A Permanent Solution to Permanent Aid

As I have discussed in the past the State of Minnesota through the Department of Revenue established a new way to value utility property. In doing so the value of the Sherco Power Plant and other utility property declined by 21.8% in the City of Becker. In the last hours of the legislative session the Legislature developed a plan to provide aid to those jurisdictions that lost value and therefore tax revenues as a result. The resulting aid program is described as permanent aid.

The good news is the city will be provided with $553,947 in aid for 2009. For 2010 the aid amount increases to $1,107,894. A little history, the rule change changed the way power plants are valued and was to be phased in over a period of 3 years. This was done with a 20% reduction the first year(2008), 50% the second and 100% the third. This explains the change in aid amounts. This aid was given to cities and townships that lost 4% or more of their value in utility property. The total amount of aid provided for in this amounts to approximately $6 million state wide for 2009 and 2010.

The unfortunate part about the way the law was drafted is the amount of aid decreases as the tax base increases. So any addition in tax base only offsets the amount of state aid paid. If you think about this a little you’ll see that adding commercial or industrial property to our community does nothing to reduce taxes. Adding 100 homes doesn’t help either. This only increases our costs for service with no additional revenue to provide those services. If you are a high growth community such as Becker or Monticello, both affected by this, growth becomes a detriment. Replacing that lost value is slightly more than a Medtronics Campus!

As you can imagine this really doesn’t make sense. Given this was done in the middle of the night, on the last day of the session, it would appear this was one of those unintended consequences of legislators trying to do the right thing for the right reasons. They got us the aid we needed, which is very helpful. We’re breathing a little easier now but the future is still a concern. As I discussed we can add all the tax base we want and only the state benefits with reduced aid payments. As tax base increases so do our expenses in serving these properties. So a permanent solution to the permanent aid needs to occur with the next legislative session.

With this uncertainty in future funding, the city has taken the conservative tact of reducing expenses while banking available resources. In doing so we’ve approached the budget for 2009 in a different way. Each department was given a figure in which to work with for their department that represented a cut in expenditures. Revenues will be lower with interest income and building permits off. The state imposed a 3.9% levy limit for the next three years which also adds to the constraint of finances in Becker.

In any event we have some room in time to get these things accomplished but as they say it’s always something.

No Video

The broadcast of our council meeting of June 3^rd didn’t go as planned. Somewhere along the line the video part of the board cast was lost and bringing it back wasn’t successful. There was a bit of a scramble dealing with it but to no avail. We were able to provide the audio portion however. This got me to thinking that the equipment was installed when the building addition was done and most of the equipment is 14 years old.

I know I discussed this issue briefly when another component failed not to long ago. Not only is the equipment we use getting to the point of failure but technology has changed drastically since 1994. The video equipment costs we experienced then were about $70,000. Over time we have added to this and replaced some equipment but we’re rapidly getting to the point of looking at the future to determine where we’re going with all of this. Replacing all the equipment at once isn’t in the budget and may not be cost effective. However waiting for everything to die, a piece at a time is also not a prudent approach.

We will hopefully have the situation resolved for the June 17^th meeting providing we can replace the component that failed. Our consultant thinks he knows what happened and is trying to get a replacement to install when he comes to check it out. During that meeting we’re also going to have the other discussion about the future and what changes need to be made.

In terms of revenues we have some options that aren’t property tax dollars. When Connections established their franchise for video services we required them to provide some capital financing for equipment needs to operate the local access cable broadcast channel. Some resources still exist from these funds. In addition there is a cable tax that is applied to users’ monthly bills. These funds are paid to the city on an annual basis. These funds have been used to pay for the existing equipment and some routine maintenance and operations expenses but need to be dedicated to replacement.

For now we’re going to hobble along but dealing with this larger issue needs to become a priority. I’m sorry for any inconvenience this may cause and thank you for your patience. If anyone would like a copy of the minutes please give city hall a call and we’ll send out a copy to you.