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CC 2018 12 03CHANHASSEN CITY COUNCIL SPECIAL MEETING TRUTH IN TAXATION HEARING DECEMBER 3, 2018 Mayor Laufenburger called the meeting to order at 7:00 p.m. COUNCIL MEMBERS PRESENT: Mayor Laufenburger, Councilwoman Tjornhom, Councilman McDonald, and Councilwoman Ryan COUNCIL MEMBERS ABSENT: Councilman Campion STAFF PRESENT: Todd Gerhardt, Chelsea Petersen, and Greg Sticha PUBLIC PRESENT: Ann Miller 6561 Fox Path Steve & Lisa Ehlers 6741 Country Oaks Road Don Amorosi 2368 Grays Landing Road, Wayzata PUBLIC MEETING ON THE PROPSED 2019 BUDGET. Mayor Laufenburger: Thank you and welcome to everybody to tonight’s Truth in Taxation hearing meeting. Those of you that are present in the council chambers as well as those of you that may be watching at home on Mediacom cable television or through our world wide web reaching all corners of the globe. Before we begin our session I just want to clarify something. It was announced earlier today that Governor Mark Dayton has ordered that all flags at public facilities be flown at half staff for 30 days I believe, is that correct? For 30 days to honor President, former President George H.W. Bush who now lays in state in the Capitol so just wanted people to be aware of that. Tonight is our Truth in Taxation meeting. And by the way just to make note that all members of the council are present with exception of Dan Campion who is traveling on business. Tonight the purpose of tonight’s meeting is to give the public an opportunity to hear the detail behind the preliminary levy which was set back in September. All this in anticipation of establishing the final levy for the City next Monday night on December 10th. So tonight we will have a presentation and then I will open the meeting to the public to hear any questions or to hear any comments from the public regarding the presentation of the details supporting the preliminary levy as it was established back in September. So Mr. Sticha is this your’s? Your item this evening. Alright welcome. Go ahead. Greg Sticha: Thank you Mayor and council. Annually at this time of the year the City Council holds a, well they’ve changed the name over the years a couple times but they at one point called it a public budget meeting. At one point they called it Truth in Taxation hearing. It’s the same thing. And we have that meeting the first Monday of December every year to give the public the Chanhassen City Council – December 3, 2018 2 opportunity to comment on the preliminary budget and levy that was set so I’m going to just over what was in the preliminary budget back in September. Just to kind of give the audience an idea of the process that we went through, we actually start work on the budget well before this fall. As early as June. The budgets that are submitted to Mr. Gerhardt and myself are done so in early July by the various department directors. The City Manager and myself review those. Make any needed adjustments within the department’s budgets. We hold a detailed budget meeting work session in August with the City Council to go over the details of what is in the general fund budget. In September as the Mayor referred we hold a preliminary levy adoption. This was done on September 24th. The purpose of holding a preliminary levy and adoption is what is used for the basis of producing the Truth in Taxation statements that all residents should have received this past week or so. On that statement is the breakdown of the requested levies of the taxing jurisdictions where your home or business might be. Included is the City of Chanhassen obviously so this evening we’re just going to go over what the City’s portion of your property tax bill makes up and attempt to answer any questions. And then on December 10th the City Council will meet and set a final levy and budget for taxes payable in 2019. So I have 3 columns on this particular slide. The left column being what was set as a budget in 2018. The middle column being what was set as a preliminary budget back in September. We have also included what staff is going to be recommending as a final budget next Monday. You’ll notice there are no changes between the preliminary and final. There have been no substantial changes in any items that impact the general fund since we set the levy in September. All items have remained unchanged within, whether that might be a change in either the health care contract, which there are none, or any other line items within the budget. The staff is not recommending any changes between what was set in September and what they’re recommending for the final next Monday. Looking at each of these line items individually, while there’s a 10 percent increase in the community development line item, the dollar amount is not significantly different. There was one salary adjustment within that department to get one of the community development staff on a pay range with the comparable work that he is doing. But other than that no significant changes from the 2018 budget as compared to what’s recommended as a final 2019. On the revenue side there are a couple items I do want to point out. Well actually one item in