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Duluth City Council wrestles budget to trim proposed double-digit levy

Proposals and counterproposals are flying, as the city's budget deadline nears

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A pedestrian walks in front of Duluth City Hall on Tuesday, June 29, 2021. Steve Kuchera / file / skuchera@duluthnews.com

As it stands, Duluth’s budget for 2022 would necessitate a 10.72% increase in the city’s share of the property tax levy. But city councilors have been desperately working to drive that number down into single-digit territory, and they must complete their work this month.

That’s not an easy task, according to at large Councilor Zack Filipovich, who said he and 2nd District Councilor Joel Sipress spent hours poring over it line by line and peppering city staff with questions.

“There is no fat in this budget,” he said. “I’m happy to say that, but I’m also discouraged to say that, because it means that city staff are doing all their incredible jobs with no wiggle room whatsoever.”

At Thursday’s agenda session, Sipress told fellow councilors that he and Filipovich plan to bring forward a budget “amendment that would reduce the property tax levy for streets by $200,000, while also applying $200,000 of reserve to the street maintenance fund in 2022.”

“Our reason for doing this is that allows us to reduce the levy by $200,000, allows us to fulfill the street-work commitments that have been made by administration for the year 2022, and in effect, what this would do is set the new baseline for property tax spending on streets at $2.3 million next year, rather than $2.5 million,” Sipress explained.

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Funding for streets also comes from a dedicated half-percent sales tax that was expected to generate about $7.5 million annually when it went into effect in 2019, following a city-wide referendum vote. But revenues from the tax have continued to grow.

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Duluth mayor Emily Larson announces the results of a referendum to raise the sales tax to fund street repairs during an election party at Lyric Kitchen-Bar in Duluth on Nov. 7, 2017. Clint Austin / File / Duluth News Tribune

“As sales tax revenue grows, it seems appropriate to lower the amount that we spend from property taxes on streets, particularly from my perspective, given that when the referendum on a sales tax for streets was put in place, one of the biggest selling points — and for me one of the main reasons I supported it — was that funding our streets through a sales tax was a better way to do it and a way to do it that would lessen the impact on property tax payers,” Sipress said.

But Mayor Emily Larson emailed councilors to express her displeasure with any effort to reduce the city’s commitment of tax dollars to streets, as the council meets Monday night.

“In 2017, when I announced the dedicated street sales tax referendum question, I made the clear and explicit commitment to maintain the $2.5 million annual investment made to streets at that time, and to add the sales tax on top of it,” she wrote.

Also expressing skepticism of the idea, was 5th District Councilor Janet Kennedy, who said: “I do have concerns about decreasing any funding for the streets, because we are so far behind that I don’t know that my constituents who live out west are going want to support that.”

Duluth’s Chief Administrative Officer Noah Schuchman pointed out that drawing on the city’s reserves to plug a $200,000 hole in street funding would be a one-time solution that offers relief for 2022 alone. To maintain the mayor’s commitment to street maintenance, he said the $200,000 currently raised from property taxes would need to be added back into the levy in 2023.

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Piggybacking on Kennedy’s point, Schuchman said: “We are far more than 25 years of sales tax behind on roads. We are multiple decades behind on roads.”

In order to lower Duluth’s levy below the 10% mark, Finance Director Jennifer Carlson said the council would need to trim at least $255,000 from the city’s 2022 budget. And to reduce the levy by a full percentage point, would require a $348,000 reduction, she said.

At large Councilor Arik Forsman endorsed the effort, saying: “I am supportive of continuing to drive this number down around a point.”

Toward that end, 1at District Councilor Gary Anderson said he intends to introduce an amendment that would trim $15,000 from the proposed police department training budget and $7,500 from the proposed fire department training budget, leaving both with an even $100,000 in training funds for 2022.

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Duluth City Council President Renee Van Nett opens a news conference Thursday, Sept. 23, 2021, on the steps of Duluth City Hall. Andee Erickson / Duluth News Tribune

Filipovich had lobbied for $325,000 to be included in the levy to provide ongoing funding to preserve the principal in Duluth’s newly created $6 million Housing Trust Fund — a resource the city hopes to draw on as it works to increase the local supply of affordable housing. He stressed the importance of sustaining that nest egg and protecting it from erosion.

PREVIOUSLY: Pioneering Duluthian ties up a career devoted to making things better

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Nevertheless, Filipovich also agreed the investment could be pared back a bit to help lessen the burden on local taxpayers.

“I think it is fair and reasonable to reduce that number by a comparable amount to the reduction in the public safety initiative that Councilor Anderson just laid out,” he said.

Fresh off a successful campaign for another term, at large Councilor Terese Tomanek, she said: “During the past seven months, I’ve had the opportunity and the honor to be talking to people throughout this city, from Fond du Lac to Lester, and there are three topics I heard mostly … and that’s streets, housing and taxes.”

As a senior citizen herself, Tomanek said she shares the concerns of many elderly constituents. “We’ve all received emails about people being taxed right out of their homes. So, I think we need to look at getting that levy down as much as we can this year.”

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