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Home My WebLink About12-11-00.. . CITY OF LAKEVILLE SPECIAL COUNCIL MEETING DECEMBER 11, 2000 Mayor Zaun called the meeting to order at 7:00 p.m. Roll call was taken. Present: Council Members Luick, Sindt, Mulvihill, .Bellows and Mayor Zaun. Also present: B. Erickson, City Administrator; D. Feller, Finance Director; S. Michaud, Parks 8v Recreation Director; D. Martens, Police Chief; B. Kempa, Senior Accountant; J. Hawkins, Deputy Clerk. Mayor Zaun stated that the purpose of this meeting is to provide for the Truth in Taxation public hearing, per state statutes, which provides an opportunity for taxpayers to ask questions and make comments regarding the proposed budget for 2001. The City Council has had the opportunity to review the preliminary budget since its presentation at the September 13, 2000 meeting. The City Council may approve a final tax levy that is equal to or less than the preliminary levy approved in September. It may not, however,. adopt a final tax levy that is greater than the preliminary tax levy approved in September. No formal action may be taken until the December 18, 2000 Council meeting. Finance Director Dennis Feller presented an overview, via video production, of the City of Lakeville proposed 2001 budget. (See attached narrative from Dennis Feller, dated December 1 1, 2000.) Following this presentation, Mayor Zaun thanked the Finance Department, especially Senior Accountant Brian Kempa for his hard work in the preparation of the budget. Mr. Feller. attested that the notice of the public hearing had been duly published. A letter had been received at City Hall from, Lori Benson, 16661 Firestone Path, who was concerned about the notice they received. stating the valuation of their property and their proposed real estate taxes for 2001. Minutes of Special Council Meeting December 11, 2000 Page -2- 00-208 Motion was made by Sindt, seconded by Mulvihill, to receive the letter from Lori Benson and enter the letter into the minutes of this meeting. Roll call was taken on the motion. Ayes: Luick, Sindt, Mulvihill, Zaun, Bellows Ms. Benson was in attendance and stated that their taxes were proposed to increase 32.4%, which did not include the school levy which had been proposed for ISD # 196, since it had not passed. She feels the increase is surprisingly large and is concerned that she may not be able to afford to live in her Lakeville home, where they have resided for 14 years. Finance Director Dennis Feller stated that he would like the opportunity to review the statement with Ms. Benson and the County Assessor, especially to clarify the significant increase in the valuation of their home. Mayor Zaun stated that a recent article in the "Minneapolis/ St. Paul Magazine" had stated that Lakeville's levy increased 20%. Mr. Feller stated that the increase was due in part to operation and • maintenance of the Lakeville Area Arts Center, the Ipava Avenue improvement project, the pavement management (seal coating) program and general growth. in the City. The proposed tax Levy represents a significant change in fiscal policy whereby sealcoating would be financed with property taxes rather than special assessments. It should also be noted that of all the cities in Dakota County, only Mendota Heights has a lower tax capacity rate than Lakeville. If significant commercial development occurs as anticipated, future tax capacity rates in Lakeville will be even lower. Mr. Erickson stated Lakeville should be proud of its low taxes based on a Citizen League report which indicated Lakeville ranked 99~ out of 107 metropolitan area cities. Lakeville residents also enjoy the lowest water rates of any city in Dakota County with treated water. Mr. Erickson added that the recent voter-approved school levies were not included in Truth in Taxation statements received by residents and business/property owners. Mayor Zaun stated that,. based on Lakeville's annual financial reports, the City's per capita expenditures have remained relatively constant during the past decade. In response to Mayor's Zaun's question relating to the debt service tax levy, Mr. Erickson stated Minutes of Special Council Meeting December 11, 2000 Page -3- that the City will be debt free by 2003 for public facilities. The "debt free by2003" objective is due in large part to transfers from the Liquor Fund which provide a significant revenue source that enables the City to build and maintain its facilities. 00-209. Motion was made by Mulvihill, seconded by Luick to close the Truth in Taxation public hearing. Roll call was taken on the motion. Ayes: Sindt, Mulvihill, Zaun, Bellows, Luick City Administrator Erickson apologized for the technical difficulties this evening and informed those in attendance that videotape copies of the meeting would be available to them. Item #4. Consent Agenda. 