HomeMy WebLinkAboutCity Council Packet 06-07-2005 SpecialAgenda
City of Plymouth
Special City Council Meeting
Tuesday, June 7, 2005 7:00 PM
City Hall Lunchroom
1. Call to Order
2. Discuss budget priorities
3. Adjourn
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DATE: June 2, 2005
TO: Mayor and City Council
FROM: Laurie Ahrens, City Manager
SUBJECT: Budget Priority Session
One of the Council's goals for 2005 is to "evaluate budget principles and city program
priorities, with emphasis on Council input, prior to the budget process." The budget
process will soon begin. Departments will submit budget requests by July 1, and during
July and August, the budget team will develop a budget proposal for the Council's
consideration in late August. The preliminary levy must be adopted by September 15.
Jim Rice, a former Plymouth resident, has volunteered his services to assist as facilitator
for this meeting. The Council can decide after this meeting whether additional meetings
are desired prior to the budget study sessions in Late August. Jim Rice is President of the
International Health Summit. He is also Vice Chairman of The Governance Institute
www.goveinanceinstitute.coDq) and the Co -Director of the Cambridge International
Health Leadership Programme (www.cambridaeihlp.org). Mr. Rice assisted the City of
Bloomington with several budget exercises a few years ago, and they were very pleased
with the result. The work that he led in Bloomington was a bit different than we are
doing here. Bloomington was responding to the loss of LGA/HACA Aid and needed to
cut significant dollars from their operating budget the subsequent year. Their process
also involved some longer-term financial planning.
We hope to get direction from the Cotmcil that would guide us if large budget cuts were
needed, as well as an understanding of any shifts in funding priorities desired by the
Council.
We are suggesting a two-hour session to accomplish three things:
1) Discuss Budget Challenges/Opportunities. Attached is a list of challenges that
staff identified. At the meeting, you will be asked to add any missing items
from the list and then narrow it down to identify the most significant
challenges. These are issues that we will be mindful of when preparing future
budgets.
2) Discuss Financial Trend Report. I have attached a copy of the most recent
Financial Trend Report. The Council asked that this be reviewed during
budget considerations. If there is any direction that you wish to make related
to financial trends, this would be welcomed. The Council also asked for some
additional information to be included in the report and this is being
incorporated in the next update.
3) Discuss Service Program Priorities. The Council will be asked to identify the
relative priority of a number of services/programs offered by the City. This is
a priority -setting exercise — not a budget cutting exercise. I stress this because
if we needed to cut 3% or so from the City's operating budget in a given year,
it would likely be best done by directing staff to suggest smaller cuts across all
programs and cutting in areas of support services, while maintaining most
visible service levels. However, if more than 5% of the budget needed to be
cut, it would be preferable to consider eliminating/reducing services, rather
than cutting across the board and having all services suffer. This priority
exercise is particularly important if the Council desires any adjustments in
priorities/funding between functions now or in the future.
Any direction that you provide regarding budget principles or priorities would be
greatly appreciated as we begin work on the 2006 Budget.
Budget Challenges/Opportunities (Next 3 to 5 Years)
1. Identify adequate funding for replacement of aging infrastructure: streets, water,
sanitary sewer, storm sewer, buildings/facilities.
2. Identify adequate funding for Risk Management Fund.
3. Implement and fund pond maintenance program.
4. Respond to future water quality mandates.
5. Provide services to an aging population with different service and revenue
expectations.
6. Continue to provide services to an expanding population.
7. Provide services to a population with shifting attitudes toward taxes and fees (pay
less — get more).
8. Respond to race, cultural, and economic changes in different parts of the City.
9. Address need to conserve water or expand infrastructure.
10. Respond to decreased state aid/state levy limits.
11. Locate and acquire the next dirt storage site (current site will last 5-10 years).
12. Reduce dependence on Utility Trunk Fund for operating expenditures (salaries,
allocations).
13. Maintain property values as properties age.
14. Identify redevelopment areas and evaluate options.
15. Update Comprehensive Plan (Northwest Plymouth).
16. Plan for the end of growth.
17. Deal with rising healthcare/benefit costs.
18. Address succession planning and labor shortages in certain fields.
19. Address transportation/mobility issues — congestion.
20. Respond to unfunded mandates.
21. Obtain funding for major capital needs: CR 47, Vicksburg, Peony Lane, Hwy 55,
northwest greenway, 4th fire station.
TABLE OF CONTENTS
Introduction...................................................................................................................................... 1
Summary.......................................................................................................................................... 2
RevenueIndicators........................................................................................................................... 3
Operating Revenues Per Capita........................................................................................................ 4
Restricted Revenues As Percent of Operating Revenues................................................................. 6
Intergovernmental Revenues As Percent of Operating Revenues .................................................... 8
Elastic Revenues As Percent of Operating Revenues..................................................................... 10
Property Tax Revenue As A Percentage of Total General Fund Revenue ..................................... 12
User Charges As Percent of Related Services................................................................................ 14
General Fund Surplus Percent of Budgeted Operating Revenues .................................................. 16
The Expenditures Indicators...................................................................:....................................... 18
ExpendituresPer Capita................................................................................................................. 19
Number of Residents Served by Each Employee........................................................................... 21
Fringe Benefits As A Percent of Salaries...................................................................................... 23
The Operating Position Indicators.................................................................................................. 25
Enterprise Operating Results Before Depreciation......................................................................... 27
Fund Balance As A Percent of Operating Revenue........................................................................ 29
Current Liabilities As A Percent Of Operating Revenues.............................................................. 31
Liquidity......................................................................................................................................... 33
The Debt Structure Indicators......................................................................................................... 35
Net Direct Long -Term Debt As A Percent of Market Valuation .................................................... 36
Debt Service As A Percent of Operating Revenue......................................................................... 38
Overlapping Debt As A Percent of Market Value.......................................................................... 40
The Condition of Capital Plant Indicators...................................................................................... 42
Maintenance Expenditures............................................................................................................. 43
Capital Outlay As A Percent of Operating Expenditures............................................................... 45
This Page Intentionally Left Blank
INTRODUCTION
The 2003 Financial Trend Report presents a series of indicators which help measure the overall financial condition of the
City and help identify trends with respect to a number of areas of the City's financial operations.
For each group of related indicators there is a narrative section which describes the overall importance of the group of
indicators and the trends likely to be shown through their evaluation.
For each indicator, a series of information is presented:
INDICATOR NUMBER AND IDENTIFICATION - indicates the number and title of the indicator used to
assess financial condition.
TREND COMMENTARY - describes the situation which would lead the City to consider further
investigation of the financial condition measured by the indicator and to monitor and take action if the trend
indicates a threat to the City's overall financial health.
DESCRIPTION - describes the indicator and how a positive or negative trend might affect the City.
EXPLANATION - explains the particular data as it relates to the City of Plymouth, specific reasons for a
positive or negative trend for the indicator, and actions taken or contemplated to be taken as a result of the
data shown.
DATA - presents a data history of the factors which make up the individual indicator. Since data was
generally gathered separately for revenues, expenditures and other general factors considered for each
indicator, specific groups of data may not necessarily correspond to one another due to the variation in
totaling data from the different groups of City funds.
NOTES - provides a more specific definition of the factors included in the data section.
GRAPHIC ILLUSTRATION AND TREND LINE - provides a graphic illustration of the information
presented in the data section for each indicator as well as projected trend line developed from the data. The
trend line has been developed through a statistical method called linear regression. It is important to
recognize the trend is based on historical data and can be significantly influenced by short-term variations
in the data. Therefore, the trend line does not mean the City will find itself in a particular situation, but
rather it means the data gives a positive or negative indication of the City's likely course, barring any
unforeseen changes.
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SUMMARY
Of the nineteen financial trend indicators, only two suggest areas that should be watched or evaluated for potential concerns.
These are:
Indicator 8 (Page 19) Expenditures Per Capita - Expenditures per capita have risen steadily since 1993. This is an
indication that costs of providing service are increasing at a rate greater than population growth
or that additional services have been provided to residents in the last few years. Areas of
expenditure that have led the increase are Community Development, Parks and Recreation,
Police, Fire, Recreation Fund, HRA- General Fund, and GO Debt Service.
To be specific, GO Debt increased from 1999 to 2001 as a result of adding debt service for the
Plymouth Creek Center. In addition, 25.5 full-time staff positions have been added to the
General Fund between 1998 and 2004. They include such positions as traffic officer, DARE
officer, patrol sergeant, patrol officer (4), traffic engineer, planning assistant, fire captain (2),
fire clerical, firefighter, building inspector (2), forestry worker, park maintenance worker,
environmental officer, street maintenance worker (4), and Plymouth Creek staff (5).
Indicator 9 (Page 21) Number of Residents Served by Each Full Time City Employee - The trend indicates that the
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City is adding employees faster than the population is increasing. Additions in personnel
include the hiring of additional employees for traffic enforcement, school liaison, police patrol,
design engineering, planning, street and sewer maintenance, information technology, HRA
programs, park maintenance, fire department, ice arena, Plymouth Creek Center and field
house. 2002 and 2003 (due to budgetary constraints) show a reversal of the long-term trend.
