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Home My WebLink AboutFY2010-2011 City Manager’s Recommended Budget Commission Memorandum REPORT TO: Honorable Mayor and City Commission FROM: Chris Kukulski, City Manager Anna Rosenberry, Finance Director SUBJECT: FY2010-2011 City Manager’s Recommended Budget Presentation And, Adoption of the City Manager’s Recommended Budget as the Preliminary Budget for the Fiscal Year beginning July 1, 2010. **Reminder: Bring the Budget Document that you received on June 7, 2010. MEETING DATE: June 21, 2010 AGENDA ITEM TYPE: Action RECOMMENDATION: Listen to presentation and provide comments/questions, and then adopt the City Manager’s Recommended Budget as the Preliminary Budget for the Fiscal Year beginning July 1, 2010. BACKGROUND: This presentation will outline the FY2010-2011 City Manager’s (CM) Recommended Budget, on a “large scale” view. This recommended budget serves as the “Preliminary Budget”, as referenced in MCA 7-6-4020. It can and will be modified through public hearings and workshops with the City Commission throughout the summer, before its final adoption. Attached is a copy of the Budget Message, as included in the document itself. If you have questions related to details in the recommended budget document that you would like addressed in detail on Monday night, please forward them to Anna or Chris before the June 21st 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 “FY2010-2011 City Manager’s Recommended Budget” document is available online at http://www.bozeman.net/bozeman/finance/Accounting/budgetDocuments.aspx. Copies are also available to the public at the Bozeman Library and City Clerk’s office. Adoption as Preliminary Budget: State property tax timelines prohibit the City from adopting a final budget and tax levy before the fiscal year begins. Specifically, the property tax levy cannot be established prior to receiving certified tax values from the Department of Revenue – which will occur in early August. We customarily present the CM Recommended Budget and then adopt it as the Preliminary Budget on the consent agenda the following week. Because the Commission Meeting for June 28 has been cancelled, we are asking that you take action to adopt the Preliminary Budget tonight. Between the time the fiscal year begins (July 1) and the final budget is adopted (August 23), the City Manager’s Recommended Budget will be in effect. However, the following operational conditions are recommended and will be followed by staff: 1. No newly recommended Capital Projects, Personnel Positions, Contracted Services or Equipment will be purchased or entered into prior to final budget adoption in August, except: 2. We will be seeking to hire the additional Police Officers that come from the FY2010- 2011 levy. 3. We will be advertising for and potentially awarding a bid for the replacement of Engine 1 from the Fire Equipment & Capital Reserve Fund. This is expected to result in a cost savings on this important equipment purchase. 4. We will be entering into an agreement (not to exceed $17,000) for the engineering and design work related to the Swim Center improvements contained in this budget. This is expected to mitigate “down-time” at the facility, once the full construction project is approved. These restrictions are meant to retain maximum flexibility in budget decisions for the Commission prior to final budget adoption. Hearings and Work Sessions before Final Budget Adoption: The Budget and Tax Levy Hearings are tentatively scheduled for August 2, 2010, and will be opened-and-continued until taxable values are received. This “open-and-continue” process allows for multiple public hearings prior to the receipt of taxable values, and the quickest adoption of the budget after those values are received in August. We estimate Final Appropriation and Tax Levy resolutions will be adopted on August 23, 2010. The process that is used to get us from Preliminary to Final Budget adoption has changed from year to year. Our goal each year is to meet the needs of the Commission and the public – which often change given economic or programmatic circumstances. Last year, we successfully used a series of budget work sessions to review detailed areas of the City’s recommended budget. They usually lasted 1-2 hours, and allowed us to delve more specifically into the finances and operational plans for our various programs. We propose the following dates for work sessions during this summer: Monday, July 26 – Budget Work Session on Special Revenue Funds Monday, August 2 – Budget Work Session regarding Mandeville Farm Judgment Monday, August 9 – Budget Work Session on Enterprise Funds Monday, August 16 – Budget Work Session on General Fund UNRESOLVED ISSUES: Because this is the beginning of the formal budget process, there are many unresolved issues. We will be identifying and discussing those during this presentation and the budget workshops and hearings this summer. ALTERNATIVES: Delay adoption of the