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HomeMy WebLinkAboutDecember 6, 2004 Truth in TaxationCITY OF COLUMBIA HEIGHTS 590 40th Avenue N.E., Columbia Heights, MN 55421-3878 (763) 706-3600 TDD (763) 706-3692 Visit Our Website at: www. ci. cohtmbia-heights, mn.us ADMINISTRATION Mayor dulienne l, lZyclcoff Councibnembers Robert .4. b?illiams Bruce Na¥~rocki Tammera Ericson Bruce Kelzenberg Cit~ Mana. ger b?alter R. Fehst The following is the agenda for the Truth in Taxation Hearing of the City Council to be held at 7:00 p.m. on Monday, December 6, 2004 in the City Council Chambers, City Hall, 590 40th Avenue N.E., Colmubia Heights, Mi~mesota. 'Il The City of Columbia Heights does not discriminate on the basis of disability in the admission or access to, or treatment or Il employment in, its services, programs, or activities. Upon request, accommodation will be provide_d to allow individuals with disabilities to participate in all City of Colmnbia Heights' services, programs, and activities. Auxiliary aids for disabled persons are available upon request when the request is made at least 96 hours in advance. Please call the Deputy City Clerk at 763-706-3611, to make arrangements. (TDD/706-3692 for deaf or hearing impaired only) Call to Order - Roll Call Pledge of Allegiance Presentation of 2005 Budget and Tax Levy hfformation a. Walt Fehst, City Manager, will present budget overview information. b. William J. Elrite, Finance Director, will graphic budget information using Power Point c. Presentation by staff on department needs (10 minntes each) i. Tom Jolmson, Chief of Police ii. Charlie Thompson, Fire Clzief and Jolm Larkin, Firefighter iii.Becky Loader, Library Director and Marsha Tubbs, Children's Librarian d. Walt Fehst, City manager Budget Presentation Summation e. Public Comments f. City Council conuuents 4. Adiourmnent Walter R. Fehst, City Manager THE CITY OF COLUMBIA HEIGHTS DOES NOT DISCRIMINATE ON THE BASIS OF DISABILITY IN EMPLOYMENT OR THE PROVIBION OF SERVICES EQUAL OPPORTUNITY EMPLOYER City of Columbia Heights Truth in Taxation Hearing on the 2005 Proposed Budget and Property Taxes December 6, 2004 TRUTH IN TAXATION HEARING ON THE 2005 PROPOSED BUDGET AND PROPERTY TAXES Table of Contents 2005 Budget Message ......................................................... 2005 Revenue by Source ...................................................... 2005 All Budgetary Funds Expenditures By Functional Area .......... 2005 All Budgetary Funds Expenditures By Classification ............. 2005 Sources of General Fund, Library Fund, and EDA Revenue... 2005 General, Library, and EDA Expenditures by Classification .... General Fund Percent of Fund by Department ............................ Changes in State Aid ........................................................... Proposed Property Taxes ..................................................... Where Your Property Taxes Go ............................................... Property Tax History from 1997 to 2005 .................................... Tax Levies Payable ............................................................. Cumulative LGA Lost ........................................................... LGA and Tax Levy History ................................................... Total Tax Supported Budgets ................................................. What will $30 a Month Buy? ................................................... 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 CITY OF COLUMBIA HEIGHTS 2005 BUDGET MESSAGE The budget message and document have been put together to comply with the City Charter and state statute requirements for providing budget information and adopting a proposed budget and a proposed tax levy. Under state statutes the City of Columbia Heights must adopt a proposed budget and a proposed tax levy and certify it to the County Auditor's office prior to September 15. The City then has until December 28 to adopt and certify a final budget and levy to the County Auditor's office. The final levy can be less than the proposed levy but it cannot be greater than the proposed levy. Based on this, staff traditionally recommends establishing a proposed levy that is adequate to cover budgetary