HomeMy WebLinkAbout10.F.2. Discussion of FY 2014 City Operating Budget Preparation 1111111111111 General Business 10. F. 2.
SHAK0PEE
TO: Mayor and City Council
Mark McNeill, City Administrator
FROM: Julie Linnihan, Finance Director /City Clerk
DATE: 07/02/2013
SUBJECT: Discussion of FY 2014 City Operation Budget Preparation. (C)
Action Sought
Request City Council to provide staff with direction for preliminary 2014 budget process.
Background
The 2014 budget process will begin shortly. This will involve the coordination of budget
estimates, personnel adjustments and capital needs to name a few.
There are several issues unique to the 2014 Budget and budget preparation as follows.
A. Elimination of sales tax on municipal services. This tax was implemented in1992 and staff
will need to allow for the reduction of sales tax in 2014 estimates. The Minnesota Department of
Revenue will be releasing information on this specific to the new legislation, which will be a
useful tool for departmental calculations. The impact of this is difficult to estimate, but to put this
in context, when Public Works orders salt /sand product, the sales tax will exceed $1,500 per
order. Equipment Fleet purchases are heavily impacted, recent purchase of a Groundsmaster
mower required a sales tax payment of $6,074. The basic products that have required sales tax in
the past 20 years may result in a reduction in line item costs of up to $500,000. This is a
conservative estimate, as staff will need to differentiate between taxable products, public safety
non - taxable products, and services, which will still remain untaxed.
B. Offsetting this reduction is the reinstatement of Property Tax Levy Limits, established a 3%
increase over the 2013 property tax levy. The 2013 levy amount of $15,333,223. Using this base,
the amounts for increase consideration are as follows:
1 % increase results in $152,223 additional levy revenue
2 % increase results in $306,554 additional levy revenue
3 % increase results in $459,997 additional levy revenue
As with prior year levy discussions, the preliminary 2014 levy will need to be established by
September 15th, 2013. The final levy cannot increase above the amount established in December,
but can be reduced prior to adoption in December, 2013. That means that adjustments to the
details of the actual budget as to service levels could take place any time prior to that adoption.
C. The 3 % levy limit is determined without inclusion of any debt service levies. In 2013, the
City levied $150,000 for debt service levy. The total amount of debt service payments for 2013
totaled $2.6 Million. Special assessment collections, fund cash position, building fund allocations
and fund transfers have been utilized for debt service payments, but Council again will need to
consider increasing the amount of levy for payment of the upcoming 2014 debt service payments
of approximately $3 Million. Recent city budgets have held levies low by reducing or eliminating
the annual levy for each bond issues principle and interest amounts. That has required use of
existing funds cash position. This practice may not be sustainable in the future, and prior to the
issuance of any new debt, decision makers will need to determine if they are willing to levy the
debt service costs for the life of the debt (10 to 20 years)
D. The 2013 budget allowed for partial year personnel costs for eight newly created positions.
The following provides a review of the allowance of the newly hired (2013) positions, as they
require full year funding in 2014:
Position 2013 Wade 2014 Waee Increase
Economic Development Spec. $72, 146 $86,057 $13,911
Human Resources Technician $67,600 $67,600 $0
4 Full Time Firefighters $125,000 $247,962 $122,962
Natural Resources Tech. $57,596 $68,701 $11,105
Crime Prevention Specialist $62,151 $62,151 $0
Totals $384,493 $532,471 $147,978
This means there will be an increase of approximately $148,000 in 2014, over 2013 wages.
E. Capital projects — Infrastructure and maintenance will continue to require increased funding in
the 2014 budget, with a capital transfer of $500,0000 (the first of the planned annual transfers).
As discussed during the 2013 budget process, this will be increased to $750,000 in 2014 and
$1,000,000 in 2015. These planned transfers are critical to meet the infrastructure requirements
for the 2015 -2019 CIP. This plan will be presented in to Council in July 2013.
F. The City during 2013, has committed to several projects that may impact future
year's budgets. These include:
1. Road and infrastructure projects that are coordinated with Scott County and the State of
Minnesota (e.g., CR 17 improvements,)
2. Economic development programs have become a higher priority of the CityCouncil. These
programs have introduced the discussions of the possible purchases of land by the City,
participation in abatements and grants, as well as reductions in fees and charges. These
projects may include studies of property near the 169 and 69 sites, as well as the former
K -Mart Distribution site.
3. Expansion and addition of park land and park sites, including a potential dog park, as well
as the consideration of future discussions related to a tennis facility and trail expansion
Estimated Market Value
One positive factor in the budget discussions for 2014 is the upward trend that the City and
County are experiencing in market values. For several years, the City experienced decreasing
value levels, but early estimates from Scott County indicate that the City could experience an
increase in residential and commercial/industrial property valuations in the range of 2.6 to 2.8 %
over the prior year value. This follows several years of declining values in both categories, some
reductions in values of over 8 % from the prior year values. As staff and council have previously
discussed, the declining market values and increases in property tax levies can provide for a
difficult environment for property tax payers, elected officials and staff.
