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06/17/1991 - City Council SpecialIiiiiiirr ,., i4 MEMO TO: HONORABLE MAYOR AND CITY COUNCILMEMBERS FROM: CITY ADMINISTRATOR HEXES DATE: JUNE 17, 1991 SUBJECT: SPECIAL CITY COUNCIL MEETING/JUNE 18, 1991 A special City Council meeting is scheduled for 5:00 p.m. on Tuesday, June 18, 1991, for the purpose of reviewing recommendations for a second adjustment to the 1991 General Fund Budget and revised numbers for the 1992 through 1996 capital improvements program. A meal will be provided from Apples Restaurant (menu attached) ; please contact Karen by noon on Tuesday to order the sandwich of your choice. All Department Heads will be present and an hour and 15 minutes, starting at 5: 00 p.m. , should allow enough time to discuss each of the two agenda items that are outlined in further detail in the attached memos. —,------7 - City dministrator TLH/kf = 9 - g L 1 t w ? p P r;4 r;Y1 S • E ., I t t 4. 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C4=1 .1 l " 2' ifjI V r Vt li w et 11 I 1 i 1 L f � � I1 is 1 i 45 a L • $ ti ca = 3 = 'a . i all o xG�J, u uu_ o 15. 1 % r e w 1 MEMO TO: HONORABLE MAYOR & CITY COUNCILMEMBERS FROM: CITY ADMINISTRATOR HEDGES DATE: JUNE 10, 1991 SUBJECT: BUDGET REDUCTIONS/JUNE 1991 The Legislature has adopted, as a part of the Omnibus Tax Bill package, yet another HACA reduction in 1991 to be taken from the December payment. The Director of Finance has verified the reduction with the Department of Revenue to be $162,575, subject to a small adjustment. Like the July payment reduction, the general fund adjustment is 79.9% of that total, while the debt service levy, major street fund levy and equipment revolving fund levy combined are 20. 1%. The general fund dollar amount of the reduction is therefore $129,897 and the other funds total a reduction of $32,678. At the March 5, 1991 City Council meeting, the general fund budget was adjusted by $171,160 of which $154,660 were reductions and $16, 500 were an increase in park revenues. This budget adjustment offset legislative action that reduced the July payment of HACA by $167, 820. There were five (5) positions eliminated as a result of that budget reduction. The City Administrator issued a memo to all departments in early February suggesting that a part of each departmental operating budget be frozen, including capital equipment, until the Legislature adjourned and cities knew the implications of the 1991 budget reductions and also budgetary expectations for 1992. Across all City departments, the services currently being offered by the City of Eagan are basic. Most all of the services are considered essential as public safety, both police and fire, or are expected by the public, such as street and park maintenance, recreational programs, planning and zoning and inspections. Support functions, such as administration and finance, provide only basic support to these operating functions as well. Numerous cities provide services, such as tree trimming, leaf pick-up from curbsides and other similar programs, which are clearly less essential in nature. Three (3) options are being presented for the City Council to consider in adjusting the 1991 general fund budget. The first consideration is a proportionate reduction of the $129,897 across all general fund departmental budgets. The result of this decision might be cuts and reductions of certain line items the City will find very difficult to control, such as supplies, fuel, maintenance and other related costs. Also, the impact, without reducing a 0. specific service delivery, is a lowering in the quality of all City services. Each time the general fund operating budget is reduced without eliminating or reducing the quantity of service, the quality of all services is reduced. Department Heads have considered a variety of reductions that vary from transferring certain fees to public enterprise, such as, intersection street lighting energy costs, a reduction of line item expenses in the Fire Department, a reduction of capital totalling $19,000 in Community Development, across the board reductions on line item expenses for Police, reduction of sealcoating in Parks and Recreation for trail improvements, and other capital outlay equipment as listed in the General Fund to be financed by the Equipment Revolving Fund or General Fund. The second consideration is to reduce one or two departments by the $129,897 which specifically eliminates a service to the public. The department heads did not address this option as a part of the 1991 budget amendment, using the argument that services that are being provided in the City of Eagan are basic and the impact would be felt and considered unacceptable by the residents/users. As an example, boulevard mowing could be eliminated. However, developers, neighborhoods and the image of the community would be impacted by this type of decision. Reducing recreational programs when the users are increasing at a rate of 20% per year is another difficult decision. The City Council has already reduced certain services, such as responding to car lock-outs which will now be served by the private sector. The third consideration is to create new revenue sources. One example which many cities are utilizing is to charge a management investment fee for all investments that are coordinated by the Director of Finance or City Treasurer. A 2% management investment fee charged against all interest earnings generated by the City would generate approximately $100,000 of revenue for the general fund. There are public entities that hire management investment firms to handle all investments on behalf of the municipality. Since the City of Eagan uses the talent of the Director of Finance for coordinating all City investments, it would be appropriate for the general fund to receive, as a revenue source, a management investment fee for that