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ARDEN HILLS SPECIAL CITY COUNCIL BUDGET WORK SESSION—SEPTEMBER 4, 2012 2 Director of Finance and Administrative Services Iverson explained that fiscal disparities runs on a one year lag and is based on the levy amounts that jurisdictions submitted for 2012. She indicated that the jurisdictions who increased their levies will receive more, and those who kept their levies flat, or had fairly small increases, will see decreases in fiscal disparities funds. The effects of the market value exclusion from last year are also seen in this year's fiscal disparities numbers. Director of Finance and Administrative Services Iverson stated that according to information provided by Ramsey County in May 2012, the median home value in Arden Hills will decrease from $272,800 for 2012 taxes to $257,400 for 2013 taxes. She noted that this is a 5.6% drop in value compared to the county average decrease of 7.6%. She further explained that Ramsey County noted that assessed value has declined for the past five consecutive assessments as a result of the recession, and that the loss in value this period has been the largest loss in value of residential property. She commented that there are encouraging signs that the markets have stabilized, and there is a flattening in the decline of residential values. Apartment values are rising and the commercial markets are showing a promise of appreciation, and foreclosures are at a lower percentage than they have been in many years. Director of Finance and Administrative Services Iverson stated that in order to evaluate the true impact to the residential property owner, two things need to be taken into account. First, is the amount of the decrease in fiscal disparities, which is 8.2%, and second is the change in the taxable value, which is a decrease of 4.4% after exclusions. The reduction in fiscal disparity dollars and changes in the assessed market value, resulted in a net tax rate increase of 5.4% before any changes are made to the levy. Director of Finance and Administrative Services Iverson recapped Arden Hills' levy history. She noted that the State of Minnesota has given local municipalities the authority to levy taxes to fund operations and debt payments. She explained that the City's entire tax levy goes to general fund expenditures. She stated that for the City of Arden Hills, the property tax levy accounts for approximately 78% of the general fund revenues. Although the City does not generally use reserves to balance the City's budget, due to the turn in economy, the City used $41,201 to balance the budget in 2010 and $20,000 in 2011. Reserves were not used in 2012. She noted that the City has been very conservative in its budgeting and has reduced department budgets or used reserves to deal with the increased costs of contracted services such as public safety. Director of Finance and Administrative Services Iverson indicated that the 2013 preliminary budget was prepared assuming a 2% wage increase for non-union staff and a $32 per month increase in the City's contribution to health and dental insurance. She also discussed the General Fund and the revenues and expenditures within the fund. She noted that using the Council directed levy increase of 4.1% equated to $128,516 in additional tax revenue. In spite of the tax levy increase, some departmental budgets are decreasing (Administration, Finance and Administrative Services, and Government Buildings). Therefore, a slight revenue loss shows up in the General Fund as the overhead charges are decreasing. She also reminded the Council that the City received conduit debt fees from the Presbyterian Homes project in 2011 and transferred those funds to the EDA in 2012. There is no other funding source identified for the EDA or for funding reserves in the capital funds at this time.