HomeMy WebLinkAbout2021 08-02 FCAC IT Y
C O UNC I L/F INANC I AL
C O M M IS S IO N M E E T I NG
City Council Chambers
A ugust 2, 2021
AGE NDA
1.Roll Call - 6:30 pm
2.Work Session Objectives
a.Operating Budget/Revenue Policies
b.City Vision, Values, P riorities, & Outcomes
c.L ocal Government Aid
d.Debt S ervice Levy
e.M arket Value & T rends
f.Preliminary Property Tax Implications
3.Next Steps
4.City Council / F inancial Commission - Interactive Activity
5.Adjourn
MEMORANDUM – COUNCIL/FINANCIAL
COMMISSION WORK SESSION
Our Vision: We envision Brooklyn Center as a thriving, diverse community with a full range of housing, business, cultural and
recreational offerings. It is a safe and inclusive place that people of all ages love to call home, and visitors enjoy due to its
convenient location and commitment to a healthy environment
Financial Conditions
The following discussion items will cover the General Fund revenue sources, market value changes,
impacts on residents, and financial conditions. It will highlight some of the key financial factors to be aware
of as we continue through the budget process.
General Fund Revenue Summary
The General Fund is primarily funded through property tax revenues which make up 75% of total revenues
collected. In addition, intergovernmental revenue which is primarily local government aid makes up 8%,
lodging, and other tax comprises 7%, licenses and permits 5%, and the remaining 5% is miscellaneous
items. Some of these revenues and more susceptible to economic conditions than others. The following
includes some highlights of the revenue sources and impacts to consider.
Local Government Aid
On May 30, 2019, Governor Walz signed into law a tax bill that included a $26 million increase in local
government aid (LGA) effective with the 2020 distribution. This restored the program to the funding level
of 2002. According to this formula the City is currently projected to receive $2,372,752 in 2022.
Chart 1: Local Government Aid (LGA) Past 20 Years
As shown on the 20-year chart, the City experienced significant LGA reductions following 2002, specifically
during times the state faced budget deficits and the LGA was frozen at $411,378 for the years 2010
through 2013. The City received a significant increase in LGA from 2013 to 2014. In 2014, the City Council
adopted a policy that effectively limited the use of 50 percent of LGA for general operations, with the
remaining 50 percent used for capital improvements.
The City’s 2022 General Fund budget includes $1,186,376 for LGA, which is a budgeted increase of
$39,151. The City has significantly reduced its operational reliance upon LGA, for the 2021 budget LGA
$2,372,752
$411,378
$1,019,990 $1,229,388
$-
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
2022202020182016201420122010200820062004
Local Government Aid (Past 20 Years)
MEMORANDUM – COUNCIL/FINANCIAL
COMMISSION WORK SESSION
Our Vision: We envision Brooklyn Center as a thriving, diverse community with a full range of housing, business, cultural and
recreational offerings. It is a safe and inclusive place that people of all ages love to call home, and visitors enjoy due to its
convenient location and commitment to a healthy environment
makes up approximately five percent of General Fund operations, during the early 2000’s LGA made up
over 17% of General Fund operations.
Chart 2: Local Government Aid (LGA) as a Percentage of General Fund Operations
It is important to note that although unlikely, depending on the state budget challenges the governor
does have the authority to unallocate local government aid.
Lodging Tax
The city currently collects lodging tax from ten local hotels. Gross lodging tax is calculated at 6% of net
room rental fees. 95% of the first 3% is the convention and visitor bureau’s share and the remaining 5%
is retained by the city as an administrative fee. The second 3% is retained by the city as property tax
replacement.
In 2021, the city had budgeted net revenues of $292,000, which is approximately 1.4% of general fund
revenues. This was a significant decrease from net revenues over $600,000 in prior years due to the
effects of COVID-19 lockdowns. For 2022 we are budgeting a slight improvement to approximately
$410,000 of net revenues.
The lodging industry was one of the hardest hit by COVID-19 and industry experts suggest that it could
be 2023-2024 to fully recover depending on multiple scenarios. It will be important to factor this in
while evaluating the 2022 budget.