needs with the understanding that as the budget process is finalized, the City Council has the opportunity to reduce the final property tax levy. Budget Format The City of Columbia Heights budget is prepared and distributed in a summary format that includes useful narrative information highlighting department activities, objectives, and budget summary. This format is designed to provide the user of the budget with a more descriptive narrative explaining the highlights of the budget. Under this format the budget is broken down into ten functional areas and is prepared with a summary for each of these areas along with a detailed budget workbook for the City Council to utilize during their budget review. The summary budget book is then again summarized in a public document that is used for the City's public budget adoption meeting and for any required Truth in Taxation hearings. The budget message follows the format of the overall budget and provides a narrative section summarizing each of the functional areas along with overall summary information regarding the budget document, the total budget, property taxes, and other revenue sources. Budget Overview Budget Highlights The budget has followed a steady downward trend and has not kept up with inflation for several years due to levy limits. With the imposition of levy limits and no significant new revenue sources, it has been difficult for the City of Columbia Heights to maintain cost of living increases in the budget and impossible to increase the budget to provide expanded services to residents. This situation worsened in 2003 when the state reduced state aid by $696,700. This situation continued with the 2004 budget. In 2004 the state reduced aid to the City by $1,048,796 and allowed the City to only make up 60% of this reduction or approximately $629,296 in a property tax increase. For the 2005 budget the City will lose an additional $544,726 in local government aid (LGA), which the City Manager has proposed to make up through a property tax levy increase. Looking to the future, the City is also scheduled to lose an additional $338,380 in LGA for the budget year of 2006. This will bring our total annual reduction in LGA to $1,931,902. The bottom line of this is that the 2004 budget was significantly reduced and the City Manager has recommended that we "hold-the-line" on that budget with no increases for inflation in 2005 or 2006. Although a portion of the aid lost has been made up through a property tax levy, the actual budget has seen a reduction and no inflationary increase for three years. The following charts reflect this reduction in LGA and the effect of the "hold-the-line" budget. Page 1-1 As mentioned above, the state legislature greatly reduced state aid to the City of Columbia Heights in 2002. The following chart reflects what the City received in state aid for the years 2001 through 2004 and includes the projection for 2005 and 2006. 2001 2002 2003 2003 2004 2005 2006 Adopted Adopted Adopted Revised Adopted Proposed Projected Budget Budget Budget Budget Budget Budget Budget HACA 1,004,368 0 0 0 0 0 0 LGA 2,385,618 2,589,420 2,651,999 1,955,299 1,603,203 1,058,477 720,097 Total 3,389,986 2,589,420 2,651,999 1,955,299 1,603,203 1,058,477 720,097 Change from PriorYear 60,835 (800,566) 62,579 (696,700) (352,096) (544,730) (338,380) Following the guidelines established by the state legislature and governor, the City of Columbia Heights has passed a significant amount of the aid reductions on to residents in the form of a property tax levy increase. It should be noted that although the City and County had property tax levy increases as a result of state legislation in 2002, in that year there was a large offset to this because the state drastically increased aid to school districts and the levy reduction by school districts was greater than the levy increase from the City and County. Then, for both the years 2003 and 2004, the City levy increase was less than the state LGA reduction the City received; 2005 is the first year where the City is actually proposing to make up the entire state LGA decrease through a levy increase. The following property tax chart represents the City Manager's recommended budget. This does not