WRIGHT COUNTY BOARD MINUTES
DECEMBER 4, 2014, 6:30 PM
The Wright County Board met in special session at 6:30 P.M. with Sawatzke, Borrell, Daleiden, Husom, and Potter present.
The purpose of the meeting was to discuss the proposed 2015 Budget and Taxable Certified Levy. The Assessor’s Office was open to assist with questions regarding individual property tax statements.
The following documents were distributed:
Page 1: Board Meeting Agenda;
Page 2: Sample Property Tax Statement;
Page 3: Taxable Market Value By Class of Property;
Page 4: Tax Capacity By Class of Property;
Page 5: Resolution From 9-30-14 Establishing the 2015 Draft Budget;
Page 6: 2015 Departmental Net Operating Budgets With Prior Year Comparisons;
Page 7: Wright County Proposed 2015 Budget with three pie charts (Where It Comes From, Where It Goes, and How the Budget Is Spent);
Page 8: A bar chart entitled Wright County Expenditure Budget by Function;
Page 9: A bar chart entitled Wright County Expenditure Budget by Classification.
Bob Hiivala, Auditor/Treasurer, referenced Page 2, the Sample Property Tax Statement. He said the sample statement shows the value and classification of the property. Taxes are calculated by taking the levy figure and dividing it by the tax capacity of the County to come up with a tax rate. This number is multiplied against the taxable value of these properties. The County tax rate went down, and the tax capacity went up. Hiivala said even though the levy went up, the tax capacity increased more. Overall, the tax rate decreased.
Hiivala suggested that taxpayers look at the property value and classification on their tax statements. If those numbers stayed the same as last year, Hiivala said their property taxes should have gone down.
Hiivala said Page 3 indicates that the Taxable Market Value of the County has increased significantly. Moving to the bottom of Page 4, Hiivala said the County Tax Capacity Rate declined from 43.50 percent in 2014 to a proposed 40.620 percent for 2015. Most property owners should see a reduction in taxes.
Lee Kelly, County Coordinator, reviewed the budget process for the year. Departments submitted budgets to the Coordinator, the Auditor/Treasurer, and the County Board in August. Eleven meetings were held to review budgets and adjust revenues and expenditures for each Department. The Board established priorities and appropriate funding sources. Kelly referenced Page 5 of the handout, which is the actual Resolution of the draft 2015 Budget that was unanimously adopted by the County Board on 9-30-14. From that date onward, Kelly said the Budget for next year may decrease, but not increase.
Kelly said there are three major funds in the Budget: General Revenue, Road & Bridge, and Human Services. There were two major impacts to the 2015 Budget. Transportation costs comprised the largest change, as the County works to catch up on road projects that were postponed over a number of years. The second is due to personnel costs. The County is currently negotiating with all seven unions. Kelly said there have been general adjustments on wages over the last several years.
Kelly said the General Revenue Fund is going up $1,964,240 or 3.71 percent to $54,946,310 for 2015. This is primarily due to increases in proposed salaries. The 2014 General Revenue Fund was $52,982,070. County management did market research and found the County is experiencing issues with attraction and retention in some areas of the County.
Road & Bridge had the largest increase of $2,207,462, or 11.72 percent. The 2014 Road & Bridge Fund was $18,827,332. All County roads are paved, and the cost of labor and materials has risen. The Board wants to be proactive in maintaining County roads.
Kelly said the third Fund in the Budget, Human Services, is showing a decrease this year of 1.56 percent to $25,372,100 from 2014 due to retirements, turnover, and streamlining of programs. The 2014 Human Services Fund was $25,775,357.
Debt service is also listed on the Resolution, and increased only slightly by $5,723 to $4,699,316 from 2014. Debt service in 2014 was $4,693,593.
Kelly said Lake Improvement District (LID) funds are collected and passed through the County. The LID funds total $52,550 for 2015.
Kelly referred to Page 6, 2015 Departmental Net Operating Budgets With Prior Year Comparisons. This page details an overview of adjustments to revenues and expenditure changes made in the budget process by the Board.
Kelly directed attention to the graphs on Pages 7, 8, and 9 that show summaries of the 2015 Budget. Kelly referenced the first graph on Page 7, “Where It Comes From.” He said property taxes comprise the bulk of County revenue at 53 percent, although State Aid and Federal grants make up 16 and 11 percent, respectively, along with other fees and charges. The bottom two pie charts show “Where It Goes,” and “How It’s Spent.”
Hiivala discussed the 2015 Levy. Turning back to Page 6, the 2015 column, Hiivala said Departments presented operating budgets and revenues generated. Overall, the County projects $47,603,361 in Board approved revenue from grants and other sources. Approved County expenses are $106,105,070. The levy amount is derived by taking the total operating budget minus anticipated revenues. The proposed levy is $53,050,696 or a 4.91 percent increase over last year. Hiivala said the Departments presented their budgets to the Board, who then calculated revenues realistically, and recommended reduction of some revenues.