particular. If you look at the licenses and permit lines you’ll notice a 9.7 percent increase. As part of setting the preliminary levy what was established is we did increase the permitted, budgeted permit revenue for 2019 as compared to 2018 by $100,000 as a part of the budget setting process so you’ll notice that line item is up 9.7 percent. The majority of the remaining line items are relatively flat. There is an increased budgeted revenue under other revenue and that is for, and some additional cell tower leases that the City is going to be the benefactor of starting in 2019. Mayor Laufenburger: Mr. Sticha can I interrupt? Regarding licenses and permits, you’re showing a $100,000 revenue target goal for license and permits. When was the license and permit goal last changed, do you recall? Greg Sticha: Prior to, for budget year ’19 I want to say maybe 3 or 4 years ago. There has been small changes in it in the last 9 years. I believe there was one $50,000 increase about 4 years ago. The goal of the council in going back to 2009, if people recall the shortfall the economy Chanhassen City Council – December 3, 2018 3 saw in that point in time led to a severe shortage of permit revenue at the City of Chanhassen in 2009. And that council going forward made the effort to keep that line item relatively flat at it’s lowest point rather than try to adjust the permit revenue each year to match what exactly the market is going to do as the markets are volatile and can change so within $100,000 of the $1,032,000 is where the initial amount would have been back in 2009 so. Mayor Laufenburger: So what you’re saying, I interrupt that to mean we’ve been conservative in our permit revenue forecast or budgets over the last 7-8, well 9 years now and staff is simply recommending that you’re comfortable that permit revenue of an additional $100,000 is not inconsistent with the performance of that line item in actual over the last 7 years. Greg Sticha: Correct. Over that time the base line has shifted a little north. Mayor Laufenburger: Okay. Greg Sticha: The baseline low amount so we’re comfortable increasing that line item by $100,000. Mayor Laufenburger: Okay thank you. Greg Sticha: So what are some of the factors that changed the budget for 2019 as compared to 2018? The City of Chanhassen experienced .97 percent increase in new construction dollars in the city of Chanhassen and that number is relatively important as it will get into some of the other slides a little later on and will show the impact of the average home here in just a moment but that relates to or correlates to about $106,000 in new property tax dollars. These were new homes or new businesses that were constructed in Chanhassen in the past year so that dollar amount is important because it’s the new growth that if you levied just the new growth assuming all other factors are the same, i.e. market value, you would have no change in anyone’s property taxes. Market values did change and I’ll explain that here shortly. The City saw an 8 percent increase in it’s health care cost for 2019. I mentioned the $100,000 higher budgeted building permit revenue. A 3 percent increase for cost of living and merit pay is included in the 2019 budget as well as some market adjustments for department heads. There is no increase in the policing services contract in terms of total cost. The staffing levels all remain the same. It’s just they’ve had some changes in their personnel over the past year that’s allowing that contract to be flat as compared to the previous year. And the budget does have the elimination of the Crime Prevention Specialist position and as we’ve talked earlier this fall when we set the preliminary levy we’ve been able to get by handling those duties amongst some of the other departments within City Hall and at this point in time staff is recommending that that position is not needed right now. So taking a look at the total levies as they compare to last year and for 2019. The general fund levy which was the levy I was primarily talking about in the previous slides. The City also has an $800,000 levy for it’s equipment and that is staying the same as compared to the previous year. City also has a $93,000 levy for sealcoating. This is just the sealcoating program that we also get some small state aid dollars for sealcoating our roads. Not an overlay or a Chanhassen City Council – December 3, 2018 4 patching program. It’s just a sealcoating program. The City does have in place a levy for it’s revolving assessment construction fund. In 2018 that amount was $384,000. As it compares to the debt levies below it gets adjusted slightly for 2019 to $381,223. And then the debt levies down below. One for the public works facility which was built in 2006 and the one for the library which was built in 2001 and last payment will be made on the library in 2022. So taking a look at our levy as it compares to new growth in the city of Chanhassen, and as I mentioned earlier it’s fairly important to note that if your levy increases by more than new growth and your home increases or decreases by more than the average home in Chanhassen, this is what’s going to have an