10%
7%
4%
5%
8%
4%
6%
3%3%2%2%
4%4%
4%4%4%4%4%
5%5%
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
LGA Contribution to General Fund Expenditure Budget
MEMORANDUM – COUNCIL/FINANCIAL
COMMISSION WORK SESSION
Our Vision: We envision Brooklyn Center as a thriving, diverse community with a full range of housing, business, cultural and
recreational offerings. It is a safe and inclusive place that people of all ages love to call home, and visitors enjoy due to its
convenient location and commitment to a healthy environment
Debt Service Levy
Chart 3: Debt Service (paid from property tax levy)
The 2022 budget includes an additional debt service levy of $254,339, which will provide the levy funding
needed for the 2021 debt issue to fund the neighborhood reconstruction program.
Based on the Capital Improvement Plan discussion, the City anticipates a $200,000 average annual
increase is needed over the next five years to continue to fund this program. The chart above reflects
the 2022 budgeted debt service levy increase and the future projected increases.
General Levy
The following chart details the general property tax levy for the prior six years, noting the % change
from the prior year above each column.
$-
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
Debt Service Levy
MEMORANDUM – COUNCIL/FINANCIAL
COMMISSION WORK SESSION
Our Vision: We envision Brooklyn Center as a thriving, diverse community with a full range of housing, business, cultural and
recreational offerings. It is a safe and inclusive place that people of all ages love to call home, and visitors enjoy due to its
convenient location and commitment to a healthy environment
Chart 4: General Levy
The general levy provides the resources for the day-to-day operations of the General Fund, which is the
primary operating fund within the City. Many of the operations in this fund are not funded through user
charges or fees, and therefore the resources for them need to come from the tax base as a whole. Such
operations include administration, police and fire protection, public works (streets & parks), and
community recreation.
Market Value Trends
Chart 5: Taxable Market Value (preliminary estimates)
2.41%4.18%4.03%
6.71%5.97%1.94%
$-
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
$12,000,000
$14,000,000
$16,000,000
$18,000,000
$20,000,000
2016 2017 2018 2019 2020 2021
General Property Tax
MEMORANDUM – COUNCIL/FINANCIAL
COMMISSION WORK SESSION
Our Vision: We envision Brooklyn Center as a thriving, diverse community with a full range of housing, business, cultural and
recreational offerings. It is a safe and inclusive place that people of all ages love to call home, and visitors enjoy due to its
convenient location and commitment to a healthy environment
Preliminary estimates from the County assessor’s office shows continued growth in taxable market value.
The City’s taxable market value is estimated to increase by $289 million (11.7%) for taxes payable in 2022.
The market value continues to increase across the board except for Commercial and Other (American
Legion). To note, there is a one-year delay between the time a property is valued and classified and the
property tax an owner owes based on that value. The property tax paid this year is based on your
property’s valuation and classification as of January 2 last year.
The following chart depicts the trend of median value homes since 2008. As you can see we are now well
beyond the previous market value peak in 2008 before the recession.
Chart 6: Median Value Home Value Trend
Most residents have probably experienced an increase in the assessed value of their homes over the past
year. The Hennepin County’s assessor’s office estimated the median value home in the City of Brooklyn
Center to be $223,000, compared to $207,000 in 2021.
Chart 7: Tax Capacity Comparisons (preliminary estimates)
The tax capacity charts provide a breakdown of tax capacity by classification. The comparison of this
MEMORANDUM – COUNCIL/FINANCIAL
COMMISSION WORK SESSION
Our Vision: We envision Brooklyn Center as a thriving, diverse community with a full range of housing, business, cultural and
recreational offerings. It is a safe and inclusive place that people of all ages love to call home, and visitors enjoy due to its
convenient location and commitment to a healthy environment
chart to last year shows that residential properties will pay 1.9% more of the share of total City property
taxes in 2021, with commercial properties paying about 2.5% less. Apartments will pick up an additional
0.6% and Industrial is down 0.1%. This is similar to trends in recent years, however, the Commercial
sector saw a slight increase from 2019 to 2020.
Property Tax Implications
Chart 9: Preliminary Estimates (Based on preliminary assessment estimates)
The estimated property tax impact based on hypothetical properties of different classification types is
illustrated in the chart above. The above chart does include the impact of the increase in the HRA levy. A
few items that should be highlighted from the chart above:
• Under a scenario of “no change” in the City’s levy, single-family residential would see a
decrease in property taxes, despite an increase in property value, as a result of larger
property value increases in multi-family residential, commercial and industrial. The
median value home could expect to see an estimated decrease of $84 a year.
• A one percent levy increase provides an additional $191,000 of funding for City
operations.
