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Budget (Issues and Options) Study Session Report2015 Budget Work Document “Issues and Options” ISSUE #1 – Agency Contracts: Economic Development The City of Salina provides fiscal support for several independent or semi-independent organizations within the City for various purposes and from different funding sources. Typically this is done when a private or non-profit agency is better suited to provide a particular public service than is the City. The Salina Area Chamber of Commerce receives support for Convention and Tourism Promotion. Visit Salina provides Convention and Tourism promotion services by agreement with the City of Salina, and has done so since 1977. The City currently levy’s a 6.7% Guest or “bed” tax. The tax is distributed as follows: Purpose/Organization Rate Visit Salina (CoC) 3 cents Cultural Arts Regional Marketing (CARM) (CoC) .5 cents BiCentennial and Oakdale/Kenwood Marketing (CoC) .2 cents Bicentennial Center Ops. (City) 2 cents Bicentennial Center Capital (City)* 1 cent * $2.5 million in renovations to Heritage Hall, meeting rooms and west parking lot The contract renews annually. The tax increased from 5% to 6.7% on October 1, 2009. As a result, 2010 was the first year working with the expanded scope of the program. 1 2015 Budget Work Document “Issues and Options” Prior history of funding for the Chamber’s allocation is as follows: Year Amount Visit Salina Cultural Kenwood Marketing Marketing 2010 $ 678,906 $ 550,592$ 91,652 $ 36,662 2011 $ 736,386$ 597,209$ 99,412 $ 39,765 2012 $ 745,875$ 604,905$ 100,693 $ 40,277 2013 $ 745,875$ 604,125$ 108,872 $ 43,549 2014 Budget $ 831,835$ 674,461$ 112,410 $ 44,964 (revised) 2015 Budget $ 784,179$ 635,821$ 105,970 $ 42,388 The allocation to them is dependent on Guest Tax receipts, and is limited to that source only. Receipts in 2013 were $1,407,406 or $10,060 per penny. 2014 receipts to date are about 3.0% behind 2013. The budgets filed for 2014 and 2015 are summarized by program as follows: 2014 2015 Visit Salina: Project Activity Revenues $128,492$129,400 Guest Tax $604,764$650,000 Total Revenues: $733,255$779,400 Expenses: Project Activities $262,657$288,750 Staffing, Building, Admin $451,997$498,000 Total Visit Salina Expense $714,654$786,750 2 2015 Budget Work Document “Issues and Options” OPTIONS: 1. Authorize funding as requested 2. Take other action as the City Commission may desire *COMMISION DIRECTION: Notes: ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ 3 2015 Budget Work Document “Issues and Options” Salina Downtown Inc . (SDI) receives two supplements from the City of Salina, in addition to the operating budget provided for by the Lee district (formerly Business Improvement District #1) service fees. SDI receives a $38,000 per year stipend from the City to supplement their annual operating budget. This supplement is provided from the Special Sales Tax Economic Development Fund. Since 2007 SDI has received an economic development program grant from the proceeds of the Special Sales Tax to provide Development Incentive Program for the Downtown Area. The purpose of the program is to provide incentive to improve the exterior’s of existing buildings and encourage construction of new buildings. The amount granted was $50,000 for 2008 through 2010. In 2011 and 2012, the program was funded at $47,000; and in 2014 at $50,000. No funds were provided in 2013 due to availability of carryover from prior years. Since 2010, both the General Supplement and the Development Incentive Programs have been financed from the Economic Development Special Sales Tax Fund. The 2015 budget has $88,000 set aside for this purpose. The remainder of the SDI budget is provided by Lee District fees and program income. The City bills for and collects these fees and passes them along to Salina Downtown, Inc. to implement the programs for the Lee District. The total budget proposed for 2015 is $218,000. Of this amount, $62,000 is derived from grant income carried over from 2014. The Lee District Board of Advisors is recommending no fee increase for 2015. The most recent fee increase for the District was effective 1/1/2012. This will be the third consecutive year without a fee adjustment. The request from SDI for 2015 is for a $50,000 operating supplement. The $12,000 change is to cover the cost of banners to be utilized with the new lighting system. They are requesting no funding for the Development Incentive Program. 