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VII. 2. 2021 Preliminary Budget and Tax Levy and Preliminary HRA/EDA Levy; BishopSeptember 15, 2020 Council Report 2020-064 APPROVE PROPOSED 2021 LEVY, PROPOSED 2021 GENERAL FUND BUDGET AND SET BUDGET MEETING DATE Proposed Action. Staff recommends that the Council approve the following motion: Approve Resolution 2020-045 “Approving proposed 2021 tax levy, debt service levies at levels under those required in bond covenants, proposed general fund budget, and setting budget meeting dates”. Adoption of resolution 2020-045 will set a maximum tax levy for 2021, will set debt levies at amounts sufficient to pay debt service requirement taking into consideration other revenue sources and fund reserves, approve a proposed 2021 general fund budget and set the Truth in Taxation hearing for Monday, November 30, 2020. A decision on whether the meeting will be held in-person or virtually does not need to be made at this time. Overview: The City is required to certify a proposed tax levy and submit to Hennepin County by September 30th. This will be the maximum levy for 2020 and can only be reduced. The certified levy amount is also used for truth in taxation notices. The City must hold a public hearing on the budget between November 25th and December 28th. The proposed date of November 30th would allow time to consider comments heard at the public hearing before passing a final tax levy and budget. The date does not conflict with public hearings of Hopkins School District or Hennepin County. A proposed tax levy and budget has been prepared and reviewed. Adoption of the final budget will occur in December 2020 following the public hearing. Supporting Information: •Overview of Preliminary Tax Levy and General Fund Budget •2021 Preliminary General Fund Budget •2021 Tax Levy Summary •2021 Budget Preparation Schedule •Resolution 2020-045 ________________________________________ Nick Bishop, Finance Director Overview of Preliminary Tax Levy and General Fund Budget A draft version of the 2021 Budget and Tax Levy was prepared by staff and presented to City Council on July 21st. The draft included both conservative revenue estimates and decreased expenditures. Charges for services and miscellaneous revenue have decreased from the 2020 Budget by $22,800 and $48,300, respectively. The City also hosted a virtual budget engagement session on August 17th that reviewed the same draft version of the budget and tax levy. City Council directed staff to make reductions before the preliminary levy is set in September. The budget and tax levy being recommended for approval were reviewed at the September 1st City Council meeting. The general fund budget and tax levy will still meet the needs of the community, but does offer a lower level of services than in 2020. The General Fund budget is balanced. Revenues and expenditures are both set at $15,750,835, a $389,122 or 2.53% increase from 2020. The 2021 tax levy has also been revised based on the direction of City Council. The total tax levy is $18,023,384, a $493,700 or 2.82% increase from 2020. Based on preliminary tax capacity information, city taxes on a median value home ($291,000) will be $1,867, a $40 or 2.19% increase from 2020. Details regarding the budget and reductions being proposed are provided in the remainder of the memo. Local Government Aid (LGA) amounts were certified and published the last week in July. We have incorporated the certified amount of $853,671 in this budget. This is an increase of $118,725 over the draft budget previously presented and results in a reduction to the tax levy of the same amount. Although the 2021 amounts have been certified there is still some uncertainty surrounding the State’s budget. Projections released on July 31st project a $4.7 billion deficit during the State’s next two-year budget period. The 2021 LGA payments are scheduled for July 2021 and December 2021 could still be impacted by the actions of the Legislature or Governor. In the past, there have been reductions to LGA that have had a substantial impact on our organization. General Fund Reductions of $100,000 have been identified and removed from the budget. An open public works superintendent position was eliminated and the supervisory