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CC 2017 12 04 CHANHASSEN CITY COUNCIL SPECIAL MEETING DECEMBER 4, 2017 Mayor Laufenburger called the meeting to order at 7:00 p.m. The meeting was opened with the Pledge to the Flag. COUNCIL MEMBERS PRESENT: Mayor Laufenburger, Councilwoman Tjornhom, Councilman McDonald, Councilwoman Ryan, and Councilman Campion STAFF PRESENT: Todd Gerhardt, Chelsea Petersen, and Greg Sticha PUBLIC PRESENT: Bob and Cheryl Ayotte 6213 Cascade Pass Barb Nevin & Ben Jeffrey 6361 Minnewashta Woods Drive Craig Mertz & Janine Hanson 8561 Osprey Lane Mayor Laufenburger: Thank you and for the record all council members are present this evening. Thank you to those of you that are joining us, both in the council chambers as well as those of you that are watching either on Mediacom cable TV at home or via the website live. We have essentially one item on the agenda tonight but it is my practice, I will ask council members if there’s any modifications to the agenda. And if not we will proceed with the agenda as printed. PUBLIC MEETING ON THE PROPOSED 2018 BUDGET. Mayor Laufenburger: The single item that we have on our agenda tonight is the public meeting on the proposed 2018 budget, otherwise known as the Truth in Taxation meeting. There is essentially three components to this. First is the staff report I’ll ask of Mr. Sticha. Then I’ll ask council if there’s any questions and then I will ask for any public input from those who are in the chambers, and then following that input we will then adjourn the meeting so Mr. Sticha. Staff report on the proposed 2018 budget if you will please. Greg Sticha: Thank you Mayor, City Council and those present this evening. I’m going to go through a brief power point that discusses the budget and the preliminary levy that was set by the City Council in September. We’re going to first start with discussing, so that the public is aware of the length of the budget process that we go through. We start our budget planning in as early as May and June of the year. In this particular year we had our first discussion with City Council on budget in late June. In early July the various department directors submit their budgets to the finance department. The City Manager and myself review those budget requests. In August we have multiple budget and levy meetings with the City Council. One meeting in particular we review in detail each of the department budgets with the City Council in work session setting. City Council Truth in Taxation Meeting – December 4, 2017 Then in September the City Council sets a preliminary budget and levy for taxes payable for the following year, in this case 2018 and at that meeting we review in total the levy requested to the County. That number is then used to generate of calculate the Truth in Taxation or proposed property tax statements that are sent out to all of our residents and businesses in the city of Chanhassen. Those were received by our constituency about a week and a half ago giving them the notification of when the meeting was and what time. This evening we are holding the public budget meeting to allow for public comment on the budget, preliminary budget set in September and then next week the City Council will approve a final budget and tax levy for taxes payable in 2018. So taking a look at the expenditure side first, and this is for the City’s general fund, and there’s 3 columns on this table. The first column is the 2017 budget. The second column is the 2018 preliminary budget set by the City Council and the third column is the recommended final th budget that staff will be recommending to City Council on December 11. We are not required to have that information as part of this presentation but if we have the information available we always try to make it a known at this meeting if possible. You’ll notice one thing. The second column and the third column don’t vary so there will be no significant changes between the items th that you see this evening and what will be presented to City Council on December 11. So looking at total spending by the various departments, an increase in total spending of 2.2 percent. A number of factors go into setting the expenditures and we’re going to get into those in just a minute on one of my future slides on what impacts the budget but taking a look at a couple of these departments, in specific taking a look at law enforcement example. The City’s contract with Carver County for our policing services is by far the largest single line item in the budget. That increased 5 percent for budget year 2018. A total of about $90,000 so you can see how one large line item like that can have a significant impact on the total budget but total expenditures projected to increase by the 2.2 percent. On the revenue side the only significant, I would call significant change would be in the property tax levy. That levy is used to pay for all the, the majority of the expenditures that you saw on the previous slide. Some other revenues that help