HomeMy WebLinkAbout12-12-2011 Truth in Taxation MinutesMINUTES OF THE
ORONO TRUTH -IN- TAXATION MEETING
Monday, December 12, 2011
6:00 o'clock p.m.
The Orono City Council met on the above - mentioned date with the following members present: Mayor
Lili Tod McMillan, Council Members Cynthia Bremer, Doug Franchot, Aaron Printup, and David Rahn.
Representing Staff were City Administrator Jessica Loftus, Finance Director Ron Olson, and Recorder
Jackie Young.
Mayor McMillan called the meeting to order at 6:05 p.m., followed by the Pledge of Allegiance.
2012 BUDGET AND TAX LEVY
Ron Olson, Finance Director, stated the purpose of the public hearing is to discuss the 2012 budget and
tax levy for the City of Orono. It is not to discuss property values, which is done at the Local Board of
Review hearing in the spring.
Olson stated the amount of tax that an individual property pays is calculated by multiplying the property's
taxable value by the City's tax capacity rate. The tax capacity rate is also a calculated number that is
determined by dividing the City's tax levy by the total taxable market value of all properties in the City.
The taxable market value for the City has decreased by $202,371 or 7.3 percent. Based on the 2012
taxable value, the City's tax capacity rate for 2012 will increase from 14.991 to 16.233 percent.
A majority of the decrease in tax capacity is the result of the overall decrease in home values. Part of the
• decrease, however, is the result of the change from the Market Value Homestead Credit to the Market
Value Exclusion. This change instituted by the State of Minnesota resulted in $13,067,192 of the
decrease. The total tax levy required to fund the 2012 budget is $4,701,760. This is the same amount as
the 2011 levy.
Olson stated the MN Legislature this year passed the Market Value Exclusion and eliminated the Market
Value Homestead Credit. Under the Market Value Exclusion system, on values up to $76,000, 40 percent
of the value of the home is excluded from the tax base, with the percentage being phased out totally on a
home worth $413,000. As a result, a $76,000 home would have a tax capacity of only $45,600. On a
$300,000 home, it would be $289,760, and on a $500,000 home, it would be $500,000 for calculation
purposes. That resulted in an increase in the tax capacity rate for the City from 16.160 to 16.233 percent.
The lower valued homes might pay a little extra in property taxes, but the change primarily pushes the tax
to higher valued homes, commercial/industrial properties, and non - homesteaded properties. From 2011
to 2012, the property tax levy is exactly the same, but the City's tax rate increases slightly.
Olson stated 46 percent of a person's tax dollar goes to Hennepin County. Schools receive 29.57 percent,
the City receives 14.98 percent, and other is 9.29 percent. The other category includes Hennepin Parks,
Hennepin County Regional Rail Authority, and the HRA, which raises Hennepin County's share to 51
percent. The general fund receives $3.9 million, the park fund receives $5,000, and debt service receives
$764,000. For the City's purposes, 52 percent of the expenditures are for public safety, which is police .
and fire; 13 percent goes to street maintenance; 8 percent goes to planning and zoning; and 12 percent
goes to general government.
As it relates to the tax affect on a home, assuming a $250,000 home experienced a 5.8 percent decrease in
• value, their taxes would decrease by $18.46. On a $500,000 house that experienced a 5.8 percent
decrease in value, they would experience an increase of $3.26. A two million home would experience an
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NIINUTES OF THE
ORONO TRUTH -IN- TAXATION MEETING
Monday, December 12, 2011
6:00 o'clock p.m.
increase of $60. With a zero percent change in value, a $500,000 would increase $62 and a million dollar
home would increase by $139.
Olson stated the 2012 budget reflects an effort to maintain City services during an extended period of flat
to decreasing revenues. The economy and the housing market have limited the City's primary revenue
source, which ,is the property tax levy. Other revenue sources have continued a four -year trend of
remaining flat or decreasing. Throughout this period, City Staff has worked diligently to control
expenditures. The overall General Fund budget and property tax levy has not increased from the 2011
budget.
The proposed 2012 General Fund expenditures are $5,785,630. This is the same amount as the 2011
budget. This is the smallest General Fund budget since 2007, and is $380,130 less than the peak budget
year of 2009. The 2010 budget was the first year that the golf course was included in the General Fund.
If the golf course expenditures are excluded for comparison purposes, the 2012 General Fund budget is
$546,460 less than the 2009 budget.