4 2015 Budget Work Document “Issues and Options” Year BID Fees SupplementFaçade/Dev. Incentive BID Fund Special SalesSpec. Sales Tax 2011**$ 81,500$ 38,000$ 47,500 2012$ 81,500$ 38,000$ 47,500 2013$ 86,000$ 38,000$0 *** 2014$ 86,000$ 38,000$ 50,000 2015$83,000$50,000$ 0 ** Budgetary reduction of 5% *** Development Incentive Program used carryover money from 2012 in 2013 OPTIONS: 1. Authorize 2015 funding as requested by SDI. No funds are requested for the Development Incentive Program. An increase in the operating supplement from $38,000 to $50,000 is requested to cover the cost of light pole banners. 2. Re-authorize the operating supplement at the 2014 level ($38,000). 3. Affirm the recommendation not to increase fees for members of the Lee District. 4. Request that the Board of Advisors reconsider the possibility of a general rate increase for 2015. 5. Take other action as the City Commission may desire. COMMISION DIRECTION: Notes: ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ 5 2015 Budget Work Document “Issues and Options” ISSUE #2– Agency Requests: Transportation 2015 will be the sixth year of full operation of a fixed route public transit system and modified para-transit system. th For 2015, OCCK has proposed adding a 5 route to enhance service to the area north of Crawford Street. According to the report (attached) from Bourne Transit Consulting, residents in this area experience “much longer” travel times when “origin/destination pairs” are of similar length. The additional route is intended to address this disparity in service level. KDOT has funded 70% of the cost of the additional route. OCCK has indicated that they can fund the first year of local match from other resources, and so the request for 2015 does not include the required City match. Presumably, the full match would then be required from the City in 2016. The OCCK request for funding from the City of Salina is as follows: 2011 2012 2013 2014 2015 Bus Paratransit $ 90,000$ 85,500$ 78,574$ 78,574 $ 108,047 Taxi “Vouchers” $ 15,600$ 14,820$ 15,000$ 15,000 ** Fixed Route (4) $ 425,200$ 403,940$ 441,741$ 441,741 $ 466,703 th Additional 5 Rt. $ 60,287 Capital$ 25,500$ 24,225$ 25,500$ 25,500 $ 25,500 Replacement Total Request $ 556,300$ 528,485$ 560,815$ 560,815 $ 660,537 th Request less 5$ 600,250 Route The 2012 request was reduced 5% below the 2011 amount at the City Commission direction. As a result, some of the services contemplated in the original request were eliminated, including a requested expansion of peak hour coverage. The amount provided in 2013 was restored to the 2011 amount. A direct route from the transfer station at 7th and Walnut to the Health Department Clinic on North Street was initiated in 2013, providing service once per hour. This was 6 2015 Budget Work Document “Issues and Options” included in the base proposal for 2014, and will be provided as long as necessary. This is incorporated into the totals above. The service is provided subject to the provisions of a multi-year grant agreement. Amounts were established for 2013, with a provision for negotiation for future years. KDOT contributes 70% of the direct operating cost of the program (net of program fees). The system design incorporates the following elements: i. Four routes to serve the community. The fourth route became operational in the first quarter of 2010. ii. Service provided Monday through Friday from 6 AM to 9 PM. Saturday service is from 9 AM to 5PM. Peak times are currently 6 AM to 9 AM and 3 PM to 6 PM. The central transfer point is located at 7th and Walnut. iii. 30 minute peak headway, with 60 minute off-peak headway iv. The system has five transfer points where it is possible to transfer between routes. v. Fee Schedule Single Trip: $ 1.00 Day Pass: $ 2.00 6 trip book: $ 5.00 Monthly Pass: $35.00. vi. Para-transit (door to door demand service) will continue to be provided only to pre-qualified individuals. A $2.00 fee is requested of para- transit users vii. Subsidized taxi service is considered to be a part of the para-transit system, and also requires pre-qualification. The system contributes $2.00 towards a taxi ride. Taxi service is normally provided only when other para-transit service is not available. Volume of use has changed dramatically with the changes in the program. Paratransit i.: In 2007 and 2008, there were 46,000 para-transit (excluding taxi) rides. By 2012, that had declined to 27,402. 