2005-04-19City of Mound
Key Financial Strategies
Session Four
4/19/05
AGENDA
Spread Sheet Basics
a. Revenue and expense assumptions (1,2)
b. Base line operating balance ~
c. Existing debt (58)
Residential tax target (72)
Future debt allowance within goal (57)
Priority needs (1-58)
Bonding needs (65-73)
Bottom line to solve (81 net of debt allowance)
Review and revise strategies
Review Implementation
a. Review and update assumptions
b. Update needs
c. Revise plan
d. Update strategies
Establish roles
a. Review and revise plan before financial decisions
b. Encourage debate on options
c. Explore long-term solution over short-term fixes
d. Other
5. Final questions and wrap up
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
8O
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
100
101
102
103
Exhibit B
City of Mound
Financial Management Plan
CIP Requests Compared to Available Resources
Dept 2005 2006 2007 2008 2009 2010
I Available Ne~v De~t Ser'.4ce/Speclal Levy Capacity 0 0 82.500 141.000 237.000
2
3 Projected Additional CIP and Related Requests
4 Level One
5 Personnel
6 Human Resoumes/Comm unicatlon Admin 65.000 65,000 65,000
7 Planner Pien/Inspect 60.000 60.000 60,000 60.000
8 Accountant Finance 60.000 60.000 60.000
9 P.W, Street Staffing Street 40.000 40,000 40,000 40,000
10 PW-Recepdonist Street 8,000 8,000
11 Parks-Sessonal Parks 21.000 23.200
12 Parks-Receptionist Parks 8,000 8,000
13 Parks Staffing FT Parks 40.000 40,000 40,000 40.000
14 Police staffing Police 36.000 58,000 58,000
15 Capital
16 Eng/Planning Staff Office Area City Hall Bldg 20.000
17 Admin city car Admln 30.000
18 Comp Plan Plan/inspest 50.000
19 Zoning ordinance update Plan/Inspect 30.000
20 Comprehensive Tech Plan Finance 38,500 38.500 3.500
21 Financial system improvement/replacement Finance 20,000 20,000 20,000
22 Squad car equipment Police 9.000 9.000 7.000
23 Squad car computer Police 60,000
24 Police fleet replacement Police 42,000 26,000 26.000 44.000
25 Pollce MIS upgrade Police 3,500 3.000 3,000
26 Emergency preparedness siren Police 17,000 17,000
27 Fire tanker truck Note 3Fire 78,000
28 First response fire rescue Note 3Fire 75,000
29 Aedal ladder Note 3Fire
30 Emergency preparedness SUV Note 3Fire 21.000
31 Mintpumpar grass rig Note 3Fire
32 Fire pumper Note 3Fire
33 Fire equipment replacement Note 3Fire 7,200 9,000 9,000 10,800
34 P,W. Street Equipment Replacement Street 225.000 310,000 305,500 182.000 15.000
35 Parks Equipment Replacement Parks 43,300 48,300 16.500 36.500 77.000
36 Park Planning & Redevelopment Parks 500.000 500.000 500.000 500.000
37 City Entrance & Park signage Parks 40,000 40,000
38 Retaining Wall replacement Street
39 Lased=[che Upgrade City Clerk 6.000 4.000 10.000
40 Services
41 Interac6ve. online sauces Finance 0 50.000 10,000 10.000 10,000
42 Tach support Finance 5.000 36.250 50.750 72.500 72.500
43 Facilities
44 City Hall replacement City Hall Bldg 50.000 15.000
45 P.W. Park Building replacement P.W./Parks 25.000 50,000 0
46 Public safety facility repaidmalnt Fire
47 Public safety facility rapair/malnt Police
48 Other
49 Madna Note4 100,000 224.853 224.853 224,853 224.853
Mound Bay Park Redevelopment 25.000 50,000 2.000,000
Lost Lake Canal 75,000 75,000 75,000 75.000 75.000
Level Two
Personnel
Fire staffing wages Fire 30.000 30,600 31,200
Level Four
Community Center Note 5 25,000 50.000 269.823 269,823
Lifeguards 15.000 15.000 15,000 15,000 15.000
Leaf Coflection Site 25,000 50,000 1,000.000
441.500
65,000
60,000
60,000
40,000
8,000
8,000
40,000
26,000
17.000
750.000
24,000
10.800
62,000
500,000
10.000
3,500,000
15,000
15.000
224,853
75.000
32.000
269.823
15.000
Additional Bonding
Street reconstruction,2005 projects Note 1 53.425 53.425 53,425 53,425 53.425 53.425
Street reconstruction-2006 projects Note 1 53,425 53.425 53,425 53,425 53.425
Street recons~tJction-2007 projects Note 1 53.425 53,425 53,425 53.425
Street reconstruction-2008 projects Note 1 53.425 53,425 53.425
Street reconstruction-2009 projects Note I 53,425 53.425
Public Works Building replacement Note 2 404.735 404,735 404,735 404,735
Total Additional 562.725 1,873.453 2.428.813 2.761,211 5.421.536 6,499.336
Subtotal Excess (Deficit) Levy Capacity (562,725) (1,873.453) (2.346.313) (2.620,211) (5.184.536) (6.057.836)
Note 1 -Street Reconstruction projects-based on a levy of 33% of the cost (66% assessed) wffh project costs of $1.800,000 each year in the year shown, at 4% per year over 15 ye~
Note 2-Building replacement based on a lew of debt service on $4.500,000 project cost at 4% par year over 15 years
Note 3-Amounts shown represent the General Fund cost. that is 60% of total asset cost.
Note 4-Amount si~own represents debt P&~ of $2.500.000 spread over 15 years at 4%
Note 5-Amount shown represents debt P&I of $3,000,000 spread over 15 years at 4%
Funded bv Other Sources (I.e. Enterprise Funds or olher Fun(is)
Phase II Planning
Scattered Site Housing
SIloreline Retention Program
PW Water Equipment Replacement
PW Sewer Equipment Replacement
PW Storm Equipment Replacement
True Value Parking Deck
MCES Lift Station
Water Tower #3 Replacement
Well House ~
75,000
100,000 100.000
50.000 50,000 50,000 50,000 50.000
120,000 38,000 42,000 152,000 15,000
30,000 60,000
15.000
1,500,000
400,000
1,000,000
300,000
150,000
4/19/2005
EHLERS
& ~SSOCIATE$
KEy FINANCIAL STRATEGIES
EXECUTIVE SUMMARY
Key Financial Strategies is a process that combines financial planning with strategic planning. Its
primary purpose is to provide a disciplined .fram6w. ork for decision-making required to identify and
implement strategies that will assure long-term community viability. This is especially important for
communities like Mound that face the task of preserving the foundation of a mature, developed
community. Long-term viability also reflects the fact that the value of current assets owned by
residents and other property owners is directly linked to the ability to prepare the community for
future residents and investors.
Mound is a well-managed City that has developed and maintained sound fiscal policies in the areas of
budgeting, fund balances, and debt management. The strong A1 credit rating reflects the results of
this management and the strength of the local tax base. The financial principles guiding the
community reflect a commitment to maintain the financial stability, maintain service levels based
upon community standards, maintain the community infrastructure (streets, sidewalks, lighting, utility
systems, etc.), and to provide additional services and investments based on the needs of current and
future residents within the context of community affordability and without sacrificing the ability to
maintain current operations. During the past five years the City has initiated an effort to assure that
the community infrastructure is properly maintained. A new public safety building has been
constructed, a pavement management system has begun, publicly owned retaining walls are being
replaced, equipment is being upgraded and steps to redevelop the core downtown area are underway.
At the same time a significant challenge remains. The City will need to address replacing or updating
Public Works, Parks and City Hall buildings. In addition, funding will be needed to assist with
redevelopment, operating cost for public improvements within the redevelopment area, public docks
and staff to assist with growing demand for City services.
The financial projections prepared as part of the KFS plan indicate that the City will be able to
maintain these principles with careful attention to the financial planning process. This process
requires a specific commitment to reviewing and updating this financial plan on an annual basis with
a focus on the following:
· Review of staff-prepared projections for the cost to maintain current level of services.
· Review of investments (capital costs) required to maintain current facilities.
