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HomeMy WebLinkAboutCC 12-07-1998 MINUTES CITY OF ARDEN HILLS, MINNESOTA TRUTH-IN-TAXATION PUBLIC HEARING -1999 BUDGET . DECEMBER 7, 1998 7:30 P.M. - ARDEN HILLS CITY COUNCIL CHAMBERS CALL TO ORDER/ROLL CALL Pursuant to due call and notice thereot: Mayor Dennis Probst called to order the Truth-In- Taxation Puhlic Hearing - 1999 Budget at 7:30 p,m, Present: Mayor Dennis Probst, Councilmembers Gregg Larson, Beverly Aplikowski, Susan Keirn, and Paul Malone. Absent: None Also present were City Administrator, Brian Fritsinger; Assistant to the City Administrator, Kevin Ringwald; City Accountant, Terrance Post; Public Works Director, Dwayne Stafford; and Recording Secretary, Lori Rolfson. ADOPT AGENDA MOTION: Councilmember Keirn moved and Councilmember Larson seconded a motion to adopt the agenda for the December 7,1998, Truth-In-Taxation public hearing, . The motion carried unanimously (5-0), MAYOR - MEETING OVERVIEW AND PROCEDURES Mayor Probst explained the City of Arden Hills was legally required to hold a public hearing on a night which does not contlict with any other public hearings to allow public comments with regard to the proposed 1999 budget. Subsequently, the City Council will be required to adopt the 1999 budget. Mayor Probst stated the most notable issue within the 1999 budget, as a result of the Council Retreat, was the recognition and commitment to TCAAP in terms of Stafftime as well as consultant time. He also noted that the proposed levy for 1999 was 3,2% higher than last year, Mayor Probst requested City Accountant, Terrance Post, to provide a presentation reviewing the proposed budget and property taxes. He explained, once Mr. Post completes his slide presentation, the Council will open the hearing to public comments, Mr. Post stated an apology letter had been received from Lillie Suburban Newspaper, When the announcement for the Truth-In-Taxation Public Hearing was published, the publisher made an error in the printers proof in that it stated the proposed levy amount would be $1,123,937 dollars rather than the correct amount of $1 ,923,93 7 dollars, Mr. Post noted that the notice was published correctly in the Focus newspaper. . ARDEN HILLS TRUTH-IN-TAXATION - DECEMBER 7,1998 2 . Mr. Post stated the presentation for the Truth-In-Taxation public hearing reviews the 1999 proposed budget in three general categories. Category A, Making Sense of Property Taxes, provides an understanding of how the City's market valuation, tax capacity and median values, specific to Arden Hills, impacts the property taxes, Category B, Cost of City Services in Perspective, provides a hypothetical monthly service bill which breaks down the cost of the services received by the citizens of Arden Hills, Category C, Discussion of Proposed City Budget, explains the specifics of the proposed budget in a more detailed fashion. Mr. Post proceeded with the slide presentation, He explained Slide #1, Who Determines Your Property Tax, was a three-legged process in terms of the components of the property taxes, State Legislature establishes property class rates, determines formulas for State Aid and determines mandates which may impact local governments. The County Assessor determines market values and assigns property classes. Mr. Post stated the public hearing will not address the State or County components of the property taxes, What will be discussed was the City taxing jurisdiction, Other jurisdictions including the School District, the County and miscellaneous jurisdictions will not be addressed, . Slide #2, Tax Computation Example, provides an example of how property taxes are calculated, The first step was determining the property's tax capacity, This was determined by the class rate and the market value determined by the County Assessor. The tirst $75,000 of the estimated market value has a 1% tax capacity, The estimated market value in excess of $75,000 has a tax capacity of 1,7%, For a home in Arden Hills, with an estimated median market value of $146,850, there would be a net tax capacity of$1,971.45, To determine the total property taxes, each of the jurisdictions have created a budget which was translated to a levy for the needs of the budget which are supported by property taxes, This levy amount was compared against the total tax capacity for the jurisdiction and a percentage yielded, In the case of Arden Hills, the local City levy proposed for 1999 would be 19,054%, This percentage, multiplied by the tax capacity of$1971.45, would result in a local city tax of$375.64, When this was added to the other jurisdiction's levy rates, the total proposed 1999 property tax payable would be $2,413.17. Slide #2A lists a number of changes in class rates which have occurred over the last three years, The primary changes have involved the Commercial/Industrial class rate. With a market value over $150,000, the marginal class rate for CommerciallIndustrial was 4.6% in 1997. This has been lowered in two significant increments, In 1998 the class rate was lowered to 4,0% and was further lowered to 3.5% for 1999. This equates to a 24% drop in Commercial/Industrial property class rates over the last three years, The impact of this drop in class rate will be that, over time, the residential properties will pick up a greater portion of the tax capacity than CommerciallIndustrial compared to the 1997 rates assuming the mix of valuations remains . relatively constant Slide #3, Legislative Changes/Class Rates and Thresholds, was a historical look at the City's valuation, tax capacity and tax levies since payable year 1992. A highlight was that, for payable ARDEN