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Sanford Center needs could push tax levy increase over 8% in 2022

During a Bemidji City Council work session, elected officials were presented with a possible tax levy increase of about 5% based on new revenues and expenses. However, based on needs at the city-owned Sanford Center, the council discussed adding to the levy for the event facility's capital improvements.

Bemidji City Hall 2020 web art.jpg
Bemidji City Hall.

BEMIDJI -- A tax levy increase for Bemidji could range from 8% to 10% in 2022.

During a work session Monday, the Bemidji City Council was walked through anticipated revenue and expense changes expected next year, as well as the impact from costs at the Sanford Center. Those factors were explained by City Finance Director Ron Eischens, who concluded the presentation by describing what's expected in 2022's tax levy.

According to Eischens, revenue for the city is predicted to increase by $420,000, while expenses will likely rise by $798,000.

Personnel costs are the main driver pushing expenses up. Pay raises based on a job market study combined with the cost of living increases have a $333,000 levy impact.

Additionally, the city is adding new positions, including a deputy fire chief, an assistant mechanic and an assistant city manager. In his comments, Eischens explained that personnel costs make up nearly two-thirds of the city's general fund budget.

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When accounting for both revenue and expenses, Eischens said a levy increase would come to $378,000, or 5.8%, over the $6.5 million amount approved for 2021 . When accounting for the value of new construction the levy increase felt by residents would be more like 4.8%.

For a home worth $139,000, a 4.8% increase would equate to a rise of $13 in taxes. For a business valued at $383,000, 4.8% would mean a $76 increase.

However, Eischens also noted the Sanford Center, an event facility owned by the city and operated by the Iowa management company VenuWorks, has more than a million dollars worth of capital needs. In total, facility officials have requested nearly $1.4 million in maintenance and upkeep costs.

If the entire amount was accommodated into the levy for 2022, Eischens said the levy increase would come to 26.3%.

During the meeting, council members said such an increase wouldn't be feasible but did argue an investment was necessary for the Sanford Center's continued operation.

"We are at that point, after kicking it down the road, that we're going to have to bite off a big piece of that apple," Ward 4 Councilmember Emelie Rivera said. "I think we need to be realistic about the fact that we need to address these needs so we have a viable center."

In past years, Eischens said the city had budgeted $180,000 for the Sanford Center's capital needs. If the council was to bring that amount back for 2022, it would add about 2.5% more to the levy increase.

In his comments, Mayor Jorge Prince said the city could possibly round out the amount to $200,000, which would bring the levy increase to about 8.5%. Ward 2 Councilmember Josh Peterson agreed that the levy increase should be closer to 8.5%.

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Rivera, meanwhile, said she would support a levy increase closer to 10% to support capital needs. In his comments, At-Large Councilmember Daniel Jourdain also said he'd support an increase closer to 10%.

During the discussion about the Sanford Center's fiscal needs, the subject of a hospitality tax to support the facility was brought up. The city has advocated in the past for a hospitality tax, on either hotels or restaurants, to generate more revenue from visitors to Bemidji.

Currently, an annual operating investment to cover losses at the Sanford Center and all of its maintenance needs are paid for through property taxes. During a listening session held in mid-July, community members expressed openness to a hospitality tax, but asked for a third-party review of the facility's operations before the city moves forward on any new tax.

City Manager Nate Mathews said Monday that the subject of a third-party review will be up for discussion and would likely be paid for through the city's municipal liquor store operation revenues. Such a study would likely take 60 to 90 days.

If a hospitality tax was fast-tracked to be approved in 2022, though, the city likely wouldn't experience a financial impact until 2023.

After hearing from the council, Eischens said his office will come back with details on what a tax levy increase between 8.5% and 10% would look like. The council is set to vote on a preliminary tax levy in September.

City law forbids the council from raising the tax levy amount after September, but it is allowed to decrease the number before the final vote for approval in December.

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