02. Budget Messagey , i
Honorable Mayor Mark Johnson
Members of the Kalispell City Council
PO Box 1997
Kalispell, MT 59903
Ladies and Gentlemen,
City of Kalispell
OFFICE OF THE CITY MANAGER
201 First Avenue East
Kalispell, MT 59903
May 26, 2015
It is my pleasure to submit for your consideration, the Fiscal Year 2016 proposed budget for all
municipal operations. This letter is intended to serve as the budget message for this proposal
and outlines the nature of the approximately $51 000,000 budget plan for the conning year. This
message is not intended to identify all the specifics of the budget document, but rather provide
an overview of the revenues and expenditures, fund levels, unique attributes impacting the
budget, and significant budget related activities of the organization. Moreover, as changes will
be implemented between the preliminary budget and final budget adoption, numbers in this
document may be slightly different than the numbers in the budget document itself.
The budget document is a substantial policy and managerial tool that highlights the interaction
between the staff and the governing body. Through the budget document, service levels are
established, policy directions are initiated, and fiscal positioning is achieved. The budget is an
effort in cooperation between the entities of the City and the public as a whole.
Over the past three years, the budget development and implementation process has been an
exercise in examining services in order to maximize our efforts, resources, and outcomes. This
included privatization of airport management and some forestry operations. We have also
restructured our internal service funds and established formulas for our departments' interaction
with these operations. It has been a time marked by limited growth in revenues and the
necessary focus on efficiency. while these efforts are continuing with the FY15 budget
development proposal, and should be continued into the future, we are optimistic that we are
now emerging from the impacts of the recession and can look at our service levels and capital
equipment replacement with a slight sense of increased flexibility. There is a lot of excitement
occurring within the community surrounding our Core Area redevelopment targets, commercial
development, and large infrastructure projects such as the bypass completion and the rail park
development efforts. These projects lend to the creation of a culture of optimism within the
community and in our efforts to provide municipal services.
I am pleased to present the FY15 proposed budget and am comfortable in the allocation of
funds, the expected service levels resulting from this funding distribution, and the efforts to
adjust service levels and delivery methodologies to the community that we are serving.
ACCOMPLISHMENTS- IN 2014 AND 2015
As the FY1 6 budget is proposed, it is appropriate to return to recent municipal
accomplishments. While the listed items are only a sample of the improvements and respective
municipal accomplishments, they do represent a concerted effort across departments for the
improvement of services being offered by the City of Kalispell.
> Acquired ownership interest in 6 parcels of land at old School Station as a means of
managing the outstanding debt obligation for the special assessment improvements and
to facilitate the opportunity for private investment in the development;
➢ Approved a Resolution of Intention for the construction of the West Side interceptor as
part of the deviation process for the active management of the allocated, but unused,
capacity within the sewer conveyance system, thus allowing additional usage of the
system while the design and construction of the west Side Interceptor commences;
➢ Approved a Memorandum of Understanding with Flathead County Economic
Development Authority for the engineering design for Glacier Rail Park, thus moving
forward with the plans for the Core Area redevelopment;
;o, Approved a Memorandum of Understanding with Kidsports related to the operation and
maintenance of the youth athletic complex;
Implemented a Solid Waste apparatus refurbishment program to extend the life of the
side -arm loaders by an additional 4 years;
> Approved a Memorandum of Understanding with the Kalispell Golf Association which
allows therm the flexibility to overtake the capital improvement responsibility for facilities
at Buffalo Hill Golf Course and to retain lease payments to further that effort;
> Authorized the implementation of the electrical permit inspection as part of the City of
Kalispell service delivery platform;
Anticipating a late summer bid letting from the State Department of Transportation for
the completion of the Alternate Highway/Bypass and Four Mile Drive;
> Adopted an updated version for Public Works' Design Standards which, among other
things, increases flexibility for developers in respect to storm water retention;
➢ Adopted a legislative platform that defined the priorities for the City of Kalispell in respect
to the 2015 legislative session; which led to the passage of impact fee legislation that
was proposed by the City of Kalispell;
> Passed a social media policy to aid in the overall communication efforts with the
community;
> Shifted service delivery in the Forestry department to outsource certain components,
such as tree removal;
Initiated an update of the South Kalispell Urban Renewal Plan and retained CTA
Architects to facilitate this update, which should provide a long terra vision for the
redevelopment of South Kalispell and identify how the Kalispell City Airport fits into the
community vision;
➢ Completed a review and implementation of a new methodology and rate structure for the
City of Kalispell's light maintenance district;
> Adopted a new market study and pay matrix methodology as part of the AFSCME labor
negotiations; a methodology which is being presented with this year's budget for non -
represented employees;
➢ Participated in a second outreach effort in Washington, D.C., with elected
representatives and Federal Agencies related to the TIGER Grant application;
> Continuing a Kalispell Downtown study to review various needs and desires in the
Downtown District.
