4th of July in Eden Prairie

July 1, 2009 – 6:47 am

It’s almost the 4th of July in Eden Prairie. Our community 4th of July celebration is one of the largest 4th of July celebrations in the Twin Cities. There’s a Kiddie Parade, a sand volleyball tournament, food booths, live music and fireworks. Our 4th of July celebration is hosted at Round Lake Park. It starts in the morning around 9am and ends with the fireworks crescendo around 11pm that night. (Fireworks start around 10pm)

It’s a long day with something for everyone. Good weather on Saturday would be much appreciated.

By Scott Neal | Posted in Community | Comments Off

The Budget Ahead

June 30, 2009 – 12:43 pm

Last week I did an interview in the Eden Prairie News with Leah Shaffer about the City’s upcoming budget process for 2010-2011. It’s not going to be pretty. My goal is to hold our quality services together while flattening our tax levy for the next two years. That’s going to be tough. It’ll require sacrifices by City employees and residents alike. I think we can do it, but it’s a short run approach. We can’t get into the “something for nothing” cycle here where people begin to expect that the City can provide more and better services for less and less taxes. Not possible. You can look at our national and state government budgets to see that. But, as I said, I think we can do it in the short run, and we’re going to give it a run for next year. Here’s that interview from last week’s Eden Prairie News:

City looking to keep levy flat for next two years

Submitted by Leah Shaffer on June 24, 2009 - 1:27pm.

For the city of Eden Prairie, the rainy day has arrived. That means this fall, as staff and council members gear up for the next two-year budget cycle, it may be the time when the city taps into its rainy day fund.

City Manager Scott Neal said that the goal is to keep the tax levy flat into 2010 and 2011. To make that feasible, the city would keep employee wages flat in 2010 and tap into its reserve - more formally known as the budget stabilization fund, which currently has approximately $5 million in it.

Neal said both of those actions are appropriate given the purpose of the reserves, which was to cover the city in downturns and also given the fact that employee wages are flattening throughout the private sector economy so it’s not unreasonable for them to be flattened in the public sector economy.

The city typically operates under a two-year budget planning cycle, which starts up again this fall. Last year, in light of the economic downturn, the council took the step of amending the 2009 levy to keep city taxes flat from 2008. A wrinkle in that plan came about this spring when it became apparent that the city faced an unprecedented lag in revenue that typically comes through building development.

To fill the projected shortfall, the city tapped $500,000 from the budget stabilization fund, $200,000 saved in the operations budget and $300,000 in personnel reductions, which eliminated 10 employee positions. Four of the positions were unfilled, while six full-time city employees were let go. Neal noted that since cutting the six employees, one was rehired to another position.

Neal said that the city reduced the number of employees in areas where the workload was decreasing, primarily related to building development. Another position was cut because it was a case where the city could redistribute the work from that position among existing staff members.

Unless the economy changes drastically, Neal does not plan on proposing additional layoffs for this year, or into 2010-11.
If the economy takes another downturn, all bets are off, he noted, but “right now we’re not projecting additional decreases in staffing levels.”

Though facing tight budgets and layoffs, Eden Prairie finds itself in a far better position than many cities, which may soon bear the brunt of impacts from cuts in state aid.

The legislative session adjourned with an approximately $2.7 million gap in the budget. The gap is being addressed through the unallotment process. According to the Gov. Tim Pawlenty’s office, the unallotment reductions will include a $200 million cut to local aids and credits to cities and townships.

Eden Prairie receives money from the state in two forms: aid to police and firefighter pensions (which will likely be unaffected this session) and through the Market Value Homestead Credit. As part of the cuts proposed by the governor, Eden Prairie will not be receiving its Market Value Homestead Credit reimbursement from the state for 2010 and 2011. According to Neal’s blog on the subject, the state owes the city $456,419 in 2010 and $511,416 in 2011.

The MVHC program requires that cities provide a tax break for residents and then the state reimburses cities for the lost revenue. Neal has previously written about the problems with the program. In a recent blog entry on the subject, he wrote, “While the MVHC program may be a noble program established out of noble sentiment, the state operates it is as (almost) a scam.”

In an interview, Neal noted that Eden Prairie did not receive its MVHC reimbursement in 2003, 2004, 2005 and 2006. In 2008, the city received half the fund and then the governor unallotted the second half, while no reimbursement will be forthcoming in 2009, 2010 and 2011.

Neal noted that the city gives a tax break, but then the state decides not to reimburse cities because it can’t afford it.

“It’s disingenuous and it’s not transparent,” he said about the program.

It’s also a program that Eden Prairie doesn’t count on. Neal noted that some cities budget for MVHC as an operating revenue in their general funds.

But, for a number of years Eden Prairie has funneled this fluctuating revenue source into capital improvements. City operations are not dependent on the credit.

While Eden Prairie is not dependent on state aid, other cities who set their budgets based on Local Government Aid (LGA) will feel the pinch. Eden Prairie does not receive LGA.

“I think in some cities it’s going to be devastating,” said Neal, noting that in Northfield where he was previously a city manager, 30 percent of the city’s general fund revenue came from LGA. Neal said the city that will face the biggest struggle is probably going to be St. Paul, which is dependent on LGA and the fiscal disparities program.

While LGA will be cut, the funds for fiscal disparities are tied to the commercial real estate base, noted Neal.