City Manager’s Recommended Budget as the Preliminary Budget; or, adopt it as the Preliminary Budget with changes or restrictions. FISCAL EFFECTS: 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 16, 2010 Attached Documents: Budget Message (excerpt from Budget Document) CM Recommended Budget FY11 9 City of Bozeman, Montana CITY MANAGER’S BUDGET MESSAGE ___________________________________________________________ June 7, 2010 Bozeman City Commission: I am pleased to present the City’s Recommended Budget for Fiscal Year 2010-2011 (FY11). As our community and citizens have been weathering the effects of this prolonged reces- sion, this organization has been working hard to develop responsible spending plans and creative ways to conserve resources and deliver quality services to Bozeman’s residents and visitors. This fiscal year marks the third year of our belt-tightening efforts; what started in March and April of 2008 (FY09 budget development) is now carrying into the FY11 budget. We continue to seek opportunities to invest in projects that improve efficiency in our opera- tions, and continue to make the difficult funding and staffing choices that these times re- quiring of all local governments. 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. This trend continued through FY09. During FY10, Planning and Building activities have continued to decline below their FY09 levels; however, we do continue to see moderate activity in our City. Our FY11 estimates for Building and Planning revenues mirror the FY10 actual receipts. We continue to monitor the revenue and workload status of the Building Inspection and Planning Depart- ments on a monthly basis, and report to the Commission on a quarterly basis. Property Tax Revenues from New Construction: During 2009, local taxable con- struction continued to decline. Based on our building permit values, we have estimated a 2% increase in property taxes from new construction for the FY11 preliminary budget. This estimate continues to be one of the most uncertain elements of our budgeting process. We will have final Certified Values for new construction from the State of Montana in Au- gust, prior to final budget approval. Bond Rating Upgrade: In April 2010, Standard and Poor’s reviewed their 2007 Rating of the City’s Downtown Tax Increment Bonds. Their rating at the time of bond issuance was BBB. They have upgraded their rating to BBB+, citing an outlook that “the district will maintain good coverage levels at a minimum through continued growth in its tax base.” This is a positive indicator for our prominent, historic downtown area. 225 CM Recommended Budget FY11 10 City of Bozeman, Montana Mandeville Farm Judgment: In December 2009, the Montana Supreme Court ruled against the City in our appeal of Delaney v. City of Bozeman. At issue was the City’s pur- chase of the Mandeville Farm property in 2003. Delaney was awarded $3 Million. The City and MMIA are working towards a judicial determination as to whether the City or the MMIA is responsible for the payment. Currently the MMIA has paid the judgment, subject to a non-waiver provision that could require the City to reimburse the MMIA, if a court finds the City is obligated for a portion of the judgment. The costs associated with this legal process are estimated to be $50,000 for FY11 and have been included in the City Attorney’s Budget. Sewer Plant Construction: Fiscal Year 11 will see the final full-year of construction on this critical, $54 Million project. We plan to issue the final $9.5M of debt related to the project in the coming fiscal year. Substantial completion of the project is estimated to oc- cur in October 2011. Water Plant Design: The slowdown in community growth gave us a bit of headway in our existing water capacity. As a result, we re-analyzed water rates and recommended a 5 -year plan of 3.2% rate increases each year, with construction on the new plant to begin in April 2011. This budget includes $5.7 Million in construction spending on the project. We anticipate having our full loan commitments in place for the project prior to August 2010. State & Federal Stimulus Funding: With the passage of the American Recovery & Rein- vestment Act of 2009 (ARRA) and the State’s House Bill (HB) 645—Montana Reinvest- Entity Description/Source Eligible Use/Identified Use Amount STATE Department of Commerce HB645—Local Government Infrastructure Grants Vehicle Maintenance Shop ADA Pedestrian Ramps Bogert Park Tennis & Basketball Courts Bogert Park Sidewalk Replacement Depot Park ‐ Phase 2 Improvements North 7th TIF Sidewalk Improvements $ 277,000.00 90,000.00 90,000.00 35,000.00 18,600.00 110,400.00 STATE Department of Environmental Quality ‐ SRF Program Water Reclamation Facility ‐ Admin Lab Building $ 800,000.00 STATE Department of Commerce ‐ Treasure State Endowment Program (TSEP) Water Reclamation Facility ‐ Digester Complex $ 500,000.00 FED Department Of Justice ‐ Edward Byrne Me‐ morial Justice Assistance Grant Electronic Police