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MINUTES OF THE <br />ORONO CITY COUNCIL MEETING <br />Monday, September 23, 2019 <br />7:00 o’clock p.m. <br />_____________________________________________________________________________________ <br /> <br />Page 4 of 11 <br /> <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. <br /> <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. <br /> <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. <br /> <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. <br /> <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. <br /> <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. <br /> <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. <br />