City tax levy talks begin

Council interested in halving the 16.3% increase that started the conversation Monday evening

Budget and tax levy talks are underway for the Pipestone City Council, which must pass a preliminary levy for 2018 property taxes by Sept. 30.

The council members can lower the preliminary number once certified, but cannot increase it when they make their  final tax levy decision in December.

The council’s journey to the preliminary decision continued during a special meeting set for that purpose, Monday, Sept. 11.

After a 60 minute conversation, they gave city staff direction to bring back a scenario that effectively halves the number they started with, which was a property tax increase in 2018 that was 16.3 percent higher than this year.

What the double-digit percentage increase would mean to property owners, in dollars for the city’s portion of the tax only, is roughly $106 more annually for a residential home worth about $100,000, according to a spread sheet prepared by the Pipestone County Auditor’s Office. For a home worth $225,000, that increase would be roughly $308 annually and on the low end, a house worth $50,000 would be charged $44 more per year.

“When you look at dollars, it really isn’t very much,” said Mayor Myron Koets, who had the spreadsheet prepared. The numbers calculate the impact of the city’s portion of the tax levy, and don’t include county, school district, or state taxes.

The council decided by consensus by the end of the meeting that it wasn’t prepared to pass that kind of an increase. When Koets queried each councilor “what can you tolerate as a percentage levy increase,” the answers ranged from 5.7 percent (Rodger Smidt) to an 8-10 percent (the rest of the councilors).

“We knew 16 percent, frankly, was not going to be an acceptable option,” said Jeff Jones, city administrator.

Each $15,000 equates to a 1 percent levy increase. The primary item elevating the levy increase for 2018 is the need for a new boiler for the Ewert Recreation Center ($115,000). In addition, the contract with the Sheriff’s Office has increased by $48,513.

The city’s annual contributions to the blight fund — $100,000 — and the Main Street fund — $25,000 — were highlighted as optional commitments. Others were not, such as the $50,000 the council resolved in 2016 to take from its general fund annually to pay down the debt the water fund owes the liquor store fund (at that time, the water fund owed the liquor fund $521,160).

The council also committed to setting aside money for trails as part of a matching grant commitment.

Meinders Community Library has asked for a $30,500 increase in the contribution the city makes, which would bring the city’s total contribution from its current level of $94,500 to $125,000.

Jody Wacker, director for Meinders Community Library, distributed a 10-page report and an additional handout of library trends to support her 2018 budget request. Her data showed that while all uses of the library have again increased in 2017 for an all-time high (visits, circulation and program attendance), salaries and wages are actually falling.

“Wages are currently less than they were in 2011 and we have extra staff hours,” Wacker said.

The additional dollars would primarily go towards staffing for both existing staff (Wacker said she deferred her salary increase this year) and to hire a new part-time position.

“If we don’t get more funding, we will have to start going backwards,” Wacker told the council, becoming more of a “book depository.”

The debt service levy for 2018 is increasing by $116,819. One item impacting that number is debt still being paid for a 2004 street improvement project. In a spreadsheet prepared by Lenae Scholten, city treasurer, that debt service payment will increase in 2018 by 2280 percent, or by an increase of $209,500. Scholten said Tuesday that the 2004 debt has a balloon payment in it for the final three years (2018, 2019 and 2020).

“I’ve never seen one like that ever,” Scholten said.

The Minnesota State Auditor’s Office recommends municipalities have five months worth of expenses in reserve to meet unplanned expenses. For the city of Pipestone, that would be around $860,000. Instead, the city had a fund balance surplus of $1,122,954 by December 2016, according to its official audit. Koets reminded the council of this fund balance “as one fix that we could do,” though it would be a one-time fix only, he added.

The council agreed by consensus to cut the budget by about $120,000 to lower the preliminary tax levy increase. They’ll consider the new numbers during their regular meeting, Monday, Sept. 18.