budget workshop 2019 - minot, nd
TRANSCRIPT
Budget Workshop 2019
Purpose/Intent
→ To improve the Council & Community’s
knowledge and understanding of the City’s
finances and its financial challenges
→ To provide better context for more informed
budget decisions
→ To highlight cause and effect relationships
and promote data-driven decision making
→ Not intended to develop budget
Content Development
→ CAFR
→ Budget Book
→ Council Feedback/Input
AgendaWorkshop 1 (June 14):
Welcome & Housekeeping
Background
Government Budgeting BasicsRevenues & Expenses
Current Financial Position
Future Challenges & Budget Priorities
Workshop 2 (June 21):
Quick Review
Financial Projections
Open Discussion
THANKS AND
RECOGNITION
WORKSHOP SUBCOMMITTEE
Sue Greenheck, Penny Johnson, Jenna
Vollmer, Heather Brandt, Melody Shelkey,
Lisa Jundt, Kelly Matalka, Kevin Ternes,
Derek Hackett, David Lakefield, Tom Barry
MAYOR AND CITY COUNCIL
DEPARTMENT DIRECTORS
32.8% 34.2%10.6% 22%
What does property tax fund
2017 Property tax collected - $16.7Million
$ 17.9 Million was levied for 2017
4.87% has yet to be collected
City of Minot Governmental Fund
City Council/Mayor Office
City Manager Office
Human Resource Department
City Attorney Office
Administration & General
Finance
Information Technology
Assessor Office
Police Administration
Police Patrol
Investigations
Narcotics Task Force
Dispatch
Municipal Court
Fire Control
Planning
Inspection
Traffic
Engineering
City Shop
Street
Property Maintenance
Vehicle Maintenance
Debt Service
Bus
Recreation
Library
Airport
Cemetery
Capital Improvements
Emergency Levy
16% OF
REVENUE
$891Total Annual (COM)
Tax/ Avg HH:
Street: $133.82
Fire: $119.72
Police: $169.27
Recreation: $117.81
Transit: $17.30
Airport: $25.34
Cemetery: $9.00
Debt: $117.63
General
Government:
$181.18
FY 18 Value of Tax Dollars
What are expenses?
Costs of Doing Business
PersonnelOperating
CostsMaintenance
Capital Improvements
Depreciation
THE COST OF BONDING
City Debt Limits8% of taxable property for GO and Special Revenue
Payment Limits
(What can we afford?)
City of Minot currently has highest credit rating possible - AA2
General Obligation
Debt
Balances
Original Outstanding Interest
Year Amount 12/31/17 Rate Matures
2010 1,375,000 445,0002.25-
2.70%10/01/2020
2012 2,900,000 960,000 2.00% 10/01/2023
2013 6,815,000 3,935,0002.00-
3.00%10/01/2023
2014 3,950,000 2,845,0002.00-
4.00%10/01/2024
2015 390,000 320,0002.00-
3.00%10/01/2025
2016 10,110,000 9,545,0003.00-
4.00%10/01/2031
$25,540,000 $18,050,00
THE COST OF BONDING
City Debt Limits8% of taxable property for GO and Special Revenue
Payment Limits
(What can we afford?)
