HomeMy WebLinkAboutCity Council Packet 04-28-2009 SpecialCITY OF PLYMOUTH
AGENDA
SPECIAL COUNCIL MEETING
APRIL 28, 2009, 5:00 p.m.
MILLENNIUM GARDEN AND
MEDICINE LAKE CONFERENCE ROOM
1. Call to Order.
2. Dedication of artwork at Millennium Garden.
3. Preliminary budget discussion.
Part 1
Part 2
Part 3
4. Set future Study Sessions.
5. Adjourn.
Special Council Meeting 1 of 1 January 13, 2009
rP)City of Agenda
P1YM"ou_th Number:
Adding Quality to Life
To: Laurie Ahrens, City Manager
SPECIAL
COUNCIL MEETING prepared by: Calvin Portner, Director of Administrative Services
April 28, 2009 Reviewed by:
Item: Preliminary Budget Discussion
1. ACTION REQUESTED:
Provide staff with direction for the General Fund 2010 budget levy.
2. BACKGROUND:
REVENUE
Levy Limit Projection (Attachment 41)
Attachment #1 shows a side-by-side comparison of past general levies and two projected levy options
calculated with the best information we have at this time, one calculated at the maximum amount the
city could levy and the second freezing the levy at the 2009 number.
2009 Levy amount — The 2009 total levy was $2'8,898,845.62, a 5.14% increase over 2008.
This is shown in Column A.
Maximum'Projected 2010 Levy — As of now, the state -mandated levy limit utilizes the implicit
price deflator to calculate the annual levy increase. Currently, the implicit price deflator is at
2.2%. The statute exempts special levies from the calculation. Estimated public safety wage
and benefit increases, adjusted bond payments and inflationary -adjusted special levies for street
reconstruction, recreation and the Capital Improvement Fund and Mandated PERA increases
are shown in Column B. Also shown is an estimated amount for repayment of new Open Space
Bonds, if sold in 2009.
2010.Lew with Special Levies frozen at 2009 levels -- Columns C & D show projected 2010
increases with special levies and the total levy frozen at the 2009 Total Levy amount of
28,898,845.62. Column D shows the impact of a potential Open Space Bond payment on the
general levy.
Page 1
Property Tax Tolerance (Attachments #2 & #3)
Attachments 92 and 93 show the projected tax impact on three properties.
Maximum Projected 2010 LM — Tax impact of the maximum levy on average, above and
below homes and on $1 million commercial property. The impact of the maximum levy for
2010, if all other revenue streams are maintained and if expenditure projections do not change
substantially would require a General Fund cut of approximately $750,000.
2010 Levy with Special Levies frozen at 2009 levels -- Tax impact without public safety and
PERA increases added to the general levy. The impact of the frozen levy if all other revenue
streams are maintained and if expenditure hold true would require a General Fund cut of $1.24
million.
Market Value Homestead Credit (MVHC)
The governor un -allotted $500,000 in MVHC from the City of Plymouth for 2009 and $248,000 in
2008. The projection does not include revenue for the tax credit. Because of the uncertainty of the
credit, Plymouth had the means and the foresight to place the MVHC receipts in the Street
Reconstruction Fund. The fluid will need more general tax levy support and/or bonding to maintain
our planned reconstruction projects.
Permit Revenue
Plymouth had traditionally budgeted permit revenue conservatively. For 2009, revenue was decreased
375,000 from the prior year. In all, $1.8 million in revenue was projected for 2009.
Fines/Forfeitures
The city receives about $900,000 in fine and forfeiture revenue each year. The concern going forward
is a Hennepin District Court proposal to discontinue collection of certain fines as well as an increased
transportation cost if the Ridgedale Satellite Court is closed and officers have increased travel time,
overtime and parking costs to appear in court.
EXPENDITURES
New for 2010
At this time, staff has not discussed the addition of new resources or programs. Potential organizational
changes were discussed and the reallocation of existing resources to meet necessary program/activity
changes. The CIP includes about $140,000 in General Fund expenditures. Contractual Services
accounted for more than five million dollars (about 18%) in General Fund expenditures for 2009.
Street Reconstruction Levy
The city levied $2,458,092 for street reconstruction for 2009, $155,000 more than the year before. It
was anticipated we would need to bond for 2010 street reconstruction after the 2009 recon season,
however recent council decisions may push the need to bond for street reconstruction out to 2011. The
2003C Street Reconstruction Bonds will be paid off in 2009 ($424,000).
Open Space Levy
Last year, the city added a $255,000 bond payment to the levy. We anticipate another bond sale this
year for the Northwest Greenway, which would increase our levy for 2010.
Page 2
Sales Tax increase
Minnesota voters elected last November to increase the state sales tax by .375% for environmental
protection concerns. The added sales tax will have a small impact (approximately $20,000?) on taxable
city expenditures.
Fire Fighter Pension
Market changes due to the economy have created pension fund issues in a number of cities including
Minnetonka and Bloomington. Those cities are levying fiends to make up for lost investments. The
City of Plymouth is continuing to measure the situation but from our most recent audit report, the
pension fund is sufficient.
Projected Wage benefit Increases
The city's general fund payroll in 2009 was approximately $14.3 million. Public safety accounted for
6.6 million of the general fund payroll. Public Works and ClericaUTechnical/Professional union
contracts are settled for 2010 and include a 2% general increase. The projected general fund increase
for non-public safety wages and benefits is $615,000 for 2010.
Public safety payroll for 2009 was approximately $7.2 million. The patrol officers and sergeants will
open negotiations for 2010 contracts late this year. The total public safety (police and fire) increase is
projected to be $150,000 for salaries. Benefits are projected to increase by $60,000.
The total projected personal service increases on the 2009 payroll are expected to increase
approximately $800,000.
Tax Delinquencies
The past two years, Plymouth budgeted $20,000 for tax abatements. Due
to the economy, a number of communities are budgeting 1 to 2% less
revenue to cover for lost/delayed tax revenue from tax delinquencies. The
city currently has a fund (Reserve Fund 408), which was created to cover
tax abatement losses and loss of past state aid.
With the changing economy, it is expected to see more delinquent taxes in
the near term. Since the properties typically repay the tax upon future sale
of the property, it may be worthwhile to account for delinquency through
Reserve Fund 408.
Energy increases
An internal review was completed in 2008 to account for increases in
energy costs for fuel and electricity. The 2009 Budget included a motor
vehicle fuel increase of $110,000 over 2008 and a natural gas increase of
40,000.
Internal Service Funds
Analysis was completed or will soon be completed on our internal service
funds. The analysis shows a historical imbalance of charges to funds
other than the general fund. Correction is necessary to properly reflect
revenue and expenditures; however it may need to be phased in over an
Page 3
unspecified period of time to ensure we meet budgetary needs and budget
priorities.
Central Equipment Fund — (Attachment #3) The Central Equipment Fund analysis was brought
to council for review in March of 2008. The report shows a $420,000 shortfall in allocation
imbalance to the General Fund.
Facilities Management Fund — (Attachment #4) The facilities review was recently completed
and also shows structural imbalance against the General Fund of $510,000.
ITS — The IT fund will undergo a number of allocation changes, however they are all expected
to be within the General fund and would not impact the budget.
