In addition to a 6.03% proposed increase to the city's property tax levy for 2021, the Detroit Lakes City Council also approved a $14.5 million preliminary budget at its regular meeting Tuesday.
City Finance Officer Heidi Ostlie said the budget set by the council "didn't include a lot of fluff" for the coming year, with $7,022,095 allocated to the General Fund, $3,840,501 to Special Revenue Funds, and $3,595,192 to Debt Service.
"It's pretty realistic," Ostlie said, with much of the money going toward things like union contracts — city employees will receive salary increases of 3% across the board in 2021 — and much-needed repairs to the city fire hall.
"We paid off the last of the debt on the fire hall in February, so we own the building free and clear," Ostlie said, "but some improvements are needed ... it needs some love. We're redirecting the fire hall debt service funds to the fire department's capital budget so they can make these improvements."
Much of the money will be used to repair leaks and damages to the building's exterior, she added.
In addition, Ostlie said, the city will be doing some much-needed building improvements and equipment upgrades in other departments as well.
She added that she has begun implementing a 25-year schedule for the replacement of outdated equipment, as well as much-needed repairs and improvements to city facilities, across all departments.
"I wanted to make sure we had a plan in place to address those needs and plug in some different funding scenarios ... so we don't have any huge increases in any one year," she explained. "We're behind in some areas, so we will need to play catch up over the next couple of years."
Of course, some of the reasons for the levy increase were largely out of the council's control, such as an expected $94.750 decrease in Local Government Aid funding from the state, and an anticipated 15% decrease in Municipal State Aid funding for city road projects, with the latter due to a statewide, pandemic-related decrease in gas tax revenue.
"That (Municipal State Aid) funding was originally projected to go up," Ostlie said, but with the drastic decrease in traffic caused by the statewide pandemic shutdown between March and June, gas tax revenues also took a significant dip, causing a drop in MSA funding of just over $23,000 for next year.
The pandemic-related economic downturn also resulted in a significant drop in interest rates, which while good for things like debt service, was not good at all for the city's financial investments.
"I lowered that budget (for investment income) by almost $37,000 as well," Ostlie said.
She added that the Detroit Lakes Police Department is also expected to move into its new building next spring, and because the facility will be more than double the size of the department's current home, that will result in considerably higher operational costs for things like lights, heat, water, and cleaning services.
"That's factored into the budget as well," Ostlie said.
Despite the proposed levy increase of 6% — the final amount won't be certified until December — Ostlie said there is some good news for taxpayers: Property valuations have also gone up significantly, and the council also acted on Tuesday night to decertify six tax increment financing districts, "which adds a whole lot of tax capacity back onto our tax rolls."
"Because of those two things, the overall tax rate won't increase dramatically for most (property owners)," she said.
For instance, the owner of a $170,000 homestead property will see an increase of just $7 on their actual property taxes in 2021, provided their property valuation has remained unchanged.
On a $500,000 commercial property that has not gone up in value over the past year, the increase in property tax would be just $42.
The public hearing on the city's proposed 2021 budget and property tax levy is set for Tuesday, Dec. 8, at 6:01 p.m. Though the council could act to decrease the tax levy established in September, it cannot be increased from that amount, according to state law.