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PROPOSED FY16 BUDGET AT A GLANCE
Major highlights and conditions of the proposed FY15 budget include the following:
);P, The proposed FY1 6 budget is based on service levels needed to accomplish the goals
outlined in the budget for each department, balanced with available resources.
> Property taus is the primary source of revenue for the general fund and is anticipated to
increase through new growth and the allowable inflationary index as identified in state
statutes. This is always a difficult assumption to make as final valuations are not
released until August, when we will know what the final property tax valuation is for the
year. Reviewing new additions to county records, however, we feel comfortable with the
forecast applied to the revenue projections.
> While new revenues are limited to new growth and respective inflation factors, the
legislature passed HB 33, a bill to appropriate money for new or expanded mental health
crisis intervention. Unfortunately, this bill was funded by taking money from the growth
share of the entitlement distribution for municipalities. We are waiting to see the final
numbers from the Department of Revenue, but we anticipate that this will cost the city of
Kalispell about $25,000 in revenue for FY16.
➢ Public Works has scheduled an improvement project for 4h Avenue East. This would
include water and read replacement. There are 14 blocks that are part of the overall
project. The question that will be discussed in budget work sessions is how the city
should approach this project. If we approach the project with a pay-as-you-go concept,
we will be looking at breaking the project into four or five phases over five or six
construction seasons. If we wanted to approach the project in a pay -as -you -use
concept, we could be looking at a single phase for the entire project broken out over one
or two construction seasons. If we use this methodology, the debt could be backed by
future street assessments and the water fund.
Information Services, in conjunction with our Communications Manager, is budgeting
funding for equipment that would enhance our ability to add and adjust municipal
programming, announcements, etc., on the government channel.
Information Services has also budgeted for a redesign of the municipal wehsite_ We
have been in discussion with civicPlus, which offers a web -based experience geared
toward municipalities. This would provide for an increased user experience and the
ability to more easily make changes within the website format. The agreement with
civicPlus would be spread over four years and includes two full redesigns/updates,
During last year's budget sessions, we discussed shifting our utility billing operations
from a schedule of billing every two months to a monthly billing cycle. We have included
increases in our water and sewer budgets to accommodate this service delivery change.
This includes an increase in materials and postage, and an additional FTE that is split
across the utilities. In addition to creating consistency on a monthly basis for the
customer (rather than a larger bill every two months), there is the potential to alleviate a
large burden for an individual customer that may be experiencing a leak in a service line
that could go an extra month prior to being identified. This scenario does occur and
leads to unexpected costs for the customer. Additionally, the monthly billing proposal
would eliminate the discrepancy in the application of sprinkling rates across the city.
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Currently, different parts of the city receive the discounted sprinkling rates for different
months. Moving to monthly billing would alleviate that discrepancy in our billing practice.
> The Community Development special revenue fund is showing an increased amount of
activity from last year's level. This is in response to the acquisition of the 8 parcels at
Old School Station. The Community Development fund will now be responsible for
maintaining the parcels and paying the special assessments on an annual basis.
Additionally, it will be receiving funding from the Tax Increment Districts to aid in the
initial land acquisition cost.
Full-time equivalencies:
This year, we are proposing an increase of 0.2 (8 hours a week) FTE in our
Information Services Department, an internal service fund. This will aid in the
management of increasing reliance on computer based components in our
overall service delivery and the anticipated overhaul of the municipal website.