2004 saw the addition of 8 new positions which headed the trend back downward. This should
be watched closely as future budgets are considered.
K
REVENUE INDICATORS
Revenues determine the City's capacity to provide services. Important issues to consider are growth, diversity, reliability,
flexibility and administration. Under ideal conditions, revenues would grow at a rate equal to or greater than the combined
effects of inflation and expenditure pressures. They would be sufficiently flexible (free from restrictions) to allow necessary
adjustment to changing conditions. They would be balanced between elastic and inelastic with respect to the economic base
and inflation (some would remain relatively constant). They would be diversified by source so as not to be overly
dependent on residential, commercial, or industrial land users, or external funding sources such as Federal grants or
discretionary State Aid. User fees would be regularly reevaluated to cover the full cost of services.
Analyzing revenue will help the City Council to identify the following types of problems:
Deterioration in revenue base.
Internal procedures or legislative policies that may adversely affect revenue yields.
Over dependence on obsolete or external revenue sources.
User fees that are not covering the cost of services.
Changes in tax burden.,
Lack of cost controls and poor revenue estimating practices.
Inefficiency in the collection and administration of revenues
Changes in revenues are monitored in the Financial Trend Report by using the following indicators:
Indicator 1 Revenues Per Capita
Indicator 2 Restricted Revenues
Indicator 3 Inter -governmental Revenue
Indicator 4 Elastic Tax Revenues
Indicator 5 Property Tax Revenues
Indicator 6 User Charge Coverage
Indicator 7 Revenue Shortfalls
3
INDICATOR 1 - REVENUES PER CAPITA
DESCRIPTION:
Examining per capita revenue shows how revenues are changing relative to changes in population. As population increases,
it might be expected that the need for services would increase proportionately, and therefore, the level of per capita revenues
should remain relatively constant. If per capita revenues are decreasing, the city may be unable to maintain existing service
levels unless it were to find new revenue sources or ways to save money.
EXPLANATION:
In general, per capita revenues have shown strength since 1996. This is the result of strong development, inclusion of the
Plymouth Creek Center, and other fee and tax increases. The peak in 2002 is due to record building permit fees, higher
recreation fees, increased intergovernmental revenues in the HRA General Fund, and a higher than average increase in
property taxes for the General Fund primarily due to the loss of HACA aid in the 2001 Tax Reform Act. The drop in 2003
is due to a reduction in building permit fees, loss of intergovernmental revenues, reduction in fines and forfeitures, and
reduction in interest earnings.
TREND COABIEENTARY:
The graph indicates a warning trend when there are decreasing, or rapidly increasing, net operating revenues per capita.
Constant Dollars)
4
OPERATING REVENUES PER CAPITA
350
325
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J
O
O
300
275
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O OV000fOD
00
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YEAR
DESCRIPTION:
Examining per capita revenue shows how revenues are changing relative to changes in population. As population increases,
it might be expected that the need for services would increase proportionately, and therefore, the level of per capita revenues
should remain relatively constant. If per capita revenues are decreasing, the city may be unable to maintain existing service
levels unless it were to find new revenue sources or ways to save money.
EXPLANATION:
In general, per capita revenues have shown strength since 1996. This is the result of strong development, inclusion of the
Plymouth Creek Center, and other fee and tax increases. The peak in 2002 is due to record building permit fees, higher
recreation fees, increased intergovernmental revenues in the HRA General Fund, and a higher than average increase in
property taxes for the General Fund primarily due to the loss of HACA aid in the 2001 Tax Reform Act. The drop in 2003
is due to a reduction in building permit fees, loss of intergovernmental revenues, reduction in fines and forfeitures, and
reduction in interest earnings.
TREND COABIEENTARY:
The graph indicates a warning trend when there are decreasing, or rapidly increasing, net operating revenues per capita.
Constant Dollars)
4
DATA: TABLE 1
OPERATING REVENUES PER CAPITA
Year 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003,
Operating
Revenue 13,058,155 14,037,177 15,044,950 15,437,855 16,358,637 17,296,542 17,789,468 19,222,801 20,297,388 22,803,055 22,781,398
Inflation rate 3.00% 2.50% 2.80% 3.30% 1.70% 1.61% 2.68% 3.39% 1.55% 2.38% 1.88%
103.00% 102.50% 102.80°/ 103.30% 101.70% 101.61% 102.68% 103.39% 101.55% 102.38% 101.88%
compound 126.48% 124.73% 120.03% 116.20% 114.26% 112.45% 109.51% 105.92% 104.309% 101.88%
Revenues
Inflation Adjusted 16,516,001 17,508,590 18,059,131 17,938,773 18,690,975 19,449,465 19,481,639 20,361,073 21,171,139 23,231,752 22,781,398
Population 55,137 57,391 58,960 60,344 61,620 62,979 64,313 65,894 66,675 67,824 70,238
Actual per capita 300 305 306 297 303 309 303 309 318 343 324
NOTES:
OPERATING REVENUES are that portion of total revenues available for general city operations. These revenues include
the General Fund, the Recreation Fund, the General Obligation Debt Service Fund, and HRA- General Fund.
THE ADJUSTMENT TO 2003 DOLLARS is accomplished by revising previous years' dollars to a 2003 equivalent, by
correcting for inflation.
POPULATION figures are from the Plymouth Planning Department and are based on data from the Metropolitan Council
and the 2000 Census.
5
INDICATOR 2 - RESTRICTED REVENUES
DESCRIPTION:
A restricted revenue is one which is legally earmarked for a specific use as may be required by State law, bond covenants, or.
RESTRICTED REVENUES AS OF OPERATING REVENUES
conditions. A large proportion of restricted revenues also makes the City vulnerable to spending dictates from funding
16.0%
agencies. In addition, it may indicate a growing over dependence on external revenues and signal an inability to maintain
service levels.
EXPLANATION:
14.0%
The trend line for the ratio of restricted operating revenues to net operating revenues has increased since 1993. Restricted
revenues declined between 1993 and 1996; however, they have moved substantially higher since then. This is the result of
large increases in Recreation revenues and GO Debt. Most of the increase in GO Debt revenues are attributable to the
Plymouth Creek Center. The increase in 2003 is largely attributable to a substantial increase in intergovernmental revenue
12.0%
for the HRA -General Fund.
TREND COMMENTARY:
The graph indicates a warning trend when there are increasing amounts of restricted operating revenues as a percentage of f
operating revenues.
10.0% F—
Z
LU
U 8.0%
w
a 6.0%
6
4.0%
2.0%
0.0%
CD CD CD CD CD
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W A C)1 O) v
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co CD O -1 N W
YEAR
DESCRIPTION:
A restricted revenue is one which is legally earmarked for a specific use as may be required by State law, bond covenants, or.
grant requirements. As the percentage of restricted revenues increases, the City loses its freedom to respond to changing
conditions. A large proportion of restricted revenues also makes the City vulnerable to spending dictates from funding
agencies. In addition, it may indicate a growing over dependence on external revenues and signal an inability to maintain
service levels.
EXPLANATION:
The trend line for the ratio of restricted operating revenues to net operating revenues has increased since 1993. Restricted
revenues declined between 1993 and 1996; however, they have moved substantially higher since then. This is the result of
large increases in Recreation revenues and GO Debt. Most of the increase in GO Debt revenues are attributable to the
Plymouth Creek Center. The increase in 2003 is largely attributable to a substantial increase in intergovernmental revenue It
for the HRA -General Fund.
TREND COMMENTARY:
The graph indicates a warning trend when there are increasing amounts of restricted operating revenues as a percentage of f
operating revenues.
6
DATA: TABLE 2
RESTRICTED REVENUES
DESCRIPTION 1993 1994 1995 1996 1907 1998 1999 2000 2001 2002 2003
Operating Revenues: 13,058,155 14,037,177 15,044,950 15,437,855 16,358,637 17,296,542 17,789,468 19,222,801 20,297,388 22,803,055 22,781,398
Restricted Operating 1,474,422 1,512,623 1,279,135 1,164,289 1,476,444 1,761,614 1,698,211 2,286,310 2,368,230 2,768,257 3,435,083Revenues
Restricted Operating
Revenues As a % of
NOTES:
RESTRICTED OPERATING REVENUES are those which are legally earmarked for specific purposes. These revenues
include the Recreation Fund, the General Obligation Debt Service Fund, and HRA - General Fund.
7
INDICATOR 3 - INTERGOVERNMENTAL REVENUES
INTERGOVERNMENTAL REVENUES AS % OF OPERATING
REVENUES
16.0% ----- -- --- ---
14.0%
12.0%
Z
10.0%
LU
U 8.0%
W
6.0%
4.0%
2.0%
0.0%
CO CO CO CO CO CO CO O O O O
W Cn O v CC) CD O O O O
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YEAR
v
i
DESCRIPTION:
Intergovernmental revenues are revenues received from another governmental entity. They are important to
analyze because an over dependence on intergovernmental revenues can have an adverse impact on financial
conditions. The conditions, or "strings" that the external source attaches to these revenues may prove too costly,
especially if these conditions are changed in the future after the City has developed a dependence on the program.
