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City putting off large purchases until economy turns around

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Cottage Grove,Minnesota 55016
SWC Bulletin
City putting off large purchases until economy turns around
Cottage Grove Minnesota 7584 80th Street South 55016

Cottage Grove residents will see an average $15 drop in taxes paid to the city under the preliminary 2009 property tax levy, city officials say, as the median taxable value on homes in the city fell by eight-tenths of a percent last year.


Officials have proposed a 1.5 percent bump in the property tax in the preliminary 2009 budget that City Council and staff met to discuss formally at a workshop last week. That represents a levy increase 1.6 percentage points lower than 2008 and almost 10 percentage points less than the city's 2002 budget.

It's part of a proposed budget that would increase general fund expenditures by roughly $300,000 -- most of which will be eaten up by increases in personnel costs (like insurance and wages) and -- what else? -- fuel.

So with almost all the additional expenditures in the 2009 budget used up by those mundane costs, what's getting squeezed?

"Everything else," said city administrator Ryan Schroeder.

"What we're doing is pushing off everything we can as far as capital projects and things like that," he said in an interview. "You'll see them slow down."

And for the next few years, at least. While the city sits down to pound out the 2009 budget, officials are also working on the numbers for 2010, an effort "to take a longer-term look at everything we do," said Ron Hedberg, director of finances and administrative services.

This year is the first that the city has worked on a multi-year budget, "a more prudent way to look at things," he says.

"Public works is probably a good example of the desire to use a multi-year look at it because some of their projects are bigger," Hedberg said. "You can see them coming on the horizon, and (multi-year budgeting) just gets them down on paper."

It's a way, officials say, to ensure the city isn't digging itself out of a hole this year only to find itself in a deeper one 12 months later. And it's the even rockier budget road ahead that prompted the change.

'Now we're concerned about 2011'

City officials have said for much of this year that it wasn't the 2009 budget that worried them, but rather 2010 and beyond. Now, "2010 is a concern, but the larger concern is 2011," Schroeder said.

As the housing market has gone bust and permits for new residential construction have slowed to a trickle in Cottage Grove, a revenue stream officials had relied on during the first half of the decade has dried up significantly. To date, the city has taken in $680,000 in building permit revenues this year -- but about $180,000 is due to renovations at Park High School, Pine Hill Elementary and the Ice Arena addition.

It's what Schroeder called "an anomaly" that the city cannot expect to repeat next year.

"We've been able to work things through so 2009 looks good, 2010 looks not-so-bad and now we're concerned about 2011," Schroeder said. "Hopefully the economy turns around by then. We're budgeting for about 60 (new) homes (to be constructed) over each of the next two years, and hopefully we're wrong and hopefully construction picks up. But I don't think it will."

So the city has elected to continue its yearly routine of budgeting conservatively, avoiding major cuts in the budget this year but being forced to defer major capital purchases like heavy equipment or city trucks.

The budget crunch has also affected the city's freedom to add to its staff. City council members in January gave the OK to a hiring freeze that will delay the hire of replacements for six vacant staff positions in a cost-cutting effort. At first glance it might seem inconsequential, but Schroeder pointed out to council members at last week's budget workshop that the size of city staff hasn't matched its population growth.

Today the city operates with the same number of employees (117) as it did a decade ago.

But the city's conservative budget model has helped weather storms before, like in 2003 when Cottage Grove lost more than $2 million in local government aid from the state.

And officials expect there could be more cuts coming from above. With the state of Minnesota facing what is expected to be a massive budget deficit, Hedberg and Schroeder both suggested a property tax credit Cottage Grove receives each year from the state may disappear by 2011. It's a move that would leave a roughly $600,000 hole in the city's budget.

"It's kind of like you can survive anything for a short while, but you can't survive it forever," Schroeder said. "We're not really in (2011 budget discussions), but what we're kind of saying is, between now and 2011 we'll have to make an adjustment if things are on the same path that they are now."

Jon Avise can be reached at