TRUTH IN TAXATION 2004 12 06
CHANHASSEN CITY COUNCIL
SPECIAL MEETING
DECEMBER 6, 2004
Mayor Furlong called the meeting to order at 7:05 p.m. The meeting was opened
with the Pledge to the Flag.
COUNCIL MEMBERS PRESENT: Mayor Furlong, Councilman Labatt, Councilman
Ayotte, Councilman Lundquist and Councilman Peterson
STAFF PRESENT: Todd Gerhardt, Justin Miller, and Bruce Dejong
PUBLIC PRESENT:
Peter Klinkenberg
Qingshan Niu
Bethany Tjornhom
Bryan McCoskey
6351 Oxbow Bend
6991 Country Oaks Road
6321 Trap Line Circle
6720 Pointe Lake Lucy
TRUTH-IN-TAXATION HEARING.
Mayor Furlong: Well good evening and thank you for those that are joining us here this
evening. This is the Truth in Taxation hearing for the 2005 levy and budget. Tonight
we're going to receive a presentation from our city staff, our Director of Finance with
regard to the proposed levy and budget for the coming year. And then we will open up to
the floor, the podium for public comment. We are not going to be making any decisions
this evening with regards to the budget. We will consider those, the budget and the levy
at our meeting next Monday night, December 13th. At our regular council meeting that
begins at 7: 00. So with that, let's move to the one item on our agenda this evening and
I'll defer to our Director of Finance, Mr. Dejong for a staff report. Good evening.
Bruce Dejong: Good evening Mayor Furlong, members of the City Council and
members of the general public who are here tonight or watching on TV. I'm going to
walk you through the steps that we go through in order to get to this point where you've
actually received a proposed property tax bill for 2005, which is individually based on
each parcel in the City of Chan. What we have to do is we have to walk through in this
presentation about 5 different steps. We have to determine, this was actually based in
state law. It says that at this hearing we're supposed to go over the 2005 budget. We're
supposed to present the 2005 tax levy. We're supposed to discuss changes in both of
those. We're supposed to adopt or to open a public hearing and accept public comment
on both the budget and the tax levy. And then we're supposed to close that hearing and
wait one week, at least before we make any decision to finalize those budget and the tax
levy. So we'll do that tonight. Have the public hearing after my presentation and then
we'll wait one week until you're regularly scheduled meeting on December 13th before
we propose to take any action on this budget for 2005. The process that we've gone
through to get here is fairly lengthy, starting back in July when department directors
City Council Truth in Taxation Hearing - December 6, 2004
present their proposed original budgets to me and to the city manager. We review those
in August and then have a discussion with you, well actually several of them prior to
adopting a preliminary tax levy by September 15th of each year. Then we have some
detailed budget meetings. Each department head comes in and goes through in fairly
extensive detail what the changes are in their department. Why they're recommending
them and what the outcomes are expected to be based on those budget changes. Then we
have our Truth in Taxation meeting tonight to accept the public comment and we adopt
again as I said next week, Monday. Our 2005 general fund budget actually is going down
by 4.3 percent. That seems a little strange but I'll walk through that quickly. What's
really happened is basically this budget is an inflationary budget for the most part but
there are some increases in personnel costs to keep up with the growth in population that
we've experienced in the past few years. Those increases are primarily in the law
enforcement with our Carver County Sheriff s contract, but we also have another full
time position we're proposing in our planning department and we're proposing to add
part time staff in our engineering department. So what's happened is those departments
are seeing some fairly large increases. The rest of the areas are seeing basically
inflationary increases and we've reduced our transfer to debt service that we've had in
there the past 2 years down to zero, which leads us from approximately 8.7 million
dollars down to about 8.3 million dollars. That has led to a reduction in general fund
property tax levy of a 2.4 percent. We do have some increases in our intergovernmental
revenue which is primarily aid which goes to pay for our fire relief association for our
volunteer fire fighters. And then we've had a change because of our prosecution contract
with Campbell-Knutson that we are anticipating a much higher increase in the amount of
fines that are actually transferred to us from Carver County, but that is offset by an
increase in expenditures in the legal services budget. Our general fund expenditure
history, as you take a look at that, you can see that for the past couple of years we've
actually gone down from our 2002 level. That's been primarily driven by decreases in
state aid in the form of the market value homestead credit. We lost about $300,000 of
