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CC Minutes 2002 12 02 TaxationCHANHASSEN CITY COUNCIL SPECIAL MEETING DECEMBER 2, 2002 Mayor Jansen called the meeting to order at 7:00 p.m. COUNCIL MEMBERS PRESENT: Mayor Jansen, Councilman Labatt, Councilman Boyle, Councilman Ayotte, and Councilman Peterson STAFF PRESENT: Todd Gerhardt, Justin Miller, Teresa Burgess, Todd Hoffman, Kate Aanenson, Bruce DeJong, and Mark Littfin PUBLIC PRESENT: Julianne Ortman Jill Madore Brian Lundquist Don Rye Curt Robinson Todd Michels Corey Kohnen Jerry Eck Jeff Seiler Tom Furlong Dick Hauser Terry Nelson Tom Workman Mark Senn Laurie Engelen Mark Lundgren Janet & Jerry Paulsen Gary Delaney 8698 Chanhassen Hills Drive North 381 Deerfoot Court 7281 Conestoga Court 957 Santa Vera Drive 202 West 77th Street 2436 Highover Trail 405 Highland Drive 2510 Bridle Creek Trail 6511 Gray Fox Curve 1841 Ringneck Drive 7750 Crimson Bay Road 161 South Shore Court 181 South Shore Court 7160 Willow View Cove 11825 78th Street, Waconia 3075 Autumn Way, Chaska 7305 Laredo Drive County Commissioner Elect TRUTH IN TAXATION PUBLIC HEARING. Mayor Jansen: We're here this evening to hear staff's budget presentation of the numbers that they've been reviewing with us over the last month and give us some of the detail of the general city information as well as department information so with that I will open it up for the staff report please. Todd Gerhardt: I'd like to introduce Bruce DeJong, our Finance Director who has put together a power point presentation on our budget for 2003. Bruce. Bruce DeJong: Good evening Mayor Jansen, council members and members of the public. I'd like to kind of walk you through why we're here tonight for the Truth in Taxation meeting. Give you a little background on how we put our budget together. What's required of this process, and then start talking about some of the numbers that the Truth in Taxation statements that were mailed out a while back. There's a few things that we have to do according to state law in doing this. We need to present and discuss the proposed budget for next year. Mayor Jansen: Can you maybe pull the microphone just a titch closer. Thanks. Truth in Taxation Hearing - December 2, 2002 Bruce DeJong: We need to discuss the proposed tax levy for next year. We're going to talk about some of the major changes to the levy and the budget, and then we're going to open it up for citizen comment and input. Then what we have to do is, tonight is not the final step in this process. We are going to have another meeting because we cannot by state law adopt a budget or tax levy tonight. We have to do that no more than, or no less than 5 days later. So our budget process really started out back in July when department directors submitted their preliminary estimates. Those budgets were reviewed by myself and Mr. Gerhardt and presented to the City Council in August for some preliminary basis. Then by September 15th we have to adopt a preliminary tax levy so that the County can put together the Truth in Taxation statements. This is an amount that we cannot exceed. We can be cut underneath that amount. We can reduce our tax levy but unless there's been a special referendum election, we cannot increase our tax levy above that amount. Then during October and November we've had detailed budget meetings with the City Council, and now we're having the Truth in Taxation hearing. Next week Monday we'll have our budget adoption. The expenditures in the 2003 budget have increased. General government is up 3.1%. You can see law enforcement's up 8%. Public works up 16.5%. Community development up 8.2% and parks and recreation up 5.4%. Our revenues. You can see that in the case of most of our revenues, they do not increase very much. A lot of that is due to the current economic conditions. We are not predicting much increase in economic activity next year. Our largest source of revenues outside of the property taxes are license and permit fees. Those are generally for building new buildings that are going up, and while we expect that we are going to be pretty close to those projections next year, we do not have a lot of developable property available right now, so 2003-2004 are going to need looking at opening up the MUSA area down south of Lyman Boulevard in order to keep those revenues up. The remaining revenues are intergovernmental revenue. That is state aids for streets and police and fire generally. Charges for services are park and recreation fees and other user fees that we assess for people who want the city to provide services. Fines and penalties are generally traffic tickets and ordinance violations. And our other revenue is primarily our interest earnings on our fund balance. That leaves the property tax at 13.5% increase over last year. Now the number that we've talked about is, and the amount that we have levied has gone up 20 ½%. The reason that I'm showing 13 ½% is because for 2002 we received additional money from excess tax increment payments that was used to balance the levy for this year. Just a little graphic on what's happened with our general fund expenditures. You can see that it's been increasing steadily. Part of the reason for that is that we've been consolidating of other activities into the general fund. This year's increase is primarily driven by a large increase in our street maintenance program. We included an extra $280,000 there so that we can do some significant street reconstruction as opposed to the patchwork and sealcoating that was done primarily in the past. What are the factors that increase the budget for 2003? Well total expenditures increased by $705,000. It's driven by personnel costs at 4 1/2 %. The general salary increase is 2 ½%, but we've experienced increase in insurance rates of 10% for health insurance. And the other part is driven by, we've got actually 3 new people included in the budget. Three full time positions. One in finance department, one in the street department, and one in the community development department. Materials and supplies increase is estimated at 3.3%, roughly following inflation. Contractual services increasing 19%, and we've got multiple things in there. As I mentioned before, the increase for the street maintenance. We also have costs of operating the library. Our liability insurance is expected to increase dramatically. Rates upwards of 20% primarily based off of 9/11 risk factors and the insurance companies trying to bring their liability back up. An increase in our police contract of approximately 8%. And increases in recreation programs primarily in the self supporting area where those are offset by revenues. The capital outlays have decreased 71%. We've moved all of the computer purchases, the MIS equipment into the capital replacement program, so those are no longer the general fund. That leaves us with a total expenditure increase of 8.7%. Truth in Taxation Hearing - December 2, 2002 Mayor Jansen: Bruce if you wouldn't mind, before we get too far along. When you mentioned the additional 3 full time employees. We're looking at a half of year, correct? Bruce DeJong: Two of those are half year positions. We're not looking to hire someone until summer next year. Those are in the street maintenance and in the finance department. The one employee that will be full time starting as soon as possible in January is the code enforcement, the housing inspector, so that would be for the rental housing program... Mayor Jansen: And the majority of that is funded through the rental licensing program, correct? Bruce DeJong: That's primarily offset through the rental licensing. It's expected to generate approximately $40,000 a year. Mayor Jansen: Okay. Thank you. Bruce DeJong: Now do we have some fund balance? Certainly we do. A little history on our general fund balance. You can see that it jumped dramatically in '99 and 2000. Those were driven primarily by building permit revenues that came in much higher than expected. We have since remedied that by raising our estimate on building permit revenues substantially. We were back in the $700,000 range. We're now up to over $1.2 million with the building permit revenues that we're anticipating. So we've gotten much closer on our estimates of how much revenue's going to be coming in. Now we do have a fund balance policy that the council has followed for the past several years, and that is that we will keep on hand 50 percent of the next year's tax revenues and state aids. The reason that we do that is because when you run this budget for the general fund, there isn't much money until the property taxes come in. We have a fiscal year that starts in January, and as you know, property taxes aren't paid until May 15th so they don't actually come to us from the County until all the way in June. And the same thing for the second half where those are paid in October 15th. Those don't come to us until November and December. So we need money in this fund in order to cashflow ourselves until those revenues come in. The amount that's in excess of the fund balance policy has been shown as being applied towards the TIF deficits that we're facing in the next two years. That's approximately 1.5 million dollars so there is a use for that money. Just talking a little bit, I think this is just a recap of what we do. The other thing that you've heard from several sources, not just me. Including Mark Ruff, our Financial Advisor, and from Dave Mol our Auditor, that we need to keep approximately 50 percent. They would like to see some of that dedicated as a contingency fund in case of emergencies, and that bond rating agencies like to see a substantial fund balance, and that is part of the reason that we received the upgrade in our bond rating when we sold the library bond. Is that we do keep a healthy fund balance. Our debt service is fairly dramatic over the course of the next couple of years. We've got in excess of $15 million worth of bond payments that we need to make in the next 15 months approximately. Our TIF deficit, when that district is done in 2004, when the last debt is paid off, is going to be someplace between $6.1 million and $7.3 million. Now we've had some other discussions previously, and identified some sources that can pay part of that deficit, but a tax levy will be required to be paying for some of that. I don't think that there's a