1. Administration’s Recommended 2018 Proposed Budget September 26, 2017
Madam Chair and Commissioners,
The Administrator’s recommended 2018 budget was presented to the board on August 8, Prior to that a workshop was held in April with the County Board to get direction on budget parameters. Throughout the months of May and June, departments prepared their budgets through internal meetings with staff, supervisors and managers. During July, Molly, Melinda and I met with each department individually to review their budget requests.
And finally in August the County Board met in a public workshop with each department to review the key initiatives, changes in staffing, major projects and budget drivers. In addition, Commissioners have been asking for additional information, following up on specific items, and meeting with department heads to get any questions you have answered.
Today the Board is being asked to set the preliminary levies and budgets as required by law for the County, the Regional Rail Authority and the Community Development Agency.

2. Actions Requested Preliminary Washington County Levy
Preliminary Regional Rail Authority (RRA) Levy
Preliminary Washington County Budget
Preliminary Regional Rail Authority (RRA) Budget
Preliminary Community Development
Agency (CDA) Levy
At the conclusion of this presentation and after any questions you have are answered, we will be asking the board to take the actions that you see on this slide.

3. 2018 General Highlights County Tax Rate (Net Tax Capacity)
30.095% Decrease 1.2%
County Net Tax Levy
$102.4 million Increase %
$335,000 (Lake Elmo library) Increase %
County Tax Impact (Median Valued home)
$31 Increase 4.4%
LWLP Tax Impact (Median Valued Home)
$3 Increase 33.3%
Non-Levy Revenues
$109.8 million Increase %
Operating Expenditures (excludes capital and debt)
$176.3 million Increase %
Capital Expenditures
$31.9 million Increase %
This slide includes the general highlights of the 2018 budget as recommended by the County Administrator. The recommended budget led to a 1.2% drop in the county’s tax rate. A levy increase of 6.9% and an increase in the Land and Water Legacy debt service to fund an additional $5 million in bonds sold to support that voter approved program.
The falling tax rate, coupled with the levy increase, was leading to a tax impact on the median valued home that has increased by 4.9% from last year of $31, or a 4.4% increase.
Non-levy revenue, operating expenditures and capital expenditures are all increasing, reflecting the increased demand for services from a growing county population and changes in state mandated services.

4. Tax Rate History
This slide shows the change in the county’s tax rate over the past five years. You can see, the estimated tax rate reduction in 2018 would be the fourth reduction in tax rate over that 5 year period.
The county is experiencing more than $426 million in new construction for Pay 2018, and overall the tax base is increasing by 6.9%. The affect of that growing tax base is that new properties will be paying about 20% of the increase in levy recommended in 2018.
2018 – 1.2% reduction
% reduction
2016 – 1.3% increase
2015 8% reduction
% reduction

5. 2018 Budget Drivers
Mandated services lack sufficient state and federal funding (i.e. child protection, MNChoices, treatment facilities)
Return of the Lake Elmo Library
Cost of employee wages and benefits
Service demands from growing population
Improvements to ensure efficient operations and security of technology infrastructure
Staffing and funding support for preventative building maintenance and timely delivery of projects
Safety net services
Debt service funding
As you are aware, the Lake Elmo Library will be returning to the County Library system in The recommended budget includes a .35% levy increase to cover the costs associated with its return.
The recommended budget includes funding for settlements of the labor agreements through 2018.
The budget includes funds to pay for a portion of the roughly 9% increase in our health insurance premiums.
The budget includes additional funds for Information Technology costs as those costs are increasing and the number of devices and amount of data we are storing is rising rapidly.
The increase in demand for safety net programs and increased population in the county, coupled with the lack of sufficient state funding to pay for increased costs of these mandated services, also is placing a greater stress on the property tax.
Finally, the budget includes adequate debt service funding as required by statute to meet the debt obligations of the county

