07-26-2021 Counil Special Work Session Packet

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WS – Item 1 WORK SESSION STAFF REPORT Work Session Item No. 1 Date: July 26, 2021 To: City Council From: Hannah Lynch, Finance Director Re: 2022 Budget & Tax Levy Background A high-level overview of the draft 2022 Budget & Tax Levy is provided for your review. The draft was prepared by department directors and reviewed by the City Administrator with the intention of providing the resources needed to continue city services at their current levels. At the May 3rd work session, City Council direction was given to maintain or decrease the tax rate of 39.437% for 2022 taxes payable. The draft includes a proposed tax rate of 44.533% and a $1,556,759 or 13.97% increase in the total tax levy. Staff is looking for Council’s direction regarding where attention should be given to reduce the tax levy and rate, if desired. Council adopted a 2021 budget and tax levy that resulted in an anticipated tax rate of 39.437%, although the final tax rate was 40.109%. The net tax capacity figures to calculate the tax rate are never final until the end of December, but this was a larger than average swing in final values. The anticipated 2021 net tax capacity was projected at $24,520,345 by Anoka County, but was finalized at $24,108,643. Anoka County’s response is as follows: “In December 2020 it was discovered all newly platted parcels subject to the 3 year plat value exclusion/phase in were being assessed and taxed at full market value. This accounted for over half of the value reduction in your city. A second issue was identified with division parcels where both the parent and children parcels were remaining active with values and proposed taxes. A process change was implemented to ensure this does not happen in the future. The second issue accounted for another large reduction in value within Lino Lakes. The errors were both discovered with the TNT mailing and fixed for the final tax calculation” In addition to the total tax capacity decreasing $343,706, the captured value for tax increment increased $67,996. With the final net tax capacity lower than anticipated, $162,000 of the City’s tax levy contributed to the final 2021 tax rate of 40.109% instead of 39.437%. In order to maintain a tax rate of 39.437% in 2022, the total tax levy could only increase roughly $280,000. 1