include the City Council's cost of living increase to the proposed 2005 levy. PROPERTY TAXES, 2003 - 2007 Property Taxes 2003 2004 2005 2006 2007 Adopted Adopted Proposed Proposed Proposed Library 433,585 433,585 433,585 433,585 433,585 EDA 140,569 84,965 84,965 84,965 84,965 General Fund 4,243,830 4,299,434 4,928,710 5,473,436 5,811,816 Lost LGA Levy Increase 629,276 544,726 338,380 0 Cost of Living Levy Increase 268,466 Total Levy 4,817,984 5,447,260 5,991,986 6,330,366 6,598,832 Levy Increase from Prior (6,146) 629,276 544,726 338,380 268,466 Year The final factor in the property tax formula is the state legislature's restructuring of class rate percentages for real property taxes payable in 1997 and for future years. The class rate changes made during this period of time had a major effect on residential property, as there was a considerable shift in tax capacity value from commercial-industrial and residential non-homestead to residential homestead property. As shown in the following table, residential homestead property shows no change in class rate for the first $72,000 of value. There is a slight decrease in class rate for higher priced homes. However, there was a significant decrease in class rate for commercial-industrial property and residential non-homestead property. The result of this is that although there was a small reduction for residential property, there was a far greater reduction for Page 1-2 non-residential property that, in effect, shifts a significant amount of the property tax payment to residential non-homestead property from other properties. CLASS RATE PERCENTAGES BY REAL PROPERTY TYPE TAXES PAYABLE 1997 THROUGH 2005 Real Property Payable Payable Payable Payable Payable Payable Payable Description 1997 1998 1999 2000 and 2002 2003 2004 and Class Class Class 2001 Class Class 2005 Rate Rate Rate Class Rate Rate Rate Class Rate Residential homestead First $72,000 1.00% Over $72,000 2.00% First $75,000 1.00% 1 .oO% Over $75,000 1.85% 1.70% First $76,000 1.00% 1.00% 1.00% 1.00% $76,000 - $500,000 1.65% 1.00% 1.00% 1.00% Over $500,000 1.25% 1.25% 1.25% Commercial-Industrial and public utility First $100,000 3.00% Over $100,000 4.60% First $150,000 2.70% 2.45% 2.40% 1.50% 1.50% 1.50% Over $150,000 4.00% 3.50% 3.40% 2.00% 2.00% 2.00% Residential non-homestead, 1 unit First $72,000 2.30% 2.10% 1.70% Over $72,000 2.30% 2.10% 1.70% First $75,000 Over $75,000 First $76,000 1.65% 1.50% 1.25% 1.25% $76,000 - $500,000 1.65% 1.50% 1.25% 1.25% Over $500,000 1.65% 1.50% 1.25% 1.25% Residential non-homestead, 2-3 units and undeveloped land 2.30% 2.10% 1.70% 1.65% 1.50% 1.25% 1.25% Residential non-homestead 4 or more units 3.40% 2.90% 2.50% 2.40% 1.80% 1.50% 1.25% Low Income 1.00% 0.90% 1.00% 1.25% Economic Environment As indicated in the Moody's Municipal Credit Rating for the City of Columbia Heights, our finances remain satisfactory with reasonable reserves. However, Moody's did state that the General Fund reserve of 40% of the General Fund expenditures was adequate, but as a rating agency they would prefer to see a 50% level. As a result of this review by Moody's, the City has retained an A1 bond rating. In this rating review Moody's also commended the City Manager for the foresight to look at a three-year budget process rather than the traditional one-year budget plan. In general, the City's revenue structure is somewhat vulnerable to economic pressure as for 2005 the City will still be receiving $1,058,477 in LGA. This is slated to decrease the $720,000 in 2006. However, as the state's financial condition continues to worsen there is always the potential that this amount of aid could be reduced further. The City still maintains a cash flow fund balance equal to 45% of the general operating fund budget. This is necessary as the City does not receive any significant revenue from state aid or property taxes in the first six months of the year. Without this fund balance it would be necessary for the City to borrow money to operate with Page 1-3 during the six months of the year. The City's primary source of increased revenue is through property tax levies. Over the past several years the City Council has maintained a very conservative profile by increasing property taxes