Employee Benefit Fund — The Employee Benefit Fund is reported each year in the CAFR and
adjustments are made to ensure it is actuarially sound. We currently make some transfers to the
fund through allocations to departments and charge some expenditures directly to department
budgeted line item. We will streamline the fund allocation for the next budget for ease of
understanding and 'improved transparency.
Risk Mana egment — The Risk Management fund will be completed this spring, but a
preliminary analysis shows that allocations were increased to maintain the fund but it appears
the General Fund share may have been lower than actual expenditures.
Budget Prioritization
The City Manager and directors met in two study sessions to identify the programs and activities
provided by the City of Plymouth. They sorted the activities into three categories, Mandatory,
Discretionary and Political and then prioritized the activities/programs on a scale of 1-4. The work is
still in progress.
The process began with a Webinar produced by ICMA called Fiscal Distress: I-Iow to Diagnose the
Cause and Identify the Right Solutions. Staff then identified the core services expected to be provided
by the city. Staff then looked for items that are currently, could or should be provided by another
organization or entity. They also looked for activities that are duplicated throughout the organization or
that may be better provided by another component of the city organization. Lastly, they looked at the
cities changing needs and discussed opportunities to decrease or change operations.
Working Philosophy
There are a number of means to build a budget to meet the community need and targeted revenue. The
staff exercise took an approach to identify structural change that can be sustained in the current
economy, as well as into the future. Further, the approach looked for innovative means to accomplish
activities though organizational restructuring, partnerships with other entities, discontinuing activities
or decreasing the General Fund tax subsidy for the activity.
TMporga Organization Structural Changes — One -tune changes made to reflect the current
economic conditions such as using fund balance, sun setting/temporary increases in fees, and
other one-time tools. Negative: not sustainable over time, may impact bond rating if fund
balance is used, delays the inevitable. Is the time to use reserves?
Longer-term Organizational Structure Changes — Aligns needs, mission and resources. Makes
difficult decisions early and implements them at the same time. Negatives: Shock to
organization. Costs of layoffs are up front for unemployment.
Planned Future Structure Chan&e -- Identify potential staffing vacancies 3-5 years out and
slowly move the organization to restructure as vacancies occur. This would avoid large-scale
Page 4
layoffs. Negatives: Can't count on proper resources available in right areas, delays the
inevitable and may not increase organizational efficiency.
More Typical/Common Emergency egting — continue to prioritize budget as information is
available. Begin cuts with ancillary items such as conferences, schools, professional services.
Use vacancy rate, contingency fund and fund balance as needed. Negatives: Across-the-board
cuts don't result in longterm savings, they may not address city needs/priorities and are often
detrimental to morale.
Lastly, the last three attachments are reference information you may find helpful. Attachment #6 is the
ICMA white paper Navigating Fiscal Crisis: Tested strategies for local leaders. Attachment #7 are
the budget instructions provided to directors and Attachment #S is the memo distributed to council
before your goals discussion in January, which has a historical matrix of levy and budget increase from
2002 to present.
3. BUDGET IMPACT:
NIA
4. ATTACHMENTS:
1) Levy Limit Projection Calculation
2) Property Tax Tolerance — Maximum Levy
3) Property Tax Tolerance — Zero Increase
4) Central Equipment Fund Memo
5) Facilities Management Fund Memo
6) ICMA White Paper Navigating the Fiscal Crisis
7) February 10, 2009, Memo — Budget Priority Discussion
S) January 22, 2009, Memo — Council Goals Discussion Background
Page 5
Levy
General Fund
PERA
Police
Market Value Aid
Street Reconstruction
Recreation Fund
Capital Improvement Fund
GO 20036 Street Recon Bonds
GO 2003C Street Recon Bonds
GO 2004A Public Safety
GO 2007A Open Space
Total City Tax Capacity Levy
City Market Value levies
Activity Center Bonds
200313 Open Space Refunding
Total City Market Value Levy
Total City Levy
HRA Levy
TOTAL LEVY
101,012
453,737
510,000
2,458,092
678,497
358,216
178,355
424,531
596,354
28,081,213
432,016
267.257
699,273 0.
28,780,486 6.
551,277
331,763 6.
2010 LEVY
C,01 I IMN k I Imi I IhAN R I I rr)I i im Ki r. rrll I imm n
2009 in Concept 2009 in Concept 2009 Amended 2009 Amended 2010 Projected 2010 Projected
w/no levy increase or
open space
2010 Projected
w/no increase -but
new levywithnewlevyfinalpwWicsafetycalcw/2.2 levv limit
i2"1,445,1:Sd5 22,445,230 ZW,69U,4t5'J.UU 1z,Ut)u,138.00
265,000 267,257
101,012.00 101,012.00
693,000 0.07% 699,273 0.98%
453,737.00 9,231,614.00
450,000 510,000 510,000.00 510,000.00
2,458,092 2,458,092 2,458,092.00 2,456,092.00
678,497 678,497 3678,497.00 678,497.00
358,216 358,216 358,216.00 358,216.00
184,000 178,355 178,355.63 178.355.63
425,000 424,531 424,531.43 424,531.43
594,000 596,354 596,354.06 596,354.06
0 255,486 255,486.00 255,486.00
27,593,043 5.04% 27,904,769 6.23% 27,904,770.12 6.23% 27,648,296.12
428,000 432,016 432,016.00 432,016.00
265,000 267,257 267,256.50 267,256.50
693,000 0.07% 699,273 0.98% 699,272.50 0.98% 699,272.50
28,286,043 4.92%q 28,604,042 6.10% 28,604,042.62 6.10% 28,347,568.62
551,277 551,277 551,277.00 551,277.00
28,837,320 4.92% 29,155,319 6.08%n 29,155,319.62 6.08% 28,898,845.62
13,244,314.00 13,136, 518.68 12,686,518-68
111, 525.00 11 1, 525.00 111, 525.00
9,354,167.00 9,354,167.00 9,354,167.00
6510,000.00 will lose 510,000.00 510,000.00
2,531,834.76 2,458,092.00 2,458,092.00
698,851.91 678,497.00 678,497.00
368,962.48 358,216.00 358,216.00
179,038.13 179,G38.13 179, 038.13
250,000.00 open space 0.00,044:00—_ ].
