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4. 2012 Budget and Tax Levy Meeting Date: 12/13/2011 Agenda item: / / ,�<< City Council Agenda Report City of Scandia 14727 209th St. North Scandia, MN 55073 (651) 433-2274 Action Requested: Hold the required public meeting on the 2012 Budget and Tax Levy. Deadline/ Timeline: The location, date and time (6:30 pm) of the meeting were included on proposed property tax statements mailed in November. The city must certify its final 2012 tax levy to the County Auditor by December 28, 2011. Background: • The draft budget prepared for the meeting incorporates direction received during the Council's budget work sessions and meetings up through the last discussion at the November I S meeting. • It also includes the recommendations in the draft Capital Improvements Program (CIP), as reviewed by the Council at the budget work sessions. The Planning Commission held a public hearing on the CIP at its November meeting and recommended adoption without any changes. • The most significant change in the proposed tax statements for 2012 is the change in homestead benefits. In 2011 the Legislature repealed the Homestead Market Value Credit and replaced it with a new Homestead Market Value Exclusion. Residents may have questions about how this affects their tax bills. More information on this change is included in the budget materials. • The draft budgets are posted on the City's website. Recommendation: Staff will present an overview of the draft 2012 budget, after which the Council should take any questions or comments from citizens. The Council should discuss any changes you may wish to make before final approval. The Council should then announce the date of the final budget and levy adoption hearing (7:00 p.m., Tuesday, December 20, 2011) at the conclusion of ineeting. Attachments/ • Draft 2012 Budget for December 13, 2011 Public Meeting Materials provided: . Handouts for the budget presentation will be provided at the meeting Contact(s): Prepared by: Anne Hurlburt, Administrator Colleen Firkus, Treasurer (2012 Budget and Tax Levy Hearing) Page 1 of 1 12/07/11 2012 Changes in Homestead Benefits What is Chanaina? The 2011 Legislature repealed the Homestead Market Value Credit, (the homestead credit), and replaced it with a new Homestead Market Value Exclusion. The last year of the credit is for property taxes paid in 2011 and the exclusion begins for property taxes payable in 2012. What is a credit? i' What is an exclusion? l ; A credit is a reduction in the �� i �� ` An exclusion is a reduction in the amount 1 i amount of taxes due. � ��� � of property value subject to tax. � ; Why is this Change Resulting in Tax Increases? There are four reasons why this change in homestead benefits results in tax increases for most properties: • State money is no longer reducing total taxes. By eliminating the homestead credit the state is saving$260 million per year and this amount is now being paid by local property tax payers. • The reduction in taxable value increases tax rates. With the total taxable value being reduced by the exclusion, collecting the same total amount of property tax as the prior year requires a higher rate. • The reduction in taxable property value shifts the relative burdens of who pays. With homestead values reduced,other property types (and homes with higher values) pay a larger share of the tax. • The exclusion provides less benefit to most properties than the credit. The new homestead exclusion may not be enough to offset the increases in tax rates and the elimination of the credit,especially in areas that have lower total property tax rates like Washington County. Comnutation of Credii and Exclusion Amounts Even though the tax benefits of the credit and exclusion are not equal,the calculation of the exclusion amount is similar to the calculation of the former credit. Credit=0.4%of the first$76,000,minus Credit/Exclusion Comparison ' 0.09�of the value over$76,000 �j 2012 j Home Exclusion=40%of the first$76,000, � Homestead Nomestead Market Market Value Market Value , minus 9%of the value over$76,000 ,� Value .