Property

taxes are

27 percent

of 2002

city budget

By RON LARSEN

Journal Staff Writer

NEW ULM -- It's a popular notion among taxpayers upset about their property tax bills that City Hall should take action to reduce their tax because "we pay your salaries."

While there may be some validity to that argument (the City Treasurer wouldn't provide an estimate of the anticipated 2002 payroll), most taxpayers don't realize how small the contribution toward the city's overall budget from property taxes really is.

Take the city's final budget for 2002.

The City of New Ulm plans to spend $11,809,592 next year in serving the needs of the community. The property tax levy is expected to bring in $3,182,082 which is only 26.94 percent of the city's budget.

"Most people are amazed at that fact," said City Manager Brian Gramentz. "As a general rule, people don't recognize all the revenue streams that go into making up our budget."

That means nearly three-fourths of the city's total revenue to cover the budget will come from other sources.

In fact, the city's largest revenue stream is, and has been for sometime, in the form of local government aid from the state. The $4,165,314 in LGA that the city is scheduled to receive represents 35.27 percent of the budget. That makes LGA the largest, single source of revenue for the city.

The rest of the city's revenues come from fees/transfers/Interest/other (18.02 percent), Public Utilities Commission transfers (11.43 percent), charges for services/licenses (7.49 percent) and cash carryovers (.85 percent).

It should be said that the property tax levy percentage in 2002 is the lowest in 11 years. In 1991, the gross property tax levy of $2,159,726 represented 26.46 percent of that year's $8,162,410 budget. And that was a major jump from 1990 when the property tax levy represented only 22.37 percent of the total budget.

During the intervening years, the levy percentage fell below 30 percent only once, with 28.47 percent in 1994. It reached a peak of 35.42 percent in 1999, then hung at just below 35 percent through 2001.

As Assistant City Manager Tom MacAulay, who provided the analysis, noted, "much of the fluctuation can be attributed to changes in state aid, particularly in the Homestead and Agricultural Credits Act (HACA) funding."

HACA is no more, and the city has only the promise of state government that increases in local government aid will at least offset the removal of HACA. For 2002, the first year without HACA, the city is scheduled to receive $4.16 million in LGA which is about a half million more than the city would have received if HACA had been retained at the same level as in 2001.

But Gramentz is concerned that the city's property tax levy "will become a larger player in the discussion as I think in 2002-03, there will be a reduction in state aid."

If that happens, Gramentz said, "maybe we will have to get smarter in replacing revenue (to keep the burden off the property taxpayer)."

It could be more reliance on user fees or possibly a reduction in services, Gramentz suggested, or it may be necessary "to allocate the burden in the least objectionable way."

"Should we be forced to make those decisions, getting more revenue out of the municipal-owned utilities would have to be looked at," Gramentz said. "But we do know that it won't be only one single thing that is required. We'll have to look at all the options."

In the final analysis, Gramentz said there is one thing city officials do know.

"It changes every year so we need to plan in advance, but we also need to remain flexible."