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CC Minutes 2000 12 04CHANHASSEN CITY COUNCIL AND ECONOMIC DEVELOPMENT AUTHORITY SPECIAL MEETING DECEMBER 4, 2000 Acting Mayor Senn called the meeting to order at 6:30 p.m. COUNCIL MEMBERS PRESENT: Acting Mayor Senn, Councilman Labatt, Councilwoman Jansen, and Councilman Peterson ECONOMIC DEVELOPMENT AUTHORITY MEMBERS PRESENT: Gary Boyle, Jim Bohn, Steve Labatt, Mark Senn, Linda Jansen, and Craig Peterson COUNCIL MEMBERS ABSENT: Mayor Mancino STAFF PRESENT: Public Present: Name Scott Botcher, Todd Gerhardt and Bruce DeJong Address Curt Robinson A1 Klingelhutz C. Hanna Mark Kroskin Colleen Dockendorf Bob Ayotte Frank Kurvers Clara Thorne Donald Smith 202 West 77th Street 8600 Great Plains Boulevard 400 Santa Fe Trail 9841 Deerbrook Drive 2061 Oakwood Ridge 6213 Cascade Pass 7220 Kurvers Point Road 7866 Harvest Lane Acting Mayor Senn: ...there's going to be a little bit of musical chairs tonight. First we're going to meet briefly as the City Council to discuss and take action regarding some bonds for the recreation, or the Lake Ann storage facility. Then from there we're going to adjourn the council and we are going to convene the EDA. We will then doing some short considerations for the EDA on the same subjects and then as soon as that's all done, which should be brief on both counts, we will reconvene as the City Council and we'll then have the Truth in Taxation hearing. Okay, so that's basically kind of the schedule. So we'll go from there and when the EDA comes in there will be a couple of additional people joining us up here at the table. PUBLIC HEARING AND CONSIDER RESOLUTION APPROVING REDEVELOPMENT PLAN FOR DOWNTOWN CHANHASSEN REDEVELOPMENT AREA~ MODIFICATION NO. 14. Bruce DeJong: There really isn't much of a staff report. We went through the process with the Planning Commission to create a new redevelopment area, but we discovered during that process that there was no necessity for putting a new redevelopment area in since this area was already included in the redevelopment area for the downtown TIF district, which the EDA has authority over. So what we're asking you to do tonight is just simply to adopt the modification to the plan for TIF District 1 that says that we can build a City Council Special Meeting - December 4, 2000 public facility in the Lake Ann Park, in that area, but we're not changing any of the redevelopment area or any of the other financing alternatives. Acting Mayor Senn: Okay. Any questions from council? Okay. Alright, this is a public hearing. Is there anybody here to be heard on this matter? If not we'll close the public hearing. Is there a motion please? Peterson: Motion to close public hearing. Acting Mayor Senn: Is there a second? Councilman Labatt: Second. Councilman Peterson moved, Councilman Labatt seconded to close the public hearing. All voted in favor and the motion carried. The public hearing was closed. Okay, could we have a motion on the resolution approving the redevelopment plan Acting Mayor Senn: modification. Councilman Labatt: Acting Mayor Senn: So moved. Is there a second? Councilman Peterson: Second. Acting Mayor Senn: Okay. Any discussion? Resolution/12000-87: Councilman Labatt moved, Councilman Peterson seconded to approve the Resolution approving Redevelopment Plan for Downtown Chanhassen Redevelopment Area, Modification No. 14. All voted in favor and the motion carried unanimously. CONSIDER RESOLUTION AUTHORIZING THE EXECUTION AND DELIVERY OF A LEASE WITH OPTION TO PURCHASE AGREEMENT~ GROUND LEASE AGREEMENT AND ALLOCATING SMALL ISSUER REBATE EXCEPTION AUTHORITY. Bruce DeJong: What we're doing here is, in order to have the EDA construct the building and to obtain the financing for the building, is that they need to have access to the ground and security for the ultimate bond holders who will be actually giving us the cash to construct the facility. So what we have to do is we have to, the City has to lease this portion of Lake Ann Park to the EDA and then we also have to lease the building from the EDA. And that's essentially how it functions and then doing the small issue or rebate exception is just for financing purposes. Acting Mayor Senn: Okay. Any questions from council? Councilman Labatt: Yeah. When you say lease this portion of the park, are we just talking the square footage for the footprint of the building? Or are we talking the 60 acre... Bruce DeJong: No, it's actually a 60 acre parcel of the park. City Council Special Meeting - December 4, 2000 Councilman Labatt: Okay. So how many acres is that park total? Bruce DeJong: Approximately 100. I don't know exactly, Todd do you? Todd Gerhardt: I don't know exactly either. Councilman Labatt: So if the ownership of this 60 acres goes to the EDA, how does it work for, is it still a public property as far as parkland dedication and enforcement of any city ordinances in that park? Todd Gerhardt: I believe so. Councilman Labatt: So we're just more or less just paper shuffling? Bruce DeJong: Yeah. The ownership of the property isn't changing. It's just giving them legal access so that we can make these marketable securities in case the City Council decides not to pay off the debt. Or pay off the lease in due time. The two on-holders can come in and take possession of the building. Councilman Labatt: Okay. That's all I have for questions. Thank you. Acting Mayor Senn: Okay, any other questions? Councilwoman Jansen: No. Acting Mayor Senn: Bruce, I mean as far as the park property there, there were a number of call them caveats, restrictions, whatever that were put on to it with the deed when I believe this thing was acquired what, by the federal, wasn't it some federal grant or something? Bruce DeJong: Yes. Acting Mayor Senn: And stuff so I mean has that all been researched and we're not running the risk of violating any of the terms of that? Bruce DeJong: We have discussed that and the public purpose for the park area has not changed. It's still a public building and the EDA is a public authority. So it doesn't seem that there is any discrepancy in that. It's not the same situation where when we actually sold part of a park to the State for the highway, where we had to replace that. Acting Mayor Senn: That was a use problem essentially? Bruce DeJong: That was a situation with use. This is not a change in use. Acting Mayor Senn: Okay. So the primary limiting factor's on use, not on actual ownership. Who is the ownership or transfer of title or anything like that? Bruce DeJong: Yeah. Because the title is not transferred and it's still public use. There shouldn't be any problems. City Council Special Meeting - December 4, 2000 Acting Mayor Senn: Okay. Alrighty. Okay, is there a motion to approve the resolution authorizing execution and delivery of the lease with the option to purchase? Councilman Labatt: So moved. Acting Mayor Senn: Is there a second? Councilwoman Jansen: Second. Acting Mayor Senn: Any discussion? Resolution #2000-88: Councilman Labatt moved, Councilwoman Jansen seconded to approve the Resolution Authorizing the Execution and Delivery of a Lease with Option to Purchase Agreement, Ground Lease Agreement and Allocating Small Issuer Rebate Exception Authority. All voted in favor and the motion carried unanimously. Acting Mayor Senn recessed the City Council meeting at this point to convene with the Economic Development Authority. Chairman Boyle called the Economic Development Authority meeting to order at 6:40 p.m. CONSIDER REDEVELOPMENT PLAN FOR DOWNTOWN CHANHASSEN REDEVELOPMENT AREA~ MODIFICATION NO. 14. Chairman Boyle: Well this is fun. Almost like a repeat. We have three different things on the agenda here. First is consider redevelopment plan for downtown Chanhassen Redevelopment Area, Modification No. 14 is what we just, the Council just approved. So if there's nothing more to add to that Bruce, I'm going to call for a motion. Jim Bohn: I'll make the motion. Chairman Boyle: Second? May I have a second? Councilman Labatt: Second. Chairman Boyle: Discussion? Acting Mayor Senn: We thought you were seconding it Gary. Chairman Boyle: Any discussion? Okay. Resolution #2000-2: Jim Bohn moved, Steve Labatt seconded to approve the Redevelopment Plan for Downtown Chanhassen Redevelopment Area, Modification No. 14. All voted in favor and the motion carried unanimously. CONSIDER ADOPTION OF LEASE WITH OPTION TO PURCHASE AGREEMENT AND GROUND LEASE AGREEMENT. City Council Special Meeting - December 4, 2000 Chairman Boyle: Again, pretty much a repeat from what the council just did. So I call for a motion. Linda Jansen: So moved. Chairman Boyle: And I call for a second. Jim Bohn: Second. Chairman Boyle: Discussion. Linda Jansen moved, Jim Bohn seconded to approve Adoption of Lease with Option to Purchase Agreement and Ground Lease Agreement. All voted in favor and the motion carried unanimously. CONSIDER ADOPTING A RESOLUTION FOR A $930~000 PUBLIC PROJECT REVENUE BONDS~ SERIES 2000 (LEASE WITH OPTION TO PURCHASE PROPERTY). Chairman Boyle: This is somewhat new Bruce. Do you want to add anything to that? Bruce DeJong: Yes. We received two bids on this, which was actually not bad. There were only three bidders who had expressed interest in it and typically with smaller issues like this, and not being graded or insured, there is less interest. It's harder to sell on the retail market, but the bids came in actually very nicely. Representatives from Ehlers indicated that these unrated bonds came in only 30-35 basis points higher than some AAA insured bonds that they also issued this morning. So very good interest rate. The interest rate, coupons range from 4.75% in 2003 up to 5.35% in 2012, which is the final maturity. And the true interest cost is 5.39%. So I would recommend that you accept the bid from Bernardi's Securities of Chicago. Chairman Boyle: Questions? Anybody have any questions regarding this? Give us just a minute if you would please. Yes Al, if you'd like to take the podium please. A1 Klingelhutz: Yeah I have a question. You're spending $930,000 for a public... Maybe I haven't been reading the paper or something but I'd like to know where