offset the expenditures that allow the levy to stay slightly lower than our total expenditures are licenses and permits. Some other intergovernmental revenues that we get from other governmental agencies. Charges for services. These would be services such as rec programming and other services that we charge a fee for. Fines and penalties and then miscellaneous other revenue which would include investment earnings and a few other items. But in total a balanced budget. Revenues increasing by the same 2.2 percent. If you’ll notice permit revenue, we did keep budgeted at roughly the same number as the previous year. This has been a consistent approach by previous city councils and this city council to keep budgeted permit revenue at the same amount as the previous year and if we receive more permit revenue than the budget it’s been historically done by city councils to transfer that to the revolving assessment street construction fund to help pay for the City’s portion of street improvements. So what changes are there in the budget for 2018? The majority of budget line items remain flat for 2017. Our total spending as I said increased by the 2.2 percent. The budget does include a 3 percent increase for employee wages. It also includes a 15 percent increase in health care costs for employees. It’s important to note that our new growth for taxes payable in 2018, which is essentially the new property tax dollars that are now in the community either from newly constructed homes or remodeled or added on homes was 1.1 percent for taxes payable in 2018 and this equates to 2 City Council Truth in Taxation Meeting – December 4, 2017 roughly an additional $118,000 in property tax dollars available to the City Council to decide where to use those. So taking a look at our levies, and our projected levies for 2018, the majority of levies stay the same. You’ll notice that the capital replacement equipment fund levy as well as the sealcoating levy and the revolving street construction fund levy all remain the same as the previous year. The increase in the general fund levy as noted earlier and we did have one change in one of our, significant change in one of our debt levies. The public works facility. The bonds for the public works facility were refunded a couple years ago and this is the first year that we’re seeing a savings from that refunding so that did help keep the levy at the 1.1 percent which is the new growth or a change between last year’s final levy of $10,795,121 to the $10,913,868. As we have historically looked in the past, we’ve looked at the new growth in the city versus what the final levy was set by the City Council and this is a historical graph showing exactly what the new growth was in each of the last 11 years along with the green bar next to it what that City Council set the final levy at. You’ll notice in almost all the cases the final levy has been set either at or below the new growth amount and that was the case in 2017 where the final levy was set exactly at new growth of 1.56 percent. Staff will be recommending this year setting the final levy at the same again as at new growth in this case 1.10 percent. So we talked about the Truth in Taxation statements that went out to residents about a week and a half ago and this graph shows you four parcel examples in the city of Chanhassen of exactly what happened to their city portion of their property tax based on their change in their market value and I tried to find some examples of homes that increased in value by 4.2 percent. Before I go there I should have mentioned, the average home in Chanhassen increased in value, taxable market value by 4.2 percent for taxes payable in 2018 and that’s a key number to keep in mind. If the City Council sets a levy at the new growth and if the average increase in the home of the homes in Chanhassen are at let’s say in this case 4.2 percent, with the City Council setting a levy at the new growth what the impact will be on the average homeowner is a zero dollar increase to the property statement on the city portion of their property tax for that particular year, and that’s where the preliminary levy was set by City Council. An attempt to have a zero dollar increase on the city portion of the property tax and as these four statements will show you, we did slightly even better than that. So the average home increased 4.2 percent and if you take a look at Parcel 1, that home increased in value by 5.1 percent and it resulted in actually about a 50 percent, 50 cent reduction in their property tax bill. Minus .2 percent for taxes payable in 2018 so this particular property even did slightly better than the average. The 4.2 percent. As you notice as you go up the scale in terms of values of homes, the Minnesota Property Tax System does have a graduated scale for it’s property tax calculation. It also has a market value homestead exclusion which excludes certain early values of homes from paying a certain portion of the property tax so, in other words it boils down to