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4. SR 12-11-1995( ty of� k lRiver • TO: INTRODUCTION ITEM 4. MEMORANDUM MAYOR AND CITY COUNCIL FROM: PAT KLAERS, CITY AD TR DATE: DECEMBER 7, 1995 SUBJECT: 1996 BUDGET AND TRUTH IN TAXATION HEARING The City of Elk River General Fund Budget public hearing is scheduled for 7:00 p.m., Monday, December 11, 1995, at the Elk River City Hall. This budget public hearing will follow the Economic Development Authority meeting. This public hearing is required by the Truth in Taxation law. The • purpose of the public hearing is to receive citizen input on the proposed 1996 City of Elk River budget and tax levy. Notice of this public hearing has been sent out by the county to each property owner within the city. Along with this notice for the public hearing was information on the property owners' proposed taxes. Additionally, a public hearing notice for this meeting was published in the 12/6/95 Elk River Star News. Information on the 1996 proposed budget, the tax levy, and this public hearing was also published in the October and December 1995 city newsletters. In September 1995, the City Council adopted the proposed maximum budget and levy. In accordance with these previous decisions, a balanced budget in the amount of $4,094,750 is proposed. This 1996 budget proposal reflects a 9.71 percent or $362,500 increase over the adopted 1995 budget. The proposed city net tax levy for 1996 is $2,570,439. Of this total, approximately 82.8 percent or $2,128,501 is for General Fund activities. The balance (17.2 percent of the total net tax levy) is used for special assessments, equipment certificates, previous bond issues, the dam loan, the library, and the surface water management program. The proposed net levy increase for 1996 is $347,092. Of this net tax levy increase, $337,400 is for the General Fund. 13065 Orono Parkway • P.O. Box 490 • Elk River, MN 55330 • (612) 441 -7420 • Fax: (612) 441 -7425 1996 Budget Memo December 7, 1995 ---------------------------------- - - - - -- 46 THE ISSUE Page 2 State law requires a Truth in Taxation public hearing on the city budget and levy, but what people really want to do at this public hearing is to express their concerns over taxes. The preliminary city tax rate in 1996 (based on the current 1996 NTC estimate) is identical to the city tax rate in 1995. This tax rate is 23.958. While the tax rate did not change, additional tax revenues are generated and are available for city programs. This additional tax revenue is generated by a growth in the city's net tax capacity. The net tax capacity for the city increased by 15 percent for taxes payable in 1996. If individual property owners saw an increase in the value of their property, then they also will see an increase in their taxes at the city level regardless of the tax rate remaining unchanged. It should be noted that the city is approximately 22 percent of the total tax rate. Approximately one half of all the taxes a property owner pays go to the school district. The balance goes to the county and to the city HRA and EDA. Overall, I believe that the city provides very good services for the dollars paid by property owners. Some additional information to help everyone understand the status of taxes • in Elk River is offered in the attached League of Minnesota Cities magazine summary and from the 9/15/95 Star Tribune newspaper article on property taxes. The newspaper article shows Elk River with one of the best rankings, regardless if it is considered metro or non - metro, for the taxes a person would pay on a house that sells for $100,000. It should be noted that this house selling for $100,000 may have a different market value in Elk River that it may have in another community. Elk River ranks twenty -fifth best out of twenty -seven non -metro cities and 100 out of 103 metro cities ... The average tax rate information from the League of Minnesota Cities summary shows Elk River with a 1995 tax rate of 104.13. This is lower than the 25 listed metro and non -metro cities that have a population between 10,000 and 20,000. These two attachments help indicate that the taxes paid in Elk River are very reasonable when compared to other communities. THE BUDGET AND TAX LEVY As previously noted, the budget is proposed in the amount of $4,094,750. This is a $362,500 or 9.71 percent increase over the adopted 1995 budget. One organizational change took place in the 1996 budget. This change is the relocation of the use of equipment reserves out of the General Fund budget. This is being done in order to better track the actual expenditures and the funding sources for capital outlay items. Use of the equipment reserves is now separated out of the General Fund and listed in a separate special 1996 Budget Memo Page 3 December 7, 1995 revenue budget page. Accordingly, when looking at the budget increase, the information is skewed by approximately $40,500. This is how much money is being taken out of equipment reserves for purchases in 1996. When references are made to tax