08/22/2006 - City Council SpecialSPECIAL CITY COUNCIL MEETING
AUGUST 22, 2006
5:30 PM
EAGAN ROOM-EAGAN MUNICIPAL CENTER
AGENDA
I. ROLL CALL AND AGENDA ADOPTION
II. VISITORS TO BE HEARD
III. CONSENT
A. ECONOMIC DEVELOPMENT AUTHORITY - Cedarvale Mall Property
Management Service Contract with Griffin Companies
5 IV. 2007 PROPOSED CIVIC ARENA BUDGET
2007 PROPOSED TAX LEVY AND GENERAL FUND OPERATING
~. ~• BUDGET
VI. OTHER BUSINESS
VII. ADJOURN
The City of Eagan Economic Development Authority will hold a special meeting as a part of this
Special City Council Meeting.
Agenda Memo
Special Eagan City Council Meeting
Consent Item -Economic Development Authority Meeting
August 22, 2006
A. CEDAR GROVE REDEVELOPMENT DISTRICT -PROPERTY
MANAGEMENT SERVICE CONTRACT WITH GRIFFIN COMPANIES
FOR OPERATION OF THE CEDARVALE MALL PROPERTY
ACTION TO BE CONSIDERED: To convene a meeting of the EDA, adopt a
resolution to approve a Property Management Service Contract with Griffin Companies
for the operation of the Cedarvale Mall property and to authorize the EDA President and
Executive Director to execute the appropriate documents and to adjourn the EDA
meeting.
FACTS:
• In anticipation of the redevelopment of the Cedar Grove Area, the City is
proceeding with the acquisition of the Cedarvale Mall. The City is scheduled to
take possession of the mall on September 1, 2006.
• While staff, the City Attorney and relocation consultant are working with the mall
tenants to facilitate their relocation, a number of them will remain in the building
for a period of time after that date.
• To minimize the number of changes occurring at that time, staff has solicited a
proposal from the property manager that currently operates the mall, Griffin
Companies, to continue that service until the remaining tenants aze relocated from
the space. The scope of work will include general building maintenance, repairs,
cleaning, site management, mowing, etc. It is staff's intention to have the snow
removal for the property added to one of the City's snow removal contracts.
• Staff and the City Attorney are finalizing the details of the agreement, so it will be
in order for approval at Tuesday's meeting.
ATTACHMENTS:
• Area map on page
• Resolutions on pages w
• Property Management Agreement available upon request.
Cedar Grove Redevelopment Area
Cedarvale Mall Site
o azs sso t,aoo
tr city of Cagan Feet
CITY OF EAGAN
RESOLUTION TO APPROVE A PROPERTY MANAGEMENT AGREEMENT
BETWEEN THE CITY OF EAGAN AND GRIFFIN COMPANY RELATED TO
THE MANAGEMENT OF THE CEDARVALE MALL PROPERTY
BE IT RESOLVED by the Eagan City Council to Property Management Service
Contract Between the City of Eagan and Griffin Companies for operation of the
Cedarvale Mall property in the Cedaz Grove Redevelopment District.
Motion by:
Second by:
Those in Favor:
Those Against:
CERTIFICATION
I, Maria Petersen, City Clerk of the City of Eagan, Dakota County, Minnesota, do hereby
certify that the foregoing resolution was duly passed and adopted by the City Council in a
regulaz meeting thereof assembled this 22"d day of August, 2006.
Maria Petersen, City Clerk
EAGAN ECONOMIC DEVELOPMENT AUTHORITY
RESOLUTION TO APPROVE A PROPERTY MANAGEMENT AGREEMENT
BETWEEN THE CITY OF EAGAN AND GRIFFIN COMPANY RELATED TO
THE MANAGEMENT OF THE CEDARVALE MALL PROPERTY
BE IT RESOLVED by the Board of Commissioners of the Eagan Economic
Development Authority to approve a Property Management Service Contract Between
the City of Eagan and Griffin Companies for operation of the Cedarvale Ma11 property in
the Cedar Grove Redevelopment District.
Motion by:
Second by:
Those in Favor:
Those Against:
CERTIFICATION
I, Jon Hohenstein, Secretary/Deputy Executive Director of the Economic Development
Authority of the City of Eagan, Dakota County, Minnesota, do hereby certify that the
foregoing resolution was duly passed and adopted by the Authority in a regular meeting
thereof assembled this 22"d day of August, 2006.
Jon Hohenstein, Secretary/Deputy Executive Director
`~
Agenda Information Memo
August 22, 2006, Special Eagan City Council Meeting
IV. 2007 PROPOSED CIVIC ARENA BUDGET
ACTION TO BE CONSIDERED:
To approve the 2006-2007 ice rental rates, to approve the 2007 Civic Arena operating
budget, and to approve the 2006 purchase of 2007 capital outlay items.
FACTS:
• The Civic Arena Budget is being presented in advance of the other Enterprise
Funds due to the fact that the Civic Arena operations are run on a seasonal
basis starting in September as opposed to the calendar year. This is consistent
with the practice established over the past few years.
• The budget as presented is balanced, provides for the appropriate level of
renewal and replacement funds, includes an allocation for capital equipment, and
annual debt service. It is presented in a fashion consistent with previous years
and provides for continued successful arena operations building on the
successes of the enterprise.
• Campus Facilities Manager Vaughan, Superintendent of Operations Mesko, City
Administrator Hedges, Director of Parks & Recreation Johnson, Director of
Administrative Services VanOverbeke, and Chief Financial Officer Pepper have
reviewed the proposed rates, revenue estimates, and expenditure requests
included in this budget.
• The proposed budget is based on ice rental rates being increased slightly for the
2006-2007 season.
• The budget is supported entirely by user fees with no tax dollars used as a
revenue source.
• Since the Civic Arena operates on a season that overlaps two fiscal years, it is
important to begin the 2007 capital outlay improvements in 2006 in advance of
the new ice rental season.
• The proposed capital outlay improvements are presented as part of the
proposed 2007 Civic Arena operating budget.
ATTACHMENTS:
Enclosed on pages ~_ through is a copy of the proposed Civic Arena
2007 budget including rate information, venue and expense information, capital outlay
information, and all related material.
2006 Civic Arena Budget
Traditionally, the Civic Arena Budget has been acted upon in advance of the
other Enterprise Funds and the General Operating Budgets due to the fact that
the Civic Arena operations are run on a seasonal basis starting in September as
opposed to the calendar year. To provide for proper communication with the
various organizations and individuals that are users of the facility, it would be
helpful to have rates, revenues and expenditures all formally set by City Council
action at the August 22, 2006 special meeting. A rate change is being
recommended and the rates would officially be effective September 1, 2006. The
budget including the revenues, expenditures, and capital improvements covers
the calendar year 2007. Approval to begin purchasing 2007 capital items during
calendar year 2006 is also scheduled for consideration in formal action at the
August 22 meeting.
Campus Facilities Manager Vaughan, Superintendent of Operations Mesko, City
Administrator Hedges, Director of Parks & Recreation Johnson, Director of
Administrative Services VanOverbeke, and Chief Financial Officer Pepper have
reviewed the proposed rates, revenue estimates, and expenditure requests
included in this budget. The budget as presented is balanced, provides for the
appropriate level of renewal and replacement funds, includes an allocation for
capital equipment, and annual debt service. Hourly ice time rental rates are
proposed to change; however, Eagan's rates remain competitive while slightly
below the average of surrounding ice arenas. The proposed hourly rates
continue to aggressively price non-prime time ice rental. The strategy which has
been very successful over the years is to maximize rental hours and therefore
total revenue even though the hourly rate is lower than nearly all of the
competing arenas.
Revenues
The estimated 2007 revenues are projected to increase to $881,500 compared to
the 2006 budget of $850,000. The budget as presented includes a $5 per hour
increase to the ice time rental rates. The total increase in revenue results
primarily from the increased hourly rates (approximately $10,000), an increase of
$20,000 in the budget for Adult Leagues, and a $10,000 increase in sponsorship
revenue. Numerous other accounts continue to be adjusted to reflect actual
results. There is no significant increase in the total projected rental hours.