City of Minot currently has highest credit rating possible - AA2
• Need 120% to service debt to cover potential reductions in sales tax
Coverage Ratio
• Bond Council
• Underwriting
• Brokering fees
Bonding isn't free
LOOKING
BACK at
Developing
the FY18
Budget
A little background
on previous year’s
correction
Budget Mill Levy FY17
79.3
Budget Mill Levy FY18
106.46 = 27.2Mills
27.2
- 6.0 Valuation = Net 0 Change*
21.2
-16.16 Less sales tax reserves
Mills
Mills
5.04
- 4.95
Mills = $1.5 Million
Mills = Emergency Fund
.09 Mills
Eliminating $5M from
Budgeted Expenses
Mitigating Modifications to the FY 18 Budget
Initial mill increase anticipated at 45 Mills (or about a 50% increase)
Eliminating 20 staff
positions
Reducing staff salary
increases by 50%
Eliminating City’s Community
Facilities Budget of nearly $3M
and Reallocated $823K from
Economic Development
Using $1.5M in Reserve
Money to Balance Budget
Raising City Property
Taxes about 25%
Mitigated to 28 Mill increase by:
Reasons for FY18 Property Tax Increase in MinotSummary
• Total Loss of over $3M/year compared with 2014
• State elimination of 12% Property Tax Relief
Subsidy
• Oil and Ag commodity prices hurting sales tax
revenues (loss of $14M over 4 years)
• Other: Canadian Dollar & Inflation
• Loss of $57M in Property Tax Revenue over 10 years (if steadied)
• Loss of property valuations past two years (-12%)
• Rising Debt since 2012 (+123%)
• Sales Tax Subsidization of Property Tax
• Deficit Spending ($7.7M over 3 Years of Reserves)
Investments in infrastructure and
services due to growth cost taxpayers
more
Regional Market Changes
Local Decisions
State Revenue Contributions
Future Needs• Need $165M over next 5 years for NAWS &
Flood Control
• Rising Personnel, Operations, and
Maintenance Demands
Property Tax Comparative Influencers
SIZE OF CITY
VALUE OF MILL
TYPES OF REVENUE SOURCES
TYPE AND LEVEL OF SERVICES
STATE SUBSIDIES
11,451 11,765 6,113
$127,877,546
$22,269,401
$69,017,507
-
20
40
60
80
100
120
140
-
2
4
6
8
10
12
14
Williston Minot Dickinson
Hub C
ity
$ -
Mill
ions
Po
pu
lation
Cha
ng
e -
Th
ou
sa
nd
sPopulation Change vs. Hub City Funding
2009-2016
Population Change Hub City $Source: US Census Bureau
11,451 11,765 6,113
$127,877,546
$22,269,401
$69,017,507
-
20
40
60
80
100
120
140
-
2
4
6
8
10
12
14
Williston Minot Dickinson
Hub C
ity
$ -
Mill
ions
Po
pu
lation
Cha
ng
e -
Th
ou
san
ds
Population Change vs. Hub City Funding2009-2016
Population Change Hub City $Source: US Census Bureau
$11,290 per
person
$1,893 per
person
$11,167 per
person
Western Cities Comparisons
CHALLENGES:
Forgone Revenues
Increasing Expenses
Declining Income
PAST DECISIONS1. Committed to Construct & Finance
NAWS & Flood Control
2. Took on Significant Expansion (City
Limits)
3. Added Massive Growth Infrastructure
4. Constructed 2 Large Parking Garages
5. Significant Increase in City Debt
6. Donated Large Sums to Organizations
7. Considerably Reduced the Mill Levy
8. Used Sales Taxes to Cover Levy
Activities
9. Experienced Massive Economic
Downturn (Oil, Ag, Canadian Dollar)
10. Underfunded Important City Projects
(NAWS, Flood Control, Pension, M&O,
CIP, etc.)
11. Using Reserves to Balance Budget
FORGONE REVENUE
$56.3M
$21.6M
$14.6M
$110.9M
MILL REDUCTION IN 7 YEARS
COMMUNITY FACILITIES IN 6 YEARS
LOSS OF SALES TAX OVER 3 YEARS
APPROXIMATE LOST REVENUE
OVER PAST 7 YEARS
$18.4MOTHER CITY-FUNDED GRANTS AND DONATIONS
IN 7 YEARS
LOST REVENUE
$56.3M
$21.6M
$14.6M
$110.9M
MILL REDUCTION IN 7 YEARS
COMMUNITY FACILITIES IN 6 YEARS
LOSS OF SALES TAX OVER 3 YEARS
IN LOST REVENUE
$18.4M OTHER CITY-FUNDED GRANTS AND DONATIONS
CURRENT DEBT:
$ 88 MILLION
BUDGET OUTLOOKKEY CONSIDERATIONS
City has been generous in past
Future Obligations
are Mounting
Economy has
contracted
Funding
Challenges Abound
Changes are
Needed
FUTURE OBLIGATIONSMajor bills in next 5 years
$26.5Million
$3.5 Million
$58Million
$49.7Million
$108.1
Million
Flood ControlWaste Water
TreatmentNAWSFire Station 5 Pension
Five-year Departmental Additional needs
Information Technology
$429,000
Police
$1,202,349 Fire
$4,827,000 Planning
$240,000 Inspection
$102,000
Traffic
$60,000 Engineering$15,343,034
Vehicle Maintenance$30,000
Street
$1,927,500 Property Maintenance
$96,000
Airport
$12,062,000
Cemetery
$282,000 Garbage Collection $640,000
Landfill
$5,106,000 Storm Sewer$9,195,000
Water Plant
$4,845,378 Water Distribution$6,395,500
Sewage Pumping$9,473,500
Utility Billing
$24,000 Bus
$3,165,000
Library
$1,007,157 Admin & General$27,800,000
Tax Relief(Down 12%)
Flood Control(Down 12%)
Infrastructure(Down 16%)
NAWS40%
Second PennyTax Relief
10%
Economic Development
15%
Improvements25%
Flood Control50%
First Penny
SALES TAX ALLOCATIONSFY 2019 EXPECTED BREAKDOWN
Second penny reduced proportionately
$35
$60
$85
$110
$135
$160
$185
$210
$235
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018* 2019* 2020* 2021* 2022* 2023*
Mil
lions
Outstanding & Projected Debt Trends
* Projected
Will Require a New ½ ₵ of ST every 3 Years
Going Forward
What Does Property Tax Fund?
