12. Discussion on 2019 Budget and Property Tax Levy
Staff Report
Date of Meeting: September 5, 2018
To: City Council
From: Neil Soltis, Administrator
Re: 2019 Tax levy and Operating and Capital budgets
Background: At the August work session the Council reviewed an initial draft of the 2019 budget that
included inflationary adjustments and recommendations from staff and Committees of the Council
regarding changes to the 2018 budget. These changes were based on projected inflation, historical
spending patterns, and information provided by outside sources regarding charge or rate increases. A
listing of those assumptions and other changes that are reflected in the financial information follow
the financial information.
Incorporating all these changes and the other budget assumptions that were discussed at the August
Work Session, the City’s 2019 tax levy would be $2,313,880. This is an increase of $56,008 (2.5%) from
the 2018 levy of which $48,780 would be levied for General Fund activities. It should be noted that for
the 2018 levy, the Council reduced the final levy by $125,000 due to the unallocated balance in the
General Fund being in excess balance established by the City’s Fund balance policy . The largest
components of the levy increase are funding for the codification of City ordinances ($10,000, contract
for Sheriff Department services ($8,800) and contractual services for Park maintenance ($13,600).
Issue: Are there changes that should be made to the proposed budget in advance of the Council
approving a resolution to establish the maximum levy rate for 2019.
Proposal Details: The preliminary levy for taxes payable in 2019 must be certified to Washington
County and the date of the public hearing must be set no later than October 3rd. The recommended
property tax levy would be preliminary and would be used for the estimate of property taxes that
would appear on the property tax notices that will be sent out by the county in November. The Council
may make additional changes to the budget prior to its adoption in December, but the tax levy may not
be increased.
Fiscal Impact:
The total levy would increase by 2.5%. The decrease in the levy for the Local Road Improvement Fund
offsets the increase in the levy for debt service on the bonds that were issued for the 2018 Road
Improvement project.
Based on the estimated property values provided by Washington County, the estimated market value
of properties rose from 2018 by $45,355,200 to $687,795,100 with the taxable market value rising by
$47,242,800 to $655,195,300. The resulting levy capacity rose by $508,195 (8.2%) to $6,735,177. As
presented the City would levy 34.36% of its tax capacity (36.26% of tax capacity levied for 2018).
When the City’ levy is spread over the property value, the net result is the levy as presented would be
$3.53 per $1,000 of taxable market value which is an decrease of $0.18 per $1,000 over the 2018 levy.
Based on a residential property with an estimated market value of $250,000 the City’s levy as
presented would increase from $756 for 2018 taxes to $780 for 2019 taxes.
Fund 2016 Actual 2017 Actual 2018 Budget 2019 Budget
General Fund 1,484,612$ 1,531,749$ 1,349,820$ 1,398,600$
Debt Service Fund 148,582$ 116,739$ 152,202$ 501,350$
Capital Improvement Fund 30,000$ 30,000$ -$ -$
Equipment Replacement -$ -$ 30,000$ 30,000$
Local Road Improvement 581,142$ 560,533$ 725,050$ 378,930$
Economic Development Authority -$ 5,000$ 800$ 5,000$
Total Levy 2,244,336$ 2,244,021$ 2,257,872$ 2,313,880$
PROPERTY TAX LEVY
Summaries of the preliminary revenue and expenditure budgets for 2019 and with a projection of the
12/31/2018 fund balances for those activities supported by the property tax levy follow this report.
Options:
1. Recommend preparing the levy resolution based on the previous discussion
2. Hold a special meeting to discuss additional changes to the budget and levy amount
Recommendation: Option 1
The levy for debt service increases for 2019 due to the $346,120 to be levied for payments on the
bonds issed for the 2018 Street Improvements. In accordance with the 2018 – 2022 Capital
Improvement Plan, the funds levied for the Local Road Improvement Fund and for road maintenance
in the General Fund have been reduced.