The majority of the budget decreases are the result of reductions in staffing levels. The 2011 budget
reflected the following unfilled positions: building inspector, planner, public works maintenance worker,
a part-time clerk, and four police officers. In 2012, the position of Public Works Director /City Engineer
is being added to the budget. By adding this position, the City will be able to increase efficiency and
provide better customer service to our citizens. The savings in contracted services that will result from
the addition of this position will allow the addition to be made without increasing the overall budget. •
Although the overall General Fund budget is decreasing, certain line items are increasing. The budget
includes a 1 percent increase in employee wages effective July 1. For the fiscal year, this is an effective
increase of 0.5 percent. The City's contribution for insurance is being increased by $75 per month for
employees who are on a family health plan. The contribution is frozen at the 2011 level for employees
who are on single coverage or waive insurance. 2012 is the first year that all employees will not receive
the same insurance contribution.
The proposed General Revenues are $5,785,630, which is the same amount as 2011. The property tax
levy, representing 68.0 percent of total fund revenues, has not been increased from 2011 and remains at
$3,932,260.
While most revenues are being budgeted at the same level as 2011, two revenues have increased
significantly. The revenue for building permits has been increased by $14,600. The other significant
revenue increase is the line for engineering and legal fees, which has been increased by $20,000. Both of
the revenue increases are based on the actual 2010 revenues and an estimate of 2011. Other, less
significant revenue sources have also increased and are identified in the revenue section of the budget.
Olson stated in addition to the General Fund budget, the City also adopts budgets for certain special
revenue funds. The Park Fund revenues are budgeted and include $5,000 in tax levy. The 2012 Park
Fund budget includes $23,500 for new equipment at the Crystal Bay Park. The City has applied for a
grant in the amount of $11,750 to help fund this improvement. The Drug/Felony Forfeiture Fund budget
includes revenues and expenditures related forfeiture activity of the Police Department. The funds are
restricted for use related to drug/DWI enforcement activities. The TIF Fund budget accounts for funds •
associated with the Orono Senior Housing TIF District.
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MINUTES OF THE
ORONO TRUTH -IN- TAXATION MEETING
Monday, December 12, 2011
6:00 o'clock p.m.
Debt Service Funds are used to collect funds for the annual principal and interest payment on the City's
outstanding bonds. The tax levy for the debt service funds is formally adopted by the Council as part of
the budget process. The 2012 levy required for the debt service funds is the same as 2011 but will
increase slightly in 2013. If no new bonds are purchased, the debt service in 2015 will drop to $623,000
and to $573,000 in 2016.
Printup asked what the other category includes.
Olson stated it primarily includes the Hennepin County Regional Rail Authority, Hennepin Parks, and
HRA, which is 5.14 percent. Also included would be the Metropolitan Council at approximately 2
percent, the Watershed District, and the park museum. Every property in Hennepin County pays a very
small percentage for the" park museum.
Rahn asked how much more of a decrease in the budget the City would have needed to keep the same tax
rate.
Olson indicated it would be several hundred thousand and would be approximately 1 percent times 28
million. '
Rahn commented that other cities have been using a tax rate rather than the levy rate.
Olson stated there were years when the City's tax capacity was going up 10 percent per year but that the
City's tax rate was actually decreasing from a high of 20 percent to a low of 12 percent. Olson stated he
would not recommend using the tax rate rather than the levy percentage.
McMillan asked if the property valuations are still dropping in the City.
Olson indicated the amount of decrease has lessened somewhat but that there will still likely be a small
decrease over the next year. Olson noted the valuations for apartment buildings have increased.
McMillan opened the meeting for public comment at 6:30 p.m.
Kevin Landgraver, 2570 Thoroughbred Lane, asked of the City's $29 million tax capacity, how much is
residential versus commercial.
Olson stated the majority of it would be residential but that he does not have the exact percentage.
Landgraver asked if commercial /industrial has also declined by a comparable percent rate.
Olson noted some of the commercial buildings were empty this past year so their valuations were less, but
that once they secure tenants, their valuation would increase. Olson indicated he would be able to provide
that information to the Planning Commission.
Landgraver asked how the 7.5 FTE's would impact the budget.
Olson indicated those positions are not included in this year's budget and that he does not anticipate those
• positions being filled in the coming year.
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MINUTES OF THE
ORONO TRUTH -IN- TAXATION MEETING
Monday, December 12, 2011
6:00 o'clock p.m.
McMillan closed the public hearing at 6:36 p.m.
Olson noted the updated financial information will be posted on the City's website in the next few days.
McMillan commented that the City of Orono has a tremendous amount of financial information on their
website in comparison to other cities.
ADJOURNMENT
Franchot moved, Rahn seconded, to adjourn the Orono 2012 Budget and Tax Levy meeting at 6:40
p.m. VOTE: Ayes 5, Nays 0.
ATTEST:
Linda S. Vee, City Clerk Lili Tod McMillan, Mayor
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