reasonable way that we can avoid having some of our tax levy go towards this. And the debt levy increase in 2004 will be mitigated somewhat by the downtown TIF district coming back on the tax rolls. Rather than being dedicated towards tax increment payments, that will come back as general property taxes. You can see on this projection that we do have a spike in debt service in 2004. That was recommended as part of the debt study. That's the $700,000 that we've talked about coming and applying towards our...so after that, in 2005-2006 it starts dropping off fairly dramatically and the current debt schedule shows us down to about a million dollars of debt payments a year starting in 2008. The net tax levy affects the general fund tax Truth in Taxation Hearing - December 2, 2002 levy is up about $1,100,000. That's the 24.5% that I talked to you about previously. The expenditures are up $705,000. The difference being the amount of the excess increment that we receive this year is kind of a one time revenue source that we use to balance our budget. The debt service levy is actually down $136,000. Council had cut that in the preliminary go around so this budget has already been cut somewhat, or the tax levy has been cut. Because basically the City Council wanted to not hold out a large increase that would be cut later and unnecessarily excite the residents. So the total tax levy increase is $983,000. That's up 12.8% in total, and that is roughly what people are seeing on their tax increases. Based on some new information that we've just received from Carver County, these are some increases that people are likely to see on their tax bills. This is factoring in an increase in home value of 8 ½%, which is approximately the range that most properties in Chanhassen saw the last year, according to the Carver County Assessor. That would lead to some dollar figure increases that are shown on here. I won't go through them individually I guess but suffice it to say, it is a substantial tax increase and our staff recommendation is to adopt the tax levy and the budget as shown next Monday and continue looking for options to continue to fund the TIF deficits. So that's my presentation. I'd be happy to take any questions or if you'd like to open up the public hearing. Mayor Jansen: Okay, thank you. The only point that maybe we need to clarify just a little bit was when you were touched upon the, our debt. Our current debt, and you quoted that our TIF deficit would be between 6.1 million and 7.4 million. That's the amount after we've applied all of our current fund balance, as well as some other balances that you've reflected to the council could conceivably be used to try to reduce that. So it's above and beyond applying what we have currently in cash, correct? Bruce DeJong: That is correct Mayor Jansen. That includes applying the $5.4 million that's in the historic preservation trust fund and applying some other funds that we have that may be available. Some in our closed bond fund, and some in a couple of others such as the environmental fund so. Mayor Jansen: Okay, because what you've emphasized to council is any reduction that we make in the levy by using our fund balances would then exaggerate that deficit. If we were to take cash that we have on hand, which we were originally trying to consider doing, until you re-did the debt service and showed us where we're actually heading. If we take that cash and we use it now, we're increasing that already 6 to 7 million dollar deficit. Bruce DeJong: That's correct. Anything that happens to reduce the tax levy, or to use cash to fund some current operations, will simply put us farther in the hole with our deficit situation. Mayor Jansen: Okay. Any questions for staff before I open this up for the public hearing, council? Councilman Peterson: Bruce the only question I have is tagging along Linda's question. On the 10/7 estimate we had a 2.9 million potential deficit at the low end and a 4.1 on the high end so I'm lost in those two different numbers. Bruce DeJong: At the meeting that we had a week ago, I showed you those things that were actual cash on hand and that's where the deficit comes from. The 10/7 estimate, the one that I gave you at the beginning of October, really includes speculation on my part that we would use some future tax revenues. The $700,000 increase in the debt service for 2004. Some of the money that we have earmarked for some other programs that we may or may not levy such as the environmental fund. If we don't incorporate those into the general fund, then we are going to Truth in Taxation Hearing - December 2, 2002 have a larger deficit. So talking about the deficit I guess as I see it existing, with the current cash resources we have, if we continue to apply some other resources that will come about in the next 2 years, then our deficit is going to be closer to the 3 million, 4 million dollar mark. Councilman Peterson: But either of the numbers you choose to use, there's still speculation involved and some assumptions of revenues and expenses, etc, etc, correct? Bruce DeJong: Correct. Councilman Peterson: That's it. Mayor Jansen: Okay. Any other questions? Councilman Ayotte: With respect to what we might anticipate coming up from the state, what sort of adversities are we going to be realizing from there which would potentially influence what we decide to do down the road? Bruce DeJong: The state has, as I'm sure you're well aware and probably most of the members of our audience, is facing about a 3 billion dollar deficit. We'll have a better idea here in a couple of days exactly how much that is because I believe the Department of Revenue will put out a new forecast sometime this week. But certainly as part of the state dealing with their deficit situation, they're going to be looking at aids to cities and counties and school districts as part of that. Aids to cities I think are roughly 12 percent of the state's budget and they're going to have to cut those in order to deal with their own problem, so I'm estimating that we could have as much as $356,000 that's on the line to be cut. That is the homestead credit that's applied based on property value and that includes the local government aid that we receive. So next year we could be facing a deficit situation to the tune of about $300,000 in the general fund with the existing budget. Talked previously with the City Council at some of other budget discussions that, you know even if you do decrease the budget, the expenditure budget that I would recommend not decreasing the levy amount to allow us to have some flexibility to deal with those cuts that will be coming. Part of our problem is that the state has a budget cycle that's tied in with the school district so they have a fiscal year that starts July 1 and ends June 30th. So they make their budget decisions for the next year and then finish their legislative session by June. Our problem is that we've already started our year and really can't make those kind of budget changes after we know what the state's going to do. Councilman Ayotte: Thank you. Mayor Jansen: Any other questions? Councilman Boyle: My question's been asked. Councilman Labatt: Yeah, mine too. Mayor Jansen: Okay. One of the other things that you shared with us at our last meeting was a comparison to the other key financial strategy cities as far as the, our levy limits and where we are compared to what the state would deem to be our levy limit. Do you have any of that information with you this evening that you can share with us again here for the public? Bruce DeJong: Certainly. I'm going off memory, but the key financial strategies is a process that we're going through to try and set some priorities as far as a council and staff as to how we're Truth in Taxation Hearing - December 2, 2002 going to fund our operations and what projects are going to be priorities for the next few years. In facilitating that with Ehlers, we've gone through and done some comparison to other similarly sized and situated cities and what we've found is that of those cities, and there's 9 of them, that there are only 3 of them that are not at their levy limit. One of those is under by $10,000, which is really just a token amount. The other one, Farmington I believe is under by $700,000. And then there's Chanhassen who, we will be under our levy limit by $650,000 for 2003 with no change to this levy as proposed. Todd Gerhardt: Mayor I'll just add that Prior Lake is approximately $300,000 below their levy limit. The rest of the communities are at their maximum amount, and have been levying additional dollars forecasting a state cut in aids in the future. Mayor Jansen: Okay. At our preliminary hearing when we went through this, we of course had hoped that we might be able to come up with some additional cuts, which is what we've been working on over the last several months. Currently you've already noted that we cut the $200,000, and cut that from the debt levy in an attempt to bring at least that portion of the levy down leaving our budget balanced. So we've already dipped in to $200,000 of the cash reserves to try to bring that debt levy down. We were looking for an additional $180,000 until as I mentioned, you brought forward an updated look at our debt situation and the TIF situation. We had of course been hoping that that report might look a little better than it ended up looking. So at this point, as you've directed us, and you briefly mentioned I believe to Councilman Peterson's question, or Councilman Ayotte, though we would like to look for additional cuts, and we've challenged staff to find cuts within the budget, you're recommending that we take those cuts, if and when found, which they'll have to be if the state cuts funding, and apply it after the levy's set so that you're able to cover all of the expenses with the current levy and then reduce the budget as you end up with your revenues reduced and balance it. Bruce DeJong: That's correct Mayor Jansen. Alright. If there aren't any other questions then I will open this up for the public hearing. You are welcome to step forward and give us any additional feedback that you would like to about the budget this evening. Pose any questions if we don't have answers for you this evening, we'll certainly get back to you with those answers so if you would step forward to the podium and