6.1. SR 06-06-2016 - Laserfiche WebLink

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The annual budget serves as the foundation for the City of Elk River's financial planning and control. Budget requests are submitted by all departments to the Finance Department each May. The Finance Department compiles these requests into a proposed budget. The Finance Department and city administrator review the information and present a draft budget to the Council in July for consideration. Following Council discussion and public input, the final tax levy and budget are approved in December. The City's Financial Management Policies allow department heads to make administrative budget amendments (excluding personal service and capital outlay) throughout the year as long as the total department budget does not change and the amendment is approved by the city administrator and finance director. The Council approves additional budget amendments in December of each year. Budget to actual comparisons are provided in this report for each individual governmental fund for which an appropriated annual budget has been adopted. For the general fund this comparison is presented on page 39 as part of the basic financial statements for the governmental funds. For other governmental funds with appropriated annual budgets this comparison is presented in the governmental fund subsection of this report. Local economy The local economy has continued to grow by the increase in building permits with a construction value of $57,694,602 being issued in 2015. This is a 23 percent increase from 2014. New additions and remodels accounted for $26,886,010 of new value, and an additional $16,399,266 in residential construction with miscellaneous permits making up the balance. The number of new housing units remained steady from 72 in 2014 to 74 in 2015. Single family homes accounted for all the new housing units in 2015. The average value of new homes increased to $215,426. Many of Elk River's largest employers reported stable or growing employment levels between 2015 and 2016. This is largely due to the upward trend in manufacturing activity in the region. Many larger Elk River employers are experiencing modest growth There has been continual interest in both affordable and market rate multi-family housing projects. Several Elk River companies made significant new improvements including Sportech, Inc. with the construction of a new 105,000 sq. ft. facility. Several other businesses completed expansions and upgraded their facilities. The outlook in this region looks promising with anticipation of several commercial industrial and housing projects working through the review process, with construction expected the last half of 2016. Long-term financial planning As part of a yearly budget process, the City Council reviews the updated Financial Management Plan. The Financial Management Plan provides a long-range forecast that brings together future expenditures, revenues, and development of the City. The Council has been diligent in maintaining a level tax rate. This plan provides the information needed to develop in a manner that will sustain or expand City services while keeping the property taxes stable. Department heads take part in this process to estimate staff additions, service levels, and capital needs for the next ten years. In addition, the City Council continually reviews cash flow analysis and long-term planning as part of the comprehensive Capital Improvement Plan (CIP) process. The CIP is a 5-year planning tool that forecasts the City's capital needs based on the City's long-range plans, goals, and policies. Relevant Financial Policies The City Council has adopted several Financial Management Policies and continually monitors and updates the policies. The Financial Management Policies include: revenues, property taxes, investments, purchasing, financial reporting, reserves, fund balance, capital investment, and debt policies. The City's policy on fund balance states that the City will maintain an unassigned fund balance of not less than 40-45% of budgeted general fund operating expenditures. The percentage of unassigned fund balance at December 31, 2015 is 44%. Since property tax payments are received by the City in two installments in July and December, the City needs adequate cash reserves for cash flow in order to avoid short-term borrowing to finance operations. Changes in state law over the past several years have resulted in funding changes for both schools and local governments. Replacements of Market Value Homestead Credits (MVHC) with the Market Value Exclusion (WE) program and Local Government Aids (LGA) program have resulted in revenue losses to the City. Due to the uncertainty in receiving the aid from the state, the LGA and MVHC revenues are not included in the 2016 General Fund budget. The City does not expect in the short-term to see LGA and MVHC amounts restored to previous year's levels.