CR 05-128 2005 Levy and 2006 Budget
September 1, 2005
Council Report 2005-128
APPROVE PROPOSED 2005 LEVY, PAYABLE IN 2006,
PROPOSED 2006 GENERAL FUND BUDGET
AND SET BUDGET PUBLIC HEARING DATES
Proposed Action
Staff recommends adoption of the following motion: Move to approve Resolution 2005-083 "Approving proposed
2006 tax levy. proposed 2006 general fund budget. and setting public hearing dates".
Adoption of resolution 2005-083 will set a preliminary maximum tax levy for 2006, and approve a proposed 2006
general fund budget. Actual budget and tax levy adoption will not occur until December 2005.
Overview
The Truth in Taxation process requires the City of Hopkins to certify a proposed levy and set public hearing dates in
conformance with state statute. A proposed general fund budget has been established. Adoption of the actual budget
will occur in December 2005, and at that time, the fmallevy may not exceed the approved proposed levy. The city
council is charged with the authority to establish a budget for 2006 and set the preliminary levy. Levy limits have not
been reinstated to date, which allows us more flexibility in setting the budget and levy for 2006.
. Staff is recommending that council approve the resolution setting the proposed levy for general fund
operations, approve the levy adequate for the payment of debt, approve a levy for the Housing and
Redevelopment Authority and capital improvements and to set the public hearing dates as set forth in the
resolution.
Primary Issues to Consider
. Legislative impacts
. 2006 budget concerns
. Tax impacts of budget concerns
SnPDortin!! Information
. Staff analysis
. Power point presentation slides
. 2006 proposed general fund budget
. Historic Tax Levy Table
. Property tax impacts for Hopkins taxes payable 2006
. Resolution 2005-083
~~
Christine M. Harkess
Finance Director
Staff Analvsis
. 2005 Legislative Actions
Local government aid (LGA), a property tax relief program to 836 of 853 cities, that ensures residents have access to
basic services, regardless of where in Minnesota they live, did not see any changes in 2005 that would impact the city
of Hopkins. The City of Hopkins receives $50,000 in LGA, down from $1,880,000 three years ago, now a very small
portion of the budget.
Levy limits were repealed for all cities for 2005 and to date have not been reinstated.
. 2005 Payable 2006 Levy
The City of Hopkins is proposing a total tax levy increase of $495,000 or 6.1 %. A current general fund operating
levy increase of 0%, a current debt service levy increase of60% or $485,000, no increase for the PERA adjustment,
and a Housing and Redevelopment Authority levy increase of $10,000. The City's levy's are proposed as follows:
General fund $7,261,263, HRA $20,000, PERA $11,815, Capital $25,000 and Debt $1,297,000 for a total levy of
$8,615,078. The overall tax capacity rate for the city will decrease to 47.6938% from 48.936%, which is due to
increased values and new construction.
The increase in the debt levy is a result of removing the "levy swap" done in 2005 and reinstating the debt levy
pursuant to the bond covenants. The Housing and Redevelopment Authority levy for 2006 is a continuation of the
reinstatement of their past levy authority, however it remains at a significantly reduced level. In an ongoing attempt to
establish a fund for capital improvements we are continuing the levy of $25,000 implemented in 2005.
The City of Hopkins' taxable market value increased by 9.0% or $120 million due to new development, construction
and general increases in property values. All these factors contribute to keeping the proposed 2006 levy at a moderate
level
. 2006 Budget Analysis
The 2006 general fund budget, and the 2005/2006 general operating tax levy are proposed at $8,946,738 and
$7,261,263, respectively. The proposed levy is set at maximwn amount with a possibility of future reductions. The
general fund budget is proposed to increase by $24,976 or .28% over the 2005 budget. The minimal increases is due
to the levy capacity of the prior year's levy swap. Expenditures have increased due to salary and benefit increases,
insurance - health and liability/property, fuel and fuel related products such as bituminous products, and heating costs.
Many of these costs are beyond our control.
Because we are a service related operation, salaries and benefits compose 76% of current general fund expenditures
and any labor negotiations have a tremendous impact on the budget. The council and staff will continue to work on a
final budget that will allow for essential programs and services to be accomplished. Attached to this report is a
sununary of 2006 estimated general fund budget revenues and expenditure requests. The summary shows historical
revenues and expenditures, which allows us to analyze current and future requests.
. Tax Impacts of Levy's 9
Attached you'll find the proposed levy impacts for residential and commercial property.
