City Council

HOPKINS CITY COUNCIL WORK SESSION AGENDA Tuesday, November 10, 2020 6:30 pm Hopkins City Hall – Council Chambers 6:30 p.m. Special Revenue Fund Budgets, Activity Center Budget, Enterprise Fund Budgets and Utility Rates; Bishop Other Adjournment  Finance Department CITY OF HOPKINS Memorandum To: Honorable Mayor and Council Members Mike Mornson, City Manager From: Nick Bishop, Finance Director Date: November 10, 2020 Subject: Special Revenue Fund Budgets, Activity Center Budget, Enterprise Fund Budgets and Utility Rates _____________________________________________________________________ PURPOSE No formal action is required at this meeting. Staff is requesting input on the proposed budgets for special revenue funds, enterprise funds, activity center and utility rates. INFORMATION Chemical Assessment Team Fund (Special Revenue) The State Chemical Assessment Team provides emergency response for assessment of chemical hazards, the maintenance of state owned equipment and training of personnel. The response area includes Hennepin, Scott, Carver, McLeod and Renville Counties. The State of Minnesota reimburses the City quarterly for actual costs. The Chemical Assessment Team does not receive any tax levy support from the City. Proposed 2020 2021 Percentage Budget Budget Incr (Decr) Revenues $ 65,000 $ 65,000 0.00% Expenditures $ 65,000 $ 65,000 0.00% Revenues over (under) Expenditures $ - $ - 0.00%  Economic Development Fund (Special Revenue) The Economic Development Fund coordinates the economic development processes not directly funded by specific project budgets and also supports Artstreet and marketing. The main revenue sources of the fund are the Hopkins Housing and Redevelopment Authority (HRA) property tax levy and excess tax increment financing (TIF). A preliminary HRA levy of $378,070 was set on September 15th, excess TIF is budgeted at $100,000. The major expenditures of the fund are salaries, benefits and grants. The 2021 budget includes a $100,000 budget for the Façade Improvement Program (previously offered in 2015, 2017 & 2019). The program strengthens the vitality of Mainstreet by improving the pedestrian experience, increasing building transparency, and beautifying buildings through façade revitalization efforts, which will have a lasting impact on downtown Hopkins. Eligible property owners, or business owners, may apply for grant assistance up to 50 percent of the cost of the improvements – up to $25,000. The Façade Improvement Program could be delayed until 2022, when there may be more interest from local businesses that are still feeling the economic effects of COVID-19 in 2021. Proposed 2020 2021 Percentage Budget Budget Incr (Decr) Revenues $ 467,951 $ 503,070 7.50% Expenditures $ 430,345 $ 498,900 15.93% Revenues over (under) Expenditures $ 37,606 $ 4,170 -88.91% Parking Fund (Special Revenue) The Parking Fund accounts for activities related to parking enforcement and parking operations in the City. The major sources of revenue and parking permits, parking leases and fines. The revenue budget for parking permits was reduced based on a decrease in permit sales since the COVID-19 state of emergency. The major expenditures are salaries and benefits. The budget is projecting a decrease in fund balance of $33,375. The 12/31/2021 ending fund balance is projected to be a positive $41,933. Proposed 2020 2021 Percentage Budget Budget Incr (Decr) Revenues $ 154,524 $ 121,500 -21.37% Expenditures $ 150,690 $ 154,875 2.78% Revenues over (under) Expenditures $ 3,834 $ (33,375) -100.00%  Communications Fund (Special Revenue) The Communications Fund provides two-way communication between