CR2002-145 - 2002 Levy and 2003 GF Budget
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September 3, 2002 HOPK\NS City Council Report 02-145
. APPROVE PROPOSED 2002 LEVY
PROPOSED 2003 GENERAL FUND BUDGET
AND SET BUDGET PUBLIC HEARING DATES
Proposed Action
Staff recommends adoption of the following motion: Move that Resolution 02-082 "Approving proposed
2002 tax levy, collectible in 2003. adopting a preliminary 2003 general fund budget, and setting public
hearing dates" be adopted.
Adoption of this motion will set a preliminary 2003 general fund budget and a Illilximum tax levy for 2002.
collectible in 2003. Actual budget and tax levy adoption will not occur until December, 2002.
Overview
The Truth in Taxation process requires the City of Hopkins to adopt a proposed levy and set public hearing
dates in conformance with state statute. A preliminary general fund budget has been established. Adoption
of the actual budget will occur in December 2002, and at that time, the final levy and budget may not exceed
the adopted preliminary levy. The city council is charged with the authority to establish a budget for 2003
and set the preliminary levy. The overall levy limitation law is still in place for taxes payable in 2003,
through the Minnesota legislature.
The 2003 general fund budget, and the 2002/2003 tax levy are proposed at $8,552,227 and $7,179.253,
respectively. The general fund budget increase is projected at $205,639 or a 2.46% change over the 2002
budget. The 2003 proposed budget includes an additional police officer. The 2003 budget also projects
. continuation of all current services. The levy increase for the general fund is 0.49% or $30,112. The levy
increase for the general fund is kept low due to implementation of the "Rental Housing Tax Base
Replacement Aid. This is a temporary aid ment to offset the classification rate changes that were
implemented last year for rental housing. Hopkins will receive this additional aid in 2003 & 2004.
The cities proposed levy for debt service is increasing $552,000 over the 2002 debt levy, $550.000 of the
increase is directly associated with the fire, police and public works facilities project approved by the
council in June 2002. The debt service levy is $894,000 or 12% of the total levy. The Housing and
revdevelopment levy is proposed to increase $6,000 over 2002. The overall tax capacity rate for the city
will increase to 57.8% from 54.9%, which means an increase over last years city taxes of approximately
$115 for the average homeowner.
The City tax levy proposed is at the levy limitation set by the State of Minnesota for taxes payable 2003.
. Staff is recommending that council approve the resolution setting the proposed levy at the levy limit for
general fund operations, for the payment of debt. for the operations of the Housing and Redevelopment
Authority, and to establish the public hearing dates as set forth in the resolution.
Primary Issues to Consider Supporting Information
. 2003 budget concerns Staff analysis of revenues and expenditures
. Tax impacts of budget concerns 2003 proposed general fund budget
2002 tax levy estimate
.d~~v---- Property tax impacts for Hopkins taxes payable 2003
Resolution 02-082
ori K Yager
Finance Director
Staff Analvsis
. Attached to this report is a summary of 2003 estimated general fund budget revenues and estimated 2003
general fund expenditure appropriation requests. The summary shows historical revenues and expenditures,
which allows us to analyze current and future requests.
. 2002 Legislative Actions
Levy limits are still in place for all counties and cities with populations over 2,500. The City of Hopkins has
always stayed under levy limits in the past and has not regarded the limits as the levy amount. These limits
are imposed to help control property tax increases. Increases are imposed for factors such as inflation,
household growth, and increases in market value due to the construction of new commercial and industrial
properties. The City's budget is designed to cover its' costs within a reasonable levy increase.
. 2003 Levy
The City of Hopkins is projecting a current general fund operating levy increase of 0.5% or $30,000, a 161 %
or $552,000 increase for the debt service levy, a 6% or $6,000 increase for the HRA levy and no increase for
the PERA adjustment. The increase in the debt service levy is directly related to the fIre, police and public
works facility project approved in June 2002. The City's levy's are proposed as follows: General fund
$6,167,437, lIRA $106,000, PERA $11,815 and Debt $894,000 for a total levy of $7,179,252. The tax levy
increase is proposed at $588,000 or 8.9%. The cities tax capacity rate goes from 55% to 58% in 2003.