the larger taxable market value results in a higher portion being paid in property taxes. So if you take a look at Parcel number 4, it did increase in taxable market value by 8.3 percent resulting in about a $100 increase in it’s property tax bill to the City of Chanhassen or 3.8 percent but even in this instance the market value in this case did increase by almost double what the average did but the dollar impact was not quite the 4.2 percent we would have expected so even this property had a little bit of a benefit from the calculation so I guess the news is good for residents in that, even what we had projected when we set the preliminary levy, it’s resulting in a just ever so slightly better property tax statement on your city portion of your property taxes. So 3 City Council Truth in Taxation Meeting – December 4, 2017 where do your property taxes go? In this case this is a home that is in School District 112 and this graph shows which taxing jurisdictions collect which dollars from you. The City of Chanhassen essentially collects 20 cents on every dollar of property tax collected and the school district and county collect a larger portion of the total piece of the pie. The 5 percent is other taxing jurisdictions which includes the watershed districts and the Mosquito Control District. Mayor Laufenburger: Is the Met Council part of that 5 percent tax as well? Greg Sticha: Yep. Next taking a look at general fund budgeted expenditures and for those at home who aren’t familiar with our KFS cities, we’ve undertaken the practice of comparing ourselves to 10 other like communities across the Twin Cities metro that have a lot of similar characteristics to our’s and this particular table shows our budget increase in our expenditures from 2016 to 2017. Not all the data is available for 2018 obviously as a number of communities are setting their budget right as we speak but taking a look at how we compared over this past year, the City of Chanhassen’s general fund budgeted expenditures increased 2 ½ percent. The average of our comparable cities increased 4.3 percent and each of the communities and their budgeted expenditures, change in their budgeted expenditures are listed on the far right. So the message here being are budgeted expenditures doing better than our comparable cities on average. Another item to note that I like to point out every year is that this City Council and previous city councils has taken the practice of trying to keep spending consistent and as low as possible from year to year so while you’ll notice some communities with significantly higher percentage increases in their budgeted expenditures and then occasionally a year where they’re lower or in some cases less than the previous year, it’s been the practice of this City Council and previous city councils to keep that consistent from year and avoid those spikes in spending going up and down year after year. So taking a look at our comparable cities again and per capita spending, the City of Chanhassen has a per capita spending of general fund spending of $447 dollars per person. The average of our KFS cities is $540. Our’s is the lowest of all of our comparable cities but you can take a look at some of the other numbers in some of the other communities listed on the right. So how do we compare in terms of tax rates? This particular table looks at the cities within Carver County only and this is based on the 2018 preliminary levies that were set in September so the tax rate projected for the City of Chanhassen for 2018 is projected to be 22.658 assuming a preliminary levy to be the same as the final levy which will be set next week. You could take a look at all of the other communities within Carver County. The average of all Carver County cities having an average tax rate of just under 59. Again Chanhassen is the lowest tax rate within the county. Then taking a look at our tax rate as compared to Hennepin County cities, again the City of Chanhassen compares quite favorably with the tax rate of 23.855. The average amongst these communities is 43.411. Only a couple of communities slightly lower in terms of tax rates across Hennepin County and I think the message you’re seeing from this slide and the previous slide is that the City of Chanhassen has among the lowest tax rates in all of the Twin Cities metro area and something certainly to be I think very proud of. So with that I will ask City Council if they have any questions and at that point if they would like to open up the conversation for the public. 