Blaine’s 2013 preliminary tax levy is expected to remain unchanged from last year, but city leaders will have to make almost $500,000 in unspecified cuts.
Expenditures in the proposed general fund budget total $24.19 million. City leaders need to reduce the 2013 budget by $489,477 and will levy the maximum.
The council’s final review before Thursday night’s vote to certify the 2013 preliminary levy and budget involved a tense and contentious workshop on Aug. 23.
City Finance Director Joe Huss provided Anoka County tax data that showed the city’s of Blaine’s tax base was declining.
Projections for 2012-2013 show the city’s net capacity decreasing by 9 percent. The residential tax base is expected to drop by 9 percent and the commercial and industrial tax base 11 percent, Huss said.
With no increase in the city’s levy, the declining tax base is expected to produce an estimated tax rate of 36.97 percent, compared with 33.56 percent last year.
Huss said homes valued between $100,000 and $415,000 that experience a 9 percent decline in value would likely experience a drop in the city taxes paid.
“The greatest decline will be in lower valued properties,” Huss said. Higher value properties, new construction and commercial and industrial would pay more.
City Manager Clark Arneson said during the Aug. 23 workshop program cuts made by the council would affect services.
Huss addressed use of reserves. “We had indicated there would be $1.9 million in reserves,” he said. “We used $650,000 of that for capital purchases. That leaves $1.1 million based on this year’s budget. We would use $500,000 in 2013 and $500,000 in 2014 to supplement the budget.” Councilmember Russ Herbst wanted a better estimate.
Fall months critical
“We don’t know what the next five months are going to bring,” Huss said. “At this point, we are ahead of where we antcipated with the budget, but we still have five months remaining. We have a winter plowing season that we don’t know if we will have 12 plowing incidents or none. We have an open contract for fuel.”
Councilmember Dave Clark said 70 percent of the city’s proposed budget was salaries. Clark wasn’t happy with the Aug. 23 budget presentation made by staff.
Councilmember Mike Bourke said he thought the council was going to start its 2013 budget discussions at ground zero, with city department heads coming back and reporting what they needed above and beyond a certain level to maintain budgets.
Huss said staff used zero-based budgeting in preparing numbers.
“What we’re trying to do is justify entire costs, not take from last year’s base,” he said.
Clark said that the council needed to address individual programs.
Reserve use questioned
Mayor Tom Ryan said having a budget reserve was a detriment that tied a heavy anchor around city councilmembers’ heads.
“We are not covering salary, fuel and cost increases. We are taking the money out of the bank,” he said.
Councilmember Katherine Kolb also addressed the use of budget reserves.
“We are no longer projecting a real picture to the public,” she said. “We may have to start cutting into the nest-egg.”
Councilmember Russ Herbst disagreed.
“It’s called rainy day money [for a reason,]” he said. “We had a real estate crash; valuations are down. It’s the residents’ money.”
Clark disagreed with Herbst and sided with Kolb.
“Kathy is absolutely right,” he said. “The problem is we have half of the council that wants to hold taxes down and the other half who won’t cut a damn thing. This is the compromise that we’ve struck.”
Herbst was willing to hold the levy and not tap into reserves, he said.
Survey addresses taxes
“Why did we do a city survey?” Kolb said, referring to the recently completed 2012 citizen survey that queried residents about changes to city services.
Residents were given the option in the mailed survey to write in their own words which, if any, city services they thought should be decreased or increased.
More residents indicated in the survey they would like to see services increased rather than decreased.
Of the 436 residents who completed the random survey, 22 percent wrote in at least one service that they thought should be decreased, while 50 percent wrote in a service that they thought should be increased.
Survey results indicated other common services residents proposed increasing included street repair and maintenance, police and city parks and trails.
Residents who responded said they would like to see city services increased also were asked if they would support a property tax increase to fund these increases.
About half of the residents (55 percent) said they would support a property tax increase to fund the service they felt should be increased, while 21 percent indicated strong support.
Forty-five percent said they would oppose a city tax increase, with about one quarter of those respondents (24 percent) indicating strong opposition.
City over performing?
“Kathy, I read the survey and I’ve come to a different conclusion,” Clark said. “One, I see a city council that in the last three or four years has put the brakes on its spending. The city satisfaction [ranking] is fine. I see us over-performing in a lot of survey areas that we don’t necessarily have to be over-performing in.”
Ryan then asked, “Dave, as an example, where are we over-performing?”
Clark replied, “[In] everyone of those metrics that says we are above the national average or state average. That means we are over-performing compared to every other city.”
Councilmember Dick Swanson said in the city survey, one area where residents thought the city was over-performing was athletic field maintenance.
“We are spending about $400,000 on that,” Swanson said. “I’m really questioning that type of spending.”
Swanson said he’d take $100,000 out of parks and rework the city’s field maintenance budget.
Process is questioned
“We haven’t dived into expenses and said what we’re willing do give up,” Clark said. “We’ve struck comprise to get through the budget. We have to rank priorities and give it to staff.”
Kolb said the discussion the council had at its Aug. 23 workshop occurs every year because councilmembers are running for office.
“We always go out and say, ‘Look at what we did.’ Why can’t we decide what to throw out?” she said.
Bourke acknowledged he was up for re-election, but that political considerations were beside the point.
“We haven’t changed the way we’ve done our budgets since I started on the council,” he said.
Arneson said he needed the council to make a decision. “I sense there’s not a majority of the council that wants to raise the levy this year,” he said. “If you could answer that policy question, that will give us direction.”
Councilmember Wes Hovland was the last to offer budget comments.
He suggested the council hold the line and bring the budget back for review after the preliminary levy was adopted Thursday night.
“We do this year after year,” Hovland said. “It’s time to take action. We keep kicking the can down the road. We have to start looking at making the cuts.”
Hard decisions ahead
Arneson said if the council set its Sept. 6 preliminary levy at the same dollar amount as 2012, the gap of almost $500,000 would still exist in the 2013 budget.
“You have to plug that by moving reserves or make actual cuts,” he said. “It’s my opinion any level of cuts beyond $75,000 is a service cut and you will be in that mode.”
Arneson said the council would have to use the most of its remaining workshop time this year prioritizing the 2013 budget.
The council is scheduled to adopt its final 2013 levy and budget on Dec. 20.
Tim Hennagir is at [email protected]