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HomeMy WebLinkAbout12-08-03tt` x • CITY OF LAKEVILLE SPECIAL COUNCIL MEETING DECEMBER 8, 2003 A complete videotape of the City Council proceedings is retained for one year .Mayor Johnson called the meeting to order at 7:00 PM. The pledge of allegiance to the flag was given. Roll call was taken. Present: Council Members Bellows, Wulff, Rieb, and Mayor Johnson. Council Member Luick was absent. Also present: R. Erickson, City Administrator; D. Feller, Finance Director; B. Anderson, Assistant to City Administrator; J. Hawkins, Deputy Clerk. MINUTES The minutes of the December 1, 2003 City Council meeting and the November 24, 2003 Council work session were approved as presented. CONSENT AGENDA 03.139 Motion was made by Wulff, seconded by Rieb, to approve the consent agenda items as follows: a. Resolution No. 03-231 approving an amendment to the severance pay policy in the Employee Handbook. b. Resolution No. 0~-232 designating all Fire Stations and the Water Treatment Facility as smoke free areas. c. Designation of Thisweek/Life & Times as the official City newspaper for 2004. d. Approve name change on 3.2 malt liquor license and wine license from Steaming Bean Lakeville, Inc. to Caffvino Lakeville, Inc., 7704 - 160tH Street W. e. Renewal of .billboard licenses for 2004. . f. .Renewal of mechanical amusement device licenses for 2004. 4 1 i Special City Council meeting December 8, 2003 Page -2- i g. Maintenance contract with Haldeman-Homme, Inc. for Lakeville. Area Arts Center retractable. seating risers. h. Landscape maintenance contract with Jeff Reisinger Lawn Service, Inc. Resolution No. 03-233 appointing depositories for the City of Lakeville. j. Final acceptance of utility and street improvements, Zweber Farm Sixth. k. Final acceptance of utility and street improvements, Zweber Farm Eighth. L Resolution No. 03-234 approving traffic control signal agreement between MnDOT, Dakota County, and the City of Lakeville, CSAH 46/I-35 traffic signals, Improvement Project 03-14. Roll call was taken on the motion: Ayes: Johnson, Rieb, Wulff and Bellows TRUTH IN TAXATION PUBLIC HEARING . Mayor Johnson opened the Public Hearing on Truth in Taxation. City of Lakeville Finance Director Dennis Feller .provided an overview of the proposed 2004 budget and tax levy. The purpose of the public hearing was to provide taxpayers the opportunity to ask questions and present comments relating to the proposed budget and tax levy. Mr. Feller stated that. the Governor and the 2003 Legislature, in their attempt to address the State's budget crisis, dramatically reduced state aids and imposed severe fiscal constraints on cities. These constraints were especially severe for .growth cities, including Lakeville, which required the City Council and department directors to pare back the level of services. Mr. Feller's budget overview provided information on the General Fund, Special Revenue Funds, Internal Service Funds, Capital Projects Funds and Enterprise Funds.. An Executive Summary of the presentation is attached to the minutes. For the first time since 1985, Liquor Fund profits will be transferred to the General Fund to finance operations. Long-term appropriation of liquor profits to operations rather than capital improvement- projects will significantly impact the City's ability to construct and maintain its facilities such as the Public Works Facility without future tax .increases. Lakeville has prided itself on a .lean budget, making cutbacks .especially difficult. It is .essential to maintain an . adequate fund balance in order to insure adequate reserves for cash flows and minimize potential adverse impacts due to future budget cuts. Depleting Special City Council meeting December 8, 2003 Page -3- reserves could also endan er the Ci 's bond ratin makin future borrowin 9 tY 9~ 9 9 more.. expensive for taxpayers. Adoption of the budget and tax levy will be considered at the, regularly scheduled City Council meeting of December 15, .2003. Council Member Wulff commented that the recent ISD #194 school district referendum was not included on the Truth in Taxation notice she received at her home. She asked if Mr. Feller could estimate what the increase would be. Mr. Feller stated that on an average priced home ($222,000) the referendum would increase ISD #194's portion of the total tax bill by approximately $270.00. He pointed out that some Lakeville taxpayers reside in other school. districts and stated that the referendum