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Home My WebLink AboutPresentation of the City Manager's Recommended Budget Commission Memorandum REPORT TO: Honorable Mayor and City Commission FROM: Chris Kukulski, City Manager Anna Rosenberry, Finance Director SUBJECT: FY2009-2010 City Manager’s Recommended Budget Presentation **Reminder: Bring the Budget Document that you received on June 1, 2009. MEETING DATE: June 15, 2009 RECOMMENDATION: Listen to presentation and provide comments/questions. BACKGROUND: This presentation will outline the FY2009-2010 City Manager’s Recommended Budget. This budget serves as the preliminary budget. It can and will be modified through public hearings and workshops with the City Commission. The Budget and Tax Levy Hearings are scheduled for July 20, 2009, and will be opened-and- continued until taxable values are received. The City has received notice from the Montana Department of Revenue that taxable values will be delayed by at least 3 weeks this year. They estimate delivery of certified values in the last week of August. Based on this information, we estimate Final Appropriation and Tax Levy resolutions will adopted on September 14, 2009. The August Policy Meeting has tentatively been scheduled for discussion of FY10 Budget related items, as directed by the Commission. 231 Attached is a copy of the Budget Message, as included in the document itself. If you have any questions related to details in the budget document, please forward them to Anna or Chris before the June 15th meeting. In order to speak to the specifics of account history or changing budget priorities in an individual account from year-to-year, we will likely need time to investigate. We want to get you and the public accurate information when discussing the item at the public hearing. The entire “FY2009-2010 City Manager’s Recommended Budget” document and the “Budget Details” report are available online at http://www.bozeman.net/finance/budget.aspx. Copies are also available to the public at the Bozeman Library and City Clerk’s office. FISCAL EFFECTS: None at this time. The adoption of the final budget in September will have far-reaching fiscal effects. ALTERNATIVES: As suggested by the City Commission. Report compiled on: June 10, 2009 Attached Documents: Budget Message (excerpt from Budget Document) 232 City Manager’s Recommended Budget FY10 9 City of Bozeman, Montana CITY MANAGER’S BUDGET MESSAGE ___________________________________________________________ May 28, 2009 Bozeman City Commission: I am pleased to present the City Manager’s Recommended Budget for Fiscal Year 2009- 2010 (FY10). With the significant economic changes of the past 18 months, this budget seeks to meet those challenges, enable us to continue to weather the downturn in our local economy, and ensure that Bozeman continues to be “The Most Livable Place”, now and into the future. Downtown Explosion: On March 5, 2009, the City both responded to a significant public safety emergency, and lost an important piece of our vibrant, historic downtown to a natu- ral gas explosion. As a organization, approximately $330,000 went into funding the staff, equipment and incidental expenses of the immediate response and subsequent investiga- tion of the event. In May, the Commission created a Blast Clean-up Fund of $300,000 to assist the effected property owners in expediting the clean-up (and eventual re- development) of the site. State & Federal Stimulus Funding: With the passage of the American Recovery & Rein- vestment Act of 2009 (ARRA), the city has been aggressively seeking to identify and apply for stimulus dollars. We have a number of worthy projects that are shovel-ready and would create local jobs in the Bozeman community. To date, the following funding oppor- tunities are in various stages of application and approval. STATE House Bill 645 ‐ General Allo‐ cation VM Shop/Shop Remodel City Buildings and Facilities. $344,000.00 $277,000.00 Undesignated Dedicated to Shop Project STATE State Revolving Fund Program WRF ‐ Admin Lab Building $ 800,000.00 50% grant, 50% loan STATE Treasure State Endowment WRF—Admin Lab Building $ 500,000.00 Senate Committee 4/9/09 FED Department of Justice ‐ Ed‐ ward Byrne Memorial Justice Assistance Grant Police/Courts Automated Ticketing System $ 67,500.00 Applied for. Not Yet Awarded FED Department of Energy Clean Cities Grants Transportation Infrastruc‐ ture N/A September 09 Deadline. Joint Application with Region for Solar Panels in Parking Garage. FED Department of Energy Energy Efficiency Conservation Block Grants (EECBG) Building Sector, Transpor‐ tation, Public Buildings $ 175,500.00 Allocation to City. FED Department of Energy— Competitive Grants. Building Sector up to $24,500 TOTAL $ 2,188,500.00 Entity Description/Source Eligible Use/Identified Use Amount Other Notes 233 City Manager’s Recommended Budget FY10 10 City of Bozeman, Montana Changes during the past 12 months: Building Activity: Local