596,957.81 596,957.81 596,957.81
255,223.50 255,223.50 255,223.50
5.25% $28,100,874.59 1.64% 27,638,235.12 27,638,235.12
428,007.00 428,007.00 428,007.00
281,326.50 281,326.50 281,326.50
0.98% $709,333.50 1.44% 709,333.50 709,333.50
5.14% $28,810,208.09 1.63% 28,347,568.62 28,347,568.62
551,277.00 551,277.00 551,277.00
5,14% $29,361,485.09 1.60% 28,898,845.62 28,898,845.62
CADocuments and SethngslcportnerSLocal Settings%Temporary Internet Files%Contenl.OutlookUXRETCJZ2t2010 Prc ected tax levy #i3.xls
End of Levy
2013
2009
2024
2023
2013
2010
Page 6
Tax Impact on Average Home & Commercial Business with 2.2% increase in Levy
200912010 Budget
Residential Property
Estimated Estimated Percentage
2009 2010 Increase Increase
Average Home Sale Value
Tax Capacity at 1 %
Combined City Tax & Market Value Tax Rate
Total City & Market Value Property Tax
HRA Tax Capacity Rate
NRA Property Tax
Total Property Tax
262,000 250,000
2,620 2,500
24.351% 26.199%
637.99 $654.98 $16.99
0.483% 0.509%v
12.67 $12.73 $0.06
650.65 $667.71 $17.06
Market Value Credit 35.86) 38.69 2.84)
Total Net Property Tax 614.79 629.02 14.23 2.32%
Estimated Estimated Percentage
2009 2010 Increase Increase
Average Home Sale Value 384,400 366,800
Tax Capacity at 1% 3,844 3,668
Combined City Tax & Market Value Tax Rate 24.351% 26.199%
Total City & Market Value Property Tax 936.04 960.99 24.95
HRA Tax Capacity Rate 0.483% 0.509%
HRA Property Tax 18.58 18.68 0.09
Total Property Tax 954.62 979.67 25.05
Market Value Credit 6.94) 11.10) 4.16)
Total Net Property Tax 947.68 968.57 20.90 2.21%
Estimated Estimated Percentage
2009 2010 Increase Increase
Average Home Sale Value 524,000 500,000
Tax Capacity at 1 % 5,240 5,000
Combined City Tax & Market Value Tax Rate 24.351% 26.199%
Total City & Market Value Property Tax 1,275.97 1,309.96 33.99
HRA Tax Capacity Rate 0.483% 0.509%
HRA Property Tax 25.33 25.46 0.12
Total Property Tax 1,301.30 1,335.42 34.12
Market Value Credit 0.00 0.00 0.00
Total Net Property Tax 1,301.30 1,335.42 34.13 2.62%
Page 7
Cornmercial Property
Estimated Estimated Percentage
2009 2010 Increase Increase
Combined City & Market Value Tax Rate 24.351% 26.199%
4n a $1,000,000 Property $1,051,000 $1,000,000
Tax Capacity 20,270 19,250
less: Fiscal Disparity contribution rate 0.371552 0.371552
Net Tax Capacity 12,739 12,098
Total Property Tax 3,102 $3,169 $67.55 2.18%
Page 8
Tax Impact on Average Home & Commercial Business with no increase in Levy
20_QjkWj Budget
Residential Property
Estimated Estimated Percentage
2009 2010 Increase Increase
Average Home Sale Value
Tax Capacity at 1%
Combined City Tax & Market Value Tax Rate
Total City & Market Value Property Tax
HRA Tax Capacity Rate
HRA Property Tax
Total Property Tax
262,000 250,000
2,620 2,500
24.351% 25.739%
637.99 $643.48 $5.50
0.483% 0.509%
12.67 $12.73 $0.07
650.65 $656.21 $5.56
Market Value Credit ($35.86) ($38.69) ($2.84)
Total Net Property Tax $614.79 $617.52 $2.73 0.44%
Estimated Estimated Percentage
2009 2010 Increase Increase
Average Home Sale Value 384,400 366,800
Tax Capacity at 1% 3,844 3,668
Combined City Tax & Market Value Tax Rate 24.351% 25.739%
Total City & Market Value Property Tax 936.04 944.12 8.08
HRA Tax Capacity Rate 0.483% 0.509%
HRA Property Tax 18.58 18.68 0.10
Total Property Tax 8.18954.62 962.80
Market Value Credit 6.94) 11.10) 4.16)
0.00
Total Net Property Tax 947.68 951.70 4.02 0.42%
Estimated Estimated Percentage
2009 2010 Increase Increase
Average Home Sale Value 524,000 500,000
Tax Capacity at 1% 5,240 5,000
Combined City Tax & Market Value Tax Rate 24.351% 25.739%
Total City & Market Value Property Tax 1,275.97 1,286.96 10.99
HRA Tax Capacity Rate 0.483% 0.509%
HRA Property Tax 25.33 25.46 0.13
Total Property Tax 1,301.30 1,312.43 11.12
Market Value Credit 0.00 0.00 0.00
Total Net Property Tax 1,301.30 1,312.43 11.12 0.85%
Page 9
Commercial Property
Combined City & Market Value Tax Rate
On a $1,000,000 Property
Tax Capacity
less: Fiscal Disparity contribution rate
Net Tax Capacity
Total Property Tax
Estimated Estimated Percentage
2009 2010 Increase Increase
24.351% 25.739%
1,051,000 $1,000,000
20,270 19,250
0.371552 0.371552
12,739 12,098
3,102 $3,114 $11.90 0.38%
Page 10
rp)Crty of
Plymouth
Adding Quality 1v Lite
To:
REGULAR
COUNCIL MEETING prepared by:
April 28, 2009 Reviewed by:
Item:
Agenda
Number:
Laurie Ahrens, City Manager
Doran Cote, P.E., Director of Public Works
Doran Cote, P.E.. Director of Public Works
2010 Budget — Central Equipment Fund
1. ACTION REQUESTED:
Provide staff direction for 2010 budget preparation.
2. BACKGROUND:
In late 2007, staff began evaluating the Central Equipment Fund and developing a
Fleet Operation, Maintenance and Replacement Policy. Early in 2008, the analysis
was complete and a copy of the Policy was provided to the City Council. Some of the
significant findings of the analysis are as follows:
It appears that the most recent similar analysis was conducted in 2001.
The fleet and equipment allocations to other departments are not appropriately
distributed to the utilizing departments (e.g. the Nater Fund was being
charged an allocation for a bucket truck).
Budgeted allocations are not adequate to cover the cost of providing fleet and
equipment maintenance services.
Budgeted allocations are not adequate to cover the cost of replacing fleet and
equipment.
Replacement costs were underestimated, particularly for fire apparatus.
Maintenance costs charge through work orders are not accounting for the true
cost of the service (e.g. overhead is too low).
The analysis of the Central Equipment Fund concluded that maintaining the
current allocations will result in a negative impact on the fund balance. Fund
balances would fall below the level established by the Policy.
3. BUDGET IMPACT:
After all of the City's fleet and equipment is properly allocated and adjustments are
made to increase the allocations to fully account for costs, the total allocations require
a $200,000 increase. A number of allocations require significant increases, most
notably Park Maintenance (5270,000) and Street Maintenance (5230,000), while
Page 11
others would see decreases if the adjustment is made. In total, the General Fund
impact of the reallocations is $420,000. One way to reduce that impact would be to
utilize the Central Equipment Fund reserves for capital purchases to offset the
increase in General Fund allocations.
4. ATTACHMENT$;
Spreadsheets.
