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HomeMy WebLinkAbout120496 Regular MINUTES OF THE PRIOR LAKE CITY COUNCIL TRUTH IN TAXATION HEARING DECEMBER 4, 1996 CALL TO ORDER: The Hearing was opened at 8:00 p.m. PRESENT: Mayor Andren, Councilmembers Kedrowski, Schenck, and Mader, City Attorney Pace, City Manager Boyles, Finance Director Ralph Teschner, Building Official Gary Staber, Police Chief Dick Powell, Police Lieutenant Schmidt, Planning Director Rye, Public Works Director Greg Ilkka, Assistant City Engineer Wingard, Public Works Supervisor Doug Hartman, Parks and Recreation Director Paul Hokeness, and Recreation Supervisor Bret Woodson. Councilmember Greenfield was absent. PLEDGE OF ALLEGIANCE: Mayor Andren led the Pledge of Allegiance and welcomed everyone to the meeting. PRESENTATION: City Manager Boyles began by responding to Councilmember Mader's letter to the editor in the Prior Lake American that raised six points about City Budgeting and Fund Balances. After reading the response, City Manager Boyles explained the purpose of the truth in taxation hearing, required under statute and the notices that taxpayers received. He said one of the Council's primary objectives is, "adopt a 1997 General Fund Budget which provides needed services with no tax increase". He said this budget meets this goal with some conditions. One, it assumes that the valuation on your household has gone up the average of about six to eight percent, which is about the average people have seen. Second, it assumes that your house has not gone from homestead to non-homestead, or a substantial depreciation has not taken place, or a substantial additional valuation has not been added. City Manager Boyles outlined the percentages of the budget which are property-tax based, and the entities which depend on this base. He then presented exhibits 7 through 20, which discussed information about the budget as was distributed to the Council and public present. COMMENTS AND QUESTIONS: Bernie Arnoldi, 3094 Spring Lake Road SW, - expressed his opinion on City taxes being raised while County taxes went down. He did not believe it cost more to run the City than the County. He was upset about the apparent surplus and wanted to 16200 E~~l~!'~i$~l.~,~P.~f:Lake, Minnesota 55372-1714 / Ph. (612) 447-4230 / Fax (612) 4~7-4245 AN EQUAL OPPORTUNITY EMPLOYER credit Wes Mader with saying what was going on. He said there were five senior citizens that sold their homes because they could not afford to pay the property taxes. Jeff Mader, Butternut Circle, said that one of his concerns was that Prior Lake says they are doing well on a per capita basis. He said per square mile, Prior Lake was the worst listed. Depending on what was used to compare budgets, he felt the statistics could reflect whatever was necessary and the surplus should be used to lower taxes. Charhe Hall, 3486 Sycamore Trail, said he lived in Prior Lake 15 years and for 15 years taxes have gone up. Numbers can be made to look as good or as bad as needed, but the message is that the federal and state government have received the message on taxes and surpluses, and it is time Prior Lake got the message. Matt Prettyman, 3442 Sycamore Trail, said he has been in Prior Lake 15 years, and has seen increases every year for 15 years. He said City Council and staff should recognize that citizens are upset. Mayor Andren said that he should not attack individuals personally, and should keep focused on the issue of taxes. Mr. Prettyman said City Manager is in charge of the City, so he is accountable for these things. When the surplus is used wisely, don't run a deficit, and don't get sloppy. He asked who is responsible for the expenditures of the City. Mayor Andren said the City Council was responsible and set the tax policy, and was responsible for accepting or not accepting the manager's budget. Mr. Prettyman said that the City Council was not taking care of its taxpayers interests. He asked if a fire truck goes to Mystic Lake and it costs $200, do we charge them that or do it at a profit? Mayor Andren said we have a contract with the Dakota Community and they pay for the services they receive. We have contracts with Spring Lake, Credit River, and the Dakota Community. They are not subsidized. They pay for the capital facilities, they pay for the trip. All of that is incorporated into the contract. Mr. Prettyman asked if it were for at cost or profit. Finance Director Teschner said cost. City Attorney Pace said the law prevents the City from making a profit in the general fund. I: kC()UNC I L",M IN UTESVFA2. DOC 2 Finance Director Teschner said that utilities were operated for profit. Mr. Prettyman said it was a strain on the City's finances. He said he disagreed with the percentage comparisons. For example, on expenditures per capita, it is a gauge, but City Manager Boyles doesn't want to use percentages but that is all he talked about. So do we operate the City by not comparing these percentages or we just don't want to use them? City Manager Boyles said he would meet with Mr. Prettyman and answer these questions if he wanted. Finance Director Teschner said the percentage was a composition percentage, what they represent from the total budget, not resources spent. We have separate costs, like legal, etc. not distributed across the General Budget. Per capita costs are City Auditor figures. Our per capita is less than average. The other per capita comparison is an overall comparison to see how we hne up with the other cities. In the case of Mr. Mader's comment regarding the miles, Prior Lake's service delivery costs increase because of transportation challenges created by the lake and the dispersion rather than concentration of population. Mr. Prettyman said we were the second most expenditures per capita, the seventh highest in taxes. Finance Director Teschner said all the surrounding Cities in Scott County have similar taxes. Prior Lake is second lowest per capita of the eight to which it was compared. The higher the commercial industrial tax base, the