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Budget Process
<br />
<br />The budget process began in the beginning of
<br />June. At a work session held on July 22nd, the
<br />Council was provided background
<br />information on the budget and an overview of
<br />the budget challenges for 2021. Over the
<br />summer, a draft budget was prepared and
<br />reviewed by the Council at the August work
<br />session. In September, the preliminary
<br />budget and tax levy was publically presented
<br />and adopted at the council meeting of
<br />September 28th.
<br />
<br />Prior to the adoption of the 2021 budget and
<br />tax levy, the City is required to hold a public
<br />hearing to allow public input on the budget
<br />and tax levy. By law, this hearing must occur
<br />between November 25th and December 28th.
<br />When the preliminary tax levy and budget
<br />was approved in September, the public
<br />hearing was set for December 7, 2020 at 6:00
<br />pm. The final budget and tax levy was
<br />adopted at the conclusion of the public
<br />hearing.
<br />
<br />In addition to the work on the actual budget,
<br />staff has been working on updating the
<br />Capital Improvement Plan (CIP). The CIP
<br />identifies the long-term infrastructure needs
<br />and is a valuable tool in the budgeting
<br />process. The CIP was also approved as part
<br />of the December 7th meeting.
<br />
<br />In conjunction with the budget process, staff
<br />has also reviewed the fee schedule. The 2021
<br />fee schedule, as amended, was adopted on
<br />December 7th.
<br />
<br />Tax Levy
<br />
<br />The total tax levy required to fund the 2021
<br />budget is $6,610,620. This is an increase of
<br />$603,170 or 10% over the 2020 levy. The
<br />increase includes an additional $132,550 for
<br />road maintenance and reconstruction;
<br />reflecting the Council’s desire to establish a
<br />long term funding solution for the City’s road
<br />infrastructure. Added to the tax levy this year
<br />includes funding towards the Building Fund
<br />and Parks Fund, of $310,000 for
<br />development, improvements and repairs for
<br />buildings and $50,000 for parks,
<br />respectively. There is a slight increase of
<br />$1,400 for the 2014 bond and a slight
<br />decrease of $195 for the 2016 bond. The
<br />remaining increase of $242,140 is an increase
<br />to the General Fund operating levy. Overall,
<br />the tax rate is slightly increasing from
<br />16.512% to 16.765%. Orono continues to
<br />have one of the lowest tax rates in both
<br />Hennepin County (ranking 41 of 45 cities),
<br />and the State of Minnesota.
<br />
<br />The tax levy is used to fund the general
<br />operations of the City (General Fund), pay
<br />the debt service on the City’s outstanding
<br />bonds, and fund the Pavement Management
<br />Fund, Building Fund and Parks Fund. A levy
<br />amount of $6,610,620 was approved in the
<br />preliminary tax levy. This has not changed in
<br />the final tax levy. The breakdown of the 2019
<br />levy is $579,480 for debt service, $750,000
<br />for roads, $310,000 for buildings, $50,000
<br />for parks and the remaining $4,921,140 is
<br />used in the General Fund.
<br />
<br />Tax Capacity Rate and the Impact of the
<br />Tax Levy on Property Owners
<br />
<br />The County Assessor provides an annual
<br />calculation of the City’s tax capacity based
<br />on the annual property revaluation. As of
<br />August 20, 2020, the City’s taxable market
<br />value is $3,432,437,494 with a tax capacity
<br />of $$39,438,081. When compared to last
<br />year, taxable market value has increased by
<br />7.86% and the tax capacity by 8.37%. As a
<br />result of the City’s increased tax capacity, the
<br />tax capacity rate will increase from 16.512%
<br />in 2020 to 16.765% in 2021. Using this tax
<br />rate and assuming no change in a property’s
<br />value, the City’s share of the property tax bill
<br />would be: an increase of $28.79 (7.41%) on
<br />a home previously valued at $250,000; an
<br />increase in tax of $65.04 (7.88%) on a
<br />City of Orono - 2021 Budget Page 3
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