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Sep 28

[ARCHIVED] City Spotlight - Budget & Levy Information

The original item was published from September 28, 2023 4:22 PM to October 26, 2023 11:42 AM

Budgets, Property Taxes, and a Levy - What does it mean and what is it used for?

What is the Levy?

The City of Monticello collects tax revenue through two levies:

  • The Property Tax Levy is used by the City of Monticello to fund general operations, capital projects, and payments on existing debt.
  • The Housing and Redevelopment Levy (HRA Levy) is a significantly smaller amount and is used to fund the Monticello’s Economic Development Authority (EDA).

The levies are not the only funding source, but Minnesota’s constitution gives cities authority to levy property taxes to fund public services. Monticello has been steadily adding other revenue sources, but it would take a larger shift on a state-wide level to significantly reduce our reliance on property taxes.

The City Council is responsible for setting the levy using a two-stage process that provides opportunities for public participation.

  • First, the Council sets a preliminary levy which Wright County uses to help calculate the individual property taxes for the Truth-in-Taxation Notices mailed each November.
  • Second, the Council holds a public hearing in December to gather public feedback before setting the final budget and tax levies for the upcoming year.

Despite the authority to set the levy, there are other factors that influence changes to the taxes of individual properties. Any changes in the value of the property will directly influence the taxes for the following year. Finance Director Sarah Rathlisberger explains it like a pizza: the Council decides the size of the pizza to order; the property value influences the size of slice you get.

The Council can only control the city’s portion of the overall tax bill. The county and the school district also levy property taxes in Monticello and their changes will also impact the amount due.

How is the levy amount determined?

To set the levy most accurately, Monticello starts by creating a draft budget. Starting in late spring staff began to update revenue projections, review year-to-date expenses, and review tax base changes using information from the Wright County Assessor’s Office and MN Dept. of Revenue.Budget Process

Next, city departments make initial budget requests that are compiled into a comprehensive draft. Prior to initiating discussions with Council, staff go through the budget line by line to look at service costs, requests, and projects. This process is done with a focus on balancing service needs and community impact.

Once the initial draft is complete, City Council engages in a series of discussions to review, prioritize, and edit the proposed budget. They carefully consider the upcoming year as well as strategically plan for several years into the future. During this process, they look for ways to reduce costs by shifting some projects into the future or phasing initiatives to reduce the initial impact on the public.

Overall, the primary goal is to balance what is needed to provide the services our community expects from the city while limiting the tax impact as much as possible.

How do changes in the tax base impact my property taxes?

There are four property classifications affected by the levy in Monticello: residential properties, commercial & industrial properties, apartment properties, and the nuclear generating plant.

Our city is actively seeking balanced development in new apartments, houses, and businesses to help add new contributors to the tax base. Our Monticello 2040 Comprehensive Plan outlines our plan to encourage this growth within our city limits where there is access to roads and utilities with lower development costs. Yet our efforts to grow our tax base are affected by a unique presence in town.

Unlike many other cities, Monticello’s tax base is significantly impacted by the nuclear plant. Given its immense size and value, Xcel pays the greatest share of the property taxes in town. However, its share has been decreasing over time as other property types, like residential, have seen quickly rising values. Adding to this for 2024, the nuclear plant received a property value 4.6% lower than 2023.

That change in value means a share of the property tax burden will shift to other property taxpayers in Monticello, even if the levy stayed the same as 2023.

Why is there a proposed increase in 2024?

During the discussions to create a draft budget, several factors influenced the preliminary levy increase. Most of the increase is being driven by:

  • Increases in the cost of local law enforcement
  • 3 elections in 2024: Presidential Primary, Primary, and General
  • Inflation and rising operational costs
  • Response to the spread of Emerald Ash Borer (EAB) in Monticello

The Council also increased the levy to help fund upcoming projects, including the completion of the downtown improvements, the city’s contribution to Wright County’s 2024 East Broadway pavement project, and the city’s matching funds for roundabouts at the intersections of Cedar Street/School Blvd. and Edmonson Ave./School Blvd. The remaining cost for the roundabouts will be paid by grant funds awarded to Monticello.Property Taxes at Work in our Community:  photos of City roads, services, and public safety.

What are property taxes collected by the levy used for?

The City’s levy is deposited into four funds: the General Fund, Monticello Community Center Fund, Capital Projects Fund, and the Debt Service Fund.

The general fund is used for general government (administration, planning and zoning and finance), public safety (building inspections, law enforcement, and fire department), public works (street and sidewalk maintenance, snowplowing, stormwater management, engineering), recreation and culture (senior center, library, park maintenance, MontiArts), and sanitation.

  • The largest share, 30%, goes to public safety – including fire department operations & the contract with the Wright County Sheriff’s Office.
  • The second largest share, 24%, is used for public works – including snow & ice removal, engineering, & street maintenance.
  • 21% is used for general government and 17.9% goes to recreation and culture.

The Community Center Fund’s main revenue source is charges for services, but a small part of the tax levy is used to support the operations of the facility.

The City’s Capital Project Fund is used to pay for street improvement and reconstruction projects and other capital items or projects. Often the costs for these larger projects are combined with additional funding sources like special assessments, grant dollars, or issuing debt.

The Debt Service Fund is used to pay the principal and interest payments on bonds issued for projects in the past.

The separate HRA Levy is used to fund the economic development initiatives of the Economic Development Authority. This includes initiatives like redevelopment efforts, funding for the Downtown Façade Improvement Program, and marketing EDA-owned properties.

Truth-In-Taxation Public Hearing

Now that the preliminary levy has been set, the information will be certified with Wright County for use in the Truth-in-Taxation Notices. Property owners can expect to receive their notice(s) by mid-November.

The Truth-in-Taxation Public Hearing will be held during the regular City Council meeting on Monday, December 11, 2023 starting at 6:30 p.m. This is residents’ opportunity to voice their opinions about the budget and levy before the Council considers final adoption of both.

Residents and other property owners are also welcome to contact city staff with questions or comments before the formal public hearing.