HomeMy WebLinkAboutItem 1A and 1B, 2008 Proposed Budget and Proposed 2008-2012 CIP
~
~~HILLS
MEMORANDUM
DATE:
November 19, 2007
AGENDA ITEM: LA, 1.B
TO: Mayor and City Council
FROM: Sue Iverson, Finance Director ~
SUBJECT: 2008 Proposed Budget and Utility Rates
BACKGROUND
The council received a draft copy of the 2008 Budget on November 3, 2007. Included in this
packet is a bound copy with page numbers for Council review and discussion at the work
sessIOn.
DISCUSSION
Items to note in regard to the budget document:
1. The levy increase in the proposed budget calculates to a 4.95% increase for
the City portion of the tax rate, per Council direction. (The memo dated
11/10/07 incorrectly states a 4.99% increase.) The actual levy increase is
6.0%, which is offset by Fiscal Disparities of $233,713, leaving the City
portion at $2,602,044 or 4.95%. I have attached the Tax Impact Worksheet
that was presented at the Council work session at 5% and the revised 4.9%
copy. (The 4.9% page also has an updated "Local Taxable Value" of
$13,145,084 which I received frDm Ramsey County on Monday. This
increased the cost per homeowner slightly as the amount of Taxable Value
decreased slightly.)
2. We have also replaced the City-Wide Summary pages as we noticed some
incorrect titles and formulas.
Utilitv Rates
You will notice that the enterprise funds have excess revenues over expenditures. I met with our
financial consultants from Ehlers on Monday to review the Financial Management Plan and to
discuss conducting a Utility Rate Study. (This was to be a part of last year's Financial
Management Plan, but was post-poned in order to get accurate numbers and accurately assess
what our major problems areas were.)
I have attached a memo from Ehlers which lists policy issues that need to be discussed. Council
feedback/direction is needed regarding these policy issues. A good rate study takes
approximately three to four months to complete, so Ehlers recommends that the City implement
Memorandum to Mayor and City Council
Re: 2008 Proposed Budget and Utility Rates
November 19, 2007
Page 2 of2
the current proposed rates and then do a "mid-year" rate adjustment once the study is completed.
Much of the information that will be used for the rate study will also be used for the resource
plan for TCAAP, so the Financial Model and the Rate Study will be based on the current budget
and then worked into the Resource Plan. I am confident that there are accurate numbers from
which to complete these models/studies and have discussions with the Council.
For purposes of discussion on Monday night, staff proposes a review of the Policy
Considerations that are listed in the attached memo. I will bring supporting documentation and
analysis with to the meeting to answer questions on the senior discount and what other cities are
doing with connection fees. Staff can proceed with preparation of the Model and the Study
based on Council direction.
CIP
Included in the 2008 Budget document is the proposed five-year CIP. The plan as presented has
been incorporated into the 2008 Budget. Staff will have additional information supporting these
items at the workshop.
DIRECTION REQUESTED
1. Provide staff with input and feedback regarding the 2008 Budget.
2. Provide staff with input and feedback concerning policy considerations for the utility
funds.
3. Provide staff with input and feedback regarding the 2008 - 2012 CIP.
Proposed Pay 2008 Property Tax Impact Worksheet
Taxing District:
Arden Hills-Levy increase 5%
STEP 1 - Calculate the Taxing District's Tax Rate:
1. La before reduction for state aids
2. State Aids
3. Certifed Pro e Tax Le
4. Fiscal Dis arit Portion of Le
5. Local Portion of Le
6. Local Taxable Value
7. Local Tax Rate
8. Market Value Referenda Le
9. Fiscal Dis arit Portion of Le SDs anI
10. Local La
11. Referenda Market Value
12. Market Value Referenda Rate
$0
0.00000%
0.0000
=
STEP 2 - Calculate the Impact of the Taxing District's Rate on Residential Homestead Taxes:
13. Assumes a
3.2%
increase in market value from 2007 to 2008, which is the countywide median increase.
14.
15.
16.
17.
18.
19.
