12-08-2014 Council Minutes - Laserfiche WebLink

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MINUTES OF THE ORONO CITY COUNCIL MEETING Monday, December 8, 2014 6:30 o’clock p.m. _____________________________________________________________________________________ Page 2 of 26 5. 2015 BUDGET HEARING Finance Director Ron Olson stated the purpose of the public hearing tonight is to discuss the 2015 budget and tax levy. Olson noted tonight’s meeting is not to discuss property values, which will be done in the spring at the truth-in-taxation meeting. Olson stated the valuation of someone’s home is set by the Hennepin County Assessor and is usually around 95 percent of what the market value is. In addition, a number of tax rates have been set by the Minnesota Legislature. Based on the City’s annual property valuation, the County Assessor will provide an annual calculation of the City’s tax capacity. Olson stated the City’s taxable market value is $2,431,508,871, with a tax capacity of $27,217,909. Compared to last year, the City’s taxable market value has increased by 3.7 percent and the tax capacity by 0.88 percent. As a result of the City’s overall increased tax capacity, the tax capacity rate will decrease from 17.81 percent in 2014 to 17.38 percent in 2015. Assuming a two percent increase in someone’s property value, the City’s share of the property tax bill would be a decrease of $5.31 on a home previously valued at $250,000, an increase in tax of 0.48 on a $500,000 home, and a decrease of $4.35 on a $1,000,000 home. Olson stated the Orono City Council has tended to be very conservative over the years and as a result has had a lower tax levy than most of the cities in Minnesota. Olson noted Orono is approximately half of what the Hennepin County average is. Olson indicated on the Council handout provided that the blue on the chart depicts the City’s tax capacity, which is one of the factors used in calculating someone’s tax rate. Olson noted the housing market is starting to move up again and that house valuations in the Twin Cities for last year increased by 3.4 percent. The green line depicts the City’s tax rate. Since 2010, Orono’s tax increase has been significantly below the state’s average and Orono’s taxes have increased by 8.02 percent less than the state average. Olson stated the City attempts to keep the levy as small as possible, and that if Orono had increased at the same rate as other cities in Minnesota, they would be levying almost $400,000 more every year. Olson noted the majority of the tax levy goes into the General Fund, which is the City’s operating budget, and accounts for 52.9 percent of the revenue budget. The other portion received from property taxes goes towards the City’s debt service on existing loans or general obligation bonds and other expenses of the City. The City’s current debt service is $755,500. The total tax levy required to fund the 2015 budget is $4,772,000, which is an increase of $70,240 or 1.5 percent over the 2014 levy. Olson noted the total tax levy required to fund the 2015 budget is $4,772,000, which is an increase of $70,240 or 1.5 percent over the 2014 levy. Olson noted this is the first increase in the tax levy since 2011 and that during the same time period, inflation has increased by 8.34 percent. Olson stated in the City’s 2015 budget, the total general fund expenditures are increasing by approximately $246,000 or 3.3 percent over the 2014 budget. The majority of the increase is for the police department and reflects a 2.5 percent increase in police officer wages, which the contract calls for.