A look at history of Starbuck taxes, debt
News | Published on May 23, 2022 at 12:35pm CDT
By Kris Goracke, news@pctribune.com
Benjamin Franklin once said, “Only two things are certain in life, death and taxes.” With the recent increase in property value, taxes seem to be the topic at hand. And, although an increase in property value does not necessarily equate to an increase in a city’s tax levy, a person’s taxes are computed using the value of property.
For the city of Starbuck, property taxes have consistently been the highest in the county for a number of years. To give context of how this evolved, one needs to go back to the year of 2008. This is the year the Starbuck city council realized a significant shrinking balance in the general fund and an increasing debt. The total debt for Starbuck in 2008 was $5.647 million. Debt had been cumulating over the years due to the building of the community center, storm sewer improvement, street improvements and as well as paying the bills for running the city. And so, in a very unpopular move, the council increased the tax levy by 75%, resulting in the city having an additional $342,500 money to pay the bills and begin to get out of debt. This raised the general fund in 2008 from $273,500 to $459,000 for 2009.
The goal of the council was to get the City of Starbuck out of debt. For the next several years the levy remained the same with no increase as the city continued to pay down its debt. At the December 2010 city council meeting, according to the Starbuck Times, one resident spoke before the council asking when residents would see some relief in their taxes to which the mayor at that time, Steve Dinsmore, stated, “The city must pay off $5 million in debt before the taxes can be knocked down.”
By 2011, the city had reduced the city budget from $800,000 to $700,000 and had $66,000 still to pay on the community center. By 2012, the city still had not raised the levy, still keeping it at the 75% increase from 2008, but had also reduced the total debt obligation of the city to $4.7 million and $4.2 million in 2013. According to Steve Dinsmore, mayor at that time, “Any cash the city has had in the last four years had been used to significantly reduce the debt.”
Although the levy did not increase in those years, it did not decrease. Then, for the year of 2014, the levy increased. From the chart below, a person can see how the cost of running the city also began to rise. In 2011 the general fund was $700,000; five years later it grew to $1,074,474.00 and in 2021 it was $1,581,813.00. One example of an increase in expenses is salaries and benefits. According to the city’s budget proposal, in 2016 total salary and benefits were $516,844 and now, in 2022, it is $601,192.
This impact of the increase to a levy is perhaps best understood by looking at the city tax rate. The chart also shows the difference in tax rate among the cities in the county. The tax rate is used to calculate property taxes. For example, residential homestead class rate is 1.00% for the first $500,000 value and residential over $500,000 class rate is 1.25%. Below is a chart showing the tax rate used to calculate property taxes for three cities in Pope County.
The city continues to have projects and repairs which come at a cost. Projects such as the lowering of the manhole covers in 2014. As well as the 5th and Wollan Project in 2013, costing the city $917,143 of which $652,000 is being paid by assessment and a bond which is scheduled to be paid off in 15 years.
Now it is 2022, the levy has once again increased. The city’s total debt which was once at $4.2 in 2013, is now $4.1 million in 2022. This debt does not include the final bill for the 20/20 road project. Of the estimated $1.9 million local cost for the 20/20 Road Project, an estimated $645,000 will be assessed to the taxpayers. The city is hoping to have final costs for this project by this summer, so the assessment public hearing can be conducted the fall of 2022 and assessments begin on 2023 taxes.
According to Starbuck City records, the bonds for the project have been secured. The debt is reflected in the 2021 Schedule of Indebtedness under Business Type Activities, PFA Water & Sewer Notes 2020B and 2020C.
As with any budget, expenses can fluctuate as can debt. Below is a chart showing the total debt of three cities in the county. This information is recorded at the county level at the end of the year which then is reported to the state.
Despite the city’s total debt, the city was able to increase their cash fund balance. According to the recent audit report prepared by Conway, Deuth & Schmiesing, the total cash fund balance in 2020 was $1,005,519 whereas in 2021, the ending cash fund balance was $1,622,083. The recommendation is for cities to be 35-50% of receipts whereas and Starbuck is at a “healthy” 85%, according to that audit.
In addition to the general fund, both city water and sewer funds are also “quite healthy” according to the auditor’s report. The City of Starbuck has a strong cash balance in both accounts with the water fund cash at $123,000 and sewer at $165,000. City Clerk and Treasurer Joan Kerkvliet stated in an email that the surplus is kept “to cover the cities bond payments, daily operations and any emergencies that arise.”
Taxes are a necessity. They help fund local programs and services, such as fire and police protection, streets, sidewalks and more. At the recent Starbuck City Council, the council approved supporting Resolution 2022-10, this supports that local government aid (LGA) and $90 million appropriation increase as the “cost of providing service services continues to rise due to a significant increase in inflation; from 2009 to 2022, inflation has grown 41% while LGA has only grown by 18%. Perhaps with an increase in LGA, cities in Greater Minnesota will be able to lower the tax burden on their citizens.