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HomeMy WebLinkAbout08-29-11-WSHILLS Approved: September 12, 2011 CITY OF ARDEN HILLS, MINNESOTA CITY COUNCIL WORK SESSION MEETING AUGUST 29, 2011 5:00 P.M. - ARDEN HILLS CITY COUNCIL CHAMBERS CALL TO ORDER/ROLL CALL Pursuant to due call and notice thereof, Mayor Pro -Tem Fran Holmes called to order the City Council Work Session meeting at 5:03 p.m. Present: Mayor David Grant (arrived at 5:20 p.m.); Councilmembers Brenda Holden (arrived at 5:25 p.m.), Fran Holmes, Nick Tamble and Ed Werner. Absent: None Also present: City Administrator Patrick Klaers; Public Works Director Terry Maurer; Director of Finance and Administrative Services Sue Iverson; Finance Analyst Kyle Howard; Parks & Recreation Manager Michelle Olson; Community Development Director Jill Hutmacher and Deputy Clerk Rebecca Brazys 1. APPROVAL OF AGENDA MOTION: Mayor Pro -Tem Holmes moved, Councilmember Tamble seconded, to approve the agenda as presented. Motion carried unanimously (3 -0). 2. COUNCIL COMMENTS & STAFF UPDATES Deferred to later in the meeting. 3. AGENDA ITEMS A. 2012 Proposed Preliminary Budget and Tax Levy Mayor Pro -Tem Holmes asked if the 2.1% decrease in local taxable value is due to the new Market Value Exclusion program. Director of Finance and Administrative Services Iverson stated that is correct. ARDEN HILLS CITY COUNCIL WORK SESSION — AUGUST 29, 2011 2 Mayor Pro -Tem Holmes asked for clarification on the reference to local tax rate at 24.180% in 2011 and 25.050% in 2012. Director of Finance and Administrative Services Iverson explained those figures refer to the local taxable rate on the local portion of the levy. Mayor Pro -Tem Holmes referred to the chart on Page 3 of the 2012 Preliminary Budget, specifically the table at the top of the page and asked if property taxes will be based on the $45,600 Market Value After Exclusion. Director of Finance and Administrative Services Iverson responded that is correct. Mayor Pro -Tem Holmes then asked if the City would get the Market Value Exclusion reimbursed. Director of Finance and Administrative Services Iverson responded that the City will no longer be reimbursed by the State. That amount is now excluded from the tax. What used to happen, she explained, is that taxes were based on the Home Market Value and the State was supposed to reimburse the cities for the Market Value Credit, but they have not been doing that. So what the State did was lower the taxable value. Mayor Pro -Tem Holmes asked for clarification on the tables on Page 4. Director of Finance and Administrative Services Iverson reviewed the figures in the chart on Page 3 which was calculated based on last year's rates and the chart on Page 4 shows this year's figures. She referred to the chart on the bottom of the page and pointed out that the tax for a $272,800 home would be an annual decrease of $4.06 but the impact from the legislative change is an annual increase of $14.28. She further stated that the total net impact ($14.28 minus the $4.06) is an annual increase of $10.22. Mayor Pro -Tem Holmes questioned the figure of $3,070,525 at the top of the chart on Page 5 but on the other chart that same item is listed as $3,040,964 on Page 3. Director of Finance and Administrative Services Iverson explained that both figures are correct; the $3,070,525 includes delinquent taxes and other miscellaneous tax revenue items. Mayor Pro -Tem Holmes stated that on Page 6 in the chart at the top of the page MHVC is listed for $61,774 and asked if Finance had adjusted too much. Director of Finance and Administrative Services Iverson responded that previously whatever we determined our levy was, we would certify that to the County then the homestead credit would reduce the property taxes paid by the property owner and the City was to have been reimbursed that amount by the State. However, the State only reimbursed the City fully one of the nine years the program was in effect. She stated since the City knew they weren't going to be reimbursed by the State, we artificially set the levy higher. She explained that the chart on Page 6 is for the 2012 budget and reflects the major increases for revenue. The MVHC is an increase as we no longer have to budget for not receiving the monies from the state. ARDEN HILLS CITY COUNCIL WORK SESSION — AUGUST 29, 2011 3 Councilmember Werner reviewed the expiring statute and the new statute regarding the Market Value Exclusion. Director of Finance and Administrative Services Iverson explained that the property tax statements going out to residents will only show the figures for the 2011 taxes and taxable value and the 2012 taxes and taxable value under the new law, which will show a reduced value. There will be no explanation of the changes which will be confusing to the property owners. Mayor Grant arrived at 5:20 p.m. Mayor Grant asked if it is up to the City to get the word out to residents about this change. Director of Finance and Administrative Services Iverson responded that the League of Minnesota Cities, the County, and the Department of Revenue are working to provide information for the public. Councilmember Tamble suggested that our City newsletter include information about this change prior to the tax statements going out. Councilmember Holden arrived at 5:25 p.m. Since all Councilmembers were now present, Director of Finance and Administrative Services Iverson proceeded with her presentation on this agenda item. She reviewed the table on Page 1 of the budget book stating that the levy has remained at the same level as 2011 while the tax rate has increased. This is due in part to the change in legislation regarding the Market Value