Red Wing Mayor John Howe said today he planned to veto the 2 percent property tax levy the city council approved Monday. He also plans to use his line item veto on a budget provision that calls for a new franchise fee on electricity and gas bills.
Howe, who will soon be facing the budget dilemma of the whole state when he takes his seat in St. Paul as a newly elected Republican state senator, told me the impacts of the tax increase and the franchise fee were too uncertain for Red Wing businesses in a fragile economic recovery.
He said the city can dip into its reserves to make up the revenue in 2011. Investments in the Xcel Energy generating plant and elsewhere in the city mean that in coming years Red Wing’s city budget should be in better shape.
Like practically every city in Minnesota, Red Wing has been wrestling for several years with tighter budgets. State aid has been declining and many services have been cut, but local officials everywhere are reluctant to raise property taxes even in the face of uncertainty about next year’s state aid. See more from earlier this week.
The tax increase approved in Red Wing this week actually would result in a residential property tax decrease for most people, but Xcel and other commercial property would see taxes rise.
Howe said both the city and the state need to communicate fiscal reality better to residents.
“A lot of our residents want to increase or maintain services, but they do not want us to raise taxes,” Howe said. “This is not an option.” Of the state’s long-term structural budget problems, Howe said, “You can’t get there just by cutting services.”
The city council has the ability to override Howe’s veto later this month.