Memorandum

City of Lawrence

City Manager’s Office

TO:	Dave Corliss, City Manager
FROM:	Cynthia Boecker, Assistant City Manager Casey Toomay, Budget Manager
CC:
DATE:	June 6, 2008
RE:	Development of 2009 City Manager’s Recommended General Fund Budget

Projections used in development of the 2009 general fund budget have been previously reviewed with the City Commission and are updated to reflect new revenue and expenditure information. Per discussion with county officials, a slight upward change to property tax projections may be expected, however we await updated information from the State to further assist in this analysis. Information from the state is anticipated around June 15. At this time, we are continuing to project no change in 2009 assessed valuation from 2008.

A current projection summary is attached. Based on current revenue and expenditure assumptions, 2008 ending fund balance in the general operating fund will be $9,895,225, or 17.58% of expenditures.

Revenues in 2009 are projected to total $55,582,611. This represents an increase over 2008 projections of $839,193, or 1.5%. The budget as submitted by departments and holding outside agencies at 2008 expenditure levels currently totals $60,490,000. This amount does not include any increases to employee compensation or funding for the longevity program. In order to balance projected expenditures to projected revenues, the expenditure budget cannot exceed $56,694,264. The difference between these two levels is slightly under $3.8 million.

Over the past few weeks, staff has worked to identify ways to balance the projected revenue and expenditure budget. In order to accomplish this, funding for 10 currently vacant non-public safety positions has been eliminated, resulting in savings of just over $500,000. Positions eliminated include:

Administrative Support III (Administrative Services Department)
Planner II (Planning and Development Services Department)
2 Zoning Enforcement Officers (Planning and Development Services Department)
Management position in Development Services
Management Analyst (Finance Department)
Information Systems Technician (Information Systems Department)
Human Relations Staff Attorney (Legal Department)
Municipal Court Clerk (Legal Department)
GIS Analyst (Public Works Department)

In addition, Parks and Recreation eliminated five vacant positions with their budget submittals. Vacancies in the Police and Fire/Medical Departments have been left funded.

Additionally, $2.3 million for the purchase of a ladder truck and a quint in the fire department 2009 budget have been eliminated. Purchase of $2.1 million of fire apparatus is still recommended for 2008 through the issuance of debt.

Finally, almost $1,000,000 in cuts to operating budgets have been made, including:

reducing the KPERS retirement amount based on revised calculations from the State;
reducing printing, contractual services, training and travel, advertising, and supplies line items in various departments;
deferring replacement of four vehicles per recommendations of the fleet manager (this includes two sedans in the fire department, one police vehicle and one public works inspection vehicle);
eliminating contingencies for weather related events in the public works budget;
reducing the health department request to reflect a 1% increase over 2008 budgeted levels;
reducing funding to outside agencies by $20,055 per recommendations of the City Commission Committee; and,
reducing transfers from the general fund to the worker’s compensation, equipment capital and liability reserve funds.

As noted above, this balanced budget does not include any increases for employee compensation or funding for the longevity program. Based on current payroll, each 1% adjustment to employee compensation totals $330,000 in the General Fund. This calculation is different than the existing merit and wage adjustment system, which has included a general wage adjustment and merit increases of 2.5% to 5%. The estimated cost of maintaining the existing merit system is $411,220. This figure includes the 2.5% to 5% merit increases as well as Police Department competencies for all eligible employees.

The longevity program at the existing level ($48 per year to employees with 5 or more years of employment) is estimated to cost $260,000 in the General Fund in 2009.

In order to fund increases to this base budget such as upward movement in employee compensation, additional cuts or additional revenues would be recommended versus spending down fund balance or significantly reducing reserve funds. The budget as submitted includes $512,300 in equipment purchases, which could be purchased through the equipment reserve fund (current available balance is $2,278,151). Some street maintenance expenditures could be funded through the capital improvement reserve fund (current available balance is $3,389,454). Funding of this nature would represent a one-time expenditure adjustment to address on-going budget needs and would not be recommended as a long-term solution to fund the City’s General Fund ongoing needs including employee compensation.

The 2009 total liability for the group health plan is expected to increase 9.6% or $634,159 from 2008 to $7,222,676. The health care committee recommends that City funding be increased 3%, or $190,978, and that employee contributions be increased 8%. Alternatively, the City Manager’s recommended budget will likely maintain 2008 funding levels, requiring the increase to be funded through retained earnings in the Health Insurance Fund. The savings to the General Fund would be $110,220.

As sales tax election discussions continue, it should be noted that the transit levy represents approximately $1 million in revenues annually. Vice Mayor Chestnut’s sales tax memorandum included an option to fund transit/infrastructure from a voter approved sales tax and use the existing transit levy for general fund, bond and interest fund purposes and overall mill levy reduction.