· An analysis of the impact of adding new services and facilities on the tax rate and fees.
· Periodic surveys to determine public assessment of the value and need for the current level of
services.
· Identification of a select number of new goals and initiatives for needs assessment, study, or
implementation.
· Direction to staff to prepare specific strategies for future years.
KEY FINANCIAL STRATEGIES
Ehlers & Associates was engaged by the City of Mound, Minnesota (the "City"), to assist in the
preparation of the City's Key Financial Strategies. The need to create a comprehensive financial
management plan was identified by the Mayor, Council, Manager and Staff due to growing demands
for financial resources. This strategic financial plan is the result of four intensive workshops with the
Council and many hours of staff consultation. Workshops focused on identifying potential financial
needs of the City, reviewing financial projections, and discussing priorities for the community. The
results from those sessions have been incorporated into this plan document. In addition, the City
Council has conducted an annual goal setting session to help frame issues of importance to the
community.
OBJECTIVES FOR THE FINANCIAL PLANNING PROCESS
A financial plan is a necessary element of a City strategy to remain competitive in today's demanding
environment. Other objectives of the City's Key Financial Strategies are:
Establishing a common understanding among the elected officials and staff of the City's needs
and financial capacity.
Developing a comprehensive view of financial resources and options.
Identifying City issues and opportunities.
Creating a framework in which elected officials and staff can make immediate and long-term
investment decisions.
Developing a consensus among the elected officials and staff on key actions the City will take
to remain competitive.
Provide a framework for forecasting long-range financial planning issues to the public.
Meeting the new standard presented in the Governmental Accounting Standards Board
Regulation 34 including its capital planning provisions.
Through this workshop process, the City Council has examined the current and future ability to meet
these objectives to answer the question "How do we get there?" The City's Key Financial Strategies
will provide a road map into the future and a framework for future decision-making.
City of Mound- Key Financial Strategies Page 2 of 17
FINANCIAL PRINCIPLES
In order to guide the City financial planning ~he following principles have been adopted by the City
Council:
· Fiscal Health - Maintaining fiscal health is the very first goal listed in the recently adopted City
Council goals for the coming year. It is a carry-over from last year's goals document. The basics of
maintaining fiscal health for the community focus on a property tax policy that will level or reduce
the property tax rate; maintain a healthy Fund Balance of at least 35% of projected current year
budget revenues, and, maintaining the City's A1 Bond rating.
· City Services - Council has previously indicated the strong desire to maintain City services at
current levels, even as growth in the Community continues to occur. In other words, staff interprets
that maintaining City services is intended to be consistent with the growth so that new growth does
not negatively affect the delivery of services. In the 2002 resident survey, the Community indicated
very favorable opinions of the services being provided in relation to taxes paid.
City of Mound- Key Financial Strategies Page 3 of 17
FINANCIAL ASSESSMENT - FINDINGS
The financial assessment conducted of the City was divided into seven Strategic Focus Areas:
2.
3.
4.
5.
6.
7.
COMMUNITY GOALS/INITIATIVES
LOCAL TAX BASE CONSIDERATIONS
FINANCIAL POSITION
CITY OWNED INFRASTRUCTURE
COMPETITIVENESS
CREDIT POSITION
ENTERPRISE FUNDS
As part of the financial assessment, a number of findings were presented within the workshops. These
findings are outlined in more detail within this report. A summary of these findings is as follows:
1)
COMMUNITY GOALS/INITIATIVES - Establish a strategic proffie including community
vision (purpose), goals (means to achieve the purpose), and strategies (directed at
accomplishing goals), which are essential to the efficient and effective use of scarce City
resources.
A) Important Initiatives -- City Officials have identified several initiatives as part of this
financial planning process. Key issues include:
Downtown Redevelopment
o Completing redevelopment
o Establish downtown parking facilities
o Establish public streetscape
o Maintenance for new public areas
Maintaining City Infrastructure
o Street and utility maintenance (continuing the street maintenance
program)
o Park maintenance (replacing outdated play features and upgrading play
fields)
Vehicle and major equipment replacement
o Water System Improvements
o Dock maintenance
Maintaining Current Service Levels
o Future staffing issues to service growth population
o Comprehensive Plan update
Services for redeveloped downtown
o Support for increased demand for planning, zoning administration and
inspection services
Explore support for upgraded City facilities
o Public Works and Parks building
o City Hall
City of Mound- Key Financial Strategies Page 4 of 17
Implication: The City has identified a significant agenda for future needs. Developing
a mechanism to regularly prioritize needs, develop implementation programs (including
resource requirements) and evaluate the City's capacity to implement the programs
should be a high priority. Given this aggressiv~ agenda it will be important to manage
the time required for the Council to make the required policy decisions needed to
implement the strategies. A disciplined approach to selecting a manageable number of
strategies should be a priority. Financial strategies should also include direction
regarding the nature of activities to be undertaken for each issue including:
· Assessing need for services or facilities.
· Studying alternatives, methods and cost and funding sources for implementation.
· Implementation.
2) LOCAL TAXBASE CONSIDERATIONS - Structure, quality and size of a community's
tax base impact its ability to fund services and investments.
A) Development- Mound is essentially completely developed. There are several sites
that are likely candidates for redevelopment. In addition the City's character has been
largely defined by lakeshore access, which has been a stimulus for scattered site
residential development.
Implication: The City will add residents and businesses to its population and, will
face new requests for future services as demographics and resident interests change. In
addition the City will need to address reinvestment in existing facilities. Understanding
the dual impact of new service requests of existing residents and the impact of
additional new residents will be a key to future planning. It is likely that the City will
face increased pressure from owners of higher value home regarding maintenance of
public and private property.
B)
Market Value - City market value of $812 million has been increasing steadily an
average of 11.2% per year over the past five years. The City has a good per capita
market value of $84,000.
Implication: The high per capita market value provides good opportunity for revenue
diversification. The tax rate should be evaluated in terms of what rate creates the
outcomes that the City seeks for itself. The tax rate goals should be set in conjunction
with both the budget and the yearly costs identified in the capital plan.
c)
Diverse Tax Base -- The City has a tax base with 95% residential and 5%
commercial/industrial/other. Mound Marketplace and Commerce retail centers are the
largest two taxpayers to the city with a combined value of $10 million.
Implication: Tax base diversification is a focus to achieve stability in City services
requirements and property tax production. Continued effort should be made towards
increasing commercial/industrial base to at least 10%. It is not feasible for the City to
achieve the recommended ratio of 25% to 33% retail and commercial to 75% to 67%
residential considering the fully developed status of the community. Updates to the
Comprehensive Plan should consider opportunities to increase commercial (office and
retail) property uses. The Balboa property is currently underutilized and should be
considered for enhanced development.
City of Mound- Key Financial Strategies Page 5 of 17
D) Economic Development Policy - The city has provided economic development
incentives in the form of tax increment financing.
Implication: Previously the City used economic development incentives to attract
targeted development. This strategy has contributed to the level of tax base
diversification that exists today. To encourage continued balanced community growth,
the City should consider appropriate strategies such as use of tax increment financing
and tax abatement for financial assistance if necessary.
3) FINANCIAL POSITION - Availability of funds to meet current and future needs, adequate
fund balances for cash flow purposes and to meet emergency needs requires planning and
discipline.
Effective past financial management practices has left the City with a reasonable
undesignated, unreserved fund balance within the General Fund, Water and Sewer Fund
and Storm Sewer Fund. However the General Fund balance has diminished from 45%
in 2002 to a projected 20% in 2005. The City Council has not adopted a Fund Balance
Policy.
Implication: The City's General Fund Balance has been gradually diminishing, from
Changes in State property tax structure and potential capital project costs indicate the
need to continue to carefully monitor the fund balance. It is recommended that the City
consider adopt a fund balance policy for the General Fund. A minimum fund balance of
35% of current year projected revenue is recommended.
B) The City faces growing demand and cost to provide services with limited ability to
increase short-term tax base.
Implication: The competitive position of the City tax rate will impact the City's ability
to increase operating expenses without an offsetting increase in non-property tax
revenues.
c)
The City has developed effective loss reduction strategies (accident review, safety
committee). Additional risk management efforts that include review of risk retention
levels, deductibles, funding of loss reserves may be warranted.
