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12-02-19 Truth-In-Taxation Public Hearing Agenda Packet CITY OF SHOREWOOD 5755 COUNTRY CLUB ROAD TRUTH-IN-TAXATION PUBLIC HEARING COUNCIL CHAMBERS MONDAY, DECEMBER 2, 2019 7:00 P.M. AGENDA 1. CONVENE CITY COUNCIL MEETING A. Pledge of Allegiance Mayor Zerby___ Johnson___ Labadie___ Siakel___ Sundberg___ B. Roll Call C. Review and Adopt Agenda Attachments 2. TRUTH-IN-TAXATION PUBLIC MEETING A. Truth-In-Taxation Presentation Finance Director Memo B. Public Comment 3. ADJOURN 2A MEETING TYPE City of Shorewood Council Meeting Item PUBLIC HEARING 2019 Truth-In-Taxation Presentation Title / Subject: Meeting Date: December 2, 2019 Prepared by: Joe Rigdon, Finance Director Reviewed by: Greg Lerud, City Administrator Attachments: Truth-in-Taxation PowerPoint Presentation Notable Budget Changes General Fund 2020 Budget Shorewood Community & Event Center 2020 Budget Enterprise Funds 2020 Budgets Capital Improvement Plan 2020-2029 Capital Project Funds 2019 Budgets Policy Consideration: The City Council is required by statute to consider public input at this Truth-In- Taxation meeting prior to adopting the property tax levy and budget for 2020. For this meeting, the City Council holds a public meeting to allow taxpayers to discuss the budget in general, department budgets, and the amount of property taxes levied by the City of Shorewood. This meeting is not structured for property owners to discuss individual property values, which were set earlier in the year at the Open Book and Board of Review process held from April through June. The required elements for the Truth-in-Taxation process are: 1.The proposed property tax levy must be certified to the county auditor by September 30. 2.The public meeting is held at the scheduled time and place indicated on the TNT notice. 3.The proposed budget and property tax levy are discussed at the meeting. 4.The public is invited and allowed to speak and to ask questions concerning the budget and proposed property taxes at the public meeting. 5.The final property tax levy and the final budget are adopted. 6.The final property tax levy may not exceed the preliminary certified property tax levy. 7.The final property tax levy must be certified to the county auditor by no later than December 28. 8.The Certification of Truth in Taxation Compliance form is filed with the Minnesota Department of Revenue after the final property tax levy is adopted, but no later than December 28. Background: The property tax system’s general timeline is as follows:  January 2, 2019 – A property market value is set for each parcel in the City by the Hennepin County Assessor.  March, 2019 – Valuation notices are sent to each parcel with the new estimated property value. Mission Statement: The City of Shorewood is committed to providing residents quality public services, a healthy environment, a variety of attractive amenities, a sustainable tax base, and sound financial management through effective, efficient, and visionary leadership. Page 1  April-June, 2019 – Open Book meeting at City Hall and valuation appeals to the Hennepin County Board of Equalization. This will finalize the value to be used for Truth-in-Taxation estimates and 2020 property taxes.  July-September, 2019 – City Council discusses the General Fund budget and property tax levy for 2020.  September 30, 2019 – The preliminary tax levy is certified to Hennepin County.  November, 2019 – A Truth-in-Taxation parcel-specific notice is mailed to each property owner with the estimated taxes identified for each taxing jurisdiction - County, City, School District, Metropolitan Council, Watershed District, and other minor taxing districts.  December 2, 2019 – Shorewood City Council holds the Truth-in-Taxation meeting.  December 9, 2019 – Shorewood City Council adopts a tax levy and budget for 2020.  December 28, 2019 – Final tax levy is certified to Hennepin County and Certification of Truth in Taxation Compliance form is filed with the Minnesota Department of Revenue.  