The Planning Commission would normally meet on Monday. However, that meeting has been canceled due to a lack of agenda items.
The City Council will be meeting for a special budget discussion at 1pm on Wednesday at Prairie Center. This is the third meeting this year to go over the budget, with the prior two meetings being held to discuss an overview and then special revenue funds. However, this meeting will go into more detail on the general fund budget, which does not include all of the items in a city budget. Other items in the budget that are not included here are: debt service funds, reserves, and business-type activities (water/sewer funds). Water/sewer funds are handled through user fees and generally do not impact the property tax levy. Last year, the general fund budget made up around 70% of the total property tax levy. Importantly, the general fund budget does not include any costs associated with the bond or lease payments for the new fire station - that will be discussed at a future meeting.
This meeting is expected to run for several hours as each department head presents their budget and plans for the upcoming year. The Council will then provide direction on the budget, but no budget approvals will occur during this meeting. A budget must be approved by September 30th in order for the preliminary tax levy letters to go out - that way every resident can understand how their property taxes are affected by the city budget. The final budget will then need to be approved by December 20th, after a public hearing.
The property tax levy is really just the budget minus any other "revenue" - fees, grants, fines, intergovernmental monies, etc. However, property taxes make up the biggest portion of that bucket - whatever isn't coming in from other revenue sources has to be paid with the property tax levy. This is why it's important to keep expenditures low, even when grants and other money come from the state: because you can't count on that money always being there. It's best to use grants and other temporary money for temporary things .
The general fund budget is fairly straightforward: each department has anticipated expenditures, and a comparison is made between how much was budgeted the prior year and how much has been spent year-to-date. In some cases, those expenditures haven't come in yet. The first page summarizes the totals, with the next few pages breaking out the "revenue" and expenditures. After that, each page goes into the specific department budgets. I won't go into detail on each of those as I would like to hear the presentations, first. However, it's worth pointing out a rather curious development.
The anticipated total tax levy increase is "only" 11.79% (not to be confused with the 11.71% increase which is only the property taxes that will go towards the general fund). This number refers to the increase over the total property tax levy from last year ($8,988,761). That means the new property tax levy is estimated to be around $10,048,536. Why is that important? Because it means that the property tax levy is projected to not include a lease payment for the new fire station.
A new " Frequently Asked Questions " document was put on the city website yesterday that may provide a bit of insight into what is going on.
Question 2 says: "How much will my taxes increase due to this initiative?" The answer provided is as follows:
For a median-value home in Otsego, the estimated annual cost will be between $154 and $173. This amount is significantly lower than the rumored increase and is structured to be manageable for residents.
Not sure what the "rumored increase" is referring to here. but as many residents have pointed out: this "estimated annual cost" appears to only be for the construction cost and only for a median value home. It's not the total cost of owning a fire department, no matter how “well structured to be manageable” it is. Remember, the city website used to say that it wouldn't cost any more in taxes to have our own fire department (see: Issue 47). This portion of the FAQ only adds more Q, and less A. It goes on:
The city has been planning for this initiative for more than 15 years and has accumulated funding to pay for the vehicles and the small equipment being planned. In this manner the mayor and city council have significantly reduced the impact of future tax levies – with likely no increase in 2025.
I would love to see this plan that has been in the works for the past 15 years . That would put as at 2009. There was no plan. At that point, the city council had purchased some land off of Park and 85th in the hopes that Elk River would want to build a station. The mayor at the time had repeatedly directed Elk River to multiple sites which he felt would have been great for a substation. Each time Elk River had declined, so the council just decided to purchase some land. There was no agreement with Elk River. The land has sat vacant ever since - that's a plan?
Furthermore, the City Council Minutes from the August 13th, 2009 budget planning session tell a different story:
So the implication that there has been a plan to start a fire department for the past 15 years is just absurd and not supported by the public record.
There was no plan in 2016 when the council abandoned discussions with Albertville over a JPA. The "plan" was to conduct a study. The results and the recommendations of the study were ignored. Then the "plan" was to hire a consultant. It wasn't until November of 2022 that the council decided to form its own fire department - and it did so without any allocation of funds. So "the plan" to start our own fire department has been in place for less than 2 years - not 15 years.
It is fair to say that the city has been putting aside monies in a fire reserve fund since around 2004. In 2010, those funds had been for four fire districts and were consolidated into two funds, and then in 2011 the funds were rolled into one fire reserve fund. The original intent was to set aside money to pay for a future station, furnishings, and equipment should the need for a substation ever occur. As of the end of 2023, that fund had $2.36MM in it. Additionally, funds from the American Rescue Plan Act totaling $1.98MM were transferred into the fire reserve as well. The plan was to pay for the fire trucks totaling $3.83MM with this money.
The last part of the answer on the city website is the most telling, though: "likely no increase in 2025." The $1.68MM in annual "lease payments" for the cost of building the fire station are not expected to increase the property tax levy? Where's the money going to come from? Again, there's more Q than A in the FAQ.
We can try to make some assumptions: the total reserve as of the end of last year was $4,802,434 (it included new money from property taxes being put into the fund). If we take out the $3,827,239 for the fire trucks, that leaves $975,195 estimated reserves left over. That's not enough to cover the annual payment for the lease from the EDA - it's not even enough to cover the other equipment costs of $1.425MM that the answer seems to be eluding to. That means the money to pay for these things is probably coming from some other fund. We shouldn't have to be guessing at this point - the plan should be abundantly clear to everyone. but since it isn't we just have to scratch our heads and wonder how one year is going to look compared to the rest. Are we going to defer the costs for just this year in order to make this look like a sweeter deal than it is?
What about 2026? That's the year where there will be annual lease payments, plus equipment purchases, plus the hiring of 20 part time firefighters and 9 full time. We certainly can't defer those costs. The estimated $5.53MM in 2026 is going to have to come from somewhere .
During the discussion of the bond for the new city hall campus project last year, a similar sort of reallocation was offered as an option. Instead of taking a 24% increase in the property tax levy, we could use some other funds to offset one year of the bond payments. I made the case at that meeting that all this does is get people off our back for one year - it masks the actual costs going forward. It seems as though we are headed down a similar path. The only difference is: this time it's more money and the citizens have been prevented from petitioning against it.