Implication: Additional development of ~isk management policies will help reduce
exposure to financial risks. Over the long run, an effective risk management policy will
reduce unbudgeted costs for loss reimbursement and increased insurance costs.
4)
CITY INFRASTRUCTURE - Communities need to regularly invest and reinvest in their
infrastructure (roads, buildings, parks, etc.). Regular deferral of investment can lead to
fiscal stress and community disinvestments.
A)
The City has maintained a street reconstruction program since 2003. The City Council
has recently reviewed a Pavement Management System and is considering increasing
funding levels, in light of its importance to maintaining current levels of service and as
part of the 2005 budgeting process.
Implication: Overall the streets are in a deteriorated condition, but an increased annual
investment will be needed to maintain streets at an acceptable level. Progress on
maintenance should be carefully monitored.
City of Mound- Key Financial Strategies Page 6
B) Facility Options -- City Officials are looking at options for Public Works, Park and City
Hall building improvements and a variety of other needs.
Implication: Involving the public with this process will be key to progressing this issue
to the implementation phase. Careful consideration should be given to the funding
options and impacts (including operating costs). While there are some issues impacting
the timing of these decisions, it is essential that public understanding and support be
developed.
C) Technology -- Ever growing demands for staff services and the need for City
departments to work together require ongoing investments in computers and technology.
Implication: Further enhancements to the City's information technology systems may
require financial support from the City's General Fund. Electronic document storage and
retrieval systems have proven to be effective means of reducing document-handling
costs. There will be more and better technology products available to cities. Residents,
customers and employees will likely create pressure to invest in improved and new
technology. This will require the City to develop a disciplined approach to reviewing
the requests and needs for technology investments. That approach should address cost
and benefits (not limited to financial), productivity, training, support and potential
obsolescence.
Potential need for reinvestment in public facilities infrastructure may increase the
property tax above the normal inflationary increase. The City has major investments in
buildings, utility systems, streets, lighting systems and related improvements.
Implication: Community involvement will be key to addressing need for major
investments. The City should undertake a public participation process to involve the
community in understanding and then selecting options. Preparing plans and schedules
for anticipated required maintenance and replacement would provide information
necessary for financial planning purposes.
E)
The City has extensive vehicle replacement requirements for Public Works, Police and
Fire equipment. The City does have a schedule of equipment replacement as part of the
1 O-year CIP that forecasts these needs for the expected life of the equipment.
Implication: Equipment replacement is often deferred as part of budget balancing
efforts. In the long term this may increase maintenance costs, increase downtime of
equipment and staff and lead to a funding problem in future years. Maintaining the
equipment replacement schedule and establishing a funding source will help remedy this
problem and provide a more accurate measure of services.
Minnesota State Statutes, Section 475.521 authorize cities to issue bonds to finance
certain capital improvements including street replacements, city hall, public safety and
public works improvements without referendum. However, the requirements to issue
bonds include preparation of a "capital improvement plan" in accordance with the
provisions of the statute, conducting a hearing
Implication: This new statute provides an option for funding capital facilities, which
may benefit the City. The statutory requirements for a "capital improvements plan"
differ from the conventional plans prepared by most cities and require pre-planning of
about six to eight weeks. Staff should review these requirements as part of planning for
the fire, city hall and public works building improvements.
City of Mound- Key Financial Strategies Page 7
5) COMPETITIVENESS - Communities compete for people to live, work and do business.
Understanding and responding to the elements of competition is an important role for the
City.
A) The City's overall tax rate is slightly above average compared with other comparable
communities in the metro area.
Implication: Given the tax rate and the high level of services, the City is carefully
monitoring its tax rates. The tax rate reflects the fact that the City has had to "catch-up"
with investing in infrastructure maintenance, fund staff required to maintain current
service levels and continue with redevelopment. Residents are likely to support the taxes
at their current levels if the believe they are receiving value for their taxes. Maintaining a
customer feedback system and regular community surveys will assist in evaluating the
value of services offered to residents and businesses.
B) The City offers a full complement of services to residents and businesses.
Implication: Services offered by the City appear to be consistent and competitive with
surrounding communities.
c)
Mound's park system appears to be more expansive than many other communities in the
metropolitan area for two reasons. First the City maintains 30 neighborhood parks and
220 boat slips. Both of these features add significantly to overall operating costs.
Replacement of playground and park features for safety and functional purposes is likely
to be costly. Recently the City has received a proposal to purchase a marina.
Implication: Planning and investments in these areas has provided a foundation for
creating a community with amenities that will attract and retain residents, visitors and
businesses and enhance property values. Careful attention should be paid to the
operating costs of recreation and cultural amenities. Consideration should be given to
reducing the number of smaller neighborhood parks. The proposal to purchase a marina
should be carefully evaluated from a return on investment basis. The cost of maintaining
and replacing docks should be self-supporting or a profit center to support other
community amenities such as beach life guards. Community involvement in discussions
regarding the cost to build and maintain new facilities will be a key factor for future
considerations. Replacement costs for playground and park features should be included
within the City's financial plan.
Mound has a diversity of housing options that is typical for established communities.
More established neighborhoods of the community are populated with modest residential
structures typified by 1960s and 1970s styles. The City also has a growing number of
upscale lakefront homes.
Implication: A healthy and diverse housing stock increases community marketability.
The redevelopment of selected residential properties is likely to accelerate as the City
completes redevelopment on key areas. This should help increase overall tax base.
City of Mound- Key Financial Strategies Page 8
....... & ,, ,l. J ,h I,J, . L
E) The City has issued debt in moderate amounts to finance capital improvements. The need
tO replace and maintain existing facilities is projeoted as part of this analysis may
increase the amount of outstanding debt.
Implication: The City has recently begun to replace and renew infrastructure including
building and facilities. This will require issuance of debt. Monitoring the impact of this
debt on the City's overall taxes will be required.
F) The City provides Fire Services to Mound and other member communities utilizing paid-
on-call firefighters. To continue to attract adequate qualified members competitive pay
and benefits should be provided. The Fire Department is requesting an evaluation of
pension changes including a reduction in vesting requirements (currently 20 years) and
an optional lump sum payout in lieu of monthly benefits.
Implication: The cost of these changes should be evaluated for future discussion and
consideration by the City Council.
6) CREDIT POSITION Maintaining a strong credit rating helps reduce the cost of borrowing
required to develop and maintain the community.
The City is rated "Al" by Moody's Investors Service. This is an above average rating
reflecting the City's strong property value growth and maintenance of a strong financial
position while supporting debt required for future growth and reinvestment in
infrastructure.
Implication: This strong credit rating has helped the City successfully issue debt at
very competitive interest rates in the commercial marketplace.
B) The City's debt burden is low (.95% direct and 1.76% total. Forty-three (43%)
the City's debt will be paid off in ten years.
of
Implication: The City has capacity to use debt to support continued investment. Careful
attention should be paid to "mapping" out future debt issues for the next five to ten
years. An aggressive debt repayment schedule will enable the City to continue to invest
as needed.
C) The City currently has a prudent undesignated fund balance.
Implication: This strong fund reserve helps the City to maintain its current rating and
provide operating flexibility. The City should be careful to maintain this strong fund
balance.
City of Mound- Key Financial Strategies Page 9
7) ENTERPRISE- Operating enterprise funds as a business is key to avoiding a transfer of the
burden of operational costs to general taxpayers. In addition some enterprise operations
can help reduce the cost of general government.
Implication: The City currently updates their utility rates on a regular basis and charges
general fund service costs to the enterprise funds. Both are examples of best practices for
enterprise management. These practices should be continued as part of on-going financial
strategies. In addition, the City may want to consider converting existing government
functions (where feasible) to enterprise funds to permit tracking costs and extending fees
to cover those costs. Two examples include street lighting that can be converted to a
utility fund and billed separately to users and the dock rental and marina which should be
converted to an enterprise fund.
