Kathy Bailey

Just one day after the Blue Earth City Council passed the 2009 budget and set the local tax levy, they got told by the state they need to lower the levy. And lower it a lot.

At Monday night’s regular meeting, the council set the 2009 tax levy increase at three percent.

That meant the levy was going to be raised $38,259 in 2009, going from the current $1,275,700 to $1,313,959.

On Tuesday, City Administrator Kathy Bailey received a letter from the Minnesota Department of Revenue which stated the city actually has to reduce its levy by $184,000.

The reason gets a bit complicated.

“We received a $280,000 increase in our Local Government Aid (LGA) from the state,” Bailey explains. “This means we can’t increase our local levy amount, without getting the LGA total cut back by the same amount, dollar for dollar.”

Rather than have the state do the trimming for the city’s budget, Bailey called a special city council meeting for tonight, Monday, Dec. 8.

“I feel our solution is to trim the budget by $184,000 our-selves,” she says.

Bailey adds while this will hurt several city services and proposed projects, it is actually good news for local property owners and taxpayers.

Recent proposed tax levy notices from the county indicated Blue Earth property owners would see a dramatic increase in city taxes.

“That number was based on the council’s first proposed 22 percent levy increase,” Bailey says. “The actual amount of increase set on Monday was just three percent.”

Now, because of the state mandate, that number will actually become a negative amount, causing local residents to see a decrease in their property tax for 2009.

Bailey says the levy increase had originally been made as a safeguard in case the state cut the LGA later, because of a forecast large state revenue deficit.

“Now if the LGA gets cut next year we are going to be in real trouble,” she says. “We had some cushion in the budget, but not any more.”

The 2009 budget adopted Monday included some previously discussed cuts in the police department. It also included an additional $1,000 for advertising for the Economic Development Authority.