2024 General Fund Budget & Property Tax Levy

On Monday, December 11, 2023, Shorewood City Council held a truth-in-taxation meeting as required by statute prior to adopting the property tax levy and budget for 2024. During this public meeting, taxpayers were given time to discuss various aspects of the 2024 budget, including department budgets and the amount of property taxes levied by the City of Shorewood.

Shorewood City Council approved the following:

  • A resolution adopting the 2024 General Fund operating budget and approved the property tax levy collectible in 2024.
  • A resolution adopting the 2024 Shorewood Community & Event Center budget and 2024 Enterprise Fund budgets.
  • A resolution adopting the 2024-2033 capital improvement plan, and 2024 capital project fund budgets.

2024 General Fund Budget & Property Tax Levy
On September 25, 2023, the City of Shorewood adopted the proposed 2024 General Fund budget. In addition, the city adopted the “2024 Proposed Levy Certification” for submission to the Hennepin County Auditor.

Overall proposed 2024 General Fund expenditures and transfers out are budgeted at $6,485,291 or a 6.5% increase from the 2023 General Fund budget. The revenues section of the 2024 General Fund budget draft includes a detail of taxes section. Notable investments for 2024 based on community feedback include a new website platform, funding for tree replacement, and the continuation of technology related investments to improve processes and user experiences.

General Fund 2024 revenues and transfers in are budgeted at $6,485,291 or a 6.5% increase from the 2023 budget. The increase is due to the proposed General Fund taxes increasing to cover 2024 expenditure increases. Property taxes account for 88.9% of the 2024 General Fund revenue budget. Non-tax revenues make up 11.1% of the budget and are projected to increase by 3.3%.

For the 2022, 2023 and 2024 budgets, no use of reserves has been included in the annual General Fund budget, resulting in structurally balanced budgets. It is recommended that the City strive to structurally balance its General Fund budget with revenues equaling expenditures, and without the use of reserves.

Property Tax Levy
The City’s 2024 overall property tax levy of $7,115,274 is 9.3% higher than the 2023 total levy of $6,510,948.  The General Fund portion of the property tax levy increased by $372,996, or 6.9%, with all other non-General Fund tax levies (capital and debt levies) budgeted to increase $231,330, or 20.3%. 

Based on a property tax capacity increase of 10.0%, the City decreased the estimated payable 2024 City tax rate by 0.4% from 22.416% in 2023 to 22.323% in 2024. 

Property owners with no change in market values from payable 2023 to payable 2024 should experience a 0.4% decrease in the City portion of their overall property tax bill.  In the event of a market value decrease or increase from payable 2023 to payable 2024, City property taxes would change proportionately.

The City’s overall market value increased by 9.2% from 2023 to 2024, including existing value increases and new construction.  The following tables calculate the property tax impact on residential homesteads that had an average market value growth increase of 5.0%, 10.0% and 15.0% for 2024.

Fig 1. 2024 City Property Taxes with Market Value Increase of 5.0%

Fig 2- 2024 City Property Taxes with Market Value Increase of 10 percent

Fig 3-2024 City Property Taxes with Market Value Increase of 15 percent

Level of change to the overall 2024 property tax levy 
The budget includes a 9.3% increase in the total property tax levy from 2023 to 2024. As described, the tax impact (percentage change in taxes) to homeowners may be different than the 9.3% percentage increase in the total levy. This is due to the spreading of taxes on an increased property tax base. In recent years, the overall property value of the City has increased at a faster rate than the property tax levy, resulting in a slow decline to the local tax rate.   For 2023, the decline in the tax rate was significantly more pronounced, due to total market value increasing approximately 26.2%.

Shorewood Community & Event Center Budget
The SCEC is funded by facility rentals and annual transfers from the General Fund.  A transfer of $105,000 to assist with operations and with building improvements in 2024 is included.  Staff will evaluate the SCEC expenditures and revenues on an annual basis, while reviewing the transfer amount.

Enterprise Fund Budgets
The City maintains and budgets four enterprise funds:  Water, Sewer, Storm Water, and Recycling.  These funds are supported by user charges/utility fees.  In recent years, the financial impact of completing various city street and utility construction projects has been analyzed, and the City Council has approved utility rate increases with a goal to sustain positive utility fund cash balances.

Capital Improvement Plan 2023-2032/2037
On an annual basis, the City Council adopts a Capital Improvement Plan (CIP). The CIP lists major capital improvements, and the sources to pay for them. Items in the CIP are not mandated, and the Council reviews capital spending throughout the year. The CIP provides an estimation of the timing and cost of future projects.  The Planning Commission reviewed the CIP on November 21, 2023, and found it generally consistent with the Comprehensive Plan.

Shorewood Community & Event Center (SCEC):  Capital items for the SCEC include building improvements and equipment for the Center.  Transfers from the General Fund are the planned source to pay for these items.

Park Improvements:  The parks CIP includes funds for parks and playground replacements and improvements.  For 2023, the annual levy to the parks fund was $123,000, and is proposed to increase to $128,000 in 2024.  Transfers from General Fund reserves may be used to assist in funding park improvements.

Equipment Replacement:  The majority of the CIP for equipment replacement pertains to Public Works items, but also includes some administrative technology items.  For 2023, the annual levy to the equipment fund was $123,000, and is proposed to increase to $128,000 in 2024.  Transfers from General Fund reserves may be used to assist in funding equipment replacement. Projects being proposed for 2024 include various vehicles and equipment.

Street Improvements:  City staff has discussed overall infrastructure system recommendations and is proposing the following projects for 2024:

  • Shorewood Lane Ravine (storm)
  • Mill Street Trail ROW – County LED (streets)
  • Mill and Overlay (streets, water, storm)
  • Smithtown Road Curb & Drainage Improvements (storm)

For 2023, the annual levy to the street improvements fund was $123,000 and is proposed to increase to $128,000 in 2024. 

For each of the applicable proposed street and utility improvement projects, it is assumed that the Water, Sewer, and Stormwater funds will fund associated utility costs.  Without financing assistance and beginning in 2020, the Street Improvement fund activities were originally projected to result in a significant fund deficit.  In addition, the City’s utility funds were projected to be significantly depleted.  In order to complete the proposed street and utility projects, Street Reconstruction bonds and utility revenue bonds are proposed to be issued periodically to allow for the spreading of repayments over a period of years.  To repay the bonded debt, a combination of annual property tax levies and utility fund rate increases and contributions will be necessary.

Utility Funds:  The Capital Improvement plans for Water, Sewer, and Stormwater funds include equipment, portions of street infrastructure projects, as well as maintenance and preventative maintenance items. In order to finance the improvements, bonded debt with debt service repayments supported by utility revenues and franchise fees will be necessary.