SUPPLEMENTAL OPERATING BUDGET 2023
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City of Rochester 2023 Supplemental Budget TABLE OF CONTENTS SECTION I -Transmittal and General Summaries Letter of Transmittal City Council’s Budget Priorities Vision, Principles, and Priorities Mission Statement R.I.S.E General Summaries Summary of Means of Financing Summary of Budget by Fund and Character Budget Recapitulation of Expenditures Trend Data by Object Frozen Positions SECTION II -Operating Expenditure Budget Details- All Funds -Operating Revenues- All Funds -General Fund City Council Mayor City Administration City Clerk Elections Parking Ticket Collections Administrative Fines Finance City Attorney Human Resources Community Development DSIC & North Station Maintenance Information Technology City Hall Maintenance Police Animal Control Dispatch Fire Community Development-Building Safety Flood Control Emergency Management Engineering
City of Rochester 2023 Supplemental Budget Infrastructure Maintenance Administration Fleet Maintenance/PWTOC Building Traffic City Lighting Music Art Center/Civic Theater/125 Live Community Reinvestment Economic Development Administration CBD Maintenance Unallocated Joint Facilities Maintenance Contingency -Library -Municipal Recreation System Park and Recreation Administration Recreation Tennis Swimming Pools Parks Parkway Landscape Maintenance Plummer House F.E. Williams Golf Graham Arena National Volleyball Center Recreation Center -Mayo Civic Center -Airport Airport Operations US Customs -Mass Transit Administration -EDA Administration -Parking -Sanitary Sewer Wastewater Utility Sewer Fund Debt -Storm Water Utility -Rochester EDA
-Operating Revenue SECTION III -Internal Service Detail -Internal Service - Revenues SECTION IV -Capital Improvement Budget – Summary -Capital Improvement Budget – Revenues SECTION V -Debt Service Budget – Details -Debt Service Budget – Revenues SECTION VI -Decision Packages SECTION VII -Additional Requested Decision Packages SECTION VIII -Outside Agency Applications SECTION IX -Additional Requested Outside Agency Applications SECTION X -Six Year Forecast Summary SECTION XI -Rochester Public Utilities Operating Budget SECTION XII -Rochester Public Utilities Electric Utility SECTION XIII -Rochester Public Utilities Water Utility City of Rochester 2023 Supplemental Budget
SECTION XIV -Rochester Public Utilities Personnel Budget SECTION XV -Rochester Public Utilities Supplemental SECTION XVI -Capital Improvement Plan Airport Parks Golf Recreation Center Graham Arena Mayo Civic Center Streets Traffic Pedestrian Facilities Mass Transit Parking Sewer and Water Storm Water Water Reclamation Flood Control Destination Medical Center Downtown Development/Tax Abatement District Fire Police Library Administration -Rochester Public Utilities Capital Improvement Plan Electric Water Appendix I -City Council Study Session Presentation – 3/22/2021 Appendix II -City Council Study Session Presentation – 4/19/2021 Appendix III -City Council Study Session Presentation – 6/28/2021 City of Rochester 2023 Supplemental Budget
City of Rochester 2023 Supplemental Budget Appendix IV -City Council Study Session Presentation – 7/19/2021 Appendix V -City Council Study Session Presentation – 8/23/2021 Appendix VI -City Council Study Session Presentation – 8/30/2021 Appendix VII -City Council Study Session Presentation – 9/13/2021 Appendix VIII -City Council Study Session Presentation – 9/20/2021 Appendix IX -City Council Study Session Presentation – 11/8/2021 Appendix X -City Council Study Session Presentation – 12/6/2021 Appendix XI -City Council Study Session Presentation – 4/11/2022 Appendix XII -City Council Study Session Presentation – 7/18/2022 Appendix XIII -City Council Study Session Presentation – 8/22/2022 Appendix XIV -City Council Study Session Presentation – 9/7/2022 Appendix XV -City Council Study Session Presentation – 9/19/2022 Appendix XVI -City Council Study Session Presentation – 12/5/2022 Other Supplemental Information
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Section I Transmittal, City Council’s Budget Priorities, General Summaries, and Frozen Positions City of Rochester 2023 Supplemental Budget
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December 5, 2022 Honorable Mayor and Council Members, On behalf of our entire organization, I am pleased to provide you and the Rochester community with the Adopted 2023 Supplemental Operating Budget and 2022-2027 Capital Improvement Program (CIP). In total, the adopted 2023 budget includes expenditures of $600,934,114 million, of which $92,772,574 million is supported by the property tax levy. This includes $227,904,000 million in expenditures necessary to operate and maintain the Rochester Public Utilities (RPU) Water and Electric utilities. General Fund expenditures account for $105,343,869 million of the $600,934,114 million and the 5-year CIP totals $717,541,378 million. This budget prioritizes supporting necessary City services while mitigating financial impact to residents and businesses as we return to more normal service and address the structural gaps left by COVID-19 and a zero-levy year. In particular, the budget relies on holistic budget stability funds to address heating and cooling improvements ($7M) and reduce the impact to property owners ($2.37M). On November 3, 2020, Rochester voters approved a $2 million per tax property tax levy funded park referendum. Related revenue and projects are included. In particular improvements to Soldier’s Field and Silver Lake Park, with final spending authority and concept plan approval anticipated for Council review. We are proud of the fact that the City Council and professional team came together to transition to a two year budget process. This is the first time that the Council will be adopting a supplemental second year budget which relied on a baseline forecast which was then adjusted for significant changes in personnel, fuel, natural gas, and other inflationary impacts. During their review, the City Council made the following revisions in the adopted budget to allocate Levy that was left unspecified in the preliminary recommendation. • Training and Travel Adjustment - $100,000 • Community Funding - $50,000 • HR Position (DEI Recruitment and Retention) - $75,000 Special appreciation to Rachel Houdek, Dale Martinson, Aaron Parrish, Noloan Schild and the Leadership and Finance Teams for their outstanding efforts in developing a supplemental budget that assures we remain fiscally responsible, while improving communication and aligning services with strategic priorities. We also thank the community, as we continue to focus on making Rochester, MN a place where everyone can enjoy a high quality of life. Sincerely, Alison Zelms, City Administrator -1-