the City and its residents, employees, businesses; its civic and service organizations; and other communities and government agencies. Some examples of the services provided are Hopkins Highlights, the City’s website and the State of the City event. The main source of revenue is cable franchise fees. The main expenditures are salaries, benefits and a transfer out to the Arts Center Fund. The budget is projecting a decrease in fund balance of $8,224. The 12/31/2021 fund balance is projected to be a positive $313,732. Proposed 2020 2021 Percentage Budget Budget Incr (Decr) Revenues $ 238,014 $ 243,000 2.09% Expenditures $ 238,656 $ 251,224 5.27% Revenues over (under) Expenditures $ (642) $ (8,224) -100.00% Depot Fund (Special Revenue) The Depot programs offer area youth creativity and leadership opportunities, strengthens involvement in community activities, and nurtures their growth and development through interacting with peers, the public and community partners. The Depot Youth Board guide and support site and programming decisions, including the management of the Depot Coffee operations. The major revenue sources of the fund are coffee sales and support from community partners (Hopkins School District, Three Rivers Park District, City of Minnetonka and a transfer from City of Hopkins General fund). The major expenditures are salaries, benefits and coffee supplies. The fund had a breakeven budget planned for 2020. Due to the effects of COVID-19 the fund is now projected to decrease its fund balance in 2020 by $2,680. The 2021 budget is projecting a decrease in fund balance of $14,266. The 12/31/2021 fund balance is projected to be a negative $79,527. Proposed 2020 2021 Percentage Budget Budget Incr (Decr) Revenues $ 307,412 $ 233,000 -24.21% Expenditures $ 307,412 $ 247,266 -19.57% Revenues over (under) Expenditures $ - $ (14,266) -100.00%  Arts Center Fund (Special Revenue) The Hopkins Center for the Arts is a premiere cultural and artistic destination drawing over 250,000 visitors annually. Its amenities include a 715 seat theater, black-box theater, art gallery, dance studio, classroom, meeting and multipurpose spaces. The main revenue sources are property tax levy, rents, leases, ticket sales, grants, and transfers in. The preliminary tax levy amount of $331,182, includes both $271,182 needed to sustain current operations and also $60,000 to reduce the deficit owed to the City’s General fund. The fund is also supported by transfers of $50,000 and $30,000 from the City’s Communication and Economic Development funds. Major expenditures include salaries, benefits and payments to artists. Significant expenditure reductions including a reduction in full time employment were made in 2020 and planned in 2021 to maintain a balanced budget as a result of revenue shortfalls associated with impacts of COVID-19. Proposed 2020 2021 Percentage Budget Budget Incr (Decr) Revenues $ 1,185,836 $ 1,084,159 -8.57% Expenditures $ 1,125,836 $ 1,024,159 -9.03% Revenues over (under) Expenditures $ 60,000 $ 60,000 0.00% Activity Center (General Fund) The Hopkins Activity Center is a community facility with a gym, kitchen and meeting rooms. The Activity Center’s mission is to provide pathways to “Experience the Upside of Aging”. It is a gathering place for mature adults to participate in recreational, social, educational, fitness and volunteer activities. The main sources of revenue are member fees and facility rentals. The main expenditures are salaries, benefits and payments to instructors or for other programming. Program revenues are $374,798 less than program expenditures. The indirectly funded amount is provided