Historically the City Council has set the proposed levy amount at the State's recommended levy limit. This is the
second year without levy limits so we continue to have more flexibility in setting the levy. Finance is recommending
that the Council set the proposed levy at an amount that provides adequate resources to meet the needs of the
community while minimizing the impact on property owners.
. 2005 Public Hearings for the 2006 Budget and 2005/2006 Tax Levy
Cities with populations above 500 are required to hold public hearings to give notification of the proposed property
tax levy for the taxes payable in 2006 and the proposed budget for 2006. 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 2006 budget and
property tax levy. 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 but it must not
overlap the county or school districts dates and must be between November 29,2005 and December 20, 2005. There
are other restrictions that must be adhered to also.
Staff is recommending the City Council set its initial hearing date for December 5, 2005 with a continuation hearing
date (if needed) for December 20, 2005, and final adoption to follow at the close of the continuation hearing on
December 20,2005. Ifno continuation hearing is needed the final adoption will occur on December 20, 2005.
2006 Preliminary Levy an d Budget
PROJECTIONS OF YOUR CITY TAXES
AND THE GENERAL FUND BUDGET
I
oea\-g6
\
~.
J~
" Limited Market Value has been extended to
2009 which mitigates the impact of taxes on
property that experiences significant increases
in value.
" There has been no change to the Locai
Govemment Aid formula as it relat ed to
Hopkins.
" Levy limits repealed in 200S were not reinstated
for 2006..
" For 2006, city council and staff have been
meeting and discussing options for m
maintaining a balanced budget in
2006 and beyond.
. Options include budget cuts, use of
reserves, taxes and new revenue sources.
. The 2006 General Fund budget details will be
outlined prior to adoption in December 2005 of
the final budget and levy.
Truth and Taxation Process
" Council adopts a proposed levy.
. Council sets public hearing dates for final
proposed levy and general fund budget.
" The recommended public hearing dates are
Monday, December S. with a continuation
hearing set for Tuesday, December 20. (if
needed).
. A $1.00 per month franchise fee on electric and
gas utility bills implemented in 2004 was
extended to 2007. This adds approximalely
$290,000 to revenues.
. The council and staff co ntinue to explore
aiternative revenue sources that wi Ii help keep
taxes down.
?
. The city experiences increases in the levy through
increased spending or decreases in other revenue
sources.
. Spending may increase for several reasons.
Inflationary increases in salaries and benefits,
property & liability insurance, fuel & fuel related
products, equipment cosls, additional programs,
infrastructure improvements, debt etc...
. Other revenue sources may decrease due to a
slow economy, reduction in government aids,
reduced interest earnings, etc...
1
F1o'.v do le':ieSil
. The dly may reduce its tax levy by decreasing costs
or increasing other revenue sources.
To decrease costs the cily could eliminate programs
or services ~ currenUy provides to the ciUzens. The
cily may a~o oulsource certain cily services at a
lower cost.
. Increased revenues are derived primarily nom new
fees and increased charges for services.
. The Cily may receive grants for specific programs.
n r I
2006 Preliminary Levy
2006 General Fund Budoet 200512006 Lew
$8,946,738 $8,615,078
This is a increase over last This is an increase over last
~.~ years budgat of .28%. years levy of $495,000 or
The minimal increase is a 6.1%.
result of eliminating the The increase is a result of
levy swap and using that inflationary increases, and
levy authorily for olher debt service requirements
general fund inflationary for G.O Debt.
increases.
ESTIMATED PROPERTY TAX IMPACTS FOR CITY LEVY'S
RESIDENTIAL HOMESTEAD PROPERTY
loc,/{D<<r)
IT~~a..\e 4U36 47.6381 """Prew.u.
c~ C~ """{(Deer) lr>:rf(Decr) VCllifTox
... '"" T."". ,~. overPreviow overPrevious R.lteiosamc
....." ...... ,,,.>< Payable V..ratsamc Vearol!ni:r wilIMad;tt
~~~.....l!!2L..Mark<tVa1Jo~~
$142,962 $164,406 . ." , '" . (21) . .. . "S
S189,1l79 5217,441 SO"" . ],oJ6 , '''l , '" . '"
"'m<> $)):5;:m $1>92 $l,sSO . ,'. , '" . =
$427.349 $491,451 $2,40S ",., . 'M) . "" . '"
II The 2006 preliminary levy has a proposed
increase of $495,000 or a 6.1% increase over the
2005 levy.
II The increase is a result of inflation ary increases
in expenditures, primarily salaries & benefits,
insurance premiums, fuel costs, fu el related
product costs, heaUng and electric costs. Debt
service payments on G.O Debt also has an effect
on the tax levy.