The work budgeted for 2019 include engineering, testing, and culvert cleaning where needed for the
road that will be included in the 2020 Road Improvement Project. Based on the 2018 -2022 Capital
Improvement Plan the budget for road improvement projects for 2020 through 2022 will be
$620,000, $450,000, and $320,000 respectively. There may be additional funds available based on
the cost of the 2018 Road Improvement project.
Capital Improvement Fund projects in the 2018 - 2022 Capital Improvement Plan include the
following:
Stormwater plan for the northern portion of the Bliss addition $30,000 based on 50% funding
from the Watershed District
Replacement of skateboard ramps at the ice rink - $12,000 based on 50% grant / donation
funding
HVAC replacement at Fire / Public Works Building - $15,000
LED lighting project at Fire / Public Works Building - $30,000
Equipment Replacement Fund projects in the 2018- 2022 Capital Improvement Plan include the
following:
Replace Public Works Department 2008 Ford F350 and plow
The only revenue source for the Park Capital Fund beyond the advertising revenues reserved for the
Wayne Erickson lighted ballfield are park dedication fees which are charged when new lots are
created. These are being used to repay the interfund loan from the Capital Improveme nt Fund. At
the end of 2018 the Park Capital Fund’s debt to the Capital Improvement Fund is projected to be
$20,000. In 2018 The Capital Improvement Committee transferred $100,000 to the Park Capital Fund
in order to facilitate planning for future projects with the intention that the funds would be repaid
out of the proceeds of the Olinda Lane lot.
Park Capital Fund projects recommended by the Parks & Recreation Committee for include the
following:
Lilleskogen Park wetland restoration - $10,000
Install concrete pads under the bleachers at the Wayne Erickson Memorial Ball Park - $10,000
Expand the pleasure skating rink at the Community Center - $10,000
Clearing and trail work at park lands (Bone Lake, Big Marine School site, and Orwell Court)
Improvements at the Settlers Monument - $5,000
Doors for the picnic pavilion at Lions Park and extending water from the Hay Lake School to
the Pavilion - $15,000
The 2019 budget for the Economic Development Authority includes $3,750 for the final payment to
the University of Minnesota Tourism Development Center for the Tourism Assessment.
BUDGET DISCUSSION
COUNCIL WORK SESSION 08/01/18
PERSONAL SERVICE
Pay structure - merit step increases for non-bargaining unit employees -2.00%
Pay structure - bargaining unit employees -2.75%
Mayor & Council wages increase based on Ordinance 156 -5.2%
Health insurance - bargaining unit - estimated -10.0%
Health insurance - non-bargaining unit - per renewal information from insurer -21.0%
PERA contribution rates - no change in rate -0.0%
Social security & medicare - no change in rate -0.0%
Workers Compensation - League range 3-6% increase -6.0%
Wage allocations
Administrator - 20% to Planning 20.00%
Public Works Director - 201 Sewer Systems 12.50%
Public Works Director - 5% Uptown Sewer System 4.00%
Wage allocation estimates
Public Works staff - Parks Maintenance 7.50%
Public Works staff - Community Building Maintnenance 3.00%
Public Works staff - Uptown Sewer System 3.00%
PT Parks - 20% to Park Improvement fund for lighted ballfield maintenance 20.00%
