Cloquet sets preliminary levy at zero percent

Talk about it

Cloquet City Councilors and Mayor Bruce Ahlgren voted unanimously Tuesday to set the preliminary levy for taxes due next year at $2,650,000, a zero percent increase from the previous year.

However, that doesn’t mean all property owners will see exactly the same charges on the Cloquet portion of their property taxes next year.

Some – especially those people whose homes and/or businesses were affected by the flood and were assessed at a lower rate as a result – will pay less money to the city this year. Other property owners could see an increase.

During the work session prior to the formal city council meeting, Ahlgren wondered if the council would be wise to set the levy rate at 1 or 2 percent, just to be safe, because once the preliminary levy rate is set in September the city can revise the rate downward, but not upward. Therefore, if some unforeseen situation – natural disaster, a massive spike in fuel prices or a dramatic reversal of the state budget forecasts ­– were to come up between now and the final vote Dec. 18, the council would not be able to adjust the levy.

“When you commit to zero percent this early, you’re hedging all your bets in one direction,” City Administrator Brian Fritsinger said.

When asked if she felt there is enough “cushion” built into the budget, City Finance Director Nancy Klassen said yes.

“With what I know right now, yes,” she said, noting that the state already paid the city it’s promised Local Government Aid to help with the flood recovery efforts.

Fritsinger reminded councilors that the city has been working on a four-year budget cycle, so the new budget contained few surprises. He added that part of the goal with long-term budgeting is to avoid “roller coaster” budgets that rise and fall dramatically each year.

Even though Cloquet also set its levy at zero percent last year, property owners did see an increase in their Cloquet taxes, however, because the state of Minnesota eliminated the market value homestead credit program (MVHC), a state funded program designed to reduce the property taxes paid by qualifying homeowners.

Councilors and city staff also debated what kind of effect a levy increase might have on how voters regard the city sales tax vote in November. Approved by the state legislature during last year’s session, the city will ask voters to approve a half-percent (equivalent to half a cent) sales tax. Essentially, passage of the sales tax would give the city another funding source to finance projects that might not happen otherwise. Revenues raised by the tax could not be used to finance normal city expenditures, only those outlined in the legislation passed by the Minnesota House and Senate which include certain park, infrastructure and utility improvements.

If passed by voters, the tax would only apply to taxable items – not groceries, clothes or prescription drugs – purchased in Cloquet. If approved, proceeds from the tax are estimated at between $500,000 and $625,000 per year.

“We would benefit a lot more from a sales tax than a 1 percent levy increase,” Ahlgren said.

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