SCC Item 3. 2024 Budget Review
City of Otsego│13400 90th Street NE, Otsego, MN 55330│Tel. (763) 441-4414 Fax (763) 441-9163
TO: Mayor and City Council
FROM: Adam Flaherty, City Administrator & Finance Director
DATE: September 11, 2023
SUBJECT: Budget Meeting #5
On Monday, Council and staff will continue review the draft 2024 budget and property tax levy.
Please note that the staff is seeking Council input during this budget review meeting to move the budgeting
process forward effectively and efficiently. I have developed an outline of discussion topics below.
Previous Meetings
At the budget meeting on August 21, 2023, the City Council and staff were able to complete the initial
review of the draft expenditure budgets for each department within the General fund. Due to time
constraints, the draft revenue budgets and property tax levies were not able to be completed.
At the budget meeting on August 28, 2023, the City Council and staff were able to complete the initial
review of the draft revenue budgets within the General fund. The draft property tax levy for taxes payable
2024 was also reviewed.
Revenues
The City Council provided direction at a previous meeting to explore a more aggressive amortization of the
public safety aid within the 2024 budget. City staff will review the revised amortization, discuss the impacts
on the budget, and accept feedback and direction on how to proceed.
Expenditures
The City Council provided direction at a previous meeting to review the contingency budget line item
included in the draft budget and to compare against historical actuals applied against said contingency. City
staff will review the historical information and accept feedback and direction on how to proceed.
Property Tax Levy
The Council provided direction at a previous meeting to develop additional levy scenarios that include the
fund balance policy transfer as a reduction of the total levy. City staff will review this information and
accept feedback on how to proceed.
City staff were able to obtain the latest estimates of tax capacity from Wright County and have
incorporated that information into levy scenarios. City staff also obtained clarification on new legislation on
the homestead market value exclusion and will review and discuss the impact for taxes payable 2024.
City of Otsego│13400 90th Street NE, Otsego, MN 55330│Tel. (763) 441-4414 Fax (763) 441-9163
Fund Balance Policy – Calculation of Transfer
The unassigned fund balance from year-end 2022 is $4,300,321, or 45% of the draft general fund budget for
2024. The City’s fund balance policy outlines that the ending fund balance in the General Fund should be
45% of the subsequent year’s budget. The policy further outlines that any balance more than the defined
45% minimum can be transferred to a capital reserve fund at the Council’s discretion. This transfer is
calculated to be $710,829 and will be reviewed by the City Council. The pending net fund balance after the
transfer is $3,589,492, or 38% of the draft general fund budget for 2024.
The City Council provided direction at a previous meeting to include the fund balance policy transfer as a
reduction of the total levy. City staff will review this during discussion on the property tax levy as noted
above.
Council Roundtable
This is an opportunity for the Council to express their current view on the budgets as presented thus far
and to discuss any recommended changes to the preliminary budgets and tax levies.
Next Steps
The Council will need to adopt the preliminary property tax levy, which is the maximum amount the City
can levy for taxes payable 2024. This action will take place at a regular Council meeting, on the 25th of
September. It should be noted that the preliminary property tax levy is the amount used for truth-in-
taxation notices that are sent to the taxpayers by Wright County.
Staff need to prepare a resolution for adoption of the preliminary tax levy and will need a majority direction
from the City Council to include within the agenda packet for the meeting on September 25th.
The final budget and property tax levy will not be adopted by the City Council until December. Changes to
the budget can still be made between now and then but increases to expenditures become difficult
because the primary revenue source to pay for those increases is property taxes. The property tax levy can
be decreased between now and then, but the levy cannot be increased.
