City Council Special Meeting

CITY COUNCIL SPECIAL MEETING MINUTES Monday, December 05, 2022 at 6:00 PM Baxter City Hall, 13190 Memorywood Drive, Baxter, MN “A Growing Community” CALL TO ORDER Mayor Olson called the meeting to order at 6:00 p.m. ROLL CALL Mayor Darrel Olson and Council Members Connie Lyscio, Zach Tabatt, John Ward and Mark Cross were present. City Administrator Brad Chapulis, Assistant City Administrator Kelly Steele, Finance Director Jeremy Vacinek, and Assistant Finance Director Brenda Brooks were present. PRESENTATIONS 1. 2023 Budget and Proposed Property Tax Levy Informational Meeting Scheduled for Monday, December 5, 2022 at 6:00 p.m. Finance Director Vacinek presented the 2023 budget and property tax information. The presentation included an overview of legislation affecting property taxes and the 2023 budget; a summary of market value and tax capacity; proposed property tax levy; the 2023 general, special revenue, capital project, debt service, and enterprise funds budget; next steps to adopt the final levy and 2023 budget; and provide an opportunity for public comments. The City of Baxter does not receive local government aid. The market value homestead exclusion program reduces homesteaded property taxes by excluding a portion of the homestead property’s value from taxation. The program applies to properties up to a market value of $413,800. The 2023 estimated market value composition is 58% homestead residential, 25% commercial, 8% apartments, 6% non-homestead residential, and few minor other classifications. Over the past ten years the city’s net tax capacity has trended upward from $10,113,932 in 2014 to $16,068,981 in 2023. The property tax levy percentage change from 2022 to 2023 is a 7.31% increase. The 2023 proposed levy of $8,304,500 is an increase of $2,796,300 or 50.77% over the last ten years. During the same period, inflation has increased 27.60% overall. Finance Director Vacinek presented several examples of how the 2023 levy would impact various home and commercia/industrial properties. Even if there were no increase in the city levy from 2022, the valuation shift occurring from commercial/industrial to residential results in estimated property tax increases for the city’s portion of property taxes. Property taxes make up 38% of the city’s annual revenue. The next three largest revenue sources are 20.7% charges for services, 14.5% sales tax, and 8.1% intergovernmental revenue. 12/5/2022 City Council Special Meeting Minutes Page 2 The largest expenditures by function are 16.8% debt service, 13.9% public safety, 12.2% sewer, and 12% general government. The 2023 proposed general fund revenues and transfers total $8,460,600. The 2023 proposed general fund expenditures and transfers total $8,460,600. Finance Director Vacinek summarized several budget revenue and expenditure highlights. Staff is recommending utility rate adjustments for 2023. Rates are proposed to increase 7.1% for water, 4.0% for sewer, and 13.1% for storm water. Finance Director Vacinek summarized several enterprise fund and debt service fund highlights. Finance Director Vacinek explained the council reduced the levy by $200,000. This reduction reduces the propose levy from 9.89% to 7.31%. OPEN PUBLIC HEARING Mayor Olson opened the public hearing at 6:44p.m. John Ring, 10800 Red River Drive, explained Baxter taxes went up 36% and this is not sustainable. Lives in south west Baxter and is frustrated with property access. Willing to pay taxes or negotiate taxes if the city would provide him a minimum maintenance road to his property. The city has equipment that it is not using. Loren Beilke, 13971 Kenwood Drive, stated he has a large increase in property taxes. Questioned why the City of Baxter doesn’t receive LGA. The city’s portion of his taxes increased 54% and he would like to understand how this was calculated. Jerry Niemi, 13108 Timberlane Drive, explained Finance Director provided too much detailed information on the budget. His property value increased 44% and the Baxter portion of his taxes increased 39%. This is unsustainable. Commercial values increase slightly, and residential property values increased significantly. Inquired what is the split between the revenues coming in for commercial and residential. Finance Director Vacinek explained he hasn’t received that information yet from Crow Wing County. Debbie Crochet, 13746 Memorywood Drive, explained her property is considered by commercial and residential due to her home hair salon. The increase in property taxes takes a quarter of her income and her mother’s property taxes have doubled and the property is located in a floodplain. Doesn’t understand why her property is considered commercial. Kay Greenwalt, 14390 Shorewood Drive, understood property values would increase but have trouble understanding the increase comparison between Baxter and the other jurisdictions. Baxter’s portion of taxes increased 78%. The presentation mentioned water and sewer costs are also increasing. Commercial properties are given a tax break and the increase is being passed on to residential properties. Inquired about revenue received for the lodging tax. Questioned why Baxter’s taxes are so much higher than the school district and the county. The council discussed the process to renew the sales tax and the requirement to support the airport with sales tax proceeds. 12/5/2022 City Council Special Meeting Minutes Page 3 Paul Straka, 12936 Knollwood Drive, questioned property evaluations and inquired what is the city’s plan when property values decrease. The city needs to be sustainable and reduce spending. Brian Ross, 14380 Memorywood Drive, explained his estimated market value increase 57%. When he contacted Crow Wing County, the county told him he won’t pay more in taxes. A 7.1% levy increase seems reasonable. Jim Janco, 13565 Olivewood Drive, explained he doesn’t have the impression the city is trying to save money due to grounds keeping, size of roads, and planting and replanting trees. The city needs to cut back on spending and live in realty. Chuck Hiltner, 4614 Michelle Circle, asked for clarification on the valuation shift and questioned why his home value increased $75,000 when he hasn’t completed any repairs. Karen Abram, 14750 Ninebark Drive, moved to the area one year ago and live on Red Sand Lake. Her husband is a disabled veteran and their property value increased $103,000. Council members discussed the reasons cities do and do not receive LGA (local government aid) from the state. CLOSE PUBLIC HEARING MOTION by Council Member Ward, seconded by Council Member Tabatt to close the public hearing at 7:44 p.m. Motion carried unanimously. NEXT STEPS Finance Director Vacinek explained the next step is for the council to consider adopting the budget and levy tomorrow, during the regular council meeting, at 7:00 p.m. ADJOURN MOTION Council Member Cross, seconded by Council Member Tabatt to adjourn at 7:44 p.m. Motion unanimously carried. Approved by: Respectfully submitted, _____________________________ Darrel Olson Kelly Steele Mayor Assistant City Administrator