7B, 2013 Proposed CIP, Final Budget and Tax Levy

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Memo - City Council 2013 Proposed Final Budget and Tax Levy 4 TAKING A LOOK AT ARDEN HILLS LEVY HISTORY The State of Minnesota has granted local municipalities the authority to levy taxes to fund operations and debt payments. The City's entire tax levy goes for General Fund expenditures. For the City of Arden Hills, the property tax levy accounts for approximately 78% of the General Fund revenues. Historically, the City does not use reserves to balance the City's budget, however, due to the current economic environment $41,201 was used to balance the budget for 2010 and $20,000 was used in 2011. No reserves were used in 2012. The following table provides a historical view of the City's property tax levies: Year Tax Lew Change Tax Rate Change 2002 $2,201,002 - 25.092% - 2003 $2,265,712 2.94% 23.930% -4.63% 2004 $2,333,337 2.98% 23.367% -2.35% 2005 $2,440,453 4.59% 21.299% -8.85% 2006 $2,537,520 3.98% 20.191% -5.20% 2007 $2,688,944 5.97% 20.206% 0.07% 2008 $2,797,348 4.03% 19.585% -3.07% 2009 $2,948,646 5.41% 20.520% 4.77% 2010 $3,016,465 2.30% 22.647% 10.37% 2011 $3,040,964 0.81% 24.180% 6.77% 2012 $3,096,994 1.84% 25.544% 5.64% 2009 saw the start of the LJFD duty crew implementation, while 2010 and 2011 saw the unallotment of the MVHC to cities. We have been very conservative in our budgeting and have reduced department budgets or used reserves to deal with the increased costs of our contracted services while still maintaining services the last few years. OPERATING BUDGET Salary and Benefits The 2013 preliminary budget was prepared assuming a 2% wage adjustment for non-union staff and a 0% wage adjustment for union staff as it is unknown what our costs will be as our union contract is up on December 31, 2012 (Monies have been set aside in contingency for this purpose). As previously discussed with the City Council, in surveying surrounding communities most have included a 1.5% - 3.0% COLA increase in their preliminary estimates (the majority using 2.0%). Each 1% of COLA wage increase has approximately a $8,557 impact on the General Fund. The budget also assumes no increase in the City's contribution to health and dental insurance contribution from last year. In 2008, the City added a high-deductible HSA plan which has been helping to keep our costs low; in 2011 we saw a decrease of 13.1%, so there was no increase in the City contribution in 2011; 2012 was a 3.6% increase (the lowest rate they could give us by law) and this year's increase is also the lowest increase they could give us by law. Due to this success and per Council direction we have discontinued the Co-Pay Plan for 2013 and added a second HSA plan with an embedded deductible which is allowing us to keep costs down further