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City again gets look at potentially dire future

By Tom Larson

Sun Tribune

The last two years, Morris City Manager Blaine Hill and his staff have set the city's preliminary levy with a dual purpose:

First, approach the state-mandated preliminary levy deadline with an extremely high percentage to allow for budgeting wiggle room while also guaranteeing the final levy figure will be much lower.

But, secondly, Hill also likes to set the number at or near the amount allowed by the state to serve as a reminder to the public what their local tax bill could look like if state funding cuts continue.

The Morris City Council on Tuesday approved a preliminary levy of 12.1 percent and a General Fund budget for 2011 of $3.37 million, a 1.95 percent increase over this year's budget. The increase includes new bonds for the East 2nd Street project now underway.

The council is required by law to set a levy maximum in the fall. By the time final budget approval comes in December, the council can lower the levy but can't increase it.

Last year, including special levies the city ultimately didn't assess, the city's preliminary levy rate was set at about 23 percent. Eventually, the council approved an 8.5 percent increase. The levy the council will approve in December almost certainly won't 12 percent, Hill said.

"That is not what the final levy will be, I guarantee you that," he said.

Hill said the actual levy will be about 3 percent to 5 percent by December's final budget vote. The city's Utility Fund budget is based on a 3 percent hike in utility rate, and the city's preliminary budget also includes 8 percent cuts for Community Education and the Stevens County Economic Improvement Commission.

Any excess funds that exist under the preliminary budget could be gone if, as Hill expects, the state cuts city aids again.

"It is my belief that we will see a massive reduction in (Local Government Aid)" from the State Legislature this upcoming session, he said.

As such, as Hill said last year, seeing the high preliminary levies is a good reminder for taxpayers what the city might have to levy them to maintain services if the state's budget problems necessitate aid cuts to cities and higher local property taxes.

City Council member Bill Storck didn't disagree with Hill's budget strategies but did note that "people get scared" when they see the preliminary levy numbers on their statements.

"They should be very scared what's going to happen with city finances going into next year," Hill said.

For 2008, the city approved a 5.5 percent levy decrease. But since then the state has taken back about $500,000 from Morris' Local Government Aid allocation. That's a significant amount considering LGA makes up about two-thirds of the city's General Fund budget each year, Hill said.

The city's budget numbers could fluctuate depending on contract negotiations with the three unions that represent city employees. Hill's budget now is assuming freezes on wages and health plan contributions, cuts in benefits and reductions in sick leave payouts. All those stipulations are part of current negotiations, he said.

The city's workers compensation claims this year are up 40 percent from last year, which further strains the budget. That's why the city has to "put a lot of things on the table" in labor negotiations, Hill said.

"We're going to have to," he said. "From an operations standpoint, no one out there is figuring out how to give (the city) more money. They're figuring out how to give us less because the state needs the money."

Other city business:

*Rainy, cool weather has slowed progress on the East 2nd Street infrastructure repair and building project. The project, which began late this spring, extends from Atlantic Avenue to the city's wastewater treatment facility near the University of Minnesota, Morris campus. Most work has been completed on the campus and east of Columbia Avenue, and underground work has been finished on the three blocks near Atlantic Avenue.

*Hill stated that the bond market is ripe for refinancing, and that the city bond consultants have recommended that doing so on two bond issues could save the city $90,000 over the life of the issue. The council is expected to review the proposal at its Sept. 28 meeting.