What’s in Shakopee’s proposed 2021 budget and what it could mean for your taxes

The Shakopee City Council will meet Tuesday night to discuss the preliminary 2021 budget and tax levy, which includes a proposed 3.25%, or $662,300, tax levy increase.

According to Finance Director Nate Reinhardt in a detailed memo to the city council, taxes from newly constructed buildings alone will account for about $420,000 of the levy increase, leaving the remaining balance of $242,300 to be distributed among existing properties.

Median home values in Shakopee have increased about 6.3% from last year to $266,800, according to Reinhardt, which equates to an annual increase of about $6 in property taxes for someone with a median value home. Individual property owners will see varying degrees of changes to their city taxes depending on their home value and their property valuation.

The orange bars in the chart above represent the median value home in Shakopee. The grey shaded area is the property tax amount paid on median value homes.

Due to the increase in apartments and commercial properties in town, residential properties will pay 1.6% less of the total share of property taxes than they did last year, Reinhardt’s memo notes. 

Budget pressure

The city’s expenditures for 2021 are projected to increase by $352,000 to a total of $29.49 million, with revenues projected to be $28.74 million. To offset the projected shortfall in revenue, the proposed budget includes a transfer of $500,000 from the city’s unassigned reserve fund. The city offset a similar shortfall for 2020 with $795,000 from the unassigned reserves.

In an inteview with the Shakopean, Reinhardt said an increase in building permit revenues helped offset the shortfall, and he expects those revenues to help in 2021, as well.

In his memo, Reinhardt acknowledged the city is facing budget pressures from increasing infrastructure and personnel costs and the impact of COVID-19 on programming and facility closures, but with an unassigned fund balance of $14 million at the end of the 2019 fiscal year, Reinhardt told the Shakopean he feels optimistic about Shakopee’s financial future.

“I feel like we’re in really good shape actually. I believe this year we’re going to have positive results. We’re helped with some of the funding the state provided for the CARES Act. We’re having strong building permit revenues, so I think we’re in pretty good financial position,” Reinhardt said. “Our goal with this budget was to try to minimize any further impact on residents the best we could.”

Public safety accounts for the largest portion of the city budget with projected expenditures of $13.76 million, followed by Public Works with projected expenditures of $6.65 million. Combined, the two departments are projected to increase spending by $531,000 over 2020’s budget.

A breakdown of the city of Shakopee’s projected 2021 expenditures.

A comparison of 2020 budgeted expenditures with 2021 projected expenditures.

Personnel changes account for an additional $371,300 in the proposed budget, including increases in workers compenstation premiums, pension expenses, and an 8% increase in health insurance premiums. The budget, Reinhardt said, was built with the assumption that union and non-union staff will not receive a cost of living raise for 2021, though initial negotiations are just beginning with the police patrol and sergeant unions.

The city will save about $90,500 in Community Center costs relating to advertising, training, and contractual cleaning services. Barring any further closures due to COVID-19 restrictions, Reinhardt projects the Community Center will generate an additional $178,700 in revenue over 2020.

“The community center and ice arena revenues saw an increase … from 2018 to 2019 and revenues were looking like they were going to continue to expand in 2020 before COVID-19 facility closures,” Reinhardt wrote. Because the future is uncertain, Reinhardt used 2019 revenue figures as his baseline for the 2021 projections.

City Administrator Bill Reynolds said COVID-19 restrictions certainly put a damper on revenue momentum at the community center, but the ice arena has helped ease that burden.

“It’s paying for itself, and it’s a money maker. The ice sheets are money makers and we’ll use that to subsidize the community center,” Reynolds said.

Other budget considerations mentioned in Reinhardt’s memo include:

  • A proposed $4 million capital improvement bond issue to help fund $50 million in slated capital improvements for 2021. If approved, which would happen separate from budget approval, the additional debt levy of approximately $200,000 would first occur in 2022.
  • A $259,000 decrease in budgeted building permit revenue as a result of dwindling available developable property within the city limits and an uncertain economy.
  • An additional $175,000 to continue funding the current Fire Department staffing model, which has reduced average response time by five minutes. If this increase is approved by council, the preliminary levy will be increased from 3.25% to 4.11%, increasing the estimated annual impact on a median value home to about $8.
  • An Economic Development Authority levy of $350,000 that remains flat from 2020. The EDA levy has remained flat since 2018, according to Reinhardt.

Next steps

The city council will review the proposed budget and tax levy at a 7 p.m. meeting Tuesday night. The meeting will be livestreamed on the city’s website.

At its Sept. 15 meeting, the council will adopt the proposed maximum tax levy. Scott County will send proposed tax notices to property owners in November, and the city council will adopt the final tax levy and 2021 budget in December.


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