HILLS TRUTH-IN-TAXATION - DECEMBER 7,1998 3 . year 1999, the City's market valuation increases approximately $46 million dollars. This resulted in a tax capacity increase of2,97%. The City's market value increase has been partially due to the fact that the City has had a couple of strong previous years in terms of CommerciallIndustrial building permit activity, When a building permit was requested for construction, the valuation does not occur that year, rather there is a lag factor to be reflected in valuation, In the future, the City will see the results of some strong building permit valuation from permits granted in 1997 and 1998. Slide 3A, Comparative Market Valuation and Tax Capacity Data, indicates that the residential properties had decreased in valuation from 69% to 67% in payable year 1998, however, the tax capacity has remained the same. With regard to Commercial/Industrial, the valuation has increase approximately 3% and the tax capacity has increased by only 1 %, due to the property class rate reductions, Slide #5, Components of Total Proposed 1999 Rates, explains the portions of the property tax bill from each of the jurisdictions, For a resident within the Independent School District #621, the City of Arden Hills' levy represents 16% of the total property tax bill. Ramsey County represents 39% and the School District represents another 39% of the total bill. For those residing in Independent School District #623, the City's portion ofthe bill was 15% and the School District's portion was 44%, due to the higher tax rate ofI.S,D, No, 623. . The miscellaneous portion ofthe bill was primarily represented by Regional Transit, the Metropolitan Council, the Mosquito Control District, Special Independent School District #916, and the Rice Creek Watershed District. Slide #6, Analysis of 1998 State Aid to Cities, looks at the distribution of State Aid for North Metro cities. The HACA and Local Government Aid may be used as a dollar-for-dollar reduction in need for property tax levy, The City of Arden Hills has historically been a significantly less than average recipient of State Aid funds, Arden Hills receives approximately $9 per capita in State Aid which was substantially lower compared to the amount of such aid received by neighboring cities, Slide #7, City Delivers Quality Services at an Affordable Price, presents a hypothetical check which breaks down the General Fund services being funded by the property taxes based upon the total City taxes of $376 for a $146,850 median-valued home, The monthly bill for this median- valued home would be $31.33, In terms of the value of the services being provided, this appears to be a reasonable cost, Slidc #8, How Does the 1999 Proposed Budget Impact Your City Taxes, utilizes various categories of valuation for both residential and commercial/industrial uses, assuming there was no change in market value from 1998 to 1999. This provides a look at the spending from one year to the next and the impact on the levy request as well as the property class rates and results in reductions across the board for estimated 1999 City portion of property taxes, . Slide #9, General Fund Revenues/Transfers In, provides an overview of the sources of Arden Hills' General Fund revenues, The largest portion was received by property taxes, The next ARDEN HILLS TRUTH-IN-TAXATION - DECEMBER 7,1998 4 . highest was Intergovernmental revenues which are mainly the result of State Fire Relief Aid, MSA maintenance, and HACA. Slide #10, General Fund Expenditures/Transfers Out, explains the distribution of the proposed expenditure total of $2.5 million dollars. Slide #11, Summary Comparison of General Fund Revenues, Expenditures, and Operating Transfcrs, provides historical information on the General Fund proposed revenue and expenditures from 1994 to 1999, The information reflects a balanced budget and an overall reduction in proposed 1999 expenditures of approximately $20,000, The levy increase was due to the cost of a variety of items going up, The Police Protection Contract had been proposed to be increased by $21,120 and the Fire Protection Contract was proposed to be increased by $18,653, Additionally, the Protective Inspection and Administrative costs are proposed to increase for 1999 due to the City Council's commitment to the next phase of TCAAP planning analysis and implementation, This has caused Staff increases and some reallocation of administrative costs, Slide #12, Proposed Capital Budget Summary, explains the General Fund capital items which are funded by property tax dollars, One significant item being funded under the General Fund #101 was the City's annual financial commitment to the Pavement Management Plan. Additionally, . within the General Fund, there had been a philosophy shift over the last two years regarding the replacement of playground equipment. Prior to 1997, these replacement costs were funded by the Park Fund, Since 1997, these replacement costs have been funded by the Park Maintenance Budget as a capital item, The Park Fund includes a significant project which was the completion of the County Road F lraillinkage at a cost of $115,000, The City had been awarded a $50,000 DNR grant to help fund this project. A large expenditure item within the Governmental Funds category was the new City Hall facility. The construction for this project was budgeted at $2 million dollars. Additionally, there was the Maintenance Garage Facility Planning budget of $50,000. Another significant item involves the EDA Projects/Activities expenditures. The City issued a General Obligation TIF bond in 1998. These proceeds are being utilized primarily for the