Loading...
3. 12-2-2020 Budget Workshop Presentation2021 Budget/Levy Truth in Taxation Public Hearing December 2, 2020 –City Council Budget Workshop Tonight’s Discussion will focus on: Presenting the Proposed 2021 Budget for public comment and the property taxes needed to pay for the total expenditures budgeted for 2021. Discussion of the 2021 Levy and Tax Rate (Included are 4 Options) Review of any budget line-item concerns Review of 2021 Capital Expenditures. Anticipated Rate Increases for the Big Marine and Uptown Sewer will be discussed following a November meeting of the Sewer Committee likely in December. (The budget currently includes as 7% increase to Big Marine and 5% for Uptown.) Understanding the Property Tax System Assessor sets proposed property values as of January 1 for the following year taxes. Values are based on comparable sales. These values are sent to the County Auditor. Auditor then sends property specific notices to property owners notifying of the value change. Included in the notice is the information about the Board of Review meeting. City Council conducts Board of Review meeting in April of each year; this is when residents can question their proposed values. Values are then finalized and set for calculating the taxes. In September the City sets the maximum levy amount which is used to calculate taxes in notices mailed in November City and other jurisdictions adopt levy and budgets in December. Tax rates are calculated by County based on the levies adopted by each jurisdiction. What is city’s tax levy vs. the city’s tax rate? Tax rate is calculated by distributed the City’s total taxes needed over the City’s total taxable value. Different types of property have a different classification rate set by the state. Share of 2021 Preliminary Tax Capacity Rate County 30.16% City 35.18% Forest Lake Area Schools 27.59% CMSCWSD 4.18% All Other 2.70% County Referenda 0.00%School Referenda 0.18% County City Forest Lake Area Schools CMSCWSD All Other County Referenda School Referenda What is the impact on property tax bills? •The changes to City’s tax rate are applied to local property tax bills along with other taxing jurisdictions which include: •The State of Minnesota •Washington County •Your Local School District •Your Local watershed district. •The Metropolitan Council •And others…like Washington County Community Development Authority and mosquito control •Your property tax bills will also be affected by: •The levies set by the other above jurisdictions •Changes in your property valuations made by the Council and City assessor •Changes in state property tax classifications •Homestead Market Value Exclusion City Budget Calendar June/July-staff and committees draft operating budgets August/September –City Council Work Session budget overview September –City Council adopted resolution certifying maximum tax levy of $2,613,824 (7.06% increase for 2019) for a city tax rate of 31.825% for est. percentage increase of 1.1% November-County mails proposed property tax statements based on maximum levy amounts December 2nd -Public hearing on 2021 budget December 15th -Council adopts 2021 budget Summary of Funds General Funds Operating Budgets by Department Special Revenue Funds Cable Television Fund and Economic Development Authority Fund Debt Service Funds Bonds for Road Improvements and Loan Certificates for Capital Equipment Capital Funds General Capital, Park Improvement, Equipment Replacement, and Road Improvement Enterprise Funds Big Marine Sewer (Anderson/Erikson & Bliss Systems) and Uptown Sewer Budget Highlights Budget Summaries can be found in your budget packets. The summaries are based on the no levy change scenario or Option B. The CARES Act reimbursements have left the City with approximately $460,000 in available fund balance (at a 0% tax rate increase otherwise referred to as Option B). Prior to this we were estimated to have a surplus of $230,000) The current surplus is made up of reimbursements from CARES Act, underutilized budgeted services for planning, and public works savings related to road maintenance, engineering, salt purchases, and equipment repair. Conservative revenues on permits and charges for service we entered into the budget. This element of general operations is break-even so it can be easily adjusted if activity turns around. This may contribute to surplus for next year, as this year’s permit revenue performance was within 5% of original projections. The 2019 Wage Study, which was approved this year has been built-in to this budget. Benefits were adjusted this year for non-union employees. The effect of these changes have had minimal effect on the 2021 budget as the difference from one-time expense projects in 2020 have offset most of these expenses. This incudes increased hours for the office administrative assistant. Budget Highlights -Continued •Wages and benefits were also distributed between departments to reflect employee work between departments. Share of benefits were not distributed to the Enterprise Funds or utilities due to their lack of capacity to absorb the expense. •Assessor and Animal Control were moved to separate departments outside of administration. •The Washington County Contract for Police Services with the Sheriff’s Department has increased by 