impact on your city portion of your property tax bill. You can see going back to the earlier in the 2000’s the purple line being the new growth the City experienced or the new construction dollars available for property taxes to be used towards various levies, that number exceeded the total levy. But you’ll also note that our new growth over the last 3 years has been shrinking. We’re not experiencing as much new growth as we did in the earlier, in 2008, 9 and 10. We had the downturn in ’11 and ’12. Keeping in mind the assessment process is lags the economy typically by a year or two so not surprisingly, when the market started to turn in late 2008 and 2009, a couple years later you see new growth start to lag behind a little bit as well. So how does this impact a home in Chanhassen? And I have four, these are actual Truth in Taxation statements that went out last week. Four different valued homes on the screen. Again it’s important to keep in mind that the average home increased in value in the city of Chanhassen by 7.5 percent. It increased in market value by 7.5 percent. So with the City Council setting a preliminary levy at new growth, if your home increased in market value by 7.5 percent you should have seen no change in your city portion of your property tax statement and parcel number 3 is a perfect example of exactly that. That parcel saw a 7.4 percent increase in it’s market value and it’s city property taxes actually saw a slight of $2. Actually less than $2 decrease in it’s city portion of it’s property taxes. This was as close to the average home in Chanhassen I could find. The average home in Chanhassen is valued at about $360,000 and the average home as I mentioned earlier increased in market value by 7.5 percent. As you look at some of the other examples including parcel number 1, it’s also important to note that the State of Minnesota has a progressive property tax system. So as your home increases in value the property tax system in Minnesota puts more of a burden on the larger value homes. So you’ll notice parcel 4, while it also saw exactly a 7.5 percent increase in it’s market value it’s bill did go up by $18 so even though it’s very close in terms of increase to parcel 3 it still saw a slight increase in it’s city portion of it’s property taxes simply because it’s a higher valued home than parcel 3. And parcel 1 correspondingly saw an even larger than new growth change, 8.6 percent but only saw a $4 increase in it’s city portion of it’s property taxes. Based on the preliminary levy the City Council set in September all of these statements make very clear sense as it compares to the average home in Chanhassen. Audience: Can I ask a question? Mayor Laufenburger: You’re going to have a chance to ask that question later okay. Chanhassen City Council – December 3, 2018 5 Greg Sticha: On the screen now is the breakdown of the property taxes by taxing jurisdiction. I note that it’s School District 112 but the difference between School District 112 and 276 is less than a percent so the percentages do not change significantly on this pie chart. I believe 276 the green, the largest green piece of the pie would probably be 45 ½ percent increase of 44 ¼ or whatever it is do, but in general the city portion of your property tax bill is around 20 cents on every dollar or 20 percent. As we do every year we compare ourselves to our KFS cities. These are our cities that we compare ourselves to in terms of geographic. Location. Growing communities and other demographics that are similar to the city of Chanhassen so taking a look at the budgeted expenditures for 2018 as compared to 2017 which is the most current data available on the State Auditor’s website. You’ll notice the general fund expenditures for the City of Chanhassen increased 2 percent. There’s a number of changes in a number of other jurisdictions listed on this list. The average being 5.4 percent but I think one thing I always like to point out each year on this particular screen, Chanhassen typically is always the flattest or most consistent change from year to year or year over year. Whereas some communities see a 9.3 percent increase in one year and might see a zero percent increase in one year, it’s been the goal of some of the previous city councils to keep the budgeted expenditures consistent from year to year with maybe 2 percent or less increases as compared to the previous years budgeted expenditures. Mayor Laufenburger: So Greg just pausing right here for a second. So you’re showing Chanhassen’s budget expenditure growth from 2017 to 2018 was 2 percent. What’s the expenditure growth that you’re proposing from 2018 budget to 2019? Do you know what that number is? 1.73 percent. Greg Sticha: Yes. Now it also takes into account the State Auditor’s Office provides this data so it also takes into account some special revenue funds which have a minor impact on that so the bulk of it though is the general fund so it will be right around that number next year. Mayor Laufenburger: So it will be somewhere in the realm of 2 percent or less? Greg Sticha: Most likely. Mayor Laufenburger: For Chanhassen. Greg Sticha: Yes, yep. For Chanhassen. Mayor