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TO: <br />FROM: <br />DATE: <br />Mayor and City Council <br />Ron Moorse, City Administrator <br />December 4, 1998 j <br />SUBJECT: Truth in Taxation Healing to be heid at 7:00 p.m. on Monday. December 7, 1998 <br />The City's Truth in Taxation Hearing will be held at 7:00 p.m. on Monday, December 7. The <br />purpose of the hearing is to present information, and receive input from property owners, regarding <br />the City's 1999 budget and tax levy. <br />The 1999 payable tax bills are affected by a combination of the City's budget and tax levy and <br />changes in property class tax rates that have caused a shift in the rclati\ e property tax burden from <br />higher-valued residential property and commcrcial/industrial property to lower-valued homes. <br />Attached are materials providing a summaiy' of the proposed 1999 budget and tax levy, and an <br />explanation of the tax burden shift to lower-valued homes. This information was provided to all <br />properties in the City through the City newsletter. <br />As indicated in the attached budget summary, the 1999 budget includes a significant tax levy <br />increase. Although the majority of the increase is due to items that will be continuing expenditures, <br />such as increases in fire .service and assessing service costs. 30% of the tax levy increase is due to <br />the one-time costs of updating the City's Comprehensive Plan and City Code. A key factor in the <br />Council's decision to add these expenditures to the 1999 budget was that, as Orono grows and <br />scrv'icc expectations increase, the need and demand for services will increase. This will cause a need <br />for expenditure increases both for facilities and equipment and for stalT. Future needs have already <br />been identified in the areas of stormwater management, street maintenance, and parks and open <br />space. <br />Orono's population and number of households are growing at approximately 1% per year. Although <br />the amount of growth in any one year is not sutTicient to require increased facilities or stalTing levels, <br />as this growth continues, the increased service needs and demands will exceed the capacity of <br />existing stalT, facilities and equipment. The Council determined that it is preferable to begin to make <br />additional incremental increases in the tax lev\ in anticipation of increased expenditures to meet <br />future service needs rather than being forced to make large levy increases in future years. <br />Although new development causes expenditure increases, it also generates new' tax capacity which <br />expands the base over w hich property taxes are levied. This helps to limit the impact of expenditure <br />increases on City taxpayers in general. However, in recent years the reductions in property class <br />rates for higher-valued residential properties and commercial/industrial properties have caused the <br />City's tax capacity or tax base to be reduced, even though the City has experienced significant new <br />development. The tax eapacity reductions increase the tax burden on those whose tax capacity has <br />either remained stable or increased, fable 1 - Property Class Tax Rate Changes 1997-1999, and <br />I'able 2 - Impact of Property Class Rate Changes on City faxes, illustrate how the relative tax <br />burden has been shifted to lower-valued homes.