How wiIJ m taxes be affected?
. The Cily of Hopkins' taxable markel value increased by
9.0% or $120 million due 10 new construction,
development and increases in property values.
. Due to increases in the taxable market value the
preliminary tax rate for the d"J decreased by an
estimated 2.7%.
. The markel value of the median (average) home in
Hopkins increased about 15% for 2006 nom $187,400
to $218,000.)
. Property thai had signfficant increases in valuation will
most lik.ely realize an increase in taxes.
Cily property laxes for 2006 are going to be affecled by
decisions thai were made over the past years for various
development projects that continue to be added to the tax
base.
,,$ This Council and pasl Councils have seen the wisdom of
..
committing time, energy, and funding to projecls whose payoff
may be years in the future.
Projects funded by lax incremenl financing have added to the
Cily's tax base. These projects have also crealed the
environment for additional development.
2
2006 Preliminary Levy an d Budget
3
%
Change
PROPOSED
2006
BUDGET
2005
BUDGET
2004
ACTUAL
2003
ACTUAL
2002
ACTUAL
Fund Budget
SOURCE
Current Revenues
General
0.48%
8.54%
-1.05%
-15.11%
-12.36%
7,308,078
411,910
621,400
11 0,000
186,200
19,150
290,000
8,946,738
$
7,273,078
379,510
627,975
110,000
219,350
21,851
290,000
8,921,764
$
6,372,727
743,812
687,655
48,919
277 ,206
56,283
242,431
8,429,033
$
5,932,258
1,094,005
773,539
101,647
333,085
9,783
$
5,799,310
1,522,152
583,667
116,211
295,001
16,019
$
CURRENT PROPERTY TAX
INTERGOVERNMENTAL REVENUE
LICENSE, PERMITS & FINES
INVESlMENT EARNINGS
CHARGES FOR CURRENT SERVICES
OTHER REVENUES
FRANCHISE FEES
TOTAL REVENUES
0.28%
8,244,317
8,332,360
4.48%
4.17%
5.46%
#DIV/O!
4.42%
6,703,637
3,177,817
400,000
6,416,183
3,050,591
379,292
6,291,222
2,780,197
82,186
6,259,361
2,400,725
276,306
6,111,391
2,449,202
701,283
86,186
9,348,062
1.00%
4.96%
-95.20%
0.28%
10,281,453
(1,354,7l5}
8,926,738
20,000
8,946,738
9,846,066
(1,341,302)
8,504,764
417,000
8,921,764
9,153,605
{1,321,365)
7,832,240
313,408
8,145,648
8,936,392
(1,265,183)
7,671,209
161,600
7,832,809
(1,248,954)
8,099,108
55,378
8,154,486
SALARIES AND EMPLOYEE BENEFITS
MATERIALS, SUPPLIES AND SERVICES
CAPITAL OUTLAY
CAPITAL IMPROVEMENTS
TOTAL
LESS EXPENDITURES CHARGED TO
OTIIER ACTIVITIES
NET TOTAL
OTHER FINANCING USES
TOTAL EXPENDITURES
Current Expenses
(0)
4,071,296
$
4,071,296
$
283,385
4,071,296
$
411,508
3,787,911
$
177,874
3,376,403
$
CHANGE IN FUND BALANCE
Total Fund Balance
CITY OF HOPKINS
INCLUDES GENERAL FUND, DEBT SERVICE, HOUSING & REDEVELOPMENT and PERA
HISTORIC, CURRENT AND PROJECTED TAX LEVIES AND CITY TAX RATES
Total City
Levy Total Levy Tax Tax Gross
Payable Before Tax Capital HRA Debt PERA Levy Capacity Tax Levy
Years Credits Caoacitv 1m Tax Levy Tax Levy Tax Levy After Credits Rate Increase
12005/06 8,615,078 15,914,270 25,000 20,000 1,297,000 11,815 7,581,204 47.638% 6.10%1
2004/05 8,120,078 14,655,800 25,000 10,000 812,000 11,815 7,172,029 48.936% 5.40%
2003/04*** 7,704,136 11,901,703 1,038,000 11,815 6,767,872 56.865% 7.48%
2002/03** 7,168,252 11,140,721 106,000 883,000 11,815 6,348,865 56.988% 8.76%
2001102* 6,591,140 10,658,607 100,000 342,000 11,815 5,850,411 54.889% 9.78%
2000/01 6,003,993 13,451,366 342,000 4,314,233 32.073% 6.00%
1999/00 5,664,144 12,526,355 330,000 4,022,438 32.112% 5.23%
1998/99 5,382,640 11,749,302 330,000 3,811,583 32.441% 3.63%
1997/98 5,194,184 11,936,742 330,000 3,635,016 30.452% 0.30%
1996/97 5,178,800 13,194,123 739,663 3,647,887 27.648% 1.21%
1995/96 5,117,000 12,902,081 578,574 3,682,276 28.540% 3.30%
1994/95 4,953,600 12,981,406 573,947 3,510,380 27.042%
* NO HACA
.. First portion of new facility bonds levied
"*Levy for second portion of new facility bonds and no local government aid.