the project is and what land you're purchasing or creating a lease on. Bruce DeJong: The property that we're constructing is actually the new Lake Ann Park facility building. The pole barn that was out there is right in the way of West 78th and had to be torn down. This is reconstructing it with a heated shop area and putting in an ambulance bay so that we can move the ambulance closer to downtown near the majority of the population. A1 Klingelhutz: That is already city land, isn't it? Bruce DeJong: Yes it is. It's on Lake Ann Park. A1 Klingelhutz: How come you need a lease with option to purchase then? Bruce DeJong: Because of the financing method that we're using. The EDA, the Economic Development Authority is actually the people who are getting the financing and issuing the bonds. So the City, because they're a separate legal entity, the City has to lease them the land. City Council Special Meeting - December 4, 2000 A1 Klingelhutz: Okay. Chairman Boyle: Any other questions? Mark Senn: Bruce, as far as the bonds themselves go now, they're going to be revenue bonds. How are we, I guess how do we get to call them revenue bonds when there's no revenue coming in to pay off the bonds? Bruce DeJong: It's revenue to the EDA and the City will have to levy taxes, the same way that it does but it's under the authority and direction of the EDA. Mark Senn: Okay. So in the eyes of the EDA so to speak they are revenue bonds. In the eyes of the City we will be using the general levy to pay the EDA for them? Bruce DeJong: Correct. It's like a lease purchase agreement. The City is leasing it with the option to purchase at the end of the lease from the Economic Development Authority. Mark Senn: Okay. And the $930,000 for those who probably aren't familiar with it is purely the cost of the improvements. Bruce DeJong: The cost of the improvement and financing the first year's interest expense. Mark Senn: Right. So there's no land included one way or the other. It's purely the improvements. There is a fair amount of what, earthwork or dirt work or whatever included, as well as the utilities and that sort of thing. Bruce DeJong: Correct. Mark Senn: Alrighty. Chairman Boyle: If there are no more questions I'm going to call for a motion. Donald Smith: ... and we need that lease of the property. When is that removed? Bruce DeJong: The lease is actually written out until 2038. Is that correct Mary? I'll defer to Mary Ippel who is from Briggs and Morton. Bond counsel. Mary Ippel: The land is leased to the EDA and then the land is leased along with the building back to the City. When the bonds are paid off, the ground lease terminates and the land remains with the City. So the ground lease does run longer in case the City chose to terminate the lease. But once the lease is paid off, all the land, all the buildings revert back to the City. Mark Senn: And under your projections that's 20127 Mary Ippel: Yes. The final maturity of the bond issue is 2012. Chairman Boyle: Mr. Hanna? City Council Special Meeting - December 4, 2000 Carroll Hanna: Yeah, my name is Carroll Hanna. How long, the money that the City received money from the State for the land that was taken from the city for the road? Mark Senn: That's a separate. Carroll Hanna: But was there? ... do you know Mark? Mark Senn: I don't remember. It wasn't a big amount by any means. Carroll Hanna: It wasn't $930,000? Mark Senn: No. Carroll Hanna: I'm just wondering what happened to that money and why that isn't being applied to on this... Scott Botcher: The majority of the money went towards the City's contribution on the frontage road that will run along Highway 5. We do have some obligation to pay for part of that. That money that we received from the State condemnation, as Steve said, it wasn't a whole heck of a lot, will be applied back to the street. Carroll Hanna: Okay, thank you. Chairman Boyle: Thank you. Any other questions? Okay, then I will call for a motion. Linda Jansen: Move approval. Steve Labatt: Second. Chairman Boyle: Okay, we have a first and second. Any discussion? Resolution #2000-3: Linda Jansen moved, Steve Labatt seconded to Adopt a Resolution for a $930,000 Public Project Revenue Bonds, Series 2000, Lease with Option to Purchase Property as presented. All voted in favor and the motion carried unanimously. Chairman Boyle adjourned the Economic Development Authority portion of the meeting at 6:50 p.m. Acting Mayor Senn reconvened the Special City Council meeting at 6:50 p.m. TRUTH IN TAXATION HEARING. Acting Mayor Senn: The purpose of this hearing is to receive public input on the tax levy for next year. Bruce, are you going to start with a staff report or Scott? Scott Botcher: Bruce will give it. I'll be technical support... City Council Special Meeting - December 4, 2000 Bruce DeJong: Well what we're really here for tonight is to receive public input regarding the total amount of our budget for next year and our tax levy for next year. So as we go through the discussion, what I'd like to highlight is first of all some of the process that we've gone through. We started out back in actually June and July when the department heads starting putting their preliminary budget information together, and submitted that to Scott and I to compile. Then we went through an evaluated that. Presented the City Council with a recommended, manager's recommended budget, and made some adjustments to that during some discussions with the council in August and early September. On September 11th you adopted a preliminary tax levy for the year 2001. Then in October and November we went through with the council and discussed, had a presentation by each one of the department directors regarding their individual areas. Made some modest adjustments based on that and now here we are at the Truth in Taxation meeting. The statements were mailed out to all the individual property owners, both in Hennepin County and in Carver County at the end of November. Sometime I think probably right around Thanksgiving. And so everybody who owns property in Chanhassen should have received the notice that shows what happens to their individual property based on changes in market value. Based on changes in other jurisdictions and showing an overall increase in their property taxes projected for next year. So tonight is just the hearing and we receive input. If there are still people that need to talk after we're done tonight, then you can continue the hearing or you can close the hearing tonight, but we're anticipating that we'll be able to get everyone's point of view in tonight and then you can close the hearings and next week, Monday at the 11th we should be able to adopt a budget. So that would probably be the appropriate time for serious council discussions, after you've had a chance to mull over the input from tonight. I just wanted to show you a little bit of the expenditure history on the general fund. You can see that it's been steadily rising. There's certainly been some increases in the last 2 years that I know about because of some changes in how we are doing our budgeting and I guess in philosophy, that we want to charge today's taxpayers for today's services and we want to make the budget more understandable and accountable. That included bringing in quite a few expenditures that were not included in the general fund. They were I guess kind of put off in some other funds and we were ending up doing some bonding for those and paying for those out of different areas rather than the general operations that they actually were intended to be. This year we've included some salaries that were allocated in the tax increment funds. I believe there was also some from Mr. Hoffman who was in the park dedication fund that we had to bring in. Those salaries were almost $200,000 worth by the time you got all the benefits and everything included. We are no longer able to use those tax increment funds to pay for salaries after April 1st of next year. We've had the discussion with the City Council regarding the limitations on pre-79 districts and we are only able to pay for bonds that were issued prior to April 1st of 1990 out of those tax increment funds next year. Those expenditures have been moved to the general fund and then in the 2000 budget we used some of the fund balance to reduce the tax levy and this year we're not anticipating using any fund balance out of the general fund for that purpose. At least in this budget as presented, so if you include that, that's another $367,000 that the tax levy needs to go up in order to make the revenues match the expenditures. When you take a look at the general fund balance you can see that prior to 1998 our balance was adequate but it was not up to the policy level. We have a policy that the council's adopted that we need to keep in reserve or it's reserved for cash flow actually on the financial statements. An amount equal to 6 months worth of tax levy and homestead and agricultural crediting. That's because we don't receive any tax levy for the year until almost the end of June. Everybody knows how the property tax system works. You don't have to make your first half payment until May 15th and then the county has, I believe it's 40 days to make that payment to the cities. So we won't get our money until June and we need some funds on hand to cash flow our expenses for the first half of the year. That's why the council put the policy in place. But you can see that we have a significant fund balance above that policy now. Actually when I look at it, because I redid this based off of our new estimated tax levy. With the tax levy being $4,630,000 and our HACA being $668,000, that leads us to a policy amount that we have to have of approximately $2.6 million. That is higher than the $2.3 City Council Special Meeting - December 4, 2000 million that we used last year, so when we had our discussions the last couple of weeks about our TIF debt issues, we were talking about a million six above the policy. Because our tax levy has gone up for this budget, it's down to approximately a million three. Now certainly the council can move more money around than that