revenue increase being a certain percentage of the total budget increases, or increases in personal services being a certain percentage of the total increase in the budget, it should be kept in mind that this $40,500 budget change has taken place and the numbers are slightly skewed. With that being said, almost all the total 1996 budget increase is in personal services. The budget increase is $362,500 and personal services are projected to increase $324,350. This is due to cost of living and step increases for existing employees and due to the hiring of new employees in 1995 to provide additional services. All of the cost of living increases and expenses for new employees in 1996 are included in the City Council contingency budget. As these increases are approved and new employees are hired, funds will be transferred out of the contingency budget into each departmental budget. Of the total budget increase of $362,500, most of this revenue increase is in general taxes. The increase in General Fund tax revenues is $337,400. However, the city tax rate did not change and all of this revenue increase is generated through additional tax capacity. The city tax levy was 23.958 in 1995 and is the same for 1996. As you can tell by the figures in the above paragraph, most of our increase in spending is for employees and most of our increase in revenues is from taxes. Hopefully, our tax capacity will continue to increase so that our tax rate can remain stable and the city can still generate additional revenues for additional expenses. However, if our tax capacity doesn't increase in the future, we will either have to increase the tax rate to finance new employees or we will not be able to hire new employees and may even have to freeze wages. I wish the relationship between taxes and employees was not so close, but when all other revenue sources are being used, then this becomes the case in Elk River and in most Minnesota cities. MISCELLANEOUS NOTE Before concluding this budget memo, it should be noted that the city taxing districts have changed for 1996. Nineteen ninety -five was the last year when there were separate urban and rural taxing districts. In 1996, there is only one tax rate for the entire city. This is a modest change as in 1995 the rural rate was 95 percent of the urban rate. r: 1996 Budget Memo December 7, 1995 ---------------------------------- - - - - -- to CONCLUSION Page 4 At the 12/11/95 Truth in Taxation budget public hearing, city staff will be prepared to discuss the proposed 1996 budget and tax levy. This packet contains a lot of budget information and tax levy information for the City Council to review and consider. The City Council has seen most of this material in the past few months and should be familiar with the big issues that affect the budget and tax levy. According to the Truth in Taxation law, the City Council cannot adopt the tax levy or budget at this 12/11/95 meeting. The public hearing should be closed if all in attendance have had the opportunity to speak, after which the City Council must announce continued consideration and proposed adoption of the budget and tax levy until 7:00 p.m. on Monday, 12/18/95. This will provide the Council with an opportunity to evaluate the public input it receives on 12/11/95. However, if the public hearing is continued to allow all in attendance to speak, and the City Council receives and considers additional public input on 12/18/95, then adoption of the tax levy and budget cannot take place at that meeting. Adoption of the tax levy and budget • would then have to take place at a special meeting on Thursday, December 21, 1995. (In short, the Council can't adopt the budget and levy at the same meeting in which public input is received through a public hearing. After the public hearing is closed, the Council must announce when they will consider the budget and levy.) ATTACHMENTS 1. City of Elk River tax rate information - This information shows the City tax rate remaining stable over the past few years. 2. League of Minnesota Cities Tax Summary Information - This information shows an average tax rate for some of the communities in the state. 3. Property Tax Survey Newspaper Article - This 9/15/95 Star Tribune newspaper article discusses taxes on a house that sells for $100,000 in the metro and non -metro communities. This information shows Elk River in a very positive manner. 4. The Current - The October and December, 1995, city newsletter preliminary budget and tax levies information. 5. The budget document including the tax levy resolution for the calendar year 1996. CITY OF ELK RIVER • PRELIMINARY 1996 TAX RATE INFORMATION Levy Year 1995 1994 1993 1992 1991 1990 1989 Tax Payable Year 1996 1995 1994 1993 1992 1991 1990 TAX RATES CITY (Urban)* 23.958 23.958 21.902 20.560 19.472 20.690 22.620 TOTAL NTC Tax Rate 104.321 104.247 108.217 103.025 104.612 94.845 97.145 MV Tax Rate** 0.05250 0.05050 0.05252 *City tax rate does not include the HRA or EDA. **School Excess Levy Referendum Sample Property: Residential Homestead Market Value Net Tax Capacity Count ... x ....... ............................... City School School Referendum HRA EDA • TAX DISTRIBUTION 105,000 1,380 TAX 1994 1996 1995 1994 339.45 308.84 300.94 330.62 330.62 302.25 750.78 779.85 870.82 55.13 53.03 55.15 8.11 8.36 8.45 10.67 10.93 10.94 1494.75 1491.63 1548.54 PERCENT OF TOTAL 1996 1995 1994 22.71% 20.71% 19.43% ................................. 