Included in the revenue estimates is a conservative projection of $2,000 resulting
from the Arena Softball initiative that is contingent upon approval of the capital
outlay request to purchase the necessary infrastructure.
The following table displays the Civic Arena Revenue Summary and Revenue
Detail including actual revenues for 2004 and 2005, the approved 2006 budget,
and the estimated 2007 revenues.
Cv
CIVIC ARENA REVENUE SUMMARY
2004 2005 2006 2007
Actual Actual Budget Estimated
Rentals-Ice $ 503,402 $ 500,878 $ 465,000 $ 479,000
Rentals-Non Ice 22,287 12,126 20,500 16,000
Services 42,000 42,517 48,500 46,500
Programs 145,171 162,228 161,000 183,000
Events 27,192 24,321 24,000 20,000
Sessions 31,507 24,659 32,500 31,000
Sales 86,431 87,202 93,500 96,000
Other 16,628 12,094 5,000 10,000
Total $ 874,618 $ 866,025 $ 850,000 $ 881,500
CIVIC ARENA REVENUE DETAIL
2004 2005 2006 2007
Actual Actual Budget Estimated
Ice Rental-Exempt
Ice Rental- Non exempt
Equipment Rental
Skate Sharpening
Learn to Skate
Ice Show
Open Skate
Open Hockey
Adult Leagues
Equipment Washing
Punch Card Revenue
Parties
Concession Revenue
Pro Shop Revenue
Vending-Vendor Owned
Vending- Arena Owned
Home Show
Arena Advertising
Marketing Money
Sponsorships
Dry Floor Rental-Exempt
Dry Floor Rental-Non Exempt
Open Freestyle
Circus
Interest
Other
Total
$ 401,049 $ 383,574
102,353 117,304
6,897 5,908
10,825 9,941
110,583 114,870
10,805 6,445
21,454 14,504
9,561 9,337
23,784 40,913
10,178 7,881
6,989 7,168
1,723 5,338
58,603 60,891
5,463 5,017
9,653 10,186
5,723 3,940
24,471 21,956
12,376 13,449
5,416
19, 365 11, 365
2,922 761
492 818
2,721 2,365
6,981 9,294
4,231 2,800
$ 874,618 $ 866,025
$ 370,000
95,000
6,500
11, 000
111,000
10, 000
22,000
10, 000
40, 000
12, 000
7,000
4,000
65, 000
6,000
9, 500
6,000
22,000
15,000
15,000
5,500
500
2, 000
5,000
$ 850,000 $ 881,500
$ 380,000
99,000
6,500
10,000
115,000
8,000
20,000
10, 000
60,000
9,000
7,000
6,000
65,000
6,000
12,000
6,000
20,000
15,000
10,000
15,000
1, 000
1, 000
Hourlv Rates
The following is a summary of hourly ice rental rates for the surrounding
comm
unities/arenas proposed for the 2006-2007 skating season.
Proposed 2006107 Season Rates For Surrounding Communities
Hourl Ice Rental Rates
Prime Non-Prime
Cit /Arena Time Time
Farmington $ 150 $ 120
Apple Valley 165 110
Rosemount 165 115
Burnsville 170 125
Lakeville 180 145
Inver Grove Heights 175 145
South St. Paul 170 140
Richfield 160 130
St.Thomas Ice Arena 190 120
Average Prime Time Rate Excluding High ($190) and Low ($150): $169
Avera a Non-Prime Time Rate Excludin Hi h ($145) and Low ($110): $125
The following is a comparison of Eagan's 2005-2006 rates to the rates proposed
for the 2006-2007 season.
Eagan Hourlv Ice Rental Rates
Season
Approved Proposed
User/Use 2005-2006 2006-2007
Eagan Association $ 155 $160
Eastview Association 157 162
High School 165 170
Non-Prime 112 112
Turf 75 75
D floor 40 40
Expenditures
Enclosed on pages ~ through ~ is a copy of the detailed line item
budget information for the Civic Arena. On a comparative basis the proposed
2007 budget of $881,500 is increased by 3.7% from 2006 budget of $850,000.
Enclosed on page ~ is a reconciliation that allows a comparison of the
budget format on a cash basis to the actual financial report which is reported on
a full accrual basis. This page has no budget implications; however it helps
explain the differences between the budget and the official financial report as
certified to by the independent auditors.
The personnel section of the Civic Arena budget is consistent with the
presentation for the 2006 budget and continues to reflect the implementation of
the recent organizational study. To better utilize resources and to gain
efficiencies, the study recommended more consolidation of operations between
the two enterprise facilities located on the Municipal Center Campus and the
Community Center. The study recommended and the City Council authorized
the elimination of the Cascade Bay Manager and Civic Arena Manager positions,
and the creation of the Campus Facilities Manager and the Superintendent of
Operations positions. This action and the related reallocation of support
personnel between the Civic Arena and Cascade Bay are reflected in the
following table for the Civic Arena and in the presentation of the Cascade Bay
budget. Finally, with the consolidation of the management of the two campus
facilities the need for operational support is reflected in this proposed budget
through the continuation of an additional clerical/administrative position. The
new position was added in 2006 with a one year sunset provision to allow the full
implementation of the new operational model and to provide for a management
review of organizational needs and service delivery over the year. Staff is
recommending that the position be approved on a continuing basis beginning in
2007 to maintain the required support services to the management of the
enreronse racniues.
Personnel
2004
2005
2006 Proposed
2007
Civic Arena Manager 1 1 0 0
Campus Facilities Manager 0.67 0.67
Building Supervisor 1 1 0 0
Skating School Coordinator 0.75 1 1 1
Maintenance Worker (2 @ 0.5) 1 1 1 1
Operations/Maintenance Worker (1 @ .67) 0.67 0.67
Clerical Technician 0.20 0.20 0.20 0.20
Administrative Coordinator 0.33 0.33
3.95 4.2 3.87 3.87
All partial positions are shared with the Cascade Bay and in the case
of the clerical technician also with the General Fund.
In addition to the above noted regular employees the proposed 2007 budget
includes $150,000 in wages for seasonal employees compared to $145,000 in
the 2006 budget.
As a result of the above referenced changes, the personal services budget
increases by $22,500 or 5.7%.
9
Other significant expenditures changes in the proposed 2006 budget include the
following:
• Line item 6220 Operating Supplies -General is reduced by $3,000 to more
accurately reflect past actual expenditures.
• Line item 6357 General Advertising is maintained at $8,000. In the past, the
ECVB has assisted the Civic Arena with the advertising for the Home and
Leisure show and this line item reflects the continuation of the partnership
through the ECVB funding of approximately $3,000 for that promotion.
• Line item 6405 Electricity is increased by $3,000 to reflect actual usage.
• Line item 6410 Natural Gas is increased by $7,000 to reflect actual usage.
Additional adjustments in future years for these two line items (Electricity &
Natural Gas) are expected as a result of the improvements being made following
the energy audit. Staff has not made an effort to include projected savings from
the energy audit related improvements into this operational budget. Completion
of the improvements and establishment of a track record will facilitate better
estimates in the future.
• Line item 6535 Other Contractual Services is increased by $17,100 to more
accurately reflect historical usage. This account provides for the more
specialized and technical maintenance requirements at the arena, for
example refrigeration and HVAC.
• Line item 6491 Debt Services Payments is increased by $1,800 to reflect
changes in the actual debt service schedule.
• Line item 6855 Merchandise for Resale is reduced by $20,000 reflecting the
new process in accounting for and pricing the cost of goods sold across the
enterprise operations.
Capital Expenditures
The 2007 expenditure line items show an account for a capital outlay allocation
with an appropriation of $10,000, continuing the process implemented with the
2004 budget. Civic Arena capital needs can best be addressed by setting aside
some money from each year's operations through the operating budget process
and combining that with the use of available retained earnings to provide for
capital needs to renew and enhance the facility beyond what is available through
the renewal and replacement account. This process clearly designates a Civic
Arena use for retained earnings while preventing spikes in annual operating
budgets caused by fluctuating capital needs.