4 City Council Truth in Taxation Meeting – December 4, 2017 Mayor Laufenburger: Alright, thank you Mr. Sticha. Well prepared. City Council any questions of staff at this time before I open the public hearing? Okay. At this time I would like to open the public hearing for the Truth in Taxation meeting as is advertised in the tax state, preliminary tax statements that were delivered to our citizens as Greg said about a week and a half ago. If there’s anybody present that would like to make a comment, any comment specifically related to the information presented by Mr. Sticha would you please step forward to the microphone. Identify yourself with your name and your address and then your comments. Bob Ayotte: My name is Bob Ayotte, 6213 Cascade Pass. Obviously Chanhassen. You brought up District 112 and correct me if I’m wrong, I think about 30 percent of the kids that live in Chanhassen out of a portion of Precinct 3, a portion of 1A, 1B, 2A, 2B, 276. Is there any way that you could, not necessarily this time around but for future purposes it might be good to see that especially since there were a total of 68 people that would have voted in the referendum out of Chanhassen this year for 276 activity. I personally see the residents of Chanhassen not hungry for education so my second request besides the specifics of 276 is to have sessions like you did on more controversial land development activities that would help educate the public on taxes. This is a good news story tonight. I don’t see this place filled up as it should be on good news and maybe if we could have activities like you had for the land development to educate the public, that was really cool. I attended that last one and I’d like to see something like that in our community where we begin to educate those people on good news but I do think you need to incorporate 276 in your discussion. Thank you. Mayor Laufenburger: Thank you Mr. Ayotte. And for the record Mr. Ayotte in his reference to people in the chambers tonight, there are a total of 6 citizens in the chambers tonight for those of you that may not be able to see that at home. And in fact Mr. Ayotte earlier this evening it was suggested by a council member to include 276 in consideration and we directed staff to do that for next year so were you eavesdropping on our work session Mr. Ayotte? Bob Ayotte: No. Mayor Laufenburger: Okay. So thank you. Is there anybody else who would like to speak at this time during the public portion of this meeting? Just a reminder to all citizens that we welcome comment, not only in our public hearings but we welcome comments by email. By phone calls. By letters and your city staff and your council members contact information is available on the city website so you can reach out to us in that way if you’d like as well. Again is there anybody else who would like to address the council at this time in the Truth in Taxation? Okay, there being none I’m going to close the public hearing and bring it back to the council. Any questions or comments from council at this time? Mr. Sticha I just have one. Would you go to the slide that shows the levies please? Greg Sticha: This one right here? 5 City Council Truth in Taxation Meeting – December 4, 2017 Mayor Laufenburger: Correct. Can you speak to the library levy and the public works levy? How much longer does the public works levy continue do you know? Right off the top of your head. Greg Sticha: I believe 2028 or 2029. The public works bond will. Mayor Laufenburger: Another 10 or 11 years. Greg Sticha: Yep. Mayor Laufenburger: Alright. How about the library, do you know? Greg Sticha: 2021. Mayor Laufenburger: 2021, so the library is another it looks like another 3 years. Or 4. 18, 19, 20 and 21, okay. Alright. Okay. Mr. Gerhardt did you want to add any comment of any sort? Todd Gerhardt: I just want to thank the council for the extra time and effort that you always put into the budget process. I talk to my predecessors and other cities and nobody puts as much time and effort into the budget process than I think the City of Chanhassen and the Mayor and City Council do and I think that helps you and the public understand what services we provide and the costs of those services cost back to the public. I also want to thank Greg for his time and effort in coordinating with our department heads and also department heads in keeping their budgets tight every year. They do a great job of trying to do the most with the less amount of money that they can so I just want to thank everybody for their time and efforts. Mayor Laufenburger: Mr. Sticha would you return to the first slide? Or actually the second slide showing the process. There. So with that said, thank you Mr. Gerhardt for expressing that sentiment. The council shares that view. We appreciate your work Greg, thank you. Just a reminder to the public that we, the City Council by statute will adopt the budget on December th 11, or adopt a budget and it may or may not be exactly in accordance with the preliminary budget. That’s up to the council to decide between now and that time and we invite all of our participants back to City Council a week from tonight at 7:00 p.m. and with that I would ask for a motion to adjourn. Councilman McDonald moved, Councilman Campion seconded to adjourn the meeting. All voted in favor and the motion carried unanimously with a vote of 5 to 0. The City Council special meeting was adjourned at 7:30 p.m. Submitted by Todd Gerhardt City Manager Prepared by Nann Opheim 6