4.1. SR 11-17-1997~ty of
iver
Item #4.1.
MEMORANDUM
TO:
FROM:
DATE:
SUBJECT:
Mayor & City Council
aotv eK lmai i tlY9 mi
1998 Budget
The Truth in Taxation public hearing on the 1998 city budget and tax levy is
scheduled for 6 p.m. on Monday, December 1, 1997. The City Council
established its maximum levy and budget for 1998 when it adopted
Resolution 97-94 on September 8, 1997. In general, this resolution was based
on the levy limits established by state law.
At the October 27 and November 3 City Council meetings, the Council
identified approximately $150,000 worth of budget adjustments in order to
possibly reduce the city tax revenues. This was done after preliminary
county information on the city net tax capacity (NTC) growth was provided.
While the market value growth in the city was similar to previous years, the
growth in the NTC was not what we had seen in the past few years due
mainly to state law changes regarding the tax classes. This low growth in
the NTC led the City Council to consider tax revenue reductions because of
the belief that the city tax rate growth of almost 8 percent based on the
9/8/97 resolution was too high.
Additional county information is now available on the estimated tax rate in
Elk River and this information is positive. The information from the county
is positive in terms of our total tax rate DECREASING slightly for 1998.
However, this positive tax rate information doesn't take into account any
property value changes as established by the county assessor, nor does it take
into consideration the recently approved school levy referendum. The
preliminary 1998 tax rate information is as follows:
13065 Orono Parkway · P.O. Box 490 · Elk River, MN 55330 · TDD & Phone: (612) 441-7420 · Fax: (612) 441-7425
1998 Budget
November 17, 1997
Page 2
1998
1997 (estimate)
County 24.392 27.251
City 24.683 26.613
EDA .759 .840
HRA .574 .632
School 62.359 56.462
Total 112.767 111.798
Additionally it should be noted that the estimated 1998 city tax rate
information is based on the 9/8/97 city resolution. If the tax reduction which
the City Council reviewed on 10/27 and 11/3 is implemented, then there
would be a further reduction of approximately 1.2 in the 1998 tax rate.
The question before the City Council at this budget worksession is whether or
not the Council would like to add back in some of the tax revenues which
were proposed to be cut on 10/27 and 11/3. The 9/8/97 resolution showed the
city tax rate going up 7.82 percent (from 24.683 to 26.613). The 10/27 and
11/3 City Council action has the city tax rate going up approximately 3
percent (from 24.683 to 25.423). If the City Council would like to add some or
all of the tax revenue adjustments from 10/27 and 11/3 back into the budget,
it should be done at this ti'me before the Truth in Taxation public hearing. It
is much harder to go into the December I public hearing with the lower tax
figure and increase this amount versus going into the public hearing with the
9/8/97 amount. The Council can always reduce this tax amount in December.
If the City Council would like to add back some or all of the tax revenue, then
the city tax rate will go up from what was discussed on 10/27 and 11/3.
Nonetheless, the total rate will still be less than the 1997 total rate based on
current estimates from the county. Please see the attached list of
adjustments which the City Council authorized on 11/3 in order to review
possible changes in the budget. Staff priorities for adjustments include
reducing the cash flow, increasing funds back into the Council Contingency,
moving the equipment purchases back into the budget, and reducing some of
the revenue increases based on growth (i.e. building permit fees, plan check
fees).
1998 Budget
November 17, 1997
Page 3
In light of the 1998 tax rate decrease, another issue should be considered by
the City Council. This issue, which has only been briefly discussed by the
Council during past Capital Improvement Program meetings, is a general
city tax for the core village street reconstruction program. Information on
the total cost of this program is being developed by the city engineer and the
street/park superintendent and will be presented to the City Council in
January, but it is clear that in order to adequately fund a program, the city
will need a long term tax revenue source similar to the surface water
management levy. Initial estimates indicate that a total plan for the core
village area streets which need reconstruction could cost in the $6-$8 million
range. This project could be accomplished over a ten or twenty year time
frame, but if it takes 20 years, then essentially we will have to start over once
we get completed with the 20th year. Over a 20 year period, the program
would cost somewhere in the range of $350,000 per year and over a ten year
period, the cost could reach $700,000 per year. Funding for a core village
street reconstruction program will include some general fund tax revenues,
use of some city reserves, and some assessments to benefited property
owners. Because the 1998 tax rate is going down and the City Council has
considered adjusting its budget and tax revenues, the Council could now
consider establishing this core village street reconstruction tax revenue with
limited impact on the total tax rate.
It is much more difficult to initially establish a tax revenue source of funds
for programs than it is to continue this tax revenue. The city could begin the
street reserve program with about $125,000 in tax revenue at this time and
add to this total in 1999 and thereby have a street reconstruction tax levy of
about $250,000 per year established. This can then be continued for the life
of the reconstruction program.
Even though the City Council has not discussed a street reconstruction tax
revenue program in any detail in the past, it is something the Council should
seriously consider at this time as it appears we have an opportunity to begin
this program with limited impact on the total tax rate.
\\elkriver\sys\shrdoc\council\bdgt 1117.doc
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MEMORANDUM
TO:
FROM:
DATE:
SUBJECT:
Mayor & City Council
Pat Klaers, City Admiv~tor
November 3, 1997
Adjustments in the Budget Due to the
$149,650 Reduction in General Fund
Tax Revenues
Revenue Increases
Plan Check Fees
Planning/Zoning Fees
Fire Calls and Contracts
Building Permit Fees
Plumbing/Heating Permits
Liquor Store Transfers
Street Reserve Transfers
Total
+$1o,ooo
+$ 3,000
+$ 6,000
+$16,000
+$ 2,000
+$10,000
+$ 5.000
$52,000
Revenue Increase
Use of cash flow reserves -
Expenditure Reductions
Mayor & Council- No contribution to
CMIF and Historical Society - ($13,850)
· Move the street computer, equipment repair/maintenance, hoist, and park
mower capital outlay purchases to the equipment reserve category -
($13,600)
· Reduce the ice arena reserve - ($2,000)
· General reduction in most of the budgets in the supphes and other
charges categories - ($17,500)
Total ~
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3065 Orono Parkway · P.O. Box 490 · Elk River, MN 55330 · TDD & Phone: (612) 441-7420 · Fax: (612) 441-7425
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