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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 1-1 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 1-3 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. 1-4 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 ,-- i ~.- _ >Bti,...~ i'~nm: Iry \~l"~ ~ Telephone ~ c==> Two Twins Tickets n Standard Cable TV Columbia Heights City Services Parks Streets Police Fire Library 16