Workshop Item Joe Huss, Finance Director/Asst. City Manager
Title
Title
2020 General Fund Financial Update and 2022 Budget Outlook
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Background
Staff will provide a summarized, pre-audit 2020 financial review. The review will focus on the financial performance of the General Fund. The 2020 financial review will lead into a preliminary discussion on the 2022 Budget with regard to property value trends and the tax levy outlook.
2020 General Fund Review
Total revenue exceeded budgeted revenue by nearly $300,000 (1%), with property taxes at virtually at 100% of the 2020 budget of $25.9 million. Actual performance also exceeded budget in intergovernmental revenue as well as administrative charges and investment earnings. Licensing and permit revenue wound up the year 4% below budget as building activity rebounded in the latter part of the year. And while Charges for services, fines and forfeits, and miscellaneous revenue underperformed the budget, the strong performance in the other categories was enough to overcome the lagging performance of these revenue accounts.
On expenditures, with the implementation of cost containment measures, all departments were within budgeted appropriations, as the General Fund ended 2020 with actual expenditures $3.26 million (9.5%) under budget. Categorically, General Fund expenditures were within budget for all categories: Personal Services (wages and benefits), Supplies, Contractual Services and Other Expenditures.
Departmentally, Public Works, which includes Streets and Parks Maintenance, and Engineering accounted for the largest dollar savings, having under-spent its budget by nearly $1.3 million (16%). Safety Services, which includes Police, Community Standards, and the SBM Fire contract, accounted for nearly as much in savings, $1.04 million (6%). Other areas include Finance at $118,650 (7%); Public Services (Parks & Rec; GIS) at $425,500 (25%); Community Development with $31,700 (1.4%); and Legislative and Administration a combined $284,000 (10%) under budget.
General Fund reserves remain strong and align with the City’s adopted policy that requires 30% of budgeted expenditures be set aside for cash flow, with another $1.35 million held in reserve for contingencies such as declines in tax collections and state funding programs. With the positive performance outlined above, the General Fund generated an operating surplus of $3.8 million. Additionally, net transfers (Transfers-In less Transfers-Out) added $1.1 million to the General Fund reserves, leaving nearly $18.1 million in reserves at December 31, 2020.
Per City policy, the General Fund’s 2020 required year-end fund balance is $11.8 million. With the adoption of the 2021 General Fund and Capital Fund budgets, Council approved a transfer of $2.1 million for capital spending. Following that plan leaves the General Fund with $4.3 million in unrestricted reserves.
Attached to this item is the memo sent to Council that provides a more detailed 2020 financial summary of all operating funds.
2022 Budget Outlook - Property Values and Tax Base
The City continues to experience some difficulties getting valuation information from Anoka County. Indications are mixed, with some properties retaining or increasing in value while others are showing declines. Initial expectations were that the COVID pandemic would negatively impact property values and the City could experience low to no growth in values for developed property. This would be somewhat offset with new construction. At this point, staff is preparing various valuation and tax base scenarios to incorporate into the 10-year tax levy and budget models.
2022 Budget Outlook - Property Tax Levy
Staff is updating the 10-year levy model and has already reviewed debt service needs. Early information indicates that the 2022 debt service levy would stay at the same amount as the 2021 debt service levy of $4.9 million. Other levies for the General Fund, the EDA, Parks and Trails, and the Pavement Management Program are still in the development stage.
Staff Recommendation
The item is mostly informational to help set the stage for a more detailed budget discussion at the upcoming Council Retreat.
Attachment List
2020 Financial Summary