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HomeMy WebLinkAboutItem A: Renewal of Library Local Option Levy ECC UGENE ITY OUNCIL AIS GENDA TEM UMMARY Work Session: Renewal of Library Local Option Levy Meeting Date: April 12, 2006 Agenda Item Number: A Department: Library, Recreation and Cultural Services Staff Contact: Connie Bennett www.eugene-or.gov Contact Telephone Number: 682-5363 ISSUE STATEMENT The council is asked to consider renewal of the Library Local Option Levy for placement on the November ballot. BACKGROUND Council Action History The council authorized creation of the Mayor’s Library Improvement Committee in October 1997. The committee was charged with developing a plan to address improved library services and facilities and to return a completed proposal for City Council consideration. On July 22, 1998, the council accepted the Mayor’s Library Improvement Committee’s report and recommendations for long-range library improvements with specific improvements to be funded by a local option levy. On July 29, 1998, the council voted to place the Library Local Option Levy on the November 1998 ballot. The levy was for $2,190,000 per year ($0.28 per $1000 of assessed value or $39 per average taxpayer per year) for four years. Voters approved the levy by a 64% vote on November 3, 1998. The levy expired on June 30, 2003. In October 2001, the Mayor reactivated the Mayor’s Library Improvement Committee. The committee’s new charge was to review progress toward its original recommendations, consider what should be included in a levy renewal proposal, and propose the timing of the new levy. The committee returned a report on library services to council on February 11, 2002, and recommended that a Library Local Option Levy renewal be placed on the ballot for the May 2002 election. The Mayor’s Library Improvement Committee recommend continuation of on-going library services, and in addition enhancing the collection budget to bring the library system up to the Oregon Library Association’s “adequate” standard of at least 2.5 books per capita, adding evening hours to the Downtown Library schedule to meet the Oregon Library Association’s “adequate” standard of at least 60 hours per week, adding hours to the branch library schedules to provide system consistency, funding additional staff for telephone reference service for the library system and full service desk coverage at the Downtown Library, and adding Sunday hours at the branches. The council unanimously accepted the committee’s report. On February 22, 2002, the council voted to place renewal of the Library Local Option Levy on the May 21, 2002 ballot. The levy renewal was for $19.6 million over four years, or $4.9 million per year ($0.50 L:\CMO\2006 Council Agendas\M060412\S060412A.doc per $1000 of assessed value for a typical taxpayer). The measure was approved by 56% of voters participating in the May election. The levy will expire on June 30, 2007. On November 16, 2005, the council held a work session on sequencing of financial measures to be presented to the voters. The council approved a tentative election schedule that included presenting a Library Local Option Levy renewal to the voters in November 2006. Financial and/or Resource Considerations Library services are funded both in the General Fund and the Library Local Option Levy Fund. In FY06, the General Fund portion of the library budget is $4.5 million, or 46% of the total, and the Local Option Levy portion is $5.3 million, or 53%. The current Library Local Option Levy, which expires June 30, 2007, includes a range of service enhancements that were described above under Council Action History. Under the proposed renewal of the Library Local Option Levy, all of these services would continue and no new services would be added. The Library Advisory Board, a Departmental Advisory Committee, was formed in January 2005 and meets monthly to provide citizen advice to staff. Agendas have included discussion of the levy’s role within the Library’s budget, levy sequencing, whether to recommend continuation of current services or enhancements (such as the addition of one or more branches) as part of the levy renewal, and the effect of Measure 5 compression on the levy. The board has unanimously recommended local option levy renewal at the current level of services. The proposed renewal will be for a four-year, rate-based levy for the years FY08 through FY11. This proposal assumes shifting some levy-funded services, valued at $700,000 per year, from levy funding to the General Fund in FY08. Because it will be a rate-based local option tax levy, the amount levied each year will depend on the amount of assessed value in the City. The chart below sets out the gross amount levied, the estimated tax rate and the cost to the median homeowner for FY07 (the last year of the current levy) and for the proposed levy renewal period. Attachment A shows the six year Library Levy Fund forecast assuming the levy is renewed as proposed with the $700,000 shift of services to the General Fund. Existing Proposed Levy Renewal Levy Assuming $700,000 Shifted to