Workshop Item - Joe Huss, Finance Director/Asst. City Manager
Title
Title
City Manager’s Preliminary 2022 General Fund Budget and Tax Levy
end
Background
At the August 16, 2021 Workshop, staff presented to Council a preliminary budget and tax levy scenario and discussed the next step in budget development - the City Manager’s Preliminary 2022 General Fund Budget. This budget will serve as a recommendation for the 2022 Preliminary Budget and Tax Levy that is scheduled for Council approval on September 20, 2021.
2022 Preliminary Tax Levy
The City Council is required to annually adopt a preliminary levy before the end of September and certify that levy to the County. Once certified, the levy cannot be increased; it can only be decreased. Blaine’s 2021 overall tax rate is 35.834% and Council consensus was to proceed as in prior years and develop a preliminary levy that, in total, produced the same overall tax rate as that of 2021. Current tax base estimates indicate an overall growth in taxable market value of 6.4%. Most of the growth in tax base is from residential property, which saw a $461 million increase (7.3%) from 2020 to 2021. Roughly 2% of the increase in residential value is from new construction. Estimates for commercial/industrial property indicate an increase of $44 million (3%) increase in value, with $6.6 million of that increase coming from new construction.
After factoring in tax base adjustments for tax increment financing (TIF) and Fiscal Disparities, a conservative estimate for the increase in the City’s tax capacity for 2022 is 5%. These preliminary, conservative, tax base estimates would allow for an overall levy increase of $1,540,000 (4.5%) to $35,725,000. This levy would maintain the previous year’s combined tax rate of 35.834%.
Allocating the 2022 Tax Levy
Going back several years the allocation of the City’s levies has been very consistent, with 82-83% being allocated to the General Fund; 12-13% allocated to the city’s debt service levy; 1-3% for the EDA; and 2-3% for levies for pavement management, parks improvements, and other council-directed strategic priorities. Current allocations for the 2022 preliminary levy have been adjusted since last discussed at the August 16 Workshop and are shown in the chart below. Under this scenario, the General Fund’s allocation was reduced by $200,000 and represents 82.6% of the 2022 levy. Similar to 2021, the current allocation would provide additional levy capacity for strategic priorities beyond the purposes for which the City has historically levied.
|
|
2021 Levy |
2022 Additional |
2022 Preliminary |
|
|
|
Levy Allocation |
Levy |
|
General Fund |
$27,735,000 |
$1,790,000 |
$29,525,000 |
|
PMP |
$ 100,000 |
-0- |
$ 100,000 |
|
Debt Service |
$ 4,900,000 |
($ 100,000) |
$ 4,800,000 |
|
EDA |
$ 700,000 |
$ 50,000 |
$ 750,000 |
|
Parks, Trails |
$ 350,000 |
-0- |
$ 350,000 |
|
Bandshell |
$ 75,000 |
($ 75,000) |
-0- |
|
Strategic Priorities |
$ 325,000 |
($ 325,000) |
-0- |
|
Additional Capacity |
$ 0- |
$ 200,000 |
$ 200,000 |
|
|
|
|
|
|
|
$34,185,000 |
$1,540,000 |
$35,725,000 |
|
|
|
|
|
|
Tax Rate |
35.834% |
|
$35.826% |
2022 Preliminary Budget Profile - Revenues
The 2022 Preliminary General Fund Budget provides total revenues of $38,659,800, an increase of $2.4 million (6.7%) over the 2021 Adopted Budget. The portion of the levy allocated to the General Fund would rise from $27,735,000 in 2021 to $29,525,000 in 2022. While this represents a 6.5% increase in the General Fund allocation of the levy, the total levy increases only 4.5%.
Based on current trends that indicate a level of economic recovery, other revenue categories - Licenses & Permits, Intergovernmental Revenue, and Charges for Services are expected to recover to levels similar to pre-pandemic levels of 2019.
At this stage of budget development, all revenue sources and categories continue to be monitored and are subject to adjustments prior to final budget adoption in December.
2022 Budget Profile - Expenditures
The 2022 Preliminary budget contains total appropriations of $38,439,695, which is $233,000 lower than the proposed budget presented on August 16. This represents a $2.46 million (6.8%) increase over 2021. Major components of this increase and the relative share of the percentage increase is broken down as follows:
|
Salaries, Wages - Cost of Living Adjustments (COLA) |
$714,000 |
2.0% |
|
Compensation Plan adjustments |
$615,000 |
1.6% |
|
Benefits adjustments |
$146,000 |
0.4% |
|
Workers Compensation insurance increase |
$ 92,500 |
0.2% |
|
2022 Elections |
$145,000 |
0.4% |
|
Customer Service Initiatives |
$ 50,000 |
0.1% |
|
Decision Packages |
$567,005 |
1.5% |
The funding for Customer Service Initiatives represents a new initiative for inclusion in the Preliminary Budget that was not a part of the preliminary budget reviewed by Council on August 16.
But not all adjustments have been increases. Staff has made a conscientious effort to budget only the amounts needed to provide services. This effort has helped to actually reduce appropriations in a number of areas, including:
- Supplies: overall reduction of $68,000 (3%), including $58,000 in fuels and shop supplies
- Contractual Services: while some contracts are expected to increase, overall contractual services have been cut by $37,000
2022 Preliminary Budget Decision Package Proposals
Department Heads submitted 18 separate requests that were classified as Decision Packages. The requests included eight personnel requests that would add 11 positions (one decision package includes a request for four additional patrol officers). Three positions - an Elections Assistant and two support positions at MAYC (a Receptionist and a Building Coordinator) - are part-time. Thus, the personnel-related decision package requests represented 8.5 FTE. Of the remaining 10 packages, five were for enhanced employee development programs and totaled $21,000; three relate to technology enhancements and total $65,000; the other two decision packages would provide an additional K-9 officer ($27,000) and continue the city’s Emerald Ash Borer program ($175,000).
Initially, total appropriations for all Decision Package requests equaled $984,305. However, the proposals for the four patrol officers and the victim/witness advocate were amended to phase-in the hiring of those positions, cutting the Decision Packages total that was presented to Council on August 16 to $756,400. Since that date, the request to add the Victim/Witness Advocate position has been removed, and the proposal to add a Generalist position in Human Resources has been amended. The proposal now is to convert a vacant HR Technician position to that of HR Generalist. The adjustments for these positions reduces the total of Decision Packages still under consideration to $567,000.
At this point in the budget process, the remaining decision packages as outlined above will be moving forward for additional review before a recommendation for the 2022 General Fund Budget is brought to Council at the Council’s retreat scheduled for the end of October.
2022 Budget Profile - Safe Margin
The 2022 Preliminary budget now provides for a safe margin of revenue over expenditures of $244,655, an increase of $57,000 from the budget reviewed with Council on August 16.
Staff Recommendation
Staff is seeking Council consensus to move both the 2022 Preliminary Tax Levy and the City Manager’s Preliminary 2022 General Fund Budget forward for approval at the September 20, 2021 Council meeting.