but I just wanted to let you know that based on the policy, as it exists, it's approximately a million three right now. Donald Smith: Question. Bruce DeJong: Yes. Donald Smith: The money you have bonded, is it making money or is it just sitting there? Bruce DeJong: No, it's certainly making money. It's invested primarily in government bonds. Government agencies and commercial paper. So we're making, the most recent trades that we've been doing, we were making someplace in the neighborhood of 6 ½% on that money. Donald Smith: Is that interest rate showing as interest income? Bruce DeJong: Yes. Donald Smith: $170,000. Bruce DeJong: Correct. Now you can see how much the general fund tax levy is up and when I calculated that I included also the $40,000 that we had levied last year for the fire relief fund which we incorporated into the general fund this year. So that's the difference between $4,630,000 and the $4,076,000 that we levied last year. Now the thing that's in our favor to a large extent this year, and I put this together I think back for the preliminary Truth in Taxation levy which you adopted in September 11th, is that we have some significant growth in the community. There's been a lot of construction and based on the best estimate we could get, that's about 7.9% increase in taxable value. The issue that we have with debt service, you know why is it going up? We have significant schedule debt service levies. Those are presented to the council on an annual basis in, as one of the exhibits in our comprehensive annual financial report. It shows how much is scheduled based on the bond indentures that we've created each time we've issued debt as a city. Now, there are ways to cancel those levies. Quite honestly we probably haven't been doing a great job of defining why we're canceling those levies in the past, but you can see that we've been significantly under levying based on the amount that is shown in the bond indentures versus the amount that's shown here for the actual levies. Councilman Peterson: What's the...in 2001, do you know? On that last chart. Bruce DeJong: That is about a million one. That million seven in actual levies, it's about 2.8 million in scheduled levies. Now there's some good reasons why those could be less. Certainly you could have some, some of these debt issues we've had green acre parcels that you can't really plan on them coming in and so you have to schedule a levy for them. If they do develop, they come in for platting, then at that point they owe assessments that they pay to the city. That's certainly one reason. Another reason that you could cancel them is you're required to levy 105% of the amount of the debt service to allow for delinquencies or non-payment of property tax, which you know certainly happens. It hasn't been happening.., but in any case the state law provides that you put in a higher levy to cover that. Now if you have funds on hand through some other payments that may have come in, you know early special assessment payments or City Council Special Meeting - December 4, 2000 things like that that have generated additional interest, you can cancel some of those. I've not found in the record detailed reasons for canceling those levies and Carver County has certainly taken whatever we've certified as our Truth in Taxation levy as being the maximum. So we still have issues that we need to resolve going through with the debt but you know I think that the council's been very forthright in discussing those and you will come to some resolution on those in the next couple of years. Let's see. On this, I guess when I say back loading. What back loading really means is that you have significantly higher expenditures for debt in later years and significantly lower expenditures for debt in early years. Donald Smith: Why? Bruce DeJong: I'm not sure exactly why they did that in the past. You know. Donald Smith: Was there over reaction to decrease the debt or are we just going to be charged interest and keep going on and up and up like a bad debt? Bruce DeJong: We're certainly looking at ways of reducing that. In new issues we're trying to flat line those as much as possible. Now in this issue, it looks like it's more back loaded because the principle payments, just to take the EDA one. The principle payments are higher but in the early years the interest payments are higher so our actual annual debt payments on this issue would be going from down in 2003, where we start paying off principle of $117,000 up to 2012, the debt service levy's only $126,000. So we're certainly trying to deal with those issues and I think that the majority of the problem comes in through the year 2005. Donald Smith: Give me an example of what the debt, or I mean who is it, who is the debt? Who owes the money? Bruce DeJong: Well the City of Chanhassen owes the money because we've issued bonds for both general obligation purposes and for special, for improvement purposes, which are being covered partially by special assessments. Now in our processes we have not always covered our special assessment projects 100% with assessments so there is city money that's going towards those improvements and we have to levy taxes to pay for that. Donald Smith: Is that a TIF district on it or is it an overall, just in the general money? Bruce DeJong: No. This does not include TIF district debt. This is just strictly in the general fund. General obligation I should say. And it's probably not a huge surprise as we go through the, or we've talked about this last year at this time. That there were significant levies waiting to be made for the debt and at that point I wasn't sure exactly why we were canceling. Now what we have in front of us is the $1,699,054 that we're asking you to levy for debt next year is because of the plan put together by Mr. Ruff from Ehlers and Associates, which is essentially a workout plan based on the cash balances in those funds and what is required for debt repayment over the course of the next actually 9 years. Up through 2009. To get us back to 0. So what we have is a workout plan for the $1,699,000 rather than those actual scheduled levies. Councilwoman Jansen: And Bruce, if I recall that's a 40% increase in just the debt levy this year to last year, correct? Bruce DeJong: In the improvement debt levy, yes. City Council Special Meeting - December 4, 2000 Councilwoman Jansen: Okay. But as I note on this slide, that's been scheduled anywhere from 2.1 million up to the 2.7 million and shown in the annual report of at least the last 5 years. I went back to the '96 and that's as far back as I have in my office without going downstairs and getting involved in the dusty files. But it has been shown there and will continue to be shown there what those scheduled levies are. So the recommendation, at least from the staff viewpoint, is that we adopt the tax levy and the budget as presented on next Monday and that we continue to work on the debt study to determine how our TIF actions affect some of our general obligation debt and continue to work on our debt study and capital improvement program. Make sure that we've minimized the impact on the taxpayers over the course of the next several years. This budget is really a maintain a line budget. There are no new programs. No new activities that are anticipated in the general fund. Certainly you can see where the changes have come from in the tax levy and it, other than moving the salaries in, does not do an awful lot as far as increasing the overall expenditures. Scott Botcher: Some of these issues we addressed last year, if you remember. We addressed the TIF issues last year with the salaries. We addressed some of the salary issues that, if you remember they were in the capital funds. Where we were actually financing projects and paying salaries out of those funds. Salaries and benefits. We have now rolled those all into the general fund in advance of the April 1,2001 deadline. And we also last year made no bones about the debt service issue. Remember the 1-6 number sitting out there. And frankly we just have to, we have to get our books in order and we're attempting to do that. You know I think that Bruce and I have probably generally lean toward doing what we can to keep the tax levies suppressed. At the same time, and we've made no bones about the spike in the debt service levy in 2002 and 2004. They sit out there like big issues we have to deal with and we continue to deal with them. At the Department of Revenue meeting Bruce went to this morning, you know in some of the positive things that we've done like the bond rating increase. Those are things we need to do to get our debt house in order. But a number of things that we talked about last year are reflected in this budget. And I'm going to turn this off so you can. Mr. Chair, that's the extended presentation and if you'd like to take the public comment, now would be an appropriate time. Acting Mayor Senn: Okay. First, are there any questions of staff from council on the presentation? Councilman Labatt: When you said in your last, to adopt the tax levy budget is shown next Monday. Is that going to be something different than what we've got today? Bruce DeJong: No. Scott Botcher: Not unless you change it. Bruce DeJong: Not unless you guys change it. Councilman Labatt: Okay. No, I just want to understand. Okay. Acting Mayor Senn: Anybody else? Councilwoman Jansen: Actually Bruce, of course when you mention the $1.3 million above policy as far as these cash reserves if you would. The surplus. I know we've had extensive conversations around your need to be able to access that cash as far as some of these debt service issues and I don't know if you'd be City Council Special Meeting - December 4, 2000 comfortable doing something of a summary of the fact that you're not just sitting on this. We're not hoarding taxpayer dollars. That there is a purpose in mind for that. Bruce DeJong: Certainly. There are some significant problems with our tax increment districts. We have a deficit in the downtown district that's estimated to be about $4 million in 2004. We have issued what's called general