at that time state your name and your address for the record, I would appreciate it. So with that, whoever would like to go first. Don Rye: Thank you Mayor, Council members. My name's Don Rye. I live at 957 Santa Vera Drive. It's the Oak Hill development up behind Byerly's and Office Max. I suspect as you know, that is in a tax increment district and hearing the presentation regarding deficits I guess I've got a couple of questions. The tax increment tax portion of, which is basically the entire tax, increased by 26 ¼% and that was in the column under due to other factors. Now I know a portion of that stems from valuation increase, which was about 10%. I guess my question is, what is the other 15 or so percent added onto that? What is that intended to do? Bruce DeJong: As you noted, part of that is the increase in property value and the other is just the increase in our levy. Don Rye: Is that dedicated specifically toward the TIF deficit? Bruce DeJong: Yes. All property that's inside the TIF district, any increment which is the amount that was above the tax that was generated when we set the district up back in the 70's, any amount above and beyond that comes to us twice a year as tax increment payments and that is dedicated to payment of our tax increment debt. Truth in Taxation Hearing - December 2, 2002 Don Rye: The income stream that that was to produce though, if that was set up back in the 70's, I would assume was based on 70 values. So I'm wondering why it's increased that much. Bruce DeJong: Well, quite honestly this is the type of tax increment district that was not required to be completely budgeted and they were left open and those plans were modified as late as 1994. So we made some.., anticipating that it would be paid off by the cashflows that we could see at that point. What's happened in the meantime is that the property tax has changed dramatically. The rates on commercial/industrial properties have gone down significantly, and some of the property tax is now being directed specifically towards a state wide tax on commercial industrial properties, which is specifically for school aid and that is no longer included in our calculations. Our increment in the district dropped by approximately 2.3 million dollars just in the last year. Don Rye: Excuse me, is this, is Oak Hill a separate district or is that all part of the downtown district? Bruce DeJong: It's all part of the downtown district. So, but due to those property tax changes, Justin Miller put together a calculation to see where we would have been had the property taxes just simply stayed at the same level they were from 1998. If that had been the case we would have been $5.4 million ahead in that district and essentially would have wiped out most of the deficit. Don Rye: Would it be fair to say that the Oak Hill development is generating an excess increment based on current TIF plan? Bruce DeJong: Well excess increment. I guess I wouldn't say excess increment. It's generating tax increment and what's considered excess increment by the state is amounts that are. Don Rye: Beyond what you need to pay off the obligation. Bruce DeJong: Beyond what we need to pay off the obligation. So since we're in a deficit situation, there really are no excess increments. Don Rye: Well I can see that if it's all lumped in with the downtown. Todd Gerhardt: Sir, I just want to clarify one thing. You are not being taxed any more than if you were inside the district or outside the district. I just want to make sure you understand that. If you were in the district you'd pay the same amount. Don Rye: That was my concern that if there was some differential treatment being given. Todd Gerhardt: No. If your townhome was sitting a mile outside that district you'd pay the same amount. We are not levying the deficit against the downtown or in that TIF district. Don Rye: Alright, thank you. Todd Gerhardt: Yep. Mayor Jansen: Thank you. Thanks for clarifying that Mr. Gerhardt. Appreciate it. Curt Robinson: My name is Curt Robinson. I live at 202 West 77th Street. That was a good presentation. Thank you. I'm trying to understand, my tax statement says, and I'm looking at just Truth in Taxation Hearing - December 2, 2002 the City of Chanhassen portion, increase due to spending and that's 16.1% increase. Yet in your presentation you had an 8.7% increase due to spending. Increase in spending and I don't know what that difference is. Bruce DeJong: The way these statements are calculated is that they put together basically a no increase budget. Now if the levy were to stay exactly the same against the new property levy, the total tax capacity that's available, that's the calculation that shows the decrease, increase or decrease due to other factors. And then everything else becomes an increase due to spending. Kind of, I don't know that I have a great explanation for it, but the way it was explained to me by someone in the Department of Revenue is, there's, it's really missing a column because it calculates, if we had last year's taxes against this year's tax base, what would the dollar factor be. You know what would the increase or decrease be. And then anything above that they call it an increase due to spending. Curt Robinson: I see. Is the TIF expense included in that 8.7%? Bruce DeJong: No it is not. That is just our general fund. Curt Robinson: Do you know what percentage that would be? Bruce DeJong: Well, like I had mentioned before. The TIF district is generating about $2.3 million less. That's actually an overall, in the sense of the city's revenues, that's an overall decrease of about 40% in TIF revenues. Todd Gerhardt: We haven't earmarked any levy as a part of this year's budget to go to the TIF deficit, so there's nothing in the budget dollar amount that is going to the TIF deficit. Curt Robinson: I see. Okay. Is the capital expenditures in that 8.7% included in that? Bruce DeJong: Yeah. The capital expenditures were primarily about $70,000 worth of computer related equipment. So it's a very small part of the overall general fund budget. Curt Robinson: Thank you. Mayor Jansen: Anyone else with questions? Randy Raddatz: If I can get there. Mayor Jansen: No hurry. Randy Raddatz: Good evening. My name is Randy Raddatz. We live at 6340 Elm Tree Avenue in Chanhassen. I believe I heard Commissioner Ayotte say that, or he asked the question, you know what can the state essentially do for us. We are the state. We fell for this ruse 31 years ago when Wendy Anderson put the Minnesota Miracle on our backs and said let's reduce property taxes and let's have the state take care of it. And a mere couple years after that, we were faced with huge increases in spending at the local level because the state took over the property tax burden. In roughly 2001 we fell for it again, and our taxes, our property taxes went down. I suspect there weren't anywhere near as many people here a year ago as there are this evening. The problem is not tax per se, it's spending. Spending is out of control. We're looking at this completely backwards. I'm not exactly sure, what's the population growth in Chanhassen projected? 10% roughly. Truth in Taxation Hearing - December 2, 2002 Todd Gerhardt: We grow about 8% per year. Randy Raddatz: 8%, okay. You would think that there would be some efficiencies with population growth. Some so that hopefully if the population increase is roughly 8%, maybe we see a 5%, a 6% increase in spending. I will grant you that spending will increase somewhat greater than the rate of inflation simply because there are more people. However, how can spending be going up faster than the rate of population growth? It's unfathomable to think that you, like every other city, every other county, every other school district, have cut spending to the bone. Every one of you have. It's just amazing. You're all so efficient and yet spending goes up and up and up. And it's very frustrating as a taxpayer. I wonder how many people in the private sector can talk about their budgets that they were able to hold them to a 15% increase in spending. I'm, exactly. I'm in the private sector. I'm a financial person. If I proposed a 15% increase in spending, it would be the last one at that employer that I would be proposing that increase to. And yet people around here pat themselves on the back. I don't know if you think you're going to get streets named after you or what for spending but it's very frustrating as a taxpayer and I think you have to take a good hard look at yourselves and realize that at some point we have to get this under control. One other point I would like to make and that's in reference to the reserve. The more we increase spending, if we're putting a 50% reserve aside, guess what? Now we've got 150% increase relative to the spending. In other words, you know if you're looking at a 15% increase in spending, you're really looking at 22% because you've got to set more aside for the reserve. And I really think, you know in general you just have to quit saying the state, the federal government, can we get this from there. Can we get this from here. You're getting it from us and we can't take it any more. Get your spending under control. We'll be glad to pay our taxes for necessary services but don't continue to waste our money, thank you. Mayor Jansen: Is there anyone else? Okay. Seeing no one. Jeff Seiler: I'm Jeff Seiler. I live at 6511 Gray Fox Curve and this is the first time I spoke at a meeting like this so ifI seem nervous it's because I am. Councilman Ayotte: You ought to be up here. Jeff Seiler: What's that? Councilman Ayotte: I said you want to be nervous you ought to be up here. Jeff Seiler: Okay. Well I can understand how you could probably be nervous with a lot of people probably are upset about the amount of taxes that are going up. I just thought I'd share with you some of the, how your choices are affecting me on a personal level. Just to let you know that your choices are affecting, how it affects an individual person. My taxes are going up this year approximately 31.9% total. Or that's the city taxes. Some of that's because I did an addition last year on my house. My addition's approximately 11.33% of my assessed value this year. I made the mistake of falling for the trap that, one of the reasons I did do the addition was because the state said there's going to be property tax relief, so