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092021 Work Session Meeting Packet      CITY COUNCIL  WORK SESSION MEETING    New Hope City Hall, 4401 Xylon Avenue North  Northwood Conference Room    Monday, September 20, 2021  6:00 p.m. ‐ dinner  6:30 p.m. ‐ meeting    Mayor Kathi Hemken  Council Member John Elder  Council Member Andy Hoffe  Council Member Michael Isenberg  Council Member Jonathan London        1. CALL TO ORDER – September 20, 2021    2. ROLL CALL    11. UNFINISHED & ORGANIZATIONAL BUSINESS     11.1 Dialogue with Citizens Advisory Commission   11.2 Discussion of 2022 general fund budgets with city manager, AEM and  department heads    12. OTHER BUSINESS    13. ADJOURNMENT  I:\RFA\P&R\CAC\2021\WS Dialogue\11.1 Q ‐ WS 2021 Dialogue.docx   Request for Action  September 20, 2021    Approved by: Kirk McDonald, City Manager  Originating Department: Parks & Recreation  By: Susan Rader, Director    Agenda Title  Dialogue between City Council and Citizen Advisory Commission   Requested Action  The Citizen Advisory Commission (CAC) has been invited to attend the September 20, 2021 work session to  discuss the commission’s activities and to hold a dialogue between the Council and commissioners. The CAC  last met with the City Council on April 15, 2019. The annual dialogue in 2020 was cancelled due to COVID‐ 19.  Policy/Past Practice  The Council meets with each Commission on a yearly basis.  Background  The City Council has requested that various city commissions attend Council work sessions to have a  dialogue. The CAC, per city code, shall advise the City Council as to its opinions and recommendations on  such subjects and matters which the city council shall assign to it on a continuing, temporary or interim basis,  and shall serve as a resource group to the community, and as an informative and educational coordinator to  the city, through the city council. The commission may also initiate projects on its own motion.     Continuing with the direction from the city council to increase commission involvement and knowledge  about city projects and programs, the attached 2021 CAC agenda list includes updates from a number of  departments, including review of the 2022 budget scheduled for November 9, 2021.    The commission currently has seven members including its chair, Randy Herman, and commissioners, Jill  Kaufman, Scott Kulzer, Carrie Neuburger, Rick Riley, Mike Terres and Bill Wills. Meetings are held on the  second Tuesday of the month at 7 p.m. in the council chambers.  Attachments   2020 CAC Annual Report   2021 CAC Agenda listing     Agenda Section Work Session Item Number  11.1  NEW HOPE CITIZEN ADVISORY COMMISSION 2020 ANNUAL REPORT The following is a listing of items discussed during 2020 by the New Hope Citizen Advisory Commission. The Commission met six times in 2020.  Accepted the 2019 Citizen Advisory Commission Annual Report.  Elected Randy Herman to serve as Chair in 2020.  Elected Mike Isenberg to serve as Vice Chair in 2020.  Elected Rick Riley to serve as Secretary in 2020.  Participated in a discussion regarding the 2020 Census.  Discussed Tobacco 21 and conducted a public hearing.  Welcomed new member Scott Kulzer.  Received an update on the Meadow Lake drawdown project and other 2020 public works projects.  Reassigned parks for 2020.  Conducted the 2019-20 Snowman/Snow Sculpture Contest and discussed plans for the 2020-21 contest.  Received an update on West Metro Fire-Rescue District activities.  Received an update on Communications goals and objectives from the Communications Coordinator.  Reviewed the 2021 budget as well as the sustainability of the Ice Arena, Golf Course and Outdoor Pool.  Discussed plans for the 2021 City-Wide Garage Sale.  Discussed brainstorming ideas to bring attention to New Hope.  Received updates on the Police Department/City Hall project. Citizen Advisory Commission 2 2020 Annual Report  Received updates on the Civic Center Park and Pool projects.  Received updates on the Begin Park playground project.  Commissioner Bauer declined reappointment to the Citizen Advisory Commission.  Commissioner Isenberg resigned from the Citizen Advisory Commission due to his election to the City Council.  Commissioners Herman and Wills were reappointed for additional 2-year terms.  No meetings were held April through August due to COVID-19. CAC AGENDA ITEMS FOR 2021    January 12   Discussion with Human Rights Commission Chair Meyer and other HRC Commissioners     February 9   Update on French Park Regional Park Master Plan with Three Rivers Park District staff    March 9   Update on Public Works projects with Megan Hedstrom, Stormwater Specialist/Project  Coordinator    April 13   Discussion with Kris Frey regarding the New Hope Farmer’s Market    May 11    Aquatic Park update and tour with Tony Portesan, Recreation Facilities Supervisor    June 8    No regular meeting; Park adoption event at Liberty Park    July 9   Police Department update with Chief Hoyt    August 10   Community Development Update: Projects and Programs with Director Sargent    September 9 – Commissioner Bus Tour  September 14 – No regular CAC meeting  September 20 – Work Session with the City Council    October 12    No regular meeting; Park adoption event at Liberty Park    November 9   Budget Update with Kirk McDonald and Vicki Holthaus    December 14        January 11   Representative from the Seven Dreams Education Foundation    