City’s expenses down 2.3 percent
By Ryan Gueningsman
DELANO, MN The City of Delano is facing a 16.53 percent total levy increase from this year moving into 2010.
The city’s expenses are down 2.3 percent from the 2009 original budget amount.
At a special meeting of the city council Dec. 1, Finance Director Brian Bloch outlined the budget purpose and process.
He explained the budget is a tool utilized by the city to allocate resources toward goals and priorities for the city.
Bloch said it is the catalyst that drives the city’s actions for the following year and is a tool to reach an end providing the highest quality services in a fiscally responsible manner.
The budget process each year follows the same steps, including the council setting needs and priorities, establishing goals, updating the city’s capital improvement plan, and reviewing detailed budgets prepared by city staff.
From there, a preliminary budget and tax levy is approved, revisions are then made to the preliminary budget and tax levy, and the final budget and tax levy is presented and approved by the city council.
Looking at the city’s expenditures/revenues
Bloch said the city’s proposed total general fund expenditures are $2,506,782, which is down 2.3 percent from the 2009 original budget amount of $2,564,436. In 2008, expenditures were $2,473,875.
For Delano, general government expenses and community services are the top two departments, each taking up 24 percent of the city’s expenditures. Public safety comes in next at 21 percent, public works at 17 percent, other at 9 percent, and capital outlay at 5 percent.
Bloch said items impacting expenditures include the economy, revenue restrictions (property tax levy limit, local government aid unallotment), and the need to fund matching grant/project awards such as the Barb King Inspiration Park and the old city hall/community room rehabilitation grant.
The city’s revenues are dependent upon a lot of the same things, Bloch said. He also noted a decrease in license and permit revenues.
For the 2009 budget, the city relied on $170,000 of building permit revenue, Bloch explained after the meeting. The 2010 budget has only $50,000 of building permit revenue.
The $120,000 reduction in building permit revenue is made up for by the tax levy increase.
“There are other similar, but not as significant, of an amount items throughout the revenue budget,” Bloch said after the meeting. “That is basically why the levy is going up and expenditures are decreasing.”
Bloch also reviewed information on how property taxes are calculated, and said, in some cases, the property taxes one pays will go up when assessed valuation goes down.
“If the tax levy goes up, you’ll still pay more taxes,” he said. Property taxes support three levels of government city, county, and school district. Bloch said the state establishes a formula for how taxes are divided amongst properties.
Factors that influence the tax levy include market value, tax capacity of the community as a whole, class rates, state aids, city budget and debt levies, county budget, and school district operating and debt levies.
The proposed 2010 tax rate for the City of Delano is 42.432 percent, which is just over 7 percent of an increase from this year’s actual rate of 35.040 percent. The city establishes a levy amount based on its general fund, debt service, and tax abatement, Bloch said.
The city’s general operations levy is $1,915,101. The proposed increase for 2010 is $257,784, or 15.55 percent. This compares to a levy increase of $42,622 for 2009, Bloch said, adding that $160,631 of the 2010 increase is for 2008 and 2009 Local Government Aid (LGA) unallotments. The other $52,220 is for the decrease in LGA from the state from 2009 to 2010.
The city also looks at its debt levy and tax abatement levy when planning the budget.
“The 15.55 percent increase is just the general fund, and the 16.53 percent includes all the city’s levies general fund, debt service, and tax abatement levies,” Bloch said.
The total levy for 2010 is $2,388,101, which is an increase of 16.53 percent from 2009. This results in a tax rate increase of 7.392 percent due to the economy and statewide funding problems, Bloch said.
It was noted that, despite the increase, Delano still has the lowest proposed city tax rate of Wright County’s 17 cities, behind Otsego, St. Michael, Buffalo, Albertville, and Hanover.
For total tax rate comparisons, Delano falls third behind Annandale and Buffalo.
To conclude his presentation, Bloch said there is a balanced general fund budget, the general fund budgeted expenditures are lower in 2010 than where they were in 2007, and that the main goal is to provide the highest quality services in a fiscally responsible manner.
“It is what it is,” commented Mayor Joe McDonald. “We did everything we can do to be fiscally responsible and cut the budget.”
He said the city is operating at the “bare minimum” and said any additional cuts that would be made would be noticed immediately. He added the city staff welcomes comments and questions on the proposed budget.
Council Member Larry Bartels noted this is the third year some capital improvement projects have been postponed.
“That’s going to catch up to us soon,” he said.
The council is expected to approve the budget for 2010 at its regular meeting Tuesday, Dec. 15 at 7 p.m. at the Delano City Hall.
Governor Pawlenty not going to ‘unallot’
Governor Tim Pawlenty wrote to city and county leaders Dec. 8 to inform them he does not intend to take executive action to reduce local aid payments later this month.
Last week, state budget officials announced a $1.2 billion deficit for the current two-year budget period, according to the governor’s office. Pawlenty stated he will work with the legislature to resolve the shortfall, but had said because of the timing of payments, that a portion of the December local aid payments could be unalloted.
In his letter, Pawlenty said, “Given the imminent expected payment of December local aid, I have determined that additional local aid program cuts, if any, should be focused on future payments.” The governor noted that if the legislature is unable to pass appropriate budget reductions, future aid payments would likely be reduced.
Approximately $437 million in local aid payments are scheduled to be sent to cities and counties later this month. Those payments include local government aid (LGA), county program aid (CPA), market value homestead credits (MVHC) and other local aid programs. LGA and CPA payments are delivered in two separate payments in July and December. MVHC payments are sent out in October and December.
Approximately 45 percent of the state’s population, 2.4 million Minnesotans, lives in communities that receive no LGA payments. In 2009, 92 cities with a combined population of nearly 1.4 million people and the state’s townships, with 980,000 residents, received no LGA.
Pawlenty has requested that legislative leaders start committee hearings immediately to craft budget reductions that could be enacted promptly at the beginning of the legislative session that gets underway Feb. 4, 2010.
The governor has also ordered state government agencies to begin holding back a portion of their spending for possible cuts.
Locally, Bloch said that at the end of the month, the City of Delano was expected to receive another $98,145 in Local Government Aid (LGA) and Market Value Homestead Credit (MVHC).
“After the state’s budget announcement last week, the governor indicated he may reduce and/or delay this LGA and MVHC that cities and counties expected to receive in late December,” Bloch said.
“If the cuts were made, it would be very hard for the city to make any adjustments to its 2009 expenditures, since it is so late in the year, and therefore would result in expenditures exceeding revenues in many cities and counties. Therefore, the cities and counties would be using up some of their reserves or would have to make adjustments to the following year’s budget in order to make up for the shortfall.”
Since the city won’t be seeing these cuts, the city does not have to make adjustments to this year’s expenditures or try to cut additional expenditures out of next year’s budget in order to make up for $98,145, Bloch said.
“However, there is about $45,000 we have in the 2010 budget that is for MVHC aid that the city could possibly lose in 2010,” Bloch added. “That is something the city staff and council will look into in the coming weeks and months and see if we want to make adjustments to the 2010 budget now or wait and see what the state does before we make any changes.”