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Cities play the tax numbers game

By Staff | Sep 9, 2012

Here we go again.

Every year about this time I feel duty bound to write a disclaimer to the stories that are appearing in not only the Faribault County Register, but in other publications as well.

It has to do with your property taxes. And governmental bodies such as City Councils increasing their local tax levies for the next year.

If a Blue Earth resident only reads the headlines in the Fairmont Sentinel this week, for instance, they would be led to believe that the Blue Earth City Council raised the local property tax levy for next year by 6.7 percent to $1.2 million and, that it is a ‘done deal.’

That is not true.

If you read the headline and story on the front page of the Register, you might get a clearer picture of how this actually works.

If you’ve read this before, and understand it, you can feel free to skip this week’s Editor’s Notes and turn to something more interesting in this week’s paper. There are a couple of really interesting stories in our bridal section, for instance.

But, here is a primer on property tax hikes.

Every September all newspapers report on various local governments “setting” their tax levies, and they usually include what percentage increase that will be compared to the current levy.

The issue, of course, is that the cities and counties are actually setting a ‘preliminary’ levy amount. They are working with a ‘proposed’ budget for the next year, and then extrapolate a figure that is going to be needed in local taxes to pay for that budget.

Then, they spend a month or two fine tuning the budget, and in December, they approve the final budget version and then come up with a real number for the levy and how much of an increase that will really be on citizens’ 2013 tax notices.

As we have mentioned in our stories dozens of times, the governmental body can lower the levy increase from the September figure, but they cannot increase it.

This causes the council or commission to sometimes set the levy increase relatively high, with a full intention of lowering later.

Last year, for instance, the Blue Earth City Council set a 10 percent increase amount in September, but when December rolled around they actually decreased the levy by six percent.

That is a huge difference.

Are we, local newspapers, doing a disservice to our readers by writing stories and headlines about this preliminary levy amount, leading some to believe their city tax is going up a hefty percent, while in actuality it will be much less when the final decision is made?

Could be. We talk about it all the time.

But, on the other hand, it is our job to report what our elected officials are up to. People should know that the council is at least considering raising a local property tax. And how much that amount is, in actual dollars.

In the case of the Blue Earth council, it is doubtful the levy increase will stay at 6.7 percent. Already the discussion has been to set it at 3.4 percent in December. Mayor Rob Hammond would like to make it around a three percent increase each year.

The council, however, seems to be regretting having lowered the levy by six percent last year. While they did it to benefit local property taxpayers, many of those residents told the council members it really didn’t make much difference on their total tax bill.

Many citizens said they would have rather had the property tax stay the same, or have a modest increase, if the money was used wisely to improve the community.

As long as they see something positive being done and progress being made, people are a little happier when they have to write those two checks in May and October.

The council decided to increase the levy amount back to what it was in 2011, before they slashed it by the six percent decrease in 2012.

Then they rounded that figure up just a little to make it an even $1.2 million.

If they leave it at that figure, it will mean the city would have some extra cash to work with, or put aside for a special project or two.

I have an idea or two where that could be spent. I am sure you do, too.

Citizens will have a chance to speak their minds about the budget and the tax levy at the annual Truth and Taxation hearing in December.

Because right after that hearing, the council will set the actual budget and the real levy amount.

When we report that number, it will finally be the correct one.