SHERBURN - The few Sherburn residents attending Monday's 2013 budget and levy hearing arrived upset about a proposed 7.3 percent property tax levy increase, so they were pleased with the news that the increase had fallen to 1.4 percent.
"It took a number of cuts and trimmings to get to that 1.4 percent," said Sherburn Mayor Bob Roesler.
In fact, the final decrease was reached just minutes before Monday's City Council meeting.
"(Council member) Brad (Ringnell) came in early, and we hammered out those final cuts to get from 3.1 percent to 1.4 percent," said City Administrator Jamie Letzring.
The major cuts and changes made from the preliminary 7.3 percent levy hike presented in September included a larger transfer from the town's municipal liquor store, from $5,000 to $10,000.
There also were updated insurance costs, which decreased with staff turnover and lower wages for new hires.
The city also eliminated set-aside savings for the library, new motor grader blades and the Community Hall capital outlay.
Letzring told the public and council it has been pointed out that state aid has decreased by an average of $61,769 in the last 10 years.
Ten years ago, state aid was a good portion of the city's revenue, helping the city keep property taxes low. But when state aid decreased, cities such as Sherburn had to rely on local taxpayers to make up for the lost funds. Today, about half of Sherburn's income comes through the levy, while 27 percent is state aid.
Letzring's presentation also offered a breakdown of the city's expenses, with debt service taking the biggest part of the budget at 24 percent, and general administration costs at 20 percent.
The rest is made of items such as the street department, police and ambulance, set-aside savings, and funds for the Community Hall, library and parks.
Debt service for 2013 is budgeted at $203,000, to pay off bonds needed for street and infrastructure projects. Set-aside savings for 2013 are budgeted at $98,000, with Roesler noting that even in tight times, there needs to be some savings.
"The towns not doing this ... If not now, then they may not have a town tomorrow," he said. "That's when it will all come at once."
Complaints from residents were about the end result on their property tax statements. While specific property tax issues are addressed at assessor hearings in the spring, Letzring explained some of what is being seen in the property tax assessments.
"The Market Value Homestead Credit ended in 2011," she stated. "Originally, the state had this as a property tax relief program. The state was to reimburse the credit given for taxes to the cities. But the state was unable to live up to its reimbursement obligation. It only covered the obligation completely two out of the nine years. This caused property tax shortfalls, and the cities began to not count on the reimbursement."
Minnesota is now in its first full year of the Homestead Market Value Exclusion.
"There is no more tax credit to homeowners, but the state still wanted to do something to help those lower-income taxpayers," Letzring explained. "The taxable value of the home goes down, yet the sale market rate of the home is unaffected."
Homes with values of $76,000 or less get the greatest exclusion, or $30,400. For homes with a value between $76,000 and $150,000, owners see an exclusion of $23,740, while a value between $150,000 and $250,000 gets an exclusion of $14,740. The exclusion is phased out when the home value hits $413,778.
"You would think that you would see your taxes go down with this," Letzring said. "However, the exclusion causes a reduction in the overall tax base in the community. And the cities and schools still have the same needs."
Roesler admitted the system was complicated and confusing.
"I'm glad to see people here tonight, because none of us, by ourselves, [is] going to be able to face this system unless we come together," Roesler said. "It's not just [Local Government Aid]; it's not just the homestead credit or elimination; it's not just aging infrastructure or aging homes. It's all of this and all of it will need to be faced by future councils."
The 1.4 levy increase is expected to be approved at the Dec. 17 City Council meeting.