08-01-11 WSCITY OF
TSEGO
ON THE GREAT RIVER ROAD
MEMORANDUM
TO: Mayor and City Council
FROM: Lori Johnson, City Administrator
DATE: July 28, 2011
SUBJECT: 2012 Budget
8899 Nashua Avenue N.E. • Otsego, MN 55330
(763) 441-4414 • Fax: (763) 441-8823
E-mail: cityhall@ci.otsego.mn.us
At Monday's work session discussion on the 2012 budget and tax levy will begin. In addition to
setting the budget and levy, there are several global issues to discuss. Those items will affect the
levy and budget; therefore, the focus of Monday's meeting will be to get Council direction on the
policy/global issues first. Once staff has received direction on these issues, an accurate and
comprehensive budget and proposed levy can be prepared for Council review and consideration.
Below is a list of those items along with a brief overview of the topic. Staff will be prepared to
discuss each of these in more detail at the work session.
• Funding source for fire service — Currently, each property is assessed a per unit amount for fire
service. Typically, payment for fire service is handled like any other public safety service and is
part of the tax levy. I would like to discuss with the Council the possibility of changing the
funding mechanism for fire service.
• Community Development and Building Safety Fund - The Community Development and Building
Safety Fund has a significant deficit balance that needs to be addressed. A plan needs to be put
into place to eliminate the deficit. Part of that plan would include a change in the way permit
revenue and expenditure allocations are accounted for in the 2012 budget.
• Tax Levy
o General Fund levy
o Debt service levies including the 2006 debt service levy
o Pavement management levy
o Trail management levy
o Park capital equipment levy
o Capital equipment levy
The budget legislation recently approved by the Governor changes the method for payment of
the Market Value Homestead Credit (MVHC). Attached is a brief outline of the change as
prepared by the League of Minnesota Cities. We will explain the change and the effect of the
change to the levy, tax capacity, and tax rate at the meeting.
• Capital Improvement Plan (CIP) — I strongly recommend adopting a five year CIP annually. I
understand that various staff members have prepared their part of the CIP for their own use.
The next step is to pull together a comprehensive plan that includes all identified projects along
with proposed funding sources. Inexpensive software packages are available to assist in
organizing the data and providing comprehensive, easy to use CIP documents. If possible, it
would be best to purchase the software in 2011. The finance department could then use the
software as we prepare to present the CIP to the Council for review and approval late this year
or early next year.
• Employee COLA and Benefits — The pay plan approved by the Council in 2009 anticipates annual
review of the pay plan by the Council each year to determine if a cost of living adjustment
(COLA) should be made. Additionally, employee benefits should be reviewed in order to
incorporate the benefit cost in the budget projections. Further, addressing pay and benefits
earlier in the budget process assists employees.
• Website Upgrade — We have briefly discussed the importance of updating the City's website
particularly for economic development purposes. If the Council concurs, funds need to be
included in the budget for a consultant to perform those services. This is the first impression
potential developers and residents often have of the City thus it is important that the website
present the City in a professional and positive manner.
• City Hall Roof Repair — Funds need to be budgeted to pay for the roof repair needed at City Hall.
Staff is currently getting estimates for the repair and possible change to a pitched roof.
Finally, before adjourning the work session, a budget timeline needs to be set. As you know, the
preliminary levy must be certified to the county auditor before September 15. That means the Council's
last regular meeting to adopt the preliminary levy is September 12. The general fund budget can't be
adopted until December; therefore, the focus now is on the levy. There is plenty of time to review and
adjust the general fund budget before it is adopted in December. At the conclusion of Monday's
meeting, the Council should call a work session for either August 8 or 22 or both depending upon how
much is accomplished at the August 1 work session. That will allow for preparation of a preliminary levy
for adoption on September 12.