~~
Enclosed on page is a list of proposed 2007 capital items for
consideration. Renewal and replacement items are included in the first section of
the list and are funded by the annual allocation set aside from operations for that
purpose. There are no replacement items not funded through the renewal and
replacement account proposed in the 2007 budget (second section). The third
section includes new items that would either enhance operations at the arena
with the goal of increasing utilization of the facility thereby increasing revenues or
by maximizing other revenue opportunities. The third section of the list is funded
through the annual capital allocation from the operating budget ($10,000 each in
2004, 2005, 2006, and 2007 to date) and from retained earnings as available and
appropriate.
Enclosed on pag is an ex lanation of each of the proposed 2007 capital
items. Also enclose on page is a worksheet showing the infrastructure
included in the renewal and replacement funding process. The worksheet shows
the cost, being recovered and the useful life of each capital item.
Enclosed on page is a copy of the 2006 Civic Arena Capital Improvement
List -Update showing a current status of each of those capital needs.
At the time of final 2007 budget approval staff is recommending that the City
Council approve the purchase of the 2007 capital items in the 2006 fiscal year so
they are in place for the 2006-2007 operational season.
Cash Position
Enclosed on page is a copy of an analysis showing the cash position of
the Civic Arena Fund rom inception through the 2006 budget. In summary the
analysis shows $347,960 in the official renewal and replacement account and
$173,654 of retained earnings over the 12 year period. Those balances will both
be impacted in the process of paying for the energy related improvements
recently approved by the City Council. On a cash basis, results from operations
vary annually depending primarily on capital acquisitions. The analysis
demonstrates that the facility is on firm financial footing and should be able to
sustain similar operations into the future absent any significant change to market
forces.
The following is a recap of the status of the Eagan Hockey Association
commitment to the addition of the East Arena. The commitment will be
completely paid off in 2007.
Eagan Hockey Association Contributions to Eagan Civic Arena II
9337.1340.3
$500,000 over 10 year period.
Payment
Number Date Amount Paid Balance Due
$ 500,000
1 02/17/98 $ 50,000 450,000
2 Ice Resurfacer 59,500 390,500
3a 05/05/99 25,000 365,500
3b 05/23/00 50,000 315,500
4 06/03101 50,000 265,500
5 06/03!02 50,000 215,500
6 05/30/03 50,000 165,500
7 06/20/04 50, 000 115, 500
8 06/09/05 50, 000 65, 500
9 05/31 /06 50, 000 15, 500
10
TOTAL $ 484,500
Payments 1 & 2 were deposited directly to the Civic Arena Fund.
All additional payments are to be deposited to the CIF.
Summary
There is a great deal of material presented with this budget proposal to assist the
City Council in its consideration of the 2007 budget. The 2007 budget as
presented is balanced, continues the results of the organizational study, provides
for the appropriate level of renewal and replacement funds, includes an allocation
for capital equipment as well as an allocation for some capital improvements, and
the annual installment for the scheduled debt service. Although increased,
hourly ice time rental rates remain competitive while slightly below the average of
surrounding ice arenas.
Staff continues to efficiently operate the arenas and to aggressively market the use of
the facility to increase revenues and is making every effort to operate a successful
business venture per City Council direction. While ice time rental is the basic
business of the facility, auxiliary uses account for approximately 19% ($165,000) of
the estimated revenues for 2007 and clearly demonstrate management's and staffs
commitment to customer service and to expanding revenue opportunities. The
continued marketing has attracted some non-ice users, growth of the Home and
Leisure Show and extra amenities for our customers.
t''~
Positive Civic Arena operations continue with the growth of the skate school provided
by the City of Eagan, the continuation of a figure skating club at the arena and the
growth in Adult Leagues.
The cash position is an indicator of previous success as a business. However,
the competition from surrounding rinks and customer expectations demonstrate
the need to remain efficient and to remain a preferred vendor for the services
provided through the arena operations. This proposed operating budget and the
proposed capital improvements assist in meeting that objective.
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2007 Civic Arena Capital Improvements List
Renewal and Replacement
Hot Water Heaters $ 6,000
Sub-total $ 6,000
Replacement Items
None
Sub-total $
New Items
Arena Softball $ 10,000
Arena Curtain 8,000
Sub-total $ 18,000
Total Capital Improvements $ 24,000
The hot water heaters ($6,000) will be paid for from the renewal and replacement
account and the new items ($18,000) will be financed from the capital outlay allocation set
up with the 2004 budget and being funded annually at $10,000. The cumulative balance in
that account is carried forward in the unrestricted retained earnings account for
financial reporting purposes.
~~
2007 Capital Improvements Descriptions
Renewal and Replacement
Hot Water Heaters -The hot water heaters in the West Arena need to be
replaced in the very near future. Staff has been working with Harris Services
regarding the replacement and potential upgrade to the system. Based on the
renewal and replacement schedule, the equipment was scheduled for
replacement after 7 years in 2002. There is currently $6,600 in the R&R fund
scheduled to be used for the purchase of new water heaters. The preliminary
research from Harris Services identifies a potential cost of $14,000 and they are
working to determine if this project would be eligible for energy rebates.
New Items
Arena Softball -Staff is working with the Arena Softball organization to upgrade
the East Arena for expanded spring use of the indoor turf. Arena softball is a
new sport to Minnesota and Eagan would be the first and only option to try this
extreme sport for players of all ages. Half of the arena will be netted from ceiling
to the floor to create acaged-in area for arena softball leagues, enlarged batting
cages, and to add protection to the lighting.
Arena Curtain -The arena currently rents curtains for the annual ice show and
staff is requesting to purchase them instead. While owning them would expand
the versatility of the ice show, these curtains could be rented to other ice arenas
for events or utilized at the Eagan Community Center in the gymnasium for
events.
~~
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~~
2006 Civic Arena Capital Improvements List -Update
Renewal and Replacement
Boiler $ 15,000
Sub-total $ 15,000 See below-- to be completed
by 11-1-2006.
Replacement Items
Computer $ 2,000 Completed
Carpet for Community Room 2,000 Change to waxing-carpet not installed.
Multi Plexer 5,000 Completed
Sub-total $ 9,000
New Items
Feasibility and Design Options
Rubber Matting Installations
Computer CPU Only
Sub-total
Total Capital Improvements-
2006 Budget
$ 5,000 In process pending more planning.
4,000 Completed
1,000 Completed
$ 10, 000
$ 34,000
Note: The boiler replacement has been incorporated into the improvements resulting
from the energy audit to maximize cost effectiveness of operations. The complete
energy related project and funding sources are as follows:
Renewal
and Retained
Improvement Component Replace Earnings
Boiler $ 15,000 $ 3,083
De-Super Heater - 25,194
Replace Lighting - 33,518
Total $ 15,000 $ 61,795
Total
$ 18, 083
25,194
33, 518
$ 76, 795
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Agenda Information Memo
August 23, 2006, Special Eagan City Council Meeting
V. 2007 PROPOSED TAX LEVY AND GENERAL FUND OPERATING BUDGET
DIRECTION TO BE CONSIDERED:
• To provide direction regarding the 2007 proposed tax levy, which will be placed
on the September 5, 2006, regular City Council meeting agenda for approval and
certification to Dakota County.
• To provide public policy direction to the City Administrator regarding any
questions and/or revisions to the proposed 2007 General Fund Operating
Budget.
FACTS:
• Preparation of the 2007 preliminary General Fund budget began this past April,
with departments each submitting budget requests in June.
• Since that time, the budget team-City Administrator Hedges, Director of
Administrative Services VanOverbeke, Chief Financial Officer Pepper, and
Assistant to the City Administrator Miller-have met with each of the
departments to finalize the City Administrator's recommended budget.
• The general narrative is laid out in a fashion similar to previous years. The
individual department budgets are presented in a revised manner incorporating
additional information helping to begin the process of enhancing the budget to
become a better and more comprehensive planning, policy, and communications
tool
• The department directors will be present at the meeting to respond to any
questions the City Council may have about the proposed budget.