Page 12
Central Equipment Fund
Fleet and Equipment
Cost Allocation Summary
Fund Department Fund Allocation Pool Car
Allocation
Subtotal Fund
Allocation
Split Fund
Allocation
Total Allocation 2009 Budget
1120 Administration 5,222.54 7,704.48 12,927.03 0.00 12,927.03 14,919.00
1180 Assessing 3,284.62 5,503.20 8,787.82 0.00 8,787.82 16,588.00
1210 Community Development 0.00 1,100.64 1,100.64 0.00 1,100.64 199.00
1220 Planning 0.00 733.76 733.76 0.00 733.76 1,046.00
1231 Protective Inspetions 45,876.24 0.00 45,876.24 0.00 45,876.24 55,382.00
1240 HRA 1,265.00 0.00 1,265.00 0.00 1,265.00 8,895.00
1310 Park and Ree Admin 5,440.77 7,337.60 12,778.37 0.00 12,778.37 14,144.00
1321 Park Maint 484,398.82 0.00 484,398.82 1,867.45 486,266.26 217,529.00
1330 Forestry 13,372.20 0.00 13,372.20 8,914.01 22,286.22 58,828.00
1342 Ice Center 3,415.50 0.00 3,415.50 0.00 3,415.50 2,040,00
1343 Plymouth Creek Center 4,034.03 0.00 4,034.03 0.00 4,034.03 0.00
1450 Facilities Mgmt 7,806.03 0.00 7,806.03 0.00 7,806.03 7,664.00
1510 Police Admin 21,859.98 0.00 21,859.98 0.00 21,859.98 43,949.00
1511 Patrol 290,397.04 0.00 290,397.04 0.00 290,397.04 205,346.00
1513 Support Services 42,303.02 0.00 42,303.02 0.00 42,303.02 173,364.00
1530 Fire Operations 348,194.37 0.00 348,194.37 0.00 348,194.37 307,547.00
1531 Radiological 32,424.32 0.00 32,424.32 0.00 32,424.32 24,627.00
1610 Street Maint 473,839.85 0.00 473,839.85 164,098.78 637,938.63 405,571.00
1630 Engineering 11,635.40 0.00 11,635.40 0.00 11,635.40 8,581.00
1710 Design Eng 3,795.32 14,308.33 18,103.65 0.00 18,103.65 9,875.00
1720 Water 100,627.04 0.00 100,627.04 37,956.30 138,583.34 221,610.00
1730 Sewer 66,087.68 0.00 66,087.68 57,049.15 123,136.83 237,047.00
1740 Solid Waste 0.00 0.00 0.00 6,869.54 6,869.54 0,00
1750 Water Resources 133,528.15 0.00 133,528.15 5,953.65 139,481.80 206,241.00
1760 Central Equip 15,456.65 0.00 15,456.65 0.00 15,456.65 0.00
Other Funds I I 1 1 14,731.00
Totals 2,114,264.57 1$36,688.02 2,150,952.59 282,708.88 2,433,661.47 2,255,723.00
Notes
1. Includes $11,145 from 1120, $1,197 from 1130 and $2,617 from 1170.
2. Includes $2,190 from 1240, $4,515 from 1251 and $2,190 from 1252
3. Includes $3,294 from 1321 and $10,850 from 1341 from 1440
1 4. Includes $8,601 from 1770, $4.410 from 1344, 1,720 from 1440
v
0Z
General Fund Impact $420,091.78
Central Equipment Fund
10 -Year Fund Analysis
Budget -based Analysis
Year
Revenue
Rent
Expenditures
Operations
Capital
Improvements Total
Interest
Income Balance
9,400,000
2009 2.255.723 1,335,598 1,008,300 2,343,898 186,237 9,498,062
2010 2,323.395 1,375,666 1,542,600 2,918,266 178,064 9,081,254
2011 2,393,097 1,416,936 1,521.000 2,937,936 170.728 8,707,143
2012 2,464,889 1,459,444 1,072,500 2,531,944 172,802 8,812,894
2013 2,538,836 1,503,227 2,216,700 3,719,927 152,636 7,784,435
2014. 2,615,001 1,548,324 1,865,707 3,414,032 139,708 7,125,113
2015 2,693,451 1,594,774 1,841,753 3,436,527 127,641 6,509,677
2016 2,774,255 1,642,617 1,122,445 2,765,062 130,377 6,649,247
2017 2,857,482 1,691,896 1,850,979 3,542,874 119,277 6,083,132
20181 2,943,2071 1,742,652 719,369 2,462,0221 131,2861 6,695,604
3% Inflationary Growth
Allocation -Based Analysis
Year
Revenue
Rent
Expenditures
Operations
Capital
Improvements Total
Interest
Income Balance
9,400,000
2009 2,433,661 1,335.598 1,008,300 2,343,898 189,795 9,679,559
2010 2,506,671 1,375,666 1,542,600 2,918,266 185,359 9,453,323
2011 2,581,871 1,416,936 1,521,000 2,937,936 181,945 9,279,204
2012 2.659,328 1,459,444 1,072,500 2,531,944 188,132 9,594,719
2013 2,739,107 1,503,227 2,216,700 3,719,927 172,278 8,786,178
2014 2,821,281 1,548,324 1,865,707 3,414,032 163,869 8,357,295
2015 2,905.919 1,594,774 1,841,753 3,436,527 156,534 7,983,221
2016 2,993.097 1,642,617 1,122,445 2,765,062 164,225 8,375,480
2017 3,082,890 1„691,896 1,850,979 3,542,874 158,310 8.073,805
2018 3,175,3761 1,742,652 719,369 2,462,0221 175.7431 8,962,903
3% Inflationary Growth
Page 14
Central Equipment Fund
10 -Year Fund Analysis
Reserves to Fund Capital Costs
Budget -based Analysis
Year
Revenue
Rent
Expenditures
Capital
Operations Improvement Total
Interest
Income Balance
Capital
Improvements Total
Interest
Income Balance
9,400,000
2009 2,255,723 1,335,598 1,008,300 2,343,898 186,237 9,498,062
2010 2,323,395 1,375,666 1,542,600 2,918,266 178,064 9,081,254
2011 2,393,097 1,416,936 1,521,000 2,937,936 170,728 8,707,143
2012 2,464,889 1,459,444 1,072,500 2,531,944 172,802 8,812,890
2013 2,538,836 1,503,227 2,216,700 3,719,927 152,636 7,784,435
2014 2,615,001 1,548,324 1,865,707 3,414,032 139,708 7,125,113
2015 2.693,4511 1,594,774 1,841,753 3,436,527 127,6411 6,509,677
2016 2,774,255 1,642,6171 1,122,4451 2,765,062 130,3771 6,649,247
2017 2,857,482 1,691,896 1,850,979 3,542,874 119,277 6.083,132
2018 2,943,207 1,742,6521 719,3691 2,462,022 131,2861 6,695,604
3% Inflationary Growth
Allocation -based Analysis
Year
Revenue
Rent Transfer In Total
Expenditures
Operations
Capital
Improvements Total
Interest
Income Balance
9,400,000
2009 2233,661 200,000 2,433.661 1,335,598 1,008,300 2,343,898 185,795 9,275,559
2010 2,300,671 200,000 2,500,671 1,375,666 1,542,600 2,918,266 173,159 8,631,123
2011 2,369,691 200,0100 2,569,691 1,416,936 1,521,000 2,937,936 161,258 8,024,137
2012 2,440,782 200,000 2,640,782 1,459,444 1,072,500 2,531,944 158,659 7,891,634
2013 2,514,006 200,000 2,714,006 1,503,227 2,216,700 3,719,927 133,714 6,619,427
2014 2,589,426 200,000 2,789,426 1,548,324 1,865,707 3,414,032 115,896 5,710,718
2015 2,667,109 200,000 2,867,109 1,594,774 1,841,7531 3,436,527 98,826 4,840,125
2016 2,747,1221 200,000 2,947J221 1,642,617 1,122,445 2,765,062 96,444 4,718,628
2017 2,829.5361 200,000 3,029.5361 1,691,896 1,850,979 3,542,874 80,106 3,885,395
20181 2.914,4221 200,000 3,114,422 1,742,652 719,369 2,462,0221 86,756 4,224,551
3% Inflationary Growth
Page 15
rp) City of
Plymouth
zmw
Adding QUONCy Ze LifP
To:
REGULAR
COUNCIL MEETING Prepared by:
Reviewed by:
April 2$, 20119
Item:
Agenda
Number:
Laurie Ahrens, City Manager
Doran Cote, P.E., Director of Public Works
Doran Cote, P.E., Director of Public Works
2010 Budget — Facilities Management Fund
1. ACTION REQUESTED:
Provide staff direction for 2010 budget preparation.