On‐going   Continue to sponsor Snowman Contest, City‐wide Garage Sale   Discuss ideas to bring attention to New Hope    Adoption of Liberty Park   Promotion of existing City programs: In Focus, RAVE, Outstanding Business   Volunteering at P&R/City events    Updates   Park Projects     Possible Future Topics   Legislative Update   Planning Commission Update  I:\RFA\City Manager\2021\Budget 2022\WS 092021\11.2 Q ‐ Budget 2022  09.20.20.docx   Request for Action  September 20, 2021    Approved by: Kirk McDonald, City Manager  Originating Department: City Manager  By: Kirk McDonald, City Manager    Agenda Title  Discussion of 2022 general fund budgets with city manager, AEM and department heads  Requested Action  Staff requests that the City Council conduct a discussion with the department heads, AEM and the city  manager regarding 2022 general fund budget requests. Please bring your budget workbooks to the meeting  for reference.  Policy/Past Practice  It has been the general policy/past practice of the Council to continue review of the general fund budget after  adoption of the preliminary maximum levy to determine whether further adjustments are needed prior to the  budget public hearing in December.    Background  The City Council adopted resolutions at the September 13 council meeting establishing a maximum 2022  property tax levy and adopting a proposed 2022 tax‐supported budget.    The purpose of this work session discussion is for the City Council and city manager/department heads to  have a dialogue about the 2022 general fund departmental budgets, to highlight major projects or changes  planned for 2022 and to respond to any questions from Council. Enterprise and utility fund budgets  (sewer/water/storm water/street lights/recycling/golf course/ice arena) will be reviewed and discussed at the  October 18 work session. The past several years’ discussions among the City Council and staff have been very  productive. Specific budgets to be discussed at this work session include:     City Manager/City Clerk   Mayor and Council   City Manager   Assessing   City Hall   Elections   Fire Services    Human Resources/Administrative Services   Human Resources   Finance   Communications   IT     Agenda Section Work Session Item Number  11.2    Request for Action, Page 2    I:\RFA\City Manager\2021\Budget 2022\WS 092021\11.2 Q ‐ Budget 2022  09.20.20.docx    Community Development   Planning    Inspections   Legal Services   Economic Development Authority    Police Department   Police   Police Reserves   Animal Control    Public Works   Streets   Engineering   Street Infrastructure Fund   Central Garage    Parks & Recreation   Recreation   Parks   Swimming Pool   Park Infrastructure Fund    2022 Budget  The 2022 preliminary general fund budget is $16,179,193, which is an increase of $242,216 (1.5%) over the  2021 budget of $15,936,977. The major changes in the budget include:      An increase of $281,056 for wage and benefit increases ($131,694 for reallocation of personnel expenses  from EDA to provide funding for scattered site housing/redevelopment projects; $149,362 for all other  general fund personnel costs). A 3% cost of living adjustment is budgeted for employees along with an  increase in the city’s share of health insurance coverage and a comparable cities adjustment. A 3%  increase in City Council salaries is also included in the budget.   IT charges to the general fund increased $105,200. Similar to 2021, the charges are based on the new  allocation method for indirect charges (number of phones, computers and employees per department),  with direct departmental LOGIS IT costs being allocated to the benefitting department. The software for  body cameras (WatchGuard/$30,000) is allocated to the police department budget, and in 2022 a small  percentage of the HR director/coordinator personnel cost is allocated to the IT budget.   There is an increase of $65,859 in the budget for West Metro Fire‐Rescue District due to a 4.9% increase in  New Hope’s share of the joint powers agreement. Similar to 2021, it is recommended that New Hope’s  share of the aerial lease payment ($51,800) be funded by the general fund instead of a transfer from the  Fire Capital Projects. The lease payments for two new engines will be included in the 2023 budget.    The budget includes a $50,000 increase for the Emerald Ash Borer Removal/Replacement Program on  public property (city right‐of‐ways, parks, etc.) due to the increasing occurrence of the disease in the  northwest metro area.   2022 is a gubernatorial election year, and there is a $39,000 increase in the budget for election judge costs.     Request for Action, Page 3    I:\RFA\City Manager\2021\Budget 2022\WS 092021\11.2 Q ‐ Budget 2022  09.20.20.docx     There is a $315,454 decrease in central garage charges primarily in the police department (for leasing  vehicles) and the street department (reduced equipment purchases).    The city is scheduled to receive $866,642 in LGA (local government aid) in 2022, which is a $4,916 increase  over 2021. The revenue will be utilized in the general fund to offset central garage equipment and  building replacement charges; it is not used for general operations.   There is a decrease of $130,000 in building permit and related revenue, as the Windsor Ridge single‐ family home development will be completed at the end of 2021.    