1. Dakota County Budget Workshop
August 20, 2019

2. Discussion Items 2020 Budget/Levy Decision Schedule
Financial Planning Assumptions
Budget Priorities by Division
Levy Planning Financial Models
2020 Property Tax Base and Market Values

3. 2020 Budget/Levy Decision Schedule
August 20 – County Board Budget Workshop #2
September 10 – County Manager’s Recommendation of Maximum Levy (GGP)
September 24 – County Board Adoption of TNT maximum levy
November 4-7 – County Board Budget Hearings

4. Financial PLANNING ASSUMPTIONS AND Division Budget priorities

5. Summary of Proposed Planning Parameters
Preliminary cost pressure estimates
Labor Costs: ~4.2%
Non Labor Costs: %
Internal reallocations aligned to cover current level 2019 cost pressures and revenue shortfalls
Utilize a portion of Levy Management Account to reduce cost pressures on the 2020 levy
Retain Levy Management Account (LMA) for future years as uncertainties grow
Caseload Growth/Prior Commitments & Pilots/New Initiatives (TBD)
Extent/Type
Funding
updated xx/xx/xxxx
Paul/Allie
Between 2015 and 2018 the County has seen moderate growth of levy funded FTEs, averaging 13 FTE/year.

6. 2020 Current Level Additional revenues comprised of:
EEA federal revenue increase, $600K.

7. 2020 Division Identified Requests
Additional Specific Items:
Cahill Place
$660,000
Building CIP Maintenance Needs
$2,400,000
Continue Social Services/Law Enforcement Coordinated Response Pilot
$96,432
Expand Social Services/Law Enforcement Coordinated Response Pilot (1 City)
$96,432
Expand Social Services/Law Enforcement Coordinated Response Pilot ( All Remaining Current Cost Share)
$712,177
Total Identified Needs
$9,222,786

8. Total 2020 Requests by Category
Levy Portion: $5,257,745
Ability to fund 1 in 5 levy funded requests at prior year’s level
Supporting Infrastructure, $1,882,843
Existing Mandates, $757,993

9. 2020 Budget Issues Resolved in Planning Base
Foster Care Costs $800K
Juvenile Services Bed Fees Shortfall $320K
Fleet Capital Equipment Base Increase $50K
Highway Salt & Sand Increase (Levy Impact $28K) $250K
Library Fines Shortfall $40K

10. Remaining Right Sizing Surpluses by Division
Community Services $207K Physical Development $182K County Administration $ 6K Operations, Mgmt & Budget $ 0 Public Services & Revenue $ 8K Elected Offices $ 0 Total $403K

11. Funding Options
Additional Funding Options

12. Funding Options - Building CIP Repair/Maintenance
Option A: Increase Buildings CIP Levy by an additional $2.4 million in 2020
Option B:
+$1,000,000 Operations
(Revised split 91.3% Ops, 8.7% CIP)
Transportation Levy Reduction = $1,962,959 (replaced with approximately 6 weeks of Transportation Sales Tax revenues) approx $342,000/week Sales Tax
Parks Levy Reduction = $141,025 CPA Reduction (net Interest) = $250,000 Total Reduction $391,025
Buildings Levy Increase = $2,103,984 Total Increase $2,353,984

13. 2020 Levy Scenario - 1
In millions

14. 2020 Levy Scenario - 2
In millions

15. 2020 Levy Scenario - 3
In millions

16. 2020 Levy Scenarios 5.1% CIP Building Maintenance, $2.40M 3.4%
Co-Response, $0.90M
2.9%
New Requests, $1.00M
Cahill Place, $0.66M
New Levy
Current Level Inflation, $8.79M
Levy Mgmt Acct., $0.67M
Funding Source Increases, $5.89M

17. Funding Options Looking Beyond 2020
Potential Available Levy Management Account
$ 5,225,000

18. Levy planning FINANCIAL modelS

19. 2019 Budget Model Updated with Scenario 1
Updated 5/16/18 by Paul
Forecasting Assumptions:
Total annual operating cost growth: ~3.1%
(cost growth impact on levy ~5.2% to 5.5% annually)
All Levy Management Account used by 2020
Future labor contracts renegotiated at rates similar to current contracts. Current agreements run through 2020.
Stable state and federal budgets
Maintain structural balance in operations
** New Labor Contracts in 2021 could impact out year projections

20. 2019 Budget Model Updated with Scenario 2
Forecasting Assumptions:
Total annual operating cost growth: ~3.1%
(cost growth impact on levy ~5.2% to 5.5% annually)
All Levy Management Account used by 2021
Future labor contracts renegotiated at rates similar to current contracts. Current agreements run through 2020.
Stable state and federal budgets
Maintain structural balance in operations
** New Labor Contracts in 2021 could impact out year projections

21. Levy Management Scenarios
5.9%
6.0%
6.0%
6.0%
5.1%
5.9%
4.6%
3.4%
3.4%
Combined 2019 County Levy with RR reduced to $1 = 3.6% ($334,991)
2.9%
2.9%
** New Labor Contracts in 2021 could impact out year projections
2020
2021
2022
2023
2024
Updated 3.4% Scenario 2

