Loading...
HomeMy WebLinkAbout12-06-2010 Truth in Taxation MinutesF r MINUTES OF THE TRUTH -IN- TAXATION MEETING ' Monday, December 6, 2010 . 7:00 o'clock p.m. ROLL CALL The Orono City Council met on the above - mentioned date with the following members present: Mayor James White, Council Members James Murphy, Cynthia Bremer, Lili McMillan, and Doug Franchot. Representing Staff were City Administrator Jessica Loftus, Finance Director Ron Olson, and Recorder Jackie Young. Mayor White called the meeting to order at 7:00 p.m., followed by the Pledge of Allegiance PUBLIC HEARING 1. 2011 BUDGET HEARING — 2011 BUDGET AND TAX LEVY White noted this is the truth -in taxation meeting to allow for public input on the City's 2011 budget. White stated the final budget will be adopted at the December 13'h City Council meeting. Olson stated the purpose of the meeting tonight is to discuss the budget and how it was arrived at and the City's levy. Olson stated a person's property taxes could increase even though their values have gone down since the tax rate is calculated based on a formula. The tax calculation begins with the value set by the assessor. This value is then multiplied by the tax class rate to determine a property's tax capacity. • Property class rates are set by the State, and for residential properties the rate is 1 percent of the first $500,000 and 1.25% of the value over $500,000. In Orono 93.6% of properties are residential. This calculation is performed for every property and added together to determine the City's total tax capacity. The tax capacity is divided by the amount of the tax levy to determine the City's tax rate. The tax rate multiplied by a property's tax capacity determines a property's tax. The City's tax rate is estimated to be 15.44 percent this year. _ Olson stated the total tax levy required to fund the 2011 budget is $4,724,200, which is an increase of $58,330, or 1.25 percent over the 2010 levy. General fund expenditures have the greatest impact on the proposed tax levy. The tax levy required to fund the 2011 general fund budget is $3,932,260. This is an increase of $42,550 or 1.09 percent over the 2010 levy amount. This is a decrease of $22,720 from the preliminary budget and below the 1.74 percent limit. It is estimated the City's tax capacity, based on the annual property revaluation conducted by the County Assessor, has decreased by approximately 7.53 percent. By applying the proposed tax levy to the estimated tax capacity, it results in a tax rate of 14.86 percent. This is an increase from the 2010 level of 13.677 percent. Olson noted almost half of the money collected in property taxes goes to Hennepin County, with another major share going to the school districts, and then the smaller portion going to the City. Olson stated if your property value went down by less than 7.6 percent, you will likely see an increase in your taxes. White stated one common question asked by residents is how they know their property valuation is accurate. The State of Minnesota requires assessors to follow a sales ratio that requires assessors to compare homes to comparable properties and the property must be valued within 90 to 95 percent of the • average market value. The properties in the City of Orono are valued at approximately 96 to 97 percent, which is determined by actual sales. PAGE 1 of 6 IV MINUTES OF THE TRUTH -IN- TAXATION MEETING Monday, December 6, 2010 7:00 o'clock p.m. • Olson stated taxes go up because the city, county, and school district have increased their levies. A number of factors that have affected the general fund expenditures are union contracts, insurance contributions for the employees both for 2010 and 2011, PERA, and increased bond debt service. In addition, the city administrator's salary in 2010 was only budgeted for 75% of the year, which needs to be increased in 2011 by $28,000. The budget also reflects a one percent increase in wages for nonunion employees. Those items resulted in approximately $80,000 in increased expenditures over 2010. Olson reported the City's other general fund revenue sources are decreasing. Police service revenues are budgeted to decrease by $312,940. Olson noted they have made a number of permanent cuts in the police department budget for 2011. MSA funds from the State of Minnesota will be credited to the MSA fund instead of the general fund. The $55,000 will be used to pay interest on the bonds sold for the reconstruction of Old Crystal Bay Road. The amount budgeted for interest has been decreased by $30,000 to reflect the current interest rate environment. These revenue reductions total $397,940, which is a decrease of 6.72 percent from 2009. The proposed 2011 general fund expenditures are $5,815,630. This is a decrease of $142,580 or -2.41 percent from the 2010 budget. When the additions of the golf course expenditures to the general fund are excluded, the 2011 general fund budget is $317,035 less than the comparable 2010 budget. When compared to the 2009 budget year, the general fund budget has decreased by $522,675 (8.97 percent) in two budget years. Currently the City has the following unfilled positions: building inspector, planner, public works maintenance worker, and two police officers. As part of the 2011 budget, four additional positions will be eliminated: two full -time police officers, a part-time office person, and a part-time clerk. The budget includes an increase of $5 in the annual septic program fee and a 3 percent increase in the • recycling charges. With the exception of a small increase in the amount budgeted for building