Budget Message

Administrative Services Department

Kris Busse, City Administrator 507.774.7340 kris.busse@owatonna.gov

 

To: Honorable Mayor and City Councilmembers

From: Kris M. Busse, City Administrator

Re: 2025 Recommended Budget and Levy

Date: August 22, 2024

 

Pursuant to the Owatonna City Charter and Minnesota statutes, the City Administrator hereby submits to the City Council the 2025 recommended budget and levy for all funds of the City of Owatonna. This budget is the result of months of preparation and review by Council and City Staff. This budget reflects the City of Owatonna’s vision, where residents and businesses thrive, with easy access to work, shopping, high-quality education and recreation. We are better together, welcoming and diverse, creating a quality of life unparalleled in Southern Minnesota. This budget is also following the priorities set by the City Council through its strategic planning process. 

 

Economic Outlook 
Owatonna continues its history of steady growth in the industrial, commercial, and housing sectors. The City is experiencing another strong year in terms of building permit valuation. At the end of July, the city had issued 1149 building permits totaling $64.5 million total valuation. Last year at this time the city had issued 930 building permits totaling nearly $63 million in valuation. Many exciting development projects are under construction and will be completed towards the end of 2024. The Ascend Riverfront Development continues their construction on Owatonna’s first major mixed-use project. The project includes Olmsted County Medical Center, a new expanded space for Mineral Springs Brewery (MSB), and, new to Owatonna, a West Bank facility. Sixty-nine luxury apartments will be in the top four floors of the complex. This is the first major development along the Riverfront.

In terms of industrial development, Foam Craft Packaging is adding a 15,000 square foot addition to their manufacturing facility. Cemstone has completed a new cement plant in the industrial park. This plant was relocated from an existing commercial area. Plans include constructing another vehicle storage building. Commercial zoning approvals were for given Scooters coffee shop and Marthaler Honda dealership. Grapeful Wine Bar opened in the downtown. Construction is underway on a new 6,000-square-foot shelter for the Humane Society. Steele County is adding a 9,000 square foot addition to the existing Detention Center and an office building near downtown. Another building has been added to the fairgrounds, Steele Saloon, providing a year-round venue for the community.

In the housing sector, apartment construction continues at a brisk pace. West Lake Meadows will complete their third building by the end of September 2024 and the fourth building by the end of November 2024. The fifth building is expected to be completed by February 2025. Once all buildings are constructed this will add 276 units to the community. For single-family development and townhouse units, the city has 10 as of July 1. To encourage further development, the city adopted a new policy whereby the city would finance the hard surface costs (streets, curb, gutter and sidewalks) for the developer.

Budget Highlights
The 2025 budget is reflective of the four key focus areas as determined by the city council during the strategic planning process. Priorities in the budget are aligned with these key focus areas, Infrastructure, Economic Vitality, Quality of Life and Efficient, Effective Government. Infrastructure continues to be a strong priority for the city. After city staff and ICS consultants completed an assessment of all facilities, a list of prioritized critical maintenance needs and a long-term facilities plan was created. For 2025 the emphasis will be on the Police and Fire department capital needs. The City and Steele County have jointly owned the Law Enforcement Center (LEC) since the mid 1990’s. In order to meet each department’s space requirements, the city purchased the other half of the building from Steele County in 2024. The County will be constructing an addition to their jail facility to house the sheriff’s department. The LEC will require remodeling and updating as well as addressing deferred maintenance items. The fire station, built in 1906, does not meet the needs of a modern, functional public safety space. Funding for various planning activities is included to explore options relating to these two critical public safety needs. They consist of building a new combined Police / Fire facility including 911 dispatch or remodeling the current LEC for the police department and 911 dispatch and building a separate new facility for the fire department or separate new facilities for each. The city owns more than 90 buildings and structures that support other key services such as streets, recreation, airport and library. Deferred maintenance must be addressed to continue to support these key services. Projects include Completion of the Merrill Hall mechanical and electrical upgrades, pavement rehab and reconstruction, HVAC replacement at Social Commons, (the last of three units), tuckpointing at various city facilities, airport roof replacement, garage door replacements, Library roof repair and new AV equipment, reel grinder equipment for Brooktree and maintenance of cart paths and replacement of a pergola. Replacement of boiler and exchange equipment at River Springs Water Park.

Fostering Economic Vitality is critical to creating a diverse economic base that attracts and maintains quality jobs and continues growth in the city tax base. New for 2025 is the strategic initiative for the Airport to become more of an economic driver for the community. Plans include developing a new business plan and developing an action plan for a runway extension project. Additional staffing hours have also been added to the Airport budget to assist with customer service levels. Owatonna is also experiencing a lack of housing variety and availability. This is a common problem many cities experience. To increase housing options at all levels, funding has been increased in the HRA levy to hire an additional part-time person to support the housing choice voucher program. The city has also passed an incentive program for residential development. 

 

Quality of Life is a vital component to a healthy community. It helps facilitate growth and attracts the business community along with new residents. The 2025-2027 Strategic Plan reflects the interest the community members have been expressing to city staff and council members in addressing inadequate and outdated recreational facilities. One facility item that has risen to the top is a community center. This budget has planning funds included to engage the public on this issue, explore funding mechanisms and scope of a potential project. Other important investments in Owatonna’s quality of life involve maintaining the City’s record of lowest crime rate in the region. This budget includes funding for one additional police officer. A part-time (.7FTE) Library Specialist will be added bringing the staffing levels back to previous levels. Additional hours will be added to part-time recreation staff. The budget also includes improvements and enhancements to community and recreational programs/equipment as identified previously.

 

Efficient, Effective Government is one that is innovative, customer focused, and works collaboratively across the organization. In 2025 the city will focus on aligning staffing levels with community growth. A staffing analysis will be completed. Retaining and recruiting high performing employees will be an important task in 2025 and for years to come. It is imperative that the city continues its culture work maintaining and enhancing a positive workplace. The addition of a HR specialist will help this department in meeting the additional demands placed on them. Other important initiatives involve ordinances meeting community expectations and efficient enforcement. Funding has been included for a major revision of the zoning code to follow the newly approved comprehensive Plan and additional legal support.

 

Recommendation

When putting my recommendation together, I considered that collective bargaining agreements are unsettled and the LEC acquisition has resulted in several operating changes. In addition, growth has resulted in additional services and costs including more staffing needs, 8 FT and 2.2825 PT FTE.

Therefore, I am recommending an increase in the levy of 7.5%. Preliminary estimates from the Steele County assessor indicate the city’s tax capacity increasing by approximately 7%. This growth will minimize the impact to the taxpayer. The city has a history of strong economic growth. The tax capacity growth over the last three years has exceeded the increase in the levy. The recommended 2025 budget reflects strategic investment to accommodate and continue economic growth. This budget closely follows and advances the strategic plan.

Special thanks to the Finance Department and Department Directors for their work developing the 2024 budget for their work on the budget and CIP documents and the department directors for their excellent work in developing the programs necessary to carry out the vision and strategic plan of the City Council.