Homestead Credit (MVHC) program and a reduction in our share of fiscal disparity dollars. According to information provided by Ramsey County in March of this year, the median home value in Arden Hills will decrease from $276,000 for 2011 taxes, to $272,800 for 2012 taxes which is a 1.16% drop in value compared to the county average decrease of 4.01%. The MVHC program was replaced with the new Market Value Exclusion (MVE) program which reduces the local taxable value of homestead properties under $413,800 at which point the credit is phased out. This affects the City's tax rate as it reduces the overall taxable value of the City. All jurisdictions will see an increase in tax rates in 2012 as a result of this change. She pointed out that the table at the top of Page 3 provides an example of how the new program will work for five different home values. Homes valued at $76,000 receive the maximum value reduction, and homes valued at $413,800 (value at which the exclusion is phased out) and above receive no value reduction. She then referred to the table at the bottom of Page 4, specifically referring to the line item with a Taxable Market Value of $272,800 and explained that without the change in legislation, there would have been a $4.06 annual deduction in property taxes for that value level. The impact from the legislative change and fiscal disparity raises the annual tax to $14.28. The $4.06 deduction combined with the $14.28 increase results in a net annual increase of $10.22. Mayor Grant asked if the $10.22 figure would be reflected on property tax statements. Director of Finance and Administrative Services Iverson responded tax statements will reflect the net figure. ARDEN HILLS CITY COUNCIL WORK SESSION — AUGUST 29, 2011 4 Councilmember Holden commented that the bottom line is that even with no levy increase, homeowners will be paying more in property taxes. Mayor Grant was concerned that homeowners would find it difficult to understand the process by which the new taxes have been determined. Director of Finance and Administrative Services Iverson pointed out that the figures she has included are tentative because the final rates are not set until January after the period for filing homestead exemptions has ended. Director of Finance and Administrative Services Iverson stated for salary and benefits the 2012 preliminary budget was prepared assuming a 1.5% wage adjustment for non -union staff (1.0% January 1 / 1.0% July 1) and a 1.0% wage adjustment for union staff effective January 1, based on contract negotiations. As previously discussed with the Council, in surveying surrounding communities most have included a 2.0% COLA increase in their preliminary estimates at this time. The budget also assumes a $21 per month increase in the City's contribution to health and dental insurance. The increase for 2012 is 3.6% for medical. 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. Dental has been estimated at 10% as we have not yet received the actual rates from the insurance carrier. Director of Finance and Administrative Services Iverson reviewed the Revenue estimates in the General Fund and pointed out the major differences listed on Page 6. She explained the Revenues are $20,000 higher than the expenditures because $20,000 was used from fund balance reserves to balance the budget last year. Councilmember Holden asked how much the City used from reserves the year before. Director of Finance and Administrative Services Iverson responded that the City had used $40,000 for a total of $60,000 from reserves in two years. She went on to explain the most notable difference in Revenues is that we no longer have to budget the negative amount for the homestead credit; an adjustment in the water tower rental amounts to reflect actual; the increases in program field uses has been included; and miscellaneous adjustments. Director of Finance and Administrative Services Iverson explained that in 2008 the EDA expenditures were moved from the EDA fund to the General Fund because of the negative balance in the EDA fund. The EDA excess TIF revenues are now projected to be $35,000 annually. She added that we had been making transfers from the General Fund to the EDA fund for the gateway signs but have never built the signs. So, the EDA fund balance by the end of this year is estimated to be approximately $115,000. Because we're starting to work on economic development again, we believe those expenditures should be moved back into the EDA funds. She also explained that the City has certain authority for use of EDA funds so she transferred out the same amount of salaries that used to be in the EDA fund and allocated its part of accounting costs, IT and insurance. In addition, the Community Development intern position was increased from a quarter time position to a half time position for the full year. She then reviewed the following increases: Public Safety - $58,820 for increases in the fire contract ($13,467, 3.55 %); Sheriff's contract ($33,966, 3.63 %); 911 Dispatch Services ($7,053, 16.73 %); and Animal Control ($4,334, ARDEN HILLS CITY COUNCIL WORK SESSION — AUGUST 29, 2011 5 72.23%). She explained that Animal Control will be provided by the Ramsey County Sheriff beginning January 1, 2012. As far as Elections, she explained that there were no elections in 2011 so there will be an increase of $16,280 for 2012 which is an election year. In addition, $10,000 has been budgeted for a lease on a copy machine to replace the current copier which is six years old. The maintenance agreement for the current copier expired in June of this year. She stated the $6,000 annual cost for the City's postage meter has been added because it was not