by minimal percentages. The only exception to this has been the decision to increase property taxes to make up for a portion of the lost state aid. To maintain the quality of services provided to the residents of Columbia Heights, it will be necessary to look at more aggressive increases in the property tax levy. Significant Highlights on Expenditures "Hold- the-Line" Budgets For the 2005 budget preparation the City Manager instructed all division and department heads to prepare a "hold-the-line" budget. This necessitated absorbing all inflation for 2005 into the current budget allocation. The most noteworthy portion of this was in the area of personnel. When the 2004 budget was completed union contracts had not been settled. Subsequently, the 2004 budget did not include funds for cost of living increases. In 2004 the City Council finalized collective bargaining agreements and granted employees a 2% pay increase effective July 1, 2004. In addition to this they granted a 2% pay increase in salaries for 2005. This equated to a 4% pay increase adjustment for the 2005 budget. As personnel is a major cost factor in the City's budget, even a small pay increase has a major effect on budgets. The following chart reflects 15 positions in the City that were either eliminated from the budget or left vacant in 2004. POSITION FTE In 2004 Budget Yes No Accounting Clerk II-Assessing 1 1 Administration Clerk 0.75 0.75 Police Officer 4 2 2 Community Service Officer 2 2 Public Works Clerical 1 1 Maintenance Worker 1 1 Maintenance III-Utilities 1 1 Secretary II Permits/Licenses 0.75 0.75 Recreation Coordinator 1 1 Building Official 0.5 0.5 Firefighter 1 1 0 Accountant 1 1 TOTAL 15.00 6.00 9.00 * Full-time position filled at 3/4 time; half-time position not filled. ** Seasonal was hired for summers of 2003 and 2004. This was funded through the 21 st Centm'y Grant. ***Building Inspector was reduced to a 20 hr a week contract position. As you can see from this chart, of the 15 vacant positions, nine were actually deleted from the budget while six remained in the budget but were not filled. Of these six unfilled positions in 2004, three of them have actually been removed from the 2005 budget. Those removed from the 2005 budget are one police officer, one public works maintenance III position, and one accountant. This left one police officer and one firefighter in the 2005 budget and it is anticipated Page 1-4 that these positions will be filled in 2005. Staff is also recommending that the City Council add back one police officer and a fulltime building official for the final adopted 2005 budget. The following chart shows the tax-supported funds budget for 2003, the reductions to the 2004 and proposed 2005 budgets alon'g with the City Manager's recommendations or budget projections for 2006 and 2007. Total Tax Supported Budgets General Fund, Library Fund, EDA Fund 10,000,000 9,500,000 9,000,000 8,500,000 8,000,000 7,500,000 7,ooo,ooo 6,500,000 6,000,000 5,500,000 2003 2004 2005 2006 2007 As you can see from the above chart, the 2004 budget decreased by $770,928 from 2003 and we are "holding-the-line" and keeping the budget at this same level for 2005 and 2006 with a 3% increase for 2007 that amounts to $268,466. The net result of this is that the 2007 budget will still be $502,462 less than the adopted 2003 budget. This in itself is noteworthy. However, when you take into consideration that all pay increases and other inflationary factors have been absorbed into this budgeting level, all managers should be complimented for their effo~-ts in holding the line on expenses and still providing a high level of service to residents. Page 1-5 Conclusion The above narrative should provide an overview of the most salient changes and assumptions included in the budget. The budget for 2004 went way beyond a "hold-the-line" budget. It made significant reductions to all functional areas. Staff has maintained the same budget level for 2005 and is projecting to also maintain this level for 2006. Even with this major reduction of expenditures, it was necessary to implement a 13% increase in the certified levy for 2004 to make up 60% of the state aid reductions to the City. This levy increase equated to approximately