Memorandum

City of Lawrence

City Manager’s Office

DATE:	July 12, 2011
TO:	David L. Corliss, City Manager
FROM:	Cynthia Wagner, Assistant City Manager Casey Toomay, Budget Manager
CC:	Diane Stoddard, Assistant City Manager Jonathan Douglass, Assistant to the City Manager / City Clerk
RE:	Options for Reductions to the Recommended Mill Levy

As follow up to the City Commission Study Session on July 8 at which time direction was provided to provide options for reductions to the recommended mill levy, the following possible changes to the recommended budget have been developed.

Based on City Commission direction, a .9 mill decrease has been identified, reducing the total mill levy increase to 1.9 mills, 1.5 mills for the library debt, .2 for library operations and .2 for general fund operations.

Library Expansion

The recommended budget includes an increase of 1.7 mills for the construction and operation of an expanded Lawrence Public Library.  Of the recommended mill increase, 1.5 mills would support the debt issued to construct the $18 million dollar expansion, while 0.2 mill would support operations as the facility prepares for expanded operations. 

Possible Changes to Recommended Budget

The table below shows possible changes to the City Manager’s recommended budget in order to reduce the necessary increase to the mill levy for 2012.  Any changes should be sustainable and permanent, not one time reductions or additions.  This is because increases (compensation and the addition of police officers) are permanent, repeatable expenses in future years.

Possible Change	Savings/Revenue Generated	Mill Levy Equivalent
Eliminate Recreation Fund Mill Levy	$200,000	0.242 mill
Changes to Infrastructure Sales Tax Allocations	$300,000	0.40 mill
Reduce Commodities Costs (including fuel, streetlights, computers and other equipment)	$166,000	0.20 mill
Increase Court Fees	$60,000 in additional revenue	0.07 mill
TOTAL CHANGES	$726,000	0.912 mill

These changes, including a discussion of the consequences or impact, are further outlined below.

Eliminate Recreation Fund Mill Levy.  The 2012 Recommended Budget included a mill levy of 0.242 to support Recreation operations.  This mill levy is expected to generate approximately $200,000 in 2012.  If this mill levy was eliminated, the total mill levy increase for 2012 could be reduced by 0.242 mill.  The $200,000 needed to support recreation funds would need to be replaced with proceeds from the county-wide sales tax.  This would mean a permanent increase in the amount transferred from the General Fund to the Recreation Fund and an offsetting permanent reduction in the money transferred to the City’s Sales Tax Reserve Fund.  Because the Parks and Recreation Department relies heavily upon the reserve fund, permanently reducing the transfer to the City’s Sales Tax Reserve Fund would mean a reduction in the City’s ability to respond to routine maintenance needs in the Parks and Recreation Department.  It would also substantially limit the ability of the Parks and Recreation Department and the City as a whole to take on new projects.  Examples of future projects which will be difficult to sustain with reduced maintenance funding include new recreation centers, new parks and trails, and City acquisition of the Santa Fe Station.  The City previously agreed to participate in partial funding of the architecture plans for the currently privately-owned Santa Fe Station, but the City will not be able to further participate nor seek ownership in the future.

Changes to Infrastructure Sales Tax Allocations.  The current spending plan for the 0.3% Infrastructure Sales Tax assumes $500,000 will be used toward the purchase of fire apparatus each year, for a total of $5 million.  By permanently reallocating $2.4 million from fire apparatus to the City’s street maintenance program, the general fund could be permanently reduced by an equivalent amount, $300,000, or 0.4 mill, each year over the remaining eight years of the sales tax.  The consequences could include deferral of the purchase of fire apparatus and/or the need to increase the amount of debt issued to fund the purchase of apparatus. 

In addition, the 2012 Recommended Budget assumes $1 million from the infrastructure sales tax will be used to replace radios in the fire department, pursuant to a federal mandate.  This would bring the total infrastructure sales tax proceeds used to fund fire equipment and apparatus to $3.6 million.  Should sales tax proceeds continue to exceed projections, it may be possible to use funds toward additional apparatus purchases.      

Reduce Commodities.  The 2012 Recommended General Fund Budget includes $4,551,021 for commodities.  This is an increase over 2011 Budget of just $193,639.  However, only $4,249,616 was spent on commodities in 2010.  Commodities include unleaded and diesel fuel, the charges the city pays Westar for streetlights, computers and other small equipment.  Fuel prices are now expected to be somewhat less than when the department’s submitted their original budget requests.  And while rates are expected to increase in 2011 and again in 2012, it may be possible to reduce the budget for streetlights.  Staff will need to work with departments to identify necessary cuts.  We believe an appropriate cut goal is to reduce commodities in 2012 by $166,000, or approximately 0.2 mill.  This will mean an increase of just $27,639 (or .6%) over 2011 budget.  It should be noted that, in recent years, reduced resources have lengthened the replacement schedule for computers beyond what is recommended by Information Systems staff.  Further reducing the budget for commodities could mean departments will have to continue to defer replacements.      

Municipal Court Fees Increase.  The Legal Department has recommended that municipal court fees be increased in 2011 to fund the purchase of software needed to replace an obsolete system.  The fees will be increased and the software purchased in 2011, however the increase to revenue will be permanent, and is estimated to generate $60,000, or 0.07 mill, each year.      

Other Possible Changes

If the City Commission wishes to further reduce the necessary mill levy increase for 2012, additional changes, which are not recommended at this time, are outlined below. 

• Reduction in the number of new Police Officer positions.  As discussed at Friday’s Study Session, the mill levy equivalent of each new police officer is approximately 0.1 mill.  The detective and sergeant positions are slightly higher; 
• Reduction in Force.  If the City Commission desires to reduce general fund supported positions, staff recommends that the Commission agree on a total dollar amount to be achieved with lay-offs.  Staff can then develop a plan to accomplish the appropriate layoffs of City personnel.  However, staff can not recommend it at this time due to the anticipated impact on service levels. 
• Permanent Elimination of Longevity.  The 2012 recommended budget includes full funding of the employee longevity program.  Permanent elimination of this program would reduce general fund expenditures by $310,000, a 0.4 mill levy equivalent.  Staff does not recommend this option as well.