22.12% ............................... 22.17% 19.52 %€ .................................... 50.23% ............................... 52.28% 56.23% 3.69% 3.55% 3.56% 0.54% 0.56% 0.55% 0.71% 0.73% 0.71% 100.00% 100.00% 100.00% Average Total Tax Rate City 1994 Population For 1995 7 County Metro * Andover 19,465 115.96 18,492 Anoka 17,509 122.76 * Chanhassen 14,316 151.50 * Chaska 13,721 139.06 * Hastings 16,200 130.19 171.38 Mendota Heights 10,636 116.98 Worthington Mounds View 12,552 141.59 N. St. Paul 12,809 142.70 * Prior Lake 12,559 156.25 * Ramsey 14,907 114.11 * Rosemount 11,086 130.52 * Savage 13,703 162.17 * Shakopee 13,041 152.55 * Stillwater 15,350 132.72 Vadnais Heights 11,968 136.78 . * White Bear Lake Twp. 10,236 135.16 *Cities Experiencing modest or Rapid Growth Non Metro Fairmount 11,350 122.89 Faribault 18,492 148.00 Hutchinson 12,174 148.17 Marshall 12,397 116.19 New Ulm 13,477 121.42 N. Mankato 11,183 130.93 Northfield 15,352 171.38 Willmar 18,544 131.40 Worthington 10,200 119.18 ELK RIVER 12,811 9 Source: October 1995, League of Minnesota Cities Magazine sAadminkitypop.doc 104.13 t7p� t i Star Tribune Friday September 15/1995 Please read and recycle 1 B W Property taxes : jump,,.a ga. in n in s Rising metro home values cited; Hudson has g hi hest burden By Norman Draper Much of that increase was fueled by rising Actrording to the survey, the owner of a hypo- those other categories. Staff Writer home values, not tax levy increases said Lynn thetical 5100,000 home in Hudson would pay Reed, research associate with the Taxpayers $2,917 in property taxes. That's S 1,292 more "Over here we tax everything the same," said Twin Cities residential properly taxes contin- Association. than the Minneapolis owner of a $ 100,000 Gerald IIerning, Hudson's clerk/treasurer. ued annual al soar in 1995, according g the 29th home would pay. It's $1,529 more than a "Consequently, businesses are paying less tax - annual survey by the Citizens League and the Also, thin ys could be worse: you could be comparable Bloomington homeowner would es compared to neighboring states, and resi- Minnesota Taxpayers Association. living in Wisconsin. y, $1,617 more than one in Lakeville and dences are paying more ... The businesses V 162 more than one in Waconia, which was are finding the business climate more attrac- The median tax for the average metro area The survey, which calculated property taxes determined to have the highest metro area tive in Wisconsin." home rose slightly more than I 1 percent, for three Wisconsin communities for the first taxes for a$ 100,000 home. according to the survey, which was released lime, found that Wisconsin homeowners real- But doesn't Berning get an earful from irate Thursday. 1), get soaked. The typical homeowner in Hud- That's in large part because Wisconsin taxes homeowners, especially since his name is on son, for instance, pays twice as much in homeowners at the same rate as apartment lhetaxbills? Cause for despair? Not necessarily. property taxes as many Minnesotans with owners and businesses. In Minnesota, home- . equally priced homes. I' : owners are taxed at a lower rate than both of Property taxes continued on page 3B The Current Printed o0 n recycled paper she City of Elk River Newsletter Vol. 6, No. 5 — October 1995 Council holds the line on taxes On September 5 the City Council approved the maximum 1996 City Tax Levy and General Fund Budget. The levy as approved will not increase the city' s tax rate. This means that if you live in the urban district and your property value, as determined by the county assessor, did not increase, your 1996 city property tax will be the same as it was in 1995. Keep in mind that if your property value increased for taxes payable in 1996, your tax will increase due to the increase in value. Also, ifyou live in the rural district, you will experience a slight increase in your tax rate because the urban and rural districts will be combined for taxes payable 1996. The city, Sherburne County, School District 728, and the city's Economic Development and Housing and Redevelop- ment authorities all receive a portion of your property tax. As the chart below indicates, in 1995 the city will receive ap- proximately 22.23 percent and the city's EDA and BRA will receive another 1.29 percent of the property taxes paid by city property owners. • 1995 PROPERTY TAX ALLOCATION City 22% School District 56% County EDA/HRA 21% 1% Most of the city's tax revenue is used to pay for general fund activities. The balance is used to fund the Library building and maintenance, to pay for bonds issued to finance the purchase of capital equipment for public safety and public works departments, to fund storm water improvements and other public improvements. General fund activities include general government (elec- tions, administration, finance, mayor & council, planning, legal, etc.), public safety (police, fire, police reserves, emer- gency preparedness, building inspections and code enforce- ment), public works (streets, snow removal, engineering, fld eet lighting, program and equipment repair) and culture recreation (parks, recreation, shade tree program and senior citizen programs). As you can see from the chartbelow, public safety accounts for the majority of the general fund expenditures. 