City of Mound- Key Financial Strategies Page 10
RECOMMENDATIONS
Based on the findings and analysis conducted in the workshops, Ehlers developed a list
recommendations for the City -- their Key Financial Strategies -- listed in the seven categories below.
of
1.0
1.1
COMMUNITY GOALS/INITIATIVES
GOAL SETTING:
The Mayor and City Council should establish annual goal setting sessions, prior to budget
preparation. The goal setting session should prioritize needs. This information should be used by
staff to develop programs, service options, and resource requirements for consideration within the
budget process. The goals should specifically address the major issue categories.
Comment: Staff recommends that the City Council consider conducting future goal setting sessions
prior to May of each year as departments are beginning the budget preparation process. Financial
strategies should be incorporated into the annual goal setting program.
1.2
1.3
FACILITY NEEDS:
The City should continue the deliberate and careful approach to addressing facility needs for future
growth, reinvestment and quality of life services and capital investments.
Comment: The City should initiate a public participation process (similar to the Fire Station process)
to engage public discussion in the review of need and funding for these facilities.
COMMUNICATION PLAN:
A communications plan should be developed in order to inform and seek community feedback on
important financial issues including future needs and financial constraints. The plan should also
forecast the process that will be used to seek community participation for significant community
investment decisions.
Conducting a community survey will help identify the types of services vital to attract and retain
residents. Consideration should be given to expanding the survey to collect information regarding
improving the City's competitive position, economic development, quality of life, school funding
inequity and possible intergovernmental / tax sharing solutions.
Comment: Mound has developed a strong reputation as a good communicator with the public on key
issues. Formalizing this plan will assure continuity of effort and results.
1.4 TECHNOLOGY PLAN:
The City should consider developing a technology plan with projected needs some time within the
next five years. The plan should also include a basis for evaluating the requests for technology
investments that address cost and benefits (not limited to financial), productivity, training, support
and potential obsolescence and funding source
1.5 REDEVELOPMENT PLANNING AND IMPLEMENTATION
The City is close to a final agreement for the redevelopment of the downtown area. A significant
amount of staff work will be required during the project approval and construction phase. In
addition, planning for maintenance of the new infrastructure will be needed.
City of Mound- Key Financial Strategies Page I 1
2.0
2.1
2.2
3.0
3.1
3.2
3.3
3.4
3.5
3.6
4.0
4.1
4.2
4.2
4.3
4.4
LOCAL TAX BASE
Growth planning should address continued attention to balancing commercial and residential
development. Special attention should be paid to increasing the amount of commercial (C-I)
development and to developing housing types that reflect life cycle, financial ranges and life style
choices.
The use of public subsidies to assist with encouraging the type of development needed to maintain
community competitiveness and balanced tax base should be continued where it meets the goals and
objectives of the community. The public assistance policy should be reviewed to assure flexibility to
meet broad based community needs.
FINANCIAL POSITION
The City Council should consider a Fund Balance Policy for the General Fund, Special Revenue
Funds, Debt Service Funds, Capital Project Funds, Enterprise Funds, and Internal Service Funds
City staff should prepare an alternative revenue source report for the City Council. These options
should be reviewed annually as part of the Key Financial Strategies update.
The City should continue to adjust all user fees and utility rates on an annual basis to reflect changes
in the cost of services.
The City should review assessment practices to include pavement management cost recovery through
special assessments to benefiting property owners (i.e. increasing assessments to property owners and
including street maintenance such as crack sealing) and to address increased cost of pavement
management projects.
The City should continue annual evaluation of development fees to reflect the City's cost of services.
The City should use the Key Financial Strategies report as part of its annual goal-setting framework.
CITY OWNED INFRASTRUCTURE / CAPITAL EQUIPMENT
The Manager and Finance Director should review the final list of items which were recommended as
part of the vehicle/equipment replacement program and develop a funding program to provide a more
level annual replacement contribution. The City should evaluate an internally funded equipment
rental program that could potentially level out annual replacement costs.
The City should initiate a process to assess the need for updating Public Works and Park buildings.
The process should include public participation.
The City staff should enact each annual capital improvement program based on review of the multi-
year capital improvement needs. City staff should continue to coordinate development of the capital
improvement budget with the development of the operating budget. Future operating costs
associated with new capital improvements should be projected and included in operating budget
forecasts.
The City should prepare a non-annual recurring maintenance schedule for City facilities.
City staff should prepare a plan in accordance with the capital improvement plan requirements for
issuance of debt under Minnesota Statutes, Section 475.521 (Capital Improvement Bonds) if this
funding source is contemplated for improvements to city hall, public works or public safety.
City of Mound- Key Financial Strategies Page 12
5.0
5.2
5.3
5.4
5.5
5.6
5.7
5.8
5.9
6.0
6.1
6.2
6.3
COMPETITIVENESS
The City's tax rate is slightly higher when compared with comparable communities. In managing
property taxes, the City will seek a balance between providing an appropriate level of service,
maintaining infrastructure, and affordability for residents. Having the lowest property taxes is not
always the best measure of this balance. Assessing the value of services through community surveys
and customer feedback is strongly recommended.
The City should review and implement a revenue enhancement study for additional revenue options
including utility franchise fees, dock fees, utility bill preparation fees and similar alternatives. The
information should be prepared to identify options prior to their need.
Staff should annually prepare three-year projections of tax levies. The City Council may consider
community involvement in the long range planning process to build support for the development of
resources to achieve goals the public has supported.
The City should continue to meet and confer with overlapping local government units (county,
schools, etc.) to discuss operating and capital funding issues that will impact residents overall taxes.
In order to provide direction to staff, the Mayor and City Council should review and select the
appropriate items from the Budget Option Impact Worksheets that would be included in next year's
budget. This budget should then be constructed by balancing resources with current and future
needs.
The Financial Strategies should be reviewed and updated annually as part of the City's budget
process. The City Council should annually agree that the three priorities for budget adoption are (1)
maintaining fiscal health, (2) maintaining City services at existing levels or higher, and (3) providing
community amenities where possible and when they do not adversely impact items (1) and (2).
Annual budgets should include budget option analysis for 5% to 10% of total projected expenditures.
Budget presentations and discussions should be supported with a balance of input/resources and
outcome options.
The City should evaluate its risk management program and make improvements where necessary.
Additional effort to reduce risk exposure including review of retention levels, deductible levels,
funding of reserves for retained risks should be considered.
The City should evaluate the cost of changes in the Fire Pension system designed to attract and retain
qualified personnel.
CREDIT POSITION
The approval of Key Financial Strategies by the Mayor and City Council will help document the
future City plan to Moody's Investors Service.
The City should endeavor to keep the total maturity length of general obligation bonds below 20
years and at least 50% of the principal shall be retired within ten years. In all cases, the maturity
should be shorter than the life of the related assets.
The City should work to minimize the amount of debt supported by property taxes and will seek
additional use of special assessments, utility revenues and other non-tax sources to support debt.
City of Mound- Key Financial Strategies Page 13
7.0
7.1
7.2
7.3
7.4
7.5
ENTERPRISE FUNDS
The City should evaluate the benefits of establishing the dock rental as an enterprise fund.
Annually, the Manager and Finance Director should continue to review and recommend necessary
adjustments to water, sewer and other utility sufficient to recover cost of operations and provide for
capital needs for consideration by the Mayor and City Council.
City staff should continue to annually review the cost of general fund services provided to enterprise
activities including insurance, financial and accounting services, management, legal and related
expenses. These costs should be evaluated by the City Council for inclusion in the rates for
enterprise services.
City staff should annually review the utility rate policy that addresses the need for fees to recover
operating costs and provide for operating cash, reserves, non-annual recurring maintenance, and debt
service.
City staff should identify the costs to meet mandated water quality standards and the impact on water
rates.
City of Mound- Key Financial Strategies Page 14
This section describes the actions needed to implement the City's Key Financial Strategies. Actions fall
into two categories: Tasks for immediate action, and tasks that reflect on-going financial management
actions. The following is a recommendation on the tasks that require attention over the next five-year
period. Implementation of these Key Financial Strategies requires annual review and updating of the Plan,
and revision of the schedule prior to initiating the budget process. Careful attention should be paid to
developing realistic time frames and work plans.
