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11-25-13 CC WS MinCITY OF SHOREWOOD CITY COUNCIL WORK SESSION MONDAY, NOVEMBER 25, 2013 MINUTES 1. CONVENE CITY COUNCIL WORK SESSION 5755 COUNTRY CLUB ROAD COUNCIL CHAMBERS 6:00 P.M. Mayor Zerby called the meeting to order at 6:02 P.M. A. Roll Call Present, Mayor Zerby; Councilmembers Hotvet, Siakel, Sundberg (arrived at 6:18 P.M.), and Woodruff, Administrator Joynes; City Clerk Panchyshyn; Finance Director DeJong; and Director of Public Works Brown Absent: None B. Review Agenda Siakel moved, Woodruff seconded, approving the agenda as presented. Motion passed 4/0. 2. 2014 BUDGET — FINAL GENERAL FUND BUDGET REVIEW Administrator Joynes noted that his intention is to walk through the materials that will be presented during the December 2, 2013, Truth -in- Taxation Public Hearing about the 2014 Budget. He explained there is a legal requirement for the City to hold a Truth -in- Taxation Public Hearing. The Truth -in- Taxation requirements are to present the City's 2014 Proposed General Operating Budget, discuss the budget and 2014 tax levy, to take public comment and to adopt a balanced budget. The highlights of the presentation for the Public Hearing are as follows. The presentation has nothing to do with the Capital Improvement Program (CIP) or the potential utility rate increases that have been discussed. The City's portion of the property taxes pay for a number of services funded out of the General Fund. They include police and fire protection; street and park maintenance; recreation programs; building inspections; transfers to the Southshore Community Center (SSCC) and capital funds; and, administration, finance, planning and zoning, elections, and other miscellaneous services. The assumptions used in preparing the 2014 Operating Budget are as follows. ➢ A 3 percent tax levy is proposed (the first increase since 2009). Of that increase 2 percent is for general operations and that is fairly consistent with what is happening throughout the metropolitan area. One percent is a placeholder for SSCC operations. ➢ There is no change in staffing level or service levels when compared to 2013. That assumption has been made for a number of years. ➢ A 2.5 percent salary increase is budgeted for. Management will have its second contract negotiations meeting with representatives for the labor union on November 26. CITY OF SHOREWOOD WORK SESSION MEETING MINUTES November 25, 2013 Page 2 of 4 ➢ A $25 monthly increase for health insurance is budgeted for. A new health insurance program will go into effect on December 1 resulting in savings for employees and for the City. The City is now with the insurance brokerage firm Gallagher; the same organization that provides advice to the League of Minnesota Cities (LMC) and other public institutions. This increase is currently under consideration. ➢ Transfers to the Street Improvement Fund and the Equipment Replacement Fund were increased by 3 percent. That level of increase is needed for a number of years to stabilize those funds. ➢ The use of $102,848 in General Fund balance reserves is proposed to balance the budget. ➢ Shorewood homes decreased 1.5 percent on average for taxable valuation. Councilmember Woodruff suggested this be taken off the list of assumptions because it is not a budget assumption. The City's General Fund Balance Policy stipulates maintaining a reserve level of 55-60 percent of the upcoming year's operating expenditures. The Policy, which has been in place for a number of years, is very conservative when compared to the Office of the State Auditor's recommendations. It's estimated that at the end of 2013 the General Fund balance will be $3,480,871 (or 62.2 percent). The Policy maximum of 60 percent would equate to $3,356,812. Therefore, the amount in excess based on the Policy is $124,059 (or 2.2 percent). The Policy also stipulates that if the reserves are higher than 60 percent the excess should be drawn down at a rate of no more than 3 percent per year and used for items such as one- time projects, acquisitions, or transfers to any City capital fund. The 3 percent annual maximum use would be $167,841. The proposed Budget includes the use of $102,848 in reserves. That would leave an additional $64,993 ($167,841 - $102,848) in reserves available for use based on the Policy. The balance would still be in the target range of 55 — 60 percent. The City's General Fund budgeted revenues total $5,594,687. Of those revenues 89 percent is from property taxes, 4 percent is from transfers and miscellaneous revenues, 2 percent is from licenses and permits, 2 percent is from General Fund balance, 1 percent is from charges for services, 1 percent is from fines and forfeitures, and 1 percent is from intergovernmental. The City's General Fund budgeted expenditures total $5,594,687. Of those expenditures 38 percent is for public safety services (police and fire), 23 percent is for general government services, 18 percent is for public works, 17 percent is for capital transfers and 4 percent is for parks and recreation. Expenditures and transfers have been fairly consistent between 2007 and 2014. The tax assessment and levy timeline for residential property taxes payable in 2014 has been as follows. Hennepin County collected data on property sales from October 1, 2011 — September 30, 2012. The market value was established on January 2, 2013. The Board of Review process to hear appeals took place from April 2013 — June 2013. The City certified its maximum tax levy for 2014 to Hennepin County in September 2013. The County mailed out Truth -in- Taxation notices to property owners in November 2013. The Truth -in- Taxation meeting will be held on December 2. In 2014 final property tax bills will be mailed to property owners. The 2014 property tax distribution for a property in the City located within Minnetonka School District 276 is: 35.2 percent to the school district, 35.1 percent to Hennepin County, 22.5 percent to the City, and 