In addition, the funding agency may withdraw the funds and leave the City with the dilemma of cutting programs
or funding them with property tax.
EXPLANATION:
The diminishing relationship between inter -governmental revenues and operating revenues since 1994 is a result of C
reductions in state grants and aids. In 2003, the General Fund saw a reduction in the Market Value Homestead Credit of C
690,940. This was partly offset by a $285,991 increase in state grants and aids, which was previously a transfer to the
General Fund. The HRA - General Fund saw an increase in intergovernmental revenues of $440,333.
C
TREND COMMENTARY:
C
The graph indicates a warning trend when there are excessive amounts of intergovernmental revenues as a C
percentage of operating revenues. However, steadily decreasing amounts of intergovernmental revenues is also
undesirable since these revenues must be made up by other sources unless programs are cut.
C,
C
C
C
C
c
c
C
8
DATA: TABLE 3
INTERGOVERNMENTAL REVENUES
TION 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
nmental
1,896,723 2,055,986 1,570,949 1,612,833 1,293,065 1,296,701 1,200,382 1,253,888 1,358,320 1,397,837 1,402,400
Revenues: 13,058,155 14,037,177 15,044,950 15,437,855 16,358,637 17,296,542 17,789,468 19,222,801 20,297,388 22,803,055 22,781,398
asa%of
Revenue:
NOTES:
INTERGOVERNMENTAL REVENUES include any operating revenues received from other government units. The
largest share of these is Market Value Homestead Credit received from the State. Others include M.S.A. money, and State
and Federal grants.
INDICATOR 4 - ELASTIC TAX REVENUES
ELASTIC REVENUES.AS % OF OPERATING REVENUES
22.5%
22.0%
21.5%
21.0%
H
w 20.5%
V
W 20.0%
a
19.5%
19.0%
18.5%
18.0%
to to m m m m co 0 0 0 0
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YEARS
DESCRIPTION:
C
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L
Elastic revenues are highly responsive to changes in the economic base and inflation. As the economic base and inflation go
up or down, elastic revenues will go up or down by relatively the same proportion. An example is building and related
permit fees which increase during healthy economic times and decline when the economy lags. It is to the City's advantage
to have a balance between elastic and inelastic revenues so that it has protection in a declining economy and can take
advantage of an expanding economy.
EXPLANATION:
The change from 1993 to 1994 was upward due to housing growth and fee increases. The percentage then leveled off until
1998. The downward direction taken between 1998 and 2000 is the result of a leveling off of elastic revenues while other
types of revenues have accelerated. The increases in 2001 and 2002 are the result of increases in General Fund "charges for
services" and "permit fees" which were in response to increased development activity. The reduction in 2003 is the result of
a decline in "permit fees" and "charges for service".
TREND CON'EWENTARY:
The graph indicates a warning trend when there are decreasing amounts of elastic operating revenues as a percentage of
operating revenues.
10
DATA: TABLE 4
FELASTIC REVENUES
DESCRIPTION 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Operating Revenues: 13,058,155 14,037,177 15,044,950 15,437,855 16,358,637 17,296,542 17,789,468 19,222,801 20,297,388 22,803,055 22,781,398
Elastic Oper. Rev. 2,643,137 3,110,685 3,173,933 3,399,235 3,487,360 3,797,311 3,828,968 3,775,715 4,128,774 4,988,730 4,434,925
Elastic Operating.
Revenues as a
NOTES:
ELASTIC OPERATING REVENUES are highly responsive to changes in economic conditions and inflation. Examples
would include licenses, building permits, and recreation fees.
11
INDICATOR 5 - PROPERTY TAX REVENUES
DESCRIPTION:
Property tax is an important revenue to consider individually because the City is heavily reliant on it. Over 70% of the
City's General Fund revenue is from the property tax.
EXPLANATION:
Between 1993 and 2002, the reliance on property tax remained within a range of 70 to 73 percent. In 2003, the reliance
increased to 73.3%. This was not due to an increase in property tax revenues. It was a result of a reduction in other
revenues.
FI—Mao1 • k31 ,a_ . _
The graph indicates a warning tend when there is increasing growth in reliance on property tax revenue. When this happens
it means that other revenues are not keeping pace with the growth in expenditures. A sharp decrease in property tax
revenues must also be evaluated to make sure that it is not the result of abatements and appeals possibly caused by declining
property values.
12
PROPERTY TAX REVENUE AS A PERCENTAGE OF TOTAL
GENERAL FUND REVENUE
74%
73%
72%
F„
Z
w
U 71%
W
a 70%
69%
68%
CO CO CO CO CO CO CO O O O O
CO CO CO CO CO CO CO O O O O
W A CJ1 Q) V co CO O N W
YEAR
DESCRIPTION:
Property tax is an important revenue to consider individually because the City is heavily reliant on it. Over 70% of the
City's General Fund revenue is from the property tax.
EXPLANATION:
Between 1993 and 2002, the reliance on property tax remained within a range of 70 to 73 percent. In 2003, the reliance
increased to 73.3%. This was not due to an increase in property tax revenues. It was a result of a reduction in other
revenues.
FI—Mao1 • k31 ,a_ . _
The graph indicates a warning tend when there is increasing growth in reliance on property tax revenue. When this happens
it means that other revenues are not keeping pace with the growth in expenditures. A sharp decrease in property tax
revenues must also be evaluated to make sure that it is not the result of abatements and appeals possibly caused by declining
property values.
12
DATA: TABLE 5
PROPERTY TAX REVENUES AS A PERCENT OF TOTAL REVENUE
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
8,434,547 8,996,926 9,964,760 9,996,278 10,466,775 11,016,737 11,336,954 12,240,354 12,847,702 14,333,258 14,180,968
Fund 11,583,733 12,524,554 13,765,815 14,273,566 14,882,193 15,584,845 16,091,257 16,936,491 17,929,158 20,034,798 19,346,315
x % of Total 73% 72% 72% 70% 70% 71% 70% 72% 72% 72% 73
NOTES:
PROPERTY TAX REVENUES are those received through the City's share of ad valorem property taxes, and include the
Market Value Homestead Credit.
13
INDICATOR 6 - USER CHARGE COVERAGE
USER CHARGES AS % OF RELATED SERVICES
115.0%
110.0%
105.0%
F -
z
U100.0% ' i
W
d
95.0%
90.0%
85.0%
D (D CD (D CD (D CD O O O O
AW vcoOOOW . W co CD W
YEAR
DESCRIPTION:
User charge coverage refers to how well fees and charges cover the cost of providing a service. This concept can be applied
to enterprise programs, such as the City's water and sewer utility, or to General Fund programs, such as inspection services.
As coverage declines, the burden on other revenues to support the service increases. It is particularly easy for inflation and
other factors to erode the user charge coverage without the City realizing the extent. For this reason, costs and fees should
be reviewed frequently.
EXPLANATION:
In 1994, rates were increased as a result of review which led to adequate user charge coverage. In 1997, user charge
coverage dropped largely as a result of sewer rates not keeping up with sewage treatment fees. Sewer rates were increased
in 1998 to reverse this trend. The declines in 2000 and 2001 are largely the result of steady or declining building permit
revenues and inclusion of the Plymouth Creek Center which does not pay it's own way. The increase in 2002 is almost
entirely the result of one full year of Water Resource revenues coming on line and significantly lower than budgeted Water
Resources expenditures. In 2003, Water Resources expenditures nearly matched revenues and building permits declined.
TREND COMMENTARY:
C
C
The graph indicates a warning trend when there are decreasing revenues from user charges as a percentage of total
expenditures for providing related service. it
14
DATA: TABLE 6
USER CHARGE COVERAGE
DESCRIPTION 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
tevenues from fees
and charges: 9,299,731 10,088,017 10,936,837 11,676,270 12,011,793 13,286,595 13,280,861 13,869,920 14,930,755 16,058,289 16,859,699
3xpenditures for
2elatedServices: 9,117,353 10,170,576 9,649,437 10,319,920 12,532,502 12,963,447 12,870,626 13,850,003 15,581,496 15,910,695 17,634,368
NOTES:
REVENUES FROM FEES AND USER CHARGES include fees collected for virtually all types of user orientated services
It would include all licenses and permits, charges for current services and Water, Sewer, Ice Arena, Plymouth Creek Center,
Field House, Water Resources, and Solid Waste fees.
EXPENDITURES FOR RELATED SERVICES are the actual expenditures to provide the services outlined above. These
would include all of the costs of running Planning, Inspections, Recreation, Street and Traffic Lights, Water, Sewer, Ice
Arena, Solid Waste, Plymouth Creek Center, Field House and Water Resources.
