North Mankato could decrease proposed 2019 tax levy

Nov. 20--NORTH MANKATO -- The North Mankato City Council is looking to decrease the city's 2019 property tax levy even further thanks to budgeting concerns laid out by Council member Bob Freyberg.

Freyberg outlined concerns he had with North Mankato's 2019 budget during a council workshop Monday night.

North Mankato is tentatively planning a $23.8 million budget next year, up from $22.8 million in expenditures this year, with a tax rate decrease of .8 percent compared to the 2018 rate. Under the current model, residents won't pay more in taxes unless their property values increase.

Council members opted Monday to look at a 1.4 percent property tax rate decrease, which would cut about $70,000 from North Mankato's planned budget. City staff will present an updated budget to the council during a workshop just before its Dec. 3 public meeting, when city staff will publicly review the budget with residents at a Truth-in-Taxation meeting.

The council will finalize North Mankato's 2019 budget on Dec. 17.

North Mankato officials estimate a 9 percent growth in this year's tax base based on county tax figures as well as numerous fee increases to make up the majority of the budget difference. Most of that comes from property value increases, but about a sixth of this year's tax base growth comes from new homes and businesses.

Freyberg takes issue with the way the city used its estimated growth to budget. The city's estimated market value increase is close to $102 million this year, but only about $15 million of that was due to new developments.

Freyberg argued North Mankato staff was overestimating the amount of sustained growth the city is experiencing. He pointed to city estimates that North Mankato's population grew by only 2.6 percent over the past five years, even as it grew by about 7 percent over the past decade. During that time, the city's total tax levy increased by 28 percent and its general levy increased by 50 percent.

In addition, Freyberg pointed out residential growth is far oustripped by commercial growth. And more businesses are coming to North Mankato under tax increment financing deals or other agreements to offset tax burdens during startup. That forces residents to pay more in taxes to make up the difference, Freyberg said.

"If we're going to look at growth and how do we define growth and how do we fund growth, it should be on growth," Freyberg said. "Physically demonstrated growth. And it shouldn't be on estimated market value in my interpretation."

North Mankato Finance Director Kevin McCann pointed out the city's estimates come from Nicollet County data based on property sales over the past year, meaning the city's market value increases reflect actual purchases and appraisals and therefore would be accurate to use in tax calculations.

Freyberg recommended the city use its new construction and annexation figures as its basis for recommended budget growth. That would mean instead of an additional $646,000 in revenue and expenditures, the city would only increase its general funding by about $178,000.

He proposed the city cut back on some capital investment expenditures, from newer street department equipment to using money set aside for future projects on current needs.

"We don't have to have Minneapolis-type equipment when we live in North Mankato, Minnesota," Freyberg said.

Council members were reluctant to cut from the proposed budget. Diane Norland said the city needs to set aside more funding to maintain its current infrastructure and facilities. Billy Steiner said he appreciated Freyberg's work but supported the city's proposed budget improvements.

North Mankato Mayor Mark Dehen asked city staff to draw up budget proposals with a slightly decreased tax levy as a compromise between Freyberg and city staff. And city staff said several planned projects are necessary to tackle over the next few years.

"This is an opportunity for the city to set aside big chunks of capital dollars to go toward some projects that have been on the back burner for a number of years," McCann said.

North Mankato officials have several options to reach a 1.4 percent tax levy reduction. The city could cut a planned $50,000 increase in its parks budget as well as a $20,000 increase in its sidewalk maintenance fund, or it could cut from a proposed $250,000 facility maintenance fund to reach about $70,000 in savings.

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