2. BACKGROUND:
In 2008, staff began evaluating the Facilities Management Fund and developing a
Facilities and Related Operating Equipment Operation, Maintenance and
Replacement Policy Manual. Early in 2009, the analysis was complete and a copy of
the Policy will be provided to the City Council. Some of the sigzhificant findings of
the analysis are as follows:
It appears as if the most recent similar analysis was conducted in 1999. That
analysis did not include capital replacement costs in detennininb allocations.
The 1999 analysis assumed that Facilities Management would fund 1001/0 of
the replacement of all of the Fire Stations and only portions of other buildings.
Significant changes gowth to the City's facilities has occurred since 1999.
The facilities allocations to other departments are not appropriately distributed
to the utilizing departments (e.g. the Water and Sewer Fund were being
allocated 20° 0 of City Hall maintenance costs).
Budgeted allocations are not adequate to cover the cast of providing facilities
maintenance services.
Bud-eted allocations are not adequate to cover the cost of replacing facilities
and related operating equipment.
Replacement costs were underestimated.
An analvsis of the Facilities Management Fund concluded that maintaininUT
the current allocations will result in a negative impact on the fund balance.
Fund balances would fall below the level established by the Policy.
The neNA analysis contemplates Facilities Management funding only 250,0 of
the costs to replace all buildings.
Page 16
3. BUDGET IMPACT:
After all of the City's facilities and operating equipment are properly allocated and
adjustments are made to increase the allocations to fully account for costs. the total
allocations require a $6=40,000 increase. A number of allocations require siggnificant
increases, most notably Fire (S230,000) and Police (S1 30,000). while others will see
decreases. In total, the General Fund impact of the reallocations is SS 10,000. One
way to reduce that impact would be to utilize the Facilities Management Fund
reserves to offset the increase in General Fund allocations for capital purchases.
4. ATTACHMENTS:
Spreadsheets.
Page 17
Table 20
Allocation Comparison
2009 Budget to 2010 Allocation
5314.888 General Fund Impact
Pruerainifund
MM
1110 Ciry Council
1120 City Manager
1130 Conununicamms
1940 Elections
It50 Human Resources
1210 CD -Administration & Support
1230 Planning
1231 Proteelive InspecliostS
1232
11_33
1390 P&R Administration
13'1 Park Maintenance
1322 Trail Maintenance
1323 Athletic Field 4laintenance
13'.4 Ice Rink Maintenance
1330 Foreslry
1310 Finance
1420 Assessing
1510 Police - Administration
1511 Patrol
1512 Conmmnir% Service Officers
1513 Support
1514 investigations
1515 Traffic Enforcement
1516 Cade[ Program
1510 Einer_=cnc-y Management
1530 Fire
1610 Street Maintenance
1611 Street Cleaning
161' Sttox^1ceContml
1613 Drainage Maintenance
1620 Street & Traffic Lights
1630 Engineering,
1810 Volunteer Coordinator
201 Recreation
203 Transit
20 HR -A CDBG
5U IMA Section
251 HRA - General Fund
401 Capital ProjecLs Fund
4'_1 Uti1[t% Trunk
421 Unlinanecd ProlccL
501 Water Fund
50'_ Sewer Fund
503 Sol id'haslc Management
504 lee Arena
iOi Water Resources
601 Central services
60' Central Equipment
603 Risk Manapient
604 Design Engineenng
605 Employee B,:netils
606 Information Techuolo._n
506 Ac;irvc Center
507 Fietd House
2009 Budgeted .Allocations
7UU9 2010
Budget Allocation Difference
39.933 39.73
35.891 5S.607 716
6.560 11_.550 5,490
2.273 3.53' 1.259
20.378 16.430 3.948)
12.029 15.745 3.716
36.-126 40.610 4.984
31.895 53.670 21-785
57.865 69.499 II,ti34
3.435 64.640 41203
2A87 7.071 4.584
13.304 53902 39.448.
24.856 31.909 7,053
139.652 73.197 76.455)
173.839 183.051 9.'02
84.346 84.396)
96,326 96.3-76
11,61' 4.227 7,335)
126.757 390.571 163.2314
Ii:08i 47507 32.322_
5?64 5.264
28.800 473.901 20.101
3539 3.043 504
15.203 16._'85 1.081
3.946 6.435 489
3.640 4.104 4.1
4.01; 4.i6-, 5411
10.535 12.284 1.744
7.777 7.777
78.614 C-.561 9.247
3_.47- 7.372 113.5051
6.046 6.435 389
3.493 6.627 3.134
12,130 t4.171 041
i28, 2.2S2
11.563 76.380 I4317
4.208 3,013 1.165)
1"43 1.058 9.815
46-40$ 61.384 15.141,
t.ln 'I(+ I. l8,>'! 413.308
34. SII?
1.16r1
1.141.Iss
Increase
or Decrease
63.2906
yl.a'_°u
55.21%
19.38";.
30.89%
11 A".
68.22°,%
MI 1%
175.83"0
18-4.31 u'"
244 67
7 K, 37"
51 09°,0
5.'4°.a
100.00°
63.60%
129.3°0
714-93%
69.80°
14 83".r,
b3.08 d
13.46"
16.6)" i,
147.8 \""
70%
80.1767
32.640'.