1996 PROPOSED GENERAL FUND EXPENDITURES Public Works General 15% Government 27% Culture & Public Safety Recreation 49% 9% Although the city continually tries to find innovative ways to increase revenues with out increasing taxes, property tax revenue is still the major source of general fund revenue. Intergovernmental Revenues (state and federal aids) have continued to decrease and now account for less than a quarter of the general fund revenues. 1996 PROJECTED GENERAL FUND REVENUES Intergovt. Fines & Forfeits Revenues 2% 23% Transfers 5% Property Taxes 51% Licenses & in;D Permits Charges for Other 6% Services Revenues 10% 3% Public hearings on the proposed 1996 Tax Levy and General Fund Budget will be held in December. The first hearing is scheduled for December 11, 1995, at 7 p.m., at City Hall. The public is invited to attend. This is your opportunity to share your comments on the tax levy and budget with the Mayor and City Council. Following input from the public, the final 1996 Tax Levy and General Fund Budget will be adopted at a subsequent meeting. The Cuse n Printed on recycled paper The City of Elk River Newsletter vol. s, No. s — December 1995 arbon Monoxide: Early Warning Can Save Your Life What is carbon monoxide? Carbon monoxide is an invisible, odorless, colorless gas created when fuels burn incompletely. In the home, heating and cooking equipment are possible sources of carbon monox- ide. Vehicles running in an attached garage could also pro- duce dangerous levels of carbon monoxide. You can protect yourself against carbon monoxide poisoning by maintaining, using, and venting heating and cooking equipment properly and by being cautious when using vehicles in attached ga- rages. A reminder that the installation of a carbon monoxide detector is NQ substitute for safe use and maintenance of heating and cooking equipment. What to do if your carbon monoxide detector alarms? If anyone shows signs or symptoms of carbon monoxide poisoning, exit the home immediately. Call 911 from a neighbor's home and tell the 911 operator that people are ill and in need ofinedical attention. After you have reported the alarm, stay at the neighbor's home until the fire department and ambulance arrives; do not go back into the home. What should you do if you arrive at home and hear the carbon monoxide alarm sounding? In this case you should ,y outside the home and go to a telephone and call your fuel plier, (example: Minnegasco, or a propane supplier, etc.) and ask them to come to your home. You should remain Christmas Tree Disposal As a service to Elk River residents, the city of Elk River will be accepting Christmas trees for disposal on Saturday, January 6, 1996 and Saturday, January 13, 1996 from 8:00 a.m. to noon. Residents may bring their Christmas trees to the Fire Station at III T- ckson Avenue (north of High - 0). There is no charge for this ser- but the city asks that you ing a donation of a non- perish- Lble food item for the local CAE R food shelf. A bin will be avail- able for food shelf donations. If you have any ques- tions on the Christmas tree disposal program, please call City Hall at 441 -7420. Happy Holidays!! outside of your home until the fuel supplier arrives to check out the source of carbon monoxide. In this case, there is no need to call the fire department since all occupants are safe and in no medical danger. * *A reminder to all homeowners: Remember the name and phone number of your fuel supplier (Minnegasco or other fuel suppliers). Always remember to stay outside the home and wait until the service technician you have called arrives and checks out the source of carbon monoxide. Here is a list of some safety t�ila to remember* When warming up your vehicle, remove it from the garage immedi- ately, do not run a vehicle or other fueled engine or motor in the garage even if the garage doors are open. Have fuel - burning household heating equipment checked every year before the cold weather sets in. Make any needed repairs to ensure proper working order of the equipment. When using a fireplace, open the flue for adequate ventilation. Always use barbecue grills (which can produce carbonmonoxide) outside. Never use them in the home or garage. If you have any questions in reference to carbon monox- ide detectors, First Alert has a customer service phone num- ber available to help answer your questions. Call 1- 800 -323- 9005.