Herald Journal, Dec. 12, 2005
Winsted lowers tax levy to no increase
By Dave Cox
A flurry of tax-related questions has blown through Winsted recently, following the delivery of tax statements that show higher proposed city taxes.
The city has maintained that when it approved the preliminary levy in September, it was not aware that McLeod County had increased taxable property values by 10 percent.
During Tuesday’s truth in taxation hearing, the city council directed staff to revise the levy to result in no city property tax increase.
This required the city to cut over $92,000 from its preliminary amount.
“Our intention was to keep city taxes exactly the same. We did not want to increase taxes at all,” Mayor Don Guggemos said during Tuesday’s hearing.
“If you increase the value by 10 percent and decrease the tax rate by 10 percent, the [tax] dollars for the city should stay the same,” Guggemos said.
Thursday, Mareck provided the Herald Journal with updated information, based on figures from the McLeod County auditor’s office.
Based on this, the city would adopt a levy of $937,133, with a corresponding tax capacity of $1,389,427, and a tax rate of 67.447, slightly less than the rate discussed during the hearing Tuesday.
What it means
If you own a home with a taxable market value of $250,000 in 2005, your tax capacity would have been $2,500, and based on the tax rate of 74.231 percent, your city tax payable would have been $1,855.76.
Assuming you made no improvements and there were no other adjustments, and your taxable market value increased by 10 percent, your taxable market value for 2006 would be $275,000.
This would give you a tax capacity of $2,750, and based on the adjusted proposed tax rate of 67.447 percent, your city taxes payable for 2006 would be 1,854.79, a decrease of $0.97.
Guggemos also stated during the hearing that city taxes actually decreased last year, and following the adjustment for the proposed levy, there will have been no increase in city taxes for two years.
“City taxes last year went down about $100 on a $100,000 home,” Guggemos said.
Prior to the hearing, there had been concern among city taxpayers who received statements showing increases in the proposed city taxes payable for 2006.
City Administrator Brent Mareck presented information regarding how the situation came about.
Mareck said that the city felt the proposed preliminary levy that was approved in September would result in lowering taxes.
“We found out later that valuations had increased by 10 percent,” Mareck explained.
Because the proposed levy was based on taxable market values that were 10 percent higher than the values for 2005, the levy resulted in higher proposed taxes, even though the tax rate was lower.
Mareck explained that there are two parts to the levy, a general levy that covers operating expenses of the city, and a bond levy, which covers operating expenses for major projects.
By the end of 2005, the city will have paid off a $57,700 bond.
In order to maintain the overall levy amount for a potential city center project, $57,700 was added to the capital equipment fund.
“We were trying to keep the levy static, so that if the (city center) project does move forward, taxes would not become exorbitant,” Mareck said.
How the city avoided a city tax increase
Mareck explained the proposal that allowed the city to avoid a city tax increase.
In order to get to a levy that would result in no tax increase, the city needed to reduce the total levy to $938,133.
The city arrived at this figure by calculating an adjusted total tax capacity. It did this by taking the 2005 tax capacity of $1,220,706 and adding the tax capacity of $43,552 for new construction, Mareck explained.
“In essence, the property valuation increases will go untaxed under this budget,” Mareck said.
In order to arrive at a total levy of $938,133, the city needed to cut $98,250. This figure is made up of a reduction of $92,000 plus the additions of $2,500 for a public cemetery contribution and $3,750 for public works land rental.
The budget cuts were taken from a variety of sources.
Mareck said that the city had planned to increase the intern position from three to six months. Keeping it at three months will save $5,000.
The parks budget was cut by $10,000, and $5,000 for a mobile security system was cut from the police department budget.
The public works maintenance budget was trimmed by $8,000, and moving the hiring of a new city employee from January to February will save $2,847, Mareck explained.
Cutting $11,574 from the facilities budget competed the reductions.
The remaining difference will come from $55,829 that the county owes the city for the Westgate tax increment financing district, Mareck said.
The changes resulted in a revised tax rate of 67.586 percent.
Effects of annexation
Verbal fireworks erupted during the hearing, when resident Scott Bachman objected to his tax statement.
Bachman accused Guggemos and Mareck of misleading him about the tax impact he would face when his property was annexed into the city.
“My taxes went up 261 percent from the township to the city. You told me my taxes would be minimally affected. You told me it would only be a couple of hundred dollars difference,” Bachman said.
Guggemos said that he had never made such a statement. After reviewing the figures, Guggemos pointed out that the township tax rate was between 20 and 22 percent last year, and the city tax rate was 74.231 percent, so Bachman’s taxes would have been at least two and a half times higher when he came into the city.
“It costs a lot more to run the city than it does the township,” Guggemos commented.
Mareck said that he had never prepared a tax statement to indicate what Bachman’s taxes would be when his property was annexed, and suggested that Bachman had misunderstood the figures that were discussed during the annexation meetings.
Other residents who were affected by the same annexation (Pontas Point) said that their taxes were almost four times what they had been in the township.
Guggemos asked Mareck to review numbers for the residents that were affected by the annexation. Mareck said he could do this by the end of the week.
Mareck said Thursday that he found a document from the county that had been given to Pontas Point residents showing tax implications prior to the annexation.
Mareck said that he delivered a copy of the document to Jack Littfin, another resident who spoke during the hearing, and exlained it to Bachman.
Mareck said that Bachman denied having received a copy of the document prior to annexation.
HLWW school vote
Another issue that was brought up during the meeting was the school vote.
Some residents expressed concern that even though the city has agreed to reduce the levy and not increase city taxes, the fact that the preliminary statements showed a potential tax increase might affect the Tuesday, Dec. 13 referendum, where people will be asked to vote on a new high school.
“Are you going to do any PR to make a splash and let people know that taxes are not going to go up?” one resident wondered.
“This is a big deal and it is very important to the community,” he added.
In an effort to clarify the situation, the city prepared a statement to inform taxpayers of the fact that there will be no city tax increase.
The statement includes samples of changes in market value and taxes payable, based on figures received from McLeod County.
Mareck said the city will make the form available to members of the BUILD committee, who requested the information.
City center questions
Residents also asked what the proposed new city center would cost, and whether residents will have the opportunity to vote on that project.
“We are not that far yet,” Council Member Tom Ollig commented.