Husom invited public comments.
Layne Roschen, of 3095 Lander Avenue in St. Michael, thanked the Board for greater transparency on the County website for citizen review. He said the website has improved much in the last twelve months.
Roschen mentioned a few concerns, including increases in the Budget that exceed the inflation rate for items such as employee health insurance, Human Services, and employee compensation. He asked the Board to provide justification for these increases.
Roschen said his health care costs have gone up more than 30 percent annually every year. He asked what contribution County employees make to health insurance rates. Husom said the Board is taking a serious look at the coverage offered to employees. Due to the Affordable Care Act (ACA), the County may not offer plans that exceed Federal requirements, or will risk significant fines by the Federal government in 2018.
Sawatzke said in 2014, County employees with single coverage paid $4 to $5 per month for health insurance. However, family coverage costs employees from $760- to $900 per month. Sawatzke said the Board does not want to provide insurance to employees that incur a penalty to the County in 2018. The current plans would trigger such fines if the County continued to offer them. The Board is in the process of negotiating new insurance plans with unions at this time.
Roschen said he is also concerned about overall increases in the budgets of some Departments. He said his property taxes are going up by 10 percent. He recognizes that a portion of taxes are allocated for roads, snowplows, and public safety. Roschen questioned the appropriateness of some Departmental expenses that appear excessive or could be scaled back. He cited military equipment purchased by the Sheriff’s Office, which involves continuing training, operations, and supply dollars to maintain. Sawatzke said the equipment was given to the County by the Federal government. Roschen said the equipment violates second amendment rights, and might disturb people if it appeared in public.
Tom McGregor, Albion Township, voiced questions regarding transportation funding. He said the Board Approved Highway Construction revenue is $10,382,335, and approved Expenditures are $10,090,802. He asked why the Board states that Budget increases are due to transportation expenses when revenue exceeds expenditures.
Hiivala reviewed the data with McGregor. He said this presentation identifies the Federal and State grants that go toward construction. He agreed that the Highway Construction revenue is higher than the expenditures. However, there are additional costs in the Road & Bridge Budget besides construction, such as engineering costs. The County needs a levy of $9 million, or $1.2 million over last year. Hiivala said the bulk of the cost is highway construction.
Potter said in the past the County borrowed ahead. Now they are only taking $800,000 for 2015 versus $1.2 million or more last year. He’s hoping with the lower cost of oil, the County will be able to afford to catch up on road maintenance. Road maintenance is a core function of government.
McGregor asked why the Parks Department is getting a $264,000 increase in their budget. Daleiden responded that some funds went to equip a new park, which is a one-time expenditure. The money will provide riding lawn mowers, gators, equipment for the Bertram Chain Of Lakes Park. That accounted for a substantial amount. Husom said staff was added as well.
McGregor asked whether the public can expect the Parks budget to go down by this amount in 2016. Daleiden said the Board may decide to do improvements elsewhere. Sawatzke said the Furniture and Equipment line item should be less. Staff expenditures, however, are ongoing.
McGregor asked regarding the status of the Bertram Chain Of Lakes Project. He inquired whether there was $476,000 left in acquisition costs. Potter clarified that was for Phase 7. There are a total of eleven Phases. The last few Phases are less than previous acquisitions. Daleiden said it depends on how much the State makes available. Sawatzke said the County received different percentages from the State. The County applied for 90/10 percent money from the State, but was never approved for that ratio.
McGregor asked about a million dollar increase in Personal Services. Typically, in the last few years, that line item has been a few hundred thousand dollars. He questioned the drastic increase. Hiivala said the County put in a placeholder for negotiation adjustments in the Department 100 line item. After the end of the year when negotiations are done, the funds are allocated to various Departments. Sometimes a balance of $100,000 to $200,000 remains. The County cannot predict the remaining balance after negotiations. The 2014 number reflects this kind of situation. Typically, this annual presentation always shows a large increase in this line item. But after union negotiations are completed, the line item drops back down to relatively the same amount every year.
McGregor said he looked at previous budgets, and did not see $1 plus million dollars in this line item. Sawatzke said he didn’t see them because although the placeholder money starts there, it is divided out to various Department budgets. What McGregor saw was the balance after it had been allocated. McGregor said he was looking at budgeted numbers. Sawatzke said in 2012 and 2013 there was a zero percent general increase for employees. In 2014 there was a one percent increase. Those numbers are lower than can be expected for 2015 due to union negotiations. Hiivala said McGregor is seeing changes in the past few years when the County Board tried to recognize Step increases in Departments that were a known quantity. Hiivala said the total budget never changes once approved by the Board. The Department 100 budget will go down during the year as funds are transferred to various Departments.
Sawatzke said perhaps preallocating funds to Departments makes it easier for the public to understand where the money is going. Borrell said then perhaps the Board should preallocate funds instead of initially placing them in Department 100, even if the final amount isn’t known at the budget approval date.
