The Bemidji City Council balked at a double-digit tax levy increase Monday evening, instead opting to direct staff to consider cuts and savings for the 2011 budget.
"We had a 19 percent increase last year," said Councilor Greg Negard. "I'm not comfortable with a 13 percent (increase)."
Negard was the first to oppose a double-digit increase. He noted that Beltrami County is considering a 1 percent levy decrease and said he would like the city to have no increase.
Ron Eischens, the city's finance director, will now lead the effort to present cuts and savings that would reflect other possibilities, such as perhaps a 5 percent increase or no increase at all. The council did not offer a target figure.
It was the council's first budget work session of the fall. The council, composed of all seven councilors, discussed a memorandum from Eischens that detailed a 13 percent levy increase.
The proposal, which was not a recommendation, depicted the tax levy needed to continue offering the city's current level of services and fully fund anticipated needs, such as operations at the Bemidji Regional Event Center and capital improvements throughout the city's departments.
John Chattin, city manager, said staff never expected the council to embrace the 13 percent increase depicted.
"To continue with the same number of services we provide, that's what it would take," he said.
Bemidji, like many other outstate cities, has been affected by repeated cuts to Local Government Aid. Because of that, Eischens and city staff are planning the 2011 budget based on the aid received this year - not on what the city has been told to expect.
In fact, the city could receive an additional $400,000 in LGA to what is currently budgeted for 2011, but staff can no longer count on those dollars, Eischens said.
"It's a lot easier to spend additional money you get than cut after the budget is done,' Chattin said.
The budget included a $300,000 operating subsidy for the BREC, to which Councilor Barb Meuers objected.
"This is why I've been voting no all along," said Meuers, who has continued to vote against most BREC-related expenditures
Meuers said the public has repeatedly been told in the past two years that property taxes would not be used to subsidize BREC operations.
The budget included $300,000 for BREC operation, based on VenuWorks estimates; $200,000 for capital replacement funding, also per VenuWorks; and $50,000 to promote the south shore and sell property.
Chattin disagreed with Meuers, saying that he has all along stated that the facility would lose money.
Likewise, Mayor Richard Lehmann said the council has always said it would do everything it could to keep the operations and maintenance costs down.
Lehmann also said the budget does not take into consideration naming rights, if they are sold for the BREC.
Councilor Ron Johnson said the city could tap into a fund that was raised from residents outside of the city limits who wanted to financially support the BREC but do not pay property taxes.
The fund, he believed, was at about $70,000.
Johnson also said property will be sold and the corresponding development could cover all operational funding needed for the BREC in the future.
Meuers said Mankato, which has the Verizon Wireless Center, has had to implement a hospitality tax to cover its losses.
Al Felix, the city attorney, said the city certainly could explore that option, if it wishes to do so.
The Bemidji Fire Department is one of three city departments that have not had staff reductions in the last three years. (Also untouched have been the parks and engineering departments.)
But two councilors said they were not opposed to considering cuts to the Fire Department.
Councilor Roger Hellquist said it should be looked at.
Negard suggested that the city consider saving hundreds of thousands by discontinuing coverage to emergency medical calls.
The city could go to having a full-time chief and an all-volunteer, paid-on-call firefighting staff, Negard said.
The city now has a chief, seven full-time firefighters and 40 paid-on-call firefighters. There also are six live-in "dormers," who are volunteer firefighters as well.
Negard's comments were not the first time the council considered such a move. In April 2009, Hellquist mentioned the possibility, but no action was ever taken.
"It's a policy decision for the council," Chattin said. "Does the city want to provide emergency medical services?"
Chattin said it could save upwards of $350,000 a year, but it would involve a conversation with the townships, which provide funds through the Rural Fire Association.
He also noted that the greater savings would not be felt immediately, as there would be costs involved in changing the makeup of the department.
Aside from the medical discussion, Negard also wondered about the necessity for a new ladder truck, which is scheduled for 2014 at a city cost of $560,000.
"Is that something that is absolutely critical?' he said.
Fire Chief Dave Hoefer, who attended the work session, said it is the standard to replace aerial devices, such as ladder trucks, every 20 years. The current truck is from 1994.
If that does not happen, he noted, it could negatively impact the city's ISO rating, which determines homeowners' insurance rates, known as ISO rates.
Equipment age is carefully looked at in determining ISO, he said.
"Equipment gets older and older and gets less and less reliable," Hoefer said. "There gets to be a point of no return."
More LGA cuts?
Johnson said it would not be the BREC or the city's departments that would devastate the city's budget.
Instead, he said, it would be the complete loss of LGA.
Johnson, who serves on the Coalition of Greater Minnesota Cities, said the CGMC has estimated that property taxes would increase 80 percent if LGA was ever completely cut.
Negard said he saw parallels in the LGA and Social Security discussions, noting that Americans have long been told that Social Security is not going to exist in the future.
"There will be something there" even if Social Security is eliminated, Negard said.
Likewise, he said, even if LGA is eliminated, another program or formula would be constructed in its place.
"Who in this room could afford an 80 percent increase to their property taxes?" he said. "I, for one, could not."