When it comes to Eden Prairie, “we’re fortunate on three fronts, really,” Neal said
He said Eden Prairie is fortunate that it is not depending on state financial aid, and that city leaders in past decades were able to put money away.

When growth shot up in the ’90s, “those city leaders recognized that it wasn’t always going to be like that and they established some reserve funds for just this kind of time.”

Thirdly, Neal noted that Eden Prairie has a lot of good people here on its council and staff who are going to figure out ways to fulfill the city’s mission with the same or fewer resources.

“We have smart people here and we’re going to figure out how to keep doing what needs to be done.”

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By Scott Neal | Posted in City Facilities, City services, Employees | Comments Off

Round Lake Tennis Courts

June 23, 2009 – 12:34 pm

Do you remember the Round Lake Tennis Courts? That’s them in the photo to the left. They’re gone. History. Poof.

The tennis courts were in rough shape. The City is engaged in a project right now to reconstruct them. We hired a construction company to remove the old courts, reshape the soil, and to build new courts and fencing. There were eight courts in the past. There will be eight courts in the future.

The cost of the project is around $400,000. We had $500,000 in our budget, so the current economic situation seams to have produced a good project cost for us. The City and the School District are splitting the cost of this project 50%-50%. We use the tennis courts for our programming and for general public use. The School District uses the courts for its athletic programs. It’s a fair way to split the costs.

They’re gone, but they’ll be back — hopefully by the start of September. Perhaps the end of August.

By Scott Neal | Posted in City services, Parks & Recreation | Comments Off

Governor Pawlenty Announces Unallotments

June 16, 2009 – 3:59 pm

Governor Pawlenty announced his state budget unallotment decisions today. The cuts fell heavy on city government budgets. For cities that rely on the state for a significant share of their annual budgets, today was a dark day. We’re fortunate in Eden Prairie that we’re not all that connected to the state’s budget system. We didn’t get any Local Government Aid (LGA) this year and we won’t get any next year either. Frankly, I hope we never get any. We’re free of dependence on the state’s LGA system. That’s a good thing.

Eden Prairie will not go completely untouched by today’s announcement. The Governor’s plan cancels the state’s reimbursement to the City in 2010 and 2011 for their Market Value Homestead Credit program. That is a reduction in revenue the State owes the City of $456,419 in 2010 and $511,416 in 2011. This is real money. And as I’ve said before, it’s disappointing that the State will stiff our City on this reimbursement, but will probably continue to take credit for reducing local property taxes. No fair, but that’s the way it is.

If you’re interested in more detail about today’s unallotment action, here is the text of the report that I received from the League of Minnesota Cities:

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Today, Governor Tim Pawlenty announced his plans to balance the remaining $2.7 billion state budget deficit. His plan includes $64.2 million in cuts for cities in 2009 and $128.3 million in 2010 cuts. In total, these cuts are roughly $90 million below the cuts proposed by the governor in his January budget. Nonetheless, the reductions are significant-especially in light of last December’s $66 million unallotment.

The League has posted a spreadsheet with city-by-city estimates of the reductions for 2009 and 2010 on the League’s web site of http://www.lmc.org/page/1/state-budget.jsp

By way of background, the 2009 session ended on May 18 and the budget bills approved by the governor left roughly a $2.7 billion imbalance in the state’s upcoming 2010-2011 biennial budget. During the waning hours of the session, the governor indicated that he would address any remaining shortfall at the close of the session through unallotment. The legislature sent him a last minute bill that would have plugged the remaining budget deficit largely by “shifting” $1.8 billion in school revenues, but that bill also included roughly $1 billion in tax increases and as a result, he vetoed the bill, setting up today’s (Tuesday, June 16^th) announcement.

Under unallotment, the governor can reduce, delay or defer state appropriations in order to balance the state’s budget. According to House Research Department, governors have only exercised their unallotment authority only four times since the law was enacted in 1939. Governor Al Quie unallotted $195.1 million during the 1980 budget crisis, Governor Rudy Perpich unallotted $109.8 million in 1986, Governor Tim Pawlenty unallotted $281 million in 2003 and then he unallotted $271.6 million this past December. With a remaining deficit of roughly $2.7 billion, the pending unallotments by the governor would be by far the broadest and largest exercise of the power. In addition, we believe that the unallotment power has never been exercised at the beginning of the state’s biennium.

The details

-The cuts to cities will be computed as a percentage of each city’s levy plus aid (certified 2009 levy plus certified 2009 LGA plus taconite aids). This is the same basis used for the December 2008 unallotment reductions and it is the basis that has most frequently been used by the legislature and governor when cuts have been imposed. The House plan would have distributed the cuts as a flat percentage of each city’s adjusted net tax capacity.

-The cuts are substantial. The 2009 cut will be computed as 3.31 percent of each city’s levy plus aid. For 2010, the percentage reduction will be increased to 7.64 percent. According to the governor, no city will have a reduction greater than the original cuts proposed by the governor in his January budget. The cut is first taken from a city’s LGA and then from MVHC if necessary. No other aid programs are affected by the cut.

-Cities under 1,000 population that also have below average property tax bases will be exempt from cuts in 2009 and 2010. According to the governor, this will exempt 454 cities from the 2009 and 2010 reductions. Under last December’s unallotment, all cities under 1,000 population were exempted.

-No city cut will exceed $22 per capita in 2009 or $55 per capita in 2010.

-For cities, approximately one-third of the reduction will occur in 2009 and two-thirds will occur in 2010. This “backloading” of the cuts will allow cities the most flexibility and longest time frame to make budgetary adjustments.

