What should be cut from the budget, what services can people live without and what are people willing to pay in taxes were all before the Baxter City Council in a work session Wednesday, Sept. 15.
The council has to adopt a preliminary levy prior to Sept. 30. Wednesday, council members were trying to find areas to cut to reduce the proposed tax levy.
Jeremy Vacinek, city finance director, presented the information to the council during the budget work session, noting the actual tax capacity information isn’t expected from Crow Wing County until late October or early November.
An annual $14,600 lease for Baxter Industrial Park land with T-Mobile for the communication company’s tower helped reduce the preliminary levy numbers by adding to the city’s revenue for 2022. In addition, a tax-increment financing district established in about 2015 is expiring at year-end. The Isle Drive TIF district was created for extension of Isle Drive, the parcels south of Walmart for the medical offices, the Essentia Health Baxter Clinic and the McDermott Orthodontics office. With the statutory end of the TIF district, Vacinek said about $220,000 of tax capacity will now go back on the tax rolls.
As a result of those changes, Vacinek said the taxable tax capacity increased to about $13.3 million.
“So the good news is that there is an additional $220,000 or so of tax base that we're able to add into the calculation here, which drives that rate down a little bit further,” Vacinek said.
Looking at current spending of $7.9 million with taxable tax capacity of $13.3 million results in a tax capacity rate of about 59.7%, Vacinek reported.
What does that mean for residents? On average, Vacinek said there is a 3.75% increase in residential property valuations and just shy of 3% on commercial/industrial valuations. Using those increases in estimated market value based on that average and applying the actual tax capacity rate from 2021 and the proposed for 2022, estimates show how much more property owners may pay.
A home with an estimated market value of $250,000 could see an increase of about $131 for the city portion of its property taxes, or about 9.8% overall. Before the two changes that will bring in more revenue for the city, the $250,000 home could have had an increase of about $159.
A small commercial industrial property valued at $500,000 could see an increase of about $444 or an 8.5% increase overall.
By the numbers
Existing 2021 levy\u0009
Preliminary 2022 levy
Increase over the prior year
$735,200 or 10.1%
Council member Zach Tabatt said he would rather not see an increase in double digits.
City Administrator Brad Chapulis said the question would be the council’s level of expectation for providing certain services as it relates to parks or streets and utilities, in particular. Chapulis said they could try to stretch out a year or a few years on road construction projects, or do temporary 1-inch overlays, and work with the community so there is an understanding roads will be of a less quality than the city has been used to having. Chapulis said the other bigger ticket item out there is the replacement of the Oscar Kristofferson park equipment. The playground equipment is pre-2000 and the equipment has a life expectancy of 25 years, Chapulis said.
“Can we push it off a year? Yes,” Chapulis said. “Park staff is saying, as the condition, in their opinion, should warrant that it should be taken down if not replaced. I look at it from the standpoint that we don't want to get to a point where it does become a liability.”
Other proposed expenditures highlighted include:
$13,600 for 2022 elections,
$19,000 for The Center, a 3.26% increase,
$5,330 to the Initiative Foundation,
$8,000 to Fourth of July Fireworks,
$25,000 for city hall building maintenance,
$14,100 for employee wellness program, funded primarily from a Sourcewell grant,
$3,400 annual funding for future pooled vehicle replacement,
$25,000 for general fund expenditures to maintain reserves and unanticipated expenditures, including fuel cost increases or unknown continued pandemic effects,
$50,000 for council chambers audio/visual upgrades.
Council member Connie Lyscio pointed to the audio/visual upgrades. Chapulis said the question for the council would be what level of transparency or public process is wanted. Historically, those who wanted to attend meetings had to be in person at city hall. When meetings were virtual because of the pandemic, the council used Zoom and created a YouTube channel. Since they went back to meeting in person, they’ve recorded regular council sessions where the council members are at their microphones using an iPhone on a tripod. The quality of the audio has been a question for those recordings. Otherwise, people can request audio recordings of sessions without visual recordings, such as workshops. Chapulis said consensus from the council was for the ability for people to access, listen and participate. He said others indicated they wanted to participate remotely.
Tabatt said of all the things on the list, he was willing to go to zero on the audio/visual upgrades. He said while he would personally love to be able to do it, he was not in favor as part of a $700,000 levy increase. Later in the conversation, the city noted it gets few views of its recorded meetings now.
Mayor Darrel Olson said he’s talked to every department head and gone over the budget about 10 times and this increase does not include wish lists, like the dog park and other items. Olson said when he first saw the 10% increase he felt sick when he went home after the discussion.
Olson said the areas of major savings is potential doing the 1-inch overlays for some neighborhoods versus the hundreds of thousands of dollars the city has been carrying for construction projects. Or, he asked, are they messing up the normal cycle of the neighborhood or is it better to let the roads rot to a point where they are ready to be redone? The city’s roads are aging and getting to be 30 years in age, he noted.
Tabatt noted River Vista has been “pathetically bad” but doesn’t know of anyone who would be too upset if it was left as it is for five years.
Trevor Walter, public works director, said road patching citywide is about $50,000 to $60,000 right now and rising. It was, he said, almost $100,000 a year just doing pothole patching and one summer, before the city started doing road projects again, the city put in 12 semitrailer loads of mix by hand before the city started its pavement management program about eight years ago.
Olson said the council’s job is to be managers and visionaries and haven’t always done a good job in some areas. He noted the push to put in trails and more trails even as some cautioned there would be future maintenance and the need to put away money for those future costs. Olson said they didn’t do that fast enough and now they have 20-30 year old park equipment and pavilions starting to rot and really haven’t set aside money for some of that.
“I’m sure,” Olson said, “some of those decisions were made on a night like this when they were cut from the budget as not being a current priority but in 10, 15, 20 years that can come back to bite you.”
Walter said the needs for the ailing water treatment plant have been an eye-opener and looking at what it takes to maintain city hall and now add in nine more parks, the dollar amount will be another eye-opener.
“This is the important conversation,” Tabatt said. “So you are saying that we should expect indefinite 10% tax increases or stop adding stuff. ... That is what I'm hearing anyway, you know, just to replace what we have, we're at this budget, year in/year out.”
After an extended conversation, Chapulis said with items changed and stretched, they could be at an increase of 7.4% instead of more than 10%.
Chapulis asked if the city wanted that or a lower number and then staff can work to see how to get down to that. Tabatt said he’d like to see the number lower than 5% but he hears that 7% is bare bones and he didn’t want to be short-sighted.
“It's the same internal debate I have with myself every year,” Olson said. “It's how low do you go without handicapping staff, without handicapping the city, without looking extravagant.”
Chapulis said they’ll continue to work on the numbers and be back before the council for its next meeting Tuesday.