City Council Workshop

Name: City Council Workshop — Oakdale, MN
Start: 2023-08-29
End: 2023-08-29
Location: Oakdale, MN

Regular Meeting

Oakdale, MN · August 29, 2023

Minutes

SPECIAL WORKSHOP MINUTES OAKDALE CITY COUNCIL AUGUST 29, 2023 The City Council held a special workshop on Tuesday, August 29, 2023 at Oakdale City Hall, 1584 Hadley Avenue North, Oakdale, Minnesota. The meeting began at 5:30 PM. Present: Mayor Kevin Zabel Council Members: Noah Her Jake Ingebrigtson Andy Morcomb Susan Willenbring City Staff Members: Christina Volkers, City Administrator Jesse Farrell, City Engineer Andy Gitzlaff, Community Development Director Melanie Lee, Human Resources Director Nick Newton, Police Chief Lori Pulkrabek, Communications Manager Kyle Stasica, Accounting Manager Julie Williams, Recreation Superintendent Kevin Wold, Fire Chief Jason Zimmerman, Finance Director REQUESTED 2024 GENERAL FUND, SPECIAL REVENUE FUND, AND DEBT SERVICE FUND BUDGETS AND PROPERTY TAX LEVY Finance Director Jason Zimmerman noted that this discussion is the fifth one in a series of discussions regarding the proposed 2024 property tax levy and associated budgets. He noted that Minnesota Statutes require the certification of a proposed tax levy for taxes payable in 2024 by October 2, 2023, to the County Auditor. Mr. Zimmerman reminded Council that the levy can only be decreased, not increased, after adoption of the proposed levy and prior to the adoption of the final levy in December. He added that the goal of the conversation is to get Council’s intent on setting the proposed 2024 property tax levy. Mr. Zimmerman explained that the previously proposed levy of 13.8% has now been decreased to 13.5% due to a number of line items that have been removed or allocated to other funding sources. Additional changes impacting the levy include amendments to a recent union settlement and the addition of the full-time Assistant City Administrator position. In response to Council Member Morcomb’s question about when the City realizes the Park Dedication Fees and how those revenue funds can offset the Park Capital Fund levy increase, Mr. Zimmerman stated the funds are not included in the budget until the City has been paid, and the spending of those funds is a policy decision. City Administrator Chris Volkers added that the park dedication fees are added to the Park Capital Fund and can be spent at any time at Council’s discretion. Community Development Director Andy Gitzlaff mentioned several SPECIAL WORKSHOP MINUTES AUGUST 29, 2023 PAGE TWO other development projects that will likely pay the City a park dedication fee in the next year or two. Council Member Her related these potential incoming park dedication funds to the additional franchise fee funds that the City will start receiving in 2024. Ms. Volkers indicated that Council can discuss next year where these additional funds for franchise fees are needed and may be applied. Mayor Zabel stated that his philosophy has always been to set a reasonable high-water mark for the levy knowing that over the next 2.5 months, Council will work to decrease the levy as much as possible. Mayor Zabel added that with the proposed tax levy included in the residents’ preliminary property tax statements, it is beneficial for the City to strive to reduce the property tax levy. Mr. Zimmerman reviewed the Changes in Assessed Median Value Residential Property which includes all single-family homes (fourplexes or less); and the process to compute property taxes using the State’s Net Tax Capacity calculation. Ms. Volkers asked Mr. Zimmerman to provide a high-level definition of fiscal disparities. He explained that it is a shared tax base from commercial-industrial (C-I) development in the seven-county metro area. The tax-base sharing spreads the benefits of C-I growth regardless of property location. He further explained that the distribution amount given to each city is based on the prior year’s tax capacity rate. Oakdale is a beneficiary of fiscal disparities. Council Member Morcomb asked for clarification on Oakdale’s tax capacity rate. Mr. Zimmerman said of the overall tax capacity of the City, this percentage is the amount