through property taxes, local government aid, franchise fees and interest. The Activity Center is part of the City’s General fund and does not have its own fund balance. Proposed Budget Budget Percentage Budget Budget Incr (Decr) Revenues $ 119,100 $ 82,000 -31.15% Expenditures $ 497,843 $ 456,798 -8.24% Indirectly funded amount $ (378,743) $ (374,798) -1.04%  Pavilion Fund (Enterprise) The Hopkins Pavilion is a multi-use, year-round arena and community facility. The arena is used for a multitude of activities including ice skating, broomball, soccer, lacrosse, inline skating, rugby, baseball, softball, concerts, company picnics and other community and private events. The main revenue sources are a property tax levy, facility rentals and leases. The main expenses are depreciation, salary, benefits and bond interest. The depreciation budget increased from $100,000 in 2020 to $480,000 in 2020, causing the majority of the 56.4% increase in expenses. The budget is projecting a decrease in net position of $274,860, which includes $480,000 of depreciation. The funds cash flow is projected to be neutral. Proposed 2020 2021 % age Budget Budget Incr (Decr) Revenues $ 781,500 $ 823,500 5.37% Expenditures $ 702,256 $ 1,098,360 56.40% Revenues over (under) Expendi $ 79,244 $ (274,860) -100.00% (remainder of this page left blank intentionally)  Utility Funds (Enterprise) The City has four separate utility funds to provide: water, sanitary sewer, storm sewer and refuse collection services. They are classified as enterprise of business-type funds. The main source of revenue for all funds is user charges. The main expenses are salaries, benefits, depreciation, bond costs and municipal wastewater charges. Collectively, the funds are projected to end the year with a cash balance of $3.4 million and a net position (fund balance) of 27.8 million. All funds have a positive cash flow projection in 2021. Water Proposed 2020 2021 % age Budget Budget Incr (Decr) Revenues $ 2,256,004 $ 2,292,074 1.60% Expenditures $ 2,235,098 $ 2,198,674 -1.63% Revenues over (under) Expenditures $ 20,906 $ 93,400 100.00% Sanitary Sewer Proposed 2020 2021 % age Budget Budget Incr (Decr) Revenues $ 3,052,340 $ 3,105,587 1.74% Expenditures $ 3,025,741 $ 2,963,236 -2.07% Revenues over (under) Expenditures $ 26,599 $ 142,351 100.00% Storm Sewer Proposed 2020 2021 % age Budget Budget Incr (Decr) Revenues $ 793,532 $ 789,332 -0.53% Expenditures $ 621,945 $ 596,969 -4.02% Revenues over (under) Expenditures $ 171,587 $ 192,363 12.11% Refuse Proposed 2020 2021 % age Budget Budget Incr (Decr) Revenues $ 1,006,206 $ 1,001,941 -0.42% Expenditures $ 1,008,049 $ 1,029,220 2.10% Revenues over (under) Expenditures $ (1,843) $ (27,279) -100.00%  Utility Rates Proposed Water, Sanitary Sewer, Storm Sewer and Refuse fund budgets have been prepared for 2021. The Water and Sanitary Sewer budgets being proposed include rate increases of approximately 2% based on operational and capital needs. The City has a tiered rate structure for water consumption. There is no proposed rate increase proposed for the Storm Sewer of Refuse funds. 