May 15, 2020 – 2020 first half taxes are due at Hennepin County. General Fund Budget & Property Tax Levy: On September 23, 2019, the City of Shorewood adopted the proposed 2020 General Fund budget. In addition, the city adopted the “2020 Proposed Levy Certification” for submission to the Hennepin County Auditor. Overall proposed 2020 General Fund expenditures and transfers out are budgeted at $6,622,581, or a 4.8% increase from the 2019 General Fund budget. Included is an increase to operating expenditures of $266,523, or 5.2%. Total transfers out are budgeted to increase by $36,110, or 3.0%. This includes a $25,000 increase for street improvements and a $50,000 shift from capital equipment to park improvements. General Fund 2020 revenues and transfers in are budgeted at $6,566,196, or a 4.7% increase over the 2019 budget. Of the $292,664 increase in revenues and transfers in, $326,289 is proposed to be generated from the property tax levy (all non-tax revenues are projected to decrease $33,625). To balance the 2020 General Fund budget, a “use of reserves” of $56,385 is proposed. This compares to a budgeted use of General Fund reserves of $46,416 within the 2019 budget. The City’s 2020 preliminary property tax levy of $5,856,611 is 5.9% higher than the 2019 total levy of $5,530,322. The City is proposing to increase the payable 2020 City tax rate by 1.5% from 28.539% in 2019 to 28.973% in 2020. In other words, property owners with no change in market values from payable 2019 to payable 2020 should experience a 1.5% increase in the City portion of their overall property tax bill. In the event of a market value decrease or increase from payable 2019 to payable 2020, City property taxes would change proportionately. The City Council adopted a preliminary General Fund budget and 5.9% property tax levy increase on 9/23/19. That information was sent to Hennepin County who used the County Assessor’s property values to determine an estimated tax rate for each overlapping jurisdiction. This information was combined with preliminary tax information from other taxing jurisdictions to create a Truth-in-Taxation statement for each property. Shorewood Community & Event Center Budget: The Shorewood Community & Event Center is funded by facility rentals and annual transfers from the General Fund. For 2020, a transfer of $70,000 is scheduled to assist with operations, and a $32,300 transfer is projected to assist with building improvements. Enterprise Fund Budgets: The City maintains and budgets four enterprise funds: Water, Sewer, Storm Water, and Recycling. These funds are supported by user charges/utility fees. The budget format is one in which the enterprise full accrual accounting method is utilized. For example, depreciation expense is listed as a line item, while capital outlays are not. This format tracks the City’s annual financial reporting process to maintain comparability. An approximation of each utility enterprise fund’s change in overall cash is included (Water, Sewer, and Storm Water). Capital Improvement Plan 2020-2029: The Capital Improvement Plan is largely unchanged from the previous presentation, with the exception of the following change:  Moved Glen Rd/Amlee Rd/Manitou Ln from 2020 to 2021 and updated project estimates The CIP provides an estimation of the timing and cost of future projects. Future fund balance surplus (deficit) projections for the City’s various capital project funds are included to assist in financial planning. The 2020 amounts in the capital project fund projections are considered to be the preliminary 2020 budgets.  Shorewood Community & Event Center (SCEC): Capital items for the SCEC include building improvements and equipment for the Center. Transfers from the General Fund are the planned source to pay for these items.  Park Improvements: In recent years, the parks CIP has included significant expenditures for projects and proposes various improvements going forward. Due to a difference of projects in the CIP compared to revenue, the Park Improvements fund is projected to become negative in 2020, and subsequently show a fund balance deficit thereafter. Staff is recommending two approaches to eliminate this deficit. First, it appears that approximately $50,000 per year, through 2029, can be taken from the Equipment Replacement fund and reallocated to the Park Improvements fund. These funds will be in addition to the planned $45,000 already being proposed to be allocated to the Park Improvements fund in the 2020 budget. That amount, combined with an annual increase of $5,000 for the Park Improvements fund will provide approximately $550,000 for park capital. The second component to reducing the anticipated deficit is to take a critical look at the projects on the Parks CIP and plan projects that can be done for that amount. To that end, the Parks Commission has developed a park improvements priority list.  