Crow Wing County: What does budget mean for taxpayers?

The Crow Wing County Board of Commissioners can no longer boast of passing a reduced levy for another consecutive year after last week's adoption of a 6.99 percent levy increase for 2019.

The property tax levy is the amount of money collected from property owners in Crow Wing County to fund county government, which allows it to provide services to about 62,500 people.

So how much does the board's approval of the levy increase at its Tuesday, Dec. 11, meeting eliminate, so to speak, the savings that resulted from eight years of having a reduced levy?

"Some people like to say that if the county had levied 5 percent per year for the eight years that would have equated to a 40 percent increase. In that scenario, the 6.99 percent would not wipe it all away completely," Finance Director Jason Rausch said Friday.

"If you were to look at actual percentages, then, yes, we did increase further than we reduced. It is a question of perspective, of which neither would I agree with," Rausch said of the levy.

"Each year is its own; one year there are increased needs or services and in other years you can reduce by consolidations, efficiency and lower costs."

General fund

Driving the county's 2019 final budget and the county's expenditures are increasing methamphetamine use in the county and rising employee health insurance costs.

On top of the levy increase, the county is expected to spend about $3.06 million from its fund balance-akin to a savings account-for ongoing expenses.

"Some of these savings accounts can only be spent on specific things, so they build up over time and then are used to buy larger assets or equipment. Usage of fund balance for operation from non-restrictive sources is something that needs to be closely watched," said Rausch, who recently resigned from his position with the county to accept a position with Sourcewell, formerly known as National Joint Powers Alliance, a partnership with education, government and nonprofits.

As part of securing the reduced levy in 2018, the board approved last year dipping into its fund balance for the first time in at least 13 years, using $748,000 for ongoing expenses.

"State statute does not dictate on shortfalls or how to build back fund balance. It is up to the governing body to decide at what level to carry fund balances and when and how it should make any corrections necessary to continue the operations of county government," Rausch said.

Last year, Rausch explained to the board that spending three-quarters of a million more than revenues would lead to a compounding problem in 2019, coupled with an expected increase of $1.5 million in expenditures as a general baseline for the organization.

"The general fund and other funds fund balances will be a question for future boards and the decisions that they make in regards to the retiring debt and the amount they want to assess the taxpayers in future levies to replenish these funds," Rausch said.

The levy revenues for the 2018 budget were $34.35 million while the expected levy revenues for the 2019 final budget approved Tuesday were $36.75 million, so the increase in the levy revenues from 2018 to 2019 will be $2.4 million.

"The county board by statute must adopt a final levy before the end of the year. If they do not adopt a final levy before the end of the year, they are subjected to using last year's levy," Rausch noted.

Rausch's recommendations

Rausch offered two years ago a plan to increase the levy by 2 percent each of the following four years, followed by a 4 percent increase over the four years after that. This includes the $5 million in debt service payments the county will no longer be required to make in 2020, which Rausch said could be used to stabilize levy increases.

"The board has decided to remove the $200,000 funding of OPEB or other post-employment benefits. This decision does not affect the current amounts that are paid yearly for retired county employees health insurance," Rausch said.

"The plan that was put into place was to save money for a point in time where these expenditures would increase to a level that would (be) a larger portion of our county levy. The actuaries project this to be somewhere between 2036 and 2038."

Also in 2017, Rausch laid out a plan showing what three more years of no increases would mean for the county's finances. In all, Rausch said that would have led to an estimated $3.4 million deficit below the recommended minimums of the funds.

"With setting aside this additional amount for a period of time, we would have money to shave off this peak when it occurs long into the future," Rausch said of other post-employment benefits and county finances.

"This would help future boards to keep the levy increases lower than if we had not saved. The county still has time to implement a different funding strategy if the board wishes."

Levy increase

According to Rausch's presentation about the 2019 final budget and levy, for a seasonal recreational property in Crosslake with an average market value of $376,500 that had no change in value, there would be an increase of $34 from $1,195 in 2018 to $1,229 in 2019.

Likewise, for a commercial industrial property in Baxter with an average market value of $1.06 million that had no change in value, there would be a tax increase of $184 from $6,511 in 2018 to $6,695 in 2019 with the tax impact of a 6.99 percent county levy increase.

And finally, for a residential homestead property in Brainerd with an average market value of $101,200 and no change in value, there would be an increase of $9 from $314 to $323 in 2019, after Tuesday's adoption of the 2019 final budget and levy, according to Rausch's presentation.

"The (no change in value) page shows you what the tax impact of a 6.99 percent levy increase has on three different property classifications. ... Another way to look at it would be to say of my tax increase this is the amount that was from the 6.99 percent levy increase," Rausch said.

"The values are an average since I am trying to find a value that could be close to the average taxpayer in our county. In reality, very few people probably have a property with these values."

Using those same three property classifications in Crosslake, Baxter and Brainerd-but this time with an average change in value of 3.73 percent-there would be an increase of $79, $443 and $22 from 2018 to 2019, respectively, with regards to seasonal, commercial and residential.

"This percentage was the average value increase in all of Crow Wing County. Again, very few people, if any, actually probably saw their value increase by this exact percentage. Some people probably had increases, and some people had decreases which averaged out to this number," Rausch said.

"The main point is that part of the increase on your tax statement is related to the levy, and the other part of your increase is related to your property value change if you had increased value. If you had reduced value larger than the levy increase, you probably saw a decrease in the amount of property taxes owed on your county portion."

2019 budget and levy

Crow Wing County's record of a reduced tax levy for the last eight years ended when the board approved the 2019 budget and a levy increase of 6.99 percent at its Tuesday, Dec. 11, meeting.

The board of commissioners approved the 2019 preliminary budget and levy at its Sept. 25 meeting after County Administrator Tim Houle proposed the levy increase, noting the county would otherwise risk reductions in staff and services.

Excluding unorganized townships, the total expected county revenue for the 2019 budget is

$86.05 million, with property taxes comprising 43 percent of the total and money in the form of federal or state grants and aid comprising 33 percent of the total.

About 30 percent, or $10.99 million, of the property tax portion of the total expected county

revenue for the 2019 budget goes toward community services, while 25 percent, or $9.2 million,

goes to public safety services in the final levy and budget approved Tuesday, Dec. 11.

Excluding unorganized townships, the total county expenditures for 2019 is $89.21 million in the

final adopted budget, with community services spending accounting for 33 percent, or $29.12

million, and highway services accounting for 18 percent, or $16.37 million, of the total expenses.