Laufenburger: Okay. Alright thank you. Greg Sticha: So then we do a per capita spending comparison of those exact same cities so real simple calculation. Just dividing the population by the total general fund spending and of those KFS cities Chanhassen is easily the lowest. The average being $581. They’re listed in alphabetical order. And then we also each year take a look at the tax rates within Carver County and within the Twin Cities metro in general. This slide is an indication of what the preliminary Chanhassen City Council – December 3, 2018 6 2019 tax rates are for all the cities within Carver County so like we’re having this meeting this evening, each of these jurisdictions will be having their meeting sometime this week and based on the preliminary levies each of those jurisdictions set back in September, the County calculates a preliminary tax rate. Chanhassen’s went down again as compared to the previous year. 21.066. The average in Carver County is 60 and you can see the other taxing jurisdictions what their preliminary tax levies are based on. As long as we’re talking about this particular item, when the preliminary levy is set in September that is the high point as to which the City Council can set a levy for taxes payable in 2019. So when the City Council sets the final levy on December 10th they cannot go up from that number. They can only go down from the number that they set as a levy on September 24th. So this tax rate, the 24.066 would be the worst case scenario if the City Council set the exact same levy that it set on September 24th. And same with all the other jurisdictions on this slide. So how do we compare to some of the Hennepin County tax rates. Again Chanhassen, you’ll notice I used 22.66 primarily because I’m comparing all the other jurisdictions to 2018 tax rates. I don’t have access to the 2019 preliminary tax rates for all of Hennepin County at this point in time but taking a look at the 2018 tax rates for each of these cities in Hennepin County, again Chanhassen very competitive amongst all those with only two cities having a lower tax rate and by far the majority of cities in Hennepin County have a significantly higher tax rate than the City of Chanhassen. So staff will be meeting with the City Council next Monday to go over any final details on the budget and then next Monday at the regular session, the City Council will adopt a final budget. A final tax levy and a final CIP document for taxes payable in 2019. With that I’ll just take some time for some questions. Mayor Laufenburger: Okay, thank you Mr. Sticha. In just a few moments I’m going to open this to the public hearing then I’ll invite you to ask your question ma’am but before I do that is there any questions from council of Mr. Sticha at this time? Anybody? Okay. Before I open the public hearing I just want to make a couple comments. First of all that this public hearing is about the city tax portion of your tax, Truth in Taxation statement. This is not about the market valuation of your home. That is done through a, it’s done through a visit with the tax court or what’s that again? Todd Gerhardt: Open book process through the County Assessor. Mayor Laufenburger: Yeah through the County Assessor so if you have a question about your market valuation that’s not something that we can deal with. This is your opportunity to comment to the staff and council regarding the preliminary levy, which Mr. Sticha as just gone over and this is for the city only. Not for the county tax levy or the school district tax levy or the others that are identified so at this time I would open the public hearing and I would invite anyone who would like to make a comment to the podium. And if you’d like ma’am I would invite you to come up first and just step up to the microphone. State your name and your address and your comments. Ann Miller: Okay, hello. I’m Ann Miller. I live at 6561 Fox Path in Chanhassen and I received the proposed taxes from the Carver County property tax department and I understand that you Chanhassen City Council – December 3, 2018 7 just mentioned that this is only for the city. However in looking at my own information for my own property it’s mentioned, billed by authority. Do you know what I’m talking about? And I can, you want me to show you? Mayor Laufenburger: Sure why don’t you do that. Ann Miller: So I guess I don’t know if you can answer this or not but I got billed by authority so for instance, I think WS stands for watershed and we’re in the Minnehaha Creek so when I compare it to my neighbors around me the numbers are never the same and why is that? If I want to compare apples to apples. And then I’m wondering about the other list there too when they’re documented out. I mean if I put my neighbor’s next to me it’s like, it’s almost willy nilly like who decides all that? Or are you not the right people to ask? Greg Sticha: I can I think mostly answer this question. Ann Miller: Okay. Greg Sticha: So the largest portion of the calculation is based on the market value of your home so I don’t know how your home compares in terms of market value to your neighbors. Ann Miller: Right because I’ve lived