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VII.1. 2019 Budget Meeting, 2019 Tax Levy and General and Special Revenue Fund Budgets; BishopDecember 4, 2018 Council Report 2018-126 2019 BUDGET MEETING, 2019 TAX LEVY AND GENERAL AND SPECIAL REVENUE FUND BUDGETS Proposed Action Staff recommends adoption of the following motion: Move to Adopt Resolution 2018-090 approving the 2019 tax levy and adopting the 2019 General and Special Revenue Fund budgets. Adoption of this motion will result in staff forwarding the appropriate documentation to Hennepin County for inclusion on property taxes for 2019 and will approve the 2019 General and Special Revenue Fund budgets. Overview The City Council and staff have held a number of meetings and work sessions during 2018 to prepare for the 2019 general fund budget and 2019 tax levy. This evening we are taking input from the public on the 2019 budget. During 2018 the council reviewed and gave input related to the Capital Improvement Plan, the Equipment Replacement Plan and updated the Financial Management Plan which along with a series of program and budget discussions were instrumental in the development of the 2019 budgets. The budget in its current form recommends spending in the general fund at $14,410,478 and a total tax levy of $15,977,936. The recommended levy has been reduced by $65,000 from the preliminary levy. In addition, a proposed HRA levy of $350,154 is also being recommended. Staff is recommending that the council adopt the resolution approving the tax levy for 2019 and setting the 2019 general and special revenue fund budgets. Primary Issues to Consider • The state mandates certification of the 2019 levy to the County Auditor no later than December 28, 2018. Supporting Information • Resolution 2018-090 • 2019 General Fund and Special Revenue Fund Budgets • Power point presentation slides • Assoc. of MN Counties – “Fourteen Reasons Why Property Taxes Vary from Year to Year” Nick Bishop, CPA Finance Director Financial Impact: $14,410,478 GF Budgeted: Y/N Y Source: Taxes & other revenues Related Documents (CIP, ERP, etc): 2018 Budget, CIP, ERP, Notes: CITY OF HOPKINS Hennepin County, Minnesota RESOLUTION NO. 2018-090 RESOLUTION APPROVING 2019 TAX LEVY AND ADOPTING THE 2019 GENERAL AND SPECIAL REVEUNE FUND BUDGETS 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 2019 upon the taxable property in the City of Hopkins, for the following purposes. General Levy General $12,364,507 Special Levies Debt Levies 2010A GO Improvement Bonds 90,000 2012A GO Capital Improvement Bonds 220,000 2012B GO Bonds 150,000 2012B Equipment Certificates 96,495 2013A GO Bonds 88,348 2014A GO Bonds 97,000 2014B GO Refunding Bonds 655,000 2015A GO Street Reconstruction Bonds 250,000 2015B GO Tax Abatement Bonds 115,000 2016A GO Improvement Bonds 100,000 2016B GO Tax Abatement Bonds 34,366 2016C Equipment Certificates 240,240 2017A GO Street Reconstruction Bonds 925,000 2017B GO Tax Abatement Bonds 163,908 2018A GO Bonds 310,072 2018A Equipment Certificates 78,000 Subtotal Special Levies 3,613,429 Total Levy $15,997,936 HRA/EDA Levy Housing & Redevelopment Authority Levy $ 350,154 This levy is made based on current law and the 2019 General Fund Budget of $14,410,478. BE IT FURTHER RESOLVED, that the following amounts are budgeted for the Special Revenue Funds: State Chemical Assessment $60,000 TIF 2.6 Handicapped Housing Dev $7,500 Economic Development $390,519 TIF 2.11 Super Valu $1,750,053 TIF 1.2 Entertainment District $14,500 5th Avenue Flats $2,000 Parking $141,783 TIF 1.4 – Marketplace & Main $176,000 Communication (Cable TV) $482,459 TIF 1.5 – Moline $92,000 Depot Coffee House $347,925 Arts Center $1,005,600 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 on this this 4th day of December, 2018. _______________________________________ Molly Cummings, Mayor ATTEST: _____________________________ Amy Domeier, City Clerk City of Hopkins General Fund Revenue Budget For the Year Ending December 31, 2019 December 4, 2018 Department 2018 Budget 2019 Budget % Increase (Decrease) Property Taxes 10,832,657 11,821,624 9.13% Intergovernmental Revenue PERA Aid 20,510 20,510 Local Government Aid 549,023 556,619 Intergovernmental Revenue - Other 604,400 590,000 Total Intergovernmental Revenue 1,173,933 1,167,129 -0.58% Licenses, Permits & Fines Court Fines & Penalties 176,500 176,500 