• For each additional one percent levy increase:
o The median value of residential property would see an approximate $10 increase
in property taxes.
o An apartment valued at $2.45 million would see an approximate $154 increase in
property taxes.
o A commercial property valued at $1.61 million would see an approximate $158
increase in property taxes.
o An industrial property valued at $1.97 million would see an approximate $194
increase in property taxes.
TIF #3 Decertification
TIF 3 will receive its final increment in 2021. Due to the size of the district, and the scope of
improvements made, bringing the increased value in these properties back onto the General Tax
Capacity of the City will have a significant effect on taxpayers throughout the City. As show before the
MEMORANDUM – COUNCIL/FINANCIAL
COMMISSION WORK SESSION
Our Vision: We envision Brooklyn Center as a thriving, diverse community with a full range of housing, business, cultural and
recreational offerings. It is a safe and inclusive place that people of all ages love to call home, and visitors enjoy due to its
convenient location and commitment to a healthy environment
overall taxable market value is projected to increase 11.7% the actual tax capacity increase is closer to
19% as shown below.
Franchise Fees
In December of 2003, the City has implemented a franchise fee that is collected in the Street Construction
fund and supports a small portion of the related projects. There have been some increases and the current
collections are approximately $710,000 annually. Currently, a large portion of the street projects is
financed with special assessments paid by the benefiting property owners.
With franchise agreements coming up for renewal in the upcoming years (2023), there is an opportunity
to transition to a more comprehensive franchise fee program. The city would continue to collect a
franchise fee on all-electric and gas accounts within the city at a higher rate. The revenue generated from
these fees would pay for the maintenance of the city streets (seal coats, mill and overlays, full depth
reclamations, and reconstruction). Different from most other cities, all needed revenue for street
maintenance and reconstruction through this fee. There would be no need to levy separate general
property taxes or special assessments for this maintenance and reconstruction.
Operating Budget Policies
The Operating Budget Policies provide a basic framework for the overall budget process. Operating
independently of changing circumstances and conditions, these policies assist the decision-making
process of the City Council and Administration. The Operating Budget Policies are as follows:
1. In accordance with Chapter 7, Section 7.06 of the City Charter, the total sum appropriated in the
General Fund annual budget shall be equal to the total estimated General Fund revenue and any
allocated General Fund balance.
2. The City will pay for all current expenditures with current revenues. The City will avoid budgetary
procedures that balance current expenditures at the expense of meeting future year’s revenues, or
rolling over short-term debt, or that rely on accumulated fund balances to meet current obligations.
3. The City will annually appropriate a contingency appropriation in the General Fund budget, not to
exceed five percent of the total budget, to provide for unanticipated expenditure of a non-recurring
nature.
4. The City Manager, when submitting the Proposed Budget to the City Council, shall submit a balanced
General Fund budget in which appropriations shall not exceed the total of the estimated General Fund
revenue and any fund balance appropriated by the City Council.
5. Prior to adopting the General Fund Annual Budget, the City Council shall review the Reserve Policy.
6. In the event that there is a shortfall of revenues in a current year budget, the City Manager may
recommend the use of a portion of the General Fund balance not to exceed the amount available after
deducting amounts reserved for items not readily convertible to cash or reserved for working capital.
7. The budget will provide for adequate maintenance of the capital plant and equipment, and for their
orderly replacement.
8. The budget will provide for adequate funding of all retirement systems.
9. The City will maintain a budgetary control system to assist in adhering to the budget.
10. The City administration will prepare regular monthly reports comparing actual revenues and
expenditures to the budgeted amount.
11. Each year the City will update expenditure projections for its Enterprise Funds for at least the ensuing
five years. Projections will include estimated operating costs of future capital improvements included in
the Capital Budget.
12. The Operating Budget will describe the major goals to be achieved, and the services and programs to be
delivered for the level of funding provided.
13. Where possible, the City will integrate performance measurement and productivity indicators with the
budget.
14. Enterprise funds shall be budgeted to have positive net income plus a sufficient margin to provide for
replacement cost of property, plant, and equipment.
Revenue Policies
Revenue Policies direct how the City maintains the ability to pay for the services it provides its customers.
The Revenue Policies are as follows:
1. The City will attempt to maintain a diversified and stable revenue system to shelter it from short-run
fluctuations in any one revenue source and to minimize property taxes.
2. The City will estimate its annual revenue by an objective conservative analytical process.
3. The City will project revenues for the next three years and will update this projection annually. Each
existing and potential revenue source will be reexamined annually.
4. The City will ensure the County maintains sound appraisal procedures to keep property values correct.
Property will be assessed at the legally mandated market value for each type of property.