2022 Tax Levy  The tax levy for the general fund is $11,393,354, which is $513,889 or a 4.72% increase over the 2021 general  fund levy of $10,879,465. The total tax levy for 2022, including the general fund, street and park infrastructure  funds, economic development and housing and redevelopment authorities, and prior debt levies for City  Center, Northwood South and Northwood North infrastructure bonds, the 2017 Police Station/City Hall  facility bonds, and the 2018/2019 Pool and Park improvement bonds is $18,231,011. This represents a 4.67%  or $813,410 increase over the 2021 levy of $17,417,601, which was a 3.4% or $572,885 increase. The total tax  levy includes a 5% increase in the street and park infrastructure levies to support the long‐term funding plans  for street and park improvements. There is no additional increase in the park infrastructure levy for ice arena  to assist with ice arena capital needs, as the final increase was implemented in 2021. Three of the bond debt  tax levies are decreasing (2015 City Center, 2015 Northwood South, and 2018 Pool and Park) for a total  decrease of $8,833. Three of the bond debt tax levies are increasing (2016 Northwood North, 2017 Police  Station/City Hall, and 2019 Pool and Park) for a total increase of $7,036. Overall, the combined debt levies are  decreasing by $1,797.    The preliminary budget presented at the August work session included a $420,000 EDA levy and a new  $150,000 HRA levy, for a total of $570,000 for redevelopment activities (scattered site housing, etc.). Per  financial advisors, with the addition of the new HRA levy, the EDA levy is required to be included in the  city tax rate and the HRA levy is not included in the city tax rate. It is beneficial to lower the EDA tax levy  and increase the HRA levy to lessen the impact to property owners. Therefore, the updated tax levy chart  includes a $212,000 reduction in the EDA levy (from $365,000 to $153,000) and an increase in the HRA levy  to $417,000 to achieve the same goal of $570,000 for redevelopment purposes ($153,000 + $417,000 =  $570,000).    The median home value for taxes payable in 2022 is $275,000, which is a 7% increase from the median value  home in 2021. Per updated information recently received from Hennepin County the estimated impact on  residential homes based on the proposed 4.67% increase in the city tax levy is 7%. For homes valued between  $150,000 and $400,000 the tax increase estimate is $57 to $180. The city tax rate is projected to slightly increase  from 62.596% in 2021 to 62.719% in 2022.    The 2022 budget goals are listed in the preliminary budget binder and are the same goals discussed at the  June work session     Budget discussions will continue in October and November, including discussion regarding cost of living  wage adjustments and insurance contributions. A special public hearing meeting for public input will be held  on December 6, and a final budget will be presented to the Council for adoption at the December 13 council  meeting.    Request for Action, Page 4    I:\RFA\City Manager\2021\Budget 2022\WS 092021\11.2 Q ‐ Budget 2022  09.20.20.docx    Attachment:   2022 Preliminary Budget      -1- August 16, 2021 Budget Message Mayor and Council Members: Annually, the city manager must prepare a budget and present it to the city council. A preliminary budget is considered and the maximum tax levy is adopted in September, with review and discussion of all budgets between September and December, with the final budget and tax levy adopted in December. The following preliminary general and enterprise fund budgets represent a summary of all services to be provided by the city in 2022. The 2022 Budget includes the operations of the general fund that are supported by property taxes and budgets for certain special revenue and enterprise funds. The city’s budget is reflective of the city’s plans, policies, procedures, and objectives regarding services to be provided in fiscal year 2022 and beyond. Prior Years 2019 Budget The 2019 general fund budget was $14,224,112, and included a $395,439 levy increase (or 3.96% levy increase) over the 2018 budget of $13,737,762, for a total general fund tax levy of $10,374,948. The total city tax levy for 2019 was $15,301,610, which represented an 18.5% or $2,388,868 increase over the 2018 levy. The major increases in the general fund were wage and benefit increases (3% wage increase for city employees and council members) and compensation plan adjustments, central garage charges, West Metro Fire-Rescue District joint powers agreement, Hennepin County Assessing contract and a price increase for salt used for snowplowing. 2019 was not an election year so there was a general fund decrease for election judge expenses. The city received $697,864 in local government aid (LGA), and it was utilized in the general fund to help fund equipment replacement savings (not used for general operations). The total tax levy included a new levy for the police department/city hall construction bonds, a $100,000 increase in the park infrastructure fund for ice arena debt service/capital improvements and a $100,000 increase in the EDA levy for the scattered site housing program. 