6. STATE FUNDS FAIL TO KEEP PACE WITH RISING COST OF MANDATED SERVICES
MOST COSTLY MANDATES
AMOUNT
PERCENT COUNTY FUNDED
Jail/juvenile detention
$9,502,100
97%
Sheriff Patrol services
$4,027,000
93%
911 Emergency dispatch services
$3,181,600
88%
Probation Supervision
$5,373,600
61%
Child out-of-home placements
$2,815,500
82%
Attorney’s Office prosecution
$3,202,000
98%
Minnesota counties play really two very different roles. First we are an administrative arm of the state government, providing the administration of many state and federally mandated programs. Second, we act as a local government unit, providing those services that we are allowed to provide by law.
Most of the large programs the county’s provide are state or federally mandated. We spend nearly $10 million each year to house inmates in the jail, more than $4 million to provide sheriff services, more than $3 million to provide emergency dispatch and more than $5 million to provide probation services.
The cost of providing these mandated services increases each year.

7. INCREASED PRESSURE ON THE COUNTY PROPERTY TAX
The cost to provide the $116 million in mandated services in 2017 is estimated to increase by 6.7% in This growth is from increased service demand, program changes, and the typical increases in costs of employees that provide these services. The county property tax pays for roughly 60% of the total cost of these mandated services. The increase in county property taxes to fund the cost of existing mandated services in 2018 will exceed $4.6 million. A county property tax levy increase of 4.5% is needed to just pay for these costs.
1n 2017, the county estimates that it spent over $116 million to provide mandated services. The increase to provide just those same services in 2018 is anticipated to increase by over 6% or $4.6 million. This increase is from additional service demand from a growing county population and the increase in costs to provide those same services. The cost of our employees is growing by the amounts negotiated in union contracts and all the costs to support these programs including software systems, and the costs of goods and services are increasing.
Not all of that increase is paid for with property tax levy. About 40% comes from federal or state sources or fee revenue that we raise at the county level. But the levy does fund about 60% of those increasing costs, placing an increasing burden on the property tax to fund mandated services.
To fund the $4.6 million in new costs in 2018 for these mandated services requires a levy increase of 4.5%.

8. SIGNIFICANT 2018 MANDATED COST INCREASES COMPARED TO INCREASED AID
Out-of-home placement of children
$284,900
MnChoices cost increases
$260,500
Child protection costs
$231,100
Regional Treatment Center cost share
$205,500
State public safety radio upgrade
$87,500
Chemical Dependency Treatment cost share
$85,100
Subtotal
$1,154,600
Less new County Program Aid (CPA) in 2018
($990,000)
Net increased costs
$163,700
EXAMPLES OF RECENT UNFUNDED MANDATE COSTS
More than $1.1 million in new county costs for 2018 are the result of recent legislative changes related to child protection, out-of-home placement of children, regional treatment center, and chemical dependency treatment costs, an upgrade to the statewide public safety radio system, and assessments for the elderly and developmentally disabled (MnChoices). Just the cost increases in these five programs exceeds the new county program aid received from the state for 2018.
In addition legislative changes in recent years has increased our costs by over $1.1 million, exceeding the amount of new county program aid received by the county in Costs of out of home placements for kids and other child protection costs are being driven by recently adopted recommendations from the Governor’s task force on child protection. In addition, county shares were increased for certain clients at state run treatment facilities.
Again, the cost increases just from these very limited sample of county programs exceeds the amount of new state county program aid the county will receive in 2018.
Much of this data is included in a document that has been placed at your desks on the funding of state mandated services. If anyone would like additional copies of this document please let staff know.

9. ITEM
COST
Providing facilities and security for the state courts
$3,000,000
County costs for state courts, including representation of indigent adults
$665,000
Eliminate charge to county for state-operated treatment facilities
$575,000
Eliminate requirement for county share for child foster care/transition services for year olds
$100,000
Eliminate county charge for Medical Assistance costs for stays longer than 90 days
$250,000
In total, the county has identified more than $8 million in costs or maintenance of effort requirements that should be changed to reduce the reliance on the county property tax for mandated services.
SUGGESTED MANDATES FOR REPEAL OR REFORM
Pressure on the local property tax from state mandated services can be reduced through the repeal or reform of certain mandates, or paying the costs of mandated services from state sources, rather than the property tax. Examples of costs that could be reduced, eliminated, or funded by the state are:
Each year the county’s legislative agenda includes suggested mandates for repeal or reform in order to reduce the pressure to raise the property tax levy. A number of these items are state controlled services and we are suggesting in those cases that state tax sources, not the property tax, should pay for those services. For example, the courts moved to state funding in 2005, and it would make sense for all court costs, including the cost of facilities and security should be funded through a state source.
It is important to remember that in a lot of these cases of increasing state mandated program costs, the county has very little or no opportunity to control costs. There are often rules in place on how we administer and who is eligible, leaving very little more for counties to control costs through efficiencies or new ways of delivering the services.

