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MEMORANDUM DATE: September 5, 2000 TO: Mike Mornson, City Manager FROM: Roger Larson, Finance Director ITEM: LEVY CERTIFICATON/TAX RATE PUBLIC HEARING A new law requires that all cities over 500 population to pass a resolution if the levy for the subsequent year will result in a tax rate increase. Under the law, the City Council must adopt a resolution at a public hearing if its levy will result in an increase in the tax rate over the base line tax rate. Essentially, a base line tax rate is computed based on the prior year's levy and the current year tax base. The intent of the law is to provide the public with added information about the levy process. Specifically, under the current calculation methods used, a city could increase its levy or increase spending, yet experience a tax rate decrease due to an increase in their Total Tax Capacity (valuation increasing). Citizens could incorrectly assume that a reduction in their "city taxes" equals no increase in spending. For the budget year 2000 St. Anthony was a prime example of what the intent of the law was to accomplish. Last year's increase in the levy was offset in a $323,974 (6.67%) increase in the city's Total Tax Capacity causing a (1.852%) decrease in the tax rate. The impact on a $125,000 home (increased valuation from $118,000) was the "city portion" of their property taxes remained the same. For budget year 2001, the budget reflects a $116,505 increase in the levy. To compare St. Anthony's levy increase to other communities, staff conducted a levy survey (see attached). The analysis indicates that in comparing percentages, St. Anthony is in line with our neighboring communities and of the 21 communities surveyed, St. Anthony is in the lower half of the results. The majority of the Finance Directors surveyed indicated that most of their levy increase would be offset by increased valuation. Hennepin County indicates that the calculation of the impact is still a couple of weeks away. The trend of higher valuations due to market conditions should contribute to another increase in St. Anthony's Total Tax Capacity for budget year 2001. It is likely that most of the levy increase of the budget will be offset by a reduced tax rate Recommendation: • To comply with the State law (Minn. State 204b.135, Subdivision 5), Council pass resolution #00-068 indicating its intention to increase the levy.