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HomeMy WebLinkAboutTNT Hearing Documents City of Oak Park Heights 2008 Annual Budget Page 1 2008 Annual Budget Table of Contents City Officials 3 Budget Process 4 General Fund Revenues 6 General Fund Expenditures g Tax Levies, Tax Capacity and Tax Capacity Rate 10 Anticipated Changes to Preliminary Budget 12 Utility Fund Revenues and Expenditures 15 Debt Service Funds 16 Budgeted Projects Fund 17 Page 2 Oak Park Heights City Officials Position Term Expires Mayor David Beaudet 12/31/2008 Councilmember Les Abrahamson 12/31/2010 Councilmember Jack Doerr 12/31/2008 Councilmember Mary McComber 12/31/2008 Councilmember Mark Swenson 12/31/2010 City Staff Eric A. Johnson — City Administrator Judy Holst — Finance Director Lindy Swanson — Police Chief Tom Ozzello— Public Works Director David Mol — City Auditor Mark Vierling — City Attorney Dennis Postler — City Engineer Page 3 1 Budget Process The annual budget process is a thorough review of all City revenues and expenditures for the current and upcoming year. There are many uncontrollable factors the City must comply with that affect both the amount of revenues the City receives and the amount the City must expend in order to provide the current level of services. There are also numerous unfunded mandates the City must comply with, such as: Revenues • Tax exempt property — City must still maintain police /fire protection, streets, etc. • Limitations of local special assessments. • Local improvement feasibility reports requirements. • Limitation of maximum penalties and fines for ordinance violations. • Truth in taxation requirements. • Limitation on fees for licenses, i.e. off -sale and Sunday on -sale liquor, fireworks. Expenditures • Pay equity, implementation and reporting. • Worker's compensation. • Public pensions. • Continuation of health and life insurance coverage. • Prevailing wages paid on public contracts. • Veterans preference. • Mandatory binding arbitration for employee classes such as police and firefighters. • Various public safety requirements i.e. Peace officer standards and training, confined space entry, suspense file reduction, tobacco compliance checks. • Building code administration and limits to permit fees for minor improvements. • Numerous environment requirements i.e., wastewater treatment standards Wetland Conservation Act, recycling programs, waste collection practices, drinking water standards, surface water management plans, Federal Clean Water Act, Wastewater permit requirements, and storing of hazardous substances reporting. • Planning requirements for land use, zoning, building codes. • Comprehensive plan updates. • Conducting elections including paying judges, absentee ballots and recounts. • Record keeping requirements for Data Practices Act and retention schedules. • Competitive bidding. • Open Meeting Law notices, agendas and minutes. • Various financial reporting requirements, i.e. budget, audit reports, TIF reports, Building Inspection fee reporting, business subsidy reports, outstanding debt reports, Continuing Disclosure reports. Page 4 Budget Process The City Council and staff engage in a thorough budget process each year in order to present a fair and balanced budget for the citizens of Oak Park Heights. 1. The annual budget process commences in July of each year with the Finance Director distributing budget worksheets to the department heads for completion. The City Council is requested to inform the Finance director of any special requests they may have for the budget. 2. The department heads determine the anticipated expenditures and budget requests for the upcoming year. These requests are submitted to the Finance Director and Administrator for review by the end of July. 3. The Finance Director compiles a draft of the preliminary budget and submits it to the City Council. 4. The City Council schedules workshops for discussion and review of the preliminary budget. There are usually 2 to 3 workshops held during the month of August and the first week in September. All workshops are public meetings and the public is welcome to attend. 