Duluth mayor seeks to avoid tax hikeMayor Don Ness aims to hold the line on local property taxes in 2014, according to plans he laid out Monday evening at a budget meeting with the Duluth City Council — almost two months earlier than he has done in previous years.
By: Peter Passi, Duluth News Tribune
Mayor Don Ness aims to hold the line on local property taxes in 2014, according to plans he laid out Monday evening at a budget meeting with the Duluth City Council — almost two months earlier than he has done in previous years.
Ness proposes the city should take in no more property tax revenue next year than it did this year. As Duluth’s property base continues to grow, he actually predicts a slight decline in local property tax rates levied by the city in 2014.
That may come as welcome news for taxpayers, but some city councilors expressed concerns that the budget would provide short shrift for city streets in desperate need of repair.
Councilor Linda Krug said she was frustrated that the mayor’s budget provides no new funding for city streets and also would eliminate support for an enhanced pothole repair program that cost the city $450,000 this year.
“All you have to do is drive around town to know how bad our streets are,” she said.
Krug is leading a special task force studying how best to pay for street improvements in Duluth. Until recently, the city had primarily relied on about $6 million per year it received from the Fond-du-Luth Casino to pay for street work, but that funding has dried up in the wake of recent court and administrative rulings.
The legal battle between the city and the Fond du Lac Band of Lake Superior Chippewa, which operates the casino, continues, with the outcome of the case uncertain.
“The loss of our most important revenue source along with the rising costs of street construction make for a very challenging issue,” Ness acknowledged.
David Montgomery, Duluth’s chief administrative officer, said city administration wanted to give the street task force room to offer a long-term plan on how to care for city roads.
“We didn’t want to presuppose what the solution should be,” Montgomery said.
Ness said he was not a fan of relying simply on property taxes to pay for city streets. Such an approach doesn’t spread the financial burden equitably and omits nonprofit organizations from the equation, he said.
Ness suggested that perhaps a 1-cent-per-gallon local gas tax might be one way to pay for street improvements, but that would require support from the Minnesota Legislature.
Krug said the city administration’s decision to propose reduced funding for city streets doesn’t sit well with her.
“It puts the council in a tough position. Now, the onus is on us to raise taxes to pay for city street repairs or to ask if there are other places to cut instead,” she said. “But the nice thing is getting to know about this situation earlier in the process.”
Usually, the mayor doesn’t present a budget proposal until late summer, but Ness explained why he wanted to get a jump on it this year.
“The (City) Council has made it clear that it wanted to engage in the process a little earlier,” he said.
Duluth City Councilor Dan Hartman expressed his appreciation, saying: “It’s great to know where city administration is coming from this early in the budget process.”
Hartman said the City Council typically doesn’t learn of the mayor’s budget proposal until late August, giving it only a couple of weeks to respond and set a maximum levy accordingly.
Ness said the city also is on firmer ground to plan ahead as it heads into 2014, thanks to a firm commitment by the state to increase local government aid payments to Duluth.
“We know what our funding will be in 2014 and 2015, and that allows us to budget with more confidence than in previous years,” he said.
Cuts In Store
To avoid raising local property taxes, Ness said the city will need to make some cuts nevertheless. He explained that the $1.6 million in additional local government aid Duluth is slated to receive in 2014 falls well short of covering the $2.6 million in inflationary costs the city expects to incur next year as a result of increased spending on payroll, health care, fuel and material expenses.
The city’s payroll expenditures will increase by more than $1 million in 2014 because of recently negotiated contract agreements. But Ness noted the modest raises come after city employees endured two to three years of frozen wages.
“You can only ask people to accept zero percent pay increases for so long,” Montgomery said. He pointed out that health insurance costs also continue to mount, with an 8 percent increase expected next year.
“It blows me away that the city’s health-care costs continue to grow the way they have,” said Duluth City Council President Patrick Boyle.
Montgomery said the city continues to work with its employees and their unions to develop wellness programs that can help to hold down health-care costs in the future by keeping more people healthy.
In an effort to contain costs, Ness proposed the city should dispense not only with its enhanced pothole prevention program in 2014 but should also delay any new capital investments in community centers and place a moratorium on new programs and initiatives. Even with these restrictions, Ness said city departments will need to trim another $600,000 from the collective budget.
Hartman observed that even with the increase in state funding Duluth will receive in 2014, inflationary costs beyond the city’s control will force service cuts to avoid a property tax increase.
“This isn’t an easy zero,” he said.
Ness characterized the preliminary budget he presented Monday as “the start of a conversation with the City Council.”
The council won’t set its maximum levy until Sept. 9, and the budget won’t be finalized until Dec. 16.