service. The 1991 budget could be amended to include this revenue source in addition to some other budgetary reductions totaling $129,897. The second amendment to the 1991 general fund operating budget could then be approved without any further impact on general fund operations. The 1989 actual general fund expenditures eliminating non-recurring charges and transfers were $10,628,111. The 1990 budget was $10,767, 130. Assuming a budget adjustment totaling approximately $300,000 to the 1991 budget of $11,109,160, the 1991 budget as amended will be $10,809,160. Unfortunately, the level of spending has been nearly constant for three (3) years while inflation has increased at a rate of approximately 4% and the growth of the community has increased at a rate of 4%-5% per year. During these three (3) years, there have been very few reductions in the quantity of services provided by local government. However, the quality of those services has been impacted due to a constant budget with a corresponding increase in police calls, recreation program sign-ups, miles of streets to maintain by serving approximately 7,000-8, 000 more constituents over the past three (3) years. Because the City of Eagan is a rapid growth community, struggling due to levy limits, low per capita aids and the pressures of a growing constituency, it is recommended that the third option be given strong consideration in evaluating the second budget amendment for 1991. Tc3cLCity Admini rator T41- TLH/vmd • MEMO TO: HONORABLE MAYOR AND CITY COUNCIL MEMBERS FROM: CITY ADMINISTRATOR HEDGES DATE: JUNE 17, 1991 SUBJECT: C.I.P. (1992 - 1996) The draft Capital Improvements Program budget has been changed from 1991 - 1995 to 1992 - 1996. Both replacement and new equipment for 1991 has been authorized for acquisition. More than likely capital building programs will not require funding during 1991. This change will be consistent with plans for the 1992 general fund budget. Certain C.I.P. expenditures are financed with public enterprise user or connection fees and other projects receive financing from dedicated funds, such as special assessments. This memo addresses projects that require funding from the sale of General Obligation Bonds (G.O. ) , Community Investment and Equipment Certificates. Instead of considering $16,018,500 of capital expenditures that would require $7,858,500 to be financed by a bond referendum or referendums and the remaining amount financed with interest from the Community Investment Fund, the five year C.I.P. has been reduced. For comparative purposes these numbers are included in this memo. At the most recent meeting, during which the C.I.P. was discussed, the following summary was presented: COMMUNITY G.O. INVESTMENT BOND PROJECT FUND JEFERENDUM 1991 Law Enforcement Arch $ 30,000 Ice/Pool 2,750,000 $2,750,000 Park Improvements* 486,500 1992 Law Enforcement 2,500,000 Fire Station 6, Station 2 and Equipment 2,865,000 Park Improvements* 1,484,000 1993 Fire Administration Remodel 425,000 Fire Opticom Signalization 343,000 Park Improvements* 442,500 1994 Fire Station 3 Expansion 185,000 Park Improvements* 569,500 CAPITAL IMPROVEMENTS PROGRAM JUNE 17, 1991 PAGE TWO COMMUNITY G.O. INVESTMENT BOND PROJECT FUND REFERENDUM 1995 Fire Station 1 Remodel $ 125,000 Park Improvements* 1,063,000 $8,433,000 $7,585, 500 Summary Law Enforcement $2,530,000 - $2,530,000 Ice/Pool 2,750,000 $2,750,000 5, 500,000 Fire 1,078,000 2,865,000 3,943,000 Park Improvements* 2.075. 000 1,970.500 4. 045.500, $8,433, 000 $7,585,500 $16,018,500 * All park improvement expenditures listed are over and above amounts available from the Park Site Fund. The revised C.I.P. is non-specific by project, for example, amounts have been proposed for Parks and Fire without an actual designation of use. Direction by the City Council as to a level of capital spending and years to propose financing certain projects is necessary. Staff will readjust the priorities and recommend projects that meet the revenue levels set by the City Council. The following is one consideration/example of a five year C.I.P. that reduces reliance on referendums and allows for the use of interest only of the Community Investment Fund. Any expenditure proposed to be financed by a referendum can certainly be changed if financing is available from another funding source such as a private contribution or special City funding. REVISED C.I.P. COMMUNITY 0.0. INVESTMENT BOND PROJECT FUND REFERENDUM 1992 Land Acquisition/Fire Station #6 $100,000 Ice Arena Facility $2,500,000 1993 Law Enforcement/ Municipal Center 2,500,000 Fire Station #6 and Equipment 1,200,000 CAPITAL IMPROVEMENTS PROGRAM JUNE 17, 1991 PAGE THREE COMMUNITY G.O. INVESTMENT BOND PROJECT FUND REFERENDUM 1994 Park Land Improvements (Non-park site) $1,000,000 1995 None 1996 None $4,800,000 $2,500,000 Summary Law Enforcement $2,500, 000 $2,500,000 Ice Arena $2, 500,000 2,500,000 Fire 1,300,000 1,300, 000 Park Improvements 1.000.000 1.000, 000 $4,800,000 $2,500,000 $7,300,000 The reduction in reliance on G.O. Bonds from $7,585,500 to $2,500,000 is favorable in terms of the City's ability to pass the necessary referendums as well as with the impact on the bond rating. The recently passed omnibus tax bill which requires referendum levies to be spread against market value and not tax capacity will probably make it more difficult to pass any type of referendum. The revised amount from the Community Investment Fund also brings that funding source into line with a principal amount that can be supported from interest earnings. All available revenue currently projected from that source would be tied up for the 20 year period. You will note that this consideration/example illustrates significant reductions and eliminates or postpones $8,718,500 of expenditures which had originally been included in the proposed five-year C.I.P. , IQ% City Administrato i TLH/jeh