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CC 2016 12 05 CHANHASSEN CITY COUNCIL TRUTH IN TAXATION HEARING DECEMBER 5, 2016 Mayor Laufenburger called the meeting to order at 7:45 p.m. The meeting was opened with the Pledge to the Flag. COUNCIL MEMBERS PRESENT: Mayor Laufenburger, Councilman McDonald, Councilwoman Tjornhom, Councilwoman Ryan, and Councilman Campion STAFF PRESENT: Todd Gerhardt, Chelsea Petersen, and Greg Sticha PUBLIC PRESENT: Ruby Beebe 874 Kimberly Lane Dennis Rakocy 880 Kimberly Lane PUBLIC MEETING ON THE PROPOSED 2017 BUDGET. Mayor Laufenburger: Thank you and welcome to this council meeting. This is the annual Truth in Taxation meeting. This is a time for public hearing and we do have an agenda item which is the public meeting of the proposed 2017 budget and Truth in Taxation. Mr. Sticha do you have a staff report? Greg Sticha: I do. Mayor Laufenburger: Alright. Greg Sticha: Thank you Mayor and council. Thank you for all those that are joining and listening to us at home this evening as well and I’m going to go through my entire presentation but with the basic understanding that this evening’s meeting is based on the preliminary levy that City Council set in September. This is not the final step in the budget process. The council will be deciding a final budget and levy next week at the City Council meeting but just to be clear for those at home listening in, tonight’s numbers are in large part based on the levy that the City Council set in September. Mayor Laufenburger: And isn’t it true Mr. Sticha that the levy that was established as the preliminary levy was the basis for the preliminary property tax statements that were delivered to Chanhassen residents within the last couple weeks is that correct? Greg Sticha: That is correct. Thanks for reminding me of that. The County uses the preliminary levy to send out the Truth in Taxation statements which all the residents should have had by now. If you did not get one certainly talk to Carver County or call the City and we can make Chanhassen City Council – December 5, 2016 Truth in Taxation Hearing sure that you get a copy of your statement. So let’s go through the process the City went through in setting the budget. The preliminary budget as well as what we’ll go through to set the final budget. We began budget discussions with the City Council actually in June. In July staff submitted, the department heads submitted their budget requests to Todd, the City Manager and myself. In August City Council had their first review of the requested budgets and had a detailed presentation of the general fund budget to the City Council. And then at the end of September th the City Council on September 26 approved a preliminary levy for the basis of the Truth in Taxation statements that went out a couple weeks ago. This evening we’re holding the public budget meeting or the Truth in Taxation hearing to give residents a public comment period on their statements and the levy that was set by the City and then next week the City Council will adopt a final levy and budget. So let’s take a look at the difference between the 2016 and the 2017 budget, and this is broken out by category. An increase in the total budget of 4.8 percent or right around $500,000. There’s no one significant department or account that I guess you could say is the basis for the increase and I’ll go over a couple of items here in a minute in one of my future slides but across divisions and departments similar increases across the board. Increases in part due to wage increases, health care cost increased and other insurance increases and we’ll go over those shortly here in a few minutes. Again by division, no significant difference in any of the divisions. A total preliminary budget of $10,947,000 and we’ve included a column for council’s prerogative and I guess for the residents that might be watching. Column 4, what staff’s recommending for a final budget for next week’s meeting and we’ll get into more detail th about that at our next meeting on December 12 but we wanted to give for comparative purposes what we’re looking at a final budget. Now one thing to keep in mind this is not the levy. This is the actual general fund spending that we’re looking at here. We’ll get into the actual levies in just a moment. There’ll be no staff recommended change in the preliminary levy as compared to what we’re recommending for a final levy. There is however going to be a small recommended change in regards to an insurance adjustment that staff was presented with and that we’ve already discussed with council at a previous meeting that needs to be taken care of. On the revenue side again across the various revenue line items no significant change. The largest change is in property taxes itself. License and permits relatively flat. Intergovernmental revenues on a percentage basis it looks like a large dollar amount but for the most part relatively flat. Charges for services flat. So from a revenue standpoint the property tax levy in the general fund is increasing to pay for the expenditures in the general fund. So what changed from 2016 to 2017? Why the increased expenditures? Most of the line items did remain flat or with slight inflationary increases and general fund spending did increase by 4.4 percent. That was based on the preliminary levy. The number based on the final levy is 4.8 percent or roughly $500,000 but for Truth in Taxation statement purposes I wanted to use the number that was based on the preliminary levy. We include wage adjustments of 4 percent for staff. We’ve added a portion of a position that was a part time position. Now a full time position in the senior center. We had health care cost increases. Again this was at the time of the preliminary levy of 20 percent. The final number came in at 13 percent and we had new growth for taxes payable in 2017 of 1.56 percent which included the decertification of TIF number 5 and number 9 