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BUDGET IN BRIEF 2023-2027 -3-
ROCHESTERMN.GOV Budget in Brief 2 In an effort to ensure that the budget process is transparent, accessible and easily understood, the Budget in Brief was created for the first time in 2018. This document is intended to provide you with information about your City’s budget process. Included in the Budget in Brief are totals for revenues and expenditures. Also included in the Budget in Brief are facts about the various departmental budgets. It is important to note that the City of Rochester is able to maintain its positive financial condition and AAA credit rating due to the fiscally responsible actions taken in the prior years and by prudently investing in service level enhancements as resources allow. The 2022 budget represents a financial commitment to the vital and necessary services that our residents and businesses depend on. It also continues some prior year cost reductions, while prioritizing necessary strategic investments for a growing city. This includes leveraging Federal Rescue Plan dollars made available to mitigate the ongoing economic challenges and other impacts that COVID-19 presents to the community. The 2023 budget is a part of the first-ever two year budget process. It is referred to as the Supplemental Budget and differs from the first year of the process, where budget priorities and an initial budget for both years is set. • Supplemental Revisions only (significant, known or close estimate) • No baseline budget requests (changes only based on major new unknown influences) • No decision packages • Six year CIP not requested to be submitted, revisions only Supplemental Budget Process Focuses On: Budget in Brief Align resources with City Council strategic priorities Advance the City’s commitment to financial sustainability Prioritize both operating and capital expenditure The Goals of the Process are: Ensure sufficient revenues exist to deliver existing and proposed services and projects As a steward of taxpayer dollars, the City of Rochester, MN prides itself on providing transparency and accountability in its budget. Budget Process April City Council adopts budget and priorities September Team presents City Council with 2022 recommended operating budget & CIP September Max Levy Set - Adopt Preliminary Budget & CIP December Public Hearing & Adoption April - August Budget Development August Finance Department Prepares Budget September City Council Reviews Budget Documentation September - December • Public Notification on Budget & Service Modifications • City Council Discusses Any Revisions to Recommended Budget November City Council Finalizes Budget and Capital Improvement Plan -4-
2023 $600.9 million Operations $367.8 million Debt Service $19.3 million Capitol Improvement Program $213.8 million City of Rochester Budget 2023, inclusive of RPU ROCHESTERMN.GOV Budget in Brief 3 The 2023 adopted budget is $600,934,114 million. General Fund expenditures account for $105,343,869 million of the $600.9 million and the CIP totals $213,779,287 million. The 2023-2027 CIP totals $717.5 million. The inclusion of Rochester Public Utilities’ (RPU) budgets with all other City budgets is to ensure a comprehensive financial picture. It is included in the same document for the benefit of the Mayor, City Council, community, and Rochester team. 2023 Adopted Budget Budget Formula + = + Baseline Budget Service Modifications Capital Improvement Program Budget Rochester has received a Certificate of Achievement for Excellence in Financial Reporting for almost 50 years, the longest in the state of Minnesota. City of Financial Distinction The City of Rochester has a AAA Rating -5-
ROCHESTERMN.GOV Budget in Brief 4 Where the Money Comes From Tax dollars are accounted for in the General Fund, along with license fees, permit fees, state shared revenues, interest income, miscellaneous revenues, and prior year revenue. This portion of the budget is comprised largely of discretionary funds, since the Mayor and City Council can allocate the funds to programs and services in any area. There are few restrictions on how these resources may be allocated. The City cannot use fees collected from services for discretionary use. General fund dollars are used to support such City services as police and fire, as well as streets, community development and administrative support services. General Fund Enterprise, Special Revenue, Capital Improvement Plan, Airport, Debt, and Internal Service Fund 2023 Total Operating Revenue Inclusive of RPU The City of Rochester has a few different enterprise and special revenue funds. Enterprise funds are entirely funded through customer charges and do not require tax support. These include electric utility, water utility, sewer utility, storm water utility, and the parking fund. Special revenue funds are a combination of customer charges and taxes. These include: municipal recreation, library, and transit. As shown in the chart, the majority of funding for the City of Rochester budget comes from sources other than property taxes. Those taxes fund 15.44% of the total revenues. Items like charges for services, which are items like electricity, water, parking, and sewer fund the total budget by 40.44%. $105,343,869 million $495,590,245 million *Miscellaneous Revenues include: Miscellaneous Revenue Taxes and Valorem Charges for Service Intergovernmental Revenue Other Taxes Special Assessments Prior Year Revenues/Fund Balance Licenses and Permits 2023 Total Operating Revenue, inclusive of RPU 24.97% 15.44% 40.44% 12.83% 4.14% 0.27% 0.83% 1.08% - Non Property Tax Debt Payment Revenue - Capital Improvement Program - Revenues In Lieu of Tax Enterprise Funds - Private funds -6-
ROCHESTERMN.GOV Budget in Brief 5 General Fund Revenue $105,343,869 million Property Tax In total, the City of Rochester receives $92.8 million from residential and commercial property tax. Residential property owners pay approximately 54.4% of that total while commercial property owners pay 34.9%. Of the $92.8 million, 67.9% supports the General Fund, while 10.5% supports the Parks & Recreation department and 8.4% supports the Rochester Public Library. Average Residential Home Commercial/Industrial Property 33.5% Olmsted County 37.4% City of Rochester 27.8% School District (535) 1.3% Olmsted County HRA 28.5% Olmsted County 31.3% City of Rochester 17.8% School District (535) 1.1% Olmsted County HRA 21.3% State of MN Taxes Ad Valorem License & Permits Misc Revenue Charges for Govt Services Intergovernmental Other Taxes (such as Hotel/Motel tax, Cable Franchise Fee, and People Coop Franchise Fines, Forfeits Prior Year Revenue 17.3% 7.3% 5.8% 4.7% 4.1% .7% .3% 2023 General Fund Revenue FIG 1 59.8% General Debt. Internal Services Parks and Recreation Airport CIP Rochester Public Library 10.5% 8.6% 8.4% 4.1% .5% 2023 General Fund Revenue FIG 2 67.9% -7-
