City Council Meeting December 6, 2017 Truth in Taxation Meeting *** Proposed 2018 Budget & Property Tax Levy Information

Truth in taxation meeting This annual Truth in Taxation Meeting is required by State Statutes. The meeting may not begin prior to 6:30 p.m. The purpose of the meeting is to explain the tax impact the City’s levy will have on the taxpayers of the City of Sandstone.

REMINDER – Tonight we discuss the City’s share of your total tax bill – NOT property valuations. You can discuss your property valuation with the County Assessor at any time, followed by the Board of Adjustment and Appeal hearing in the spring.

Who Levies Property Taxes? Counties Cities and Townships School Districts State Various special taxing jurisdictions (e.g., watershed districts, library districts, hospital districts, HRA, ECRDC).

Distribution of Tax Bill Levy Authority 2016 2017 School District 26.5% 26.1% Pine County 30.8% 30.6% City of Sandstone 40.5% 41.2% Special Taxing Districts 2.2% 2.1% TOTAL 100% 100%

KEY STEPS IN THE PROCESS Step 1. The County Assessor determines the EMV for each parcel in the City, then calculates the exclusion if eligible. This determines the TAXABLE Market Value. Step 2. The Legislature sets the formula for tax capacity. Minnesota Classification Rates: Examples - a. Residential Homestead First $500,000 1.00% Over $500,000 1.25% b. Commercial – Industrial First $150,000 1.50% Over $150,000 2.00% c. Rental Housing 4 or More Units 1.25%

KEY STEPS IN THE PROCESS – continued Step 3. The County Assessor calculates the tax capacity for each value of property in the City – based on values from Step 1 and tax capacity from Step 2. Step 4. The City Council adopts a preliminary levy in September. Step 5. After a public meeting, the City Council adopts a final levy in December. Tonight is the public meeting. The final levy will be adopted at the December 20th Council Meeting. Step 6. The County Auditor divides the final levy (determined by the Council in Step 5) by the City’s total tax capacity (determined in Step 3) to determine the tax rate. The auditor multiplies this tax rate times each property’s tax capacity to determine the City tax for each property.

Measures of Property Value Measures used for Individual Parcels 1. Estimated Market Value (EMV) Basic starting point Equal to the local assessor’s estimate of the true market value (fair selling point) of a parcel of property State Department of Revenue monitors the assessment (assessing) practices. 2. Taxable Market Value (TMV) The Homestead Credit was replaced with a Market Value Exclusion, this results in a reduction of the value of the homestead that is subject to tax. This Exclusion affects each homeowner independently. For homes valued at less than $76,000, the exclusion is equal to 40% of the homes EMV, for homes valued between $76,000 and $413,800, the exclusion is $30,400 minus 9% of the value over $76,000. The ending result is the TMV.

Example: Homestead Residential EMV 91,000 - 76,000 to figure the exclusion =15,000 x 9% = 1,350 30,400 – 1,350 = 61,950 TMV 61,950 x 1% = 619.50 Tax Capacity

Tax Capacity Number The Tax Capacity Number is calculated for each property based on the Taxable Market Value times (x) the Classification Rate. The Classification Rates vary among types (or classes) of Property. The Net Tax Capacity Value for all taxable properties within the City limits of Sandstone are: Tax Capacity Value 2017 $525,803 Projected Tax Capacity Value 2018 $574,330* The above numbers indicate that the Total Market Value for properties within Sandstone are projected to increase. Sandstone’s Net Tax Capacity breakdown: 27.56% Homestead 24.77% Non-Homestead Residential 0.86% Farm/Ag 35.82% Commercial/Industrial 10.99% Other * The 2018 figure is proposed and won’t become certified until February, 2018.