10. Lake Elmo Library Return $335,000 (.35% levy increase)
REVENUE/EXPENDITURE TYPE
2018 PROPOSED AMOUNT
REVENUES:
Levy
$335,000
EXPENDITURES:
Staff Full-Time Equivalent (FTE)
$154,800
Internal Rent
$ 94,300
Collection, Programming, etc.
$ 55,500
Technology (Phones, Licenses, Computers, Communication Lines, etc.)
$ 23,200
Office Equipment & Supplies
$ 7,200
TOTAL EXPENDITURES:
As mentioned earlier, the return of the Lake Elmo library is increasing the county levy for library services. Most of the increased expenditures will go to staff the branch and pay the internal rent needed for cleaning and upkeep of the facility. Some additional funds are provided for the collection, technology and office equipment and supplies.
It is also important to remember that while the county must increase its levy to operate this branch, the City of Lake Elmo will be reducing its levy since it no longer has to pay these costs.

11. Estimated Impact of Levy Increase Residential Homestead Taxpayers
Home Valued at $257,000 for Pay 2018
(assuming a 4.9% value increase from 2017 to 2018)
2018
Net Levy
Change
Actual Pay
2017
Estimated Pay
General
LWLP
Total
6.9%
33.3%
$700
$ 9
$709
$731
$ 12
$743
$ 31
$ 3
$ 34
(+4.8%)
Joanne Helm from Property Records and Taxpayer Services has provided this estimate of the tax impact from a 6.9% levy increase on an average valued residential homestead. This estimate shows that a house that has increased in value by 4.9% (which is the countywide average for residential property), would see their county tax portion of their tax bill increase by $31.
This chart also shows the estimated $3 increase in taxes to fund the Land and Water Legacy Program debt issuance, for a total increase of $34.
This is very early in the tax cycle to be providing estimates, so I should note that these numbers will likely change as we get additional and updated information.
This is also a good time to also talk about the Land and Water Legacy Program increase that is included in the recommended budget. As the Commissioners know, the county was very close to completing a major land conservation project. However, this project has slowed and hit a bit of a hurdle. We are suggesting that the proposed budget continue to contain a debt service levy to fund a possible issuance of $5 million in bonds for this program. However, if we are not able to revive this major project in a next month or so, staff would be recommending not to issue the new debt for the program and therefore would eliminate the increased levy. If we did not issue the debt, the $3 a year increase shown on this slide would go away.

12. History of Levy and Tax Impacts on Median Valued Home
Year
County Tax Rate
% Levy Increase
% Total Tax
Base Increase
$ Amount
of New
Construction
Median Value
Change Residential
Hstd Property
Tax Impact on
Median Valued
Home
2013
34.22%
0.0%
-5.7%
$201.1 million
-8%
-$22
2014
32.81%
0.66%
2.9%
$237.4 million
2.4%
-$4
2015
30.19%
3.49%
12.1%
$332.8 million
13.5%
$41
2016
30.56%
2.8%
$303.2 million
1.0%
$16
2017
30.45%
3.0%
$363.0 million
1.1% $7
2018
30.095% (estimated)
6.9%
$426.7 million
4.9%
$34
This slide shows the history of tax rate changes, levy changes and tax impacts over the last five years. As you know, the tax impact on an individual property is impacted by a number of factors, including the ones shown on this slide.
Because of the large amount of new construction in Pay 2018, the recommended levy increase is leading to a tax impact on the median valued home of $34. This impact is less than the tax impact in 2015 even though the levy increase that year was lower than we are recommending for 2018.