Reassessments will be made of all property at least every five years.
5. The City will follow an assertive policy of collecting property tax revenues. The annual level of
uncollected property taxes should generally not exceed two percent.
6. Each year the City will recalculate the full costs of activities supported by user fees to identify the impact
of inflation and other cost increases.
7. The City staff will recommend revised user fees with review by the City Council on an annual basis, to
adjust for cost factors and inflation on the City’s cost of providing services.
8. The City will set fees and user charges for each Enterprise Fund, such as Water and Sewer, at a level
which fully supports the total direct and indirect costs of the activity. Indirect costs include the cost of
annual depreciation of capital assets.
9. User charges and fees determined to be appropriate for City services will generally be established at a
level which will recover the full cost of providing the service, including administrative costs.
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2022 – 2023 Budget Overview
October 8, 2018
Review
City Council/Financial Commission Joint Work Session, August 2, 2021
Agenda
•Work Session Objectives
•Operating Budget/Revenue Policies
•City Vision, Values, Priorities & Outcomes
•Local Government Aid (LGA)
•Debt Service Levy
•Market Value Trends
•Preliminary Property Tax Implications
•Next Steps
•City Council/Financial Commission –Interactive Activity
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Work Session Objectives
The draft budget assumes that we have the necessary major programs
in place and our 2022 budget requests will continue to provide the
services needed, with additional advancements as we work towards
our strategic goals.
3
Budget Policies
Purpose: Provides basic framework and assists in the decision making
process
•Balanced Budget
•Current revenue should pay for current expenses
•Contingency of up to five percent of budget
•Provide adequate funding for capital replacement & maintenance
•Budget should describe goals, services and programs
•Targeted unassigned General Fund balance of 50 – 52% of the next
year’s General Fund budget
4
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Revenue Policies
Purpose: Direct how the City maintains the ability to pay for services it
provides its customers
•Maintain diversified and stable revenue system
•Annual revenue estimates completed through an objective conservative
analytical process
•User fees should be reviewed and revised on an annual basis
•Fees and user charges for Enterprise Funds should fully support total direct
and indirect costs
•User fees for City services will generally be established at a level which will
recover the full cost of providing the service
5
City Vision and Mission
Vision Statement
•We envision Brooklyn Center as a thriving, diverse community with a full range
of housing, business, cultural and recreational offerings. It is a safe and inclusive
place that people of all ages love to call home, and visitors enjoy due to its
convenient location and commitment to a healthy environment.
Mission Statement
•The mission of the City of Brooklyn Center is to ensure an attractive, clean,
safe, and inclusive community that enhances the quality of life for all people
and preserves the public trust.
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Goals & Outcomes
Strategic Priorities:
•Enhanced Community Image
•Resident Economic Stability
•Inclusive Community Engagement
•Targeted Redevelopment
•Safe, Secure, Stable Community
•Key Transportation Investments
7
Resident Economic Stability
The economic stability of residents is essential to vibrant neighborhoods
and to retail, restaurant, and business growth. We will lead by
supporting collaborative efforts of education, business, and government
sectors to improve income opportunities for residents.
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Targeted Redevelopment
Redeveloping properties to the highest value and best use will
accomplish our goals regarding housing, job creation, and growth of the
City’s tax base. We will appropriately prepare sites and provide the
necessary supporting infrastructure investments to guide development of
publicly and privately owned properties.
9
Inclusive Community Engagement
In order to provide effective and appropriate services, we must clearly
understand and respond to community needs. We will consistently seek
input from a broad range of stakeholders from the general public, non-
profit, and for-profit sectors. Efforts to engage the community will be
transparent, responsive, deliberately inclusive, and culturally sensitive.
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Enhanced Community Image
Our ability to attract and retain residents and businesses is directly
influenced by the perception of the City. We will take specific actions to
assure that Brooklyn Center is recognized by residents, businesses,
stakeholders, and visitors as a high quality, attractive and safe
community.
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Safe, Secure, Stable Community
For residents and visitors to fully appreciate and enjoy a great quality of
life it is essential that all neighborhoods are safe, secure and stable. We
are committed to assuring compliance with neighborhood condition and
building safety standards, providing proactive and responsive public
safety protection, wise stewardship of City resources and policies that
promote safety, security and lasting stable environment
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Key Transportation Investments
Proactively maintaining an efficient and effective infrastructure will meet
the high level of community expectations. We will plan for and invest in
critical infrastructure improvements that enhance safety, improve life
quality, and support opportunities for redevelopment, while sustaining the
natural environment.