I figured I'll do this addition because my property taxes are going down and they're going to stay down because there's supposed to be property tax reform. Well, I fell for that. We had a big, I saw a big decrease in my taxes last year, and now this year they're basically back to where they were before. I'm pretty confident between the city, the county and the school district, that the City of Chanhassen will be the number one taxed city in the metro area again. I think we fell to third or fourth place last year, but we are getting back to it. But as an elected official do you really think you can afford to keep Truth in Taxation Hearing - December 2, 2002 increasing people's taxes 20 to 30 percent a year? Do you honestly think that? I go, I'm with the other gentleman. I work in the private sector as well. You can't increase spending that much every year. You can't keep increasing government more than the rate of inflation. I mean you're a lot more than the rate of inflation so I just wanted to share with you, you know that's some of my thoughts. That's how it's affecting us. My neighbors feel the same way. You have to get spending under control. I have one, I do have one question. I don't know if this is true. This is from the Star Tribune yesterday. It's comparing tax levies of various counties and the towns, and in here it did say that Chanhassen's levy was approximately 8.61 million and Chaska's is approximately 2.3 million. Do you know if that's correct? Bruce DeJong: I'm sure that it probably is. Jeff Seiler: So given that they're, we're in the same county. We're within 3,000 people of each other. We both start with Cha. Mayor Jansen: Chaska actually has a different funding source so it is very difficult. Jeff Seiler: Yes. Why are they you know. Mayor Jansen: To compare them both. Jeff Seiler: 6.3 million less. Mayor Jansen: Exactly. Jeff Seiler: I mean as a citizen, you know I look at this you know, so I'm saying that if I moved to Chaska, I could pay a lot less taxes. Mayor Jansen: And I would encourage you, at some point to maybe have a conversation with Mr. DeJong. I don't know if you want to address some of the differences this evening but. Jeff Seiler: I mean do you think that that's a big difference? I mean 6 million dollars is a lot of money. Councilman Boyle: Well there's a reason for it. Mayor Jansen: It's tremendous, but what I'm saying is that there are reasons and you could take other communities similar to Chanhassen and do that comparison and their levies will be closer because there is a, there are significant reasons why Chaska's is lower than our's. Jeff Seiler: Can you give just one as an example? Todd Gerhardt: Mayor, we have an handout that we did for our key financial cities. Justin has a, or can make some additional copies. I think Nann can zoom in on it too. But of the 10-11 cities that we compared, we were probably the third lowest and we used Chaska in that comparison. So if you, can you zoom in on that Nann? Mayor Jansen: Is the farthest right column the one that you need her zoomed in on the most or? If you shift it over you might. Other direction. 10 Truth in Taxation Hearing - December 2, 2002 Todd Gerhardt: Chaska sits here at 19.84 and Chanhassen is right above them at 37.17. If you work in your bottom going up, Shoreview has a tax rate of 30.40. That's 8. We'll get to that one next. And Savage has atax rate of 42.74. Prior Lake has atax rate of 39. Oakdale has 42. Lino Lakes has 53. Inver Grove Heights has 45. Farmington has a rate of 48. Chanhassen again has one at 37. Champlin 42. And Andover at 33. Of those communities, Shoreview, Andover, and that's it. Andover, Shoreview and Chaska have lower tax rates than the City of Chanhassen. This column shows you why we see some of the disparities. These are total local government aids that each of those cities receives. We receive $23,000 in local government aid. The City of Andover gets $1.8 million. Champlin gets $1.9 million. Chanhassen $23,000. Chaska gets $466. Farmington $1.3. Inver Grove, a million 75. Lino Lakes, a million 9. Oakdale, a million 2. Jeff Seiler: Why is there such a discrepancy between them? Todd Gerhardt: It's home values. We have such a high end home value average, so the single family homes in town have a higher value than those communities. So we produce more in taxes and the State has a formula that is going to make all cities alike. Every city of 22,000 population will have a budget of 8.6 million dollars. And they put levy limits on cities and give aid to those cities that cannot produce enough revenue to make all cities alike. So in Chanhassen we pay the full boat. We do not receive any aid. Every tax dollar that is spent here stays here. We don't receive any money from the state to help operate our facilities and our programs. So right now that's the program. I believe in the next 2 years you will see those rates go up dramatically, and we will stay about the same in that 37 to 40 percent range, because the state will be cutting those aids dramatically in June to try to help offset their deficit problem at the state level. Jeff Seiler: Hoping you understand the question from a citizen standpoint. I look at that and you're looking at $6 million difference to the town next door. It's quite a difference so thank you. Mayor Jansen: Absolutely understood. No, it was a very good question and as you just heard, it's somewhat complicated as to the answer to that but no, we understand the. Jeff Seiler: I think the answer counted for 1.3 million of it roughly but there's still a lot more. Todd Gerhardt: Yeah, the rest of it, they have a, they run their own electrical utility in Chaska too. I mean it's a very well run city but they also run their electrical utility helps offset a lot of their different operations. We have NSP in town here, or Xcel Energy, and they run their own electrical utility. NSP is not in their community. Jeff Seiler: Well it kind of looks like Chanhassen could learn something from Chaska maybe. Thank you. Mayor Jansen: Thank you. Anyone else? Corey Kohnen: My name is Corey Kohnen and I live at 405 Highland Drive, and Chaska has a wonderful pool too. We belong there and it's a wonderful facility. I'm outraged when I got it. I'm increased over 20%, and I'm going to go at this at a personal level, what you guys are doing to my family. I have a single income. I provide for my family. I have 3 wonderful children. I moved to Chanhassen about 5 years ago. My taxes are absolutely killing me. I'm taking a 7% decrease in my salary this year and if you guys haven't noticed, I think there's a lot of other people that are unemployed or losing their jobs. I have physically cut to the bare bone. I drive two crappy cars. I have an operating budget that I do, that I have to go by and I would expect that 11 Truth in Taxation Hearing - December 2, 2002 you guys would do the same thing. I have literally cut everything to the bone. I also send my kids to private school, and that also comes out of my budget. Needless to say I'm extremely strapped. Extremely proud that I can send my kids to private school and it's a priority for me. But I'm going to be taxed right out of Chanhassen. My health benefits are going astronomically high. Paying over $500 a month for benefits for my family, and they're going to go up even higher. I do not understand how you guys can go up 20% and have my salary decrease. It's just outrageous to think that I have to pay higher taxes, which I don't mind paying, but I'm not even using the services for the school. And again you're going to come across and say that's my choice. It is my choice and I accept that responsibility because I care about my child. But I am outraged to think that you're going to increase 20% and you are going to tax me out of Chanhassen. And I'm not going to change my situation. I believe in my family. My family is the most important thing to me, but at this tax rate I will be out of here and I want you to know that. Mayor Jansen: Thank you. Anyone else? Brian Lundquist: My name is Brian Lundquist. I live at 7281 Conestoga Court. Bruce, I had a question. In your presentation you talked about expenditures going up about $850,000. What was the amount that you had? Bruce DeJong: $983,000. Brian Lundquist: I'm looking at the sheet that Justin handed out to us and if we see our revenue, general fund revenue increased about $750,000 from last year. If you look at the spending from 2002, if we were to keep that spending flat from 2002 to 2003, that's about a $700,000 difference. Makes up the majority of, that only leaves us about $150,000, $200,000 difference in that so that's just a tag onto the comments that were made before about spending increases in light of the economy that we have. I want to make sure that everybody realizes that if that spending were to stay flat with the revenue increases that we had, that would have substantially lowered the amount of burden that all the taxpayers have. Thank you. Mayor Jansen: Bruce, do you care to add to that as far as where part of the revenue has diminished, that it's then being shifted to the general property tax? Is that not part of it? Bruce DeJong: Mayor Jansen, that's correct. What we did last year was we had some excess increment coming from a payment out of the Hennepin County TIF district and we used that as a one time revenue source to fill the budget. What happens, and I've talked about this since I started this job 3 years ago is that if you use a one time revenue source to fund continuing operations, what you're doing is you're decreasing the amount below what you need and the following year you have to raise up substantially in order to adjust for that one time revenue source. That's why I've tried to stress that we should use continuing revenue sources for continuing operations. Use one time revenues for one time expenditures. But when you do that, we had to fill up a $365,000 gap essentially from last year to start out with, just to stay even. And then the other significant increase in this budget is the $280,000 for the road reconstruction program. If we leave that in, that's a significant portion of the increase. So I think that an important thing to mention to the people who've been up speaking and to the rest of those who are either here tonight or watching this broadcast, is that our general fund expenditures are primarily salary based. Roughly 2/3 of the general fund expenditures, if you include our police contract since we don't have in-house policing. That we contract with Carver County. That's 66% of our budget. The difficulty lies in which one of those programs do you cut because you can't make any significant decreases without cutting people and the services that they provide. 