Minnetrista voted Sept. 3 to move forward on a preliminary tax levy increase of 5.87 percent, which would bring total city revenue to $4.95 million for the 2020 tax year if approved.
The city last raised the general fund levy in 2012 and even enjoyed a levy decrease in both 2010 and 2011.
But stepped-up road construction and a depleted reserve fund prompted city officials over the past two months to look at three different options for raising the levy.
By law, cities must submit their maximum proposed levies to the county by Sept. 30. The final approved levies can differ from that preliminary amount, but they cannot exceed it.
The 5.87 percent increase was the highest of all levy options discussed. Such an increase would bring a net gain in revenue of $267,000 over 2019 and that version, one of three city officials have reviewed over the past two months, funnels more dollars into roads and equipment for capital improvement projects.
Mayor Lisa Whalen called that option “really the only choice” because the city has the legal capacity to bring that rate down when it approves the final levy in December.
A 5.87 percent increase translates into a bump in property taxes next year of about $53 for residents with homes valued at $500,000, according to an analysis. The median home value in Minnetrista is $467,000.
The three tax levy options that Brian Grimm, finance director for Minnetrista, presented to the city council Sept. 3 were increases of 4.28 percent, 4.77 percent and 5.87 percent. With each version, the increase would be partially offset by a slight decrease in the debt fund levy; the differences lie in the funding earmarked for roads and equipment for capital improvement projects.
In this city of high-value homes that still holds miles of hard scrabble roads, most councilmembers hardly considered the lowest levy of 4.28 percent: that option showed fewer dollars going into road projects.
Minnetrista has worked toward meeting a roads committee’s 2012 recommendation for a phased-in route to funding the city’s road infrastructure – everything from mill and overlay to full reclamation projects. That plan now calls for injecting an additional $125,000 into road projects. In 2019, roads were budgeted at $475,000.
The $600,000 the city would set aside for road projects with adoption of either the 4.77 or 5.87 levy would continue that plan as recommended. The 4.28 levy, by contrast, allocates just $525,000 to road projects, still an increase over the current year but $75,000 short of what was initially requested.
Councilmember Shannon Bruce said she’d prefer the lowest of the levy options, which funnels fewer dollars to roads, but that reworking in the final levy where those dollars currently go could still fund roads at the recommended level.
Even with new construction – the city added nearly 100 new homes last year, according to a report by the Hennepin County Assessor’s Office – and the expanding tax base that comes with new development, Minnetrista has needed to open the vault to its reserve funds in recent years.
“The percent of fund balance on hand is going down, and we need to levy more for the general fund to get it back towards a balanced budget,” said Grimm.
And that won’t change: even if the maximum levy gets final approval, the city still forecasts using about $224,000 of reserve money, said Grimm, who further explained this would keep the levy manageable but maintain enough cash on hand to match the current year’s reserves-to-budget ratio of 44 percent. Minnetrista has a city policy of keeping reserves at a minimum of 40 percent of its operating budget.
“I do believe that we need to work to have a balanced budget. Governments we know just don’t do it, and sooner or later it comes back to bite you,” said Councilmember John Tschumperlin, who cast his vote for the 5.87 preliminary levy option because of the city’s recent reliance on the balance fund for meeting expenditures.
The 5.87 percent increase is only a preliminary amount the city is submitting to the county. Minnetrista will finalize its levy Dec. 2 following a public hearing.