Memorandum

City of Lawrence

City Manager’s Office

 

To:

Mayor

City Commissioners

From:

Dave Corliss

City Manager

cc:

Debbie Van Saun, Asst. City Manager

Ed Mullins, Finance Director

Casey Liebst, Budget Manager

Date:

July 17, 2007

Re:

Agenda items – 2nd Quarter Report and 2008 Budget

 

Second Quarter Report

Attached please find the second quarter report for 2007.  While revenues for the General Fund are about where they were budgeted for this time period, we continue to monitor revenue from sales tax and fines.  Expenditures thus far in the General Fund are 48.5% of a budget that has been reduced by 6% per pervious direction from the City Commission.  Staff will continue their efforts to find efficiencies and limit expenditures throughout the remaining months of 2007 in order to provide a healthier fund balance going in to 2008.

 

2008 Budget

At the conclusion of the July 16, 2007 budget study session, I understood that further discussion was needed on several items from my recommended budget.  An outline of those remaining issues is as follows:

 

             I.      Pool fees for the Recreation Fund.  The Recreation Fund is supported primarily by three revenue sources: property tax, sales tax, and user fees.  The revenue requirements for the 2008 budget are around $3.5 million.  My recommended budget provided no mill levy increase for this fund but does rely on an increase in pool fees to provide the necessary revenue for 2008.  An increase in daily admission fees for all customers (with the exception of toddlers) to $4.00 provides that revenue source (estimated projection $291,636).  The memorandum from Parks and Recreation is attached.

 

An alternative option is to look at a revenue total that increases the pool fees for children/teens/seniors to $3.00 (rather than $4.00) and increases the adult fees to $4.00.  Using the same average daily attendance figures, resulting in a proposed revenue projection for daily admission fees of $244,704, we are about $47,000 short for revenue.  Therefore, if the City Commission opts to raise daily admission fees to $4.00 for adults and $3.00 for children/teens/seniors, the $47,000 revenue shortfall for the 2008 budget can be made up as follows:

 

·            Increase the mill levy by 0.057 mills;

·            Increase the transfer from sales tax by $47,000; this would result in a decrease to the sales tax reserve fund of $47,000.  One of the uses for the sales tax reserve fund is funding miscellaneous facility maintenance projects.  A $47,000 reduction would affect our ability to complete next year’s priority projects, such as replacing the restroom in Hobbs Park, overlaying the parking lot in Broken Arrow Park, replacing the wall partitions in the basement of the Community Building, improvements to the floor in the lobby and gym walls at Holcom Park Center, upgrading the adult soccer fields in the Outlet Park, etc.  (One or more of these projects would be deferred to 2009 or later to make up the $47,000 reduction).

·            Alternatively, we can reduce services but as noted in earlier discussions, there are revenue consequences when we reduce recreation programs that are non-aquatic.  For example, if we eliminate a program in order to save staff salaries, we also eliminate the revenue from that program, thus negating the budgetary impact.  Reducing pool hours to make up for the $47,000 revenue shortfall would be an option to consider and would include closing the outdoor center at 8 pm rather than 9 pm; close the facility for the season when school starts in August; close the indoor center at 7 pm rather than 8 pm during the school year and close at 8 pm rather than 9 pm during the summer.      

 

          II.      Mill Levy for 2008.  Five funds are supported by property tax levies: General Fund, Library, Public Transit, Recreation, and Bond/Interest.  My recommended budget provided a .32 mill levy increase for the General Fund and a .70 mill levy increase for the Public Transit Fund.  Combined, this mill levy increase allows for the five property tax supported funds to continue providing services at current levels and provides a 2% wage adjustment for employees.  The total recommended mill levy increase is 1.02 mills.

 

As noted in the recommended budget, the budget options for the General Fund contain different fund balances, both within City policy.  To review, Option 1 has no mill levy increase, no wage adjustment for City employees, and a 17.55% fund balance as % of expenditures.  Recommended Option 2 has a .32 mill levy increase, a 2% wage adjustment for City employees, and a 16.5% fund balance.

 

A reduction in the mill levy increase to the Public Transit Fund can be accomplished but involves a reduction in services.  If service ends at 6:00 p.m. we can reduce the mill levy increase for Transit to .42 mills.

 

       III.      General Fund Sales Tax Projections.  There were also questions concerning the proposed 2008 budget sales tax revenues.  If sales tax revenue is 2% above the revised 2007 sales tax projections, the difference between the 3.5 % recommended budget amount and a 2% projection is $328,628.  Staff will not make budgeted transfers or expenditures (e.g. equipment reserve and capital improvements reserve fund) in 2008 equal to this amount until the 2nd quarter in order to ensure that sales tax projections are on target.

 

        IV.      Revenue Increases for 2008.  Rate increases for solid waste and water/sanitary sewer services are necessary in order to provide adequate revenue for these enterprise funds.  Information regarding recommended rates for solid waste and water/wastewater services (including rural water district rates and water/wastewater system development charges) was provided in materials for the July 16, 2007 study session.  Additionally, the administrative policy for the allocation of the transient guest tax will be updated in order to allocate the recommended amount ($150,000) to the Guest Tax Reserve Fund. 

 

           V.      Other Budget Items.   Unless directed otherwise, after adoption of the budget I plan on proceeding with the other recommendations contained in the recommended budget, with implementation reports and Commission policy decisions as appropriate.

 

Agenda for August 7, 2007

On August 7th you will not only conduct the public hearing for the 2008 budget, you will also take action on two ordinances: an ordinance adopting and appropriating by fund the budget for 2008 and an ordinance noting the necessity of appropriating/budgeting property tax revenues for 2008 in excess of that which was appropriate/budgeted for 2007. 

 

The August 7th meeting will provide you the opportunity to approve the various ordinances for establishing water/wastewater/extra strength rates, water and wastewater system development charges, and solid waste service rates for 2008, as proposed at the July 16th study session.  Additionally, you will be approving the wholesale water rates and pool fees for 2008. 

 

Action Item

Staff seeks direction from the City Commission on the following item:

 

·       Authorize the publication of the 2008 Budget Summary and set August 7, 2007 as the public hearing date, if appropriate.  The required budget summary/notice of public hearing document will set the upper limits of the 2008 budget and the mill levy.  Once that summary is published, the budget cannot be increased, nor can the mill levy.