2009 city budget brings tax reduction, increased street spendingHudson Mayor Dean Knudson had uncommonly good budget news to deliver at the Nov. 24 City Council meeting. Thanks to the closure of the city’s tax increment financing district and a reduction in health insurance premiums, the 2008 mill rate will drop 5 percent.
By: Randy Hanson, Hudson Star-Observer
Hudson Mayor Dean Knudson had uncommonly good budget news to deliver at the Nov. 24 City Council meeting.
Thanks to the closure of the city’s tax increment financing district and a reduction in health insurance premiums, the 2008 mill rate (funding the 2009 budget) will drop 5 percent from the 2007 rate.
And despite the tax reduction, general fund spending next year will increase 4.65 percent.
In addition, a one-time windfall of $1.1 million in left-over TIF funds will allow the city to pay off some debt and set aside money for future capital projects.
“It has been an unusual budget year,” Knudson said at the start of the budget discussion.
The council approved the 2009 general fund budget of $9,416,499 on a 4-2 vote.
The two dissenters – alderpersons Alan Burchill and Lori Bernard – wanted the budget to include a room tax allocation plan proposed by Knudson that would have boosted the share going to the Hudson Area Chamber of Commerce & Tourism Bureau to 70 percent. The Tourism Bureau now gets 40 percent of the room tax revenue.
The room tax allocation was the only area of disagreement regarding the budget, but feelings ran deep on both sides of the issue.
After about 20 minutes of debate, the council approved a motion by Alderperson Scot O’Malley to adopt the proposed 2009 budget minus the mayor’s room tax allocation plan. The motion said the council would take up the room tax allocation at a later date.
Alderpersons O’Malley, Lee Wyland, Randy Morrissette II and Pam Brokaw supported the motion.
A front-page story in this edition of the Star-Observer details Knudson’s room tax plan and the debate over it.
A property tax levy of $6,363,673 will be needed to support 2009 spending. The city expects to receive state aid, other taxes, fees and other income totaling an additional $3,052,826.
It will take a mill rate of $4.02 per $1,000 of assessed property value to raise the levy. That is a 21-cent drop from the 2007 mill rate of $4.23 per $1,000.
Even better news for city property owners is that the mill rates in all of the taxing districts they fund have declined or stayed the same.
The result will be a 47-cent decline in their total mill rate. The 2008 total mill rate is expected to be $13.92 per $1,000 of valuation, down from $14.39 in 2007. (The numbers are estimates because the state hasn’t announced what the lottery credit will be).
The owner of a $200,000 house will see a total tax bill reduction of about $94. The total bill for a $300,000 house drop about $142, and for a $400,000 house, about $188.
TIF district impact
“I recommended that we take a very conservative approach,” Knudson said regarding the added revenue the city will get as a result of the closure of Tax Increment District No. 4.
The TIF district, formed in 1995, encompasses St. Croix Business Park and some of the commercial district along Carmichael Road south of Interstate 94.
The closure of the district earlier this year has added about $190 million to the city’s assessed valuation, which for 2008 was $1.58 billion.
At the start of the budgeting process, Knudson announced that he wanted to use the added tax dollars (and the $1.1 million in leftover TIF funds) to reduce the tax rate by 5 percent, increase city department budgets by 5 percent, and increase spending on infrastructure upgrades by 50 percent. He called it “The 5:5:50 Plan.”
Speaking to the council on Nov. 24, Knudson said the taxpayers should benefit from the TIF district closure.
He noted that over the past 12 years, tax revenue from new buildings in the TIF district has gone to pay for the district’s infrastructure.
As a result, city property owners paid more for schools and city and county services than they would have otherwise. Now they should receive a return on that investment, Knudson indicated.
More spending on infrastructure
Knudson is recommending that the city increase its annual long-term borrowing for capital improvements to $2 million in 2009.
Last year, the city borrowed $1.3 million for street projects and other capital improvements.
“We’ve had some deferred (street) maintenance,” the mayor said. “We’re going to set about to remedy that.”
He said indicated that increased revenue because of the city’s larger tax base would allow for the increased spending on infrastructure.
Resurfacing Carmichael Road from Interstate 94 to the south city limits is the major street project planned for 2009.
Also at the Nov. 24 council meeting, Chuck Schwartz of Bonestroo, the city’s consulting engineering firm, reported that planning for the project is underway.
The portion of the 2008 tax levy that will go to repaying the city’s long-term debt is $1,357,574.
Knudson reported that a switch in health insurance plans for city employees will reduce 2009 general fund spending by $207,000.
The savings is $400,000 when water and sewer utility employees are included, he said.
The city’s 2009 personnel costs will be $35,000 less than in 2008 because of the reduced health insurance costs, he added.
The city is planning to provide its employees with health insurance through Preferred One, a Minnesota-based company, next year. The City Council voted in October to leave the more expensive state health insurance plan.