08-26-2004 Council Work SessionA

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c c .r1 rehabilitation needs. Although the proposed levy is a significant percentage increase, it provides substantial benefits while having a relatively small impact on homeowners. Tax Levy and Tax Rate Trends Attached are tables showing the tax lev>’ and tax rate levels over the past ten years. As the tables demonstrate, the tax levy has been held to conservative increases, which has resulted in a trend of significant tax rate reductions (i.e. from 16.25% in 1994 to 13.71% in 2001) In 2002, the State tax reform legislation, that provided State funding for schools and eliminated $300,000 of State HACA Aid, caused the City tax rate to increase when the levy was increased to recover the lost HACA Aid revenue. The tax rate increased to 20.97%. However, the tax rate has been declining since then. The tax rate for 2004 is 17.64%. The tax rate for 2005 is expected to be somewhat less than the 2004 rate. Tax l.evy. Tax Capacity Rate, and Impact of the Tax Levy on Property Owners In the initial budget overview information, staff took a conservative approach to estimating the City’s tax capacity and tax rate, which resulted in an estimated slight reduction in the tax rate. Prior to the budget workscssion, the actual tax capacity numbers will be available. It is expected that the tax capacity will be higher than the initial estimate, which will result in a reduction in the tax rate. This would cause the impacts on homeowners to be less than tho.se reflected in the initial budget overview memo. Certified Levy can be Reduced but not Increased The maximum levy must be certified by September 15. The final levy is adopted after the Truth-in- 1 axation hearing in late November or early December. Prior to the final levy adoption, the lc\7 can be reduced, but it cannot be increased. Street Rehabilitation and Equipment Replacement Funding The attached table titled “Funding Level Detail-Equipment Replacement and Street Rehab ” show^thc current underfunding of both Street Rehabilitation and Equipment Replacement needs. Street Rehabilitation Although most of the City’s local streets do not require significant rehabilitation work, there are a number of higher-traffic streets that will require major rehabilitation work in the coming years. Two of these streets are Orono Orchard Road and Casco Point Road. The cost of the major rc'iabilitation of each of these roadways will exceed $1 million. In the early ‘90 ’s, the city began an effort to increase funding for street rehabilitation. 'I'he annual funding level was increased from $70,000 to $132,450. For 2004, in order to fund general city operations within the lev^ limit and reduced State Aid, the annual funding level was reduced to $65,450. I he proposed 2005 budget reflects a funding level of $114.950, which is still $17,500 less than the 2003 annual funding level. jlafeilr ». t i i I I 1