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City council makes another budget change

Just when it looked like a budget and levy was set for 2012, the Farmington City Council decided to make one more change -- to go back to where they started.

On a 3-2 vote Monday, council members approved the 2012 levy of $8,565,982, which was the same as last year's levy. The decision added added $141,192 to the 2012 budget. That money will be set aside as part of a contingency fund eliminated last week as council tried to find $160,000 more in budget cuts for 2012.

Prior to a Nov. 28 budget workshop, council members were wrestling with the idea of adding $367,000 of excess fiscal disparities money - money that comes as a state allotment every year -- to the city's budget to reduce the operating levy for 2012. Doing so would have reduced the tax burden on residents and businesses, but city administrator David McKnight cautioned, it would also mean the city automatically starting its 2013 budget that much in the hole, because the city may not receive as much in fiscal disparities next year.

Still, council agreed to add the entire $367,000 to the budget.

:A change of thinking

With one week to think about things and ask a few more questions, putting all of that one-time fiscal disparities funding into the budget started to feel like a bad decision to council member Jason Bartholomay. When council member Christy Jo Fogarty asked Bartholomay and mayor Todd Larson Monday if they still felt confident about the direction they'd given the previous week, both admitted they did not.

"It could be dangerous for us," Bartholomay said.

Over the past week, Bartholomay had contacted a representative from the Metropolitan Council and laid out Farmington's plan. He asked whether adding the fiscal disparities money to the budget was a prudent decision, and was advised it was not. The operating levy is what the state bases its allocation amounts on. If the city lowered the operating levy that much, it would all but guarantee the city received far less in fiscal disparities funds in 2012.

And that, Bartholomay pointed out, would put Farmington further behind in planning for 2013.

Most of the increases to the city's tax base came by way of a new formula to the Market Value Homestead Credit process. MVHC is a form of state aid, which had previously based taxable rates on the market value of a property. However, last summer, legislators reformatted the formula so that taxes are based on a property's taxable value, not the market value. In doing so, that decreased the amount of state aid Farmington received by more than $400,000.

Fed up with the almost annual changes made at the state level, Fogarty said she felt council members were trying to decrease the levy to make up for decisions made by state legislators last summer. In changing the way the MVHC is calculated, Fogarty said cities have to increase their taxes to make up the difference. She offered another option.

"Part of me wonders, what happens if we just left it as is?" Fogarty said.

With the city approving a levy the same as last year's, any increase in residents' tax bills is the result of decisions the state made to the way property taxes are calculated.

"The shifts all come from things out of our control, and perhaps, maybe, our elected officials at the state need to hear from our residents how the changes they make affect residents," Fogarty said.

It was an argument Larson and Bartholomay were behind. With more discussion - and council members Terry Donnelly and Julie May expressing concern with increasing taxes under the plan - Fogarty made a motion to increase the levy to the 2011 figure. Bartholomay seconded the motion. They voted in favor and May and Donnelly voted against. The decision came down to Larson.

"Boy, this is a tough one," Larson said. "I left last week saying using fiscal disparities for buying down the levy is a bad idea, and we're just setting ourselves up for failure.... I'm going to vote yes."

The decision will mean taxes will go up in 2012, but it also puts $141,200 back into the city's budget, allowing them to have a contingency fund. That gives the city a cushion in case of a tornado or bad winter, which was a concern for Larson.

At the very least, the decision helps to offset some of the deficit that will be created if the city of Farmington does not receive as much money in fiscal disparities next year as it did in 2011, according to finance director Teresa Walters.