!Ille
SOO,OOO@1.0% (A7xE)+ 76,QOO@.40%
rem@1.25% (A12X 0) -rem@.09% (G)x% (F)-(H)
Estimated Tax District rate as % oftolal rate: .. :;2~Wo'i;Y';-;;::;'
145,300 1,453 $293.59 $241.63 $50.74 $242.85
193.800 1.938 $391.59 $197.98 $41.58 $350.01
285,000 2.850 $575.87 $115.90 $24.34 $551.53
484,500 4.845 $978.98 $0.00 $0.00 $978.98
726,700 7.834 $1.582.94 $0.00 $0.00 $1.582.94
20.
21.
22.
23.
24.
25.
$3.96
$5.13
$7.49
$9.87
$23.94
Increase
26.
27.
28.
29.
30.
Instructions for Calculating a Residential Homestead Property Tax:
6.0%
0.0%
6.0%
19.3%
5.0%
7.3%
-2.1%
0.0%
0.0%
0.0%
0.0%
0.0%
D. Taxable Market Value of Residential Homestead
Assumes that the Pay 2008 market value increased over Pay 2007 by 3.2%. The maximum increase allowed
under the Limited Market Value law is the greater of: (1) 15% increase or (2) 33% of the difference from 2007 to 2008.
Countywide, the median increase in taxable market value from Pay 2007 to Pay 2008 is 0.5%.
E. Calculate the Net Tax CaDacltv of a Residential Homestead
Pay 2007: 1st 500,000 of Market Value @ 1.00%, remainder@ 1.25%
Pay 2008: 1st 500,000 of Market Value @ 1.00%, remainder@ 1.25%
F. Calculate the taxinn district's Dortion of the Gross Tax
Pay 2007: multiply the Pay 2007 net tax capacity (E) by the Pay 2007 tax capacity local tax rate (A7), plus
multiply the Pay 2007 market value (D) by the Pay 2007 market value local tax rate (A12)
Pay 2008: multiply the Pay 2008 net tax capacity (E) by the Pay 2008 tax capacity local tax rate (B7) , plus
multiply the Pay 2008 market value (0) by the Pay 2008 market value local tax rate (B12)
G, Calculate the total market value homestead credit
0.40% of the first 76,000 of market value (D), reduced by 0 .09% on the market value over 76,000
The credit decreases as the market value over 76,000 increases, until a 414,000 home receives 0 credit.
H, Calculate the taxina district's estimated share of market value homestead credit
The credit is apportioned to all taxing districts based on their share of the total tax rate.
Example of 150,000 home: (76,000 x .40% = $304) - (74,000 x .09% = $66.60) = $237.40
Assume the city is 30% of the total tax, then the city receives 30% of the Credit $237.40 x 30% = $71.22
The actual percentage will vary depending on the combination of county, city/town, school, and special taxing
districts.
I. Calculate the taxina district's Dortion of the Net Tax
Gross Tax (F) minus the taxing district's share of credit (H)
26-30. Calculate the % increaseldecrease from 2007 to 2008
(2008 -2007) /2007
Proposed Pay 2008 Property Tax Impact Worksheet
Taxing District:
Arden Hills-Levy increase 4.9%
STEP 1 - Calculate the Taxing District's Tax Rate:
1. Le before reduction for state aids
2. State Aids
3, Certifed Pro e Tax La
4. Fiscal Ois ari Portion of Le
5. Local Portion of Le
6. Local Taxable Value
7. Local Tax Rate
8. Market Value Referenda Le
9. Fiscal Ois ari Portion of Le SOs onl
10. LocalLe
11. Referenda Market Value
12. Market Value Referenda Rate
STEP 2 - Calculate the Impact of the Taxing District's Rate on Residential Homestead Taxes:
13. Assumes a
3.2%
increase in market value from 2007 to 2008, which is the countywide median increase.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
{G)x% (F)-(H) Increase
Li:s;';:';;21;%R;:j2~'"
1.500 $296.93 $237.40 $49.85 $247.08 $4.23
2.000 $395.90 $192.40 $40.40 $355.50 $5.49
2.941 $582.17 $107.71 $22.62 $559.55 $8.02
5,000 $989.75 $0.00 $0.00 $989.75 $10.77
8.125 $1.608.34 $0.00 $0.00 $1,608.34 $25.40
26.
