Lakeville's Murky 2012 Budget Features a Tax Levy Decrease; Kind of

Government budgets are often accused of being nothing but smoke and mirrors. In the case of Lakeville’s proposed preliminary 2012 budget it’s more like a two-way mirror: the numbers are straight forward and above board, but whether the proposed $23.4 million levy is actually an increase or decrease may depend on which side of the mirror you’re viewing it from.

The Lakeville City Council approved a preliminary 2012 budget Tuesday night that numerically translates into a 2.7 percent reduction in the levy amount from 2011. However, due to some funky math the $660,000 reduction actually represents an approximate 1 percent increase.

It’s not trickery or fancy accounting shifting recently seen in action elsewhere in the state. But Lakeville city administrator Steve Mielke concedes the numbers are confusing and says that ultimately it’s the state’s switch from the Market Value Homestead Credit (MVHC) tax credit to a homestead market value exclusion that’s helping to muck up the clarity of the numbers.

“It looks like taxpayers should see a reduction,” said Mielke during a presentation to the council summarizing the proposed $23,376,570 levy. “In theory, it (the switch) should have almost no impact on property taxes. They should be relatively unchanged.”

Under the repealed MVHC, the state (theoretically) reimbursed municipalities for tax credits given to lower valued homes. In reality, according to Mielke, that rarely happened and in eight of the last ten years the state couldn’t afford to pay up. Lakeville chose to include those non-payments from the state in previous levies to monetarily balance the city’s budget with real cash.

Under the new system, the state will exclude a portion of a home’s value for residential properties on the rolls that fall between $76,000 and $413,000. The new system eliminates approximately $281 million in state payments to municipalities for tax credit reimbursements to help numerically balance the state’s budget.

The result is that the city can apply $788,000 in market value credits already collected to offset the proposed actual increase.

“In a way, it kind of washes out in Lakeville,” said Mielke. “We’ve tried to make some predictions, but in all honesty, with the market value changes some of the information needed to make those predictions are not available. We’re trying to make the point that even though it looks like a reduction, it really isn’t.”

The city is also proposing to transfer $991,636 from the liquor fund balance to help offset the increase further.

The end result of the number shuffling turns an approximate one-percent increase into an approximate 2.7 percent decrease in raw dollar amounts as compared to the 2011 levy of $24,036,652.

Without the $788,000 in MVHC monies, the proposed 2012 levy would reflect a $24,164,597 amount.

What this means to individual homeowners is unclear. City officials have said "in theory" it should result in a wash, but any increase or decrease will still be dependent on the assessed value of your home. They lack sufficient data at this point to speculate specific impacts on high-value or non-residential properties. The overall impact over the broad base is expected to be minimal, however.

Budget Open Houses

Still confused?

There will be plenty of opportunities to get clarifying answers. In addition to a complete proposed budget breakdown on the city’s website, Lakeville officials will be hosting a number of community open houses in the coming months to seek citizen input and answer specific questions.

The open houses are new to the budgeting process in Lakeville and officials are hoping the new arenas will help to provide additional input the council and city staff as well as provide the public with expedited answers to individual questions.

Tuesday’s approval of the preliminary $23.4 million levy represents the maximum amount that will be allowed for the 2012. But that doesn’t mean that will be the final number. The approval was decided on a 3-1 vote with council member Colleen Ratzlaff-LaBeau voting against it. Council member Laurie Rieb was absent.

Mayor Mark Bellows stated he was in favor of continuing to look for ways to reduce the levy even further.

Currently, the proposed General Fund budget lists $21.2 million in expenditures on revenues of $19.9 million. Other "funds" such as liquor, communications, utilities, economic development, and others comprise the remaining overall budget.

“This is a preliminary tax document, and it is a fluid a document,” said Bellows before approving the budget. “As it stands now I would not be in favor of voting for it in December, but we do have the opportunity for reductions.”

The budget open houses will take place Oct. 5 and Nov. 9 and will feature the full proposed budget documents, educational pieces and city department heads on hand to help explain the budget numbers, answer questions and receive feedback.

Those sessions will be interspersed with three more city council work sessions to address citizen feedback and crunch numbers further before a December 5 truth in taxation hearing. A final adoption of the budget is slated for Dec. 19.

If the city had not approved a proposed levy by September 15, they would have been forced to use the 2011 levy figure by default.

Major Initiatives

While traditional operations and core services have been repeatedly trimmed in recent years, there are a number of new expenditures in the budget that may come under further review as discussions progress.

Those include:

Cyber crimes investigations: Approximately $12,000 requested by the Lakeville police department for additional equipment and training in developing increased in-house cyber crime investigations.

Police firearms training: Approximately $9,800 for firearms training due to the decommissioning of the outdated firing range. Building a new range would cost approximately $1 million and the department plans to utilize the new to satisfy the bulk of their required ongoing training needs.

Class ‘A’ firefighter uniforms: Approximately $9,600 to supply dress uniform components to firefighters as needed for special occasions. Currently firefighters are limited to their standard t-shirts when representing the department at functions.

Fire Officer training: $4,000 for leadership training to help department officers hone their leadership skills. The city’s fire department is comprised of approximately 90 volunteers, including the officers.

Employee training and development: Previous budget reductions have eliminated or significantly reduced many employee training and development opportunities. $25,000 has been allotted to help fund training programs.

Reconfiguring City Hall: City council work sessions are currently held in the city hall board room and at times the room is inadequate to accommodate larger sessions and public attendance. $20,000 has been allotted to study reconfiguring city department spaces to make better use of overall space and possibly move the board room to another area of city hall.

Community visioning and survey: $30,000 for each project to come from the Communications Fund budget to establish a visioning process and strategic direction for the city.

Those won’t be the only options to reduce the budget and all have been agreed upon by the council as a need. But they do plan to figure into ongoing discussions.

Debt

As of July 1, 2011, the city reported that it had approximately $82.3 million in debt obligations. The 2012 budget plans to eliminate approximately $10.7 million in debt while also taking on additional debt of approximately $5 million to help with road reconstruction and pavement management as well as other needs.

While owing almost four times the city’s annual budget that may seem alarming, Mielke says the city is positioned well financially.

“The total debt is proposed to come down and we do have a debt repayment schedule that we’re meeting,” said Mielke. “Lakeville is a relatively new community and most new communities do have a higher debt level that they have incurred to help meet needs.”

Mielke says the last decade of rapid growth spurned a need for the city to expand and incur debt to do so. But he pointed to Moody’s Investor Service’s top Aa1 rating given to the city as a sign that the city is doing well.

“Moody’s acknowledges that we have higher than normal debt levels but they call it manageable debt,” said Mielke. “They do expect us to maintain that rating moving forward.”

The city will utilize $1.45 million of the $2.4 million in liquor proceeds it plans to tap in 2012 to retire the debt of fire station #4.

Other proposed liquor fund expenditures include $420,770 for new snowplows and trucks, $152,800 towards street reconstruction, $110,000 to replace the city’s Showmobile portable stage, and $100,000 towards the new police station debt among other things.

With the results of a to examine whether the city should be in the liquor business or not expected at any time, being able to utilize $2.4 million in 2012 and another $1.6 million in 2013 to fund a variety of needs that don’t hit the tax levy may add to the discussions of those results.