Sections

Weather Forecast

Close
Advertisement

Bemidji City Council to discuss proposed 2012 budget at Monday meeting

Email Sign up for Breaking News Alerts
news Bemidji, 56619
Bemidji Minnesota P.O. Box 455 56619

Determining the budget is the most important decision city councilors make on a yearly basis, according to Ron Eischens, Bemidji's finance director.

Advertisement
Advertisement

The city council will discuss the proposed 2012 budget at a work session to be held at 5:30 p.m. Monday, Aug. 22, at the Bemidji City Hall.

The council will likely spend more of their time discussing street improvement spending, increasing the use of liquor store profits and union contracts.

In a memorandum to the city council, Eichens stated in the past two years, the budget has been largely determined based on how much state aid the city receives, which has been reduced in recent years. This has resulted in a city having a smaller operational budget.

For 2012, Eischens stated, the proposed budget will focus on the city's operational budget. The proposal includes a 1.5 percent levy increase, which stems from a change the change in gas and electric fees. The increase is needed, Eischens stated, to capture the tax capacity of new construction and would not increase the current tax rate.

The recommended budget amount for the next 5 years is $520,000.

While the city's Local Government Aid remains at 2010 levels for the next two years, Eischens stated the city should be proactive to secure alternative revenue sources since LGA could be subject to future state budget cuts.

One revenue source available to the city is gas and electric franchise fees, Eischens stated. The city adopted a gas/electric franchise fee in March of 2006. This generated approximately $280,000 annually using a fixed fee.

A usage-based gas/electric franchise fee of 3 percent, Eischens estimated, would generate an additional $380,000 of revenue (equivalent to a 10 percent levy increase). The maximum usage fee by law is 5 percent.

Other items included in the 2012 budget proposal are:

E Maintaining the current levels of services and staff.

E Increasing the amount of transfer money from liquor profits from $65,000 to $340,000, which includes $40,000 for park improvement projects.

E Increasing refuse rates of $1 per canister creating an additional $24,000 in refuse profits transferred.

E A 3 percent increase to operational budgets for a total cost of $67,000.

E $20,000 to street department for increased annexation-related costs.

E An increase of $6,000 to the Parks Department for increased maintenance on Algoma Park.

E Reducing the contingency budget to $40,000.

E Increasing the Bemidji Police Department funding to maintain two grant-funded positions as patrol officers at a cost of $140,000.

Eischens stated the tax levy required to support the budget is $3.3 million, plus debt-specific levies of $572,000 for a total levy of $3.9 million. The city funded $358,000 of the projected 2012 bond shortfall with 2010 budget surplus, but is required to fund an additional $118,000 to meet statutory requirements.

City staff is also recommending the city fund projected future shortfalls equally over the next 15 years at $131,000.

If the council approves the proposed levy, the city tax rate should remain the same as 2011 (42.3 percent). Eischens stated it is anticipated that an average home owner would see no change in city taxes assuming home values stay the same.

For 2012, Eischens stated the Market Value Homestead Credit will no longer be a reduction in taxes paid, but rather a reduction in property market value. This will result in reduced property market value for the city and will have an impact on property tax rates.

Based on the city assessor's preliminary calculations, property values on a county-wide basis will decrease by 7.5 percent due to the change in the MVHC, Eischens wrote in the memo.

For 2012, the city would collect 100 percent of its tax levy directly from taxpayers and would not have to budget for the loss of MVHC payments from the state.

Determining the budget is the most important decision city councilors make on a yearly basis, according to Ron Eischens, Bemidji's finance director.

The city council will discuss the proposed 2012 budget at a work session to be held at 5:30 p.m. Monday, Aug. 22, at the Bemidji City Hall.

The council will likely spend more of their time discussing street improvement spending, increasing the use of liquor store profits and union contracts.

In a memorandum to the city council, Eichens stated in the past two years, the budget has been largely determined based on how much state aid the city receives, which has been reduced in recent years. This has resulted in a city having a smaller operational budget.

For 2012, Eischens stated, the proposed budget will focus on the city's operational budget. The proposal includes a 1.5 percent levy increase, which stems from a change the change in gas and electric fees. The increase is needed, Eischens stated, to capture the tax capacity of new construction and would not increase the current tax rate.

The recommended budget amount for the next 5 years is $520,000.

While the city's Local Government Aid remains at 2010 levels for the next two years, Eischens stated the city should be proactive to secure alternative revenue sources since LGA could be subject to future state budget cuts.

One revenue source available to the city is gas and electric franchise fees, Eischens stated. The city adopted a gas/electric franchise fee in March of 2006. This generated approximately $280,000 annually using a fixed fee.

A usage-based gas/electric franchise fee of 3 percent, Eischens estimated, would generate an additional $380,000 of revenue (equivalent to a 10 percent levy increase). The maximum usage fee by law is 5 percent.

Other items included in the 2012 budget proposal are:

- Maintaining the current levels of services and staff.

- Increasing the amount of transfer money from liquor profits from $65,000 to $340,000, which includes $40,000 for park improvement projects.

- Increasing refuse rates of $1 per canister creating an additional $24,000 in refuse profits transferred.

- A 3 percent increase to operational budgets for a total cost of $67,000.

- $20,000 to street department for increased annexation-related costs.

- An increase of $6,000 to the Parks Department for increased maintenance on Algoma Park.

- Reducing the contingency budget to $40,000.

- Increasing the Bemidji Police Department funding to maintain two grant-funded positions as patrol officers at a cost of $140,000.

Eischens stated the tax levy required to support the budget is $3.3 million, plus debt-specific levies of $572,000 for a total levy of $3.9 million. The city funded $358,000 of the projected 2012 bond shortfall with 2010 budget surplus, but is required to fund an additional $118,000 to meet statutory requirements.

City staff is also recommending the city fund projected future shortfalls equally over the next 15 years at $131,000.

If the council approves the proposed levy, the city tax rate should remain the same as 2011 (42.3 percent). Eischens stated it is anticipated that an average home owner would see no change in city taxes assuming home values stay the same.

For 2012, Eischens stated the Market Value Homestead Credit will no longer be a reduction in taxes paid, but rather a reduction in property market value. This will result in reduced property market value for the city and will have an impact on property tax rates.

Based on the city assessor's preliminary calculations, property values on a county-wide basis will decrease by 7.5 percent due to the change in the MVHC, Eischens wrote in the memo.

For 2012, the city would collect 100 percent of its tax levy directly from taxpayers and would not have to budget for the loss of MVHC payments from the state.

Advertisement
Advertisement
Advertisement
randomness