Elk River approves budget, 4-1

Click here  to read Mayor John Dietz’s statement on the budget.

Click here, Elk River budget online, to see a graph on Elk River’s budget and property tax levies.

by Joni Astrup
Associate editor
A city budget for 2012 has been approved by the Elk River City Council that reduces the property tax levy by $837,000 over last year but still results in a 4 percent increase in the city’s tax rate.
The bottom line is most homeowners will see their property taxes for city services decrease, but many commercial-industrial properties are looking at a slight tax increase.
The budget and tax levy were approved by the City Council on Monday, Dec. 5, in an unusual 4-1 vote.
Mayor John Dietz voted ‘no.’ Despite some “very hard work” on the budget, he said he felt the council did not go far enough in making cuts.
“When I campaigned for this position I told the residents that I would do my best to hold the line on taxes,” said Dietz, who was elected mayor in 2010. “Obviously I have not done a very good job so far and I apologize for that.”
Dietz said he is very concerned about the 4 percent increase in the city’s tax rate in 2012. The brunt of the increase will be borne by commercial properties in the city that are already strapped by the down economy, he said.
Council Member Nick Zerwas said while he echoes some of the mayor’s concerns, the budget process is one where there are a lot of ideas and the council has to reach a workable middle ground. He said an $836,000 reduction in the levy is a significant decrease.
“I think we could have cut a little bit more, but I learned a long time ago I don’t always get my way no matter how hard I try,” Zerwas said. “This is a good budget. It’s a good compromise and I feel good in supporting it.”
Council Member Paul Motin also said it is a good budget, though not a perfect one.
Motin pointed out that Elk River has always been a fairly fiscally conservative city. But having been on the city council for 13 years, he said he can see cracks within the city and its ability to function and believes the city is understaffed. While services are good, he said they are stressing out city employees.
Council Member Matt Westgaard said the council has spent the last five months poring over the budget and the final result is a good budget.
“Could we look harder? Could we cut more? Maybe. But it comes down to making a decision about what level of service do we want to try to maintain for the residents that live here,” he said.

Tax levy is 8 percent lower than last year’s
The City Council approved a property tax levy of $10,275,815 for 2012, which is $837,000 or 8 percent less than the $11,112,391 levied by the city in 2011.
There are two main reasons that an $837,000 decrease in the levy isn’t enough to reduce taxes across the board. One is Elk River’s tax base is shrinking, as the city’s net tax capacity will decrease 5.7 percent next year due to declining property values. The other is an additional 5.4 percent decrease in the city’s net tax capacity related to the market value exclusion calculation, which was caused by legislative changes.
Another factor is the city’s commercial and industrial properties have retained their values better than residential properities.
When all is said and done, the city’s tax rate will go from 45.72 percent in 2011 to 47.55 percent in 2012.
Other budget highlights:
•General fund expenditures are budgeted at $12.7 million in 2012, up 1.4 percent over 2011.
•About three-fourths of general fund revenues come from taxes — primarily property taxes but also a gravel tax.
•The largest category of general fund expenditures is public safety (46 percent), followed by general government (23 percent), public works (17 percent) and culture and recreation (14 percent).
•Personal services — city employees — make up the largest type of general fund expenditure, acccounting for 71 percent of expenditures.

Citizens weigh in

Several Elk River residents commented on Elk River’s proposed 2012 budget during a hearing Monday, Dec. 5.
Gary Santwire told the council he represents Rivers Crossing and Equity Management, which have residential and commercial property in Elk River.
“Our yearly tax bill is headed up quickly, soon to be $200,000 a year,” he told the council. “We’re extremely concerned about taxes.”
But he thanked the City Council and city staff for working to reduce the city’s property tax levy by $800,000. He told council members he hoped they could whittle it down a little more.
Frank Carlson told the council that the taxes on his home have gone up 40 percent since 2002 and the taxes on a commercial building he owns in Elk River have risen 25 percent since 2006.
“Right now I don’t really see a whole lot of benefit for the 25 to 40 percent my property taxes are going up,” he said.
He told council members he knows they worked hard on the budget, but suggested that they could probably cut another 15 percent or so without damaging services.
Florence Schuldt, Mike Klegin and Curt Krone also spoke.
Klegin said he realizes the council is doing the best it can with the resources it has.
Having said that, he pointed to the model of Oak Grove. That city has about a third of Elk River’s population and wealth, but he said city officials were able to reduce expenditures by $600,000 and property taxes by 18 percent.
He’s concerned about the effect of Elk River’s tax rate on the commercial sector.
Krone said his home value has gone up $44,000 and his property taxes increased 33 percent over last year.
City officials noted that the tax increases property owners saw on their statements were based on a preliminary levy, which was $837,000 higher than the one ultimately adopted by the council.