2020 Budget The 2020 general fund budget was $15,410,550, and included a $136,483 levy increase (or 1.32% levy increase) over the 2019 budget of $14,224,112 for a total general fund tax levy of $10,511,431. The total city tax levy for 2020 was $16,844,716, which represented a 10.08% or $1,543,106 increase over the 2019 levy. The major increases in the general fund were adding pool operations back into the budget, wage and benefit increases (3% wage increase for city employees and council members), central garage charges, West Metro Fire-Rescue District joint powers agreement and 2020 election costs. The city received $815,623 in local government aid (LGA), and it was utilized in the general fund to help fund equipment replacement savings (not used for general operations). The total tax levy included a new levy for pool and park improvement bonds, a $100,000 increase in the park infrastructure fund for ice arena debt service/capital improvements and a $48,000 increase in the EDA levy for redevelopment. The tax levy for the 2010 fire truck certificates was eliminated from the total levy as that debt was paid off in 2019. -2- 2021 Budget The 2021 general fund budget was $15,936,977, and included a $368,034 levy increase (or 3.5% levy increase) over the 2020 budget of $15,410,550 for a total general fund tax levy of $10,879,465. The total city tax levy for 2021 was $17,417,601 which represented a 3.4% or $572,885 increase over the 2020 levy. The major increases in the general fund were for police department body and squad camera purchase, wage and benefit increases (3% wage increase for city employees and council members), West Metro Fire-Rescue District joint powers agreement, central garage charges and the city hall budget (increases in utility cost and liability insurance for larger building and new emergency generator replacement cost). The city received $865,307 in local government aid (LGA), and it was utilized in the general fund to help fund equipment replacement savings (not used for general operations). The total tax levy included a 5% increase in the street and park infrastructure levies, a $100,000 increase in the park infrastructure fund for ice arena debt service/capital improvements and a $17,000 increase in the EDA levy for redevelopment. Overall, the combined debt levies decreased by $3,611. 2022 Budget The 2022 preliminary general fund budget is $16,179,193, which is an increase of $242,216 (1.5%) over the 2021 budget of $15,936,977. The major changes in the budget include: • An increase of $281,056 for wage and benefit increases ($131,694 for reallocation of personnel expenses from EDA to provide funding for scattered site housing/redevelopment projects; $149,362 for all other general fund personnel costs). A 3% cost of living adjustment is budgeted for employees along with an increase in the city’s share of health insurance coverage and a comparable cities adjustment. A 3% increase in City Council salaries is also included in the budget. • IT charges to the general fund increased $105,200. Similar to 2021, the charges are based on the new allocation method for indirect charges (number of phones, computers and employees per department), with direct departmental LOGIS IT costs being allocated to the benefitting department. The software for body cameras (WatchGuard/$30,000) is allocated to the police department budget, and in 2022 a small percentage of the HR director/coordinator personnel cost is allocated to the IT budget. • There is an increase of $65,859 in the budget for West Metro Fire-Rescue District due to a 4.9% increase in New Hope’s share of the joint powers agreement. Similar to 2021, it is recommended that New Hope’s share of the aerial lease payment ($51,800) be funded by the general fund instead of a transfer from the Fire Capital Projects. The lease payments for two new engines will be included in the 2023 budget. • The budget includes a $50,000 increase for the Emerald Ash Borer Removal/Replacement Program on public property (city right-of-ways, parks, etc.) due to the increasing occurrence of the disease in the northwest metro area. • 2022 is a gubernatorial election year, and there is a $39,000 increase in the budget for election judge costs. • There is a $315,454 decrease in central garage charges primarily in the police department (for leasing vehicles) and the street department (reduced equipment purchases). • The city is scheduled to receive $866,642 in LGA (local government aid) in 2022, which is a $4,916 increase over 2021. The revenue will be utilized in the general fund to offset central garage equipment and building replacement charges; it is not used for general operations. • There is a decrease of $130,000 in building permit and related revenue, as the Windsor Ridge single- family home development will be completed at the end of 2021. -3- 2022 Tax Levy The tax levy for the general fund is $11,393,354, which is $513,889 or a 4.72% increase over the 2021 general fund levy of $10,879,465. The total tax levy for 2022, including the general fund, street and park infrastructure funds, economic development and housing and redevelopment authorities, and prior debt levies for City Center, Northwood South and Northwood North infrastructure bonds, the 2017 Police Station/City Hall facility bonds, and the 2018/2019 Pool and Park improvement bonds is $18,231,011. This represents a 4.67% or $831,410 increase over the 2021 levy of $17,417,601, which was a 3.4% or $572,885 increase. The total tax levy includes a 5% increase in the street and park infrastructure levies to support the long-term funding plans for street and park improvements. There is no additional increase in the park infrastructure