2013 paratransit rides increased to 37,584. Historically. the overwhelming majority of these (nearly 50%) are for medical services. The required pre-qualification has resulted in a harder to serve population—frail/elderly, 7 2015 Budget Work Document “Issues and Options” physically disabled, wheel-chair bound, etc. This is the primary target population for para-transit services. Taxi vouchers ii. have also declined, from about 12,000 rides to 5,487 for 2013. Fixed Route iii.: In 2013, the fixed route system provided 223,001 rides. The first quarter of 2013 is running about 2.5% above the same period in 2012. As appoint of reference, the first full year of operation consisted of just a little over 100,000 rides on 3 routes. th System Costs and Components Base System (4 5 Route routes) Fixed Route Number of Rides 225,000 ? Operating Expense $ 1,105,343 $ 210,955 Ridership Fees $ 138,000 $ 10,000 KDOT Participation $ 677,140 $ 140,669 City Match $ 290,203 $ 60,287 Plus Overhead 176,500 Total City Contribution $ 466,703 $ 60,287 System Cost (Operat ing Expense plus $ 1,281,843 $210,995 Overhead) Paratransit Number of Rides 37,500 City/83,563 OCCK/5,500 Taxi Operating Expense $670,824 Less Rider Fees $94,000 KDOT Participation $ 140,669 OCCK Contribution $65,000 City Match $108,047 8 2015 Budget Work Document “Issues and Options” Paratransit system. The paratransit system consists of three sub-systems. The first is a taxi supplement. We will supplement taxi fares off hours for those whom have no other options. We contribute $2.00 per ride, and anticipate about 5,500 rides. The second is Van paratransit. The consumer contributes $2.00 per ride; we anticipate about 37,500 rides. The third is OCCK core services, that is, transportation for their consumers. While core services are a part of the paratransit grant, they work differently than does public paratransit.In public paratransit, there is nearly a one to one ratio between bus trips and rides. That is, one trip equals one ride. In core services, there may are multiple (perhaps 5 to 10) rides per bus trip. As a result it is more efficient than public paratransit. In that way core services are perhaps more comparable to a fixed route service. OCCK credits the program for $65,000 per year to compensate for core services. The system provides about 83,000 core service rides, equivalent to about 15,000 trips. Fares. Book rate fares are set to $1.00 for Fixed route transit, and $2.00 for paratransit. However, due to discounted monthly/daily passes, the average fare collected per ride is $.46 for the fixed route system, and $2.00 for paratransit. In 2012, the fee for the monthly pass was increased from $30.00 to $35.00. Basic fares have not been changed since program inception. Current funding source is the General Fund. The draft budget as presented continues funding at the current rate of $560,815. Funding the amount requested for 2015 for th base operations would necessitate an increase of $39,435. Addition of the full 5 route would add an additional $60,297. 9 2015 Budget Work Document “Issues and Options” OPTIONS 1. Authorize funding at the same leve l as 2013. ($560,815) This includes extra service to the Health Department location. 3. Authorize funding for the base 4 routes as requested ($600,250). th 4. Implement the proposal to add a 5 route, accepting the OCCK proposal for them to provide match in 2015. This would call the question of an approximate $60,000 th increase in City match for the 5 route in 2016. th 5. Implement the proposal to add a 5 route, but splitting the OCCK offer of funding over a two year period. This would result in an additional City match of $30,143 in th 2015 and 2016, delaying the full impact of the 5 route until 2017. 6. Fully fund the proposal, at a cost for local match of $660,537 for 2015. 5. Take other action as the City Commission may desire. * COMMISSION DIRECTION: Notes: ______________________________________________________________________ _____________________________________________________________________ 10 2015 Budget Work Document “Issues and Options” ISSUE #3 – General Fees and Charges Major fees will be treated separately, following, within this document. There are, however, a large number of minor fees that are updated by resolution, or are established by authorized administrative action. We are suggesting inflationary fee changes that are equivalent to 2% to 3% per year. In some cases there may be larger increases to accommodate cost of service or market pricing considerations. This has been a past directive of the City Commission. As always, there are a number of exceptions to this treatment. Some fees (Alcohol Licenses, for example) are capped by statute. Others are subject to review or requests from Advisory Boards and Commissions (Business Improvement District, Building Advisory Board). The Municipal Court Judge typically sets the schedule of fines. Finally, most Parks and Recreation fees are set on a