The Proposed General Fund Levy is $0.00 General Fund Expenses The General Fund pays for all City Services as outlined below. The services provided are those most commonly associated with City government and include: General Government City Council and Advisory Commissions Administration, Financial & Legal Services Licensing & Elections Planning/Zoning Buildings & Grounds Some Economic Development Public Safety Police/Sheriff Fire Code Enforcement/Building Inspections Civil Defense Animal Control Public Works Street Maintenance Snow Removal Street Lighting Engineering Culture & Recreation City Celebrations Parks Library Miscellaneous Contract for Services Cemetery Contingencies The Proposed General Fund Levy is $0.00

Proposed 2018 General Fund Expenses GENERAL GOVT/ADMIN = (43.1%) City Council, Advisory Commissions, Financial, Administration, Legal Services, Licensing, Elections & Planning & Zoning, Animal Control, Code Enforcement, Building & Grounds POLICE PROTECTION =(11%) Pine County Sheriff’s Department Contracted Services FIRE DEPARTMENT = (16.5%) FD Operating & Capital Improvements PUBLIC WORKS = (22.1%) Street Maintenance Operating, Snow Plowing, Engineering, Street Lighting CULTURE/RECREATION = (4.1%) Parks, Library, City Celebrations ECONOMIC DEVELOPMENT = (2.2%) Abatements, Professional Services, Marketing MISCELLANOUS = (1%) Contract for Services, Cemetery Operating, and Contingencies

GENERAL FUND EXPENDITURES City of Sandstone 2018 Budget Comparison Summary GENERAL GOVERNMENT Budget 2017 Proposed 2018 +/- Difference Administration/Elections/Finance $ 316,754 $ 336,340 $ 19,586 Planning & Zoning $ 52,350 $ 12,200 $ (40,150) Legal Services $ 31,000 $ 0 Building/Grounds $ 70,766 $ 72,350 $ 1,584 Total General Government $ 470,870 $ 451,890 $(18,980) PUBLIC SAFETY Pine County Sheriff’s Dept $ 117,845 $ 133,000 $ 15,155 Fire Department $ 194,412 $ 197,693 $ 3,281 Code Enforcement/Bldg Insp $ 30,275 $ 31,500 $ 1,225 Animal Control $ 1,550 $ 1,200 $ (350) Total Public Safety $ 344,082 $363,393 $ 19,311

GENERAL FUND EXPENDITURES City of Sandstone 2018 Budget Comparison Summary - continued PUBLIC WORKS Budget 2017 Proposed 2018 +/- Difference Engineering $ 15,000 $ 0 SD Maintenance/Operating/Safety $ 279,146 $ 237,000 $ (42,146) Street Lighting $ 28,000 Total Public Works $ 322,146 $ 280,000 $(42,146) CULTURE & RECREATION Budget 2017 Parks Operating $ 43,102 $ 45,030 $ 1,928 Library $ 5,000 $ 0 Total Culture & Recreation $ 48,102 $ 50,030 $ 1,928

GENERAL FUND EXPENDITURES City of Sandstone 2018 Budget Comparison Summary - continued ECONOMIC DEVELOPMENT Budget 2017 Proposed 2018 +/- Difference Abatement $ 4,320 $ 18,000 $ 13,680 Marketing $ 12,500 $ 11,520 $ (980) Miscellaneous Economic Development $ 36,600 $ 21,120 $ (15,480) Professional Services $ 14,000 $ 14,000 $ 0 LESS EDA LEVY $ (9,080) $ (9,000) $ (80) Total Economic Development $ 58,340 $ 55,640 $ (2,700) MISCELLANEOUS Budget 2017 Cemetery $ 11,605 $ 11,590 $ (15) Total Miscellaneous $ (15) TOTAL EXPENDITURES $1,255,145 $1,212,543 ($ 42,602)

Proposed 2018 General Fund Revenues PROPERTY TAXES = (0 %) Current Ad Valorem Taxes, Delinquent, Penalties & Mobile Home Taxes INTERGOVERNMENTAL = (87.6%) LGA (Local Govt. Aid), State Fire Aid, and PERA Aid Payment CHARGES FOR SERVICES = (4.9%) Zoning & Subdivision Fees, Assmt Searches, Fire Dept MISCELLANEOUS = (4.1%) Interest, Rents, Court Fines LICENSES & PERMITS = (3.4%) Bldg Permits, Rental Licenses, Animal Licensing, Antenna/TV Licenses, and Liquor and Beer Licensing

GENERAL FUND REVENUES City of Sandstone 2018 Budget Comparison Summary TOTAL REVENUE SOURCES Description Budget 2017 Proposed 2018 +/- Difference General Property Taxes $ 0 $ 0 Licenses & Permits $ 42,450 $ 42,550 $ 100 Intergovernmental Revenue $ 1,088,183 $ 1,122,777 $ 34,594 Charges for Services $ 65,300 $ 61,600 $ (3,700) Miscellaneous Revenue $ 28,900 $ 31,200 $ 2,300 TOTAL REVENUE $ 1,224,833 $ 1,258,127 $ 33,294