and in regards to that I have some good news that I’ll show in a later slide. So here’s a look at the actual levies of the City by levy type with the 2016 final levies. The 2017 preliminary and then the staff 2 Chanhassen City Council – December 5, 2016 Truth in Taxation Hearing recommended 2017 final levies. In total no change between the preliminary and final. The change between the previous year’s levy and the final is the 1.56 percent or the new growth that the City experienced. Taking a look at the history of the City’s levy as compared to new growth over the last decade you can see in every year going back to 2008 the City has set the final levy either at or below new growth. In 2008 we did add a couple of positions that impacted the budget and we did have a levy that exceeded the new growth in that particular year but as consistent with other previous City Councils City Council this year set a preliminary levy at new growth and some previous City Councils have set a final levy less than that and some have not. But that shows a graphical history of the new growth in the city versus the change in the levy. So what was the impact on the homeowners based on the Truth in Taxation statements they received a couple weeks ago? In general the average home increased in value by a half a percent so that’s kind of the bogie that we look at in terms of when we’re setting the preliminary levy so in theory if the City sets a preliminary levy at new growth, in other words the new homes constructed in the city and the average home increases a half a percent in taxable market value, if that is the case for your home you will see no change in your city portion of your property tax. I’ve randomly, well not randomly. I went through and looked for property tax statements based on the preliminary levy that council set and tried to look for different valuation properties and how they compared to the average and if it made sense based on what the City Council set as a preliminary levy as to what we saw on the Truth in Taxation statements and what I found was that it appears if your home saw a greater than half a percent increase in it’s taxable market value you still saw a reduction in the city portion of your property tax and I’m fairly certain that is to do with the calculation of the decertification of TIF districts 5 and 9. They amounted to more than what we calculated earlier. In other words they had a better impact or more of an impact on having those properties come back on the tax roles than we had anticipated earlier this summer and fall. It’s good news in that the City’s portion of the property tax will be lower than we even thought when we set the preliminary levy and it means the majority of homes will see a reduction in their city portion of their property tax bill. Mayor Laufenburger: So Mr. Sticha say again, if somebody had the property value increase by, did you have one half percent or less? Up to one half percent. Greg Sticha: Up to one half percent. Mayor Laufenburger: So if they saw less than a one half percent increase in property value then likely their property taxes will go down. Greg Sticha: Their city. Mayor Laufenburger: Excuse me the city portion. Greg Sticha: Yep and what I found was it actually is even larger than that. Even though the market value, the overall market value changed by half a percent what I found when looking at a number of tax statements is that if your property increased by a value of even 1 or 1 ½ percent 3 Chanhassen City Council – December 5, 2016 Truth in Taxation Hearing you still saw either zero change in your property tax bill, the city portion or a decrease. So what that means to me is that the decertification of TIF 5 and 9 had a greater impact on the overall tax levy than we had calculated originally. Mayor Laufenburger: But the corollary to that is if somebody saw perhaps a 5 percent or as you’ve demonstrated here, even a 2.2 percent change in their property value they likely saw, will see a modest increase in their property taxes city portion. Greg Sticha: That is correct. Mayor Laufenburger: Okay. Greg Sticha: So this graph shows the property taxes broken out by jurisdiction. This is a property tax statement in school district 112. Roughly 44 percent of your property tax bill goes to the school. 31 percent to the county and the city receives about 20 percent of your total tax bill. 5 percent other taxing jurisdictions such as the watershed and Mosquito Control District. What we do every year is we compare ourselves to our key financial cities. Key financial strategy cities and we do this in a number of areas including spending and property taxes. So what this graph represents is the budgeted expenditure increases from 2015 to 16. At this point we still don’t have data for taxes in 2017 so this is the most current data that we would have available to us but this representation shows that compared to other cities like us the percent that we increased in expenditures from 2015 to 16 was below the average or in line with our comparable cities. Our increase at 3.2 percent with the average being 4.4 percent. Every year there’s going to be some cities that are going to have larger increases. Chaska saw a budgeted expenditure increase of almost 10 percent and then some cities that are going to be typically either zero or in some cases less than zero. This City Council and city management has taken the approach of keeping spending on a direct, not a significant increase from year to year. Rather than fluctuating wildly in terms of larger percentages followed by lower percentages, taken a steady approach and having spending increases mirror either our inflationary costs or the expenses that are driving our budgets. Taking a look at our budget expenditures as compared to other Carver County cities, again we compare favorably with our average at 3.2 with the average in the county right around 5 percent. Another measurement tool is to