22. Longer Term Issues and Uncertainties
National Economic Trends
Labor Market and Costs
Federal Policy Changes
State Budget, Mandates, and System Performance
National economic trends
The July 2018 state revenue and economic update from MMB indicates higher national economic growth for 2018 (3% GDP growth now forecast for 2018), but with growth in future years slowing to half that rate (but still positive) by The July ‘Beige Book’ report from the Minneapolis Federal Reserve reports the regional economy to be growing moderately.
The labor market
The July 2018 state revenue and economic update from MMB indicates higher national economic growth for 2018 (3% GDP growth now forecast for 2018), but with growth in future years slowing to half that rate (but still positive) by The July ‘Beige Book’ report from the Minneapolis Federal Reserve reports a ‘robust hiring demand continuing to be restrained by tight labor supply’ and growth in manufacturing, residential construction, and commercial real estate. 
Federal policy changes
In addition to potential federal policy changes that could affect the County’s scope and costs of service delivery, Federal funds represent 13% of our annual operating revenue.
State budget, mandates and systems performance
The most recent (February 2018) planning estimate for the state general fund budget for the upcoming FY20-21 biennium forecasts a $313 million positive balance (although this does not include an additional $1.224 billion in estimated inflationary pressure on spending). State systems that are required to be used for state-mandated services (such as METS and MNLARS) will continue to pose cost and service challenges to the County and our customers unless/until they are improved. State funds represent 18% of our annual operating revenue.
Potential housing and self-sufficiency initiatives
No anticipated increases in 2019 but additional requests anticipated in 2020.
Enterprise risks
Information security requirements

23. 2020 Property tax base and market values

24. 2020 Property Tax Base
Total county tax capacity will increase approximately 7.74%, and taxable net tax capacity will increase by 8.29% for taxes payable in 2020
If tax levy collected remains at 2019 total, County tax rate will decrease 7.99%
If County tax rate from 2019 is maintained, total County tax collections would increase approximately $4.3 million next year
Trends in values vary by property type
The median res homestead EMV is $263,800 before homestead exclusion.
The vacant ag land per acre is essentially unchanged from last year $7,500 EMV, $7,100 TMV.
Apartment aggregate increase was 11%, however that includes new construction, so the median existing apartment property increase was 5.3% (varies widely). 
CI aggregate increase was 5.5%, however that also includes new construction value, so the median existing CI property increase was 2.2% (varies widely).
That being said, I understand you have used a flat $1 million property value in the past for the estimates because of the wide range of changes and values for these property types.    

25. Tax Base, Levy, and Rate Trends

26. Market Value Summary Property Taxes Payable in 2020:
Residential Average Increase 4-9%
Median Market Value $280,600
Mean Market Value $300,933
Apartments – 11.0% aggregate increase
Commercial/Industrial – 6.2% aggregate increase
Agriculture:
EMV increased 5%
TMV tillable acreage unchanged while non-tillable acreage decreased 6% on average

27. Levy Increases Used in Tax Rate Calculations
0.0% - Historically used to illustrate baseline impact on property taxes
2.9% - Funding for cost growth, $1.0 million in new levy requests, Cahill place, and Co-Response expansion to one city.
3.4% - Funding for cost growth, $1.0 million in new levy requests, Cahill place, Co-Response expansion to all cities (with cost sharing), and cap CPA operating split at 90% .
5.1% - Funding for cost growth, $1.0 million in new levy requests, Cahill place, Co-Response expansion to all cities, and increases Buildings CIP levy by $2.4M but does not change Transportation & Parks CIP levy amounts from 2019.

28. 2020 Property Tax Trends and Impacts: Homes
If the Median Value stayed at the 2018 amount (243,000) the tax would DECREASE $46.16, a 7.62% decrease
If the Median Value only increased 4% (252,720) the tax would DECREASE $20.12, a 3.32% decrease
If the Median Value increased 12% (272,160) the tax would INCREASE $31.97,  a 5.28%  increase

29. 2020 Property Tax Trends and Impacts: Farmland
The vacant ag land per acre is essentially unchanged from last year $7,500 EMV, $7,100 TMV.

30. 2020 Property Tax Trends and Impacts: Business Property
CI aggregate increase was 5.5%, however that also includes new construction value, so the median existing CI property increase was 2.2% (varies widely).
That being said, I understand you have used a flat $1 million property value in the past for the estimates because of the wide range of changes and values for these property types. 

31. 2020 Property Tax Trends and Impacts: Apartments
Apartment aggregate increase was 11%, however that includes new construction, so the median existing apartment property increase was 5.3% (varies widely). 

32. How would a high range levy increase have effected the levy per capita?

33. How would a high range levy increase have effected the tax rate?
Updated by Michael Johnson 08/14/2019.
In St Paul and Minneapolis there is a different level of services and therefore a higher county rate. All remaining cities in both counties put the suburban rate and tax. It’s important to realize that 2019 valuation information been used for this comparative analysis.

34. Budget Development Process
August 20 - County Board Budget Workshop #2
September 10 - GGP Budget Update
September 24 - County Board Adoption of maximum levy
November 4-7 – County Board Budget Hearings
November 26 – CIP Public Hearings
November 26 – County Board Budget Public Hearing (“Truth-In-Taxation”)
December 17 – County Board Adoption of 2020 Budget

35. Questions & Discussion