that the City is levying to maintain operations. In response to Council Member Willenbring’s question about information on the fiscal disparities program, specifically how much has been paid in versus how much has been paid out. Mr. Zimmerman confirmed that information is available. In response to Council Member Her’s question about a targeted tax capacity rate, Mr. Zimmerman stated that there is not necessarily a target capacity rate. To follow up, Council Member Her asked how an increased property tax levy would affect the tax capacity rate. Mr. Zimmerman said it would increase the tax capacity rate but it is relative as to how much. Mr. Zimmerman moved on to discuss the 2023 median value residential property trends and potential scenarios for 2024 based on these trends. He reminded the Council that the values used in these scenarios will change come September. Mayor Zabel suggested that the Council work toward decreasing the City’s tax capacity rate for another year in a row. Council Member Morcomb was in support of this suggestion. In response to Council Member Her’s suggestion to use the Economic Development Authority’s (EDA) taxing authority to pass a 0.0025% levy to set aside a fund for development SPECIAL WORKSHOP MINUTES AUGUST 29, 2023 PAGE THREE and redevelopment in the City, Mayor Zabel noted that there is an excess in the Tax Increment Financing (TIF) fund that can be used for redevelopment first. Mr. Zimmerman reviewed the Property Taxes for Median Value Residential Properties over the last ten years, noting the percentage changes year-over-year. Lastly, Mr. Zimmerman went over sample Oakdale historical tax rates for actual properties and estimated values for 2024 property taxes. Mayor Zabel asked the Council if there were any concerns with setting the proposed tax levy at 13.5%. Council expressed no concerns. Council Member Willenbring asked if the possibility of passing the utility billing credit card processing fees onto the residents has any effect on the budget. Mayor Zabel noted that this expense will increase the Enterprise Fund by about $75,000 due to the recent direction to staff to reduce it and pass the credit card fee onto residents. Ms. Volkers indicated there would not be a chance to vote on this specific decision, but rather the Council would vote on approving the Enterprise Fund budget. Council Member Willenbring asked how the decision regarding the credit card processing fees will be made if there is not a direct vote. Mr. Zimmerman explained that this operational process was part of the merchant contract for the new utility billing software which was approved by Council in late 2022. Mayor Zabel suggested approving the Special Revenue Fund and Enterprise Fund separately, with the option to make a motion to amend the Enterprise Fund budget at the December 12, 2023 regular City Council meeting in which these budgets will be approved. Mr. Zimmerman offered additional insight into the reason for offering online credit card payments for paying utility bills, which include a reduction of in-person and physical payment methods. Council Member Her encouraged the Council to reconsider their position on the decision to pass credit card processing fees onto the residents. Council Member Willenbring asked if City staff will have the capability to accept cash and checks if residents opt not to pay online due to the credit card processing fee. Mr. Zimmerman said he does have a concern due to the fact these payment methods have decreased significantly in recent years, but the City does have the ability to do so, it would just involve a two-step process for staff. Mayor Zabel asked if there was enough Council support to move forward with implementation of this new operational process – charging a convenience fee for online utility billing credit card payments – in January 2024. It was determined there is enough Council support, but there will be an option to make a motion to amend the Enterprise Fund budget at the December 12, 2023 regular City Council meeting if an alternative decision is preferred. ADJOURNMENT The special workshop was adjourned at 6:37 PM. Respectfully submitted, Sara Ludwig, City Clerk