-There is a special exemption from the cuts for the city of St. Charles for 2009 only. This exemption is related to the fire that destroyed a processing plant in the city earlier this year.

-Levy limit cities (cities over 2,500 population) will be able to declare “special levies” in 2010 to replace all or part of the losses for the December 2008 and the 2009 unallotments. This authorization was enacted in 2008 at the urging of the League of Minnesota Cities and the Minnesota Inter-County Association.

In addition, if the 2010 unallotments are effectuated (actual reductions have been made in state accounting system) in early July along with the 2009 unallotments, the 2010 levy limits will reflect the loss of LGA and MVHC under the 2010 reductions. This will increase the limited levy by the amount of the 2010 aid and credit losses. In other words, for taxes payable in 2010, levy limit cities will be able to increase their property tax levy for all of their 2008, 2009 and 2010 aid and credit losses.

However, several cities have told us that due to the economy and local budget concerns, there is no way their city can raise taxes to cover the 2008, 2009 and 2010 losses in one budget year. Due to the fact that the 2008 and 2009 losses can only be declared a “special levy” in 2010, this authority cannot be carried forward into 2011. In addition, when the levy limits are computed for cities for 2011, the LGA appropriation is restored–at least under current law. As a result, when the 2011 levy limits are computed, the current law restoration of the LGA appropriation in 2011 will again reduce the levy authority for levy limit cities. In the event that levy limits cannot be repealed next session, the League’s policy committees will likely consider a position to allow greater flexibility for unused 2010 levy authority.

In addition to last year’s unallotment special levy provision, the 2009 omnibus tax bill (Chapter 88) will now allow all cities to recertify their property tax levies by Jan. 15 if the December LGA or MVHC payments are further unallotted. The League had suggested this option last January, but some key legislators and the governor initially balked at the idea. Rep. Ann Lenczewski (DFL-Bloomington) decided to include this provision in the House tax bill and, after the League discussed the proposal with Revenue Commissioner Ward Einess and senators on the tax conference committee, the language was added to Chapter 88.

Chapter 88 also includes a levy limit provision that will treat future cuts in MVHC in a way that is similar to the treatment of LGA cuts. Under the current levy limit law, future certified reductions in LGA automatically result in an increase in a city’s levy limit. In contrast, MVHC is a replacement for a portion of a city’s property tax levy and as a result, future reductions in MVHC do not result in a similar increase in a city’s levy authority. Under Chapter 88, cities that lose MVHC will be allowed to declare a special levy for the estimated subsequent year’s loss.

Questions? Contact Gary Carlson at gcarlson@lmc.org, Rachel Walker at rwalker@lmc.orgor Jenn O’Rourke at jorourke@lmc.org.

By Scott Neal | Posted in City services, Community, Politics | Comments Off

Market Value Homestead Credit: More of the Same

June 10, 2009 – 2:19 pm

If you’ve read my blog for any length of time you’ve probably come across a post (or two) that I’ve written about the State’s Market Value Homestead Credit program. The MVHC program is a property tax relief program devised by the State government to give local property tax payers relief from the burden of local property taxes.

It’s more complicated than this, but here’s basically how the MVHC works. The State requires local governments to provide a reduction in property taxes to the taxpayer. The State determines how much the reduction should be and who qualifies. The State then promises to reimburse the local governments for the amount of property tax relief given under the program. Everybody wins! The property taxpayer gets relief. The State gets political credit for providing the tax relief. And, the local governments don’t lose any revenue on the deal because the State pays them back.

While the MVHC program may be a noble program established out of noble sentiment, the State operates it is as (almost) a scam. Here’s what happens, more often than not. The State compels local governments to provide the property tax relief. The State takes political credit for the tax relief. And then the State stiffs the local governments by not reimbursing them for the amount of the property tax relief granted under the program.

It happened just this way in 2003-2006, and again in 2008. I expect it to happen again in 2009, 2010 and 2011. It’s to the point that we do not budget to receive the reimbursement from the State anymore in our General Fund operating budget because the reimbursement is so unreliable. That’s a sad thing to say about our State government, I think.

There was a pretty good article in the Pioneer Press today about this subject. I’ve pasted it in below. For Eden Prairie, our total amount lost to the non-reimbursement of MVHC is comparable to the amounts listed for Eagan and Burnsville.

+++++++++++++++++++++++++++++++++++++++++++++

Homeowner tax credit leaves cities in the lurch

State often raids funds for reimbursing municipalities - and this year is no exception

By Frederick Melo
fmelo@pioneerpress.com

Updated: 06/09/2009 11:21:14 PM CDT

It’s tough to balance a budget with an expense check that never seems to arrive in the mail.

Each year, the state offers homeowners a credit of up to $304 off their municipal property taxes, with the expectation that the state will reimburse cities for the money they would have received toward their tax levies. It’s a promise that’s rarely kept. More often than not, qualifying homeowners get the credit but the cities get pinched. Many recoup little or nothing from the state. “In some years, it simply has been written out of the budget,” said Eagan Mayor Mike Maguire, who has testified on the issue repeatedly in front of state lawmakers.