obligation tax increment bonds which are to be repaid primarily from tax increment but that increment has been reduced as the state has reduced the class rates that commercial and industrial property pay. So those have gone down from 4 point, what. I don't remember what the exactly, no. It was 4.8% was the class rate that commercial industrial property was at. It's now down to 3.4%. Something on the order of a 30% drop and that has decreased the amount of property taxes and tax increment generated in our TIF districts. That's led to some issues that we're trying to recoup some of that from the State of Minnesota through a grant program set up by the legislature two years ago. But that is not going to entirely solve the problem. So we need to have some cash available since these are general obligations of the city for which we've pledged our full faith and credit. We have to have the cash to pay for those bonds as they come due. I mean we certainly don't want to default and seriously damage the City's credit rating. That means we need some financial flexibility and that's exactly what that surplus in the general fund gives us, along with some other areas that I outlined for the council a week ago. Scott Botcher: Additionally what the, the other thing the cash allows us to do is pursue issues like defeasance. We have, we did last year defease some debt. We plan on this year defeasing some debt. AT this point it's estimated to 3.55. Bruce DeJong: No, 3.7 1 think was the last. Scott Botcher: Okay, a million dollars. What that allows us to do is really leverage that cash to apply against the State grant fund that they have set up to reimburse cities that have been negatively impacted by rate compression. And last year we did it and we were successful in our grant application and this year we do plan on doing the same thing. If we didn't have that cash, we wouldn't be able to do that. Councilwoman Jansen: Thank you. Acting Mayor Senn: Do you have the slide or anything where you could explain to people essentially the impact of the budget on the tax levy and what that impact will be? Bruce DeJong: I'm not quite sure what the question is. Acting Mayor Senn: Essentially taking your proposed budget, okay and run people through so they understand what that means in relationship to their property tax rates. Bruce DeJong: I have not done that this year. Quite honestly because I've had a very difficult time getting solid information to base that on. What happens is, the Truth in Taxation notices come out and they are on an individual property. It doesn't show what happens overall. Overall I can tell you that the tax levy on the Truth in Taxation notices for the City of Chanhassen went up 18.4%. Now what happens when an individual's property tax depends a lot on what's happened to the value over the course of the last year. That change in value really makes a big difference. And it's really extremely difficult for me because we've got a couple of different things going on. You have what are market value referendums, which is like the debt that we have to repay for our park referendum. And that will be the debt that we have to repay on whatever we end up going out for bond issue on our library referendum for. Those are based on City Council Special Meeting - December 4, 2000 the market value of each property. The general tax levies are based on tax capacity of the property which is determined by taking the market value times the class rate and then using that to determine how much each individual property pays so. The best thing to do is to try and explain it to an individual based on what's happened on their statement rather than trying to make a blanket effect because I honestly don't know. Scott Botcher: Antidotally, and this is, I don't have any data to support this. I think the biggest issue between the, in Chanhassen is pretty much depending on what school district you're in. I mean I think the Chaska school district now has their $43 million referendum on the levy. I think that has, that certainly has impacted district 112 properties. Just antidotally from folks that I know of that live in my part of Chanhassen, and mine as well, tax bills are up in the range of 5.2 to 5.4%. I'm not going to represent that that's a standard Minnetonka rate. Maybe those of you who live in Minnetonka have different rates on your's, but I know 4 out of 4 that I spoke with had tax increases in that range. I don't have any knowledge about the Chaska district. Councilwoman Jansen: So you're talking about the total bottom line. Scott Botcher: Bottom line. Councilwoman Jansen: All of them rolled together, they're seeing a 5. Scott Botcher: That's what mine was personally and others in my neighborhood. Councilwoman Jansen: Okay. Councilman Peterson: But by an example, I'm just trying to follow how much would follow through of 18.4%. Let's assume that the City's portion of my tax bill is $1,000. Will all of that 18.4 go directly to that and so now my tax bill's going to, if my property has not changed in value. Will that be now $1,0847 Bruce DeJong: No. Because of the increase due to new construction that I discussed earlier, we were estimating, at least at the Truth in Taxation levy adoption, that it was going to approximate the increase in value in your home. So if the value of your home went up 10%, the increase in the city taxes would be approximately 10%. If the increase in your home's value was 6%, the increase of city tax would be approximately 6%. But that was just a rough... Scott Botcher: Yeah, if there was no increase in the base upon which we tax, then your scenario was correct. Acting Mayor Senn: If your value remained the same essentially. Would it be an 18% increase? Councilman Peterson: It does follow dollar for dollar through the process. Acting Mayor Senn: Yes. Excepting other external factors. Councilwoman Jansen: So Bruce, what you just described, if I followed you correctly, means that our tax rate probably remained the same on individual properties? Probably? Roughly? Bruce DeJong: No. The tax rate is probably going to go up. City Council Special Meeting - December 4, 2000 Councilwoman Jansen: But you don't have that yet? Bruce DeJong: If the tax rate had remained the same, we would collect just the increase in new construction basically. Acting Mayor Senn: No, you'd fund the increase of the budget off of growth basically. Purely. Councilwoman Jansen: So you don't pick up the additional value on the existing? Bruce DeJong: Can you rephrase that for me? Councilwoman Jansen: So when you're saying that it would be, you're just adding in the incremental. The new growth. It's not adding the increase in our tax capacity from the existing. Bruce DeJong: Right. Councilwoman Jansen: Okay. Bruce DeJong: With the increase in the tax capacity from the existing properties. Property that was here January 1 of 1999 and January 2 of 2000, without any change, will still have some increase. And what I'm suggesting is that the increase in value of that property, whatever the county assessor raised that value, is approximately the amount of increase in city tax that they're going to see. Donald Smith: I have a question and it bothers me a great deal that I'm sitting here. Where do we go from here? Do the people that are commercial pay the same rate as the people who own private homes? And the reason I say that is, taxes are going up constantly but there doesn't seem to be a conscientious effort to spend the money in proportion. So if we keep going on the way we're going, my house in 5 years will double in taxes. I don't see any significant change in services whatsoever. So as the overall price of the house goes up and the value goes up, that gives you more money. Where do we go from there? Do we have an abundance of money or what? I mean I'm trying to figure out why my taxes keep constantly going up. And when we get into the evaluation of property, we're forcing people out of here that want to live here. Because they can't afford the houses because of the way they're taxed. That's a very deep concern. Plus the fact that every time you turn around there's some kind of a new school tax, which I know you can't approach here, but something needs to be done to keep the lid on what is being spent and how it's being spent and where it goes. You can't keep going on this way. So I'm saying, here we sit 5 years from now with all of these things that are coming in. We have to pay off our debt. My taxes cannot keep going up. You're going to force these people out of here and I'm very seriously considering 5 years from now I probably won't be able to afford to live here if my taxes are going from 3 to $6,000 a year. Why? Bruce DeJong: Well quite honestly I can't disagree with you because I don't think that we've added an awful lot of significant services. Certainly we passed a park and trail referendum a couple of years ago and that does have an impact. But you know that's something that certainly the majority of voters on that issue supported. Spending money for that which raised the levy for the debt that we issued for that and it has raised the maintenance costs for those new park areas and for those trails. Scott Botcher: Took property off the tax rolls. City Council Special Meeting - December 4, 2000 Bruce DeJong: ... property off the tax rolls. So I really don't have much to disagree with you on that. I think it's certainly our hope that as we deal with our issues of getting everything back so that it's understandable, that we certainly, you know unless there's significant influence from the council and the citizens, to change the level of services that we would try to maintain that at some modest increase for inflationary purposes but beyond that, not to make significant changes. Scott Botcher: We frankly can't afford it. I mean certainly between now and 2005, we just cannot afford it and we do have citizens that will come to us and desire you know increased or different services. As you're well aware, there's people in all sorts, on both sides of the fence on issues. And frankly we have people who wants us to do that and we at a staff