'First cut' Cottage Grove budget proposal includes 8.5% levy hike
After several years of flat or modest property tax levy changes, the initial city of Cottage Grove 2015 budget proposal includes an 8.5 percent levy hike.
The increase would help cover rising expenses, a bump in employee pay, an anticipated double-digit jump in staff health insurance premiums and new equipment purchases that were deferred in past years. The budget does not include any new employee positions.
City Administrator Ryan Schroeder called the proposal a “first cut” meant as a recommendation of what the City Council should consider. Council members and city staff are discussing the budget proposal at public workshops throughout August.
Mayor Myron Bailey said he had asked staff to spell out the levy increase and what, specifically, it would fund. That list was released as part of the budget proposal.
“We’re not increasing for the sake of increasing, for anything I would consider fluff,” Bailey said, adding: “The number is not necessarily going to be the (final) number. That’s kind of the starting point and we work from there.”
Bailey said the levy increase will be smaller than 8.5 percent when the budget is approved in December.
It’s “going to be kind of hard to swallow,” council member Dave Thiede said last week of the proposed increase.
The proposal would bring the total property tax levy to $13.78 million, an increase from $12.7 million this year. That includes funds levied to pay off city debt.
The proposed levy increase comes as home values are anticipated to rise.
In 2014, the average market value home in Cottage Grove is $196,000, based on Washington County data. The average price of a home in the city is expected to rise 13 percent to about $220,000 by next year.
A $196,000 home pays $879 in property taxes toward the city this year. Assuming the value increases at 13 percent, the owner would pay $100 more in property taxes to the city under the proposed levy scenario.
Finance Director Robin Roland said city revenues have increased an average of 2.5 percent a year over the past four years. In that time, expenses have increased 3.7 percent annually. Yet there were a number of years in which the levy — the largest source of city revenue — essentially remained flat.
That “frugality” was good at the time, Roland said. However, she added: “We do need to examine what our expenses are doing over time” and how the city will pay for them.
The staff-proposed budget would spend about $12.29 million on general fund operations next year. That is up 9 percent, from roughly $11.26 million this year.
The budget includes more than a dozen city department requests for new spending, among other increases. It assumes a 2.5 percent annual increase for city employees; negotiations on new union contracts are ongoing.
Health insurance premiums could jump in 2015. The budget forecasts a 20 percent increase in the city portion of employee premiums next year.
A similarly large increase this year was partly absorbed by a city health insurance fund. Tax dollars indirectly provide some of the money in that fund. It also is supported with insurance rebates the city receives.
The double-digit increases are due in part to the five or six major claims that have been filed annually in the past couple of years, Schroeder said.
City departments requested a total of about 9.3 new positions next year, but they didn’t make it into the budget proposal.
“We cut them all,” Schroeder said. “We couldn’t afford it. We already have total expenditures beyond what our goal is, so we certainly couldn’t add staff.”
Here are some of the other new spending requests:
-- Increased road salt and asphalt purchases
-- Police squad car and equipment purchase
-- Public works equipment
-- Enhanced funding to fight emerald ash borer
-- Police and fire training
-- Fire equipment
Bailey said the increases can be tied to services provided by the city, whether it’s emergency responders, street pavement improvements or salted roads in the winter. There is a need for increased spending because costs are increasing, he said. In recent years, as the city maintained a near-flat levy, it held off on some purchases.
“The more we push things off, somebody at some point’s going to have to pay for it,” he said.