ROCHESTERMN.GOV Budget in Brief 6 Overall, the adopted 2023 budget includes expenditures in six major categories for all funds. The largest being the CIP at $213.8 million dollars. Approximately 22% of the City’s total budget is invested in Employee Services, with a total of $133.9 million dollars. This expense is for the City’s full-time and parttime employees, which allows the City of Rochester to deliver high quality services. Approximately 71% is related to salaries, while 29% is related to benefits. 2023 Adopted Budget of $600.9 million • Mayor and City Council • City Administration • City Clerk • Elections • Administration Fines • Finance • City Attorney • Human Resources • Planning and Zoning • Information Technology • City Hall Maintenance • Music Art City/ Civic Theatre/ 125 Live • Community Reinvestment •Development Administration • Economic Development • CBD • Unallocated Contingency Public Safety 57.1% Public Works 16.5% General Gov. 17.3% Other 9.1% Where Does the Money Go? • Engineering • Street Infrastructure • Fleet Maintenance • Traffic and City Lighting General Fund Expense $105,343,869 • Police • Animal Control • Dispatch • Fire • Building Safety • Flood Control and Emergency Management Water Reclamation Plant Upgrades Marion Road Substation Silver Lake Sediment Removal & Revitalization Bus Rapid Transit Downtown Buildings Energy Transition $29M $27.3M $22.3M $17.7M $15.6M Top 5 CIP Projects 2023 Adopted Budget Employee Services Contractual Services Other Charges CIP Debt Service Miscellaneous 36% 22% 24% 12% 3% 3% -8-
ROCHESTERMN.GOV Budget in Brief 7 CITY OF ROCHESTER 2022 LEGISLATIVE PRIORITIES - ADOPTED BY CITY COUNCIL ON 10/04/21 Action Plan Organizational Vision Foundational Principles Strategic Priorities City Vision - Environmental Stewardship - Fiscal Responsibility & Sustainability - Public Safety - Social Equity - Compassion A vibrant, compassionate, innovative team. - Affordable Living - Quality City Services for Quality Living - Economic Vibrancy and Growth Management Rochester is a city that cares. Where all people are treated with dignity and respect. Where residents, employees, and visitors enjoy high quality lof life. Where business and industry thrive, and where the land and environment are renewed and sustained for the benefit of all. It is a welcome and diverse community. Renowned for it’s reputation as a center for growth and innovation. Characterized by its safe and friendly neighborhoods. Committed to health and wellness for its people. Connected both physically and socially. Dedicated to the sustainable and responsible use of public resources. In order to achieve these priorities, the Council has committed to a legislative and process structure that emphasizes Strategic Governance and Inclusive Decision-Making: • Service delivery models consider partnerships where City is not always the leader • Decision-making is informed by citywide communication and engagement strategy with Diversity/Equity/Inclusion (DEI) at the forefront • Teammates create action plans/annual commitments aligned with Foundational Principles and Strategic Priorities • Policy and operational actions reflect equitable community investment Strategic Priority: Affordable Living Strategic Priority: Economic Vibrancy and Growth Management Strategic Priority: Quality Services for Quality Living Areas of Focus • Housing variety and affordability • Transportation options and access • Equitable regulatory landscape and creative incentives • Access to opportunities and amenities Areas of Focus • Create clarity, alignment and unity with economic development partners in defining city leadership and community values • Establish competitive and sustainable approach to effectively allocate DMC resources, Legislative allocations, and city revenue • Develop implementation tools and strategies for Comprehensive Plan to ensure current decisions reflect future projections • Adopt design guidelines that better reflect Council and community values Areas of Focus • Cultural and Recreational opportunities that provide access and equity • The organization and Services reflect changing demographics and needs identified by community • Operations are sustainable, integrated, and easy to navigate • Service delivery is optimized, cost effective, and reflect our Foundational Principles Action Plans will be developed to identify goals, actions and performance indicators that help advance priorities. VISION, PRINCIPLES, AND PRIORITIES Vision, Principles, Priorities CITY OF ROCHESTER 2022 LEGISLATIVE PRIORITIES - ADOPTED BY CITY COUNCIL ON 10/04/21 2 BACKGROUND The city of Rochester is the third largest city in the State of Minnesota with a population of over 119,000 and anticipated to grow by 50% over the next 20 years. It stretches across 55 square miles. Rochester is home to major employers including Mayo Clinic and our strong small business community. Roches er has been recognized as an All-American City, a Gold LEED certified City and is consistently recognized as one of America’s most livable cities. It hosts over 3.3 million visitors each year. Rochester is a unique place that enjoys a growing and div rse population, a high employment rate, and international connectivity unlike other Midwestern communities of a similar size. As home to the Mayo Clinic, Rochester competes with cities across the nation and around the world for the best and the brightest minds in health and technology. City residents overwhelmingly believe Rochester offers them a high quality of life, providing arts and entertainment typically found only in larger cities along with an accessible parks and trails system that contributes to community identity and livability. CITY OF FINANCIAL DISTINCTION The City of Rochester has a AAA R ting Rochester received a Certificate of Achievement for Excellence in Financial Reporting for almost 50 years, the longest in the state of Minnesota. 2022 COMMUNITY SURVEY RESULTS 81% plan to remain in Rochester for the next 5 years would recommend living in Rochester to others 80% 78% ROCHESTER, MN rate Rochester as an excellent or good place to raise children rate the quality of life in Rochester as excellent or good 81% rate the overall feeling of safety in Rochester as excellent or good 75% A representative sample of 828 resid nts of the Rochester were coll cted between March 9 to April 27, 2022. The margin of error arou d any reported percentage is 3% for all respondents and the response rate for the 2020 Community Survey was 16%. Survey results were weighted so that the emogr hic profile of respondents was representative f the demographic profil of adults in Rochest r. 2022 Community Survey Results -9-
