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Council votes for modest tax levy cap

Finances weighed heavy on the Duluth City Council Monday night, as members set the maximum property tax that can be levied by the city and took up a proposed subsidy for a Kenwood rental housing/retail development.

City Hall
The Duluth City Hall building. (file photo / News Tribune)

Finances weighed heavy on the Duluth City Council Monday night, as members set the maximum property tax that can be levied by the city and took up a proposed subsidy for a Kenwood rental housing/retail development.

Levy cap

Despite efforts by 1st District Councilor Jennifer Julsrud to levy an additional $1 million in local property taxes to catch up on deferred road reconstruction, the city council essentially decided to stick with a more modest plan put forward by outgoing Duluth Mayor Don Ness.

The mayor proposes the city increase its levy by no more than 3.5 percent next year to cover growing labor costs, plus an additional $500,000 each for road and park maintenance.

Julsrud contends that doesn't go far enough to address the number of city streets that have fallen into disrepair.

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Duluth previously relied primarily on about $6 million in annual revenues it received from the Fond-Du-Luth Casino to care for city streets, but that funding source has dried up in the wake of regulatory and legal rulings that deemed the payments by the Fond du Lac Band of Lake Superior Chippewa inappropriate.

Julsrud said that even her proposal fails to adequately address the city's need for street repairs.

"This is just a step in the direction we need to go," she said.

Krug voiced support for Julsrud's amendment, saying: "If we don't do something, all we are doing is kicking the can down the road while our streets crumble."

Other city councilors agreed that the city needs to come up with a solution for its streets but rejected a piecemeal approach.

"We're going to have to have a serious conversation as a community about how we pay for streets," said 2nd District City Councilor Joel Sipress.

The street funding amendment failed 6-3, with Julsrud, Krug and At Large Councilor Barb Russ voting in the minority.

A separate amendment also offered by Julsrud would have provided an additional $162,000 in funding for police. However, it failed 5-4, with Larson, Fosle, Gardner, Hanson and Sipress voting in the majority.

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Councilors opposing the measure said they didn't have enough information to authorize increased police spending.

The increase would have resulted in a 0.7 percent increase in the levy.

The Ness budget would translate into about an extra $18 in tax for the owner of a typical value $160,000 home in Duluth.

An amendment proposed by 2nd District Councilor Joel Sipress and At Large Councilor Zack Filipovich would increase the city's property tax levy by about an additional 2 percent, but those funds would be offset by the continued phase-out of a city streetlight fee. That monthly fee would drop from $4.50 to $3.50 next year under the councilors' plan. The council approved the revenue-neutral resolution.

Development subsidy

The council also signed off on a subsidy of up to $2.86 million for Kenwood Village, an apartment building expected to contain at least 80 housing units plus more than 14,000 square feet of retail space.

The subsidy would come from the creation of a 26-year tax-increment financing district. New property taxes generated by the $21 million development over the life of the district will be used to finance up-front development costs for the project.

After 26 years have elapsed, the full value of the tax proceeds will flow to local taxing authorities, including the city, county and school district.

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The project, located at the southwest corner of Kenwood Avenue and Arrowhead Road, will be the first development Bloomington-based United Properties has tackled in Duluth.

United Properties is a company that is privately held by the Pohlad family, which also owns the Minnesota Twins, several auto dealerships, a radio station and a movie studio.

Peter Passi covers city government for the Duluth News Tribune. He joined the paper in April 2000, initially as a business reporter but has worked a number of beats through the years.
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