• The City must certify a proposed tax levy to the County Auditor, adopt a
proposed budget, and select dates for the initial and continuation truth in taxation
hearings no later than September 15. Formal City Council action to comply with
those requirements is currently scheduled for the September 5, 2006 regular City
Council meeting. Material prepared for that meeting will incorporate direction
received at this workshop as well as at the August 29 workshop.
ATTACHMENTS:
• Enclosed on the following pages is the proposed 2007 tax levy and General
Fund Operating Budget information. (As an FYI, numbers 104 through 107 were
not used in the page numbering; there is nothing missing.)
MEMO
city of eagan
TO: HONORABLE MAYOR AND CITY COUNCILMEMBERS
FROM: CITY ADMINISTRATOR HEDGES
DATE: AUGUST 18, 2006
SUBJECT: PAYABLE 2007 PROPERTY TAX LEVY, PRELIMINARY
GENERAL FUND OPERATING BUDGET AND BUDGET
INFORMATION
Introduction
This proposed budget presents the City Council with an opportunity to continue
providing the current level of services while resulting in a reduction in property taxes
even after accounting for reasonable inflation on property values. If desired, it also
provides an opportunity to begin providing replacement revenues for franchise fees and
to enhance funding for the Major Street Fund. The following highlights explained in
more detail in the complete narrative provide a summary of relevant facts:
> The payable 2007 tax levy for operations included in the proposed budget is at
the same dollar amount as the payable 2006 levy. The combined levy including
the levy for the Community Center Debt Service is slightly Tess than payable
2006 and means that a Truth in Taxation (TnT) Hearing is not legally required for
the second consecutive year. The City Council may wish to consider levying
some or all of the amount available under the state threshold to enhance the
Major Street Fund or some similar infrastructure need.
> The estimated City tax capacity rate for payable 2007 is currently 9.0% lower
than the final payable 2006 rate.
. > The estimated market value rate for payable 2007 is 8.1 % lower than the final
payable 2006 rate (applies only to the debt service for the Community Center).
> After providing for a 5.2% inflationary increase in the market value of the
average valued house in Eagan as determined by the County Assessor
(increasing from $264,281 to $278,021), there is a 3.5% decrease in overall City
taxes for payable 2007 (decreasing from $709 to $684) on that sample property.
> As is always the case, and especially with a $25 million budget, there are
significant fluctuations in required appropriations and /or revenue estimates from
year to year that cause anomalies in percentage calculations in certain areas, in
certain departmental budgets or even in the total budget. The 2007 budget
includes a number of those types of items with an extraordinary fuel cost
increase coming in, the biannual election judge wages out, the biannual
community survey in, State payment of the Market Value Homestead Credit
(MVHC) in, and accounting modifications in both directions to highlight a few
examples. The percentage fluctuations are even more dramatic in smaller
departments with lower expenditure bases.
> In an "apples to apples" comparison the proposed 2007 budget is increased by
4.4% over the approved 2006 budget. Due to the combination of the above
mentioned anomalies along with numerous other modifications the overall
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summary shows an increase for 2007 of 5.6 %. Again, due to the various
anomalies and modifications individual department changes vary from a
decrease of 22.3% (City Clerk with no election judge wages and a small base) to
an increase of 26.5% (Fire after moving certain personnel costs in from
Protective Inspections). While remaining sensitive to these variations, staff has
attempted to frame the basic public policy matters for consideration at the more
macro policy level through out the narrative and through out the entire budget.
> Budgets and taxes typically create challenges for staff and elected officials alike
and this budget is no different; however, this proposed budget builds on past
successes, maintains the desired level of services, and allows for reasonable
options for today and into the future.
Meeting Purpose
The City is required to certify a proposed payable 2007 property tax levy to the County
Treasurer- Auditor on or before September 15, 2006.
The primary purpose of the August 22 Special City Council meeting is to review the
proposed property tax levy, the preliminary 2007 General Fund operating budget, and to
provide direction to staff. Any modifications to the proposed levy as directed by the City
Council will then be made in preparation for the September 5 regular City Council
meeting, at which time the preliminary levy can be adopted in official action. The
required material will then be forwarded to the County in time to comply with the
September 15 deadline. Modifications to the preliminary 2007 budget as directed by the
City Council can continue beyond that date in preparation for the TnT hearing to be
scheduled for a date in November /December and before final budget approval.
In a subsequent section of this memo possible dates for the City's TnT hearing are
delineated for City Council consideration. It has been the City's practice to hold the TnT
hearing in late November or early December, followed by a second meeting in
December to adopt the budget. The TnT hearing and the adoption of the budget are
required to take place at separate meetings. Although, since the combined levy is
slightly Tess than the payable 2006 levy and significantly less than the State threshold, a
TnT Hearing is not legally required. In the interest of inviting community participation
into the budget process it has been the City's past practice to follow all procedures in
noticing and holding the hearing as if it is a legal requirement.
The final property tax levy that is due at the County no later than December 28, 2006
can be decreased but cannot be increased from the preliminary certification. To the
extent that it does not require an increase to the overall tax levy, the budget can be
changed at any time throughout the process.
Background
In early April staff began the 2007 budget process with Department Director's proposals
due to the City Administrator on June 16, 2006. The City Administrator and budget
team have met with Directors in preparing the City Administrator's recommended budget
that is now being presented for consideration by the City Council. This budget cycle is
incorporating the beginning steps of a process of enhancing the budget to become a
better and more comprehensive planning, policy, and communications tool. The desired
enhancements are consistent with recommendations of the Govemment Finance
Officers Association and are generally accepted by practitioners and govemments as
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•
appropriate objectives. While the old budget process and book have served the City
well for years, it is important to take the document to the next level.
When reviewing individual department budgets please note that staff has not been able
to complete the necessary work on refining the Performance Indicators and the Work
Plans for this budget draft. They are currently included in each department budget, but
will be refined and improved upon for the published budget and in future years.
Even though there was no financial assistance provided, since the State Legislature has
completed its work, some of the uncertainty associated with previous year's budgeting is
eliminated for at least this one cycle. For the last couple of years the budget has been
prepared without the benefit of knowing whether or not the State would' provide funding
of the MVHC and whether or not formal levy limits or any other types of limitations on
local control would be implemented. This budget incorporates the expectation that the
State will pay the MVHC to the City per current statute and the City's . levy has been
allocated accordingly.
As a starting point and consistent with past practice, Directors were instructed to target
an inflationary 3% increase or less in each department. In addition they were asked to
clearly outline resource requirements to maintain the current level of service and to
adjust for budgetary items that fluctuate from year to year. Depending on impacts
remaining from adoption of the 2006 budget, other service delivery challenges, and
unique circumstances within departments, the 3% goal is clearly not realistic in all
departments. It also has proven to be problematic and perhaps unreasonable across
the entire budget, if a constant level of services is desired. However, the City
Administrator's recommended budget has again been prepared keeping in mind the City
Council's continuing financial goal including the objectives to:
> Streamline City operations and staffing to reduce City costs and improve
efficiencies and output.
> Research the impacts of the possible reduction in non - essential services
currently provided within the City's annual budget.
The following general observations again help provide background to implementation of
these goals and to this budget preparation cycle and its unique challenges:
> The City of Eagan has historically been a relatively low service delivery City
committed to limited govemment.
> Numerous services that other communities are evaluating and considering
eliminating as part of limiting the role of local government are not provided in
Eagan.
> During Eagan's years of rapid growth, the allocation of limited resources was
balanced between providing services to the development community and to
current residents and new residents moving into the City.
> At the same time, the commitment to low property taxes and an aggressive
approach to user fees was continued and strengthened.
> The combination of rapid development, gradual provision of desired, albeit
limited, services and relatively low property taxes forced a healthy emphasis on
creating efficiencies, a wise and limited selection of services and low
cost/efficient service delivery.
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➢ The process also drove limited resources to higher priority, essential services
and at the same time limited development of non - essential services.
➢ Sound operational budget management by the City Councils and staff
consistently helped to generate efficiencies through the delivery of expected
services resulting in very high citizen satisfaction in the City.