12 Truth in Taxation Hearing - December 2, 2002 Now as we've gone through the key financial strategies and looked at what a significant program decrease does, you've seen that. You know if you start decreasing a position, you're going to significantly cut into the services that the residents sees. And unfortunately they're fairly visible. Mayor Jansen: Okay. Thank you for speaking to that because I guess a large part of what we've seen is a decrease in the revenue source, whether it was that one time tax increment that we used last year or the decrease in the state aid that we receive. As those sources have gone away, that has added to what the tax burden is on our individual property tax owners. The state unfortunately, or fortunately or unfortunately, was a shift. Though they weren't being taxed for that by the state, it shifted and yes we did end up having to apply part of that tax relief to the city expenses. And the other significant portion of it has been the debt service levy increase that we've experienced so the expenditures on the city's portion, even for this year, you're reflecting on this sheet, an 8.7% increase in expenditures. The levy's gone up for other reasons besides that. It's not that our city services have been increasing. If anything we've had more comments that there are probably additional services like the one gentleman who mentioned using the Chaska pool. You know there's services within the city that the residents would like to see but unfortunately we can't add those as we're trying to pay down these debt service levies for some of the past projects that have been done. Bruce DeJong: That's exactly correct Mayor Jansen, and we've talked about this at length in the last several of these Truth in Taxation meetings. Part of our difficulty lies in the fact that we did back load ourselves with debt. When I started 3 years ago our debt levy was over a million dollars lower than it is today. So we increased those. We did increase those significantly over the past few years and that was done intentionally at the time that those bonds were issued because the assumption was that growth in the community would pay for that. But as new properties were built, as new businesses were built, that they would contribute property tax that would cover those debt outlays. Well, with the changes in the tax rates and the way that the state has done the property tax reform, that hasn't been the case and so it's fallen directly onto the taxpayer's shoulders for those you know, I guess past mistakes. We've certainly tried to correct that since Todd and I have started trying to manage this, we've put this so that each one of our debt levies is set at an amount that is basically the same over the life of the debt issue so we don't face big increases on down the line. That's consistent with our philosophy of having today's taxpayers pay for today's services. When you put in infrastructure that's going to have a useful life, you ought to assess that over the useful life and have the taxpayers each year pay for their portion of it. That's a similar concept to depreciation in a business setting. So we've attempted to remedy a lot of these things... Looking back at it from a viewpoint of 5 or 6 years ago, I don't think anyone imagined that we would be in this situation. I know that the city management at that point did not and had their projections held, we wouldn't be facing these kind of increases but this is the situation that we find ourselves in and we have to deal with it in the best manner that we know how. And I certainly don't feel comfortable standing up here and saying you know boy, we ought to increase 20% every year. I've looked for ways to decrease the tax levy, but without cutting significant programs, there really isn't any way to do it. Mayor Jansen: Okay, thank you. If you'd maybe speculate a little, and we've done some of this in work session so forgive me for having you repeat it but I do think it's significant. As we're sitting here and we're looking at this potential deficit that's going to occur in either what, 2004. Isn't that when it becomes more of a reality as to what the number is. What are some of the alternatives then that the city will be faced with as far as trying to take care of whatever that shortfall number is? What are some of the alternatives that they'll have to use to try to address that number? 13 Truth in Taxation Hearing - December 2, 2002 Bruce DeJong: Well I think we've certainly talked about using all of the available cash from our existing funds. Now we do have a lot of fund balances but some of that is not really available. A lot of it is tied up in our debt service funds for other purposes, and what happens is we have bond covenants that say that we won't use any of that money until those bonds are paid off. That's really pledged to future debt service payments. So anything else we've, you've certainly discussed taking money from our special revenue funds. We've discussed taking money from our utility funds. But everything has a consequence and we have a lot of utility expenditures that are going to be coming up fairly soon. As we open up areas to the south we're going to have to put in infrastructure to service that area. That's going to be water and sewer lines. New wells. New water tower. New lift stations. So if you use a lot of that, you can certainly solve the current problem. It comes back and will affect the water rates... Mayor Jansen: And when we did speak, when you brought that up in the last meeting and I know Teresa's sitting behind you, we had the conversation about the utility funds and where that comes from as far as those being fees that were paid by development specifically for the infrastructure. That's growth paying for itself basically. By having those fees in place to take care of the infrastructure needs caused by the growth, correct? If I'm repeating that accurately from what we were told. Okay. And then the other circumstance I think you brought up is an option, it will have to be bonded for, correct? And that ends up again being, or levied for again back to the taxpayers. Bruce DeJong: That's correct. We've talked about that. To the extent possible we'd like to avoid bonding. We've certainly had the discussion about when we levy for equipment certificates, we had a $550,000 issue and over the life of that issue it's going to cost us something in the range of approximately $75,000 through issuance costs and for interest payments over the life of that so we want to try and minimize the amount of bonding that we have to do. But you know, bonding for some future projects will certainly free up some cash that's available to deal with our current deficit. Mayor Jansen: You'd also mentioned the reaction of the rating agencies were we to bond for debt and the impact. We've of course been improving our rating over the past several years, but there would be a negative impact, and again costing the residents higher interest rates then were we to impact our service rate, correct? Bruce DeJong: Yes. When we received our rating upgrade, the discussion from Standard and Poors was to the effect of Chanhassen has a high overall debt level, but it's offset by a rapid repayment schedule and by significant cash reserves. As we use up those cash reserves we eat into our cushion so we need to try and keep our debt level down in order to maintain the rating that we have. Mayor Jansen: Okay. And we did look at options this year similar to what we had done last year as far as trying to retire some of the debt to see if there would be some savings involved, and in doing that you came back to us and said that we'd really maximized that capability to save on the interest by retiring debt sooner. Bruce DeJong: Well we're really in the situation where any balances that we use to try and pay off any of our TIF debts really don't affect the overall deficit situation. And none of those candidates are really likely to be refinanced at this point. We don't have any that are of you know, higher rates of interest that are currently callable so we don't have any good situations to apply that money that actually affect the current interest rate savings. 14 Truth in Taxation Hearing - December 2, 2002 Mayor Jansen: Okay. Alright. I think we've belabored that enough. Is there anyone else who would like to comment this evening? Seeing no one, that worked the last time to have somebody stand up. Okay. Seeing no one I'm going to close the public hearing and bring this back to council at this time. And I want to thank all of you for coming this evening and sharing your thoughts with us. It has been a long several months of discussing the budget since it was presented to us in August. We have proposed several different scenarios to staff that worked very hard with us to try to come up with some better alternatives and we would like to be able to come up with some strategies where we can help in the short term and not harm the financial situation of the city in the long term. And that's where we're inbetween that rock and a hard place. If we wanted to be short sighted and look at this year, there are some things that we could probably do. Fortunately we're advised by staff people who, like most of our residents, are here for the long term and they're looking to the financial security of the city for the long term, and not just the short term. So we've tried to take some very hard looks at where the money's being spent. How it's being spent. Come up with efficiencies. As we were trying to share, and I know sometimes it isn't shared clearly, we have had a tight cap on spending. There are programs within the city like the street improvement program that have not been addressed to date. In the long term it's less expensive to our residents if we start addressing some of these things before they end up being more expensive and again it gets somewhat complicated and we've gone through a couple of sessions and I know there's been a few newspaper