LGA helps keep area levy increases to a minimum
WORTHINGTON —During the 2013 session, the Minnesota Legislature increased the Local Government Aid (LGA) amount by $80 million.
“We do have to thank the legislature for getting through when there were so many years that went by and we either had part of the LGA withheld or we had considerably less,” Worthington Mayor Alan Oberloh said. “At the rate we were going, we were going backwards every year on the amount of LGA we were getting. Our needs don’t go down.”
Across the state, cities are expected to raise the levies by 2.1 percent, according to a state Revenue Department report.
“There will be a number of legislators who seize on any increase as evidence that local governments are (big) spenders, and they will take every dollar and spend it and get more and more and they will take every dollar they can get,” Gov. Mark Dayton said. “So they are going to undermine the case we have been making.”
Throughout southwest Minnesota, many of the levy increases were minimal.
“Communities, generally, in this area, I don’t think put in a lot of fluff with the things they put on their levy,” Oberloh said. “That isn’t something people are trying to do. There are ways to get projects done that have to get done.”
In fact, while levies increased across five of the six cities contacted by the Daily Globe, many of the citizens will actually see a decrease in property taxes.
“The total tax rate within the city went down about 10 percent for residential and six percent for commercial,” said Ben Martig, city administrator of Marshall, which had a 2.9 percent increase in the levy. “We pay very close attention to the total tax bill. Ultimately, we are concerned about the city’s portion, which our tax rate is a very slight decrease. … Next year, they will pay virtually the same — about a dime less.”
Here is a look at six cities across southwest Minnesota:
The city of Worthington had one of the lowest tax bases of the six cities surveyed by the Daily Globe.
“I think over the years, traditionally, the Worthington city council has always been very conservative when it comes to setting their levy for the next year,” Oberloh said. “This council pretty much sent the message we are going to do what we can to keep property taxes in line. I think we’re doing a great job.”
Worthington increased the amount levied by $28,324 — or .9 percent.
“I’m pretty proud of the amount we got to,” Oberloh said. “At the beginning of the year, would I have ever thought that? No, I would have thought we would have been in the mid-three range — 3 1/2 percent.”
The city is receiving $3,175,460 in LGA next year, which represents a $404,477 increase.
Because of the growth in the tax base, most in Worthington won’t see an increase in their taxes in 2014.
“Our tax rate continues to go down as more development happens and our levy continues to stay in check,” Worthington City Administrator Craig Clark said. “Next year’s increase in the adjusted tax capacity will allow most residents to see a 6 percent decrease in their city taxes.”
The city of Luverne passed a 4.9 percent increase for the coming year.
“Obviously, we try to keep the tax rate as low as possible,” Luverne City Administrator John Call said. “This was going for a good cause, which was a new pumper for our fire department.
“Overall, it should have a pretty minimal increase on at least the residential taxpayers because we did have an increase in our tax base,” Call continued. “In running the numbers on a $100,000 house, the tax payers are actually going to see a decrease for this coming year.”
The total amount levied is $1,484,357. The 4.9 percent increase equals $69,771. However, the debt service for the fire truck is more than $100,000, meaning without the truck, the city could have decreased the levy.
“A growing tax base is a big plus for our city,” Call said. “In looking about putting that debt service in there and increasing our levy, we have the knowledge our tax base would be increasing, so that’s how the numbers came out. We’re very happy about that. The owners of houses in town will actually see a decrease in their tax bill for 2014.”
Luverne will receive $1,349,790 in LGA next year, which is $155,615 more than in 2013.
“Everybody looks at the tax rates and what people are paying in taxes, but we also have to look at what services do people get for their tax dollars,” Call said. “Really, the whole theory of LGA is to try to allow governments and communities out here like Worthington and Windom and Luverne to have the services that are somewhat comparable to what you’d have in the Twins Cities, which has a much larger tax base.”
In Windom, the tax levy will remain unchanged.
“The council has worked very hard at this,” Windom City Administrator Steve Nasby said. “I kind of took a look back at the last five years, and I think we’ve averaged just a hair over 1.6 percent a year over the last five years. That would include this year.
