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