BEMIDJI -- As a growing city with new businesses and increasing population, Bemidji has made several investments in capital improvements the past decade, which has coincided with an average property tax levy increase of 5.3%.

In 2010, the city's property tax levy was $3.68 million and for 2020, the levy was set at $6.12 million. According to data from City Finance Director Ron Eischens, when extending the range to 17 years, 70% of the reason for property tax increases has been in response to capital investments.

"Our tax base has grown and our population has grown," Eischens said. "I think from a business perspective, we have seen business expansion and new businesses come to town when you look back 10 to 15 years. With that growth comes the need for new capital."

The capital referenced by Eischens includes the city's involvement in the Law Enforcement Center shared with Beltrami County, the Public Works Department facility, investments in the Parks and Recreation Department and the Sanford Center.

"The economic boom that we've experienced in the last decade or so has been a great blessing for us," said Ward 5 Council member Nancy Erickson. "It certainly has helped with keeping the levy in a reasonable range, because all of those new people and businesses pay property taxes. So they help alleviate the pressure. But those folks also need the services, so there's a cost and benefit there."

Erickson also referenced staffing for the city as a reason for tax levy increases in the last 10 years.

"We have seen levy increases, and we've been trying to keep them under 5%, and the cause for that is both the cost of providing services, as well as salary increases," Erickson said. "Another reason is the expansion of the city in general, due to annexation and the economy. That requires additional staff and equipment. We've increased staff by at least 10 people in the last 10 years."

According to Eischens' data, the other 30% cited as reasons for property tax increases are related to growing city operational needs. City activities aren't the sole cause of the rising tax levies, though.

The state of Minnesota's fluctuating amount of local government aid provided to cities has also played a major role in Bemidji's yearly financial decisions. In Bemidji's case, the LGA is useful because nearly 50% of the city's property is non-taxable, with much of the land dedicated to BSU, health facilities and government buildings.

The LGA from the state peaked in 2002, when the city received $3.82 million. By 2008, the number fell to $2.82 million. By 2014, the amount was boosted to $3.21 million and in 2018, it reached $3.34 million. Eischens said for state funding as a whole, LGA is back to the 2002 level, but not for Bemidji.

"The city had an LGA increase in 2019 by the Legislature, and the funding as a whole was at 2002 levels," Eischens said. "However, for Bemidji, we're still about $400,000 short of what we were in 2002, because of the formula changing since that time. We appreciate the increase we've received, but we're still not where we were."

Uncertainties in the future

While the city has had to weather growth and changes in the amount of LGA received, Eischens said the city enters 2020 in good financial shape. Infrastructure needs and the Sanford Center's future do require attention, though.

"Currently, I think the city is financially healthy," Eischens said. "However, I'd say when I look forward, I think there are financial challenges the city will face. The water issues are significant."

Those issues exist at the city's water wells near the Bemidji Regional Airport, and the wastewater treatment plant located near the Mississippi River.

For the former, the city is looking to construct a water treatment facility to treat chemicals known as perfluorocarbons, or PFCs. Estimates have put the plant at a $16.3 million cost, and the city is hoping at least half of the amount can be covered by state bonding.

The city is also looking to make upgrades to its wastewater treatment plant, allow the facility to handle a greater capacity in response to city growth and because a new license may require the plant to treat ammonia and nitrogen. For these upgrades, estimates come in over $10 million.

The 10-year-old Sanford Center is also in need of funds to meet capital needs and replacements. Currently, the city budgets $230,000 for capital maintenance, but the requested funding from Sanford Center staff has come in closer to $750,000.

To meet all three of these costs, the city is supporting the creation of a sales tax, which needs both legislative approval and a to get passed via referendum.

"I think we have bigger challenges ahead then I have had in the past," Eischens said. "If it weren't for those challenges, I'd say looking forward it's bright. We have some hills to climb, though, so hopefully the state bonding money comes through and the sales tax is approved."