15
INDICATOR 7 - GENERAL FUND REVENUE SHORTFALLS
DESCRIPTION:
This indicator examines the difference between revenue estimates and revenues actually received during the budget year.
Major discrepancies that continue year after year, can be an indication of either a declining economy, inefficient collection
procedures, or inaccurate estimating techniques. It can also be an indication that revenue estimates are being made
optimistically high.
EXPLANATION:
The City has made it a practice to conservatively budget anticipated revenues and as a result, no shortfall has been
experienced since 1990.
TREND CONEWENTARY:
The graph indicates a warning trend when there is an increase in revenue forecasting variance.
16
GENERAL FUND SURPLUS % OF BUDGETED OPERATING
REVENUES
7.0%
6.0%
5.0%
z 4.0%
W
U
LU
a
3.0%
2.0%
x, 1.0% --
0.0%
s N N N N
Co Co Co CD Co Co CD O O O O
Co CD CD Co Co Co Co O O O O
W CJS O v co CD O N W
YEAR
DESCRIPTION:
This indicator examines the difference between revenue estimates and revenues actually received during the budget year.
Major discrepancies that continue year after year, can be an indication of either a declining economy, inefficient collection
procedures, or inaccurate estimating techniques. It can also be an indication that revenue estimates are being made
optimistically high.
EXPLANATION:
The City has made it a practice to conservatively budget anticipated revenues and as a result, no shortfall has been
experienced since 1990.
TREND CONEWENTARY:
The graph indicates a warning trend when there is an increase in revenue forecasting variance.
16
DATA: TABLE 7
7- REVENUE FORECASTS
DESCRIPTION 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Actual Operating
Revenues: 12,106,633 13,053,254 14,188,315 14,815,084 15,331,427 16,114,710 16,598,901 17,576,515 18,903,541 20,697,726 20,428,177
Budgeted Operating
Revenues: 12,058,200 12,854,500 13,485,012 13,957,624 14,799,195 15,731,526 16,334,891 17,493,824 18,662,827 19,874,125 20,311,398
Revenue Shortfalls/
Surplus as a % of
Budgeted Operating
Revenues: 0.4% 1.5% 5.2% 6.1% 3.6% 2.4% 1.6% 0.5% 1.3% 4.1% 0.6%
17
THE EXPENDITURES INDICATORS
Expenditures are a rough measure of the City's service output. Generally, the more the City spends in constant dollars, the
more service it is providing. This reasoning does not take into account how effective or how efficiently services are
delivered. The first issue to consider is expenditure growth rate to determine whether the City is living within its revenue.
Because the City is required to have a balanced budget, it would seem unlikely that expenditure growth would exceed
revenue growth. Nevertheless, there are a number of subtle ways for a City to balance its annual budget but create a long -
run imbalance, whereby expenditure outlays and commitments would be growing faster than revenues.
Some of the more common ways are to use bond proceeds for operations, to siphon small amounts from intergovernmental
grants, to borrow, or to use reserves. Other ways are to defer maintenance on streets, buildings, and other capital stock or to
defer funding of future liability such as a pension plan. In each of these cases, the annual budget remains balanced, but the
long -run budget is developing a deficit. Although long -run deficits can be funded through windfalls or surges in revenue
due to inflation, there is a substantial risk in allowing them to develop.
A second issue to consider is the level of mandatory or "fixed costs". This is a measure of expenditure flexibility. It shows
how much freedom the City has to adjust its service levels to changing economic, political and social conditions. A city
with a growing percentage of mandatory costs would find itself proportionately less able to make adjustments. As the
percentage of debt service, matching requirements, pension benefits, State and Federal mandates, contractual agreements,
and commitments to existing capital plant increase, the flexibility of spending decisions decreases.
Ideally, the City will have an expenditure growth rate that does not exceed its revenue growth rate and will have maximum
spending flexibility to adjust to changing conditions.
Analyzing the City's expenditure profile will help identify the following types of problems:
Excessive growth of overall expenditures as compared to revenue growth or growth in
community wealth (personal and business income).
An undesired increase in fixed costs.
Ineffective budgetary controls.
A decline in personal productivity.
Excessive growth in programs that create future expenditure liability.
Changes in expenditures are monitored in the City's Financial Trend Report by using the following indicators:
Indicator 8 Expenditures Per Capita
Indicator 9 Employees Per Capita
Indicator 10 Fringe Benefits
18
t.
INDICATOR 8 - EXPENDITURES PER CAPITA
330 EX_ PENDMURE-S RE.R.—CARIT-A
320
310
300
z
w
0 $290
W
a $280
270
260
250
CD CD CD CD CD CD CD CD O O O
CD CD CD CD W co co O O O OW -0. CJ1 -I c0 CD O i N W
YEAR
DESCRIPTION:
Changes in expenditures per capita reflect changes in expenditures relative to changes in population. Increasing per capita
expenditures can indicate that the cost of providing services is outstripping the City's personal income or other relevant tax
base. Also, if the increase in spending is greater than would be expected from continued inflation and cannot be explained
by the addition of new services, it can be an indicator of declining productivity - i.e. the City is spending more real dollars to
support the same level of services.
EXPLANATION:
The trend line indicates an increasing rate of expenditures per capita. This is a result of increased levels of service for City
residents. Rates of increase by department and fund are as follows for the period 1998-2003: Administration 12.6%,
Community Development 32%, Park & Recreation 47.8%, Finance 20.4%, Police 32%, Fire 56.4%, Public Works 16.7%,
Recreation Fund 41.7%, HRA -General Fund 122.9%, and GO Debt Service Fund 117.1%. The sharp increase since 1999 is
largely the result of increased debt and operating costs for the Plymouth Creek Center. Other contributing factors include
the addition of the duty crew, full-time staff in the Fire Department, and personnel in the following positions: traffic officer,
DARE officer, patrol sergeant, traffic engineer, planning assistant, building inspector, forestry worker, recreation
coordinator, environmental officer, street maintenance worker, and Plymouth Creek Center staff.
TREND COM IENTARY:
The graph indicates a warning trend when there are increasing operating expenditures (constant dollars) per capita.
19
DATA: TABLE 8
NOTES:
TOTAL OPERATING EXPENDITURES include all expenditures of the General Fund, Recreation Fund, GO Debt Service
Fund, and HRA -General Fund.
20
EXPENDITURES PER CAPITA: CONSTANT DOLLARS
SCRIPTION 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
d Oper. Exp.: 12,189,987 13,113,681 14,019,443 14,997,762 15,554,751 16,389,634 17,027,654 18,743,893 20,204,204 21,160,997 22,655,029
to 2003 S: 15,417,939 16,356,712 16,828,169 17,427,386 17,772,474 18,429,673 18,647,359 19,853,807 21,073,943 21,558,824 22,655,029
for inflation)
ulation 55,137 57,391 58,960 60,344 61,620 62,979 64,313 65,894 66,675 67,824 70,238
2003 S Exp./
NOTES:
TOTAL OPERATING EXPENDITURES include all expenditures of the General Fund, Recreation Fund, GO Debt Service
Fund, and HRA -General Fund.
20
INDICATOR 9 - NUMBER OF RESIDENTS SERVED BY EACH FULL TIME CITY EMPLOYEE
305
NUMBER OF RESIDENTS SERVED BY EACH EMPLOYEE
300 t
295
290
U)
z 285
p 280
w 275
270
265
260
255
CO Cp CO CO Cp O O O O O O O
O O O CO O O O O O O O O
co 4 (T O c0 M O co 4
YEAR
DESCRIPTION:
Because personnel costs are the major portion of the City's operating budget, plotting changes in the number of residents
served by each employee is another way to measure change in expenditures. A decrease in the number of residents served
by each city employee might indicate that expenditures are rising faster than revenues; that the City is becoming more labor
intensive; personnel productivity is declining; or that additional city services are being added, either mandated by the state
and federal government or demanded by the voters.
EXPLANATION:
The City has seen a gradual increase in the number of employees per capita. It may be inferred from this statistic that the
City has had to meet increased service requirements which cannot be accurately approximated by population. Recent
additions in personnel include the hiring of additional employees for traffic enforcement, school liaison, design engineering,
planning, street maintenance, sewer maintenance, information technology, HRA programs, park maintenance, fire
department, ice arena, and Plymouth Creek Center. Some of these additional employees have generated more dollars than
they cost.
TREND COMMENTARY:
The graph indicates a warning trend when there is a declining number of residents per municipal employee.
21
DATA: TABLE 9
22
NUMBER OF RESIDENTS SERVED BY EACH EMPLOYEE
Year 1993 1994 1995 1996 L 1998 1999 20000 2001 LOU 2007 2QQ4
Employees 184 197 206.5 212.5 220.5 224.5 231.5 236.0 245.1 246.7 249.1 257.1
Population 55,137 57,391 58,960 60,344 61,620 62,979 64,313 65,894 66,675 67,824 70,23871966
Pop. per employee 300 291 286 284 279 281 278 279 272 275 282 276
22
INDICATOR 10 - FRINGE BENEFITS
FRINGE BENEFITS AS A % OF SALARIES
25.0% —
24.0%
23.0%
z
LU
U 22.0%
LU
x-
21.0%
20.0%
19.0%
CO CO CO CO CO CO CO O O O O O
CO CO CO CO CO CO CO O O O O O
W ? U1 O J c0 CO O - W ?
