No residents addressed the property tax levy during a public hearing Tuesday, Dec. 15, as the Crow Wing County Board entertained a 4.97% increase in 2021.

At the behest of Commissioner Rosemary Franzen, who wanted more time to examine information she’d requested from staff, the board voted unanimously to table the vote on the resolution to its next regular meeting Dec. 29.

The county is expected to collect a total of $41,262,480 in 2021 from those who own property. While still an increase over the 2020 tax levy, it’s a smaller increase than each of the last two years — 6.99% in 2019 and 6.95% in 2020.

Three main budget pressures are driving increases, according to county officials — about $1.1 million in additional personnel costs, due to the once-in-a-decade occurrence of a 27th pay period; another nearly $1 million expected loss in revenue because the Minnesota Department of Corrections may no longer house state inmates in the county jail due to the effects of the pandemic; and a loss of investment income because of a drop in interest rates, conservatively estimated at $293,985.

Impact on taxpayers

How would this increase in the county’s levy impact taxpayers? It depends on the individual circumstances of each property — most notably, changes in value. In some cases, people may end up paying less to Crow Wing County than in the previous year, even with the increase in the amount of money to be collected.

For example, if the owner of a Brainerd residential homestead property with an average market value of $101,200 saw no change in the assessed value of their home between 2020 and 2021, they would actually see the county portion of their taxes decrease by $1 — $328 versus $329. If the value of their home increased by the average 3.73% next year, they would pay $340, or $11 more.

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The owner of the average Baxter commercial/industrial property valued at $1,063,100, experiencing no value change, would pay $6,773 instead of the $6,801 paid in 2020, or $28 less. With an average increase in value, however, that taxpayer would shell out $233 more.
No value change to the average $376,500 seasonal recreational property in Crosslake would also result in a small decrease in taxes year over year, from $1,248 to $1,243. Or with the average value increase, the seasonal recreational property owner would pay $41 more.

County Administrator Tim Houle said in September an important consideration when setting a budget is the amount of new construction in the community expected the following year. New construction represents an increase in demand for services, Houle said, which will drive additional expenses. According to a county analysis, the value of new construction expected in 2021 is $140,573,617 — a 26.17% increase over the previous year and 1.17% of the total estimated market value in Crow Wing County, which exceeds $12 billion.

How property taxes are expected to be spent

Property taxes are expected to account for 45% of total county revenues next year, with intergovernmental revenue — such as grants, cost-sharing agreements and other financial arrangements with other units of government — accounting for 33% of the projected revenue. Other taxes (9%) and charges for services (7%) make up the bulk of the remaining revenue, which is expected to total $92,788,205.

Of the $41.2 million proposed for tax collection in 2021, the bulk will support community services and public safety. One-third of the taxes will be directed to community services — the county department tasked with adult services, child support, children and family services, community corrections, public health, financial assistance, nutrition support and veteran services. Public safety services — accounting for the sheriff’s office and the county jail — will receive 28% of the collected property taxes.

The remaining taxes collected will be split among the remaining county departments and spending areas — administrative services (12%), governance services (11%), land services (7%), highway services (5%) and capital projects (4%). Less than 1% will go toward paying off debt, toward which the last major payment was made this year. Remaining debt includes airport bonds and a small portion for the Crosslake highway department facility. The highway department benefits from outside revenue sources, such as state aid and the local option sales tax, more than most other county departments.

Evolution of budget requests

When budget talks began, the collective budget requests of senior managers would have increased the levy by $5.2 million, more than twice the $1.9 million agreed upon by county commissioners. It’s typical during the budgeting process for departments to begin with a proposal that would fulfill wants and needs, only to be reduced as concessions are made.

The decision to divert funds originally intended to bolster unallocated fund balances — essentially the county’s savings accounts — to help cover the extra pay period and lost jail revenue helped to bring the increase down to within the 5% margin requested by the county board. This means those funds will not be rebuilt as quickly as county staff originally planned, but Finance Director Nick Mielke noted in September federal funding from the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, will funnel toward some of those fund balances when used to offset expenses the county incurred specifically due to the pandemic.

Reductions were made to budget requests in most departments, including the sheriff’s office, which originally accounted for 56.8% of the overall potential increase to the 2021 levy.

Sheriff Scott Goddard said in September the majority of his controllable budget requests were shelved for next year, including body cameras, a K-9 officer, training for two new bomb technicians, less lethal equipment, funding for the sheriff’s reserve program, and contracted mental health support services for employees. He also no longer plans to shift six part-time deputies to full-time in 2021, which would’ve impacted the budget by an additional $231,163, according to the original proposal. Goddard said he plans to seek outside funding sources to support some of those items, such as the K-9 program.

Unorganized territories

Also part of the resolution were the levies for the First and Second assessment districts, for which the county board serves as the township board. The 2021 levy in the First Assessment District — otherwise known as Unorganized Territory — is a proposed $1,074,355. This is an increase of $96,333, or 9.85%, over 2020. The First Assessment District includes the area north of Baxter and Brainerd, east to Merrifield, extending northward to the Nisswa city limits. It represents the third-largest population center in the county.

In tabling the levy and budget resolution, Franzen also cited the need for further discussion concerning the Unorganized Territory levy increase, which she erroneously said was more than 20%. Franzen referenced the expected expenditures in 2021 — $1,182,681 — instead of the tax levy.

In 2017, the county board agreed to increase the Unorganized levy by about 9% each year through at least 2023 to cover road construction costs. This decision came when county officials realized the rate at which residents were taxed was not sufficient to cover those costs after 2020.

The Second Assessment District preliminary levy was originally set at $66,048, which would’ve led to a 77% increase over the previous year. Mielke explained in September this was due to a clerical error in 2020, when residents in that district were taxed according to a $36,000 levy instead of $67,000.

The final proposed levy, however, was reduced to $47,450 for 2021. After Tuesday’s meeting, Houle said since it was the county’s error, it was decided the increase would be spread across three years, rather than occurring all at once.

The Second Assessment District, formerly Dean Lake Township, is located in the east-central portion of the county along the Crow Wing-Aitkin county line.

CHELSEY PERKINS may be reached at 218-855-5874 or chelsey.perkins@brainerddispatch.com . Follow on Twitter at twitter.com/DispatchChelsey .