00-210 Motion. was made by Luick, seconded by Bellows to approve the consent agenda items as follows: a. City Council budget work session minutes, November 27, 2000. b. Resolution authorizing public and private stop signs. c. Approve specifications for a Fire Department rescue vehicle and set a bid date for January 4, 2001, at 2:00 p.m. d. Resolution adopting COLA for the non-exempt liquor stores' position salary structure. e. Agreement with Stanton Group, Inc. for flexible benefits spending plan administration. f. Renewal of billboard licenses for 2001. g. Renewal of mixed municipal solid waste and recyclable material collection licenses for 2001. h. Escrow Agreement with Rice Lake Contracting for the water treatment plant expansion, Improvement Project 00-03. i. Resolution authorizing car allowances. • Minutes of Special Council Meeting December 11, 2000 Page -4- Roll call was taken on the motion. Ayes: Mulvihill, Zaun, Bellows, Luick, Sindt Item #5. Originally staff felt it would be necessary to set a date and time for a special meeting so that bids could be awarded for the Lakeville Area Arts Center. City Administrator Erickson stated that the City Attorney recommended that the December 18~ meeting could be continued. to a specific date for that purpose. 00-211 Motion was made by Mulvihill, seconded by Sindt to delete Item #5 from the agenda. Roll call was taken on the motion. Ayes: Zaun, Bellows, Luick, Sindt, Mulvihill Mayor Zaun adjourned the meeting at 7:45 PM. Respectfully submitted, ~1Ct.GJ'IW ham./ udi Hawkins, Deputy Clerk • Duan Zaun, May HEARING PROCESS The purpose of tonight's truth in taxation hearing is to provide taxpayers the opportunity to ask questions and present comments. After all persons have had an opportunity to speak, the City Council should close the hearing... Formal approval of the resolutions will take place at the Council meeting scheduled.. for Monday, December 18. General Fund The General fund accounts for all revenues and expenditures necessary to provide a full range of services including general government administration, .community and economic development, public safety, public works, and parks and recreation.. CHARGES FOR SERVICES (10. $1,340,561 LICENSES AND PERMITS (13.5%) $1,752,604 GENERAL FUND 2001 REVENUES TOTAL REVENUES - $12,934,995 OTHER (7:8%) TAXES (45.9%) $1,012,200 $5,937,660 INTERGOVNTL (5.0%) $644,366 STATE AID (LGA/HACA/LPA) (17.4%) $2,247,604 The largest .single revenue category is taxes in the amount of $5,937,660, which represents 46°10 of the revenue sources. The second largest revenue source is State Aids for Property Tax Relief. Other revenue sources include intergovernmental revenues, licenses and permits, charges for services and other revenues. • • GENERAL FUND 2001 EXPENDITURES TOTAL EXPENDITURES - $13,179,737 PARKS AND RECREATION (14 PUBLIC WORKS (19.1%)$2,514,384 GENERAL ^^"ERNMENT $3,328,205 Of the major city functions, public safety has the largest proposed- expenditures in the amount. of $5,437,257 or approximately 41% of the total expenditures. In addition, General Government Services are estimated to be $3,328,205, Public Works at $2,514,384 and Parks and Recreation at $1,899,891. According to the State Auditor's office, Lakeville's per capita expenditures are significantly less than those of other Minnesota cities. Lakeville's per capita expenditures are below the state average in every category CITY OF LAKEVILLE EXPENDITURES PER CAPITA $200 $150 $100 $50 $- 2 PUBLIC SAFETY (41.2%) $5,437,257 GENERAL GOVERNMENT PUBLIC SAFETY PUBLIC WORKS PARKS & RECRATION • Lakeville is able to maintain below average expenditures due to prudent fiscal management and the fact that Lakeville will continue to have 3.4 employees per thousand. CITY OF LAKEVILLE EMPLOYEES PER THOUSAND CITIZENS F 4.0 Z W a O 3.5 ~ g 3.0 W W a 2.5 1994 1995 1996 1997 1998 1999 2000 2001 The General fund balance represents the amount of funds required to operate during the first six months of the year. The City's most significant revenue sources--taxes and intergovernmental revenue--do not provide appreciable .revenues until the second half of the .year. The ending fund balance is $5,496,738, which is 41.7% of the budgeted expenditures. The projected fund balances are adequate and sufficient but not excessive. SPECIAL REVENUE FUNDS Special Revenue Funds are used to account for the proceeds from specific revenue sources that are legally restricted to expenditures for specific purposes. Establishment of such funds also enables the City to more effectively manage its resources and minimize tax levies. 