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More experts testify in Wyoming annexation trial |
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Wednesday, 16 April 2008 |
Alice Pickering
Wyoming Area Reporter
Joe Rigdon of Kern, DeWinter, Viere, testified as a financial expert for Chisago City during the final days of the Wyoming annexation trial. Rigdon prepared a fiscal impact analysis for Chisago City, Wyoming and Wyoming Township annexation scenarios.
Rigdon made the “assumption that the township will no longer exist, no matter which way it goes.” Chisago City figures were presented as if the contested part of the township was combined into the city. His Wyoming calculations assumed that Wyoming Township was merged in its entirely with the city of Wyoming.
Without presenting all numbers, he basically considered what it would cost to continue providing service at the same levels, then divided by the number of people paying for the service.
Public works costs were handled differently. Instead of per capita costs, Rigdon figured the number of miles in the cities before and after annexation, determined the cost for maintenance, calculated the cost-per-mile for maintenance, and made comparisons. Overall, his opinion is Chisago City has a “more efficient cost basis than Wyoming.”
He said the proposed orderly annexation plan offers no plan for adding potential buildings and facilities needed for an expanded Wyoming. There were not a lot of revenue options to pay for facilities. The police budget seemed large for the number of officers.
One particular focus was the populations of the respective cities. If Chisago City is successful in annexing its contested portion of the township, its population would be above 5000 which would qualify it for municipal state aid for roads. The current Chisago City population is 4408. Adding 952 residents in the contested area would bring it to 5365.
Wyoming has a population of 3768. The township population is 3586 for a total of 7354. However, Wyoming would still have over 5000 people even if it is not successful in merging with the entire Wyoming Township.
Local government aid to Chisago City was $111,816 (2008) but will drop to $59,706 (2009) if it is successful in annexing its part of the township. Wyoming received $22,500 in LGA in 2008, but will receive none in 2009 if it is combined with Wyoming Township.
Neither city currently receives municipal state aid, which is earmarked for roads. That would result in an estimated $237,600 in MSA for Chisago City and $22,472 for Wyoming; a regional impact of $460,000, annually.
If the entire township is annexed to Wyoming, the city then qualifies for $277,264. Rigdon predicted a better scenario for the region if both cities had at least 5000 residents.
A tax rates history table provided a comparison of tax capacity rates. Tax capacity is a percentage of the value of all homes and businesses in a city. For residential property this is 1 percent of property value.
Tax capacity rate is determined by dividing what a city must levy by the taxable tax capacity. The table showed Chisago City currently has a lower tax capacity which Rigdon suggests shows that Chisago City provides general municipal services more efficiently and cost-effectively than the city of Wyoming. He had not completed a quality of services analysis, which would show how well services are delivered.
While taxable tax capacities and tax capacity rates in his table are from Chisago County and are preliminary, they revealed another pattern. Merging cities can determine tax capacity rates two ways. One is called blended and the other a 50-percent model. In the first, the annexed residents are brought into a city and pay the same tax rate as current city residents.
When Chisago City annexed part of Wyoming Township in 2005, the township residents were brought in at the blended rate.
Chisago City residents had tax capacity rates of 56 percent and 47.7 percent for the years 2004 and 2005, respectively. In the three years beginning in 2006, the year after the annexation, city residents saw their tax capacity rate drop to 35.3 percent, 33.9 percent, and 34.4 percent.
All Wyoming Township residents had tax capacity rates of 20 percent for 2004 and 2005. However after the 2005 annexation, township residents who lived in the annexed area saw their rates jump to 29.4 percent, 28.8 percent, and 32.5 percent for 2006, 2007, and 2008, respectively.
Those Wyoming Township residents, who still lived in Wyoming Township, had tax capacity rates of 17.9 percent, 16.2 percent, and 24.7 percent for the same three years.
The city of Wyoming had tax capacity rates for the same five-year period of 41.3 percent, 41 percent, 43.7 percent, and 45.5 percent for the most recent two years.
Rigdon observed that Wyoming had one TIF district for which the city had neglected to levy sufficient property taxes. The city generally has a low fund reserve balance. Rigdon was unaware that in the joint plan for annexation, former town properties will continue with rural tax rate service.
David Drown, McComb, Frank, Roosy, Associates, served as the financial expert witness for Wyoming and Wyoming Township. He used the joint annexation study, to update information. He considered the impact of losing contested areas in Wyoming and reviewed the Stacy and Chisago City documents. Drown used a different method to assess costs. He disagreed with costs figured on a per capita basis.
The city and township are budgeting for full departments. He sees no immediate change in structure or providing service. The level of service ought to meet the new city needs in the short term and there is likely to be better specialization than they have now, he said.