Projected Projected
2005 ACTIVITY Start Date Level/Status Completion Date
Develop customer service feedback systems 2005 2/A 2006
[or selected City services
Downtown redevelopment planning and implementation 2005 1/I 2008
Goal Setting Annual 1/I Annual
Annual CIP Annual 1/I Annual
Develop communications plan including annual report on
accomplishments and future challenges 2005 2/I Annual
Review opportunities to increase commercial tax base
when Com rehensive Plan is u dated i.e. Balboa) 2007 1/P 2010
Update Debt Management Plan 2005 2/A 2006
Update Investment Policy Annually Annual 2/A Annual
Review assessment practice to address pavement Annual 1/S Annual
mana ement
2005 1/A 2007
Initiate process for assessing need for Public Works and Parks
building
Prepare facility needs assessment for Mound Bay Park and City Hall 2006 1/I 2007
Pre are assessment of information technolo infrastructure 2006 2/S 2007
Establish/Update Risk Management Policy 2006 2/S 2007
Property tax review Annual 1/S Annual
Prepare five-year budget forecasts including revenue Annual 2/S Annual
forecasts
Identify and fund future staffing requirement to match Annual 1/S Annual
growth
Identify a limited number (1-3) of selected services for Annual 2/S Annual
>otential competitive pricing on annual basis
Review budget option analysis as part of budget process Annual 2/S Annual
~valuate Fire Department pension changes 2005 1/S 2006
City of Mound- Key Financial Strategies Page 15
Adopt Key Financial Strategies 2005 2/I 2005
~~2005 2/I 2006
Evaluate Dock Rental for enterprise fund 2005 1/A 2005
Evaluate Water Treatment Improvements 2005 1/A 2006
Develop special service area for downtown maintenance 2005 2/A 2006
Adjust user fees on annual basis to reflect changes in cost Annual 1/S Annual
of services
Evaluate proposal to purchase marina 2005 3/A 2006
PRIORITY DEFINITIONS:
LEVEL 1
LEVEL 2
LEVEL 3
LEVEL 4
Critical to continued operation of city baseline services at present levels. This includes
restoration of services identified as baseline.
Provides opportunity for increased efficiency in baseline level of service. This includes
ability to continue to serve existing level of services without staff increases.
Provides opportunity for expansion of services to meet existing demand as evidenced b
by Council direction or staff analysis
Provides opportunity to increase services that improve quality of life within City.
I
S
A
Implementation
Study Need
Assess Need
City of Mound- Key Financial Strategies Page 16
IMPLEMENTATION
KFS is a policy implementation plan that permits cities to combine long-term strategic planning
with sound financial management practices. The results of the financial planning are used to
guide the annual budget preparation process. In order to effectively use KFS the following
process is recommended:
1)
City staff updates and refines the five-year budget projection. The update should reflect
the financial and performance result of annual operations.
2) City staff updates KFS issues and Action Plan (reflecting actual results of
accomplishments and new issues) prior to annual budget planning.
3)
City Council reviews KFS updates as part of (or prior to) annual goal setting/strategic
planning.
4) Results from annual goals incorporated into updated KFS.
5)
Updated KFS used to guide preparation of annual budget and preparation of Council
work plan (scheduled meetings).
6) Summary of KFS results provided to Boards and Commissions and general public.
City of Mound- Key Financial Strategies Page 17
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KEy FINANCIAL STRATEGIES
EXECUTIVE SUMMARY
Key Financial Strategies is a process that combines financial planning with strategic planning. Its
primary purpose is to provide a disciplined fram6w.ork for decision-making required to identify and
implement strategies that will assure long-term community viability. This is especially important for
communities like Mound that face the task of preserving the foundation of a mature, developed
community. Long-term viability also reflects the fact that the value of current assets owned by
residents and other property owners is directly linked to the ability to prepare the community for
future residents and investors.
Mound is a well-managed City that has developed and maintoined sound fiscal policies in the areas of
budgeting, fund balances, and debt management. The strong A1 credit rating reflects the results of
this management and the strength of the local tax base. The financial principles guiding the
community reflect a commitment to maintain the financial stability, maintain service levels based
upon community standards, maintain the community infrastructure (streets, sidewalks, lighting, utility
systems, etc.), and to provide additional services and investments based on the needs of current and
future residents within the context of community affordability and without sacrificing the ability to
maintain current operations. During the past five years the City has initiated an effort to assure that
the community infrastructure is properly maintained. A new public safety building has been
constructed, a pavement management system has begun, publicly owned retaining walls are being
replaced, equipment is being upgraded and steps to redevelop the core downtown area are underway.
At the same time a significant challenge remains. The City will need to address replacing or updating
Public Works, Parks and City Hall buildings. In addition, funding will be needed to assist with
redevelopment, operating cost for public improvements within the redevelopment area, public docks
and staff to assist with growing demand for City services.
The financial projections prepared as part of the KFS plan indicate that the City will be able to
maintain these principles with careful attention to the financial planning process. This process
requires a specific commitment to reviewing and updating this financial plan on an annual basis with
a focus on the following:
· Review of staff-prepared projections for the cost to maintain current level of services.
· Review of investments (capital costs) required to maintain current facilities.
· An analysis of the impact of adding new services and facilities on the tax rate and fees.
· Periodic surveys to determine public assessment of the value and need for the current level of
services.
· Identification of a select number of new goals and initiatives for needs assessment, study, or
implementation.
· Direction to staff to prepare specific strategies for future years.
KEY FINANCIAL STRATEGIES
Ehlers & Associates was engaged by the City of Mound, Minnesota (the "City"), to assist in the
preparation of the City's Key Financial Strategies. The need to create a comprehensive financial
management plan was identified by the Mayor, Council, Manager and Staff due to growing demands
for financial resources. This strategic financial plan is the result of four intensive workshops with the
Council and many hours of staff consultation. Workshops focused on identifying potential financial
needs of the City, reviewing financial projections, and discussing priorities for the community. The
results from those sessions have been incorporated into this plan document. In addition, the City
Council has conducted an annual goal setting session to help frame issues of importance to the
community.
OBJECTIVES FOR TIlE FINANCIAL PLANNING PROCESS
A financial plan is a necessary element of a City strategy to remain competitive in today's demanding
environment. Other objectives of the City's Key Financial Strategies are:
Establishing a common understanding among the elected officials and staff of the City's needs
and financial capacity.
Developing a comprehensive view of financial resources and options.
Identifying City issues and opportunities.
Creating a framework in which elected officials and staff can make immediate and long-term
investment decisions.
Developing a consensus among the elected officials and staff on key actions the City will take
to remain competitive.
Provide a framework for forecasting long-range financial planning issues to the public.
Meeting the new standard presented in the Governmental Accounting Standards Board
Regulation 34 including its capital planning provisions.
Through this workshop process, the City Council has examined the current and future ability to meet
these objectives to answer the question "How do we get there?" The City's Key Financial Strategies
will provide a road map into the future and a framework for future decision-making.
City of Mound - Key Financial Strategies Page 2 of 17
FINANCIAL PRINCIPLES
In order to guide the City financial planning the following principles have been adopted by the City
Council:
· Fiscal Health - Maintaining fiscal health is the very first goal listed in the recently adopted City
Council goals for the coming year. It is a carry-over from last year's goals document. The basics of
maintaining fiscal health for the community focus on a property tax policy that will level or reduce
the property tax rate; maintain a healthy Fund Balance of at least 35% of projected current year
budget revenues, and, maintaining the City's A1 Bond rating.
· City Services - Council has previously indicated the strong desire to maintain City services at
current levels, even as growth in the Community continues to occur. In other words, staff interprets
that maintaining City services is intended to be consistent with the growth so that new growth does
not negatively affect the delivery of services. In the 2002 resident survey, the Community indicated
very favorable opinions of the services being provided in relation to taxes paid.
City of Mound- Key Financial Strategies Page 3 of 17
FINANCIAL ASSESSMENT - FINDINGS
The financial assessment conducted of the City was divided into seven Strategic Focus Areas:
2.
3.
4.
5.
6.
7.
