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Council reviews budget, talks hospitality tax

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Council reviews budget, talks hospitality tax
Bemidji Minnesota P.O. Box 455 56619

BEMIDJI – The city council here discussed last year’s budget and looked toward its financial future in a work session Monday night.

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The city’s general fund had a $708,643 surplus in 2012, thanks mainly to higher than expected revenues and lower expenses, said city finance director Ron Eischens. 

The council voted Monday to dedicate the surplus to increasing general fund cash reserves to $4.9 million, future capital equipment purchases, $100,000 for the Carnegie Library restoration the council previously committed, capital obligations with the Rural Fire Association and to undesignated reserves.

The city reduced its overall cash balance by $1.7 million to $23.8 million in 2012, though that was anticipated due to $1.4 million worth of water and sewer construction projects.

The city’s liquor stores had a good year, increasing sales by $156,000.

“Even more important than sales … we generated almost $700,000 worth of profits for the city to primarily reduce property taxes,” Eischens said. In his memo presented to the council, Eischens wrote that $340,000 of the liquor store profits were used to reduce city property taxes.

Toward the end of the meeting, city manager John Chattin said the city will discuss next Monday whether to add another liquor store in the city. Chattin said the city wouldn’t be buying any existing liquor stores.

The Sanford Center operating deficit came in at $377,992 in 2012, which is $14,300 less than budgeted.

In discussing next year’s budget, Eischens pointed out the city will not know until June whether a grant request for a police officer position will be funded. The officer hired with the state grant money focuses on auto theft crimes in Bemidji.

“The grant is more competitive now that it has been because more police departments are aware of that funding source,” Eischens said.

The council indicated they want to keep funding that position through the end of the year if the grant does not come through.

“Auto theft is huge in Bemidji,” Chattin said. “And if we lose that officer that means you’re pulling a different officer that’s on patrol to deal with that.”

Ward 1 Councilor Michael Meehlhause said the Kitchigami Regional Library Board will take a look at what adding another staff member at the Bemidji Library would cost.

“So they’re going to get us those numbers so we can have that conversation,” Meehlhause said.

Chattin also suggested the city should budget for summer interns in the future.

Hospitality tax

The council formalized a talking point in the ongoing debate over the hospitality tax Monday night.

It approved unanimously a resolution stating the city would reduce its property tax levy by $400,000 otherwise needed for the Sanford

Center if the hospitality tax bill is approved by the Legislature. The city budgeted for a $400,000 subsidy for Sanford Center operations in 2013.

The bill, as currently written in both the state House and Senate would allow the city to impose up to a 1 percent tax on purchases at restaurants and hotels in Bemidji to pay for Sanford Center operations, maintenance and capital improvements. Sen. Ann Rest, DFL-New Hope, had asked councilors and Chattin what assurances residents had that property taxes would be reduced as a result of the hospitality tax during a hearing in the Senate taxes committee April 3. 

“I think what we're saying is that we would guarantee that our levy would be reduced by $400,000 over what it would otherwise have to be,” Chattin said at the time, explaining that unrelated budget needs could increase the levy. 

As the bills approach crunch time at the Legislature, the council also voted Monday to hire a lobbyist to represent them on the issue.

The city will pay a flat fee of $5,000 to the firm Flaherty & Hood in their role with the Coalition of Greater Minnesota Cities to see the bills through some crucial stages in the coming weeks.

“It seems like a small investment for a possible huge return,” Councilor Jim Thompson said.

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John Hageman
John Hageman covers local business and Grand Forks' legislative delegation. Get more business news at aroundtown.areavoices.com. 
(701) 780-1244
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