Blaine council at odds over no tax levy increase

The majority of the Blaine City Council Sept. 6 decided that the 2013 operating tax levy should be no higher in 2013 than it was this year.

Finance Director Joe Huss. Photo by Eric Hagen
Finance Director Joe Huss. Photo by Eric Hagen

The council on a 5-2 vote approved a 2013 preliminary levy amount of $16,295,000, which is estimated to account for 67.35 percent of the city’s estimated general fund revenue for next year. The next top three general fund revenue sources after the tax levy is estimated to be charges for services ($4.02 million), licenses and permits ($1.61 million) and intergovernmental revenue ($1.08 million).

Besides this operating tax levy, the city also has a $2.2 million debt service levy and a $238,834 pavement management program levy.

With this decision behind it, the council is preparing to dig deeper into a 2013 budget that still forecasts expenditures as being $489,477 higher than the revenues projected.

Councilmember Dave Clark wants the city staff to look deeper into the assumptions they make when proposing departmental budgets to the council. He said huge progress was made on the water budget after a January workshop “and not a gosh-blessed thing has happened since.”

“We have not dug into the budget,” Clark said. “I’m disappointed with staff that we have not done any assumption-based budgeting. We need to be challenging the assumptions. We just can’t be doing the same things that we do year after year after year.”

At this point, revenues in the proposed budget total $24,193,050, which includes a $500,000 draw on the reserve fund. However, expenditures are estimated to be $24,682,527, which leaves the $489,477 funding gap. The council could fill this gap by utilizing more fund reserves or making budget cuts.

Finance Director Joe Huss said the council cannot raise the levy when it approves the final 2013 budget and levy in December. A public hearing will take place at 8 p.m. at the Thursday, Dec. 13 council meeting. The public hearing could be continued to Dec. 20 as well, which is when the council will approve the budget and levy.

Anoka County will soon be notified of Blaine’s preliminary 2013 levy and will prepare preliminary property tax statements that residents will receive in November to get a ballpark number on what their property taxes could be for next year if none of the governmental bodies, such as the city, county or school districts, lower their levies in December.

Mayor Tom Ryan and Councilmember Kathy Kolb did not want the council to lose its flexibility and were concerned about the long-term implications of decreasing the fund balance, so Ryan proposed an amendment that sought to not take $500,000 out of reserves and instead increase the levy by the same amount to $16,795,000.

Ryan said the council has asked city staff to do five-year budget forecasts. He said it is up to the council to do a five-year forecast or where it is putting itself.

“It’s the same discussion they’re having in Washington,” Ryan said. “Cutting yourself to success ain’t going to work. Sooner or later somebody has to look at revenues.”

Kolb and Ryan pointed to the recently completed city survey in which 55 percent of those picking a city service to increase supported a property tax increase to fund the service.

In the survey, the tax increase question was only asked to those who said they would like to see a city service increased.

According to Clark, another page on the survey results showed that 61 percent support the city building a community center that includes sports facilities, yet only 42 percent support a property tax increase to fund this.

Residents were never asked on the other city services question how large of a tax increase they would support, Clark said.

Councilmember Mike Bourke said the council has a responsibility as public officials to manage the reserves.

“If you look at it in retrospect, that’s the people’s money there,” Bourke said.

A clarification Bourke made is that the council could do more than use reserves. He said the council must look outside the box and he wanted to place a cap on the levy.

Councilmember Russ Herbst said when the city was growing and valuations were growing, people’s property taxes went up.

Now valuations are going down, but taxes could still go up, he said. Blaine’s overall net tax capacity is decreasing by 9 percent.

Many cities have been facing the same quandary in recent years. Governmental bodies such as city councils set levies and every property owner is a slice of the whole pie. If everyone’s valuations are declining, that does not mean the city’s levy declines. The money has to come from somewhere. Therefore, those who experience lower valuation decreases than others may still see property tax increases.

“I don’t expect (taxpayers) to understand it,” Herbst said. “I don’t understand it. I think as Mr. Clark said we have to get into some assumption-based budgeting. We have to dig into it here.”

Councilmember Wes Hovland said besides addressing “assumption-based budgeting” the council needs to look at how it spends its money.

Hovland said he voted against the city receiving a $35,000 grant for an emerald ash borer prevention program because the Minnesota Department of Natural Resources (DNR) required a $10,000 match from the city.

Hovland did not get an opportunity to ask where this $10,000 is coming from, he said.

“Maybe we need to slow down a little bit and try to maintain where we’re at until we get through this crisis,” Hovland said.

Kolb said they can fine-tune all they want, but in the end, cutting staff is what makes the big difference when cutting the budget. She expressed concerns that the city is losing an economic development staff member and Blaine is supposed to be a growing city and must look at ways to fill vacant buildings.

Kolb does not mind using some reserve money, but does not want to use it until the city has to. She wanted the council to have flexibility over the next four months of budget refinement rather than setting itself to the same levy as 2012.

“We’re not the city we were 10 years ago,” Kolb said. “We’re not the city where we have abundant property and we have businesses looking at us. We have empty offices now.”

Councilmember Dick Swanson said he is certain that the council will “muddle through this year.”

Swanson’s concern is that the city will go back to the days where the budget fluctuated greatly and he prefers a more steady budget, he said.

“I think next year we’ll have some major soul searching, but we’ll get through this year,” Swanson said. “But we’re creating major problems for next year.”

Eric Hagen is at [email protected]