City of Minot Governmental Fund
• City Council/Mayor Office
• City Manager Office
• Human Resource
Department
• City Attorney Office
• Administration & General
• Finance
• Information Technology
• Assessor Office
• Police Administration
• Police Patrol
• Investigations
• Narcotics Task Force
• Dispatch
• Municipal Court
• Fire Control
• Planning
• Inspection
• Traffic
• Engineering
• Street
• Property Maintenance
• Vehicle Maintenance
• Debt Service
• Bus
• Recreation
• Library
• Airport
• Cemetery
• Capital Improvements
• Emergency Levy
WHAT’S NOT COVERED?PUBLIC SAFETY’S PIECE OF PROPERTY TAX
$ 19,565,075
$ 3,051,253
2018 TOTAL BUDGETED PROPERTY TAX
CITY GOVERNMENT DEBT
$ 22,616,328
Public Safety:
$ 19,178,072
$387,003REMAINING:
PROJECTIONS:Property & Sales Taxes
⇢Started with FY18 Sales Tax
Allocations
⇢ Incorporated Historical Actual
Budget Trends
⇢3-Month Operating Reserve
⇢Depreciation Financing:
Straight Line
⇢Only Reflects Levy and Sales
Tax Funds
INPUTS
⇢ Utilizes Cash-Flow Approach
⇢ Projected 5 Years of Revenues &
Expenses
⇢ Cash Reserves Use
✓ Liquidity
✓ 3-Month Operating Reserve
✓ Future Capital Purchases
⇢ Utilizes a JIT capital financing strategy
⇢Model attempts to anticipate current
revenue needs based on future
personnel, operational, maintenance,
and capital needs
APPROACH
⇢ City POM meets current level of service
⇢ No Tax Increases Included
⇢ Allocate 40% of 2nd Penny Sales Tax to
NAWS in 2019 & 2020, decreases to
around 30% to cover debt service in
2021-2023.
⇢ Bonding Terms:
✓ NAWS: 15 Year
✓ Flood Control: 20 Year
⇢ Bond Interest Rate:
✓ NAWS: 3.5%
✓ Flood Control: 4.25%
⇢ Growth Factors:
✓ Property Valuation Increase: 1.5%
per year in 2021-2023
✓ Personnel Increase: 3% per year
✓ Inflation: 1.5% per year
✓ Sales Tax Increase: 3% each year
ASSUMPTIONS
NOTE: Model results subject to increased system knowledge, revised financial projections,
new regulatory requirements, revised infrastructure & capital plans & upgrades, etc.
Tax Collection
Financial Projection Model
Projection ModelKEY CONSIDERATIONS
View is only 5 years
Only models Levy Activities
NAWS Costs Included as O & M Costs
Only Incorporates Sales Tax & Property
Tax Revenues
As Ongoing Expenses Grow, So Does the Gap
$49,000,000
$51,000,000
$53,000,000
$55,000,000
$57,000,000
$59,000,000
$61,000,000
$63,000,000
$65,000,000
$67,000,000
2019 2020 2021 2022 2023
Total Government Revenue and Expense Projections(Levy and Sales Tax Funds Only)
Personnel Operations, Maintenance, & NAWSSoftware Upgrade City CIP Needs (excluding flood control, NAWS, Fire Station, City Hall)Flood Control NW Fire StationCity Hall Relocation Revenue
$66.6M
$53.6M
Gap
1 Mill
$8
Annual Cost
Projection GuidanceNumbers to Plan By:
Property Tax
2 Mills
$8
$16 per year
Example:
Sales Tax
1 Mill generates
about $206,000 in
Property Tax
Revenue