Citizen Opinions /Continuing Reform
The proposed 2006 budget provides for a continuation of services at a level that has
been satisfactory to the citizens of Eagan. This preliminary budget continues to be
responsive to today's circumstances while providing for the highest priority, desired
services in the most cost efficient manner possible. City staff continues to work to
deliver a balanced budget that provides the services that citizens desire and are willing
to pay for at the lowest possible cost, financed by revenues, including property taxes
that are fairly collected and consistently allocated to the highest priority services.
Given the size and complexity of the General Fund Budget, the inter - relationships with
other funds, and diverse perspectives about services, costs, and program value, it can
become an overwhelming task to formulate an appropriate and efficient budgeting
process much Tess to formulate the budget itself. The logical and foundational
questions in budgeting are "what do we do, how much does it cost to do it, and are the
results worthwhile ?" According to the 2005 community -wide survey, citizens find great
value in the services Eagan provides as demonstrated in the following results:
➢ A "comparatively high" 83% of residents polled rate the value of City services as
excellent or good. This is up 6 percentage points from the 2002 City Survey.
➢ A very large 84% rated City services in Eagan as excellent or good in
comparison to their previous city of residence. The mean positive rating for all
City services is 87.3 %, well within the top five ranked communities in the
Metropolitan area.
➢ 56% rated their City taxes as about average or somewhat low. Only 4% said
they were very high.
➢ Of 11 City services rated (from police protection to snow plowing and park
maintenance) every service was rated excellent or good by 4 or more of every 5
residents who had opinions and was rated higher than our neighboring cities.
➢ 95% rate their quality of life as excellent or good:
➢ Nearly 1 out of 4 residents polled could not think of a serious issue facing the
City. Of the issues raised, only 3 (growth, traffic, and airplane noise) garnered
double -digit responses (19 %, 14 %, and 13% respectively.)
By a 20 -point margin (54% to 34 %) residents favored an increase in City
property taxes in order to maintain City services at their current level. Even
among those who opposed a tax hike, nearly 30% could not name any portion of
the budget they would cut.
➢ Of the citizens who have had interaction with City staff, 79% rate City staff
positively, placing Eagan within the top dec'ile of suburban communities. The
job approval rating of staff is up 19% from 2002 and among the highest in the
metro.
➢ The approval rating for the City Council has increased 22% since the 2002 study.
The almost 10 to 1 approval rating of the City Council is at the top of the
Metropolitan area suburbs.
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While rated highly in the past by its residents, the City of Eagan in this survey now ranks
among the top four cities in terms of citizen satisfaction — together with Minnetonka,
•
Woodbury, and Shoreview. In general, Eagan compares very favorably- meaning a
higher percentage of approval -to our neighboring cities and to Dakota County in ratings
for Quality of Life and in the willingness to consider tax increases, if necessary, to
maintain the current level of services.
Independent analysis also ranks Eagan highly:
> Not only did the Met Council find Eagan to be the number one job producer in
the Twin Cities in its most recent study from 2000 -2004, but MONEY magazine
July 2006 named Eagan to be among the top 12 best places in America to live.
> Starting with cities with 50,000 or more population, the magazine conducted
months of research on everything from incomes to taxes, parks to transportation,
with the goal of identifying those "small livable cities that had the best possible
blend of good jobs, low crime, quality schools, plenty of open space, rational
home prices and Tots to do."
> Eagan was found to have higher than average median household incomes and
education and more miles of walking trails than even the #1 city selected (Fort
Collins, CO). These best places "offer a quality of life that is hard to find," and
the people who live there, said MONEY magazine, "couldn't agree more."
Given this citizen survey information and the various options, the City Council through
the public policy process is able to decide the appropriate reforms and /or changes by
enhancing revenues, modifying service delivery or implementing some combination of
the choices. In continuing challenging economic times such as today's the budget
question obviously becomes even more important and responses more challenging than
ever.
The City Administrator has prepared this document as a preliminary 2007 General Fund
Budget incorporating City Council direction, as referenced in the individual department
narratives. The preliminary budget is a starting point for City Council consideration and
is not presented as a finished product. Importantly, it is balanced and will continue to
provide changes to operations in the spirit of reform as well as a continuation of services
expected and rated highly by the citizens. It allows for a reasonable continuation of
services in 2007 and maintains options for future years. To that end, also included in
this budget narrative is information that will allow the City Council to make changes and
adjustments to the preliminary budget through the deliberative process.
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Benchmarks
While it is not always complete information and must be used carefully, it can be helpful
to show comparisons with similar cities to provide benchmarks on efficiency and
productivity. The following attachments may also be useful in making comparisons and
in helping to understand Eagan's financial position and budgeting options:
• Enclosed on page • is a copy of the recently released State Auditor's
Report for 2004 expenditures showing Eagan's per capita spending lowest,
• relative to other cities with 50,000 or more residents.
• Enclosed on page 23 is a copy of local payable 2006 property taxes of
selected other metro cities as well as a number of Dakota County cities. Eagan
has significantly lower local property taxes than average in the metro area and
the lowest local property taxes compared to any of our neighboring cities except
Mendota Heights.
City Market Value and Tax Capacity
Based on the preliminary information received from Dakota County the City will see an
increase in overall market value of 8.5% from $7,025,353,800 for payable 2006 to
$7,620,484,300 for payable 2007. The City will also see a net tax capacity increase of
9.3% from $74,524,899 to $81,429,731. The net tax capacity calculation is affected by
the fiscal disparities contribution and the tax increment tax capacity being factored into
the base tax capacity. This information is demonstrated in the following table.
COMPARISON OF MARKET VALUE AND TAX CAPACITY
Final Preliminary Change
2006 2007 Amount Per Cent
Market Value $ 7,025,353,800 $ 7,620,484,300 $ 595,130,500 8.5%
Tax Capacity $ 85,160,030 $ 93,150,301 $ 7,990,271 9.4%
Fiscal Disparities (10,064,239) (10,735,570) (671,331) 6.7%
Tax Increment Value (570,892) (985,000) . (414,108) 72.5%
Net Local Tax Cap $ 74,524,899 $ 81,429,731 $ 6,904,832 9.3%
Approximately 19% ($111,184,100) of the increase in overall market value results from
new construction with the balance generated through inflation.
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Tax Capacity Property Tax Levy
The City is not receiving any Local Government Aid in 2006 and that will not change for
2007 per the recent State certification. State Statutes sunset levy limits for taxes
payable in 2005 so there is no State mandated property tax levy limit on the City to be
considered in this budget.
The property tax component of the City's proposed certified levy for operations included
in the proposed budget is $21,557,307 for payable 2007 or the same as payable 2006.
This information is demonstrated in the following tables:
COMPARISON OF TAX LEVY FOR OPERATIONS & TAX CAPACITY RATES
Final Preliminary Change
2006 2007 Amount Per Cent
Operating Levy $ 21,557,307 $ 21,557,307 $ - 0.0%
F D Distrib (1,656,452) (1,761,253) (104,801) 6.3%
Net Local Levy $ 19,900,855 $ 19,796,054 $ (104,801) -0.5%
Tax Cap Rate -City: $ 19,900,855 $ 19,796,054
$ 74,524,899 $ 81,429,731
0.26704 0.24311 (0.02393) -9.0%
•
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Tax related resources available to the City to appropriate in the budgets to provide
services are $20,403,745 (all taxes) and $21,557,307 ($20,607,207 taxes and $950,100
MVHC) for the years 2006 and 2007 respectively. The property tax resources for the
two years are allocated as follows:
Final Allocation of 2006 Property Tax Levy
Net
• (Not Budgeted) Budgeted
Property MVHC Amount of
Taxes 2006 Budget Tax Revenue
General Fund $ 18,225,400 $ - $ 18,225,400
General Facilities R & R 127,629 - 127,629
Equipment Revolving Fund 862,324 - 862,324
Major St Const Fund 1,188,392 - 1,188,392
Mkt Value Homestead Credit 1,153,562 1,153,562 -
Totals $21,557,307 $ 1,153,562 $ 20,403,745
Preliminary Allocation of 2007 Property Tax Levy
Net
Preliminary Budgeted
Amount of MVHC Amount of
Taxes 2007 Prelim Tax Revenue
General Fund $ 19,067,200 * $ 840,353 $ 18,226,847
General Facilities R & R 134,010 ** 5,906 128,104
Equipment Revolving Fund 905,440 ** 39,906 865,535
Major St Const Fund 1,247,812 ** 54,995 1,192,817
Communications 202,845 * ** 8,940 193,905
Totals $ 21,557,307 $ 950,100 $ 20,607,207
* $ 841,800 or 4.6% Increase
** 5% Increase
* ** New
The proposed 2007 payable levies for the General Facilities Renewal and Replacement
Fund, the Equipment Revolving Fund, and the Major Street Construction Fund are all
increased by 5.0% over the actual 2006 payable levies, while the General Fund levy is
increasing by 4.6 %. An additional tax levy is proposed to begin replacement funding for
Cable TV Franchise Fees as Federal action continues to threaten that revenue source.