When considering the property tax levy amount for any budget year, it is important to remember
that the City does not automatically benefit from market value increases, it does require an
increase in the levy to obtain the additional funds that may be needed to finance the projects,
personnel, and operations that are prioritized by Council action and activity.
Council Direction Requested
As Council and staff prepare for the 2014 budget year, the process can be most effective if the
Council provides direction on the following:
• Parameters for property tax levy estimates
• Prioritization of projects and capital plans, allowing for the projects that have been approved
and discussed at recent Council meetings
• Definition of a budget process, including the development of a more "administrative budget
process ", which will reduce the meetings for planned departmental reviews, and the City
Administrator, will provide the overview of the 2014 budget. This will eliminate the lengthy
detailed review of each business unit/budget program. Council will receive the details of the
departmental budgets, but the meetings can focus on less line item review and more specific
information on projects, programs and priorities
Recommendation
Provide staff with direction for preliminary 2014 budget process.
Budget Impact
Relationship to Vision
This item relates to City Goal C, Maintain the City's strong financial health.
Requested Action
For City Council to provide staff with direction for preliminary 2014 budget process.
Attachments: Scott County Information
Good afternoon Julie,
Just to let you know we are expecting valuation notices (pay 2014) and tax statements (pay 2013) to
hit mailboxes early next week. We know that your staff and elected leaders also receive calls regarding
the notices, so we wanted to provide a brief overview of the changes that were implemented for the
2013 assessment. A more detailed 2013 annual assessment report should be available sometime in
May. Please forward this information to all interested parties.
Based on the sales study, which occurred between October of 2011 and September of 2012, the
following preliminary overall valuation adjustments were made:
Commercial AG /
Residential
& Industrial Development
Belle Plaine Township -5.3% -1.1% 5.3%
BlakeleyTownship -4.9`0 -0.3% 5.3%
Cedar Lake Township -6.3% -1.7% 4.6%
Credit River Township - 1.2`6 i -0.1% 3.5%
Helena Township -1.9% -0.8`5 3.356
Jackson Township 0.5% -0.3`0 2.5%
Louisville Township 1.5% 15.550 2.5%
New Market Township -5.3`0 -0.2% 4.2%
Sand Creek Township -5.6% 15.7% 4.4%
St Lawrence Township -9.9% 0.6% 5.350
Spring Lake Township -4.5% 0.3% 4.1%
Belle Plaine City -3.6% - 1.2`,•0 0.0%
Jordan 2.9% -2.250 0.0%
Elko New Market 1.9% -1.9% 0.0%
New Prague 5.3% -0.2% 0.0%
Prior Lake 2.1% 0.4% 0.0%
Savage 3.5% 1.1% 0.0%
Shakopee 2.6% 2.8% 0.0%
COUNTY 0.8% 2.3% 3.4%
Please keep in mind that these are aggregate changes. Depending on the jurisdiction or property type,
there will always be more specific areas delineated such as neighborhoods. These segments could have
changed at differing rates based on the sales specific to that area.
Green Acres: We have also received the 2013 Green Acres values from the Department of Revenue.
The 2013 price per acre for tillable land was set at $6,300 per acre. This rate is used throughout the
entire county for property enrolled in Green Acres. This represents a 10.5% increase over the 2012
price per tillable acre of $5,700. These Green Acre valuations are determined based on agricultural sales
that are deemed to be unaffected by any outside market pressures, such as development forces. In our
1/40 building eligibility areas of the county, most of the estimated values are now equal to the Green
Acre values for the first time ever.
This indicates that the actual highest and best use is for agriculture. Property owners enrolled in Green
Acres in those 1/40 areas will not receive a deferred value benefit on tilled acres for taxes in 2014. This
is due to the values now being the same (Green Acre v. Estimated Market Value).
GREEN ACRE V. EMV IN 1/40 ZONING AREAS
$7,000
$6,0.00
$5,000 . 141
$4,000 GA $ /Acre
$3,000 —EMV $ /Acre
52,000
51,000 _
50 .
2007 2005 2009 2010 2011 2012 2013 2014
Finally, I would like to add the following information regarding your specific jurisdiction.
Residential: With a wide range of housing throughout the City of Shakopee, a range of changes occurred
throughout the city with differing areas /neighborhoods receiving differing adjustments to Estimated
Market Value (EMV). No adjustments were applied that would encompass the entire city. i.e.; while
some townhome developments received increases in value others may have remained stable or even
received small decreases in value from the 2012 assessment. The city wide average for changes in the
residential market was a 2.6% increase in EMV based on signs of a strengthening real estate market
throughout 2012.
Industrial: Due to market sales activity in Scott County as well as the metro area and improving market
conditions (decreasing vacancy, increasing rents, and new /planned construction), market values of
industrial flex and distribution warehouse uses were increased 10% to 25 %. In addition, larger tracts of
vacant industrial land in Shakopee were increased substantially based on recent land sales pertaining to
the Trystar Cable and SanMar developments
Please let me know if you have any questions about this information.
Thanks,
Lance Link
Scott County Taxation Department
95- 496 -8772