YEAR
ICY 1 M OF
The most common forms of fringe benefits are pension plans, health and life insurance, and worker's compensation and
unemployment insurance. Together, they represent a significant share of operating costs, often amounting to more than 25%
of salaries. Some benefits, like health and life insurance, require immediate cash outlay. Some like pension benefits, can be
deferred for many years. The City is fortunate that it participates in the State Public Employee Pension system which results
in no unfunded liabilities to the City for pensions.
EXPLANATION:
The trend line indicates a slowly declining rate of fringe benefit expenses. This trend seems to have reversed course in the
year 2000. Increases in health and dental insurance and worker's compensation are the main causes in the reversal of the
declining trend in fringe benefits.
TREND COIVEUENTARY:
The graph indicates a warning trend when there are increasing fringe benefit expenditures as a percentage of salaries and
wages.
23
DATA: TABLE 10
FRINGE BENEFITS
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Fringe benefit
expenses as a%
of salaries and v
w
L
V
NOTES:
THE COST OF FRINGE BENEFITS includes payments for direct benefits to employees such as Medicare, Social Security,
L
Public Employees Retirement Association, Workers Compensation, Unemployment, Health Insurance, Life Insurance, Long-
term Disability Insurance and Deferred Compensation.
SALARIES AND WAGES are the total wages, including temporary salaries and overtime, paid to all General Fund (
employees.
24
THE OPERATING POSITION INDICATORS
Operating position refers to the City's ability to balance its budget on a current basis, maintain reserves for emergencies and
maintain sufficient cash to pay its bills on a timely basis.
During a typical year, the City will usually generate either an operating surplus or an operating deficit. An operating surplus
develops when current revenues exceed current expenditures, while an operating deficit develops when the reverse occurs.
An operating surplus or deficit may be created intentionally as a result of policy decision, or unintentionally because it is
difficult to precisely predict revenues and expenditures. When deficits occur, they are usually funded from accumulated
fund balances; when surpluses occur, they are usually dedicated to the fund balance, or to funding future year's operations.
Reserves are built through the accumulation of operating surpluses. They are maintained for the purpose of providing a
financial cushion in the event of:
Loss of a revenue source
Economic downturn
Unanticipated expenditure demand due to natural disasters, insurance loss and the like
Need for large scale capital expenditures or other non-recurring expenditures
Uneven cash flow
Reserves may be budgeted in a contingency account or carried as a part of one or more fund balances. They can be highly
visible in the financial statements or buried within balance sheets and operating statement transactions. If carried as an
unappropriated part of fund balance, the resources may never appear in the City's budget, nor be discussed during budget
deliberations. The City attempts to annually budget a contingency account, separate from General Fund Balance.
Liquidity refers to the flow of cash in and out of the City treasury. The City receives its revenue at frequent intervals during
the year, and sometimes in large installments. If revenues are received before they will need to be spent, the City will have a
positive liquidity or cash flow position. It is to the City's advantage to have some excess liquidity or "cash reserves" as a
cushion in the event of an unexpected delay in receiving revenues (such as has occurred in recent years with delay in the
receipt of State shared revenues), and unexpected decline or loss of a revenue source, or an unanticipated need to make a
large expenditure. For whatever reason, if the City has negative cash flow and has no cash reserves it must borrow either
internally or externally, or put off paying its bills.
An analysis of operating positions can help the City Council identify the following situations:
Emergence of operating deficits
Decline in revenues
Decline in liquidity
Ineffective revenue forecasting techniques
Ineffective budgetary controls
Inefficiencies in management of enterprise operations
25
Changes in operating position will be monitored in the Financial Trend Report by using the following indicators:
Indicator 11 Enterprise Losses
Indicator 12 General Fund Balances
Indicator 13 Current Liabilities
Indicator 14 Liquidity
26
INDICATOR 11- ENTERPRISE LOSSES
ENTERPRISE OPERATING RESULTS BEFORE DEPRECIATION
1,800,000 --- — -- -- --
1,600,000
1,400,000
y 1,200,000
a 1,000,000
J
0 800,000
600,000
400,000
200,000
0
M M M M M M M O O O O
M CO M CO M M M O O O O
W ? Ul O V 00 CO O -• N W
YEAR
DESCRIPTION:
Enterprise profits or losses are a special and highly visible type of operating result. If losses, they clearly show potential
problems because enterprises are expected to function as if they were commercially operated as a "for profit" entity as
opposed to a governmental "not for profit" entity. In time of financial difficulty, the City may raise taxes to increase support
for a General Fund program. For an Enterprise Fund program, however, the City may raise rates and find that revenue
actually decreases because of decreased use of the service. In other words, enterprises are typically more subject to the laws
of supply and demand; thus, operating deficits are distinct indicators of emerging problems.
EXPLANATION:
The enterprises are expected to be operated as for profit or break-even entities. The trend line indicates a decrease in profits
from the water and sewer operations between 1995 and 1997. This was reversed in 1998 when sewer rates were increased
and sewer contractual services decreased. The declines in 2001 and 2002 were largely attributable to declines in the
profitability of the water, and sewer utilities. The decline in operating results appears to be slowing in 2003. Rate increases
for the Water and Sewer funds were implemented in 2004 which should serve to stop the decline.
TREND COMMENTARY:
The graph indicates a warning trend when there are consistent enterprise losses (deficits) in constant dollars.
27
DATA: TABLE 11
NOTES:
ENTERPRISE OPERATING RESULTS are operating revenues less expenses, including depreciation. Non-operating
revenues and expenses such as earned interest, transfers and debt service are not included.
28
ENTERPRISE OPERATING RESULTS
DESCRIPTION 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Enterprise operating
results:
Operating Income (Loss): 1,142,563 -592,045 -414,664 -605,249 -1,079,330 -430,980 -208,752 835 -509,431 -655,579 -741,241
Operating Income (Loss)
Before Depreciation: 40,640 667,656 786,762 662,556 285,469 1088 356 1,308,124 1 699 738 1,247,338 1 087313 1,042,539
NOTES:
ENTERPRISE OPERATING RESULTS are operating revenues less expenses, including depreciation. Non-operating
revenues and expenses such as earned interest, transfers and debt service are not included.
28
INDICATOR 12 - GENERAL FUND BALANCES
FUND BALANCE AS A % OF OPERATING REVENUE
50.00%
48.00%
46.00%
F -
w
44.00%
U
W 42.00%
a
t
40.00%
38.00%
36.00%
CD Co Cfl Cfl Cfl Co Co O O O O
CD CD O O O CD Co O O O O
W Vl CA --I Cb CD O N W
YEAR
DESCRIPTION:
Fund balances can be thought of as a reserve, although the entry on the City's annual Financial Report labeled "Fund
Balance" is not always synonymous with "available for appropriation". The level of the City's fund balances may determine
its ability to withstand unexpected financial emergencies, such as may result from natural disaster, revenue shortfalls, or
steep rises in inflation. It may also determine the City's ability to accumulate funds for large scale purchases or projects,
without having to borrow or bond.
EXPLANATION:
The trend line indicates a slowly declining level of fund balance for the General Fund as a percentage of net operating
revenues. The low point was reached in 1995, when excess funds were utilized to reduce future long-term debt, to provide
for future tax cancellation abatements, to set aside funds to avoid HACA penalties on TIF districts, and to replenish building
and equipment reserves. The drop in fund balance as a percent of operating revenues in 2002 is largely the result of record
building permit revenues and the transfer of surplus to reserve funds in anticipation of state aid cuts for 2003. Fund balance
has recovered nicely in 2003. Fund balance as a percent of operating revenue has remained above the targeted 40%
threshold.
TREND CONEWENTARY:
The graph indicates a warning trend when there is a declining unrestricted fund balance of the General Fund as a percentage
of net operating revenues, and a positive trend when the percentage is stable.
DATA: TABLE 12
NOTES:
The fund balance of the General Fund includes all reserves of the General Fund.
Z
GENERAL FUND BALANCE
DESCRIPTION 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Fund Balance of
General Fund: 5,630,342 5,852,769 5,580,593 5,965,893 6,269,187 6,713,273 6,848,984 7,421,893 8,062,377 8,200,934 8,458,338
Operating revenue: 11,583,733 12,524,554 13,765,815 14,273,566 14,882,193 15,534,928 15,998,724 16,936,491 17,929,158 20,034,798 19,346,315
Fund balance of General
Fund as a % of
48.61% 46.73% 40.54% 41.80% 42.13% 43.21% 42.81% 43.82% 44.97% 40.93% 43.72%
o eratin revenue:
NOTES:
The fund balance of the General Fund includes all reserves of the General Fund.
