01-14-2019 Council Packet - Laserfiche WebLink

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MINUTES OF THE ORONO TRUTH-IN-TAXATION/CITY COUNCIL MEETING Monday, December 10, 2018 6:30 o’clock p.m. _____________________________________________________________________________________ Page 2 of 19 Orono is very low in the realm of averages across the state with the surrounding cities having higher rates. The Hennepin County average is around 40 percent, which simply means if Orono’s property tax rate was at the Hennepin County average, people would pay three times as much in city taxes. In comparison to the metro area, the average residential segment is 79 percent and 18 percent commercial/industrial, but Orono’s tax base consists of 89 percent residential properties and 2 percent commercial/industrial. The reason that is of importance is that commercial and industrial pay a higher rate than residential. Olson noted of someone’s total tax bill, the City of Orono is at 15 percent, the county and school come in at 39 percent, and the state and other is around 8 percent of a property tax bill. As it relates to the property tax rate, Orono is about half of what the metro average is. As it relates to the budget, the General Fund operating levy is $4,083,000, with the second largest piece being $544,450 for pavement management to help maintain the roads. The Orono City Council has made it a goal to get long-term funding for the city’s roads, and in approximately three to four years, the City’s road funding will be solved. The City currently has three sets of outstanding bonds for its debt levy. Each year a portion of the property tax levy goes to pay those outstanding bonds. In 2019 the City’s total debt levy will be $711,000, and it will stay that way for three more years before it drops off significantly, which is a positive sign for the future. The City’s net tax capacity, based on the values and the formulas from the County, increased 4.7percent but the City’s total levy is only increasing by 3.59 percent. Olson noted some cities levy a minimum of what the rate increase is but Orono has decreased theirs. Orono’s local tax capacity rate for 2018 is 16.553, and is projected to be 16.378 percent for 2019, which is a decrease of 1.74 percent. As a result, if someone’s property does not change in value in 2019, they would actually see a decrease in taxes. On a $250,000 home, it would decrease around $4, and on a $2 million house, it would decrease by $42 for the year. If someone’s property value increased by about 5 percent, on a $250,000 home, that home’s property taxes would increase by $18 per year, and on a $2 million home, their property taxes would increase by $162. If your home decreased in value, your property taxes would also decrease accordingly. Olson noted home values do affect someone’s tax bill but only how that individual value changes in relation to the rest of the City. In Orono, the biggest portion of someone’s city taxes goes into the General Fund. Approximately $4.39 million will go into the General Fund, which is an increase of .8 percent. Total revenue is projected to increase by $383,880. Some of that increase has to do with an increase in building permits as well as anticipated higher grants from the state. The biggest portion of the increase is under General Government Services. Because a lot of work is done by people at city hall that has not been charged directly to the utility funds, Staff has been trying to accurately capture those costs associated with water and sewer and in 2019, all costs associated with utility funds are now reflected in the budget. As it relates to the overall budget, property taxes consist of 51 percent of the City’s budget. Orono receives very little state aid money with the exception of a few grants given to the police department. Part of the reason Orono is able to keep it that low is because Orono receives public safety service fees, which comprise 29 percent of the budget. Those fees are derived from the police service contracts, which in turn allows the City to fund its police department and save costs for all four cities by consolidating police services.