programmatic basis following the “Parks and Recreation Revenue and Pricing Policy” adopted by the City Commission. These fees can literally change on a week to week basis, as programs are developed and offered Attached is the Comprehensive Fee Schedule last adopted on November 19, 2013 and generally effective January 1, 2014. Also attached is the Parks and Recreation Summer Program Guide, which has the most recent published information available along with some other supplemental information. Please review this information, and if you have any particular areas of concern regarding fee changes that you would like to see addressed, feel free to comment or make suggestions OPTIONS 1. Proceed as recommended, with increases where possible on the order of 2% to 3%. 2. Make such changes to the general fee schedule as the City Commission deems appropriate. * COMMISSION DIRECTION: Notes: ______________________________________________________________________ ______________________________________________________________________ 11 2015 Budget Work Document “Issues and Options” ISSUE #4 – Sanitation Fees Recommend a modest trash service rate increase. The basic fee will increase from $13.65 to $13.91 per month (2%). This will provide sufficient resources to maintain an adequate operating position for the fund. OPTIONS 1. Approve fee change plan as recommended. 2. Modify the recommendation. * COMMISSION DIRECTION: Notes: ______________________________________________________________________ _____________________________________________________________________ 12 2015 Budget Work Document “Issues and Options” ISSUE #5– Solid Waste Fees Staff recommends increasing the tipping fee by 3%, from $30.50 to $31.42 per ton Other disposal fees will be increased in a like amount. We anticipate that the McPherson County Solid Waste Authority will finalize their landfill construction in the second half of 2014 resulting in a loss of volume (15,000 – 20,000 tons) to about 80,000 tons per year. Partially as a result of this change, landfill operations have undergone intensive scrutiny with an eye to modifying operations to meet this challenge. The result was a list of 19 recommendations, some of which are already being implemented. The result is that we anticipate that the facility will be operated in a fiscally balanced manner through at least the next five years. Salina is well within the range of fees charged at other public landfills. The City of Salina has about 14,600 residential Sanitation customers generating about 15,000 tons of refuse per year, or about 1.02 tons per year per residential household. The disposal portion of the monthly residential sanitation fee is thus about $2.67. OPTIONS 1. Approve fee change plan as recommended (defer decision). 2. Modify plan * COMMISSION DIRECTION: Notes: ______________________________________________________________________ ______________________________________________________________________ 13 2015 Budget Work Document “Issues and Options” ISSUE #6– Emergency Medical Service (EMS) Fees Recommend indexing the rate changes to the Federal fee schedule allowed by Medicare. The effective date will be when we receive notice of changes in the schedule. Annual adjustment assures that we can continue to receive maximum reimbursement Medicare, Medicaid and other contracted third party payors. Total direct costs for Countywide EMS services, including capital replacements, are projected to be $2,561,881. Fees for service will provide $1,687,438. The balance is scheduled to come from Saline County (largely property tax proceeds). The Saline County portion includes $681,841 for operations, and an allowance of 195,000 for one vehicle replacement in 2015. OPTIONS 1. Approve fee change plan as recommended. 2. Disapprove program. 3. Modify Program. * COMMISSION DIRECTION: Notes: ______________________________________________________________________ ______________________________________________________________________ 14 2015 Budget Work Document “Issues and Options” ISSUE #7 – Water and Wastewater Rates Water Utility – Staff is recommending that we defer the rate decision until we have a solid estimate of current year performance. Based on previous experience, this will be in November, with rates to be effective January 1, 2015. Our long term financial projection suggests a 4% change in the rates for 2015 Wastewater Utility – As with water, staff is recommending that we defer the rate decision until we have a solid estimate of current year performance. Based on previous experience, this will be in November, with rates to be effective January 1, 2014. Our long term financial projection suggests a 4% change in rates for 2015. Given our experience last year with a cool, wet summer, and what is now appearing to be much the same this year, it may be necessary adjust future rates to address lower volumes. OPTIONS 1. Consider this item in November, 2014. 