In five of the past seven years, the state has raided funds initially intended to allow cities and other taxing districts to make up for lost tax revenues as a result of the Homestead Market Value Tax Credit, created by the Legislature in 2001. In December, when the state canceled the second of two annual payments, Blaine and Eagan each lost more than $400,000. Lakeville and Woodbury each lost more than $300,000. Two cities that qualify for local government aid from the state, Hastings and Stillwater, lost $279,000 and $176,000, respectively. They also lost half their state aid.

This year looks to be typical in terms of the raiding, but more painful in terms of the impact. With the state in fiscal crisis, Gov. Tim Pawlenty has said he may reduce or “unallot” funding for the homestead credit as part of a slate of budget cuts. State House and, to a far lesser degree, Senate budget proposals also recommended digging into the funds. For heavily residential cities, the credit can amount to more than 5 percent of the city’s tax levy. City officials fear that the loss of those dollars will force municipalities to slash more jobs and services, or to make up for the lost revenue through higher taxes and fees.

“They say no new taxes on the state level,” said state Rep. Paul Marquart, DFL-Dilworth, chair of the House Property and Local Sales Tax Division. “We’ve just pushed it out onto the local level.”

Stillwater, which lost more than $400,000 in homestead funds and state aid last year, has responded to the fiscal crisis by raising fees on services and keeping more than 10 percent of its positions unfilled. Among the jobs left vacant are two police positions, a firefighter, an accountant, the human resources director and a janitor at City Hall.

“That’s like me giving someone a loan with your money,” said Larry Hansen, Stillwater city administrator. “If the state of Minnesota can’t afford to give a homestead credit, then don’t give it. But don’t use somebody else’s money to pay for it.”

Woodbury City Administrator Clint Gridley called the state’s record of reimbursement “abysmal.”

“On the tax bill, it’s supposed to be a credit from the state. But they run it through the cities, and then they don’t reimburse us,” Gridley said. “In our view, if it’s a state program, and a state credit, then the state should give it directly to the taxpayers. Don’t run it through our books.”

Burnsville’s situation represents a strong case in point. The state is expected to reimburse cities for the homestead credit with a payment in October and another in December, at the end of the municipal fiscal year. Cities learned late last year that they would not receive the December payment. For Burnsville, that meant the loss of nearly $500,000, with little time left to balance the books or adjust for the cuts by tweaking this year’s budget.

“Our 2008 budget was set based on the assumption that the state would keep its promise. It did not,” Burnsville City Manager Craig Ebeling said. “What had to be done is to take those dollars from our reserves.”

“Generally, when these cuts are made, they tend to be made at the last minute by the Legislature,” said Gary Carlson, a lobbyist with the League of Minnesota Cities. “(By then) the property tax statements have already gone out to the residents.”

Burnsville ended up depleting its reserves to the point that city officials are worried about falling below state guidelines. Racked by the economy, the city council last month agreed to make $3.5 million in cuts, in part by slashing 20 positions, mostly through attrition or voluntary departures. Three employees will be laid off. As for the chances of Burnsville receiving any homestead funds in 2009, Ebeling isn’t holding his breath.

“We’re anticipating losing $1 million this year” in homestead funds, he said. “It certainly does not appear that we will receive any of those dollars.”

For city officials, there’s worse news ahead. As the budget-planning season gets under way for most cities in June, municipalities will be forced to abide by a new tax levy limit the Legislature imposed on them last year. The limit, which is indexed to inflation, was capped at 3.9 percent last year. Numbers are still being finalized, but with the economy creaky, the new limit looks to be less than three-fourths of 1 percent.

“You’ve got health care costs going up more than 1 percent. You’ve got labor costs going up more than 1 percent,” said Maguire, the Eagan mayor. “All of these things create pressure on the upcoming budget cycle. … Every year, (they) say we’ve got to cut some fat. Well, cut enough fat, you’re going to hit some bone.”

Maguire and other city leaders have taken their concerns to the statehouse numerous times, but their pleas to reform the reimbursement process so far have been unsuccessful. They said alternatives exist in the form of direct state refunds to low- and moderate-income property owners, such as the circuit breaker credit, which provides relief to property holders whose taxes exceed a certain percentage of their income.

Sen. Thomas Bakk, DFL-Cook, chair of the Senate Taxes Committee, said he has asked the state commissioner of revenue to hold off on cuts to the funding for homestead credits and a related agricultural credit this year, followed by a reduction of $5 million - less than 2 percent - in 2010. That would give cities a few more months to prepare for the impact. The House budget proposal included a cut of $20.5 million from homestead and agricultural credits this year, or 7 percent of the funds intended for cities and townships. The governor’s budget proposal included a cut of $32.4 million, or 11 percent.

“The Legislature pushed back really hard on not reducing local government aid or market value credit, which are two direct payment programs from the state to the city,” Bakk said. “The governor has felt that reducing state aid and credits doesn’t necessarily mean increased property taxes. His assumption is that local governments can find a way to reduce their budgets.”

Repeated calls to the governor’s office were not returned.

As of next year, a new law would eliminate language in tax statements indicating that the homestead credit is paid for by the state. The bill was authored by state Rep. Bev Scalze, DFL-Little Canada, and state Sen. Ann Rest, DFL-New Hope, a member of the Senate Tax Committee. Rest called the existing language misleading, given how the credit is largely paid for by cities. Other than that tweak in presentation, there’s one more change to the homestead credit that cities can count on in 2009.

“They should count on it getting some pretty significant cuts,” Rest said.

Frederick Melo can be reached at 651-228-2172.

