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12-07-15 CC Spec TNT Mtg MinCITY OF SHOREWOOD CITY COUNCIL SPECIAL MEETING MONDAY, DECEMBER 7, 2015 MINUTES 1. CONVENE CITY COUNCIL SPECIAL MEETING -'7T COUNCIL CHAMBERS it Mayor Zerby called the meeting to order at 7:00 P.M. A. Roll Call Present. Mayor Zerby; Councilmembers Labadie, Siakel, Sundberg, and Woodruff, Administrator Joynes; and Finance Director DeJong Absent: None B. Review Agenda Sundberg moved, Labadie seconded, approving the agenda as presented. Motion passed 510. 2. TRUTH -IN- TAXATION PUBLIC HEARING A. Staff Presentation Mayor Zerby stated that there had been a request to forego a formal presentation by staff on the 2016 General Fund Budget because there was no one present in the audience for the Public Hearing and to enter a copy of the presentation into the public record. He noted Council has a thorough understanding of the City's 2016 General Fund Budget because of the numerous budget discussions it has had and it saw the presentation during its November 23, 2015, work session. He asked Council if it wanted to forego the presentation. There was Council consensus to skip the presentation and to enter it into the public record. A copy of the presentation and Budget would also be made available on the City's website. B. Public Hearing Seeing no one present to comment on the 2016 General Fund Budget, Mayor Zerby opened and closed the Public Hearing and Public Testimony portion of the Public Hearing at 7:01 P.M. C. Council Deliberation /Decision to Reconvene Administrator Joynes stated the meeting packet contained a memorandum from Director DeJong which identified what the use of excess General Fund reserves would have to be for a 3.0 percent, a 2.5 percent and a 2.0 percent levy increase when compared to 2015 per Council's request. In September 2015 the City certified a maximum 3 percent levy increase with Hennepin County. During Council's November 23, 2015, work session there was discussion about possibly using more General Fund reserves to reduce the levy increase to 2.0 percent or 2.5 percent. CITY OF SHOREWOOD SPECIAL MEETING MINUTES December 7, 2015 Page 2 of 5 Joynes explained that for the last four to five years the City has taken larger amounts of money out of the excess reserves to help fund the General Fund Budget for the upcoming year. The amount of reserves used has been increasing and the amount of excess reserves has been decreasing. If the City continues to use reserves to fund the Budget, eventually the reserves will reach the General Fund Balance Policy high - end level of 60 percent and possibly go lower than the 55 percent low -end level. Although a 2.0 percent levy increase might appear to be the correct thing to do, he thought the safer thing to do would be to have a levy increase of 2.5 or 3.0 percent. Maintaining excess reserves makes it easier in future budget years because people would not be as constrained when there are other issues. The mediation about the Southshore Center will begin later in the week. The City's exposure on a settlement would range from $65,000 — $247,000 based on where the two parties are in the contention. It has been assumed that any settlement would be paid for out of reserves. If the City were to acquire total ownership of the Center this year the excess reserves would be reduced significantly. It may be possible to pay a settlement over a couple of years. He doubts a settlement would be on that high end. Joynes reiterated there may be more comfort in the next few years if the levy increase were to be 2.5 or 3.0 percent. Mayor Zerby stated he thought all members of Council were comfortable with the proposed 2016 Budget. The outstanding question is how much of the reserves to use to help fund it in order to reduce the levy increase. He asked if anyone wanted to bring up something specific in the Budget. Councilmember Siakel stated she thought Council has been quite judicious and used the tax dollars wisely. During her five -year tenure on Council there have been minimal levy increases. She noted she supports keeping the levy increase at 3 percent. She thought that would be the prudent thing to do because of the projects Council would like to get done. Councilmember Labadie stated there is too much uncertainty about things at this time. She could support a 2.5 percent increase but prefers a 3.0 percent increase. She does not support a 2.0 percent increase. The increase could possibly be less in future years when there is not as much uncertainty about things (e.g., litigation). Councilmember Siakel noted that 1.0 percent of the City's General Fund Budget is about $50,000. Mayor Zerby noted the proposed 2016 Budget anticipates the use of approximately $180,000 in reserves and a 3.0 percent levy increase. Per Director DeJong's memo a 2.5 percent levy increase would require the use of approximately $205,000 in reserves and a 2.0 percent levy increase would require the use of approximately $230,000 in reserves. Councilmember Sundberg stated she supports a 3.0 percent levy increase in large part because of the unknown about the Southshore Center and in part because of other potential projects. Councilmember Woodruff