2. Take other such action as the Commission may desire. * COMMISSION DIRECTION: Notes: ______________________________________________________________________ ______________________________________________________________________ 15 2015 Budget Work Document “Issues and Options” ISSUE #8 – 2015 Capital Improvement Program (CIP) Budget The total 2015 CIP budget includes the following projects: Waterline Improvements: For waterline improvements, $4 million is scheduled to be financed using revenue bonds or Kansas State Revolving Loan Funds. This project is scheduled to replace the oldest and most occluded lines within the City. Construction will likely continue at least through 2016. Iron Avenue Reconstruction: This project will reconstruct Iron Avenue from Front Street to just east of Ohio Street. The project will include removal and replacement of pavement in the outside lanes, mill and inlay in the cent er lane, curb and gutter replacement, sidewalks, bike paths, and aesthetic enhancements. The cost is currently estimated at $2.8 million, with the project to be financed through the issuance of G.O. bonds. This project was deferred from 2014. South Well Field Design: This project will provide de sign for improvements to the South Well Field and Plant to insure a hi gh quality and reliable water supply through 2060. This is a significant project with an anticipated design cost of $1.35 million. To be financed either by revenue bonds, or set-aside capital reserve funds. ECRA Field Lighting. This project will replace the nearly 30 year-old lighting systems for fields #1 through #4 at the East Crawford Recreation Center. These lights provide maintenance concerns and do not meet required lighting levels. The estimated cost of this project is $380,000, to be funded from the special sales tax. HVAC Replacement - Smoky Hill Museum. The current HVAC system was installed in 1998. Significant components have failed since that time and the needs of the building are not met. Interim measures have been used to extend the life of the system until replacement can occur. The project is asso ciated with a preliminary cost estimate of $900,000, to be provided by general obligation bonds. Gateway signage/Wayfinding. An allotment of $75,000 is currently provided for Gateway Signage/Wayfinding from the Sales Tax. Greeley Avenue Bridge. A shared project with KDOT. The City share is projected to be $165,000. General Obligation Bonds. Hike Bike Trail. $50,000 is allocated from the Special Sales Tax Widen North Ohio Street from North Street to Elm Street. The project is intended to widen this short stretch of Oh io Street to make it consis tent with the remainder of the street. Cost is estimated at $1,170,000 from general obligation bonds. 16 2015 Budget Work Document “Issues and Options” Police Department HVAC Repairs. Replace the Boiler. Estimated Cost of $90,000 from the Special Sales Tax. This program will be reconsidered when the Five Year Capital Improvement Program is completed later this year, along with a complete financial analysis. It is possible, perhaps even likely, that the schedule will change at that time. Sub-CIP categories for 2015 are comparable to 2014, and include: i. General Fund Vehicles and Equipment $510,000 (includes EMS Vehicle). This is $40,000 less than prior years, and reflects a shift of resources to the Fire Department to cover the lease-purchase obligations for the Zoll defibrillators. ii. General Fund Buildings $50,000. iii. Gas Tax Street Repair $1,102,000. This is somewhat lower than the allowance for 2014, due to depletion of fund balances. iv. Water/WW Vehicles a nd Equipment $708,000. v. Water/WW System Enhancements $2,000,000. vi. Water/Wastewater Buildings $60,000. . vii. Sanitation Vehicle: $145,000. In 2014, this was $160,000. viii. Solid Waste Vehicles $106,000. The 2012 amount is $1,000. OPTIONS 1. Affirm recommended 2015 CIP projects 2. Defer consideration and provide additional direction to staff. * COMMISSION DIRECTION: Notes: _____________________________________________________________________ 17 2015 Budget Work Document “Issues and Options” ISSUE #9 – .40 Cent Special Sales Tax Budget Projects and Expenses allocated to the Special Sales Tax Budget for 2014 and 2015: Item 2014 as revised2015 Vehicles and Equipment $425,000$300,000 Buildings and