HomeMy WebLinkAboutDecember 5, 2005 Truth in Taxation
CITY OF COLUMBIA HEIGHTS
Mavor
GQ1Y L. Peterson
COllllcilmembers
Rohert A. Williams
Bruce Nawrocki
Tammera Ericson
Bruce Kelzenherg
City Mallaf!er
Walter R. Fehst
590 40th Avenue N.E., Columbia Heights, MN 55421-3878 (763) 706-3600 TDD (763) 706-3692
Visit allr Website at: www.ci.colll/llbia-heiglzts./Il11.lIS
ADMINISTRA nON
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 5, 2005 in the City Council Chambers, City Hall, 590 40th Avenue N.E., Columbia
Heights, Minnesota.
The City of Columbia Heights does not discriminate on the basis of disability in the admission or access to, or treatment or
employment in, its services, programs, or activities. Upon request, accommodation will be provided to allow individuals with
disabilities to participate in all City of Columbia 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. (TDDI706-3692 for deaf or hearing impaired only)
1. Call Truth in Taxation Hearing to Order - Roll Call
2. Pledge of Allegiance
3. Presentation of 2006 Budget and Tax Levy Information
a. Walt Fehst, City Manager, will present budget overview information.
b. William 1. Elrite, Finance Director, will graphic budget information using Power Point
c. Presentation by staff on department needs (10 minutes each)
i. Tom Johnson, Chief of Police
ii. Bob Streetar, Community Development
d. Walt Fehst, City Manager Budget Presentation Summation
e. Public Comments
4. Adiourmnent of Truth in Taxation Hearing
Walter R. F ehst, City Manager
THE CITY OF COLUMBIA HEIGHTS DOES NOT DISCRIMINATE ON THE BASIS OF DISABILITY IN EMPLOYMENT OR THE PROVISION OF SERVICES
EQUAL OPPORTUNITY EMPLOYER
CITY OF COLUMBIA HEIGHTS
2006 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
budget and a 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 narrative budget
message 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 workbook for
each functional area follows the same overall budget format providing 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 by not keeping up with inflation for
several years due to cutbacks in local government aid (LGA). With no significant new
revenue sources, it has been difficult for the City of Columbia Heights to maintain cost
of living increases within the budget and impossible to increase the budget to provide
expanded services to residents. The current situation began in 2003 when the state
reduced LGA by $696,700. The 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 property tax increases. For the 2005
budget the City lost an additional $544,726 in LGA bringing the annual reduction in aid
to $1,593,522. For the 2006 budget it was projected that the City would lose an
additional $338,380 in LGA. However, due to changes in several of the factors that are
used in the formula for the distribution of LGA to cities, the City of Columbia Heights will
only see a reduction of $29,990 in 2006 which brings the annual loss in LGA to
$1,623,512. At the same time, the City Manager is recommending a 4% increase in our
certified levy. This amounts to an increase in property tax revenue of $245,000. When
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this amount is offset by the $29,990 lost in LGA, the City will see an increase in revenue
of $215,010. The net effect of this for property tax payers in Columbia Heights is that
they will see an increase of approximately 5.5% in the city portion of property taxes
collected by Anoka County.
As mentioned above, the state legislature greatly reduced LGA to the City in 2003.
However, this was not the first significant reduction. HACA aid to the City was
eliminated in 2002. The following chart reflects what the City received or is certified to
receive in state aid for the years 2001 through 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 1,028,487
Total 3,389,986 2,589,420 2,651,999 1,955,299 1,603,203 1,058,477 1,028,487
Change
from 60,835 (800,566) 62,579 (696,700) (352,096) (544,730) (29,986)
Prior
Year
Following the guidelines established by the state legislature and governor, the City of
Columbia Heights has passed a great amount of aid reduction on to its residents in the
form of a property tax levy. It should be noted that although the city and county had
property tax levy increases as a result of the state legislation in 2002, in that year there
was a large offset to this because the state drastically increased aid to school districts.