stated he thought the City has the ability to take on some budget risk and noted that he normally does not want to do that. He then stated he thought there are a couple of things that would mitigate what Administrator Joynes spoke about. The City's General Fund can, by Policy, go down to a 55 percent reserve level before any action needs to be taken. He thought the Office of the State Auditor (OSA) recommends a 40 percent reserve level. Director DeJong clarified the OSA recommends a range of 35 — 50 percent. Woodruff stated he thought that one of the reasons the City has such a high bond rating is because is because the City is conservative with its reserve policy. But, he did not think having a 50 percent reserve CITY OF SHOREWOOD SPECIAL MEETING MINUTES December 7, 2015 Page 3 of 5 policy versus 55 percent would affect the bond rating much. He then stated if the City ended up having to pay $250,000 to obtain sole ownership for the Southshore Center that could be financed internally over time by borrowing the money from the Water Fund. The City would pay the Water Fund back at a rate of $24,000 a year over 10 years plus a modest interest rate. He noted he does not think there is any great budget risk. He then noted a 3.0 percent levy increase versus a 2.0 levy increase would hardly be noticeable to the taxpayers. He went on to note that he would not feel bad about having a 2.0 percent increase. Mayor Zerby noted he is comfortable staying with the 3.0 percent levy increase. He does not think there would be a big enough difference to really impact a lot of taxpayers. He stated that using reserves to balance the General Fund Budget can be a "slippery slope ". It can be an easy way to get a little money when needed. He thought if the Council wants to use reserves in the future he thought they should be used for specific projects (e.g.; trails, equipment purchases) that are incorporated into the Budget. He clarified he was not saying anyone did anything wrong. But, philosophically he encouraged people to be more forward thinking about using reserves. Councilmember Siakel reiterated she thought Council and staff have been extremely prudent with the City's budgets. Mayor Zerby concurred. Council decided to hear public comment hear because two property owners showed up after the Public Hearing was opened and closed. Pat Goodall, 5635 Harding noted she was not sure that this was the appropriate meeting to bring her questions up. She explained that she reviewed the taxable market value for her property for the last 10 years. From 2014 — 2016 the value increased by $56,000; it was $298,480 in 2014 and it is $355,160 for 2016. The taxes increased from $4,397 in 2014 to $4,797 for 2016. The valuation closest valuation to that for 2016 was in 2006 when the valuation was $351,000 and the taxes were $4,165. The highest valuation was $381,000 and that was for taxes payable in 2009 and taxes payable were $4,289. Mayor Zerby stated property taxes included taxes for a number of taxing entities such as Hennepin County, the School District, Shorewood, the Minnehaha Creek Watershed District (MCWD) and so forth. He asked staff to display a graphic showing what the 2016 property tax distribution is. He explained the District (35.7 percent) plus the County (35.0 percent) plus the City (22.4 percent) make up 93.1 percent of the taxes. He clarified Council and staff can comment on the City's portion of the property tax but not on the other taxing entities. Councilmember Woodruff stated he thought that on the City's website there is tool to look at property assessments and taxes and he encouraged Ms. Goodall to look at that. He clarified this is not the appropriate meeting to talk about taxable market valuations. Ms. Goodall clarified she was talking about her property taxes. Woodruff asked staff to display a graphic showing the City's revenues for years 2007 -- 2015. He stated it showed that there were minimal, if any, levy increases for a number of years. He noted that if people are seeing Iarge increases in their property taxes it is not because of the City tax. Councilmember Siakel noted that a lot of the overall property tax increase has been because of the School District. She also noted that another referendum passed for the School District after the preliminary property tax statements were mailed out. Therefore, the preliminary taxes will likely go up. Mayor Zerby noted that one of the City's largest increases annually is for the City's contribution toward employee health insurance. He stated the City's infrastructure is aging. Its roadways were built out in the CITY OF SHOREWOOD SPECIAL MEETING MINUTES December 7, 2015 Page 4 of 5 1970s and the costs to repair them will be significant. The City has also had to implement unfunded mandates from other government entities such as the MCWD. Councilmember Woodruff stated one thing that dramatically affects an individual's property tax is the taxable market value of their property in relationship to the market value of all of the other properties in the City. Each year a County assessor sets a value for each residential property in Shorewood. A detailed review of about 25 percent of the properties /houses is done each year. He then stated property values in Minnesota were approaching their peak in 2006 and they started to drop after the 2008/2009 significant drop in the financial markets. The percentage drop in values was not the same for property owners and the impact on property taxes varied. He noted that for the last six years the City's levy increase ranged from 0.00 — 2.0 percent. Director DeJong stated that in 2012 the City collected about $4,784,000 in taxes and the 2016 budget anticipates collecting $5,079,000 in taxes. That is about a 6 percent increase over five years. Ms. Goodall noted she understands that the City tax is just a piece of the puzzle. She explained she had spoken with Mike at Hennepin County who sent her a real estate data card which told her that her property was assessed fairly. She had asked Mike if the new houses along Fairway Drive impacted her assessment. He told her no. She stated her property was compared with those along Wedgwood Drive, Star Lane and Star Circle, and in a few other areas. Mike told her that Minnesota has one of the most complicated property tax formulas; there are more than 40 categories that factor into property taxes. She noted in 2006 her valuation was closest to what is for 2016. She also noted that her valuation kept going up in 2007 — 2008. She stated there is a lag between when the valuation is set and when the valuation is used to influence taxes. Councilmember Woodruff commented that valuations of properties that front a lake changed very different than non - lakeshore properties in the City because the market for lakeshore was very different. Ms. Goodall asked if properties valued around a $1 million impact the taxes for mid -range value properties. Mayor Zerby stated there are two components for property taxes — the land and the house. He has heard complaints from owners of lakeshore property who felt they were penalized for living next to a lake because of the high property taxes they have to pay. He told them it was because they have "very expensive dirt". He then stated if Ms. Goodall thinks her home is not worth the value indicated on her property tax statement she could ask the assessor to look at the interior of her home. Ms. Goodall stated the last time her home was inspected was in 2012. It was also inspected in 2007 and 2008. She does not remember if the inside of her home was inspected. One year she asked the inspector to inspect the inside of their home because the assessment was based on things they had not done to their home. Councilmember Woodruff stated if Ms. Goodall wanted to pursue her taxes in more length he encouraged her to schedule an appointment with Director DeJong to discuss that. Ms. Goodall stated each year she gets a property tax refund. She asked why she could not just pay less in property taxes. Councilmember Woodruff encouraged her to talk to her legislature. Ms. Goodall thanked Council for its time. Mayor Zerby thanked Ms. Goodall for bringing her questions forward. CITY OF SHOREWOOD SPECIAL MEETING MINUTES December 7, 2015 Page 5 of 5 Bob Hinnenkamp, 6075 Strawberry Lane, noted his home was built in 1979 and at that time his in -laws were his significant neighbor. His in -laws had the oldest house in Shorewood at the time. He stated he had come this evening with two things in mind. One was to talk about the taxable market value for his property and he just learned that this is not the appropriate meeting to discuss that. Councilmember Woodruff explained property owners receive property valuation notices in March. The City holds its Board of Review meeting sometime in April — June where assessors are present for property owners to discuss concerns they have about their valuations. If a property owner does not get any satisfaction during the Board of Review process they can then go to Tax Court to appeal the valuation. Mr. Hinnenkamp stated the other reason he came is because new houses are being built along Alexander Lane near his property. The contractor put up an erosion barrier along the side of his property. He called the City in May 2015 to have the contractor remove the barrier because it no longer served a purpose and he has not heard back from the City. No one at the City acted as if it was any of their business. He thought that maybe by telling Council he would get some response. Mayor Zerby stated that message would be carried forward to staff and someone will get back to Mr. Hinnenkamp. There was Council consensus not to continue deliberation of the 2016 General Fund Operating Budget to Council's December 14, 2015, meeting. 3. APPROVING THE 2015 GENERAL FUND BUDGET AND PROPERTY TAX LEVY COLLECTIBLE IN 2016 Sundberg moved, Siakel seconded, Adopting RESOLUTION NO. 15 -089 "A Resolution Adopting the 2016 General Fund Operating Budget in the amount of $5,857,087 and Approving the Property Tax Levy in the Amount of $5,079,408 (a 3 percent increase over 2015) Collectible in 2016." Motion passed 510. Sundberg moved, Siakel seconded, Adjourning the City Council Special Meeting of December 7, 2015, at 7:33 P.M. Motion passed 510. RESPECTFULLY SUBMITTED, Christine Freeman, Recorder 9��n- pawhr�� Jean Panchyshyn, City Clerk