2020 2021 Percent Current Proposed Increase Flat Rates Per Meter Per Month Residential - 5/8" meter 2.96 3.02 2.03% Residential - 1" meter 2.96 3.02 2.03% Apt/Commercial - 1-1/2" to 2" meter 5.93 6.05 2.02% Apt/Commercial - 3" meter 8.90 9.08 2.02% Apt/Commercial - 4" meter 11.85 12.09 2.03% Apt/Commercial - 6" meter 17.78 18.14 2.02% Consumption Rates, Per 1,000 Gallons Residential and Multi-Family 0 - 3,000 gallons 3.04 3.10 1.97% 3,001 - 5,000 gallons 3.49 3.56 2.01% 5,001 and over 4.01 4.09 2.00% Commercial 0 - 10,000 gallons 2.90 2.96 2.07% 10,001 - 20,000 gallons 3.32 3.39 2.11% 20,001 and over 3.83 3.91 2.09% Irrigation - all usage 3.63 3.70 1.93% Production meter 3.06 3.12 1.96% Sanitary Sewer 6.73 6.86 1.93% The two following charts show the impact of the water and sewer rate increases for different user types. Impact on Low, Median and High Residential User Proposed Actual 2020 $ Increase % Increase 2021 Single Family Residential (Lower User) Water (1,500 Gallons) $ 7.52 $ 7.67 $ 0.15 1.99% Sewer (1,500 Gallons) $ 10.10 $ 10.29 $ 0.19 1.93% Total Monthly Bill $ 17.62 $ 17.96 $ 0.34 1.96% Single Family Residential (Median User) Water (4,000 Gallons) $ 15.57 $ 15.88 $ 0.31 1.99% Sewer (3,000 Gallons) $ 20.19 $ 20.58 $ 0.39 1.93% Total Monthly Bill $ 35.76 $ 36.46 $ 0.70 1.96% Single Family Residential (High User) Water (8,800 Gallons) $ 34.30 $ 34.98 $ 0.68 1.99% Sewer (4,800 Gallons) $ 32.30 $ 32.93 $ 0.62 1.93% Total Monthly Bill $ 66.60 $ 67.91 $ 1.31 1.96% Impact on Low and High Commercial User Proposed Actual 2020 $ Increase % Increase 2021 Commercial Property (Low User with a 1" Meter) Water (3,000 Gallons) $ 14.63 $ 14.93 $ 0.30 2.05% Sewer (3,000 Gallons) $ 20.19 $ 20.58 $ 0.39 1.93% Total Monthly Bill $ 34.82 $ 35.51 $ 0.69 1.98% Commercial Property (High User with a 2" Meter) Water (35,000 Gallons) $ 125.58 $ 128.20 $ 2.62 2.09% Sewer (35,000 Gallons) $ 235.55 $ 240.10 $ 4.55 1.93% Total Monthly Bill $ 361.13 $ 368.30 $ 7.17 1.99%  Annual Service Cost for Median Value Home Based on the preliminary tax levy passed on September 15th and the utility rates proposed in this memo the annual service cost for a median value home is projected to increase by $63.76 or 2.13%. The median value home was $276,000 in 2020 and $291,000 in 2021. Annual Service Cost for Median Value Home Actual Proposed 2020 2021 % Increase City Property Taxes $ 1,828.00 $ 1,877.00 2.68% Water - Consumption 7,500 gallons per month $3.04/$3.49/$4.01 Tiered Rates $ 349.08 1.99% $3.10/$3.56/$4.09 Tiered Rates $ 356.04 Sewer - Consumption 5,000 gallons per month $6.73/ 1,000 gallons $ 403.80 1.93% $6.86/ 1,000 gallons $ 411.60 Refuse Collection $ 262.20 $ 262.20 0.00% Storm Sewer $ 60.00 $ 60.00 0.00% Franchise Fees $ 84.00 $ 84.00 0.00% Total $ 2,987.08 $ 3,050.84 2.13%  FUTURE ACTION: 2021 Budget Preparation Schedule The following table outlines the tentative schedule for discussions on important aspects of the City’s Budget. Meeting Date Meeting Type Subject Details October 6 Regular Meeting Financial Management Plan (FMP) -Overview of the FMP, prior tax increases and Update debt October 13 Work Session Review Capital Improvement Plan -Park Dedication Fund (CIP) and Equipment -Capital Improvement Levy (City Buildings) Replacement Plan (ERP) -Permanent Improvement Revolving Fund (Street Projects) -Equipment Replacement Levy October 20 Regular Meeting Quarterly Financial Report November 4 Regular Meeting Review Options for 2021 Tax Levy -Review reduced levy options for 2021 (Wednesday) November 10 Work Session Review Special Revenue Budgets, -Chemical Assessment -Activity Center Activity Center Budget, Enterprise -Economic Development -Sewer Fund Budgets and Utility Rates -Parking -Storm Sewer -Communications -Refuse -Depot -Pavilion -Arts Center -Water November 17 Regular Meeting Approve CIP, ERP & Utility Rates November 30 Regular Meeting Truth in Taxation Hearing -Overview of 2021 Budget and Tax Levy (Monday) -Public Comment December 1 Regular Meeting Approve Final Budget & Tax Levy -Final Comments from Council on Budget -Could be approved if appropriate December 15 Regular Meeting Approve Final Budget & Tax Levy -Last scheduled meeting to approve