When the township becomes part of the city, the assets of the township merge with those of the city. There are likely to be efficiencies in a larger group because the two operations are merging, he added. Buildings are likely to be needed, but it will not be all at once. The largest benefit is improved police protection in the Wyoming Township area, he said.
The two groups benefit from consolidation. There is relative stability for city residents, then a gradual decline in taxes over a five-year period. Township residents who join a greater Wyoming benefit by “stable taxes and enhanced service.” he said.
In the orderly annexation plan, the city and township have chosen to use the “50 percent model” to assess taxes with a rural service rate. In the 50 percent model, new residents are brought into the city and pay 50 percent of the city tax rate for the first three years, 60 percent in the fourth year, and 70 percent in the fifth year.
Wyoming city residents had a tax capacity rate of 45.7 percent in 2008. Projected after annexation for 2009 through 2013 these tax capacity rates are 44.4 percent, 40.2 percent, 38.6 percent, 35.9 percent, 33.1 percent.
Wyoming Township residents annexed to the expanded city had tax capacity rates of 24.7 percent in 2008. The first three years following annexation their rates will be half that of city residents; 22.2 percent (2009), 20.1 percent (2010), and 19.3 percent (2010). In 2012 the rate is 60 percent of the urban rate, 21.5 percent. This increases to 70 percent of the urban rate in 2013, 23.2 percent.
Drown said this is a “balanced win-win situation.” The tax stability is important. If the city and township had not agreed to a rural service district in their annexation agreement, usually service delivery is slower and tax rates for the township tend to go up.
In the case of Chisago City, the budget went up, but not as much as annexation reports suggest. Increased tax revenue from the annexation area appears to have subsidized property tax rates in the city.
According to Drown, the contested area of the township represents 43 percent of the tax base of the township, but includes 32 percent of the population. It is the most valuable part to annex because there is more tax revenue for the service cost. He said if Wyoming annexes “what’s left,” the tax base is relatively weaker and the deal does not work nearly as well.
Regarding development in the contested area, if Chisago City acquires the area it is seeking, access through existing developed area. It would mean utilities from two cities closely abutting each other. Project costs to re-route would take years longer to recover costs. Water and sewer connect charges would be about the same for both communities.
Asked about Stacy’s petition, Drown said Stacy has about 50 percent more debt than Wyoming, with three major projects to pay off, with uncertain revenue sources, and deferred assessments on these. From city financial reports he estimated per capita debt each city carries; Chisago City, $1100; Stacy, $7000; and Wyoming, $1000.
Craig Mattson, city administrator for Wyoming, believes the merger/annexation is a win-win situation for the city and the township.
The comprehensive plan is an example of the cooperation, he said. He said it will improve services and some departments are already working together. Maintenance workers are to be trained on the water and street service. The zoning and building inspector fit in perfectly, and the employees know their jobs and areas, he said. The police budget has salaries for two officers more than are now in the department. However, the officers on duty now provide 24/7 coverage of the city.
The EDA is working on ways to attract business to the city. It is also actively evaluating how the city can improve the climate for existing businesses.
Xccent is seeking to locate in the city and will be creating between 110 and 135 new jobs. In annexing the land for Xccent, a $500,000 grant from the DEED has been secured to help develop infrastructure. Eleven acres of JOBZ State credits will be transferred within the county to the city to help with development of the site. This includes a feasibility study for water and sewer and streets. Negotiations are on-going for the relocation of the propane company from its site north of Viking Blvd. and west of Sunrise Prairie Trail.
Mattson said Wyoming is in very good financial health. Non-levy revenue sources include Fairview Lakes Regional Medical Center which annually makes a payment in lieu of taxes to the city. Existing senior housing, adjacent to the Fairview campus, pays taxes and expansion is planned. The city is not relying on LGA.
Mattson emphasized the need for housing once jobs are in the city.
Areas requested by Stacy and Chisago City are the prime lands for development.
The merger provides space for expansion, otherwise the city is landlocked. The completion of the trunk sewer line can support expansion but annexation of the contested area by Chisago could mean additional costs to reroute future lines. Improved sewer and water lines are tied in with the reconstruction of CR-22 through the city in 2009.
In cross-examination there were questions about the permanency of the access through the Polaris site. Mattson explained that the built into levy are increases to cover shortfall in collections for bond for to pay Viking Commons TIF 3-2. There had been a failure to levy enough for that project earlier.
Other questions related to need for space for an expanded staff, storage of public works equipment, timing for the extension of water and sewer to Comfort Lake, and road upgrades.
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