37.40"0
Page 18
Central Equipment Fund
Fleet and Equipment
Cost Allocation Summary
Fund Department Fund Allocation Pool Car
Allocation
Subtotal Fund
Allocation
Split Fund
Allocation
Total Allocation 2009 Budget
1120 Administration 5,222.54 7,704.48 12,927.03 0.00 12,927.03 14,919.00
1180 Assessing 3,284.62 5,503.20 8,787.82 0.00 8,787.82 16,588.00
1210 Community Development 0.00 1,100.64 1,100.64 0.00 1,100.64 199.00
1220 Planning 0.00 733.76 733.76 0.00 733.76 1,046.00
1231 Protective Inspetions 45,876.24 0,00 45,876.24 0.00 45,876.24 55,382.00
1240 HRA 1,265.00 0.00 1,265.00 0.00 1,265.00 8,895.00
1310 Park and Rec Admin 5,440.77 7,337.60 12,778.37 0.00 12,778.37 14,144A0
1321 Park Maint 484,398.82 0.00 484,398.82 1,867.45 486,266.26 217,529.00
1330 Forestry 13,372.20 0.00 13,372.20 8,914.01 22,286.22 58,828.00
1342 Ice Center 3,415.50 0.00 3,415.50 0.00 3,415.50 2,040.00
1343 Plymouth Creek Center 4,034.03 0.00 4,034.03 0.00 4,034.03 0.00
1450 Facilities Mgmt 7,806.03 0.00 7,806.03 0.00 7,806.03 7,664.00
1510 Police Admin 21,859.98 0.00 21,859.98 0.00 21,859.98 43,949.00
1511 Patrol 290,397.04 0.00 290„397.04 0.00 290,397.04 205,346.00
1513 Support Services 42,303.02 0.00 42,303.02 0.00 42,303.02 173,364.00
1530 Fire Operations 348,194.37 0.00 348,194.37 0.00 348,194.37 307,547.00
1531 Radiological 32,424.32 0.00 32,424.32 0.00 32,424.32 24,627.00
1610 Street Maint 473,839.85 0.00 473,839.85 164,098.78 637,938.63 405,571.00
1630 Engineering 11,635.40 0.00 11,635.40 0.00 11,635.40 8,581.00
1710 Design Eng 3,795.32 14,308.33 18,103.65 0.00 18,103.65 9,875.00
1720 Water 100,627.04 0.00 100,627.04 37,956.30 138,583.34 221,610.00
1730 Sewer 66,087.68 0.00 66,087.68 57,049.15 123,136.83 237,047.00
1740 Solid Waste 0.00 0.00 0.00 6,869.54 6,869.54 0,00
1750 Water Resources 133,528.15 0.00 133,528.15 5,953.65 139,481.80 206,241.00
1760 Central Equip 15,456.65 0.00 15,456.65 0.00 15,456.65 0.00
Other Funds 14,731.00
Totals 2,114,264,57 36,688.02 2,1541,952.59 282,708.88 2,433,661.47 2,255,723.00
Notes
1. Includes $11,105 from 1120, $1,197 from 1130 and $2,617 from 1170
2. Includes $2,190 from 1240, $4,515 from 1251 and $2,190 from 1252
3. Includes $3,294 from 1321 and $10,850 from 1341 from 1440
W
4. Includes $8,601 from 1770, $4,410 from 1344, 1,720 from 1440
f,L1
LC
D
Difference
1,991.97
7,800.18
901.64
312.24
9,505.76
7,630.00
1,365.63
268,737.26
36,541.78
1,375.50
4,034.03
142.03
22,089.02
85,051.04
131,060.98
40,647.37
7,797.32
232,367.63
3,054.40
8,228.65
83,026.66
113,910.17
6,869.54
66,759.20
15,456.65
14,731.00
177,938.47
General Fund Impact $420,091.78
Central Equipment Fund
10 -Year Fund Analysis
Budget -based Analysis
Year
Revenue
Rent
Expenditures
Operations
Capital
Improvements Total
Interest
Income Balance
9A00,000
2009 2,255,723 1,335,598 1,008,300 2,343,898 186,237 9,498,062
2010 2,323,395 1,375,666 1,542,600 2,918.266 178,064 9.081,254
2011 2,393.097 1,416,936 1,521,000 2,937,936 170,728 8.707,143
2012 2,464,889 1,459,444 1,072,500 2,531,944 172,802 8,812,890
2013 2,538,836 1,503,227 22216:700 3.719,927 152,636 7,784,435
2014 2,615,001 1,548,324 1,865,707 3,414,032 139,708 7,125,113
2015 2,693,451 1,594,774 1,841,753 3,436,527 127,641 6,509,677
2016 2,774,255 1,642,617 1,122,445 2,765,062 130,377 6,649,247
2017 2,857,482 1,691,896 1,850,979 3,542,874 119,277 6,083.132
20181 2,943,2071 1,742,6521 719,3691 2,462,0221 131,286 6,695.604
3% Inflationary Growth
Allocation -based Analysis
Year
Revenue
Rent
Expenditures
Operations
Capital
Improvements Total
Interest
Income Balance
9,400,000
2009 2,433,661 1,335,598 1,008,300 2,343,898 189,795 9,679,559
2010 2,506,671 1,375,666 1,542,600 2,918,266 185,359 9,453,323
2011 2,581,871 1,416,936 1,521,000 2,937,936 181,945 9,279,204
2012 2,659,328 1,459,444 1,072,500 2,531,944 188,132 9,594,719
2013 2,739,107 1,503,227 2.216,700 3,719,927 172,278 8,786,178
2014 2,821,281 1,548,324 1,865,707 3,414,032 163,8691 8,357,295
2015 2,905,919 1,594,774 1,841,753 3,436,527 156.534 7,983.221
2016 2,993,097 1.642,617 1,122.445 2.765,062 164,225 8,375,480
2017 3,082,890 1,691,896 1,850,979 3,542,874 158,310 8,073,805
20181 3,175,376 1,742,6521 719,369 2,462,022 1757743 8,962.903
3% Inflationary Growth
Page 20
Central Equipment Fund
10 -Year Fund Analysis
Reserves to Fund Capital Costs
Budget -based Analysis
Year
Revenue
Rent
Expenditures
Gapital
Operations Improvement Total
Interest
Income Balance
Total
Interest
Income Balance
9,400,000
20091 2,255,723 1,335,598 1,008,300 2,343,898 186,237 9,498,062
2010 2,323,395 1,375,666 1,542,600 2,918,266 178,064 9,081,254
2011 2,393,097 1,416,936 1:521,000 2,937,936 170,728 8,707,143
2012 2,464,889 1,459,444 1,072,500 2,531,944 172,802 8,812,890
2013 2,538,836 1,503,227 2,216,700 3,719,927 152,636 7,784,435
2014 2,615,001 1,548,324 1,865,707 3,414,032 139,708 7,125,113
2015 2,693,451 1,594,774 1,841,753 3,436,527 127,6411 6,509,677
20161 2,774,255 51,642,617 1,122,4451 2,765,062 130,377 6,649,247
20171 2,857,482 1,691,896 1,850,9791 3,542,874 119,277 6,083,132
20181 2,943,207 1,742,652 719,3691 2,462,022 131,286 6.695,604
3% Inflationary Growth
Allocation -based Analysis
Year
Revenue
Hent Transfer In Total
Expenditures
Operations
Capital
Improvements Total
Interest
Income Balance
9,400,000
20091 2,233,661 200,000 2,433,661 1,335,598 1,008,300 2,343,898 185,795 9,275,559
2010 2,300,671 200,000 2,500,671 1,375,666 1,542,600 2,918,266 173,159 8,631,123
2011 2,369,691 200,000 2,569,691 1,416,936 1,521,000 2,937,936 161,258 8,024,137
2012 2,440,782 200,000 2,640,782 1,459,444 1,072,500 2,531,944 158,659i 7,891,634
2013 2,514,006 200,000 2,714,006 1,503,227 2,216,700 3,719,927 133,714 6,619,427
2014 2,589,426 200,000 2,789,426 1,548,324 1,865,707, 3,414,032 115,896 5,710,718
20151 2,667,109 200,000 2,867,109 1,594,774 1,841,753 3,436,527 98,826 4,840,125
2016 2,747,1221 200,000 2,947,122 1,642,617 1,122,445 2765,062 96.444 4,718,628
2017 S2,829,5361 200,000 3,029,536 1.691,896 1,850,979 3,542,874 80,106 3,885,395
2018 2,914,4221 200,000 3,114,422 1,742,652 719,369 2,462,022 86,756 4,224,551
3% Inflationary Growth
Page 21
TO:
FROM.-
DATE:
ROM:
DATE:
SUBJECT
CITY OF PLYMOUTH
Laurie Ahrens, City Manager
Directors
Calvin Partner, Adm Svcs Dir
February 10, 2009
Budget Priority Discussion
Thank you or taking the time to review your departments, identify activities and functions and
to painfully attach a cost and impact of all of the work we do.
