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City of Orono 2023 Preliminary Budget The city began the budget process at the beginning of June with the various city departments completing their budget request forms. Departments then met with the City Administrator and the Finance Director to review their budget requests. Upon completion of the reviews, the draft preliminary General Fund budget was discussed by the Budget Committee on July 21st and the full Council at a work session on July on 24th. The Preliminary General Fund Budget and Tax Levy will be adopted by the Council on September 26th. The draft budget is being presented tonight to the whole council for their review prior to adoption at the next council meeting. Tax Levy. 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 (PMP), Building, Facilities, Community Investment, Fire Capital and Park Funds. The total tax levy required to fund the 2024 draft budget is $9,415,100. This is an increase of $1,028,100 or 12.26% over the 2023 levy. The additional $904,100 for the General Fund represents the largest increase in the levy. The increase is needed to cover a budgeted 3% increase in employee wages, an increase in employee insurance contributions, and the establishment of the Orono Fire Department. Other levy increases include $275,000 for the recently created Fire Facilities Fund. The levies for the Community Investment Fund and the 2014 Debt Service Funds are being reduced by $19,000 and $182,000. The additional $50,000 for Parks continues the Council’s commitment to adequately fund park infrastructure and better maintain current facilities. There are also a couple of reductions in the levy amounts. The decrease in the 2014 debt service reflects the fund’s current balance and its 2024 debt service needs. The Community Investment Fund levy is used to fund projects that are of general benefit to the Community. This portion of the levy is being reduced by $19,000 to $200,000. The fund has adequate funding for future needs with the $200,000 levy. 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 June, the City’s taxable market value is $4,912,740,729 with a tax capacity of $57,000.00. When compared to last year, taxable market value has increased by 12.33% and the tax capacity by 12.26%. As a result of the City’s increased tax capacity, the tax capacity rate is projected to decrease to 16.52%; one of the lowest rates in both Hennepin County, and the State of Minnesota. Using this tax rate and assuming no change in a property’s value, the City’s share of the property tax bill would decrease slightly when compared to 2023. 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 with this budget document. General Fund Budget. General Fund Expenditures. The 2024 preliminary expenditure budget is $11,536,623 which is an increase of $543,353 (4.92%) over the 2023 budget. The largest increase is in Personal Services (Wages and Benefits) in the amount of $462,700. Professional Services is increasing by $319,148 (19.34%) as the result of an increase of $138,638 in the Long Lake fire budget and $100,750 in IT Services. Transfers to Other Funds is decreasing by $200,000 (50.0%). This reflects the creation of the New Fire Capital Fund for fund fire equipment purchases. By Department, the significant increases are: Mayor Council is increasing $$17,650 (41.29%). Elections are increasing $41,600 (107%) with 2024 being an election year. A change in budgeting for the custodian and a reallocation of insurance expenditures has the City of Orono Work Session 11 Sept 2023Exhibit A - Budget Introduction Page 1