�: _�_ ....... _.�_.__� �....�..�_�----- ;, Credit Exclusion Example: House valued at�'IS0,000 g�6,000 5304 $30,400 $150,000 $237 $23,700 Credit = (0.4%x$76,000)-($74,000 x 0.09%) $250�000 5147 �14,700 _ $304-$67 $300,000 $102 �10�200 - $23� $350,000 $57 �5,700 Exclusion = (40%x�76,000)-($74,000 x 9%� $400,000 $12 $1,200 _ $30,400-56,660 $450.000 $0 �0 _ $23,700*(rounded to nearest SI00) Want More Details and Information? Taxpayers may find more detailed explanations of this change by visiting the county website at wivw.co.washinUton.mn.us and click on the link titled'2012 Homestead Benefit Changes" �`'`f' 12/13/2011 �� City Budget Process ❑ June/July- staff drafts budgets ;5C1�Nv�A ❑ August/September- Council workshops 1 ' ❑ September 15- certify maximum Public Meeting property tax levy (former/y"Truth in Taxation Hearing') O November- county mails proposed property tax statement 2012 Budget ❑ December- Public meeting(s) December 13, 2011 ❑ December 28- certify final tax levy (may not increase) Purpose of Meeting? Scandia's Budget ❑ Purpose: to gather public comment ❑ General Fund on the City's budget, and the ■ Operating Budgets by Department property taxes needed to pay for the ❑ Debt Service Funds expenditures in 2012 i streets,Buildings,Equipment ❑ Capital Funds ❑ Meeting held in each taxing ■ Capital Improvements, Parks,Equipment jurisdiction (county, city, school Replacement d'IStriCt, etC.) ❑ Enterprise Funds (201 Sewer) ❑ Mandated by State Legislature ❑ Special Revenue Funds (Uptown Sewer- NEW) y�.,, T� �,i�iiiiiiPi�iCiii� ^i....� ��' �� Proposed 2012 Spending, All Funds •. EMerprise Spad�l _ _. �,_,,,.`� Fund� Raranue _ _ �i \ Gp{t�l� 7% � �% �'""�i CId55iflCd[iOfl 4% _� � " _ and Value DebtServi�a '_ � Informa[ion is96 _ �u I, �• -�r _. .._ '. � � . PrOp050d � Gmaral/ � Clty Tax op�ntlnq ` — 7�% City of Scandia, 2012 Budget Meeting 1 12/13/2011 Proposed General Fund Spending, Proposed 2012 Spending, All Funds by Function, 2012 � Total proposed ��•�«•� , P��k�� spending: � � . comm.a, $2,503,422 .�:.o..� ; � — — e� - /c.�iiiv.ao�n �� r ■ -3.86%from 2011 .�.o.,.» ' ` budget - �.����oi ■ Less spending on "'°"»° ' f`°°°;a%'"" '-- io•�° EIS � -- .�...o,.� . ----- � Includes transfers pp�.Ce ..�,� .' i - --- � � ,a� � Iflra w ams am.aoo>>aw zoos:oao aou ao» 16Yo � �ew...i eo.r oMdi� .a.e.mw rmx...... � Proposed Spending all Funds, General Fund Spending by Function, By Category, 2012 2008- 2011 & Proposed 2012 Tran�ten 5800,000 _ _ ._ DeMServlce �'b Panonal 15% � servlces �600�000 I.. -� . ,25% Gpltal � ..� .4,_, � Materlals■ OuHays r-�. upD��n �400,000 , 7% s°* �"-- ;200,000 i I �'' -- � � � ro 2 0 ; �! �, ��.., Contractual � , s�rv�«. i■zoo9'I �'` `�.M �,� cr �+' �° 41% '��2010I � �ya E.F' ■2011 �c° �\� ' 2012 Proposed 2012 Spending, Proposed Spending General Fund, General Fund By Category, 2012 ❑ Proposed ��.»�.� , _ -- - --- spending: .�»..«. i- ----- Tnnden Venonel $1,847,798 ....�.». �Y•�__ •% �3% ■ -6.05%from .�.�.� � � 3`'� -J - - � 2011 budget �,,,,,,,,, � � - � .,....,� ' Nm,aao 1 I -.__ �wa.ee0 �'"' . � � ' - _ �.we�� . �'0°."O �� f �- � COMractual -Materielsa Services �PW�es �am.oaa �. F- � 53% 7% w - .. . __ L.. . _ .-..'� . ]Oos]ON]Op)]OM 30M]OSO m1l iol] City of Scandia, 2012 Budget Meeting 2 12/13/2011 General Fund- Spending Changes Debt Service Funds ❑ 2%wage increases (first in 3 years) ❑ Proposed spending: ��,,,,, ❑ Some costs increasing faster than inflation $381,098 w„�„ (insurance) ■ +25.83°io from .,,,,,,, ❑ Zavoral Mining and Reclamation Project EIS 2011 budget �,,,,,,, (approx. $62k compared to$200k in 2011) ❑ Added payments ,.. � Eliminate 1FTE Building Official/Maintenance for equipment ,.�,.o. � - - -- Supervisor(Planning & Building) certificate .,.