The Free Press, Mankato, MN

August 5, 2013

Mankato eyes 1.7 percent levy hike

Tax base growth should mean smaller bills for property owners

By Mark Fischenich
mfischenich@mankatofreepress.com

---- — MANKATO — Mankato's tax levy would increase 1.7 percent in 2014 under a proposed budget City Manager Pat Hentges will present to the City Council later this month, but growth in Mankato's tax base should result in a slight decrease in what most property owners pay to the city next year.

Hentges presented an outline of his upcoming budget proposal at a council workshop Monday night, and a majority of the council indicated they were comfortable with his direction. The budget is based on neither an increase nor a decrease in city operations or its level of staffing.

"This assumes all the same levels of service," Hentges said.

Under the proposal, the city's general fund would rise $1.2 million to $22.4 million — primarily to provide a 2.5 percent bump in salaries and to cover a 4 percent rise in medical insurance coverage for city employees.

That increase is to be covered without an increase in property taxes. Rising Local Government Aid payments from the state of $495,000, growth in other grants and growing revenue from licenses and permits is nearly enough to cover the rising personnel costs without boosting the existing $9.3 million general fund property tax levy. But there's currently a $184,000 gap between general fund revenue and spending which will have to be addressed as the council finalizes the 2014 budget later this summer and fall.

"We'll have to do some work ...," Hentges said. "We'll have to make some cuts someplace or we'll have to increase revenues someplace else."

The proposed 1.7 percent jump in the overall property tax levy is concentrated entirely in the debt service levy, which would rise from $4.65 million to just under $5 million. About half the increase is to cover bond payments for the remodeled and expanded Public Safety Center, improvements to the Public Works facility at Victory Drive and Hoffman Road, and the new fire station going up on Mankato's northeast side.

The other half of the proposed increase in the debt service levy is to provide some cushion on payments for projects where assessments have been deferred against some benefiting property owners. The city saw an increase during the economic recession in the number of senior citizens who chose to defer payment of assessments on street projects until their home is sold.

A larger share of the deferrals involved properties on the edge of town but outside the city limits that aren't forced to pay their share of assessments until they are developed and are annexed into the city, Hentges said.

State law allows levying 105 percent of anticipated debt payments, and Hentges suggested now is a good time to put that cushion in place.

"I think it just makes good fiscal sense," he said.

Mayor Eric Anderson asked staff to prepare a 10-year projection of future debt service obligations, saying he would be more comfortable with the levy increase if he saw signs that the debt service levy would level off or fall in coming years.

"What does that trend line look like?" Anderson wondered.