level have just been truthful. We don't see the money being there. Now, we met as a community leaders group in District 112. You know they in the district are facing a very difficult problem, because they are having a lot of children come into the school district and they're having to face some of the capital needs that they have and they did the 40 some million dollar referendum. And there are future referendums scheduled between now and I think the end of the decade. And it will have an impact on our taxpayers and I know they don't like it. Don't want to do it. At the same time they've got to have places to put the bodies. And I don't know if there is a great answer for it. I just know from our point of view, looking at our numbers, what you see is what you get for a while as far as the citizens go. Donald Smith: Well I would recommend, instead of building pyramids, which we call a school, with the use of high tech you can rent store fronts and put a teacher and a computer. You cannot keep building schools because school population changes. We've already gone through this. We have a Catholic school that moved out, built it's own school and I almost fell over. We've got a private school here. We also have a... school in Chaska which is part of Carver County, because of the shift in population. I'm not going to, I don't think.., school building that nobody uses 12 months out of the year. And we're going to have to look for other sources of revenue and I'm saying you'd better start charging on usage because that park thing went through didn't sit well with me because I know the maintenance is so high and the insurance must be astronomical. For a very limited group of people so we'd better start thinking in terms of usage and how we're going to make this company work without sacrificing what I call real estate people which is me, a homeowner. It's got to stop. Acting Mayor Senn: Bruce, to help frame it for people, can you give people approximately what the breakdown is of their property tax bill between the different taxing jurisdictions? Bruce DeJong: The approximately breakdown between the three primary ones is the school district is generally someplace around 50%. That depends on which district you're in. Whether you're in 112 or 276. The Carver County is approximately 30%. And the City of Chanhassen, I haven't gotten any figures as far as what the total is based off of the new estimated levy figures but last year we were about 17% of the property tax bill. And then there's 3% for some other miscellaneous things. Mosquito District and Met Council. Acting Mayor Senn: And what we are, essentially as far as the Truth in Taxation hearing before us tonight, effectively just involves the 17% essentially attributable to the City and the City's decision process. Bruce DeJong: That's correct. City Council Special Meeting - December 4, 2000 Acting Mayor Senn: And to further help frame it, essentially there's two primary factors going into it from the city's end, as far as the property tax goes. One is the value or the valuation of your property. Secondly is the level of expenditure that the city makes which affects the tax rate. Bruce DeJong: That's correct. Acting Mayor Senn: Okay. And trying to do this so everybody understands it and then we can go from there. As far as the valuation end of your property tax bill goes, that is the subject of a separate hearing that is held in, usually around March or April sometime. And the city, how would I say this? The city participates in that process but essentially has very little impact in it because essentially the values are set by the county assessor and then essentially we review those and if we think that they've made a mistake or something's out of whack or something like that, from the City's perspective, then we essentially switch around what the assessor does, but we're not even the last word anyway because even once we switch around the county board can switch us around. Which often times happens so, so that part of the equation you know we really have very little to do with so, essentially the focus of tonight is really the city budget and the city budget process and I guess more basically the level of city expense because that is the one primary facet affecting your tax bill that the city has pretty much total control over. Okay. And so from that standpoint that's, you know essentially where we're trying to focus on tonight. Okay? Audience: I have a question? If you were taking the average homeowner, which would be what, $140,000. Would that be the average in Chanhassen? What would be the increase... ? Bruce DeJong: Actually the median single family home in Chanhassen is probably in the neighborhood of $225,000 and you know it's hard to say but the effect would be an approximate 10% increase, assuming they have a normal statistical adjustment to their property. That they've not made any changes, additions or remodeling's that have increased the value of that property. Scott Botcher: So if your city taxes were $1,000 bucks, they'd go up $100 bucks. So that's divided it by the month. Acting Mayor Senn: Okay, kind of tried to kind of free flow here on questions so people can get the answers to the questions and the information can get on the table. We do need to switch here shortly to comments and take input under the public hearing. So but it'd be nice to just kind of get some of the questions again answered first so if, maybe just for more clarity, if you could come up to the mic, then we'll get them on the table a little bit better. A1 Klingelhutz: I guess I'd better hang onto something when I tell you about this one. Acting Mayor Senn: Do you want to give your name and address? A1 Klingelhutz: A1 Klingelhutz, 8600 Great Plains Boulevard. Last Monday I picked up the mail, first think I opened was this thing. And I found one of my properties jumped from $164,800 to $473,500. 155% increase. I barely opened the envelope and I was on the phone to the County. Talked to the County Auditor and they put me onto the County Assessor. And he said there must be some mistake. He says I'll write you a letter verifying that there is a mistake. But I haven't received a letter at this time and I figure well I'd better come to this meeting and show that I have no intentions of paying that kind of taxes on that property. This property went up 155%. My home went up 16.1%. I know we did a $6,000 improvement on it. That's what the building permit was for so it might have brought it down to about 11% if you figure City Council Special Meeting - December 4, 2000 that increase in value on the home. But this is the first time I ever came before any tax board, I used to sit on the same side you guys are, to complain. And I just wanted this into the record. What I'm telling you tonight about this piece of property. The increase of 155% .... if this goes back to the original amount you might get $800 less taxes from me. So it might have something to do with your budget. $800 isn't much but if you get enough $800, it's a lot. Acting Mayor Senn: Thank you. Yes. Curt Robinson: Curt Robinson. I live at 202 West 77th Street. And I have a very specific question and I think it's one that as you have total control over here. On the City of Chanhassen line, property tax in 2000 was $478. Increase or decrease due to spending, that number is $89.62. So I read this as my taxes are going up 18.7% strictly because of spending. Now my assessment did go up 2 ½% so I think we're talking your 18.4% that I believe you asked for an explanation on. And I guess I'd like to understand that better. What that increase is. Is that a fair question? Acting Mayor Senn: No, that's a fair question. Bruce DeJong: The increase is primarily made up of two components. One that last year we used to fund the balance, and we're not anticipating using any fund balances this year simply because we need to maintain the flexibility in dealing with our $4 million deficit problem in our TIF district over the course of the next 4 years. So that was $367,000. And then the other was that, what we discovered was happening was we were paying for salaries out of some other areas that we can no longer pay for them. The regulations on our TIF district say that we cannot use, we cannot expend any money except for bonds issued prior to April 1st of 1990. So we had, it was approximately $160,000 worth of salaries that were included in there that we've had to re-incorporate in the general fund. Curt Robinson: Can I see that reduction someplace else on some other line here then? Bruce DeJong: No you cannot. Because what it's done is it's transferred those expenditures from being supported through other revenues, to really only having general tax revenue able to support them. We're not able to take money out of those, we have to keep separate funds in governmental accounting and those funds are dedicated for specific purposes. And when the rules say that we can no longer use those funds for a certain expenditure, and we don't want to cut those expenditures, which you know in this case was salaries for our employees at City Hall that are performing not only TIF regulatory functions but also providing general functions, you know it's pretty hard to pay somebody ~ of their salary or something and expect to keep them producing full time. So we haven't cut any programs. We haven't added any programs. It's just that we're no longer able to pay for some of those expenditures out of the areas that we were... Curt Robinson: I would just ask you to bring that 18.4% or whatever it is, down to the maybe 5% range. I know for a fact that I get 3 ½ % increase in my pay next year so I think 5% increase is reasonable. Thank you. Acting Mayor Senn: Thank you. Scott Botcher: At some point do you want to open the public hearing? Acting Mayor Senn: Oh we did. In the first place, yeah. City Council Special Meeting - December 4, 2000 Scott Botcher: I thought you said we had to. Misunderstood. Frank Kurvers: Frank Kurvers, 7220 Kurvers Point Road. And I understand a couple years back that the City lost $4.7 million or something on tax bonds that they were.., is