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2. Transportation Impact FeesCity of Kalispell Post Office Box 1997 - Kalispell, Montana 59903-1997 Telephone (406) 758-7701 Fax - (406) 758-7758 November 24, 2008 TO: Mayor & Kalispell City Council FRM: Myrt Webb Interim City Manager Re: Transportation Impact Fees On Wednesday evening (19 Nov), I met with the impact fee committee to discuss transportation impact fees. I asked them to limit their concerns to the study rather than the policies that would come after the study. Most of these concerns were a result of workshop meetings with the council. The Wednesday evening meeting included input from interested members of the community. Concerns (staff department responsible for answers): Insure that a better approach is not available. (Public Works) ® Validate the trip generation data. (Public Works) • Insure that projects MSN 2, 3, 23, 28 are related to new growth. (Public Works) • Develop findings of fact. (City Attorney) During the 24 Nov workshop I will ask the council for other areas of concern, related to the impact fee study. City of Kalispell Post Office Box 1997 - Kalispell, Montana 59903-1997 Telephone (406) 758-7701 Fax - (406) 758-7758 November 24, 2008 TO: Mayor Kennedy & Kalispell City Council FRM: MyrtWebb Interim City Manager Re: FY08/09 General Fund (GF) Budget Update Since 2002, the City of Kalispell has grown rapidly. As we grew core (difficult to reduce) expenses such as salaries and benefits, debt service and insurance increasingly relied on volatile revenues like growth fees for support. Initially when the volatile revenues dropped suddenly, expenses were funded from the reserve. Reductions were made, but they were not enough to keep the reserve healthy. Expenditures continue to outpace revenues and the reserve has dropped to an alarming level. At our present expenditure rate we will exhaust the general fund reserve within the next year. The general fund will be insolvent. Options (all figures are in thousands-k): Do Nothing Projected Revenues: $10,289k Project Expenditures: $10,755k Overrun: $ (466k) Projected EOY Reserve: $8k Within one month the GF would be insolvent. Lockdown Projected Revenues: $10,289k Project Expenditures: $10,655k Overrun: $ (366) Projected EOY Reserve: $108k Within three months the GF would be insolvent. Reduce Expenditures by $466k (Recommended Option) Projected Revenues: $10,289k Project Expenditures: $10,289k Overrun: $ 0 Projected EOY Reserve: $474k Revenues and expenditures would be stabilized. Government Budget Truisms: • Planned reductions should exceed the minimum necessary. Seldom will you be able to reduce as much as you planned. • The chance that you will have unanticipated expenses greatly exceeds the probability that you will have unanticipated revenues. • If personnel are affected you will have a sudden increase in personnel expense due to severance and other costs. In the short run, when personnel are involved it is expensive to save money. • Budgets have momentum. Savings from reductions will not appear for several months. • Tough budget situations do not get better with age. You cannot save money you have spent. Issues: • How much risk do we take? An intermediate option is to take more risk by allowing the present project reserve of $474k to fall. This would reduce the amount of reductions we would take this fiscal year. A reserve of $1.5 million would be comfortable for our $10 million GF. One million would be adequate and below $1 million is risky. We are below $500k which is very risky but we could assume more risk. There are two problems with this approach. Lowering our reserve increases the chance that we could be placed into immediate insolvency by a large unexpected GF expense caused by an emergency. Since expenditures still exceed revenues further cuts would probably be necessary next year. • Should the priorities change? The amounts in the present budget for each department represent the priority that department has. Another intermediate option is to change priorities by decreasing the amount of reduction assigned to a specific department. Simply reducing an assigned reduction would increase risk. The reserve would have to make up the reduction. A reduction in the assignment could be reassigned to another department or spread between the remaining GF departments. Many of the GF departments have been through previous reductions and their ability to reduce past the present drill is limited. It is difficult to further reduce a small department with one director and a shared assistant.