Building Permits & Inspections 463,900 440,700 Inspection Fines & Citations 8,000 8,000 City Clerk - Business Licenses 7,050 7,000 PD - Liquor, Animal Licenses & Penalties 95,600 89,100 Fire - Licenses & Permits 3,800 1,100 Public Works - Licenses & Permits 27,115 19,415 Planning & Zoning - Licenses & Permits 3,500 3,500 Total Licenses, Permits & Fines 785,465 745,315 -5.11% Charges for Service Finance Department 9,750 9,750 Assessing 3,000 3,000 Inspections 87,850 104,360 Police 33,000 25,000 Fire 15,000 10,500 Public Works 2,750 4,150 Activity Center 71,500 94,000 Total Charges for Service 222,850 250,760 12.52% Miscellaneous Revenue Franchise Fees 290,000 290,000 Miscellaneous 15,250 15,250 Finance Department 5,100 5,100 Police 2,000 2,000 Fire 3,500 3,500 Public Works 4,600 5,300 Activity Center 10,000 14,500 Community Development 90,000 90,000 Total Miscellaneous 420,450 425,650 1.24% Total Revenues 13,435,355 14,410,478 7.26% City of Hopkins General Fund Expenditure Budget For the Year Ending December 31, 2019 December 4, 2018 Department 2018 Budget 2019 Budget % Increase (Decrease) City Council 103,558 96,131 (7.17%) Administrative Services Administration 197,485 214,453 Personnel 61,611 61,454 Wellness 2,550 2,750 Information Services 405,615 478,036 Total Administrative Services 667,261 756,693 13.40% Finance General Accounting 209,572 230,820 Payroll 94,559 104,910 Utility Billing 9,892 15,443 Total Finance 314,023 351,173 11.83% Legal 150,000 175,000 16.67% Municipal Building 389,106 392,396 0.85% Receptionist 38,107 40,887 7.30% Assessing 218,681 226,682 3.66% City Clerk City Clerk 82,957 96,499 Elections 85,323 86,744 Total City Clerk 168,280 183,243 8.89% Inspections Building Code Inspections 306,745 348,891 Fire Inspections 44,316 50,467 Heating & Plumbing Inspections 99,815 114,265 Housing Inspections 192,341 203,000 Misc. Community Inspections 93,442 96,876 Vacant Property Management 4,972 5,089 Total Inspections 741,631 818,588 10.38% City of Hopkins General Fund Expenditure Budget For the Year Ending December 31, 2019 December 4, 2018 Department 2018 Budget 2019 Budget % Increase (Decrease) Police Police Administration 626,204 714,393 Patrol 3,519,221 3,740,914 SWAT 86,573 80,868 Reserves 21,964 20,890 Investigations 405,750 397,794 Metro Drug Task Force 144,441 141,397 Outreach 123,615 127,394 Reception-Records 296,875 315,567 Systems Management 65,500 69,888 Total Police 5,290,143 5,609,105 6.03% Fire 1,238,250 1,399,178 13.00% Public Works PW Building 65,956 75,435 Equipment Services 137,215 151,835 Administration 68,434 80,277 Engineering 180,072 206,716 Street & Alleys 1,125,641 1,141,127 Snow & Ice Removal 245,174 211,546 Parks 930,822 1,060,632 Forestry 304,565 293,569 Total Public Works 3,057,879 3,221,137 5.34% Recreation Playground 22,762 23,900 Ice Rink 31,634 33,218 Park Service 27,174 28,532 Joint Recreation 172,000 174,350 Skate Park 9,039 9,279 Total Recreation 262,609 269,279 2.54% Activity Center Community Use 353,341 386,261 Maintenance 76,799 77,155 Total Activity Center 430,140 463,416 7.74% Planning & Zoning 204,672 217,372 6.21% City of Hopkins General Fund Expenditure Budget For the Year Ending December 31, 2019 December 4, 2018 Department 2018 Budget 2019 Budget % Increase (Decrease) Community Development 102,810 101,498 (1.28%) Tuition Reimbursement 18,200 18,700 2.75% Contingency 25,000 50,000 100.00% Transfer to Other Funds 15,000 20,000 33.33% Total Expenditures 13,435,350 14,410,478 7.26% City of Hopkins Special Revnue Funds Budget For the Year Ending December 31, 2019 December 4, 2018 Revenues Fund No.2018 Budget 2018 Budget % Increase (Decrease) 203 State Chemical Assessment 60,000 60,000 0.00% 204 Economic Development 402,037 395,154 (1.71%) 211 TIF 1.2 Entertainment District 30,000 30,000 0.00% 214 Parking 150,500 152,650 1.43% 217 Communications (Cable TV)269,200 255,235 (5.19%) 219 Depot Coffee House 352,000 362,600 3.01% 226 TIF 2.6 Handicapped Housing Dev.21,000 15,000 (28.57%) 231 TIF 2.11 Super Valu 2,408,000 2,408,000 0.00% 232 5th Avenue Flats - - 0.00% 233 TIF 1.4 - Marketplace & Main 125,000 188,000 50.40% 234 TIF 1.5 - The Moline - 98,000 100.00% 250 Arts Center 975,626 988,582 1.33% Expenditures Fund No.2018 Budget 2018 Budget % Increase (Decrease) 203 State Chemical Assessment 60,000 60,000 0.00% 204 Economic Development 245,700 390,519 