Believing it already has reached the limit on budget cuts, the city of Lakeville has turned to tax increases, including its first imposed franchise fee on the use of gas and electricity, in preparation of establishing its 2010 budget.

The Lakeville City Council approved on Monday a maximum tax levy of 2.9 percent to counter lost revenue. The amount of the additional fee each residence would see on its monthly utility bills will be set at a later date.

The moves follow sizable budget cuts the city made in April.

"We did a hefty decrease in spending earlier this year, $1.4 million," Lakeville City Administrator Steve Mielke said, "and now our operating budget is being proposed to go down another $100,000. So it's a continuation of reducing expenses.

"We looked at what is the least amount we do to maintain services at the level we established this spring. So if this [budget] is adopted in its entirety and we accomplished all the objectives on spending we would be able to maintain those service levels."

The city will hold a public hearing on Dec. 14 before finalizing the 2010 budget.

Lakeville Finance Director Dennis Feller, who referred to the country's economic woes as the "Great Recession," said the city has lost $160,000 because of delinquent taxes. Lakeville also will have to do without the $600,000 the state no longer contributes through the Market Value Homestead Credit.

Lakeville businesses will absorb most of the tax increases. Lakeville home values have decreased a total of $3.5 million, which decreases the residential tax dollars the city collects. Commercial property owners are looking at a tax increase of 9 percent to help offset that loss. Homeowners would not see more than a minimal increase.

Mielke said the business community already has expressed its displeasure.

"They would prefer for us to do something to reduce that burden," Mielke said. "But we're already proposing a reduction in spending. A lot our increase in the levy is due to debt; road improvements, bridges, facilities."

Mielke said the city will be looking for concessions from the three labor unions who represent city workers. All three contracts run through 2010.

"We want to talk to [the unions] about options," Mielke said. "It doesn't necessarily mean opening up the contract. It could be increased furloughs, reductions in positions. We need to balance the money available with what the contracts call for."

Should the unions elect not to change their agreements the City Council would have to decide how the shortfall would be made up. Approximately two-thirds of the city's workers are in a union.

Dean Spiros • 952-882-9238