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City Council Regular Meeting Minutes February 8, 2000 Page 5 1 review of the city is made in determining the appropriate credit rating. That review would 2 include: (1)how the city is managed; (2)how the city develops plans and follows through with 3 them; (3) demographics; (4) wealth of the city; and (5)historic precedent. 4 Additionally, Mr. Thistle stated that Springsted develops a Prospectus for the City, which is the 5 best source of information on the community. It provides up-to-date information and is an excel- 6 lent source document for the Councilmembers to have on hand. 7 Mr. Thistle offered a suggestion that the City was in a position to accomplish three major items: 8 (1) continue with the maintenance of an older city and infrastructure; (2) revitalize portions of the 9 community; and(3) continue with the City's history of providing quality services to the 10 residents-- a noted challenge in a changing environment. 11 Mr. Thistle stated that Springsted developed a study in September 1999, and then provided an 12 updated study in January 2000. He reviewed the table of contents of the report with the Council 13 and then provided a brief overview of each topic. 14 The real crux of the study, he stated, is that cities have historically produced capital budgets that 1015 pay for all of the public improvements, repairs, and equipment. Cities typically fail to match a 16 plan to the capital needs; in other words, how the needs will be financed. 17 In this respect, Springsted has instituted a capital improvement plan to assist with the efficiency 18 of the organization. Specific purposes include(1) analyzing the capacity of current fund 19 balances and projected revenues; (2) determining the level of additional project funding that can 20 be supported; (3) assisting the City in its process to schedule capital projects to meet existing and 21 projected needs; (4) reviewing tax increment financing; (5) analyzing the fund balances; and (6) 22 determining impact on the City's legal debt limit. 23 Mr. Thistle spoke about the effects of compression on the tax base. He stated that, since 1997, 24 the Minnesota legislature has made several changes in classification rates for taxable property. 25 Class rates have decreased for all types of property, but the most significant reductions have been 26 in commercial-industrial-public utility, seasonal recreational and residential non-homestead 27 property. The collective result of these changes is that a relatively greater share of the tax burden 28 has been shifted to residential homestead property owners. However, the impact of compression 29 has been offset by the increase in property values on all properties of the City. 30 Mr. Thistle directed the Council's attention to pages 18 through 20 of the Springsted report, 31 which explained the concept of compression. In particular, page 20 showed a table which ana= 32 lyzed the tax base composition. Regarding compression and the City's general fund, the report ®33 stated that, as the compression of tax rates has diminished the City's tax base, the City has had 34 two options in terms of dealing with the decreased capacity. The City could raise rates to obtain