there since 1992. Greg Sticha: Right and some of their market values could have increased or decreased depending on if they’ve made improvements to their home so if let’s say your home has a market value of let’s say the average $360,000 but your neighbor had an addition and you know added an extra 500 square feet. Their home market value could potentially be $400,000-$425,000. The difference in those two market values will significantly change each of these line items because their home is now worth more in taxable market value than your home so while I can’t speak to what your taxable market values in your neighborhood are, that first and foremost has the most impact on why you might see a difference between the watershed district at your home and compared to the watershed district at your neighbor’s home. I’m guess most likely it’s because there’s a significant difference in the market values of your home. Ann Miller: Really? Huh interesting. Okay. Mayor Laufenburger: Did you have another question Ms. Miller? Ann Miller: Oh I live in a ranch house. It is above grade. It’s 2,058 square feet so I’m one of three houses in the Fox Chase development that is a ranch house and I’m just amazed at the difference. The difference in those numbers on that list that you’re looking at sir. And so I’m just trying to figure out, so do I have to go to everybody’s meeting to decide how they figure things out because it just doesn’t seem, it just seems crazy to me. Chanhassen City Council – December 3, 2018 8 Mayor Laufenburger: Ms. Miller? Ann Miller: Yes. Mayor Laufenburger: The unfortunate answer is yes. Ann Miller: I thought so. Mayor Laufenburger: Yeah. This, each of the, each of the taxing authorities are granted their taxing authority from the State Legislature and each of them have different methodologies for calculating the taxing levy that they can provide and we, you know our responsibility is specifically for the city portion of that levy. Ann Miller: Alright. Mayor Laufenburger: Alright, I hope though that’s not a great answer. It doesn’t necessarily help you at all. Ann Miller: No but that’s okay. Mayor Laufenburger: But that’s the truth. Ann Miller: It’s a learning moment at age 71 yeah. Mayor Laufenburger: And you’ve been here since 1992? Ann Miller: Correct. Mayor Laufenburger: My oh my. 26 years in the community. Ann Miller: Yeah and we have not expanded our house so yeah. And the taxes were horrible one of those years. They were like Connecticut. They went down but now they’re going back up. Todd Gerhardt: Mayor. Mayor Laufenburger: Go ahead Mr. Gerhardt. Todd Gerhardt: Okay. Ann just so you know if you can find another home with the exact same market value that you have. Ann Miller: Does that mean the price it was sold for? Chanhassen City Council – December 3, 2018 9 Todd Gerhardt: Nope, the market value. Mayor Laufenburger: Market valuation right at the top. Todd Gerhardt: Right at the top of your sheet. Greg Sticha: She printed what was on the County’s website. I do not have her market value listed but I can certainly research. Ann Miller: Oh is this it right here? This one. The assessor information. Greg Sticha: Yes so that’s your estimated market value but that doesn’t necessarily correlate to your taxable market value but they’re typically generally close. So if you’d like, if you’d give me your email I can check. Go online and check your records. Find out what change in your taxable market value was for 2019. Tell you how that compares to the average home in Chanhassen and I can even check out some of your neighbors tax statements then to see if their market value changed significantly different than your’s. Ann Miller: Okay, well that’s pretty nice of you… Todd Gerhardt: And we find one probably the exact same market value as your’s and show you how it relates back to that same watershed district. The school district and the county and the city too and it should be right in line with each. Ann Miller: Okay thank you. Todd Gerhardt: But it’s got to be the exact same market value because in the system that we have in the State of Minnesota it changes with whatever the market value of your home is. If it’s higher you’re going to pay more. If it lower you’re going to pay a little less. Ann Miller: Okay, thank you very much. Mayor Laufenburger: Thank you Ms. Miller. Nice to have you here. Is there anyone else who would like to address the council related to the Truth in Taxation this evening? State your name and address please. Don Amorosi: I’m Don Amorosi. The bad penny from Wayzata, Minnesota. Mayor Laufenburger: What’s your address in Wayzata please? Don Amorosi: It’s 2368 Grays Landing Road. If you need a Chanhassen address I’m sure I can be a proxy for my ex-wife. Chanhassen City Council – December 3, 2018 10 Mayor Laufenburger: No, that’s alright. Nice to have you here Mr. Amorosi. What’s your comments? Don Amorosi: So first on the budget there was, on the budget under police and fire there was a discontinuation of a position if I read it correctly. Can you tell me what that, what position was removed and why? That’s my first question. Mayor Laufenburger: Alright Mr. Sticha can you speak