ROCHESTERMN.GOV Budget in Brief 8 Rochester at a Glance Square miles 55 Population 121,000 Maintained nearly 500 miles of street. • Annual mill & overlay project 28,469 tons of blacktop • Chip sealed 74.8 lane miles • Crack sealed 112 lane miles • Blacktop patched 5,500 tons • Poured 720 yards of concrete Public Works Library 450,000 visits and 1.89 million titles borrowed. Parks & Recreation is responsible for 2,978 acres of parkland 1,550 acres of flood control lands 600 acres of parkway lands 100+ miles of paved trails to explore 142 individual park areas to visit 29,000+ Construction Inspections Completed 230+ Planning Applications Reviewed 1,000+ New Housing Units 12,000+ Permits Issued $719M+ in Construction City Attorney Prosecuted 1,615 misdemeanor cases. Prosecuted 430 gross misdemeanor cases. City Clerk Assisted over 25,000 people in person or through the City’s main phone line. 5.4 billion Wastewater Utility collects and treats gallons annually. Over 60,000 calls for service for Rochester Police Department - over 10,000 for Rochester Fire Department. Incorporated in 1854 Community Development Department 2022 Awards and Recognition Top 25 City on Forbes Best Places to Retire #3 ‘Top 100 Best Places to Live’ Livability.com -10-
August 12, 2022 Honorable Mayor and Council Members, On behalf of our entire organization, I am pleased to present the recommended 2023 Supplemental Operating Budget and Six Year Capital Improvement Program (CIP). This represents the first year that the City is completing a supplemental budget, which focuses on revision only based on significant known changes to cost of operations and revenue sources or a close estimate. The original two-year budget forecast decision packages for both years, as well as baseline budget adjustments. Final changes were made based on review from many teammates, and in particular the Administration and Finance team as we reviewed key factors that have impacted the budget. The CIP also only includes revisions to the original proposal. Supplemental Budget Summary In total, the recommended 2023 supplemental budget includes expenditures of $588.3 million, of which $92.8 million is supported by the property tax levy. This includes $227.9 million in expenditures necessary to operate and maintain the Rochester Public Utilities (RPU) Water and Electric utilities. As occurs each year, the initial RPU budget forecast is a draft that will be revised before final adoption with the value of a complete picture of the summer months of electric and water use to finalize rates. This recommendation reflects the Foundational Principle of fiscal responsibility and sustainability – prioritizing spending that will sustain and optimize operations and maximize the useful life of capital infrastructure. General Fund expenditures account for $105.5 million of the $588.3 million and the 2023 CIP is $202.6 million. This budget continues the initial planning of the two-year budget which prioritized a return to stable and sustainable funding for programming following the zero-levy necessary to limit impacts to residents and businesses in 2021. It seeks to further limit increases in fees and taxes as our community continues its economic and individual recovery. This is achieved in large part by Council decision to prioritize American Rescue Plan Act dollars as Holistic Budget Stability and relies on $2.37 million dollars this year to reduce the necessary levy increase from 9.6% to 6.85% year over year. As a reminder this is the percent increase in the total amount collected, not the change in the tax rate. We expect the tax rate to remain stable. That rate is then applied to the net tax capacity and spread based on property value, resulting in changes to individual tax bills. -11-
The use of park referendum dollars, authorized in 2021 reflects the spending authority that was determined in February 2022. Based on additional refinement and survey updates the CIP now includes $15 million in accelerated investments for key park amenities and ongoing additional investment across the system. System-wide investments are intended to be spread across the entire city as seen in this map which specifies site specific (blue), playground replacement (yellow) and court improvement projects (orange) over the next five years. Year Two Decision Packages already included in the 2022-23 Operating Budget and carried forward in the supplemental proposal include the following adjustments which allow us to continue to provide high quality services: As an active and growing community, with key strategic priorities guiding us toward our City Vision, the supplemental budget priorities focusesd on Quality Services, Economic Vibrancy, Managing our Growth and assuring that Quality Living is achieved in the most affordable manner. We continued our efforts to prioritize key investments in capital infrastructure that will achive an optimal life cycle cost over time as we continue to invest. It also prioritizes personnel costs necessary to sustain existing service levels and absorb some growing demands. This was achieved by consistently reviewing new vacancies in the context of the organizational structure, and looking for opportunities to optimize or reorganize service, by refining position types and titles in Development Services, Human Resources, Library and Parks. Finally, the recommendation brings us to near pre-pandemic funding and reestablishes a normalized baseline, except for $200,000 of citywide training and travel funds key to career development, and one City Inspector position which remains frozen. Other needs that were identified prepandemic will be reviewed and reprioritized with newly identified opportunities as we approach the next two-year budget cycle. -12-