58.94% 211 TIF 1.2 Entertainment District 13,242 14,500 9.50% 214 Parking 113,529 141,783 24.89% 217 Communications (Cable TV)285,566 482,459 68.95% 219 Depot Coffee House 367,753 347,925 (5.39%) 226 TIF 2.6 Handicapped Housing Dev.6,976 7,500 7.51% 231 TIF 2.11 Super Valu 1,640,240 1,750,053 6.69% 232 5th Avenue Flats 2,000 2,000 0.00% 233 TIF 1.4 - Marketplace & Main 120,950 176,000 45.51% 234 TIF 1.5 - The Moline - 92,000 100.00% 250 Arts Center 992,908 1,005,600 1.28% Fund Fund Public Meeting for the 2019 Levy & Budget December 4th, 2018 Purpose of this Meeting Discuss and Review the City’s Budget and how it impacts your taxes Discuss the City’s Tax Levy Will NOT address individual property valuations Taxation Process Set Preliminary Levy on September 18th Proposed Tax Notices were available on November 13th Public Meeting for Final Levy and Budget – Tonight/December 4th Adopt Final Budget and Levy Planned for Tonight/December 4th Must be passed before December 28th General Fund Expenditures Salary and Benefit Increases All employee contracts settled 2018 -2020 Full-time Park and Forestry Worker Reduces part time expenditures Fire Hall Tables and Chairs Comprehensive Plan Implementation Equipment Charges, Legal Services, Transfer to Depot General Fund Expenditures Budget Proposed % Increase FY2018 FY2019 (Decrease) General Government 1,623,948 1,771,393 9.08% Community Services 1,474,181 1,588,270 7.74% Public Safety 6,528,393 7,008,283 7.35% Public Works 3,057,879 3,221,137 5.34% Recreation 692,749 732,695 5.77% Other 58,200 88,700 52.41% 13,435,350 14,410,478 7.26% General Fund Expenditures General Fund Revenues Tax Levy –increased $989K or 9.1% Charges for Services –increased $28K Licenses, Permits & Fines –decreased $40K General Fund Revenues Budget Proposed % Increase FY2018 FY2019 (Decrease) Property Taxes 10,832,657 11,821,624 9.13% Intergov't Revenue 1,173,933 1,167,129 -0.58% Licenses, Permits & Fines 785,465 745,315 -5.11% Charges for Service 222,850 250,760 12.52% Misc. Revenue 420,450 425,650 1.24% Total Revenue 13,435,355 14,410,478 7.26% General Fund Revenues 2019 Tax Levy Actual Proposed % Increase Purpose FY2018 FY2019 (Decrease) General Operations General Fund 10,747,657.00 11,736,624.00 9.20% Capital Levy 75,000.00 100,000.00 33.33% Arts Center 250,000.00 257,500.00 3.00% Pavilion Fund - 40,383.00 100.00% Equipment Replacement - 230,000.00 100.00% Total General Operations 11,072,657.00 12,364,507.00 11.67% Pavilion and Equipment new in 2019 2019 Tax Levy Actual Proposed % Increase Purpose FY2018 FY2019 (Decrease) Debt Previously Issued 3,149,223.00 3,225,257.00 2.41% Debt Issued in 2018 - 388,072.00 100.00% 3,149,223.00 3,613,329.00 14.74% 2018 Street Project (Cambridge/Oxford) City portions of Blake Road Equipment: 2 dump trucks, sweeper, toolcat, pickup truck, swap loader 2019 Residential Property Tax Changes Decrease/Increase Increase Increase Increase Increase No Change .1% - 4.9%5.0% - 9.9%10.0% - 14.9%15.0% - 19.9%over 20.0% % of Total 6.75%15.17%33.90%16.42%13.00%14.76% # of Parcels 265 595 1330 644 510 579 2019 Residential Property Tax Changes Increase Increase Decrease/ No Change Increase $0.01 - $150.00 $150.01 - $300.00 $300.01 - $450.00 % of Total 6.75%26.18%31.74%21.00% # of Parcels 265 1027 1245 824 Increase Increase Increase Increase $450.01 - $600.00 $600.01 - $750.00 $750.01 - $900.00 $900.01 and over % of Total 8.59%2.55%1.81%1.38% # of Parcels 337 100 71 54 Where your taxes go 24-hour police and fire protection Emergency medical service Street, sidewalk and trail maintenance and improvements Snow plowing Hopkins Activity Center Hopkins Center for the Arts Boulevard and forestry program Park maintenance and improvements Planning and economic development A publication of the Association of Minnesota CountiesA publication of the Association of Minnesota Counties THE MARKET VALUE OF A PROPERTY MAY CHANGE. • Each parcel of property is assessed at least once every five years and a sales ratio study is done to determine if the property is assessed similarly to like properties. If not, the Commissioner of Revenue may issue an ‘order’ that would affect the taxable value of a parcel. • Additions and improvement made to a property generally increases its market value. THE MARKET VALUE OF OTHER PROPERTIES IN YOUR TAXING DISTRICT MAY CHANGE, SHIFTING TAXES FROM ONE PROPERTY TO