Hopkins' Budget Gets a Bit Lighter

Hopkins residents will pay a bit less in property taxes than initially expected following approval of a budget lower than originally planned.

The preliminary levy that council members approved Tuesday is a 2.07 percent increase over the 2011 levy—down from the 2.43 percent increase first presented and the 2.3 percent increase broached August 5.

The current proposal would result in a 2.14 percent spending increase over 2011.

The taxes on a typical home are not yet available, in part because of delays created by the .

Salaries

Salary changes account for much of the reduction over the past month, Finance Director Christine Harkess said. Hopkins has five union contracts up for negotiation in the upcoming year, and the city trimmed the budget by assuming they would receive smaller salary increases than first penciled in.

In order to avoid affecting the negotiations, Harkess would not specify what salary increase is in the budget.

In any case, that unknown number could change during negotiations, and Harkess offset some of the savings by increasing the contingency fund in case the negotiations go to arbitration or the city needs more wiggle room.

Financial help

2012 should also bring some additional help for taxpayers. The decertification of a tax increment financing district added about $500,000 to the tax base, spreading the costs of government among more taxpayers.

In the upcoming year, Hopkins will also not lose as much to “,” a program that seeks to spread the benefits of development across the Twin Cities metro.

In 2011, Hopkins contributed $3.3 million to the program but received just $2.6 million back—. For 2012, Hopkins should see a loss closer to $400,000.

Low construction bids, low interest rates on city bonds, paying off arts center debt eight years early and bond refundings have also helped make the tax levy lower than what it otherwise would be.

And the levy could still inch down. Under state law, the city council can reduce the levy—but not increase it—when approving a final levy and budget. Cities have until Dec. 20  to submit the final plan.

“We’ve been working on this two months now, and we still have a lot of work to do,” said Mayor Gene Maxwell.

Franchise fees

However, the council has already given final approval to a measure that will result in a tax increase for utility users in everything but name.

Members OK’d a 67 percent increase in franchise fees, which are payments Xcel Energy and Centerpoint Energy make as a condition for providing service to Hopkins customers. Like a sales tax, the companies pass the fees on to their customers.

Similar to the tax levy, the increase is lower than originally proposed. a plan that would double fees for most users, but council members thought that was too much.

The 67 percent increase approved Tuesday will generate an additional $206,000.

Although franchise fees are not technically taxes, council members have made it clear that the city has viewed them as a tax since their inception.

The city will direct the additional money to its capital improvement fund to pay for long-term improvements. The city has about $5.8 million in capital improvements scheduled for the next five years but only about $4.8 million available in the fund. The extra money from the franchise fees will nearly close that gap.

Harkess said not increasing the fees would have forced Hopkins to bond for long-term improvements, resulting in added interest costs. Council members added that they like that every utility user must pay the fees—including organizations, such as churches and schools, that are exempt from property taxes. This spreads the costs of infrastructure among more people.

Said Councilman Bruce Rowan: “I was against this to begin with, but I think Christine [Harkess] has laid out a convincing argument.”