Facilities $66,000$100,000 Wayfinding $236,037$75,000 Street Maintenance Initiative $1,960,000$1,615,000 General Fund Tax Stabilization $360,000$360,000 Aquatics Center Bonds $1,350,000$1,350,000 Aquatic Center Maintenance Set Aside$50,000$106,750 Community Theatre (Year 5 of 5) $15,000$0 Sidewalk Repairs $30,000$30,000 ECRA Ball Field Light Replacements $380,000 Levee Trails $50,000$50,000 Management Software $130,000$130,000 Police Department HVAC $90,000$90,000 Flood Control Levee Improvements $208,585 Fire engine $420,000 Downtown Banner Brackets $20,000 After providing for the projects listed above the Sales Tax Capital Fund is projected to have a year end balance of about $300,000, compared to a targeted balance of $200,000. OPTIONS 1. Reaffirm existing commitments and recommended major equipment replacement, including allocation of a contingency and additional transportation funding. 2. Consider other needs ident ified. Funding may be approved at the requested level, adjusted, decision deferred, or denied. * COMMISSION DIRECTION: Notes: ______________________________________________________________________ 18 2015 Budget Work Document “Issues and Options” ISSUE #10– Property Tax Levy Review the current mill levy. One mill is equal to approximately $407,000 in property tax revenue. The proposed budget as published contemplates a property tax levy of 26.927 mills, the same as the current year. Recent tax levy history is shown below: Budget Year Mill levy 2009 25.886 2010 25.855 2011 26.022 2012 26.272 2013 26.190 2014 26.927 2015 26.927 General fund property tax revenue decreases slightly to $8,121,259 compared to $8,195,367 for 2014. This is partially achieved by a shift in tax levy from the General Fund to the Bond and Interest fund. Property tax revenue for the Bond and Interest Fund increases, from $2,548,887 to $2,726,506. Total taxes levied increase from $10,908,146 to $10,982,854, an increase of $74,708 (.68%). The General Fund is still supported by a supplement from the .4 cent special sales tax. The annual supplement is $360,000 in 2014 and 2015, down from $400,000 in prior years. The General fund supplement is the equivalent of .8 mill. A $400,000 supplement to the Bond and Interest fund was eliminated in 2014. The Special Sales tax sunsets in 2019. We need to continue to wean the City of Salina away from reliance on this tax supplement in the near future.Staff does not anticipate that expected tax base growth will be sufficient to accomplish this objective; a future mill levy increase is likely to be required. Effective with the budget year 2009, the State of Kansas exempted business machinery and equipment from the personal property tax base under the guise of economic 19 2015 Budget Work Document “Issues and Options” development and job growth. This provided a substantial tax reduction for selected taxpayers, and is an additional stressor on our budget. Annual loss due to this exemption is as follows: Budget Year Annual Amount 2009 $291,359 2010 $397,320 2011 $484,684 2012 $527,892 2013 $585,761 2014 $618,222 2015 $725,854 To date, we have lost $3,631,092 in cumulative revenues as a result of this change. The loss to the City of Salina in 2015 is equivalent to 1.78 mills. Consideration should be given to offsetting this loss with an addition to the tax levy as a replacement for this state mandated loss in revenue. Finally, the City of Salina is struggling with a tax structure whose natural growth, absent some change in the tax levy amount, does not keep pace with inflationary pressures. Our taxing funds are supported by a mix of revenues consisting of about one-third sales tax ($12M), one-third property tax (12M) and one-third other revenues. Property values continue to be anemic, which means that, absent levy rate increases, property taxes do not grow. We are fortunate that, so far in 2014, sales taxes are showing a modicum of growth—about 3.9%. Other revenues are a mixed bag. OPTIONS The City Commission should consider whether or not they wish to reduce the proposed tax change, by how much, and which of the above options they prefer to provide a fiscal balance. Some options include: 1. Leave the tax mill levy at 26.927 mills 2. Increase the tax mill levy up to .8 mill to eliminate the special sales tax supplement (sunsetting in 2019), for the General Fund. 3. Increase the tax mill levy up to 1.78 mills to offset the impact of annual revenue reductions due to the State of Kansas’ business machinery and equipment personal property tax exemption. 