Cloquet looking at minimal tax levy increase
Surprisingly perhaps, the 2019 budget for the city of Cloquet likely won't result in much of a tax hike for residents.
As the budget was originally presented to the City Council and without any cuts in services or personnel, the levy for 2019 could have actually gone down slightly because
revenues are also increasing. Cloquet Finance Director Nancy Klassen said property valuations went up 4.3 percent between new construction like Taco Bell and higher assessments on existing properties.
However, department heads provided just over $1 million in requests, a wish list of sorts. City Administrator Aaron Reeves told the council earlier this year that he asked staff to provide him with all their requests, knowing many couldn't be funded. Right now a few of those are parked on a list of project that might be funded by a tax increase, depending on what the council decides.
Additionally, there's at least one major project on the horizon that won't cause the levy to go up.
Citizens won't pay a penny of new tax dollars for the $3.5-$4 million purchase and renovation of the current Members Cooperative Credit Union building in 2018, which will be used for a combined City Hall and police department. That's because the money is coming from reserves built up over the past decade.
During the Sept. 4 City Council work session, Reeves pointed out that the state of Minnesota recommends that cities have between 35-50 percent General Fund reserves and Cloquet is sitting at close to 77 percent. So rather than opt for a more expensive short-term bond issue to pay for the building, the city is spending down its very healthy savings.
Ward 2 Councilor David Bjerkness explained that the city council and staff opted to be more fiscally conservative after the state dramatically cut the amount of LGA (local government aid) it sent to cities probably more than eight years ago.
Klassen admitted that she is a little nervous about drawing down the reserves so substantially.
"We're still fiscally sustainable, but things might be tighter over the next few years," Klassen said in an interview Tuesday.
The cost of doing business is going up too.
The city's two most expensive departments are public works (25 percent of the annual general fund budget) and the police department (43 percent). The proposed total police department expenditures for 2019 is $3,061,500, an increase of close to 10 percent, versus actual costs of $2,777,341 in 2017 and $2,507,199 in 2016.
When asked why the police department has seen an increase of more than half a million dollars over the past two years, Klassen pointed to increased salaries (almost $300,000), because the city hired two additional officers and for wage increases. They also had a required retirement contribution increase ($50,000). Health insurance also increased about $100,000 over that period. Overtime was also a factor, but not among the top three.
It is difficult to compare many other budget line items for 2019, because the city changed the way it accounts for the way certain costs are covered. For example, the city administrator's salary used to show up piecemeal in the different departments that paid portions of his wages. Now, according to Klassen, his wages show in one place, but the money to pay for them is simply being transferred into the General Fund, so there is no actual change in the amount.
That is particularly true of the Public Works department, which is also funded in part by the water and sewer budgets. Thus the fund for Highways, Streets and Roadways shows the budget at $634,550 for 2018, and the proposed budget for the same jumping to $1,128,550 in 2019 before settling in to the lower $700,000 range from 2020-2022.
Klassen said staff salaries were shifted from different departments and money transfers from other funds to pay for those went up by an equal amount.
During the Sept. 4 work session, Reeves also offered the council a list of projects to consider for 2019, including the following items:
-Library expansion - $2 million, annual debt service payments of $155,000 for 20 years;
-West End parking lot - $200,000
-Pickleball Courts at Churchill - $50,000
-Braun Park scoreboards - $50,000
-Police side-by-side ATV - $25,000
-Coalition of Greater MN Cities membership - $20,070
-Marketing - $19,000
-Cloquet HRA Funding - $35,000
Reeves pointed out that the city has close to $100,000 in one-time funds available from closing out Business Park bonds along with money from TIF administration.
The Council has to set its maximum levy increase for 2019 at its Sept. 18 meeting, and a final levy number in December. Between now and then, they can change how money is spent in the budget. They can also decrease the maximum levy, but they can't increase it beyond what they vote for on Tuesday.
At the last work session, councilors seemed inclined to support a 1 percent maximum levy increase. That would put the tax levy at $3,067,500 versus $3,037,000 in 2018.