2019 Budget breakdown: effective tax rate up 6.3 percent
The City of Litchfield heads into 2019 with a set property tax levy of $2.67 million, receiving an increase of $189,000 from 2018. With a proposed $5.3 million operating budget, costs are slightly down from the preliminary general fund budget.
The 7.6 percent increase to the property tax levy was attributed to the addition of a school resource officer, a splash pad, storm sewer fund increases, initiation of a Convention Visitors Bureau through the Chamber of Commerce, staff wage increases and the city having to rely less on Local Government Aid. Approximately one third of the city’s revenue comes from property taxes and accounts for the city’s largest source of funding.
City Adminstrator Dave Cziok said at the Dec. 1 city council meeting that the city’s budgeting fundamentals have remained largely unchanged.
“The revenues are conservative, the expenditures are conservative,” Cziok said. “We make that statement every year and that continues to be true. We under estimate the revenues and overestimate the expenditures.”
Some of the changes the city will see this year is the change in the debt service fund. Bond calls went out Dec. 6, which Cziok said that there will be a slight increase to the debt payments from 2021-24.
“That’s largely due to the MnDOT project, and so we will be having to do discussions with the council about when we want to issue that debt or how we want to issue that debt and how long we want to finance it,” Cziok said.
Cziok said all of those debt service levies are funded by the local property tax levy.
“There is no other revenue source for that,” Cziok said. “The state’s Local Government Aid does not get funded against that debt payment, so all of those debt payments are funded by our local levy.”
In the future, the city may have to deal with upgrades to the water plant. Cziok said it’s now around 20 years old, and will need, at minimum, some new controls, valving and other updates.
“We’ve also got some potential environmental impacts at the waste water plant, and it may be advantageous for us to solve some of that with upgrades to the water facility as well,” Cziok said. “Those are some future things we will be dealing with, probably through 2019.”
2019 would be a planning year for improvements, Cziok said.
“I would predict a project probably within the next two to three years out there,” Cziok said. “The hope would be that the expiring improvement would equal the improvement that we are looking at, so there wouldn’t be a rate adjustment.”
According to Cziok, some of the requirements related to environmental improvements are far beyond what the city may be able to realize in the next few years.
“In that scenario we might need a rate adjustment,” Cziok said.
For the electric fund, a generation project – a plan to add two new generators to the city’s generation facility – is in review by the state, but it should not affect rates. The city’s current Western Area Power Association costs are down by 3 percent from last year, which Cziok said could help with the generation project’s costs, but it’s too early to tell.
With our WAPA costs going down, we may be able to swallow this thing without changes,” Cziok said. “We haven’t made changes to the rates in years, and if we weren’t doing the generation project, I would stand up here and say i’m not forecasting any changes, but I would say let’s just wait and see how things go with that project.”
The generation project will be discussed at the city council meeting slated for Dec. 18, with a presentation by Bolton and Menk.
The council unanimously certified the local levy for $2.67 million, operating budgets, debt service payments and revolving funds for 2019 at the Dec. 1 meeting.
Cost to Litchfield homeowners
According to the city’s 2019 budget, the average value of a home in Litchfield is $123,600. A homeowner with a property valued at this amount would pay around $615 – up by about $37 from 2018.
The city’s budget calculation speculates that with a homeowner’s $615 property tax payment, it would use $116.35 to repay bonds, $9.21 to pay equipment debt, $5.64 to pay tax abatement and $483.80 to pay for city services, critical and recreational funds.
The largest portion of essential city services goes toward police and public safety. With the hypothetical $615 property tax payment, about 23 percent of those taxes fund police services. The tax burden is shared between 2,228 residential properties and 255 commercial and individual properties.