COMMUNITY GOALS/INITIATIVES
LOCAL TAX BASE CONSIDERATIONs
FINANCIAL POSITION
CITY OWNED INFRASTRUCTURE
COMPETITIVENESS
CREDIT POSITION
ENTERPRISE FUNDS
As part of the financial assessment, a number of findings were presented within the workshops. These
findings are outlined in more detail within this report. A summary of these findings is as follows:
1)
COMMUNITY GOALSfINITIATIVES - Establish a strategic prof'fle including community
vision (purpose), goals (means to achieve the purpose), and strategies (directed at
accomplishing goals), which are essential to the efficient and effective use of scarce City
resources.
A) Important Initiatives -- City Officials have identified several initiatives as part of this
financial planning process. Key issues include:
Downtown Redevelopment
o Completing redevelopment
o Establish downtown parking facilities
c> Establish public streetscape
o Maintenance for new public areas
Maintainin~ City Infrastructure
o Street and utility maintenance (continuing the street maintenance
program)
o Park maintenance (replacing outdated play features and upgrading play
fields)
o Vehicle and major equipment replacement
c> Water System Improvements
o Dock maintenance
Maintaining Current Service Levels
o Future staffing issues to service growth population
o Comprehensive Plan update
o Services for redeveloped downtown
o Support for increased demand for planning, zoning administration and
inspection services
Explore support for upgraded City facilities
o Public Works and Parks building
o City Hall
City of Mound- Key Financial Strategies Page 4 of 17
Implication: The City has identified a significant agenda for future needs. Developing
a mechanism to regularly priOritize needs, develop implementation programs (including
resource requirements) and evaluate the City's capacity to implement the programs
should be a high priority. Given this aggressiv~ agenda it will be important to manage
the time required for the Council to make the required policy decisions needed to
implement the strategies. A disciplined approach to selecting a manageable number of
strategies should be a priority. Financial strategies should also include direction
regarding the nature of activities to be undertaken for each issue including:
· Assessing need for services or facilities.
· Studying alternatives, methods and cost and funding sources for implementation.
· Implementation.
2) LOCAL TAXBASE CONSIDERATIONS - Structure, quality and size of a community's
tax base impact its ability to fund services and investments.
A) Development - Mound is essentially completely developed. There are several sites
that are likely candidates for redevelopment. In addition the City's character has been
largely defined by lakeshore access, which has been a stimulus for scattered site
residential development.
Implication: The City will add residents and businesses to its population and, will
face new requests for future services as demographics and resident interests change. In
addition the City will need to address reinvestment in existing facilities. Understanding
the dual impact of new service requests of existing residents and the impact of
additional new residents will be a key to future planning. It is likely that the City will
face increased pressure from owners of higher value home regarding maintenance of
public and private property.
B)
Market Value - City market value of $812 million has been increasing steadily an
average of 11.2% per year over the past five years. The City has a good per capita
market value of $84,000.
Implication: The high per capita market value provides good opportunity for revenue
diversification. The tax rate should be evaluated in terms of what rate creates the
outcomes that the City seeks for itself. The tax rate goals should be set in conjunction
with both the budget and the yearly costs identified in the capital plan.
c)
Diverse Tax Base -- The City has a tax base with 95% residential and 5%
commercial/industrial/other. Mound Marketplace and Commerce retail centers are the
largest two taxpayers to the city with a combined value of $10 million.
Implication: Tax base diversification is a focus to achieve stability in City services
requirements and property tax production. Continued effort should be made towards
increasing commercial/industrial base to at least 10%. It is not feasible for the City to
achieve the recommended ratio of 25% to 33% retail and commercial to 75% to 67%
residential considering the fully developed status of the community. Updates to the
Comprehensive Plan should consider opportunities to increase commercial (office and
retail) property uses. The Balboa property is currently underutilized and should be
considered for enhanced development.
City of Mound - Key Financial Strategies Page 5 of 17
o)
Economic Development Policy - The Cig has provided economic development
incentives in the form of tax increment financing.
Implication: Previously the City used economic development incentives to attract
targeted development. This strategy has contributed to the level of tax base
diversification that exists today. To encourage continued balanced community growth,
the City should consider appropriate strategies such as use of tax increment financing
and tax abatement for financial assistance if necessary.
3) FINANCIAL POSITION - Availability of funds to meet current and future needs, adequate
fund balances for cash flow purposes and to meet emergency needs requires planning and
discipline.
Effective past financial management practices has left the City with a reasonable
undesignated, unreserved fund balance within the General Fund, Water and Sewer Fund
and Storm Sewer Fund. However the General Fund balance has diminished from 45%
in 2002 to a projected 20% in 2005. The City Council has not adopted a Fund Balance
Policy.
Implication: The City's General Fund Balance has been gradually diminishing, from
Changes in State property tax structure and potential capital project costs indicate the
need to continue to carefully monitor the fund balance. It is recommended that the City
consider adopt a fund balance policy for the General Fund. A minimum fund balance of
35% of current year projected revenue is recommended.
B) The City faces growing demand and cost to provide services with limited ability to
increase short-term tax base.
Implication: The competitive position of the City tax rate will impact the City's ability
to increase operating expenses without an offsetting increase in non-property tax
revenues.
c)
The City has developed effective loss reduction strategies (accident review, safety
committee). Additional risk management efforts that include review of risk retention
levels, deductibles, funding of loss reserves may be warranted.
Implication: Additional development of ~isk management policies will help reduce
exposure to financial risks. Over the long run, an effective risk management policy will
reduce unbudgeted costs for loss reimbursement and increased insurance costs.
4)
CITY INFRASTRUCTURE - Communities need to regularly invest and reinvest in their
infrastructure (roads, buildings, parks, etc.). Regular deferral of investment can lead to
fiscal stress and community disinvestments.
The City has maintained a street reconstruction program since 2003. The City Council
has recently reviewed a Pavement Management System and is considering increasing
funding levels, in light of its importance to maintaining current levels of service and as
part of the 2005 budgeting process.
Implication: Overall the streets are in a deteriorated condition, but an increased annual
investment will be needed to maintain streets at an acceptable level. Progress on
maintenance should be carefully monitored.
City of Mound- Key Financial Strategies Page 6
B) Facility Options -- City Officials are looking at options for Public Works, Park and City
Hall building improvements and a variety of other needs.
Implication: Involving the public with this process will be key to progressing this issue
to the implementation phase. Careful consideration should be given to the funding
options and impacts (including operating costs). While there are some issues impacting
the timing of these decisions, it is essential that public understanding and support be
developed.
C) Technology -- Ever growing demands for staff services and the need for City
departments to work together require ongoing investments in computers and technology.
Implication: Further enhancements to the City's information technology systems may
require financial support from the City's General Fund. Electronic document storage and
retrieval systems have proven to be effective means of reducing document-handling
costs. There will be more and better technology products available to cities. Residents,
customers and employees will likely create pressure to invest in improved and new
technology. This will require the City to develop a disciplined approach to reviewing
the requests and needs for technology investments. That approach should address cost
and benefits (not limited to financial), productivity, training, support and potential
obsolescence.
D) Potential need for reinvestment in public facilities infrastructure may increase the
property tax above the normal inflationary increase. The City has major investments in
buildings, utility systems, streets, lighting systems and related improvements.
Implication: Community involvement will be key to addressing need for major
investments. The City should undertake a public participation process to involve the
community in understanding and then selecting options. Preparing plans and schedules
for anticipated required maintenance and replacement would provide information
necessary for financial planning purposes.
E)
The City has extensive vehicle replacement requirements for Public Works, Police and
Fire equipment. The City does have a schedule of equipment replacement as part of the
1 O-year CIP that forecasts these needs for the expected life of the equipment.
Implication: Equipment replacement is often deferred as part of budget balancing
efforts. In the long term this may increase maintenance costs, increase downtime of
equipment and staff and lead to a funding problem in future years. Maintaining the
equipment replacement schedule and establishing a funding source will help remedy this
problem and provide a more accurate measure of services.
F)
Minnesota State Statutes, Section 475.521 authorize cities to issue bonds to finance
certain capital improvements including street replacements, city hall, public safety and
public works improvements without referendum. However, the requirements to issue
bonds include preparation of a "capital improvement plan" in accordance with the
provisions of the statute, conducting a hearing
Implication: This new statute provides an option for funding capital facilities, which
may benefit the City. The statutory requirements for a "capital improvements plan"
differ from the conventional plans prepared by most cities and require pre-planning of
about six to eight weeks. Staff should review these requirements as part of planning for
the fire, city hall and public works building improvements.