Calculation of 2018 Proposed Levy Budget 2017 Proposed 2018 General Fund Levy $ 0 Debt Service Levy $ 113,292 $ 91,550 Abatement Levy – Kettle River $ 3,000 Capital Improvement Fund Levy $ 233,320 $ 340,062 Wild River Levy $ 120,000 $ 100,000 TOTAL GROSS LEVY $ 469,612 $ 531,612 LESS EXCESS LGA $ (57,304) OTHER INFORMATION Total Tax Levy $ 469,612 $ 474,308 Taxable Net Tax Capacity Value $ 525,803 $ 574,330 City Tax Rate 89.314% 82.585% EDA Operating Levy $ 9,080 $ 9,000

Impact on Taxpayers If the proposed 2018 Budget is adopted, the City will direct Pine County to collect $483,308 from City taxpayers to help pay for Capital Improvements, Debt Service, and Wild River. A portion of the proposed tax levy will fund the EDA (Economic Development Authority). The EDA was established to market the community’s economic resources to expand the tax base beyond the single family residential sector. The EDA levy portion is $9,000 and is included in the $483,308 Net Tax Levy.

TAX IMPACT – RESIDENTIAL TMV 1/2/2017 Taxable Market Value 2017 2018 No Change in Value Difference 2017 to 2018 No Change 2018 City Tax with Inflation Value of 5% $ 30,000 $ 268 $ 248 $ -20 $ 260 $ 50,000 $ 446 $ 413 $ -33 $ 434 $ 74,200 $ 663 $ 613 $ -50 $ 643 $117,400 $ 1,049 $ 970 $ -79 $ 1,018 $143,300 $ 1,280 $ 1,183 $ -97 $ 1,243 $172,800 $ 1,543 $ 1,427 $ -116 $ 1,498 $233,200 $ 2,083 $ 1,926 $ -157 $ 2,022 $250,000 $ 2,233 $ 2,065 $ -168 $ 2,168 $300,000 $ 2,679 $ 2,478 $ -201 $ 2,601 For taxes paid, the above figures are calculated with the Taxable Market Value exclusion, if eligible. Houses valued above $413,800 receive no exclusion. The above numbers are calculated with no change in the market value of a homestead property. A column with an inflation factor of 5% was added.

TAX IMPACT – COMMERCIAL TMV 1/2/2017 Taxable Market Value 2017 2018 No Change in Value Difference 2017 to 2018 No Change 2018 City Tax with Inflation Value of 5% $ 75,000 $ 1,004 $ 929 $ -75 $ 976 $ 100,000 $ 1,339 $ 1,239 $ -100 $ 1,301 $ 150,000 $ 2,009 $ 1,858 $ -151 $ 1,951 $ 200,000 $ 2,902 $ 2,684 $ -218 $ 2,818 $ 250,000 $ 3,795 $ 3,510 $ -285 $ 3,685 $ 300,000 $ 4,688 $ 4,336 $ -352 $ 4,552 $ 400,000 $ 6,474 $ 5,987 $ -487 $ 6,287 The above numbers are calculated with no change in the market value of a commercial property and also a column with an inflation factor of 5%.

Tax Increase Factors 1. Change in individual assessed market value. 2. The market value of other properties in your taxing district may change. Your tax bill is intertwined with your neighbors’ tax bill. If the market value of a property increases more or less than the average increase or decrease in a taxing district, the taxes on that property will also change. Real Estate Market Inflation/Deflation. 3. Possible change in property classification. 4. Property improvements not previously taxed. 5. The City, County, and/or School District budget and levy may change. 6. Special assessments may be included in your property tax bill.

2018 Proposed Levy TOTAL LEVY $ 483,308 General Government Levy Fund $ 0 EDA (Economic Development Authority) Levy $ 9,000 Debt Service Levy $ 91,550 Wild River Levy $ 100,000 Capital Improvement Levy $ 340,062 LESS EXCESS LGA $ (57,304) TOTAL LEVY $ 483,308 PROPOSED LEVY INCREASE 1% TAX RATE 82.585% (Year 2017 tax rate was 89.314%)