Materials Attached for Discussion
1) Property Tax Levy Summary for Payable 2024
City of OtsegoProperty Tax Levy CalculationsPayable 2024Revised: September 8, 2023$% $% $% $%2022 2023 2024 Change Change 2024 Change Change 2024 Change Change 2024 Change Change CommentGeneral Revenues 5,009,000 5,366,000 6,491,000 1,125,000 20.97% 6,491,000 1,125,000 20.97% 6,491,000 1,125,000 20.97% 6,491,000 1,125,000 20.97%CHANGE - Public Safety Aid AmortizationTax Abatements 40,228 74,668 91,181 16,513 22.12% 91,181 16,513 22.12% 91,181 16,513 22.12% 91,181 16,513 22.12%Debt ServiceSeries 2010B - - - - - - - - - - Series 2018A 97,187 94,416 102,144 7,728 102,144 7,728 102,144 7,728 102,144 7,728 Series 2020A 450,000 450,000 197,000 (253,000) 197,000 (253,000) 197,000 (253,000) 197,000 (253,000) City Campus - Phase 1 - - 2,766,538 2,766,538 2,055,709 2,055,709 1,876,619 1,876,619 1,165,790 1,165,790 CHANGE - Discuss Each ModelSub-total 547,187 544,416 3,065,682 2,521,266 463.11% 2,354,853 1,810,437 332.55% 2,175,763 1,631,347 299.65% 1,464,934 920,518 169.08%Capital ReservesPavement Management 1,100,000 1,100,000 1,000,000 (100,000) 1,000,000 (100,000) 1,000,000 (100,000) 1,000,000 (100,000) Trails Management 63,000 65,000 70,000 5,000 70,000 5,000 70,000 5,000 70,000 5,000 Parks Equipment 64,000 70,000 400,000 330,000 400,000 330,000 400,000 330,000 400,000 330,000 Capital Equipment Revolving 320,000 477,325 550,393 73,068 550,393 73,068 550,393 73,068 550,393 73,068 Fire Reserve 200,000 210,000 210,000 - 210,000 - 210,000 - 210,000 - Storm Water 36,000 38,000 40,000 2,000 40,000 2,000 40,000 2,000 40,000 2,000 Capital Improvements 1,175,590 1,349,614 - (1,349,614) - (1,349,614) - (1,349,614) - (1,349,614) City Buildings & Property 30,000 35,000 35,000 - 35,000 - 35,000 - 35,000 - Sub-total 2,988,590 3,344,939 2,305,393 (1,039,546) -31.08% 2,305,393 (1,039,546) -31.08% 2,305,393 (1,039,546) -31.08% 2,305,393 (1,039,546) -31.08%Increase / (Decrease) for Levy Model - - - - Grand Total 8,585,005 9,330,023 11,953,256 2,623,233 28.12% 11,242,427 1,912,404 20.50% 11,063,337 1,733,314 18.58% 10,352,508 1,022,485 10.96%Growth (%) 9.66% 8.68%Tax Capacity 25,254,743 32,075,441 39,567,388 39,567,388 39,567,388 39,567,388 CHANGE - Per Wright County (9/7/2023)Growth (%) 10.40% 27.01% 23.36% 23.36% 23.36% 23.36%Net Tax Capacity 24,852,871 31,550,432 38,946,763 38,946,763 38,946,763 38,946,763 CHANGE - Per Wright County (9/7/2023)Growth (%) 10.01% 26.95% 23.44% 23.44% 23.44% 23.44%Tax Rate 34.545 29.572 30.691 28.866 28.406 26.581 Population 19,966 21,289 22,705 22,705 22,705 22,705 Source = MN State DemographerTax Levy Per Capita 430 438 526 495 487 456 2022 2023 2024 2024 2024 2024Estimated Estimated Estimated Estimated Estimated EstimatedResidential Value City Tax City Tax City Tax Change ($) Change (%) City Tax Change ($) Change (%) City Tax Change ($) Change (%) City Tax Change ($) Change (%)200,000 624 535 555 522 513 480 300,000 1,001 857 889 836 823 770 403,700 *Median Value 1,391 1,191 1,236 45 3.79% 1,163 (28) -2.39% 1,144 (47) -3.94% 1,071 (120) -10.11%500,000 1,727 1,479 1,535 1,443 1,420 1,329 600,000 2,159 1,848 1,918 1,804 1,775 1,661 700,000 2,591 2,218 2,302 2,165 2,130 1,994 800,000 3,023 2,588 2,685 2,526 2,486 2,326 900,000 3,455 2,957 3,069 2,887 2,841 2,658 1,000,000 3,886 3,327 3,453 3,247 3,196 2,990 Full Year 1 PrincipalFull Year 1 Principal + TransferReduced Year 1 PrincipalReduced Year 1 Principal + TransferLevy DescriptionCalculated by the Finance DirectorY:\Budget\2024\Property Taxes\Tax Levy Calculations (2024)9-11