Where do your property tax dollars go in Two Harbors?

City Finance Director Miranda Pietila presented the City Council and the public with information on the 2020 proposed budget and levy at the truth in taxation hearing Monday, Dec. 9. The council unanimously approved the 7% levy increase and 2020 budget following the presentation and public hearing.

Small levy adjustment

Back in September, the council adopted a preliminary property tax levy increase of 9%. Once submitted to the county, the property tax levy can't be increased further, but can be decreased. Which is what the city finance committee recommended.

"During this time, the finance committee has been meeting and reviewing the budget. Once the tax statements came out, the committee realized the anticipated increases were not close to what our estimations were with the 9% increase. Due to this, the finance committee is recommending the levy be reduced to 7% from the 9% increase," Pietila said.

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The 7% increase will generate $143,283.

If a home has a market value of $125,600 — the average for Two Harbors residents — it would have a tax impact of 21.4%, which is an increase of $114 annually.

The funds from the property tax levy are dedicated to the city's general fund.

For 2020, the total general fund revenues are estimated to total $4.85 million, a $330,00 increase for 2019. Part of the increase comes from the levy increase, while the rest comes from a 9% local government aid increase. Property taxes make up 45% of the general fund revenues, with local government aid generating about 36%.

Where do general fund expenditures go?

The general fund expenditures total $4.71 million with the proposed 2020 budget. The largest departments are Public Works and Public Safety, which make up 30% and 29% of the total general fund expenditure, respectively. Public Works includes maintenance of city streets and Public Safety includes the police and fire departments.

The third-largest section, which makes up 15% of the general fund, goes to transfers to other accounts to support the library, airport, golf course and capital equipment fund. Another 15% of the fund goes to support general governmental services such as the employees at City Hall, city councilors, city attorney services and support of the community buildings.

What other issues impact the budget?

Employee-related costs are one of the biggest budget impacts. Health insurance and benefit costs have increased 9% from 2019 to 2020. The police and fire pension contribution has increased from 16.9% to 17.7%. And the city is currently in negotiations with bargaining units and they haven't come to any agreements as of press time.

The city is also looking to maintain the general fund balance of 15% in case of emergencies and to continue to contribute to the capital equipment fund to allow for big equipment purchases such as a grader or fire engine.

The city is also involved in several projects, such as the six-unit T-hangar construction project at the airport, the third year of street and alley improvement projects, the east bathhouse replacement and the anticipated water treatment plant upgrades.