Expect tax hikes across south metro

Cities find they can no longer delay some expenditures. Homeowners may be spared portions of the increases.

Shakopee, says Mayor Brad Tabke, has not been taking care of itself.

"If you want to see firsthand what happens when we don't properly maintain our infrastructure," he wrote in a recent installment of his blog, "head over to Van Buren St. or 12th Ave., where we have delayed road reconstruction for years in favor of a flat levy. Remember, from the street you can't see sewer backups resulting from aging city pipes."

The upshot: By a narrow margin, Shakopee's City Council is preparing this year to pump up its property tax.

For complicated reasons, that doesn't mean that most homeowners would see a jump in their own city tax bill. But it does represent a changing posture on tax hikes -- and one that's common this tax season all across the southern suburbs.

"A lot of communities have really cut as much as they can," said Eagan Mayor Mike Maguire, "and have to go back to taxpayers at some point and say, 'The cost of your cable bill goes up. Sometimes your government bill goes up as well.'"

Even places that are still holding firm are warning that it can't last forever.

"We keep tapping into our savings account and we are dangerously close to state minimums," Savage Council Member Al McColl warned colleagues. "It's going to affect our bond rating." Folks might not like to hear it, but "we will have to take a look at an incremental tax increase [at some point] ... We have to be realistic that that point is coming soon."

With the values of many homes still dropping -- there's a time lag between the actual market and what gets factored into tax bills -- a lot of homeowners won't see the effect when taxes bump up.

Take Burnsville, where rising costs of services, from a staff pay hike to rising gas prices, are driving a levy increase.

Officials have already curtailed some programs to offset the jump, stashing less aside for parks improvements or emerald ash borer prevention. But council members are reluctant to further slash city services.

"We took our bitter medicine in 2009 for the 2010 budget," Council Member Mary Sherry said at a budget workshop. "Like all medicine, if you take too much of it, you can kill the patient."

But the increase would still yield a drop in the city tax for the average homeowner, mostly because the burden shifts to business property.

"Residential properties have dropped dramatically faster than the commercial-industrial [properties], so the commercial-industrial carries a larger burden," Council Member Dan Kealey said. With that in mind, in fact, council members stressed -- as do many of their peers in other jurisdictions -- a desire to cut the proposed levy further before final approval in December.

The figures being approved this month are maximums from which cuts can still be made, and are meant to alert constituents of what's going down -- or up -- at City Hall in time to weigh in before final decisions are made in December.

Eagan Mayor Maguire describes his city's proposed maximum levy as part of a "continuation budget," adding: "We haven't really cut any significant services, nor have we added any." The increase is driven by inflation and other rising costs, including the first pay raise for non-union staff in a couple of years.

"At some point you make the determination that you need to make some modest moves in compensation to staff," he said.

Likewise, Mendota Heights' preliminary 3.9 percent levy increase reflects a 2 percent wage increase for city employees and a 10 percent increase in what the city will pay in health insurance premiums next year.

West St. Paul has announced a possible 5.7 percent levy increase as a place to start examining budget needs, said Mayor John Zanmiller.

"We are not so much playing catch-up as anticipating the needs of the departments given our future projects and obligations," Zanmiller said. The hike reflects a request by city staff for an additional officer and support staff for the police department and a communications-marketing specialist.

Rosemount proposes to increase its levy by 1.26 percent to cover salary adjustments, the proposed addition of a senior center and additional maintenance for new ballfields at UMore Park.

Similarly, the biggest part of Northfield's $546,026 levy increase is $451,505 for the first-year bond payment for a planned new police building, said City Administrator Tim Madigan.

In Apple Valley, Finance Director Ron Hedberg said the city's 4 percent proposed increase needs to be seen in the context that his city has no property assessments to help pay for street repairs, which account for about $1 million of the 2013 levy.

In Prior Lake, officials note that an abnormally large bump this year is caused mainly by the council's decision last year to use some unexpectedly large reserves to offer a one-year break. That was always going to end up in a slight wince when the levy bouned back up.

However, there are also some new spending initiatives, as in Shakopee, in both cases including major infusions for economic development as the county seeks to energize its efforts in that direction.

Even so, said Council Member Warren Erickson, "per household, versus two years ago, we actually have a reduction in the levy. It's a whole dollar, but it's a reduction, not an increase. We're keeping costs stable. As the city grows, we do have more roads and things to plow and can't keep total costs the same."

Council colleague Richard Keeney said he isn't sure the headline numbers always reflect actual spending trends. Although he supports some of the spending concepts, he said, "We need to make sure we don't mislead people ... we can't tell ourselves we're only spending a certain amount when every year, off to the side, we also have these one-time-only 'special' expenditures [for such things as technology upgrades and parkland], because it ends up being a hefty increase on the spending side."

Many cities are making modest cuts or delays to minimize tax ramifications. Prior Lake, for instance, is delaying a costly citizen survey.

In Shakopee, Tabke notes, "In 2013 you will probably no longer see the Hometown Messenger [a city publication], Shakopee Public Access Channel, employment ads in the newspapers or overtime [weekend] help at Derby Days. These cuts resulted in $31,500 in savings."

Laurie Blake and Jim Adams contributed to this report. dapeterson@startribune.com • 952-746-3285 katie.humphrey@startribune.com • 952-746-3286

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