Key Factors Influencing Final adjustments to Supplemental Budget • $2.4 million reduction in Local Government Aid from 2022 and projected 2023 Budget. This amount is absorbed by Tax Levy and Holistic Budget Stability Funding. • $504,272 in Fuel (Gas & Diesel) and Natural Gas costs based on estimates of inflationary impacts in tax supported funds. Additional increases are absorbed in non-levy supported funds. • Decrease organization wide in costs of Salary and Benefits based on staffing realignment, continued changes in employee demographics and less costly benefit elections. Notably, the recommended budget includes: • 6.85% tax levy increase (amount, not tax rate). Continues to absorb the impacts of the 2021 Zero-levy adjustment and return to sustainable resourcing of service levels. • 2.5% general rate or $2.27 per month increase, for the average residential electric utility customer, with individual customer class increases ranging between 1% - 5% based on the 2020 Cost of service study recommendations. Customers may be impacted by Wholesale price changes through the Power Cost Adjustment, a rate not set by the City. Final data will be reviewed by the RPU board and any adjustment to rate recommendations will come forward in September and December. • 5% general rate or $0.72 per month increase, for the average residential water utility customer. • $2,368,028 million in budget stability funding • No parking ramp or transit rate increases in 2023. • $54.5 million increase in total City (non RPU) operating expenses from 2022. • $24.5 million increase in total RPU operating expenses from 2022. All Funds To fund all recommended expenditures, Table 1 provides the detail of the proposed 2023 Major City Revenues. For comparison, the 2022 Adopted Budget revenues are also provided. As you can see revenue streams are continuing to rebound in many categories. There are significant impacts to LGA, Parking Fund Revenue and In-Lieu of Taxes remain flat or declining. -13-
Expenditure Summary As mentioned, the total 2023 recommended (inclusive of RPU) supplementary budget is $588.3 million which includes all operating and CIP expenditures. The recommended budget is compared to the City Council’s 2022 adopted budget to show where changes have occurred in the operating, CIP, and debt service portions of the budget. The 2023 recommended supplemental budget almost recovers the pre-pandemic service levels, which totaled $587 million in the adopted 2020 budget. Capital investment and reinvestment continues to be a priority, bringing value not only to those who rely on this infrastructure, but also spreading across the construction economy of Rochester – putting people to work, purchasing materials, and improving infrastructure. -14-
Where did the money go? The recommended supplemental budget includes expenditures in six major categories for all funds. Historically, employee services account for approximately 25 percent of total expenses. The actual percent generally depends on the CIP budget as this is the largest annual expenditure and fluctuates from year-to-year. Teammates The City’s full-time and part-time teammates are the most important resource for the delivery of high-quality services. These costs are reflected in the Employee Services area of expenditures. Throughout the financial impacts of the pandemic and resulting economic challenges, the City prioritized retention of existing employees, avoiding any layoffs and continued to meet its contractual obligations by sustaining wage adjustments while other communities were freezing -15-
and reducing positions. While several vacant or planned new positions were frozen and held, we have continued in 2022 and now 2023 to reinstate positions to assure that teammates have necessary support to deliver services. This was accomplished through other expenditure reductions while helping the community by establishing a flat Levy in 2021 that reduced the total property tax collected. This budget continues that commitment. Of the City’s annual investment in its professional team, approximately 68 percent is related to salaries and the remaining 32 percent is attributed to benefits (health and dental insurance, PERA, etc.). The 2023 cost of employee services in all funds will increase by $2.7 million over 2022 with the majority of the change in base compensation per the existing collective bargaining agreements. Of the $133.5 million, $79.5 million is for General Fund teammates with the remaining in special revenue and enterprise funds. One frozen position remains from the COVID mitigation plan. The City is self-insured for health insurance. In 2023, the overall cost to the City is projected to increase, seven percent for health premiums and one percent for dental premiums. Bargaining units absorbed an additional 1.25 percent of health insurance in 2022 and in 2023 are anticipated to absorb another half percent of health insurance costs by employees. Currently approved labor contracts include this change. Thank you again to all teammates for their willingness to further share in insurance costs. Changes in employee demographics, and reasonable adjustments to current three-year contracts prioritize employees while recognizing the economic challenges facing the community as inflation impacts cost, and we seek to minimize impact to the Levy and Charges for Service. Capital Improvement Plan The final significant piece of the recommended budget is the 2023-2027 CIP which totals $682.9 million. The CIP is divided into 23 categories and potentially funded by 34 different sources. For 2023, the CIP totals $202.6 million of which $8 million (or 4.0%) is funded through the tax levy. It should be noted that the current 2023 CIP does not include the 48th St SW Roundabout that was authorized in July, but will be adopted in advance of final adoption, with funding from MSA. Key adjustments to 2023 CIP include: • No changes to total tax levy ask in any year. • Revisions to Parks CIP to reflect changes per the Resolution "Authorizing a Budget Amendment to Parks and Recreation Capital Improvement Plan" adopted by City Council on February 23, 2022. • New projects added based on funding sources becoming available (federal funds and grants). • Downtown Buildings Energy Transition (formally District Energy) has been modified in scope and cost to reflect City Council's decision at the June 20, 2022, meeting. Final funding decision will increase 2024 and beyond tax levy. • Known or expected cost revisions. • DMC CIP is considered draft and not final as we work with the DMC team to review and revise. Contingency Annually, the City Council’s adopted budget includes a $1 million contingency in order to respond to unanticipated expenses throughout the year. The supplemental 2023 budget recommendation includes an additional $404,243 of unallocated contingency within the recommended levy adjustment. To advance the City Council’s foundational principles of financial sustainability and public safety, the following options are recommended for consideration before adoption of the final 2023 budget. -16-
