4. KEY FINANCIAL STRATEGY: 2018 Budget Outlook. Y
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qN CITY OF ClIANHASSEN
H ASS Chanhassen is a Community for Life-Providing for Today and Planning forTomorrow
MEMORANDUM
TO: Mayor& City Council
FROM: Greg Sticha, Finance Director w
DATE: February 13, 2017 if ,
SUBJ: KEY FINANCIAL STRATEGY: 2018 Budget Outlook
BACKGROUND
During the Key Financial Strategy goal-setting sessions,the city council identified the desire to
have an early budget meeting to discuss potential budget impacts for the upcoming year. The
discussion would prove to be helpful for the council to consider and research any budget impact
issues in advance of the budget meetings that take place in the summer. The implementation of
the second budget year in the city's budget document proved to be useful in preparing for this
request.
It is very important to clarify that the numbers presented in this document are extremely
preliminary and should be considered estimates only. We used historical trends and information
we had available whenever possible,but the majority if not all of these numbers will change to
some extent between now and setting the final levy at the end of the year. In addition, these
were the significant changes staff was aware of at this point in time. It is very likely there will
be other significant changes that could have an impact on the 2018 budget not included in this
list; therefore, the list should not be considered all inclusive. Staff will do its best to
communicate any other significant impacts on the 2018 budget as soon as they become available.
POTENTIAL REVENUE/POSITIVE CHANGES IN 2018 BUDGET
The first number we usually discuss each year when setting the budget is the new growth (or new
homes/businesses constructed or improvements made). Based on the current new growth trends
and the previous year's permits and construction, staff is estimating new growth to be around
1.4% for taxes payable in 2018. This equates to roughly$150,000 in new tax dollars available to
offset any increased service costs.
In addition, in 2018 the city's debt levy is being reduced by roughly S 117,000/year because of
the refunding of the Public Works Building bonds.
Lastly, based on discussion with city council in last year's budget-setting process, staff is
researching the appropriate amounts of costs to be allocated to the city's Enterprise Funds that
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Mayor& City Council
2018 Budget Outlook
February 13, 2017
Page 2
are currently being paid out of the city's General Fund. Staff will be making a separate
presentation about those allocations to city council later this summer,but based on the initial data
received by staff we are estimating it to be somewhere between $100,000-$130,000.
POTENTIAL EXPENDITURE CHANGES IN 2018 BUDGET
The list of expenditure impacts include two types of potential impacts/changes, new expenditures
or services not included in the previous year's budget, and increases in costs to existing services.
We will discuss the changes in new expenditures within this memo and will review the changes
in costs for the existing services during the meeting on Monday.
New Position for MIS department
The City of Chanhassen established the MIS Department in August of 1997 with the hiring of a
MIS Coordinator,reporting to the City Manager. This positon was responsible for the
maintenance of all city technology,which included all end user,network, and
telecommunications equipment. In May of 2002 a PC Support Technician was added to take over
support for all end user equipment and to assist with the technical support of the utility
department's SCADA systems. Since that hiring, the city added the East Water Treatment Plant
and relocated the Public Works Facility and Library to new facilities. Each of these locations
included new technology to support.
When the first technician was hired, the department was supporting roughly 80 end user
computers running on 7 physical network servers and 11 network switches. Today the number of
end user computing devices has more than doubled, and the number of servers and network
switches have nearly tripled. The city has also added new audio visual, video surveillance, access
control, GIS, asset, and document management systems that require additional maintenance and
support. New security threats, mobile devices, training needs and increasing demands for open
data requests are among some of the newer responsibilities for the department.
Staff is requesting consideration for the hiring of a Network Support Technician to assume the
responsibility for the maintenance of all city network equipment. Both technical positions would
report to the MIS Coordinator who would continue to be responsible for managing the
department,providing support for major software, project management, application integration,
staff training and technology policies. The cost to add this position would have roughly a
$70,000 impact to the general fund and another$23,000 impact to the city's Enterprise Funds.
These amounts include wage, all insurances, taxes, and retirement costs.
