|
A COMPUTER MODEL FOR VICTORIA
TO FORECAST IMPACT OF FINANCIAL DECISIONS
Springsted Incorporated is the finan-cial firm hired to build a computer pro-gram whereby the City of Victoria can now determine, easily and exactly, how any and all capital expenditures will affect city budgets both now and in the future.
Springsted called the product an "Integrated CIP Model." CIP stands for Capital Improvement Plan. Cost of the CIP model was $17,500.
The model was first presented to city councilmembers and staff at a special council workshop on Thursday, Novem-be 1st by Springsted reps Nick Dragisich, management consultant, and Patty Kettles, project manager. Patty built the model on the 2001 tax law. The model allows for many variables that can be plugged into the program to forecast the impact they would create for the City of Victoria.
Some of the variables will not be expenditures; they can be sources of revenue. For example, the city can plug in new numbers for utility charges to developers or residents, as well as in-creased or decreased fees for parkland dedication, and any number of other fig-ures. The Springsted model immediately determines the impact on the city's finan-cial situation.
Said Nick, "There are an infinite number of possibilities with the model, which is both its strength and its weak-ness. All major permits currently in use in the city are included. Fees can be adjust-ed to determine total income projected."
Number of housing starts in the city can project income from building permits. Average cost of city employees to the tax-payer can be determined. Projected costs for each category of city government can be determined at the click of a mouse. Council and staff can easily see the impact of debt service decisions.
Said Nick, "It's a large model with a lot of information and a lot of calcula-tions. It allows you to see data in many different ways."
He added, "If the legislature changes the tax law again, we'll come in and make the changes for you." The model will al-ready be used this year in finalizing figures for Victoria's 2002 budget.
The model, written specifically for the City of Victoria, was downloaded to personal laptop computers by several city people including Public Works Superintendent Bruce Osborn and Councilmember Jim Paulsen.
Springsted has built similar models for "six or seven" other entities including the cities of Hugo, Waseca, and Mahoto-medi, as well as nearby Scott County and also St. Croix County in Wisconsin.
PROJECTING INCOME AND EXPENDITURES
DEPENDENT ON NUMBER OF HOMES BUILT
On November 29th, after council and staff had an opportunity for hands-on experience with the Springsted CIP model created for the City of Victoria, Nick Dragisich of Springsted responded to questions at a council meeting.
Asked about comparing property tax rates, for example, he replied, "There is no way to compare the rates anymore." This is because the school portion of prop-erty taxes is now being picked up by the state. Only the city and county levies will now be part of the property tax statement.
Mayor Mary Meuwissen pointed out the City of Victoria will not be taking advantage of the lowered property tax bills by raising its own taxes. "We didn't think we should spend the school district's money," she said. "Who's going to pay the school district's share? The state! The state taxes are going to go up!"
Agreed Nick, "Focus on what your residents paid in city taxes in 2001 and how that will or will not change in 2002."
Victoria city taxes are affected in a big way in 2002 by the loss of HACA, homestead credit in the amount of $200,000. City councilmembers are working to make up the difference in revenue in ways outside of increasing the levy. However, said Nick, "The state expected cities to levy to recoup that lost HACA."
The city's budget for 2002 will be fi-nalized and adopted before the end of this year, with the assistance of the Springsted model.
The number most heavily injected and ejected in the Springsted model was the number of homes that will or won't be built in Victoria on an annual basis. Asked Councilmember Richard Tieden, "Are we going to be dependent on 100 to 150 homes every year to pay our debt service, for our income? Is that the direc-tion we want to go?"
He added, as an aside, "During my first year on the council, I thought that's why I was here - to help developers build houses."
Replied Councilmember Jerry Bohn, "If we take on too much debt, we've got to build the homes."
Replied Mayor Mary, "If we start building our sewer and water facilities for too few people, there'll be a problem. We have to be careful. If we underestimate, we'll have a lot of people with a lot of expectations. We're basing this whole deal on how many houses we're going to build each year. That is what's driving the revenue side."
During the year 2001, there were 170 new homes built in Victoria from which property taxes were collected.
Said Jerry Bohn, "Every bit of our revenue, except what we levy, is depen-dent on the number of homes coming in."
Conversation also steered to the building of an ice arena/community center at Diethelm Park, which has been projected to create an approximate $200,000 annual expenditure for the city. That is the amount anticipated to not be covered by ice fees and other arena revenue.
Richard said such a debt service would be worthy. With the inclusion of a gymnasium, kitchen, and workout area, he said, "It would be a phenomenal piece to accomplish. It would be a completed project for Victoria. There's a need for it now, with our existing demographics. I think the timing of this is fantastic."
A decision on the arena is expected from the council before the end of this year. Click here for more City Scoop.
|
|
