Council approves Farmington's preliminary budget on 3-2 vote

Talk about it

By a 3-2 vote Tuesday, the Farmington City Council approved a preliminary 2013 levy that would lessen the tax burden on residential taxpayers, but would place more of the responsibility on commercial and industrial properties in the city.

Farmington city administrator David McKnight presented the preliminary 2013 levy and budget during this week’s regular city council meeting. The city is required to send a preliminary levy to Dakota County by Sept. 15. Once the preliminary levy is approved, the city council may decrease the amount of the levy, but not increase it before the final levy is approved in December.

The $8,808,865 preliminary levy presented by McKnight represents a $242,883 increase – approximately 2.84 percent — over the 2012 levy. The proposed general fund budget, also approved Tuesday, is currently set at $10,060,366, which represents a .46 percent increase over the 2012 general fund budget.

Budget highlights

The city’s general fund budget has been a source of concern for McKnight since he took over his position one year ago. In looking back over the past five years, McKnight said he started to notice a trend, and it wasn’t one he liked.

Over all five years, the city’s general fund budget follows the timing of when the city receives its allocation of property taxes in December and June. The year starts off strong in January, but then drops off gradually until it falls below zero within four to five months. It is built up again in June, but drops to below zero again by November.

In some years, the general fund budget has dipped into the negative as many as four months of the year, McKnight said. So far in 2012, the city has already operated in the negative for two months.

“My biggest concern in reviewing the financial state of the city is the status of the general fund,” McKnight told council during his presentation.

The proposed includes several new, big-ticket items for 2013. Earlier this year, the council approved the purchase of a new fire truck, which requires $120,000 to be paid in 2013. A number of revenue adjustments were made, adding $254,308. Personnel costs were added into the budget for another $107,000, and another $106,000 was added for capital equipment purchases, mostly for the fire department.

On the other hand, several cost-saving measures have happened, as well. Over the past year, the city has eliminated two full-time positions, two part-time positions and, in 2013, a full-time position in the police department will become a part-time spot. Those reductions in personnel have resulted in an estimated savings of $242,000, McKnight said.

Levy increase

McKnight’s budget plan comes with a tax increase. The good news is that it does not affect residential taxpayers as much; the bad news is, commercial and industrial taxpayers will be asked to pay more under this year’s financial plan.

Residential taxable values have tumbled by about 6 percent in Farmington, for taxes payable in 2013, McKnight said, but for commercial and industrial properties, the values fell by about 1.1 percent, countywide.

That means the property values for businesses now make up more of the tax base for 2013 than do residential properties. As such, under the proposed levy, Farmington commercial and industrial properties will be subjected to a tax increase in 2013, while residential taxpayers will likely see a decrease.

“Their tax capacity has grown,” McKnight said. “It is a significant issue that as a city, we don’t have any control over.”

Reaction

Three of the five council members were on board with the plan, which also starts to set up a two-year budget cycle, and begins to address McKnight’s concerns regarding the general fund budget’s annual woes.

“I don’t like the increase one bit, but I also know if we’re going to be a healthy community we need to have a budget we can stand behind,” mayor Todd Larson said. “I do feel that we have a sound budget document right now. That’s one of the things we asked you to do when we hired you.

“We have a sound document for the city for the first time in what I think is a long time … and I’m going to support it,” Larson said.

Larson’s opinion was echoed by council members Christy Jo Fogarty and Terry Donnelly. Those three voted in favor of accepting McKnight’s preliminary budget and levy plan. Council members Jason Bartholomay and Julie May cast the dissenting votes. Though May said the budget was the first she’s felt comfortable with in her time on council, she is still concerned with the level of city spending and does not like the idea of increasing taxes for the commercial and industrial taxpayers.

“I will not approve the budget because I still think there are cuts that can be made, and if I’m not going to approve it in the end I’m not going to approve it today,” she said.

McKnight plans to bring the budget and levy back to council at an October workshop. At that time, he will have received the final numbers he needs from Dakota County, and he will have updated numbers on the city’s nonfunded levies.

Council will be asked to ratify a final 2013 budget and levy in December. A full version of the city’s 2013 preliminary budget proposal is available on the city’s website, ci.farmington.mn.us.

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