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City Council continues with 9.9 percent levy increase

The Bemidji City Council on Monday decided to "hope for the best, plan for the worst," according to Mayor Richard Lehmann.

City staff was directed on Monday to continue working toward a 2008 budget utilizing a 9.9 percent levy increase despite a shrinking amount of state aid.

The city of Bemidji earlier this year was poised to receive $428,000 in Local Government Aid in 2008, but by vetoing the 2008-09 budget bill, Gov. Tim Pawlenty canceled those funds.

And now, the city has learned its LGA amount for 2008 will be $70,000 less than what was predicted.

Bemidji's LGA amount was certified by the Minnesota Department of Revenue to be $3,068,088 for 2008, which is $260,000 less than the city received in 2007.

Councilors earlier this summer supported a 9.9 percent levy increase if Pawlenty did not call a special session to deal with the vetoed budget bill, among other matters. If a special session is ordered and the budget bill is adopted as presented, the City Council indicated that residents would not face a levy increase for 2008.

During a work session on Monday, the City Council debated how to make up for the loss of funding.

A 1 percent levy increase accounts for approximately $26,000 in revenue, according to Finance Director Ron Eischens. It would take a 2.7 percent levy increase to make up for the $70,000 loss in LGA, he said.

Councilors Nancy Erickson and Jerry Downs were opposed to increasing the levy to cover the loss. Downs suggested that the city cut back or hold off on equipment needs, while Erickson said the city has seen a surplus in each of the last three years.

The city's preliminary levy must be submitted to Beltrami County for certification by Sept. 15. The preliminary levy amount, a percentage, may be lowered after that date, but not raised.

Councilor Onen Markeson reminded the council that it could adopt a higher levy amount and then lower it, if deemed appropriate.

But Erickson was concerned that the new number would become the target figure if a special session is not held.

Mayor Richard Lehmann has gone to St. Paul twice recently to meet with other mayors and state officials regarding a possible special session. He said legislators are expecting that a special session will be called, but not until after Labor Day, and those who attended the discussions seemed open to including the vetoed tax bill on the agenda.

He said 431 Minnesota cities were told their LGA amounts would be different than what was previously expected.

"More saw a reduction than an increase," he said.

Markeson said the city should address what the "real needs of the city are" and not cut services to keep the levy down.

Downs said he would like to see the City Council hold off on deciding its levy. If the city can wait until the first week of September, he said, it might better know whether a special session would address the tax bill.

Downs said the council has supported double-digit tax increases in the past and he believed the city could postpone some equipment costs to cover the newest LGA loss.

"That may send the wrong message to St. Paul," Lehmann said, explaining that the council should consider what message it is sending to Pawlenty and the Legislature.

But Downs said that the city's track record also would send that message.

Past levy amounts were discussed at length during Monday's meeting. Since 1990, the council has adopted the following levy amounts:

E 1990: 12.3 percent

E 1991: 15.3 percent

E 1992: -1.8 percent

E 1993: 3 percent

E 1994: -21.9 percent

E 1995: 5.2 percent

E 1996: 5.1 percent

E 1997: 3.1 percent

E 1998: 7.8 percent

E 1999: 7.4 percent

E 2000: 7.8 percent

E 2001: 35 percent

E 2002: -30.7 percent

E 2003: 22.5 percent

E 2004: 21.5 percent

E 2005: 18.7 percent

E 2006: 4.9 percent

E 2007: 19.9 percent

Councilors said that since 2001 they have supported higher levy increases to help make up for the years prior to then because the previous council did not increase the levy in regards to inflation.

Erickson said she was told in 2001 that it would take three or four years to catch up.

Councilor Ron Johnson said that was the intent, but the council also did not know the governor was going to slash LGA.

"I think we're on track to right the ship," he said.

Erickson said those who live on fixed incomes may not have the money available to pay their taxes if the city continues to increase taxes.

Markeson said the City Council needs to take into account all of its city residents, not just one group of people.

The council needs to "do what is best for the community as a whole," he said.

City Manager John Chattin said he and Eischens are meeting now with department heads regarding their budget requests for 2008. Not only will they state what is being funded next year, but they also will be asked to develop a list of what is not being funded because of budget restrictions, he said.

About LGA

Originally created in 1971 as part of the "Minnesota Miracle," LGA replaced several smaller state-aid programs. Its formula has repeatedly been tweaked and changed, but it always has attempted to account for a city's need and takes into account a municipality's past aid amounts, according to the Minnesota House of Representatives.

"Communities with higher populations, declining populations, older housing, and less commercial and industrial property are considered higher-need," according to the Minnesota Department of Administration/Office of Geographic and Analysis.