levy for ice arena to assist with ice arena capital needs, as the final increase was implemented in 2021. A new HRA levy of $417,000 is recommended for 2022 which is established as a special taxing district. The EDA levy of $153,000 will be included in the city’s tax rate. Both levies are needed to support the scattered site housing program and other redevelopment due to funding changes in the CDBG program. Three of the bond debt tax levies are decreasing (2015 City Center, 2015 Northwood South, and 2018 Pool and Park) for a total decrease of $8,833. Three of the bond debt tax levies are increasing (2016 Northwood North, 2017 Police Station/City Hall, and 2019 Pool and Park) for a total increase of $7,036. Overall, the combined debt levies are decreasing by $1,797. The median home value for taxes payable in 2022 is $275,000, which is a 7% increase from the median value home in 2021. At this time the estimated impact on residential homes based on the proposed 4.67% increase in the city tax levy is 7%. For homes valued between $150,000 and $400,000 the tax increase estimate is $57 to $180. The city tax rate is projected to increase from 62.60% in 2021 to 62.72% in 2022. Overview The budget provides a plan for the city for 2022 and beyond. It includes priorities and initiatives for the current year, as well as a focus for the future. The major key points and initiatives include: Budget Format • A new budget format was implemented in 2010 in an effort to enhance understandability and improvements continued to be made. The 2011-2021 budgets were prepared in a way that utilized the J.D. Edwards finance software to make the process more efficient for the department heads. The budgets included the Council approved priorities for each department. These will continue to be reviewed and updated as needed for future budget documents. • In 2012 a services/programs priorities matrix was completed by the city council and commissioners rating functions as core or discretionary and the amount of expenditure for the service was identified. Departments were reviewed and discussed and percentage of budget information has been inserted on each budget narrative page. Public purpose statements were added to budget narratives. • Budget narratives under the summary section include major changes to budgets and personnel changes are noted. • A listing of positions and salaries is included with the organization chart and the salary information ties directly to departmental budgets. • A memorandum from the city’s financial consultant is included that summarizes personnel/benefit costs, staffing changes and city consultant costs. • A pie chart is included to illustrate the percentage of budget devoted to each function. • In conjunction with the League of Minnesota Cities, New Hope participates in a local performance measures program in key city service areas. This is done through an on-line and/or paper city services survey, and every five years a professional random telephone survey is completed with more -4- statistically accurate information. The city will solicit resident feedback on the delivery of services, specific performance measures will be developed and the information will be incorporated into the final 2022 budget presentation. • Per the request of the City Council, starting in 2015 the budget was reviewed with the Citizens Advisory Commission and that practice will be continued for the 2022 budget. • In 2016 staff compiled a performance measurement report to track and compare the city’s performance over a period of years and to compare performance to similar sized cities. The department heads also developed a list of SMART goals (specific, measureable, achievable, realistic and time sensitive) which are reviewed by the City Council and incorporated into the Performance Measurement Report. This document can be found on the city’s website and is reviewed with the City Council and updated annually. 10-Year Financial Plan In 2017, AEM coordinated with department heads and the city manager and expanded the city’s five year financial plan to include an additional five years. AEM presented the 10-year planning model to Council in November of last year and presented select enterprise fund capital analysis in May of this year. The model is intended to show stakeholders the results of current budget actions and provide scenarios for future actions at the staff and Council level. This format integrated the current 10-year capital plan and 2021 budget. This plan provides information and analysis on the Enterprise and Internal Service Funds as well as the Street and Park Infrastructure Funds. When the preliminary 2022 budget is completed, the budget assumptions will be integrated into an updated 10-year plan and presented to Council. The city’s credit rating was upgraded several years ago as a result of the implementation of this long-term financial planning tool, and the AA credit rating was reaffirmed in 2017, 2018 and 2021 by Standard & Poors. An overall financial management plan for the city integrating all policies and procedures was completed in August 2016, which improved the management score from “strong” to “very strong”, the highest value assigned by S&P for that part of the rating. 2022 Goals/Priorities 1. Hold the line on spending; continue to provide existing services and programs with current resources. 2. Keep the general fund tax levy/property taxes as low as possible (levy limits are not in effect for 2022). 