27.
28.
29.
30.
3.2% 3.2% 1.1% ~1.8% -1.8 1.7%
3.2% 3.2% 1.1% .2.8% _2.80 1.6%
3.2% 3.2% 1.1% -7.1% -7.1 1.5%
3.2% 3.2% 1.1% 0.0% 0.00 1.1%
3.2% 3.7% 1.6% 0.0% 0.0% 1.6%
Instructions for Calculating a Residential Homestead Property Tax:
6.0
0.0 0
6.0%
19.3%
4.9%
7.1%
~2.0%
0.0%
0.0%
0.0%
0.0%
0.0%
D. Taxable Market Value of Residential Homestead
Assumes that the Pay 2008 market value increased over Pay 2007 by 3.2%. The maximum increase allowed
under the Limited Market Value law is the greater of: (1) 15% increase or (2) 33% of the difference from 2007 to 2008.
Countywide, the median increase in taxable market value from Pay 2007 to Pay 2008 is 0.5%.
E. Calculate the Net Tax CaDacitv of a Residential Homestead
Pay 2007: 1st 500,000 of Market Value@ 1.00%, remainder@ 1.25%
Pay 2008: 1st 500.000 of Market Value@1.00%, remainder@ 1.25%
F. Calculate the taxina district's Dortion of the Gross Tax
Pay 2007: multiply the Pay 2007 net tax capacity (E) by the Pay 2007 tax capacity local tax rate (A7), plus
multiply the Pay 2007 market value (D) by the Pay 2007 market value local tax rate (A12)
Pay 2008: multiply the Pay 2008 net tax capacity (E) by the Pay 2008 tax capacity local tax rate (B7) , plus
multiply the Pay 2008 market value (D) by the Pay 2008 market value local tax rate (812)
G. Calculate the total market value homestead credit
0040% of the first 76.000 of market value (0), reduced by 0 .09% on the market value over 76,000
The credit decreases as the market value over 76,000 increases, until a 414,000 home receives 0 credit.
H. Calculate the taxina district's estimated share of market value homestead credit
The credit is apportioned to all taxing districts based on their share of the total tax rate.
Example of 150,000 home: (76,000 x .40% = $304) - (74,000 x .09% = $66.60) = $237.40
Assume the city is 30% of the total tax, then the city receives 30% of the Credit $237040 x 30% = $71.22
The actual percentage will vary depending on the combination of county, city/town, school, and special taxing
districts.
I. Calculate the taxina district's Dortion of the Net Tax
Gross Tax (F) minus the taxing district's share of credit (H)
26-30. Calculate the % Increase/decrease from 2007 to 2008
(2008 -2007) /2007
EHLERS
LEADERS IN PUBLIC FINANCE
0 To: Sue Iverson
Mark Ruff, Liz Diaz, Jon North
~ From:
W Date: 11/15/07
~ Subject: Policy considerations for utilities
It is our understanding that the Council will be discussing the City's water and sewer enterprise
funds. In advance of those discussions, Ehlers has highlighted several policy options for the
Council's consideration.
Policy Considerations
. Institute tiered water and sewer rates to keep low users' rates low and require higher per
gallon payments from higher volume users
. Eliminate senior discount with rate tiering
. Institute a "payment in lieu oftaxes" (PILOT) payment from the enterprise funds, which
would be directed to the general fund. A PILOT is utilized by some cities to offset property
tax payments that would have been received if the enterprise were operated by a private
entity.
. Eliminate projected deficit balances in the storm water funds with higher user fees
. Review commercial and non-profit rates to determine stresses upon system and equity of
payments vis-a-vis home owners
. Review rates for townhome associations, specifically related to water sprinkling meters
. Review flat fee charges and institute more volume based for sewer as well as water
. Institute connection fees for new development
. Given age of current meters, review meter replacement policy to maximize efficiency and
minimize inaccurate reporting
Weare available to discuss these policy options in greater detail at the Council's discretion.
Ehlers & AssDciates
3060 Centre PDinte Drive
Roseville, MN 55113-1105
PhDne: 651-697-8545 Fax: 651-697-8555
jnDrth@ehlers-inc.cDm