aspects combined with an existing position. Other reductions identified include reducing crack sealing on City streets by 25%, a 20% reduction in tree re-planting and delaying all pole painting. COVID-19 Contingency of $150,000 has been removed from the budget. This contingency budget was included to address the financial uncertainty surrounding COVID-19 in 2021. It could have been transferred to any of the City’s funds experiencing financial difficulty. Staff believes funds from the Equipment Replacement Fund and Capital Improvement Fund could be used as one-time contingency for 2021. Any additional impacts from COVID-19 could cause the city to need to rely on existing reserves or further reductions. Burnes Park debt service has previously been paid for with a portion of our debt levy. $150,000 of franchise fees that were previously dedicated to current park improvements will be used to pay debt service for the 2017 project. The tax levy was planned through 2032 and this decision could be one-time or continued. The five-year plan for the Park Dedication Fund would need updating based on this change. Some of the upcoming work within the next 5 years includes: rehab of deteriorated picnic shelters at Central Park, replacement of 30 year old play equipment at Central Park-East, replacement/rehab of 35 year old picnic shelter at Shady Oak Beach, rehab of 30 year old pavilion/concession building at Maetzold Field, rehab of 25 and 30 year old tennis courts at Oakes and Burnes Parks. City of Hopkins General Fund Revenue Budget For the Year Ending December 31, 2021 Proposed September 15, 2020 Department 2020 Budget 2021 Budget % Increase (Decrease) Property Taxes 12,564,305 12,893,552 2.62% Intergovernmental Revenue Local Government Aid 734,946 853,671 Intergovernmental Revenue - Other 618,000 621,000 Total Intergovernmental Revenue 1,352,946 1,474,671 9.00% Licenses, Permits & Fines Court Fines & Penalties 177,750 176,000 Building Permits & Inspections 461,300 479,300 Inspection Fines & Citations 8,000 6,000 City Clerk - Business Licenses 7,000 7,000 PD - Liquor, Animal Licenses & Penalties 102,300 97,800 Fire - Licenses & Permits 1,100 300 Public Works - Licenses & Permits 19,415 19,415 Planning & Zoning - Licenses & Permits 1,000 1,000 Total Licenses, Permits & Fines 777,865 786,815 1.15% Charges for Service Finance Department 5,500 5,500 Assessing 3,000 3,000 Inspections 105,900 103,900 Police 35,000 35,000 Fire 10,500 10,500 Public Works 4,150 3,150 Activity Center 87,000 67,500 Total Charges for Service 251,050 228,550 -8.96% Miscellaneous Revenue Franchise Fees 296,200 296,200 Miscellaneous 15,250 15,250 Finance Department 1,200 2,000 Police 2,000 500 Fire 3,500 3,500 Public Works 5,300 5,300 Activity Center 32,100 14,500 Community Development 60,000 30,000 Total Miscellaneous 415,550 367,250 -11.62% Total Revenues 15,361,716 15,750,838 2.53% City of Hopkins General Fund Expenditure Budget For the Year Ending December 31, 2021 Proposed September 15, 2020 Department 2020 Budget 2021 Budget % Increase (Decrease) City Council 97,630 102,095 4.57% Administrative Services 854,893 866,311 1.34% Finance 400,495 426,278 6.44% Legal 175,000 200,000 14.29% Municipal Building 404,014 390,560 -3.33% Assessing 221,835 245,920 10.86% City Clerk 237,513 176,656 -25.62% Inspections 863,296 879,588 1.89% Police 5,977,982 6,242,453 4.42% Fire 1,483,177 1,566,528 5.62% Public Works 3,443,017 3,469,191 0.76% Recreation 285,279 291,339 2.12% Activity Center 497,843 456,798 -8.24% Planning & Zoning 222,382 233,000 4.77% Community Development 108,160 114,921 6.25% Tuition Reimbursement 19,200 19,200 0.00% Contingency 50,000 50,000 0.00% Transfer to Other Funds 20,000 20,000 0.00% Total Expenditures 15,361,716 15,750,838 2.53% City of Hopkins Preliminary Tax Levy For the Year Ending December 31, 2021 Proposed September 15, 2020 Actual Preliminary % Increase Purpose FY2020 FY2021 (Decrease) General Operations General Fund 12,479,305 12,808,552 2.64% Capital Levy 75,000 175,000 133.33% Arts Center 325,225 331,182 1.83% Pavilion Fund 290,000 340,000 17.24% Equipment Replacement 110,000 250,000 127.27% Total General Operations 13,279,530 13,904,734 4.71% Debt Levy 4,250,154 4,118,650 -3.09% Total Levy 17,529,684 18,023,384 2.82% 2021 