benchmark our per capita spending. How much we’re spending per resident. Mayor Laufenburger: This is general fund spending. Greg Sticha: This is general fund spending and again we compare very favorably. We are the lowest of all of our KFS cities. All of our comparable cities with the average being $549 per capita and us being the lowest at $424. Looking at Carver County again we are the lowest with the average being $499 and us being $424 and the second closest is Carver at $483. Another measurement tool is the City’s tax rate and taking a look at the City’s tax rate as compared to, well in this case we’re comparing our tax rate to the other jurisdictions to other cities in Carver County. In 2016 we had the lowest tax rate in the county with the average being around 61 and 4 Chanhassen City Council – December 5, 2016 Truth in Taxation Hearing based on the preliminary levy set by all the cities in Carver County we again will have the lowest tax rate and the gap between us and the next lowest tax rate is increasing. It’s even further than it was from previous years tax rates. We also compared ourselves to Hennepin County and tax rates we see in Hennepin County and we are among the lowest even in Hennepin County with only one other city that we’re aware of with a lower tax rate than our tax rate in Hennepin County. Now this is based on 2016. We don’t have 2017 data available for Hennepin County but based on 2016 tax rates again compare very favorably to the average and we’re among the lowest, in this case the second lowest. So at this point City Council will meet next week to finalize a budget and set a final levy. There are no other action points or items in regards to anything that needs to be done with the budget tonight so I guess I would just ask the council to open up the public hearing portion of the meeting. Mayor Laufenburger: Okay thank you Mr. Sticha. Before I do that, council are there any questions of Mr. Sticha? Okay. At this time I will open the public hearing on the Truth in Taxation hearing. If there’s anybody present that would like to address the council regarding the preliminary budget. Preliminary property tax levy as assigned in September, now would be an appropriate time to come forward. State your name and address for the council and we’d like to hear what you have to say. There being nobody who’s coming forward at this time I will close the public hearing. Mr. Sticha is there anything else that you are requiring from us tonight? Greg Sticha: So that will be it. If council does recall last week we talked about a conversation we had in regards to the workers compensation premium. We finalized a few more numbers on our health care election forms that essentially amounted to $15,000 to the good for the City so if you recall we were talking about a $59,000 additional expense for the 2017 work comp that we had not previously planned on. That number is now down to $44,000 so next week we will be discussing staff’s recommendation for that $44,000 and then setting the final levy. Mayor Laufenburger: So keep, we have to remember that we did not establish a preliminary budget number. What we established was a preliminary levy number and by state statute we cannot increase that levy in the final decision. Whereas in the case of the budget we will discuss the budget in it’s final form next Monday night is that correct? Greg Sticha: Yep, two separate discussions. Todd Gerhardt: Can only be lower. Greg Sticha: The levy. Mayor Laufenburger: Same or lower is that correct? Todd Gerhardt: Yep. 5 Chanhassen City Council – December 5, 2016 Truth in Taxation Hearing Mayor Laufenburger: Okay, alright. Thank you very much Mr. Sticha. Appreciate your preparation. I did want to add one thing too. I learned earlier today that your finance department is to be congratulated Mr. Sticha. That the Government Finance Officers Association reviews are comprehensive annual financial report on an annual basis and I learned today that we th received an award of excellence in financial report for the 24 year in a row and so congratulations to the finance department in your reporting and a special kudos to Danielle Washburn. I know she’s very involved in the preparation of that financial report so 24 years in a row Greg. Keep it going. Greg Sticha: Thank you. Like I said in my email the credit goes to Danielle and Redpath and Companies. They do an excellent job preparing that document so that it meets the award of excellence. Mayor Laufenburger: Good, alright. Well pass along our congratulations to Danielle. Greg Sticha: Will do. Mayor Laufenburger: And to Redpath. There is one more item on our agenda tonight and that is to announce the results of the City Manager’s Performance Review and performance evaluation. ANNOUNCE RESULTS OF CITY MANAGER’S PERFORMANCE EVALUATION. Mayor Laufenburger: Each year as is required by statute and by the contract we have with Mr. Gerhardt it is the City Council’s responsibility to review the performance of the city manager who is accountable directly to this council. It’s my privilege to share the results of the 2016 performance evaluations for City Manager Todd Gerhardt at this time. The City Council met in executive session on November 28, 2016 to review Mr. Gerhardt’s performance for this past year and earlier this evening council met with Mr. Gerhardt to provide our observations, comments with him directly. To begin each year the City Council, working with the city staff establishes annual goals and strategies. These goals then become the work plan that City Manager Gerhardt operates against throughout the year. Working with his department heads and City Council Mr. Gerhardt guides and coordinates these strategic initiatives along with the normal operating of all aspects of city services for the community including anything that may come up on a moments notice. So tonight on behalf of the entire council I offer these comments from these discussions. The