5. After all input and requests have been considered, the Finance Director makes revisions to the preliminary budget and submits it to Council for approval of the proposed budget and tax levy. Per Minnesota State Statute this must be completed and certified to the County no later than September 15. 6. The City Council sets the dates for the initial Truth in Taxation public hearing and the date for the continuation hearing. The maximum allowable levy for 2008 to qualify for exemption from the Truth in Taxation public hearing is 4.2853% increase over 2007. The maximum increase in levy for the City to qualify for exemption is $2,909,200. The City did not qualify for exemption from the TNT public hearing requirement. The dates must be certified to the County no later than September 15. 7. Council conducts additional workshops to discuss any additional changes to the budget due to updated revenue and /or expenditure information, i.e. insurance rates, contract fees, etc. 8. The initial 2008 Truth in Taxation.hearing is held. The City must announce prior to adjournment of the initial hearing the date, time and place of a continuation hearing, if a continuation hearing is needed, or the date, time and place of a subsequent hearing to adopt the final tax levy and budget. 9. The final budget and levy must be certified to the County by December 28, 2007 and to the Minnesota Department of Revenue after the levy adoption hearing is held. Page 5 General Fund Revenues An important concern the City Council and the residents of Oak Park Heights should be aware of is the trend towards relying more on the tax levy for the City's source of revenue. In 2001 the tax levy consisted of 66.3% of the City's revenue source. The proposed tax levy for 2008 is 84.9% of the City's revenue source. There are several factors that contribute to this trend. The intergovernmental revenue has decreased from 7.8% to 2.5% of revenues. This was due to the discontinuation of HACA in 2002, Local Government Aid cuts in 2003, 2004, 2005 and 2006, and the discontinuation of the recycling grant from Washington County in 2004. The City has also reduced the utility fund administration fee from 10% to 7% in 2007. The State has also limited the ability of Cities to increase fees for certain services, i.e. Sunday on -sale license fees, sale of fireworks fees, and permit fees for minor improvements. Actual Actual Actual Actual Actual Actual Budget Budget 2001 2002 2003 2004 2005 2006 2007 2008 Taxes 66.3% 74.6% 70.8% 72.3% 71.2% 77.0% 83.6% 85.4% Licenses/Permits 9.3% 7.4% 11.9% 11.5% 11.7% 9.7% 5.6% 4.7% Fines and Forfeits 2.8% 2.6% 2.2% 2.9% 2.2% 2.6% 1.8% 1.7% Intergovernmental Revenue 7.8% 3.3% 3.0% 2.7% 3.3% 3.3% 2.7% 2.5% Charges for Services 8.6% 7.6% 8.0% 5.7% 6.9% 2.5% 2.0% 1.7% Other Revenue 5.2% 4.5% 4.1% 4.9% 4.7% 4.9% 4.3% 4.0% General Fund Revenues 100.00 % - 90.00 %_ 80.00 % - , 70.00%- �� ~-~- -'° 13 Taxes 60.00 % - = ■ Licenses /Permits 50.00%- ❑Fines & Forfeits 40.00%-, ❑ Intergovernmental Revenue 30.00%-: '- ■Charges for 2000% Services o _ ,...W....... _ ® Other Revenue 10.00 - ML 0.00% Actual Actual Actual Actual Actual Actual Budget Budget 2001 2002 2003 2004 2005 2006 2007 2008 Page 6 The overall 2008 proposed revenue budget reflects an increase of $654,002 or 19.4% over the 2007 revenue budget. General Fund Revenue Summary 2007 2008 % Increase Budget Budget (Decrease) Taxes $2,809,655 $3,431,780 22.1% Special Assessments $0 $0 .0% Business Licenses - Permits $32,005 $35,585 11.2% Non - Business Licenses - Permits $155,600 $151,375 (2.7 %) Fines & Forfeits $60,500 $70,500 16.5% Intergovernmental Revenues $91,984 $101,056 9.9% Charges for Services $68,200 $67,040 (1.7 %) Miscellaneous Revenues $145390 $160,000 10.0% Total Revenues $3,363,334 $4,017,336 19.4% The chart below shows the anticipated revenues for budget year 2008 2008 Revenue Distribution Fines & Forfeits Intergovernmental Charges for Services ® Taxes 1.8% Revenues 1.7% 2.5% Miscellaneous Revenues ■Business Licenses - Permits Non - Business Licenses- Permits 4.0% 3.8% 1314on- Business Licenses- Permits OFines & Forfeits Business Licenses - Permits 0.9% ■Intergovernmental Revenues ® Charges for Services ■Miscellaneous Revenues Taxes 85.4% While the City of Oak Park Heights is in good financial condition, the majority of our long- term difficulties will be from outside sources, i.e. the City will be required to find ways to manage future expenditures with less aid revenue. Page 7 General Fund Expenditures The 2008 budget for expenditures is $4,017,336; which reflects in a 22.2% increase over the 2007 expenditure budget. The chart below shows the expenditures for years 2001 through 2008. For the year 2008, General Government accounts for 28% of all expenditures. Public Safety accounts for 34% of all expenditures. Other expenditures, which include financing of capital projects, account for 38% of all expenditures. Actual Actual Actual Actual Actual Actual Budget Budget 2001 2002 2003 2004 2005 2006 2007 2008 General Government 41.1% 38.1% 34.8% 32.2% 29.5% 31.7% 32.4% 28.0% Public Safety 39.8% 42.6% 45.0% 44.6% 40.6% 39.8% 38.4% 33.8% Public Works 7.0% 5.7% 7.1% 6.8% 6.2% 6.1% 7.5% 6.6% Parks 5.1% 3.7% 4.2% 3.5% 3.5% 3.6% 4.1% 4.4% Sanitation 3.4% 3.8% 3.9% 3.6% 3.1% 3.0% 2.3% 4.0% Other Expenditures 3.6% 6.1% 5.0% 9.3% 17.1% 15.8% 15.3% 23.2% General Fund Expenditures - 100.0% ® General 80.0% Government ■ Public Safety 60.0% ❑ Public Works ❑ Parks 40.0% ■ Sanitation 20.0% ® Other last Expenditures 0.0% Actual Actual Actual Actual Actual Actual Budget Budget 2001 2002 2003 2004 2005 2006 2007 2008 The overall 2008 proposed expenditure budget would increase by $729,910 or 22.2% over the 2007 budget. The main contributing factors to the budget increase are financing of capital projects, salary increases, salary allocation changes, fuel /energy cost increases and general inflation. The City also proposes to subsidize 100% of the sanitation collection costs for residential property within the City. Page 8 General Fund Expenditure Summary 2007 2008 % Increase Bind et Budget (Decrease) General Government 1,065,425 1,126,585 5.7% Public Safety 1,260,725 1,356,155 7.7% Public Works 246,535 266,900 8.3% Parks 134,745 175,200 30.0% Sanitation 76,800 162,300 111.3% Other Expenditures 503,000 930,000 84.9% Total Expenditures 3,287,230 4,017,140 22.2% The chart below shows where the City will make the majority of its expenditures in the 2008 budget year. 2008 Expenditure Distribution Other Expenditures 23.2% General Government 28.0% ©General Government ■ Public Safety g ' OPublic Works O Parks Sanitation 4.0% ;; - ,, ■ Sanitation ®Other Expenditures Parks 4.4% Public Works Public Safety 6.6% 33.8% Page 9 Tax Levies, Tax Capacity and Tax Capacity Rate Tax Levies The proposed payable 2008 levy for Oak Park Heights is $3,411,780. As seen in the chart below, the City had a 24% increase in the tax levy for 2002, 1.3% increase for 2003, .01% decrease for 2004, 15.1% increase for 2005, 14.2% increase for 2006, 12.7% increase for 2007 and a proposed 22.3% increase for 2008. Tax Levy 4,000,000 3,411.780 3,500,000 3,000,000m -- 2,500,000 2,000,000 1,500,000 1,000,000" 500,000 0 2001 2002 2003 2004 2005 2006 2007 2008 Tax Catnacity The City's estimated 2008 tax capacity value is $8,743,785. This represents a 18.9% increase in tax capacity value over 2007. Tax capacity value is market value of the property times the class rates. Class rates are established by the State of Minnesota and have not changed since 2002. The current class rates for residential property is 1% of market value for the first $500,000 of value and then 1.25% on the remaining value of the property — Example of a $600,000 home- 1% of first $500,000 = $5,000 1.25% of Balance ($100,000) _ $1,250 Total Tax Capacity $6,250 The current class rates for commercial property is 1.5% of market value for the first $150,000 of value and then 2% on the remaining value of the property — Example of a $600,000 commercial business — 1.5% of first $150,000 = $2,250 2% of balance ($450,000) _ $9,000 Total Tax Capacity = $11,250 Page 10 n / The chart below shows the change in Tax Capacity Values from 2001 through Proposed 2008. The change in tax capacity values from 2001 to 2002 reflects the change in class rates established by the State beginning with the year 2002. 