The building department has been essentially contracting additional hours from
the IT internal service fund for the implementation of the Cityworks permitting
program, rather than hiring that service through the vendor. As a result,
additional usage has been shifted to the building department in this year's
budget.
o Changes in the permitting and pretreatment programming will impact the
wastewater treatment plant operations with new requirements and testing
frequencies. As such, we have reviewed staffing and organizational design
within the department. To accommodate the new requirements, this year's
budget includes the addition of an Assistant Wastewater Treatment Plant
Manager in the wastewater Treatment enterprise fund. This position would be
charged with the new requirements of the renewal permit, including: overseeing
the pretreatment program (the chemist will have more sampling requirements
that include testing 5 days a week instead of 3 days a week), managing the
optimization and nutrient trading studies, and managing the TMDL monitoring
program which is required to be implemented in July of 2015.
o As mentioned within the budget highlights, we are proposing an additional FTE
spread across the water and sewer enterprise utilities to accommodate a service
delivery shift to monthly billing.
o Initial plans in developing FY10's budget were to add an FTE to the police
department and increase the number of officers. Shift rotations have been
established for staffing during heavy call times and to provide one day a week
where overlap can occur. This allows for training opportunities throughout the
year while minimizing overtime pay. Typically, we have 4 to 5 officers on duty
from 7am to opm, depending on the day. From the 9pm to Sam swing shift, we
will typically have 7 officers on duty to cover the call loads during this period.
From Sam to 7am, we drop to 3 officers on shift. Occasionally, this results in 2
people being on shift during those times if circumstances, such as an illness,
develop. Adding an additional officer for the higher call volume days would
provide 4 officers during this shift. Initial budget review had indicated that
approximately $67,000 of the required $75,390 to fund the position was
available. Since the passage of HIB 33, we now have approximately $45,000 of
the $75,800 needed for the position. we do have a grant opportunity that would
provide funding for the additional officer .position, up to $125,000 over a three
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year period. While we have been cautions regarding adding personnel through
grant funding, this opportunity may be worth considering as we would likely have
proposed the officer's position in the budget, had we not faced the reduction in
growth revenue. This will be one of the items we would like to discuss during our
budget sessions.
> For the past several years, the ambulance fund has been a point of discussion during
the budget sessions. Following the development of an EMS funding report and
recommendation, a dedicated mill levy was proposed to the voters in November of 2015.
This mill levy was not successful and will likely result in making future adjustments
through attrition, as was stated in last year's budget letter. Adjustments in staffing were
made this past year. Specifically, in the later parts of the year, staffing was held at 5
personnel, rather than brining in a seventh person on overtime in situations where we
previously called in the seventh responder. For this year's budget, we have included an
ambulance as it is a needed piece of equipment that replaces an aging apparatus.
➢ we are not looking at any rate increases as part of the budget proposal process. we
have previously proposed increases in street assessments, light maintenance, and
forestry assessments. over the last two years, we have reviewed and made decisions
with the street and light maintenance assessments. Last year, we opted to privatize
some of the services in forestry, rather than pursue an increase in the forestry
assessment. we are maintaining this service delivery format, and are increasing the
amount of contract services to address the back -log of stump removals occurring
throughout the city.
> This is the second year for data collection and display within the departments for the
usage of the Central Garage internal service fund, which had previously been
considered as its own operation within the general fund. The internal service activity
allows us to display fuel usage within the respective departments. With this shift, we are
better able to track Central Garage usage and costs over time respective to each
department.
This is the second year of including a 5-year Capital Improvement Plan for the municipal
departments that outlines expected timeframes for equipment replacement and capital
projects. This schedule helps to forecast the needs of the department and outlines
projects that are being planned in future years. The CI P is updated on an annual basis
with some projects being adjusted on the timeline and equipment being deferred, based
upon priorities and available resources.
➢ In a continuing effort to strive for uniformity across the organization, a new pay matrix for
non -represented employees is being proposed with this year's budget. This pay matrix
follows the same methodology that was used in the AFSCNIF labor negotiations, which
includes a 20 step pay plan based upon market data from municipalities in Montana.
