Addressing her City Council not long ago, Shakopee’s finance director was candid:
“It’s a really good environment,” Julie Linnihan said, “to bring out a tax increase in a growth market rather than a declining market.”
Across much of Scott County this fall, cities are expected to hike taxes in an improving economy after having been cautious for years amid recession.
The circumstances for some are better than others, however, because not all are getting a big jolt of state aid.
The bigger, more prospering suburbs across the county’s northern tier don’t get any, while the four rural outposts further south will reel in a windfall: a jump of nearly $800,000 among them.
New Prague, a major recipient of state aid, was even able to trim its tax levy by 1.5 percent after holding it level for two years.
Belle Plaine had a very short meeting on the topic of taxes. Interim administrator Dawn Meyer merely explained that state legislators’ largesse will allow the city to bump up its budget by 5 percent while nudging its tax levy up by just a tenth of one percent. A quick vote followed.
Cities hiking taxes, such as the contentious Prior Lake council, which is looking at a 3.3 percent jump, or $310,000, spent quite a bit more time on the subject.
“We had a zero-percent increase last year, using reserves [spending down the bank account],” Council Member Vanessa Soukup reminded colleagues. “The year before that, we reduced it. That brings us back to 2011, when we last did a tax increase.”
Cities raising taxes often point to a long-awaited growth in the tax base — as construction picks up and property values rise — as factors that make tax hikes more palatable.
Some also point to a need for more personnel in certain areas, notably building inspectors to handle the rising workload.
None of the tax decisions cities make at this point are final. That happens in December. But the preliminary decisions are important as alerts to citizens ahead of time of what officials are up to, lest taxpayers want to protest.
Shakopee seems headed for a 3 percent increase in the amount of money collected, though a 4.8 percent growth in the property market means tax rates would still fall.
One factor in that city, Council Member Steve Clay reminded his colleagues, is that there’s a looming bill to be paid.
After a “major growth spurt 20 years ago, 70 miles of roads, they are going to be in need of reconstruction, and that’s all coming due in a very short period of time. They will need to be redone as part of their natural cycle.”
The council wants to build up a kitty ahead of time rather than hit folks all at once.
During the recession, Linnihan added, “there have been deferrals, projects pushed off, when we were seeing 9 percent declines in our market value. As we see increases, it does give us an opportunity to address these projects.”
Savage is going with a 3 percent hike, about $300,000, though it will continue to spend down reserves — just not as much as last year. The last tax increase came in 2009, city officials say.
Aware that the smaller cities are getting a lot of help from the state and Savage is not, some in City Hall are grumbling.
“Savage for years has not gotten LGA [Local Government Aid],” said Mayor Janet Williams. “Some cities [across the state] get staggering amounts, and we don’t get any, and haven’t for a long time.”
The state’s formula is complex, but by and large the program takes from wealthier communities and gives to needier ones. Both Prior Lake and Savage have household incomes higher than those in Eden Prairie and Edina, according to one recent set of U.S. Census surveys — median incomes that are almost equal, at roughly $90,000.
For all their wealth, however, taxes set peoples’ teeth on edge in both Prior Lake and Savage. In the latter, the city’s elevated tax rate is a big issue in this fall’s campaigns for City Council. And in Prior Lake, fiscal conservatives continue to be edgy about the city’s financial management.
Former Prior Lake Mayor Mike Myser remarked on his way out of office last year that he got the feeling that the city was routinely under-projecting revenues, then collecting reserves it could later use for purchases it would be loath to openly raise taxes to finance.
This time around, fellow watchdog Rick Keeney closely questioned officials about what’s going on in that regard now.
Finance chief Jerilyn Erickson confirmed that new building permits are coming in faster than projected, helping contribute to unbudgeted revenues of some $700,000.
Mayor Ken Hedberg did note, though, that the city’s reserves in general are well below where they used to be, and could stand to be beefed up.
“From my perspective,” he said, “a 1.3 percent increase in the levy per household is well below the rate of inflation and still below where we were in ’08.”
Still, the existence of strong revenues seemed to help push the council away from the idea of setting a higher maximum levy for purposes of flexibility, allowing it to draw back later this fall.
Keeney argued against giving people heart attacks with the truth-in-taxation statements they get in the mail this fall, then pulling back to a lower final number.