City Council has rated Mr. Gerhardt’s performance for 2016 as exceptional indicating that he consistently achieves the highest level of performance in his duties and often achieves above the level of expected or anticipated results. Some of the key highlights of this past year include, Mr. Gerhardt guided the City Council on a decision to participate in a solar garden technology that will save city taxpayers over one million dollars in utility costs over the next 25 years. Mr. Gerhardt also provided major energy and impetus for gaining support for State funding on the Highway 101 up the bluff project and this will continue during the coming biennium as well. He provided essential answers on the west water treatment plant project and the end result is that the timing of that plant project means it will be built with substantial savings to, substantial savings 6 Chanhassen City Council – December 5, 2016 Truth in Taxation Hearing over the original estimates. More than $3 million dollars in savings. As pointed out in Mr. Sticha’s presentation Chanhassen is still the lowest tax rate community in Carver County. This th is based on preliminary 2017 levies. Also this past year Chanhassen celebrated it’s 50 anniversary of the fire department and under Mr. Gerhardt’s leadership had a very successful th memorial dedication at the fire station commemorating the 50 year of our volunteer fire department. Major plus for the last year is Chick-fil-A is coming to our community. This Chick-fil-A is a restaurant that was frankly rescued from the jaws of defeat and with some successful participation on behalf of both the City and the developer and Chick-fil-A they will be here and they will be serving their delightful cuisine some time next year. Another very successful point was the transition of the front office organization at city hall following Karen Engelhardt’s retirement after 43 years of service back in January and done successfully and without a hiccup. Certainly Mr. Gerhardt’s continued leadership in the development of exceptional department heads at Chanhassen as well as guiding the surrounding communities and other city managers in the metropolitan region as well. And then lastly but certainly not least of course the unexpected passing of one of our citizens, Prince Rogers Nelson. Todd’s leadership and guidance to city staff and to council coupled with wonderful participation and support from surrounding jurisdictions helped to demonstrate Chanhassen’s ability to respond to the national and international media and the visitors to our city in a most hospitable and a welcoming th manner. This year Mr. Gerhardt completed his 30 year with the City of Chanhassen. Has been City Manager since 2001. His knowledge, his experience and his wisdom serves the citizens, the professional staff and the City Council in a most effective manner. His judgement, integrity and concern for others are the hallmark of his leadership and we want to congratulate Mr. Gerhardt on a very successful year. Based upon this evaluation and our discussions at this time I would like to move that the City Council approve this performance evaluation and a salary action for 2017 of a 4 percent increase which is commensurate with the average increase in the budget slated for 2017 which will be considered next Monday. Councilman McDonald: I’ll second. Mayor Laufenburger: Thank you very much Mr. McDonald. We have a valid motion and a second. Is there any further discussion? Mayor Laufenburger moved, Councilman McDonald seconded that the City Council approve the City Manager’s performance evaluation and a salary action for 2017 of a 4 percent increase. All voted in favor and the motion carried unanimously with a vote of 5 to 0. Mayor Laufenburger: Mr. Gerhardt do you have any administrative presentations? Todd Gerhardt: Well first off I want to thank the City Council for their feedback during my performance review. I think 2016 was another really successful year. You know like any baseball game you don’t get a pitch right down the middle every time and so we were thrown up some curve balls but you know the thing that makes we most proud of and why I enjoy my job so 7 Chanhassen City Council – December 5, 2016 Truth in Taxation Hearing much is the support that I get from the mayor and council and my department heads and all city employees. We do not operate overly staffed here and people constantly chip in whenever an emergency situation arises and Paisley Park is a perfect example. Elections are a perfect example. I don’t know of another city that has an IT and support staff and finance department that play a role in any of the preliminary and final election processes so I’m very, very fortunate to have a very supportive staff and somewhere along the line we have some fun too and, but I do enjoy working here. I keep learning at something new every day. It’s been 30 years of excitement and I look forward to not another 30 years but the future of Chanhassen is I think very bright and thank you again for those wonderful comments and just want to keep making this city stronger and stronger every day. Mayor Laufenburger: Well Mr. Gerhardt just as Mayor I will take the last word here. Yes this is an evaluation of your performance but please share our comments with your staff because we know that you as a leader, you are only successful for the city because of very dedicated and very committed and highly professional department heads and employees throughout the company so please extend our congratulations to them as well so thank you very much. Todd Gerhardt: I will. Mayor Laufenburger: We concluded our agenda items. Is there a motion to adjourn? Councilwoman Tjornhom moved, Councilwoman Ryan seconded to adjourn the meeting. All voted in favor and the motion carried unanimously with a vote of 5 to 0. The City Council meeting was adjourned at 8:15 p.m. Submitted by Todd Gerhardt City Manager Prepared by Nann Opheim 8