Public Works staff - 201 Sewer Systems 5.50%
CONTRACTUAL SERVICES
League of Minnesota Cities dues increase -0.0%
Property insurance - League range 2 - 3% increase -
Liability Insurance - League 2-6% increase -
Auto damage & liability - League range 3 - 5% increase -
Xcel - electricity --2.0%
Contract with Sheriff Department - estimated increase -6.9%
Building Permit fees - 45% of Building permit revenues
SafeAssure 4.0%
REVENUES
Building permits - $130,000 less than 2018 projected, $254,000 less than 2017 actual -0.0%
BUDGET ASSUMPTIONS
4.0%
BUDGET DISCUSSION
COUNCIL WORK SESSION - 08/01/18
2018 2019 CHANGE
CHANGES FROM STAFF REFLECTED IN THE BUDGET AS PRESENTED
REVENUE
No cable franchise fees to General Fund - 6,000$ -$ (6,000)$
Lakes Area Television accounting services - 1,800$ 3,600$ 1,800$
Fines and Forfeitures - 12,000$ 10,000$ (2,000)$
EXPENDITURES
ADMINISTRATION
Lakes Area Television - withdraw from joint powers agreement 6/30/2018 - 5,300$ -$ (5,300)$
No transfer of fund balance to EDA - 20,000$ -$ (20,000)$
ELECTIONS
Off year election cycle - 6200 2,200$ (4,000)$
PLANNING - COMPREHENSIVE PLAN UPDATE
Planner - Code changes based on Comprehensive Plan - 25,000$ 30,000$ 5,000$
Remainder on comprehensive planning agreement ($43,000 in 2017)- 15,000$ 2,000$ (13,000)$
FIRE
PUBLIC WORKS
Allowance for fuel cost increase (2016/2017 actual $10,809 / $13,833)- 20,000$ 26,000$ 6,000$
Decreased salt usage (2016/2017 actual $20,368 / $22,784)- 40,000$ 32,000$ (8,000)$
Road Maintenance supplies (2016/2017 actual $16,561 / $15,930)- 30,000$ 25,000$ (5,000)$
Contractual Road Maintenance & Repair - 215,000$ 140,000$ (75,000)$
PARKS
Additional PW & Seasonal wages - 11,500$ 14,000$ 2,500$
COMMUNITY BUILDING
Added wages for Public Works maintenance - 2,400$ 4,800$ 2,400$
GROUP HOSPITALIZATION INSURANCE - 84,100$ 93,200$ 9,100$
GENERAL FUND CHANGES FOR DISCUSSION
BUDGET DISCUSSION
COUNCIL WORK SESSION - 08/01/18
2018 2019 CHANGE
GENERAL FUND CHANGES FOR DISCUSSIONCHANGES THAT ARE NOT REFLECTED IN THE BUDGET AS PRESENTED
COUNCIL
Codify City Ordinances - -$ 10,000$ 10,000$
Replace meeting tablets as needed - -$ 600$ 600$
PUBLIC WORKS
Computer replacement - -$ 2,000$ 2,000$
PARKS
Additional Senior and Youth programming -$ -$ -$
Path & culvert to T-ball field - -$ 3,500$ 3,500$
Buckthorn control @ Lilleskogen - -$ 5,000$ 5,000$
Aquatic Invasive species boat inspections ($3,500 in 2018)- 3,500$ 3,500$ -$
BUDGET DISCUSSION
COUNCIL WORK SESSION - 08/01/18
2018 2019 CHANGE
GENERAL FUND CHANGES FOR DISCUSSION
CAPITAL IMPROVEMENT FUND
Bliss Addition Stormwater Plan - 100% of cost to be partially offset by
Watershed District - -$ 30,000$ 30,000$
Fire Department - LED lighting - would be offset by savings in the General Fund - -$ 30,000$ 30,000$
PARK CAPITAL IMPROVEMENT FUND
Lilleskogen - wetland restoration - -$ 10,000$ 10,000$
Concrete slabs under bleachers - -$ 10,000$ 10,000$
Path from t-ball field to community building / pleasure rink expansion - -$ 10,000$ 10,000$
Clearing and trails at nature parks (Bone Lake, Big Marine School site, Orwell
Court)- -$ 10,000$ 10,000$
Settlers monument improvements - -$ 5,000$ 5,000$
Doors for pavilion and water source at Lions Park - -$ 15,000$ 15,000$
LOCAL ROAD IMPROVEMENT FUND
Engineering for 2020 Road Improvement projects - -$ 50,000$ 50,000$
CAPITAL FUNDS CHANGES FROM 2018 - 2022 CAPITAL IMPROVEMENT PLAN