20 2015 Budget Work Document “Issues and Options” 4. Increase the mill levy as desired for ot her capital (i.e., streets) or other programmatic needs 5. Take other action as the City Commission desires. * COMMISSION DIRECTION: ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ 21 2015 Budget Work Document “Issues and Options” ISSUE #11 – Fund Balance Targets City Financial Policies call for establishment of revised Fund Balance Targets prior to annual budget adoption. The City has 22 budgeted funds. The City has established target balances for 17 of those funds in order to provide for emergency or “rainy day” needs and cash flow requirements. The target balances are reflected in Schedule F, last column. Three (3) of those funds will be short of target at the close of 2015: General Fund, Workers Compensation, and Employee Health Care. General Fund. The target was increased to $5,000,000 for 2013. It is apparent that it will take a number of years to achieve that newly established target. Our conversations with the Bond Rating Agency was suggestive that we should consider setting a formal goal for full recovery within the next 3 to 5 years. That would imply an expected growth of approximately $500,000 per year. Workers Compensation. This is an internal service fund supported by transfers from other operating funds. The fund is on it’s way back to target, after falling below during the recession. Employee Health Care. Do to current adverse experience, this fun is projected to drop well below its target of $1,500,000 by the end of 2015, even with a 15% rate change. If experience moderates, the outcome could be improved, however, we see no signs of that yet. Special Sales Tax, Capital Fund. This fund is anticipated to be above target, but this is contingent on the final settlement with Saline County generating sufficient funds to reimburse the City for our up-front contribution to the remodeling project. If that does not happen, the fund will be well short of target, and we will almost certainly have to revisit projects planned for 2015 Solid Waste Operations: This fund is now projected to be above targeted levels. Reserve Funds: Reserve Funds have been established a number of purposes. These funds do not have specific targets. Flood and Drainage: This fund was established in response to community flooding in 1996. The purpose of the fund is to construct flood and drainage control systems to minimize the future effects of localiz ed flooding on the community. The City is authorized to levy up to 1 mill in property taxes to finance these projects, but has not 22 2015 Budget Work Document “Issues and Options” done so for several years due to financial constraints. There are no remaining resources available for future drainage projects at this time. Providing additional dedicated resources for this purpose could be done by reinstating the mill levy for this need or by transfer of resources from the General Fund. EPA Equipment Reserve: This fund was established in regards to the United States Environmental Protection Agency (EPA) r equirements to provide resources for replacement of equipment at the Wastewater Treatment Plant. This fund is financed through an annual transfer of $60,302 from the Water and Wastewater Operating Fund. The balance in the fund is currently $116,000. Water and Wastewater Improvements Fund: This recently established fund is intended to annually provide resources for economic development related utilities infrastructure needs and to save for majo r development-related projects. The current balance in the fund is nearly $8.6 million. Budgeted transfers from operations are just below $3.4 million in 2014 and $2.2 million in 2015. Solid Waste Capital Reserve Fund: This fund was established in 2013. The 2015 transfer to the fund is currently scheduled at $600,000. This is reduced from the originally budgeted amount of $835,000 as a result of changes in the long term capital replacement schedules. Payments on bond and interest obligations and capital equipment replacement come from this fund. The current balance of the fund is just under $2.3 million. Solid Waste Closure/Postclosure Fund: The Closure/Postclosure fund was established along with the Subtitle D facility in order to provide care for the facility after it is no longer operational. A fee of $.50 per ton is paid into the fund. The current balance in the fund is $853,000. 