Bemidji City Council leaning toward 8.5% increase on preliminary tax levy

BEMIDJI -- With one week to go before the preliminary tax levy is set, the Bemidji City Council hashed out what the increase should be over 2021 during its work session on Monday, Sept. 13.

For 2021, the tax levy was set at $6.5 million and according to the city's finance department, 2022 could have an increase of $282,000 or 4.3% over that amount. The amount is based on an increase in revenue by $516,000 and a rise in expenses by $798,000.

When accommodating for new construction in the city, with a value of about 1%, the total net tax levy increase would be 3.3%

The main contributor to the expenses increase is personnel, with an increase of $333,000 for salary and cost of living adjustments. Additionally, the city is adding new positions such as an assistant city manager, assistant mechanic and deputy fire chief.

During a previous financial management meeting in August, council members asked what a potential tax levy increase would look like if capital improvements at the Sanford Center were included.

On Monday, City Finance Director Ron Eischens presented how a tax levy would look if between 5.2% and 6.7% were added to the 3.3% amount.

Adding 5.2% would bring the levy to 8.5%, or a $339,000 increase. Adding 6.7%, meanwhile, pushes the tax levy up by 10%, or $437,000. During the meeting, Eischens also said a flat 8% increase would be a $306,000 addition to the tax levy.

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During the discussion, council members found positives on both sides of the numbers presented. In her comments, Ward 4 Councilor Emelie Rivera referenced unknown costs related to the Sanford Center now that the city has initiated the termination of its contract with the Iowa-based company VenuWorks.

"Understanding that we may have some costs that we definitely did not plan for to start with, whether it's equipment or services, I would not feel comfortable going any lower than 10% at this point," Rivera said. "We can always lower it later. But, we have created a whole set of circumstances that we don't know what it will be yet. I'd much rather say later 'let's go lower' than say 'we don't know how we're going to do this.'"

Rivera was referencing the rule that allows local governments to lower the levy before its final vote in December, but not raise it.

"This is not set in stone," Ward 1 Councilor Audrey Thayer said. "It's always good to go higher and then go lower as needed. I'm comfortable with what Councilor Rivera is saying because there are a lot of unknowns. I'm real concerned that we don't have figures yet."

Mayor Jorge Prince, though, said he's hesitant of adding more taxes on residents.

"We don't just raise property taxes on the owners, it gets raised on the renters," Prince said. "We already know we have issues with affordable housing, and this adds to it. So, this really causes me to wrestle with that."

Prince also said the city has options, should costs come up related to the Sanford Center and other needs.

"We have $550,000 in the liquor store funds, so there are some dollars there to offset unknowns. Also, we have the ability to draw down on our reserves if we chose to. I'm not advocating for that, but we certainly have some avenues to tackle one-time expenses if we choose that they don't appear here in the levy."

Ward 2 Councilmember Josh Peterson also said he was more comfortable with the lower end of the options.

"I'm uncomfortable talking about 10%," Peterson said. "I'm more comfortable with the 8% range."

RELATED: Community members see hospitality tax for Sanford Center as 'last resort'

In addition to capital needs at the Sanford Center, Eischens said dollars from a tax levy increase could be used for several other items. This includes improvements to parks, city buildings, street reconstruction and operations at the Tourist Information Center.

At the conclusion of the discussion, the council came to a consensus for an 8.5% preliminary tax levy increase and to determine the allocation before the final budget vote in December.

As part of its budget discussion, the city-owned event center was also heavily considered. On Sept. 7, the Bemidji City Council voted to terminate its contract with VenuWorks , which has managed the Sanford Center since it opened in 2010.

During the meeting, VenuWorks CEO Steve Peters was present to discuss the company's position on the matter.

"We really appreciate the opportunity to be managing the Sanford Center and we would very much like to continue to do so," Peters said. "I understand the concerns we're getting. We would appreciate the opportunity to completely restructure our fee structure with you."

With the council's vote on Sept. 7, VenuWorks will continue managing the Sanford Center for at least 180 more days, which brings their time with the facility to an end in March.

With that in mind, the council decided to hold a special work session on Monday, Sept. 20, to meet with VenuWorks for a review of options for a new contract. Should officials feel it is the right move to move on from VenuWorks, several council members said Monday that they'd be interested in sending out a request for proposals.

Council members expressed interest in both other management companies and operating the facility in-house.