Duluth mayor seeks slight tax increase

• Don Ness

Duluth Mayor Don Ness (Photo courtesy of the City of Duluth)

Talk about it

Duluth Mayor Don Ness was a first-year member of the City Council when he last saw a levy increase as small as the one he proposed Monday. The 1.6 percent increase Ness sees for the 2013 city budget is the lowest proposal since 2000.

And the general fund budget is down for the fifth consecutive year.

For an average homeowner in Duluth, a house valued at $158,500, the increase in the levy is $7.

“Stability,” Ness said of the city’s financial position after “five years of some very difficult budgets.”

That stability is seen in property taxes staying level, he said, without losing public services.

Ness also said city employees no longer have to worry about massive layoffs. There were 14 job losses in the budget, but most of them came with retirements and not filling long-open positions, Ness said.

The mayor made his budget proposal in front of the City Council on Monday night before it met for its regular meeting.

There are no big project proposals in the budget. That’s the way Ness likes it in a City Hall operation he called accustomed to making more with less “in a time of diminishing returns.”

Ness recalled the days of “roller coaster” budgets that tested the abilities of past leaders. This is a “no news is good news budget,” Ness said. He added that it fulfills his goal “to make city government boring again,” referring to the distracting tension and “drama” created by budget crises.

But a vote the council took later in the evening could provide its own measure of budget drama.

The council failed to muster enough votes to transfer money from the street improvement trust fund to pay for $2.9 million in debt for past street repairs.

The transfer, which requires at least seven affirmative votes, failed on a 6-3 vote.

Council President Dan Hartman said there will need to be more discussion on the transfer since that $2.9 million could otherwise be paid through increasing taxes on residents, which would turn Ness’ 1.6 percent into a significantly higher levy increase.

Council members Jennifer Julsrud, Jim Stauber and Garry Krause voted no because they fear the city is coming dangerously close to a tipping point when it comes to using trust funds for debt service payments. The fund has no money going into it while the city continues to fight with the Fond du Lac Band of Lake Superior Chippewa over the revenue sharing agreement for the band’s downtown casino.

“This continued dipping into the fund is not the way to go,” Julsrud said.

Other council members countered that paying off debt was a way to eventually get to a “pay as you go” system of repairing streets and infrastructure. The council has vowed to keep at least $21 million in the street fund so it doesn’t fall behind in repairs.

Expenditures, revenues both fall

On the mayor’s budget, the expenditures for 2013 are expected to be $1 million less than the current budget year, but a loss of revenue in public utilities, low interest rates on investments and soaring health-care costs mean the levy will increase.

Providing health care for employees and about 1,000 retirees and their family members is expected to cost $16 million, or nearly 20 percent of the entire budget. Health-care costs rose 15 percent the past budget year.

Ness also said the one-time $1.5 million deficit in the reserve fund has turned into a $7 million surplus, representing about 10 percent of the $73.7 million budget expenditures. Cities in Minnesota are required to carry reserves of 5 percent or higher to cover for emergencies or unexpected shortfalls.

“We’ve made some tough decisions,” Ness said Monday afternoon as he prepared his proposal for the council. “As an organization we’ve gotten very lean.”

Legal expenses also increase

The council passed a resolution authorizing a new cap on the amount it will pay the attorneys working on the case to recoup the casino losses, up $250,000 to a new cap of $1.3 million.

City Attorney Gunnar Johnson said the case is moving through the federal Court of Appeals and he expects the sides to know their fate by early next year.

Council members said the payments to the firm Maki & Overom are worth it if it means the capturing of $23 million the band is under contract to pay since it stopped payments in 2009.

“We have a lot at stake to lose,” council member Jay Fosle said. “We have to go on.”

Seaway discussion

The council had a half-hour meeting on the Seaway Hotel condemnation process.

Housing advocates appeared to detail the shortage of affordable housing in the city that has been highlighted with the prospect of 60 or more Seaway residents losing their apartments.

Seaway owner Rick Caya filed his final chance for appeal in the process last week to the decision to shut down the Seaway until extensive repairs are made.

Keith Hamre, Duluth’s director of planning and construction services, said the city will need to have a hearing on the appeal in 30 days and the council will probably take it up at its Sept. 10 meeting.

The Seaway needs a new roof and repairs to its interior exacerbated by the leaking roof. The city inspected the building shortly after the June 19-20 rainstorm that caused massive damage through the region.

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