Park & Trail Maps
Every three or four years,the Park and Recreation Department updates the city's Park and Trail
Map for distribution to citizens, visitors,businesses, and Chamber of Commerce organizations
(approximately 12,000 are made). The city features one of the most comprehensive trail systems
in the State of Minnesota with 75 miles of pedestrian trails, 25 miles of public sidewalks, 13
pedestrian tunnels, and one pedestrian overpass. Our trail system is a signature amenity that
draws new residents to the community,provides daily access to recreation for those already here,
Mayor& City Council
2018 Budget Outlook
February 13, 2017
Page 3
and helps maintain our strong quality of life. Property values are preserved and strengthened, in
part, because of the city's robust trail system.
The Park and Recreation Department has made an intentional decision not to provide
comprehensive trail way findings (signs) due to the initial cost, visual and physical pollution that
hundreds of signs would produce, and the need to maintain signage once installed. Instead, we
rely on the provision of a trail map and the curiosity of people to navigate the trails. We have
maintained a long-term private/public partnership with Bokoo Bikes to produce,pay for, and
distribute these maps. Bokoo Bikes has elected to contribute either$2,500 or$5,000 per edition
dependent on the level of their sponsorship budget that particular year. They have indicated
interest in participating again. The total cost to publish/print and mail these maps is
approximately$17,000.
GIS Position now Budgeted at Full Time
During the 2017 budget process, staff discussed with council the need for the GIS position to
become a full-time position rather than the budgeted amount of 28/hours per week. This was due
in part to the retirement of the employee in the position and,more importantly, the expanding
need for mapping services in all areas, in particular related to the city's Enterprise Funds.
The position will not be filled until the end of March, thus making it budget neutral for the 2017
budget; however,the cost to fully fund the position will need to be included in the 2018 budget
(additional cost is approximately$23,000). As mentioned earlier in this memo, staff is
reviewing a number of employee wages for inclusion in the appropriate fund, this one included.
As we proceed in the 2018 budget process and review of those positions, staff is fairly certain
that a majority of the GIS position will now be accounted for within the city's Enterprise Funds,
thus not having an impact on the city's General Fund.
Other Changes Related to Existing Services
The other remaining changes identified in the attached spreadsheet are related to increased costs
in existing services. The amounts included in the spreadsheet are based on a combination of
very preliminary information and/or historical trends.
TOTAL IMPACT
If the city council proceeds with all of the new service items listed above, and based on the
estimates of the changes in the existing service items, staff is expecting a shortfall of around
$50,000. This would result in a preliminary levy larger than new growth, or the need to find a
reduction in expenditures, or an additional revenue source to fund the changes. Staff will
provide detailed discussion on the 2018 budget with the city council in June,but we look
forward to hearing your thoughts about the information presented this evening.
ATTACHMENTS
1. Spreadsheet of potential budget impacts.
f:\gregs\budget\2018 budget\kfs goal-prelim review of 2018 budget impacts.docx
City of Chanhassen
Analysis of Changes for the 2018 General Fund Budget
Item Fiscal Budget Impact
Increases to General Fund Budget
Wage Increases (3%) and other small adjustments for changes in new hires $ (135,000)
Police Contract(4.5%) (80,000)
Health Insurance (15%) (80,000)
New IT Position (75%funded by General fund) includes wage and all insurances and taxes (70,000)
GIS Position to begin at Full Time(Large portion of Salary will be Re-Allocated,see below) (23,000)
Legal Costs for New Development (10,000)
Assessing Contract and New Parcels (10,000)
Increase in General Liab &Work Comp Insurance (15,000)
Park&Trail Maps printed and mailed to residents (17,000)
TOTAL (440,000)
Decreases to General Fund Budget
New Growth (Estimate at 1.40%) 151,132
Debt Levy reducing in 2018 117,000
Re-Allocation of General Fund Wages to appropriate Enterprise Funds 120,000
TOTAL 388,132
Net Needed to Fund Levy with No change in City portion of Property Tax Bill (51,868)