City of Mound- Key Financial Strategies Page 7
5) COMPETITIVENESS - Communities compete for people to live, work and do business.
Understanding and responding to the elements of competition is an important role for the
city.
A) The City's overall tax rate is slightly above average compared with other comparable
communities in the metro area.
Implication: Given the tax rate and the high level of services, the City is carefully
monitoring its tax rates. The tax rate reflects the fact that the City has had to "catch-up"
with investing in infrastructure maintenance, fund staff required to maintain current
service levels and continue with redevelopment. Residents are likely to support the taxes
at their current levels if the believe they are receiving value for their taxes. Maintaining a
customer feedback system and regular community surveys will assist in evaluating the
value of services offered to residents and businesses.
The City offers a full complement of services to residents and businesses.
Implication: Services offered by the City appear to be consistent and competitive with
surrounding communities.
c)
Mound's park system appears to be more expansive than many other communities in the
metropolitan area for two reasons. First the City maintains 30 neighborhood parks and
220 boat slips. Both of these features add significantly to overall operating costs.
Replacement of playground and park features for safety and functional purposes is likely
to be costly. Recently the City has received a proposal to purchase a marina.
Implication: Planning and investments in these areas has provided a foundation for
creating a community with amenities that will attract and retain residents, visitors and
businesses and enhance property values. Careful attention should be paid to the
operating costs of recreation and cultural amenities. Consideration should be given to
reducing the number of smaller neighborhood parks. The proposal to purchase a marina
should be carefully evaluated from a return on investment basis. The cost of maintaining
and replacing docks should be self-supporting or a profit center to support other
community amenities such as beach life guards. Community involvement in discussions
regarding the cost to build and maintain new facilities will be a key factor for future
considerations. Replacement costs for playground and park features should be included
within the City's financial plan.
Mound has a diversity of housing options that is typical for established communities.
More established neighborhoods of the community are populated with modest residential
structures typified by 1960s and 1970s styles. The City also has a growing number of
upscale lakefront homes.
Implication: A healthy and diverse housing stock increases community marketability.
The redevelopment of selected residential properties is likely to accelerate as the City
completes redevelopment on key areas. This should help increase overall tax base.
City of Mound- Key Financial Strategies Page 8
E) The City has issued debt in moderate amounts to finance capital improvements. The need
to replace and maintain existing facilities is projected as part of this analysis may
increase the amount of outstanding debt.
Implication: The City has recently begun to replace and renew infrastructure including
building and facilities. This will require issuance of debt. Monitoring the impact of this
debt on the City's overall taxes will be required.
F) The City provides Fire Services to Mound and other member communities utilizing paid-
on-call firefighters. To continue to attract adequate qualified members competitive pay
and benefits should be provided. The Fire Department is requesting an evaluation of
pension changes including a reduction in vesting requirements (currently 20 years) and
an optional lump sum payout in lieu of monthly benefits.
Implication: The cost of these changes should be evaluated for future discussion and
consideration by the City Council.
6) CREDIT POSITION Maintaining a strong credit rating helps reduce the cost of borrowing
required to develop and maintain the community.
A) The City is rated "Al" by Moody's Investors Service. This is an above average rating
reflecting the City's strong property value growth and maintenance of a strong financial
position while supporting debt required for future growth and reinvestment in
infrastructure.
Implication: This strong credit rating has helped the City successfully issue debt at
very competitive interest rates in the commercial marketplace.
B) The City's debt burden is low (.95% direct and 1.76% total. Forty-three (43%)
the City's debt will be paid off in ten years.
of
Implication: The City has capacity to use debt to support continued investment. Careful
attention should be paid to "mapping" out future debt issues for the next five to ten
years. An aggressive debt repayment schedule will enable the City to continue to invest
as needed.
C) The City currently has a prudent undesignated fund balance.
Implication: This strong fund reserve helps the City to maintain its current rating and
provide operating flexibility. The City should be careful to maintain this strong fund
balance.
City of Mound- Key Financial Strategies Page 9
7) ENTERPRISE- Operating enterprise funds as a business is key to avoiding a transfer of the
burden of operational costs to general taxpayers. In addition some enterprise operations
can help reduce the cost of general government.
Implication: The City currently updates their utility rates on a regular basis and charges
general fund service costs to the enterprise funds. Both are examples of best practices for
enterprise management. These practices should be continued as part of on-going financial
strategies. In addition, the City may want to consider converting existing government
functions (where feasible) to enterprise funds to permit tracking costs and extending fees
to cover those costs. Two examples include street lighting that can be converted to a
utility fund and billed separately to users and the dock rental and marina which should be
converted to an enterprise fund.
City of Mound- Key Financial Strategies Page 10
RECOMMENDATIONS
Based on ~che findings and analysis conducted in the workshops, Ehlers developed a list of
recommendations for the City -- their Key Financial Strategies -- listed in the seven categories below.
1.0
1.1
COMMUNITY GOALS/INITIATIVES
GOAL SETTING:
The Mayor and City Council should establish annual goal setting sessions, prior to budget
preparation. The goal setting session should prioritize needs. This information should be used by
staff to develop programs, service options, and resource requirements for consideration within the
budget process. The goals should specifically address the major issue categories.
Comment: Staff recommends that the City Council consider conducting future goal setting sessions
prior to May of each year as departments are beginning the budget preparation process. Financial
strategies should be incorporated into the annual goal setting program.
1.2
1.3
FACILITY NEEDS:
The City should continue the deliberate and careful approach to addressing facility needs for future
growth, reinvestment and quality of life services and capital investments.
Comment: The City should initiate a public participation process (similar to the Fire Station process)
to engage public discussion in the review of need and funding for these facilities.
COMMUNICATION PLAN:
A communications plan should be developed in order to inform and seek community feedback on
important financial issues including future needs and financial constraints. The plan should also
forecast the process that will be used to seek community participation for significant community
investment decisions.
Conducting a community survey will help identify the types of services vital to attract and retain
residents. Consideration should be given to expanding the survey to collect information regarding
improving the City's competitive position, economic development, quality of life, school funding
inequity and possible intergovernmental / tax sharing solutions.
Comment: Mound has developed a strong reputation as a good communicator with the public on key
issues. Formalizing this plan will assure continuity of effort and results.
1.4 TECHNOLOGY PLAN:
The City should consider developing a technology plan with projected needs some time within the
next five years. The plan should also include a basis for evaluating the requests for technology
investments that address cost and benefits (not limited to financial), productivity, training, support
and potential obsolescence and funding source
1.5 REDEVELOPMENT PLANNING AND IMPLEMENTATION
The City is close to a final agreement for the redevelopment of the downtown area. A significant
amount of staff work will be required during the project approval and construction phase. In
addition, planning for maintenance of the new infrastructure will be needed.
City of Mound - Key Financial Strategies Page 11
2.0
2.1
2.2
3.0
3.1
3.2
3.3
3.4
3.5
3.6
4.0
4.1
4.2
4.2
4.3
4.4
LOCAL TAX BASE
Growth planning should address continued attention to balancing commercial and residential
development. Special attention should be paid to increasing the amount of commercial (C-I)
development and to developing housing types that reflect life cycle, financial ranges and life style
choices.
The use of public subsidies to assist with encouraging the type of development needed to maintain
community competitiveness and balanced tax base should be continued where it meets the goals and
objectives of the community. The public assistance policy should be reviewed to assure flexibility to
meet broad based community needs.
FINANCIAL POSITION
The City Council should consider a Fund Balance Policy for the General Fund, Special Revenue
Funds, Debt Service Funds, Capital Project Funds, Enterprise Funds, and Internal Service Funds
City staff should prepare an alternative revenue source report for the City Council. These options
should be reviewed annually as part of the Key Financial Strategies update.
The City should continue to adjust all user fees and utility rates on an annual basis to reflect changes
in the cost of services.
The City should review assessment practices to include pavement management cost recovery through
special assessments to benefiting property owners (i.e. increasing assessments to property owners and
including street maintenance such as crack sealing) and to address increased cost of pavement
management projects.