“We were 2.98 percent last year, and the year before that we were right at 1.6,” Nasby added. “Taking a little bit longer view of it, we’ve been working pretty hard to keep that tax rate down as much as we can.”
Windom will levy $1,654,328 — the exact same amount from a year ago.
“Even though we kept a zero levy change, people in town will probably see a little bit of a decrease in taxes,” Nasby said. “We didn’t come out and say you’re going to see a big decrease in taxes because we just don’t know what that number is. I know on my personal statement, when I got the preliminary a month ago, I saw that there is a decrease in my tax rate.”
The city will receive $1,418,000 in LGA in 2014, which is an increase of $216,000.
With the extra money, Windom was able to partner with the school district for a school resource officer. It also used some of the money to replace a rescue pumper truck and to offset debt services on street projects.
“Had we not had that local government aid, we would have either had to raise the tax levy quite a bit to compensate for those things, or council would have had to make some different choices on some of those items,” Nasby said.
The city of Jackson will see a 5.6 percent increase in the levy this year, according to city administrator Jennifer Bromeland.
The total levy amount in the city is $1,345,218 — an increase of $71,285.
“The increase in the tax levy is due largely to debt service associated with street reconstruction projects,” Bromeland said. “No taxpayer concerns were voiced at the (truth in taxation) hearing on Dec. 3 or on Dec. 17 when the final tax levy and budget were adopted.”
Jackson, like other cities, is seeing an increase in LGA. It will receive $205,230 more in 2014.
In Marshall, the city’s levy is increasing. However, according to city administrator Ben Martig, citizens won’t see much of an increase. In fact, on the overall tax burden, most will see a decrease.
The city did increase the levy by 2.9 percent this year.
“We have two infrastructure funds that are driving the increases,” Martig said. “Basically, its street-related infrastructure improvement. It was a planned increase in our debt service fund that we’re using that for.
“The LGA did assist us on our operating fund increases that we had on expenditures,” Martig continued. “We did have some losses in revenue in other areas. That’s where the levy is going into — our debt service for next year, which is about all we could legally do under the state law.”
The city’s general fund budget is $10,410,100. However, the expenses are even more, meaning some reserves are being used. The total levy amount is $5,119,357, which is an increase of $144,474.
Marshall is receiving $340,696 more in LGA from the previous year. In 2014, it will have $2,451,304 in LGA.
Without that amount, Martig said, the city would have had to make some different choices.
“They basically have one of two options,” he said. “We would have had to actually reduce service levels significantly, or the levy would have had to increase to make up the difference. We would have had to levy that amount of LGA to basically keep us whole, which would have been a more significant increase than we had. I think we would have had about a 6 percent more increase in property taxes had we not had the LGA increase.”
City administrator Mike Humpal looked at his estimated tax bill for 2014. His city taxes are going down by about $1.
“For example, my house is valued at $131,500,” Humpal said. “If you take off the homestead exclusion that the legislature gave and my property taxes went down 9 percent from last year in total with city, county and school district, they went from $1,535 to $1,396.”
The city is having a 3 percent increase in the levy. Fairmont will now levy $2,114,714, a $96,429 increase from last year.
“We had three-year contracts with all of our labor unions for two percent increase,” Humpal explained. “Our health insurance was held pretty constant this year. Our work compensation went up, our overall insurance through the League of Minnesota Cities went up; $96,000 doesn’t go very far in the scheme of things when you’re spending $140,000 for a front-end loader.”
Fairmont is getting one of the lowest increases in LGA in 2014. The city will receive $3.7 million, but only an increase of $18,000.
“Anytime we can increase outside sources of revenue, it’s going to help us hold the line,” Humpal said. “We took into account there’s the $18,000 of LGA and sales tax saving that the legislature allowed us; we estimated that will save us $50,000 or $60,000. Between the $18,000 and sales tax saves, it certainly allowed us to hold the line on our levy. The last couple years we’ve been in the 3 percent range.”
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