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Hugo City Council Meeting Minutes for December 5, 2022 Page 4 of 6 Finance Director Anna Wobse presented the budget and tax levy to the Council prior to taking public comment. She began by explaining the City of Hugo received no Local Government Aid again this year. Hugo is one of 110 cities that do not receive any LGA, likely because the City’s tax rate is lower than state-wide average. She provided a 2022 tax rate comparison by using the median taxable value of a home in Washington County of $315,600. The average state-wide tax on that home would be $1,381. The same home in Hugo would be $1,209, 14% lower. Hugo’s lower tax rate was due to keeping the tax levy low and having high market value on homes. She explained that as a property’s value increases, so do taxes owed on that home. Values had increased 21% for residents and 5.4% for commercial and industrial. Because of the large increase in values, Council met in a workshop on July 25, 2022, to discuss whether to keep the same tax rate or lower the rate. The City had been operating on a flat tax rate, but it was decided by Council to lower the rate to 36.274% for one year and prepare the 2023 Budget and Tax Levy reflecting the lower rate. This meant the proposed levy could not exceed $10,998,874. Wobse next reviewed the principal and interest payments on the City’s three bond issues that total $16,235,000. This equaled a debt load per capita of $988, much lower than the state-wide average of $1,927. The payments on these bonds would be $992,174 in 2023. Wobse recommended increasing the Equipment Levy by $40,000 for a total of $300,000 for future Fire Department and Public Works purchases. The largest piece of the levy was for the general fund operations. Wobse talked about the technique of contingency budgeting that had been used over the past 31 years that would assure that the budget would balance or there would be a surplus. This was cited by Standard & Poors as a favorable tool. There were 27 regular full-time employees in the 2023 budget. In addition, there was a vacant community development assistant and new deputy clerk position included in the budget. The budget also allowed for restructuring in the Public Works Department. The budget contained funding to allow for the hourly rate for qualified firefighters under the retention program to be increased by $.50 per hour. Per Council’s direction, funding for a full-time fire chief was also included. Wobse talked about data compiled by the League of Minnesota Cities that showed Hugo’s salary matrix pay grade minimums were 2% less than average and maximums were in line with other cities that reported. The proposed budget contained a 4.5% cost of living adjustment and step increases for employees that had not reached their pay grade maximums. These changes added $191,907 to the general fund budget, not including $191,799 for a full-time fire chief. Health insurance premiums increased by 2.15%, and Health Partners was not increasing their deductibles. Other increases included funds to operate Lions Volunteer Park, updates to the City website, room rental software, and planning application tracking software. She also talked about how inflation affected spending. For the fifth consecutive year, the budget contained $200,000 for budget stabilization. Wobse explained that property taxes fund the majority of the general fund budget. The City also receives an annual distribution from the fiscal disparities pool. In 2023, the City would receive $923,170 from this pool, 8.5% of the City’s total levy. The County, using the City’s proposed levy, calculated the median value residential home would see a City tax increase of $156. If the Council had chosen to keep the flat tax rate, the City tax owed would have been $274. She compared Hugo to other cities in Washington County and reviewed the other 13 different tax rates. She provided information on the Homestead Credit Refund and Special Property Tax Refund available to property owners. A Senior Citizen Property Tax Deferral program was also available to those 65 years or older.