Budget Preparation Schedule On September 15, 2020, City Council will approve the City’s preliminary budget and tax levy. The City has three months to make modifications before a final budget and tax levy are approved on December 15, 2020. The following table outlines the tentative schedule for discussions on important aspects of the City’s Budget. Meeting Date Meeting Type Subject Details October 6 Regular Meeting Financial Management Plan (FMP) Update -Overview of the FMP, prior tax increases and debt October 13 Work Session Review Capital Improvement Plan (CIP) and Equipment Replacement Plan (ERP) -Park Dedication Fund -Capital Improvement Levy (City Buildings) -Permanent Improvement Revolving Fund (Street Projects) -Equipment Replacement Levy October 20 Regular Meeting Quarterly Financial Report November 4 (Wednesday) Regular Meeting Budget Review -TBD November 10 Work Session Review Special Revenue Budgets, Activity Center Budget, Enterprise Fund Budgets and Utility Rates -Chemical Assessment -Activity Center -Economic Development -Sewer -Parking -Storm Sewer -Communications -Refuse -Depot -Pavilion -Arts Center -Water November 17 Regular Meeting Approve CIP, ERP & Utility Rates November 30 (Monday) Regular Meeting Truth in Taxation Hearing -Overview of 2021 Budget and Tax Levy -Public Comment December 1 Regular Meeting Budget Review -Final Comments from Council on Budget December 15 Regular Meeting Approve Final Budget & Tax Levy -Last scheduled meeting to approve CITY OF HOPKINS Hennepin County, Minnesota RESOLUTION NO. 2020-045 RESOLUTION APPROVING THE PROPOSED 2021 TAX LEVY, SETTING DEBT SERVICES LEVIES AT LEVELS UNDER THOSE REQUIRED IN THE BOND COVENANTS, APPROVING THE PROPOSED 2021 BUDGET, AND SETTING BUDGET MEETING DATE BE IT RESOLVED BY THE COUNCIL OF THE CITY OF HOPKINS, MINNESOTA, That the following sums be levied for 2021 upon the taxable property in the City of Hopkins, for the following purposes. General Levy General $13,904,734 Special Levies Debt Levies 2010A GO Improvement Bonds 95,000 2012A GO Capital Improvement Bonds 225,000 2012B GO Bonds 160,000 2012B Equipment Certificates 92,925 2013A GO Bonds 88,453 2014A GO Bonds 97,000 2014B GO Refunding Bonds 670,000 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 33,316 2016C Equipment Certificates 242,445 2017A GO Street Reconstruction Bonds 975,798 2017B GO Tax Abatement Bonds 4,040 2018A GO Equipment Certificates 79,222 2018A GO Improvement Bonds 464,136 2019A GO Bonds 426,315 Subtotal Special Levies 4,118,650 Total Levy $18,023,384 That based upon staff analysis of specials assessments currently levied for Permanent Improvement Bonds, alternative revenue sources for the Capital Improvement Bonds and Equipment Certificates, and available reserves within all debt service funds listed below, that the debt service levies for 2021 for the following issues be levied at amounts less than that provided by the bond covenants. Net Debt Bond Issue Service Levy $2,710,000 G.O. Improvement Bonds of 2010A (B2679) $ 95,000 $5,505,000 G.O. Bonds of 2012B (B2833) $ 252,925 $3,650,000 G.O. Bonds of 2013A (B2833) $ 88,453 $1,895,000 G.O. Improvement Bonds of 2014A (B2964) $ 97,000 $6,345,000 G.O. Refunding Bonds of 2014B (B2983) $ 670,000 $4,100,000 G.O. Street Reconstruction bonds of 2015A (B3031) $ 250,000 $2,940,000 G.O. Tax Abatement Bonds of 2015B $ 115,000 $4,335,000 G.O. Improvement Bonds of 2016A (B3123) $ 100,000 $1,630,000 G.O. Tax Abatement Bonds of 2016B (B3122) $ 33,316 $11,795,000 G.O. Street Reconstruction Bonds of 2017A (B3198) $ 975,798 $3,170,000 G.O. General Obligation Bonds of 2017B $ 4,040 $6,715,000 G.O. Bonds of 2018A $ 464,136 $12,185,000 G.O. Bonds of 2019A $ 426,315 That the Proposed 2021 General Fund Budget be set at $15,750,838. That the budget meeting to discuss the 2021 budget and tax levy be set for November 30, 2020 at 7:00 PM in the City Council Chambers or virtually under Minn. Stat. § 13D.021. 