The levy increase in the general fund operations is kept down because of the offset from increased state aids.
The city received an increase in its' state aids to offset the classification changes which occurred last year.
. Increases in state aids directly offset the amount the city needs to tax property owners. State aids went up
$298,000 in 2003. The increase in state aids is a blessing and a curse at the same time. It is a blessing
because it directly offsets the amount of taxes the city needs to levy to continue general fund operations in
2003 and 2004. It is a curse because of looming state budget deficits. The state is projecting cuts of state
aids in the amount of 20%. With the increased aids, Hopkins now has the potential for larger aid cuts.
2002 Budl!et Ana1vsis
As part of the preparation for the preliminary budget, departments are instructed to keep personnel increases
at agreed amounts per our labor agreements and to keep total expenses at or below 4.5%. Labor agreements
have not been settled for 2003. A possible change in health insurance carriers may eliminate a health
insurance increase in 2003. Salaries and benefits compose 76% of general fund expenditures. So far
departments have done an excellant job keeping expenditure increases to a minimum. Increased spending in
the general fund amounts to approximately $205,000, or an increase of 2.5% over 2002. The increases in
the general fund include a combination of salary & benefit increases projected to be 3.8%, supplies,
materials and services to increase approximately 4.9% and decreases in capital spending of $160,000. The
decrease in capital outlay helps keep the overall expenditure increase at 2.5% City Council and staff are
very aware of the possible aid cuts in our future. We are working on a plan to offset any future cuts that
may occur.
Another item that affects the overall levy is the debt service levy. This levy is projected to increase by
$552,000 to cover the debt that is going to be issued for the facility project. Increases in the debt service
. levy are anticipated into the future to pay for PIR bonds for streets and additional facility construction
bonds. PIR bonds will be issued in 2002. PIR bonds are also projected to be issued in 2004, and 2006.
These bonds are partially paid with assessments and the other portion is paid with tax levy.
The Housing and Redevelopment levy will increase $6,000 to help pay for housing redevelopment, land use,
. economic development and administration of HRA activities. Availability of future funds has been
significantly limiited for these types of activities. Specifically, the properly tax change impact on the
utilization of tax increment funds.
. Tax Impacts of Levy's
Attached you'll find one scenario for residential tax impacts and one for commercial.
Last year the council set the preliminary levy limit $230,000 under the levy limit. Because of additional
state aids and a low inflation adjustment of 0.76% to the limit, the city has lost levy capacity. In the past the
Council has set the preliminary levy amount at the State's recommended levy limit. This year Finance is
recommending that the Council again set the preliminary levy amount at the levy limit set by the state. The
reason for setting the preliminary levy at this level is that the anticipated needs of the city will fall within
this amount.
. 2002 Public Hearings for the 2003 Budget, 2002/2003 Tax Levy and the 2003 Tax Rate Increase
Cities with populations above 500 are required to hold public hearings to give notification of the proposed
property tax levy for the taxes payable year 2003 and the proposed budget for the taxes payable year 2003.
The percentage increase in the property taxes proposed and the specific purposes for a property tax increase
must be discussed at the hearing
There are restrictions on which dates cities are able to hold public hearings for their proposed budgets and
property tax levy's for 2003. The legislature has set aside the first two Mondays in December for the use of
. cities to hold their Initial Public Hearing and the Continuation Hearing. The City of Hopkins can choose
other dates if it would like to but it must not overlap the county or school districts date and must be in
between November 29,2002 and December 20,2002. There are other restrictions that must be adhered to
also.
Staff is recommending the City Council set it's initial hearing date on December 9,2002 with the
continuation meeting (if needed) set for a regular meeting on December 17, 2002, and final adoption to
follow on December 17, 2002.
.