23 2015 Budget Work Document “Issues and Options” OPTIONS 1. Affirm targeted fund balances 2. Establish specific annual goals for the General Fund: 2015: $2,950,000 2016: $3,400,000 2017: $3,950,000 2018: $4,400,000 2019: $5,000,000 3. Modify targeted fund balances as desired. * COMMISSION DIRECTION: ______________________________________ ________________________________________________________________ Notes: _____________________________________________________________________ 24 2015 Budget Work Document “Issues and Options” ISSUE #12 – Staffing Current authorized full-time employment is 473 full time employees. This is 9 more than the 464 authorized last year. The difference is attributable to absorbing the Animal Control function from the Health Department, changes in the Police Department, and the addition of a Community Engagement position. Dept.FullTime Change Employees Arts and Humanities 11 CityManager 6 Computer Technology 7 Development Services 14 Cz©;‰9a{ Finance/WCA 16 Human Resources 4 /š’’Ò“z·ä w;Œ·zš“­ Municipal Court 11 tšŒz-;5;¦· t©‰­‰w;-  Public Works 85 …·zŒz·z;­ Total 473 9 The budget as presented contemplates a 0% cost of living increase. Total salary cost for 2015 is $25,312,924, an increase of 2.4% over 2014. This would allow for merit considerations of up to 3%. The total 2015 impact of staffing salary costs is projected to be $597,457, with $461,183 attributable to the General Fund. We have not had a general adjustment to the pay plan since 2008-2009. One of the results is that increasing numbers of employees become “topped out”. We are also concerned that the plan may become out of sync with the market. While we have not yet done a formal assessment of the pay plan, we would like to retain the ability to look at other approaches to salary adjustments for 2015 that incorporate a modest pay plan adjustment in addition to merit considerations in order to address those issues. For example, a 2% merit and 2% plan adjustment combination will cost about $297,000 more than the baseline projection. However, a 1% plus 1% adjustment will cost about $78,000 less than the baseline for 2015. 25 2015 Budget Work Document “Issues and Options” OPTIONS 1. Approve plan as recommended. 2. Modify plan. 3. Disapprove plan. 26 2015 Budget Work Document “Issues and Options” ISSUE #13 – KPERS and KPF Retirement plan costs are a challenge for Cities nationwide, as the “baby boom” moves into retirement. Kansas (and Salina) have been no exception, and we have seen retirement rates increase sharply in the last several years. For 2015, that trend has moderated, with KPERS rates increasing only slightly, from 9.32% to 9.48% of salary, while KP&F decreased from 24.75% to 23.56% of salary. OPTIONS 1. Approve plan as recommended. 2. Modify plan. 3. Disapprove plan. 27 2015 Budget Work Document “Issues and Options” ISSUE #14– Health Insurance The recent history of the fund has been good. From 2009 through 2011, rates were held steady, and the fund experienced modest surpluses. For 2012, the rates were rolled back about 10%, making resources available to other programs, as well as to employee participants. With the rates rolled back, the fund essentially broke even in 2012. For 2013, rates were increased by 7%, and the fund experienced a $317,000 deficit. At the close of 2013, the fund balance was about $85,000 above target. For 2014, rates were raised by 7%. Based on experience through May 31, we are currently projecting a deficit of $317,000 for 2014. The fund is being affected by two sets of circumstances. First, with the separation of the Health Department, we lost the premiums on approximately 40 employees, but continued to pay on any incurred but unpaid claims that would have been outstanding at the end of 2013. This likely distorts the claims paid vs. revenues comparison through the first quarter of 2014. Second, we do have a number of large claims working, which do create a demand on the program.. As a result, we are projecting an increase in rates of 15% for 2015. This will reduce the annual deficit for the fund to about $158,000. Fund balance will be below the target of $1,500,000, but will still be above $1,000,000. If claims do not moderate, another substantial increase may be necessary for 2016. The Health Insurance fund does have an allowance of $200,000 in 2015 to establish an aggressive wellness program. While the specifics of the program have not yet been defined, it is imperative that we establish some means of capping future health care costs by identifying plan participants that are at-risk for adverse outcomes, and assisting them in mitigating their risk, and ultimate costs to the plan. Once a specific plan is identified, it will be brought to the City Commission for ultimate approval. OPTIONS 1. Approve plan as recommended. 2. Modify plan. 3. Disapprove plan. * COMMISSION DIRECTION: Notes: ______________________________________________________________________ 28