This levy would begin the process of funding the City's communications budget from
General Fund Revenues rather than 100% from Franchise Fees. The proposed levy
allocation assumes the State will pay MVHC in 2007 per existing law, consequently
there is no replacement levy included as a funding source in the 2007 budget.
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Market Value Property Tax Levy (Community Center Debt Service)
The City's proposed certified levy for debt service based on referendum market value is
$1,198,523 for payable 2007 compared to $1,202,093 for payable 2006. That is a
decrease of $3,570 or 0.3% from payable 2006 to payable 2007. The resulting market
value referendum rate is reduced by 8.1% from 0.0001712 to 0.0001573.
COMPARISON OF LEVY FOR DEBT SERVICE & MARKET VALUE REFERENDUM RATES
Final Preliminary Change
2006 2007 Amount Per Cent
Ref Mkt Value $ 7,024,052,900 $ 7,619,162,400 $ 595,109,500 8.5%
Debt Service Levy $ 1,202,093 $ 1,198,523 $ (3,570) -0.3%
Mkt Value Ref Rate 0.0001712 0.0001573 (0.0000139) -8.1%
The following table illustrates the impact of the market value referendum debt service
levy (Eagan Community Center) for average value property for payable 2006 and 2007:
Average Annual
Payable Market Rate Tax
Year Value Per $1,000 Amount
2006 $ 264,281 0.1712 $ 45.24
2007 278,021 0.1573 43.73
Total Levy
The following table illustrates the total proposed levy (excluding the Cedarvale Special
Services District) for payable 2007 compared to the total levy for payable 2006.
COMPARISON OF TOTAL LEVY
Final Preliminary Change
2006 2007 Amount Per Cent
Operating Levy $ 21,557,307 $ 21,557,307 $ - 0.0%
Debt Service Levy 1,202,093 1,198,523 (3,570) -0.3%
Total $ 22,759,400 $ 22,755,830 $ (3,570) -0.02%
State TnT Hearing Requirement
According to the State's calculation, a total levy up to $24,223,450 is permissible before
a TnT Hearing is legally required. The calculation allows for an inflationary adjustment
in the levy of 6.4% that is not incorporated into the proposed payable 2007 levy as
presented. Eagan is $1,464,620 under that threshold after allowing for inclusion of a
$3,000 Cedarvale Special Services District levy. This is the second consecutive year in
which a TnT hearing has not been legally required.
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Some or all of that levy capacity could be used to enhance the Major Street Fund levy or
any other levy as determined by the City Council. It would probably not be appropriate
to direct any of the additional capacity to operations and that is not necessary as the
current proposed budget is balanced as presented, unless the City Council desired an
increased level of services. The following table demonstrates the calculations:
COMPARISON TO STATE TnT HEARING REQUIREMENT
Final Preliminary Change
2006 2007 Amount Per Cent
Operating Levy $ 21,557,307 $ 21,557,307 $ - • 0.0%
Debt Service Levy 1,202,093 1,198,523 (3,570) -0.3%
Subtotal $ 22,759,400 $ 22,755,830 $ (3,570) - 0.02%
Cedarvale Sp Service 3,000 3,000 - 0.0%
Total • $ 22,762,400 $ 22,758,830 $ (3,570) -0.02%
State Threshold 24,223,450
Available $ 1,464,620
Total City Property Tax Capacity Rates /Property Tax Impact
In summary, based on the above referenced levies and current estimates for taxable
market value, tax capacity, fiscal disparities and tax increment values the payable 2007
tax capacity rate calculates to .24311 compared to .26704 for payable 2006, a decrease
of 9.0 %. The market value referendum rate for the Community Center bonds debt
service calculates to .0001573 for payable 2007 compared to .0001712 for payable
2006, a decrease of 8.1%.
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The following table of property tax history illustrates the estimated impact of the total
proposed levy for payable 2007 taxes and compares the rates and impacts to historical
tax rates and impacts for the years 2003 through 2006 on various market value
residential properties. Distribution of the MVHC for 2007 is based on consistent levies
from other taxing jurisdictions; any change in relative levies will impact the final credit
distribution.
Eagan Property Tax History
City Taxes Only
Projected
2003 2004 2005 2006 _ 2007
Tax Capacity Rate 0.29912 0.28702 0.28186 0.26704 0.24311
Market Value Rate 0.0001986 0.0001874 0.000189 0.0001712 0.0001573
Market Value
150,000 $ 404 $ 383 $ 375 $ 352 $ 319
180,000 508 483 474 446 404 .
200,000 578 550 540 508 461
225,000 664 637 622 586 433
264,281 Pay 2006 Average Eagan House Mkt Value , ,,,
278,021 Pay 2007 Average Eagan House Mkt Value ; ,V ,? a l
300,000 925 885 869 820 746
The following table illustrates the impact of these rates on the property taxes on an
average market value property ($264,281) for payable 2006 compared to an average
market value property ($278,021) for payable 2007 thereby adjusting for inflation on
property values.
City Portion of Taxes on an Average Market Value House in Eagan
2006 Value: $ 264,281 2006 City Tax: $ 709
2007 Value: 278,021 2007 City Tax: 684
Increase 5.2% Decrease -3.5%
Figures Include Community Center Debt Service Levy
a )
a-iv cf.k 4,(54 . k/c., -,
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Impact on Property Taxes Resulting From a Reduced Levy
The following table illustrates the impact on an average market value property
($278,021) for payable 2007 resulting from reductions of various amounts in the overall
tax levy. The reductions would result from a decision to levy at an amount Tess than the
proposed dollar amount. The reductions amount to approximately $3 to $4 on an
annual basis for each $100,000 that the levy is reduced.
Impact of Reductions in Tax Levy on Average Market Value House
City Tax Tax Proposed Amount
At Proposed Capacity Levy Adjusted of
Levy Rate Minus... City Tax Reduction
$ 278,021' Market Value $ 684 0.24311
0.24188 $100,000 $ 680 $ 4
0.24065 200,000 677 7
0.23942 300,000 674 10
0.23819 400,000 671 13
•
0.23697 500,000 667 17
2006 Payble taxes on same house 0.23574 600,000 664 20
valued at $264,281 was $709 with 0.23451 700,000 661 23
tax capacity rate of .26704. 0.23328 800,000 657 27
Impact on Property Taxes Resulting From an Increased Levy
The following table illustrates the impact on an average market value property
($278,021) for payable 2007 resulting from increases of various amounts in the overall
tax levy. The increases would result from a decision to levy at a higher dollar amount.
The increases amount to approximately $3 to $4 on an annual basis for each $100,000
that the levy is increased.
Impact of Increases in Tax Levy on Average Market Value House
City Tax Tax Proposed Amount
At Proposed Capacity Levy Adjusted of
Levy Rate Plus... City Tax Increase
$ 278,021 Market Value $ 684 0.24311
0.24433 $100,000 $ 687 $ 3
0.24556 200,000 690 6
0.24679 300,000 694 10
0.24802 400,00Q 697 13
0.24925 500,000 700 16
2006 Payble taxes on same house 0.25047 600,000 703 19
valued at $264,281 was $709 with 0.25170 700,000 707 23
tax capacity rate of .26704. 0.25293 800,000 710 26
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General Fund Revenue Estimates
The preliminary 2007 budget as presented is balanced based on a continuation of the
City's established budgeting practices; namely, revenues are budgeted conservatively,
but realistically. There are no significant increases to user fees for 2007. There is a
reduction in the transfers from utilities for operation of the Central Services as some
personnel costs are now charged directly to the Utility Funds. As always, there are an
infinite number of possible revenue combinations that could be used to balance the
preliminary budget at the preliminary budget level or at an increased level to maintain or
even enhance service delivery in program areas as determined by the City Council.
