Brainerd City Council: Council discusses tax levy stances
Monday night, the Brainerd City Council approved a 25 percent 2016 preliminary levy increase. Before council members voted on the increase, they reviewed the city's preliminary 2016 budget, why some level of increase was needed and the level of i...
Monday night, the Brainerd City Council approved a 25 percent 2016 preliminary levy increase.
Before council members voted on the increase, they reviewed the city's preliminary 2016 budget, why some level of increase was needed and the level of increase each member would be comfortable with.
The final levy adopted in December can be lower than the preliminary levy, but it cannot be higher.
Currently, there's a deficit of $1.7 million between revenue and expenditures in the 2016 preliminary budget, Finance Director Connie Hillman said.
Finance Director Connie Hillman provided an overview of the budget, which had been discussed in detail during a series of budget workshops in August. Currently, there's a deficit of $1.7 million between revenue and expenditures in the 2016 preliminary budget, Hillman said.
"So how do we get that to zero?" Hillman asked. "We either do it by increasing tax revenue, which I don't think anyone wants a tax increase of 35 percent. We increase other revenue sources or we decrease expenses, or we do a combination of the two."
During the August budget workshops, city staff proposed $2.2 million of capital improvements. Monday, Hillman informed the council those requests had been pared down to $1.4 million.
How to fund those capital improvements is one of the biggest hurdles the city faces when it comes to the budget, Hillman said. The requests that were dropped this year will come back next year, she said, "so how do we fund it?"
"I don't think anyone wants a tax increase of 35 percent." - Finance Director Connie Hillman
The city should have been saving more aggressively for capital improvements in the past, Hillman observed. Issuing debt every three years doesn't solve the long-term problem, she said, "but does it help lower the 25 percent increase in the levy?"
City Administrator Jim Thoreen said he's only been in his position for about six weeks, so he doesn't know the city's full history. Keeping a historic building like city hall standing for another 100 years doesn't happen without "major investments," he said.
"Our lack of capital investment is coming back to haunt us," Thoreen said. "I don't criticize anybody who's been here before, that's not my job. It's simply to bring to your attention those things that are of a critical nature to us."
Council member Chip Borkenhagen said he approaches the budget and levy issue with a "big-picture" perspective. Raising taxes doesn't solve all the city's problems, but "it goes a long ways to make a difference," he said.
More people in the community are expecting different results from the city, Borkenhagen said, and change won't happen by doing the same things that were done in the past. Because of that, he said he's going to be pushing for a higher percentage levy increase.
"I think it's crazy to just let things go to heck in a handbasket," Borkenhagen said. "It isn't going to bother me at all to vote for a 15 percent increase."
"It isn't going to bother me at all to vote for a 15 percent increase." - Council member Chip Borkenhagen
Council member Kelly Bevans presented a simplified version of his 2016 budget proposal, which calls for a 2016 levy of $5.3 million. This represents a $440,405 or roughly 8 percent increase over the 2015 levy.
The $440,405 would cover all of the operating expense increases for 2016, which amounts to $318,381, Bevans said. It would leave roughly $75,000 to cover minor capital expenses for all departments the city wouldn't bond for, like office furniture and tablets for the city inspectors.
Bevans' proposal also includes an additional $861,000 capital bond to pay for capital expenses not covered by the levy increase.
"That's as simple as I could make it, but that's the only way I can understand it," Bevans said. "I can understand that we're going to have to do a little bit more this year."
Tax levy history and percentage change
Year, Total levy in dollars, Percentage levy change
- 2006 3,198,000 14.1
- 2007 3,509,766 9.7
- 2008 3,816,296 8.7
- 2009 3,962,308 3.8
- 2010 4,112,308 3.8
- 2011 4,055,836 -1.4
- 2012 3,953,486 -2.5
- 2013 3,953,486 0
- 2014 4,453,486 12.6
- 2015 4,898,835 10
Bevans also outlined his thoughts on the potential of a new heating, ventilation and air conditioning system for city hall. The $600,000 project was brought up during discussions of capital investments during the August budget workshops.
The current HVAC system is entirely inadequate, Bevans said, and he proposed spending no money on temporary repairs until an entirely new system is purchased.
"It is not viable for the way the configuration of the building is now and the expectations we've got in place," Bevans said.
Council member Gabe Johnson said it was his first time going through the budget process, so he took some time to look at budgets from the last two years to see where the city was coming from. He said unlike Thoreen, he was comfortable criticizing past budget processes.