The levy reduction by school districts was greater than the levy increase from the city
and county. Then for the years 2003 and 2004 the City levy increase was less than the
state LGA reduction the City received. The year 2005 is the first year where the City
actually made up the entire LGA decrease through a levy increase. For 2006 the City
Manager's proposed levy increase is $215,010 higher than the amount the City is losing
in LGA. The following chart reflects the lost LGA and the increase in property tax levies
for the years 2003 through the projected proposed levy for 2007.
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
Levy Increase 629,276 544,726 338,380 286,466
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
1-2
To further reflect where we're at, the following chart shows the City's total revenue base
from LGA and property tax levies for the years 2003 through 2006. As you can see
from this chart, a significant amount of the lost LGA has been made up through property
tax levies. However, as of 2006, the total revenue is still less than the City was certified
to receive in 2003.
LGA and Tax Levy History
I OLGA
OTax Levy t
7,500,000
- - - 6,347,537 -
6,102,537
- - -
5,447,260
4,817,984 - - -
- - -
- - -
2,651,999
- - -
1,603,203
1,058,473 1 ,0~8,487
6,500,000
5,500,000
4,500,000
3,500,000
2,500,000
1,500,000
500,000
2003
2004
2005
2006
2003 2004 2005 2006
LGA 2,651,999 1,603,203 1,058,473 1,028,487
Tax Levy 4,817,984 5,447,260 6,102,537 6,347,537
Total 7,469,983 7,050,463 7,161,010 7,376,024
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 in 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
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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
non-residential property that, in effect, shifts a large amount of the property tax payment
to residential property from other properties.
CLASS RATE PERCENTAGES BY REAL PROPERTY TYPE
TAXES PAYABLE 1997 THROUGH 2005
Real Property Description Payable Payable
1997 2006
Class Rate Class Rate
Residential homestead
First $72,000 1.00%
Over $72,000 2.00%
First $75,000
Over $75,000
First $76,000 1.00%
$76,000 - $500,000 1.00%
Over $500,000 1.25%
Com mercia I-I nd ustrial
and Public Utility
First $100,000 3.00%
Over $100,000 4.60%
First $150,000 1.50%
Over $150,000 2.00%
Residential non-homestead, 1 unit
First $72,000
Over $72,000 2.30%
First $75,000 2.30%
Over $75,000
First $76,000
$76,000 - $500,000 1.25%
Over $500,000 1.25%
1.25%
Residential non-homestead, 2-3 units and undeveloped land
2.30% 1.25%
Residential non-homestead
4 or more units 3.40% 1.25%
Low Income 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 A 1 bond rating. In this rating review Moody's also
commended the City Manager for the foresight to look at a multi-year budget process
rather than the traditional one-year budget plan.
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In general, the City's revenue structure is somewhat vulnerable to economic pressure;
as for 2006 the City will still be receiving $1,028,487 in LGA. As the state's financial
condition is unknown, 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 for 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
continue to operate with during the first 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 amounts. The only exception to this has been the decision to
increase property taxes to make up for lost state local government 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
The following chart shows the tax-supported funds budget for 2003, the reductions to
the 2004 and 2005 budgets, and the City Manager's recommendations for 2006 along
with projections for 2007.
Total Tax Supported Budgets General
Fund, Library Fund, EDA Fund
As you can see from the previous chart, the 2004 budget decreased by $770,000 from
20Q3. Under the "hold the line" concept, there are only minor increases to the budget in
2006 and a 3% increase for the projected 2007 budget. The net result of this is that the
projected 2007 budget will still be $297,763 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 budget level, all managers
should be complimented for their efforts in "holding the line" on expenses and still
providing a high level of services to residents.
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 had minimal budget adjustments for 2006.
Although there have been some significant property tax increases in this period of time,
the total property tax increases have not offset the total LGA reductions and the total
tax-supported budget for 2006 is still significantly less than the adopted budget for 2003.