Z
INDICATOR 13 - CURRENT LIABILITIES
CURRENT LIABILITIES AS A % OF OPERATING REVENUES
10.00%
9.00%
8.00%
7.00% —
z 6.00%
W
U 5.00%
pW
4.00%
3.00%
2.00%
1.00%
0.00%
to CO CO CO to to 0 O O O O
W ? (n M 0D COO O O N Wa
YEAR
DESCRIPTION:
Current liabilities are defined as the sum of all liabilities including short-term debt, the curr•2nt portion of long-term debt,
accounts payable, accrued and other current liabilities.
EXPLANATION:
The long-term trend for this indicator shows a decline. In the short-term, the amount of current liabilities as a percentage of
operating revenues has stayed within a narrow range bouncing above and below 7%.
TREND CONEVIENTARY:
The graph indicates a warning trend when there are increasing current liabilities at the end of the year as a percentage of
operating revenues.
31
DATA: TABLE 13
NOTES:
TOTAL CURRENT LIABILITIES include liabilities such as Accounts Payable, Due to Other Funds, and Accrued Salaries.
These amounts are from the General Fund, Recreation Fund, GO Debt Service Fund and HRA -General Fund.
32
CURRENT LIABILITIES
DESCRIPTION 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Total current
liabilities: 1,236,753 1,264,395 1,380,780 1,411,454 1,084,862 1,179,316 1,287,980 1,360,074 1,489,998 1,527,564 1,766,331
Operating revenue 13,058,155 14,037,177 15,044,950 15,437,855 16,358,637 17,296,542 17,789,468 19,222,801 20,297,388 22,803,055 22,781,398
Current liabilities as
a% of operating revenue: 9.47% 9.01% 9.18% 9.14% 6.63% 6.82% 7.24% 7.08% 7.34% 6.70% 7.75%
NOTES:
TOTAL CURRENT LIABILITIES include liabilities such as Accounts Payable, Due to Other Funds, and Accrued Salaries.
These amounts are from the General Fund, Recreation Fund, GO Debt Service Fund and HRA -General Fund.
32
I
4
INDICATOR 14 - LIQUIDITY
DESCRIPTION:
A good measure of the City's short -run financial condition is its cash position. "Cash position" includes cash on hand and in
the bank, as well as other assets that can be easily converted to cash, such as short-term investments. The level of this type
of cash compared to the City's current liabilities is referred to as liquidity. It measures the City's ability to pay its short-term
obligations. The immediate effect of insufficient liquidity is inability to pay bills or insolvency. Low or declining liquidity
can indicate that the City has overextended itself in the long run. The first sign may be a cash shortage.
EXPLANATION:
The City has had a steadily increasing liquidity ratio as shown in Table 14. The City is in a favorable position with respect
to its liquidity, since cash and short-term investments have always covered current liabilities by a significant amount.
TREND COMMENTARY:
The graph indicates a warning trend when there is a decreasing amount of cash and short-term investments as a percentage
of current liabilities.
33
LIQUIDITY
8.
007.00-
6.00
LU
a.
5.00
4.00F=
3.00
2.00
1.00
0.00
CO
N N N N
CO co co co co co O O O O
W vWWO NWWNW
YEAR
DESCRIPTION:
A good measure of the City's short -run financial condition is its cash position. "Cash position" includes cash on hand and in
the bank, as well as other assets that can be easily converted to cash, such as short-term investments. The level of this type
of cash compared to the City's current liabilities is referred to as liquidity. It measures the City's ability to pay its short-term
obligations. The immediate effect of insufficient liquidity is inability to pay bills or insolvency. Low or declining liquidity
can indicate that the City has overextended itself in the long run. The first sign may be a cash shortage.
EXPLANATION:
The City has had a steadily increasing liquidity ratio as shown in Table 14. The City is in a favorable position with respect
to its liquidity, since cash and short-term investments have always covered current liabilities by a significant amount.
TREND COMMENTARY:
The graph indicates a warning trend when there is a decreasing amount of cash and short-term investments as a percentage
of current liabilities.
33
DATA: TABLE 14
NOTES:
CASH AND SHORT-TERM INVESTMENTS include all cash and short-term investments (generally certificates of deposit
and government securities) from the General Fund, Recreation Fund, General Obligation Debt Service Fund, and HRA
General Fund.
34
LIQUIDITY
DESCRIPTION 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Cash + short tens
investment: 6,972,797 8,337,494 8,503,040 7,621,779 7,744,427 8,363,479 8,653,056 9,932,010 10,888,374 11,585,049 12,611,644
Total current liabilities: 1,236,753 1,264,395 1,380,780 1,411,454 1,084,862 1,179,316 1,287,980 1,360,074 1,489,998 1,527,564 1,766,331
Cash and short-term
investments as a multiple of
total current liabilities: 5.64 6.59 6.16 5.40 7.14 7.09 6.72 7.30 7.31 7.58 7.14
NOTES:
CASH AND SHORT-TERM INVESTMENTS include all cash and short-term investments (generally certificates of deposit
and government securities) from the General Fund, Recreation Fund, General Obligation Debt Service Fund, and HRA
General Fund.
34
THE DEBT STRUCTURE INDICATORS
Debt structure is important to analyze because debt is an explicit expenditure obligation which must be satisfied when due.
Debt is an effective way to finance capital improvements and to even out short-term revenue flows, but its misuse can cause
serious financial problems. Even temporary inability to repay can result in loss of credit rating, increased cost to future
borrowing and loss of autonomy to State and other regulatory bodies.
a
Cities usually use short-term debt to even out cash flows. Since the City has generally maintained a strong financial
position, it has not resorted to short-term debt for this type of purpose.
The most common forms of long-term debt are general obligation, special assessment, and revenue bonds. Even when these
types of debts are used exclusively for capital projects, the City needs to be careful that its outstanding debt does not exceed
its ability to repay. IA
Under the most favorable circumstances, the City's debt would be proportionate in size and growth to the City's tax base;
would not extend past the useful life of the facilities which it finances; would not be used to balance the operating budget;
would not require repayment schedules that would put excessive burdens on operating expenditures; and would not be so
high as to jeopardize the City's credit rating.
An examination of the City's debt structure can reveal:
Inadequacies in cash management procedures
Inadequacies in expenditure control
Increasing reliance on long-term debt
Decreases in expenditure flexibility due to increased fixed costs in the form of debt service
Use of short-term debt to finance current operations
Existence of sudden large increases or decreases in future debt service
The amount of additional debt that the community can absorb
Changes in debt structure will be monitored in the financial Trend Report by using the following indicators:
Indicator 15 Long -Term Debt
Indicator 16 Debt Service
Indicator 17 Overlapping Debt
35
INDICATOR 15 - NET DIRECT LONG-TERM DEBT
NET DIRECT LONG-TERM DEBT AS A % OF MARKET
VALUATION
0.18%
0.16%
0.14%
F
0.12%
w 0.10%
U
LU
0.08%
4.
0.06%
0.04%
0.02% i
0.00%
CO CO CO CO CO CO CO O O O O
CO CO CO CO CO CO CO O O O O
W rl M 0) -4 co CO O j N co
YEAR
DESCRIPTION:
Direct debt is debt for which the City has pledged its "full faith and credit." Self supporting debt, on the other hand, is debt
for which the City has pledged a repayment source separate from its general tax revenues. The former is generally referred
to as General Obligation and the latter as Self Liquidating Debt. Net direct debt, measured in this instance, is total direct
debt net of self supporting debt, less cash on hand. A significant increase in net direct, long-term debt as a percentage of
market valuation can indicate that the City's ability to pay is diminishing.
EXPLANATION:
The long-term debt as a percentage of market valuation has varied over the years. From 1989 to 1994 the percentage was
falling. Debt increased sharply in 1998 due to issuance of debt for the Plymouth Creek Center. Since 1998, debt declined
until street reconstruction bonds were issued in 2003. It should be noted that the City is using only a marginal amount of
the legal debt limit. Therefore, the City has additional capacity for General Obligation Debt if use of such funds would be
deemed necessary.
TREND COMMENTARY:
The graph indicates a warning trend when there is an increasing amount of net direct long-term debt as a percentage of
market valuation.
36
DATA: TABLE 15
NOTES:
NET DIRECT LONG-TERM DEBT is General Obligation Debt (principal and interest), less cash on hand.
MARKET VALUATION is the valuation of all taxable property. A state law change has required the City to adopt the
market valuation method.
37
NET DIRECT LONG-TERM DEBT
DESCRIPTION 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Market Valuation: 2.78 2.92 3.14 3.41 3.77 4.14 4.46 4.86 5.42 6.19 6.84
n billions of S)
Net direct long-
term debt: 1,853,061 572,367 2,368,829 2,361,308 2,197,076 6,582,543 6,160,828 5,760,040 5,355,832 4,938,830 5,696,359
Net direct long-
term debt as a %
ofassessed/market
valuation: 0.07% 0.02% 0.08% 0.07% 0.06% 0.16% 0.14% 0.12% 0.10% 0.08% 0.08%
NOTES:
NET DIRECT LONG-TERM DEBT is General Obligation Debt (principal and interest), less cash on hand.