For those who have forwarded electronic version, they are available on the public drive
P:BUDGET/2010 Budget/Priority Worksheets. If you have not sent your worksheets, please
save in the referenced file.
At $:30 a.m. on Thursday, we will review and begin to prioritize our activities and functions.
Hopefully, everyone has had an opportunity to review the documents and articles provided a
few months ago.
Although the news of late has been rather depressing, The City of Plymouth, thanks in part to
your leadership and stewardship, is in a good position to weather the storm as we move into
the next biennium. With that, we need to be aware of local and national trends, especially
public opinion/perception.
As a reminder, the goals we discussed for this exercise is to identify proactive solutions and
opportunities to:
1) Maintain core services
2) Maintain services at a high level
3) Maintain activities that make Plymouth special
4) Improve efficiency
5) Implement structural changes for long-term viability
Before we meet on Thursday, please spend a few minutes reviewing the worksheets from
each department. I will bring copies and worksheets to the meeting. Secondly, think of the
core services municipal government is expected to provide and how they relate to the council's
adopted goals.
On Thursday, we will try to identify our core services as a team. We'll categorize
functions/activities by Mandatory/Discretionary/Political and prioritize them. If we have enough
time, we will then look for functions/activities that can be redirected, absorbed, transitioned to
other agencies or eliminated.
Page 22
TO:
FROM: rip DATE:
SUBJECT
CITY OF PLYMOUTH
Laurie Ahrens, City Manager
Calvin Portner, Administrative Services Director
January 22, 2009
Council Goals Discussion Background Info
The following table lists the General Fund Levy and General Fund Budget totals and percentage increase over
the past 8 years.
Overall
General Levy Budget Budget
Year Fund Levy Increase Total Increase
2009 22,188,764 5.14 27,932,495 2.21
2008 21,252,059 6.17 27,328,347 6.68
2007 19,894,955 8.94 25,616,296 7.41
2006 18,211,578 9.14 23,849,211 6.03
2005 17,035,807 10.13 22,493,654 4.83
2004 16,189,926 5.91 21,458,236 5.65
2003 15,003,735 4.09 20,311,398 2.2
2002 14,386,101 26.6 19,874,125 6.5
The average budget increase over this period was 4.61%. The higher than normal levy increases in 2002 and
2005 reflect legislative changes including loss of governmental aids which were absorbed by the levy.
The next biennium will present new challenges including:
1) Levy limits — the State mandate of 3.9%, changes to the implicit price deflator for 2010 and
through 2011. 2010 is expected to be about 2.2%.
2) Valuation decreases — the assessor's early estimate is an average value decrease of 5.0%.
3) No increases in non -tax revenue — the slowing economy is expected to result in stagnant or
declining permit and other revenue.
4) Structural imbalances — review of internal service and other hinds show- an historic
disproportional share to funds other than the general fund.
5) Taxation tolerance — economic concerns have increased resident resistance for tax increase
and assessments.
6) Inflation, mandates — persomiel costs, including contractual obligations, healthcare/benefit
costs, energy costs and state and federal mandates create additional cost burdens.
7) Loss of Market Value Homestead Credit and other aids — the governor has already
unallotted aids for the current state fiscal year and has indicated there may be more to come.
For the new biennium, staff is targeting a zero percent (0%) budget increase for 2010 as a starting point for
council consideration. With the assessor's estimate on total value decline at approximately 5%, and a general
fund budget of $27,932,495, to generate the same amount of tax revenue the tax impact on an average value
home would increase by approximately $5.84. If the maxiinum levy (3.9%) were adopted the impact on the
Page 23
averaged value home would be $43.56. The budget would absorb increases allowed as special levies outside
of the levy limit (i.e. open space and street reconstruction bonds), projected decreases in permit and other non -
tax revenue and offset corrections to other budgeted funds. Further, the assessor's estimate is very
preliminary and subject to adjustments from the county and the Board of Equalization.
The average value home in 2009 was $365,100, which is expected to decrease to $350,000 in 2010. The
combined city tax and market value tax rate in 2009 was 24.35%, which is estimated to increase to 26.74% in
2010.
We have just submitted our valuation to Hennepin County for taxes payable 2010 and total residential
valuation has decreased $34 trillion and another $I4.7 million will be taken off the books due to military
veteran exclusions, which was also excluded in 2009.
Page 24
NAVIGATING THE
FISCAt CRISIS:
TESTED STRATEGIES FOR LOCAL LEADERS
INTRODUCTION FOR ELECTED OFFICIALS
A White Paper prepared for the International City/County Management Association by the Alliance for Innovation
Navigating the Fiscal Crisis: Tested Strategies for Local Leaders
An Introduction for Elected Officials
As the fiscal crisis around the country threatens more and more local
governments, officials are faced with increasing challenges and a need for
immediate action. The vision and the leadership of elected officials are keys to
sustaining local governments through this crisis.
The ways that local governments responded to past economic downturns offer
guidance on how to survive and even become stronger during times of fiscal
stress. To determine the lessons of past experience, ICMA (the International
City/County Management Association) commissioned a white paper prepared by
researchers from the Academic Network of the Alliance for Innovation.
This executive summary for elected officials:
Describes the fiscal dimensions of the current economic crisis.
Identifies what worked in previous fiscal cutback efforts.
Explains why innovation is critical and how positive actions can be taken.
Describes how local government actions can contribute to the economic
recovery.
Fiscal Dimensions of the Economic Crisis
Although there is variation among the states, in general such economic drivers
as the automobile manufacturers, the financial services industries, and the new
housing construction industries have experienced slowdowns that result in higher
unemployment, reduced sales tax revenues, and reduced revenues from building
permit and related fees.
The ripple effect from these slowdowns touches related businesses, including
suppliers, restaurants, and stores. The decrease in purchasing produces a
decrease in sales tax revenues. In some localities, small businesses have closed
because they could not sustain the loss in sales.