The financing of the City's General Fund operations remains heavily reliant on the
property tax related revenues as 71 % of the estimated 2007 revenue is from that
source. This percentage reflects Eagan's situation with little reliance on any State
revenue sources to finance General Fund operations. The estimate for MVHC for the
General Fund is $840,353 or 3.3% of the total budget. With current State law providing
for the payment of MVHC in the City's 2007 fiscal year that revenue source is included
in the proposed 2007 budget. Any State response to potential revenue shortfalls in its
budget would likely include non payment of the MVHC and would create a revenue
shortfall for Eagan and other cities similarly treated.
Enclosed on page 24 is a copy of the Comparative Summary of Revenues.
Enclosed on pages 7-5 through 21 is a copy of the Revenues By Line Item.
General Fund Expenditure Appropriations
The appropriations in the 2007 preliminary budget including the extraordinary increases
like motor fuels and the accounting changes total $25,354,200 which is a 5.6% increase
from the 2006 budget total of $24,017,500 including a minimal contingency in both
years. Factoring out the extraordinary increase and accounting changes the proposed
General Fund budget reflects a modest 4.4% increase providing for a constant level of
services. -
Outlined in the following table are the proposed 2007 expenditure allocations compared
to the 2006 budget; with allocations summarized by major classifications.
Expenditure Summary by Major Classifications
% of % of Change % of Total
2006 Total 2007 Total Dollar % Increase
Personal Services* $18,432,000 76.7% $18,467,000 72.8% $ 35,000 ; 0.2% 2.6%
Parts and Supplies 1,399,900 5.8% 1,656,400 6.5% 256,500 18.3% 19.2%
Services and Other Charges 3,867,300 16.1% 4,926,400 19.4% 1,059,100 27.4% 79.2%
Capital Outlay 272,400 1.1% 233,600 0.9% (38,800) -14.2% -2.9%
Merchandise for Resale 19,000 0.1% 30,800 0.1% 11,800 62.1% 0.9%
Contingency 26,900 0.1% 40,000 0.2% 13,100 48.7% 1.0%
TOTAL $24,017,500 100.0% $25,354,200 100.0% $1,336,700 5.6% 100.0%
* The 2006 to 2007 comparison is complicated by the fact that in this table personnel
costs for dispatchers are included in the 2006 Personal Services account while the
similar costs for 2007 are included in the Services and Other Charges account as a
payment to the DCC.
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As is well known, in our service- oriented role as local govemment, labor is our primary commodity, and
thus consistently drives approximately three- quarters of the City's annual budget. Changes to the
overall 2007 personnel budget for existing and proposed personnel compared to the 2006
personnel budget appropriation are further illustrated in the following table.
•
2007 Budget
General Fund
Proposed Personnel Changes
Increase
2006 2007 % of Total
Budget * Proposed Amount % Increase
Existing Personnel
Regular Employees
Salaries/wages $ 12,590,600 $ 13,116,900 $ 526,300 4.2%
PERA ** 991,800 1,120,600 128,800 13.0%
FICA 623,400 648,100 24,700 4.0%
Health/Life/LTD Insurance 1,630,900 1,789,700 158,800 9.7%
Worker's Compensation 366,900 400,600 33,700 9.2%
Volunteer Firefighters compensation 385,000 381,500 (3,500) -0.9%
Fire Relief Association (pension) 31,900 144,600 112,700 353.3%
Subtotal - Existing Personnel 16,620,500 17,602,000. 981,500 5.9% 101.1%
New Positions
Finance - Accountant II from .75 to FT 20,300
Recreation - Clerical III 49,100
Subtotal - New Positions 69 69,400 7.1%
Position Reductions
Administration - Asst. to City Admin. (From FT to .8) (16,000)
Subtotal - Deleted Positions (16,000) (16,000) -1.6%
Temporary /Seasonal
Administration (Intem) 17,100 - (17,100) -1.8%
City Clerk (Elections) 68,200 - (68,200) -7.0%
Comm Devel (Planning Intern) 7,400 13,600 6,200 0.6%
Communications (Seasonal Intern) - 3,900 3,900 0.4%
Pub Wks/Engineering (Seasonal Intern) 19,400 15,400 (4,000) -0.4%
Pub Wks/Streets (Temp /Seasonal) 21,000 26,100 5,100 0.5%
Central Svcs Maint. (Temp /Seasonal) 18,400 16,400 (2,000) -0.2%
Parks/Recreation (Temporary/Seasonal) 629,300 635,800 6,500 0.7%
Tree Conservation (Temporary/Seasonal) 94,400 100,400 6,000 0.6%
Subtotal - Temporary/Seasonal 875,200 811,600 (63,600) -7.3% -6.5%
Total Personnel $ 17,495,700 $ 18,467,000 $971,300 5.6% 100.0%
* To make 2006 figures comparable to 2007, Police dispatch staff and Utilities Superintendent have been excluded
from 2006 figures.
** Employer PERA contribution rates mandated by the State increased from 6.00% to 6.25% for Coordinated Plan, and
from 10.5% to 11.7% for Police /Fire.
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As noted in the table, the City Administrator's recommended preliminary budget includes
appropriations for one (1) additional position, and an increase from .75 to 1.0 for one (1)
position along with the reduction from 1.0 to .80 for a second position. Implementation
of these changes results in a net increase in FTE's of 1.05 in the total personnel
compliment. Detailed information about each position is included in the department
narratives that follow this introductory memo. Numerous other changes reflected in
Temporary/Seasonal net to a $63,600 reduction. The increase in wages and salaries
reflects the cost of living and step increases per labor agreements.
The scenario as presented in the preliminary budget decreases the percentage of the
budget dedicated to personal services slightly from 76.7% to 72.8 %. Even with the
reduction the allocation continues to reflect the intensity of personnel costs to deliver
local govemment services. Overtime allocations remain at approximately the 2006
levels to provide for unavoidable circumstances such as police investigations, police call
for service responses that cross shifts, filling out patrol shifts, and snow plowing, etc.
The overtime allocation also covers the required peak service demand times without
increasing the personnel complement necessary for base level staffing for ongoing
activities.
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The following summary illustrates the anomalies, modifications, and extraordinary items
that are incorporated into the proposed budget which can make simple percentage
comparisons problematic:
2007 Budget
General Fund
Explanation of Increases
. % Increase
2006 Adopted General Fund Budget $ 24,017,500
e Ses c ' ges
COLA and step increases on existing staff $ 873,400 . 3.64%
New positions — regular staff 69,400 0.29%
Position reductions — regular staff (16,000) -0.07%
Non = Personal Se Vi..ce c an a --
Orrdinary and customary/inflationary increases 130,100 0.54%
ri'vv Yve ?os
2007 "apples to apples" budget (i'd:ce') $ 25,074,400 4.40%
Other "extraordinary" items - .. =
Gas/energy costs above normal inflation 185,000 0.77%
Increase in City contribution to Fire Relief pension 112,700 0.47%
Accounting change for Recreation expenditures 74,300 0.31%
_
Increase in DCC costs, net of staff reductions �,.,......—,.... 25 ;400 ""
0.11%
25, 300 0.11
City survey (odd years onlx) �,.- -- -,7-__
Comprehensive Guide` an update (only f,1 2007) 20,500 0.09%
f Tree sal�.(o to years only) ___ 15,00 0.06%
I munity Services Open House (odd years only) '" 5,900 ' 0.02%
j Election judges (even years only) (72 5004, —, -0.30%
Move Superintendent of Utilities to Utilities Fund (111,800) "` 0:47 %0
2007 Proposed Budget $ 25,354,200 • 5.57%
•
Enclosed on page 22 is a copy of the Comparative Summary of Expenditures.
