Kearney City Council – 2023-2024 Budget Presentation

The Kearney City Council met on July 5, 2023, to hear a presentation on the proposed 2023-2024 city budget from Finance Director Kayla and City Manager Michael (Brenda Jensen). The presentation covered expenditures, revenues, fund balances, and key financial challenges. The overall proposed budget totals $162 million, a decrease of $5,428,799 (3.2%) from the prior year.

Discussion Items

Proposed Expenditures by Fund

• General fund expenditures increased by $1.7 million (0.1%) to $1.3 million in supplies and materials (up 9% due to rising costs), while capital outlay decreased by $669,000 (34%).
• Other funds (special revenue, capital projects, enterprise, internal service, fiduciary) decreased by $7,144,000 (5.3%).
• Of the total $162 million budget, $74,354,000 (46%) is for operating expenses; the remaining 54% is for capital and debt.

Personal Services

• A 3% pay plan adjustment is proposed, costing governmental funds $495,672 and proprietary funds $201,000 (total $697,000).
• Four mid-year positions were added in the current year (sanitation equipment operator, airport office manager, etc.), and one new maintenance worker in the water department is budgeted for 2023-2024, bringing total budgeted employees to 346.
• Health and dental premiums are estimated to increase 25% based on a reinsurance cost projection; the city had budgeted 10% and may need to adjust. A $1.2 to $3 million fund balance could cover the shortfall.

Capital Outlay

• General fund capital outlay decreased by $669,000 (34%).
• Capital projects funds increased by about $8 million, driven by a $3 million donation for 20 police cars, $6 million for sports plex, and $1.2 million for street improvements.
• Enterprise funds decreased by $15 million due to completion of major projects (wastewater treatment upgrade, $7.2M; water tower, $4M; pumps, $1.1M).
• The city manager noted that lumpy capital projects make year-over-year comparisons misleading; a future budget presentation will separate recurring operating costs from one-time capital.

Top 10 Capital Projects

• The top 10 projects account for 72% of total capital expenditures ($61 million of $85 million). The largest is the sports complex, followed by the wastewater treatment plant ($19 million).
• Funding sources and original project costs were added to the budget book per council request.

Debt Service

• Beginning principal debt is $115 million; estimated principal payments total $5,000 (likely a transcription error; the slide shows $5 million?). A $3 million contribution from the sports plex facility support is pending.
• Patriot Park debt of $7.5 million was paid off in June 2023, freeing up restaurant tax revenue to support the sports complex.

Projected Revenues

• Tax revenues (sales tax $17M, property tax $4.9M, occupation tax $4M, etc.) increased by $583,000 (2.1%).
• Charges for services (utilities, rentals, concessions) are up $2.8 million due to utility rate increases.
• Interest revenue increased $2.2 million (912%) because rates rose from under 1% to 5%.
• Miscellaneous revenue (donations, police car donation) up $2.8 million (44%).
• Bond proceeds decreased by $15 million as last year included $26 million in sewer bonds. This year expects $5 million new debt and $14 million state revolving funds.
• Total projected revenues decrease by $11 million (8.7%) compared to budget-to-budget.
• Council member noted that flat tax revenues and higher interest are covering increased costs, but this may not persist. City manager explained that the property tax levy (14.8 cents per $100 valuation) is among the lowest in Nebraska and has been unchanged for years.

Property Tax Request

• Proposed property tax request: $4,939,464 (up $257,000 from last year), based on a 6% growth in valuation (new construction) estimated by the county assessor. The levy remains at 14.8 cents. An example: a $200,000 home would pay about $297; a $300,000 home about $446.
• Out of every dollar spent, 8 cents comes from property taxes (65 cents to Kearney Public Schools, 18 cents to Buffalo County).

Sales Tax

• Sales tax collections have been flat (2% average over the last seven months), but overall up 4% due to strong months in August and September 2022. The budget assumes conservative estimates.
• The city’s sales tax rate is 1.5%; many other Nebraska cities have 2%.

Fee Schedule Changes

• Landfill tipping fee for citizens: from $35 to $42 per ton (15% increase), first increase in 17 years. For compacted waste (professional haulers): from $27 to $35 per ton (27% increase).
• Sanitation collection: $1/month increase.
• Sanitary sewer: 7.5% annual increase for five years to fund wastewater treatment improvements (previously agreed).
• Water: no rate increase.
• Stormwater utility: from $2 to $3 (residential) and $6 to $8 (commercial).
• Council discussed the impact of large one-time fee increases on businesses and private haulers; the city will notify them in advance.

Fund Balances

• Policy requires at least 25% of operating expenses in key funds (general, transportation, golf, sanitation). The golf course fund benefited from payoff of keynote debt, allowing capital purchases.

Challenges

• Marginal sales tax growth, rising costs, increased health/insurance costs, flat NPPD revenues, and no state aid or municipal equalization funding (unlike many Nebraska cities). The city has operated without state aid for six years.

Important Dates

• Joint meeting with Buffalo County on July 6, 2023, at 4:00 p.m. at the Peterson Center to discuss interlocal contracts.
• Joint public hearing on September 26, 2023, at 6:00 p.m.; at least one elected official must attend per new state law.

Key Outcomes

• The presentation was informational; no votes were taken. The budget is preliminary, with adjustments expected before final adoption in October 2023.
• Council expressed appreciation for the detailed presentation and noted the need to communicate budget complexities to the public.
• The meeting adjourned by unanimous consent.