City taxes will decrease for many in Lake Elmo

Six employees at Lake Elmo City Hall have quit since March. At least three have publicly cited a hostile work environment as a factor. (Gazette staff photo by Alicia Lebens)

Many Lake Elmo residents will see a decrease in city property taxes next year, after the city set its total preliminary tax levy at $3,080,426 for 2017, a decrease of about 1 percent from 2016.

The council voted 3-2 — with Mayor Mike Pearson and Councilmember Justin Bloyer dissenting — to approve the city’s preliminary budget and certify the 2017 preliminary tax levy Sept. 20. Pearson expressed concern the budget was short-sighted because it relied too heavily on fees from new construction.

The city is required by state statute to set a preliminary budget by Sept. 30 and set the final budget for 2017 by Dec. 28. The final budget can be lower than the preliminary budget, but cannot be higher.

In the last five years, the budget has seen a steady decrease in property taxes paid into the city’s general fund. For the 2017 budget, the general fund tax levy drops below $2 million.

“The assumptions for the 2017 budget were that maximum budget would be presented, and we do believe this is on the high side of where the budget will be,” said Lake Elmo finance director Cathy Bendel. “The ultimate goal was to maintain the tax rate, offset operations increases with user fees and escrow charges where applicable, and the emphasis continues to be on street improvements.”

During 2016, the city saw a large increase in the number of building and building-related permits, which generate fees. Bendel told the council that the city is projecting to end the year with 244 new homes added to the city. Because of the development, the city saw revenue from permits and fees exceed what was originally budgeted.

Overall, the city’s budgeted revenues and expenditures for 2017 are going up compared to the original 2016 budget. However, both revenues and expenditures have been higher than expected in 2016. That means the budget for 2017 will be lower than the actual revenues and expenditures in 2016.

In a presentation Sept. 20, Bendel said the 2017 general fund budget shows $3,956,486 in revenues, and the same in expenditures.

Some areas where the city plans to increase spending next year relate to public safety and staffing. The budget projects a 60 percent increase to the building inspection department due to the proposed hiring of an additional building inspector — an increase of $126,087. The budget also shows an increase to police expenditures of $114,738. Councilmember Julie Fliflet, the chair of the finance committee, said the council hasn’t voted on a resolution yet, but the budget increase allows for an additional Washington County Sheriff’s deputy to patrol the city.

Fliflet said there was also $40,000 set aside for a fund-matching grant for the four major lakes to address invasive species and other lake maintenance.

“This is a recommendation from the environmental committee,” Fliflet said. “It’s time for the city to invest in our natural resources.”

Bendel said the fire department had requested to turn a part-time administrative position into a full-time position, but that the fiance committee had decided not to do so at this time. Fliflet said they had increased the part-time position by five hours per week. However, the preliminary fire department budget shows an overall decrease of 2.42 percent from 2015.

The preliminary budget projects the city will end 2016 with a fund balance of 90 to 95 percent of annual expenses, Bendel said. The state requires cities to have a 60 percent fund balance. Because of this high cash reserve, the majority of the city council has decided to use $50,000 to lower the general fund levy.

Pearson asked why the city would use reserves to lower the levy further, when the city could use the cash to pay down debt or replace worn equipment for the fire department and public works.

“There is the fire truck I know we have talked about, and I hear from public works that the equipment is even more tired,” Pearson said. “A dump truck — a 1986 — that we simply use for sanding and not for plowing.”

Pearson also commented that the budget was relying on revenues coming from growth, rather than sustainable sources.

“It seems that we are backstopping on growth … and eventually that will stop and I want to hold taxes as much as some — maybe even more than some — it just seems that we should prepare for the eventualities that we already have,” Pearson said. “I don’t want to put a future council in a position were those revenues dry up and the equipment is even more tired.”

“I guess I have the opposite  view — I see our reserves as almost ridiculously high,” Fliflet said. “It’s good to have heathy reserves, but at some point overtaxing our residents is not OK.”

Fliflet said she would support a higher amount of reserves being applied to the tax levy, and claimed the concerns that public works has are being addressed.

The general fund preliminary levy was set at $1,948,847, with an additional general obligation debt levy set at $874,622 for debt payments. The Lake Elmo library preliminary levy was set at $256,957.

The city of Lake Elmo saw an overall market value increase of 8.7 percent, and the median home value increased 2.1 percent to $368,100. The owner of a median-valued home that saw an increase of 2.1 percent over last year would see city property taxes decrease by 7.7 percent — about $65. The city’s Truth in Taxation hearing will be held Dec. 6.

Contact Alicia Lebens at [email protected]