previously included in the budget even though we have been incurring the expense. She stated the Government Buildings budget was reduced substantially to more accurately reflect costs for utilities. An amount was budgeted for the increased cost for the Ramsey County Maintenance Facility lease as the cold storage will be converted to heated storage with a net effect of a $28,933 decrease to this budget. She explained that there is no Reserve /Contingency budgeted in the 2012 budget as proposed. Other adjustments include: an increase in the Mayor & Council budget for newsletter costs and training; increases in the Finance and Administrative Services budget for Springbrook software maintenance costs and IT services from Roseville; increase in the Streets budget for snowplowing overtime based on the previous two -year history; a reduction in emergency management cost; and other miscellaneous adjustments. Director of Finance and Administrative Services Iverson then reviewed changes made to Other Funds. The changes to the EDA fund had already been discussed. Staff is recommending a transfer of $65,000 from the PIR fund for gateway signs. There were no significant changes to the other Special Revenue funds with the exception of the Community Services fund being folded into the Public Safety Capital Fund. She explained that this is being done in part because of new accounting standards, but also because the charitable gambling proceeds can only be used for public safety capital purchases, as a result, Council will be asked to formally dissolve this fund and move the balance to the Public Safety Capital Fund at a future Council meeting. She stated the Enterprise Funds have been evaluated and changes made to accurately reflect economic conditions and historical trends. An updated rate study will be done and presented to the Council at the November work session. The rates included in the proposed budget are from the 2008 Rate Study but will be updated and presented at the November work session. She explained that water rates will increase 7 %, sanitary sewer will increase 2 %, and surface water will increase 3 %. Director of Finance and Administrative Services Iverson further explained that the final levy will be established and certified in December. As the Council knows, once a preliminary levy is established, the amount can be reduced but not increased. The preliminary level needs to be certified by September 15. She explained that the 0% levy increase provides no opportunity to build fund balances in capital funds. If Council desires an opportunity to discuss transfers to capital funds, they may want to consider a higher preliminary levy. She asked Council for their input including reaffirming the preliminary levy amount and listing any other concerns or priorities they may have. She further stated that a 1% levy would result in an additional $30,000. Councilmember Holden stated that she is concerned the $70,000 designated for TCAAP operating expenses in Special Revenue funds is not significant enough. She explained that she doesn't see the City getting any operating revenue from TCAAP in 2012. She added that if the stadium does go through on the TCAAP property, she believes the City would need an attorney to create memorandums of understanding with Ramsey County to protect our interests. We may also need a lobbyist during special session. ARDEN HILLS CITY COUNCIL WORK SESSION — AUGUST 29, 2011 6 City Administrator Klaers stated there are no revenues identified and this is outside the General Fund and $70,000 would be transferred out of the General Fund to the TCAAP fund which takes away our ability to do anything else out of the Professional Services line item. He stated that at this time, the City would be better served to either set a levy for the TCAAP fund, or wrap those expenditures into the General Fund. Councilmember Holden stated she is also concerned about the City eating away at the reserves; $60,000 has already been used over the past two years. Our fire costs will continue to go up significantly when Lake Johanna Fire Department goes to a 24/7 paid on call arrangement. Director of Finance and Administrative Services Iverson stated that the City was at 48% of reserves when the audit was done this year and our policy is to be at 50 %. Councilmember Holden stated she would like to have a little cushion and stated she would like to see a 2% levy increase, at least preliminarily, which would bring the City $60,000. Perhaps by December the City will know more about the TCAAP development status and can lower the levy at that time. Mayor Grant questioned the impact of a 2% levy on our homeowners. Director of Finance and Administrative Services Iverson responded that a 1% levy would mean an increase of $7.02 for the median priced home and a 2% levy would increase that same property tax to $14.07. Councilmember Holmes questioned how much is in reserves now. City Administrator Klaers responded that we currently have approximately $1.9 million in reserves. Mayor Grant asked how the 2% levy would impact commercial properties. Director of Finance and Administrative Services Iverson responded that she did not check the commercial impact; those figures are more difficult to determine because fiscal disparities must be considered. Councilmember Holmes asked if the depletion of the reserves is reflected in the budget book. Director of Finance and Administrative Services Iverson directed her to Page 5 to the line item titled "Excess Revenue over Expenditures." Councilmember Tamble stated it was difficult for him to come up with an arbitrary levy percentage "out of the air" when so few details are known at this time. Director