some of this that we're paying extra because of those bonds? Scott Botcher: I think, It's not anything that we're paying back but certainly it has had a detrimental affect, I'm sorry, detrimental impact on our cash balances. It's money we don't have now. It's money we would have if we hadn't have spent it, had we not lost it. So it's money that's lost. It's not that we have to pay it back. It's not a debt service issue, but it's just simply an asset that we no longer have. Frank Kurvers: But it's costing every taxpayer something. Scott Botcher: Oh it's certainly taken away some cash balances, some flexibility we otherwise would have. Frank Kurvers: Okay. Another thing with the theory that I've been raised on, when you have more industry, you get more growth and your taxes are supposed to go down. Now I've been in this community for 67 years and my taxes has nothing but gone up and up and up. Now when is that theory going to be reversed? Scott Botcher: My guess is that, my personal, and that theory works so long as you're not building a fairly residential neighborhood with kids going into schools. Because that being said, you know the school being the biggest part of the tax bill, they have a problem. They have a huge problem and they are the 8,000 pound gorilla on the tax bill and I'd hate to be in their shoes. I don't know what the answer is. I mean the gentleman in the audience brought up some very good points and he'd be well served to go to the school Truth in Taxation hearing this week and share those because I don't necessarily disagree with those but I'm not in the school business. We have had citizens make choices of services they want. This is frankly a community that has chosen a high level of service in a lot of different areas. We have the park and trail referendum where we have an extensive amount of our property that's non-taxable. That's a choice that's been made. And that's part of the community's values. You know there's a number of people in Chanhassen that would swear that what makes Chanhassen unique and special is the green space and is the open space and that's true, but like anything else that comes with a cost. And the cost in this case is that it's property that is largely non-taxable and that we do not generate revenues from. Frank Kurvers: Well actually there's probably in the past there was a lot of mistakes were made as far as industrial property and everything. When you zone property, whatever it is, it should pay for itself. It should be built into the program that eventually when the city is completely developed, that property should all pay and all the services you're talking about, we should have at a low cost. Bruce DeJong: Certainly you're correct in that the property should pay for itself. The way we've done a lot of our development though is through TIF districts, which we've offered incentives to developers who've come in and built those commercial/industrial properties and for the most part those TIF districts have not closed so that property is not off the general tax rolls. It's repaying some of those development costs and there will be significant amounts of tax capacity, property value that come back on line as we decertify those districts starting in 2004. Frank Kurvers: Is that a guarantee? City Council Special Meeting - December 4, 2000 Bruce DeJong: Oh that's a guarantee. Frank Kurvers: It's a guarantee that. Bruce DeJong: There will be, certainly right now our downtown TIF district is about $5.6 million worth of tax capacity. For the city at current rates that would generate about $1.2 million worth of general property tax revenue each year start with 2004. Frank Kurvers: But between the time now and 2004 though you've got to subsidize it so you put all that money in the same basket so where are we at? Scott Botcher: Well certainly between now and then. Acting Mayor Senn: If you can live through the next 3 years you've got it made, right? Scott Botcher: What you said is consistent with what we've been saying. Between now and then, what you see is what you're going to get in terms of city services. I don't see the money for really enhancing those services until we get some of these properties back on the tax rolls. The other thing that is a dilemma, and I haven't run the calcs yet on this thing is that when this property all comes back on the tax rolls, you end up dealing with the fiscal disparities part of it where we write a check into the pool and it's distributed amongst the have's and have not's across the metropolitan area. To date we have been, I'll say nicked by that. Once we these properties come off tax increment status and become fully taxable, the nick will become a cut. And our contribution to the fiscal disparities pools will increase marketly. Again I don't have the calcs yet. I sort of feel what Chaska pays and some of the neighboring communities. I know Todd and I have talked about so whatever increase we receive, you know doing the growth calculations like Bruce, will have to be netted against our contribution to fiscal disparities, which that legislation certainly could change between now and 2005. Frank Kurvers: It's the money that you couldn't take out of the TIF district you said from 19907 So what kind of money did you take out of the TIF district before 19907 Bruce DeJong: No. That's a restriction on what we can pay for starting in 2001. After April 1st of 2001, we will no longer be able to expend money out of our downtown TIF district on anything except for those bond payments for bonds that were issued prior to April 1st of 1990. Certainly there's been a lot of things that have been done in the downtown area utilizing TIF funds. The problem that we're experiencing is that because the property did not develop as rapidly as we had assumed in our projections, and because of the decrease in the classrooms, in the amount of taxes paid by commercial/industrial properties, we're experiencing a shortfall in that district, and in some other districts that we have established in town. Frank Kurvers: So the amortization over long term wasn't correct? Bruce DeJong: Exactly. Our projections were optimistic and that's led to some problems. Scott Botcher: And it was compounded by the rate compression. A1 Klingelhutz: One quick question. I know we have the school referendum that was passed on taxes would be paid this year. Are the library referendum taxes on the 2001 taxes payable? City Council Special Meeting - December 4, 2000 Bruce DeJong: The library referendum is not on the 2000 taxes. A1 Klingelhutz: Not on? Bruce DeJong: Not it is not. Acting Mayor Senn: His question was 2001. Bruce DeJong: Yeah, the 2000. Well, tax levy 2000 for collection in 2001. Acting Mayor Senn: Well but I'm just saying you need to say that because. Dave Happe: Dave Happe, 604 Summerfield Drive. I hope what our council is starting to hear with respect is that, that the citizens overall aren't real excited about tax increases, and I'm sure you guys aren't. Just read an article in the Star and Tribune a week or two ago and it stated that Chanhassen had one of the highest tax rates in the state. And I guess my question is being that we're not receiving any more services than Edina or Minnetonka or other cities that we compare ourselves to, is as we've plunged into this budget, what you all have taken a look at in terms of areas that we could cut to minimize the burden on the taxpayers. If we're looking out beyond 2001, and do we anticipate raising taxes in the future and what that plan looks like. And then lastly, what aggressiveness we can show at going after and targeting corporations and/or additional retail to move into Chanhassen to try to help us offset some of this tax burden that we have so. Scott Botcher: I think the issue, and Todd's here tonight and he can maybe address some of the CI development issues but I think the recruitment of CI has probably changed. Commercial/industrial has probably changed in Chanhassen from what it was in the past. What Bruce said before was entirely accurate and that there were significant incentives offered to parties to come to Chanhassen and build. You know I constantly joke with Todd that my dad is still mad at him for Pauly's Bar being gone because he used to go there with his air traffic controller friends all the time. But downtown Chanhassen is just significantly different than what it was, you know when I grew up in Prior Lake and came up here in the late 60's, early 70's and shoot, even until you know the late 80's Todd, it was a lot different place. And the investment the city made to bring the Byerly's, you know and the Targets and stuff to town was the tax increment district. And you know until 2004 and 5, that's just there and that's an issue that we're going to have to deal with. In terms of the taxation, the city actually ranked 30th SO we were in the second cortile and given the level of services that we provide to our citizens, to me I believe that's an accurate representation of where we are vis a vis our neighbors in terms of what we provide. In the past, and this pre-dates me, there have been discussions, attempts of doing such things as eliminating the lifeguards, which I understand was just a major uproar. And as we look to some of these things that we provide, and some of the commitments the citizens have made, it's very difficult to try to find those of any significance. We could certainly go through, well let's back up. The park and trail referendum for example. The maintenance of the green space, the open space and the trails that we have requires a significant commitment. The citizens made that commitment. They invested a substantial amount of money to have those facilities and for us to let those fall apart, not maintain them, is like taking their money and throwing it down a rat hole. We owe it to them to maintain that property. We have high demands in terms of the recreation services that we have. I mean we could certainly go through and eliminate some of the park and recreational offerings that we have. This room would be packed. I mean it would just, it would be really ugly, really fast. And you