"The only thing we've been cutting is capital and it's ridiculous," - Council member Gabe Johnson
"And it's been terrible," Johnson said. "It's just disappointing to see we have not addressed any sustainable cuts to our budget while refusing to increase taxes and pushing capital improvements down the road."
The city has been trying to keep the levy flat instead of keeping it in line with inflation, which "makes no financial sense," Johnson said. The levy decreased in 2011 and 2012 without sustainable long-term cuts to services or staffing, he said.
"The only thing we've been cutting is capital and it's ridiculous," Johnson said. "It's not good governance."
Johnson presented a minimum 7.2 percent levy increase, which is "the bare minimum," he said. The 7.2 percent increase doesn't address any capital needs, he said, which will probably require bonding "because we're so far behind."
Between now and adopting the final levy in December, the council needs to find sustainable cuts to the budget, Johnson said. It's that or keep increasing taxes to pay for the services people want, he said.
"You do hear sometimes, 'hey, don't increase taxes,'" Johnson said. "You never hear, 'hey, give me less services, don't plow my street the next time it snows.'"
Council member Dave Pritschet pointed out the Great Recession started taking a toll on the city's budget in 2007, so "we've been trying to play catch-up from when all the property values and all the revenues that we'd had bottomed out."
"You never hear, 'hey, give me less services, don't plow my street the next time it snows.' " - Council member Gabe Johnson
Not investing in capital improvements is chipping away at the overall value of the city, Pritschet said. In simple terms, "capital is what you're worth," he said.
"So by not investing in capital, we're actually reducing what we're worth," Pritschet said. "We're reducing our base."
He said it doesn't make him happy to see 7-8 percent or 25 percent increases proposed, "but we cannot continue to put what we did in the last eight years on the backs of whoever comes next."
Pritschet said he was a part of the past two budget processes where the levy increased, and the council was still cutting out capital improvements.
"It wasn't a fix, it was to kind of put a bandage on the hemorrhage," Pritschet said. "Everything has been put together with bailing wire and duct tape the last few years."
Impact on homeowners and businesses
• Home with a market value of $101,200
2015 Brainerd city tax ($) - %increase - New tax ($) - Difference ($)
523.83 - 25 - 655.47 - 131.64
• Commercial property, valued at $420,000
2015 Brainerd city tax ($) - %increase - New tax ($) - Difference ($)
5,481.91 - 25 - 6,859.53 - 1,377.62
Council member Sue Hilgart said the total 22.6 percent levy increase the last two years created "a significant amount of blowback." She said she understands how a 7-8 percent increase holds the status quo but "it doesn't do anything to fix where we are."
Staffing accounts for 66 percent of budget expenses, which indicates the city is overstaffed, Hilgart said, "which is painful to have to say." The city can't start to address equipment and capital needs because paying staff takes priority.
Council member Mary Koep said the average tax levy increase over the past five years is 3.8 percent, which "I would suggest probably exceeds what the average citizen in this community received as an increase in that time."
The city needs to start looking at capital funding "in a more realistic way," Koep said. They also need to realistically look at personnel, she said. She also proposed eliminating longevity from the city's salary structure, which dictates if an employee holds a position for a certain number of years, they get a percentage bump in salary.
"I think longevity is an archaic practice, rarely used anymore in any unit of government," Koep said. "It lacks transparency."
Koep also implored the council to avoid accusing any members who propose a lower levy increase of not wanting what's best for the city.
"I want this city to be a place of shining and a place where people young and old want to come and live," Koep said.
A 5 percent levy increase with reductions "will do it," - Council member Mary Koep
Increasing taxes by a large percentage will discourage people and businesses from coming to Brainerd, Koep said. It will also cause rents on rental housing to rise as landlords attempt to keep pace with rising property taxes, she said.
"My proposal suggests structural change, some of it painful," Koep said. "What I'm suggesting is workable."
A 5 percent levy increase with reductions "will do it," Koep said.
Johnson cautioned tax reductions without sustainable cuts "is just going to cause larger increases in the future."
Council President Gary Scheeler said the city's biggest problem is "playing big brother," by "carrying the load" for things like the Northland Arboretum and Brainerd Lakes Regional Airport.
"Everybody looks at us and we can't afford it anymore," Scheeler said.
Adding city employees is great, Scheeler said, but employees need to be maintained, which results in recurring health insurance and benefit costs. Those long-term costs need to be accounted for when adding staff, he said.