in ISD #192 did not pass and there was no referendum held this year in ISD #196. Mr. Feller stated the Limited Market Value law was enacted by the Legislature to protect. homeowners from dramatic tax increases. The Limited Market Value law is being phased out over the next several years, which means some property owners may experience tax increases in coming years. In addition, the Market Value Homestead Credit decreases as the Market Value of a home increases. As such, homeowners may have an increase in taxes, even if the taxing jurisdiction does not increase • the tax levy. Council Member Rieb asked what would have been cut from the City's budget if $711,000 had .not- been available for transfer to the General Fund from the Liquor Fund. Even with the transfer of liquor profits to the General Fund, there are no new staffing positions in the proposed 2004 budget. If the Liquor Funds were not available, the City Council would be compelled to make additional significant budget reductions in spite of expanding .service level requirements, .such as increased street miles for snowplowing, as a .result of being high growth community. The Finance Director gave several examples of staffing reductions which would be required if the liquor transfer was not available. Council Member Rieb also how Lakeville's expenditure levels compare with other Minnesota cities. Mr. Feller stated that, based on .the State Auditors report on per capita expenditures, Lakeville rank extremely low at 183rd out 208 cities. The favorable per capita expenditures is due to the low number of employees per capita and prudent fiscal management. Council Member Rieb asked if the City could hold a referendum to raise. taxes. Mr. Feller stated that the City has the authority to raise taxes by a referendum. • City Administrator Erickson stated that it has been .almost a decade since the City has had a bond referendum. The City has, for the past decade, .. Special City Council meeting December 8, 2003 Page -4- endeavored to utilize Liquor Funds for construction of physical .facilities, such as the Fire Station #4, thereby avoiding increased tax levies. Mayor Johnson added that it is the long-term goal of the City to spend citizens' money wisely. Mayor Johnson invited citizens to come forward. to comment or ask questions regarding the budget and/or the proposed 2004 tax levy. There were no citizen comments. 03.140 Motion was made by Bellows, seconded by Wulff, to close the public hearing. Roll call was taken on the motion. -Ayes: Wulff, Rieb, Bellows and Johnson ITEM 6 A work session had been proposed for December 11, 2003. Council Member Luick had previously informed the City Administrator that he would be available on December 11tH 03.141 Motion was made by Rieb, seconded by Wulff, to hold a Council work session on Thursday, December 11, 2003 at 4:00 PM. Roll calf was taken on the motion. Ayes, Rieb, Bellows, Johnson and Wulff. ANNOUNCEMENTS Council work session, December 11, 2003 Next regular Council meeting, December 15, 2003 Mayor Johnson adjourned the meeting at 7:45 PM. Respectfully submitted, S V7 /l udi h Hawkins, Deputy Clerk ~~~' __~ r- Robert D. Johnso ,Mayor •., '",~ • • Truth in Taxation December 8, ZOQ3 The'Governor and 2003 Legislature, in their endeavors to address. the :State of Minnesota's $4 billion budget crisis, dramaticallyreduced state aids and imposed severe fiscal constraints (levy limits and levy adjustments) on cities-especially on high growth cities- which required the City Council and department directors to pare back the level. of our services. 1 City of Lakeville State Aid Losses 2004 Local Gov't Aid (LGA) $ 499,158 • Market Value H.Credit $ 656,230 Total $1,155,388 State cuts, including Local Government Aid (LGA) and Market Value Homestead Credit (HVHC}, which historically provided for property tax relief, were reduced dramatically for 2004. Lakeville lost all of its $499,15$ in LGA and $656,230 of its Market Value Homestead Credit in both years. • • • ~. 'r • City of Lakeville Tai Levy Limits 2004 New Ofd :Law Law Difference Levy Limit Base 9,754,611 9,754,61.1 - 60% of state aid losses 693,233 693,233 1-nplict Price Index 335,756 (335,756} Household growth 485,629 {485,629) Comm./Indust. Growth - 24,539 (24,539) Total $ .10,447,844 $ 10,600,535 $ (152,691) • • Further fiscal strain was imposed on municipalities when the Legislature allowed cities to levy back only 60% of the. state aid loss (Lakeville can levy back $693,233); however,.inthe process, the ability to levy for new residential, commercial-industrial growth and inflation factors was eliminated. This is especially punitive for high growth cities such as Lakeville. As a result,. Lakeville's tax levy authority for operations was greatly reduced - perhapspermanently. 