ITEM 2 Budget meeting #5Y
OtCITY QP
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MINNESOTA
TO: Mayor and City Council
FROM: Adam Flaherty, City Administrator & Finance Director
DATE: August 27, 2018
SUBJECT: Budget Meeting #5
On Monday, Council and staff will resume the review of the draft 2019 General Fund budget. I have
developed an outline of discussion topics below.
Confirm Assumptions
The draft budget document assumes a 2.50% cost of living adjustment to the City's pay plan for
2019. This assumption was reviewed at previous budget meetings and the Council concurred on
May 29th to include this assumption for the budget review process. Since the last time this
assumption was discussed, new information has become available and should be reviewed by staff
and Council.
Revenues & Expenditures
There have been no changes in the budgeted amounts since the draft budget books were prepared
and distributed to the Council on July 23rd.
Property Tax Lew
There have been no changes in the amount of the total levy since the July 30th budget meeting.
The Tax Capacity figure we have been using accounts for approximately 7% growth. This is an
estimate calculated based on Market Value estimates provided by the County at the Board of
Appeal meeting in April 2018.
According to this estimate, the City would be able to provide for a reduction in the City tax rate
with any increase of the total tax levy of less than $445,506. The current preliminary property tax
levy accounts for an increase of $387,807.
Budget Review
Council and staff will be reviewing General Fund department budgets as outlined in the attached
review schedule.
City of Otsego 113400 90"' Street NE, Otsego, N N 553301 Tel. (763) 441-4414 Fax (763) 441-9163
Code Enforcement
At a previous City Council meeting, the Council requested a review of code enforcement efforts
during the past year as well as budgeting options for code enforcement into 2019. City Planner
Licht has drafted an annual summary report, which is attached with your packet. Council and Staff
will fully review the subject during the course of the budget meeting.
Next Steps
There is one additional budget review meeting scheduled for September 10th. Staff is seeking
direction from the City Council on whether this meeting is necessary.
The Council will need to adopt the preliminary property tax levy, which is the maximum amount
the City can levy for taxes payable 2019. This action will take place at a regular Council meeting,
either on the 10th or the 24th of September.
It should be noted that the preliminary property tax levy is the amount used for truth -in -taxation
notices that are sent to the taxpayers by Wright County. This of course does not set the amount of
taxes that the taxpayers will pay; rather, it provides a point -in -time estimate of taxes payable in
2018.
The final budget and property tax levy will not be adopted by the City Council until December.
Changes to the budget can still be made between now and then, but increases to expenditures
become difficult because the primary revenue source to pay for those increases is property taxes.
The property tax levy can be decreased between now and then, but the levy cannot be increased.
Staff is seeking direction from the City Council on how they would like to proceed.
Materials Attached for Discussion
1) Property Tax Levy Summary
2) Department Expenditure Review Schedule
3) Code Enforcement Annual Summary
City of Otsego 113400 90"' Street NE, Otsego, N N 553301 Tel. (763) 441-4414 Fax (763) 441-9163
TPC
The Planning Company
MEMORANDUM
3601 Thurston Avenue
Anoka, MN 55303
763.231.5840
TPC@PlanningCo.com
TO: Otsego Mayor and City Council
FROM: D. Daniel Licht, AICP
Elizabeth Stockman
DATE: 22 August 2018
RE: Otsego - Code Enforcement Annual Summary
TPC FILE: 101.01
BACKGROUND
In preparation for upcoming budget discussions, our office and City staff have prepared a
summary of code enforcement activities for the one-year period between June 2017 to June
2018. This date range was utilized because in June 2017 all open code enforcement cases were
transferred to the new Permit Works program. Use of the Permit Works program has greatly
streamled the process for entering, monitoring, updating, and summarizing code violations. In
addition, we have provided a brief synopsis of code enforcement actions, including cases that
were pursued at the direction of the City Council for proactive code enforcement.
Exhibits:
■ Enforcement case by type (July 2017 - June 2018)
■ TPC monthly billing (July 2017 - June 2018)
ANALYSIS
Violations. The type of enforcement complaints most often logged over the last year have
been
Property violations such as junk/debris in yard, off-street parking such as vehicles on
grass, unlicensed/inoperable vehicles, or general zoning requirements including
driveway surfacing, illegal driveways, setback issues, refuse containers improperly
located, vegetation, blocking sight lines/hydrants, outdoor storage of too many
recreational vehicles or improper storage of recreational vehicles, etc. that were 31
percent of the complaints reported.
2. Seasonal property maintenance complaints such as grass not being mowed, noxious
weeds, or snow and ice on sidewalks that were 19 percent of complaints.
3. Building related violations such type of structure, building code compliance, certificate
of occupancy, fences, signs, and RPZ valve inspections that were 18 percent of reported
complaints.
4. Use related violations including rental properties without a license, home extended
businesses or prohibited principal uses, which were 13 percent of reported complaints.
5. Behavior complains including animals at large or noise, general noise, and open burning
were 13 percent of reported complaints.
