Lake Elmo council member said he never saw final budget council was asked to approve

The annual “Truth in Taxation” public hearing in Lake Elmo Dec. 1 left more questions than answers after one council member refused to approve a final 2016 budget that he said he’d never seen.

Required by law, the public hearing is the opportunity for the public to comment on the proposed property tax levy and budget, and to ask questions. However, a detailed copy of the final 2016 Lake Elmo annual budget and tax levy was not available at the “Truth in Taxation” public hearing, and left the public and city council to discuss the budget based on past conversations from committee meetings.

Although the final budget included more than $500,000 in proposed changes to the budget, a copy of the budget detailing the changes was not given to council members, the public or the press before the council voted to approve the budget and tax levy. Despite repeated requests from The Gazette, the city did not provide a copy of the final detailed budget in time for the Thursday, Dec. 3, press time.

Some members of the council didn’t understand why the data wasn’t available.

“(City Administrator Clark) Schroeder said that the council has seen this budget several times, but I have not seen our budget,” Councilmember Justin Bloyer said. “This is unprecedented in the history of Lake Elmo that we have not had a budget workshop and that nothing has been made available for the public to see. This is about a lack of transparency, and I won’t support it.”

“There have been two joint meetings of the finance committee that the full council was invited to,” Fliflet said. “Councilmember Bloyer didn’t attend either. There were ample opportunities.”

“I was accused of harassment in a public meeting. … I am not comfortable going to budget meetings that are not recorded,” Bloyer said.

The policy of recording committees and workshops was changed at the beginning of 2015, however, and budget workshops would not have been recorded this year. Following the city council meeting, Flifilet was asked to clarify the final budget process.

“I received copies of the budget and reviewed it in detail at several different meetings throughout the year along with the other council and committee members,” Fliflet wrote in an email.  “At the last Finance Committee, we did not review it in detail again and instead just discussed the items that would be changing on the final draft, which was a good approach that I was very comfortable with.”

Although the finance committee has discussed the budget, the full council has not discussed the budget since it approved the preliminary budget in September. But more than half a million dollars in changes have been made since then, and the line-item budget was not available to the council or public during the Truth in Taxation hearing and budget approval Dec. 1.

The council approved the final 2016 budget and tax levy in a 3-2 vote with Bloyer and Mayor Mike Pearson dissenting. Pearson said he voted against the budget because he disagreed with the increase to the library budget.

According to an email from city clerk Julie Johnson, the final detailed budget will be approved by the city’s finance committee on Dec. 9 — eight days after the city council approved the 2016 budget and tax levy. As an advisory body, the finance committee has no authority except to make recommendations to the council.

What the council approved

On Sept. 15, the city council approved a total preliminary tax levy of $3,633,898 with a general fund levy of $2,712,400. When the budget came back to the council for final approval, the general fund levy was decreased by $521,694 — 14.4 percent of the total preliminary levy.

Due to the reduction of the general fund levy, the 2016 total final levy — $3,112,204 — is actually 0.8 percent lower than the 2015 total levy of $3,137,663. In other words, the city will collect slightly less from taxpayers next year than it did this year.

The only increase in the city’s levies goes to the library fund levy; the council voted to approve an 11.1 percent increase to the library fund, raising the library levy to $256,957.

When the preliminary levy was approved Sept. 15, the packet of information given to the council included a copy of the line-item budget. At the Dec. 1 meeting, a final budget was not included in the materials given to the council members and to the public. The materials provided at the meeting didn’t show specifically how the revenue removed from the levy was being replaced, but finance director Cathy Bendel answered questions about the reduction.

“There is a reduction of $521,000 in the general fund levy,” Mayor Mike Pearson said. “Is that due to fees — building permit fees?”

“We decided to increase the number of houses (expected to be built) based on the actual number from this year, so the finance committee suggested increasing the number of houses from 130 to 140,” Bendel said.

Fees generated from building permits are entered into the city’s revenues in the same way as a tax levy is. Because of the increase in expected revenues from residential and commercial development, the finance committee directed the tax levy to be decreased.

Bloyer asked city attorney Dave Snyder if it is legal to use revenue from building development to pay for general fund expenses.

“Yes, fees can flow to the bottom line,” Snyder said.

Change to the process

This year the city changed its process for preparing and discussing the annual budget and tax levy.

Last year the city had two city council budget workshop in August, prior to approving the preliminary budget and levy for 2015. When the budget came back for final approval Dec. 2, 2014, the council made only minor adjustments.

In 2015, the budget process was substantially different. Instead of the budget being crafted by the city council during a council workshop, the city’s finance committee was responsible for having the budget meetings. City council members who are not also members of the finance committee were invited to come to the finance committee meetings.

The finance committee has also changed since last year. In 2014, the finance committee was composed of two council members and two residents. Currently, the finance committee is composed of Councilmember Julie Fliflet as chair, Councilmember Anne Smith and only one resident. Some city staff are also members of the committee now.

During the Aug. 12 finance committee meeting, Fliflet, Bloyer and Pearson were present to hear a presentation of the budget and levy, according to meeting minutes. Because finance committee meetings are not recorded in either audio or video and because detailed minutes are not required, there is little information about what issues were discussed.

At press time, The Gazette had requested but not received minutes from the Oct. 14 finance committee meeting. However, according to an email from Smith, four council members attended the Oct. 14 committee meeting, with Bloyer absent.

During the Sept. 9 finance committee meeting — the meeting before the city council approved the preliminary budget — Fliflet was the only member of the finance committee present to meet with the seven staff.

The change in the budgeting process was intended as a way to cut down on the staff time used to prepare the budget, Fliflet said in an email.

“In 2015, we held two Finance Committee meetings where the budget was reviewed in detail that we opened up to all council members to attend as a workshop session, rather than holding Finance Committee meetings to review the budget and then also holding council workshops to review the budget,” Fliflet wrote. “Having a Finance Committee meeting to review the budget at which two council members are present, as well as all the department heads and then repeating that meeting again at a separate council workshop is a waste of staff time.”

By using this new method, Fliflet believes the city saved more than 20 hours of staff time by eliminating council workshops.

“If you do the math and say there are five or six staff required to attend times a two hour working session on the budget — times two less meetings — then we saved over 20 hours of staff time and yet still allowed the full council to review the budget at two different working sessions that functioned just like a workshop,” Fliflet said.

“Other than semantics, I see no difference in Council workshops and finance committee meetings that are open to full Council,” Smith said in an email. “It is more efficient and saves staff time; a smart decision on the part of the City.”

Not all council members appeared to agree with the approach, however.

“It is true that we have had a finance committee meeting,” Pearson said at the meeting Dec. 1. “But it is true that I tried to call two council workshops, and the council didn’t provide me a quorum twice.”

Contact Alicia Lebens at [email protected]