Workshop Item Alison Bong, Deputy Finance Director
Title
Title
Introduction of the 2023 Preliminary Budget
end
Background
Staff is presenting core background information related to the 2023 Preliminary Budget to council to prepare for small group discussions which will be hosted late July and early August of the calendar year. The topics for this council workshop item are listed below:
Agenda:
- Revenue projections
- Current levy projections and 2023 tax rate
- Trends and themes
o Prior-year budget themes and impacts of Covid-19
o 2023 non-growth related
o Impacts to the base budget
o 2023 growth related
o Level of service
- Small group discussion format
o Process Improvements
o Expenditures
§ Base budget
§ 2023 department requests
o Discussion
Revenue Projections:
Revenue estimates show growth within most other revenue categories across all city funds. Summarized below are projected revenues for 2022 and 2023.
|
|
2022 Adopted Budget |
2023 Manager's Review |
Increase / (Decrease) |
|
General Fund |
|
|
|
|
Taxes |
$29,350,000 |
$31,350,000 |
6.8% |
|
Licenses & Permits |
$2,415,500 |
$2,874,500 |
19.0% |
|
Intergovernmental Revenues |
$1,568,000 |
$1,626,000 |
3.7% |
|
Charges for Services |
$4,733,500 |
$5,206,000 |
10.0% |
|
Fines & Forfeitures |
$245,500 |
$220,500 |
-10.2% |
|
Investment Earnings |
$155,000 |
$150,000 |
-3.2% |
|
Miscellaneous Revenues |
$73,000 |
$60,000 |
-17.8% |
|
Total |
$38,540,500 |
$41,487,000 |
7.6% |
Economic Development Authority
|
Taxes |
$755,000 |
$780,000 |
3.3% |
|
Special Assessments |
$3,000 |
$3,000 |
0.0% |
|
Charges for Services |
$55,000 |
$60,000 |
9.1% |
|
Investment Earnings |
$80,000 |
$80,000 |
0.0% |
|
Miscellaneous Revenues |
$15,000 |
$15,000 |
0.0% |
|
Total |
$908,000 |
$938,000 |
3.3% |
Enterprise Funds
|
Charges for Service |
$19,333,480 |
$19,959,060 |
3.2% |
|
Licenses & Permits |
$14,200 |
$50,200 |
253.5% |
|
Intergovernmental Revenue |
$138,000 |
$138,000 |
0.0% |
|
Investment Earnings |
$311,500 |
$310,300 |
-0.4% |
|
Miscellaneous Revenues |
$203,500 |
$220,000 |
8.1% |
|
Total |
$20,000,680 |
$20,677,560 |
3.4% |
Current levy projections and 2023 tax rate
The City of Blaine has incorporated boundaries in both Anoka and Ramsey Counties. The city contracts with the counties for assessing activities which determine the appropriate market value for the following property categories: agricultural, residential, commercial and industrial (C/I), and certain personal property. Each year the counties release market value estimates which the city uses to model the potential tax capacity. These estimates, in conjunction with analysis of other core components of the tax model, including estimating the metropolitan area fiscal disparities program apportionments, form the basis of the City Manager recommendation for the levy.
The experienced some of the most significant growth in the northern metropolitan area. Current estimates show a total increase in market value of 23%, which is substantially higher than the 2022 estimate of 7%. The table below shows valuation by property category within Blaine’s city limits:
|
Category |
2022 |
2023 |
Change |
|
Agricultural |
16,303,742 |
15,227,000 |
-6.6% |
|
Residential |
6,815,262,487 |
8,794,632,900 |
29.0% |
|
C/I |
1,454,382,100 |
1,414,711,300 |
-2.8% |
|
Personal |
108,084,200 |
100,868,900 |
-6.7% |
|
Total |
8,394,032,529 |
10,325,440,100 |
23.0% |
The city has attracted significant growth within the residential category. Future discussions about the budget and levy will outline the impact this has on both median and average value properties amongst both the residential and commercial/industrial categories.
Under current market conditions and the most recent estimates received from the county assessors, the city will see a significant decrease to the tax rate. The levy rate for 2022 property tax payments is 35.875%. Even under hypothetical rapid growth conditions where property tax supported expenditures were to increase by 10%, the overall tax rate within the city would fall below 32% for 2023. This is a clear indication of the desirability of the city within the broader metropolitan area. The efforts of council and staff over the years has resulted in considerable growth in property values for residents within the city.
Trends and themes
Covid-19 had heavy impacts to the budget process and outcomes for both the 2021 and 2022 budget. Cost suppression was the primary focus of both budget processes due to the unknown effects the pandemic would have on revenues with the ultimate aim to reduce the levy on Blaine property owners.
2023 expenditure forecasts are showing significant inflationary growth within multiple categories including fuel, construction materials, and other supplies. Average inflationary costs staff are currently experiencing range between 30-50% increases with very short lead times to approve quotes, and very long lead times to receive supplies. This trend is highlighted in the recent quotes brought before council related to construction for parks, roads, and other city assets. Additionally, wage competition and labor shortages are driving up the cost of business. A recent example is the building inspection contract for 2022. A critical example of 2023 estimates is fuel, a comparative table is below:
|
Fuel type |
2022 contract |
2023 estimates |
Increase |
|
Unleaded |
$2.48 |
$3.66 |
47.6% |
|
Diesel |
$2.95 |
$3.97 |
34.6% |
The 2023 base budget is calculated under the assumption that the city will at a minimum maintain the same resource level as 2022. This includes the full roll-out of the compensation plan and commodity usage for such activities as water treatment, road ice control via salt, and fleet operations and maintenance.
In recent years, the council has shifted guidance to staff related to service levels, including increasing the maintenance of parks during the high use seasons, increasing the frequency of preservation activities for capital assets including water assets and roads, and a heavy focus on maintaining a high standard of service and programs across all amenities offered while the city is continuing to develop and increase the amount of assets and properties within city limits. Staff, under council guidance and city manager direction, have evaluated these service levels and are proposing expenditures appropriate to carry out the mission, vision, and initiatives approved by the council.
Small group discussion format
• Process Improvements
• Expenditures
o Base budget
o 2023 department requests
• Discussion
Staff Recommendation
Staff is requesting council members to provide additional questions and topics to address at small group discussions that will occur late July early August.
Attachment List
2023 Preliminary Budget PowerPoint Presentation