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Local Government Aid (LGA)
•2022 LGA increase of $44,461 (50% General Fund)
14
$2,372,752
$411,378
$1,019,990
$1,229,388
$877,555
$2,265,267
$‐
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
2022202120202019201820172016201520142013201220112010200920082007200620052004200320022001
Local Government Aid (Past 20 Years)
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LGA as a Percentage of General
Fund Operations
15
17.13%
2.35%
4.99%
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
18.00%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
LGA Contribution to General Fund Expenditure Budget
Debt Service (paid from property
tax levy)
16
$‐
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
2016 Actual 2017 Actual 2018 Actual 2019 Actual 2020 Actual 2021 Budget 2022 Projected 2023 Projected 2024 Projected 2025 Projected
Debt Service Levy
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Taxable Market Value
(preliminary estimates)
17
Tax Capacity (preliminary estimates)
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Tax Capacity Estimates
19
Apartment
12.9%
Commercial
25.0%
Industrial
11.5%
Residential
50.7%
Tax Capacity ‐Payable 2020
Apartment
13.5%
Commercial
22.5%
Industrial
11.4%
Residential
52.6%
Tax Capacity ‐Payable 2021
Median Value Home
20
$196,100
$180,400
$153,600
$137,400 $133,800
$119,800 $114,200
$131,400
$142,100
$150,000
$167,000
$184,000
$198,000
$207,000
$223,000
$0
$50,000
$100,000
$150,000
$200,000
$250,000
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
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Preliminary Estimates – Property Taxes
21
Incremental – 1% Levy Impacts
22
% Levy
Change
Funding
Provided
Impact on
Median Value
Home
Apartment
($2.45 Million)
Commercial
($1.6 Million)
Industrial
($1.97 Million)
0% $‐$‐$‐$‐$‐
1% $184,000 $10 $154 $158 $194
2% $368,000 $20 $308 $316 $388
3% $552,000 $30 $462 $474 $582
4% $736,000 $40 $616 $632 $776
5% $920,000 $50 $770 $790 $970
6% $1,104,000 $60 $924 $948 $1,164
7% $1,288,000 $70 $1,078 $1,106 $1,358
8% $1,472,000 $80 $1,232 $1,264 $1,552
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Next Steps
August 16, 2021
General Fund budget requests (Public Works, Community
Development, Finance, Administration)
September 1, 2021
General Fund budget requests (Fire, Police, CARS)
September 13, 2021
City Manager’s Recommended Preliminary Levy
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City Council/Financial Commission –
Interactive Exercise
Staff will be presenting a series of questions to guide the direction of the
2022 budget. The questions pertain to establishing the parameters of a
property tax increase and input on budget allocations towards the
achievement of City Council Strategic Priorities.
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City Vision and Mission
Vision Statement
•We envision Brooklyn Center as a thriving, diverse community with a full range
of housing, business, cultural and recreational offerings. It is a safe and inclusive
place that people of all ages love to call home, and visitors enjoy due to its
convenient location and commitment to a healthy environment.
Mission Statement
•The mission of the City of Brooklyn Center is to ensure an attractive, clean,
safe, and inclusive community that enhances the quality of life for all people
and preserves the public trust.
25
City Values
•Customer Intimacy –Our primary value proposition is a commitment to
serving each customer with dignity and respect. This requires that we
seek to understand the needs of each customer and deliver quality
service that will be understood and appreciated.
•Operational Excellence –In addition we will commit ourselves to
delivering quality services in a cost effective and efficient manner. We will
be good stewards of the limited resources made available to us by the
citizens we serve.
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Question #1
•Is there anything heard that you would view as not
beneficial or valuable to the City for the coming year?
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City Strategic Priorities
1. Enhanced Community Image
2. Resident Economic Stability
3. Inclusive Community Engagement
4. Targeted Redevelopment
5. Safe, Secure, Stable Community
6. Key Transportation Investments
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Question #2
•Is there anything heard that you would view not beneficial or valuable to
the City for the coming year?
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Question #3
•Given the context of the coming year, which two strategic priorities do
you believe should be a focus in the coming year?
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Question #4
•Given that focused strategic priority, what outcomes would you envision
residents experiencing order view the City being successful throughout
the year?
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Question #5
•Given the context of the coming year, the vision/mission and top strategic
priorities, what budget levy range would you find acceptable?
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