In 2002 the legislature removed HACA from the aids to local governments and reallocated it to school districts.
In 2003 the city implemented the initial debt service levy to pay for the facility projects.
In 2004 the legislature eliminated local government aids to the City of Hopkins
In 2005 the Limited Market Value Credit is being gradually phased out.
CITY OF HOPKINS
ANALYSIS OF TAX LEVY
Purpose
General Operations
General Fund
Other Levies:
PERA Levy
Capital Levy
HRA Levy
Total General Levy .
Special Levies:
GO Bonds
Improvement Bonds
HRA Revenue Bonds
2003 2004 2005
$6,167,437 $6,654,321 $7,261,263
$11,815 $11,815 $11,815
$0 $0 $25,000
$106,000 $0 $10,000
$6,285,252 $6,666,136 $7,308,078
$190,000 $210,000 $190,000
$143,000 $150,000 $147,000
$550,000 $678,000 $475,000
$883,000 $1,038,000 $812,000
$7,168,252 $7,704,136 $8,120,078
(2) (3)
$577,112 $535,884 $415,942
8.76% 7.48% 5.40%
Subtotal - Special Levies
TOTAL LEVIES
Increase over prior year
Percentage Incr (Deer) - Total
Tax Capacity Rate
56.099%
48.936%
56.664%
Percentage Incr/Decr in Tax Capacity Rate
4.167%
(1)
1.007%
(2)
-13.638%
Notes
. Included in Operating Levy on Tax Statements
(1) First portion of new facility bonds levied
(2) Second portion of new facility bonds and no LGA
2006
Net Levy
Proposed
$7,261 ,263
$11,815
$25,000
$20,000
$7,318,078
$180,000
$147,000
$970,000
$1 ,297,000
$8,615,078
$495,000
6.10%1
47.638% est
-2.652%
CITY OF HOPKINS
ESTIMATED PROPERTY TAX IMPACTS FOR CITY LEVY'S
RESIDENTIAL HOMESTEAD PROPERTY
City Increase City Increase City Increase
2003 Taxes over 2004 Taxes over Annual. 2005 Taxes over Annual
Market Payable Previous Market Payable Previous % Market Payable Previous %
Value 2004 Year Value 2005 Year Change Value 2006 Year Change
$124,315 $704 $82 $142,962 $700 -$5 -0.6% $164,407 $783 $84 10.7%
$164,417 $931 $108 $189,079 $925 -$6 -0.6% $217,441 $1,036 $111 10.7%
$245,956 $1,393 $161 $282,850 $1,384 -$9 -0.6% $325,217 $1,550 $165 10.7%
$371,608 $2,105 $244 $427,349 $2,091 -$14 -0.6% $491,452 $2,341 $250 10.7%
MONTHLY COST OF LEVY $59 $58 $65 $7
MONTHLY COST OF LEVY $78 $77 $86 $9
MONTHLY COST OF LEVY $116 $115 $129 $14
MONTHLY COST OF LEVY $175 $174 $195 $21
ASSuMES A 12% INCREASE IN MARKET VALUE FROM 2002 TO 2003
ASSuMES A 15% INCREASE IN MARKET VALUE FROM 2003 TO 2004
ASSuMES A 15% INCREASE IN MARKET VALUE FROM 2004 TO 2005
Actual tax impacts may vary depending upon the actual inerease in market value for an individuals residence.