Attachments:
• Excerpts from League of Minnesota Cities webinar on MVHC
• Tax Levy Summary
• General Fund Expenditure Summary
• Pavement Management Summary (Part of Pavement and Trail Management Fund #201)
• Trail Management Summary (Part of Pavement and Trail Management Fund #201)
City of Otsego
Tax Levy Summary
Total $ 2,968,000 $ 3,424,716 $ 3,720,690 $ 3,818,000 $ 3,966,000 $ 3,991,000
% Increase
Final
Final
Final
Final
Final
Proposed
2007
2008
2009
2010
2011
2012
Levy Subject to Levy Limits
Collected percentage
95%
95%
96%
96%
98%
General Government
$ 2,305,439
$ 2,966,910
$ 3,212,090
$ 3,052,000
$ 3,340,000
$ 3,320,000
PW Building
177,541
-
The previous year tax capacity value
11,127,425
1999 Overlay Debt Service
40,000
-
11,661,088
The current year tax capacity value
12,924,315
13,793,048
Public Works Equipment
170,000
180,000
190,000
200,000
160,000
180,000
Total General Fund
2,692,980
3,146,910
3,402,090
3,252,000
3,500,000
$ 3,500,000
Special Levies
26.673%
The final 2008 tax capacity rate
2003 Debt Service
DS Sec., pg 2 275,020
277,806
140,900
138,000
138,000
113,000
2006 Street Improvement
DS Sec., pg 5 -
-
177,700
178,000
178,000
228,000 +$25,000 from 2003,
Quaday
34.011%
36.026%
-
- +additional $30,000
Public Works Building
DS Sec., pg 7 -
-
250,000
150,000
150,000
Total $ 2,968,000 $ 3,424,716 $ 3,720,690 $ 3,818,000 $ 3,966,000 $ 3,991,000
% Increase
15.39%
8.64%
2.62%
3.88%
4.53%
Total General Fund
3,146,910
3,402,090
3,252,000
3,500,000
3,500,000
Collected percentage
95%
95%
96%
96%
98%
General Fund Budgeted Tax Revenue
2,989,565
3,231,986
3,121,920
3,360,000
3,430,000
The previous year tax capacity value
11,127,425
12,924,315
13,793,048
13,026,469
11,661,088
The current year tax capacity value
12,924,315
13,793,048
13,026,469
11,661,088
11,078,034
The increase /decrease in the tax capacity valuation from year to year
16.15%
6.72%
-5.56%
-10.48%
-5.00%
The final 2007 tax capacity rate
26.673%
The final 2008 tax capacity rate
26.498%
The final 2009 tax capacity rate
26.975%
The final tax capacity rate and projected tax capacity rates
29.310%
34.011%
36.026%
Tax Levy Summary Section 2, Page 3 7/28/2011
City of Otsego
General Fund Expenditures Budget
Expenditure Summary - Preliminary As Of 8/1/2011
Dep't
Activity
Notes/Cost
General Government
41100
Mayor & Council
41400
Administration
41410
Elections
41600
Finance
41550
Assessing
41700
Legal
41530
Planning Commission
41570
Planner
41900
EDA
41940
City Hall
41950
Peavey House/OTH
Total
Public Safety
42100 Police
42150 Police Commission
42710 Animal Control
Total
Public Works
41560 Engineering
43200 Street Lighting
43100 Street Maintenance
Total
Community Services
43620 Clean Up Day
45200 Park Maintenance
45250 Recreation Services
45300 Heritage Preservation
Total
Other Uses
49360 Transfers - capital outlay
Total Expenditures
General Fund Expenditures
Final Proposed
2009 2010 Budget Budget
Actual Actual 2011 2012
(14,000 Pop. Est.)
From 2011
Notes/Cost
To 2012
Per
Percentage
Capita
Change
$ 49,525
$ 25,665
$ 47,392
$ 47,392
435,478
387,847
384,467
486,253
No cost allocated to Building Safety
364
9,342
1,000
10,000
Election in 2012
142,482
142,629
183,682
249,906
No cost allocated to Building Safety
67,568
67,557
70,000
70,000
63,090
69,366
65,000
65,000
620
780
2,368
861
56,785
60,912
65,000
65,000
58,292
17,096
16,500
11,135
Apex abatements completed in 2012
58,255
38,223
57,920
51,920
941
723
2,000
1,000
933,399
820,140
895,329
1,058,467
$ 75.60 18.22%
817,600
840,892
861,400
872,350
1,387
2,129
2,710
2,710
8,243
11,725
9,000
12,000
827,229
854,746
873,110
887,060
$ 63.36 1.60%
74,180
82,136
65,000
65,000
118,404
102,093
105,000
105,000
1,128,150
1,164,024
1,335,049
1,245,743
$109,772 less to street mtce reserve
Reserve transfer is $441,000
1,320,734
1,348,253
1,505,049
1,415,743
$ 101.12 -5.93%
186,599
198,783
363,112
380,864
Includes $98,000 for park equip. replacement
49,139
40,682
56,500
56,500
190
1,610
1,700
1,700
235,928
241,075
421,312
439,064
$ 31.36 4.21%
408,708
386,000
160,000
180,000
$ 12.86 12.50%
$ 3,725,998
$ 3,650,214
$ 3,854,800
$ 3,980,334
$ 284.31 3.26%
Section 3, Page 1 7/28/2011
**** The street pavement management program projection does not extend to these years.
Long Range Tax Projection - Pavement Management - Page Three
City of Otsego
Pavement and Trail Management Fund #201
Projection of Financing Sources and Uses
Pavement Management
Striping/Sealcoat
General
Patching/
Fund
Fund
Other 2.50%
Crackfilling
Fund
Calendar
Balance
Annual
Financing Interest
Annual
Balance
Year
BOY
Contribution
Sources Allocation
Expenditures
EOY
2008 Actual
$ 95,193
$ 300,000
$ 5,411
$ 183,155
$ 217,449
2009 Actual
217,449
402,574
32,000 8,466
311,351
349,138
2010 Actual
349,138
400,000
7,565
231,637
525,066
2011
525,066
420,000
13,127
50,000
EST.
