7.00 - Budget Overview
City Goals - Imagine Kalamazoo 2025
The City of Kalamazoo created strategic goals through the Imagine Kalamazoo 2025 (IK 2025) initiative. The Strategic Goals are the City’s guide to help shape the future direction of the City, and provide a framework from which all other City plans are created. Specifically, these Goals provide direction to anyone working in the City on projects or policies. Further, the Goals help shape the work of City staff as they seek to collaborate and streamlined internal operations, and represent and respond to community’s needs. The City and our partners are invested in the projects identified which residents and other stakeholders named important throughout the Imagine Kalamazoo process. To see a project list click on the projects link on the IK 2025 site.
Total Budget
The City of Kalamazoo 2021 Budget includes expenditures of $213.9 million, representing an increase of 5.29% from the 2020 Adopted Budget total expenditures ($203.1 million). The citywide budget is made up of various funding groups. The highlights of the recommended spending plan are discussed below in greater detail. The increase in expenditures is primarily due to additional capital improvements in the City's various Capital Improvement Programs. See the Capital Improvement Program section of the budget for a listing of the City's 2021 planned projects.
Total Expenditures - Percentage by Fund
General Fund Revenue
General Fund revenue is estimated at $67.9 million in the 2021 Budget, which represents an increase of .35% from the Adopted 2020 amount ($67.6 million). The three largest revenue sources for the City come from Property taxes, Intergovernmental Contributions (primarily State revenues), and Foundation for Excellence funding. These three sources represent 78.42% of all estimated General Fund resources.
General Fund Revenue - Percentage by Type
Property Taxes
Property taxes are the largest funding source for the City's General Fund. Property tax values are anticipated to increase approximately 1.34% from 2020 estimated taxable values. 2017 included a large reduction due to the Property Tax Rate cut from 19.2705 mills to 12.0000. This reduction continues to be funded by the Foundation for Excellence, which is discussed further below.
Intergovernmental Revenue - State Revenue Sharing
The estimated Revenue Sharing payments of $9.5 million in 2021 is an increase of 4.40% compared to 2020 projected receipts of $9.1 million. 2020 includes a one time reduction in the August Revenue Sharing payment. This was replaced by the State with grants through the Coronaviruse Aid, Relief, and Economic Securuity (CARES) Act. Over the past few years Revenue Sharing has had incremental growth, but remains significantly reduced from the 2001 level of $12.5M.
Foundation for Excellence
The 2021 Budget continues to include Foundation for Excellence (FFE) funding to support the property tax reduction first implemented in 2017 to reduce the City's property tax millage from 19.2705 mills to 12.0000. In 2021, FFE operational revenues also include $4.2 million of budget stabilization revenues for a total of $17.2 million to support General Fund operations.
Other Revenues
Charges for Services are 14.98% of General Fund Revenues. Revenues for Charges for Services are estimated to decrease by 7.37% in the 2021 Budget. The decrease is due primarily to continued centralization of departments, including Information Technology and 311 Customer Service. As services become centralized, the use fees charged to other departments replace the direct cost of staff or operating expenses previously charged to those departments. The remaining estimated revenues includes permits, licenses and fees, fines and forfeitures, other revenues, and transfers from other funds. Revenue for License, Permits and Fees are anticipated to increase by 5.17%. This is based continued growth in building permit and business license activity as compared to the amount in the Adopted 2020 Budget.
Non-General Fund Revenue
Major & Local Streets
The Major & Local Streets operations are primarily funded by Statewide Gas & Weight Taxes, which are apportioned to the State and Local road and transportation systems through State of Michigan Public Act 51 formulas. Act 51 revenue (as it is known) is expected to see a 10.3% decrease from 2020 budgeted amounts, primarily due to reduced gas tax revenues. Major Street revenues are sufficient to fund operations. The Local Street Fund will require an operating subsidy of $1.1 million from the Major Street Fund for 2021 and $1.25 million for 2022.
Cemetery
Cemetery operational revenue is projected to remain steady in 2021. Operational revenues are not designed to cover operations and capital improvements, therefore a recurring subsidy of $312 thousand from the Perpetual Care Fund supports the cemetery activity. In addition, the Perpetual Care Fund supports cemetery capital expenditures budgeted for $200 thousand in 2021.
Solid Waste
Solid Waste operations are funded by a dedicated millage of 1.8 mills. Property Tax revenues of $2.89 million are estimated in 2021. This represents an increase of 4.61% due to anticipated increases in tax values.
Wastewater Fund
The 2021 Budget anticipates an increase of approximately 10% in Wastewater revenues as compared to 2020 rates. Rates are dependent on final ratemaking calculations and will be presented in January 2021 for City Commission action.