3 2001 Expenditures Cable TV $522,491 Environmental Recycling 27,924 Drug Enforcement 86,386 Employee Benefit 40,000 GIS 155,849 Surface Water Management 352,511 Oak Wilt 5,849 Enhanced 911 21,929 Economic Development 0 Total $1.212939 Revenues from Cable TV franchise fees finance the Cable TV fund operations, which of course provides services for Channel 16 and the live cablecasting 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 Drug Enforcement Fund accounts for one patrol officer assigned to the South Metro Drug Task Force. The primary revenue source is property taxes and a state grant. The Employee Benefit Fund accounts for severance pay for city employees. The proposed budget includes an annual $40,000 transfer from the General Fund. The City's GIS Fund for geographic information computer system accounts for all the specific parcels within the City of Lakeville. The primary revenue sources are property taxes and GIS fees that are collected as new lots of record are created. The Surface Water Management Fund was created several years ago to help manage the City's water sources, There are no proposed increases in the surface water management fee. The Oak Wilt Fund accounts for grants received from the Department of Natural Resources. 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 E-911 system. The Economic Development Revolving Loan Fund was created to account for loans to businesses that are either expanding or building with the City of Lakeville. 4 • INTERNAL SERVICE FUND The Municipal Reserves (Internal Service) Fund accounts for the City's general liability, excess liability, property, casualty and workers Compensation insurance costs. The City's. primary insurance carrier is the League of Minnesota Cities Insurance Trust (LMCIT). Lakeville's workers compensation experience modification ratio is .82, which is considered very favorable. The fund has accumulated a $428,897 fund balance primarily as a result of self insuring the excess liability coverage since 1993. CAPITAL PROJECT FUNDS Capital Project Funds account for financial resources used in the acquisition of capital facilities and equipment. T'he Equipment Fund accounts for the purchase of public safety, street and park maintenance equipment. The budget anticipates the issuance of approximately $875,000 of Certificates of Indebtedness for 2001. • The Building Fund accounts .for construction or improvement activity related to public buildings. Transfers from the Liquor Fund provide a vital revenue source that enable the City to build and maintain its facilities. Significant 2001 projects include: • Remodelinglexpansion of City Hall • Civil Defense Siren installed at King Pazk and one relocation • architectural study for a proposed Fire Station #4 • Space Utilization and Architectural study for a future Public Works Maintenance Facility The Park Development Fund accounts for revenues derived primarily from developers at the time plats aze approved. Some of the major projects include: • Development of the Lake Villa neighborhood park plan • Highview Avenue Trail: 165`" Street -172"d Street • Valley Lake Park Plan • Vermillion Springs Trail • Playground upgrades at Antlers Park s • ENTERPRISE FUNDS Enterprise Funds account for liquor, water and sanitazy sewer operations for the City; they aze self-supporting from retail sales and user chazges. Operations aze managed in much the same way as private enterprises. LIQUOR .FUND According to the Minnesota State Auditor, Lakeville ranked third in municipal liquor sales. Sales are projected to be $9.2 million in 2001. As a result, net income before transfers is estimated to attain .$845,987 in 2001. Transfers from made from the Liquor Fund to the Building Fund from construction and maintenance of City facilities and to the General Fund for the DARE program. WATER OPERATING FUND The water fund accounts for the operation of the water system including supply, treatment, storage and distribution for more than 12,000 customers.. The City does not propose any water rate increase for 2001. Lakeville has the second lowest water rates in Dakota. 2001 Revenues $ 1,719,209 Expenses (1,285,799). Net operating income Interfund transfers $ 433,410 (68,484) Capital outlay acquisitors (188,777). Net increase $ 176,149 The affordable water rates aze due to the financial management foresight of the City Council whereby infrastructure improvements such as wells, towers and the water treatment plan are funded by connection charges rather than water use rates. SANITARY SEWER OPERATING FUND The sanitary sewer fund accounts for the treatment and disposal of the system effluent. The lazgest single expenditure is for the Metropolitan Council Environmental Services Division sewage treatment cost in the amount of $1,789,180, which represents 75% of the total budget. There aze no proposed sanitary sewer rate increases for 2001. 