Truth in Taxation Hearing
At the Truth in Taxation hearing on December 5, 2005 staff will be making
recommendations to the City Council to add back a fulltime police officer at a cost of
$51,569. It is projected that this officer would start March 1, 2006 and be assigned to
the Anoka-Hennepin County Narcotics Task Force. Other add-backs to the budget
include $9,000 for the Fire Department Sleep-in program. This would allow the Fire
Department to have an additional paid, on-call individual on duty weekends. The final
proposed add-back is $20,110 to the Library budget to restore supplies, programs and
building improvements that have been cut over the last five years. Other significant
items that will be discussed at the Truth in Taxation hearing are utilization of prior years
fund balances and other designated funds to set up a fund for a community center and
to provide funding for property acquisition and cleanup in the Sheffield neighborhood.
1-6
Utility Sales $5,026,648
Miscellaneous
$1,076,115
All Budetary Funds Revenue By Source
Net Income Liquor
$1,712,650
Taxes $6,347,537
TIFand HRA Levy
$1,103,366
Fines & Forfeits
$135,000
2
Licenses & Permits
$685,350
Governmental Rev
Charges for Services $2,704,777
$488,998
All Budgetary Funds Expenditures By Functional Area
Public Works
$10,624,370
3
Administration
$885,522
Debt Service
$2,060,496
Commun ity
/ Deve lopme nt
/ $1,061,516
Finance $1,269,623
._____Fire $1,110,260
General Government
$1,975,614
---------Library $636,521
~LiqUOr $1,343,182
Police $2,781,250
Sources of General Fund, Library Fund and EDA Revenue
Transfers & Non Rev
$483,933
Othe r $384,826
------Taxes $6,347,537
Charge for Services
$488,998
Inte rgove rnme ntal
$1,471,673
4
General Fund, Library and EDA
Expenditures by Classification
Contingencies &
Transfe rs $700,232
Capital Outlay
$133,500
_________ Personal Services
$6,290,741
Other Services &
Charges $1,672,298
Supplies $512,185
5
Recreation
Public Works
Police
General Government
Finance
City Manager
Mayor-council Assessing
Legal
6
General Fund By Percent of Total
Fire
0.00%
. 5.00%
35.00%
10.00%
15.00%
20.00%
25.00%
30.00%
Increased
Certified LGA Lost LGA Loss to LGA
Original Aid Certified for Columbia Heights 2003 2,651,999 0
Aid After 2003 Legislative Reductions 2003 1,955,299 696,700 696,700
2004 1 ,603,203 1 ,048,796 352,096
2005 1,058,477 1,593,522 544,726
2006 1,028,487 1,623,512 29,990
Total LGA lost in 4 years 4,962,530
City of Columbia Heights, Minnesota
History of Local Government Aid
7
Property Taxes
- 2004 - 2007
Property Taxes 2004 2005 2006 2007
Adopted Adopted Proposed Proposed
Library 433,585 438,835 463,086 482,182
EDA 84,965 84,965 84,965 87,514
--
General Fund 4,928,710 5,578,737 5,799,486 6,052,269
Total Levy 5,447,260 6,102,537 6,347,537 6,621,965
Levy Change from Prior Year 629,276 655,277 245,000 274,428
8
County
29%
9
Where Your Property Taxes Go
P~yable 2005
Miscellaneous
7%
School
19%
City
45%
County
30%
Where Your Property Taxes Go
Payable 2006
Miscellaneous
6%
City
44%
School
20%
City of Columbia Heights, Minnesota
Property Tax History from 1997 to 2006
On Five Selected Properties
Including City Property Tax Increase for 2006
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
Taxable Value 2006 215,700 214,800 152,700 225,700 249,800
Pro~ erty Identification Number
Year R36 ** ** 41 0042 R36 ** ** 13 0043 R25 ** ** 41 0157 R25 ** ** 22 0047 R25 ** ** 21 0097
2006 2,114.40 2,059.98 1,478.75 2,181.58 2,450.43
2005 2,077.05 1,976.71 1,495.10 2,184.83 2,375.53