CITY OF HOPKINS
ESTIMATED PROPERTY TAX IMP ACTS FOR CITY LEVY'S
RESIDENTIAL HOMESTEAD PROPERTY
Incr/(Decr)
over Previous
Year if Tax
Rate is same
with Market
Value Iner
Incr/(Decr)
over Previous
Incr/(Decr)
over Previous
47.638
City
Taxes
48.936
City
Taxes
Tax Rate
Year at Incr
Market Value
Year at same
Market Value
Payable
2006
Payable
2005
2005
Market
Value
105
139
$
$
84
$
(21)
$
783
$
805
$
$164,406
208
$
III
$
(28)
$
1,036
$
$1,064
$217,441
314
$
INCREASE IN MARKET VALUE FROM 2004 TO 2005
165
250
$
$
(42)
(64)
$
$
1,550
$ 2,341
$
$ 1,592
$ 2,405
15%
$325,278
ASSUMES A
$491,451
CITY OF HOPKINS
ESTIMATED PROPERTY TAX IMPACTS FOR CITY LEVY'S
COMMERCIAL - INDUSTRIAL PROPERTY
Annual
%
Change
Increase
over
Previous
Year
City
Taxes
Payable
2006
2005
Market
Value
Annual
%
Change
Increase
over
Previous
Year
City
Taxes
Payable
2005
2004
Market
Value
Increase
over
Previous
Year
City
Taxes
Payable
2004
2003
Market
Value
3.8%
$50
$1,373
$181,627
-7.8%
-$112
$1,323
$172,649
$102
$1,435
$164,115
3.2%
$79
$2,585
$308,765
-8.5%
-$231
$2,506
$293,503
$142
$2,737
$278,996
2.7%
$182
$6,968
$768,886
-8.9%
-$662
-$1,382
$6,786
$13,940
$730,881
$1,461,761
$350
$699
$7,449
$15,322
$694,754
$1,389,507
2.5%
$354
$4
$7
$15
$30
$14,294
$114
$215
$581
$1,191
$1,537,773
-9.0%
$110
$209
$566
$1,162
$120
$228
$621
$1,277
MONTIIL Y COST OF LEVY
MONTIIL Y COST OF LEVY
MONTHLY COST OF LEVY
MONTIlL Y COST OF LEVY
ASSUMES A 5% INCREASE IN MARKET VALUE FROM 2002 TO 2003
ASSUMES A 5.2% INCREASE IN MARKET VALUE FROM 2003 TO 2004
ASSUMES A 5.2% INCREASE IN MARKET VALUE FROM 2004 TO 2005
Market value is depeudant au the location and type
Actual tax impacts may vary depending on the actual increase in market value for a specific business.
of business. The increase used for 2004/05 is the average of all conunercial businesses in Hopkins.
CITY OF HOPKINS
Hennepin County, Minnesota
RESOLUTION NO. 2005-083
RESOLUTION APPROVING THE PROPOSED 2006 TAX LEVY,
APPROVING THE PROPOSED 2006 BUDGET, AND SETTING PUBLIC HEARING DATES
BE IT RESOLVED BY THE COUNCIL OF THE CITY OF HOPKINS, MINNESOTA,
That the following sums be levied for the current year collectible in 2006 upon the taxable
property in said City of Hopkins, for the following purposes.
General Fund
Housing & Redevelopment Authority
PERA Rate mcrease
Capital Levy
General Obligation Bonds
Improvement Bonds
HRA Leased Revenue Bonds
Total Levy
$7,261,263
20,000
11,815
25,000
180,000
147,000
970.000
$8,615,078
That the Proposed 2006 General Fund Budget be set at $8,946,738.
Provision has also been made for the payment of principal an interest for the following bond issues:
1-1-97 Redevelopment Bonds 10-1-96 Redevelopment Bonds
12-1-89 Sewer Revenue Bonds 2-1-92 Taxable Refunding Bonds
Refunded 10-15-93 & 12-4-01 12-1-89 Redevelopment Bonds
8-1-92 Improvement Revolving Bonds Refunded 10-15-93
Refunded 12-4-01 3-1-90 Park Bonds Refunded 10-15-93 & 12-4-01
Housing Bonds 5-1-99 Taxable GO Housing Improvement Bonds
Housing Bonds 8-1-99 GO Storm Sewer Bonds
GO Housing Improvement Bonds 4-1-00 Water Revenue Bonds
GO Improvement Revolving Bonds 10-1-02 GO Improvement Revolving Bonds
Redevelopment Bonds 10-1-02 BRA Lease Revenue Bonds
BRA Lease Revenue Bonds 6-1-03 GO Storm Sewer Revenue Bonds
9-1-95
6-1-97
8-1-99
8-1-99
10-1-02
6-1-03
Bold = Included in Levy
That the public hearing for the 2006 Budget and Tax Levy be set for December 5, 2005 with a continuation hearing
date of December 20, 2005 at 6:30 pm in the City Council Chambers.
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 6th day of September 2005.
By
Eugene Maxwell, Mayor
ATTEST:
Terry Obermaier, City Clerk