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HomeMy WebLinkAbout2023 08.14 CCM STUDY SESSION8/14/23 -1- MINUTES OF THE PROCEEDINGS OF THE CITY COUNCIL OF THE CITY OF BROOKLYN CENTER IN THE COUNTY OF HENNEPIN AND THE STATE OF MINNESOTA STUDY SESSION AUGUST 14, 2023 CITY HALL – COUNCIL CHAMBERS CALL TO ORDER The Brooklyn Center City Council met in Study Session called to order by Mayor April Graves at 6:09 p.m. ROLL CALL Mayor April Graves and Councilmembers Kris Lawrence-Anderson, Dan Jerzak, and Teneshia Kragness. Also present were City Manager Reggie Edwards, City Clerk Barb Suciu, and City Attorney Jason Hill. Councilmember Marquita Butler was absent. CITY COUNCIL DISCUSSION OF AGENDA ITEMS AND QUESTIONS Councilmember Kragness pointed out that page seven of the July 24, 2023, Regular Session minutes has Lauri’s name misspelled. MISCELLANEOUS Councilmember Lawrence-Anderson asked if the Council could prioritize the list of pending Work Sessions. She asked if the Finance Commission has been able to meet regarding a grant policy. City Manager Dr. Edwards stated the Finance Commission has not met, and staff is attempted to receive feedback via email. It will be brought back to the Council if the email chain is unsuccessful. Councilmember Lawrence-Anderson asked for more information on the $175,000 grant mentioned in the weekly update that’s intended for violence prevention. Councilmember Lawrence-Anderson added she would like more information about community interveners, similar to a previous request by Mayor Graves. Councilmember Lawrence-Anderson noted she would like the Council to have an opportunity to discuss the labor study with the Police Chief. Councilmember Kragness stated the next Finance Commission meeting is August 30, 2023, to review general fund revenues. There could be an opportunity to discuss the grant policy at that 8/14/23 -2- time. Councilmember Jerzak noted it has been over 60 days since he requested information from Dr. Edwards regarding the Charter, required by 7.12. They need year-to-date budgets compared to actual expenses. Also, there is a potential deficit related to Opportunity Site spending. He requested a monthly budget update. Dr. Edwards stated that staff anticipates a presentation for the Council regarding community interveners on September 11, 2023. As for the labor study, it will not be possible for a singular Department to present a plan as it requires input from multiple Departments. However, the Chief can provide his feedback on the labor study. Dr. Edwards added he would speak with the Director of Fiscal & Support Services about monthly reports. Councilmember Jerzak explained the Council has to make an initial levy request, but the Council has to be more aware of the impact of community interveners before they can commit to funding the effort. Dr. Edwards stated the presentations on community interveners will be on September 11, 2023, which is well before a levy must be set. The program just started in the last few months, so there is very little data to present so far. Mayor Graves asked which specific Work Session Items are most important to Councilmember Lawrence-Anderson. Councilmember Lawrence-Anderson stated the grant policy, discussion with Police Chief about the labor study, and Liquor Store #2. Councilmember Jerzak noted The Daunte Wright and Kobe Dimock-Heisler Community Safety and Violence Prevention Act needs to be reviewed because a lot of the Resolution has budgetary implications. Mayor Graves pointed out the Implementation Committee also wanted to discuss the Resolution with the Council. CITY COUNCIL/FINANCIAL COMMISSION MEETING ON AUGUST 30 AT 6 PM DISCUSSION OF WORK SESSION AGENDA ITEMS AS TIME PERMITS 2023 LEGISLATIVE CHANGES REGARDING 4D PROGRAM AND PROPERTY TAX CLASSIFICATION Dr. Edwards introduced the item and invited Jason Aarsvold, Ehlers representative, to continue the presentation. Mr. Aarsvold explained legislation signed into law in 2023 has resulted in adjustments to the 4d tax classification rates, which apply to affordable housing and are set up specifically to be lower than market-rate housing to preserve and promote affordability. Mr. Aarsvold stated property valuations are set through an extensive assessment process. The values for each property are converted to a “tax capacity” number using different tax classification 8/14/23 -3- rates. Rates differ depending on the property type. Also, a property’s tax capacity is used to calculate its total property tax using local tax rates. Other taxes may be included based on the property type. Mr. Aarsvold showed a table with various types of tax rates for commercial, rental housing, affordable rental housing, non-homestead residential, and homestead residential. In Minnesota, owners of qualifying affordable rental housing are eligible for reduced property taxes through the Low-Income Rental Classification (LIRC), which is also known as "4d." To receive a property tax reduction, owners of developments that receive public financial assistance agree to limit rents and impose restrictions on tenant incomes. Mr. Aarsvold noted the 4d classification rate applies only to affordable housing and is set up to be lower than market-rate housing to preserve and promote affordability. The current classification rate for 4d housing is 0.75% on the 1st $100,000 per-unit value and 0.25% on any value above $100,000 per unit. The legislative changes signed into law this year will lower the 4d property tax classification rate to a flat 0.25% on all market values for affordable housing projects. This revised classification relates to rental property and is now referred to as the 4d(1) tax classification rate. This change will be effective for the pay 2025 tax year. Mr. Aarsvold added the recent changes will require any new 4d(1) property to obtain approval, by resolution from any city or town where the next tax capacity of 4d(1) property exceeds 2% of the total net tax capacity in the prior assessment year. The Department of Revenue is required to annually report to the Minnesota Housing Finance Agency (MHFA) all cities and towns where 4d(1) property exceeds the 2% total net tax capacity threshold. Based on calculations for the prior assessment year, the City of Brooklyn Center is over this 2% threshold. Mr. Aarsvold showed an example of a tax capacity calculation for the Wangstad Commons Tax Capacity. With 54 units, the total tax capacity is $52,325. He then showed how the tax capacity is converted into the total taxes, including local and market value, which would be $76,116 for Wangstad Commons. Mr. Aarsvold presented a table showing the impact of the tax capacity for various affordable rental buildings in Brooklyn Center. The total tax capacity is $717,465, including tax increment financing (TIF), and the City tax capacity would be $32,169,910. In 4d, the percentage would be 2.23 percent. Mr. Aarsvold noted there are different calculations for non-TIF properties where there could be a potential impact. With the change to 4d, Brooklyn Center could potentially lose about $158,000 in tax capacity annually, which equates to $86,382 of the City’s portion of taxes. Mr. Aarsvold showed a table comparing the total taxes for Wangstad Commons with the current 4d class and the revised 4d class. The current calculation results in $76,116 for total taxes. However, the revised 4d class results in $37,576 for total taxes. 8/14/23 -4- Mayor Graves asked why there was opposition to the 4d revisions. Mr. Aarsvold stated the League of Minnesota Cities took a stance against the change because there would be a disproportionate impact on certain cities. It also takes away some local control as most cities fall under the two percent threshold. Councilmember Jerzak asked if the non-TIF impacts are in perpetuity because TIF districts generate less income for the length of the district. Mr. Aarsvold stated there are no time limits for being a 4d property as long as they continue to qualify. In existing TIF districts, there may be a change in term agreements to adjust for the tax generation. Councilmember Jerzak stated he has concerns with property owners selling off affordable rental properties because the City would be stuck with the reduced tax base. Mr. Aarsvold stated if the new buyer were to maintain the requirements for a 4d project, they would continue to pay the discounted rate. ADJOURNMENT Mayor Graves closed the Study Session at 6:54 p.m.