The tightening of credit due to the crisis in the financial markets has made it
much more costly and difficult for local governments to borrow money typically
used to finance capital projects. Unless cities and counties have an exceptional
credit rating, which is difficult with budget shortfalls, they may have trouble
borrowing through traditional methods
Because the stock market has sustained major losses and pensions are funded
in large part by stocks, the cost of local government obligations to pay pensions
could have a substantial effect on local governments. Officials should have a
Page 26
clear understanding of how their system works. The global dimensions of the
financial crisis have decreased the demand for United States' exports.
Foreclosures persist and are expected to continue. In addition to subprime
mortgages and mortgages that are now more than the value of a house,
unemployment will force additional people who live paycheck -to -paycheck into
foreclosure. Foreclosures cost local governments due to increased property
maintenance, crime, and such social issues as homelessness.
As property values drop from foreclosures and the declining housing market in
general, property tax revenues will decrease. Local governments that are
dependent on a significant percentage of revenues from the state will face
reductions in state funds as states face their own budget shortfalls.
A specific local government may encounter any combination of these conditions
that contribute to fiscal distress, and the timing may differ. It is imperative that
elected officials seek a full and frank assessment of the current conditions and
likely trends for the next two years. Local governments in some parts of the
country are already making substantial changes to adjust to negative conditions.
It is common, however, for the full impact on local government budgets to come
18 to 24 months after the start of an economic downturn.
What Worked In Previous Cutback Efforts?
In times of fiscal crisis, citizens look to elected officials for answers, and these
officials can fill an important educational role.
Work with staff members, educate the public, solicit their input, and
engage them in problem solving. Hold town meetings and provide
information to the public on the issues, the financial impact, and the
possible programmatic changes that will be required.
Although an immediate response to a major budget shortfall is to stop spending
and introduce across-the-board cuts, research shows that other approaches may
be more effective in sustaining a local government over time when faced with a
serious and prolonged downturn.
Make any cuts sensible and understandable to the public.
Refrain from deferring maintenance or moving money around for short -run
expediencies. Remember that one-time cuts help immediately but do not
save more money in subsequent years like cuts in continuing expenses
do.
Maintain revenues to support expenditure levels because these actions
have a greater positive impact in speeding economic recovery than cutting
expenditures.
Page 27
Consider the value of a service before cutting it. Across-the-board cuts do
not differentiate essential from nonessential services. The same
percentage cut may be easier to absorb in a large program than a small
one. Although it's important for local government program managers to
identify cost savings, they must consider the value of the service to the
local government's core mission and the impact of cutting it.
Make an effort to move staff members from positions that are eliminated
into vacant positions. Hiring freezes create a pool of unfilled positions, but
simply eliminating empty positions weakens organizational performance. It
is better to target elimination of less needed positions whether occupied or
not.
Reduce work hours or use furloughs with an accompanying reduction in
pay, which has less impact on morale than a straight reduction in pay.
Bring contracted services back in-house to be performed by staff
members in order to save money and to save jobs. Layoffs will affect the
local economy due to reduced spending and other financial effects that
unemployment can introduce. They may even lead to loss of homes.
Where possible, alternatives such as early retirements, reduced hours, or
redefined jobs are preferable.
What Elected Officials Can Do
Early in the process, elected officials can establish broad goals to guide program
and service review by staff. Mayor Charles Meeker of Raleigh, North Carolina, for
example, recently said in his state of the city address, "It's going to be a year of
choosing which programs to continue, not which programs to add."' Local
officials can convey the message to citizens and staff that all programs are on
the table.
It is likely that programs have constituencies that support them, but elected
officials need to help citizens understand that programs must meet the highest
needs in order to justify continuation at current levels. They can make sure that
citizens get their questions answered and understand the budget review process,
but they create confusion by promising individuals that their services will remain
the same or trying to get special treatment.
Elected officials should expect as much information as possible from staff about
options and consequences of specific cuts. Ultimately, they must weigh the long-
term interests of the community as a whole in making the final decisions about
cuts. Elected officials should backup central managers and give them the
David Bracken, "Meeker: Recession is both challenge and opportunity," Raleigh
News and Observer, January 26, 20019
http://www.newsobserver.comjnew§lstory%1382542.htm I
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authority and the support to act decisively and coherently. They should monitor
effectiveness and look for adjustments in the methods used to accomplish the
strategies.
Why Innovation Is Critical
Periods of fiscal stress and the necessary retrenchment can be times of
innovation and creativity. Innovations can be new and original to the
organization, and they can be adoptions of process improvements implemented
by other organizations. Innovation brings about change and new approaches to
problem solving.
In a cutback period, the resources are not sufficient to maintain the status quo.
The changes that are required can be reactive and negative or proactive and
positive. More than ever, local governments must have the flexibility to suspend
practices that are no longer adequate and thoughtfully consider and apply other
solutions. Providing incentives for improving performance will encourage staff
members to think creatively and become part of the solution.
Here are actions that local governments can take and elected officials can
support that promote constructive change:
Where cuts need to be made, take action quickly.
Focus on core mission, purpose, and highest priorities in order to
differentiate essential services from others.
Take a long-term view.
Foster stewardship and cost containment.
Support staff in trying new approaches and improving organizational
design and processes.
Commit to communicating with all stakeholders.
What Elected Officials Can Do
Elected officials' leadership in encouraging a long-term perspective, rather than a
short-term reactive stance, will be essential to effective management of this
crisis. The elected officials' role allows them to command attention. By inviting
citizens to discuss the core mission, purpose, and highest priorities, elected
officials have the opportunity to create partnerships with citizens.
Their role in educating and engaging all stakeholders in solving the problems
facing our communities will support their long-term vitality and stability. They can
reinforce the message that innovations are encouraged despite the risks.
How Local Governments Contribute to the Economic Recovery
Local governments are important economic agents. Because they make
substantial purchases of goods and services and have employees who buy
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products and pay rent or mortgages, local governments contribute to the
economic well being of a community.
There are several strategies that local leaders can implement to mitigate fiscal
stress or even mildly stimulate the economy. Elected officials leadership in
championing these efforts is essential.
It's important to maintain or increase local government expenditures by
continuing or increasing revenues or drawing down financial reserves.
These actions help support the local economy countering the downturn in
other areas.
Expand or accelerate capital projects, especially those with low operating
costs. These projects put money into the economy because they have a
direct relationship to business and industry.
Although tax cuts are an option, they are typically not large enough to
make a discernable impact on the economy.
Although it seems counter -intuitive, economic literature suggests that
cutting expenditures hurts local economic recovery more than maintaining
or raising current tax levels.
What Elected Officials Can Do
By educating citizens on how the actions of local governments impact the
economic cycle and the value of sensible budget decisions that sustain needed
programs and services, elected officials can help citizens understand how local
government actions support the local economy.
Summary
Elected officials have the responsibility to govern their communities wisely and
link residents to the governmental process. The current fiscal crisis that is
threatening local governments makes these tasks harder but even more
important. Citizens look to elected officials to address serious problems, not just
hunker down and wait out the storm.
Officials should focus resources on the most important programs and services
and encourage changes that will make communities stronger in the future. They
are in a unique position to engage citizens and to provide the leadership that
inspires confidence and trust.
The complete white paper Navigating the Fiscal Crisis: Tested Strategies for
Local Leaders and supporting research papers can be found at
http://www.transformgov.org.
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