2001 Revenues $ 2,775,350 MCES sewage treatment (1,789,180) Other expenses (506,394) Net operating income 479,776 Interfund transfers (49,148) Capital outlay acquisitons (65,736) Net increase $ 364,892 Lakeville's Water and sanitary sewer bills are among the lowest in the County as a result of its fiscal and management polices. Sanitary Water Sewer Total *Inver Grove Hgt. 40.31 47.80 88.11 *Apple Valley 33.74 48.74 82.48 Farmington 30.80 48.50 79.30 South St. Paul 19.50 59.50 79.00 Hastings 32.00 46.50 78.50 *West St. Paul 36.91 40.95 77.86 Rosemount 29.30 48.00 77.30 *Burnsville 32.80 42.80 75.60 *Eagan 27.70 38.30 66..00 *Lakeville 19.55 47.60 67.15 * cities with treated water ** based on 20 thousand gallons PROPERTY TAXES The tax levy being proposed tonight is $7,893,596 which is $$8,251 less the preliminary budget adopted in September. • 7 • General Drug Enforcement GIS Fund Certificates of Indebtedness Voter-approved debt Pavement Management Improvement Bonds Total tax levy Preliminary' Adjust Proposed $ 5,876,596 $ (8,251) $ 5,868,345 75,000 .75,000 94,913 94,913 497,372 497,372 467,536 467,536 480,649 480,649 409,781 - 409,781 $ 7,901,847 $ 8( '251) $ 7,893,596 Factors which influenced the proposed tax levy include but not limited to ~ operation and maintenance of the new Arts Center; • acquisition and financing of equipment such asthe -fire rescue trunk, dump trucks and the loader backhoe utilizing Certificates of Indebtedness; • and debt service obligations including the Ipava Avenue project. • financing sealcoating (pavement management) with taxes rather than special assessments; For only the second time in more than two decades, the Legislature removed levy limits during its last legislative session, thus enabling cities to make significant tax levy policy changes. Due to the expressed concerns of residents, Lakeville City staff is recommending that the City Council consider changing its long-standing pavement management policy. Currently, Lakeville specially assesses property owners for half the cost of sealcoating, with an average assessment of $100 to $120 once every seven years. The proposed policy change would finance the sealcoating with property taxes rather than special assessments starting in 2001. The .change would benefit Lakeville residents because: • Property taxes are deductible from State and Federal income tax; special assessments .are not deductible • The special assessment process is very labor intensive and costly to administer. The special assessment process requires two public hearings. Costs include postage ,supplies and legal notices. In addition, Dakota County charges a $4 administrative fee per parcel. • 8 • The City of Lakeville's 2001 net tax capacity rate is: Tax Cauacity Rate 2001 Estimate Tax levy $ 7,630,889 Fiscal disparities (918,662) Net tax levy $ 6,712,227 Net Tax Capacity $ 33,385,860 Tax Capacity Rate 0.20105 • The City continues to maintain a strong tax base as a result of commerciaUindustrial developwent, the increasing value of new residential housing construction, and the continued strength of real estate market valuations. 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 the 1994 Park Bonds, as shown below: Market Value Tax Rate Market Value Tax levy for 1994 Park Bonds Tax rate based on market value 2001 Estimate $ 2,380,246,886 $ 270,958 0.0001138 The improved tax base combined with a conservative fiscal policy are dominant reasons for the City's ability to continue to have one of the lowest tax capacity rates of .any city over 5,000 population in Dakota County. This was recently reinforced when Moody's Investor Service upgraded Lakeville's bond rating from A3 to A2. 9 . Tax Capacity Rates (Estimated) For taxes payable in 2001 Rosemount 0.36539 Hastings 0.33082 Apple Valley 0.31301 Farmington 0.29875 Burnsville 0.29189 South St. Paul 0.28326 West St. Paul 0.25124 Inver Grove Hts. 0.25081 Eagan 0.23423 Mendota Heights 0.19779 Lakeville 0.20105 The Council has the ability to adopt a final tax levy that is equal to or less than the preliminary tax levy approved in September. It may not, however, adopt a final tax levy that is greater than the preliminary tax levy. Lakeville's low tax rate is due to: • Prudent fiscal management • Long term and short term debt policies • Investment policy • CommerciaUindustrial growth • Increased value of new residential construction • Fiscal disparities contributions • Strategic Growth Management Plan • Economic Development Commission's Strategic Plan • Two-year budget planning process • Five-year Capital Improvement Program The proposed 2001 budget and tax levy are consistent with the City's mission statement which states,- "The City of Lakeville is committed to providing the highest quality of service possible in a cost effective, innovative and responsible manner. " g:\budget\2001 - 2002 budget\tnt presentation 12_1 l_OO.doc 10