Work Session Follow UP Aug. 23, 2018

Budget Workshop Objectives Review long-term financial plan. Review draft financial policies. Follow up from Aug. 16 work session. ● Fiscal disparities. ● Other questions. ● Preliminary levy and 2019-20 budget approval on Sept. 4.

Long Term Plan

Assumptions Rates % Interest Earnings 1% Governmental Fund Revenue Growth 3% Governmental Fund Expenditure Growth Enterprise Fund Revenue Growth 5% Enterprise Fund Expense Growth General Fund Levy Growth EDA Fund Levy Growth 2% Population Growth .49% Median Home Value Growth Tax Capacity Growth Rate (including fiscal disparities) Governmental Fund Debt Interest Rate Governmental Fund Debt Term 15 years • One showing current service levels – And the cost of maintaining service levels is increasing due to general inflation. • One showing one-time accounting changes • Increased service levels address community or workload needs include two new positions in police, one in finance and enhanced IT services.

Assumptions with Future Action Park Improvement Fund includes a $3 million project for Becker Park. Fleet Fund requires an operations and replacement cost analysis in 2019 to establish the future charge out rate for Fleet Fund. IT Fund established as an internal service fund to provide for ongoing operations - needs capital preplacement cost analysis. Storm Water Fund includes several grant assumptions for major infrastructure projects. City engaged with AEM Financial Solutions for the analyses of utility rates for water and sewer. • One showing current service levels – And the cost of maintaining service levels is increasing due to general inflation. • One showing one-time accounting changes • Increased service levels address community or workload needs include two new positions in police, one in finance and enhanced IT services.

Key Highlights General Fund had a 51.7% operating reserve on Dec. 31, 2017. Tax levy projected to increase from 11.3 million (2019 proposed) to $13.4 million over duration of plan based on projected increases for the general fund capital needs. ● Tax capacity is assumed to grow at 5% during duration of plan. ● Future captured tax increment capacity has not been analyzed. The annual tax amount for a median home is projected to increase from $850 (2019 proposed) to $1,046 during the plan. Total outstanding debt could decrease from $18.6 million (2017 actual) to $9.5 million over duration of plan. Total cash position of the city is projected to decrease from $44.6 million (2017 actual) to 33.9 million over duration of plan.

Dashboard

City Tax Capacity Rates 2017 – 2018 (actual) and 2019 – 2023 (estimated)

Tax Capacity Tax Rate Comparison 2013 – 2018 (actual)

as Percent of Expenditures General Fund Balance as Percent of Expenditures 2017 (actual) and 2018 – 2023 (estimated)

Cash Balance by Planned Use 2017 (actual) and 2018 – 2023 (estimated)

Property Taxes: General Levy, EDA, Debt Service and Capital 2017 – 2018 (actual) and 2019 – 2023 (estimated)

Projected City Tax Impact 2017 – 2023 (estimated) for an average valued house ($196,000 in 2019)

Projected Debt Balances Based on current amortizations 2017 (actual) and 2018 – 2023 (estimated)

Debt Per Capita – Comparison 2012 – 2017 (actual) and 2018 – 2022 (estimated)

Capital Improvement Plan Discussion ● Streets ● Police ● Parks ● Building ● Fleet ● Information Technology ● Water ● Sewer ● Storm Water ● Street Lights

Projected Property Tax Levies and Tax Rates Property Taxes for General Purposes 2017 Actual 2018 Actual 2019 Estimated 2020 Estimated 2021 Estimated 2022 Estimated 2023 Estimated General $8,657,000 $9,436,779 $ 9,641,249 $9,716,249 $10,266,584 $10,891,819 $11,218,574 EDA/HRA 277,200 282,744 288,399 294,167 300,050 306,051 Street Capital 163,600 110,144 116,950 121,628 126,493 131,553 PERF Fund 137,400 151,900 154,938 158,037 161,197 164,421 167,710 PIR Fund 266,220 301,210 - Building Fund 574,400 585,888 597,606 609,558 621,749 634,184 Park Improvements 248,3100 358,914 476,359 593,804 713,804 Fleet 85,680 86,537 87,402 88,276 89,159 Information Tech. 159,179 159,902 161,501 163,116 164,747 SUBTOTAL $10,075,820 $10,905,089 $11,268,132 $12,032,929 $12,486,394 $12,949,729 $13,425,782

Projected Property Tax Levies and Tax Rates Property Taxes for Debt Service 2017 Actual 2018 Actual 2019 Estimated 2020 Estimated 2021 Estimated 2022 Estimated 2023 Estimated 2005 Pool Bonds $212,000 - SUBTOTAL 212,000 Taxes Levied $10,075,820 $10,905,089 $11,268,132 $12,032,929 $12,486,394 $12,949,729 $13,425,782 Less: Value of Market Value Levies 489,200 277,200 282,744 288,399 294,167 300,050 306,051 Less: Distribution from fiscal disparities $2,267,618 20,186,657 $2,295,990 $2,410,789 $2,531,329 $2,657,895 $2,790,790 City Net Levy $7,531,002 $8,441,232 $8,689,398 $9,333,740 $9,660,899 $9,991,784 $10,328,941