reconstruction of 14th Street and the related public utility costs, as well as the West Round Lake Road/Highway 96 intersection project. Slide #13, Summary Comparison of All Funds Expenditures/Transfers Out, reviews the proposed 1999 expenditures for the General Fund as well as the other funds under which the City operates. The Community Services Fund depicts an increase in spending of $196,945 over the 1998 budget. This was due to the transfer to the TCAAP Reuse Planning Fund to fund the . implementation phase ofthe TCAAP project. The reduction in the Cable TV Fund from 1998 to 1999 was due to the fact that the City Hall construction budget was part of the 1998 budget. This construction had not proceeded on ARDEN HILLS TRUTH-IN-TAXATION - DECEMBER 7,1998 5 . schedule and one of the funding sources for this project was the Cable TV Fund, It was assumed that the construction activities that occur in 1999 will not utilize these funds, however, they will be utilized in the year 2000, The EDA Fund has on-going commitments in completing the West Round Lake Road/Highway 96 intersection in TIF District #2, Because the work was not completed in 1998 there remains approximately $1.2 million dollars of bond proceed expenditures, With regard to the Debt Service Funds, the Advance Refunding Bonds are funding approximately one-half ofthe $2 million dollars for the Capital Service FlUld's Municipal Land and Buildings FlUld #408, With the bonds issued in 1998, the City was now incurring debt service costs, There will be no principal payment for a couple of years until TIF revenues begin. The City is capitalizing interest lUltil the cash flow was available to start paying back the principal. Another large expenditure was in the Permanent Improvement Revolving Fund, This FlUld acts as thc flUlding source for the City's Pavement Management Program, The reconstruction of West Round Lake Road was a significant project with a cost of approximately $1.5 Million dollars. The PIR FlUld would be involved in financing this project and will received some foods back in the future from special assessments, . Overall, the City's proposed expenditures for 1999 total $11,758,402 which was down $2,748,965 from 1998, Slide #14, Glossary of Terms, defines some of the terms used during property tax discussions, PUBLIC COMMENTS Mayor Probst invited those present to come forward and address the Council on any questions or concerns they may have regarding the 1999 proposed budget. Mr. Craig Wilson, 1677 County Road F West, requested explanation ofthe Protective Inspection Department expenditures, Mr. Post explained the Protective Inspection Department conducts building, heating, and plumbing inspections in addition to Code enforcement activities, Mr. Tom Mulcahy, 3530 Siems Court, requested explanation of the Park FlUld expenditures shown on Slide #13, Mr. Post referred Mr. Mulcahy to the Special Revenue category Park Fund #227 on Slide #12 and explained the projects include the Country Road F trail linkage, the Arden Manor hard court improvements, the paving of Cummings Park hockey rink, and the Hazelnut Park shelter building which total $197,450. Mr. Mulcahy indicated he was requesting information on the total of$207,617 as shown on Slide # 13, He asked if these flUlds were out of the General Fund, Mr. Post stated the Park capital . expenditures are entirely from the Park Fund. Mr, Mulcahy asked if the Park FlUlds are made up of savings through out the years, Mr. Post stated this was correct, in addition to developer park dedication fees and investment interest earnings, ARDEN HILLS TRUTH-IN-TAXATION - DECEMBER 7,1998 6 . Mr. Mulcahy requested further explanation of the grant for the County Road F trail linkage project. Mr. Post explained, of the $115,000 budgeted for the project, the City received a DNR recreational grant for $50,000, Therefore, the net cost to the City Park Fund would be $65,000, Mr. Roger Aiken, 4360 Hamline Avenue, expressed his concern that the City has been experiencing a net loss of tax capacity over the last several years. At the same time, there has been an increase in the levy on a yearly basis, averaging approximately 2%, He noted there have been increasing costs through the 1998 and 1999 budgets associated with large projects the City has been working on over the years, He indicated his concern was that the trend will continue with a lower tax base and higher taxes, Mr. Aiken indicated his specific issue was with the planned and unplanned buildings such as the Public Works building and the new City Hall, He stated the Council created a financing method for the Public Works building after the referendum failed in 1992, The City Hall was supposed to have been paid for by previously escrowed funds. This financing method involved a tax levy component every year, subsequent to the 1992 Bond Referendum failure, This has resulted in a large amount of money coming out of General Fund tax revenues going into the Land and MLmicipal Buildings Fund, These funds have been converted for use for the City Hall construction. Mr. Aiken stated that a Public Works facility has been an outstanding need, however, there was . no evidence that ajoint facility would be any more efficient than other alternatives. While construction cost would be 20% lower, operations would not be significantly lower. He indicated no other parties have stepped forward with a financing plan for the Joint Public Works facility and the desire by the other entities to complete this plan seems to depend upon a lead role by Arden Hills, Mr. Aiken indicated this issue leads him to wonder if there was a compelling need here, or was the plan simply