building activity has many impacts on the operations and fi- nances of the City; from the workload and revenues in the Planning and Building Inspec- tion Divisions to the amount of funding available for Impact Fee programs and increases in Property Tax dollars due to new construction. As with the rest of the nation, credit and other economic factors began effecting the amount of subdivision and construction activity we were seeing come through the doors of our Planning and Building Inspection Divisions in early 2008. By March and April 2008, building and planning revenues were markedly lower than in 2007. With the adoption of the FY09 budget, we committed to monthly monitoring and quarterly reports to the Com- mission and the community as workloads and application revenues changed. This was the only way we could adequately respond to an uncertain outlook for workloads and revenue collection. During the first three quarters of FY09, we made additional staffing and operational cuts to both the Planning and Building Divisions as application-driven workloads continued to decrease. As of the date of this letter, we are hopeful that we will see a seasonal increase in building and planning activity. However, if seasonal increases are not experienced, fa- ther reductions will be made in these divisions over the summer months, as we prepare to weather very slow fall and winter months in 2009 and early 2010. Property Tax Revenues from New Construction: Because the property on the Prop- erty Tax roll lags nearly 8-20 months by the time we receive certified values, we continued to see an on-average increase in our tax base for FY09 (7.5% increase from previous year.) However, during 2008, local construction significantly declined. Based on building permit value, we have estimated a 3% increase in property taxes from new construction for the FY10 budget. In addition, we are watching the current year permits for an indication of value changes for the FY11 budget. Sewer Plant Costs: In November 2008, we opened bids on the much-anticipated Water Reclamation Facility (Sewer Plant) project. This significant upgrade and expansion of our system had been more than 5 years in the making, and had been the source of much analysis from both the project and rate/impact fee funding levels. We were estimating pro- ject costs of roughly $40-45Million, and were surprised with a low bid on a scaled-back to- tal project totaling $54 Million. Before awarding the bids, we analyzed rate structures over the life of the construction project that had both “zero-growth” and “moderate-growth” in customer accounts and impact fees. Based on the slow, but continued, growth in our community during this recession, we are proposing the adoption of rates under a low growth scenario, resulting in 10.2% rate increases each year for the next 3 years. Timing of Water Plant Construction: The City’s facility plan for our water plant and infrastructure had us on a timeline to test and design a new water plant design in FY08- 10 and to begin construction at the beginning of FY11. In early 2009, the engineering firm that had been hired to test and design the plant provided updated cost estimates for the facility of $40.7 Million (above the $33.2 Million in the current Capital Improvements Plan). Given that the slowdown in community growth has made a bit of headway in water capacity, we re-analyzed water rates and are recommending a 5-year plan of 3.2% rate in- creases each year, with construction on the new plant to begin in April 2011 (late FY11.) 234 City Manager’s Recommended Budget FY10 11 City of Bozeman, Montana Staffing Levels and Changes Changing economic conditions and decreased new construction will continue to make Gen- eral Fund, Planning, and Building Inspection positions difficult to maintain. During FY09 and in the course of developing the FY10 budget, we made decisions to reduce staff- ing levels through attrition, reduced hours, or lay-offs. The table below outlines FY09 & FY10 position reductions that have been made in order to balance staffing levels with workloads, and conserve resources where possible. Additions: In November 2007, local voters approved increasing our tax levy to add staff to both the Police and Fire Departments. As a result of the levy, 5 additional Police Offi- cers have been added to the FY10 budget. See page 50 for the full listing of positions included in the FY09 & FY10 budgets. General Fund Unreserved Fund Balance: In FY09, we instituted the first year of voter- approved levies for Police and Fire services and equipment. Due to vacancy saving and other cost reductions, we estimate $510,000 savings in those department budgets for FY09, which will add to the FY09 Ending Unreserved Fund Balance. This FY10 budget anticipates using that money for operations, temporarily reducing equipment purchases in FY10, and reducing the levy charged to taxpayers (reducing tax revenues) by approxi- mately 7.5 mills (4% of total tax