2009.06.02 Council Meeting PacketMemorandum
DATE:May 29,2009
TO:
FROM:
Mayor and City Council
Anne Norris,City Manager
Charles Hansen,Finance Director C H
SUBJECT:Strategic Financial Planning
Background:
The city budget consists of what seems like a million little details and data elements
that all have to be updated and properly managed to produce a working budget.There
are also a handful of major factors that guide the overall direction of the budget.This
document is an effort to take the minor factors and lump them together in an
assumption,such as a 2 or 3%overall increase in the budget,so that we can
experiment with variations in the few major factors.
Discussion:
This planning exercise begins with a baseline scenario and then changes major factors
one by one to see their effect on the city's total property tax levy and the property tax
bill of the median value home.These major factors are as follows:
•Baseline Scenario.This is the graph titled Strategic Planning Scenario 1 in the
graphs that follow.It assumes that the conditions in the 2009 adopted budget
will continue into the future with no change other than 2 or 3%inflation.There
will be no TIF district expiration,no tax levy for the local match on County
Highway 81,no LGA cuts,no fire engines or public works garages to buy,and no
franchise fees or other new revenues needed.This is viewing a fantasy world
through rose colored glasses,but it provides a starting point.
•Inflation.We are working with the assumption that there will be zero percent
wage increases for 2010.Even so,we expect the overall budget to increase
about 2%due to health insurance premiums,PERA rate increases,workers
compensation premiums,property &liability insurance premiums,costs handed
down by the state,etc.
•Bass Lake Road/Becker Park TIF District.This district expires at the end of
2009 and will no longer be collecting property taxes in 2010.The properties
located in the district are projected to pay $1,517,553 of tax increments into the
TIF district in 2009.Beginning in 2010,those properties will be able to pay a
share of the normal property taxes levied by the city,county,and school district.
This means that the normal property taxes will be spread over a larger base of
properties and the individual tax bills for all properties will go down.The City of
Crystal levies about 29%of the taxes in 2009 and so its benefit will be 29%times
$1,517,553 or $440,090.The City of Crystal won't collect this in additional
revenue,but rather the tax bills of property owners will go down as though the
City had cut its tax levy by $440,090.This would be equivalent to a 5%cut in the
City's 2009 tax levy of $8,423,789.
•County Highway 81 debt.It is expected that the City will enter into an
agreement with Hennepin County this summer for an interest free bond to
finance the local match on the County Highway 81 project.I project that this will
require an annual tax levy of $509,000 to be collected for the years 2010 through
2014.This will be a debt service levy that will be outside of levy limits.
•Local Government Aid.We may not hear the exact amount that the Governor
will cut from LGA until sometime in July.For this exercise,we are assuming that
Crystal will receive $1,100,000 less that the $1,898,952 that was promised to it
for LGA in the 2009 budget.
•Franchise fees and vacant building registration fees.This exercise assumes
that Crystal will implement franchise fees that require Xcel and Center Point to
each collect a fee of $2.00 per month per meter.This will raise about $500,000
per year in new revenue for the City.The vacant building registration fee is
expected to raise about $100,000 per year in new revenues.
•Fire engines.The City of Crystal will probably need to issue certificates of
indebtedness to pay for part of its share of the fire engines in 2011.The amount
of the certificates and annual debt service payments are unknown at this time,
but will probably increase the annual property tax levy by no more than 1%.
•Streets/Parks garage.The timing and cost of this project are unknown,but the
cost will be significant.In light of the results shown by this exercise,it may be
necessary to delay construction until 2014.That way,the first taxes collected for
debt service will be in 2015,which is after the taxes collected for the debt service
on the County Highway 81 debt end in 2014.
Conclusion:
One of the assumptions of this exercise has been that the City Council wishes to
maintain the current level of services,no additions and no cut backs.Scenario 5
accomplishes that along with a debt service levy for County Highway 81,but at the cost
of a $1,167,610 increase in the tax levy which produces a 10%increase in the tax bill of
the median value home and a $48 per year franchise fee.
This may be politically unacceptable.Even if it is politically acceptable,levy limits are
still in place and will probably hold the City to a levy that is about $200,000 less than the
one shown in Scenario 5.
Some of these issues will become clearer over the next two months.The City Council
needs to be weighing the larger aspects of the budget so that you are prepared when
the amount of the LGA cut and exact provisions of levy limits become known.