a 21% increase in City property taxes for 2004. In 2005 the City Manager recommended a proposed levy that would only make up for the loss in LGA. The City Council increased this proposed levy by $250,000 for cost of living. This equated to a levy increase for 2005 of 14.6% or an increase in City property taxes of 21%. Although these property tax increases are considerable, they still do not make up for the full amount of lost aid in 2004 and 2005. This has necessitated significant budget and staff reductions. Truth in Taxation Hearing At the Truth in Taxation hearing on December 6, 2004 staff will be making recommendations to the City Council to add back a fulltime police officer at a cost of $58,252, to add back $4,410 to the library to reinstate the summer reading program and make up for cuts in supplies and periodicals, and to add $32,760 for increased health insurance costs. There also will be a recommendation to add $19,375 to Community Development to upgrade the City Planner position and re-hire a fulltime building inspector. In addition to these add-backs there is a recommendation for a cut of $19,100 in the Mayor-Council budget for the reduction of travel, training and contingencies. The net result of these adds and cuts is a net increase to the City Manager's proposed budget of $95,697. However, the bright side to this is that the proposed tax levy adopted by the City Council on September 6, 2004 included $250,000 for cost of living increases. As staff has absorbed the cost of living increases in the budget and is only recommending a $95,697 add-back, the net result is that the proposed levy can be reduced by $154,303. This will result in a property tax savings from the Truth in Taxation notices that were mailed to all residents. Page 1-6 All Budgetary Funds Revenue By Source 2005 Budget Net Sales Liquor $1,635,800 Transfers in & Non Revenue Receipts $3,185,350 Allocations $75,OOO Sales & Related Charges $4,316,020 Miscellaneous $1,036,118 Fines and Forfeits $t35,ooo Charges for Services $428,998 Taxes $5,991,986 Debt Service and HRA Taxes $941,566 Licenses & Permits $318,800 Intergovernment al Revenue $1,036,118 Page 2 All Budgetary Funds Expenditures By Functional Area 2005 Budget Public Works Other $5,577,234 Recreation $624,300 Administration $876,163 Debt Service $2,537,6O7 Community Development $763,752 Finance $1,158,254 Public Works General Fund $1,977,027 Police $2,608,635 Liquor $1,319,480 Library $631,271 Fire $1,048,471 General Government $2,341,639 Page 3 Supplies $3,922,927 All Budgetary Funds Expenditures by Classification 2005 Budget Other Services & Charges $3,359,698 Capital Outlay $1,578,692 Debt Service $2,537,607 Contingencies & Transfers $364,220 lPersonal Services $8,396,379 Page 4 General Fund, Library, and EDA Fund Sources of Revenue 2005 Budget Other $595,821 Transfers $491,266 Charges for Services $504,350 Intergovernmental $1,890,783 Taxes $5,608,626 Page 5 General Fund, Library, and EDA Fund Expenditures by Classification 2005 Budget Contingencies & Transfers 7.49% Capital Outlay 0.48% Other Services & Charges 18.83% Supplies 5.66% Personai Services 67.54% Page 6 General Fund Percent of Fund by Department 2005 Budget Public Works 24.01% Recreation 7.58% Mayor-Council Assessing Legal 5.98% City Manager 4.66% Finance 7.47% Fire 12.07% Police 30.92% General Government 7.3O% Page 7 Changes in State Aid 2002 Adopted 2003 Adopted 2003 Revised 2004 Adopted 2005 Proposed Budget Budget Budget Budget Budget HACA 0 0 0 0 LGA 2,589,420 2,651,999 1,955,299 1,603,203 1,058,473 Total 2,589,420 2,651,999 1,955,299 1,603,203 1,058,473 iOhange from Prior Year (800,566) 62,579 (696,700) (352,096) (544,730) Note: In 2002 the State eliminated the HACA payment to cities. The loss of HACA to Columbia Heights was $1,005,368. At the same time, the State increased LGA by $203,802. The net result was a loss of $800,566 in State Aid. Page 8 Proposed Property Taxes 2003-2005 Property Taxes 2003 2004 2005 Adopted Adopted Proposed Library 433,585 433,585 433,585 EDA 14,0,569 84,965 84,965 General Fund 4,243,830 4,299,434 4,928,710 Lost LGA Levy Increase 629,276 544,726 Cost of Living Levy Increase 250,000 Total Levy 4,817,984 5,447,260 6,241,986 Levy Increase. from Prior