by Joni Astrup
The city of Elk River will collect less in property taxes in 2013 than it did this year.
The City Council voted 4-1 Monday, Dec. 3 to approve a $10,175,765 property tax levy for the coming year. That’s down from $10,275,815 in 2012 — about a 1 percent drop — and the smallest levy since 2007.
For the average home valued at $152,200, taxes for city services will go down about 9 percent in 2013 while a $1 million commercial-industrial property will see a 4 percent increase. That’s primarily because residential property values have declined 11 percent in the last year while commercial and industrial values have remained about the same.
Overall, the city budget is projected to increase $158,900 or 1 percent from 2012 to 2013.
The City Council held a public hearing before voting on the budget. No one commented.
The $12.8 million general fund budget and the levy were approved in a 4-1 vote by the city council. Mayor John Dietz voted “no.”
He said his goal is if the value of a home, business or industry does not go up, then its city property taxes should not go up, either.
Since 2007, Dietz said the city’s general fund budget has increased every year but one.
“The proposed 2013 budget again puts the burden on commercial and industrial properties,” he said. “While residential properties see a tax decrease because of the large drop in their property values, commercial and industrial properties see over a 4 percent increase in 2013 taxes because their property values remain nearly constant.”
He thanked the council and staff for the hard work on the budget, but said there were things that could have been done to reduce the levy and ensure that the city’s tax rate did not increase.
“Unfortunately, the majority of the council does not favor that approach,” Dietz said.
As things now stand, the city’s tax rate will go up about 4 percent. Sherburne County’s tax rate is proposed to increase just under 5 percent and the Elk River Area School District tax rate is proposed to go up approximately 9 percent, Dietz said.
Commercial and industrial properties provide tax base and jobs and constantly increasing taxes pushes them to the limit, he said.
“We have to do better for both residential and commercial-industrial property owners,” Dietz said.
But Council Member Nick Zerwas said it is backwards to budget and levy for property taxes based on what residential values do and not what it takes to operate the city.
“For years, when property values were going up and up and up, we kept the (tax) rate flat and the levy went up and up and up. It was a backwards way of doing budgeting then. It’s a backwards way of doing budgeting now. We set the property tax levy based on the amount of money we need to run the city. Period.”
City taps reserve
The budget will take $200,000 from the city’s $493,000 excess fund balance to help fund operations in 2013.
Initially, the budget showed $99,950 coming from reserves. But after some discussion, the council upped that to $200,000.
“It’s a rainy day, so let’s use it,” Council Member Matt Westgaard said.
At an earlier budget work session, the mayor had advocated using the entire $493,000.
He believes that any excess general fund dollars left at the end of the year should immediately be applied to revenues for the next budget cycle.
Fast facts about Elk River’s 2013 budget
•Property taxes fund the bulk of the city’s budget, making up three-fourths of city revenues.
•There are no new services in the budget.
•There are a handful of staff additions in the 2013 budget including one full-time police department administrative assistant to fill a position that has been vacant for several years, one part-time information technology desktop support position and a couple of part-time interns. The budget also includes a 2 percent cost-of-living pay increase for all employees.
•Overall, the taxable market value of property in Elk River is still declining, dropping by about 9 percent in the last year from $1.8 billion to $1.6 billion. Residential dropped by 13 percent. Commercial decreased by .21 percent while industrial increased .38 percent.
•Two-thirds of Elk River’s tax base is made up of residential property, followed by commercial (21 percent) and apartments (4 percent). Industrial properties make up 2 percent of the tax base in Elk River.
•City services (general fund budget) cost Elk River residents $46.56 per capita per month. Elk River city taxes on a $152,200 home for 2012 were about the same as the average for the 853 cities in Minnesota.
•Property taxes collected in Elk River are split primarily among the city, Sherburne County and the Elk River Area School District.
•Sanitary sewer rates are proposed to go up 2 percent in 2013; there are no changes proposed to the garbage rate.
• Two tax increment financing districts will be decertified at the end of 2012.
How much the city of Elk River has levied in property taxes, 2006-2013**
**The 2013 levy will be collected in 2013.