City Administrator Angel Weasner said the city’s net tax capacity increased $688,000 from 2021 to 2022, and is now $4,304,472.
With a preliminary budget and levy increase of 5% already approved, Weasner said, the increased tax capacity means property owners’ taxes will actually decrease next year.
“A medium household of $200,000 market value has a current tax rate of $1,545,” she said. “It is anticipated to decrease to $1,362.52.”
Weasner said there will be similar decreases for all residential property values at a 5% levy. Regarding commercial property taxes, she said it’s harder to calculate because there is a state tax as well, and lower property values are taxed at 0-1.5%. At $200,000 of market value, she said, the current commercial property tax of $5,987 is estimated to go down to $5,280, a decrease of $707.
However, she acknowledged, if a property’s assessed value goes up, the tax on it will probably still increase. “It won’t go up as drastically,” said Weasner, “because there’s still a reduction in the city’s portion.”
Weasner predicted that Hubbard County property taxes will also go down a little, but she had no information about school district taxes.
After the latest revisions, Weasner said proposed general fund expenses for 2022 total $5,505,554, excluding debt service. This figure includes increases in highways and streets, mainly the Fair Avenue project; an additional $10,000 to increase street lights with LED fixtures; election costs, since there was no election in 2021; and another $15,000 for the lodging tax, though the actual amount going out will depend on how much the city takes in.
She explained that an increase in administration salaries on the general fund budget will be reduced after percentages coming out of other funds is calculated, such as how much of the accounts payable clerk’s salary is allocated to the water fund, liquor store, airport, etc.
Council member Erika Randall pointed out that a significant jump in city attorney costs is due to an error in the 2021 budget that did not reflect the city’s contract with the law firm. Although there was a $2,000 increase per the contract, much of the apparent increase is actually to correct the error.
Regarding other funds, Weasner said the city will be required to debt service payments totaling $735,000 next year. A portion of the airport’s terminal area and taxilanes project will also be expended in 2022, when the federal and state revenue toward that project will also be received.
The Fair Avenue project will involve expenses of $2.3 million from the water fund, $1.6 million from the sewer fund, $3.5 million from the liquor fund and $273,000 from the stormwater fund, she said. Expenditures projected for all funds in 2022 total $15,365,905.
Randall questioned the sizable increase for fire department salaries. Weasner said this is based on increased call volume, which included many car accidents this year and is expected to continue increasing next year. She said the city has already expended more than it budgeted this year due to these calls.
Mayor Ryan Leckner correlated the increase with a population increase during the COVID-19 pandemic. “A lot of people are around at different times of year that weren’t around before,” he said.
They also discussed funds that will be set aside in a reserve fund for a new fire truck. Of the remaining amount of the increase, Weasner said they’re also counting on increases in property liability, workers’ compensation and vehicle insurance, though next year’s rates will not be set until the first of the year.
Randall voiced an interest in spending more workshop time looking at budget items like salaries.
As Weasner went on to discuss the city’s five-year Capital Improvement Plan (CIP), Randall also suggested having a separate council workshop next year to review the CIP, which hasn’t been reviewed since 2018.
“We need to have it on our agenda for a work session to talk about a CIP that, actually, we believe in,” she said, in contrast to approving what they have at the last minute. “There’s stuff on the 2022 CIP that I’m seeing for the first time. … I’m completely lost and confused about workstation upgrades and server improvements,” as well as replacing portable radios for the police department.
Weasner said the radios are in the budget that went through the finance committee. Randall asked to see where these items were listed on the budget, and said she would like to see a discussion of the need for such expenditures in the future.
Asked how often the radios need to be replaced, Police Chief Jeff Appel estimated a seven- to eight-year cycle, besides replacing ones that are lost or broken.
Randall admonished Appel to make sure that capital outlay items on the five-year CIP are reflected on each year’s budget by setting aside a certain amount in a reserve fund toward each anticipated purchase.
Describing the CIP as a “wish list,” she said, “We have to start getting ahead on some of these big items. We’re not always going to have a tax capacity increase.”
Randall said department heads need to recognize that when they see big expenses coming up, “we have to start putting money aside each year and using reserve funds. … If we don’t have an increased tax capacity, we can’t have a 5% increase in our levy.”
Returning to the need for the city council to have a CIP workshop, Randall said, “There’s $100,000 for a parking lot and vestibule (on the 2023 CIP), and we as a council have never talked about that. … It’s been a long time since we’ve had an in-depth CIP work session.”
Weasner agreed that she was working from old and partly obsolete information, some of which was hard to find.
As another example of the right approach to planning, council member Tom Conway cited the city’s need to request reserve funds from the Kitchigami Regional Library System when the public library’s HVAC controls went out.
“That shouldn’t catch us by surprise,” he said. “We should have known when we replaced the boiler that we were gonna have to replace the controls at some point.”
Weasner said she will get an earlier start next year and department heads will request what they want and need. She also suggested bringing back a former practice of filling out justification forms to justify the need for an expense.
Weasner said the city council will vote on the budget and levy at its Dec. 14 meeting, which will also include a truth-in-taxation hearing, in order to submit them to the state by the deadline.