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Bemidji City Council: Levy increase expected for 2010

It will take a combination of further budget reductions and a levy increase to meet the budget challenges facing the city, the Bemidji City Council agreed Monday night.

The council met in a work session to discuss the budget following Gov Tim Pawlenty's unallotment announcement last week. Pawlenty's plan to reduce Local Government Aid payments in 2009 and 2010 means a loss to Bemidji of $210,493 in 2009 and $485,688 next year.

Still, the cuts were less than the previously predicted amounts of $320,000 and $670,000.

"Although it's never nice when we get LGA cuts ... the cuts were not as bad as the council was bracing for," said Mayor Richard Lehmann.

But that doesn't mean the city's worries are over.

City Manager John Chattin and Finance Director Ron Eischens explained that between the 2008, 2009 and 2010 LGA cuts, the firefighters pension fund, and street bonding needs, it would take a levy increase of 31 percent to bring the city's finances back to their current levels, before the LGA cuts were made.

"You can't raise (the levy) enough to meet our needs," Chattin said.

The council was asked to give some sort of range in which it might be comfortable with a levy limit.

"We know we have to raise it," said Councilor Jerry Downs. "The big question is how much."

Eischens told the council that the range required would probably fall in the 15-31 percent range. Fifteen percent would cover the $700,000 LGA cuts for 2009 and 2010.

Councilor Ron Johnson placed the blame for any double-digit levy increase on Pawlenty.

"LGA is tax relief," he said. "If he cuts our tax relief, then we're raising taxes."

"The state basically passed down the dirty work to the cities," agreed Councilor Kevin Waldhausen.

Still, the council agreed that a combination of budget cuts and an increase in the levy would be required.

"I think we still need to look at tightening our belts," said Councilor Roger Hellquist.

Hellquist specifically requested that staff look at the necessity of several staff positions in the city's work force, including those providing liquor store management and also the community development director's role.

Chattin said staff would certainly take a look at the positions within the city, but stated that any reductions should come from department heads.

Regarding the previously proposed street light utility fee, that issue appears to be dead.

"It makes more sense to do it as a levy increase," Chattin said. "That is probably more honest."

In a handout provided to the council, Chattin outlined numerous funding concerns for the council's consideration, including the following:

- Capital expenditures have been delayed and will again become due in future years.

- Sales tax dollars are available now for parks and trails improvements, but what happens when those funds run out? Will future needs go unfunded?

- The city does not anticipate increases for pay or benefits in 2010, but does not know for certain whether unions will agree to the proposal for 2010, or even 2011.

- New overtime rules have been worked into select contracts now, but staff does not know if those provisions will be worked into future contracts.

- With upcoming annexation and additional parks, will the city need additional personnel?

- How does the city plan to fund initial start-up costs for the Bemidji Regional Event Center?

- How will ongoing deficits generated by the BREC be covered?

- Will the city continue to operate the Neilson-Reise Arena once the BREC is operational?