levy.) As a result of this plan, expenditures ($22.9M) in the General Fund outstrip estimated revenues ($22.4M) for the year. Without this planned use of FY09 budget savings, the Position Reductions—Economic Downturn Number of Full-Time Equivalent Positions Building Inspection - Fire Inspector 2.0 FTE Building Inspection - Building Inspector 3.0 FTE Building Inspection - Plans Reviewer 1.0 FTE Finance Office - Administrative Assistant 1.0 FTE Fire Department - Administrative Assistant 0.5 FTE Information Technology - Help Desk 0.12 FTE Library - Library Assistant 0.5 FTE Planning Department - Administrative Assistant 1.0 FTE Planning Department - Planner III 0.85 FTE Planning Department - Planner Technician 1.0 FTE Workforce Housing Coordinator 1.0 FTE 11.97 Full-Time Equivalent Positions 235 City Manager’s Recommended Budget FY10 12 City of Bozeman, Montana proposed budget would still add $76,000 to the Unreserved Fund Balance for the end of FY10. We estimate the FY10 Unreserved Fund Balance at year end to be $2.8 Million, or 13.45% of FY10 operating revenues. This is above the 12% minimum that the City Manager’s Recommended Budget must contain. Work Plan On June 2, 2008, the Commission adopted a work plan of new initiatives and ongoing pri- orities for 2008 and 2009, in an effort to assist staff in allocating resources and time. Dur- ing this coming budget year, a number of those items will be addressed. (List on page 20.) Budgetary Support for New Initiatives & Ongoing Priorities New Initiative #1: Build a new police and municipal court facility: Select and purchase a site; Select architect and complete design; Educate the commu- nity on the need for bond approval; Award bids for the construction. FY10 Budgetary Support: We have budgeted $100,000 to support leasing of additional space for the Mun- cipal Courts to bridge the gap until a new police and court facility can be built. New Initiative #5: Develop a long term plan for the Streamline bus system. FY10 Budgetary Support: Shops Facility Joint Project; Parking Garage; Galavan support; Energy Effi- ciency & Conservation Block Grant transit stop/shelter funding. Ongoing Priority #1 Reconstruct College Street from 11th west to Main Street FY10 Budgetary Support: This project was the subject of the City’s FY10 requests for Federal Transit Funding. We have listed scheduled in the City’s 5-Year Capital Improvements Plan, for impact fee funding in FY12. Collection of Impact Fee revenues and whether we can obtain Federal Funding will significantly effect the City’s abil-ity to accomplish this important project. Ongoing Priority #3 Complete the first phase of the Story Mansion’s interior restoration. FY10 Budgetary Support: Construction is scheduled to be completed in later June 2009. The FY10 budget includes a new Special Revenue Fund for the operations of the Mansion as a Community Center that is available to the public for rental. We have made esti- mates of revenue collections and operating expenses and will be monitoring actual activity during the year. Ongoing Priority #5 Break ground on Phase I of the Water Reclamation Plant (Wastewater Treatment Plant) expansion. FY10 Budgetary Support: Groundbreaking occurred in April 2009. The FY10 budget includes the first year of a new three-year rate increase plan that is necessary to fund the project. We estimate spending $19 Million and borrowing $15 Million in this first of a three-year construction project. Ongoing Priority #6 Complete City Hall relocation on time and within budget and finalize sale of the [old] site. FY10 Budgetary Support: The relocation was on time and within the budget that was established for the project. However, the sale of the old site has not been completed. The City signed a letter of intent to sell the property for $900,000. If that plan comes to fruition, $804,000 in General Fund Reserves will be needed to complete the financing of the project, due to the substantial loss in market value the property sustained during 2008 and 2009. 236 City Manager’s Recommended Budget FY10 13 City of Bozeman, Montana Budgetary Support for New Initiatives & Ongoing Priorities, cont’d Ongoing Priority #8 Complete testing and select the engineering team to design the new Water Treatment Plant. FY10 Budgetary Support: The engineering team has been selected and testing will be complete in the sum- mer of 2009. The Water Fund budget includes the first of a new 5-year rate plan to support the most recent Water Treatment Plant cost estimates, including the design and testing phases. Ongoing Priority #9 Select design team for Mystic Dam. FY10 Budgetary Support: The team was selected in April 2009. The FY10 budget includes the re—appropriation of $50,000 from the original FY08 budget for design team ser- vices, that has not been utilized to this point. Ongoing Priority #10 Watershed management – improve safety and access to Hyalite Can- yon to include guard rails and public restrooms. FY10 Budgetary