reports on the fact that if we don't address some of the maintenance issues now, it turns into 3 times as expensive a project, so we're trying to do a delicate balancing act and like all of you, we all have received our property tax statements and you know we're looking long and hard at the impact that it has on all of us. We do have a situation, long term, in the financial best interest of the city, that we all have looming in front of us that someone's going to have to deal with. We're not trying to take the whole burden on how, but we're trying to look at how to best answer that deficit problem. I mean it's there. It will have to be addressed. It's not pretty. We've got, we have numerous financial advisors that are looking at the situation. We're fortunate to have Mr. Gerhardt with us who's been a part of the what, last 15 years of the history of how these things have worked and where we've been and where we're trying to go. And it's been very helpful. We've, hopefully we haven't so much tried to say that anyone's been at fault for the situation that we're in. There have been legislative changes that no one could forecast you know 5 or 10 years ago that have impacted the city's financial situation currently. We are trying to deal with it and we're trying to do what we can to work with staff to at least have as, what, a lesser significant impact on all of you as we can. We're trying to soften the blow. We went into this with some numbers that we had thrown out to staff as a challenge to see about doing some spending cuts. We're not done with those challenges yes. They've come back to us with some proposals and I guess what council is faced with now is really having to make some policy decisions. That's the only way that we can go about cutting the budget. It's been trimmed for efficiency currently. Now we have to look at policy decisions on services that are provided to the community and that's the only real significant impact that we can have as far as trying to reduce budgets by $300,000. And that's the number that the next council will be challenged with come June if the legislature cuts the additional state funding that's coming to this community. So if we make a $300,000 cut now, and impact the levy to reduce it, you're going to have a council that conceivably is going to have to cut that same amount then due to the revenues that are going to be decreased some June. So again, we're trying to do a balancing act between what can we do now, knowing that there's something that's going to have to be done and we're not even saying if it happens in June. We're just projecting that it will. We lost a million dollars from the state last year. It just seems to be a given that we'll lose the rest of that state funding as we go into the next session. So again we're not approving a budget this evening. We're not approving a levy this evening. That will be done a week from this evening, correct? At our next council meeting. So we'll be giving staff some additional direction this evening and they'll be numerous conversations I'm sure between now and then again at the next meeting as to how we, 15 Truth in Taxation Hearing - December 2, 2002 will go about making any additional changes that we can to the budget. But I did want to thank you for coming. We do appreciate the input and we're certainly sensitive to the impact that it has on our taxpayers and ourselves. So with that I'm going to bring this back to council as far as any additional direction or comment for staff between now and next Monday evening as to, and again the challenge to us is in a policy format, any additional changes or adjustments that we can approve making next Monday night. Councilman Peterson, if you'd like to start. Councilman Peterson: Yeah, I think that everybody that did speak tonight addressed issues that we've as a group talked about, and I think we haven't necessarily agreed as a council as to fund balances and the like over the last few years and I think that will certainly be an issue a week from tonight and how we use those fund balances and legitimate questions about spending. I think that's one that between now and then I think we all need to soul search as to should we be increasing any new positions, etc, etc, and I for one certainly have not made up my mind as to what the appropriate increase, if any will be for the 2003 budget. And I think it's important for everybody to realize that is here that we have not made up our minds. At least I haven't. I'm assuming my fellow council people haven't either and there's going to be some tough choices and tough decisions so it will be a spirited debate. If you like that, come here a week from tonight and you'll probably hear one so. Mayor Jansen: Well that's where this evening I think if we've got some direction that we would like to throw out as far as the policy challenges that we've been debating over the last many months, as to where we're each comfortable looking to make, if we're going to make some cuts, so at least there's some direction prior to our going into next Monday night, where specifically we're looking. Staff had given us their proposals based on the challenge of cutting 10%. They've given us back some suggestions. We haven't really given them indications of those suggestions anything that we would be comfortable addressing further, and I think it would be productive so that we can reach a final decision at the next meeting if we at least touch on. Councilman Peterson: Enough said. To that end I think that where I'm probably coming from is, we talked about staff making cuts mid-year to that 3.4% range being ready for whatever the state does end up doing to us. I'm leaning towards taking those cuts right away, which ended up being about $300,000. I potentially would be asking staff to take a look at the lighting program that we've had in addition to that cutting out some of those right away. Taking out another $150,000 potentially of that. I'd like to see what that means. What taking out an additional 150 of, what we're speaking about is our street lights are on during the whole night everywhere and one of the staff presentations was that we could reduce that light, you know turn it off from, let's just as an example, between 2:00 and 5:00 a.m. or something and save us potentially 6 figures. I'd like to consider that. Bob will talk about park and rec. And I'll let him leave that thunder. I think there's some potential there. And right now I would say no new positions for 2003 across the board. So that's where I'm probably coming from right now. Mayor Jansen: And just for clarification sake, you mentioned the potential of needing to cut that $300,000 in next year's budget so your cuts would be targeted towards making up that $300,000 in cuts after we've set the levy. Councilman Peterson: Then I'm saying, my perspective is I'll deal with, if we do get cut what the state has, we're all assuming that we will, I'd be willing to deal with that at the time potentially using the surpluses that we have. Mayor Jansen: Okay. So you're looking at diminishing it by, the budget by $300,000 now and then having to look at an additional $300,000 then next year. 16 Truth in Taxation Hearing - December 2, 2002 Councilman Peterson: You know potential additional cuts and/or surplus usage. Mayor Jansen: Okay. Thank you. I appreciate your going into the detail. Bob. Councilman Ayotte: Thank you Mayor. First off I'm not going to take the public's time at this point but the gentleman in the comer was incorrect in some of his comments. I hope he takes a challenge and contacts me directly and I'd love to have a chat with you sir because you brought up some excellent points. But I'm not going to take up the mayor's time and the rest of the council to talk specifically to it, but I'd love an opportunity to comer some of you one on one and address some of the points you've made. I think we ought to cut services. To what degree I'm not going to specifically state. At this point I'm going to mull it over and Todd, I'll send an e- mail along with the other council a little later on. I'm going to say leave public safety alone. We have issues in public safety and even though there have been some discussions associated with what we can do, I think we really have to, at this point, leave it alone with respect to cutting costs there. Infrastructure. We, I say leave that alone because right now we're paying for the sins of the past. Our infrastructure's gone down the toilet, no pun intended, but we've had some tremendous problems and if we have to face again another referendum with water treatment, the possibility of operational expense. Of operational expenses goes up. Capital improvement goes up. So I'd like to see the infrastructure left alone but I would like to see a reduction in service because I think the public needs a message. Just like this gentleman said before, we have to tighten our belt. So if we tighten our belt, that means reduced services. And that's something Chanhassen residents don't seem to understand. Here go referendums. I know the referendums have driven up our operational expense. When we pass a referendum, when it drives up operational expense, the life cycle costs associated with keeping up parks and rec, our new library and other things come out of taxes ladies and gentlemen, so I would like to also challenge the staff to see what we need to do to generate revenue to offset the costs that we experience as a result of referendum. I realize that we probably won't be able to deal with the revenue generation now, but I'd like to at least touch upon it and get some education as to what you're going to do to see if it would offset some of the operational expense reductions we're going to need to see, especially with the cut in service. I have other things to say but I'd be running at the mouth so I hope I can talk to some of the residents one on one to share some thoughts and some insight as to what goes on at this side of the table. Thank you. Mayor Jansen: Thank you. Now Bob, you touched on two things that you'd like us to leave alone and then you've made a very general statement about see a reduction in service. If we can get specific, and that's what we're trying to do this evening. Councilman Ayotte: You're just trying to get me to say what Peterson wanted me to say and I'm not going to say the area. But what I'm saying, generally speaking I think we need to public safety in terms of cutting those costs, I don't think we should really be looking at that if there's a risk to public safety. I'm not saying necessarily through the public safety department. I'm saying if there's a cost we can cut, that's fine but if the staff interprets that cost to have an adverse affect on public safety or infrastructure, I would suggest leaving that alone. Mayor Jansen: Okay. And I'm not trying to cause you to say anything. What I'm trying to do is establish a consensus of the council so that staff has some clear direction on where we're going, because anything that we've talked about in work session at this point we have not tried to drive for any sort of consensus around that and this evening that's where we need to get much more specific so that we know what we're looking to for any potential savings in the budget. And again if you could be as specific as Councilman Peterson was to say, before the levy and after the levy. We have the situation of the $300,000 potential. 