By Scott Neal | Posted in Community, Intergovernment, Politics | Comments Off

Emerald Ash Borer

June 9, 2009 – 1:19 pm

There was a pretty interesting article in yesterday’s Star Tribune about the feared impact of the Emerald Ash Borer. That’s a close up of the critter in the photo on the right. To the left of that photo are two photos of ash trees that show the symptoms of the ash borer.

The first thing you’ll notice about in an ash tree that is home to the emerald ash borer is the thinning of the branches and leaves during the middle of the growing season. That’s not good. If you have any doubt about whether an ash tree has an ash borer problem, you can pull section of bark back and if you see the borer’s “tunnels” under the bark, you’ve probably got a tree with an emerald ash borer problem.

Minnesota cities are struggling with the emerald ash borer problem. Many cities planted ash trees to replace elm trees following the decimation of elm trees by Dutch Elm disease. Alexandria, for example, estimates that 60% of its urban forest is ash trees. It will be big issue in Minneapolis and St. Paul as well. In Eden Prairie, our City Forester told me that ash trees make up about 30% of our urban forest. But in some areas of town, ash trees are much more prevalent. In Round Lake Park, for example, about 80% of trees you see are ash. Consider the appearance of Round Lake Park with 80% of the trees gone and you’ll get an idea of what we’re worried about.

So what should cities do? Nothing and let nature take its course? Preemptively cut all its ash trees down? Chemically treat all its ash trees to protect them? We’re still trying to figure out the right course of action for Eden Prairie. Our motto, however, is “don’t panic”. We’ve had a dutch elm disease policy and tree removal program in Eden Prairie for 35 years. We still have elm trees, but we still are removing elm trees too. We believe that something very similar is in store for our ash trees. We don’t have the budget available to take them all down, but we don’t have the budget to inoculate them all either.

The best thing we can do is to make sure that we begin to plan for a species of tree to replace the ash trees when they eventually get infected and have to be removed. We expect that to happen to most, if not all of them, someday. But if we begin to replant now, in 35 years when the last of the old ash trees are coming down, we will still have a vibrant urban forest.

That’s the long term strategy, but we need to get started on it now if it’s going to be the long term solution.

By Scott Neal | Posted in Community | Comments Off

An Important Letter

June 4, 2009 – 3:58 pm

Governor Pawlenty received this important letter today from Mr. Tom Hanson, Commissioner of the Department of Management & Budget. This letter is the first official step toward the unallotment process. The Governor has said that he will reduce the State’s operating budgets to reflect the anticipated revenues. Now he has the go-ahead to start that process.

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June 4, 2009

Governor Tim Pawlenty

Office of the Governor

130 State Capitol

75 Rev. Dr. Martin Luther King Jr. Blvd.

St. Paul, MN 55155

Dear Governor Pawlenty:

The purpose of this letter is to advise you that the state’s revenues are not anticipated to be sufficient to support planned spending in the upcoming biennium. I expect that the spending authorized for the 2010-11 biennium will exceed revenues by $2.7 billion.

I have determined, as defined in Minnesota Statutes 16A.152, that “probable receipts for the general fund will be less than anticipated, and that the amount available for the remainder of the [2010-2011] biennium will be less than needed.” Several factors, including those listed below, have led me to this determination.

The February 2009 forecast showed declining revenues leading to a projected $4.6 billion general fund shortfall for FY 2010-11. Projected revenues for the biennium were $30.7 billion - $1.2 billion less than anticipated in the November 2008 forecast - while projected expenditures were $35.5 billion. Although recently enacted spending changes have reduced anticipated spending levels, a $2.7 billion shortfall still remains after considering all bills passed by the Legislature and signed into law by the Governor.

I do not find sufficient evidence to suggest that our budget outlook for the upcoming biennium will improve with new information. The national economy has worsened since the February forecast and other forecasters generally concur with this outlook. Our national economic forecaster, Global Insights, suggests that Minnesota and the rest of the nation are in the midst of a lengthy economic downturn.

Our state’s revenue collections reflect this weakened economy and are not matching expectations. Year to date receipts for FY 2009 are down $70.3 million compared to the February forecast. Nearly all major revenue categories have collected less than anticipated.

Unfortunately, the state does not have other available funds to cover lower revenue collections. The budget reserve was drawn down to zero last year and no other additional resources are available. Therefore, at the beginning of the next fiscal year, it will be necessary to reduce allotments of appropriations or transfers for FY 2010-11. I will seek your approval to take this action in a future communication.

Our department will continue to monitor the economic and revenue outlook in the coming months.

Sincerely,

Tom J. Hanson,

Commissioner

By Scott Neal | Posted in Events, Politics | Comments Off

Continuing Ed

June 3, 2009 – 11:23 am

The City hosted a continuing education session last night for City elected officials, advisory commission members and staff. The session was led by Eric Willette from the Minnesota Department of Revenue. Eric gave us a comprehensive overview of the Minnesota property tax system.

The first thing we learned was the five principles of a model tax system:

1. The system should be understandable. Taxpayers should be able to understand the tax system and how it works.

2. The system should be fair. It should treat similarly situated taxpayers similarly.

3. The system should be competitive. The tax system should not put our state at a competitive disadvantage to other states or countries.

4. The system should be reliable. The outcomes of the systems should be stable, sufficient and predictable for all concerned - both taxpayers and the government.

5. The system should be efficient. How much does it cost to actually collect $1.00 of tax? The lower this cost, the more efficient the tax.