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 15th day of September 2020. By Jason Gadd, Mayor ATTEST: Amy Domeier, City Clerk September 15, 2020 Council Report 2020-046 APPROVE PROPOSED 2021 HRA/EDA TAX LEVY Proposed Action Staff recommends adoption of the following motions: Move to approve Resolution 2020-046 Approving proposed 2021 HRA tax levy. Overview The City is required to certify a proposed HRA/EDA tax levy and submit it to the county by September 30th. There are levy limits for HRA/EDA levies which are based on the market value of personal and real estate property. For Hopkins the market value is $2,203,931,800 and the allowed levy is 0.0185% of total market value or $407,727, which would be a $39,776 or 10.81% increase from 2020. Based on the direction of City Council, the proposed levy is $378,070, which is an increase of $10,119 or 2.75% from 2020. A proposed Economic Development Fund budget is in the process of being prepared using the proposed levy. This is the main income source for our economic development activities and therefore the levy plays an important role in our continued efforts for redevelopment. When the budget is presented for review we have the opportunity to reduce but not increase the levy at that time. Staff is recommending that council approve the resolution setting the proposed levy for HRA/EDA operations at $378,070. Supporting Information • Resolution 2020-046 ____________________________________ Nick Bishop, Finance Director CITY OF HOPKINS Hennepin County, Minnesota RESOLUTION NO. 2020-046 RESOLUTION APPROVING THE PROPOSED 2021 HRA TAX LEVY BE IT RESOLVED BY THE COUNCIL OF THE CITY OF HOPKINS, MINNESOTA, That the following sum be levied for 2021 upon the taxable property in the City of Hopkins, for the following purposes. HRA/EDA Levy Housing & Redevelopment Authority Levy $ 378,070 That the levy is under the maximum allowable based on 0.01850% of market value as allowed by law for the City’s Economic Development purposes. 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 15th day of September 2020. By Jason Gadd, Mayor ATTEST: Amy Domeier, City Clerk 2021 Preliminary Budget & Tax Levy September 15, 2020 2021 Budget & Tax Levy Reviewed Financial Management Plan at January 10, 2020 Goal Setting Budget Engagement Session held on January 21, 2020 Budget Survey conducted in March/April 2021 Budget & Tax Levy 1st Draft Budget & Tax Levy Presented to City Council on July 21, 2020 Budget Engagement Session held on August 17, 2020 City Council directed staff to make reductions to 1st Draft of Budget & Tax Levy on August 18, 2020 2021 Budget & Tax Levy 2nd Draft Budget & Tax Levy Presented to City Council on September 1st, 2020 Preliminary Budget and Tax Levy recommended for approval on September 15th, 2020 (tonight) No changes since September 1st, 2020 2021 Budget & Tax Levy Will be affected by COVID-19 in some way Budget being presented will still meets needs of community, but does offer lower level of service than in 2020 2021 General Fund Budget Balanced Budget Revenues = Expenditures $15,750,838 2.53% Increase from 2020 2021 General Fund Revenues Local Government Aid amounts have been certified and included in budget Increase of $118,725 over draft budget presented on July 21, 2020 Total of $853,671, a 16.2% increase over 2020 2021 General Fund Revenues Local Government Aid (Continued) State is projecting a $4.7 billion deficit during next biennium (7/1/2021 –6/30/2023) Certified amount can still be impacted by the actions of Legislature or Governor 2021 General Fund Revenues Other revenue categories budgeted conservatively Charges for services decreased by $22,800 from 2020 Budget Miscellaneous revenue decreased by $48,300 from 2020 Budget 2021 General Fund Revenues Total General Fund Levy of $12,808,552 2.64% Increase to General Fund Levy 2021 General Fund Revenue Budget Proposed % Increase FY2020 FY2021 (Decrease) Property Taxes 12,564,305 12,893,552 2.62% Intergov't Revenue 1,352,946 1,474,671 9.00% Licenses, Permits & Fines 777,865 786,815 1.15% Charges for Service 251,050 228,550 -8.96% Misc. Revenue 415,550 367,250 -11.62% Total Revenue 15,361,716 15,750,838 2.53% 2021 General Fund Revenue 2021 General Fund Expenditures General Fund Reductions -$100,000 Open public works superintendent position was eliminated Creates ongoing savings after 2021 budget 2021 General Fund Expenditures General Fund Reductions -$100,000 (continued) 25% reduction in crack sealing on City Streets 20% reduction in tree re-planting No pole painting in 2020 Further reductions to supplies, training and other