Enclosed on pages 29 through 3 is a copy of the Comparative
Expenditures by Department by Type. /�
Enclosed on pages 33 through 1 is a copy of the individual department
narratives and line item preliminary budgets.
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Contingency Account
The preliminary budget as prepared by the City Administrator includes a very small
budgeted contingency account of $40,000 primarily for the purpose of facilitating small
changes during the budget implementation. This presentation combined with no use of
the fund balance to support 2007 on -going operations continues the City Council
direction in response to the 2004 budget public policy considerations for use of the
Contingency Account and Fund Balance. An adequate savings account is continued in
the fund balance to be used to provide security and flexibility in future operations. That
savings account remains undesignated in the General. Fund in the preliminary budget.
Previously, the City actually budgeted from current resources approximately 2% of the
budgeted operations into the contingency account in addition to maintaining the fund
balance at approximately 30 to 35% of the next year's expenditures. The fund balance
target has subsequently been revised to 40 to 45% of the next year's expenditures. Per
previous City Council direction the appropriate level and use of the fund balance will
continue to be reviewed for potential future modification.
. Supplementary Funding Sources and Uses Not Included In the General Fund
Budget
In preparing individual department budgets the Department Directors and Division
Heads identified certain expenditures that are of a non - recurring nature and when
included in the operating budget have a significant impact on the City's ability to finance
on -going operations in a consistent manner.
Consequently, consistent with the practice established in the 2005 budget and continued
in 2006, the City Administrator's recommended 2007 budget has removed certain
proposed expenditures from the General Fund operations. Review of the expenditures
and consideration for approval will be included with the individual fund budgets at a later
date. The proposed funds and requested expenditures are as follows:
Public Utilities
The City Administrator is recommending that the the following obligations be paid from the
Public Utilities operating budget:
LOGIS Utiliity Billing Assessment $ 82,400
Utility Billing System Implementation 13,000
Total Public Utilities $ 95,400
•
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•
General Facilities Renewal and Replacement Fund
The City Administrator is recommending that the the following proposed projects be given
later consideration for financing from the City's General Facilities Renewal and
Replacement Fund:
Replacement/upgrade of lighting in the Parks Department
workshop at the maintenance facility $ 12,000
Replacement/enlargement of the trash enclosure at the
Fire Administration building 26,900
Resurfacing of East & North parking lots at Municipal Center 45,000
Carpet replacement Police north stair tower 2,600
Carpet replacement City Hall 2nd floor corridor, waiting area
and stairs 6,300
Rooftop screening equipment on Police building 11,700
Fire Administration remodeling 17,000
Fire Administration lobby, stairwell, and training room
painting 5,400
City Hall 1st floor security improvements 7,200
Re -side salt storage building 11,800
Seal coat and restrip parking lots and drives at Eagan
Community Center and Moonshine Retreat Center 17,200
Total General Facilities Renewal & Replacement Fund $ 163,100
Consequently, no appropriations for any of these projects are included in the proposed 2007
General Fund Budget.
Part II CIP •
The City Administrator is recommending that the following request be given
consideration in the Part II CIP and compete within that allocation for funding:
Municipal Center Reader Board $ 40,000
• Total Part II CIP Consideration $ 40,000
Adequate resources are available in each of these funds to provide the necessary
funding if the expenditures are approved. Staff will determine a priority expenditure list
for funding and present it to the City Council for consideration.
General Fund Fund Balance
The following proposed expenditures are recommended for approval with the General
Fund budget to be financed through the General Fund fund balance.
General Fund Fund Balance
The City Administrator is recommending that the following obligations be paid from
the City's General Fund Balance:
Police CJIIN Project $ 45,600
CJIIN IT Needs Assessment Funding 34,500
DCC Dispatch Start Up Costs 54,800
Total General Fund Fund Balance $ 134,900
The General Fund fund balance as reported in the December 31, 2005 Comprehensive
Annual Financial Report was $9,659,415. This balance calculates to 39.9% of the
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budgeted 2006 expenditures and is undesignated and available as a contingency and to
provide working capital for operations.
The preliminary budget as presented proposes to use the Fund Balance as a funding
source for certain one -time, non - operational, expenditures related to General Fund
operations that have been removed from the preliminary proposed 2007 budget by the
City Administrator. Based on the continuation of City Council direction used in the
preparation of the 2004 budget operations, the balance of the Fund Balance is set aside
to provide for emergency or unanticipated expenditure appropriations during the balance
of 2006 and 2007. During the 2004 budget deliberations, it was determined that it would
be prudent to eliminate the budgeted operating contingency and to use the Fund
Balance as a contingency account.
The position of the fund balance is as follows:
December 31, 2005 Fund Balance $9,659,415
Minus Appropriations included in 2006 Budget (169,900)
Projected 12 -31 -06 Balance $9,489,515
Minus Proposed Appropriations for 2007 Budget (134,900)
Projected 12 -31 -07 Balance $9,354,615
Fund Balance Target at 40% $ 10,125,680
Projected Variance From Target $ 771,065
Again, per previous City Council direction the appropriate level and use of the fund
balance will continue to be reviewed for potential future modification.
Cedarvale Special Services District
Prior to the preliminary levy certification a final determination will be made concerning
the appropriate levy for the Cedarvale Special Services District. The levy for payable
years 2003 through 2005 was $2,000 annually. The levy for payable 2006 was raised to
$3,000 and is currently proposed at that level for payable 2007.
Truth In Taxation Hearing Dates
On or before September 15, 2006 the City must certify to the County Auditor the dates it
has selected for its public hearing and for the continuation of its hearing, if a
continuation of the hearing becomes necessary. Cities essentially choose after the
counties, special service districts, and school districts, although December 4 and
December 11 are reserved for cities until September 15. Given these parameters,
December 4 works nicely for the City. The first December meeting has already been
scheduled for Monday, December 4 rather than Tuesday, December 5. The
continuation hearing, if necessary, could be scheduled for a Special City Council
meeting on Monday, December 11 with the final adoption at the second regularly
scheduled December meeting on the 19
Action will need to be taken at the September 5 meeting to set the schedule accordingly.
20
•
Public Policy Issues
The following are matters of public policy for the City Council's consideration at this
time:
1. Truth in Taxation Hearing Dates — The Council is asked to approve or modify
the recommended dates per State scheduling requirements. The proposed
dates are Monday, December 4 which is a scheduled regular City Council
meeting for the initial hearing and December 11 which would be a special
meeting for the continuation hearing, if one is necessary. Final action would take
place at the regular meeting scheduled for December 19.
2. Preliminary Tax Levy — Is the proposed amount and allocation of the 2007
property tax levy appropriate?
> Specifically, is the implementation of a replacement levy for communications
the desired public policy?
> Given the significant reduction in the tax impact, should additional dollars be
levied for street and highway infrastructure or some other purpose?
The Council is asked to provide direction to staff for the preparation of required
material for consideration at the September 5, 2006 regular City Council
meeting.
3. Supplementary Funding Sources and Uses Not Included In the General
Fund Budget -- The Council is asked to provide a response to the continued use
of the supplementary funding sources for the non - recurring appropriations
included in the proposed budget.
%4. Fund Balance — The Council is asked to reaffirm or modify its determination on
\)\""J the use of the Fund Balance as a contingency for operations and as a savings
( , j(j account. oA
Ga` , 5. Feedback on Revenue Estimates /Expenditures Appropriations — The City
,y� (1 Council is asked to provide feedback for the City Administrator to continue
CJ preparation for the Truth in Taxation Hearing and for final budget preparation.
oki k...)
> Members of the City Council asked that the cost of storing the Web
streaming videos for more than one year be researched in the budget .
process. The upfront cost is $14,600 and the annual service charge is
estimated to be $2,400. Those costs are not included in the current
proposed budget, but can be added if that is the wish of the City Council.
Other costs related to this initiative are included in the Communications
budget.
Together with the Department and Division Heads, I submit this recommended
preliminary budget, the enclosed budget information and these policy issues for your
consideration.
(Lows4t
City Administrator Hedges
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