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Home My WebLink About2010-05-05 PACKET 12.A.REQUEST OF CITY COUNCIL ACTION COUNCIL AGENDA MEETING ITEM # DATE 05/05/10 Ig-way-m-1 Finance ORIGINATING DEPARTMENT Robin Roland DEPARTMENT HEAD COUNCIL ACTION REQUEST: Hold initial 2011/2012 Budget workshop to give direction to staff as the budget process begins. STAFF RECOMMENDATION: Hold initial 2011/2012 Budget workshop to give direction to staff as the budget process begins. BUDGET IMPLICATION: �UDGETED AMOUNT ACTUAL AMOUNT ADVISORY COMMISSION ACTION DATE REVIEWED APPROVED DENIED ❑ PLANNING ❑ ❑ ❑ ❑ PUBLIC SAFETY ❑ ❑ ❑ ❑ PUBLIC WORKS ❑ ❑ ❑ ❑ PARKS AND RECREATION ❑ 1:1 ❑ ❑ HUMAN SERVICES/RIGHTS ❑ ❑ ❑ ❑ ECONOMIC DEV. AUTHORITY ❑ ❑ ❑ ❑ ❑ E] ❑ SUPPORTING DOCUMENTS: MEMO/LETTER: Memo from Robin Roland 4/29/1 ❑ RESOLUTION: ❑ ORDINANCE: ❑ ENGINEERING RECOMMENDATION: ❑ LEGAL RECOMMENDATION: ❑ OTHER: ADMINISTRATORS COMMENTS: z /City Administrator Date COUNCIL ACTION TAKEN: EJAPPROVED ❑ DENIED 110 0 YOTHER CADocurnents and SettingsVrolandWy Documents\City Council Action Form.doc To: Honorable Mayor and City Council Members Ryan Schroeder, City Administrator From: Robin Roland, Finance Director Date: April 29, 2010 Subject: Preliminary 2011 and 2012 Budget Direction The City Council held a Strategic Planning session on January 23, 2010 and offered direction on the 2011/2012 budget process as follows: "Proceed toward the 2011 budget replicating budget direction from 2009 /2010. Include continued moderation of the tax levy rate in comparison to peer communities and moderation of future operating cost increases below our funding ability. Ensure sustainable budgeting as we react to the current down cycle in the economy." The direction staff followed with regard to 2010 was as follows: to restrict budget growth so as to reduce taxes on the "average taxpayer" commensurate with the estimated residential market value decline. In 2010 that market value decline was 7.2% and the decrease in net tax paid by the "average" home (valued at $205,600) was $45 or 6.4% less than 2009. For the 2011 levy portion of the budget, staff assumed a 0.71% increase to the levy and a 2% market value reduction to have taxes (for the same average home) remain the same as 2010. As we also discussed in January, Washington County's "first glance" estimate for Pay 2011 market values was a decline of 10% for residential and 2% for commercial /industrial properties. If this prediction is accurate, and we make no adjustments to the 2011 budget as it was previously presented, the taxes paid by an "average" property would remain at (effectively) the same level as 2010. (See the excerpt from the Five Year Financial Model.) 2006 2007 2008 2009 2010 2011 Tax Levy (after Fisc Disp) $ 9,739,379 $ 10,273,472. $ 10,473,487 $ 10,545,890 $ 10,139,218 $ 10,225,418 Tax Capacity value $ 25,758,800 $ 28,708,347 $ 29,764,369 $ 30,445,931 $ 28,690,900 $ 26,208,703 Tax Rate 37.81% 35.79% 35.19% 34.64% 35.34% 39.02% Value of "average home" $ 202,000 $ 223,400 $ 223,400 $ 221,600 $ 205,600 $ 184,834 City taxes $ 764 $ 799 $ 786 $ 768 $ 727 $ 721 % tax change 4.7% -1.7% -2.4% -5.3% -0.7% We are waiting on more current information from Washington County. Regarding continued moderation of the tax levy rate in relation to peer cities, the following chart reflects how 2010 tax rates changed from 2009 tax rates for the cities we compare ourselves to. Tax Rate Comparison Metro Cities 17,000 to 60,000 population City name 2009 Tax Rate 2010 Tax Rate % change City name 2009 Tax Rate 2010 Tax Rate % change Edina 22.41 22.67 1.16% Inver Grove Heights 38.84 30.41 - 21.70% Minnetonka 28.81 30.74 6.70% Fridley 28.68 30.17 5.20% Eden Prairie 28.03 28.51 1.71% White Bear Lake 15.29 16.50 7.91% Golden Valley 45.88 48.18 5.01% Oakdale 30.58 32.98 7.85% Chanhassen 23.12 25.43 9.99% Apple Valley 37.08 39.29 