Workshop Item Ali Bong, Deputy Finance Director
Title
Title
Introduction to 2024 Budget
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Background
Council will devote a portion of the Winter Retreat to discussions on the budget. The retreat discussion will focus on the following:
1. Preliminary 2022 Budget Performance
2. Building the Budget
3. City Financing
4. Budget Calendar
A brief presentation will be given followed by the opportunity for in-depth council discussion.
Preliminary 2022 General Fund Budget Performance
Finance staff are projecting to come in within budgeted expenditures for the 2022 fiscal year. Revenues are coming in favorably to original budget with projections higher than budgeted for licenses and permits. Additional information on 2022 budget performance will be brought forward in March.
Building the Budget
The 2023 budget was built on the foundation of maintaining service levels throughout the city. Staff uses a process that incorporates the Strategic Plan, Council priorities, studies, customer feedback to build the budget.
Every year council provides guidance on the desired outcomes for the coming year, which ensures alignment with the Council’s top priorities and adopted Strategic Plan, and provides structure for staff to begin creating department level budget proposals.
Budget process
Blaine budget process follows six core steps which are briefly outlined below:
1) Identify services to provide - services are composed of mandated, non-mandated, and support services. Basic city services may include sanitation (both sewer and refuse); water system maintenance; streets and parks maintenance; operation of public facilities such as community centers and libraries; building and community standards services; police and fire services; and transportation
2) Determine fiscal capacity - in brief, a city’s fiscal capacity is determined by the total amount of revenue it can raise to support its desired level of services. The major source of revenue for most cities is property taxes. Throughout the year Anoka and Ramsey counties provide Blaine property assessment data. This data forms the basis for the levy model which is used to determine the city’s property tax levy. The council provides the City Manager direction to establish the property tax levy by giving guidance on one of the following methods of determining the preliminary levy: percent increase or decrease to the budget, tax rate, or specific dollar amount. Additional fiscal capacity includes all other revenue sources, and, depending on the fund type, could comprise enterprise fund revenues, fund reserves, and other operating revenue sources
3) Estimate costs of services - includes determining the costs of staffing requirements, personnel costs, support costs, operating and capital needs
4) Evaluate/prioritize services - once costs are determined staff vet and prioritize services and programs based off of regulatory and council mandates, the city’s mission statement, business plans, strategic plans and initiatives, council goals and initiatives, and internal policies
5) Allocate resources - the City Manager determines budget targets for each department based on the direction of the council. Staff determine service and program levels within the allotted resources
6) Review and report - review actual against the budget, measure the effectiveness of services, programs and initiatives via qualitative feedback and quantitative metrics which deepens accountability and stewardship of the taxpayer dollar
The budget process is how cities allocate resources to initiatives to carry out city plans, meet city policies and goals, and provide services to the public. Cities provide an immense array of services, and the budget process is a critical component to ensure funding is allocated to providing those services.
Blaine is one of the most cost-effective and cost-efficient full-service cities in the 7-county metro area. Below is a high-level overview of Blaine services:
• Safety Services
o Police services
o Fire services
o Community standards
o City facilities
• Public Works
o Engineering
o Streets maintenance and preservation
o Snow removal from street, alley, and sidewalks
o Maintenance of parks, trails, and open spaces
o Water, sewer, and stormwater utilities
• Community Development
o City planning/development
o Building inspections and permitting
o Economic development
• Parks and recreation
o Recreation programs
o Blaine beach
o Mary Ann Young Center (MAYC)
• Administrative and Financial services
o Public records inquiries
o Conducting elections
o Organized collection of refuse, recycling, and organics
o Accounting and payroll services
o Internal support services
Driving forces behind the budget
The primary driving force in developing the budget is the guidance provided by the council through the values, priorities, and initiatives outlined by the council.
The below table provides examples of forces that cause increases to the budget.
|
Growth |
Non-growth |
|
Streets, sidewalks, and trails |
Wage competition |
|
Parks |
Inflation |
|
Waste disposal |
Legislative/regulatory requirements |
|
Water quality and availability |
Labor contracts |
|
Housing development |
Infrastructure resiliency |
|
Public safety |
Commodity pricing/Insurance premiums |
|
Economic development |
Increase services to improve quality of service/life |
The majority of costs are ongoing costs and adjustments. For operating funds, such as the General Fund, there are few instances where the city incurs one-time costs. Examples of one-time costs may be cost participation in the construction of an asset maintained by another agency or contributing resources for an event or aid response. In a city that is fully developed, absent a reduction in services, assets, or programs, there are several factors that put pressure on the budget that are non-growth related. These drive an increase in the budget regardless of growth.
City Financing
Financing is the process of providing funds for business activities, making purchases, and/or investing. To provide the services established by council, Blaine uses a variety of revenue sources, also called funding streams, which fall into two categories: city-controlled revenues and external revenues.
City-controlled revenues are raised in the incorporated boundaries of the city and are established by council vote; they would not exist but for council action. External revenues are raised by other agencies and the city must comply with outside agency rules to be eligible to receive those funds. External funds may be sought in both competitive and non-competitive processes.
City-controlled revenue examples are user fee charges for services, debt, investment income, licenses and permits, and the tax levy. Council is able to direct how much it wants to collect by setting the schedule of fees and the tax levy annually. These revenues still have some statutory restrictions, but council can adjust revenues within those bounds. The tax levy accounts for the majority of the city’s revenue.
External revenue examples are intergovernmental aid, grants, and participation from other cities. Council may direct staff to pursue external revenue sources; however, the rules and overall control around the funding are established by outside agencies.
Budget Calendar
The budget process is an annual cycle. The current year budget is managed by the City Manager and the departments throughout the year. The development of next year’s budget begins early in the year and spans all the way to December. An overview of the general budget items that occur throughout the year are outlined below. A detailed budget calendar is in development.
In winter, finance requests council direction for the next budget cycle and long-range staffing plans are prepared by staff. Staff receive preliminary tax base information in mid-February.
In spring, staff prepare their operating and capital requests. Finance continues to solicit feedback from council on next year’s budget priorities.
In summer, the submitted budgets are reviewed by staff and the City Manager to develop the City Manager’s Budget. Small group meetings with council members are held to allow for in depth discussion on budget topics.
In fall, the preliminary budget is reviewed during council workshops and the fall retreat. Council has the chance to ask questions and request additional information. Council may direct adjustments which can be incorporated into the budget. Council must adopt the preliminary levy by September 30. Final tax base information is received in late fall. The Truth in Taxation Hearing is held between the end of November and the middle of December. After the Truth in Taxation Hearing is complete, the final budget and tax levies are adopted.
In a change from prior years - for the 2024 budget, fund budgets will be adopted in larger groups rather than each budget being adopted individually: Economic Development Authority Fund, Enterprise Funds, General Fund, and All Other Funds.
Questions for Council
• Is Council comfortable proceeding with a service-level based approach to the budget?
• Is Council comfortable with a budget process similar to last year and as described in this document?
• Staff and Council have identified the following topics for discussion during the first half of the year:
o Special assessment policy
o Utility rate study
o Deferred maintenance
o Preliminary tax base information
o Does Council have any thoughts on additional areas to address in the budget?
Attachment List
Presentation