The 20 steps include a 1.3% adjustment which is similar to the labor contracts with the
Fire Department, Police and AFSCME employees. Additionally, a 1.9% base adjustment
will be applied to account for the average total compensation of the labor contracts for
FY1 6.
> For the third year in a row, we are receiving a credit from MMIA for liability insurance.
This credit has been applied as a decreased expense.
A
> Health insurance costs from MMIA are projected to increase for the first time in three
years by 5.3%. We have been fortunate to not have experienced the larger increases
that have been present in the insurance industry.
GENERAL FUND REVENUE
PROPERTY TAX
Property tax is the primary revenue source within the general fund. As we do not receive final
property valuations for the current year until the first week in August, we are required to forecast
revenues with incomplete information. For FY16, we anticipate the valuation to increase in
conjunction with last year's growth of taxable property. However, we tried to be conservative in
our estimates, knowing that the final numbers usually require some modification. we think our
estimates are accurate in projecting a higher level than FY15 as we saw considerable properties
completed that we project to be on the tax rolls, a trend we anticipate continuing through the
next two years. We are currently trending for increased commercial building in 2015 and
anticipate increased residential building in 2016. However, the timing of the construction and
the timing of the property assessment creates difficulty in forecasting when the increase in
taxable property will result in increased valuations.
General Fund Revenues by Percentage
General Fund Revenue By ape FY16
Fines and
Forfeitures
6%
Charges for
Services Miscellaneous
of�
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f.
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PrepertyTaxes
53%
pop
Intergovernment J
Revenues
25% Licenses and investment
Permits Revenue
1 % 0%
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GENERAL FUND EXPENDITURES
Expenditures in the General Fund are budgeted at $10,459,721. This is a 4.39% increase from
the total expenditures adopted in the FY15 budget. Expenditure categories are broken down in
the chart below.
Breakdown of General Fund Expenditures by Percentage
General Fund Expenditures by Type FY15
Capital
2%
Services and Debt Service
Supplies 0%
22%
Personal
Services
76%
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SPENDING LEVELS BY DEPARTMENT
The follong table provides a compari
wison of general fund departmental expenditures from
FY15 to FY16. The table is included to demonstrate the funding levels for respective activity in
this year's recommended budget as compared to the previous year. Changes may be indicative
of large capital items, significant additions to departmental responsibilities, or other changes in
operation and maintenance costs.
Table 1. comparison Increase from Prig Year- General Fund Departments
FY2015 FY2016
Adopted Proposed
General Fund Departments Budget Budget % change
City Manager
$182,1261
$183j111
0.50%
Human Resources
$156,224
$162,534
4.03%
Mayor/Council
$122,142
$132..677
8.62%
City Clerk
$138,f762
$120,694
-13-02%
Finance Y J -= J-
$266,550
$286.9451
7.47%
Attorney
$436,542
$450,658
3.23%
Municipal Court
$342.583
$351AO4
2.57%
Public Works
$39.522
$40,638
2.82%
City Hall
$257,v992
$279,179
8.20%
Police
$4..218,218
$4.3611632
3.40%
Fire
$2,675.306
$2,8751865
7,50%
Planning Department
$355,1246
$357,.954
0.76%
Community Development
$68,6931
$
1
SPECIAL REVENUE AND ENTERPRISE FUND REVENUES, EXPENDITURES, AND
BALANCES
Below is a table of the Special Revenue and Enterprise Funds, with their related revenues,
expenditures, and fund balances. Those funds in bold are addressed in the narrative following
the table.
