Taxes are rising, but tempers aren't

Added policing is one factor leading to incrementally rising tax levies in some south metro cities, in a year when there is little sign of a tax revolt. Cities will finalize their 2008 plans within weeks.

By David Peterson and Kevin Duchschere, Star Tribune

Last update: December 7, 2007 - 10:32 PM

Taxes are rising in many communities south of the river, but taxpayers appeared this week to be reacting calmly as officials moved toward final decisions on budgets for next year and the taxes needed to cover them.

In Lakeville, the only two taxpayers who came this week when the City Council invited citizens to react were a young couple who wanted to learn more about how the budget worked. A handful attended the Eagan hearing, with only positive feedback from the one person who spoke up. For the first time at the Dakota County hearing, no one spoke, Finance Director Rick Neumann said.

"It's basically a conservative year," said Ann Lanoue, Inver Grove Heights' finance director. "When you compare one department year to year, there are very little changes overall."

The figures in the accompanying chart, supplied by the counties, are the proposed maximum levies for all taxing jurisdictions in each city. They do not take into account the result of levy referendums approved in November or any adjustments that the county, the cities or school districts are making before taking final action on their tax plans this month.

Here's a look at the situation in a few major south-of-the-river communities:

SAVAGE

Partly because Savage is being hit by the housing slump, with revenue from building permits and the like expected to decline by $250,000, the property tax levy in the city is expected to rise by $905,000, an increase of 6.5 percent.

Another big-ticket item will be the $200,000 tab for a new dispatch system for police and firefighters.

City officials note that the tax increase for people in Savage is only marginally due to the city itself -- about $13 a year on a home valued next year at $258,200, which is the city's median (half are worth more than that, half less). "All the money [on tax bills] isn't going to the city," said spokeswoman Amy Barnett.

PRIOR LAKE

Long a site of tax-rate contentiousness, Prior Lake had a well-attended but subdued and civil public hearing on taxes this year, said the city's finance chief, Ralph Teschner. All sides agreed the city needs to pause for a deep breath after a series of major investments: a new city hall, a fire station and other big projects.

City officials point out that their rank on the annual Citizens League tax survey has dropped steadily in recent years, from 37th-highest in 2004 to 54th this year. It has the lowest tax rate of the seven Scott County cities, after being in the middle of the pack for years.

Even so, taxes collected are expected to rise, partly because of the costs of operating the new facilities.

And critics note that utility franchise fees, a back-door form of taxation, are rising -- a point Teschner concedes. It's a way of billing utilities for things they've been getting for free, he added, and the pass-through to property owners amounts to about $36 a year.

SHAKOPEE

Shakopee officials note that their tax rate is expected to drop slightly this year, in a year when several Scott County cities with higher rates to begin with -- Belle Plaine, New Prague, Jordan, and Elko-New Market -- are proposing to raise theirs.

"The proposed 2008 tax rate of 31.828 is a 0.3-percent decrease from 2007," said spokeswoman Lori Cram. More money will come in than last year, she said, but that will only "result from a change in valuation of the property."

The growing city does intend to add two police positions and a full-time fire chief but will reduce positions in other areas, including engineering.

As building activity has slackened amid a metro-wide housing slump, the share of all revenue coming into the city from taxpayers has risen tremendously. The ratio of property tax income to license and permit income was a little over 2 to 1 in 2004, but in 2008 is expected to rise to 16 to 1.

EAGAN

Dakota County's biggest city is looking at a 4.9 percent levy increase for 2008, one of the lowest in the metro area, said Gene VanOverbeke, Eagan's administrative services director.

The most significant changes are in the city's street fund, which will grow by $1.1 million, and another city fund to renew and replace public facilities and infrastructure.

About 80 percent of the budget increase is related to inflation and personnel costs, he said.

INVER GROVE HEIGHTS

After making some late adjustments in the 2008 budget -- for instance, deferring the spending of nearly $500,000 for new road maintenance equipment, squad cars and snowplows -- the City Council will be acting Monday on a 7.3 percent levy increase (slightly more if you add in the watershed tax districts, as Inver Grove Heights does, Lanoue said).

The budget includes increases for the 2008 elections, state-mandated employer pension contributions and a new information management position.

dapeterson@startribune.com • 952-882-9023 kduchschere@startribune.com • 952-882-9017

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