Council members and department heads will have until Dec. 8 to add their final touches.
Jude’s presentation factored in changes already made since the council approved the preliminary budget and levy on Sept. 8, including efforts to reduce the growth of the budget.
For the general fund, Jude said, “We’re going to assume are going to be very similar next year to this year.”
Local government aid (LGA) revenue for 2021 is certified at $590,141, he said, an increase of $36,862 from 2020.
Meanwhile, tax collections are expected to stay about the same. Currently, a total of $2,646,332 is expected to be collected, or 95 percent of the total levied.
Jude noted that according to its last financial audit, the city’s net position increased by $250,000 during 2019 – including a $150,000 gain in investment values.
In order to keep the levy’s growth as close to zero as possible, Jude proposed running a deficit budget and using the remaining $100,000 from the net position increase to offset the increase in the 2021 expenditure budget.
As a result, the preliminary expenditure budget’s increase of 3 percent (from $3,492,327 in 2020 to $3,597,097 in 2021) can be effectively shrunk to a 2.51 increase to $3,580,020.
On the revenue side, that brings the total levy increase for next year’s taxpayers down to $20,563 or 0.73 percent, from a total levy of $2,808,755 in 2020 to $2,829,318 in 2021. Most of that increase, Jude said, is caused by bond/debt service.
Besides that, Jude said, the budget tries to carry expenses over to 2021 at 2020 levels except where the city is contractually obligated, for example, to give employees cost-of-living pay raises.
Labor costs are budgeted to increase by 3 percent. Jude said this is rounded up from the contractual increase of 2.5 percent plus 22 cents per hour in order to provide a safety margin.
Since September, he said, the League of Minnesota Cities announced “way more than anticipated” increase in workers compensation premiums, including a 35 percent increase for police workers and a 4.5 percent increase for all other workers.
“That’s really nothing we can negotiate,” said Jude. To explain the rate hikes, he noted that the city’s experience rating increased from 0.84 in 2018 to 1.02 in 2020, and an increase in coverages and claims this year throughout the league’s insurance pool.
The budget for outside training expenses is being shrunk, Jude said, with few in-person training events being held this year due to COVID-19 and the same expected in 2021. He said that if training resumes, departments can request a budget adjustment as needed.
Also, he said, the budget for street maintenance expenses was reduced to what public works superintendent Scott Burlingame thought would actually be used next year.
Jude said the city’s airport commission is budgeting for an increase in federal and state grant revenue connected with a terminal area taxilane project planned for 2021-22.
The city’s match for the 2021 phase of the project is budgeted at $75,000, to be transferred from the liquor store fund.
Also, the airport’s salary expenses increased 25 percent in 2020 as more maintenance was needed. This increase carries over to the 2021 budget, Jude said, because “we don’t anticipate that decreasing, due to the aging of some of the facilities out there.”
Jude hinted that the airport commission may ask to have a joint work session with the city council before the council’s Dec. 8 meeting.
Regarding the sewer, water and storm sewer funds, Jude said revenues dipped slightly in 2020 due to the council’s decision to waive late fees, and the 2021 budget assumes this will continue.
Projected expenses include $500,000 for a public works storage building, to be split among the three funds. Jude said that if the project does not move forward in 2021, these funds will be placed in reserve so they can be used in a future budget cycle.
Also budgeted for 2021 are $380,000 to complete the well project, $35,000 for Career Path improvements and $10,000 for a water tower inspection.
Jude reported that municipal liquor store revenues increased by 12.3 percent in 2020, and Rapids Spirits manager Scott Olson expects this trend to continue in 2021. As a result, an additional 1.5 percent increase in liquor sales is reflected in the 2021 budget.
On the expense side, the cost of goods sold is expected to increase in 2021 due to the forecast rise in sales, while $10,000 was budgeted as a contingency for equipment needing to be replaced and for other smaller capital items.
Mayor Ryan Leckner voiced appreciation of the clear layout of Jude’s presentation and the fact that the council did not have to finalize the budget and levy that night. Approval of the final 2021 budget and levy will be on the council’s Dec. 8 meeting agenda.