Table 2. Revenues, Expenditures, and Fund Balances in Spacial Revenue and Enterprise
Funds
Fund Revenues Expenditures Balance
SPECIAL REVENUE FUNDS
Parks
$11523,915
$11641p834
$3671491
Forestry
$270,600
$291,679
$141,193
Ambulance
$1,214000
$11224,725
$14,874
Building Department
$381,000
$488, 011
$280,804
Light Maintenance
$376.,400
$338.*450
$840216
Gas Tax
$397,fOOO
$609,661
$146.0850
Street Maintenance
$2,321,OUO
$20589.*764
$1,096,199
ENTERPRISE 'FUNDS
Airport Operations
$74f 908
$60,880
$136, 129
Water
$3.194,000
$3,166,732
$3,366,843
Sewer
$4p300,000
$41733j200
$1*622,963
Storm Sewer
$740)000
$722,571
$401,304
Solid Waste
$984.*936
$953,pOGO
$636.,288
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FORESTRY
The Forestry Special Revenue Fund was established in 2001 with the following objectives: 1)
implement a hazard reduction program, 2) replacement for removals or vacant sites, 3) pruning
cycles for inventoried trees, 4) public education and site assistance, and 5) maintain a
departmental tree maintenance unit. The conditions during the last five years of the program
have necessitated addressing Dutch Elm Disease within the urban forest. With this effort, the
remaining objectives have been considered less of a priority, though the department is trying to
focus year-round efforts on the urban forest.
Last year, rather than pursue an assessment increase, we elected to reduce staffing and
contract out some of the duties within the forestry operations. Between our contract services
and our respective crews, we were able to remove a significant number of trees that have been
impacted by Dutch Elm Disease. This year, we removed 70 trees; compared to 54 the previous
year. We are planning to utilize the same service platform in FY15. One of the changes we are
proposing this year, however, is to increase the contract services to allow for the removal of the
back -log of stumps throughout the system. This is one of the highly visible service areas
impacted by the reduction of staff within the department. We anticipate being able to remove
between 100-130 stumps through a dedicated contract similar to the tree removal activity.
AMBULANCE
The ambulance is considered a special revenue fund as it generates a significant portion of its
revenue from sources that are committed to the fund's operation. This revenue comes from
billing for services, similar to an enterprise fund. However, as collection of full amount of billing
is impacted by Medicare, etc., this fund is essentially supported by a general fund subsidy. This
budget presents that subsidy in correlation to the personnel required to run the ambulance
operation. The subsidy for FY16 is a little over $520,000. This amount includes the
replacement of an ambulance unit at $170.000.
As was mentioned previously in this transmittal letter, this fund was the subject of a dedicated
mill levy in November of 2015 that failed at the polls. with that outcome, overtime staffing has
been reduced and will be monitored to adjust to available resources and demands. Additionally,
as was mentioned during the ballot issue recommendation, we anticipate reduction in personnel
through attrition. while we have seen an uptick in calls for service that have been dispatched to
mutual aid agencies through the overtime adjustments, we are attempting to mitigate the impact
to service delivery as best we can.
This operation will continue to be monitored throughout the year to gauge the impact of service
operations and the allocation of resources.
BUILDING DEPARTMENT
The Building Department acts as an enterprise fund that is allowed by State law to have a one
year contingency fund, and is required to have spending levels for the next year to lower the
reserve amount. We have reached this level due to increased activity in building and anticipate
additional revenue resulting from the addition of electrical inspections. Last year we budgeted
for an additional inspector to aid in the workload. This position has yet to be filled, though we
have now begun advertising for the position as we anticipate an increase in inspection activity.
As an enterprise operation, this fund's revenues and expenditures will be monitored to maintain
the proper balance.
M
AIRPORT
In the fall of 2014, voters chose to reject plans to move forward with an expansion/realignment
of the airport's footprint. Since that time, we have been working on re-establishing the
community's long term vision, not only for the airport, but also for the surrounding environment.
CTA Architects have been retained to facilitate the update to the Urban Renewal Plan for South
Kalispell. This includes identifying how the airport will be handled in the future. CTA is currently
reviewing three basic options: 1) keep the airport as it currently sits, increasing the maintenance
on the airfield, 2) close the airport and use the site for alternate uses, and 3) enhance the
airport. Each of these options presents its own list of advantages and disadvantages that are
too complex to detail in the course of a budget transmittal letter. However, we anticipate this
update to come before the City Council this fall. This plan will help identify the direction for the
Kalispell City Airport, and where we elect to place our resources.