Year (6,146) 629,276 794,726 Page 9 County 30% WHERE YOUR PROPERTY TAXES GO Payable 2004 Miscellaneous 7% School 21% City 43% County 29% WHERE YOUR PROPERTY TAXES GO Payable 2005 Miscellaneous 7% City 46% School 19% Page10 City of Columbia Heights, Minnesota Property Tax History from 1997 to 2005 On Five Selected Properties Est Mkt Value 2004 184,800 200,400 140,800 177,000 190,400 Est Mkt Value 2005 202,200 220,000 150,000 216,500 229,800 Taxable Value 2004 167,300 162,400 128,600 177,000 190,400 Taxable Value 2005 192,400 186,800 147,900 203,600 219,000 Property Identification Number Year R36 ** ** 41 0042 R36 ** ** 13 0043 I R25 ** ** 41 0157 R25 ** ** 22 0047 R25 ** ** 21 0097 2005 2,068.62 1,967.74 1,480.48 2,178.03 2,371.07 2004 1,823.95 1,740.40 1,300.14 1,930.17 2,104.45 2003 1,587.93 1,513.69 1,128.58 1,751.27 1,835.57 2002 1,697.96 1,622.21 1,215.65 1,873.16 1,962.91 2001 1,724.55 1,648.69 1,198.27 1,957.54 2,146.22 2000 1,568.26 1,515.30 1,071.81 2,038.67 2,069.82 1999 1,619.32 1,451.44 1,007.19 1,652.56 1,955.62 1998 1,742.06 1,547.69 1,055.55 1,820.10 2,110.15 1997 2,027.80 1,798.04 1,169.61 2,041.79 2,467.61 Increase from 2004 to 2005 244.67 227.34 180.34 247.86 266.62 Increase from 2003 to 2005 480.69 454.05 351.90 426.76 535.50 (Decrease) Increase from 1997 to 2005 40.82 169.70 310.87 136.24 (96.54) Page 11 City of Columbia Heights, Minnesota TAX LEVIES PAYABLE2002 - 2005 2002 2003 2004 2005 Adopted Adopted Adopted Proposed General Fund 4,095,527 4,243,830 4,299,434 4,928,710 Library 591,588 433,585 433,585 433,585 EDA 137,015 140,569 84,965 84,965 Lost LGA Levy Increase 629,276 544,726 Cost of Living Levy Increase 250,000 Total Levy 4,824,130 4,817,984 5,447,260 6,241,986 MARKET VALUE (PAYABLE 2004) 63,300 MARKET VALUE (PAYABLE 2005) 74,400 County City School Other Total 2003 Taxes 128 160 137 19 444 2004 Taxes 139 193 152 19 503 2005 Proposed Taxes 152 228 167 20 567 Amount of Increase 2004/2005 13 35 15 1 64 MARKET VALUE (PAYABLE 2004) 103,700 MARKET VALUE (PAYABLE 2005) 119,300 County City School Other Total 2003 Taxes 236 297 239 37 809 2004 Taxes 270 375 277 36 958 2005 Proposed Taxes 310 464 307 40 1,121 Amount of Increase 2004/2005 40 89 30 4 163 MARKET VALUE (PAYABLE 2004) 139,900 MARKET VALUE (PAYABLE 2005) 160,800 County City School Other Total 2003 Taxes 362 456 348 55 1,221 2004 Taxes 405 563 400 55 1,423 2005 Proposed Taxes 458 686 439 59 1,642 Amount of Increase 2004/2005 53 123 39 I 4 219 MARKET VALUE (PAYABLE 2004) i 72,700 MARKET VALUE (PAYABLE 2005) 195,700 County City School Other Total 2003 Taxes 477 600 447 89 1,613 2004 Taxes 528 734 513 90 1,865 2005 Proposed Taxes 583 873 550 104 2,110 Amount of ncrease 2004/2005 55 139 37 14 245 MARKET VALUE (PAYABLE 2004) 208,700 MARKET VALUE (PAYABLE 2005) 240,000 County City School Other Total 2003 Taxes 601 757 554 92 2,004 2004 Taxes 661 919 635 89 2,304 2005 Proposed Taxes 740 1,108 690 96 2,634 Amount of Increase 2004/2005 79 189 55 7 330 Page12 Cumulative LGA Lost 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 2003 2003 2004 2005 2006 Page 13 7,500,000 6,500,000 5,500,000 4,500,000 3,500,000 2,500,000 1,500,000 500,000 LGA and Tax Levy History [] LGA []Tax Levy I I 2003 2004 2005 2003 2004 2005 ~G~,,,~,~,~,,~, 2,651,999 1,603,203 1,058,473 Tax/e~ 4,817,984 5,447,260 6,241,986 Total 7,469,983 7,050,463 7,300,459 Page14 Total Tax Supported Budgets General Fund, Library Fund, EDA Fund 10,000,000 9,500,000 9,000,000 8,500,000 8,000,000 7,500,000 7,000,000 6,500,000 6,000,000 5,500,000 2003 2004 2005 2006 20O7 Page 15 WHAT WILL (Based on $30 A MONTH BUY? 2005 Property Tax) $30 a Month Buys Quality and Quantity in the City of Columbia Heights Telephone Pizza for four Two Twins Tickets Columbia Heights City Services Basic Cable TV Parks Streets Police Fire Library The average home in Columbia Heights pays $30 per month in city real estate taxes. The average Columbia Heights resident will spend $30 every month on various services and pleasures, such as pizza and pop for four at a local restaurant, basic cable TV for the family, monthly phone services, etc. The best value for your money in Columbia Heights is still all of the city services that $30 of your monthly property taxes will buy! Paget6