that mid-year in 2003 as the legislature confronted their budget problems, the $4.5
million dollar deficit that they had. For 2005 we're showing that increase basically to
fund the services that have come about because of increased population. What I talked
about earlier, but we're also not anticipating receiving any of that market value
homestead credit again as the state faces another budget, I believe the governor called it a
foothill but it's 700 million to 1.4 billion dollars, depending on whether you include
inflation or not. So the state is continuing to have problems which we believe will
continue to affect our budget. What changes? We talked about already the personnel
services that are basically due to growth and to the development that's going to be
occurring down south of Lyman in our 2005 MUSA area, and along the new Highway
212. Other personnel costs are increasing basically inflation slightly higher than that for
health insurance this year but I feel that's a very, a very good increase given what's
happened to the rest of the market. So total operating expenditures increased by about
5.7 percent. Our transfer to debt service is eliminated out of the general fund, and the net
effect is a 4.3 percent reduction in our general fund budget. Now how does that translate
into levies? There's two different types of levies that the city is involved with. One of
those is tax capacity which is based on a percentage of the market value of your home.
So for those levies the general fund is actually going down about 6.1 percent. Our special
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City Council Truth in Taxation Hearing - December 6, 2004
assessment levies are going down about 55 percent. Our general obligation debt service
is going up substantially, 131 percent, and our economic development authority debt is
going down about 21 percent. Now those levies are a lot lower than the general fund levy
so that's the big driver. But the two things that you see that really stand out on this chart
are that we have new levies that we didn't have certified to the county in 2004. The
$800,000 is for capital replacement fund. That is to fund our equipment purchases with
cash rather than having to bond for that on an annual basis. Staff is estimating that if
we're able to do this, that we will save someplace in the neighborhood of between 75 to
90,000 dollars annually because of not having to pay financing costs on an $800,000 debt
service, and not having to pay the issuance costs, which is basically like an origination
fee for issuing debt. So we're proposing this year that we would do that on a cash basis
rather than creating new debt for ourselves to cover that on an ongoing basis. And the
second thing is the MSA fund which is really maintenance of streets, parking lots and
trails throughout the city which is seal coating. You know patching. Minor overlays,
but generally not major reconstruction of streets. And we're proposing to fund that at a
$385,000 level. We're having this new tax levy that we're putting in place, along with
using some fund balance that's existing in the MSA fund and we're also using a
substantial portion of our annual allocation from the State of Minnesota to fund this. So
we still receive about $400,000 we're estimating for next year in total MSA funds of up
to 25 percent can be used for maintenance activities and the remainder is for new
construction activities. The net effect is our tax capacity levies are going up about 10.6
percent for 2005. The other type oflevy that we have is called a market value levy and
the difference between this and the tax capacity levies is that it's based on the full market
value of your property and not just a percentage. The tax capacity based levies, what
happens is businesses and apartment buildings and there's a whole list of properties that
are taxed at slightly higher rates than residential, so to address this a few years back the
legislature decided that all new levies for referendums from the city would be funded
through tax capacity base where a dollar of residential property pays the same amount as
a dollar of commercial property. This, whoops. I have a small error on here. I apologize
for that. We have about 1.3 million dollars in 2004 and it's up slightly in 2005, up by
about $40,000. I apologize for that. The percentage changes are correct, but I did make a
mistake in transferring that total tax market value levy over. So that's up about 2.9
percent. And that will continue increasing up for several years as our park referendum
was designed to increase on an annual basis up through 2008. Net effect on our debt
service levies, our debt levies will increase about $243,000 and that will be mitigated by
our downtown TIF district and the Eden Trace district coming back onto our general
property tax rolls. As I mentioned the debt service continues to increase until 2009 when
we have park referendum is mostly completed and that levy actually drops down by half.
