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HomeMy WebLinkAbout2022.08.31 CC Minutes - Midyear Budget Review Mayor Weidt called the meeting to order at 5:00 p.m. PRESENT: Klein, Miron, Petryk, Strub Weidt ABSENT: None STAFF PRESENT: City Administrator Bryan Bear, Finance Director Anna Wobse, Fire Chief Compton, and Assistant Fire Chief Emans, City Clerk Michele Lindau Finance Director Anna Wobse began by talking about the market value of homes and how it affected the flat tax rate policy. Market values for residential homes for 2023 increased by 21%, which meant increased tax collections and an increase in residents’ tax bills. At the preliminary budget workshop in July, there was discussion on deviating from the policy for one year by returning to the lower 2019 tax rate of 36.274%. It was the consensus of the Council to prepare the 2023 budget using this lower rate. Wobse talked about her recommendation to use a contingency budgeting technique, as in the past, where revenues are conservatively estimated, and departments budget for expenses that may or may not occur. General fund surpluses may go into the Building Maintenance Fund or Equipment Purchasing Fund. In addition, $200,000 is budgeted for tax rate stabilization to help if the economy declines. For pay 2023, taxable market value increased by 25%, which equaled a 25% increase in tax capacity. Returning to the lower 36.274% tax rate would mean the proposed levy for 2023 could not exceed $10,984,174. This would be a 14.5% increase over the 2022 levy. Wobse talked about how inflation was affecting spending patterns. Wobse reviewed the seven components of the levy beginning with debt service. There were three outstanding bond issues; Improvement Bonds of 2011, Public Works Bonds of 2020, and the Lions Park Bonds of 2021, equaling $16.235 million or $998 per capita. This was lower than the statewide average for bonded debt of $1,927 per capita. The City was required to levy taxes to make the bond payments, and the total tax levy for bonded debt would be $992,174. It would remain at that level until 2041. Wobse presented a list of non-general fund tax levies totaling $2,057,946. The street CIP levy of $1,160,000 funds street improvement projects without issuing bonds. The project for 2023 was the Birch Tree Ponds area street improvement project. Keeping the stormwater levy at $278,788 allowed additional funding for related maintenance. The special parks levy of $92,000 would help finance neighborhood park improvements. That levy would remain at that level going forward unless increased by the Council. The firefighter’s relief levy of $27,158 was adopted ten years ago to ensure the City was able to cover the pension liability. No contributions were required in 2023, so the fund could grow. Staff recommended the equipment levy be increased by $260,000 for a total of $500,000 for future Fire Department and Public Works equipment needs. Minutes HUGO CITY COUNCIL MEETING MIDYEAR BUDGET WORKSHOP TUESDAY, AUGUST 31, 2022 – 5 P.M. Hugo City Council Meeting Minutes for August 31, 2022, Midyear Budget Review Page 2 of 3 Wobse reviewed the General Fund Budget that included personnel. There were 27 regular full- time employees included in the budget, one vacant position in the Community Development Department, a new deputy clerk position, and funding to allow for the restructuring of the Public Works Department for lead worker positions and a superintendent. A salary survey showed the City of Hugo’s pay was comparable to other metro cities. The proposed budget contained a 4.5% cost of living adjustment. The budget also contained funds to increase the Fire Department retention program to an hourly rate increase of $1 instead of $.50 for firefighters working between 5-10 years. Health insurance only increased by 2.15%, and HealthPartners was not increasing the deductible. In summary, the 2023 General Fund Budget was up $1,116,240. In addition to personnel costs, there were increased operating expenses anticipated for Lions Volunteer Park; website redesign, room rental and planning software; and $200,000 for flat tax rate stabilization. Wobse reviewed how revenues were conservatively estimated. Non-tax levy revenues equaled $729,369. The general fund tax levy requirement after subtracting the non-tax revenues was $7,934,054. In summary, when adding all levies, the total proposed levy came to $10,984,174. Wobse provided fiscal disparities distribution information explaining how the City received more back in volume than contributed. Almost 8.5% of the total tax levy was paid for by this program. At the proposed urban tax rate of 36.274% in 2023, the median valued home would see an increase of $156. This rate would be midrange of other cities in Washington County. A new requirement of the state was to include an insert in the proposed tax notices that would show various levies and budget details. Wobse asked for a discussion on a fulltime fire chief saying the budget did not contain funding, but if the Council chose to add it, it would reduce the equipment levy to cover salary and benefit costs. She asked for direction on this and on the public works restructuring. Council had questions on the insert that would accompany the proposed tax notices. Wobse explained the categories would likely model what is submitted to the state auditor. Bear stated the mailing will likely influence what the residents think, and it will be interesting to see the feedback. It was noted it would put emphasis on levies and not values, and other units of government would be reflected as well, not including the state. There was discussion on the levy increase of $1.3 million over last year. Wobse talked about the increase in the equipment levy and inflation affecting the general fund. There was a question on how Lions Park affected the levy. Wobse explained the park budget increased to $884,000 from $710,000 partially due to added operating expenses for Lions Volunteer Park and additional seasonal worker. It was noted that the park costs may be offset by rental revenues. There were questions on the City’s reserves and its impact on the borrowing rate. Bear explained having a high balance helps the bond rating. There were other techniques available to achieve the AAA rating, but it was not on the City’s list to borrow money. It was agreed it was a good idea to have the reserves since it was unknown whether the fiscal disparities program may go away. The Council had questions on the impacts of restructuring Public Works. Wobse replied there would be an impact to the streets fund, parks fund, and the sewer and water fund. It was noted funds were set aside in the previous year’s budget and not used. The organizational chart had been modified, and Council indicated they were comfortable moving forward with restructuring. Hugo City Council Meeting Minutes for August 31, 2022, Midyear Budget Review Page 3 of 3 There was discussion on the full-time fire chief, and it was noted that Miron was not present for the previous discussion on it. Council was comfortable with decreasing the equipment levy and placing the funds in the general fund to cover this position. Bear talked about creating goals and direction for this position and bringing it back to Council for a decision. Fire Chief Jim Compton, Jr., agreed it was a good idea to meet at another time, but having it in the budget would make it a positive move. It was said the workshop would then be more of what the position looked like and less of a financial conversation. The Council was comfortable with that. Council thanked Wobse for the presentation and information. They agreed to lower the tax rate for one year. Adjournment The meeting adjourned at 5:48 p.m. Respectfully Submitted, Michele Lindau City Clerk