So how does the Minnesota property tax stack up to these five principles? According to Mr. Willette, here’s how:

1. Our property tax system is old. It predates statehood. The legislature tinkers with it occasionally. Overhauls it every generation or so. But it’s an old tax.

2. The property tax is the most unpopular of all taxes, according to data collected by the Minnesota Department of Revenue. There are many theories as to why, but one of the more common criticisms heard from taxpayers is that the tax doesn’t treat similarly situated taxpayers similarly. The property tax was developed as “wealth tax” back (see above) when wealth was tightly connected to property ownership. That connection is not nearly as correlated today.

3. Minnesota’s property tax system is competitive with other states for residential property. We’re near the middle of the pack when you compare the property taxes of homes in Minnesota to homes in other states. Not so on the business side though. According to the Minnesota Taxpayers Association, Minnesota currently ranks #13 in the country for commercial property taxes and #20 for industrial property taxes. While that #13 rank is still kind of high, it’s down from the 1998 rank of #3.

4. The property tax system is reliable — in terms of it being a stable, sufficient and predictable source of revenue for local governments in Minnesota. In Eden Prairie we typically collect 99% of the property taxes that we expect to collect. Right now, we’re collecting over 100% of the property tax revenue we expected to collect this year as real estate investors are buying foreclosed properties and paying off the back taxes. For taxpayers, however, the property tax is not reliable or predictable. Property taxes were sliced by 30% in 2002 by then Governor Ventura’s “Big Plan”. By 2009, property taxes for most taxpayers have risen steadily since then to the point where they are almost back to where they were in 2000 and 2001.

5. Finally, our property tax system is not very efficient. It costs a lot to collect property taxes. Think of all the property assessors, county employees and tax court employees involved in the process of determining the value of property, sending out property tax bills, considering taxpayer challenges, collecting payments and distributing the proceeds to local governments. There’s a lot of people and government process involved. And it’s not inexpensive, especially compared to what it costs to collect the income and sales taxes.

The important question about how much money the government should consume out of the private economy was not answered last night. That question is not answerable by a guy from the Minnesota Department of Revenue, or by a city manager, for that matter. That question must be answered by our fellow citizens who we elect to make that very important judgment. That question, and many more almost as difficult, will be answered by the our City Council as we begin the process of putting together our 2010-2011 City Budget starting next week.

Stay tuned.

By Scott Neal | Posted in Community, Events | Comments Off

Reviews and Goals

June 2, 2009 – 10:09 am

I had my annual performance review with the City Council at the Council’s May 19 meeting. The review is organized as an internal 360-degree review facilitated by an outside consultant. The Council likes it that way because it provides a little greater separation for employees to be honest and forthcoming with their comments about my performance. I also provide the Council a self-assessment of my performance from the past year.

The consultant consolidates the comments and self-assessment into a report which is presented to the Council in closed session. The Council discusses the report and their own individual experiences with me during the past year. Then they wrap it all up into a final report that is shared with me. They also deliver a short verbal report at that evening’s Council meeting.

Included in my self-assessment are the performance goals that I proposed for myself for the upcoming year. I share them each year about this time in my blog as I think it’s helpful to my co-workers if they know what I’m trying to accomplish in the upcoming year. Most of my goals are actually accomplished through others, so it’s both interesting and necessary for them to know what I’ve got my eye on for the year ahead.

For 2009-2010, here they are:

1. Lead the City through an organizational contraction in 2009 with minimal loss of employee morale or public confidence.

2. Lead an effort to acquire federal funds to complete the environmental remediation of the WAFTA site.

3. Build a local City-Business coalition to advocate for transportation improvements to benefit the Golden Triangle Office & Industrial Park area.

4. Write a quarterly commentary for the local newspapers.

5. Lead the City’s effort to prepare a plan for the continuation of City operations during a public health pandemic emergency.

Those are the the goals. That’s not all that I’ll be working on in the year ahead. 90% of my job is recurring stuff: budget, personnel and other organizational management issues. The biggest challenge coming up this year will be the city’s 2010-2011 budget planning process. We are facing financial constraints like we’ve never experienced before. Keeping both expenses and revenues moderated for the next two years is going to take equal doses of creativity and discipline.

I work with a lot of smart people here. I am confident that we are up for the challenge.

By Scott Neal | Posted in City Facilities, City services, Employees, Environment, Intergovernment | Comments Off

News Roofs

May 27, 2009 – 6:44 am

We’ve got a couple of big projects started on city facilities right now. There are new roofs going on the water treatment plant (L) and City Center (R). Together, the two projects will cost the City over $1,000,000. It’s a lot of money, but it’s money well spent. Not fixing a hole in roof can be seen as frugal in the short run. But after awhile, it’s no longer frugal, it’s poor stewardship.

Even as the City has been reducing its budget over the past couple of weeks, there are two broad areas where we have been very careful not to reduce. One is public safety. The other is public infrastructure and facilities maintenance.

Public safety is a fundamental service of city government. It’s our duty to protect people in our city from crime, fire and other emergencies. While it’s the largest single operating department in city government, it’s also an area that we will prioritize near the top of areas to protect from budget reductions.

During our recent budget reductions we did not eliminate any employee positions involved in the maintenance of the City’s streets, parks, fleet, utilities or buildings. It may not be quite as obvious why we would protect our service levels in the public infrastructure and facilities. In my view, it’s a matter of stewardship. Over the years, Eden Prairie taxpayers have provided the City with millions of dollars in their property taxes so the City could build streets, sidewalks, parks, water mains, sewer lines and many fine municipal buildings. It’s up to us to protect those investments.