Equipment Replacement: The majority of the CIP for equipment replacement pertains to Public Works items, but also includes some administrative technology items. The City’s Equipment Replacement capital fund projection maintains a positive level throughout the duration of the ten-year CIP. As noted above in the Park Improvements section, it appears that around $50,000 per year of the amount transferred annually to the Equipment Replacement Fund could be shifted to the Parks Fund without depleting the Equipment fund. A transfer in of $145,000 from the General Fund to the equipment fund was initially planned for 2020 but could be decreased to $95,000 and increased thereafter by $5,000 per year.  Street Improvements: City staff has met and discussed overall infrastructure system recommendations and is proposing the following options. Project costs are preliminary estimates. 2020: Enchanted and Shady Island Roads o 2020: Woodside Road/Lane o 2021: Edgewood Road o 2021: Glen/Amlee/Manitou o 2022: Birch Bluff Road o 2022: Noble Road o 2023: Strawberry Lane o 2023: Grant Lorenz o 2024: Sweetwater Curve o 2025: Excelsior Blvd o 2026: Eureka Road o For each of the proposed street improvement projects, it is assumed that the Water, Sewer, and Stormwater funds will fund associated utility costs. Beginning in 2020, the Street Reconstruction fund activities are projected to result in a significant fund deficit. In addition, the City’s utility funds may be significantly depleted. In order to complete the proposed street projects from 2020 and on, significant financing sources must be determined. This will likely require bonded debt financing and allow for the spreading of repayments over a period of years. To repay the bonded debt, a combination of annual property tax levies and utility fund contributions will be necessary. In addition to these significant projects, staff also recommends that the money that has been set aside for annual seal coating, approximately $225,000 per year, but spent on even year projects for work that will total around $450,000. That will allow the city to address either emerging street issues, or doing overlay projects rather than the road degrading to a point that requires the cost of a reclaim or reconstruction. A transfer in of $835,000 from the General Fund to the Street Reconstruction fund is currently budgeted for 2020, which is a $25,000 increase from the 2019 budget. At the annual Council retreat in February 2019, Shannon Sweeney of David Drown and Associates presented a street and utility reconstruction project funding model. The analysis suggested that “the property tax levy that supports street reconstruction project funding would need to increase by approximately 9% per year through 2028 to sustain cash balances and eliminate annual funding deficits”. Upon review, implementation of those increases would begin in 2021 and would be re-analyzed each year. Staff is analyzing that increase to see if the programming can be accomplished by a lower levy increase amount.  Trails: Placeholder amounts are included. Projects are to be determined.  Community Infrastructure: An estimate for a roof replacement for the public works facility is included for 2020.  Utility Funds: The Capital Improvement plans for Water, Sewer, and Stormwater funds include equipment, portions of street infrastructure projects, as well as maintenance and preventative maintenance items. As noted, the utility funds cash reserves are not likely to be sufficient to finance the utility portions of the proposed street improvements. In order to finance the improvements, bonded debt with debt service repayments supported by property tax levies and utility revenues will be necessary. Financial or Budget Considerations: The General Fund budget presented at this meeting includes overall minor changes, while the property tax levy is the same as the preliminary property tax levy certified to Hennepin County. This raises the 2020 property tax levy 5.9% higher than the 2019 property tax levy. Options: If time does not allow all interested parties to provide input or the City Council would like more time to discuss the budget and/or property tax levy, the public meeting may be continued at the 12/9/19 City Council meeting. Recommendation / Action Requested: Staff recommends that the City Council hold the public meeting and accept public input on the proposed budget and property tax levy. Next Steps and Timelines: The 2020 final General Fund budget and property tax levy will be on the 12/9/19 City Council agenda for approval. Additionally, the 2020 budgets for the Shorewood Community & Event Center, and enterprise funds will be on the agenda for approval. Connection to Vision / Mission: This item contributes to sound financial management by providing effective City services at a reasonable price.