New Hope looks to 2013 with budget, levy

Tax rates could increase in New Hope next year, but market changes could see homeowners paying less in 2013 than in 2012.

The New Hope City Council (minus Council Member John Elder) hosted a Truth in Taxation hearing for the city’s $9.5 million tax levy and $10.7 million budget Dec. 3 at city hall. No comments were received from the public, and both items were unanimously approved Monday, Dec. 10.

City Manager Kirk McDonald and Steve McDonald (no relation) of AEM Financial Services presented the budget and levy information.

The city budget will increase $455,775 compared to 2012’s budget. Much of that increase is due to replacement of equipment replacement charges and wages.

The city’s tax levy is set to increase 3.7 percent, but decreases in market valuations mean that the cumulative impact to most households in the city could be a 6 percent decline compared to last year. This decrease could reduce tax bills (depending on home price) by between $49-$82.

New Hope has 4,845 single-family homes. For 77 percent of them, taxes will decrease up to 20 percent. For 22 percent of them, taxes could increase 5 percent.

A majority of apartments and industrial properties could see increased taxes in 2013 compared to 2012. There are 95 apartments in New Hope, and 64 percent of them could see taxes increase up to 5 percent. For the city’s 176 industrial properties, 104 could see a tax increase of up to 10 percent.

Four tax-increment financing districts are set to expire at the end of the year.

“After that is done, the district’s tax capacity becomes part of the city’s general levy authority,” Steve McDonald said. “We point out that this is a unique opportunity to capture that value, and maintain a tax levy amount that is the same from year to year.”

The expiring districts could add $342,000 to the general levy, which could be used to partially fund the replacement of equipment.

No funding was included in the past two budgets to replace equipment and vehicles. This elimination came in reaction to state revenue reductions. The city lost $640,000 of local government aid in 2011, and eliminated that funding as a source of revenue the following year.

All sources of state funding have been eliminated from the 2013 budget, Kirk McDonald said.  In the past 11 years, the city sometimes received as much as $1.2 million (2001) and $400,000 (2009) in aid.

The equipment funding, which also covers future replacement of city vehicles, was also not included in the approved 2012 budget. As a result of two years without funding, equipment was replaced only when necessary, and sometimes with delays.

“From my experience, looking at the process, the city staff has done a very good job of extending the life of those vehicles,” Steve McDonald said.

Twenty-five percent of vehicle and equipment replacement costs have been reinstated in the 2013 budget to help stabilize a reserve dedicated towards that expense. A total of $504,084 is budgeted for all equipment and vehicle replacement charges, with that total coming from the general fund and enterprise/utility funds).

No across-the-board cost of living increases were included in the budget for non-union employees, and the city contribution for insurance is not increasing. Union contract settlements for police and public works are included in the budget, as is a slight increase in compensation for mayor and council positions (which were last raised in 2002).

Two new positions will also be added to city staff: a police officer (bringing the city’s total to 32) to serve as a resource officer at North Education Center, and an accounting technician position. The technician position’s costs will be covered by a reduction in the city’s accounting contract.

When the council was given time to ask questions, Mayor Kathi Hemken said she gets asked a lot how taxes can go up when property values are going down.

“Depending on the category of property is it, there are so many changes in the value of property that you can’t provide just one specific answer,” Steve McDonald said. “You have to look in the context of all of the properties in that class. We’d have to look at specific changes in market value from one year to the next. Multiple factors can come into play.”

Before the hearing closed, Council Member Dan Stauner praised what he described as “a real improvement” in the way the city’s budget process worked, particularly with department heads understanding cost factors.

“I think it’s worth acknowledging that staff has improved its own understanding … and it’s appreciated,” Stauner said.