by John holler
At its Sept. 20 meeting, the Wright County Board of Commissioners adopted its 2023 draft budget and certified levy with an increase in the levy of 3.89 percent – one of the lowest levy increases in the last decade. It was a difficult process to keep the levy increase as low as possible, but one the county board and staff felt was needed.
Wright County Administrator Lee Kelly said budgeting is a year-round process and that county staff, department heads and commissioners all worked together to minimize the levy increase because, even with a low levy number, residential property owners saw the valuations of their properties take one of the largest one-year spikes ever.
“The disparity in valuation changes this year is extremely unique,” Kelly said. “Residential properties saw an increase in value of more than 20 percent over the last year, while commercial and agricultural properties saw very small increases in valuation. This isn’t just a Wright County issue. It’s the same throughout the state and the country.”
Commissioner Darek Vetsch said the commissioners were mindful of this anomaly and attempted to budget accordingly. With the understanding that homeowners were going to be hit the hardest, the county board was able to reduce the preliminary levy from more than 10 percent when the budget requests were first submitted down to 3.89 percent after making its own cuts and requiring departments to take 7 percent of their discretionary costs out of their 2023 budget proposals to arrive at a $90,652,259 draft certified levy.
“The budget process for 2023 had significant challenges in comparison to previous years,” Vetsch said. “With residential values increasing at 20 percent and commercial values increasing at 4 percent or less, we have never seen a shift like this before. Commercial taxpayers are positioned to see noticeable tax savings, while residential taxpayers will see increases due to these contrasting changes. Wright County is fortunate that we have economic growth to help offset some of these shifts. The county board has positioned itself well over the past four years by forecasting its expenses and working to create a stable tax rate. Those factors will pay dividends when working to create a 2023 budget that can meet the county’s needs and hopefully mitigate the tax impact to residential taxpayers.”
Kelly said the issue with the housing market is that, while the increased value of residential property has made houses worth more, it isn’t as though homeowners have additional cash in hand.
“The hard part with property is that, on paper, now your house is worth 21 percent more,” Kelly said. “That’s all well and good, but it’s not a liquid asset. You can’t pull that money out of the bank and spend it.”
The anomaly of the current housing boom in prices is that commercial, industrial and agricultural prices have remained flat. As a result, with the increase in value of homes, those property owners take on a larger share of the burden when it comes to dividing out how the levy is paid – a larger piece of the pie shifting to residential properties.
Another hurdle the commissioners and department heads had to face was that Minnesota has the most complicated tax structure in the country. Two very similar properties could have very different classifications – making one property’s taxes spike markedly more than another.
“There are so many variables that go into individual property valuations because there are more than 50 classifications in Minnesota’s tax system,” Kelly said. “It’s very complicated. We’ve done some analysis to show the impact of a levy. Traditionally, the commissioners have let us use their properties as examples. We’ve been able to look at residential properties, business properties and agricultural properties. Those have been used both in forecasting and in the Truth in Taxation process. There are a lot of variables based on your property type, but it gives you a good idea. With Minnesota’s tax system, it’s impossible for everyone to see a 3 percent increase across the board.”
Kelly pointed out that Wright County has one of the lowest levy increases in the state when compared to surrounding counties and those of comparable size. However, he added that, while the county typically is the first blamed when a property owner opens a tax statement because the county mails out the notices, there are other taxing entities that come into play.
“The county sends out the tax statement, but there are also, depending on where you live, a city or township levy, a school district levy and maybe it will have a special assessment,” Kelly said. “There are a lot of reasons why tax statements can be different.”
The county used more than $2 million in reserve funds to lower the levy number to below 4 percent to lessen the impact on residential property owners, but Kelly cautioned that those who believe there should be a zero increase to the levy would see a recurrence of what happened in 2018. When the housing bubble burst in 2008 and brought on a recession, the county board had extremely low levy increases and was focused on not laying off employees. Expenses and bonds got pushed out to weather the short-term storm, but it resulted in an historic 17.3 percent levy increase in the fall of 2018.
“It’s easy to say, ‘just keep the levy at a zero increase,’ but that’s now how financing works,” Kelly said. “You can get by for a year or two attempting that, but you paint yourself into a corner that is hard to get out of. We’re a growth county, which helps absorb some of the increase by spreading it out over more people and businesses. But it’s not a solution if we’re looking to be good stewards of the best interests of our residents.”
It took some doing, but getting the levy down to 3.89 percent was the best solution staff and the county board could find. It eliminated almost all position requests for county departments, but it was a sacrifice that needed to be made for the good of county residents.
“Nobody likes taxes,” Vetsch said. “With the unique circumstances we faced this year, we had to do what we felt was best for our residents. We live here, too, and none of us like seeing our taxes jump up. We had no control over the value of houses jumping by 20 percent and we had no control over inflation being the worst it has been in 40 years. All we could do was address those things that were in our control and I think the board, Administration, our Finance team and department heads did the best we could under the circumstances.”