By Dan Linehan
MANKATO — The moment of truth for local governments across the state is approaching.
Cities and counties are crunching the numbers for their 2010 budgets ahead of a Sept. 15 deadline to set preliminary levies.
“The problem we’re facing here is the perfect storm predicted a year ago,” said Dennis McCoy, Blue Earth County administrator.
The combination of state aid cuts, stagnant property values and a hesitance to raise taxes has led to the most difficult budget in recent memory.
Blue Earth County lost about $1 million in state aid in 2009 and a similar amount next year in what McCoy bitingly called “a malfunction of the legislative process.”
The city of Mankato will lose about $3 million over the next two years.
In the past, local governments relied on a rising tax base that allowed the tax rate to stay flat. A rising tide lifted all boats.
But the tide went out.
The total value of all property in Blue Earth County rose from $6.2 billion to $6.24 billion for taxes payable next year, an increase of only $40 million. New construction accounted for $75 million of that total, so values for existing property actually fell.
It’s the first time in County Assessor Julie Roisen’s seven-year experience that this has happened.
In good times, levy hikes of 7 to 10 percent were standard, but elected officials are turning to budget cuts for 2010 rather than large increases.
Still, taxes will go up.
Mankato’s general fund — which includes public safety, public works, community development, the City Council and other areas — will remain stable at $8.9 million.
But the debt service fund, which pays back borrowed money, will see an increase of $389,000. It’s based on scheduled payments, so there is little flexibility.
And because of contracts signed earlier this year, nearly all city employees have a 2.5 percent salary increase in 2010 and health care premiums are going up about 10 percent.
The city asked its unions to renegotiate their contracts in light of budget problems, but there was a “less than enthusiastic” response, City Manager Pat Hentges said.
So, despite massive cuts, the city expects its levy to rise by about 3 percent in 2010. The City Council has the authority to raise or lower that figure, though.
Blue Earth County is pondering a similar increase.
Nicollet County may be looking at a preliminary levy increase of between 6 and 7 percent, County Administrator Bob Podhradsky said.
“I’m quite sure that it’ll be reduced before December,” he added.
