The City of Vadnais Heights’ 2020 budget and tax levy was approved at the December 3, 2019 City Council meeting.
The City Council has adopted a levy of $4,894,180 for 2020, reflecting a 6.9% increase over 2019 for increased spending. When deciding upon the tax levy, Council considers the impact the chosen levy will have on taxpayers. Because of an increase in the City’s tax base, the 2020 proposed tax rate reflects an increase of approximately 1.4%. Properties with the same market value for 2020 and 2019 will pay 1.4% more in city taxes in 2020. For residents with a median valued home of $293,200 in 2020 (8.8% increase over 2019) who also had a median valued home of 269,400 in 2019, city property taxes would increase by $79.93 or about $6.66 per month in 2020 as compared to 2019. Although a 6.9% levy increase may seem high when considered in isolation, the increased tax base and the accompanying increased need for City services requires a higher investment by the City. The Council’s goal is to coordinate the City’s level of growth with the residents’ desired level of services in a manner that keeps the tax burden relatively low as compared to other similarly sized cities.
The City property tax is determined by each property’s taxable value. The starting point for computing taxable value is market value. The median market value of single family properties in the City increased from $269,400 for taxes payable in 2019 to $293,200 for taxes payable in 2020, an 8.8% increase. At the same time, the median market value of commercial properties rose by 2.55% for taxes payable in 2020. The market value of a property each year is the basis of the tax computation for the subsequent year. With the approved preliminary levy, a median valued commercial property would pay $263 for the year ($22 per month) more in City property taxes in 2020 as compared to 2019. Because of the referenced valuation change differences, a shift in tax burden from commercial properties to residential properties will occur in 2020 continuing the shift of last year. In 2020, residential property owners will shoulder approximately 70% of the city’s tax burden; commercial, industrial, utility and railroad properties will pay about 30% of city taxes. Although these exact percentages vary annually, the ratio remains rather constant over time.
What happens with tax revenues received by the City?
About 82% of the annual levy is used to fund General Fund operations. The General Fund is the primary funding mechanism for the majority of City services. Because of the city’s aggressive use of outside contracting, less than half of General Fund spending is for city payroll costs. This percentage is lower than many other cities. The General Fund budget is proposed to increase $381,802 in 2020 as compared to 2019. About $167,000 of the increase is for public safety cost increases. The total proposed 2020 General Fund budget is slightly more than $6.5 million. By far the largest components of spending within the Fund are public safety costs of about $2.8 million. Other major spending components include streets related spending of $1 million, parks/recreation/Commons expenditures of $900,000 and community development spending of roughly $400,000. The remainder of the levy is used for debt service and capital improvements.
The tax levy funds slightly more than 60% of the General Fund’s budgeted expenditures. In 2020, $4 million is budgeted in tax revenues to help pay for $6.6 million of City services. One of the larger non-tax revenues for the General Fund is charges to the City’s utility funds. These funds are operated similar to private businesses; no taxes are necessary for their operations. However, the utilities are operated with personnel and equipment funded by the General Fund. These charges attempt to make the General Fund whole for the cost of personnel and equipment provided through the General Fund. For 2020, approximately $900,000 will be provided to the General Fund by the utility enterprises. Other major revenue sources include permits and licenses, Commons rental revenues, recreation fees and State aid. A unique program in the City that provides about $160,000 in funding annually is the Fire Occupancy Permit program. The Fire Department annually proactively inspects businesses and rental properties for hazardous conditions. These inspections prevent fires and potential injuries by catching dangerous conditions before it’s too late. Charging businesses for these inspections is a more equitable method of recovering the costs of the program than assessing the cost to all taxpayers since the beneficiaries of these inspections are the customers of the businesses, not necessarily City taxpayers. Businesses are able to increase their prices to benefiting customers accordingly to ensure that they are held harmless from the costs of this worthwhile program.
As it has for many years, in 2019, the City continued to assess one of the lowest tax rates among metro cities with populations between 10,000 and 20,000. Additionally, the City’s per capita expenditures continue to be among the lowest of the State’s largest 100 cities according to the MN State Auditor’s office. With the proposed budget and levy for 2020, this trend will continue.
For more detailed financial information, financial statements and budgets for past years are available on the City’s website and interactive budget website.