PERSONNEL COMPENSATION AND BENEFITS
Over the past three years, we have strived to create compensation decisions that provide equity
across the organization. Attempting to spread this equity to the non represented employees of
the City of Kalispell, we have averaged the total compensation (step plus base adjustment)
increase for the three labor unions to apply that amount to the non -represented employees.
The FY15 labor contract compensation increases are 3°lam, 3.3%, and 3.3% (listed in the table
below). This averages a 3.2% total compensation increase which is being proposed for the
non -represented employees.
Salary Increase for Respective Labor Groups
(Overall Increase- Inclusive of Base Adjustment, Longevity, Merit, etc.)
Police Contract
Fire Contract
AFSCME Contract
Non -Union
FY15
FY15
FY17
FY15
FY15
FY17
FY15
FY15
FY17
FY15
FY15
FY17
2.4%
3.0%
3.3%
3.3%
3.3%
NA
3.3%
3.3%
1.3%
3.0%
3.2%
NA
During last year's negotiation with AFSCME, a market analysis was conducted and a new pay
matrix was implemented in order to better align our organization with the market. Following the
adoption of this process and matrix by AFSCME, we initiated the same process with the non -
represented groups as a means to further the equity across the organization. The desired
outcome for this effort will be a wage matrix that provides consistency for advancement through
a respective pay range for employees while connecting every position with the respective
market. Currently, employees are hired into a respective range, yet are advanced only through
base adjustments. The proposed matrix would provide a mechanism for advancement through
a pay range in an equitable fashion. similar to the implementation of the AFSCME matrix, 1.3%
is being appropriated to allover for plan implementation, which would place employees at the
closest step in the matrix to their current annual wage. This 1.3% is similar to the annual step
increases in our three collective bargaining groups. An additional 1.9% is being appropriated as
a base adjustment. This amount would equal the average compensation of 3.2%. The intention
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for future years is to have the 1.3% act as a step realized by the achievement of specific training
requirements and the base adjustment serving as a function of the market.
Health care increases for lilIMIA are projected to increase 5.3% for FY16 for the city of Kalispell.
This increase is shared between the city and the employees, depending upon the respective
employee plan. For the past two years, we have not experienced an increase in health
insurance, which has been an unexpected occurrence, even with the low level of claims across
the MMIA system, and even lower claims submitted from City of Kalispell participants over that
time. Having the average increase over a three-year span be less than 2% is something to
appreciate. In an effort to maintain lower rates, MMIA continues to encourage employees to
participate in their wellness program activities, which are designed to identify preventive
illnesses and avoid long-term cost exposures.
CONCLUSION
The proposed budget was developed and is recommended as an appropriate use of the
resources available to the City. The focus of the budget during this years preparation has been
on delivering services that benefit the efforts of the community and the activities that we see
occurring. There is a significant amount of optimism and activity in our community surrounding
the enhancement of the City of Kalispell, including efforts to increase commercial, rail, and
manufacturing opportunities and increasing the overall quality of life. While many of these
activities are not directly related to the FY16 budget presentation, they certainly are cultural
dynamics that help shape the context in which the budget is developed.
it is anticipated that the local economy will continue to trend upward with steady growth. We
anticipate that property valuations in the next two years will show an increase over the previous
three years. Based on the amount of new commercial development occurring within municipal
imits, we sense an optimistic fiscal environment, as compared to the recent past.
In conclusion, I believe the budget development process continues to be enhanced through the
efforts of staff and the City council. The employees of the City of Kalispell have done an
exceptional job in striving for an improved community through their collective efforts, as can be
seen with developments incorporated into the budget. The City Council has been effective in
providing direction from which to work as we try to create a document that is effective,
beneficial, and responsive to the community. Finance Director, Rick Wills, has done an
exceptional job in managing the various fund changes that have been implemented over these
past two years. The collective goal of all involved has been to create the mechanism from
which municipal services are delivered to the residents of the City of Kalispell. With these
acknowledgements, I present the proposed FY1 5 budget.
Respectfully,
r
�a
Douglas R. Russell
City Manager
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