Fairmont OKs 3.1% levy hike

FAIRMONT – Fairmont City Council approved a 3.1 percent property tax levy increase Monday, but the vote was not unanimous.

The council approved a preliminary increase of 3.1 percent in September, to generate an additional $96,400 for the 2014 budget.

No mention of lowering that amount has been suggested in the meantime, not until Monday, when Councilman Terry Anderson proposed nixing the levy increase altogether.

“I think we can do it; I really do,” he said, describing the tough financial times many people are facing.

He suggested either cutting the budget or using liquor store reserve funds rather than raise the levy.

“We’re not growing, we’re dying,” Anderson said. “And yet we’re increasing our services.”

The additional funds for the 2014 budget are spread out among various departments. The library will receive $37,500 to replace the air-conditioning unit, but much of the extra revenue will go to the parks department, to pay for watering public property, improvements to Winnebago Sports Complex, and mowing at the municipal airport.

Anderson was voted down 3-1 by council members Wes Clerc, Darin Rahm and Chad Askeland.

“Do we have $96,000 in fluff to cut?” Clerc asked finance director Paul Hoye.

Hoye shook his head. The only option he suggested was to defer some capital expenses.

City administrator Mike Humpal warned the council about the risk of failing to make incremental tax increases on a yearly basis. He pointed to the 1980s, when the city failed to do so and fell behind on street repair; to this day, the city is still trying to catch up. He also noted the sticker shock citizens suffered when the city failed to slowly raise water rates and then had to hike rates a whopping 25 percent several years in a row to pay for a new water plant.

Humpal also recommended the council steer clear of using liquor store funds to offset taxes, which would set what he considers a risky new precedent for the city. Revenue from the store can fluctuate from year to year – in 2013 sales were up $150,000, but Humpal worried about when sales aren’t as good, or if the Legislature rejects municipal liquor stores in the future, or if a project came along that the city wanted to support. In the past, those funds have gone toward special projects, like building the aquatic park, the soccer fields, the Winnebago Sports Complex, and bringing colleges to town through the Southern Minnesota Educational Campus.

Humpal also argued that Fairmont is not dying.

“Yes, our population has decreased, like many cities across the Midwest,” he said.

“But we have really seen an increase in valuation,” he added, explaining that Fairmont’s strong tax base has helped keep the city’s taxes stay as low as they are.

In a study of comparable cities, homeowners in Fairmont pay considerably less for the city’s share of the local property taxes than homeowners in New Ulm, Albert Lea, Blue Earth, Jackson, Hutchinson and Winnebago. Only Alexandria ranked lower.

Though several of Anderson’s colleagues on the council commended him for his frugality, they did not support his last-minute proposal.

“I share your sentiment, but there’s a time and place to go through the budget in greater detail,” said Rahm, who backed city staff’s financial planning for 2014. “… This is a good budget and … I think we should pass it.”

Clerc suggested the council hold a work session at the beginning of each quarter to discuss issues such as those raised by Anderson.

Just because the levy is increasing by 3.1 percent does not mean every property owners’ taxes will go up by that amount. Setting aside that the county and school district each have their own levies, there are a lot of other factors that come into play, such as market valuation and the strength of the local tax base.

Following in the footsteps of his predecessors, Humpal shared his 2014 tax statement Monday, which shows his taxes to the city will actually drop by $1 next year.

In other business, the council:

o Approved the city’s 2014 budget in a unanimous vote.

o Approved the proprietary fund budgets for 2014 in a 3-1 vote, with Anderson casting the dissenting vote. The proprietary fund budgets includes public utilities, which is not calling for any rate increases for next year.

o Set a public hearing for Jan. 13 for an offer made on city property at 725 E. Seventh St., where the city demolished a blighted home. An adjoining property owner, Dave Daughtery Jr., offered $500 to $1,000 for the lot.