Preliminary City Budget Proposes 2.43 Percent Levy Increase

Pay raises, additional election expenses, higher insurance costs and other increases could lead to a bigger Hopkins tax levy for 2012.

Finance Director on Tuesday presented a first draft of a budget that would grow the tax levy by 2.43 percent to $10.4 million.

The effects of such an increase on a typical tax bill won’t be available for another couple weeks.

The Police Department would see the biggest increase under the proposed budget—with a 4.5 percent, $200,000 jump. The bulk of that increase would be spent on patrol. 

The City Clerk’s office would see the biggest percentage increase—a 19.2 percent, $19,000 jump—because of additional costs that come with next year’s elections, Harkess said. Hopkins also faces extra expenses for assessments, auditing and insurance contracts that climbed between 2 percent and 5 percent.

Salaries and benefits

Penciled-in pay raises are likely to be the most controversial increase. Labor contracts haven’t yet been negotiated, but Harkess plugged in what she called small increases of less than 3 percent and "maybe less than 2 percent" across the city.

Countered Mayor Gene Maxwell: “Zero is smaller.”

Harkess explained that she just used a conservative estimate, adding, “It’s easier to work down than work up.”

Still, council members appeared uncomfortable with an increase—noting the difficulties in the private sector and the country’s 9 percent unemployment rate. Maxwell suggested the council investigate the possibility of voluntary furloughs.

“It should at least be talked about,” he said.

Salaries and benefits are Hopkins’ biggest cost and account for nearly half of the city’s expenses. Salaries were frozen in 2010, but most labor groups saw a 2 percent increase in 2011.

The news isn’t all bad for city employees. While firm numbers aren’t in yet for health insurance, costs appear likely to fall. Because the city’s share of health insurance is likely to stay fixed, the employees’ share would go down if costs drop—putting more money back into their paycheck.

“It’s almost like a raise,” Councilman Bruce Rowan said.

“I’ll be sure to point that out to them, too,” quipped Acting City Manager Jim Genellie.

Tax credits

Meanwhile, the city will benefit from the Legislature’s elimination of the “.” This was a state-mandated property tax break for homeowners on their primary residence. The state initially reimbursed local governments for money they didn't collect because of this credit. In recent years, though, the Legislature stopped reimbursements in order to balance its books. Hopkins lost $232,000 in reimbursements in 2011—a hole that will be filled for 2012. 

The elimination of this credit will have more mixed effects on property owners. In order to avoid what would effectively be a tax increase, homeowners will receive a reduction on their property value equal to the Market Value Homestead Credit.

Yet assessments don’t directly determine a property’s tax bill; they just determine a property’s share of the levy. So commercial properties, industrial properties and homes that didn’t receive the credit will end up paying to close the gap created by its elimination.

The city still has much work to do before passing a final budget in December. Department heads continue to refine their numbers, and council members undoubtedly have several budget discussions ahead.

“This (first draft) is very rough,” Harkess cautioned.

to see a more-detailed explanation of the relationship between property values, property tax bills and the tax levy.