2004 1,844.02 1,760.98 1,323.95 1,949.37 2,122.33
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 2005 to 2006 37.35 83.27 (16.35) (3.25) 74.90
Increase from 2003 to 2006 526.4 7 546.29 350.17 430.31 614.86
(Decrease) Increase from
1997 to 2006 86.60 261.94 309.14 139.79 (17.18)
City of Columbia Heights
portion of 2005 property tax 831 .33 800.86 598.71 888.15 968.18
City of Columbia Heights
portion of 2006 propertv tax 886.74 880.76 626.70 933.90 1,051.42
Monthly effect of the increase 55.41 79.90 27.99 45.75 83.24
Amounts listed above do not include school district's voter approved property tax referendum
10
TAX LEVIES PAYABLE 2003 - 2006
MARKET VALUE (PAYABLE 2004) 63,300
MARKET VALUE (PAYABLE 2005) 74,400
MARKET VALUE (PAY AB LE 2006) 85,600
County City School Other Total
2003 Taxes 128 160 137 19 444
2004 Taxes 139 193 152 19 503
2005 Taxes 151 220 166 20 556.72
2006 Taxes 177 251 132 23 582.54
Amount of Increase 2005/2006 26 30 (34) 3 26
MARKET VALUE (PAYABLE 2004) 103,700
MARKET VALUE (PAYABLE 2005) 119,300
MARKET VALUE (PAY AB LE 2006) 137,200
County City School Other Total
2003 Taxes 236 297 239 37 809
2004 Taxes 270 375 277 36 958
2005 Taxes 309 450 306 40 1,105
2006 Taxes 355 502 255 46 1,158
Amount of Increase 2005/2006 46 52 (51) 6 53
MARKET VALUE (PAYABLE 2004) 139,900
MARKET VALUE (P A YAB LE 2005) 160,800
MARKET VALUE (PAY AB LE 2006) 182,700
County City School Other Total
2003 Taxes 362 456 348 55 1,221
2004 Taxes 405 563 400 55 1 ,423
2005 Taxes 457 666 437 59 1,619
2006 Taxes 512 724 364 66 1,666
Amount of Increase 2005/2006 55 58 (73) 7 47
11
MARKET VALUE (PAYABLE 2004) 208,700
MARKET VALUE (PAY AB LE 2005) 240,000
MARKET VALUE (PAY AB LE 2006) 268,100
County City School Other Total
2003 Taxes 601 757 554 92 2,004
2004 Taxes 661 919 635 89 2,304
2005 Taxes 739 1,077 687 96 2,599
2006 Taxes 806 1,141 568 104 2,618
Amount of Increase 2005/2006 67 63 ( 119) 8 19
Amounts listed above do not include school district's voter approved property tax referendum
3,000,000
2,500,000
2,000,000
1,000,000
500,000
12
Cumulative LGA Lost
. Certified LGA 121 LGA Lost
o
2003
2003
2004 2005
2006
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
I · LGA D Tax Levy I
2003
2004
2005
2006
2003 2004 2005 2006
LGA 2,651,999 1,603,203 1,058,473 1,028,487
Tax Levy 4,817,984 5,447,260 6,102,537 6,347,537
Total 7,469,983 7,050,463 7,161,010 7,376,024
13
14
Total Tax Supported Budgets General
Fund, Library Fund, EDA Fund
9,700,000
9,450,000
9,200,000
8,950,000
8,700,000
8,450,000
8,200,000
7,950,000
2003
2004
2006
2007
2005
Cost Savings from 2003 to 2007
Total tax (Reduction)
suppported I
or Increase
Year General Fund Library EDA Levy budgets to budget
Budget History
Budget Prior to LGA Cuts 2003 8,899,512 679,700 140,569 9,719,781
Adopted Budget reduced from 2003 2004 8,232,617 631,271 84,965 8,948,853 (770,928)
Adopted 2005 budget 2005 8,318,543 636,521 84,965 9,040,029 91,176
Proposed 2006 budget 2006 8,426,104 636,521 84,965 9,147,590 107,561
Implement a 3% budget increase 2007 8,678,887 655,617 87,514 9,422,018 274,428
Net budget reduction over 4 years Projected 2007 Budget compared to 2003 Budget (297,763)
15
WHAT WILL $50 A MONTH BUY?
(Based on 2006 Property Tax)
$50 a Month Buys Quality and Quantity
in the City of Columbia Heights
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Two Twins Tickets
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Standard Cable TV
Columbia Heights City Services
Parks
Streets
Police
Fire
Library
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