13. Estimated County Portion of Tax
Based on a home valued at $150,000 in 2000
This chart tracks the changes in the county portion of the property tax bill. This chart started with a $150,000 valued home in the year We have adjusted the value to reflect the average change in value either up or down each year since 2000.
Looking at the tax impact over the longer period of time really shows how stable the tax impact has been on properties in the county. The median valued home in 2009 paid $712 in county property tax. Nine years later in 2018, the median valued home is estimated to pay $31 more, or $743. That is about a 4.3% increase in 9 years.

14. 2017 Tax Rate Ranges 34.09% 38.62% 5-co. Avg. 7-co. Avg. 28.00% 30.45%
26%
28%
32%
34%
36%
38%
40%
42%
44%
46%
54%
56%
28.00%
Dakota
30.45%
Washington
35.90%
Scott
37.27%
Anoka
38.85%
Carver
44.09%
Hennepin
55.85%
Ramsey
When we presented the recommended budget in August we showed the board and the public a number of budget measures and how we compared to the other metro counties. We are only going to show two of those slides today.
The first shows the county tax rate. We continue to have the second lowest rate in 2017 and will likely continue to be second lowest in Our tax rate is considerably lower than the both the 7 county metropolitan county average and the 5-county average that excludes Hennepin and Ramsey counties.
What this measure means is that if you had a similarly valued home in any county but Dakota you would pay more in county property taxes than you do in Washington County.
Washington County 2018 = %

15. 2017 Average County Tax on $245,000 home
$785
5-co. Avg.
$889
7-co. Avg.
$600
$700
$800
$900
$1,000
$1,000
$1,200
$1,300
$644
Dakota
$709
Washington
$825
Scott
$857
Anoka
$893
Carver
$1,013
Hennepin
$1,283
Ramsey
This chart shows those differences. A $245,000 home in Washington county pays $709 per year, as compared to $644 in Dakota County, $857 in Anoka county and nearly $900 in Carver County.
The county property tax in Washington County is nearly 10% lower than the 5-county metro average, again excluding Hennepin and Ramsey counties, and over 20% lower than the full seven county metro average.

16. 2018 Budget Schedule April 4 Budget workshop with County Board
April - June
Departments complete budget estimates
July
Budget hearings with Administration
August 8
Present proposed 2018 budget
August - September
*Departmental budget workshops
September 26
Set 2018 preliminary levy
October 10
Capital Improvement Plan (CIP) workshop
November 14
December 5
Public Budget Hearing (after 6 p.m.)
December 12
Adopt 2018 final levy, budget, and CIP
We are about 2/3rds of the way through the annual budget preparation process. Today we are asking for the preliminary levies and budgets to be approved. After that we will be talking with the board about the capital improvement plan, hold a public hearing on the budget in early December and then ask for final adoption of the budget in mid-December.
*Public is welcome to attend all departmental budget workshops

17. Updated 2018 Budget Recommendation
Reduce debt service through refinancing savings
Include Land and Water Legacy Program debt service increase; may be removed prior to final levy
% Change
County operations
6.34%
Return of Lake Elmo Library
.35%
Net Property Tax Levy
6.69%
Based on the recent budget workshops with the board, we are recommending that the proposed levy be lowered. As we discussed on September 12, we are recommending that we lower the county debt service levy to reflect the savings we will be able to gain through the refinancing of two existing bond issues.
This change reduces the levy by $200,000, to an increase of 6.34% for county operations and a .35% increase for the return of the Lake Elmo library.
The estimated tax rate would be a reduction of ____%.
The tax impact would decrease another $___ to $ ____.
Again, while we would recommend leaving the debt service increase for land and water legacy in at this time, if we are not able to resurrect the Warner/Wilder project, we will be recommending to the board not to increase the debt service and not issue any new bonds for that program in 2017.

18. Resolutions for Adoption
Preliminary Washington County Levy
Preliminary Regional Rail Authority (RRA) Levy
Preliminary Washington County Budget
Preliminary Regional Rail Authority (RRA) Budget
Preliminary Community Development
Agency (CDA) Levy .