permits, construction- related revenues are budgeted at the same level as in 2010. The total levy for debt service is increasing by $15,780 or 2.05 percent. This is needed to pay the debt service on the City's existing debt. In 2010, the City utilized a special levy in order to increase the debt service levy by an amount greater than the levy limit. In 2011, the City will not take advantage of any special levies. Olson displayed a graph depicting the number of full -time equivalent employees over the last 10 years, which reflects a decrease of 18 percent in personnel. Olson commented in his view that decrease reflects the City's responsiveness to the poor economy. ' The City's 2011 general fund revenues consist of 68 percent in monies received in the form of taxes. The City has cut over half a million dollars in general fund expenditures over the years. Mayor White opened the public hearing at 7:29 p.m. Ronald Esau, 1230 Orono Oaks Drive, commented it would be nice to see the differences between the preliminary budget and the final budget. Esau noted the City's budget is approximately a $6 million expenditure budget. White note it is approximately a $4.7 million budget. Olson stated the general fund budget is approximately $4.7 million. LJ PAGE 2 of 6 rb MINUTES OF THE TRUTH -IN- TAXATION MEETING Monday, December 6, 2010 • 7:00 o'clock p.m. Esau stated the $4.7 million is the amount that comes from the taxes but the total expenditures of the City are 5.995 million. Franchot indicated it is 5.785 million. Esau stated it would be helpful to see the kind of monies that are spent in total. Olson noted that information is available on the City's web site. Esau stated he is also interested in what the City of Orono is spending on police protection since that appears to be a major expenditure. Loftus indicated taxes generated are 3.9 million, total expenditures are 5.7 million, and public safety consists of approximately 3.2 million of expenditures. Olson noted that number includes police, fire, and building inspections. The actual police department expenditures are $2.3 million. White noted Orono also provides police services to Minnetonka Beach and Spring Park and that the City of Long Lake has opted to get their police services from someone other than Orono in 2011. Esau stated the City's financial statement showed a fairly healthy cash fund balance of around $12 ® million. Olson noted the whole $12 million is not available to be spent. Esau asked what the constraints are on the spending and whether the City is carrying a $12 million balance going forward. Olson indicated the City's portfolio is approximately $12 million, but that approximately $2 million of the money is in sewer, $1,000,000 in water, and $500,000 in storm water funds. That money has been designated for various projects throughout the year and will be spent in large part. There is also a couple million dollars in debt service funds and money allocated towards construction funds, which includes over a million dollars that were part of a bond sale as part of the City's pavement plan, which cannot be spent since it is allocated toward projects. Ted Capra, Orono, asked what road projects the City has bonded for. Olson stated the road projects were Casco Point Road, a city -wide seal coat, and a mill and overlay. Murphy noted the City's cash balance percent was reduced to 50 percent. The point of the cash balance is that it allows for some contingency. Loftus noted the City only receives two tax disbursements a year, which requires the City to have some cash on hand to pay for expenditures. • Murphy pointed out the $12 million cash balance is a decrease from previous years. PAGE 3 of 6 IV MINUTES OF THE TRUTH- IN- TAXATION MEETING Monday, December 6, 2010 7:00 o'clock p.m. • Olson stated the state auditor recommends that cities have between 35 to 50 percent of the annual budget. At the last council meting a fund balance policy was adopted, and any fund balance over 50 percent of the budget will be transferred to a construction fund, which will be used to help finance projects. Esau stated the City could send out a message that reducing the cash balance and keeping the budget flat would be a good message to send to the citizens in these tough economic times. Olson stated there are a couple of risks with reducing the cash balance. A higher fund balance is good to have in the event of an unexpected cost. Olson stated there was a city in Minnesota that used their fund balance to decrease property taxes and then the State of Minnesota placed a levy limit on everyone. That city was not able to increase their taxes back to the pervious year's level, which caused them some difficulty. Olson stated levy limits are a good possibility this year given the poor economy. If the fund balance is used for ongoing expenses, the City may find itself in a position where taxes need to be increased by 3 to 5 percent but they are unable to raise them that amount due to the levy limit. Ed Callahan, Orono, commented each year the City is at risk that the state will decrease their state aid. White stated the amount of industrial /commercial tax has decreased, which has increased the tax on residential homes. Orono has a small industrial/commercial tax base. White stated the City has cut costs but they have also experienced increases in expenditures due to rising costs on energy and other items. Orono does not have a public works engineer and those services are contracted out. Orono also does not have a big planning department and has no park and recreation department. Ted Capra indicated his taxes went up 20 