund Balance
Debt Levies
-
100,000
200,000
300,000
400,000
500,000
600,000
700,000
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029
Total Debt Levy
2021 Road and Utility
Projects
5/14/2020 15
Capital Projects
•CSAH 38/2nd Ave SW Project and Riverside Drive/CSAH 56
✓Storm Water -$1,575,000
✓Streets -$1,121,800
•Police/PW Garage –$350,000 in 2022
✓Proposed Funding: Capital Project Fund 500
•Fire Truck –$400,000 in 2021
•Police Equipment –Average $41,700 per year
•Public Works Equipment –Average $132,800 per year
Levied Portions
of $9.8M
Projects
5/14/2020 16
New Initiatives
•School Resource Officer
✓$61,825 per year
✓Cost sharing with school district
•Public Works Staff Addition
✓$19,000 General Fund Expense
•EDA Director
✓$80,000 per year
Tax Impacts on Median Valued Home ($124,750)
2017 2018 2019 2020 2021 2022
City Taxes 539$ 512$ 483$ 547$ 706$ 789$
% Increase 1.40%-5.07%-5.59%13.17%29.19%11.76%
$ Increase 7$ (27)$ (29)$ 64$ 160$ 83$
2023 2024 2025 2026 2027 2028
City Taxes 833$ 864$ 902$ 947$ 871$ 909$
% Increase 5.50%3.81%4.31%5.05%-8.01%4.32%
$ Increase 43$ 32$ 37$ 46$ (76)$ 38$
Tax Impacts on Median Valued Home ($124,750)
0
100
200
300
400
500
600
700
800
900
1,000
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029
City Taxes)
5/14/2020 19
Options Explored to Reduce Tax Impacts
•Forgo EDA Director Position
•Delay Public Works Hire to 2024
•Implement a Storm Water Utility Fee to pay for stormwater portion of
street projects
5/14/2020 20
Storm Water Utility Fee
•Fee on utility bill applies to all properties including tax-exempt parcels
•Can be used for capital, debt and operating costs
•If established to pay debt service on 2021 road projects:
✓$79,000/year for 2021 projects = approximately $5.50 per month or $66/year
✓Mitigates tax increases in 2022 and beyond
•Water fund is currently paying for storm water for 2016 project
✓Debt totals $139,000/year for 2021 and 2016 projects = approximately $9.75 per
month or $117/year
✓Reduces financial pressures in water fund
5/14/2020 21
Revised Tax Impacts on a $124,750 Home
2017 2018 2019 2020 2021 2022
City Taxes 539$ 512$ 483$ 547$ 638$ 690$
% Increase 1.40%-5.07%-5.59%13.17%16.70%8.12%
$ Increase 7$ (27)$ (29)$ 64$ 91$ 52$
2023 2024 2025 2026 2027 2028
City Taxes 741$ 776$ 812$ 861$ 781$ 818$
% Increase 7.49%4.61%4.74%5.93%-9.23%4.77%
$ Increase 52$ 34$ 37$ 48$ (79)$ 37$
5/14/2020 22
Potential Strategies to Further Reduce Taxes
•Forgo School Liaison Officer
✓Would reduce tax increase $6/year first 3 years
✓Would reduce tax increase $14/year after 3 year grant period
•Use $90,000 from Project Fund 500 to reduce debt levy 2021-2023
✓Would reduce tax increase $18/year on median valued home
•Delay Equipment Purchases
•Delay Public Works garage until 2027 and use a portion of $350,000
from Project Fund 500 to pay debt service (reduce debt levy)
Airport Fund
Capital Projects:
✓Master Plan and ALP
Update
✓Fuel pump and card reader
✓Sealcoating runway in 2024
for $100,000
Revenues fund
operations but not
capital(80,000)
(60,000)
(40,000)
(20,000)
0
20,000
40,000
60,000
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029
Ending Fund Balance
Airport Fund
5/14/2020 24
Solutions for Airport Fund
•Limit future capital expenditures
•Operational changes
Tourism Fund
•Lodging taxes
assumed to
decline over 50%
•No additional city
support
•Expenses inflate
3% per year
(70,000)
(60,000)
(50,000)
(40,000)
(30,000)
(20,000)
(10,000)
0
10,000
20,000
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029
Ending Fund Balance
Tourism Fund
5/14/2020 26
Solutions for Tourism Fund
•One of two hotels is being repurposed to apartments
•Reduce expenditures to be no more than annual lodging tax receipts
•Fold Tourism Fund into EDA Fund
5/14/2020 27
Next Steps
•Questions?
•Council feedback
•Staff and Ehlers to revise plan
•Presentation at Council Meeting
•Serve as blueprint for 2021 Budget preparation