17 Truth in Taxation Hearing - December 2, 2002 Councilman Ayotte: If I could be specific in terms of an amount, I can see an immediate $120,000 cost reduction in the areas of parks and recreation. Mayor Jansen: Okay. Councilman Ayotte: Okay, I see that. I think there's potential for more, but I'm not comfortable in stating where that is specifically as yet, but I do see nominally $120K parks and rec. Mayor Jansen: Okay. Councilman Ayotte: Service area. Mayor Jansen: And is that being applied to the shortfall caused by the reduction in state funding after we've set the levy or? Councilman Ayotte: That 300K? Mayor Jansen: Or ahead of time. Councilman Ayotte: Ahead of time. Mayor Jansen: Okay, so as a part of the levy. Councilman Ayotte: So I'm not saying the 300K that Craig has said, but yeah. Mayor Jansen: Okay, thank you. Just so we were clear. Councilman Boyle. Councilman Boyle: Some of the, I'll be specific, how's that sound. Mayor Jansen: Okay, thank you. Councilman Boyle: Eliminate the 2003 citizen survey, which would save about $20,000. Eliminate all city council membership and subscriptions, with the exception of the Southwest Transit Coalition. Reduce Chanhassen's Connection to a semi-annual report. Street lights. I think that's something we should really study and see if we can save money without affecting the safety of our citizens. We had proposed 2 park maintenance workers. Without them we would save $120,000. We lose a lot of labor hours but let's take a real hard look at that and I'd recommend we do so. Because we've got to cut services as Bob said. We are collecting some revenue on certain special event programs, i.e. February Fest, 4th of July, etc. Let's go for more revenue, maintain the programs but see if we can't generate some more revenue. Get some of the service organizations to volunteer more time. We had projected a mid-year hiring an accountant. That's $30,500. Boy and I hate to say this Bruce but I'm going to recommend no. And I know that's a tough one, you need the help. That's it. Mayor Jansen: Okay. Appreciate your getting specific and just so everyone is aware, what Councilman Boyle was reading from were the staff's proposed 10% cuts that we were presented with when that challenge was put out to staff by department. Some of the proposals that they would make as far as cuts. Councilman Labatt. Councilman Labatt: I'm going to take a little bit different approach at it. We've talked about the lighting program and I know we've mentioned here tonight and we talked about it last week and 18 Truth in Taxation Hearing - December 2, 2002 just so, I think a point needs to be clarified that the lighting that we pay for is not in your neighborhoods. That's paid for by our individual power bills. I just wanted, I think Craig you made a point there we pay for lighting everywhere. That's not true. The lighting we pay for is in downtown, and other areas of the city. So is it fair that all 7,000 homes pay for downtown lighting, or should the benefiting parties pay for it? And I realize that we had, Todd researched that and it would take 25% of the benefiting property owners to petition to have themselves assessed, which I don't think we're going to have happen. Mayor Jansen: That was for the maintenance in the downtown, correct? Did that include the lighting as well? Todd Gerhardt: Well you could include lighting as a part of that service if you wanted to, but it's more than just the downtown is what we pay for. Councilman Labatt: Right. We're talking out at the Rec Center, the lights there and. Todd Gerhardt: Almost every collector road that the city has. Coulter, Lake Drive, some of the intersections on Lake Lucy, and I believe the neighborhoods are also included with some of the street lightings in the neighborhood come back to us too, don't they Teresa? Teresa Burgess: The majority of the street lights in the neighborhoods are resident supported. We do have a couple of lights scattered throughout town that were done prior to that starting. The lights that we're talking about, we had proposed eliminating them completely, they would be Audubon, Kerber, West 78th, Powers, Lake Drive East, Lake Drive West, Lake Drive itself is private, Coulter, and then also some of the intersections with Highway 5. Councilman Labatt: So. Mayor Jansen: And that was just in the wee hours of the morning. You were going to study that was the proposal. Teresa Burgess: The 215 proposal was to shut them off completely. We are evaluating if we can go with a shorter time period. We would not save the full 215. To shut them off completely would save us $215,000. Mayor Jansen: Okay. Councilman Labatt: ...and thank you Teresa for listing all those roads. I go back to safety, you know. The lights were put there for a reason by people before us who were intuitive enough to realize that some of these areas need lighting. They're dark. I'm not going to support cutting the lighting to reduce the money over safety. Somebody mentioned sins of the past. We all suffered from the water tower problem last year. Year and a half ago when it was drained for all summer. Preventive maintenance. What happens when we as leaders of the city don't do what we're supposed to do when we do preventive maintenance? We have a debacle like we did with that water tower where it was down. We had sprinkling problems. We had people up here complaining about not being able to water their yards because of sins of the past. So the pavement management system that has been proposed is simply that. Management. We need to manage our infrastructure. Now if we're not going to do that, we're going to keep putting off paying for it now and paying for it now, it all comes back to what Bruce said earlier and what I've always preached, we need to pay for our services that we're receiving now. Not the residents from 10 years from now, like we're doing, because of the sins of the past. We all got the same 19 Truth in Taxation Hearing - December 2, 2002 tax bill you did. I got hit too. But sitting up here for the last 4 years I have a little bit more insight of our debt problem and looking at and listening to Bruce for the last 3 years and Todd for the last 4, about how we're going to manage our debt and our TIF problem. And our fund balances aren't, they're there but there's not enough to manage our funds. To manage our debt we have. So we want to reduce that. Again, we're robbing Peter to pay Paul. What are we going to do in 2004? Instead of being faced with anywhere from 6.1 to 7.3 worst case scenario. So I think that I'm going to go out on a limb here that our city manager and finance director have proposed a budget that has no fat in it. They've trimmed everything we've told them to trim and now we're going to rob Peter and pay Paul. I don't think so. I hope not. We're going to cut lights and jeopardize safety. I hope not. We're not going to do preventive maintenance on our roads and our infrastructure. I hope not. And we voted for referendums. The park and rec. And at the time maybe that referendum wasn't presented to show all the recurring annual costs of these miles of trails that we have. The 32 parks. These are all things that people like in Chanhassen. Something I like. Yeah, there's cost to them. And as we continue to grow we're going to continue to put trails in. So how do we balance that? Health care went up 12% this year for where I work. 10% here at Chanhassen. There's expenses to run the city that we'll all have to share with. And well, I'll leave it at that. I don't know if I answered any of your questions or not Linda. Mayor Jansen: I guess the main question that that would leave is, if we set the levy where it is currently, we're facing that still potential $300,000 cut in revenue from the state in June. Councilman Labatt: In June, yep. Mayor Jansen: How do you foresee dealing with that? Because the only way for it not to become an issue would be to levy for it. And I'm assuming, I'm not hearing anyone saying that as an alternative. Councilman Labatt: No I think, I talked to Mr. Gerhardt this afternoon and you know he's proposing to make those cuts mid-year. And I think that what that does is buy us 6 months of time. We have X amount of money budgeted overtime for snowplowing. If we don't have a bad winter, we have surplus in that. We can apply some of that surplus or cut that towards that. That's why that I think to make that cut now would not be wise when we can buy ourselves 6 more months of time and make those cuts in June as he's proposing. If we need to. Mayor Jansen: Okay. Councilman Labatt: Did I answer that now? Mayor Jansen: Thank you. I guess that leaves me. I've appreciated everything that staff has done to, as you've seen our angst as we're trying to deal with these numbers and everything that we would like to have been able to do to try to reduce this levy. Whether it was buying down the debt, adjusting some of the services. You know I appreciate the fact that staff, given the challenge by department to come up with 10% cuts, that everyone was able to reach within their budgets and at least throw out some ideas. I have said from the beginning that I think the responsibility of the council is to give very specific policy direction versus having staff try to figure out where our residents are going to feel the