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City of Hopkins - Review Tax Impacts & Levy Limits July 20, 2001 REVIEW TAX IMPACTS AND LEVY LIMITS The Legislative session is over and many tax reforms are to be implemented in 2002 I am still in the process of analyzing the outcomes of the changes, but I would like to inform you of things I am aware of. Levy limits have been reinstated but unfortunately, I am not positive what the cities levy limit will be yet. As you recall, last year instead of levying for debt service we levied for a special revenue fund which transfers the money to pay the debt. This increased our overall general levy. If the city is allowed to use its' 2000/2001 levy amount and move forward with that as the basis for our levy limit in 2002, we will be able to obsorb the Art Facility into the general fund. The probability of this happening is high If we are to use our 1999/2000 levy amount as a base for this years levy, the city may need to issue an HRA levy and pay for planning and economic development activities with that levy and than obsorb the Art Center into the general fund. The state is eliminating theHACA aid and allowing cities to levy that same amount to replace these lost dollars. Our HACA amount in 2001 is $991,632. This amount will now be included in the cities general fund levy. The state granted Hopkins $50,000 in additional local government aid in replacement of allowing the city to apply a food and beverage tax. This additional LOA was directly associated with assisting the operations of the Art Center. I have adjusted our tax capacity down based on projections from the state. These projections will most likely change over the next month. I will keep you informed of any changes that affect tax rates, tax capacities, levy limits, etc... Attached is my current projections for budget and levy 2002. BUDGET CONSIDERATIONS Weare maintaining basic city services in 2002. We allocate building maintenance expenditures and equipment expenditures to more accurately reflect program costs. We will continue to work on cost allocations for all programs and funds. Attached is a forecast of general fund expenditures and revenues for the next five years with the associated tax levy's to achieve those levels. The assumptions for the forecasts made are as follows: ~ Current services will be maintained - no elimination to services. ~ A 5% increase in salaries and employee benefits each year respectively. ~ Approximately a 1.5% increase in materials, supplies and services each year respectively. ~ Approximately a 2% increase in chargebacks to special revenue funds, capital improvement funds and enterprise funds. This helps reduce general fund expenditures. ~ The Shady Oak Beach payment of $86,630 is included in the general fund for 2002. This paYment will come from reserves where it was originally was budgeted from. ~ Upgrade of heating and ventilating system in 2003 for $25,000 and 2004 for $100,000 in the general fund. ~ Valley Park parking addition of $20,000 in 2002, general fund. Downtown Park replace center concrete and benches - $20,000 Intra-city connections to trail system - $20,000 ADA accessible playground - $5,000 ~ Approximately a 6.5% and 7.5% increase in levy for 2002 and 2003, respectively. ~ Intergovernmental revenues stay flat each year except we loose HACA and replace it with property taxes. ~ Approximately a 20% increase in fines, permits and fees for 2002, with the potential redevelopment of the downtown area and starting Medica project. Continued high revenues in 2003 for Medica project completion. >: A $65,000 decrease in interest earnings for 2002 budget to accurately reflect actual earnings potential. ~ Approximately a 20% increase in charges for services in 2002 budget to accurately reflect historical collections. ~ Other revenues would remain relatively constant. >> An average increase in the assessed market value of property of 7%. The city is looking at space needs for the police and fire departments which, if implemented will have an effect on the overall budget and levy for 2004. I have included $25,000 in 2003 and another $25,000 in 2004, to operate the new facility, (this is a guess). Another issue which has risen is an increase in the time line for replacing the radio dispatch system for police and fire. Hennepin County has accelerated its proposed change to 800 mhz to April of 2001. We had not anticipated replacing our system until 2003 or 2004. The county does not anticipate us needing to change in 2001 but it is unknown how long before a change is nessecary in order to continue communications with Hennepin. The city is also in the process of a pay equity evaluation which could slightly impact the budget in 2002. The major items that could affect the general fund are as follows: Art Center inclusion - $70,000 additional levy New Fire station - $50,000 a year operational costs, additional levy Bond issue for new Fire and Police - $1,010,000 a year additional levy, for a total bond issue of $11,770,000. Wrir~ Finance Director o ~ ~ <\O~ ~8o ~N~ ?;; ~ ~ o ~ ~ ~V')~ <0'-' ~OO ~N~ ?;; ~ ~ o ~ ~ <~~ ~8o ~N;:J ?;; ~ ~ o ~ ~ <~~ ~8o ~N~ ?;; ~ ~ o ~ ~ '~N ~ ~8o ~N~ ?;; ~ ~ .. ~ ~ -= ~ ~ ==u -~..... = 0 .. ~~< ;e ~ ~ ~ ~ .; ~ ~ rI.l = ~ ~ .. i ~ ~==..e Q .; j$ Q ~ ... QQ... 0 z.n=..ra ~~;.; ~~=~ ~ ..e ~ r,} r~' j$ ... .~ """" ... ~ ..... 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