City of Crookston preliminary 2021 levy set at a 6% increase; goal is to get to 5%
Weasner says the City's massive reliance on state Local Government Aid needs to be eased somewhat, which means local property tax revenue needs to support a larger percentage of the budget.
After some pushed for a 7% City of Crookston 2021 property tax levy increase and others countered with a 5% increase, the Crookston City Council at a special Ways and Means Committee meeting Monday night found some middle ground and approved a preliminary 2021 levy increase of 6% on a total budget of just over $14 million, with the goal between now and when a final, certified budget and levy must be approved in December of whittling enough expenses to get it down to 5%.
The vote on Ward 4 Council Member Don Cavalier’s motion, seconded by Ward 3 Council Member Clayton Briggs, was 6-3 in favor. Council members Jake Fee, Steve Erickson and Bobby Baird voted against. Judging by their comments during the discussion, they wanted a 5% preliminary levy increase.
In order to get from 6% to 5%, Interim City Administrator Angel Weasner said approximately $22,000 in savings is going to have to be identified and removed from the 2021 expense ledger. Council members didn’t think that would be too difficult. Items mentioned for potential removal included $15,000 for the Northwest Minnesota Small Business Development Center in Crookston – which could be moved to the CHEDA budget, Fee said – as well as a paving project at the Crookston Police Department and a new Polaris Ranger for the Parks & Recreation Department.
The budget at this point includes $25,000 for efforts to market Crookston. The Crookston Area Chamber of Commerce has requested $25,000 to lead marketing efforts for the community, but Fee pointed out Monday that the $25,000 is “just budgeted, and not for anyone specific.”
So how does a 5% City levy increase in 2021 impact homes at various price-points in Crookston, in terms of increased property taxes paid in 2021 compared to 2020? Here are a trio of examples:
• $50,000 home: $10.36 more
• $150,000 home: $31.09 more
• $300,000 home: $62.18 more
At 6%, the impact is:
• $50,000 home: $13.31 more
• $150,000 home: $39.91 more
• $300,000 home: $79.81
Weasner recommended a 7% preliminary levy increase, citing as her primary justification the City’s need to decrease its massive reliance on the state’s Local Government Aid (LGA) program. There is perhaps no other municipality in Minnesota more reliant on LGA than Crookston, which is considered low on the property tax wealth scale. It’s been the council’s pattern over the past several years to approve levy increases of 3%, with the occasional 5% increase, but Weasner said that’s not going to put a dent in the City’s dependence on LGA, which is inching closer to $4 million a year.
“We feel 7 is a good number,” Weasner said. “I know everyone likes a lower number, but if we’re ever going to get off being so reliant on LGA, 3% does not get us anywhere.”
A 7% levy increase would help start the City down a path, even if only slightly so, of utilizing local property tax revenue more and LGA less in its budgets, she continued. To illustrate the point, Weasner said LGA made up 66% of the City’s 2020 budget; in 2021 it’s projected to account for 63%.
Potentially more alarming is the possibility, albeit remote, that the state, which has seen a multi-billion dollar surplus turn into a deficit of around $4 billion because of the COVID-19 pandemic, could pull back on its LGA commitments to Minnesota cities. It’s called “unallotment” and a lot of things need to happen before the state would actually do it, but at this point, Weasner said, the City has to be ready for anything.
In discussing an unallotment scenario with department heads, Weasner said the City’s budget could “mitigate a half million (dollars)” but, after that, “it gets very difficult.” Anything beyond a $500,000 LGA hit to the budget, and the City would be faced with reducing services and cutting positions, Weasner added.
While understanding the need to be prepared for anything, especially with the pandemic showing no signs of easing, council members didn’t think it would be politically prudent for legislators to mess with a program so critically important to Crookston and many other Minnesota cities.
“I can’t see them playing games with LGA,” Fee said. “It would affect cities all over the state.”
“There would be heads on the chopping block,” Baird added.
On the plus side, Weasner noted that Gov. Tim Walz, who hails from greater Minnesota, is “very supportive” of LGA.
A major plus in the 2021 budget in the eyes of council members if the fact that, after dipping into reserves in recent years to the tune of $200,000 to $300,000 a year in order to balance the books, the 2021 budget is balanced and it requires no reserve spending.
Another plus is the fact that the City’s property tax base continues to grow slowly but consistently, due to new homes being constructed each year and previous new homes and other new business expansion that qualified for property tax abatements having those abatements expire, meaning the revenue can be added to the property tax rolls. For years, a 1% property tax levy increase was calculated to equal around $18,000 in new revenue, but Weasner said in 2021 the positive impact of a 1% levy increase on the revenue budget is approximately $22,000. As the tax base grows, it lessens the financial impact on property owners from a levy increase.
Establishing the 2021 preliminary budget and levy will be on the council’s Sept. 14 meeting agenda. After that, work will commence to find the $22,000 in necessary savings in the budget to get the 2021 levy increase down to 5% in advance of the December final, certified budget and levy vote.
Statute allows for preliminary levies to be reduced between the time they’re established and the final levy is set, but they can’t be increased during that time.
Council members and Mayor Dale Stainbrook who were open to Weasner’s recommendation of a 7% levy increase in 2021 and also understand the desire to start at 6% with the goal of getting to 5% noted that don’t want to see a 5% levy increase come under fire as the December vote approaches, in the form of a push to get the 2021 levy increase down to 3%.
“I’m OK with 5, but when it gets down to it I don’t want to be pushed to 3%,” Stainbrook said.
“The assumption would be that we stay at 5,” Fee responded.