Uncertainty seems to be the reigning zeitgeist of this point in world history — uncertainty about the problems, uncertainty about the solutions, uncertainty about the future.
And the Baxter City Council is no different. As budget talks ramp up in anticipation for setting the citywide tax levy later this year, council members and staff are making weighty decisions that didn’t exist as recently as four months ago. The coronavirus — and related economic and societal ills — has shifted the landscape and there’s no indication when things will get back to normal.
“I think we’re all interested to see the end of this tunnel, where it’s going to shake out,” Mayor Darrel Olson said. “It seems like to me anyway that this could be the kind of year that, as a matter of survival, we have to (be careful about) dreams, wants, and wishes. We’ll get through it, I just don’t know what it's going to look like.”
Statewide, Minnesota plummeted from a $1.5 billion surplus to what’s currently projected to be a $4.7 billion deficit and deepening in a matter of weeks. Cities like Baxter are going to feel the squeeze and soon, Finance Director Jeremy Vacinek told the council during a virtual workshop Tuesday, Aug. 4.
That needs to be taken into consideration with budgetary components like union labor negotiations, increases in health insurance rates, property reinsurance premium hikes, dues for emergency services coverage, compensation claims, hiring new employees, among others. These are always areas that need to be addressed with the budget, Vacinek said, but this year they’ve taken on greater significance and greater uncertainty as well.
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Vacinek said the signs are murky, noting there’s been a notable uptick in late property tax payments that echoes the 2008 Great Recession. He also said the number of lodging tax receipts has dipped by 50% to 80% between March and April. In addition, motor vehicle excise tax receipts dipped, then came surging back as the summer went on, and the local options sales tax saw a 4.1% decrease since last year. Market data, Vaninek said, indicates consumer spending is down 35% from this time last year.
With more taxes due come Oct. 15, Vacinek said it could be illuminating if more and more residents are struggling to pay their bills.
“Then there’s the overall looming question —- I don't think anyone can answer right now — is what the overall pandemic-related costs that may be incurred by cities (will be), as well as any revenue implications that that might have,” Vacinek said. “We're going through some interesting times right now that nobody can really put a finger on — where we're going from here and how this has an impact long term with the pandemic and what implications that has for the economy.”
In total, Baxter’s estimated market value hovers just over the billion dollar mark at $1,000,067,000 for 2021, which includes roughly $10 million in new market value added by the completion of projects since last year. This includes $606,202,500 in residential homestead properties, or 57%; while the commercial/industrial properties account for $348,992,000, or 33%; residential apartment properties totaled $91,596,100, or 8%; and the final miscellaneous category, “other” clocked in at $21,002,501, or 2%. Vacinek noted while the city experienced growth since 2019, this ratio has remained largely stable.
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Net tax capacity has seen a rebound in recent years, Vacinek noted, who pointed at 2011 when it was $11.6 million, then 2014 when it dipped to around $10 million, to 2020, where it stands at $12.3 million. That means a 5% increase in existing valuations. While residential apartment properties saw a 4.74% increase, commercial/industrial experienced 8.65% increase — though, Vacinek said, about half of that latter category is in tax incremental funding districts, or districts that agree to offer affordable housing for low-income residents in exchange for tax breaks. This entails a 6% increase in small and mid-size market value once those improvements are subtracted from the total.
Council member Zach Tabatt struck a note of optimism, pointing out that all the upheavals of COVID-19 and its seismic effects on the economy could, in fact, lead to growth for Baxter in the future. As more and more companies become comfortable with remote employment, more and more workers in the Twin Cities may move to Baxter for a scenic, smaller and quieter community now that jobs don’t constrain them.
“This situation is actually a time where we should be a little bit hesitant to say optimistic, but I'll say I’m optimistic about the potential for investments in things like economic development,” Tabatt said at the conclusion of the workshop. “We're already working with organizations on economic development. I think we have an excellent opportunity here to maybe grow a little bit with people who no longer want to live in big cities.”
