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HomeMy WebLinkAbout[05] 2019 Budget Adoption Council Agenda Item MEETING DATE: December 17, 2018 AGENDA ITEM: Budget Adoption - 2019 Final Budget/Levy/5-year Capital Plans SUBMITTED BY: Finance/Administration BOARD/COMMISSION/COMMITTEE RECOMMENDATION: The EDA, Fire Board and Park Board met to recommend their respective 2019 budgets and fees. PREVIOUS COUNCIL ACTION: City Council adopted the preliminary 2019 levy on September 17, 2018. The Council held the Truth and Taxation hearing on December 3, 2018 at 6:00PM. Council adopted the 2019 Fee Schedule on December 3, 2019. BACKGROUND INFORMATION: The summary below was included in the December 3, 2018 council packets. It is included again for further discussion on the final adoption of the 2019 budget, levy and capital plans. Stearns County mailed proposed 2019 property tax statements to taxpayers in November 2018 based on the preliminary levy set by Council in September. Based on the preliminary levy (less an adjustment for the Country Manor abatement based on calculation from the preliminary levy), the following table shows the net tax capacity compared to 2018. Also included is the impact on a $150,000 homesteaded residential and a $500,000 business properties. Please note the general levy includes $160,000 (versus debt levy) for the tax abatement bonds issued for the Community Center. The certified levy will classify this dollar amount as debt levy, but in fact will be used as general levy. The Community Center bonds will be paid for with the local option sales tax receipts. NTC $3,857,737 Adopted 2018 Levy Proposed 2019 Levy 8.04% ↑ $1,494,305 41.85% $1,696,340 43.97% General Levy $697,290 19.53% $646,945 16.77% Debt Levy $2,191,595 61.463% $2,343,285 60,742% Total $9.10 ↓ $776.27 $767.18 150,000 Home $66.61 ↓ $5,685.29 $5,618.68 500,000 Business Governmental Funds: According to MN Statutes the City must hold a public hearing on their proposed total budgets and proposed property tax levies for the taxes payable in 2019. The public hearing may be part of the City’s regular scheduled meeting. The final 2019 levy and budget must be adopted by December 28, 2018. In September the City Council announced the meeting place and time the proposed final budget will be discussed and public allowed to speak as the council chambers on Monday, December 3, 2018 at 6:00pm. 2019 RESIDENTIAL PROPERTY TAX ALLOCATION 1%Watershed DistrictSauk River 20%St. Cloud Schools43%City of St. Joseph36%Stearns County th Taxpayers received their proposed property tax statements from Stearns County around November 15. The tax statement is based on the preliminary levy set in September. The preliminary levy increased 8%, a .28% tax rate decrease for the City portion. The spreadsheet below shows the tax rates of the area cities and jurisdictions part of the St. Joseph tax statement for 2018 and 2019 based on the preliminary levies. The City of St. Joseph’s levy represents the final proposed levy. Also included is the effect on a $150,000 homesteaded residential and $500,000 business properties. The orange letter represents the jurisdictions that effect St. Joseph residents. For St. Joseph tax payers, if a property’s taxable market values did not change, the 2019 tax bill will show a reduction. In reviewing several of the preliminary tax bills, a good majority of the properties experienced an increase in the taxable market values and resulted in an overall increase in the proposed 2019 taxes due. 2018 Tax Proposed Final Effect on Effect on $500K Rate 2019 Tax Rate Difference $150,000 Home Business City of St. Joseph 61.46% 60.74% -0.72% $9.10 ↓ $66.61 ↓ Stearns County 52.49% 51.30% -1.19% $15.03 ↓ $110.08 ↓ St. Cloud Schools 28.97% 27.79% -1.18% $14.90 ↓ $109.15 ↓ Sauk River Watershed 0.84% 0.86% 0.02% $0.25 ↑ $1.85 ↑ State of Minnesota 45.00% 41.00% -4.00% n/a $366.00 ↓ City of St. Cloud 48.19% 50.36% 2.16% $27.41 ↑ $200.73 ↑ City of Sauk Rapids 47.54% 46.31% -1.23% $15.53 ↓ $113.78 ↓ City of Waite Park 69.23% 69.23% 0.00% $0.00 $0.00 City of Sartell 41.39% 42.12% 0.73% $9.22 ↑ $67.53 ↑ The pie chart shows the allocation of the property tax bill for a St. Joseph resident. As depicted on the chart, three jurisdictions have the largest impact to changes in the property tax charges. The City of St. Joseph has the largest piece of the pie followed closely by Stearns County. The St. Cloud School District is a fifth of the tax impact. The levy increase came from the general levy. The general levy increased in the capital budget and general levy. The capital budget includes $60,000 to begin funding the public works garage. The current building’s debt levy was paid in full this year. The levy was moved from debt levy to general levy for the $208 LevyGeneralCapitaPerLevyServiceDebtCapitaPer Certified Levy Per Capita 2019201820172016201520142013201220112010 $400 $350 $300 $250 $200 $150 $100 $50 $-$114 $127 $102 $87 $68 $69 $67 $76 $78 $87 $222 $198 $194 $183 $183 $184 $195 $178 $211 second phase and to prevent a future spike in the levy when the next building is constructed. The general levy increased due to staffing additions, 2.5% general wage increase approved in the contracts and some estimates to implement the organizational study. Some professional services also increased based on history and projected service needs. The graph below shows the 10-year history of the City’s certified levy per capita. The proposed 2019 levy is slightly higher than previous years. Although the levy is higher, the market value increase is anticipated to be 8%. The tax rate is anticipated to decrease 0.72% as a result of the market value gains. The debt levy is proposed to decrease resulting in a reduction in levy per capita. Population changes will also cause fluctuations in the graph. The population used for 2019 is slightly higher than 2018. According to MN Statutes the City must adopt a final budget for payable 2019 and certify its property tax levy for payable 2019 to the county auditor on or before December 28, 2018. The final levy cannot be higher than the adopted preliminary levy of $2,360,285. The proposed final levy is shows a decrease for the calculated abatement payment for Country Manor. The proposed final levy supports an operating budget of $3,614,450. The proposed final 2019 levy breakdown is as follows below: General Levy $1,696,340 Debt Levy $646,945 Total Levy $2,343,285 Homeowners Resources: Residents of St. Joseph may be eligible for direct property tax relief based on one of the following three programs in State Statutes: Homestead Credit Refund, Renter’s Refund and Specialty Property Tax Refund. The programs are explain in more detail on the Minnesota Department of Revenue website. A summary of each follows below. Note, property owners must file for homesteading on their permanent th residents with Stearns County by December 15 for homeowners who have not yet filed for homesteading. The Homestead Credit Refund program provides a refund to homeowners when their property taxes exceed a certain percentage of the household’s income. The 2013 State Legislation made it possible for more homeowners to be eligible for the refund. Homeowners whose income exceeds $110,650 are not eligible for the refund (2018 amount, 2019 not available). The refund can be claimed on the Minnesota tax form M1PR which is filed separately from the individual income tax form filed in the spring/summer. The Renter’s Refund is a state-paid refund that provides tax relief to renters whose rent and implicit property taxes are high relative to their incomes. The program assumes 17% of rent paid is “rent constituting property taxes”. If the 17% exceeds a threshold percentage of income, the renter is eligible for a refund. Renters will use Minnesota tax form M1PR. The Special Property Tax Refund program, also referred to “targeting program,” directs property tax relief to homeowners who have large property tax increases from one year to the next. There is no income component to this program. A homeowner qualifies if the property tax on the home has increased by more than 12% from the previous year. The refund can be claimed on Minnesota tax form M1PR. Enterprise Funds: Also included in the proposed 2019 budget are the enterprise funds and 5-year capital improvement plans (CIP). The enterprise funds include water, sewer, refuse/compost, storm water and street light utilities. The budget for the enterprise funds includes operations (including depreciation), capital outlay and debt service costs. The enterprise funds operate similar to a private business where rates should cover full operational costs, including debt and depreciation. For many municipalities, it is very difficult to cover 100% of the depreciation due to the high costs and regulations to operate the funds. The City Council set a goal to try to reach 100% to assist with future infrastructure costs. The debt service in the water and sewer funds anticipated growth rates seen in the mid-2000s, before the Great Recession. Although the City is not growing as anticipated, St. Joseph is slowly adding development. The development will help keep additional rate increases down. Some of the proposed th upcoming projects include the Oaks on 20 apartments on the old Del Win site, distribution center, businesses in the expanded industrial park and residential homes in newer subdivisions. Also, County Manor phase one was allowed to tier out their utility connection fees. The payments are spread out each year through 2019. These are exciting potential projects for the City and will greatly enhance the landscape. In October 2015, the City Council approved hiring a consultant to review the water and sewer fees. Both funds have significant costs and struggling to breakeven. The results of the rate study were presented