General Fund FY07 FY08 FY09 FY10 FY11 Gross Amount Levied $4.9 $4.5 $4.7 $4.9 $5.2 (in millions) Tax Rate per $1000 AV $0.47 $0.41 $0.41 $0.41 $0.41 Cost to Median Taxpayer $66.50 $60 $62 $64 $66 The effect of shifting $700,000 of levy-funded services to the General Fund is a reduction, from what otherwise will be required in FY08, of about $0.07 per $1000 in the tax rate, and a reduction of about $10.25 for the taxes on a median home L:\CMO\2006 Council Agendas\M060412\S060412A.doc The economy and housing prices are expected to remain healthy over the next few years and renewal of the Library Local Option Levy is not projected to result in any significant Measure 5 compression of property tax revenue. For the vast majority of property in the city, total general government taxes will remain below the $10 per $1000 of real market value tax cap prescribed by Measure 5. However, a 3% contingency has been factored into the levy estimates to accommodate the possibility of loss of levy revenue due to a drop in real market property values or the possibility that projected future assessed value growth is less than expected. Attachment B shows the impact on the General Fund if the levy is not renewed and levy-funded services valued at $5.3 million per year were completely shifted to the General Fund in FY08. This case also assumes $2 million in other service additions for FY07 and future years, based on one of the scenarios presented to the Budget Committee in January. In this case, assuming that the library levy were no longer renewed and library services were funded within the General Fund, the council would need to identify on-going service reductions of approximately $4.7 million in FY08. Other Background Information Passage of a property tax measure on a general election ballot in an even numbered year requires a simple majority of the votes cast. A double majority is required in any other election. There are several other items that may be placed on the November 2006 ballot. These include: ?PROS (Parks, Recreation and Open Space) bond measure ?Youth local option levy renewal ?Lane County income tax proposal ?Lane Community College local option levy Timing In order to place a measure on the November 7 general election ballot, the council must act by July 26 to begin the voters’ pamphlet process. The council is currently scheduled to place the measure on the ballot at the May 8 meeting. RELATED CITY POLICIES City of Eugene Financial Management Goals and Policies Policy C.3 – Serial tax levies “To the maximum extent possible, serial tax levies will be used only for time-limited operating services or for capital improvements subject to the rate limitation for non-school governments.” Policy C.6 – Non-recurring revenue “Except for local option levies approved by the voters, the City will use non-recurring revenue on limited-duration services, capital projects, equipment requirements, or services that can be terminated without significant disruption in the community or City organization.” COUNCIL OPTIONS Two alternatives are presented to the council: 1.Direct staff to prepare a measure for the November ballot to fund all library services now funded by the current Local Option Levy, net of $700,000 in services to be shifted to the General Fund in FY08, with a tax rate of $0.41 per $1000 of assessed value; or L:\CMO\2006 Council Agendas\M060412\S060412A.doc 2.Direct staff to develop an option to identify $4.7 million in ongoing General Fund services that would be reduced or eliminated in order to accommodate funding of library services within the General Fund by FY08. CITY MANAGER’S RECOMMENDATION The City Manager recommends Option 1. SUGGESTED MOTION Move to direct the City Manager to prepare a measure for the November 7, 2006, general election ballot to fund library services with a tax rate of $0.41 per $1000 of assessed value, and bring the proposed ballot measure to the council for consideration on the Consent Calendar for May 8. ATTACHMENTS A.Six-year financial forecast of the Library Levy Fund 111 at current service levels, with Library Levy renewal and with a shift of $700,000 in services to the General Fund. B.Six-Year General Fund Forecast, with the General Fund assuming all Library services. FOR MORE INFORMATION Staff Contact: Connie Bennett Telephone: 682-5363 Staff E-Mail: Connie.J.Bennett@ci.eugene.or.us L:\CMO\2006 Council Agendas\M060412\S060412A.doc Library Local Option Levy - Fund 111 - Six Year Financial Forecast FY07 - FY12 Executive Summary Includes shift to General Fund of $700,00 in services in FY08 Major Issues for this Fund: The current Library Local Option Levy was approved in 2002. The levy is set at $4.9 million annually for FY04 through FY07 to support branch operations and support Main Library services. If voters do not approve renewal of the levy, these operations will need other funding or will have to be reduced. Services amounting to $700,000 annually are expected to be assumed by the General Fund beginning in FY08. With this assumption, a new Local Option Levy at a rate of $0.41 per $1000 of assessed value will be required