Duluth city councilors will present an amendment to Mayor Emily Larson's 2022 budget proposal Monday night that could raise her proposed levy by 3.99% to support public safety. Yet another would-be amendment could tack an additional 0.93% onto the levy in order to fund a new Housing Trust Fund, intended to boost the city's inventory of affordable housing.

Earlier this month, Larson proposed increasing the city levy by 6% under her 2022 budget plan. City Council will vote on a preliminary maximum levy Monday night, ahead of finalizing the levy in December.

Public safety

"Today we're going to be talking about a bold plan to address multiple top-priority issues for the community," City Council President Renee Van Nett said. "To me and some of the councilors, one of our top priorities is public safety. Today, we're here to go beyond saying those things. …This plan is about supporting our police, our firefighters, our community members and asking us to think differently about crisis response."

PREVIOUSLY: Mayor proposes 6% levy increase for Duluth

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City Council Vice President Arik Forsman outlined the four areas that would be supported by the budget amendment — co-authored by Councilors Van Nett, Gary Anderson, Derek Medved and himself— including a pay increase of up to 15% for the Duluth Police Department's officers, sergeants and lieutenants "to bring their salaries up to a market-competitive level."

The additional levy increase would also allow the city to establish a permanent funding source for the community crisis intervention program that's currently under development and would complement the work of the police and fire departments.

"What we do know is that everyone needs to feel confident that they can safely reach out for help when they are in crisis," Councilor Gary Anderson said. "The model that we are working on will be a valuable resource that will make Duluth safer for all community members."

The amendment authors propose to replace the annual $600,000 in COVID-19 relief money the council allocated toward the program for the next three years, in order to secure ongoing support.

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The amendment also proposes increasing the amount of money allocated to the fire and police departments each year for training. The fire department currently has $7,000 allocated each year to training, while the police department has $15,000. But under the proposal each department would get an extra $100,000 for training, Forsman said.

Earlier this year Minnesota’s legislative auditor released a report that showed the city of Duluth's officers' wages ranked last out of 33 comparable agencies in the state. As the department faces an increase in retirements and officers making career changes, Matt McShane, executive board member of Duluth Police Union Local, said it's a critical time to support recruitment and retention efforts.

"This will address a lot of those issues," McShane said of the proposed pay increase. "It certainly leads to the direct safety of this community. (W)e have a lot of work to do yet."

Lastly, Forsman said the proposed budget amendment offers "sufficient" funds for the city to offer and negotiate a one-time base-salary increase for all city staff bargaining units in exchange for structural changes to the city's employee health care plan.

The city's current health plan rates are expected to increase by 25% in 2023 and between 10-16% every year after, said Noah Schuchman, the city's chief administrative officer.

"That's an unsustainable path for the city's budget," Schuchman said. "At this rate of growth, the city's health care plan will actually equal the entire general fund's budget by 2037. So, at some point, we need to address this, and I'm thankful for the council's leadership in allowing us to have this opportunity to do that."

Mayor Larson supported the proposed amendment to the budget and said it reflects all the listening the city and council have done during the budgeting process to ensure it understands the needs of both the community and city employees.

"This plan is one of the most robust and exciting financial plans we have for a sustainable, steady, solid future in this community," Larson said. "It's a complicated plan that we're proposing, but it's also quite simple. It's about the best path forward. It's about collective safety. It's about using our budget to match those values and make sure we're stepping in line and stepping forward."

Affordable housing

On a separate front, Councilors Zack Filipovich and Janet Kennedy brought forward a proposal to add another $325,000 to the budget, potentially increasing the property tax levy by another 0.93% in order to provide support for a new Housing Trust Fund. The annual tax funding would supplement an anticipated $4 million in support the affordable housing fund stands to potentially receive by way of the federal American Rescue Plan Act and Duluth's Community Investment Trust.

Zack Filipovich
Zack Filipovich

Filipovich said the proposed Housing Trust Fund levy funds represent less than the amount of taxes generated by new construction in the city each year.

"So, it's a rather modest increase, and this would provide recurrent or ongoing funding for the Housing Trust Fund, which we desperately need," he said.

"Honestly, I think it's a pro-taxpayer proposal, because if we're able to build more housing units, that obviously adds to the tax base. Also, if we're able to rehabilitate or renovate existing housing, which the trust fund would also do, that's also a pro-taxpayer item, as well," Filipovich said.

An accountant by trade, Filipovich said the $4 million in proposed one-time funding for the Community Housing Trust could quickly erode without sustained additional support.

"Me being a financial guy, I want to protect the principal as much as I can to make sure that the program is sustainable in the future," he said.

Kennedy said: "I see this as a housing issue —one strategy to help move that forward — but also it's going to help us economically overall, to make sure we have housing for people who want to come here, people who want to live here, people who come to work here even if it's for a short time. This is going to be a win-win."

Tax implications

The proposed budget amendments could lead to higher property taxes in Duluth. Most of the 6% increase Mayor Larson initially suggested would be covered by the increased value of Duluth's property tax base, due to new construction and heightened assessments attached to existing structures.

She said the tax rate required to support her budget would boost taxes by just $3 annually for the owner of a $175,000 home. But the Housing Trust Fund amendment could nearly double that impact.

And the more ambitious amendment to bolster public safety spending would add yet another $24 to the tax bill for the owner of a $175,000 home.