know the council has a tough job because I think that the services that they have, City Council Special Meeting - December 4, 2000 included in past budgets as well as this budget, they're services that citizens have asked them for. Or individuals up here have supported along with citizens. So we look, you know frankly since Bruce and I have been here, our goal has been to get, frankly when I was here and Bruce was, our first goal as directed by these folks was to, we don't know what's there but please go in and find whatever you find. And we've tried to do that. We've cut the number of funds down from being in the 50's. We're now down to the 30's and we keep cutting these funds down. We've done the multiple defeasances. We've done the state grant as it relates to TIF and to date we've taken in, in excess of $1.8 million with that. So those are the things that we've tried to do. We tried to leverage what we have. We tried to get our house in order. We have streamlined some of our operations. We used to have a public works director and a city engineer. When the opportunity presented itself, we re-consolidated that and eliminated one FTD. You know we'll continue to look at organizational opportunities in that respect as they present themselves, but quite frankly if you run the numbers of employees per capita and compare us across the Twin Cities, our numbers aren't out of whack. So frankly that's how we've approached it. The council can certainly give us you know whatever direction they want to do. If they look at me and say, Scott we want you to cut services by 25%, then that's obviously what we do. But to date we've tried to draw a balance between the fiscal austerity that we want to have, and the services that citizens also want to have. Dave Happe: Looking out past this upcoming tax year, where does next year rank, do we have this meeting again next year at the same time and talk about the same type of increases? Scott Botcher: Most generally the first Monday in December so you can make a reservation. You can book a table at Axle's. I think you know we, we're going to have to be, we're going to have to be really careful about a lot of different things. I've made no bones about it. Between now and the mid-2000's there's, we're working our way through day by day. And it's not to say that we're in bad financial shape because we're not. But we need to be careful because we've got some things that we just, we hit some land mines we've got to dodge. Again I don't expect there to be an increase in services provided to the citizens because I just don't think the money's there. You know estimating off the top of my head, I'm going to guess that what, 75% to 80% of our budget are personnel costs. Given the labor market right now in the Twin Cities, and I know all of you are employers or hire and fire people, recognize what the labor market is. Picture doing it when you're trying to do it in the public sector when you're basically not as competitive as the private sector in terms of retaining people. So that has an impact on turn over which sometimes affords opportunities to bring in people at a lower wage rate. At the same time, when you get to the higher professional levels, in the past when you were able to bring people in at 80% of mid-point for example, that's not even possible. So we've had to be creative some in how we do that. You know we've been able to take advantage of 8% growth in the community. I don't know if that's going to happen anymore. I mean I don't think Chanhassen is certainly going to dry up and not grow anymore, but I'd be the first one to say I wouldn't bank on 8% again. I think we need to be more conservative than that. You know we don't know what kind of development patterns we're going to have in the community. We have had, as Kate has mentioned, a serious drop off in the construction of new single family homes. That will impact necessarily park dedication fees, building permit fees and these alternative revenue sources that cities want to maximize but other decisions made can impact those. So I guess that's the best answer I can tell you. Dave Happe: Is there a point.., additional corporations and/or additional retail into Chanhassen to help offset some of this tax? Scott Botcher: Well at this time I don't think we necessarily face the problem of at least getting people out here anymore. I think it's, and I think Todd and Kate and council have done a really nice job, but what we face now is that we have a large amount of our citizens are saying that's enough. We don't want, you City Council Special Meeting - December 4, 2000 know we don't want commercial here. We don't want this here. We want it to be single family here. We don't want multi-family housing here. Those decisions are all fine but they all have different financial impacts because single family residential properties, while they're nice and they're valuable, from an economic point of view, sometimes you might make a different decision, if you made it purely on the economics. You might do that. Now not in every case but certainly in some cases. We could take Highway 5, if we opened it up just for CI and retail, we could strip that highway out in no time. But that's not what's in the comprehensive plan. That's not what's in the best interest of the city frankly, and I agree with that. We shouldn't do that. But again, like every other decision the community makes, that trade off has costs and so I guess that's the best. We have properties in the city that are zoned Cl. We've got people looking at them. But the city and the development community need to work in the best interest of all parties, which certainly includes the residents of Chanhassen who pay the bills. Dave Happe: Thanks. Scott Botcher: You bet, thank you. A1 Klingelhutz: 1999 to 2000? One more quick question. How much has the valuation in Chanhassen increased from And does that include the tax increment portion of it? Oh boy. The total market value. Yeah. Valuation. The total valuation in the city of Chanhassen compared this year to last On the existing homes, businesses? That number I don't have A1 off the top of my head. I don't have it off the top of my head either but I've got it in my calculations here. I don't think it's 400% though. Or 155%. Whatever it was. Actually the total market value in the city of Chanhassen went up 13.1%. Went up from $1,365,000,000 to $1,544,000,000. So that's a significant increase. A1 Klingelhutz: How much would the increase be in millions? Audience: $180 million. A1 Klingelhutz: $180 million? Bruce DeJong: About $180 million. A1 Klingelhutz: Okay. And that's what the Chanhassen bill levy also goes against that increase as part of the budget don't it? Bruce DeJong: Acting Mayor Senn: A1 Klingelhutz: year. Bruce DeJong: Scott Botcher: Bruce DeJong: Scott Botcher: Bruce DeJong: Is that your question Al, what the market value increase was? City Council Special Meeting - December 4, 2000 Bruce DeJong: Correct. We were estimating that 7.9% of that was due to new value coming onto the tax rolls and the remainder of that was increased. A1 Klingelhutz: spent... Bruce DeJong: I don't have that on a value basis. On a tax capacity basis, and you know this is a 3.4% of the value. Roughly. That was about $670,000. I didn't bring a calculator. Councilwoman Jansen: Would you like one? Acting Mayor Senn: Well while they're doing that, is there any additional comments? Do you want the Hennepin County district as well? Because we have a TIF district in Scott Botcher: that... A1 Klingelhutz: Scott Botcher: How much of that increase was in the tax increment district, which the City of Chanhassen Okay. Then we have to add those two together. Todd Gerhardt: While we have time here. To answer that gentleman's question, of that $1., how many billion? 3 billion, 12% of that is industrial value. So 12% of the market value is industrial. Bruce DeJong: The answer to your question is out of the total increase of about $180 million, about $43 million of that increase, you know rough numbers, is in the TIF district. A1 Klingelhutz: Okay. If that was all on the tax rolls we wouldn't be number one. Acting Mayor Senn: Well but again, we aren't as far as the city goes. Just so you understand. Bruce DeJong: Yeah, Carver County's number one. Acting Mayor Senn: I think, aren't they? that. Carver County's number one and our school districts are real close to it too. 1 and 2 Close to it. Chaska's number 1 and I thought Minnetonka was 3 or something like Scott Botcher: Minnetonka's about 5. Acting Mayor Senn: Yeah, somewhere in there. Okay. Are there any other questions? Mark Kroskin: Mark Kroskin, 9841 Deerbrook Drive. In listening to your comment, I feel your pain. I understand where all of the people that have spoken have come from but just being an individual that has sat into the November 16th TIF option meeting to cover the 7 ½ million dollar shortfall and just looking at the current budget proposal along with that 7 ½ million dollar debt that's going to have to be covered by Bruce over the next 4 years, the problem is basically is, there's so much debt service to be covered in the next 4 years, that's why you're not going to see an increase in services, and that's why the tax rates are going to be going up. And there's a number of proposals on the books, the options from the TIF meeting, City of Chanhassen. City Council Special Meeting - December 4, 2000 and you were saying that we're going to stop collecting increment after April 1. 