to that? Greg Sticha: I think Mr. Gerhardt probably can answer that question better. Todd Gerhardt: Beth Hoiseth was our Crime Prevention Specialist and she retired about 3 to 4 years ago and her responsibilities were taken over by the Assistant City Manager, CSO’s and spread out amongst some of the support administrative staff and a lot of the key ones were neighborhood, National Night Out and making sure that car seats are fitted correctly for infants and coordinating with all the neighborhood watch groups. Don Amorosi: Okay thank you. Mayor Laufenburger: So just if I may. So Beth and that responsibility, and didn’t the CSO’s actually report to Beth? Is that true? Todd Gerhardt: Not directly no. Mayor Laufenburger: They work for Chelsea? Todd Gerhardt: They work for Chelsea. Mayor Laufenburger: Alright but those activities were specifically proactive efforts on the part of the City to engage with the neighborhood. Plan for as you say car seats. I think there were. Todd Gerhardt: Yeah she was not a licensed law enforcement officer. Mayor Laufenburger: Okay alright. Don Amorosi: That’s more than satisfactory, thank you. My second question is that the budget for police and fire is relatively flat from 2017 to ’18. I believe that your contracts with the City run from year to year and at least based on my research. Mayor Laufenburger: You mean with the County? Contract with the County. Don Amorosi: With the county. With the county. And so what your budget expenditures would coincide with your contract with the county for law enforcement services if I’m correct. Then Chanhassen City Council – December 3, 2018 11 I’ll ask my question this way. In the 2019 budget are there any additional resources, funds for training, technology, tools or additional personnel that would help those law enforcement agencies in crisis or in mental health engagements? Mayor Laufenburger: Okay so I think what your question is, does the contract price that the City engages with Carver County include any of those things that you mentioned. Don Amorosi: Incremental. Mayor Laufenburger: Incremental, okay. Mr. Sticha or Mr. Gerhardt, do you want to speak to that? Todd Gerhardt: Yeah. As a part of the contract with Carver County officers are union and so they get to bid on what positions come available so they would bid to come onto work in the city of Chanhassen. This year we got people with less seniority that’s going to be working in Chanhassen so they’re paid less so our contract amount is less. But we still contribute to the overall training of the officers and so that is included into the contract and any increases are all based on the contract that the County would approve through the County Commissioners. Mayor Laufenburger: So Mr. Amorosi let me add to that. So if there are an y activities specifically earmarked for training Carver County deputy personnel. The people with whom we contract then they would engage in those activities but we don’t necessarily stipulate what those specific activities are. Those are stipulated by the Carver County Sheriff’s Office. Todd Gerhardt: Through the Carver County Commissioners. Mayor Laufenburger: Right. Don Amorosi: The contract does stipulate that you may stipulate additional training resources if you choose to so I presume that you’ve delegated that to the County’s discretion and have not incorporated any incremental training to support law enforcement and presumably a crisis team or etcetera, etcetera, etcetera. Mayor Laufenburger: The contract price that we have negotiated for 2019, you know if you’re referring to a document that already exists that I’m not familiar with, I’ll trust your words that that’s correct. Don Amorosi: I just read it off the 2017, 2018 contract that’s on the internet so. I guess said differently do you feel that the contract that you have provides adequate mental health and crisis services and training through law enforcement for the residents of Chanhassen? Mayor Laufenburger: I would answer that Mr. Amorosi that I believe that our contract with Carver County Sheriff’s Office provides adequate public safety and if it’s necessary for Chanhassen City Council – December 3, 2018 12 additional public safety to be, public safety activities to be included then that will be the subject of the council discretion in 2019. Don Amorosi: Okay that’s a great political answer. Thank you. Mayor Laufenburger: Any other comment? Don Amorosi: No. Mayor Laufenburger: Okay thank you Mr. Amorosi. Is there anybody else that would like to address the council this evening? There being none I will close the public hearing. Council is there any questions or comments that you’d like to address with Mr. Sticha? Alright that concludes our business for this evening. Thank you to those of you that were in council chambers as well as those of you that were watching at home and I will entertain a motion to adjourn. Councilman McDonald moved, Councilwoman Tjornhom seconded to adjourn the meeting. All voted in favor and the motion carried unanimously with a vote of 4 to 0. The City Council special meeting was adjourned at 7:35 p.m. Submitted by Todd Gerhardt City Manager Prepared by Nann Opheim