The City should continue annual evaluation of development fees to reflect the City's cost of services.
The City should use the Key Financial Strategies report as part of its annual goal-setting framework.
CITY OWNED INFRASTRUCTURE / CAPITAL EQUIPMENT
The Manager and Finance Director should review the final list of items which were recommended as
part of the vehicle/equipment replacement program and develop a funding program to provide a more
level annual replacement contribution. The City should evaluate an internally funded equipment
rental program that could potentially level out annual replacement costs.
The City should initiate a process to assess the need for updating Public Works and Park buildings.
The process should include public participation.
The City staff should enact each annual capital improvement program based on review of the multi-
year capital improvement needs. City staff should continue to coordinate development of the capital
improvement budget with the development of the operating budget. Future operating costs
associated with new capital improvements should be projected and included in operating budget
forecasts.
The City should prepare a non-annual recurring maintenance schedule for City facilities.
City staff should prepare a plan in accordance with the capital improvement plan requirements for
issuance of debt under Minnesota Statutes, Section 475.521 (Capital Improvement Bonds) if this
funding source is contemplated for improvements to city hall, public works or public safety.
City of Mound- Key Financial Strategies Page 12
5.0
5.1
5.2
5.3
5.4
5.5
5.6
5.7
5.8
5.9
6.0
6.1
6.2
6.3
COMPETITIVENESS
The City's tax rate is slightly higher when compared with comparable communities. In managing
property taxes, the City will seek a balance between providing an appropriate level of service,
maintaining infrastructure, and affordability for residents. Having the lowest property taxes is not
always the best measure of this balance. Assessing the value of services through community surveys
and customer feedback is strongly recommended.
The City should review and implement a revenue enhancement study for additional revenue options
including utility franchise fees, dock fees, utility bill preparation fees and similar alternatives. The
information should be prepared to identify options prior to their need.
Staff should annually prepare three-year projections of tax levies. The City Council may consider
community involvement in the long range planning process to build support for the development of
resources to achieve goals the public has supported.
The City should continue to meet and confer with overlapping local government units (county,
schools, etc.) to discuss operating and capital funding issues that will impact residents overall taxes.
In order to provide direction to staff, the Mayor and City Council should review and select the
appropriate items from the Budget Option Impact Worksheets that would be included in next year's
budget. This budget should then be constructed by balancing resources with current and future
needs.
The Financial Strategies should be reviewed and updated annually as part of the City's budget
process. The City Council should annually agree that the three priorities for budget adoption are (1)
maintaining fiscal health, (2) maintaining City services at existing levels or higher, and (3) providing
community amenities where possible and when they do not adversely impact items (I) and (2).
Annual budgets should include budget option analysis for 5% to 10% of total projected expenditures.
Budget presentations and discussions should be supported with a balance of input/resources and
outcome options.
The City should evaluate its risk management program and make improvements where necessary.
Additional effort to reduce risk exposure including review of retention levels, deductible levels,
funding of reserves for retained risks should be considered.
The City should evaluate the cost of changes in the Fire Pension system designed to attract and retain
qualified personnel.
CREDIT POSITION
The approval of Key Financial Strategies by the Mayor and City Council will help document the
future City plan to Moody's Investors Service.
The City should endeavor to keep the total maturity length of general obligation bonds below 20
years and at least 50% of the principal shall be retired within ten years. In all cases, the maturity
should be shorter than the life of the related assets.
The City should work to minimize the amount of debt supported by property taxes and will seek
additional use of special assessments, utility revenues and other non-tax sources to support debt.
City of Mound-Key Financial Strategies Page 13
7.3
7.4
7.5
ENTERPRISE FUNDS
The City should evaluate the benefits of establishing the dock rental as an enterprise fund.
Annually, the Manager and Finance Director should continue to review and recommend necessary
adjustments to water, sewer and other utility sufficient to recover cost of operations and provide for
capital needs for consideration by the Mayor and City Council.
City staff should continue to annually review the cost of general fund services provided to enterprise
activities including insurance, financial and accounting services, management, legal and related
expenses. These costs should be evaluated by the City Council for inclusion in the rates for
enterprise services.
City staff should annually review the utility rate policy that addresses the need for fees to recover
operating costs and provide for operating cash, reserves, non-annual recurring maintenance, and debt
service.
City staff should identify the costs to meet mandated water quality standards and the impact on water
rates.
City of Mound- Key Financial Strategies Page 14
ACTION PLAN
This section describes the actions needed to implement the City's Key Financial Strategies. Actions fall
into two categories: Tasks for immediate action, and tasks that reflect on-going financial management
actions. The following is a recommendation on the tasks that require attention over the next five-year
period. Implementation of these Key Financial Strategies requires annual review and updating of the Plan,
and revision of the schedule prior to initiating the budget process. Careful attention should be paid to
developing realistic time frames and work plans.
Projected Projected
2005 ACTIVITY ~~Start Date Level/Status
Develop customer service feedback systems 2005 2/A 2006
for selected City services
Downtown redevelopment planning and implementation 2005 1/I 2008
Goal Setting Annual 1/I Annual
Annual CIP Annual 1/I Annual
Develop communications plan including annual report on
accomplishments and future challenges 2005 2/I Annual
Review opportunities to increase commercial tax base
when Comprehensive Plan is updated (i.e. Balboa) 2007 1/P 2010
Update Debt Management Plan 2005 2/A 2006
Update investment Policy Annually Annual 2/A Annual
Review assessment practice to address pavement Annual 1/S Annual
management
2005 1/A 2007
Initiate process for assessing need for Public Works and Parks
building
Prepare facility needs assessment for Mound Bay Park and City Hall 2006 1/I 2007
Prepare assessment of information technolo._~ l~}'~infrastructure 2006 2/S 2007
Establish/Update Risk Management Policy 2006 2/S 2007
Property tax review Annual 1/S Annual
Prepare five-year budget forecasts including revenue Annual 2/S Annual
forecasts
Identify and fund future staffing requirement to match Annual 1/S Annual
growth
Identify a limited number (1-3)of selected services for Annual 2/S Annual
>otential competitive pricing on annual basis
Review budget option analysis as part of budget process Annual 2/S Annual
Evaluate Fire Department pension changes 2005 1/S 2006
City of Mound- Key Financial Strategies Page 15
Adopt Key Financial Strategies 2005 2/I 2005
Adopt debt olicies as outlined in Credit section of re ort
2005 2/I 2006
Evaluate Dock Rental for enterprise fund 2005 1/A 2005
Evaluate Water Treatment Improvements 2005 1/A 2006
Develop special service area for downtown maintenance 2005 2/A 2006
Adjust user fees on annual basis to reflect changes in cost Annual 1/S Annual
of services
Evaluate proposal to purchase marina 2005 3/A 2006
PRIORITY DEFINITIONS:
LEVEL 1
LEVEL 2
LEVEL 3
LEVEL 4
Critical to continued operation of city baseline services at present levels. This includes
restoration of services identified as baseline.
Provides opportunity for increased efficiency in baseline level of service. This includes
ability to continue to serve existing level of services without staff increases.
Provides opportunity for expansion of services to meet existing demand as evidenced b
by Council direction or staff analysis
Provides opportunity to increase services that improve quality of life within City.
I
S
A
Implementation
Study Need
Assess Need
City of Mound- Key Financial Strategies Page 16
IMiPLEMENTATION
KFS is a policy implementation plan that permits cities to combine long-term strategic planning
with sound financial management practices. The results of the financial planning are used to
guide the annual budget preparation process. In order to effectively use KFS the following
process is recommended:
1)
City staff updates and refines the fi'ge-year budget projection. 'The update should reflect
the financial and performance result of annual operations.
2) City staff updates KFS issues and Action Plan (reflecting actual results of
accomplishments and new issues) prior to annual budget planning.
3)
City Council reviews KFS updates as part of (or prior to) annual goal setting/strategic
planning.
4) Results from annual goals incorporated into updated KFS.
5)
Updated KFS used to guide preparation of annual budget and preparation of Council
work plan (scheduled meetings).
6) Summary of KFS results provided to Boards and Commissions and general public.
City of Mound- Key Financial Strategies Page 17
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