2001. Or that's when we're supposed to. Bruce DeJong: Well that's when we have to stop expending increment. Scott Botcher: We can collect increment... Mark Kroskin: Okay. But there's a number of assumptions that were made in that meeting, just looking at the TIF grant program. We thought we were going to collect a million 89 for this year. We collected roughly about $600,000, right? Bruce DeJong: Correct. Mark Kroskin: And we're assuming about $1.8 million in collections next year in the models that were presented, right? Bruce DeJong: Correct. Mark Kroskin: So of the $6 million TIF fund total, if those hold true, Chanhassen's going to collect about 3.2 million of that 6? Roughly? I mean I think that $1.8 million assumption for the next year is pretty aggressive considering we only received $600,000 this year, correct? Bruce DeJong: That's correct. Mark Kroskin: So some of the assumptions that were made in this meeting were pretty aggressive and you've got about a $1.2 million dollar swing just in that assumption alone in some of the options that were discussed in that meeting to pay down this TIF debt. So we're going to be anywhere between you know maybe a $4 million problem. It was 7 ½ million dollar problem you know with other ramifications there. And then just looking at the budget you know we're pretty aggressive on our building permit revenue for 2001. I think I'm looking at your bottom line is about $1977 Bruce DeJong: That's the net. Increase. Mark Kroskin: The net. Increase. You know and there's some variables in the budget right here. But I think until, you know as a taxpayer, my property taxes went up about 11% and I calculated my city tax rate before I came over here and it was about 9.1%. You know I'm not happy about it either. I'm not happy about the level of services in this town for what we're paying, but I also understand the massive amount of debt that we have to overcome in the next 4 years. And in looking at the current tax levy, along with the surplus that's now roughly about $1.3 mil, I guess from my perspective, until our city, you and Scott and our council has a handle on how we're going to handle the TIF problem, and really have this budget knocked out, I just can't see justifying lowering the tax levy beyond where it is now and you know I think the surplus should be set aside or at least held in reserve in case we need it down the road. That's just my point to the council is to do everything we can in the interim to manage this problem. And in '97 and '98, when the legislature changed the tax rates 25%, not a lot was done within our organization. The city organization to start managing for this TIF debt. This TIF shortfall and it's really getting seriously addressed at this point. And I realize that Scott and Bruce came on what, in the last year and a half, so they're getting their arms around it but there's just been a lot of factors that have gone into this. So I City Council Special Meeting - December 4, 2000 certainly understand everyone's frustration and.., tax increase and I certainly feel it myself but the problem is there's just so much debt out there, the city's got to overcome it. There's just no two ways about it. A1 Klingelhutz: In fact the library referendum is coming on next year. I don't know how that's going to affect next year's taxes. It will probably increase it again. Mark Kroskin: What is it, about a percent, 1.2 percent? 1 ½ percent? Is that what it's going to kick us up? Bruce DeJong: I don't know what the library is off the top of my head. Mark Kroskin: A couple of points. Scott Botcher: But it certainly is an impact to taxes. Mark Kroskin: Yeah, you're right. That's going to be on it too. So I guess my point is, is hold the tax levy and hold the reserve or hold the surplus in reserve until the council along with our city manager and our finance director can really get a handle on how we're going to deal with the TIF problem and how it's going to impact us along the way. Thanks. Councilwoman Jansen: Thank you. Acting Mayor Senn: Anybody else? Bob Ayotte: According to the Chanhassen Villager, my name is Frank Mendez. Just had to get even. My name's Bob Ayotte, 6213 Cascade Pass. Everything that's been said is very, very important. A key comment that this gentleman made, I think his most key, the council because of circumstance last year may have, I don't know if this is true Bruce, may have worsen the situation. Not on purpose but by lowering the levy last year, it added a little bit of debt. Is that true? Bruce DeJong: No. It didn't increase the debt at all. It simply lowered the amount of general fund surplus, general fund balances. Bob Ayotte: Okay, but if we were to address lowering the levy this year, that would exacerbate the problem. Bruce DeJong: It just limits the flexibility that the council has in dealing with our other debt problems as they come up. Bob Ayotte: The point though of reducing operational expense and generating revenues is a key point that this gentleman made. Bruce DeJong: That's correct. Bob Ayotte: Has the, and I've only been in and out a little bit since I'm going to be, I'm a councilman elect, but with respect with taking a look at other cities that may have comparable situations. I know Chaska's put in a golf course and so on and so forth. Have we taken initiatives to evaluate potential opportunities along that road? Following this gentleman's recommendation. City Council Special Meeting - December 4, 2000 Scott Botcher: We have talked just in general about some of the enterprise opportunities that are out there but quite frankly we have been, as the council's heard the term, hording cash. We've been hording cash just to meet the debt issues that have been out there. I can't in good conscience recommend we go out for example and buy a whole bunch of property and put in a golf course. I know in Chaska they. Bob Ayotte: I didn't say go out and buy. Scott Botcher: No, just as an example. I guess maybe we're taking the more conservative approach at this point in saying you know, we've got to get our hands around the debt. We want to get our financial house in order. And so that's the approach we've taken frankly. We haven't, you know Todd and I have talked about well geez, and this is before the two cable companies came into town. Maybe we should go into the cable business. Triax is a terrible cable company. People seem to complain about them. We have the right-of-way's. Maybe we should go into the cable business. Soon thereafter we had two cable companies come in and do their pitch to us and at that point it became less attractive to us, to consider going for, to go into the enterprise fund of the cable business. We don't have an electric utility. We do not obviously have an electric utility. The City of Chaska spins off an incredible amount of cash with their electric utility. I don't remember the amount any more. Maybe you do. We haven't looked at it for a little while but that certainly is an advantage that the City of Chaska has, is that that generates a significant amount of cash for them. We don't have that opportunity. So we have, you know I don't disagree with what you said, and I think over the long term, it makes a lot of sense to do that. Our goal since we have been here is just to figure out what's in here and get our hands around it. So that's been our approach. Bob Ayotte: I understand, and you've hit the objective. We're going to be doing everything we can to manage the debt but does it make sense to activate some sort of effort to research the possibility of generating revenue? If the answer's no, the answer's no. Scott Botcher: I think pursuing alternative revenue sources, alternative to the...tax is always a good idea. We to date haven't pursued anything more specific than defeasing our debt and leveraging the cash we have. Bob Ayotte: And you did agree that operational expenses are an issue that we have to address. Scott Botcher: Oh yeah. And I think the council does every year. They look at them as they go through the department budgets line by line. Bob Ayotte: No, I mean beyond that. In terms of the city staff incentivizing efforts to. Scott Botcher: Oh sure. I think there's all sorts of things that we can look at. You know the council has to be comfortable with the level of service they want to provide to their citizens. That largely drives the necessity for staff and operational expenses. O & M expenses to what we have. If we didn't the trails and the green space, our operational expenses would be reduced. But that's a choice that's been made in this community. If the council decides to make choices away from services they provide now, then we can do some things with it. And I do agree. I think over the long term we need to look at what we provide our citizens as services. Bob Ayotte: So that is an option? City Council Special Meeting - December 4, 2000 Scott Botcher: I believe it is. Bob Ayotte: Go back to the community and revisit what we provide to see if the community has an interest, not the council. But if the community has an interest in revisiting some of the things that we do. Scott Botcher: Yeah, I personally don't have a problem with that but obviously it's ultimately a council decision. Bob Ayotte: Okay, thanks a lot. Acting Mayor Senn: Has this been entered into the record? Scott Botcher: I did not receive that. Bruce did and I guess I'd ask him to address that. Acting Mayor Senn: Okay, well I'm not sure there's anything to address. I just want to make sure it gets entered into the record. We have one letter concerning tonight from someone who could not be here. Dear Mayor and Council members. My name is Carol Watson. I live at 7131 Utica Lane. Lot 10, Block 3, Greenwood Shores is my legal description. I feel my taxes have been too high for several years now. I live on a fixed income and am totally disabled. My tax statement came last week payable 2001. I'm being driven out of my house. I have lived here for 28 years now and am hanging on by my fingernails. I can't see my taxes going up and up. I would very much like an opportunity to seek some relief. Thank you in advance for consideration. Carol Watson. So that is in the record and you do have a copy of it then? Okay. Any other comments? If not we'll close the, do you want to close the Truth in Taxation hearing then? Bruce DeJong: Yes. Acting Mayor Senn: Okay, we'll close the Truth in Taxation hearing and again tonight's presentation and numbers are staff's recommended budget. The council will be considering that and making final deliberations on that at their December 11th meeting, a week from tonight and stuff so. With that, meeting adjourned. Acting Mayor Senn adjourned the meeting at 8:10 p.m. Submitted by Scott Botcher City Manager Prepared by Nann Opheim