3. Continue to proactively pursue all outside funding opportunities for infrastructure and facility improvements and other programs including public safety, parks and recreation, public works and housing/redevelopment. 4. Implement 5% annual increase in street and park infrastructure levies to fund capital improvements outlined in the Pavement Management and Long-Term Financial Plan. A $100,000 increase in the park infrastructure levy to help ice arena capital needs and debt is not budgeted for 2022, as the final increase was implemented in the 2021 levy. 5. Staff is recommending that the city continue with the EDA levy for redevelopment purposes and consider implementing an HRA levy to provide additional funding for the scattered site housing program. Overall, the city’s debt service levies will decrease for 2022. -5- 6. Central Garage equipment replacement costs will be funded at 100% in the general fund and staff recommends using LGA funding for that purpose (not general operations). 7. 2022 is a gubernatorial election year and funds are budgeted primarily for election judge costs (approximately $50,000). Additional staffing may be necessary due to a dramatic increase in the number of people choosing to vote early by absentee ballot. On the local level, two council member seats will be up for election, and if any new members are elected, appropriate orientation will be provided. 8. The overall safety of the general public is always the top priority of the police department and continuing community engagement programs by a shared Joint Community Policing Partnership (JCPP) will facilitate this action. Expanding the officer/department wellness program will also be an emphasis. Major CIP items include replacement of 36 duty pistols, three (3) SWAT vests and three (3) communication headsets, two (2) radar units, two (2) bunkers and software which will enable investigations to download cellular data more efficiently. 9. Continue support and coordination with West Metro Fire-Rescue District, including emergency preparedness and EOC, in partnership with city of Crystal; continue to support long-term capital plan based on major apparatus report. New Hope’s share of JPA budget to increase approximately $66,000 including annual lease payment for aerial (lease cost for new engines to start with 2023 budget). Continue to budget annually for Station #3 improvements that are the city’s responsibility ($30,000 per year). 10. Redevelopment will remain a high priority with a continued effort to seek out potential commercial and industrial redevelopment opportunities. Continue coordination on the Windsor Ridge development, as that project will finish up in 2021, and assist St. Therese Nursing Home on the potential expansion of their campus. Another potential redevelopment is the construction of a new 22,000 square foot medical office facility (C-Axis) at 27th and Nevada avenues. A renewed emphasis will be placed on the Scattered Site Housing Program, as staff will look into ways to increase and stabilize the budget for future projects. Property maintenance and inspections will continue as a top priority. 11. Continue with infrastructure and environmental improvements; major CIP projects for 2022 include street and water infrastructure improvements in the Liberty Park neighborhood. Sewer lining will also continue. Work on the phase one public works expansion project will be completed and planning will begin for the continued necessary improvements. Continue coordination with other cities on the Joint Water Commission, maintain partnership with Meadow Lake and Friends of Northwood Lake associations. Planned projects include the drawdown of Meadow Lake and the continued monitoring of water quality in both water bodies. Scheduled equipment replacement includes three pickup trucks, one-ton utility truck, compressor truck, a utility trailer and the front-end loader. 12. In Parks and Recreation, operate the new aquatic facility for a second season. Park CIP projects include replacing playground equipment at Hidden Valley Park, replacing the picnic tables at the Northwood Park picnic shelter, upgrading or adding lighting in the parks, and completing the replacement of the wooden park name signage. Improvements at the ice arena include replacement of glass and boards for the north rink and some additional HVAC upgrades. Golf course improvements include clubhouse interior updates and the addition of a cart parking area. Expand offerings of movies and music in the -6- parks at the performance center and continue to work with OBMT to offer musical performances. Continue to offer a variety of programs including dance, gymnastics, and playground programs. 13. Continue Emerald Ash Borer program on public property and invasive species (buckthorn) removal in parks. 14. Continue contractual arrangement with AEM for financial oversight, continue to implement technological efficiencies on departmental basis to retrieve budget data, continue to update 10-year financial plan and monitor utility and enterprise fund operations, and work to improve credit rating for bonds Continue to work on implementing long-term equipment schedule replacement program for all park and recreation facilities and prepare options to internally fund phase two public works building and site improvements. 