10,000,000 -' 8,000,000--` 6,000,000 4,000,000 - _.-: 2,000,000e -: 0 2001 2002 12003 12004 2005 2006 2007 2008 ITax Capacity Value 6,795,389 4,773,711 5,569,968 5,622,052 5,964,352 6,448,195 7,356,891 8,743,785 Tax Capacity Rate The City's Tax Capacity Rate for 2008 is estimated to be 36.842% per $1,000 of tax capacity value. This represents an increase of 3.1 % from 2007 rates. An increase or decrease in the amount levied for taxes combined with an increase or decrease in market value or tax capacity value, result in the tax capacity rate changes. As you can see in the chart below, the combination of an increased levy in 2002 along with the class rate changes resulted in a 76% increase in tax rate for 2002. Although there was a huge increase in tax rates, it did not result in a huge increase in actual tax. This was due to the decrease in tax capacity values. Tax Capacity Rates 60 - 50- 40- 77W 30- 20 10 0 2001 2002 2003 2004 2005 2006 2007 2008 113 Tax Rate 23.692 41.741 35.501 34.515 36.488 36.136 35.731 36.842 The median increase in market value from 2007 to 2008 for the City is 0 %. Assuming a 0% increase in value, the net effect in City tax is 3.1 % to 4.7% depending on the market value of the home. A $250,000 home will experience a 3.3% or $28. Page 11 I.—N 10 � Anticipated Changes to Preliminary Budget The City has discussed several changes to the revenue and expenditure budget at their November 7, 2007 worksession and at their November 27, 2007 City Council meeting. The changes to the revenue budget will reduce the amount of the tax levy by $44,300, decrease the amount received for liquor licenses by $3,810. With the changes discussed, the revenue budget would increase $606,032 or 18% over the 2007 revenue budget. General Fund Revenue Summary 2007 2008 % Increase Budget Budget (Decrease) Taxes $2,809,655 $3,387,480 20.6% Special Assessments $0 $0 .0% Business Licenses - Permits $32,005 $31,915 (.3 %) Non - Business Licenses - Permits $155,600 $151,375 (2.7 %) Fines & Forfeits $60,500 $70,500 16.5% Intergovernmental Revenues $91,984 $101,056 9.9% Charges for Services $68,200 $67,040 (1.7 %) Miscellaneous Revenues $145,390 $160,000 10.0% Total Revenues $3,363,334 $3,969,366 18.0% The chart below shows the anticipated revenues for budget year 2008 with the proposed adjustments to the preliminary budget. 2008 Revenue Distribution Charges for Services Intergovernmental 1 ® Taxes Revenues Fines & Forfeits 2.5% 1.8% Miscellaneous Revenues ■ Business Licenses-Permits Non - Business Licenses- 4.0% Permits O Non - Business Licenses - 3.8% Permits 0Fines & Forfeits Business Licenses - Permits 0.8% ■Intergovernmental Revenues IS Charges for Services ■Miscellaneous Revenues Taxes 85.3% Page 12 /"� /'%� The changes to the expenditure budget will increase $5,032 in the parks budget to reflect a grant to the Lucy Winton Athletic Complex and will reduce the amount of transfers out to other funds for capital projects by $53,000. With the changes discussed, the expenditure budget would increase $681,942 or 20.7% over the 2007 expenditure budget. General Fund Expenditure Summary 2007 2008 % Increase Budget Budget (Decrease) General Government 1,065,425 1,126,585 5.7% Public Safety 1,260,725 1,356,155 7.6% Public Works 246,535 266,900 8.3% Parks 134,745 180,232 33.7% Sanitation 76,800 162,300 111.3% Other Expenditures 503,000 877,000 74.4% Total Expenditures 3,287,230 3,969,172 20.7% The chart below shows where the City will make the majority of its expenditures in the 2008 budget year with the proposed adjustments to the preliminary budget. 