The Free Press, Mankato, MN

August 30, 2013

North Mankato develops different budget strategy

Without cutting services or raising property tax, city says financial shape improving

By Dan Linehan

---- — NORTH MANKATO — John Harrenstein is calling this the “pivot” budget.

What he’s pivoting away from is obvious to anyone who’s been paying attention — the city’s troubles with debt, unpaid assessments and its credit downgrade.

But what he’s pivoting toward is a little more complicated. Harrenstein, in his first year as city administrator of North Mankato, said his budget accomplishes five things. And it appears to have the City Council’s support.

First, it has a plan to begin repaying $3.2 million that the city’s water, sewer and general funds loaned to its debt service fund to help pay for unpaid assessments. Though these loans were just internal shifts of money, at least the $1.4 million from the two utility funds must be replaced by law.

Though a consultant recommended paying those loans back within four years and begin by raising the levy by $100,000 next year, the city took a different tack.

This leads in to the second accomplishment: no property tax increase.

There’s a tradeoff in that those internal loans will take 10 years, not four, to pay back. But Harrenstein said a tax increase for the city’s financial troubles wouldn’t be fair to its residents.

“I don’t think we should foist that problem onto the community,” he said.

Residents will be paying more to City Hall next year, though, in the form of higher water and sewer fees. Combined, the funds will bring in about $1 million more next year on revenue of about $4.2 million.

That’s the budget’s third accomplishment, he said. Much of the new revenue will help the city avoid borrowing for small-scale projects and instead allow it to pay for those upgrades with cash.

Fourth, the budget allows the city to undergo its first comprehensive plan, which will cost the city about $24,000. A consultant hired by the city earlier in August is now working on a schedule, Harrenstein said.

Finally, the budget allows the city to rejoin Visit Mankato, a tourism entity, and Greater Mankato Growth, both of which it left in 2008. At that time, City Administrator Wendell Sande said it was “appropriate” for the city to part ways with those groups. And changes in the council’s makeup make it worth revisiting that topic, Harrenstein said.

He’s still negotiating with those groups, so it’s not clear what the city would pay.

Mayor Mark Dehen said he supports the city becoming a member of Greater Mankato Growth’s Regional Economic Development Alliance.

Dehen also said he was pleased with the budget.

“I think the budget will probably go through pretty easily. I didn’t hear from the council that anyone had any issue with it,” he said.

Councilman Bob Freyberg agreed, calling it the best budget he’s seen in North Mankato.

It addresses the “red flags” of previous audits, he said in an email.

“It also identifies a plan of action to restore the good faith and credit of the city of North Mankato and should impress even the most doubtful at Moody’s Investors Services,” he wrote.

Freyberg also called the utility fee increases “long overdue.”