�,«. -- � Assumes contracting building official ���� functions half year, part-time position half year(to be determined) "°°•°°° � w Uptown Sewer Special General Fund- Spending Changes Revenue Fund ❑ Add 1 FT'E Maintenance Superintendent ❑ Separate from General Fund for first (Public Works) (Note: assumptions in budget may change) time ❑ Increase .75 FfE Deputy Clerk to 1.0 FTE ❑ Improvements recommended by o Increase planning, legal expenses 2011 Master Plan ($99,601) ❑ Decrease pension contribution for Fire ■ Equalization tank and aerobic Department (PERA) pretreatment unit ❑ 2012 election costs ■ Uptown pump tank and run time meters ❑ Reduce transfers to Equipment Replacement Fund from $110k to$80k General Fund Capital Spending Capital Funds ❑ Contractual street maintenance ($300,000) ❑ Capital ImprOvement Fund- ❑ Skid Loader and trailer($35,000) inter-fund loan to Uptown Sewer Ci Miscellaneous($10,500) Special revenue fund ($99,601) ■ O�ce Equipment ■ Purniture and Fixtures ❑ Parks Capital Improvement Fund- partial funding of Lilleskogen parking lot improvements ($4,000) City of Scandia, 2012 Budget Meeting 3 12/13/2011 2012 Revenue Budgets Property Tax Levy, 2003-2012 ❑ No local government aid ❑ No state levy limit on property taxes ;z,soo,000 ❑ Interest earnings, permit revenues continue �,,..,,.�,��°"' '• to be low ;2'0°°'0°° *','°', ❑ Elimination of state MVHCA, no special levy sl,soo,000 =.�`"��°"''������ to make up state payments ''"''�� ❑ Revenues offset extra costs for EIS as ;i,000,000 r � proposer reimburses city for contractual and � � , staff costs ssoo,000 , ! i I ❑ No new borrowing- proposed internal loan to ' ' fund Uptown Sewer improvements ;0 3003 2001 2006 2006 t007 3008 i009 2010 3011 3012 2012 Proposed Revenues*, All Funds by Source Property Tax Rate, 2003-2012 Fin��t SDKIaI C�arqu for � p��er 40.000% 35.776% FoA�kun S�rviu 1� i��5b . . ...33.56)9b�� f% � __ 35.000% .036% 8.276 IM�rpovYnw 30.000% ��-=6;5=%... 5.09296<-'1�--- -� 1% 23.9969� 75.000% �Ic�nw• 7ax�s 20.000% : , P�rmib f2°Ae � �. 3% ""_'..:,�f}q.� 15.000% j �� � 30.000% . -_' _'_- .,... . 5.000% �. 0.000% ... --- �ExcluGes transfers between funds 2005 2006 2007 2008 2009 2010 2011 2012 Tax Revenue Property Tax Levy and Rate ❑ Property taxes, except: ,� w� ■ Sand and Gravel Tax ��� ■ $10,700 revenue to Public Works Budget �°�°°��°°°Y ,.� .�.....a.f ;::a " .�.o...� .,.� ;, „�,.� ,...� — .o '�..._m,_.........� �p ,.�__,_L...wa...� Tax Levy Tax Rate City of Scandia, 2012 Budget Meeting 4 12/13/2011 Scandia Levy History Your Proposed Property Tax Bill O Will also be affected by: zoos Si,368,iso 566,968 s.io^i ■ Valuation changes different than median(0.0%) 2006 $1,483,752 $115,602 8.40% ■ Classification changes ■ Homestead Market Value Exclusion zoo� gi,533,930 #so,i�e 3.00� ■ School district differences,levy referenda 2ooe gi,�o3,ss9 $169,659 ii.o5i a Watershed district differences 2009 $i,860,892 $157,303 9.23% ■ Other taxing distriCts(MQtro Council,Mosquito 2010 $1,918,647 $57,755 3.30% COf1C�01,County HRA,T�0f151t) 2011 $2,013,651 $95,004 4.95% 2�12 52,055,174 541,523 2.06% Im acts on Tax a ers City Share of Property Tax (2012) p p y (ISD 831,Car-Mar-St.Croix WSD-inGudes estimated school levy) O Elimination of Market Value ISD B31 Homestead Credit 2..9% E Reduced individual taxes by .40%of first si�9 �,, �w� $76,000 market value less .09%of rem., r r, <- phased out at$414,000 value) ■ Difference paid by state to local taxing - -- �; jurisdictions ;�.' � ■ State withheld much or all of payments co��,� aher 6.6% in recent years due to budget cuts '0.6% �,��.P.�P.�.�.,..���,o�.a,�ae�..oao, Impacts on Taxpayers Next Steps O New Homestead Market Value ❑ Open hearing for comments and Exclusion for 2012 questions � Reduces taxable value of eligible ❑ Adoption of 2012 budget and tax properties; similar calculation levy, and 2012-2016 Capital ■ Reduces city's tax base(-4.16%from Improvement Program (CIP) at 2oii to 2oi2) regular Council meeting on ■ Increases tax rates and shifts tax Tuesday, December 20, 2011 burdens (7:00 p.m.) ■ Not worth as much as old Credit City of Scandia, 2012 Budget Meeting 5