least amount of pain, as we try to cut services. I think as a council, now that we're going through this key financial strategy study, we are being given the cost of these services that are being provided to our residents so that we can better look at what the impacts are. Instead of saying, you know cut 2 park maintenance workers, we don't know what that means when we say that. What it means to the actual maintenance in the parks, 20 Truth in Taxation Hearing - December 2, 2002 the plowing and maintenance of the trails, the upkeep to the downtown. What the council's been challenged to do is say what of each of these outcomes are we willing to sacrifice as far as the quality of the service to our residents because you're the ones that are going to feel it. So we need to determine what service levels we can cut. One of the directions that council has given now over the course of our budget discussions has been a challenge back to our park and rec commission and to the park and rec staff to work on looking at the current park and rec services that we provide, and determine of those services, what the necessary services are. One of the things that we started kicking around were the neighborhood ice rinks. Some of those things that are nice to have's but they're not have to have's. And the interesting part of how that might seem insignificant to some of us that don't use the neighborhood ice rinks, we hadn't even talked outside of our work sessions. It was just something that we had kicked around as a concept. Staff happened to in the Chanhassen connection not list a few of the neighborhood rinks because it was open for conversation. They had raised it as a recommendation as far as cutting, and we were already getting e-mails from residents that would be losing those neighborhood parks. So there are going to be impacts, you know and we need to try to determine where we make those impacts. And again, as you're sharing with us that you've had to cut your personal expenses and do your budgeting, we have to do the same thing. But we need to be very specific and that's where you hear us talking about street lighting. You know that's something that everyone will feel if that's where we end up making that impact and it has to be weighed against public safety. So we're looking at services. We're trying to determine where some of those cuts can be made and I guess where I'm standing on it is wanting to give the policy direction within those services as to where I would be willing to see some of the cuts. Park and rec, though I realize that that is a significant reason why a lot of us live in Chanhassen is because of our parks, because of the natural resources and the services, we need to give it a good, hard look. As to what each of the services is. What the costs are and where we might be able to make some cuts because I've not seen any significant review done in that area of service by council in the 4 years that I've been here. And I think that is an area where we might be able to come up with either some efficiencies or some cut backs that won't affect the quality of our park service. Will impact the quality of life for some of the residents that enjoy some of the little things that aren't so little to them if it's the ice rinks. And come up with some policy direction in that area. That's one that I'm willing to look at. Realizing that the city has a very real potential of a $300,000 revenue shortfall next year, I'm feeling the responsibility of insuring that those cuts can be found. And that is the direction that we're able to give now. Is to look for that $300,000. Levy for the amount that is being requested currently and it hurts, unless we can come up with any of these cuts that can be made now that also are going to help balance that $300,00 that you're looking for into next year. I'm not looking to pad the fund reserve, and that's probably the first time that I've looked a little bit more short sighted. Not that I think of it as our having padded it. We haven't. We've balanced the budget and we're just simply not diving into that cash reserve over the last couple of years because of this deficit situation. At some point a council is going to be faced with having to make up for that 66 to 7 million dollar shortfall. And that's going to be in the very near future. But at this point, if we can speculate what numbers we might be able, and I'm hearing a few people here consensus wise talking park and rec. Come up with a reasonable number and I'll have to look at it between now and next Monday as to what I'd be comfortable cutting now. I'm not comfortable just whacking out the 2 maintenance workers. I would need to see the services that we're giving direction on. Councilman Ayotte: I said 120. I didn't say 2 service workers. Okay? Mayor Jansen: Okay. I think that was Councilman Boyle. You threw out a number. Councilman Ayotte: Yeah, I just threw out a number. 21 Truth in Taxation Hearing - December 2, 2002 Mayor Jansen: Okay. I'll have to get my arms around the number, and what that will be, and then the, you've got that impact then of still what that $300,000 will do to the budget and maybe next council makes the decision that it comes from fund balance. And that's an amount that they could pull out of cash instead of having to cut the budget and that's a policy decision that can be made come June when that occurs. When and if that occurs if you want to say potentially occurs. So that would leave that policy decision open for the next group to actually decide. So I guess that's where I'm going. As far as looking for any additional cuts and it will take some time for the park and rec commission and staff I think working together to do that analysis of the current services and come up with some creative answers. That was the other part. We have formed, I should say the park and rec commission has formed a committee that is looking for alternative revenue sources and things that out of that park and rec umbrella we can do to generate revenue instead of having those services actually costing all of the residents so they have a committee formed and hopefully there will be some creative brainstorming that comes from that, and if anyone has some ideas that they'd like to share, certainly we would look to the public for any input that we could get into that whole process. Any comments from staff at this point? Todd Gerhardt: No. None at this point. We'll be working on a packet back to council. I know there is a brainstorming session among staff and the park and rec department to look at alternative revenue sources from a staff level. I know Todd has received input from the park and rec commission but we're going to expand into our own staff to see what other alternative revenue sources are out there. That would include potentially raising services for people attending the rec center, our programs, special events and any other alternative solutions that we can come up with. Mayor Jansen: Okay. Appreciate that. And you know I guess the other bit of information that, and I know that you know any of this is still painful looking at our tax bills. The city's been going at least in a somewhat more positive direction ranked to other cities in the metropolitan area. The Taxpayers League comes out with a study every year and we've gone from, our city portion of the taxes being ranked 20th out of 109 communities to 31st, and the last year's data that was available I think was just through 2001. So we can get some further updates as they update their web site, but so the city has been dropping in rank compared to how some of the other communities have been able to handle their revenue sources as well, so we're doing what we can. We're at least going in the right direction. I hope everyone will attend the county hearing on taxes. I'm sure everybody looked at that line item too on their tax bills. It is the county and not to pick on them, but maybe I can since I'm outgoing. They are ranked number 1 in the metropolitan area as far as counties. Those taxes are number 1 and it would sure be helpful to see some creative solutions coming from the county at this point since it is the higher portion of all of our tax bills. The school district of course is also up there ranked number 5, but I think we all tend to feel a little more like that is going to be the case in a growing school district with the population and the kids going up. But that county portion of our tax bills has been going in the wrong direction and we haven't been seeing some of the decreases that I think would obviously impact all of us to an even great extent since they do represent a higher portion, 30% of the tax bills. Not to turn the force of the public against them, but sometimes I think they too need to hear the same feedback that we do and have it hit close to home. Councilman Labatt: I just wonder if you want to, as long as we're talking schools. Their latest building plan, what they're looking for over the next 6 years. How many millions of dollars in referendum, the 3 referendums potentially could be in excess of $100 million from the schools. So I would encourage people to attend that school district meeting too. Because that's a larger portion percentage increase. 22 Truth in Taxation Hearing - December 2, 2002 Mayor Jansen: And we're not shedding our burden. I mean we're taking our portion of it very seriously. And doing what we can. It's just trying to raise that level of awareness in the public as well because we all hear that combined number of the city being number 1 or number 4 in the metropolitan area, and it's difficult with the city dropping in rank to impact that number when we're such a small percentage of that total. But again, we appreciate everybody coming this evening. We obviously still have a lot of work to do on this to reach some consensus as to where we'll end up on Monday evening, but we do have some things at least thrown out as far as ideas that we'll continue to explore and come up with some final discussion then next Monday evening. Any other comments from council at this point? Okay. Then ifI could have a motion to adjourn. Councilman Ayotte moved, Councilman Boyle seconded to adjourn the Truth in Taxation hearing. All voted in favor and the motion carried. The meeting was adjourned at 8:50 p.m. Submitted by Todd Gerhardt City Manager Prepared by Nann Opheim 23