Recommended Use of Unallocated Contingency Continued Operational Adjustments (Return from 2020) - Community Reinvestment (Outside Agencies & Community Funding) - $50,000 - HR Generalist – DEI Recruitment & Retention - $75,000 Unallocated Remaining for Inflation and Preparation for 2024 - $279,243 - One-time investments could also be identified for 2023 prior to final budget approval I want to thank the Mayor and City Council for their ongoing leadership as we emerge from a challenging two years with sustainable, achievable, innovative goals. Reaching a responsible increase in the 2023 property tax levy despite significant decrease in LGA, while continuing to reemerge from unsustainable pandemic funding changes, in the face of increasing community expectations, continues to show the City’s commitment to meet community needs by prioritizing the foundational principles and keeping an eye toward the Community Vision. As we stabilize following the pandemic, face new economic uncertainty with inflation changing the near-term outlook, and unemployment at all-time lows and creating recruitment and retention concerns, we must remain prudent in containing expenses, while meeting our community’s diverse public service needs. We continue the need to limit replacements in the Equipment Revolving Fund and will need to address this in the future. The Worker’s Compensation Fund is seeing trends that will drive a need to increase contribution rates from departmental budgets. The Facility Renewal Fund is established but is still about 20% of its long-term target for annual funding. These are areas of focus for 2024-2025 that will drive our financial priorities in the future. However, this recommended supplemental budget keeps in mind those challenges. The organization’s ability to swiftly embrace the two-year budget process, is appreciated. I wish to thank Rachel Houdek, Dale Martinson, Aaron Parrish, Noloan Schild and the Leadership and Finance Teams for their outstanding efforts in developing a supplemental budget that ensures we remain fiscally responsible, improves transparency, adapts to resource and economic challenges, and enhances services. We also thank the community, as we continue to focus on making Rochester, MN a place where everyone can enjoy a high quality of life. Sincerely, Alison Zelms City Administrator -17-
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City Council’s Budget Priorities City of Rochester 2023 Supplemental Budget
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Organizational Vision Foundational Principles Strategic Priorities City Vision - Environmental Stewardship - Fiscal Responsibility & Sustainability - Public Safety - Social Equity - Compassion A vibrant, compassionate, innovative team. - Affordable Living - Quality City Services for Quality Living - Economic Vibrancy and Growth Management Rochester is a city that cares. Where all people are treated with dignity and respect. Where residents, employees, and visitors enjoy high quality lof life. Where business and industry thrive, and where the land and environment are renewed and sustained for the benefit of all. It is a welcome and diverse community. Renowned for it’s reputation as a center for growth and innovation. Characterized by its safe and friendly neighborhoods. Committed to health and wellness for its people. Connected both physically and socially. Dedicated to the sustainable and responsible use of public resources. In order to achieve these priorities, the Council has committed to a legislative and process structure that emphasizes Strategic Governance and Inclusive Decision-Making: • Service delivery models consider partnerships where City is not always the leader • Decision-making is informed by citywide communication and engagement strategy with Diversity/Equity/Inclusion (DEI) at the forefront • Teammates create work plans/annual commitments aligned with Foundational Principles and Strategic Priorities • Policy and operational actions reflect equitable community investment Strategic Priority: Affordable Living Strategic Priority: Economic Vibrancy and Growth Management Strategic Priority: Quality Services for Quality Living Areas of Focus • Housing variety and affordability • Transportation options and access • Equitable regulatory landscape and creative incentives • Access to opportunities and amenities Areas of Focus • Create clarity, alignment and unity with economic development partners in defining city leadership and community values • Establish competitive and sustainable approach to effectively allocate DMC resources, Legislative allocations, and city revenue • Develop implementation tools and strategies for Comprehensive Plan to ensure current decisions reflect future projections • Adopt design guidelines that better reflect Council and community values VISION, PRINCIPLES, AND PRIORITIES Action Plan Action Plans will be developed to identify goals, actions and performance indicators that help advance priorities. Areas of Focus • Cultural and Recreational opportunities that provide access and equity • The organization and Services reflect changing demographics and needs identified by community • Operations are sustainable, integrated, and easy to navigate • Service delivery is optimized, cost effective, and reflect our Foundational Principles -19-
CITY OF ROCHESTER, MINNESOTA MISSION STATEMENT The mission of the City of Rochester is to provide a safe, attractive environment through the responsive, efficient and cost-effective delivery of municipal services. The City will strive to enhance community pride by improving the physical, environmental, economic, cultural and social quality of the community. -20-
Respect Integrity Safety Excellence Identify, plan for, and support customer needs Seek and consider input from our customers to continually improve services Treat every customer well Treat customers in a personal and professional manner while being firm, fair, and compassionate Be an active listener to the customer Maintain a work environment that is free of disrespect and false information Provide equitable and honest treatment to all customers Follow through in a timely manner or as communicated Maintain privacy and confidentiality as applicable to Minnesota State laws Be knowledgeable in my area of responsibility Be professional in my actions, manners and appearance Meet or exceed customer needs for City services RISE to the top of Customer Service Employees act responsibly and take ownership for their actions Documented safety procedures for employees and customers Communicate clearly when dealing with emergencies or safety concerns -21-