growing government services for which there mayor may not be an established need in the future, Mr. Aiken stated another concern was the large building and investment program of Gateway which had been planned out with long-term pay-outs, Further expenditures for the Gateway District should be moderated with the knowledge that the City has other industrial areas which have contributed tax base to the City for many years with proven success, With the exception of Roscville, the City of Arden Hills has the highest percentage of Commercial/Industrial within the northern suburbs, He suggested the City keep this in mind when considering filling out the Gateway District and spending more ofthe total amount of financing authority without going to a bond situation, Additionally, the established industries will most likely need some upgrading assistance in the same way that Gateway has received a great deal of assistance. Mr. Aiken suggested the City needs to be modest and scale down the wants and needs to seek a balance in these areas, The other alternative to building a modest Public Works and City Hall facility was to co-op services with other communities or go to contracting services and facilities. These options are expensive and may only present any real savings when compared to the large . costs of building an expensive City Hall and Public Works facility, The only way to avoid further, unacceptable cost increases to the City was to choose the least cost alternative and proceed on its completion immediately, without further delays or waiting for other parities to come to the table. ARDEN HILLS TRUTH-IN-TAXATION - DECEMBER 7,1998 7 . Mayor Probst addressed and corrected some ofMr. Aiken's statements, He indicated the tax capacity did drop from 1992 through 1996. There was a positive change in 1997 and in 1998 the trend has continued. There had been an overall increase in valuation due to commercial and residential improvements. The tax capacity increase was occurring at a time when property class rates have been declining. This has allowed the City to have some limited opportunity for growth, Mayor Probst referred to Mr. Aiken's statement regarding an increase in levy related to the bond failure, He noted, there had been money identified in the General Fund in 1994 when there was a significant increase following several years that were very low, One item involved was the establishment of a Building Fund which was created to allow planning for the new facilities, Mayor Probst also pointed out that the statement that Ramsey County and the National Guard are waiting for Arden Hills to finance the Joint Public Works project was not entirely correct. According to information received by the Council, Ramsey County was willing to provide financing. The interest the Council has in driving the project was in order to maintain control over what the facility will look like and how it was constructed. The National Guard has indicated they will not have any significant problems coming up with funding, It was now up to the City to determine how to proceed with the financing. As pointed out, in 1992 the bond referendum was offered for the facility and failed. The City was moving forward under the same principle for the City Hall, however, at this point the Council does not have a specific financing . plan for the Public Works facility and whether or not a referendum will be involved, Mr, Aiken asked, when the decision was made after the referendum to increase the levy going into the Land and Municipal Building Fund, was this money specifically for the Public Works facility, or was it to be used for any future construction. Mayor Probst stated the Municipal Building Fund was set up to be used for any municipal facility which may be required, not specifically for the City Hall or the Public Works facility, Mr. Post pointed out, at the time of the referendum failure, there was concern that the quality of the Public Works facility was documented as being extremely poor. One of the concerns was, if the roof needed to be repaired, where would the funds come from, Mayor Probst closed the public hearing at 8:20 p.m. and noted that, after the adjournment of the Truth-In-Taxation public hearing, there would be a Worksession immediately following a five- minute break, Mr. Post suggested the Council take action to formally cancel the proposed continuation of the Truth-In-Taxation public hearing, MOTION: Councilmember Malone moved and Councilmember Aplikowski seconded a motion to cancel the proposed continuation of the Truth-In-Taxation public hearing - 1999 Budget, scheduled for December 14, 1998. The motion carried unanimously (5-0). . ARDEN HILLS TRUTH-IN-TAXATION - DECEMBER 7,1998 8 . COUNCIL/ADMINISTRATOR COMMENTS Mayor Probst pointed out that Tracy Peterson, Parks Department, will receive a Meritorious Service A ward from the Minnesota Parks and Recreation Association for her work over the last year. The Mayor congratulated Ms, Peterson on her five-year anniversary with the City and her receipt of this award, Councilmember Malone asked ifthe Council was required to adopt the budget at this time. Mr, Fritsinger explained Staff will be presenting the City Council with the final budget and levy action items at the December 14, 1998 City Council meeting, ADJOURN MOTION: Councilmember Keirn moved and Councilmember Larson seconded a motion to adjourn the Truth-In- Taxation public hearing at 8:22 p.m. The motion carried unanimously (5-0), B,;{~4~ . City Administrator NOTICE OF MEETINGS The next regular City Council meeting will be held Monday, December 14, 1998 at 7:30 p,m, at the Arden Hills Council Chambers, .