Faced with increased costs for construction bonding, and a $1.7 million hit from the Minnesota Legislature, St. Louis County officials are mulling what could be up to a 3 percent budget and levy increase for 2015.
St. Louis County commissioners on Tuesday, as the committee of the whole, approved a levy ordinance that will receive final action at the full board’s Sept. 23 meeting in Babbitt, when the board will set the maximum levy for 2015.
State law requires counties to set the top end of any levy increase by Oct. 1. The final levy will be approved at the board’s Dec. 16 meeting. That levy can come down from the Sept. 23 figure but can’t go any higher.
The board on Tuesday also set public hearings on the budget and levy increase for Dec. 4 at 7 p.m. at the Virginia courthouse, and Dec. 11 at 7 p.m. in the Duluth courthouse.
The board left the actual levy increase blank in the ordinance, to be decided on the 23rd. But county administrative staff has been working to close a prospective $4.3 million budget shortfall for 2015 and keep any levy increase to 3 percent or less.
“I think there’s more than enough room to come in under 3 percent, from where I stand,’’ said Commissioner Chris Dahlberg, who represents western Duluth. “I don’t think we can just automatically pass on the government inflation index to people ... taxpayers who haven’t seen their real wages go up and who keep seeing their inflation rates go up for food and other necessities.”
Frank Jewell, a county commissioner representing central Duluth, said layoffs are not in the plans but that, without some sort of levy increase, some valuable yet not mandated county programs may have to end.
“The question becomes, what things would we have to stop doing, things that we want to keep doing that are working?’’ he said.
County officials note that major construction projects, such as the $22 million complete refurbishing of the downtown Duluth Government Services Center and expansion at the Northeast Regional Corrections Center, have led to vastly increased debt service payments. The county borrows money for big construction projects by issuing bonds paid back over many years.
The county also has to cover an average 1.5 percent pay increase for county employees negotiated in multiple collective bargaining agreements, as well as cover an expected 1 percent increase in health and dental benefits - a combined $1.5 million cost for the county in 2015.
And the county took a major blow from the 2014 Legislature, which in March moved to re-allocate how the state’s per-ton tax on taconite is issued, giving more money to the Iron Range Resources and Rehabilitation Board to be used to pay for school construction costs on the Iron Range.
Much of the $1.7 million in lost taconite taxes had been earmarked for county road projects, and now the county either will have to markedly cut back on highway projects or raise more money.
County sales tax for roads?
At least one commissioner, Keith Nelson of Fayal Township, has suggested a half-cent county sales tax dedicated to transportation construction projects to make up for the lost taconite tax revenue for road work.
Some commissioners have discussed making such a sales tax seasonal, to be in effect only during the most popular tourism months.
Minnesota lawmakers in 2013 expanded the sales tax option for all counties to make up for increased highway costs. The extra sales tax can be used for roads, bridges and mass transit. Lawmakers also gave counties the option of imposing a county fee on individual vehicle registrations.
Estimates are that a half-cent sales tax, imposed on top of the state and any local sales tax, would raise about $10 million annually for St. Louis County roads, if imposed year-round, said John Ongaro, the county’s intergovernmental relations director.
St. Louis County commissioners last year voted down a fee on vehicle registrations within the county, although they can revisit that vote at any time. The county vehicle registration fee, called a wheelage tax, would have raised about $1.5 million annually for St. Louis County transportation needs.
Abbey Bryduck, transportation policy analyst for the Association of Minnesota Counties, said 47 of Minnesota’s 87 counties have adopted the wheelage tax. So far, six have adopted the sales tax option - Becker, Beltrami, Douglas, Olmstead, Rice and Wadena.
“The sales tax is getting more and more interest as counties see how much money they can raise for transportation needs,’’ Bryduck said Tuesday, adding that a seasonal sales tax doesn’t seem feasible at this time.
“It would be very difficult to administer,’’ she said. “The Department of Revenue doesn’t have a good mechanism to blink it on and off seasonally.”
The deadline for adopting a wheelage tax for 2015 already has passed, Bryduck noted. But counties need to give the state only 90 days’ notice of their intent to collect a sales tax, which could go into effect any time during the year. No referendum is needed for either option.
It is uncertain if a sales tax, which would be imposed on all purchases countywide, would gain the support of a majority of commissioners.
“Our county pavement index is getting down there where we need more money to keep up. Whether it’s the wheelage tax or sales tax or the property levy, that’s up to the commissioners,’’ Ongaro said. “But the need is pretty clear. It’s a matter of how you want to get there. The Legislature gave us these options so it wouldn’t have to go on the levy.”
Last year, commissioners approved a 1.5 percent property tax levy increase, the same tax hike as 2012. The 2014 levy budget was projected to hit $113.4 million. That’s the budget paid for by local property taxes, and covering items like law enforcement, road maintenance, snowplowing and other basic services.
Overall, the county was projected to handle an estimated $320 million in 2014, with more than $200 million of that being so-called “pass through” money from the state and federal governments, much of it to fund social services such as health care and financial assistance, as well as major road and bridge construction.