3 ~. , , Proposed Budget and Tax Levy- "Back to the Basics" _. It's a significant challenge to maintain current :service Levels for our growing; population and our business community. while facing dramatic reductions. in state aids and levy limit authority; The 2004 budget, therefore, required policy changes. relating to revenue enhancements and expenditure reductions . The proposed budget establishes a funding level for providing "back to the basics" services in what has become a new paradigm for the level of local government services. Lakeville has always prided itself on a lean budget, therefore reductions are extremely difficult. The following presentation provides an overview of the budget, changes in service levels due to state aid reductions and levy limits and an explanation of how the proposed tax levy affects the typical homeowner. • i • Proposed general Fund 2004 Revenues Total Revenues - $16,153,534 ® .taxes (61.3%1 $9,900, tnter- go.emmental Other _ (10.6%) ~ Charctes ^ t.icenses & 3.5% $567 095 $1,709,637 for. Permits , :Services {14.8%} (9.8%} $2,394,858 $1,581,387 • • The. City has a number of funds, the largest and most significant of which is the General Fund. The .General Fund accounts for expenditures relating to ..general .government administration, public safety, public works, parks and recreation. General fund 2004. estimated revenues are $16,153,534. The largest .single. revenue category.is taxes in the amount of $9,900,557, which, represents 61.3% of the total. Other revenue sources include intergovernmental revenues, licenses and permits, charges for services, other revenues and State-aid. 5 ;~ ,. , General Fund. Significant Revenue .Adjustments ^ Interfund Transfers Liquor Fund $ 711,46$ • Cable TV_ $ 156,391 The proposed -2004 budget includes significant fiscal policy changes as it relates to appropriation of Liquor and Cable TV fund. budgets The Liquor Fund profits have historically been appropriated for construction and. improvements of public facilities.: For the first time since 1985, Liquor Fund profits will be transferred to the General Fund to finance operations. Long-term appropriation of Liquor Fund profits to operations .rather than capital ..project improvements will significantly impact the City's ability to construct and maintain its :facilities (e.g. new Public Works Maintenance facility) without future tax increases. In addition, Lakeville will, for the first time in its history, appropriate Cable TV franchise fees to finance the Public Communication program, which had previously been' financed from the General Fund. Lakeville is the only Dakota County city, which has :accounted for Cable TV franchise fees. in a .Special Revenue Fund rather than the General Fund. • • • 6 • • • 1. .Proposed General Fund 2444 Expenditures Total Expenditures - $16,602,733 Community Development & Inspections Public Works General (9.5%) (20.8%) Government. SI,S&1,167 $3,462,443 (14.2%) $2,350,45 Parks & :Recreation (13.3%) $2,214,834 Public (39.9%) (2.3%°) $6,619,364 $374;384 r Of the major city functions,:publc safety has the largest proposed. expenditures in the amount of $6,619,364 or approximately 39;8% cif the total .expenditures. In addition, General Government Services are estimated to be $2,350,491, Community Development and Inspections $1,581,167, Public Works $3,462,493 and Parks and Recreation and Arts Center $2,214,834 and Other $374,384. r' s. General Fund Programs eliminated ^ Additional public safety, public works and support personnel ^ Contract snow plowing ^ Contractual tree trimming ^ Water Treatment Facility Community Room -evening use ^ D.A.R.E. ^ Beach lifeguards Warming house Attendants ^ 4~' of July Fireworks >^ Biennial community survey ^ Out-of-state travel Lakeville has always. prided itself on a lean budget, so reductions are.. extremely difficult: The proposed budget includes elimination: of programs that have been considered by many as a part of the quality of life of this :community. Services eliminated include: Additional public safety, public. works and support personnel. Contract snow plowing Contractual tree trimming Water Treatment Facility Community Room -evening use D.A.R.E. Beach lifeguards Warming house Attendants 4a' of July Fireworks Biennial community survey Out-of--state travel • • • • City of Lake~iile Expenditures Per .Capita $z0o "$180 ~ State-wide City Average $164 ®City of Lakeville $140 $120 -- $100 $80 $60 $40 $20 $- - d`' • • According to the State Auditor's office, Lakeville's per capita expenditures are significantly less than. those of other Minnesota cities. This is due is large part to the low number of employees per capita and a staff that has consistently spent less than the. amount budgeted in the General Fund budget for .nine out of the last ten years. 