By Scott Neal | Posted in City Facilities | Comments Off

Employee Meetings

May 22, 2009 – 11:02 am

I’ve spent a good share of my last two and half days meeting with individual employees and small groups of employees talking about the City’s recent employment action where we eliminated a number of full time jobs, including six full time workers. It was a sad day for all involved.

I’ve been telling employees how decisions were made; how decisions were communicated; and how the decisions will impact the City’s budget stability. I’ve been telling them about the City’s severance package and giving them advice on how they can respond to questions. The mood is still a little somber around here, but I do get the feeling that people are listening to what I have to say.

Eliminating jobs for some employers is no big deal. But it is a big deal for our organization. We don’t have a history of economic lay offs. This is new. So for many that still work here, they wonder if this is the start of a trend or if they’ll be next. Part of what I’ve been telling employees these past days is that I do not believe involuntary position reductions are going to be part of an ongoing trend here and that we’re going to take great care to make sure of that while we start the 2010-2011 budget process.

Nonetheless, people are worried. I hope it’ll dissipate, but that’ll take some time.

By Scott Neal | Posted in City Facilities, City services, Community, Employees | Comments Off

Tough Day at City Hall

May 20, 2009 – 1:29 pm

It’s been a tough day at work today. Earlier this morning we moved forward with a plan that eliminated six full time employee positions. The reductions were part of a budget amendment that I proposed to the City Council. The Council approved the amendment last night at about 11:15 pm and the actions followed this morning around 9 am.

Here’s the City’s official news release that outlines the situation:

Approved 2009 Budget Amendment Designed
to Ensure City of Eden Prairie’s Long-Term Financial Health

EDEN PRAIRIE, MINN. - At its May 19, 2009, meeting, the Eden Prairie City Council unanimously approved an amendment to the City’s 2009 General Fund budget designed to address an anticipated $1-million shortfall in 2009 development revenues.

This projected shortfall is attributed to the economic downturn and the resulting decline in business and residential development. With the Council’s approval of the amendment, City staff will implement a plan to balance the 2009 budget and position Eden Prairie for a healthy financial future, while continuing to provide core services and infrastructure improvements, as well as stemming the growth of property taxes.

The plan includes a transfer of $500,000 from the City’s Budget Stabilization Fund, $200,000 of cost savings in General Fund operating expenses and $300,000 in personnel cost reductions.

As part of this plan, effective immediately the City has eliminated the positions of six full time employees representing all six City departments: one in the Parks and Recreation Department’s Recreation Division; two in the Fire Department’s Building Inspections Division; one in the Public Works Department’s Engineering Division; one in the Community Development Department’s Planning Division; and one in the Office of the City Manager.

In addition to the six positions eliminated today, the weekly work hours of two positions, one in the Planning Division and the other in Fire Department’s Fire Inspections Division, have been reduced; a vacant position in the Engineering Division has been eliminated; a vacant Housing and Community Services Division position has been reduced from full time to halftime; and a vacant officer position in the Police Department has been eliminated.

Since January, City staff members have identified $200,000 of cost savings in operating expenses. Additional actions were taken to address the proposed $300,000 reduction in personnel costs, including the implementation of a hiring freeze, a voluntary early retirement program and reduced work schedule program. While these measures were helpful in moving toward the $300,000 target, they fell short of the overall goal, which made it necessary to permanently reduce staffing levels.

“The change in the economy required us to take a strategic look at our organization and how to best move forward for the long-term,” said City Manager Scott Neal. “Some positions being reduced are in areas that have been directly affected by the economic downturn and the job functions of all the eliminated positions are being reallocated.”

Neal said that by making these tough decisions now, the City is in a better position for the 2010-2011 budget and beyond, while continuing to provide reasonably priced quality services for Eden Prairie taxpayers.

###

Reducing a workforce is not easy. It’s not supposed to be. But sometimes it’s necessary, and I think this is one of those times for the City of Eden Prairie.

By Scott Neal | Posted in Employees | Comments Off

JAZB in EP

May 19, 2009 – 11:14 am

There’s a very good article in the Star Tribune today about the issues involved in establishing a Joint Airport Zoning Board (JAZB) for Holman Field in St. Paul. You can read the story here: “Holman Field: What Can Be Built In The Flight Path?”

The article is about the establishment of discussions between the Metropolitan Airports Commission (MAC) and the City of St. Paul, but the same issue is going on right here in Eden Prairie with creating a JAZB for Flying Cloud Airport. Earlier this year the City received an invitation from MAC to create a JAZB in Eden Prairie. The JAZB for Flying Cloud would also include representatives from the cities of Chanhassen, Bloomington and Shakopee. The Eden Prairie City Council agreed to participate in the Flying Cloud JAZB at their April 21 meeting. The Council appointed Council Members Brad Aho and Jon Duckstad to represent the City on the JAZB.

As the article explains, the JAZB will be influential in deciding how the land around Flying Cloud might be developed. The JAZB will establish runway safety zones that will prevent development in some places, but may decrease development restrictions in other areas. It’s too early to predict what’s going to change, but it’s safe to say that there will be change in the development of land around the airport in the future.

The Flying Cloud JAZB hasn’t started meeting yet. It will be convened by the MAC when they’re ready to get the effort started later this year.

