2011 Budget

The full 2011 Proposed Budget document is available on the City web site.  Tonight may be the final work session to discuss the 2011 Proposed Budget should the City Council agree on a final package.  The final recommendation includes a levy increase of 4.4 percent.  This is reduced from the 10 percent increase in the preliminary levy that the Council adopted in September.  By state law, the City must set a preliminary levy by September 15 of each year.  The City Council can reduce, but not increase, the preliminary levy.  Often, the Council sets the preliminary levy artificially high to allow for budget deliberations with full context of programs and services.

The recommended levy comes on the heels of yet another another reduction in expenditures from previous years.  The culprit, of course, is an anticipated reduction in Local Government Aid (LGA) from the State of Minnesota.  We will fight hard along with organizations such as the Coalition of Greater Minnesota Cities and the League of Minnesota Cities to retain LGA funding.  However, I prefer to budget conservatively and to explain to legislators that such an increase would not be necessary had LGA levels been maintained at their previously-certified levels.  The City has already been cut over $1 million in the last two years.  Another potential cut in 2011 identical to the 2010 cut would result in an additional cut of $615,425.  And, there is an outside chance that the City could see another unallotment next month.  The state forecast to be released on December 2 may give us a better picture of what is in store for the remainder of the current biennium.  In short, we are not asking for increases in LGA.  Rather, cities only request that the state discontinues the practice of unallotment along with further decreases to the certified levels that have already been cut.

I spoke last week with the Polk County Assessor.  He found that most property owners in East Grand Forks will see bills that are nearly identical to 2010.  A large factor in this equilibrium is a continued escalation of agricultural property values throughout the county.

Finally, the Water and Light General Manager submitted his final budget recommendation to the Water and Light Commission last Thursday evening.  He recommended a water rate increase of $0.10 per 1000 gallons.  For the average household, this translates to an increase of about $0.44 per month.  Further, the General Manager recommended that electric rates remain unchanged for 2011.  I applaud the General Manager and the Commission for working to freeze rates as the more economically-sensitive operations both in the government and the private sector continue to rebound.

Overall, most city services remain less expensive than they were five years ago, with or without adjusting for inflation.  Our fund balances have been largely stable despite repeated cuts to state funding.  This is especially significant considering that many of the cuts have occurred after the City passed its annual budget – leaving little recourse to compensate for the funding cuts.  The entire staff and the Council deserve credit for their constant vigilance of public resources.

Levy and Tax Rates

This section is for those who like numbers but who dislike having to pour through reams of paperwork.

A General Fund Summary is attached.  One can see rather quickly that overall revenues are flat and expenditures are reduced despite a slight increase in the levy.

Finally, I have attached a tax rate summary that dates back to 2002.  Note that there is a distinction between we call the levy and the tax rate.   The levy simply refers to the total property tax revenue that the City collects.  The tax rate is ratio of the levy relative to the overall city tax capacity, a function of property value.  The tax rate, not the levy, is what determines a property tax liability.  Despite slightly increase tax rate for 2011, tax rates are still significantly below the historic levels.