City Council Meeting Budget Work Session

City of Hinckley City Council Meeting Budget Work Session Minutes Monday, August 19, 2024 at 4:30 PM Council Chambers (Community Room) 106 First Street SE, P. O. Box 366 | Tel: (320) 384.7491 | Fax: (320) 384.7492 | ww.hinckleymn.gov Mayor and Councilmembers: Mayor Don Zeman | Councilmember Tim Burkhardt Councilmember John Frank | Councilmember Judy Hopkins | Councilmember Jace Scharpnick 1. Approve Agenda A. 2025 Budget Work Session 2025 Draft Preliminary Budget Staff presented the Council with the City’s preliminary 2025 budget and tax levy. The levy was proposed to be $1,171,097, a 5.9% increase over the 2024 levy and a 1.99% increase over the 2024 tax rate. The increase in the budget was due to a few items, including adding a third full- time street & parks worker $66,000.00, Legion Park siding and roof $13,000.00, replacing sheriff department doors $15,000.00, Legion Parks substrate replacement $12,000.00, and community center HVAC $10,000.00. Health insurance was raised 15%, while dental was raised 10%. Final increases for the insurance will not be out until November. Council’s goal is to keep the levy at or below 50%. One way the City helped keep the levy low was to increase the transfers from the water and sewer funds to $55,000.00 each. This is to help offset the staff costs associated with managing these funds. Funds 601 and 602 look to be operating in a deficit, but they both include depreciation, which is a non-cash expense. Administrator Jackson noted that this number should be used to indicate how much we should be saving to help offset future capital purchases. Mayor Zeman asked staff to verify how much the third full-time Streets and Parks worker will cost. After Mike Bubany's presentation, the council asked staff to include a 2% cushion on the total levy amount in case something comes through before the final budget is adopted in December. With the cushion added the 2025 proposed levy will be $1,194,519 with a tax rate of 50.08% 2024 Financial Planning with Mike Bubany As part of the City’s annual budget process, Mike met with the Council to discuss the financial strengths and weaknesses of the City’s various funds. This process helps the City plan for future projects and large purchases. His primary focus was to use the budget process as a basis to prepare the Capital Financial Plan. He began by focusing on the Fire Fund. Current contribution levels will not suffice to fund upcoming fire vehicles with cash. He built in a blended approach using a mixture of reserves and financing. Not included in the discussion, but IS included in the graphs he will submit, is  the finding that the Fire Fund tax contribution needs to increase by 7% per year (vs the 5% that was previously planned) commencing with 2026 to level out future reserves. Besides the fire vehicles, the overarching plan is to lean more on utility revenues for future projects as the proprietary funds are performing well. Not only are we leaning on user charges for sewer projects, but also for potential road projects as well. These appear to be sufficiently funded with a relatively modest increase in rates. The model projects a 2% annual increase in all sewer rates beginning in 2025, along with a 1% annual increase in water rates. Implementing these modest yearly increases can help avoid significant rate hikes in the future when large infrastructure projects arise. Mr. Bubany noted that much of the tax spike residents might see is due to the shifting valuation among property types. Residential property values have seen significant valuation increases, while the City's tax base went up only slightly. In other words, homes would see increased taxes even if the levy were held flat…and that is not a sustainable long-term strategy. The liquor store is performing well, but they will need to carefully monitor their pricing to ensure it keeps up with the inflation of costs. Monitoring performance in this Fund is vital as its profits have been a funding source for the General Fund. 2. Notices and Communications 3. Adjournment Motion made by Burkhardt, Seconded by Scharpnick, to adjourn the meeting at 6:09 p.m. Voting Yea: Mayor Zeman, Burkhardt, Frank, Scharpnick. Motion carried 4-0. Don Zeman, Mayor Attest: Leaha Jackson, City Administrator