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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 5/14/2020 10 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