Workshop Item: 2 - Joe Huss, Finance Director
Title
2013 BUDGET UPDATE
Background
Over the past two months, Council has conducted two Budget Workshops. The first, held April 12, provided preliminary information on the City's tax base and how the declining base would affect tax rates under various levy scenarios. The second workshop took place on May 10, where staff presented two levy scenarios and provided information on the funding gap that exists under each of the these scenarios, given current staffing levels and existing programs. A summary of the two previous meetings follows:
April 12, 2012 Workshop
Staff presented preliminary information on 2011 performance and informed the Council that roughly $1 million was added to the General Fund reserve from positive 2011 performance. Staff also presented preliminary Anoka County valuation figures indicating a 9% decline in property values and a 7% decline in the City's net tax capacity. Staff estimates indicated that a $1.5 million levy cut would be required to maintain the current tax rate, and that the rate would increase three percentage points if the same dollar levy was adopted for 2013.
Council direction was to begin developing budget scenarios based on maintaining the current tax rate of 33.6%. Council further directed staff to assume an additional 4% decline in property values for 2014, and to supplement the budget with a $500,000 draw from reserves for both the 2013 and 2014 budgets.
May 10, 2012 Workshop
Based on direction from the April 12 Workshop, staff presented two 2013 Budget scenarios for Council - one that maintains the current tax rate, and one that maintains the current levy. Projections were made under current staffing levels and included a 2% increase in salaries consistent with approved labor contracts. Budget projections indicate a 2013 funding gap between $140,000 (under the constant dollar levy scenario) and $1.7 million (under the constant rate scenario.) The gap grows to between $500,000 and $3.5 million in 2014 with the assumption of a 4% decline in values for 2014.
Direction from Council was to develop the 2013 General Fund Budget that is program based and uses zero-based budgeting methods and provides the assumptions used to calculate the numbers. It was further suggested that the programs then be prioritized as low, medium, and high priority.
2013 Budget - Current Status
Finance staff continues their work in refining tax base and property valuation data, while department heads have begun development of the 2013 budget using zero-based methods pursuant to Council direction. The June Budget Workshop will update Council on the most recent tax base data. The prioritization process will be introduced at the July 19th Budget Workshop, where Council will be provided initial staff-prepared budget requests.
Recommendation
Staff is seeking further Council direction and is offering no recommendation at this time.