One of the greatest challenges encountered during the code enforcement process is the conflict
between long-time residents and newer residents who, many times, have higher expectations
for property appearance and maintenance. The residents who have lived in Otsego prior to
incorporation existed in a time when there may have been little to no code enforcement and
outside storage on large lots was viewed as a part of 'country life' in a farming community. The
majority of people are not aware of City Code regulations relative to outdoor storage and don't
understand why the City is enforcing regulations that were previously overlooked. Increase in
numbers of residents, closer proximity of homes, and older neighborhoods beginning to turn
over, all contribute to increased code enforcement challenges.
Activity Summary. Permit Works software allows for reporting on activity levels for Code
Enforcement over time. A total of 211 complaints were recieved between June 2017 and June
2018. One-half of the enforcement cases were initiated through a phone call to City staff with
the remainder are logged online through the City's website. The month of May 2018 had the
highest number of complaints at 30. And complaints in July and August 2017 and May and
June of 2018 (constituting summer months) totaled half of all annual complaints at 105.
Timeframe. Permit Works tracks the time from when an enforcement case is logged to when
the violation is resolved. An inspection is done upon logging a complaint and the results of the
inspection, including photographs, entered into Permit Works. An administrative notice can be
issued if a code violation is documented. The code violation allows the property owner 14 days
to abate the condition or contact City staff. Permit Works schedules a reinspection of the
property after the 14 day notice period. The property is reinspected and the case is either
closed if the violation is abated or a citation issued. Permit Works then reschedules subsequent
inspections to determine if additional citations are warranted.
2
The majority of residents who receive a Code Violation Notice are quick to respond by either
correcting the violation or call following receipt of the letter to get more information about why
they received the notice and typically comply not long thereafter. At any given time, there are
a handful of properties that are consistently non-compliant; some have ignored numerous
citations and refuse to comply. There are other properties that make a partial effort at
compliance, but then fall right back into old habits.
Permit Works data for the period from June 2017 to June 2018 indicates that 60 percent of
code enforcement complaints are resolved within 60 days and 70 percent are resolved within
90 days. The code enforcement cases that take longer than 90 days to resolve are those that
typically involve the most investment by the property owner, such as illegal home businesses,
or building violations, violations on a significant scale that include outdoor storage of
junk/debris or inoperable vehicles, or violations that are more problematic to enforce such as
animals at large or barking.
Example Cases. The City Council in April directed City staff to identify up to 10 properties that
were either significant violations or violations at high visibility locations to pursue enforcement
action. Code Enforcement staff sought input from Parks, Streets, and Utilities staff as to
properties to be reviewed for possible action. A summary of the properties identified by City
staff for code enforcement action will be discussed with the City Council.
Options. Otsego currently undertakes code enforcement on a complaint basis. This is a
common approach used by most cities that avoids perception of government overreach into
private property and addresses those issues that cause the greatest disturbance. Issues
involving public health safety and welfare are pursued on proactive basis. The City Council
requested options for code enforcement into 2019:
■ Complaint Basis. The City may continue to initiate code enforcement action based
upon receipt of complaints. We anticipate a similar level of activity in 2019 as has
occurred during 2017-2018 documented in Permit Works.
■ Proactive Inspections. The City Council may elect to budget for proactive inspections of
major transportation corridors, on a neighborhood -by -neighborhood basis, in addition
to complaint -based responses. This approach would involve budgeting for up to a
specific number of hours each month for the year to initiate inspections and follow
through with violations identified through the inspection process. We would project a
need to add a minimum of 20 hours of code enforcement activity per month to
undertake a proactive inspection process.
■ Court Action. The City established its current code enforcement procedures in an effort
to expedite the process towards achieving compliance. This approach is partially based
on a reluctance to engage in a civil or criminal process involving the Court system. The
Court system tends to defer to the rights of the property owner and is reluctant to
outright order actions to require compliance. Certain code enforcement cases however
may be more immune to the City's administrative efforts to gain abate the violations
and court action may be more effective. The City Council may direct that unabated
violations not resolved within a certain time period be referred to the City Attorney to
initiate a court enforcement action. The cost for this approach will likely exceed current
procedures but will vary from property to property.
Budget. TPC provides code enforcement services on an as needed basis at rate of $60/hour.
The invoice amounts for two part-time code enforcement staff averaged $2,600 per month for
the year ending June 2018. As one would expect, the highest number of complaints are
generated in the spring and summer months, demanding the most site inspections, meetings
with property owners, issuance of notices, phone call follow-up or site meetings, and re -
inspections to verify compliance. The level of code enforcement activity generally seems to be
consistent from year-to-year. Use of Permit Works will aid in tracking this perception going
forward. We would project a similar budget for code enforcement services in 2019 assuming a
continuation of complaint -based responses to violations.
CONCLUSION
The information outlined herein is to be reviewed with the City Council at a work session on 27
August 2018. We will be in attendance at the work session to discuss this information and
address any questions.
