MANKATO — Mankato homeowners should be spared a property tax increase in 2014 despite passage of a nearly $70 million bond referendum to construct new and expanded schools.
That’s because the general levy that funds operations at Mankato Area Public Schools is falling, Blue Earth County’s tax levy is holding steady, and the city of Mankato’s levy is expected to increase by 1 percent at the most when 2014 budgets are finalized next month.
The most dramatic property tax impacts — both upward and downward — come from the school district. The $69.5 million building plan, which will finance a new east-side middle school and renovations or expansions at several other schools, will require additional taxes for 20 years to pay off the bonds. For a $150,000 home, the increase will be $94 a year.
At the same time, the school’s regular levy of $17.43 million this year is dropping by $977,000 next year — a decrease of nearly 6 percent. Additional state aid was a major factor in the falling levy, said Jerry Kolander, director of business affairs for the district.
The municipal portion of a homeowner’s property taxes should decline next year even though the overall tax collections by the city will rise. That’s because new construction and large increases in the valuations of some property types, notably apartment buildings, will shift some of the burden off existing residential property.
In addition, the Mankato City Council has decided to cut its preliminary levy increase of nearly 2.3 percent to about 1 percent, said City Manager Pat Hentges.
The city’s debt service levy will need to rise about $160,000 to cover money borrowed to finance public projects, such as improvements at All Seasons Arena and the Public Works Department’s move to the former state transportation facility on Victory Drive. That increase could be negated by cuts in the general fund levy, such as reducing by half a proposed 4 percent increase targeted at covering rising employee health care costs and persuading the All Seasons Arena board to use its reserve funds to cut the debt service costs of local governments that finance the arena’s debt.
“That would get us down to a zero levy,” Hentges said.
But the arena board appears reluctant to spend down its reserves, and Hentges said uncertainties about the impact of the Affordable Care Act might make it unwise to reduce the amount of money set aside to cover employee health care costs.
The only other anticipated levy increase is a $5,000 bump in the Economic Development Authority levy.
The bottom line is a slight decrease for homeowners in the city portion of property taxes because the local tax base is growing enough to offset the levy increase. For a $157,400 homesteaded house in Mankato, the anticipated cut will be $24 from the $583 paid this year if the council settled on a 1.2 percent levy increase, according to city estimates. The truth-in-taxation notices sent recently to homeowners projected city taxes based on the preliminary 2.3 percent increase, which a majority of the council favors reducing by at least half before finalizing the budget later in December.
The city’s general fund is projected to be $22.5 million in 2014, up about $1.2 million, despite no increase in the general fund levy. A substantial increase in Local Government Aid from the state, providing an additional $529,000 next year, and rising revenue from building permits and other city licenses largely fill the gap.
Driving the increased spending is a 2.5 percent average wage increase for city employees and the 4 percent rise in health insurance costs. In addition, federal grants that covered most of the salaries of three additional firefighters in recent years will expire in 2014, Hengtes said. The city also is seeing some cost increases for vehicles and vehicle-related expenses.
“The good news is that it looks like the tax base has made significant gains,” said Hentges, cautioning that the tax benefits of that growth also are accompanied by an increase in demand for services and infrastructure.
Blue Earth County’s general fund is increasing just more than $1.1 million next year to $23.36 million, but the levy is frozen under state budget rules that accompanied a state aid increase of more than $400,000 and an exemption in state sales taxes on county purchases that County Administrator Bob Meyer expects will save the county about $485,000 next year.
The county’s 2014 budget will technically not balance, with reserve funds covering about $1 million. The willingness to dip into reserves comes in part from a quirk in the calendar — 2014 will have 27 payrolls rather than the standard 26, which is a large but one-time budget hit for a service-based organization where employee salaries are the bulk of the expenditures.
The reserve spending also is justified because of some large capital expenditures that are being financed in part with money saved from previous years’ tax levies but where the expense falls in 2014, Meyer said. Cost drivers for the county also include some additional employees in the Human Services Department, partly to handle an expected crunch in enrolling more people in health care programs under the Affordable Care Act, along with single employee additions to Public Works, the sheriff’s office and a part-timer in the Licensing Center. Salaries for county employees are expected to rise about 2.5 percent with little change in health insurance expenses, Meyer said.
For county residents, 2014 will be a better-than-most year for homeowners and a not-so-good year if they own farmland. Big increases in farmland valuations because of the recent boom in the agricultural economy are causing a noticeable shift in the tax load from homes to farms.
“I think most residential property owners will be pleased with their tax statements unless they made major improvements,” Meyer said. “Unfortunately for those agricultural property owners, they’re going to be carrying the major burden.”
Staff writer Amanda Dyslin contributed to this story.
Mankato budget hearings City of Mankato 7 p.m. Dec. 2, Intergovernmental Center. Mankato Area Public Schools 5:30 p.m. Dec. 3, Intergovernmental Center. Blue Earth County 6 p.m. Dec. 3, Courthouse.