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City of Rochester, MN General Summaries City of Rochester 2023 Supplemental Budget
City of Rochester, MN Revenue Summary of Means of Financing the Adopted Budget 2023 Description Taxes Ad Valorem Other Taxes Special Assessments Licenses and Permits Fines, Forfeits and Penalties General 62,944,462 6,159,082 4,932,029 335,631 Library 7,816,734 4,646 Municipal Recreation System 9,720,195 1,045 Mayo Civic Center 365,462 F.E. Williams Rochester International Airport 506,628 Transit EDA Administration Total Governmental 80,988,019 6,524,544 4,933,074 340,277 Operating Budget Parking Enterprise 63,223 471,343 Sewer Utility 836 Storm Water Utility 20,378 Total Enterprise 84,437 471,343 Funds Budget Total Operating Budget 80,988,019 6,524,544 5,017,511 811,620 Internal Service Funds 332,515 Capital Improvement 8,015,600 1,595,000 Debt Service 3,436,440 Rochester EDA Total Budget 92,772,574 6,524,544 1,595,000 5,017,511 811,620 -23-
Intergovernmental Revenues Charges for Services Miscellaneous Revenue Prior Year Revenue Total Budget 7,677,406 4,273,346 18,236,877 785,036 105,343,869 1,169,818 7,878 11,812 72,385 9,083,273 101,195 4,184,120 58,609 60,297 14,125,461 365,462 6,600 (6,600) 2,313,910 1,721,731 2,820,242 (2,244,293) 5,118,218 9,347,845 1,054,901 1,618,775 613,278 12,634,799 2,758,090 (408,184) 2,349,906 20,610,174 11,241,976 25,511,005 (1,128,081) 149,020,988 6,420,409 205,000 (1,027,182) 6,132,793 28,594,110 391,080 (8,395,656) 20,590,370 8,826,552 124,000 (2,096,529) 6,874,401 43,841,071 720,080 (11,519,367) 33,597,564 20,610,174 55,083,047 26,231,085 (12,647,448) 182,618,552 9,091,313 3,120,438 12,544,266 55,958,818 84,696,346 13,418,523 163,684,287 8,662,350 (181,841) 11,916,949 2,266,060 2,266,060 76,568,992 55,083,047 130,947,154 3,709,672 373,030,114 -24-
City of Rochester, MN Expenditure Summary of Adopted Budget by Fund and Character 2023 Description Employee Services Other Current Expenses Capital Outlay Capital Improvements Debt Service Total General 79,910,728 25,433,141 105,343,869 Library 7,189,699 1,230,096 663,478 9,083,273 Municipal Recreation System 8,746,590 5,378,871 14,125,461 Mayo Civic Center 365,462 365,462 Rochester International Airport 5,118,218 5,118,218 Transit 537,074 12,097,725 12,634,799 EDA Administration 2,349,906 2,349,906 Total Governmental 96,384,091 51,973,419 663,478 149,020,988 Operating Budget Parking Enterprise 506,839 5,625,954 6,132,793 Sewer Utility 5,353,449 16,032,174 18,000 (813,253) 20,590,370 Storm Water Utility 838,577 6,035,824 6,874,401 Total Enterprise 6,698,865 27,693,952 18,000 (813,253) 33,597,564 Funds Budget Total Operating Budget 103,082,956 79,667,371 681,478 (813,253) 182,618,552 Internal Service Funds 7,003,086 5,493,795 47,385 12,544,266 Capital Improvement 163,684,287 163,684,287 Debt Service 1,327,575 10,589,374 11,916,949 Rochester EDA 18,308 2,247,752 2,266,060 Total Budget 103,082,956 88,016,340 6,175,273 163,684,287 12,071,258 373,030,114 -25-
City of Rochester, MN Expenditure Adopted Budget Recapitulation 2023 2022 2021 2020 Budget Description Actuals Actuals Budget Requested Recommended Adopted General Fund City Council 667,045 741,797 849,011 868,856 871,216 876,688 Mayor 287,930 299,982 351,663 356,748 357,808 363,223 City Administration 3,446,267 2,138,737 2,455,966 3,322,821 3,416,913 3,164,824 City Clerk's Office 1,321,077 779,546 957,471 997,162 884,369 888,264 Elections 479,061 140,569 374,172 381,134 444,297 444,516 Administrative Fines 15,986 8,275 23,739 24,212 13,147 13,147 Finance 1,968,248 1,959,301 2,130,039 2,194,318 2,214,474 2,217,231 City Attorney's Office 1,788,333 1,480,910 1,996,165 2,053,862 1,917,113 1,918,098 Human Resources 1,947,868 2,032,074 2,401,431 2,471,500 2,488,189 2,572,072 Community Development 3,047,262 1,519,155 1,671,262 1,849,594 1,953,330 1,947,690 DSIC and North Station Mtce 136,621 312,670 299,667 304,904 355,367 355,445 Information Technology 2,294,833 2,372,922 2,678,553 2,886,664 2,899,188 2,904,022 City Hall Maintenance 733,124 572,285 631,844 645,812 586,784 586,862 Total General Government 18,133,655 14,358,224 16,820,983 18,357,587 18,402,195 18,252,082 Police 28,389,473 41,523,122 31,839,535 33,049,827 32,573,031 32,604,984 Animal Control 372,256 505,347 396,535 406,968 408,052 408,508 Dispatch 1,104,119 1,354,703 1,068,632 1,103,684 1,082,407 1,082,407 Fire 18,957,799 27,181,671 20,047,161 20,721,484 20,557,282 20,564,592 Hazmat 62,311 95,286 Comm. Dev. - Building Safety 3,419,188 3,810,563 4,198,290 4,318,984 4,266,962 4,269,680 Flood Control 616,250 566,748 878,173 791,924 817,244 817,244 Emergency Management 770,334 441,876 401,550 411,984 397,402 398,588 Total Public Safety 53,691,730 75,479,316 58,829,876 60,804,855 60,102,380 60,146,003 Engineering 3,282,812 2,953,699 3,719,632 4,069,401 3,828,831 3,834,539 Street Infrastructure Mtce 8,018,819 8,674,927 9,092,868 9,390,915 9,595,853 9,549,910 Fleet Mtce & PWTOC Bldg 683,807 776,357 782,438 815,922 741,767 733,801 Traffic 1,545,467 1,392,533 1,601,408 1,791,402 1,680,181 1,659,923 City Lighting 1,413,282 1,189,403 1,522,124 1,543,646 1,549,024 1,549,024 Total Public Works 14,944,186 14,986,920 16,718,470 17,611,286 17,395,656 17,327,197 Music 761,992 1,101,224 1,134,909 1,168,409 1,120,204 1,121,535 Art Ctr/Civic Theatre/125 Live 758,112 864,112 315,420 315,928 315,928 389,428 Community Reinvestment 395,000 343,100 371,600 371,600 371,600 345,695 Development Administration 136,195 114,533 137,867 111,644 113,723 Economic Development 4,177,720 4,424,131 4,194,000 4,494,030 4,469,030 4,469,030 CBD Maintenance 215,418 235,083 585,596 597,652 594,500 594,609 Joint Facilities Maintenance 373,977 Unallocated 5,103,781 117,401 108,867 112,133 110,590 110,590 Contingency 991,667 1,074,764 2,033,986 2,463,884 2,504,243 2,100,000 Total General Fund 99,309,456 112,984,274 101,228,240 106,435,231 105,497,970 105,343,869 -26-