4° w City of Lakeville Prop©sed General Fund Balance 2004. Estimated ending fund balance $7,328,410 Operating expenditures $16,602,733 Percent of expenditures 44.1°!0 It is important that -the City maintain adequate. fund balances in order to insure adequate reserves for cashflowsand minimize potential adverse impacts due to .future budget cuts. Bond_rating firms, such as Moody's, take a city's fund balance into account when assigning a Mond rating. Depleting .reserves :could .endanger the City's bond rating, making future borrowing more expensive for taxpayers. The designated fund balance represents the amount required to operate during the first six_months of the year. The City's most significant revenues sources-taxes and .intergovernmental revenues-do not provide. appreciable. revenue until the second half of the year. The 2004 fund balance is projected to be $7,328,410 which is 44.1% of the operating budget. The 2004 ending fund balance is $499,199 less than the estimated 2003 balance. If the state continues to withhold the state-aids and ,impose arbitrary levy limits in 2005, Lakeville's fund balance would be reduced '' an additional $l.S million thereby .resulting in a fund balance that is approximately 2S% of the operating budget As such, budget' constraints will '~ pose a greater challenge in future years. • • • 10 4~~ Y • Special Revenue Funds 2004 Proposed. Expenditures and Transfers • Cable TV Environmental Recycling Employee Benefit Geographic Information Services (GIS) Surface Water Management Qak Wilt Suppression :Grant Enhanced 911 .Economic Development Revolving Loan Total $ 405,693 47,525 89,799 152,575 512,191 10,500 33,797 $1,252,080 Special Revenue_Funds:are used to account forthe proceeds from specific revenue sources that are legally resttcted to expenditures .far specific purposes. Establishment of such funds also. enables the City to more effectively manage its resources and minimize .tax levies. Revenues from Cable TV franchise fees finance the Cable TV fund operations, which of course provides services for Channel 16 and the live cable casting of City Council and planning Commission meetings. The Environmental Recycling Fund accounts for grants that the City receives from Dakota County for the citywide recycling efforts. The Employee Benefit Fund accounts for separation pay for city employees. The City's geographic information computer system accounts. for all activities related to :maintaining the specific .parcels data base within the City of Lakeville. The primary .revenue sources are property .taxes and GIS :fees that are .collected as new lots/parcels of record are i created. The Surface Water Management Fund was created help manage the City's surface .water resources. The Oak Wilt Suppression Grant. Fund was created to account for grants received ..from the Minnesota Department of Natural Resources. The grant proceeds will reimburse Lakeville residents for 5©% of their disbursements for oak wilt suppression. The E-911 Fund accounts for the revenues from the telephone tariffs that are specially designated to operate the police, fire and ambulance dispatch emergency 911 system. The Economic Development Revolving Loan Fund was created to account for loans to businesses that are either expanding or building within the City of Lakeville. 