ANOTHER. • If the market value of a property increases more or less than the average increase or decrease in a taxing district, the taxes on that property will also change. • New construction in a taxing district increases the tax base and will affect the district’s tax rate. THE STATE GENERAL PROPERTY TAX MAY CHANGE. • The state legislature directly applies a State General Property Tax to commercial/industrial and season/recreational property classes. Fourteen Reasons WHY PROPERTY TAXES VARY FROM YEAR TO YEAR A publication of the Association of Minnesota Counties THE CITY BUDGET AND LEVY MAY CHANGE. • Each year, cities review the needs and wants of their citizens and how to meet those needs and wants. This is called ‘discretionary spending’ in the city budget. Also included in the budget is non-discretionary spending which is required by state and federal mandates and court decisions and orders. THE TOWNSHIP BUDGET AND LEVY MAY CHANGE. • Each March, townships set the levy and budget for the next year. THE COUNTY BUDGET AND LEVY MAY CHANGE. • Each year, counties review the needs and wants of their citizens and how to meet those discretionary needs and wants. In addition, also included in the county budget is non- discretionary spending which is required by state and federal mandates and court decisions and orders. As much as sixty to eighty-five percent of the county expenditures are used to deliver mandated services. THE SCHOOL DISTRICT’S BUDGET AND LEVY MAY CHANGE. • The Legislature determines basic funding levels for K-12 education and mandates services that schools must perform. On average, approximately seventy percent of school costs are paid by the state. • Local school districts set levies for purposes including safe school and community education, etc. A SPECIAL DISTRICT’S BUDGET AND LEVY MAY CHANGE. • Special districts such as the Metropolitan Council, hospital districts, watershed districts, drainage districts, etc. set levies to balance their budgets. SPECIAL ASSESSMENTS MAY BE ADDED TO YOUR PROPERTY TAX BILL. • Water lines, curb and gutter, and street improvements that directly benefit your property may be funded, in whole or in part, through a special assessment that is added to your tax bill. A publication of the Association of Minnesota Counties VOTERS MAY HAVE APPROVED A SCHOOL, CITY/ TOWNSHIP, COUNTY, OR SPECIAL DISTRICT REFERENDUM. • Local referendums may be held for local government construction projects, excess operating levies for schools or many other purposes. • Referendum levies may be spread on the market value or the tax capacity of a property depending on process and type of referendum levy. FEDERAL AND STATE MANDATES MAY HAVE CHANGED. • Both the state and federal governments require local governments to provide certain services and follow certain rules. These mandates often require an increase in the cost and level of service delivery. AID AND REVENUE FROM THE STATE AND FEDERAL GOVERNMENTS MAY HAVE CHANGED. • Each year the state legislature reviews and adjusts the level of funding for a variety of aids provided to local governments including Local Government Aid and County Program Aid. The formulas for how aid is determined and distributed among local governments may have changed. • While direct aid and revenue from the federal government to local governments has declined greatly in recent years, federal revenue continues to be a key portion of the local government revenue stream and that revenue stream may have changed. THE STATE LEGISLATURE MAY HAVE CHANGED THE PORTION OF THE TAX BASE PAID BY DIFFERENT TYPES OF PROPERTIES. • A change in class rates will require a change in the tax rate to raise the same amount of money. OTHER STATE LAW CHANGES MAY ADJUST THE TAX BASE. • Fiscal disparities, personal property taxes on utility properties, limited market value, and tax increment financing are example of laws that affect property taxes. Revised December 2011 Association of Minnesota Counties 125 Charles Avenue Saint Paul, MN 55103-2108 Main Line/Switchboard: 651.224.3344 Fax: 651.224.6540 www.mncounties.org Glossary of Terms CATEGORICAL AID: Aid given to a local unit of government to be used only for a specific purpose. CIRCUIT BREAKER: See “Property Tax Refund.” CLASS RATES: The percent of market value set by state law that establishes the property’s tax capacity subject to the property