15. Continue contractual agreement with Solution Builders for IT services, continue replacing computers as appropriate in order to keep up-to-date with technological capabilities and meet IT needs of staff. In addition to the day-to-day operations of the city, some highlights of the IT budget include funding for: the city’s share of replacing the LOGIS fiber optic network in 2024, moving to a new police record management system in 2023 or 2024, annual renewal of the body worn camera software, and planning to hold a request for proposals for a new website in 2023. 16. Conduct professional city-wide survey with Morris Leatherman to solicit feedback on city services/projects/issues (delayed from 2020 and 2021 due to pandemic), continue to encourage/improve public participation in city affairs and promote inclusiveness, continue to promote Nextdoor.com, update performance measurement report and SMART goals and conduct City Day event. 17. Continue to update 10-year pavement management and street infrastructure plans and implement curbside residential organics collection requirement on licensed waste haulers, per Hennepin County ordinance. 18. Continue participation in Green Steps program and implement actions to achieve higher ranking in program. 19. Staff recommends incorporation of a 3% cost of living adjustment for employees so the compensation study results remain current and a 50/50 cost share for employee insurance increases. Council salary adjustments will be implemented and a 3% increase is included in the budget. All line items in the budget received several series of reviews and evaluations by department heads and the city manager. Sanitary Sewer – At 12/31/20 the sanitary sewer utility fund had a cash balance of $1,400,403. The City Council approved a 5% rate increase for 2021. A 4% rate increase is recommended for 2022 to meet ongoing capital needs and to keep pace with the rate increases approved by the Metropolitan Council. Water – At 12/31/20 the water fund had a cash balance of $2,345,370. A 5% rate increase was implemented in 2021. A 4% rate increase is recommended for 2022 to meet ongoing capital needs and to keep pace with the rate increases approved by the Joint Water Commission. Storm Water – At 12/31/20 this fund had a cash balance of $1,024,563. A 5% rate increase was implemented in 2021 and a 5% rate increase is recommended for 2022 to meet ongoing capital needs. -7- Street Lighting – At 12/31/20 this fund had a cash balance of $70,954. A 5% rate increase was implemented in 2021 and a 5% rate increase is recommended for 2022 to meet ongoing capital needs. Golf Course – At 12/31/20 this fund had a cash balance of $214,545. The 2022 budget calls for a $26,678 increase in cash, after accounting for $54,000 in capital improvements. Ice Arena – This fund had an interfund loan of $156,685 to assist with cash flow management as of 12/31/20. The arena also had cash held with fiscal agent in the amount of $1,560,053 as of 12/31/20 which was reserved for principal payoff of the 2011A facility bonds in 2028. The City refinanced the 2011A bonds in early 2021 and utilized the cash held with fiscal agent to reduce the principal obligation on the bond. The 2022 budget calls for an increase in the cash balance of $66,373 after factoring in a $500,000 transfer in from the Park Infrastructure Fund, payment on capital improvements of $260,000 and a $220,000 principal paydown on the 2021A Bonds. It is anticipated that an interfund loan will be used to finance the majority of the capital improvements to be completed in 2022. Conclusion Historically (or in prior years), legislative changes to levy limits, local government aid and other state aid programs have placed increased pressure on municipal budgets. To counteract these changes and ensure the financial health of the city, certain financial practices have been implemented. Measures include implementation of a financial management plan in 2016, a ten-year long-term financial plan in 2018 (replaced the city’s existing five-year program) as well as adherence to fund balance policies. Collectively, these practices have contributed to the city’s AA bond rating and ensure the city can maintain a strong financial position even in challenging economic times. The 2022 budget represents staff’s best efforts to hold the line on spending and keep the overall increase in levy to a minimum. Council and staff are committed to providing quality services and maintaining the city’s investment in infrastructure. As the Council is aware, the city has utilized the services of Abdo, Eick and Meyers, LLP to assist in developing the current budget format and facilitating meetings with department heads. Their assistance as a change agent has been beneficial as the city has significantly modified the budget presentation. Respectfully Submitted, Kirk McDonald City Manager -8- Budget Process The annual budget is prepared in accordance with Minnesota statutes which previously mandated a “Truth in Taxation” program for local governments. This process required local governments to give notice to each property owner regarding their intention on budgets and levies. Under statutes passed in the 2009 legislative session, the published notices, public hearings and meetings were essentially abolished. Pursuant to state law, councils must include information on the budget and levy process in meeting minutes. Citizens must be allowed to speak at “regularly scheduled meetings” dealing with