expenses 2021 General Fund Expenditures COVID-19 Contingency Reduction -$150,000 New request was removed from the Budget City still has a $50,000 contingency budget, which is consistent with 2020 2021 General Fund Expenditures COVID-19 Contingency Reduction -$150,000 (continued) Equipment Replacement or Capital Improvement Funds could be used as one-time contingency Additional impacts from COVID-19 could come from existing reserves of further reductions 2021 General Fund Expenditures Budget Proposed % Increase FY2020 FY2021 (Decrease) General Government 1,932,032 1,985,244 2.75% Community Services 1,653,186 1,650,085 -0.19% Public Safety 7,461,159 7,808,981 4.66% Public Works 3,443,017 3,469,191 0.76% Recreation 783,122 748,137 -4.47% Other 89,200 89,200 0.00% 15,361,716 15,750,838 2.53% 2021 General Fund Expenditures 2021 Tax Levy Burnes Park Debt Service -$150,000 Reduction to the debt levy Redirect franchise fees previously dedicated to ongoing park improvements Tax levy is planned through 2032 One-time or continued 2021 Tax Levy Burnes Park Debt Service -$150,000 (continued) Current five year plan includes: Central Park –Rehab of deteriorated picnic shelters Central Park –Replace/rehab 30 year old play equipment Shady Oak Beach –Replace/rehab 35 year old picnic shelter Maetzold Field –rehab 30 year old pavilion/concession building Oakes Park –rehab 25 year old tennis courts Burnes Park –rehab 30 year old tennis court Proposed 2021 Tax Levy Actual Preliminary % Increase Purpose FY2020 FY2021 (Decrease) General Operations General Fund 12,479,305 12,808,552 2.64% Capital Levy 75,000 175,000 133.33% Arts Center 325,225 331,182 1.83% Pavilion Fund 290,000 340,000 17.24% Equipment Replacement 110,000 250,000 127.27% Total General Operations 13,279,530 13,904,734 4.71% Debt Levy 4,250,154 4,118,650 -3.09% Total Levy 17,529,684 18,023,384 2.82% City Taxes on Median Value Home 2020 Actual Estimated Market Value as of 1/2/19 = $276,000 City Taxes -$1,827 Increase of $92 or 5.31% 2021 Draft Estimated Market Value as of 1/2/20 = $291,000 City Taxes -$1,867* Increase of $40 or 2.19% *estimated based on preliminary tax capacity information Truth in Taxation Hearing Setting the Date and Time Monday, November 30th at 7:00 PM Truth in Taxation statement will direct taxpayers to www.Hennepin.us.tntmeetings City of Hopkins will have a unique webpage listed with meeting details Either in-person or link to virtual meeting space Review 2021 HRA Levy September 1, 2020 Review 2021 HRA Levy Main revenue source for the City’s Economic Development Fund Levy Limits are in place for this levy of 0.01850% of the City Estimated Market Value Review 2021 HRA Levy Maximum allowable levy is $407,727, a $39,776 or 10.81% increase from 2020 Proposed levy is $378,070, a $10,119 or 2.75% increase from 2020 Preliminary and can be reduced Review 2021 HRA Levy Option 2: Approve a levy of $378,070, a $10,119 or 2.75% increase from 2020 Allows some flexibility in Economic Development Fund Preliminary and can be reduced Next Steps Meeting Date Meeting Type Subject Details October 6 Regular Meeting Financial Management Plan (FMP) Update -Overview of the FMP, prior tax increases and debt October 13 Work Session Review Capital Improvement Plan (CIP) and Equipment Replacement Plan (ERP) -Equipment Replacement Levy -Park Dedication Fund -Capital Improvement Levy (City Buildings) -Permanent Improvement Revolving Fund (Street Projects) October 20 Regular Meeting Quarterly Financial Report Next Steps Meeting Date Meeting Type Subject Details November 4 (Wednesday) Regular Meeting Budget Review -TBD November 10 Work Session Review Special Revenue Budgets,Activity Center Budget, Enterprise Fund Budgets and Utility Rates -Chemical Assessment -Economic Development -Parking -Communications -Depot -Arts Center -Activity Center -Water -Sewer -Storm Sewer -Refuse -Pavilion November 17 Regular Meeting Approve CIP, ERP & Utility Rates November 30 (Monday) Regular Meeting Truth in Taxation Hearing -Overview of 2021 Budget & Tax Levy -Public Comment Next Steps Meeting Date Meeting Type Subject Details December 1 Regular Meeting Budget Review -Final Comments from Council on Budget December 15 Regular Meeting Approve Final Budget & Tax Levy -Last scheduled meeting to approve