Agenda

AGENDA City Council Workshop Special Workshop August 29, 2023 HADLEY CONFERENCE ROOM 5:30 PM 5:30 PM Requested 2024 General Fund, Special Revenue Fund, and Debt Service Fund budgets and Property Tax Levy COUNCIL MEMORANDUM To: Honorable Mayor and City Council From: Jason Zimmerman, Finance Director Christina Volkers, City Administrator Date: August 29, 2023 Subject: Requested 2024 General Fund, Special Revenue Fund, and Debt Service Fund budgets and Property Tax Levy BACKGROUND Tonight’s discussion regarding the 2024 General Fund, Special Revenue Fund, and Debt Service Fund budgets and property tax levy is intended to continue the process of aligning City Council priorities with financial resources to provide Oakdale property owners, residents, and visitors with quality city services at a responsible taxing level. This informal discussion is intended to provide staff with direction to prepare a recommended preliminary tax levy for consideration at the September 12 City Council meeting, which will then will be certified to Washington County and be used for preparing the Proposed Property Tax Notice, also known as the Truth in Taxation (TNT) Notice. This notice is required to be mailed to property owners between November 11 and November 24 of each year and includes parcel specific estimated property taxes payable in the following year, should each taxing jurisdiction approve their levies as proposed. New for 2023, state law now requires a Supplemental Budget Information Form to be mailed with the Proposed Property Tax Notice. The supplemental summary budget information for county, city and school includes: • The certified levy for taxes payable in the current year and proposed levy for taxes payable in the following year. • Budget summary of revenue and expenditure items for taxes payable in the current year and the proposed taxes payable in the following year. Following the adoption of the preliminary levy, state law requires that Cities with a population over 500, counties, the Metropolitan Council, the Metropolitan Airports Commission, and the Metropolitan Mosquito Control District adopt their final payable 2024 property tax levies and budgets on or before December 28, 2023. The current City budget calendar calls for Oakdale to consider adopting the final 2024 levy and budgets at the December 12, 2023 City Council Meeting. Prior 2024 budget discussions: May 23, 2023 City Council Workshop: Staff presented a conceptual 2024 budget that incorporated cost of living and merit increases based on the current staffing model; increases for employee sponsored benefits; presumed inflationary impacts; department requested enhancements/adjustments; and new personnel. While this model was early in the planning model, it also provided an update on current trends in local government, including several proposed legislative changes. June 27, 2023 City Council Workshop: Staff presented the department requested 2024-2033 Vehicle & Equipment Replacement Plan and 2024-2028 Capital Improvement Plan (CIP) to the City Council. The proposed property tax levy to support the CIP for 2024 was requested at $1,710,000 which 1 represented a $556,654 or 49.6% increase compared to the 2023 levy. This funding provides for street maintenance, vehicle and equipment replacement, park enhancements, and facility improvements. July 25, 2023 City Council Workshop: Staff presented the 2024 department requested General Fund, Special Revenue Fund, and Debt Service Fund budgets and property tax levy to the City Council. The discussion focused on staffing requests, investments in software to improve citizen engagement, and accommodating inflationary pressures for fuel, utilities, and operating supplies. The direction provided during this discussion was to further scrub the budget and identify one-time expenditure requests, while maintaining the staffing and service level currently included in the draft budget. August 8, 2023 City Council Workshop: Staff presented the 2024 department requested Water, Sewer, Surface Water, and Street Light Fund budgets and utility rates as well as an update on the 2024- 2033 Vehicle & Equipment Replacement Plan and 2024 - 2028 CIP. While the utility fund operating budgets are requesting moderate increases compared to 2023 levels, the majority of the recommended rate increases are proposed to be used to invest in capital projects and to avoid increasing the city’s debt burden. These projects include water tower reconditioning/painting, lift station rehabilitation, well inspection and rehabilitation, and underground utility infrastructure improvements coordinated in conjunction with street reconstruction projects. As the budgetary planning process continues to evolve, staff has been directed to focus on the following principals as a guide: • Budget decisions to consider and acknowledge both the short and long-term impacts. • Stabilize revenues and expenditures, and eliminate unanticipated variances. • Fund operations at a level to provide quality services at a reasonable cost. • Maintain structural balance and appropriate fund balance levels. • Consider additional investments when they help achieve City goals and provide a significant return to the community. • Seek to make a connection between resources and results. The formal departmental budgeting process for 2024 began on May 25, 2023 when operating budgets were distributed with direction to incorporate City Council input from the May 23, 2023 workshop. Departments were then required to submit completed budgets to Finance by June 9, 2023. Between June 16 and June 30, 2023 Finance and Administrator Volkers reviewed the submitted budgets in a series of meetings with each requesting department. Following the July 27, 2023 City Council workshop, further discussions were held at a staff level to identify opportunities to utilize funds not supported by the property tax levy for one-time related expenditures and included an additional position in the Administration Department to assist with complex city wide projects and initiatives. Assumptions and factors impacting the department requested 2024 budget and tax levy include: • Removal of one-time expenditures and revenues from the 2023 budget. • Five new regular full-time employees: Three licensed officers in the Police Department, one Maintenance Worker in Public Works, and an Assistant City Administrator in the Administration Department. • Continued support of a full-time career based public safety service model. • Reducing debt related to equipment through long-term planning and internally prefunding these needs through the Vehicle and Equipment Replacement Fund (VERF). • Funding to promote strategic development and redevelopment while maintaining Oakdale’s strong sense of community and independent neighborhoods. 