Projected Property Tax Levies and Tax Rates Tax Capacity 2017 Actual 2018 Actual 2019 Estimated 2020 Estimated 2021 Estimated 2022 Estimated 2023 Estimated Personal & Real Estate $16,716,393 $18,459,975 $19,383,974 $20,352,122 $21,369,729 $22,438,215 $23,560,126 Other assumed net growth factors - Less: contribution to fiscal disparities 1,082,015 1,179,088 1,133,042 1,189,695 1,249,179 1,311,638 1,377,220 Less: Tax Increment 248,944 212,599 Adjusted Net Tax Capacity $15,385,434 $17,168,288 $18,037,332 $18,949,829 $19,907,950 $20,913,978 $21,970,307

Projected Property Tax Levies and Tax Rates 2017 Actual 2018 Actual 2019 Est. 2020 Est. 2021 Est. 2022 Est. 2023 Est. General 42.33% 43.66% 42.28% 43.06% 42.09% 41.14% 40.20% Capital Levies 5.58% 5.51% 5.20% 5.53% 5.80% 6.02% 6.22% Schedule Debt Levies 1.04% 0.0% Total City Levy Tax Rate 48.949% 49.168% 48.175% 49.255% 48.528% 47.776% 47.013% Total EDA Tax Rate 1.385% 1.274% 1.250% 1.225% 1.201% 1.177% 1.152% Population 22,855 22,967 23,080 23,193 23,307 23,421 Taxes Per Capita 450 475 488 519 536 556 573 Median Home Value (Jan. 2) 166,000 182,000 196,000 205,800 216,090 226,895 238,239 Median Home Taxes (from city) 703 792 850 922 962 1,004 1,046 % Change from Prior year $ N/A 13% 7% 8% 4% 9%

Projected Property Tax Levies and Tax Rates Tax Levy $ 2017 Actual 2018 Actual 2019 Est. 2020 Est. 2021 Est. 2022 Est. 2023 Est. General $8,657,000 $9,436,779 $9,641,249 $10,266,584 $10,574,582 $10,891,819 $11,328,941 Capital 1,141,620 1,191,110 1,184,960 1,318,044 1,456,145 1,594,744 1,736,410 EDA 277,200 282,744 288,399 294,167 300,050 306,051 Debt Service 212,000 - Tax Levy % 2017 Actual 2018 Actual 2019 Est. 2020 Est. 2021 Est. 2022 Est. 2023 Est. General 84% 87% 86% 85% Capital 11% 12% 13% EDA 3% 2% Debt Service 0%

Outstanding Debt Schedule

Financial Management Plan ● Auditor ● Budget & financial control ● Business assistance ● Capital ● Conduit debt ● Contacts ● Debt management ● Fund Balance ● Interfund loans ● Investments ● Post issuance compliance ● Revenue ● Risk Management ● Tax abatement ● Tax increment financing

Follow up to 2019 – 2020 Budget ● Fiscal disparities distribution – updating schedule of tax rate calculation. ● Other questions/comments.

Tax Rate Calculation Net Tax Capacity Local Levy Total Tax Rate Payable 2015 Payable 2016 Payable 2017 Payable 2018 Payable 2019 Payable 2020 Tax Capacity $14,758,503 $15,250,280 $16,716,693 $18,459,975 *$19,577,862 ***$20,556,755 TIF Captured Value (297,589) (325,706) (248,944) (212,599) **(212,599) Area-wide Contribution (1,088,083) (1,088,334) (1,082,015) (1,079,088) (1,216,174) Area-wide Distribution 4,197,619 3,999,304 4,375,023 4,467,214 Net Tax Capacity $17,570,450 $17,835,544 $19,760,757 $21,635,502 $22,616,303 $23,732,282 Certified Levy 9,074,153 9,099,500 9,798,620 10,627,889 11,060,388 11,744,529 EDA Levy 239,000 246,200 277,200 282,744 288,399 Local Levy $9,313,153 $9,345,700 $10,075,820 $10,905,089 $11,343,132 $12,032,928 2015 2016 2017 2018 Payable 2019 City Tax Rate 50.50% 51.83% 50.36% 50.42% 49.91% 51.00% County Tax Rate 46.40 45.36 44.09 42.81 School Tax Rate 33.23 33.83 31.61 31.96 Other Tax Rate 10.56 10.43 10.21 9.05 Total Tax Rate 140.68% 141.45% 136.27% 134.23% 133.73% 134.82% * 2018 Proposed Values and Tax Capacity – Hennepin County Assessor’s Department. Amounts are estimated for county, school and other tax rates for 2019. ** Estimates for the 2019 Captured Tax Capacity from Tax Increment Finance Districts will not be available until Aug. 15, 2019. The prior year, TIF Captured Value was used to calculate the estimated 2019 tax rate. *** Estimated at 5% increase over 2019.

Impact on Residential Homes Based upon proposed increase in the city tax levy. 2018 Market Value of a Home Taxable Market Value 2018 Actual 2019 Estimated $ Increase % Increase $158,760 $135,800 $685 $705 $20 3% $176,400 $155,000 $781 $804 $23 $196,000 $889 $915 $26 $235,200 $219,100 $1,105 $1,137 $32 $282,240 $270,400 $1,363 $1,403 $40

Questions?