City of Rochester, MN Expenditure Adopted Budget Recapitulation 2023 2022 2021 2020 Budget Description Actuals Actuals Budget Requested Recommended Adopted Library 8,741,357 9,188,245 8,637,205 9,084,255 9,083,273 9,083,273 Municipal Recreation System Fund Park and Rec Admin 610,350 686,968 677,377 700,157 696,878 671,736 Recreation 551,947 598,468 741,403 766,297 799,181 799,181 Tennis Center 56,534 54,712 59,294 59,731 60,762 60,762 Swimming Pools 22,029 299,958 196,521 199,038 140,184 140,184 Parks 5,847,380 6,468,834 6,528,879 6,903,515 6,939,292 6,939,292 Parkway Landscape Maint 463,305 541,409 690,351 736,951 735,435 735,435 Plummer House 43,766 81,343 97,648 101,703 105,424 105,424 Golf 1,336,849 1,574,339 1,578,038 1,639,533 1,701,156 1,701,156 Graham Arena 819,057 956,183 888,525 923,793 910,024 910,024 National Volleyball Center 318,310 352,737 422,027 435,525 432,348 432,348 Recreation Center 1,459,289 1,561,823 1,620,850 1,667,694 1,629,919 1,629,919 Total Municipal Recreation System 11,528,816 13,176,774 13,500,913 14,133,937 14,150,603 14,125,461 Mayo Civic Center 632,412 432,126 434,575 434,575 365,462 365,462 Airport Operations 5,321,066 5,600,703 4,882,616 4,978,441 4,953,488 4,953,488 US Customs 188,331 205,942 161,500 164,730 164,730 164,730 Total Airport 5,509,397 5,806,645 5,044,116 5,143,171 5,118,218 5,118,218 Transit 10,336,827 11,733,606 11,984,211 12,197,107 12,634,799 12,634,799 EDA Administration 2,389,420 2,765,677 2,321,480 2,350,252 2,349,906 2,349,906 Total Governmental Operating Budget 138,447,685 156,087,348 143,150,740 149,778,528 149,200,231 149,020,988 CBD Parking Admin/Operations 7,029,949 7,427,502 6,064,187 6,178,113 6,132,793 6,132,793 Wastewater Utility 21,799,449 20,859,371 21,373,988 21,477,805 21,403,623 21,403,623 Sanitary Sewer Fund Debt 1,595,409 1,034,359 (395,612) (803,904) (813,253) (813,253) Total Sewer Utility 23,394,858 21,893,730 20,978,376 20,673,901 20,590,370 20,590,370 Storm Water Utility 7,138,735 5,924,767 7,420,249 6,685,457 6,874,401 6,874,401 Total Enterprise Funds Budget 37,563,542 35,245,999 34,462,812 33,537,471 33,597,564 33,597,564 Total Budget with Transfers 176,011,227 191,333,347 177,613,552 183,315,999 182,797,795 182,618,552 Internal Service Funds 32,962,816 35,314,033 10,102,748 11,533,990 12,311,266 12,544,266 Capital Improvements 105,650,655 152,036,400 152,460,119 163,684,287 Debt Service 9,837,859 45,669,442 10,273,617 10,515,182 10,519,656 11,916,949 Rochester EDA 1,172,421 2,374,036 2,264,025 2,266,060 2,266,060 2,266,060 Grand Totals 219,984,324 274,690,858 305,904,597 359,667,631 360,354,896 373,030,114 -27-
City of Rochester, MN Expenditure Trend Data by Object 2021 2022 2023 Budget 2020 Description Actuals Actuals Budget Requested Recommended Adopted Expenditures Employee Services Regular Salaries 59,154,152 60,210,022 66,456,052 68,811,512 68,519,721 68,709,383 Temporary Salaries 1,043,587 1,642,877 1,961,842 2,033,842 1,972,942 2,009,914 Regular Overtime 1,520,653 2,690,993 1,425,972 1,439,372 1,439,372 1,439,372 Other Pay 623,219 946,966 204,017 204,017 204,017 204,017 Employee Benefits - Pensions 10,439,260 9,923,214 11,531,634 11,922,871 11,869,534 11,902,076 Employee Benefits - Insurance 16,125,891 16,727,565 17,954,039 19,235,105 18,654,316 18,766,282 Other Employee Benefits 51,873 48,266 51,912 51,912 51,912 51,912 Employee Services 88,958,636 92,189,904 99,585,468 103,698,631 102,711,814 103,082,956 Contractual Services Rents and Leases 1,512,384 1,487,955 1,823,843 1,861,092 1,895,146 1,839,248 Adv, Publishing, & Printing 395,057 591,173 806,563 822,696 822,696 810,125 Contractual Mtce & Repair 5,597,990 5,857,973 6,281,488 6,427,620 6,416,836 6,397,000 Expert & Professional Services 15,181,335 14,366,243 16,517,648 16,710,219 16,710,219 16,697,648 Communications 787,066 743,575 778,864 795,407 578,173 578,173 Travel/Training/Business Meals 425,136 602,425 649,809 746,227 746,307 846,307 Subscriptions/Bks/Membership 431,486 420,355 395,326 403,234 403,234 403,234 Utilities 5,702,729 5,582,524 6,140,812 6,263,627 6,350,123 6,350,123 Insurance and Bonds 1,361,470 1,447,843 1,448,831 1,474,275 1,474,275 1,474,275 Contractual Services 9,609,337 9,938,621 10,407,205 10,744,991 10,960,996 10,960,996 Contractual Services 41,003,991 41,038,687 45,250,389 46,249,388 46,358,005 46,357,129 Materials and Supplies Office Supplies 455,715 338,011 341,748 341,756 341,756 341,756 Veh & Mach Operating Supplies 2,722,940 3,329,161 3,547,627 3,547,627 4,347,372 4,347,372 Clothing & Protective Equipment 449,581 716,316 401,989 401,989 401,989 401,989 Commodities 494,429 649,968 689,073 689,073 689,073 689,073 Equipment, Tools, & Misc Parts 1,717,613 1,487,976 1,502,749 1,514,749 1,514,749 1,514,749 Construction Materials 1,178,830 1,140,349 1,506,055 1,526,055 1,526,055 1,526,055 Supplies 1,057,225 1,156,951 971,550 971,550 971,550 971,550 Materials and Supplies 8,076,334 8,818,730 8,960,791 8,992,799 9,792,544 9,792,544 Other Charges Judgmnts/Penalties/Settlements 41,521 19,945 28,465 832,377 832,377 832,377 Contributions 9,113,460 6,559,266 6,129,168 6,795,603 6,703,776 6,349,533 Taxes and Licenses 4,188,330 4,561,904 4,149,588 4,224,286 4,224,286 4,224,286 Depreciation and Interest 9,089,869 9,196,383 9,110,000 9,273,980 9,273,980 9,273,980 Other Charges 7,021,145 7,632,755 8,116,822 8,737,605 8,987,902 8,987,902 Other Charges 29,454,325 27,970,253 27,534,043 29,863,851 30,022,321 29,668,078 Capital Outlay Furniture and Equipment 252,024 744,927 18,000 18,000 18,000 18,000 Machinery and Vehicles 134,314 16,847 169,330 Library Media 708,447 782,223 663,478 663,478 663,478 663,478 Capital Outlay 1,094,786 1,543,997 850,808 681,478 681,478 681,478 Bonds-Principal & Interest Principal and Interest on Bonds 1,441,031 1,027,559 (395,612) (803,904) (813,253) (813,253) Bonds-Principal & Interest 1,441,031 1,027,559 (395,612) (803,904) (813,253) (813,253) Allocated to Other Activities Allocations to Other Activities (9,143,447) (9,673,176) (10,245,886) (10,353,469) (10,859,339) (11,054,605) Allocated to Other Activities (9,143,447) (9,673,176) (10,245,886) (10,353,469) (10,859,339) (11,054,605) Total Operating Budget 160,885,655 162,915,955 171,540,001 178,328,774 177,893,570 177,714,327 Operating Transfers Operating Transfers 15,125,573 28,417,392 6,073,551 4,987,225 4,904,225 4,904,225 Operating Transfers 15,125,573 28,417,392 6,073,551 4,987,225 4,904,225 4,904,225 Total Budget with Transfers 176,011,227 191,333,347 177,613,552 183,315,999 182,797,795 182,618,552 Internal Service Funds 32,962,816 35,314,033 10,102,748 11,533,990 12,311,266 12,544,266 Capital Improvements 105,650,655 152,036,400 152,460,119 163,684,287 Debt Service 9,837,859 45,669,442 10,273,617 10,515,182 10,519,656 11,916,949 -28-
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