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MINUTES OF THE
<br />ORONO CITY COUNCIL MEETING
<br />Monday, September 23, 2019
<br />7:00 o’clock p.m.
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<br />Page 4 of 11
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<br />Property taxes are increasing by $299,000, which is larger than it has been in recent years. However,
<br />$80,000 of that increase is due to another budgeting shift. Orono had been budgeting for road
<br />maintenance out of the Pavement Management Plan. Starting in 2020, road maintenance will be taken out
<br />of the General Fund. Previous city councils were not funding it out of the General Fund and had been
<br />using bond revenue for maintenance because they did not want to raise taxes to fund road maintenance.
<br />The current City Council has done a good job of looking at long-term maintenance needs and providing
<br />funding for them.
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<br />Property taxes consist of 51 percent of the budget. Over the years Orono has found other ways to fund
<br />the General Fund. One of those funding sources is public safety service charges, which consists of 28
<br />percent of the budget. General government service charges is at seven percent and permits are at 6
<br />percent. Surrounding cities are much higher in their dependence on property taxes to fund their General
<br />Fund, but Orono’s police contract revenue allows the City to be less dependent on property taxes.
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<br />The expenditure budget is increasing by 6.6 percent, which is consistent with the revenue budget. One of
<br />the biggest increases for 2020 is elections. Next year there will be three elections - the presidential
<br />primary, the general primary, and federal elections, which amounts to an $62,000 increase. Police
<br />services are increasing significantly by $354,000, with at least half of that going towards wages and
<br />benefits. Another big increase for the police department is insurance costs, which amount to around
<br />$40,000. Over time the City’s insurance carrier has realized that police departments in general are behind
<br />a lot of big claims, and as a result, the City’s premiums have increased dramatically. Street maintenance
<br />has an increase of $95,000, mainly as a result of an accounting shift. The City Council removed $80,000
<br />out of the Pavement Maintenance Plan and put it into the street maintenance budget.
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<br />Olson stated those are the three main departments that are increasing significantly. Special Projects and
<br />Contingencies is decreasing by $70,000 since the City will not be hiring another employee as was
<br />originally anticipated. The City’s expenditure budget overall consists of 53 percent for the police
<br />department, five percent for fire protection, eight percent for building and zoning, and seven percent for
<br />street maintenance. Personnel costs is the most significant budget line item.
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<br />The total of all proposed levies is $6,007,450. The General Fund operating budget is $4,679,000; the
<br />Pavement Management levy is $617,450, which is an increase of $73,000; and bond payments is
<br />$711,000 per year. That number will drop significantly by a quarter of a million dollars in 2023.
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<br />Orono has traditionally been very conservative on the amount that they tax. A person’s property tax bill
<br />consists of Hennepin County at 40 percent, the City at 15 percent, the school at 37 percent, and other is
<br />nine percent.
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<br />As it relates to the City’s tax capacity, in 2019 the City’s tax rate was 16.406 percent. Under the 2020
<br />levy, that would increase to 16.677 percent, which is a little over a quarter percentage increase in the rate,
<br />which yields $372,000 in revenue. If someone has a $250,000 home that did not change in value, their
<br />taxes would increase by $6.38 on annual basis. On a $2 million home, that would amount to an increase
<br />of $64.00. Because some homes will increase in value, a five percent value was calculated to each of the
<br />examples. In that scenario, the $250,000 home would see a $29 increase and the $2 million home would
<br />see a $272.00 increase. Over the years the City’s tax rate has decreased from 17.9 percent in 2014 to 16.6
<br />percent in 2020.
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