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AGENDA ITEM Item No.: 1 Date: December 11, 2017 Item Description: 2018 Budget Hearing Presenter: Ron Olson Agenda Truth In Taxation Finance Director Section: Public Hearing 1. Purpose. The purpose of this action item is to approve require 2018 General Fund Budget, Tax Levy, the 2018 Special Revenue Fund Budgets, and the 2018 Enterprise Fund Budgets. 2. Background. Prior to the adoption of the 2018 budget and tax levy, the City is required to hold a public hearing to allow public input on the budget and tax levy. By law, this hearing must occur between November 29' and December 20th. When the preliminary tax levy and budget was approved in September, the public hearing was set for December 11, 2017 at 6:30. This public hearing is the final step prior to adoption of the budget and tax levy. The budget process was begun by staff at the in May. Over the summer a draft budget was prepared and reviewed by the Council at work sessions in July and August. In September the preliminary budget and tax levy was publically presented at the meeting of September 11 and the adopted at the September 25 council meeting. Tax Lew The total tax levy required to fund the 2018 budget is $5,439,951. This is an increase of $234,721 or 4.51% over the 2017 levy. A portion of the increase to the levy ($130,000) is designated for funding the City's Pavement Management Plan to address the City's aging road infrastructure. The remaining increase of $104,721 is an increase to the General Fund operating levy. Even with the increase in the levy, the City's tax rate will decrease from 16.844% to 16.529%. Orono continues to have one of the lowest tax rates in both Hennepin County (ranking 42 of 45 cities), and the State of Minnesota. The tax levy is used to fund the general operations of the City (General Fund), pay the debt service on the City's outstanding bonds, and to fund the Pavement Management Fund. The breakdown of the 2017 levy is $711,000 for debt service, $383,000 for roads, and the remaining $4,345,951 is used in the General Fund. Tax Capacity Rate and the Impact of the Tax Levy on Property Owners The County Assessor provides an annual calculation of the City's tax capacity based on the annual property revaluation. As of 12/4/2017, the City's taxable market value is $2,879,524,978 with a tax capacity of $32,961,379. When compared to last year, taxable market value has increased by 5.44% and the tax capacity by 5.76%. As a result of the City's increased tax capacity, the tax capacity rate will decrease from 16.844% in 2017 to 16.529% in 2018. Using this tax rate and assuming no change in a property's value, the City's share of the property tax bill would be: a decrease of $7.41 (-1.87% on a home previously valued at $250,000; a decrease in tax of $15.75 (-1.87%) on a $500,000 home; a $1,000,000 home will see a decrease of $35.44 (-1.87%); and a $2,000,000 home has a decrease of $74.81 (0.48%). The actual tax impact on any particular property will depend on how the property's taxable value changed in relation to the rest of the City. Tables illustrating a 5% increase in value and a 5% decrease in value are included in the attached budget information. General Fund Budget General Fund Expenditures The 2018 expenditure budget is $8,193,401 which is an increase of $205,036 (2.57%) over the 2017 budget. Prepared By: RIC Reviewed By: 1b)X1 Approved By: �bV