Mayor Don Ness has rolled out his 2015 budget proposal for the city of Duluth. And the plan he shared with city councilors Thursday night calls for a modest increase in local property taxes.
All told, Ness aims to collect $19.87 million from the local property tax levy next year - 2.2 percent more than the city expects to receive in 2014.
But growth in the city’s property tax base is expected to generate another $114,700 in tax revenue come 2015, meaning that the local tax rate would need to grow by just 1.6 percent to support Ness’ budget.
For the owner of a typical $155,000 home, this means annual property taxes would increase by $9 in 2015, or an additional 75 cents per month, under Ness’ proposal.
“We’re proud of this budget,” Ness said. “At 1.6 percent, I think it’s at or below inflation and it shows a continued stability in the city budget that simply had not been in place in the city budget for many years.”
While Ness expects essentially to hold the line on total operating expenses, he said the cost of servicing debts that are coming due will nudge the city’s budget higher. Duluth expects to continue to trim its total general obligation debt as it has for several consecutive years. From 2008 to 2014, that debt has been reduced by $15.2 million, or more than 19 percent.
At the same time, the city also has gone from having a $1.3 million deficit in 2008 to operating with an undesignated general fund balance of more than $7.7 million today.
“Those charts are indications of the bigger-picture stability that we’ve been focused on achieving over the last six years to hopefully avoid massive deficits and wild swings in revenue and expenses,” Ness said. “You’ll see in this budget that we continue those efforts.”
The largest single cost driver Ness identified in the 2015 budget is public safety. He expects police and fire costs to rise by $900,000 next year.
While no net cuts are proposed in the city’s police and fire departments, Ness does plan to trim the equivalent of 3.5 full-time positions from city staff in 2015. David Montgomery, Duluth’s chief administrative officer, said these reductions would occur as a result of attrition, and no layoffs should be required. The number of general fund employees would fall to the equivalent of just under 590 full-time positions next year under the plan. Ness said the city employs about 125 fewer people today than it did 15 years ago.
Meanwhile, the city of Duluth expects to receive a slight bump from the state in the form of an additional $160,000 local government aid (LGA) next year.
“It certainly helps to have those extra dollars coming from the state, but when you compare that $160,000 to some of the cost pressures that we’re facing in public safety alone, it only covers a fraction of that,” Ness said.
In light of increased state aid, Ness said Duluth will be expected to restrain any prospective property tax increases.
“There is no question that because of the increases in LGA there is additional attention given to the decisions being made at a local level, and I think that our budget reflects a discipline to hold our levy low and pass along that stability to property taxpayers,” he said.
Ness proposes that Duluth use a more than $400,000 windfall from higher-than-expected natural gas and steam collections last winter to supplement the city’s street budget in 2015.
“There are some things that break in our favor this year, but we’re not making permanent expenditures with those one-time dollars. Instead, we’re trying to keep our base budget conservative and then looking to make one-time investments in particular in our street repair program,” he said.
These street funds will supplement about $3 million the city expects to collect from street fees recently adopted by the Duluth City Council.
Ness described the proposed 2015 street funding as an “inadequate” replacement for the $6 million per year the city used to direct toward streets back when Duluth used to receive a cut of revenues from the Fond-Du-Luth Casino. Those payments have long since ceased, although they remain an ongoing matter of litigation between the city and the Fond du Lac Band of Lake Superior Chippewa.
Referring to the total $3.4 million likely to be earmarked for street improvements in 2015, Montgomery said: “It’s barely covering the old street debt and then just a few little projects. So we’ll make some headway but very little at those levels.”
There has been some discussion on the City Council about moving away from a street fee and rolling the charge into the property tax levy, but Montgomery said: “That’s a tremendous increase in the levy if they want to move that over to the levy. I mean that would take a 15 percent property increase to do that.”
The Duluth City Council is expected to set its maximum levy authority later this month, but it won’t set the city’s final levy until December.
Ness said he hopes the council will exercise restraint in setting the budget.
“I do worry in part that the stability that we’ve worked so hard to achieve will be taken for granted,” he said. “My goal is that we never find ourselves in crisis mode again.”
