11-10-2008 - Laserfiche WebLink

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MEMO To: Dean Lotter, City Manager Mayor & City Councilmembers From: Dan Maiers, Finance Director Date: August 22, 2008 Re: 2009 Budget Discussion Relating to Fleet & Non -Fleet Replacement Programs The topic of the annual tax levy component for the debt service for the Family Service Center (FSC) is an important part of the 2009 Budget discussions. As you are aware, our annual tax levy has included the debt service for the FSC outstanding debt as a component of the total tax levy. This debt issue will be paid in full on February 1, 2009. The necessary amount of cash will be on hand in that debt service fund to accomplish the retirement of all outstanding amounts. The last year of the debt service tax levy required for this issue is for taxes payable in 2008. The 2008 tax levy includes $391,900 for the annual debt service payment. The current financing for the Fleet and Non -Fleet Replacement programs is inadequate. Basically, the last few annual budgets have provided for annual installment increases of 3%. There have been numerous discussions with City Councils in the past several years on this topic. The intent of previous City Council direction was to redirect the portion of the total tax levy from the FSC debt to these programs. This method would provide a significant portion of the additional financing so badly needed. At the same time, it would not result in an increase to property taxes. The first year to implement this approach is 2009. Attached are three schedules for both the Fleet and Non -Fleet programs: a schedule of all items in the replacement program sorted by department; a schedule demonstrating the deficits assuming no change is made to the financing; and a schedule showing the impacts on the 2010 installment to solve the shortfalls in one year. I am planning to review these schedules with the City Council at their August 26`" worksession. Obviously there are innumerable ways to present this data and to model various solutions. The current model projects out to the year 2020. Many assumptions need to be made in projections such as this. The attached schedules do not attempt to define an exact solution, but instead to demonstrate the size of the deficits projected to be incurred without long-term, proactive solutions. Assuming 3% increases to the annual installments, it is projected that in year 2020 the Fleet Fund will have deficits of about $1,624,000 and the Non -Fleet Fund will have deficits of about $7,754,000. The potential impacts for this solution are quite significant; $390,000 times 12 years equals $4,680,000.