By Scott Neal | Posted in Community, Environment, Politics | Comments Off

Weekend Showdown in St. Paul

May 15, 2009 – 2:41 pm

The Governor and the Legislature are still at odds over the Minnesota state budget. It’s too bad, but neither party seems sufficiently motivated to reach a mutual compromise - yet. They’ve got until Monday, May 19 at midnight. It looks like it won’t happen, but stranger things have happened in the past. Here’s a statement from the Governor’s Office from yesterday:

FOR IMMEDIATE RELEASE: Contact: Brian McClung

May 14, 2009 (651) 296-0001

NO SPECIAL SESSION, NO GOVERNMENT SHUTDOWN - GOVERNOR PAWLENTY SAYS HE WILL BALANCE STATE BUDGET

~ Governor outlines plan to use executive action to balance budget, says his preference is to sign into law a negotiated budget agreement ~

Saint Paul - At the State Capitol this afternoon, Governor Tim Pawlenty said, “Politics as usual around this place is over. The people of Minnesota expect and deserve timely and decisive action. I will not let the legislature’s work spill over into a special session. We are not going to waste taxpayer money with a costly overtime or have a state government shutdown, especially in this economy. My preference would be for DFL legislators to work with me on a reasonable budget solution, but if they can’t get that done I will take executive action to balance the budget.”

“A key principle is that the DFL-controlled legislature shouldn’t spend more money than the state has available,” Governor Pawlenty said. “Unfortunately, they have done just that and now I’ll fix it.”

Over the past week, DFL majorities in the Minnesota House and Senate passed budget bills that leave a $3 billion shortfall between spending and revenues.

Governor Pawlenty announced today that he would use line-item vetoes during the upcoming period and his unallotment authority in July 2009 to bring the state budget into balance.

“Passing a balanced budget is the legislature’s most fundamental job. Unfortunately, so far this year the DFL majority has failed to get the job done,” Governor Pawlenty said. “In January, I outlined a balanced budget that prioritized important areas like public safety, military and veterans, and K-12 education. Now we’re in the final days of this legislative session and it’s time to let the people of Minnesota know that this will be resolved. It should get done on time and I’m saying it will get done on time.

“If the DFL cannot balance this budget without reaching into Minnesotans’ pockets and increasing our already uncompetitive taxes in ways that will kill job growth, I’m prepared to make the tough decisions they’ve avoided and take action to balance the budget.”

The Governor said final decisions have not been made regarding possible impacts to state programs, but areas could include government-subsidized health care programs, welfare, and other social services; K-12 and higher education; and local government aid. In addition, state employee layoffs could be used to save additional funds. In Wisconsin, Gov. Jim Doyle has said approximately 1,100 state employees could be laid off as part of their budget cutting measures, along with 16 furlough days over the next two years.

A compromise offer from Governor Pawlenty to DFL legislative leaders earlier this week incorporated a House DFL position (a larger K-12 education shift than proposed by the Governor), a Senate DFL position (no funds included for the budget reserve, the Governor proposed $250 million for the budget reserve) and a reduction in a proposal that the DFL indicated they didn’t support (agreeing to use only half of the tobacco appropriation bond funds). Even though the Governor was willing to move in their direction in all three areas, DFL leaders rejected the offer.

Governor Pawlenty has also compromised during this legislative session by showing a willingness to work with DFL legislators regarding their proposed fee increases for the courts system, their lower levels of funding for K-12 education and their lack of interest in the Governor’s proposals to reduce business taxes to grow jobs and spur investment.

The Governor stated that he is unwilling to raise taxes on Minnesotans, especially as the state looks to grow jobs and recover from the economic recession. DFL legislators have proposed numerous tax increases this session, including:

§ New top income tax rate of 9 percent, which would be fourth-highest in the nation

§ New top income tax rate of 9.25 percent

§ Across-the-board income tax increases

§ New sales tax on Internet downloads, including music

§ Elimination of the local property tax cap, enacted just last year

§ Higher taxes on beer, wine and alcohol

§ Higher taxes on cigarettes

§ Allowing counties to increase the sales tax by 0.5 percent

§ Eliminating home mortgage interest deduction

§ Eliminating deduction when a person donates an organ

§ Eliminating elderly or disabled income subtraction

§ Eliminating child and dependent care credit

§ Eliminating exemption for Minnesota state and municipal bonds interest income

§ Eliminating long-term care credit

“I’m willing to work with the DFL on a reasonable plan, but I’m not willing to let them squeeze more money out of taxpayers and further burden job creators and employers in the midst of the toughest economy in more than 60 years,” Governor Pawlenty said. “One way or another, we will get the budget situation resolved, keeping taxpayers and families first in our minds.”

–30–

By Scott Neal | Posted in Miscellaneous | Comments Off

Birch Island Woods Plant Sale

May 13, 2009 – 6:33 am

It’s time once again for the annual Birch Island Woods Plant Sale. This year marks the 8th annual sale that provides financial support to conservation education projects and habitat restoration in the Birch Island Woods area.

The sale is conducted at the Picha Heritage Farm at 6649 Birch Island Road here in Eden Prairie. The farm is open 3-8pm on weekdays and 10am-5pm on weekends. You’ll find a vigorous array of annuals, perennials, veggies, shrubs and roses-at near-wholesale prices. The sale goes through Sunday, May 17.

Great cause. Great plants. Check it out.