Ticketing $ 67,500.00 FED Department of Energy‐ Energy Efficiency Conservation Block Grants City Lighting & Furnace Improvements/ Bus Shelters/Emissions Monitoring $ 175,500.00 STATE Department of Commerce ‐ HB645 Historic Preservation Grant Story Mansion Insulation $ 24,334.00 STATE Department of Environmental Quality ‐ Recycling Promotion Grant Recycling Bins for Public Schools & School Outreach $ 14,117.00 Total Awarded: $ 2,202,451.00 226 CM Recommended Budget FY11 11 City of Bozeman, Montana ment Act, we aggressively sought stimulus dollars for local needs. Since February 2009, we applied for $8.5 Million and were award $2.2 Million. We are now in the process of bringing these important projects to reality—and complying with all of the federal and state rules regarding the various grant programs. Staffing Levels and Changes Reductions: During FY09 and in the course of developing, adopting, and implementing the FY10 budget, we made decisions to reduce staffing levels through attrition, reduced hours, or lay-offs. The table below shows FY09 & FY10 position reductions that have been made in order to balance staffing levels with workloads, and conserve resources where pos- sible. For FY11: In November 2007, local voters approved increasing our tax levy to add staff to both the Police and Fire Departments. FY11 marks the final year of additional Police Of- ficers funded by the Levy. The Levy also approved funding three Battalion Chief positions within the Fire Depart- Position Reductions—Economic Downturn Number of Full-Time Equivalent Positions Building Inspection 6.0 FTE Finance Office 1.00 FTE Fire Department 0.5 FTE Information Technology 0.12 FTE Library 0.5 FTE Planning Department 3.85 FTE 11.97 Full-Time Equivalent Positions Positions—FY11 Recommended Budget Number of Full-Time Equivalent Positions Police Officers—Levy Approved 4.0 FTE Fire Department—Battalion Chiefs (3.0 FTE) City Manager’s Office—Executive Assistant (1.0 FTE) Finance Department—SID Clerk (0.25 FTE) Library—Library Assistant 0.5 FTE Legal Department—Administrative Assistant 0.5 FTE Municipal Court—Court Clerk 1.0 FTE Vehicle Maintenance Shop—Mechanic 1.0 FTE 2.75 Full-Time Equivalent Positions—Net Increase 227 CM Recommended Budget FY11 12 City of Bozeman, Montana ment, as a result of adding a third Fire Station to the City. After careful consideration and operation of the three stations for nearly a year, we have decided to not hire the Bat- talion Chief positions in the coming year. We will analyze the need for these positions go- ing forward but will not be levying taxpayers to fund the positions in FY11. See page 51 for the full listing of positions included in the FY09, FY10 & FY11 budgets. General Fund Unreserved Fund Balance: The City’s Charter requires we establish a minimum level of General Fund Unreserved Fund Balance, in accordance with the Gov- ernment Finance Officer’s Association (GFOA) Best Practices. The GFOA significantly changed their Best Practice Recommendation in October 2009. As a result, the Commis- sion increased the required minimum from 12% to 16 2/3%. This budget will result in an ending FY11 General Fund Unreserved Fund Balance of $3.6 Million, or 15.9% of budget General Fund operating revenues, based on the following as- sumptions: • Full Utilization of FY10 Appropriations, and • Full Collection of FY10 Revenues, and • Sale of City Hall and Close of Construction Fund, and • Close of Library Construction Fund. Work Plan On February 20, 2010, the Commission adopted a work plan of new initiatives and ongo- ing priorities for 2010 and 2011, in an effort to assist staff in allocating resources and time. They established New Policy Initiatives and Ongoing Priorities, which are detailed in full, beginning on page 18. The New Policy Initiatives are: 1. Enhance Downtown Development Opportunities 2. Reform the development review process without decreasing quality 3. Economic Development 4. Develop a plan to address deferred infrastructure maintenance 5. Determine future of Mandeville Farm & Story Mansion Additional Debt: This budget anticipates final borrowing of $9.5M for the Water Reclama- tion Facility construction from the State’s Revolving Loan Fund. These revenue bonds are required to be paid from sewer-system rate-payers and do not impact the City’s Gen- eral Obligation debt limits. While the new Water Treatment Plant will require substantial borrowing through comple- tion, we don’t anticipate needing to borrow funds in FY11. We will secure loan commit- ments in FY11 and begin borrowing in FY12. This borrowing will be secured by water- system rate-payers. Project FY11 Amount Debt Type Water Reclamation Facility $9.5 Million, 20 year term, Final Draws. Wastewater Revenue Bond, State Revolving Loan Fund 228 CM Recommended Budget FY11 13 City of Bozeman, Montana Mill Levy Comparisons, With the implementation of our Public Safety related levies, our mill levy has drifted higher, to number four of ten, for comparable communities in our state. The table below shows the city tax levy for a number of communities in Montana. West Yellowstone and Whitefish both utilize Local Option Resort Taxes as an alternative/ supplement to property taxes, which the City of Bozeman is currently prohibited from by state law. Residential City Property Taxes for FY08, FY09 and ESTIMATED for FY10. For four of the past five years, the City’s property tax levy has moved downward. The City’s total tax levy was decreased by 3 mills in FY06, as a planned savings of taxing au- thority. 