11 .,, internal Service Fund Municipal Reserves Fund 2004 Proposed Expenses Liability, Property and. Casualty premiums $ 247,858 Claims and deductibles 50,000 Administrative 37,21.2 Total $ 335,070 The Municipal Reserves (Internal.. Service) Fund accounts for the ,City's general liability, excess liability, property, and casualty insurance casts. The City's primary insurance carrier is the League of Minnesota Cities Insurance Trust {LMCIT). Revenues are. derived primarily from insurance rebates and transfers from the General,- Liquor, Water and Sanitary Sewer Funds. The fund will have an estimated $478,530. fund balance in 2004 .primarily as a result of self insuring the excess liability coverage since 1993. The fund balance is encumbered for unanticipated expenditures due to natural disasters. P • • 12 • Capital Projects /Equipment Fund /Buildng Fund • • ~ Capital Projeet Funds account for financial resources appropriated to the acquisition of capital facilities and equipment, except those financed by Enterprise Funds 13 Capital Projects Equipment Fund 2004 Police $ 299,661 Fire 436,783 Streets .5.4,728 ...Parks 89,296 Qther 28,263 Total $ 908,731.... The Equipment Fund ..accounts for the purchase of police, fire, street and park maintenance. equipment.. The City Council, at its March meeting, approved the issuance of $2;260,000 Certificates of Indebtedness to finance the 2004 and 2005 equipment acquisitions. Property taxes, levied to paythe principal and interest on the Certificates, are exempt from levylimits. • • 14 • Capital Projects Building Fund 2004 Ex,Penditures :City Hall $ 1,303 Fire Station #2 75,1.64 Public Works Facility 608,800 Senior Center 13,763 Total $ 6:99,430 • The Building Fund accounts for construction or improvement activity related to public buildings. The 2004 budget provides for architectural services to prepare site/building plans and specifications for anew Public Works Maintenance Facility. The land acquisition and construction costs will: be financed -with thee- issuance of lease revenue bonds. Due to levy limit impositions, future transfers from the Liquor Fund to finance public building improvements are endangered. 15 Enterprise Funds ~ Liquor Fund ~ Water Operating Fund ~ .Sanitary Sewer .Operating Fund Enterprise Funds account for liquor,. water: and sanitary sewer operations for the City; they are self-supporting from retail sales and user charges. Qperations are managed in much the same way as private enterprises. • 16 Liquor Sales 1995-2QO4 S11,000,OOo 59,000,000 57,000,000 55,000,000 53,000,000 1995 199b 199 1998 1999 2000 2001 2002 2003 2004 • • According to the Minnesota State Auditor, Lakeville ranks first in .municipal liquor sales. Sales are projected to increase to $1.0.3 million in the coming year.. As a result, net income before transfers_is estimated to attain $805,000 in 2004.. The Legislature has for a number of years considered. the "wine in grocery" legislation that would have authorized grocery stores to 'sell wine. Although the bill.. has not passed,. the proposed legislation will likely be reconsidered in future legislative sessions. If this legislation were to pass, the Liquor Fund could experience a $200,000-$300,000 loss of net income. 17 Water Operating Fund. 2004 Total Revenues $ I,93O,Q92 Expenses (2,$29,215, Net operating income/(loss) (899,123) Interfund transfers ($4,979) Capital outlay acquisitions 4 122 -Net increase/(decrease) $(988,226) The. water fund.. accounts :for the operation of the water system including supply, treatment, storage and distribution for more than 14,000 customers.- There are no proposed. rate increases for 2004; however, the DNR has indicated that future water appropriation-permits may require the City to institute a tiered- rate structure during peak water consumption periods. Lakeville has. the lowest water rates of any City in Dakota County.. The affordable water rates are due to the financial management foresight of the City Council whereby water infrastructure improvements such as wells, towers and the Water Treatment Facility are financed with water connection charges rather than water usage rates. • • 18 ,~ ' ' ;. • • • unitary :Sewer f3peratng Fund 2004 Total Revenues $ 3,282, l I 1 MCES sewage treatment (2,25I,039) Expenses 567 982. Net operating income/(1©ss) 463,090 Interfund transfers {83, 171) Capital outlay acquisitions (4, ~ 22) Net increase/(decrease) $ 375,797 The sanitary sewer fund accounts for the treatment and disposal of system effluent. The largest single expenditure is for Metropolitan Council Environmental Services Division sewage treatment costs in the amount of $2,251,039 - MCES is increasing sanitary sewer processing. costs by approximately 3.1 % in 2004. The proposed budget takes .into consideration a recently approved $.06/ thousand gallon increase in sanitary sewer rates to offset the MCES cost increases. The sanitary sewer rate changes will result in approximately $1.06 per quarter ($ 4.24 per year) increase for the average family in 2004. 19 Water & Sanitary:. Sewer Fees Quarterly Water Sewer Total ^ Burnsville $38.95 $52.34 $92.59 ^ Apple Valley $33.84 $47.34 $81.18 ^ Farmington $28.