BEMIDJI-Bemidji residents may see a property tax increase of 6.6 percent in 2016, according to information provided by Finance Director Ron Eischens at a City Council work session Monday.
Eischens said that-assuming the proposed revenue and expense items in the city's budget are approved-the tax levy increase for the average $100,000 homeowner would be 6.6 percent, which equates to a $19 property tax increase.
Originally, the raise in property taxes was 9.9 percent, reflecting a $446,900 increase in expenses. However, because of $118,198 in revenue adjustments, the increase fell by 2.6 percent.
By adding other adjustments, such as a grant for the Bemidji Police Department, the increase fell by another 0.7 percent to reach the 6.6 percent now expected. The 6.6 percent equates to $296,279 increase in expenses.
The council has until Sept. 21 to set the preliminary levy for 2016 and until Dec. 21 to set the final levy.
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Eischens also brought forward a shortfall in meeting bond payments because south shore land sale revenue has not met originally projected amounts. Eischens said the city faces a $3 million bond shortfall over the next 13 years.
To help cover this shortfall, Eischens said the city can reallocate savings from the tax levy in three areas to put toward the deficit in the south shore land bonds.
The first is the sales tax collection for sales tax bonds, which have exceeded expectations. The result, Eischens said, is that the city no longer needs to levy as much for those bonds. The outcome is $40,599 to be reallocated.
The other two areas include reallocating $50,000 from the 30th Street Trail project and reallocating $24,786 in savings from the Public Works bond payment. The $24,786 in savings are because of lower interest rates.
In total, the amount of tax levy savings the city could allocate toward the south shore bond payments is $115,385.
"The council could have taken those items to buy down the levy increases, but this is better financial planning," Eischens said.
Eischens also discussed future financial challenges facing the city, mainly dealing with the city having and maintaining amenities used at a regional level.
In order to meet the needs of these financial challenges, the city needs to consider creating new revenue sources, including a hospitality tax, Eischens said. The hospitality tax has been discussed at the local and state level for several years as a way to bring in revenue, however a 2013 bill allowing Bemidji to levy the tax died in committee at the state Legislature.
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Eischens noted Monday that a 1 percent hospitality tax on lodging and restaurants paid by customers would generate more than $500,000 annually, which could be used to fund assets and provide future tax relief for residents.
In keeping with the 2016 budget goal of long-term planning, Eischens also spoke of unresolved items needing to be addressed by the city. These include:
• Neilson Reise Arena, which is in need of significant upgrades with costs in the $3 million to $6 million range.
• South Shore Park, in which there is no funding or plans for park amenities, roads or facilities.
• The Sanford Center, in which there are unknown financial consequences for water leaks and legal costs revolving around the matter.
• Birchmont Drive Assessments, where the legal case may not be resolved until 2016 or beyond. Funds will be required to resolve the matter.
• Industrial Park/Railroad Corridor. There have been discussions recently about developing these areas and there may be local grant requirements that may require city financing.