MARKET VALUATION is the valuation of all taxable property. A state law change has required the City to adopt the
market valuation method.
37
INDICATOR 16 - DEBT SERVICE
r
G
G
G
G
G
G
G
DESCRIPTION:
Debt service is defined as the amount of interest and principal that the City must pay each year on net direct long-term debt
G
plus the interest it must pay on direct short-term debt. As it increases it adds to the City's obligations and reduces the City's (G
expenditure flexibility. Debt service can be a major part of the city's fixed costs and its increase can indicate excessive debt
and fiscal strain.
C
EXPLANATION: C
The City's debt service is related to the amount of long-term debt. Since 1994, the amount of debt service has varied but e
remained within a range from 1% to 3% of operating revenues. The debt service increase in 1999 is the beginning of an
increase which will result from payment of the Plymouth Creek Center bonds. C
C
TREND CONEWENTARY: e
The graph indicates a warning trend when there is an increasing amount of net direct debt service as a percentage of e
operating revenue.
C
DEBT SERVICE AS A OF OPERATING REVENUE
C
4.00%
f*
1'
3.50%
38
3.00%
z
V
2.50%
M
a
2.00%
1.50%
1.00%
0.50%
0.00%
p (p (p (p
W W 0)
p (p (D O O O O
V 000 (D O N W
YEAR
r
G
G
G
G
G
G
G
DESCRIPTION:
Debt service is defined as the amount of interest and principal that the City must pay each year on net direct long-term debt
G
plus the interest it must pay on direct short-term debt. As it increases it adds to the City's obligations and reduces the City's (G
expenditure flexibility. Debt service can be a major part of the city's fixed costs and its increase can indicate excessive debt
and fiscal strain.
C
EXPLANATION: C
The City's debt service is related to the amount of long-term debt. Since 1994, the amount of debt service has varied but e
remained within a range from 1% to 3% of operating revenues. The debt service increase in 1999 is the beginning of an
increase which will result from payment of the Plymouth Creek Center bonds. C
C
TREND CONEWENTARY: e
The graph indicates a warning trend when there is an increasing amount of net direct debt service as a percentage of e
operating revenue.
C
C
C
f*
1'
38
DATA: TABLE 16
DESCRIPTION
Total net direct
debt service
Operating rev -
Net Direct Debt
service as a %
ofoperating rev.
DEBT SERVICE
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
420,066 498,249 254,526 447,295 345,785 188,020 313,515 580,483 613,108 614,227 619,474
13,058,155 14,037,177 15,044,950 15,437,855 16,358,637 17,296,542 17,789,468 19,222,801 20,297,388 22,803,055 22,781,398
NOTES:
TOTAL NET DIRECT DEBT SERVICE is the annual amount of principal and interest paid on General Obligation Debt
and interest paid on any short term debt.
39
INDICATOR 17 - OVERLAPPING DEBT
DESCRIPTION:
Overlapping debt is the net direct debt of another local government jurisdiction that is issued against the tax base within part
or all of the geographic boundaries of the City. This includes the School District, Hennepin County, Metropolitan Council,
etc. The level of overlapping debt is only that debt applicable to the property that is shared by these taxing jurisdictions.
Overlapping debt measures the ability of the entire community's tax base to repay the debt obligations issued by all
governmental and quasi -Governmental jurisdictions.
EXPLANATION:
The trend line for the overlapping debt as a percentage of Market Valuation is indicating an upward trend in the ratio
between them. This is a result of several peaks in overlapping debt compared to a rapid and continuous growth in the City's
market valuation. Recent increases can be attributed to increases in school bond issues. This trend has leveled off over the
last 4 years.
TREND COMMENTARY:
The graph indicates a warning trend when there is an increasing amount of long-term overlapping debt as a percentage of
market valuation.
40
OVERLAPPING DEBT AS A % OF MARKET VALUE
3.00%
2.50%
2.00%
H
z
U
W
W
1.50%
1.00%
0.50%
0.00%
CD CD CD CD (o
W to
Ln CD -4
CD (o O O O O
000 coOO ON W
YEAR
DESCRIPTION:
Overlapping debt is the net direct debt of another local government jurisdiction that is issued against the tax base within part
or all of the geographic boundaries of the City. This includes the School District, Hennepin County, Metropolitan Council,
etc. The level of overlapping debt is only that debt applicable to the property that is shared by these taxing jurisdictions.
Overlapping debt measures the ability of the entire community's tax base to repay the debt obligations issued by all
governmental and quasi -Governmental jurisdictions.
EXPLANATION:
The trend line for the overlapping debt as a percentage of Market Valuation is indicating an upward trend in the ratio
between them. This is a result of several peaks in overlapping debt compared to a rapid and continuous growth in the City's
market valuation. Recent increases can be attributed to increases in school bond issues. This trend has leveled off over the
last 4 years.
TREND COMMENTARY:
The graph indicates a warning trend when there is an increasing amount of long-term overlapping debt as a percentage of
market valuation.
40
DATA: TABLE 17
NOTES:
OVERLAPPING LONG-TERM DEBT includes long-term debt issued by other taxing jurisdictions against all or a part of
the City's valuation.
41
OVERLAPPING DEBT
DESCRIPTION 1993 1994 1995 1996 1997 1998 1999 2000 2003, 2002 2003
Overlapping
long-term debt: 50,505,689 55,220,690 75,460,094 91,894,450 95,358,194 98,588,242 119,343,196 134,859,350 151,103,408 164,762,750 165,880,042
Market Valuation: 2.78 2.92 3.14 3.41 3.77 4.14 4.46 4.86 5.42 6.19 6.84
Overlapping L. T.
debt as a % of
market valuation: 1.421/6 1.73% 1.76% 2.21% 2.44% 2.30% 2.21% 2.77% 2.79% 2.66% 2.42%
NOTES:
OVERLAPPING LONG-TERM DEBT includes long-term debt issued by other taxing jurisdictions against all or a part of
the City's valuation.
41
THE CONDITION OF CAPITAL PLANT INDICATORS
The bulk of the City's wealth is invested in its physical assets or capital plant - its street, buildings, utility network, and
equipment. If these assets are not maintained they are allowed to become obsolete. The result is often a decrease in the
usefulness of the assets, an increase in the cost of maintaining and replacing them, and a decrease in the attractiveness of the
City as a place to live or do business.
Cities often defer maintenance and replacement because it is a relatively painless short run way to reduce expenditures and
ease financial strain. If deferral is continued, however, it can create serious problems that become exaggerated because of
the huge sums of money invested in capital facilities. Some of the problems associated with continued deferred
maintenance are:
Creation of safety hazards and other liability exposures as may result, for example, from a
potholed street.
Reduction in residential and business values, for example, in neighborhoods with broken curbs,
damaged street signs, etc.
Decreased efficiency of equipment as would result from an obsolete truck that spends more time
in the garage than on the street.
An increase in the cost of bringing the facility up to acceptable levels as would occur if the seal
coating of a street were put off so long that the street had to be completely reconstructed.
Potential for creating a huge unfunded liability in the form of a backlog in maintenance that can
result in accelerated deterioration.
The condition of capital planning is especially difficult to monitor because few cities maintain comprehensive records of
their fixed assets outside their enterprise funds.
The following indicators will be used in the Financial Trend Report to analyze condition of capital plant:
Indicator 18 Maintenance Effort
Indicator 19 Level of Capital Outlay
42
INDICATOR 18 - MAINTENANCE EFFORT
MAINTENANCE EXPENDITURES
7,000,000
6,000,000
I
5,000,000
W4,000,000
0 3,000,000 i
2,000,000
1,000,000
0
Co Co Co Co Co Co Co O O O O
CO Co Co Co Co Co Co O O O O
W 4 CTS to V Cb Co O
YEAR
DESCRIPTION:
The condition of the City's long-lived assets such as streets, buildings, parks and major equipment is significant because of
their tremendous cost and of the far-reaching consequence their decline can have on business activity, property values and
operating expenditures. Deferral of maintenance on the assets and their subsequent erosion can also create a significant
unfunded liability.
Over the long run, maintenance expenditures are likely to remain relatively stable in relation to the amount and nature of the
assets to be maintained. If the ratio between maintenance expenditures and size of asset stock is declining, it may be a sign
that the City's assets are deteriorating. If the trend persists, it may also be a sign that maintenance expenditures will be
going up on a unit basis due to the increased deterioration.
EXPLANATION:
Maintenance effort is an important measure of the status of major City assets. The City's maintenance expenditures have
increased moderately over time. This is to be expected as the City continues to grow and add assets. This trend warrants
regular monitoring to make certain necessary and regular maintenance of the City's infrastructure occurs.
7 TREND COMMENTARY:
The graph indicates a warning trend when there is a declining level of expenditures for maintenance and repair of general
fixed assets.