Support: The City received a $100,000 grant from the 2009 legislature for the guardrail project, that we expect to receive and expend in FY10. Ongoing Priority #12 Improve our town-gown relationship by encouraging interaction be- tween appropriate city and university personnel to prevent neighborhood conflicts between students and homeowners. FY10 Budgetary Support: The operating budget for the City Manager includes $2,200 for travel related to the attendance of the Neighborhood Coordinator at the Annual Town-Gown conference. Travel will be made with an official from Montana State University. Ongoing Priority #13 Adopt a Climate Action Plan consistent with the principles outlined in the Mayor’s Climate Protection Agreement. Implement the recom- mendations reaching 20% of the carbon reduction goal by December 2009. FY10 Budgetary Support: The City expects to receive $175,500 in Department of Energy EECBG program allocation in FY10/FY11, to support implementation of our Adopted Municipal Climate Action Plan. In FY09, the City received a grant of $30,000 for the first-year development of a Community Climate Action Plan. The FY10 budget anticipates receiving that award again, funding the second year of the two-year effort. We are also aggressively pursuing federal and state energy grants to fund the Methane Co-Generation portion of the Water Reclamation Facility that is cur-rently under construction. This element was not awarded in the original bid, due to higher-than-expected bid prices; however, it has great potential for long-term energy savings and carbon reduction. Ongoing Priority #14 Improve Bozeman as a bike friendly environment, stripe all possible bike lanes and increase street sweeping. FY10 Budgetary Support: The FY10 Street Maintenance Budget includes the lease of additional street sweepers for bike lane sweeping and thermo-plastic striping materials for use on city bike lanes. Ongoing Priority #15 Explore sources of funding for Park Maintenance and operation. FY10 Budgetary Support: We are considering creating a State of Montana special license plate to provide donation funding to benefit City Parks. The City Manager’s budget includes $4,000 in application fees and $2,000 in design/advertising . 237 City Manager’s Recommended Budget FY10 14 City of Bozeman, Montana City 2007 Census Estimates FY2004 Mills FY2008 Mills Levy Rank Missoula 67,165 176.32 212.23 1 Havre 9,618 178.74 198.33 2 Livingston 7,411 163.2 191.28 3 Kalispell 20,298 149.74 162.85 4 Great Falls 58,827 124.33 158.21 5 Billings 101,876 110.23 157.53 6 Bozeman 37,981 163.31 154.18 7 Helena 28,726 114.71 135.01 8 Whitefish* 8,083 87.14 111.21 9 Belgrade 8,047 99.34 102.21 10 West Yellowstone* 1,435 43 78.85 11 Additional Debt: This budget anticipates borrowing for the Water Reclamation Facility construction from the State’s Revolving Loan Fund. Over the 3 year construction period, the city will be borrowing approximately $30 million dollars. Mill Levy Comparisons, Bozeman’s mill levy remains in the “middle of the pack” for comparable communities in our state. The table below shows the city tax levy for a number of communities in Mon- tana. *West Yellowstone and Whitefish both utilize Local Option Resort Taxes as an al- ternative/supplement to property taxes, which the City of Bozeman is currently prohibited from by state law. Of this same list, Bozeman’s rank has dropped from 5th to 7th highest levy compared to the previous year (FY07 mills), and is the only city with a decreased levy for this time period. Residential City Property Taxes for FY08, FY09 and ESTIMATED for FY10. For three of the past five years, the City’s property tax levy moved downward. The City’s total tax levy was decreased by 3 mills in FY06, as a planned savings of taxing authority. In FY07, the Fire Equipment levy expired, and a net 4.48 mill decrease was achieved. In FY08, 9 mills came off the city’s general tax levy as a result of the 911 Dispatch vote. In November 2007, the voters of the City approved increases in the City’s general taxing authority for the following items: Project Total Amount Debt Type Water Reclamation Facility $15.3 Million, 20 year term, 1st of 3 planned draws. Wastewater Revenue Bond, State Revolving Loan Fund 238 City Manager’s Recommended Budget FY10 15 City of Bozeman, Montana For FY09, the total approved levy increase was 20 mills. The City did not immediately utilize the full amount of the 12 Mill Fire Department Staffing Increase due to award of a $948,825 SAFER Grant; that levy will increase to its maximum level in FY13, upon full expiration of the 4-year grant. The City’s FY10 city tax levy is estimated to be 170.05 Mills. This is a decrease of 1.11 mills from the prior year. Although the SAFER grant for the year is declining, we are crediting approximately $510,000 of Police and Fire vacancy savings and mid-year budget cuts, and temporary equipment reductions to reducing the levy in FY10 by 7.5 mills. Full details on the