Up they go: Crow Wing County ends 8-year streak of reduced taxes

What a difference a year makes.

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 purpose of tonight's meeting is to explain the 2019 proposed budget for county government and to explain from the budget then how much we're going to need to raise in local property taxes," County Administrator Tim Houle said before the public hearing.

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

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.

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 largest portion of our county revenue is our property taxes or levy at $36,753,448. The next largest slice of the pie is intergovernmental ... and that would include federal, state, local grants and aid," Finance Director Jason Rausch said in his presentation of the budget and levy.

Expected county revenue, expenditures

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 intergovernmental 33 percent.

"Our next largest two slices are 'other taxes' at 8 percent. This is where local option sales tax is accounted for, for additional road construction and road maintenance," Rausch said of the $7.04 million in revenue.

"And then 'charges for services' at 8 percent, which is charges for services to the customers of the county for licenses, permits and also our DOC (Department of Corrections) contract for housing inmates for the state of Minnesota."

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.

"Our largest service area is community services. We've seen drastic increases in this number in the past few years due to out-of-home placement (of children)," Rausch said.

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.

"I will point out debt service, which currently takes up 14 percent of our levy, but this would be the last year that we need to levy for debt service," Rausch said.

"Next year, we would not need to levy $5.1 million. It's right around $100,000 for the remaining debt that we still have for the airport and the Crosslake facility."

Part of the 2019 budget and levy were wage rates for county elected officials for 2019-a 3 percent raise in salaries: county attorney at $129,265 and commissioners at $30,900 each.

"As we see the national debt seemingly spiral out of control, at least one good thing is Crow Wing County will be completely out of debt in 2020, except for a small sliver of airport funds ... so I think that's great news for the residents of the county," Commissioner Paul Koering said.

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.

"The levy that we're actually collecting for community services and the levy that we're collecting for highway is drastically lower than what we're actually spending in those areas, and that's because we're getting a lot of state and federal grants," Rausch said.

According to Rausch, if the county has a desire to pursue a pay-as-you-go strategy in relation to addressing future capital outlay needs, then it would involve saving for capital outlays versus issuing debt for future capital and would take "much organizational dedication to properly plan."

Public comments

Dennis Emslie Drummond spoke at the public hearing and vented his frustration with governmental accounting, and it is not the first time he has run into a bureaucratic roadblock.

Last year, the Dennis Drummond Wine Co. opened and the county's first winery ran into permitting problems regarding wine production on site. Last month's decision by the board amended the county's land use map to allow the winery to operate as intended in Brainerd.

"We're asking for some kind of ... consideration for the fact that our business is new, and we're struggling to pay our bills and having this just being added on is just another encumbrance that we feel like 'Wow! This is coming out of nowhere,'" Drummond said Tuesday. Drummond also aired his concerns at the Brainerd School Board's levy public hearing Monday.

Vic Kreuziger of Pequot Lakes also spoke at Tuesday's public hearing and board meeting, and he continued his criticism of the county board after voicing frustrations during open forum at the Nov. 27 meeting.

"Something here fell between the cracks of our government. Someone or some department or some group of people should have been responsible for forseeing this situation that we're faced with now with a huge 7 percent tax increase," Kreuziger told the board.

"However I say that you folks are responsible. Like President Truman once said, 'The buck stops here.' The buck stops with you folks. You are ultimately responsible for what is happening here. ... From my standpoint, the county government is coming unglued."

Outgoing Commissioner Paul Thiede then called for a roll call vote on the resolution to approve the 2019 final budget and levy, and was the only board member to vote against its approval.

Writing on the wall

When it came to deliberating last year's budget, commissioners in a 3-2 decision voted against Rausch's recommendations to raise the levy by at least 2 percent. He warned them about impending budget concerns should they choose to continue their goal of achieving a flat or reduced levy.

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

In 2017, Rausch offered 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.

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've led to an estimated $3.4 million deficit below the recommended minimums of the funds.

Community Editor Chelsey Perkins contributed to this report.