2008 Expenditure Distribution Other Expenditures 22.1% General Government 28.4% OGeneral Government a' ■Public Safety 0 Public Works 0 Parks Sanitation a. 4.1% ■ Sanitation 0Other Expenditures Parks 4.5% Public Works 6.7% Public Safety 34.2% Page 13 A0011111 Reducing the tax levy by $44,300 will reduce the levy to $3,367,480. This represents a 20.7% increase in tax levy over 2007. It will also reduce the tax capacity rate to 36.336 %. This represents a 1.7% increase over the 2007 tax capacity rate. The median increase in market value from 2007 to 2008 for the City is 0 %. Assuming a 0% increase in value, the net effect in City tax is 1.7% to 2.6% depending on the market value of the home. A $250,000 home will experience an increase of 1.8% or $15. Page 14 Utility Funds Revenues and Expenditures The Water Utility Fund revenues are anticipated to increase 10.9% for the year 2008. The increase in revenue reflects an increase in water rates and an increase in water sales due to new construction. Expenditures in the Water Utility Fund are anticipated to increase 10.4% for the year 2008. The increase is due to salary increases, current and future rehab of the water towers and wells, and the purchase of equipment to monitor the water and sewer system. The Sewer Utility Fund revenues are anticipated to increase .9% for the year 2008. The increase in revenue reflects an increase in estimated interest earned. Expenditures in the Sewer Utility Fund are anticipated to increase 1.1 % for the year 2008. The increase is due to an increase in the Metropolitan Council Environmental Services sewer service charge, salary increases, and the purchase of equipment to monitor the water and sewer system. The Storm Sewer Utility Fund revenues are anticipated to increase 3.2% for the year 2008. The revenue increase is due to an increase in estimated interest earned. Expenditures in the Storm Sewer Utility Fund are anticipated to increase 15.8% for the year 2008. The increase is due to salary increases, increase in contractual services for maintenance of the storm sewer system, and the purchase of Arcview software. The Sanitation Fund will be closed in 2008. The City Council proposes to subsidize 100% of the residential sanitation collection with funds from the General Fund. Utility Funds Revenues Summary 2007 2008 % Increase Budget Bu_ dget (Decrease) Water Utility Fund $478,200 $530,240 10.9% Sewer Utility Fund $724,500 $731,200 .9% Storm Sewer Utility Fund $77,750 $80,200 3.2% Sanitation Fund $170,650 $000,000 (100.0 %) Totals $1,451,100 $1,341,640 (7.5 %) Utility Fund Expenditures Summary 2007 2008 % Increase Budget Bu_ dgeet (Decrease) Water Utility Fund $598,615 $660,960 10.4% Sewer Utility Fund $710,920 $719,125 1.1% Storm Sewer Utility Fund $51,745 $59,935 15.8% Sanitation Fund $152,700 $000,000 (100.0)% Totals $1,513,980 $1,440,020 (4.9 %) Page 15 n Debt Service Funds As of December 31, 2007 the City will have outstanding debt, including interest, in the amount of $865,001. This consists of the G.O. Improvements Bonds of 1998. The G.O. Improvement Bonds of 1998 were issued in 1998 to provide financing for Kern Center and Phase III of the 58 Street Improvements. This bond is scheduled to be repaid by special assessments and connection charges. The bonds are scheduled to retire in 2013. The City will have sufficient funds to pay the remaining debt payments on this bond issue. Page 16 Budgeted Projects Fund The Budgeted Projects Fund was established to fund capital purchases for public works, police, administration, etc. The revenues received in this fund are transfers in from the General Fund and the Utility Fund. Revenue received for tree replacement and occasionally revenue received as donations are also deposited in this fund. For the year 2008 the City has budgeted transfers in from the General Fund Preliminary Budget in the amount of $695,000 and transfers in from the Utility Fund in the amount of $9,900. Several changes are proposed for the Budgeted Projects Fund. The unallocated balance is proposed to be reduced from $245,000 to $20,000. $53,000 is proposed to be reduced from the transfers in from the General Fund, $95,000 is proposed to be transferred to the Street Reconstruction Fund and $77,000 is proposed to be transferred to a Storm Sewer Renewal /Replacement Fund. If the proposed changes are approved the amount of the transfer from the General Fund to the Budgeted Projects Fund will be $470,000. The anticipated expenditures for 2008 are for sealcoat/crack seal, park and trail improvements, police vehicle, public works vehicles, building official vehicle comprehensive plans, tree planting, computers, and police radio equipment. Page 17