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Detroit Lakes dodges bullet on last-minute LGA cut

The Detroit Lakes City Council held its Truth in Taxation meeting Tuesday night with no one speaking about the 15.43 percent levy increase for 2010.

Despite the increase, most won't see any difference when it comes time to pay their taxes.

The increase will generate about $417,000 for the city, for a total 2010 tax levy of about $3.1 million.

City Finance Officer Lou Guzek said the funds are needed mainly because of cuts in local government aid and because the city's building permits have decreased so much over the last couple years.

In fact, the city's general fund shows that expenditures are about the same as previous years, it's the revenue the city struggles with.

One good piece of news: Gov. Tim Pawlenty said this week that he won't unallot LGA funds that are payable at the end of this month, which means that the $442,000 that city officials have planned on will be delivered intact.

With the state facing a $1.2 billion budget deficit, there was a very real fear among city officials that all or part of this month's payment to cities would be "unallotted" by the governor.

Last week, state budget officials announced a $1.2 billion deficit for the current two-year budget period.

Pawlenty said he will work with the legislature to resolve the shortfall, but had said because of the timing of payments, that a portion of the December local aid payments could be unalloted.

In a letter to city and county leaders, Pawlenty said, "Given the imminent expected payment of December local aid, I have determined that additional local aid program cuts, if any, should be focused on future payments."

He noted that if the legislature is unable to pass appropriate budget reductions, future aid payments would likely be reduced.

Approximately $437 million in local aid payments are scheduled to be sent to cities and counties later this month.

Guzek warned council members to brace for LGA cuts next year.

"I'm not going to say there's a 100 percent chance, but there's a 95 percent chance we are not going to receive the full $690,000," he told members of the finance committee Tuesday.

And that's already a $317,000 cut in LGA from this year.

He wouldn't be surprised to see LGA cut some more, "anywhere from $200,000 to $300,000," he said. "We will adopt this budget tonight, but it's going to be a moving target," he added.

Although the city is increasing the levy 15 percent, taxes will only slightly increase, he said. On the average $100,000 homestead, taxes will increase $35.

That's because the city has seen healthy growth this year -- the taxable market value of all property in the city has increased by about 4 percent, or about $32 million, with about $21 million of that coming from new construction.

Guzek said, however, that he has gotten a couple calls and e-mails from people in the city whose taxes have increased about 40 percent. His best advice is to contact the county assessor's office to make sure that information is correct, because that is a substantial hike.

Even with the levy increase, "taxes in Detroit Lakes are very competitive with surrounding cities," Guzek said.

Alderman Bruce Imholte said he's tired of hearing from St. Paul that cities are reckless spenders.

The levy increase will raise $417,000, he noted. Of that, $317,000 is related to LGA money cut by the state, and the rest is to make up lost revenue in building permits and interest on investments.

Cities are trying to keep their heads above water, not spending recklessly, he said.

"I think they should concentrate on the state level more and not worry about the cities," Imholte said.