Hiivala said when there are union negotiations, the County will use Department 100 as a placeholder. The amounts will be transferred to the pertinent Departments once negotiations are settled. The amount of funds allocated for changes in staff and wages will be noted.
McGregor expressed concern over the Contract Coordinator position in Extension that is budgeted at $155,000, making it the highest paid position in the County. Sawatzke said that amount covers multiple positions. Some of Extension staff are employees of the University of Minnesota. The County contracts with the University to work at the Government Center. The $155,000 is an accumulation of four different people. Potter added that they are not all full-time equivalents.
McGregor said the newspapers are reporting that the County had a zero percent growth budget policy for the last six to ten years. His research finds otherwise. Sawatzke said the County Budget has not been zero percent growth in the last ten years. If inflation is calculated per capita, it might show negative growth. Husom said the total inflation for the last ten years is 25.9 percent or an average 2.59 percent per year. One would have to look at each year with the rate of inflation. Husom said last year the Levy was pretty flat. Sawatzke said the levy went up less than one percent. Sawatzke said he would not be surprised if on a per capita basis in real dollars that the Budget has gone down in the last ten years. Borrell said that argument could be made when adjusting for inflation and population growth.
McGregor said the newspapers are reporting that the County had a zero percent growth budget policy for the last six to ten years. His research finds otherwise. Sawatzke said the County Budget has not been zero percent growth in the last ten years. If inflation is calculated per capita, it might show negative growth. Husom said the average inflation for the last ten years is 25.9 percent or an average 2.59 percent per year. One would have to look at each year with the rate of inflation. Last year was pretty flat. Sawatzke said it went up less than one percent. Sawatzke said he would not be surprised if on a per capita basis in real dollars that the Budget hasn’t gone down in the last ten years. Borrell said that argument could be made when adjusting for inflation and population growth.
McGregor said he sees a 77 percent growth in the General Revenue, Road & Bridge, and Human Services Funds from 2005 to 2014. If you take out County Program Aid, the number increases to 80 percent growth. He understands about population growth. He is not convinced about inflation. McGregor said his wages haven’t gone up. Husom said her wages have stayed the same, and that the cost of goods and services is not equal to wages. McGregor said it places a hardship on taxpayers.
There was discussion regarding the property tax system and which land classifications get taxed the most.
Hiivala directed attention to Page 3 of the handout, “Taxable Market Value By Class Of Property.” He said 53 percent of property taxes in the County are paid by residential property owners. Residential property market values went up 11 percent for 2015. Commercial and industrial properties had the biggest increase in taxable market value at 14 percent. Agricultural land is going up by 12.3 percent.
Hiivala said the Assessors have reasons for valuation and classification of properties. State legislators determine the impact. Hiivala explained that there are thirteen reasons why property taxes change in a given year. Sawatzke said commercial and industrial property taxes went up because a lot of money was spent at the nuclear power plant when it went online.
There was discussion about transportation costs in Wright County.
Sawatzke said the subsidy for the Central Minnesota Health Center was reduced by $12,500. That amount needs to be removed from the Budget. He also said the Board should review the 50 cent per mile mileage reimbursement rate the County currently pays versus the Internal Revenue Service (IRS) rate of 56 cents. Sawatzke said the Board may want to drop the 50 cent number down to 45 cents per mile. If the Board approves the 45 cents per mile reimbursement rate, that would save ten percent on all mileage for every Department with a travel line item.
More significantly, Sawatzke said the Sheriff’s Department spends $625,000 per year on gasoline, fuel and lubes. The County spends close to $1 million on fuel for the Highway Department, and $50,000 for Parks. He said the Board needs to trim those Budget figures. Sawatzke said gasoline costs are lower than when the Budget was initially drafted. Tens of thousands of dollars, if not more, could be saved.
Borrell added that the Budget numbers may be lowered at any time if the Board deems it necessary.
Hiivala said if budgeted revenues exceed actual expenditures, the money would get turned back.
There was discussion regarding the extent the fuel budget should be reduced. Hiivala said the County pays for gasoline in bulk, which is less than the price at the pump. Sawatzke said the price of oil per barrel has dropped since the Budget was initially drafted several months ago.
Husom said Wright County was ranked 86th out of 87 counties for spending per capita in 2012. Potter said Wright is the tenth largest county. Borrell said the County can always improve. Sawatzke said with a 4.91 percent increase in the proposed levy, there is room to trim the Budget.
Sawatzke directed Kelly and Hiivala to bring the revised Budget to the 12-16-14 County Board meeting. Perhaps by then the 2015 IRS mileage reimbursement rate will be posted. Sawatzke said if the rate drops to 45 cents per mile, the Board could reduce every line item by 10 percent. Hiivala said he would look at the mileage reimbursement budget, fuel costs, and lower the Central Minnesota Health Center subsidy.
The meeting adjourned at 7:38 P.M.
Published in the Herald Journal Jan. 12, 2015.