of Finance and Administrative Services Iverson explained that this is a preliminary levy which can be reduced in December when the final levy is set. She added that the Council must set the preliminary levy by September 15. ARDEN HILLS CITY COUNCIL WORK SESSION — AUGUST 29, 2011 City Administrator Klaers stated he asked Staff to carefully review their expenses with the goal being no increase in the levy; all the Directors and Managers did a great job in evaluating their expenses, looking at available revenues, and holding costs down. He added that he understood that was the Council's direction, to be very careful and conservative when preparing the 2012 budget. He stated that Sue did a great job and worked very hard to get the budget document completed on time. He further explained that Staff does have some concerns; the $70,000 for TCAAP with no revenues for it and which, if utilized, will result in the Planning Department not having funding for planning studies they need to do. Councilmember Holmes questioned what is budgeted for Professional Services. City Administrator Klaers explained that those funds are spread throughout the budget in various departments. He also referred to the shift of EDA funds out of the General Fund while being a big savings, was one of the main reasons they were able to present a budget with a zero increase. He pointed out, however, that the Council will have to deal with the EDA expenses in the future because there is currently no funding source other than TIF monies. Mayor Grant commented that there is a tendency to want to keep things at zero, but over the longer term that won't be possible because costs are escalating. He stated that he believes some increase is needed to be safe, but he doesn't want to overburden the homeowners. Councilmember Holden commented that the public safety cost increases constitutes the largest percentage of increases every year. She stated the taxpayers need to understand that no levy increase affects the level of service they will receive from public safety. She then stated that she is comfortable with a 2% levy because that will give the City a $60,000 cushion. Mayor Grant stated he would not be comfortable with a preliminary levy of more than 2 %. He also stated he doesn't think we should allow our reserves to go below our policy level of 50 %. He stated he would like to keep the impact under $25.00 for the median valued home. Councilmember Tamble commented that if the public safety increases would consume the additional resources created by a 2% levy, and knowing that the levy can be reduced when set in December, he would recommend a 3% levy. Councilmember Holmes stated she would not want to go beyond 2% but she would also like to see that as the final levy. Councilmember Werner asked if we have any information regarding the County's proposed budget. Director of Finance and Administrative Services Iverson stated she didn't have those figures with her but anticipated that Arden Hills would be impacted more than other Ramsey County cities because we have a higher home valuation. Councilmember Werner stated he would be comfortable with the 2% levy. ARDEN HILLS CITY COUNCIL WORK SESSION — AUGUST 29, 2011 8 Councilmember Holden commented that she would be comfortable with a 3% levy because it can be reduced for final levy. Councilmember Holmes also stated that she would be comfortable at 3% but would not want to go lower than 2% for final levy. Council consensus was to set the preliminary levy at 3%. Discussion ensued and it was determined that the 3% levy would be reflected under Other Professional Services under Administration. 2. COUNCIL COMMENTS & STAFF UPDATES City Administrator Klaers stated Staff will be recommending to Council that the conduit debt revenue to be discussed at the regular meeting be shifted into the EDA funds to help finance some of our Economic Development staff expenditures and operating expenses for the next couple of years. City Administrator Klaers explained that Staff has been talking with Ramsey County Elections about assuming responsibility for the City elections process. Mounds View and Roseville have already entered into such an agreement with Ramsey County. City Administrator Klaers stated that Staff is concerned about the funding of our capital expenditures; there's a transfer of $200,000 in the budget out of PIR and also $40,000 for equipment out of the General Fund. Based on our requested expenditures, those transfers will not be enough. He stated analysis is required including whether or not to do PMP every other year instead of annually. He explained that at some point the Financial Planning and Analysis Committee will get involved to see if bonding is a viable option. Mayor Grant stated that he has heard from residents who would like to see the water rates adjusted to offer a payment tier of lower than 10,000 gallons consumption, since the senior rate has been eliminated. Councilmember Holden reported that the Trinity Lutheran Church is offering Park and Ride for the State Fair this year. This became a problem when Ramsey County Sheriff's deputies were marking cars parked on the street for more than six hours, per our City code. She asked the deputy not to ticket those cars. She suggested that our ordinance for on- street parking be reviewed. Councilmember Tamble stated he will be attending a Community Media Workshop on September 15. Councilmember Werner stated he appreciated the opportunity to tour the TCAAP property. ARDEN HILLS CITY COUNCIL WORK SESSION — AUGUST 29, 2011 ADJOURN Mayor Grant adjourned the City Council Work Session meeting at 6:50 p.m. Patrick Klaers City Administrator ji Apr P i David Grant Mayor