in December 2015 with a follow up review in February 2016. The recommendations from Carl Brown Consulting projected a 6% increase in water and 19% increase in sewer would be necessary for 2019. Staff’s comprehensive review of the water and sewer funds indicate water rates are sufficient for the 2019 budget and a 1% increase is recommended for the sewer fund. The current development reserve fees along with current rates sufficiently cover operations in the proposed final budgets. The utility fees for the other enterprise funds are recommended to increase. The fee schedule will be reviewed as a separate agenda item. The charts on the next page show the 5-year trend of operational coverage in each fund. The water and sewer funds appear to be healthy operationally, including covering depreciation. The funds are barely breaking even once debt payments are added. Rates are set to assist with debt payments. The Storm Water, Refuse and Street Light Utility funds are shown as deficits. The adopted rates in these funds do not fully cover operations. The deficits will be covered by the equity remaining balances in the funds. The rates in these funds were not increased for a couple years (decreased in some) to offset larger needed increases in water and sewer. The Storm Water and Refuse funds are currently using reserved balances in the funds to cover operations. While the funds have a reserve to currently cover operations, eventually rate increases are needed to avoid completely depleting the funds. In the case of Refuse, the 3-year contract has escalating fee increases each year. Increases are needed to keep up with the operation expenses. (100,000)street lights*storm waterrefusesewerwater Enterprise Coverage With Depreciation 2019+2018+201720162015 400,000 300,000 200,000 100,000 - (100,000) (200,000)street lights*storm waterrefusesewerwater Enterprise Coverage Without Depreciation 2019+2018+201720162015 900,000 800,000 700,000 600,000 500,000 400,000 300,000 200,000 100,000 - Chart symbols: + Indicates the numbers are based on budgeted numbers, not audited. * Indicates no assets are being depreciated in this fund. Capital Improvement Plan: The 5-year CIP includes future projects. The City uses the 5-year plan to keep levy fluctuations to a minimum by putting funds aside each year to fund improvements. Projects are reviewed each year for priorities. The City tries to tier out the projects to avoid spikes in debt issues and leveling out the debt levy. The capital financial plan also keeps debt rates lower for the City. Project funding includes debt levy, special assessments, utility rates, half cent sales tax, Municipal State Aid (MSAS), federal and state aids, and unspent equity. The proposed priority projects for ’19 -‘21 are included in the table below. 2019 Projects 2020 Projects 2021 Projects CR121 Lift Station CSAH 2 Trail, Phase II/III East Park canoe/picnic area Generator 2019 Street Improvements Elm St Extension Millstream Amphitheatre Industrial Park Expansion Street Overlays Skate Park Baseball Parking Lot Jacob Wetterling Rec Center Dog Park, Phase II East Park Plantings Wobegon Welcome Center Jade Road Reclaim south parking lot Minnesota Street ADA Transition Plan Beautification Updates CSAH 75 Pedestrian Pickle Ball Screens Crossing nd 2 Ave/Birch St sidewalk Millstream Parking Lots Welcome Monument Signs st CIPP on 1 Ave NE CSAH2 Trunk Water Capital Equipment Plan: The 5-year CEP includes the general equipment purchases and replacements. The City uses the 5-year plan to keep levy fluctuations to a minimum by putting funds aside each year to fund equipment. Part of the CEP are two equipment certificates. The certificates are 5-year issues for approximately $240,000 and $295,000, respectively. The certificates offset large spikes for more expensive equipment. The next certificate is scheduled to be issued in 2020 followed by 2023. The table below shows the 2019 planned purchases for each department. 2019 Administration 2019 Police 2019 Public Works 2019 Fire 2019 EDA Computer Parkway Replacements Handguns/Leathers Seal Coat Turnout Gear Industrial Park Business Squad Lease Buyout Z Trak Mower Computers Development Extrication Fuel Tank-w/PW Bldg Equipment Sewage Sampler Air Packs Sewer Televising/Lining Pond Maintenance Plan Setting the final budget/levy requires a simple majority. Budget revisions require a super-majority. For tonight’s action, a simple majority will set the final payable 2019 budget and levy. Please refer to the budget books provided earlier for the budget detail previously discussed. BUDGET/FISCAL IMPACT: See revenue/expenditures budget summaries in the budget books ATTACHMENTS: Resolution 2018-058 – Adopting Final 2018, Payable 2019 Tax Levy REQUESTED COUNCIL ACTION: Adopt Resolution 2018-058 – Adopting the Final 2018, Collectible 2019 Tax Levy, and adopt the final 2019 Budget and Capital Improvement/Equipment Plans.