Farmington’s budget plans have hit another snag, and city leaders and council members are frustrated.
The city recently learned that the state not only capped local property tax levy increases at 3 percent for 2014, but any local government aid (LGA) from the state counts against that 3 percent.
After getting no LGA, from the state this year the city is expecting a bump up to about $250,000 for 2014 — an amount equal to about 3 percent of its 2013 property tax levy. That means there is little room to collect more levy dollars for 2014 operating costs.
“Shame on our lawmakers and our governor,” said Council Member Jason Bartholomay at a council workshop Monday. By placing these limits, they “screw over the residents of Minnesota and the cities.”
The one-year, statewide levy limit for cities puts Farmington in a tight spot given its history — it has not increased its levy for the past two years, and would have needed an increase of almost 6 percent in its levy for its 2014 proposed budget to cover costs.
The City Council directed City Administrator David McKnight at its last council workshop to propose budget cuts to get down to just a 3 percent increase. Now, with the LGA funding coming, the cap would leave Farmington with barely any room to increase its levy. The LGA funding equals 2.97 percent of the 2013 levy.
What’s more, the city is hesitant to use LGA funding for its operating budget, because it is not guaranteed every year. Farmington planned to use LGA money for one-time needs. This is the first time Farmington has received LGA since 2004.
Council members expressed frustration about applying for LGA, thinking it would help them, but now it’s instead hurting them.
“I’m so mad,” Bartholomay said. “We do the right thing, and we get punished for it.”
The levy increase in the proposed budget was expected to fund items such as fire vehicles, fire training, fire equipment, police investigations equipment, patrol vehicle parts and finance services. The budget also contains salary estimates for city employees with contracts expiring at the end of 2013, so any salary changes are unknown.
The city also planned to set aside $125,000 for long-term capital projects like street improvements that have long been put off. “I don’t know if anyone’s driven on them lately, but it’s embarrassing,” Mayor Todd Larson said.
Paying down city debt, which increased by $80,000 for next year’s budget, was also factored into the proposed budget increase.
In addition to the levy limit, cities are allowed flexibility for “special levies,” and in Farmington’s case, that would be a levy to help pay off its debt of $2.8 million.
Farmington will now have to cut a little more than $300,000 from its proposed 2014 operating budget — which takes out the approximate 3 percent increase the city assumed it could levy. In the end, the 2014 operating levy will remain almost the same as the 2013 levy.
McKnight suggested the council consider funding the CIP or capital improvement projects through a five-year bond instead of keeping it in the budget at $125,000.
“We can’t keep pushing these projects further down the road,” he said.
Larson agreed. “We’ve just been kicking the can down the road for too many years, and it’s time to get started.”
The city awaits an exact number on its levy limit from the Minnesota Department of Revenue, when it will also find out how much it is getting in fiscal disparity funds. The information is expected no later than Sept. 1 this year.
“The numbers you see today are the worst-case scenario,” McKnight said at the council workshop. “If they get better, great. If not, we’re prepared.”
City Council members said they are put in a place where they may have to use a portion of LGA funding for operating costs — maybe capping it at $100,000 of it, Larson said. Council Member Douglas Bonar said he doesn’t want to see any LGA used for long-term financial needs.
“It’s the corner we’ve been backed into,” Larson said. “I think we’ve cut here in the city as much as we can in terms of personnel.”
Some council members said they feel the state took complete control of local budgets.
“I feel like it’s not our budget anymore,” Larson said. “Two weeks ago, we had a budget. Now we’re scrambling again.”