Working Session

MAYORCOUNCIL WORK SESSION

Wednesday, April 21, 2010 - - A101 - - 5:30 p.m.

Present: Mayor Brown, Bakken, Bjerke, Christensen, Gershman (via phone), Glassheim, Kreun, McNamara.

Vice President Glassheim called the meeting to order at 5:30 p.m.

Mayor Brown commented that looking forward to 2011 we will need to look carefully at what we do as we have less reserves but still have the same issues and needs in the community and we will be looking at this together as we move forward through the budget process. Duquette commented that administration is working with Council early in the process to establish priorities for the year which will help departments in preapring their budget requests.

Growth Fund Indicators/Property Valuations.

Saroj gave a brief overview of the type of information to be covered at this meeting.

(Gershman disconnected due to poor phone connection.)

Jerath reported that property valuation is up 2.66% for 2011 which will result in an increase of $405,083 of which $275,240 will go to the general fund. She referred them to the third page of the packet and noted that part of the increase is due to exemptions rolling off. The Canad abatement will be done in 2012, with taxes collected in 2013 budget year and will be a large effect that year.

Jerath stated that projections for sales tax are being held with a 0% increase from the 2010 budgeted amount. She noted that while we believe that the economy will turn around over the next year and we will meet the 2010 budget amount, we are still cautious and not projecting an increase at this time. CPI for the Midwest Urban size b/c for March 2010 is 2.9% and average population growth is 1.4%. We have also seen slight increases in all of the utility infrastructure areas.

Bakken asked whether we will meet our 2010 budget. Jerath stated that we believe it will be very close and as such we are not projecting increases for 2011. Bakken commented that he has heard of projections for large increases coming in gas and diesel and believes that may negatively impact our economy and that it could be a tough market until into mid-2011. Jerath stated that in anticipation of economic trends are watching closely revenues and expenditures and will continue to do so throughout the year and will be holding on capital purchases if things look to be turning down.

Jerath reviewed the handout detailing general fund revenues and made the following general notes: increase in real estate tax collections, decrease in state aid based on State’s estimate, Xcel franchise fee decrease based on their estimates, fine revenues decreased based on projection for 2010 being down, decrease due to a new credit for disabled adopted at the State level, no transfer from noxious weed fund for this year and no transfer from the State of weather related money for streets. She added that, based on expenditures at the same level of 2010, there will be a shortfall of $919,004 in the 2011 budget. She continued that this is just the revenue to expenditures and there is some cash carryover that could cover some of the shortfall. She noted that we also made the decision to hold on reserves for future capital needs and for computer capital replacement and we will need to decide if we want to hold again this year and not put funds into the reserve.
Christensen commented that at the earlier meeting heard that there is a lack of funds in reserves for depreciation and so do need to discuss that. He stated that he would like to know how much funding is needed for the staff and associated benefits before moving into discussion on future equipment needs. Duquette stated that those items will all be brought forward for discussion as we move through the process along with options for funding.

McNamara commented that he liked how the Airport Terminal project was brought in – show the total package and then here are options that you can add or take away to make the puzzle come together as know there are needs, but may need to look at prioritizing. Storstad replied that at this time just looking for a broad guideline for departments to use as they put together their requests, then will look at those and bring back individual issues for further discussion.

Bakken commented that department heads have worked very hard over the last few years to cut, but have to realize that the economy is bad and we may be getting to a point where we can’t cut any more. He continued that we may not have planned as well as we should have in the fat years and now have fallen on a stretch of lean years and we need to develop a plan for the future that will make us more prepared, which may include needing to look at an increase in mills.

Christensen commented that there are some things that we no will increase such as insurance and utility rates and need to look at priorities and what is essential and where to make cuts first. He requested that they get more information early in July so can discuss what decisions need to be made and the pros and cons of each so that there is adequate time to consider the issues.

The group discussed that one area that will need to be looked at from a policy side is cash carryover, as it was always used for department capital needs only and not operations, however last year we did use funds from cash carryover for operations and need to decide whether that is something that we want to continue to do.

Daryl Hovland, Human Resources Director, stated that they have completed the salary survey of other cities and the average increase found is 1.72%, with most North Dakota cities around 2.84%, but Fargo and most Minnesota cities are at 0%. He quoted that health insurance is projected to increase again this year, but the amount will not be set until the Legislature passes the new rate schedule, but will go into effect in July. Bakken commented that his is slated to go up 16%. Christensen again suggested that maybe this is an area that could be looked at for some cost saving and perhaps don’t need to offer the Cadillac coverage, but rather a health savings program and a less expensive plan with higher deductible, as some young people like this better and should consider looking at other options that are available. Duquette suggested that would be an item that could be referred to Pension and Insurance Committee and brought back in July as well.

The group discussed whether it was appropriate to begin discussion on the need to increase mills or if that should wait until later in the process to see what other opportunities could assist with bridging the budget gap – reductions in staffing, services, further reductions in expenses, proposal for sales tax uses, or some combination of all of the above. Christensen noted that with the increase in technology and newer equipment, perhaps we don’t need as many personnel. He continued that if we are looking at long-term reductions in staffing, then need to be planning for that. He also encouraged that the enterprise funds be looked at as they have the ability to generate a profit, a portion of which can be used to offset general fund expenditures and if we looked at that and put some parameters in place we could use those dollars to fund employees or use only for capital which would free up some funds for other operational expenses. Glassheim commented that employees know that the Council has shared the wealth when times have been good, so will realize that when times are lean that they may also have to share in that.

Kreun commented that in regards to enterprise funds, the state code sets limits for what can be transferred to the general fund and perhaps Council needs a good breakdown of what would be available and perhaps there will be some available funds to transfer without stressing the enterprise funds. Jerath responded that there could be more percent available to transfer, but then would result in a rate increase in the utility. Glassheim commented that the Council needs to consider, but then decide whether transferring cash from those utilities is the wisest decision if the result is a rate increase to users. Kreun replied that is why we need to look at it and review it, as it may not be the best solution. Christensen stated that the two biggest cities in the state use the transfers to the fullest extent to assist their general fund and doesn’t understand why it would not be good for us to also do it.

The group discussed guidelines to use in budget preparation. Duquette summarized that they would be reviewing all budgets carefully and will bring back a budget with no increase in taxes and show what affect that would have on staffing and services and if come back with a budget with any increases will have justifications for those and why a mill increase is necessary. Christensen commented that any information should also include looking at increasing revenues from transfers from the utility funds. Christensen requested that a report be done on what could be done with utility funds and also how many customers are in the lowest category of usage that would be regressively affected by any increase.

Bakken commented that he has found it is easier to look at things and evaluate what is in the best interest of the City when you’re not running for office and worrying about getting elected.

Bjerke commented that in regards to the 2010 dike special assessment, that is a tax increase and would like to make sure that gets discussed.

Meeting adjourned 6:15 p.m.

Respectfully submitted,

Sherie Lundmark
Admin Spec Sr.