6%. •Big Marine Sewer Rates (Bliss (West) & Anderson/Erikson(East)) are to be increased by $13.98/quarter or 7% to help increases funds for capital expenses. •Uptown Sewer Rates are to increase by 5% to cover capital expenses. •$100,000 levy is planned for the General Capital Fund to help cover internet expansion. $250,000 has been tentatively scheduled for grant matching and other improvements for internet expansion. $85,000 will be spend on necessary new radio equipment for Fire and DPW. Budget Highlights –Continued… •Funding consideration for a second Fire Station has been tabled and is not scheduled for discussion for a few years. •Parks will have a $10,000 levy for capital improvements. Planned expenditures for next year include: $5k for park planning, $10k on trails, $20k for park signage, $10,600 DNR Grant to continue restoration work at Lilleskogen Park, and for improvements to the $5k Settlers' Monument. •$130,000 will be levied for Capital Equipment due to the upcoming schedule in the outlay. A public works pickup truck and possible replacement of the City’s large tractor will go through the fund in 2021. •The road improvement fund levy will be $845,000 for 2021. Scheduled road construction will be likely be completed on 220th Street N and Peabody Trail N. •Debt costs will go by approximately $50,000 due to payoff of equipment purchased in 2015. •Please note that the Budget summaries in the packet are based off of the now tax rate change budget scenario (Option B) Next Steps Open Public Hearing for Public Comment Discuss Selection of a Levy Option for 2021 Adoption of 2021 budget and tax levy at the Council meeting on Tuesday, December 15, 2020 at 7:00 p.m. How does the general fund balance fit in this discussion? •The City’s general fund balance or “reserves” serve a critical purpose of cash flowing the City’s financial activity. Since the City is revenue is mostly property tax dependent, the city only receives the necessary funding it needs to operate when taxes are settled in July and December. This means cash balances are necessary to “float” expenses during the lean months of June and November when the City’s cash balances are at their lowest. •The Fund Balance report found on page 8 of your packet represents the City’s attempt to comply with its policy of maintaining a fund balance of at least 50% of the year’s budgetary expense. (This report current reflex preliminary budget or Option A.) •When a budget is not balanced, meaning expenses do not match revenues, this can either draw upon the funds that we keep in the fund or build on them. •A strong fund balance can also help the City obtain lower cost debt. Having appropriate funds on reserve demonstrate to bond rating agencies, and ultimately potential bond holders, that the City exercises financial responsibility and has the means to pay its debt obligations of unexpected circumstances arise. The 4 Levy and Tax Rate Options for Consideration •Option A (Preliminary Levy) –Proceed with the Preliminary levy and allocate any excess funds that exceed the City’s fund balance policy towards Road Maintenance such as chip and crack sealing. This choice is a 7.6% increase in tax levy over 2020. It is estimated to increase the City’s tax rate by 1.1% to a total tax rate of 31.825%. $490,000 would be available for transfer ($200k to General Capital for Internet and $290k to Roads for Road Maintenance Improvements). Your packet packets include an estimated dollar impact on tax bills. •Option B –Attempts to make an approximate 0% change to tax rate. This approach would lower the levy by $29,000 to $2,584,824 for 6.4% increase in Tax Levy and an estimated 0% increase in tax rate at 31.455% (2020's rate is 31.466%). $430,000 in fund balance would be available to transfer with $230k allocated to road maintenance and $200k toward general capital for internet expansion. Tax bill impacts are in your packets. •Option C -Lower tax rate by an estimated 1.1% -this option would lower the tax levy by $55,000 to $2,558,824 for a tax levy for 5.3% levy increase over last year and an estimated tax rate decrease of 1.1% to 31.123%$380,000 in fund balance would be available to transfer with $180k allocated to road maintenance and $200k toward general capital for internet expansion. Tax bill impacts are in your packets. The 4 Levy and Tax Rate Options for Consideration •Option D -is to lower the tax rate by an estimated 3%. This option would lower the tax levy by $103,000 to $2,510,824 for a 3.3% tax levy increase over 2020 and an estimated tax rate decease of 3% to 30.509%. Proceeding with this option would leave the City will $280,000 of excess fund balance which could be used to distribute $200k for internet expansion and $80k towards road preservation. An example of tax impacts is included in your packet. •All options we calculated at 65% projected fund balance. Levy reductions, if any were subtracted from that amount. •Based on the City Council’s selection, City Administration will bring forward a budget amendment proposal for allocating the fund towards capital. The City Council may also distribute the funds to other fund areas of needed or desired. •Council is requested to provide a motion identifying the direction it wishes to proceed with the 2021 budget and levy.