908,193
2012
908,193
441,000
22,705
484,217
EST.
887,680
2013
887,680
463,050
22,192
521,444
851,478
2014
851,478
486,203
21,287
364,200
994,768
2015
994,768
510,513
24,869
431,354
1,098,796
2016
1,098,796
536,038
27,470
281,448
1,380,856
2017
1,380,856
562,840
34,521
495,393
1,482,824
2018
1,482,824
590,982
37,071
703,848
1,407,029
2019
1,407,029
620,531
35,176
535,230
1,527,506
2020
1,527,506
651,558
38,188
700,000
****
1,517,252
2021
1,517,252
684,136
37,931
700,000
****
1,539,319
2022
1,539,319
718,343
38,483
700,000
****
1,596,144
2023
1,596,144
754,260
39,904
700,000
****
1,690,308
2024
1,690,308
791,973
42,258
700,000
****
1,824,538
2025
1,824,538
831,571
45,613
700,000
****
2,001,723
2026
2,001,723
873,150
50,043
700,000
****
2,224,916
2027
2,224,916
916,807
55,623
700,000
****
2,497,346
**** The street pavement management program projection does not extend to these years.
Long Range Tax Projection - Pavement Management - Page Three
Fund
Calendar Balance
Year BOY
2008
Actual $ 25,00
2009
Actual 50,OOC
2010
Actual 50,957
2011
82,50E
2012
26,565
2013
71,332
2014
119,421
2015
171,027
2016
226,354
2017
285,617
2018
349,041
2019
416,865
2020
489,34C
2021
566,725
2022
649,311
2023
737,37E
2024
831,235
2025
931,217
2026
1,037,654
2027
1,150,911
City of Otsego
Pavement and Trail Management Fund #201
Projection of Financing Sources and Uses
Park Trail Management
General Park
Fund 2.50% Trail
Annual Interest Annual
Contribution Allocation Expenditures
0 25,000 $ - $ -
25,000
40,000
42,000
44,100
46,305
48,620
51,051
53,604
56,284
59,098
62,053
65,156
68,414
71,834
75,426
79,197
83,157
87,315
91,681
1,250
1,232
2,063
664
1,783
2,986
4,276
5,659
7,140
8,726
10,422
12,234
14,168
16,233
18,434
20,781
23,280
25,941
28,773
Long Range Tax Projection - Park Trail Management - Page Four
25,293
9,683
100,000 EST
- EST
Fund
Balance
$ 50,000
50,957
82,506
26,569
71,333
119,421
171,027
226,354
285,617
349,041
416,865
489,340
566,729
649,311
737,378
831,239
931,217
1,037,654
1,150,911
1,271,364
Taxes -Market Value Homestead Credit
■ Extends the 2010 supplemental budget MVHC
reimbursement reductions for 2011. The language
states that "the reimbursement paid to each city and
county .... may not exceed the reimbursement payment
received by the city or county for taxes payable in
2010."
Taxes -Market Value Homestead Credit
■ If a city's MVHC reimbursement increases
in 2011 over the 2010 level, the
reduction to a city can increase.
■ Conversely, if a city's MVHC
reimbursement in 2011 decreases, the
reduction can decrease.
Questions to Imcwebinar@Imc.org
Taxes -Market Value Homestead Credit
■ In place of the MVHC, homeowners will receive an
exclusion of a portion of the market value of their
house from property taxes.
■ For homes valued at less than $76,000, the exclusion
is equal to 40% of the home's market value. For homes
valued between $76,000 and $413,800, the exclusion
is $30,400 minus 9% of the value over $76,000.
Current MVHC
MV Exclusion
$304$237.40 $102.4 a ` $0
$307400 $237740 $107240
$0
Taxes -Market Value Homestead Credit
■ The new market value exclusion for homes will mean
that beginning in 2012, your tax base will be reduced
and your tax rate will rise
■ Although the homestead exclusion is computed in a
mathematically similar manner to the repealed MVHC,
the new system will shift taxes among properties within
each community
■ Keep in mind that $261 million per year in current
state funding for the MVHC credit reimbursement is
being eliminated and therefore property taxes will be
higher than under the current credit system.
Questions to Imcwebinar@Imc.org