2 • Software improvements/agreements to modernize resident reporting of non-emergency community issues; work order processing; city code book online and codification; and employee performance management. • Services to ensure public safety policies are consistent with legislation, case law, changes in best practices, and Minnesota POST requirements. • Increased worker compensation premiums due to modification and rate changes • Proposed grade/step and cost of living adjustments in accordance with the city’s classification and compensation program. • Contingency for Medical, Dental, Life, and Disability insurance increases. Significant Changes from July 25 Budget Proposal The table below outlines significant items that have been moved from the General Fund to either Special Project Fund or Community & Economic Development Fund. Item Funding Source (7/25/23) Funding Source (8/29/23) Amount ($) 2nd Half Community Survey General Fund - Communications Special Project Fund $8,500 Long Term Financial Plan General Fund - Finance Special Project Fund $14,500 Housing Needs Assessment General Fund - Community Development Community & Economic Development Fund $12,500 Parks Master Planning General Fund - Community Development Community & Economic Development Fund $25,000 10th & Granada Redevelopment Plan General Fund - Community Development Community & Economic Development Fund $25,000 SWAT Vehicle Shared Cost General Fund - Police Special Project Fund $13,335 Mobile Breaching Kit General Fund - Police Special Project Fund $7,000 Project Close-Outs General Fund - Engineering Special Project Fund $20,000 40th Street Bridge Scoping General Fund - Engineering Special Project Fund $15,000 Total $140,835 The table below contains significant adjustments to specific line items within the General Fund between previous discussions and the current proposed budget. Staff believes these adjustments will not result in a detrimental impact to essential city services. Note this is not a comprehensive list, as many other line items have been adjusted. Funding Funding 2023 Original Item Department Requested Requested Budget (7/25/23) (8/29/23) General Planning Services Community Development $- $10,000 $- Inspection Services related to 2022 Hail Storms Building Inspections $35,000 $15,000 $- General Planning Services Engineering $- $10,000 $- Development Assistance Engineering $- $10,000 $- Playground Woodchips Parks Maintenance $15,000 $25,000 $10,000 Park Trash Receptacles Parks Maintenance $6,400 $22,400 $14,400 Turf Landscaping Supplies Parks Maintenance $10,000 $15,000 $10,000 Roadway Aggregate Street Maintenance $52,500 $57,500 $52,500 Snow Removal/Relocation Services Street Maintenance $20,000 $20,000 $15,000 Road Salt and Liquid Ice Street Maintenance $150,000 $160,000 $150,000 Assistant City Administrator Administration $- $30,000 $239,719 Total $288,900 $374,900 $491,619 3 The table below shows the four most recently approved property tax levies by fund, the 2024 requested property tax levy presented at the June 27 City Council Workshop, and the current 2024 requested property tax levy. To support the budget as presented, staff is proposing the 2024 tax levy be at $18,227,988 which represents a $2,163,131 or 13.5% increase from 2023. Based on the preliminary values provided by Washington County, the estimated tax capacity rate to support this levy is 38.338% which would be a 0.316% increase from the 2023 rate. 2024 2024 2020 2021 2022 2023 Fund Request Request YtY Change % Increase Adopted Adopted Adopted Adopted 7/25/23 8/29/23 General Fund $9,000,046 $9,716,075 $10,798,983 $12,631,812 $14,434,783 $14,399,100 $1,767,288 14.0% Debt Service Fund $2,768,305 $2,721,921 $2,520,139 $2,289,699 $2,138,889 $2,138,888 $(150,811) -6.6% Municipal Building Fund $440,000 $440,000 - $60,000 $135,000 $135,000 $75,000 125.0% Park Capital Fund $100,000 $100,000 $120,000 $170,000 $245,000 $245,000 $75,000 44.1% Street Improvement Fund $200,000 $200,000 $200,000 $225,000 $345,000 $345,000 $120,000 53.3% VERF - - $320,000 $688,346 $985,000 $965,000 $276,654 40.2% Comm & Econ Devl Fund $25,000 $55,000 $84,500 - - - - - Ambulance Fund $300,000 $300,000 $300,000 - - - - - Total $12,833,351 $13,532,996 $14,343,622 $16,064,857 $18,283,672 $18,227,988 $2,163,131 13.5% Council Direction Requested Staff would like to hear from the Council on the 2024 staffing, budgets, and tax levy as currently presented. This direction is requested in order to prepare a preliminary 2024 tax levy for consideration at the for the September 12, 2023 City Council Meeting Remaining Budget Calendar September 12, 2023 - City Council certifies 2024 Proposed Property Tax Levy and sets the date for the Truth in Taxation meeting to adopt the final 2024 Budgets and Property Tax Levy. This represents the levy ceiling for 2024, as the final levy may not exceed this preliminary levy. Fall, 2023 - Continue discussions as needed on the 2024 budget and tax levy. Dec 12, 2023 - Finance presents at the annual Truth in Taxation meeting. City Council adopts 2024 Budget, 2024 Tax Levy, 2024 - 2033 Vehicle & Equipment Replacement Plan, and 2024 - 2028 Capital Improvement Plan (CIP). 4

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