5.96% Maple Grove 31.18 1 33.79 8.37% Andover 32.04 36.88 15.11% Woodbury 28.46 30.90 8.57% Cottage Grove 34.61 35.40 2.28% Roseville 26.61 27.27 2.48% Ramsey 39.26 37.69 -3.99% Prior Lake 27.91 29.39 5.30% Richfield 42.69 47.95 12.32% Shoreview 25.34 28.07 10.77% Hastings 49.72 47.66 -4.14% Shakopee 32.66 33.40 2.27% New Hope 41.92 45.72 9.06% Maplewood 33.95 35.30 3.98% New Brighton 33.88 36.70 8.32% St Louis Park 36.62 36.83 0.57% Chaska 20.43 25.66 25.60% Rosemount 42.29 39.97 -5.49% Champlin 34.17 34.96 2.31% Lakeville 34.10 33.99 -032% Crystal 38.51 44.11 14.54% Savage 46.00 47.47 3.20% South St Paul 39.60 37.29 -5.83% Lino Lakes 38.57 37.81 - 1.97% Anoka 37.64 40.36 7.23% Blaine 29.47 29.82 1.19% Brooklyn Center 47.52 52.37 10.21% Averages 34.00 35.32 3.90% Staffs assumption is that, given the continued erosion of State aids (LGA and MVHC) and the continued decline of market values across the seven county metro area, all cities in our peer group will show stable or increased tax rates in 2011. For example, if we assume that cities will adjust their 2011 tax rates in the same manner as is reflected in the above chart, the average 2010 tax rate of 35.32 increased by 3.90% would be 36.70% (35.32* 1.0390). If Council's goal is to keep Cottage Grove at the average tax rate of these peer cities, the 2011 rate reflected on page one of this memo needs some adjustment (39.02% versus 36.70 %). At the workshop, we will use the Five year Financial Management model to show the impacts of changes in tax levy and other revenue, debt service requirements and capital projects. The ultimate goal of the workshop will be to give staff direction on the 2011/2012 budget process in the following areas: • Rate of tax levy growth: is the existing 2011 proposal appropriate? What about 2012? • Rate of general fund expenditure growth: is the assumption of 3% growth in 2011/2012 expenditures too high, too low or just right? • What is the impact of potential capital projects to the growth in the levy? In other words, what impact does additional debt have on the levy and future tax rates? Although we could provide scenarios in this memo from which Council could choose, staff believes that use of the interactive Financial Model will clarify choices and provide valuable feedback to staff as we begin the budget process. A budget development schedule is also included for Council's review. We have recently completed our initial audit fieldwork and the financial information included here reflects the 2009 actual results for the general fund. The intense efforts to reduce costs in 2009 resulted in positive results and have laid an excellent groundwork for a sustainable budget into 2011 and 2012. i � i • t . Target Date Responsible party Action May 5, 2010 Council Discussion of budget goals at worksho May 6, 2010 Finance Budget Kick -Off Meeting/ Distribute manual and forms May Finance Tax Revenue forecasts By May 10, 2010 Departments Schedule review dates June 4. 2010 Departments Return forms to finance Week of June 7, 2010 Budget team Preliminary review June 14 —June 18 Budget team and Department review departments June 28, 2010 I Budget team and Final review meeting Departments July 21, 2010 Finance Preliminary Budget to Council August 1, 2010 MN Dept of Revenue Final levy limit, HACA and LGA July 28, 2010, Council Budget workshops to August 4 & 18, 2010 review & comment September 1, 2010 Council Adopt preliminary levy and budget By September 15, 2010 Finance Certify preliminary levy and comment hearing date November 2010 County Mails notice of proposed property taxes for next year taxes payable December 1, 2010 Council Conduct budget comment meetin December 15, 2009 Council Adopt final budget and levy By December 28, 2010 Finance Certify final levy /� _e ( \ �m 2 \ � � � � � � • � � 2 a § w \ � �\ . . �° � ) � � $ , • � � ® ( : ( ~ / \ ` 0 � } �