Strategic Planning Scenario 1:2009 adopted budget,no changes in TIF
districts,no new debt for capital projects,and no LGA cuts
2009 2010 2013 201420112012
-Total City Taxes
-Median Home Taxes
-Tax IncrementTaxes
Strategic Planning Scenario 2:2009 adopted budget,BLR/Becker TIF district
expires,no new debt for capital projects,and no LGA cuts
~'--------
2009 2010 2014201120122013
-Total City Taxes
-Median Home Taxes
-Tax IncrementTaxes
Strategic Planning Scenario 3:2009 adopted budget,BLRlBecker TIF district
expires,$509,000 tax levy for Cty Hwy 81 debt,and no LGA cuts
~'-----
2009 2010 2011 201420122013
-Total City Taxes
-Median Home Taxes
-Tax IncrementTaxes
Strategic Planning Scenario 4:2009 adopted budget,BLR/Becker TIF district
expires,$509,000 tax levy for Cty Hwy 81 debt,and $1,100,000 LGA cut
~~---
2009 2010 2011 2012 2013 2014
-Total City Taxes
-Median Home Taxes
-Tax IncrementTaxes
Strategic Planning Scenario 5:2009 adopted budget,BLRlBecker TIF district
expires,$509,000 tax levy for Cty Hwy 81 debt,$1,100,000 LGA cut,and
$600,000 of new franchise fee &vacant building registration revenues
~'------
2009 2010 2014201120122013
-Total City Taxes
-Median HomeTaxes
-Tax IncrementTaxes
City of Crystal
Strategic Planning Scenarios
Summary of Key Data Elements
Adopted Projected Projected Projected Projected Projected
2009 2010 2011 2012 2013 2014
Budg~t_Budget_Budget Budget Budget Budget
Scenario #1:2009 adopted budget,no changes in TIF districts,no new debt for capital projects,and no LGA cuts
Total City Taxes 8,423,789 8,582,399 8,750,001 9,010,479
Tax bill median value home 716.53 730.34 744.95 767.29
Tax Increment Financing Taxes 1,921,093 1,959,515 1,998,705 2,058,666
9,273,246
790.31
2,120,426
Scenario #2:2009 adopted budget,BLRlBecker TIF district expires,no new debt for capital projects,and no LGA cuts
Total City Taxes 8,423,789 8,582,399 8,750,001 9,010,479 9,273,246
Tax bill median value home 716.53 692.88 706.73 727.94 749.77
Tax Increment Financing Taxes 1,921,093 411,611 419,843 432,438 433,071
Scenario #3:2009 adopted budget,BLR/Becker TIF district expires,$509,000 tax levy for Cty Hwy 81 debt,and no LGA cuts
Total City Taxes 8,423,789 9,091,399 9,269,181 9,545,235 9,824,044
Tax bill median value home 716.53 747.35 762.30 785.17 808.72
Tax Increment Financing Taxes 1,921,093 411,611 419,843 432,438 433,071
9,543,731
814.02
2,184,039
9,543,731
772.27
426,088
10,111,053
832.98
426,088
Scenario #4:2009 adopted budget,BLR/Becker TIF district expires,$509,000 tax levy for Cty Hwy 81 debt,and $1,100,000 LGA cuts
Total City Taxes 8,423,789 10,191,399 10,391,181 10,700,895 11,014,374 11,337,093
Tax bill median value home 716.53 837.15 853.89 879.51 905.89 933.07
Tax Increment Financing Taxes 1,921,093 411,611 419,843 432,438 433,071 426,088
Scenario #5:2009 adopted budget,BLR/Becker TIF district expires,$509,000 tax levy for Cty Hwy 81 debt,$1,100,000 LGA cuts
and $600,000 of new revenues for franchise fees &vacant building registration fees
Total City Taxes 8,423,789 9,591,399
Tax bill median value home 716.53 788.17
Franchise fees 48.00
Tax Increment Financing Taxes 1,921,093 411,611
9,779,181
803.93
48.96
419,843
10,070,535
828.05
49.94
432,438
C:\Oocuments and Settings\chansen\My Documents\Strategic Planning Scenarios 1.xls
10,365,103
852.89
50.94
433,071
10,668,344
878.48
51.96
426,088
5/29/2009 8:44 AM