for FY08 through FY11 to continue current services. ActualActualEstimatedProposedForecast FY04FY05FY06FY07FY08FY09FY10FY11FY12 Resources Beginning Working Capital 1,102,799 1,865,063 2,129,527 2,065,320 1,892,000 1,704,000 1,440,000 1,220,000 1,071,000 Revenues Property Tax Revenue 4,693,011 4,708,673 4,708,427 4,731,159 4,341,000 4,520,000 4,734,000 4,990,000 122,000 Rental Revenue 23,653 24,199 24,814 25,240 25,000 25,000 25,000 25,000 25,000 Other Revenue 28,486 58,198 95,700 115,751 88,000 84,000 71,000 61,000 33,000 Total Revenue 4,745,149 4,791,070 4,828,941 4,872,150 4,454,000 4,629,000 4,830,000 5,076,000 180,000 Total Resources 5,847,948 6,656,133 6,958,468 6,937,470 6,346,000 6,333,000 6,270,000 6,296,000 1,251,000 Requirements Expenditures Bethel Branch 358,672 406,670 474,028 479,328 498,000 513,000 529,000 547,000 565,000 Sheldon Branch 383,701 440,355 495,319 485,905 509,000 524,000 541,000 559,000 578,000 Main Library 3,240,512 3,679,582 3,923,801 4,080,469 4,275,000 4,401,000 4,533,000 4,677,000 4,830,000 Nondepartmental - - - - Shift of Services to General Fund (700,000) (712,000) (724,000) (737,000) (750,000) Contingency - 137,000 142,000 146,000 151,000 - Total Expenditures 3,982,885 4,526,607 4,893,148 5,045,702 4,719,000 4,868,000 5,025,000 5,197,000 5,223,000 Surplus/(Deficit) 762,265 264,464 (64,207) (173,552) (265,000) (239,000) (195,000) (121,000) (5,043,000) Total Ending Fund Balance 1,865,064 2,129,527 2,065,320 1,891,768 1,704,000 1,440,000 1,220,000 1,071,000 - Total Requirements 5,847,948 6,656,133 6,958,468 6,937,470 6,346,000 6,333,000 6,270,000 6,296,000 4,382,000 Target Unappropriated Ending Fund Balance - - - 840,950 764,000 788,000 813,000 841,000 - Amount Above or (Below) Target - - - 1,050,817 940,000 652,000 407,000 230,000 - Notes: Target ending fund balance equals two months operating expenditures. GENERAL FUND SIX YEAR FINANCIAL FORECAST, FY07 THROUGH FY12 Executive Summary: Resources and Requirements January Base Scenario, plus $2 Million Service Additions in FY07, plus assumption of Library Services in FY08 April 2006 Actual Actual Estimated Forecast FY04FY05FY06FY07FY08FY09FY10FY11FY12 Resources Beginning Working Capital(A)$ 24,309,013 $ 32,343,749 $ 29,141,626 $ 26,340,566 $ 28,910,000 $ 23,736,000 $ 19,615,000 $ 15,573,000 $ 11,744,000 Current Revenues(A) 101,501,038 102,276,905 104,087,160 109,569,188 112,904,000 117,460,000 121,334,000 125,955,000 130,655,000 Total Resources 125,810,051 134,620,654 133,228,786 135,909,754 141,814,000 141,196,000 140,949,000 141,528,000 142,399,000 Requirements Personnel(A) 63,533,686 67,524,226 74,011,778 75,465,532 82,011,000 84,580,000 87,474,000 90,805,000 94,650,000 Materials & Services(A) 24,300,845 25,894,654 25,460,582 26,968,679 29,447,000 30,202,000 30,921,000 31,803,000 32,689,000 Departmental Expenditures 87,834,532 93,418,880 99,472,360 102,434,211 111,458,000 114,782,000 118,395,000 122,608,000 127,339,000 Reappropriation & Encumbrances 1,649,585 Non-Departmental Expenditures(1) 5,631,770 12,060,149 5,766,275 4,457,635 4,576,000 4,701,000 4,829,000 4,962,000 5,097,000 Future Growth & Service Additions - 2,000,000 2,044,000 2,098,000 2,152,000 2,214,000 2,279,000 - - Total Expenditures 93,466,302 105,479,030 106,888,220 108,891,846 118,078,000 121,581,000 125,376,000 129,784,000 134,715,000 Change in UEFB(2) 1,774,670 507,000 1,531,000 584,000 632,000 735,000 822,000 Total Expenditures plus Change in UEFB 93,466,302 105,479,030 108,662,890 109,398,846 119,609,000 122,165,000 126,008,000 130,519,000 135,537,000 Annual Operating Surplus/(Deficit) 8,034,736 (3,202,124) (4,575,730) 170,342 (6,705,000) (4,705,000) (4,674,000) (4,564,000) (4,882,000) (3) Ending Fund Balance UEFB at June 30(4) 15,140,500 15,810,330 17,585,000 18,092,000 19,623,000 20,207,000 20,839,000 21,574,000 22,396,000 Reserves Reserve for Revenue Shortfall(5) 17,203,249 13,331,295 8,755,566 8,925,908 4,113,000 (592,000) (5,266,000) (9,830,000) (14,712,000) Total Reserves 8,755,566 8,925,908 4,113,000 (592,000) (5,266,000) (9,830,000) (14,712,000) Total Ending Fund Balance(6) 26,340,566 27,017,908 23,736,000 19,615,000 15,573,000 11,744,000 7,684,000 Total Requirements(7) 133,228,786 135,909,754 141,814,000 141,196,000 140,949,000 141,528,000 142,399,000 Notes: (A)Library service expenditures, associated revenue, and ending balances of Library Levy Fund are transferred to the General Fund in FY08. (1)Non-Department Expenditures includes Contingency. (2)Increase necessary to keep Unappropriated Ending Fund Balance at Council adopted policy level of two months of operating expenditures, excluding reserves and contingency. (3)Annual Operating Surplus/Deficit equals Current Revenues less Total Expenditures including Change in UEFB. (4)Per Council policy UEFB equals two months operating expenses (total department & non-department expenditures). (5)Assumes any annual surpluses are set aside and used to fully or partially fund any future operating deficits. (6)Total ending fund balance equals UEFB plus total reserves. (7)Total requirements equals total expenditure plus UEFB plus total reserves.