lower residential taxes. Mr. Prettyman said someone was responsible for this. He said the City spent money on lights for Northwood Road in the wrong place, consulting firms for trying to get the Councilmembers to get along, and these are not good business decisions. Mayor Andren said there are 13,480 people who are not here. Mr. Prettyman said he did not want his tax dollars spent on daycare for Councilmembers. John Egan; he said the most telling argument was expenditures per capita. There needs to be a baseline comparison for the Cities south of the metro. He said Prior Lake was doing an exceptional job and he appreciated everything that Prior Lake had done. Robert Tuft, 14937 Manitou, said he agreed with Wes and keeping the taxes fiat may not be the right objective for people who may have 8 or 9% decrease in income. He expressed concerns about the surplus and about his sewer and water bill. 1: \COU'NCIL",M 1N UTES\TA2. DOC 3 Finance Director Teschner said that Mr. Tuft's bill was low compared to the average water user. Most of the sewer bill pays for a $72,000 monthly metropolitan sewer treatment charge. The other two charges are facility charge for capital facilities and the last item is $3.75 storm water charge for water quality. He said surplus was necessary for funding for operating capital, and the City cannot operate on zero dollars with operating capital. We receive 50 percent of revenues twice per year, and in the meantime, the City operates from the established fund balance. A zero fund balance would reflect on our credit rating, and we would be paying higher interest and therefore higher property taxes. Manny Russo, 5484 160th street, said people should not be ridiculed. He said he managed a big company, there were two County Commissioners removed recently because they did not listen to their constituents. They thought they were gods. He said that Prior Lake was a nice City. The Police and Fire Departments are very responsive and the City has good employees. He said the City Council should listen before they get out-voted or voted out. Matt Prettyman said this is about truth in taxation and someone had to be held accountable for tax dollars, and if we can't point to someone, we have to identify who that is. It is perceived as bashing, but it is the truth. He said he did not have curb and gutter, the taxes on his house are 100% higher than when he bought it. There are people who have to sell off property to pay their taxes. The single income people get taxed right out of their homes. When you operate at a surplus, you are not using your operating skills efficiently, so therefore, the operations are sloppy Bob Cavil, 14909 Manitou Road, was concerned with surplus. From the type of budgeting he did while in business, he said these items should have been in the budget for the year. We don't want a run-down system, just an honest effort to do the best budgeting you can. John Egan stated it was the City Auditor who recommended a 40% general fund reserve. The City has opted for 30% Fund. That is where this money is coming from, the City should be commended for that. Finance Director Teschner explained the reasons for having a surplus. He said there were a number of revenue sources that exceeded projections in the course of the year, and Mr. Boyles addressed them. The City cannot project with any degree of accuracy from a year to year budgeting basis what type and volume of development is going to occur. We generate quite a bit of engineering, inspection, and development dollars from such activity that we use to cover the City's costs today and in the future. We are at an all-time high in single family starts. What we try to do is foresee as much as possible what building activity we will have in a I:\COU'NCIL\MIN UTES\TA2.DOC 4 year, and we try to do that as successfully as possible. He said most of the building permit revenues were associated with one-time large projects. Mayor Andren asked Finance Director Teschner to explain the last few years, when there were two years with tax increases, one in 1993 and one for the Fire Hall referendum. How many zero tax increase years have we had? Finance Director Teschner said that over five years there was zero, and last year there was a reduction. Two years had increases. One occurred because of the Fire Station referendum and the other because of major valuation changes. For the 23.5 cents that the City controls, we are doing well. Mayor Andren said that there are people here with tax increases, and if the City part is not increasing, then what is driving it? Finance Director Teschner explained valuation increases. Mr. Prettyman said he still was upset about the surplus. Charlie Hall, asked about the comparisons from other communities and comparative surpluses. Finance Director Teschner gave an examples of the average fund balance, when Prior Lake was at 26.1%, Shakopee maintains a fund balance of 44.1% of the annual budget. He gave a few examples. Prepaid special assessments are part of the fund balance. City Manager Boyles referred to the Clarification of Budgetary Questions. He explained that the fund was for the specific purpose of providing cash flow. Charlie Hall said there should be specific comparisons. He said there are three funds that did not grow. He said it appeared that expenses were more than receipts. Finance Director Teschner explained that TIF funds were used by other cities. Debt service accounts cannot be legally refunded or transferred because of the restrictions. He explained that the Council had control over the General Fund, Sewer and Water Fund, the Storm Water Fund and Capital Park Fund. The remaining fifteen funds are committed for specific uses. Mr. HaH asked if the funds use were approved. Finance Director Teschner explained that on a quarterly basis, the City Council reviewed the investment report which shows the status of all funds. I:\COUNCIL\MINUTESVI'A2.1)OC 5 Only General Funds come from taxes and the rest comes from other sources Jeff Mader, Butternut Circle, said that his taxes went