estimated levy can be found in Mill Levies and Mill Value, page 46, of this document. The median home “assessed market value” represents the value on the tax roll for a home within the Bozeman city limits. This is the value of the property after the “homestead exemption” is applied (approx 32%). Median simply means that half of the homes in the city have a higher value and half have a lower value. The median value taxable value has not changed significantly on the tax roll due to our reappraisal cycle. With FY10 being a reappraisal year, the median value may change and will be available in August 2009. City residents living in the median residential home will pay approx $2.83 for each mill the city levies. In FY10, that is a total of $483, or $40.25 per month. General Taxes Cost per Mill For FY09, the value of one mill was $74,178—an increase of 7.5% over FY08. For FY10, we estimate the value of one mill to increase 3.0% to $76,403. Taxable values will be certi- fied by the State in August. Taxable values for the city have had an average annual in- crease of 8.4% for the past 5 years. With slowing construction activity, we anticipate a smaller increase for FY11, and are tracking construction activity for an indicator for next Assessed Market Value (~32% exemp- tion) FY08 Taxable Value FY08 City Tax (Levy = 154.18) FY09 Taxable Value FY09 City Tax (Levy = 171.16) Median Home = $94,000 $2,794 $431 $2,838 $485 $150,000 $4,710 $726 $4,710 $808 $200,000 $6,280 $968 $6,280 $1,077 ESTIMATED FY10 City Tax (Levy = 170.05) $483 $801 $1,068 FY10 *EST Taxable Value $2,838 $4,710 $6,280 Purpose FY09 FY10 FY11 & Beyond Police Department: Staffing Increase 4 Mills Total 9 Mills Total 14 Mills, No sunset Fire Department: Staffing Increase 12 Mills, each year No Sunset 12 Mills, each year No Sunset 12 Mills, each year No Sunset Fire Department: Equipment and Capital Replacement Reserve 4 Mills, each year No sunset 4 Mills, each year No sunset 4 Mills, each year No sunset 239 City Manager’s Recommended Budget FY10 16 City of Bozeman, Montana Average Residential Customer FY 08 Monthly Bill FY09 Monthly Bill 9% Increase Sewer Water $30.73 per month $30.73 per month Sewer $20.87 per month $22.74 per month Total $51.60 per month $53.47 per month FY10 Monthly Bill 3.2% Increase Water 10.2% Increase Sewer $31.71 per month $25.06 per month $56.77 per month year. City-wide Street and Tree Assessments City property owners pay annual street and tree assessments based on the square footage of the lot they own. These assessments are the major funding for Street Maintenance and Forestry Divisions. The recommended budget is based on a 2% increase in the Street as- sessment, resulting in an annual assessment of $84.48 for the average sized lot. The budget does not increase the Tree assessment, keeping an annual assessment of $16.22 for the average sized city lot. Combined, the annual increase over the previous year is $ 1.65 for owners of an averaged sized lot in the city. Water & Sewer Rates City property owners are by-and-large required to utilize the city’s water and sewer treat- ment systems. The adopted facility plans outline large capital projects will need to be funded in the coming years. Rate studies have been completed for both utilities and recommend changes to our rate levels and structures in order to fund the utility improvements needed in the next 5 years. Those recommendations were adopted August 2007, and have been revised to reflect the new plant-expansion costs that for the awarded Water Reclamation Facility and the Water Treatment Plant that is currently under design. We anticipate adoption of two-year rate resolutions in the Summer of 2009. They will in- clude a 3.2% increase in water rates each year, and a 10.2% increase in sewer rates each year. In Conclusion As with businesses and governments around the country, the past 12 months have signifi- cantly changed the city’s outlook for growth and service delivery. We are cautiously opti- Lot Size FY 08 Approved 5% Streets & 4% Trees FY09 Approved 7% Streets & 0% Trees Small= 5,000 sq ft. Streets—$51.60 Trees—$10.81 Streets—$55.21 Trees—$10.81 Average = 7,500 sq ft. Streets—$77.42 Trees—$16.22 Streets—$82.83 Trees—$16.22 Large = 10,000 sq ft. Streets—$103.21 Trees—$21.63 Streets—$110.43 Trees—$21.63 FY10 Recommended 2% Streets & 0% Trees Streets—$56.31 Trees—$10.81 Streets—$84.48 Trees—$16.22 Streets—$112.64 Trees—$21.63 240 City Manager’s Recommended Budget FY10 17 City of Bozeman, Montana mistic that Bozeman will see continued, although much slower, growth than recent years past. As always, this spending plan could not have been developed without the input and advice of dozens of people, from citizens to staff members to Commissioners. We greatly appre- ciate their assistance in this process. Respectfully, _______________________________________ Chris Kukulski, City Manager _______________________________________ Anna Rosenberry, Finance Director 241 242 243 244 245