CR 98-198 Presentation of Proposed 1999 Budget & Proposed 1998/99 Levy
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...... December 7, 1998 o P K \ "" Council Report 98-198
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PRESENTATION OF PROPOSED 1999 BUDGET
AND THE PROPOSED 1998/99 LEVY
Overview
The Truth in Taxation process requires the City of Hopkins to hold a public hearing, to inform residents
and area businesses and to gather information from those mentioned, in regard to the proposed 1999
budget and the 1998/99 levy.
The city council and city staff have worked deligently to keep the amount required from property taxes
below the levy limit and at the same time maintain the level and quality of services the residents and
businesses of Hopkins expect. The city council is charged with the authority to establish a budget for
1999, staying within the levy limits set forth by the State of Minnesota.
Following is a presentation of the proposed 1999 budget.
The final approval of the ] 999 budget will occur on December J 5, 1998.
Primary Issues to Consider
. . Accounting Changes
. 1998 Property tax law changes
. 1999 proposed budget
. Tax impacts
Supportinl! Information
. 1999 Budget
. 1999 General Fund Budget
. 1998/99 Tax Levy
. Property tax impacts for Hopkins taxes payable 1999
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Lori K Yager
Finance Director
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. Accounting changes to the 1999 budget
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,.. Revenue changes
There is a significant decrease in interest earnings revenue in the general fund in 1999 as compared to
1998. This decrease is the direct result of a change in accounting procedures for allocating interest
earnings. Previously interest was allocated to most funds on a year-end cash balance basis. Finance has
determined that it is more equitable to allocate interest to all funds on a monthly basis. This however
leaves the general fund short interest earning revenues of about $130,000. This is part of the reason for
the projected tax levy increase this year.
Expenditure changes
Another change in accounting has been the allocation of bui Iding maintenance expenses to departments.
Previously these costs were only included in the general government category within the general fund.
In 1999 the costs are allocated to all general fund departments to help reflect actual costs of operating
each department. The final accounting change was the allocation of equipment replacement costs to the
general fund departments. This was done to reflect the yearly capital needs of each department.
. 1998 Legislative Actions
The action of the 1998 State Legislature will impact local tax structure in several ways. Levy limits are
imposed, there are tax rate changes and a property tax rebate will be implemented.
For the second consecutive year levy limits are imposed on all counties and on cities with populations
over 2,500. These limits are imposed to help control property tax increases_ Increases are allowed for
It 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 under the established levy limits.
Property class rate changes have been enacted. In Minnesota property is taxed at different rates based
upon its type. In 1999, commercial, industrial, utility and apartment property will receive the greatest
reduction in property tax rates. The changes will cause a shift of the property tax burden from these
classes to homestead properties.
The state has again approved a property tax rebate for homeowners and renters. The surplus in state tax
revenue will be distributed back to Minnesota taxpayers in the amollnt of$500 million.
. Tax Impacts of the proposed 1999 Budget
The general fund is the largest portion of the city's portion of the tax levy. Included in the general fund
is equipment replacement. Tn addition to the general fund levy there is a levy for the debt service funds.
Included you'll find different scenarios for Residential and Commercial/Industrial tax impacts_ You'll
notice that no matter which scenario is used, Hopkins residents will have an increase in taxes and the
Commercial/Industrial class sees a slight percentage increase or a decrease in their share of property
taxes. This is the result of the legislative decision to shift some of the burden of taxes from
Commercial/Industrial properties to Homestead properties.
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