09-14-05 Council Workshop Minutes

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MINUTES CITY COUNCIL SEPTEMBER 14, 2005 Net Levy increase at 5.72% The second, Exhibit B demonsh~ates the percentage change in the 2006 levy if the City levies back the 2006 cut, Gross Levy increase at 8.02% and Net Levy increase at 10.84%. The third, Exhibit C, calculates the percentage change in levy if the infiastructure fund (electric franchise fee) absorbs the MVHC cut, Gross Levy increase at 3.74% Net Levy increase at 5.95% The Director explained that the Market Value Homestead Credit is a crediC that the State gives on property taxes for lower valued homes. As home valuations increase, the amount of credit decreases and is no longer applicable once a home value reaches a certain point. The City Administrator explained that homeowners are still getting the benefiC of the MVHC, the State has decreased the amount of reimbursement to cities for this credit. Again, LitCle Canada's reimbursement of this credit from the State is anticipated to be less than $5,000. The Finance Director indicated that under the three scenarios explained above, the net levy increases range from 5.72% to 10.84%. She noted the City's action in late 2003 initiating a franchise fee to deal with the State's budget cuts and to help with funding trail completion. Given the fact that the low end of 5.72% is not truly feasible, and given the past action of establishing the franchise fee, it is staff's recommendation that the Infrastnrcture Fund absorb a portion of Che MVHC cut. Based on that recommendation, the Finance Director reported that the budget was prepared assuming the Infrastructure Fund would absorb 50% of the MVHC cut. As a result, the following are some of the key highlights for the preliminary 2006 Budget: • Our gross levy is projected to increase by 2.77% ($2,048,298 vs. $2,131,418). • Our net levy is projected to increase by 4.84% ($1,955,014 vs. $1,864,775). • Our Fiscal Disparities distribution has decreased by $31,178 ($235,465 vs. $266,643) and has a 2.l% negative impact on the net levy. This is due to growth in our commercial tax base. • Our Tax Capacity (tax base) has grown by over 16% based on preliminary numbers submitted by the County ($11,123,960 vs. $9,459,049). • Our Tax Rate will drop from 23.682 to 21.432% in 2006. This is a 9.5% reduction in our tax rate! • We have implemented the levy for the Infrastructure Fund based on the amount originally recommended by the Debt Levy Reduction Committee ($157,200), less the 2006 MVHC cut of $102,019 resulting in a levy of $55,181. Again, the franchise fees on the electric utility are going to this fund. 2