tax. COUNTY PROGRAM AID: State property tax relief aid to counties, distributed with a formula based on needs (households on foodstamps, age of the population, number of serious crimes) and tax base equalization for counties with smaller tax bases. EDUCATION AID: The total amount of state dollars paid for K-12 education. This aid is paid to the school districts. FISCAL DISPARITIES: A program in the Twin Cities metropolitan area and on the iron range in which a portion of the commercial and industrial property value of each city and township is contributed to a tax base sharing pool. Each city and township then receives a distribution of property value from the pool based on market value and population in each city. GENERAL PURPOSE AID: Aid given to units of government to be used at their own discretion. Examples are Local Government Aid and County Program Aid. HIGHWAY AID: Motor fuels tax and license tab money the state distributes to counties, cities and townships for highways and bridges. HOMESTEAD: A residence occupied by the owner. INDIVIDUAL INCOME TAX: A state tax on the income of residents and non-residents with Minnesota sources of income that is deposited into the state general fund. LEVY: The imposition of a tax, associated with the property tax. LEVY LIMIT: The amount a local unit of government is permitted to levy for specific services under state law. LIMITED MARKET VALUE: A state imposed limit on property value increases for the purpose of calculating property taxes. LOCAL GOVERNMENT AID (LGA): A state government revenue sharing program for cities with low property wealth or high service burdens that is intended to provide an alternative to the property tax. LOCAL SALES TAX: A local tax, authorized by the state, levied on the sale of goods and services to be used for specific purposes by the local government. LOCAL TAX RATE: The tax rate usually expressed as a percentage of tax capacity, used to determine the property tax due on a property. MARKET VALUE: An assessor’s estimate of what property would be worth if it were sold. MARKET VALUE AGRICULTURE CREDIT: A state credit to reduce the property tax paid by agricultural homesteads to the local taxing jurisdiction. MARKET VALUE HOMESTEAD CREDIT: The Market Value Homestead Credit (MVHC) program was eliminated during the 2011 Special Session for taxes payable in 2012 and beyond. The credit was replaced with a market value exclusion. This guide describes the (MVHC) reimbursement program. The program was designed to provide state-paid property tax relief to owners of certain qualifying homestead property. This program has been replaced by the Market Value Homestead Exclusion (defined below). MARKET VALUE HOMESTEAD EXCLUSION: The exclusion reduces the taxable value of qualifying homesteads. Despite the decreased taxable value, taxes will increase on most properties including apartments and businesses and is independent of any action taken by local governments. The exclusion provides for a portion of each home’s market value to be excluded from its value for property tax calculations. The amount of value excluded is directly proportional to the MVHC the home received under the old law. In this way, each home contributes a smaller amount to each taxing jurisdiction’s tax base. The tax rate tends to be a little higher because of the reduced tax base, which is why taxes increase for the other types of property. The tax burden on any given homestead could be lesser or greater depending upon the mix of properties in the jurisdiction and the level of the tax rate. PROPERTY TAX: A tax levied on any kind of property. PROPERTY TAX REFUND: A partial property tax refund program for those who have property taxes out of proportion with their income. This program is available to homeowners and renters. SALES RATIO STUDY: A study conducted by the Department of Revenue of open market property sales, which is then compared to local assessments to ensure that local assessments adequately reflect the market. STATE GENERAL PROPERTY TAX: A state-imposed property tax on commercial, industrial, and seasonal recreational properties. STATE SALES TAX: A state tax (6.5%) levied on the sale of goods and services that is deposited into the state general fund. TAX CAPACITY: The valuation of property based on market value and class rates, on which property taxes are determined.