7.2 percent to other smaller taxing jurisdictions. It is based on a home in the District valued at $360,000. The properties in the City experienced an average decline in value of 1.5 percent. Mayor Zerby clarified that is based on 2012 sales. Councilmember Woodruff suggested adding footnote saying that are from market values up to two years ago. The average City tax impact is as follows: For a property valued at $250,000 in 2013 its value decreased to $246,250 for 2014, and the tax increased by $21. For a property valued at $375,000 in 2013 its value decreased to $369,375 for 2014, and the tax increased by $34. For a CITY OF SHOREWOOD WORK SESSION MEETING MINUTES November 25, 2013 Page 3 of 4 property valued at $500,000 in 2013 its value decreased for $492,500 in 2014, and the tax increased by $49. For a property valued at $750,000 in 2013 its value decreased for $738,750 in 2014, and the tax increased by $73. For a property valued at $1 million in 2013 its value decreased to $985,000 for 2014, and the tax increased $104. The 2014 total property tax percent change compared to the 2013 total tax for residential homestead properties in the City based on statistics from the Hennepin County Assessor's Office is as follows. Approximately 42.9 percent of the parcels (983) will see a decrease. Approximately 35.6 percent of the parcels (816) will see an increase of $0 — $300. Approximately 14.5 percent of the parcels (251) will see an increase of $301 — $600. Approximately 2.9 percent of the parcels (67) will see an increase $601 — $900. Approximately 4.1 percent of the parcels (94) will see an increase of more than $900. Councilmember Siakel noted that she thought the PowerPoint presentation flowed well. She stated throughout the budget process there has been one thing weighing on her mind. She noted she supports increasing the budget by 2 percent for general operations. She complimented the City for delivering value for its services and for Council and staff being good stewards of the taxpayers' dollars. Siakel expressed concern about the 1 percent increase as a plaeeholder for the SSCC. She noted that she is fully supportive of the SSCC. She stated she thinks the SSCC campus should be developed and incorporated into Badger Park. That needs to be done. She explained that the part that is problematic for her is the passive participation by the other four cities that co -own the SSCC with Shorewood. To levy for that when the City does not own it is disconcerting for her. She asked if it would be better to levy a 2 percent increase for general operations and use the $64,993 in additional available reserves for potential SSCC needs. She suggested that in 2014 things move away from the passive participation. She stated it's time for a decision to be made about the SSCC. She does not think it's appropriate to levy 1 percent for the SSCC when there is no clear vision for the SSCC at this time. She reiterated she is very supportive of the SSCC. She asked if there is anything else that the approximate $65,000 in reserves would be needed for during 2014. She noted she is open to hear what others have to say. Administrator Joynes stated the approximate $65,000 in reserves could be used instead of the 1 percent levy. That amount is very close to what has been used to help fund SSCC operations in the last few years. Using those reserves would not put the City in danger. He noted the I percent is based on continuing with the current level of operations. He stated he agrees that putting that 1 percent increase in the budget could send the wrong message to the other four cities. He then stated it has been made very clear by Mayor Zerby to the representatives on the Southshore Center Advisory Committee (SCAC) that things are going to change and that Shorewood expects each city to participate or get out. He noted that he is confident a decision will be made on the SSCC. He stated that he is not uncomfortable leaving that 1 percent levy as a placeholder. Councilmember Siakel noted that she thought staff has done its job. Councilmember Woodruff applauded Councilmember Siakel for her perspective and noted that he concurs with it. He asked that the year -to -date information in the Budget documents be updated with information from the end of September at least. He explained that in an email from the LMC earlier in the day there is a suggestion that during Truth -in- Taxation hearings councils convey to property owners there are three ways to get money back from the taxes they are going to be assessed. They are: 1) there is an income based form M 1 P that can be submitted up to August 25, 2014; 2) there is an algorithm used on M1PR that helps determine what relief there would be for taxes that will go up dramatically; and, 3) there is a renter's tax credit. He agrees with mentioning that during the December 2 hearing. CITY OF SHOREWOOD WORK SESSION MEETING MINUTES November 25, 2013 Page 4 of 4 Councilmember Sandberg concurred with Councilmember Siakel's point of view and stated there are still unknowns about the SSCC. There is a need for greater participation from the other four cities. She also concurred with Councilmember Woodruffs suggestion to make the year -to -date information in the budget documents more current. Councilmember Hotvet stated the City would be sending a wrong message to the other four cities if the City takes ownership of subsidizing SSCC operations through a levy. Mayor Zerby stated he concurs with Councilmember Siakel's suggestion to subsidize operations through the use of General Fund reserves if needed. It is better to use existing tax dollars than levy additional taxes. There should not be an assumption that the City will subsidize that going forward through a tax levy. 3. ADJOURN Woodruff moved, Siakel seconded, Adjourning the City Council Work Session of November 25, 2013, at 6:29 P.M. Motion passed 510. RESPECTFULLY SUBMITTED, Christine Freeman, Recorder Scott by, Mayor ATTEST: JeaW Panchyshyn, Ciq Clle k