Water Fund
The 2021 Budget anticipates an increase of approximately 14% in Water revenues as compared to 2020 rates. Rates are dependent on final ratemaking calculations and will be presented in January 2021 for City Commission action.
Expenditures
General Fund
The 2021 Budgeted expenditures for the General Fund is $68.3 million, representing an overall increase of 1.03% when compared to the Adopted 2020 Budget.
The City’s programs are divided into Governance Programs and Community Programs. Governance Programs are primarily served by the City Commission Appointees, including the City Manager, City Attorney, City Clerk and Internal Auditor. The City Manager oversees the Community Programs of the City and the remaining Governance Programs. The General Fund has four departments that facilitate the majority of community programs of the City: Public Safety, Public Services, Community Planning and Economic Development, and Parks and Recreation. The remaining departments that primarily serve governance programs include: Management Services, Human Resources, Information Technology, and 311 Customer Service. Certain expenses included in the General Fund are general in nature and are therefore not assigned to a specific department or governance program.
General Fund Expenditures by Department - Percentage of Expenditures
General Fund Expenditures by Type - Percentage of Expenditures
Projected General Fund
Long term revenues and expenses in the General Fund are projected to exceed a target fund balance of 15% of operating revenues through 2025. Projected revenues continue to anticipate support from the Foundation for Excellence (FFE) based on funding levels outlined in the by-laws. FFE operating support includes a subsidy to reduce the City's property tax millage and $4.2 million in 2021 for budget balancing. The City continues to implement new initiatives and City programs in order to implement the strategic goals outlined in Imagine Kalamazoo 2025 and initiatives to become a High-Performance Organization.
General Fund Five Year Fiscal Plan - Revenue and Expenditure Projections
2021 General Fund Five Year Fiscal Plan
The General Fund targets to exceed a fund balance target of 15% of Operating Revenues. The fund balance projects to exceed this targed by $976.7 thousand at the end of the five year plan in 2025.
General Fund expenses are projected to exceed revenues in 2021. The projected unreserved fund balance in 2021 is $12.7 million which is 19.0% of estimated operating revenues, exceeding the target of 15% of General Fund projected revenues. The projected fund balance does not include the Contingency Reserves and Park Reserves, which have balances of $560.9 thousand.
POSITION ALLOCATIONS POSITION ALLOCATIONS
The 2021 Budget includes 665 full-time positions and 8 part time positions, for a total of 673 allocated positions. The city-wide increase in staffing is to better meet the needs of the community. The Position Comparison schedule included within this budget document provides further detail of the positions and changes by department.
Positions - Department Totals
Capital Improvement
The detail of the City’s Five-Year Capital improvement plan for the General Capital Improvement Fund, Major Streets, Local Streets, Wastewater, and Water funds are included in the budget document under the section “Capital Improvement Program” .
The City’s total capital improvement for 2021 is $62.6 million (see chart below). The improvement plan anticipates $12.8 million of General Obligation bond proceeds to be funded by the General Fund, Major Streets, and Local Streets. The Water and Wastewater Funds plan to utilize a mix of bond reserves, State of Michigan Drinking Water Revolving Fund bonds authorized in 2020 and system reserves to fund the ongoing capital plan.
General Fund Capital
General capital projects, which are funded in the Capital Improvements Program (CIP) Fund, total $8.3 million. Capital projects in the CIP Fund include $1.8 million in heavy equipment, $1.9 million for farmers market and park improvements, and 2.9 million for facilities and improvments.
The General Fund transfers funds annually to cover the debt service payments required by the City’s General Capital Improvement program that is not otherwise funded by other sources. In 2021, the total transfer is $3.8 million as compared to $3.4 million in 2020 adopted transfers.
The Five Year Fiscal Plan for the Capital Improvement Fund is included in the Budget Summary section of this budget document.
Non-General Fund Capital
Local Streets
Improvements to various local streets total $999 thousand which is 100% bond funded in 2021.
Major Streets
Improvements to various major streets total $6.1 million in 2021. The capital improvements are to be funded with $.72 million in federal funds, $5.1 million in new capital improvement bonds, and .20 million in funds from the State of Michigan for the transfer of streets to the City of Kalamazoo.
Water & Wastewater
Capital improvements of $11.4 million and $37.4 million are planned in the Wastewater and Water Funds, respectively. Capital investment in the Wastewater and Water systems is necessary to ensure the supply and quality of drinking water and the flow and treatment of sanitary sewer. This includes new & replacement mains, service connections, hydrants, meters, pumping station upgrades, capital maintenance, and improvement of existing infrastructure.