43
DATA: TABLE 18
NOTES:
MAINTENANCE EXPENDITURES
DESCRIPTION 1993 1994 1905 1996 1997 1998 1999 2000 2001 2002 2003
Expenditures for
C
maintenance and
repair of General
Fixed Assets: 3,639,171 3,517,120 3,677,231 4,029,374 4,080,838 4,376,365 4,662,608 4,965,243 5,380,495 5,606,447 5,861,100
Adjusted to 2003 S: 4,602,837 4 386908 4,413,946 4682 129 4,662,665 4 921 097 5,106,125 5 259258 5,612,112 5,711,848 5861100
NOTES:
EXPENDITURES FOR MAINTENANCE AND REPAIR OF GENERAL FIXED ASSETS include all expenses incurred to
maintain and repair City streets and trails, parks buildings, athletic fields, and equipment. They do not include any C
maintenance or repair expenses for the water and sewer utility.
C
C
C
C
G
G
c
c
c
c
C
C
C
C
C
C
c
C
C
C
r
44
P
INDICATOR 19 - LEVEL OF CAPITAL OUTLAY
14.00%--DA.P.I.TA.L_Q_U.T-L-AY—A.S__A_/a_O-FO.P.ERA.TI.NG_EXP.EN.D.LT-U RES----.--
12.00%
ES_---.__
12.00 /o
i
10.00%
Z 8.00%
W
L)
a 6.00%
4.00%
2.00%
0.00%
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
YEAR
DESCRIPTION:
The expenditure for operating equipment such as trucks or equipment purchased from the operating budget is usually
referred to as capital outlay. It normally includes equipment that will last longer than one year and whose initial cost is
greater than $2,000. Capital outlay does not include capital budget, expenditures for construction of capital facilities, such
as streets, buildings, or bridges.
EXPLANATION:
The trend for purchases of capital equipment compared to operating expense is flat. The sharp increase in 2000 and 2001 is
largely because of the purchase of transit vehicles and a fire truck. The reductions in 2002 and 2003 are because of a slight
reduction in Central Equipment purchases and the fact that Transit did not purchase any vehicles in 2003. It should also be
noted that new General Fund capital purchases have decreased over the last several years due to state aid reductions and levy
limits.
TREND COMMENTARY:
The graph indicates a warning trend when there is a decline in capital outlay in operating funds as a percentage of operating
expenditures.
45
DATA: TABLE 19
NOTES:
CAPITAL OUTLAYS include expenditures for major equipment purchase through the General Fund, Special Revenue
Funds, park and facility related Capital Projects Funds, and Internal Services Funds. It does not include capital outlay
expenses of the Utility Funds.
46
LEVEL OF CAPITAL OUTLAY
DESCRIPTION 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Capital outlay: 954,510 1,545,423 1,498,489 1,354,957 1,181,822 1,458,284 1,327,912 2,907,852 3,852,316 1,871,466 1,326,919
Total operating
expenses: 17,179,666 17,047,971 18,530,663 20,350,747 21,762,836 22,864,321 24,384,274 27,496,374 29,776,269 30,470,513 31,790,276
Capital outlay as
a % oftotal operating
expenses: 5.56% 9.07% 8.09% 6.66% 5.43% 6.38% 5.45% 10.58% 12.94% 6.14% 4.17%
NOTES:
CAPITAL OUTLAYS include expenditures for major equipment purchase through the General Fund, Special Revenue
Funds, park and facility related Capital Projects Funds, and Internal Services Funds. It does not include capital outlay
expenses of the Utility Funds.
46
MeetinmPlymouth Council Polling Questions Date:June 6, 2005Listfile:Challenges 2010 Page:1
Data set:1
How concerned should we be over next 3-5 years?.
1.1
IA- Funding needs for replacement of aging infrastructure for ]
streets, water, sewer, buildings/facilities
B- Funding for "Risk Management Fund"
C- Funding for Pond Maintenance Program
D- Funding for future Water Quality Mandates
E- Cost for services of aging population with expanded service
expectations
10 F- Providing services for growing number of residents
S, I G- Providing services to population that "wants more for less'
H- Expanding demands of ethnically and culturally diverse
residents in different parts of Plymouth
I- Need to conserve water or expand infrastructure
J-- Risk of decreased state aid/state levy limits
K- Cost to locate and acquire Dirt Storage Site (current will last
5-10 years)
How concerned should we be over next 3-5 years?
Reduction in dependence on "Utility Trunk Fund" to meet
some of our operating cost needs (salaries allocations)
Risk of reduced property values as properties age
Identifying and evaluating "redevelopment areas"
Complexity of updating our Comprehensive Plan for
Northwest Plymouth
Strategies to enhance quality of life when City fails to grow
Economics of rising employee healthcare/benefit costs 3
HR plans for manager succession and shortages in certain
fields
strategies to address transportation/mobility congestion 6L.,
Cost of responding to unfunded mandates
Securing funding for major capital needs, such as CR 47,
Vicksburg, Peony Lane. Hwy 55, Northwest Greenway, 4th
0 Octants3 Performance 2005
S
5-
Y
01
Meeting: Plymouth Council Polling Questions Date:June 6, 2005
List file:Challenges 2010 Page:2
0 Octants3 Performance 2005
Data set: t
0
Meetinq:Pi mouth Council Polling Questions Date:June 6. 2005
List file :Challenges 2010 Page:3
D. No challenge for Plymouth
1. ...
2. ...Small challenge
3.
4.
5. ...Somewhat of a challenge
6.
7.
8. ...Important challenge
g- ...
10. Critical challenge for our planning
How important is this as a challenge for our planning & budgeting 2006-2090?
@ actants3 Performance 2005
Data set:1
MeetinwPlymouth Council Palling Questions Date:June 6, 2005
List file:Philosophy Page. -1
Data set:1
Relative philosphical priorities to guide planning and
budgeting
A- Planning & community development: growth, land use,
redevelopment
B- Collaboration: working with other agencies and
organizations to achieve mutual benefitsleconomies
C- Sustainability: ability to maintain what we have now and to
deliver at the same levels in future, including infrastructure
and services
D- Resource management: people and financial, in addition to
infrastructure such as water mains, roads, sewers, storm
water management
E- Community enrichment: facilities and services to enhance
quality of life, such as parks and recreation and housing
programs
Relative philosphical priorities to guide planning and
budgeting
i F- Community safety: including safe drinking water, street
maintenance, safe playground equipment, buildinq code
enforcement, in addition to services provided by police and
fire
Octants3 Performance 2005
Meeting:Plvmouth Council Polling Questions Dale:June 6, 2005Listfile:Philosophy Page:2
Press key'l'
Press key'2°
O Octants3 Performance 2005
Data set:9
6)
Meelinq:Plymouth Council Polling Questions Date:June 5, 2005
List file:Priorities 2006 Page:1
fila ll tnY/wak UO
Specific programs to protect or most at risk of reductions
indicate relative priorities
A- DARE/GREAT program elimination: $19,000 + more patrol
hours
8- Reduce police patrol by 5% to save $208,000
C- Reduce police public education/crime prevention $65,000
D- Reduce snow plowing (plow at 3"+) save $40,000
E- Reduce street maintenance (pothole patching, seal coating,
crack sealing) $100,000
F- Eliminate rental licensing and reduce nuisance response:
100,000
G- Eliminate discretionary funding for housing projects from
HRA lax levy: $110,000
H- Reduce rent subsidies for Plymouth Towne Squaro:160160
I- Reduce Fire Code enforcement: $ 75,000
J- Eliminate lifeguards at beaches: $32,000
Specific programs to protect or most at risk of reductions
indicate relative priorities
U- Explore joint powers of services and/or key positions:??
50,000 L4j/MWA 6t"
V- .Ghaage to automated 9witchboard messaging: $55,000
W- Eliminate Goose Management: $20,000
Data set:1
Specific programs to protect or most at risk of reductions
indicate relative priorities
5 K- Eliminate staffing of warming houses and ice rink
maintenance: $225,000
L- Reduce senior recreation programs (net cost of programs
52,000 + staffing): $52,000
M- Eliminate contributions to Music in Plymouth: $25,000
N- Reduce frequency of ballfield maintenance: $90,000
O- Reduce recreation programs equivalent to one rec
supervisor: $100,000
f P- Ellminate "Level A" Hazardous Material Response Team
duplication of State): $4000
Q- Reduce paid -on-call fire hours by 5%: $21,000
R- Reduce social service contributions (retain only HomeFree):
79,000
S- Reduce trail plowing by 50W $100,000
T- Eliminate median maintenance: $40,000
9 Octants3 Performance 2005 0
Meeting:Plyrnouth Council Polling Questions Date:June 6, 2005
List file:Priorities 2006 Page:2
D% -testas top nori
y} 10% 1
20% ll
30%
4. 40%
5. 50%
S. 60%
8. 8011. VJt, PA Nt w ak* 9. 90% UUU
i0. 700%—Very vulnerable for targe reductions
What is degree of rufnerabilly for large reductions?
O Octants3 Performance 2005
Data set:1
is