$0 $44.10 $72.90 ^ Rosemount $27.26 $45.20 $72.46 /Lakevlle $17.87 $45.86 $63.73 ' Eagan $26.00. $33.80 $59.80 In spite of the proposed: modest increase in sanitary sewer rates, Lakeville's utility. fees are amongst the lowest in the County. • • 20 • 2QO4 Proposed Tax Levy Proposed 2003 2004 Change General Fund/GIS Fund $ 9,963,013 $ 10,522,227 $ 559,214. Cert. of indebtedness 854,591 1,071,016 216,425 Votear-approved debt 474,179. 412,215 (61,964) Improvement bands 632,406 832,971 200,565 Total tax kvy $ 11:,924,189 $ 12,838,429 $ 914,240 • Lakeville's proposed tax. levy for 2004 is $12,83.8,429.- The tax tax levy will increase. $559,214 for operations Increased $2 f 6,425 for equipment purchases Reduced by $61,964 due to -the last payment on the Fire Station #3 bonds ~, And. increased $200,565 for interchange improvements. '' To help ensure that crucial interchange improvement projects proceed in a timely ', manner, the "Interchange Financing Report dated November 2002" was prepared to identify the estimated costs and proposed financing for the coming :years.. The proposed tax increase for improvements are appropriated to the General Obligation. Street Reconstruction Bonds Series 2003 A ($14.88 million) which were issued. to finance the 2002 - 2004 Improvements.. 21 :; ., , Tax rapacity Rate calculation ZQ04 Tax Capacity Rate calculation Proposed Tax levy $ 12,56$,744 Fiscal disparities (1,410,454} Net tax Ievy $ 1 I,I58,290 Net Tax Capacity $ 37,122,444 Tax Capacity Rate 4.34058 The tax levy results in an approximate' 8.8% decrease in the tax-capacity rate primarily due to a 18.2% increase in the net tax capacity as a result of market value appreciation, limited market value increase from 10% to 12% and tax .base increase due to -new construction of residential, commercial and industrial property. • 22 • • 20041VIarket Value Tax Rate 2004 Estimate Market. Value $ 3,703,861,000 Tax levy €or 1994 Park Bonds $ 269,685 Tax rate bused ©n market value 0.0000728 ___ Tax levies for bond issues approved by referendum after August 1, 1994, are :based on market-value rather than tax capacity value.. The only City of Lakeville .levy based on market value is for repayment of the 1994 Park Bonds, 23 City of Lakeville Estimated Property Taxes on ` Residential Homestead 2003 2004 Change Taxal~e Market Value $ 202,200. $ 222,240 -$'20,000 9.9°l0 Lakeville (City) $ 620 $ 629 $ 9 1.5% Increas a due to: Loss of Market Value Homestead Crecl;t $ 8 Operations $ 1 ..Total ~ $ 9 The median value of a home in Lakeville is $222,200 for taxespayable in 2004. It's estimated to have a $9 increase in the City share of taxes. Ofthatncrease, $8 was due to the decrease in the Market Value Homestead credit, . and $1 is for operations. The State of Minnesota provides the Market Value Homestead to residential properties.. The credit is limited to a maximum of $304 on a $76,000 home. Thee .market value homestead credit is phased aut for homes in excess of $76,000 at a rate of .09% of the home's value in excess of $76,000. In other words, as the home appreciates, the credit is reduced. The City has no control over the State Market Value Homestead Credit. • • • 24 • • Lakeville's low tax rate is due to: Prudent fiscal management ~ Long-term and short-term debt policies ~- Commereial/Industral growth ~- Increased value of new residential, .commercial. and industrial construction Fiscal disparities contributions +~ Strategic Growth Management Plan Historically, Lakeville has had one of the lowest tax capacity rates in Dakota County for cities over S,OOQ population.. Lakeville's low tax rate is due to: 4Prudent fiscal management. Long-term and short-term debt policies +~ Commercialllndustrial growth Increased value of new residential, commercial and industrial construction 4Fiscal disparities contributions ~ Strategic Growth Management Plan 25 Lakeville's low tax rate is due to: v Economic Development Commission's Strategic Plan ~- Two-.year budget planning process o Five-year Capital improvement:Program ~- Municipal liquor profits +~ Effective risk management .Joint {shared services}.Powers Agreements Privatization - outsourced services with private firms ~iEconomic Development Commission's Strategic Plan ~ Two-year budget: planning. process 0 Five-year Capital Improvement Program - O Municipal liquor profits 4t Effective risk management Q3oint (shared services) Powers Agreements Privatization - outsourced services with private firms • 26