Here's a chart that shows our debt service levy projects over the course of the next few
years, starting in 2005 we're up $243,000 and slight increases then out until 2008. The
net tax levy effects, just to try and summarize all the information that I went through is
that our general fund levy is down about $400,000. Our debt service levies are up
$243,000. We've got some new capital replacement and MSA levies that are in there,
with a net tax levy increase of about $823,000 or 9.5 percent. Now that would seem to
translate into a fairly large impact on an average property taxpayer, but because of those
tax increment districts going away, the average property owner who's got an increase of
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City Council Truth in Taxation Hearing - December 6, 2004
about 10.7 percent will see a property tax reduction from the city portion of about 4
percent. And the reason that is is because the City of Chanhassen actually is raising a lot
more taxes this year. We have tax increment revenues coming in from our downtown
district of about $3.8 million dollars and the Eden Trace TIF district brings in over
$400,000, so that's about $4.2 million dollars worth of tax levy that is coming in here this
year. Next year, because those tax increment districts are being decertified at the end of
the year, that property tax is re-distributed back to the city and the county and the school
district and other property taxing jurisdictions in accordance with the tax levies. The City
ofChanhassen is about 25 percent of that levy as a general rule of thumb. So that means
that that property would generate something in excess of you know a million dollars in
new taxes for us. So by increasing our levy by less than that for 2005, the average
property taxpayer will actually see a reduction. So the staff recommendation is to go
ahead and hold the property tax hearing tonight. Excuse me.
Mayor Furlong: ... recommend a reduction.
Councilman Ayotte: He's all choked up over it.
Bruce DeJong: No, I'm very happy to be able to do that. It's been a long time a coming.
But hold the public hearing tonight and then adopt the tax levy and the budget as shown
next Monday. So that's it for my presentation and I'll be available for questions.
Mayor Furlong: Thank you. Does the council have any questions for Mr. DeJong at this
time?
Councilman Labatt: No sir.
Councilman Peterson: No.
Mayor Furlong: Okay. At this point then I'd like to open up the, as a public hearing.
This is our Truth in Taxation hearing so residents, other property owners are free to come
forward and address their comments to the council with regard to the proposed levy and
budget. If you'd come forward to the podium. Please state your name and address
please.
Jack Atkins: Sorry, I've got the wrong week. I'll see you guys next week.
Councilman Ayotte: Nice seeing you though.
Mayor Furlong: Yeah, thanks for coming Jack.
Councilman Labatt: Take care Jack.
Mayor Furlong: Okay, good. Would anybody like to come forward and make comments
to the City Council? If not I would proceed to close the public hearing so this will be the
last call. Very good, we will close the Truth in Taxation hearing at this point. I'll bring it
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City Council Truth in Taxation Hearing - December 6, 2004
back to council for any comments at this time. We will be addressing or considering the
adoption of the levy and budget at our next meeting so there will be more discussion I'm
sure from council as well but if anybody would like to say anything now, they can.
Hearing nothing.
Todd Gerhardt: Mayor, I will be around and Bruce DeJong will be around after the
meeting if anybody has any personal questions regarding your Truth in Taxation
statement. Please don't hesitate to grab either one of us. There's been a few changes this
year with limited market value affecting your value. Bruce or I can help answer any
questions you may have on that.
Mayor Furlong: And Mr. Gerhardt, I assume they can call during the week as well, to
City Hall and ask for either Mr. Gerhardt or Mr. DeJong. Good, if there are no more
comments, that is the only item that we're going to consider this evening so at this point,
if there's nothing else to come before the council, is there a motion to adjourn.
Councilman Labatt: Motion to adjourn.
Mayor Furlong: Is there a second?
Councilman Lundquist: Second.
Councilman Labatt moved, Councilman Lundquist seconded to adjourn the Truth
in Taxation hearing. All voted in favor and the motion carried. The meeting was
adjourned at 7:20 p.m.
Submitted by Todd Gerhardt
City Manager
Prepared by Nann Opheim
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