Adam Flaherty, City Administrator/Finance Director
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July 30th
Department
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Revenues
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2
Yes
City Council
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5
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Old Township Site
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Streets
30
Yes
Street Lights
35
Yes
Fleet Management
36
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Police Services
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Public Safety Commission
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Fire Protection
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X:\Budget\2019\2019 Budget Calendar
August 13th (Rescheduled)
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Additional Consideration
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August 27th
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city of Otsego
Property Tax Levy Calculations
Payable 2019
Revised: August 22, 2018 Preliminary (8-27-2018) Preliminary (8-13-2018)
Levy Description 2015 2016 2017 2018 2019 Change Change 2019 Change Change Comment
General Revenues 3,319,000 3,529,352 3,766,000 3,986,000 4,221,000 235,000 5.90% 4,221,000 235,000
Tax Abatements 23,000 88,814 81,385 65,546 60,816 (4,730) 7.22% 60,816 (4,730)
Debt Service
Series 2010D & Series 2011A 200,000 225,000 225,000 215,000 205,000 (10,000) 205,000 (10,000)
Series 2010B 410,000 415,000 430,000 440,000 450,000 10,000 450,000 10,000
Series 2018A, Mississippi Shores - - - - 69,116 69,116 69,116 69,116
Series 2018A, Kadler Avenue - - - - 10,177 10,177 10,177 10,177
Sub -total 610,000 640,000 655,000 655,000 734,293 79,293 12.11% 734,293 79,2931 12.11%
Capital Reserves
Pavement Management 320,000 339,200 475,960 600,000 800,000 200,000 800,000 200,000
Trails Management 25,000 25,250 26,000 30,000 32,000 2,000 32,000 2,000
Parks Equipment 53,000 54,590 55,000 56,000 58,000 2,000 58,000 2,000
Capital Equipment Revolving 160,000 168,000 235,200 242,256 260,000 17,744 260,000 17,744
Fire Reserve 145,000 150,000 150,000 160,000 170,000 10,000 170,000 10,000
Storm Water 25,000 25,000 25,000 26,000 30,000 4,000 30,000 4,000
Capital Improvements - - 160,200 282,500 125,000 (157,500) 125,000 (157,500)
Sub -total 728,000 762,040 1,127,360 1,396,756 1,475,000 78,2441 5.60% 1,475,000 78,2441 5.60%
Grand Total 4,680,000 5,020,206 5,629,745 6,103,302 6,491,109 387,807 6.35% 6,491,109 387,807
Tax Capacity 11,358,615 13,238,424 14,873,116 16,783,003 18,004,252 18,004,252 Estimated at 1% of County Provided Value
Growth (%) 16.55% 12.35% 12.84% 7.28% 7.28%
Net Tax Capacity 11,358,615 13,238,424 14,872,821 16,696,008 17,914,231 17,914,231 Estimated at 99.50% of Tax Capacity
Growth (%) 16.55% 12.35% 12.26% 7.30% 7.30%
M
Tax Rate 41.202 37.921 37.852 36.556 36.234 36.234
Taxing
2016
2017
2018
2019
2019
2019
Median Appraised Value
Authority
Final Tax Rate
Final Tax Rate
Final Tax Rate
Estimate
Change
Estimate
Change
Jty of Otsego
37.921
37.852
36.556
36.234
-4.27%
36.234
-4.27%
Vright County
39.970
39.599
39.946
39.946
0.88%
39.946
0.88%
chool District
39.266
36.659
36.137
36.137
-1.42%
36.137
-1.42%
choolDistrict - RMV
19.441
19.373
19.422
19.422
0.25%
19.422
0.25%
Description
2017
2018
2019
Change
2019
Change
Median Appraised Value
198,300
217,206
220,572
11.23%
220,572
11.23%
Less: MV Exclusion
(19,393)
(17,691)
(17,389)
(17,389)
Taxable Market Value
178,907
199,515
203,183
13.57%
203,183
13.57%
Tax Capacity
1,789
1,995
2,032
2,032
2017
2018
2019
2019
Taxing
Estimated
Estimated
Estimated
Estimated
Authority
Tax
Tax
Tax
Change
Tax
Change
City of Otsego
677
729
736
8.71%
736
8.71%
Wright County
708
797
812
14.69%
812
14.69%
School District
656
721
734
11.89%
734
11.89%
School District - RMV
384
422
428
11.46%
428
11.46%
Total
2,425
2,669
2,710
11.75%
2,710
11.75%
Annual Increase
41
41
X:\Budget\2019\Property Taxes\Tax Levy Calculations
The City rate is calculated by the Finance
Director. County and School District tax rates
were obtained from Wright County, and
represent the tax rate from their respective
preliminary levies and are NOT FINAL.
Source = Wright County Assessor
These are best estimates calculated by the
Finance Director based upon information
available at the time of presentation. These
should only be considered as estimates, and
should NOT be considered final.
8-27