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 Dis- patch vote. And, in FY10, 0.97 mills were reduced due to savings in the Police & Fire De- partments. In November 2007, the voters of the City approved increases in the City’s general taxing authority for the following items: City 2008 Census Estimates FY2004 Mills FY2009 Mills Levy Rank Missoula 68,202 176.32 222.45 1 Havre 9,575 178.74 219.85 2 Livingston 7,500 163.20 198.12 3 Bozeman 39,442 163.31 171.16 4 Kalispell 21,182 149.74 170.23 5 Billings 103,994 110.23 163.76 6 Great Falls 59,251 124.33 162.76 7 Belgrade 8,145 99.34 149.78 8 Helena 29,351 114.71 149.29 9 Whitefish* 8,281 87.14 112.22 10 West Yellowstone* 1,511 43 79.19 11 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 229 CM Recommended Budget FY11 14 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 was adopted at 170.19 Mills. This was a decrease of 0.97 mills from the prior year. Although the SAFER grant for the year was declining, we credited 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 7.44 mills. For FY11, we have reduced the estimated levy for the FY11 Safer Grant and Battalion Chief positions, and 911 related mills. This results in a tax levy of 181.95 mills, nearly 15 mills ($1.67 Million) lower than our statutory limit. Full details on the estimated levy can be found in Mill Levies and Mill Value, page 48. 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. General Taxes Cost per Mill For FY10, the value of one mill increased 5.5% to $78,290. Taxable values for the city have had an average annual increase of 8.1% for the past 5 years. With slowing construc- tion activity, we anticipate a 2% increase for FY11. The FY11 Recommended Budget is based on an estimated mill value of $79,856. City residents living in the median residential home will pay approx $2.83 for each mill the city levies. In FY11, that is estimated to total $516, or $43.00 per month. 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 5% increase in the Street as- sessment, resulting in an annual assessment of $88.70 for the average sized lot. A portion of this increase (2%) is recommended to be set aside to fund a Curb Replacement Reserve. Assessed Market Value (~32% exemp- tion) FY09 Taxable Value FY09 City Tax (Levy = 171.16) FY10 Taxable Value FY10 City Tax (Levy = 170.19) Median Home = $94,000 $2,838 $485 $2,838 $483 $150,000 $4,710 $808 $4,710 $801 $200,000 $6,280 $1,077 $6,280 $1,068 ESTIMATED FY11 City Tax (Levy = 181.95) $516 $857 $1,143 FY11 *EST Taxable Value $2,838 $4,710 $6,280 230 CM Recommended Budget FY11 15 City of Bozeman, Montana The recommendation is to increase the Tree assessment by 4%, resulting in an annual as- sessment of $16.86 for the average sized city lot. Combined, the annual increase over the previous year is $4.86 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. The Commission adopted two-year rate resolutions in August of 2009. They include a 3.2% increase in water rates each year, and a 10.2% increase in sewer rates each year. For FY11, the average residential customer will see a combined monthly increase for these services of $3.57/month, or $42.84 per year. In Conclusion Governments, businesses, and households around the country remain significantly im- pacted by these difficult economic times. We believe our strategy of spending reductions during the early part of this recession, combined with monthly and quarterly monitoring, have helped us stay in front of a number of financial problems. We will continue to utilize this strategy to help ensure Bozeman stays a safe, affordable, and beautiful community. 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 Lot Size FY09 Approved 7% Streets & 0% Trees FY10 Approved 2% Streets & 0% Trees Small= 5,000 sq ft. Streets—$55.21 Trees—$10.81 Streets—$56.31 Trees—$10.81 Average = 7,500 sq ft. Streets—$82.83 Trees—$16.22 Streets—$84.48 Trees—$16.22 Large = 10,000 sq ft. Streets—$110.43 Trees—$21.63 Streets—$112.64 Trees—$21.63 FY11 Recommended 5% Streets & 4% Trees Streets—$59.12 Trees—$11.24 Streets—$88.70 Trees—$16.86 Streets—$118.27 Trees—$22.50 Average Residential Customer FY09 Monthly Bill 9% Increase Sewer FY10 Monthly Bill 3.2% Increase Water 10.2% Increase Sewer Water $30.73 per month $31.71 per month Sewer $22.74 per month $25.06 per month Total $53.47 per month $56.77 per month FY11 Monthly Bill 3.2% Increase Water 10.2% Increase Sewer $32.72 per month $27.62 per month $60.34 per month 231