budgets and levies and these meetings must not be held before 6 p.m. Cities must provide the same specific meeting information to county auditors on or before September 30. The city manager and finance consultant, in conjunction with department heads, are responsible for the development of the annual budget. The city attempts to adopt a balanced budget so that the appropriated expenditures do not exceed the estimated revenues and reserves available from prior years. As the budget calendar indicates, the budget process begins in May each year with the distribution of budget information to all departments. All departments are responsible for compiling budget figures which are then reviewed and adjusted by the city manager during individual department meetings. After the departmental meetings the city manager presents the proposed budget to the City Council. The proposed budget is reviewed by the City Council and the final budget is adopted by the end of December. A public hearing to receive public comment on the budget will be held on December 6, 2021. 2022 BUDGET SCHEDULE May - June, 2021 General discussion/direction. By July 31, 2021 Department head meetings with city manager and finance consultant. August 16, 2021 Preliminary budget presented at work session/discuss tax levy. September 7, 2021 Tentative additional budget work session if no consensus on tax levy at August work session. September 13, 2021 Preliminary maximum levy adopted by council. September - Nov. Continue to refine general fund budget and discuss all enterprise and utility fund budgets. September 20, 2021 Review individual department budgets with department heads. October 18, 2021 Review HRG programs and rates as well as utility and enterprise fund budgets. November 15, 2021 Review budget document for public hearing. December 6, 2021 Budget public hearing. December 13, 2021 Adopt final approved budget. Revenues Property Taxes are a revenue source in the general, special revenue and infrastructure funds. This revenue source is primarily used in the general fund to pay for general government services and is determined on the basis of availability of other revenue sources and the expenditure level necessary to conduct city business in accordance with council policies and directives. Intergovernmental Revenues includes state aid for police, street maintenance, and grant funding. These budget items are susceptible to overall State of Minnesota budget conditions. -9- Revenues (continued) Licenses & Permits include business licenses, building-related permits and fees, and other non-business licenses and permits. Charges for Services include administrative charges, recreation program fees, police and fire services, and facility use fees. Fines & Forfeits include fines paid for traffic violations and criminal offenses occurring within city limits. Investment income includes interest earned on the city’s investment portfolio. Interest income continues to be difficult to predict due to the current market conditions. Franchise fees were implemented in 2003. The rate for residential properties was $1.50 per month for gas and electric franchise fees. Between years 2003 to 2009 the revenue from franchise fees was split between the EDA and the general fund. Between years 2010 to 2016, due to the reduction of LGA, the entire revenue from franchise fees (approximately $440,000) was placed in the general fund. Council adopted ordinance 2016-11 to increase franchise fee rates effective January, 2017, to raise additional revenue for the street infrastructure fund based on the long-term pavement management plan. The new rate for residential properties is set at $3.00 per month for gas and electric franchise fees. It was agreed that the first $880,000 of revenue would be divided equally between the general fund and the street infrastructure fund ($440,000 per fund) and that any excess revenue above the first $880,000 would be allocated to the general fund in an effort to keep the tax levy lower. -10- Tax Levy, Tax Capacity, and Tax Impact The proposed budget for 2022 reflects a tax levy of $18,231,011 which is an increase of 4.67 percent. The following table summarizes the 2021 tax levy compared with 2022: The city-wide tax capacity represents the taxable property value within the city. It is determined by applying the state-wide property tax formula for each parcel, then adding each parcel’s tax capacity. The city-wide tax capacity is then applied to the proposed levy to determine the local tax rate. The following table shows the change in tax capacities by property type: -11- The following table summarizes the local tax rate: (1) Source: Hennepin County Tax Capacity Values by City/Town for Taxes Payable 2022 Proposed. (2) Source: Hennepin County Table VIII Computation of Area Wide Distribution Levy for Taxes Payable in 2022. (3) Amounts for county, school district and other districts are not known at this time. Prior year actual tax rates have been used for this illustration. -12- The following table summarizes the estimated tax impact on residential homes based on the proposed increase in the city tax levy. *The median home value for taxes payable in 2022 is $275,000, which is a 7% increase from the median value home in 2021. Information on the median value home was obtained from the Hennepin County 2021 Assessment Report – Estimated Market Value Medians by City Report. Actual impact to a home will vary.