CITY OF HOPKINS
. Hennepin County, Minnesota
RESOLUTION NO. 02-082
RESOLUTION APPROVING PROPOSED 2002 TAX LEVY COLLECTIBLE IN 2003, ADOPTING THE
PRELIMINARY 2003 BUDGET, AND SETTING PUBLIC HEARING DATES
BE IT RESOLVED BY THE COUNCIL OF THE CITY OF HOPKINS, MINNESOTA, that the following sums
of money be levied for the current year collectible in 2003 upon the taxable property in said City of
Hopkins, for the following purposes.
General Fund $6,167,437
Housing and Redevelopment Authority 106,000
PERA rate increase 11,815
General Obligation Bonds 190,000
Improvement Bonds 154,000
Housing and Redevelopment Lease Revenue Bonds 550,000
Total Levy $ 7,179,252
This levy is made based on current law and the 2003 General Fund Budget of $8,552,227.
Provision has been made for the payment of the City's contributory share to the Public Employees Retirement
Association.
. Provision has also been made for the payment of principal and interest on the following bond issues:
Redevelopment Bonds 1-1-97, Redevelopment Bonds 10-1-96,
Sewer Revenue Bonds 12-1-89, Refunded 10-15-93 & Refunded 12-4-01,
Refunding Bonds (Taxable) 2-1-92, Redevelopment Bonds 12-1-89 & Refunded 10-15-93
Improvement Revolving Bonds 8-1-92 & Refunded 12-4-01 *,
Park Bonds 3-1-90 & Refunded 10-15-93 & Refunded 12-4-01 *, Housing Bonds 9-1-95,
Refunding Bonds 3-1-90 & Refunded 10-15-93, Taxable G.O. Housing Improv. Bonds 5-1-99,
Housing Bonds 6-1-97, G.O. Storm Sewer Revenue Bonds 8-1-99,
Taxable G.O. Housing Improvement Bonds 8-1-99, G.O. Water Revenue Bonds 4-1-00,
G.O. hnprovement Revolving Bonds 8-1-99*, G.O. hnprovement Revolving Bonds 10-1-02*,
Redevelopment Bonds 10-1-02 and BRA Lease Revenue Bonds 10-1-02 Levy*
Public hearing date for the 2003 budget is December 9, 2002, with a continuation hearing date of December 17,
2002, if necessary.
BE IT FURTHER RESOLVED, that the City Clerk is hereby ordered and directed to transmit a certified copy of
this resolution to the County Auditor of Hennepin County, Minnesota.
Adopted by the City Council of the City of Hopkins this 3rd day of September, 2002,
By
. Eugene Maxwell, Mayor
ATTEST:
Terry Obermaier, City Clerk
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e INCLUDES GENERAL FUND, DEBT SERVICE, HOUSING & REDEVELOPMENT and PERA
HISTORIC AND CURRENT TAX LEVIES AND CITY TAX RATES
Total City
Levy Total Levy *** Tax Tax Gross
Payable Before **Tax HRA Debt PERA Levy Capacity Tax Levy
Years Credits Capacity Tax Levy Tax Levy Tax Levy After Credits Rate * Increase
2002/03 7,179,252 11,079,786 106,000 894,000 11,815 6,399,252 57.76% 8.92 %
2001/02 6,591.140 10,658,607 100,000 342,000 11,815 5,850,411 54.89% 9.78%
2000/01 6,003,993 13,451,366 342,000 4,314,233 32.07% 6.00%
1999/00 5.664,144 12,526.355 330,000 4,022,438 32,11 % 5.23%
1998/99 5,382.640 11,749,302 330,000 3,811,583 32.44% 3.63%
1997/98 5,194,184 11,936,742 330,000 3,635,016 30.45% 0.30%
e1996/97 5.178,800 13,194,123 739,663 3,647,887 27.65% 1.21%
1995/96 5,117,000 12,902,081 578,574 3,682,276 28.54% 3.30%
1994/95 4,953,600 12,981,406 573.947 3,510,380 27,04%
* Tax Capacity Rate Computation
** Tax capacity reduced by Fiscal Disparities contribution and Tax Increment Financing Districts.
***Levy reduced by Fiscal Disparities distribution and HACA (Homestead and Ag Credit) through 2001.
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