up every year, and the house valuation would not help until the house was sold. It sounds like a lot of dissatisfaction with taxes. He wanted to know if the tax situation was going to be readdressed. Mayor Andren said the City Council would act on it and move a motion to pass the budget unless someone motioned not to. Bob Kayla asked about the budgeting process. He wanted to know about the $75,000 that was taken from surplus and put into the Lakefront Park Improvement. He wanted to know if the Parks budget did not have to plan a budget? Finance Director Teschner said all of the budgets were submitted for review by the individual department heads. He said governmental fund accounting was vastly different than the private sector. He said that the operating budget was the year to year operations of the City and typically did not reflect large capital outlay. Bob Kayla said shouldn't that have been budgeted instead of taken from surplus? Finance Director Teschner said if it had been budgeted, there would have been a tax increase. Matt Prettyman of Sycamore Trail asked when severance compensation was recommended. Finance Director Teschner said within the last five years. Mr. Prettyman said that he was hearing there was no taxes on that, but it is because the money has already been taken from taxpayers. While the City has the money, the City is earning interest, and the citizens are denied this interest earning on the surplus. The barrage of numbers needs to be looked at further. Where will we go from here? The process needs to be changed. Surplus needs to be explained again. The $483,000 surplus is more like a $335,000 surplus because the $148,000 is needed to cover the General Fund at 30% of the threshold. The other $335,000, how is this to be approached? Mayor Andren said the workshop was held in January, when the Council set policy for this year. In February, the Goals and Objectives were adopted to provide needed services with a zero tax increase. Mr. Prettyman said the $100,000 for the severance comp fund is the only one that makes sense. I:\COUNCIL\M IN UTES¥1'A2 .DOC 6 Mayor Andren said the budget was at a regular City Council meeting, a regular item on the agenda. Any time the Public wishes to voice their opinion they are welcome to do so. It is published in the newspaper. It is available at City Hall. Residents are responsible for staying informed. Mr. Prettyman said the public should be notified instead of after the fact to prevent controversy, to make the public more aware. He said the City should pay for an ad. Uses of surplus should be up for public discussion. The agenda should be a detailed analysis, the City should do a better job of communicating what is going to be spent. He said the City owed it to the citizens. If things were clearer, more people would come to the meetings. Mayor Andren said he could subscribe to the agenda. She said the City Manager was aware of Mr. Prettyman's concerns. Bernie Arnoldi said residents are overtaxed. A surplus is money above the expense and it should not be there. He asked if there was any chance of freezing the senior citizens taxes. He spoke on the transit fee. He said a lot of people were being taxed in this case to benefit a few. Mayor Andren said they did not have the authority to do that. City Manager Boyles explained it would not happen. Councilmember Kedrowski said that the tax was mandated by the state. The bus authority contracts the Minnesota Valley Transit, because there are few providers available. These services are cheaper than us going out and buying them. He said that Prior Lake controls the dollars. It is all predicated by state law. The City Council recessed for ten minutes. Mayor Andren stated that the public portion of the meeting was over and Council discussion would now be heard. Councilmember Mader said that regarding the comments the City Manager made, with regard to surpluses, there has been no tax decrease measurably, and they keep going up. He said his have gone up 6-7% in four years, and surpluses are misleading. He said 17.5% , or $2 million of the 11.5 fund balances came from general fund surplus. That is 2/3 of what is collected from taxpayers. With a 12% increase in spending, it has nothing to do with transit levy tax. The expenses this year will be $5.5 million, and $6.15 is the 1997 budgeted amount. That is a 12% increase, or four times the inflation rate. We ~re spending 35% more on general government than the average Minnesota City. qhis was not taken out of the Truth in Taxation materials but from the 1996 budgel What is needed is an open and honest discussion. The majority of people are beir g overtaxed. 1: \CO UNC I [.",.M 1N UTE S',,TA 2. DOC "/ Councilmember Kedrowski said it was difficult for the senior citizens and the new people that come to the community. As mandated by state, we must review this every three years. Looking at the budget, increased valuation is the right way to deal with growth in the community. Diversification of the tax base is the answer and the City is trying to do this. The results will be seen in future years. A meeting might be appropriate to solicit input regarding surplus allocations. Returning surplus dollars is a double-edged sword. Councilmember Schenck said taxes are high in Prior Lake. His review of the budget does not reveal areas for cutting. The surplus is needed for the City to address problems which need attention and are not anticipated. The new EDA will provide a better tax base than the old one did. It is important not to look at this as the one year only but as a budget which allows growth where it is needed. Mayor Andren said the chair was in want of a motion. MOTION BY SCHENCK SECONDED BY MADER TO CLOSE THE PUBLIC HEARING. Upon a vote, ayes by Andren, Kedrowski, Mader and Schenck, the motion carried. The Council agreed by ge~neral consensus to schedule the final for consideration at the December 16, 1996 meeting, budget adoption Th~neetin~ w~adjou~ed by general consent at 11:06 p.m. 1 y Man .ger Z/ 1 :\C. OUNCI [,\ M 1N UTES¥1'A2.DOC 8