12-06-2016 CCM Truth in Taxation HearingMINUTES
CITY COUNCIL
TRUTH IN TAXATION HEARING
DECEMBER 6, 2016
CALL TO ORDER — 6:00 P.M.
Members Present: Mayor Gary Forcier, Bill Arndt, Mary Christensen, Chad
Czmowski and John Lofdahl
Others present: Andy Reid, Finance Director, Matt Jaunich, City Administrator, and
Marc Sebora, City Attorney
2. TRUTH IN TAXATION HEARING
Mayor Forcier opened the hearing at 6:00 p.m.
Matt Jaunich, City Administrator,presented before the Council. Mr. Jaunich
explained the budget process the City has used to date. Four work sessions have been
held over the past seven months. The Council adopted the preliminary budget and tax
levy in September and last month truth in taxation notices were mailed to all City
property owners. Mr. Jaunich explained the purpose for tonight's hearing is to
enhance public participation in the property tax system by allowing a public forum to
discuss the budget, discuss the proposed tax levy, explain the increases and hear
public comments and questions on the budget and tax levy. If the hearing needs to be
continued it will continued at the next Council meeting on December 13, 2016, and
the final budget and tax levy is expected to be adopted by the Council on December
27, 2016. Mr. Jaunich briefly explained market valuations and how they relate to a
property's tax. Mr. Jaunich also explained that the preliminary budget set in
September showed a tax increase of 2.7% that included a deficit of $92,130. The
revised budget has maintained the same 2.7% increase from September, however the
City has adjusted its revenue projections and eliminated roughly $96,869 in expenses
since its preliminary budget was adopted to eliminate the deficit.
Hutchinson's 2016 average City tax rate ranked the second lowest in McLeod County
and is the fourth highest among other outstate regional centers. Hutchinson is the
lowest of all outstate regional centers for the poverty level, 5t highest of all outstate
regional centers for median household income, 8t highest of all outstate regional
centers for median home value and is the third lowest of all outstate regional centers
in LGA payments. These statistics are amonF 19 outstate regional centers. Mr.
Jaunich provided information on variables used in calculating local government aid
and provided a brief overview on property taxation and homestead exclusion. Mr.
Jaunich also provided an overview on the history of market values. Mr. Jaunich
provided various reasons as to why property taxes may vary from year to year.
Mr. Jaunich then reviewed the City's mission statement and six core areas of focus.
Mr. Jaunich reviewed the proposed tax levies for 2017 which is a 2.7% increase for
the City's portion and a 3.9% increase for the EDA and HRA levies, for a total
increase of 2.8%. The proposed 2017 tax levy includes the second straight year of an
increase in the general fund portion of the levy since 2011. The proposed 2017 tax
levy includes the first year a 0% increase to the debt fund portion of the levy since
2013 and not expected to increase again until 2023. Compared to 2011, the City's
total tax levy has increased by 9.3%. The average annual tax levy increase since
2011 has been 1.5%. The 2017 city tax levy accounts for a per capita tax of $491, up
from $481 in 2016.
Mr. Jaunich reviewed the general fund revenues and expenses. Mr. Jaunich explained
that the general fund revenues include property taxes, other taxes, licenses &permits,
intergovernmental revenue, charges for service, fines & forfeitures, miscellaneous
revenue, transfers -in and fund balance. Mr. Jaunich also spoke about local
government aid and the variables used in LGA calculations, such as: pre -1940
housing units, housing units 1940-1970, total housing units, household sizes, number
of employees, peak population decline, sparsity adjustment and tax effort rate. Mr.
Jaunich noted that additional facts on general fund revenues include: general fund
revenues include a 4% tax levy increase, property taxes account for 39% of the
general fund revenues, $444,000 increase in "charges for service" to account for new
waterpark revenue, general fund revenues include a reduction of the transfer from the
HUC in the amount of $111,733, City is increasing the LGA portion to the general
fund by $137,500 to help offset the loss of HUC money, expecting most of the other
revenue sources to remain relatively flat, minor changes in transfer -ins from
enterprise funds and a 1% tax levy increase to the general fund is equivalent to
$45,690. Total general fund expenses are comprised of wages & benefits, supplies,
services & charges, miscellaneous expenses, transfers -out and capital outlay. Mr.
Jaunich explained that wages & benefits increased 7.6% in 2017 and include
performance and other annual adjustments and additional staff (aquatic center
seasonal staff, new full-time waterpark/ ark maintenance position, new police officer,
other changes/shifts). Wages & ben -fats account for 67% of general fund expenses
and is the largest expense in the general fund. Operational & supplies for the aquatic
center are included in the 2017 budget at $142,500. Inflation and other miscellaneous
costs make up the additional increases. The 2017 budgeted expenses are balanced
with revenues. Mr. Jaunich then reviewed the aquatic center budget which is
forecasted at $444,000 in revenues and $423,596 in expenses.
Mr. Jaunich then reviewed the enterprise funds — consisting of the liquor, compost,
refuse, water, sewer and stormwater funds. All of these funds are cash flowing and
are healthy funds. Mr. Jaunich noted that the Liquor Hutch and Creekside continue to
do well and will contribute $610,000 to the general fund in 2017. This is the second
straight year Creekside assumes a reduced production model focusing on higher
margin products. There will be no increases ingarbage, water and sewer rates. All
enterprise funds continue to have healthy fund balances and are borrowing against the
refuse fund to help pay for the aquatic center. There will be a slight rate increase to
stormwater rates of 3%. Transfers to the general fund from the enterprise funds will
be at $785,000 in 2017 which is up 8.1% from the $726,290 budgeted for in 2016.
Mr. Jaunich reviewed the 2017 capital improvement plan and debt management plan.
Major capital items included in the capital plan are: completion of the aquatic
center/rec center upgrades, Roberts Road/School Road/South Grade Road and trail
improvement projects, south central trunk storm sewer project, capital upgrades to
Creekside and wastewater plant and various equipment/fleet vehicle replacements and
facility upgrades. The debt management plan has a target debt levy at $2.6 million.
The 2004 debt payment of $436,450 has its last payment this year. After a 1% debt
levy increase in 2016, the debt plan won't need another debt levy increase until 2023.
The 2023 tax levy will be a 1.5% increase. Years 2024 to 2032 will see an average
increase of 1.7%. The plan includes financing for heavy equipment in 2017-2021.
The plan moves annual project costs from $1.5 million to $1.9 million. The plan
moves the annual debt limit from $2.2 million to $2.6 million.
Mr. Jaunich noted that the three main factors behind the levy increase are that the
general wage and benefit increases are expected to cost $121,200; new positions and
salary adjustments not associated with the aquatic center are expected to cost
$176,182, and a loss of $111,733 in HUC's PILOT payment. Mr. Jaunich lastly
noted that there are no significant staffing cuts and/or changes in service. The new
aquatic center has been included in the 2017 budget. Staffing costs and capital needs
are the biggest "driver" of the City's budget. Fund balances continue to remain high
and the fiscal condition of the City is healthy. The State's budget forecasts continues
to remain good and there shouldn't be any fiscal restraints at the State that would
impact the City. Home values are increasing and the local economy appears to be
improving from the recession years.
Motion by Lofdahl, second by Christensen, to close public hearing at 7:25 P.M.
Motion carried unanimously.
There were a couple of comments from the public in attendance throughout the
presentation put on by Mr. Jaunich.
3. ADJOURN
Following the public hearing, the meeting was adjourned.
ATTEST:
Gary T. Forcier
Mayor
Matthew Jaunich
City Administrator