New franchise fee seems likely to fund street needs
It’s taken some chopping, funding shifts and a new revenue generating vehicle, but it appears the city of Forest Lake is on track for a zero growth property tax levy in 2013.
A final decision on the 2012 tax levy is yet to be made, but many of the details for that package were ironed out at the Forest Lake City Council’s third budget work session on Thursday, Aug. 30. The council met again on Tuesday night and budget items were part of the agenda.
A fourth budget work session has been scheduled for 6:30 p.m., Thursday, Sept. 6. The council did not cancel that meeting but hinted it may not be needed.
The council must certify its preliminary 2012 levy to the Washington County Auditor by September 15th. That is expected to happen during the council’s next regular meeting on Monday, Sept. 10. The preliminary levy is an amount that can be lowered but not increased.
Final levy certification will come in December.
As it stands early this week, following consensus on August 30, the proposed tax levy is $7,163,901. That compares with the $7,166,525 levy certified a year ago for property taxes collected by the city in 2012. Fiscal disparities will reduce the local levy by $814,234.
When an estimated $15,000 is signage expense is reduced, the new levy will be lower than a year ago. The signage dollars will be spent this year.
Getting there has required some creative steps by the council and staff.
Ellen Paulseth, finance director, and City Administrator Aaron Parrish presented council with levy options that ranged from a zero growth model to a model that raised the levy as much as 20 percent.
In light of the current economic climate and another decline in the taxable market value of property in the city, the consensus was to aim low for 2013 taxes. After seeing a taxable value of $16.96 million for 2012, the proposed taxable value for 2013 is $14.69 million, a drop of 13.4 percent.
When budget planning for 2013 began earlier this year, Paulseth said the early numbers stood at just above $8 million. Staff and department level meetings whittled away some $1 million, she added.
Staff cuts, creation of a new franchise fee to pump money into street needs and a general fund levy cut and shift are all part of the new budget and levy plan.
There is consensus that street needs in Forest Lake are a priority, but there is no consensus for a levy increase to cover such needs.
In fact, the council is moving in the opposite direction despite a warning by Parrish that the city is falling behind in maintaining and upgrading streets. A streets task force has identified that the city needs $1 million of capital investments each year for the 100 streets the city maintains, including 30 that are still gravel roads.
The street needs include maintenance and streets that need total reconstruction. The city has some 100 miles of roads to maintain.
Rather than levy tax dollars in the 2013 budget, the council consensus is now to enact an ordinance that would collect franchise fee dollars dedicated to street needs. The franchise fee would be tied to residential and commercial customers who have accounts for natural gas and electricity from Xcel Energy and Connexus Energy.
The council consensus is to move forward with a 4 percent residential plan and 2 percent commercial plan which would generate an estimated annual income of $768,480 for street needs.
The 2 percent commercial franchise fee is tied to some 610 accounts while the 4 percent residential fee would apply to just over 8000 homes. Staggered rates would be used to determine the commercial monthly fee; a flat rate of $4 a month or $48 a year would apply to each residential unit in Forest Lake.
The ordinance would come before council later this year for ratification.
To help pull down the levy for taxes to be collected next year, the council also agreed to trim $170,000 from its 2013 street maintenance budget and direct that the $170,000 be included in the $768,480 franchise fee budget.
Councilman Mike Freer championed the levy switch and found support from the balance of the council.
During the open forum segment of the meeting last week, two citizens, Jeff Klein, Forest Lake, and John Freed, Columbus, spoke to the franchise fee. Both described the franchise fee as effectively an additional tax.
Klein, who is a candidate for a city council seat this fall, served on the streets task force. Even with the fee, he said the city will continue to fall behind in its efforts to address street needs.
Ed Eigner, another council candidate, warned that the franchise fee would have the same negative public reception as the street light and stormwater utility fee.
By dropping the $170,000 designated for mill and overlay work from the general levy, the city effectively reaches a zero levy growth for 2013. The remaining $180,000 will stay in place for regular maintenance and seal coating projects.
The city also receives an estimated $800,000 in state municipal state aid road funds that are earmarked to desiganted streets.
In shaping its proposed budget and levy for 2013, the council did not eliminate or reduce the full-time fire inspector position which carries a cost of $87,361. And in keeping with a council consensus to emphasize public safety, a cut of $4000 in community policing was retained.
The council also backed away from $13,100 in department head reductions and kept $4000 in the budget for Arts in the Park events in 2013.
One major cut in staff will save an additional $115,000 next year. With building activity at a low point, the council has agreed to eliminate the supervisory position of building official, now filled by Keith Wille. Under the reorganization plan, the city will employ two building inspectors who will report to the community development director.
Wille, the two building inspectors now employed and new candidates will be eligible to apply for two positions under a hiring program for the new year.
With no levy limits in place this year, the consensus, however, is levy for zero growth. There was reluctance on the part of some council members to put a higher amount in play based on a belief the council would not lower the amount in December.
There was brief mention last week of levy dollars to support the first steps in a plan for new facilities for the city, but found little support from the majority to add levy dollars. No amount was identified.
Mayor Chris Johnson said later the city continues to explore the possible purchase of the Northland Mall site as a future home for a new city hall and public safety complex. Next year will be ample time for any levy decisions that will be necessary to start that project, he said.