percent because the City moved commercial properties into a • lower tax bracket and residential into a higher tax bracket. White noted the state legislature did that and not the City. Murphy noted Wayzata has a large commercial tax base and they experienced some difficulty with their budget given that state legislature mandate. White stated that change occurred over a 10 -year period of time. Franchot asked how much Mr. Capra's city's tax amount went up. Capra indicated his residential property did not increase that much. Beth Bailey, Community Mediation Services, indicated their organization provides mediation services to the Orono community. Community Mediation Services helps people who are stuck in conflict move through that conflict. That process is expensive, and if the conflict is not resolved, it likely will end up with a police officer being called or end up in the court system. A number of people volunteer their services and they currently have over 100 volunteer mediators available. Bailey stated they would propose that the City of Orono's 2011 budget include mediation services at the level of 2005, which would reflects a 10 percent cut. They believe it is a resource that the City will want to have available to the residents. Community Mediation Services would recommend that as part of that $2000, someone from the City, perhaps someone from the police department or the city administrator, • attend a 30 -hour training session. That training would provide the individual with the skills necessary to handle conflicts and would provide them with some insight into the types of conflicts that they deal with. PAGE 4 of 6 • MINUTES OF THE TRUTH -IN- TAXATION MEETING Monday, December 6, 2010 7:00 o'clock p.m. Bailey indicated she would be happy to meet with city staff and the police department to discuss the types of conflicts they handle. In 2009, there were 16 cases that were referred to mediation, and in 2010, 14 cases were referred. Bailey noted their organization is listed on the City's web site. White noted the City had requested information from Community Mediation Services prior to the budget being finalized but did not receive any response. That amount was then taken out of the budget and any funding would require special council consideration. Bailey indicated they were unable to provide that information earlier due to a problem with their data base. McMillan asked if those cases were Orono related. Bailey indicated they keep their statistics by zip code and that those numbers may include Orono, Minnetonka Beach, Long Lake, and Crystal Bay. Bremer indicated it is likely that people serviced by the Orono Police Department were given that information. Bremer noted they had requested information a couple of times and did not receive anything. Bremer commented there are a number of good options available for this type of service and that the City Council should look at it prior to the adoption of the final budget. Elizabeth Levang, 4010 Bayside, asked for additional information on the one percent increase that will go • to all employees. Olson stated the one percent increase would go to all nonunion employees but that the police would be under a different contract. Levang asked if there is a cost associated with arbitration. Olson indicated there is and that there is no guarantee the City will win. Esau stated the cost of the increase in salaries is ongoing and will go up every year. The post employment benefit packages based on compensation also continues to increase. Esau suggested that the City have a payroll freeze and go on a flat budget. Esau pointed out federal employees are not getting an increase. Esau stated he understands a one percent increase is nominal but that it does send a message to the residents. White noted employees have also experienced increased health costs and other costs. White stated Orono is not a high salary city and that they are at the bottom half of the cities as it relates to tax increases. Orono's employees are not paid like federal employees and they do not have life -long benefits. Esau stated from his perspective it would be a good message to send during the poor economy A resident commented that approximately 55 percent of everyone in the United States has lost their job or has taken a pay cut. The resident indicated he would like his road paved. He has lived here 32 years and it has not been paved yet. . White indicated they do have a pavement management plan that was recently adopted and that the City is planning to pave the roads throughout the city. PAGE 5 of 6 MINUTES OF THE TRUTH -IN- TAXATION MEETING Monday, December 6, 2010 7:00 o'clock p.m. The resident commented he is not sure what the residents get for their tax dollars and that they even have to pay for their own street light. Loftus indicated the residents receive police and fire protection for their tax dollars. Franchot stated the roads not being kept in good repair is not a good thing and that the City is attempting to catch up on the maintenance with the pavement maintenance plan. White noted the City of Orono has never gone into the red on their budget and that they have watched their spending very carefully over the years. White noted they have reduced the amount of staff by six positions. Mayor White closed the public hearing at 8:08 p.m. MAYOR/COUNCIL REPORT None CITY ADMINISTRATOR'S REPORT None ADJOURNMENT • Murphy moved, Bremer seconded, to continue the truth -in- taxation meeting to December 13, 2010, and to adjourn at 8:08 p.m. VOTE: Ayes 5, Nays 0. ATTEST: Lin a S. Vee, City Clerk (Jesthi�t�eMayor • PAGE 6 of 6