St. Peter’s zero levy increase makes a point

Across the state, cities have set their preliminary property tax levies, a maximum number that will be made final in December. One wrinkle has been the state's new Homestead Market Value Exclusion, which replaces the old Market Value Homestead Credit. It's a complicated transition with hard to anticipate impacts on taxpayers. If you want to read more about it, Ground Level's Dave Peters has done an admirable job of explaining the change here.

The upshot is that even if cities keep their levies flat, property taxes for many homeowners will increase. By how much and on which properties is being sorted out county by county. Meanwhile, legislators and city officials have been embroiled in strenuous PR campaigns to deflect public blame.

Times continue to be tough for Minnesota's cities, with decreasing state aid, a slumping economy, declining property values and rising health care costs. And most cities--at least preliminarily--appear poised to raise their levies, if often by small amounts.

That's not the case in St. Peter, just southwest of the Twin Cities. The city plans to keep its levy flat, mostly to help strapped taxpayers in a time of economic turmoil. But Mayor Tim Strand, who used to head the Coalition of Greater Minnesota Cities, has another goal in mind as well.

"It was extremely important" to keep the levy flat for 2012, says Strand, "mainly because of the Homestead Market Value Exclusion. I wanted to say to citizens, even if we keep the levy at zero, the taxes are going up. The Legislature might not have been aware of the ramifications of that. If we all kept our levies at zero, taxes would go up anyway. It was important to us to make the point."

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Given years of ever-tightening budgets, it's galled some city leaders to hear legislators blame cities for the tax increase by arguing that if they wanted to keep the taxes of individual property owners flat, they could simply lower their levies. Most say they don't see any fat left to trim.

St. Peter has made significant budget cuts, delaying purchases, putting off street repairs and mowing the parks less often. They've prioritized the reduction of overtime hours. The city was able to spruce up Highway 169, which runs through town, thanks to federal stimulus dollars.

Ironically, by holding levies steady, cities may bring in more property tax dollars under the new exclusion than they did under the old credit. That's because they weren't receiving the total state reimbursement in recent years, while now taxpayers will pay in full. "Local taxpayers are filling in where the state used to fill in," says St. Peter City Administrator Todd Prafke. In his mind, the Legislature raised taxes. "In St. Peter, this results in a tax increase," he says.

That's an assertion that Republican lawmakers have taken exception to.

The credit/exclusion amounts to a small portion of the city's overall levy of approximately $2 million. And given state aid reductions over the years, the fact that taxpayers will step up where the state fell short isn't very comforting. "It's a small amount in the scheme of things," Prafke says. "It's not through anything we've done overtly to raise funds."

"[This is really] about the ongoing disintegration of the local/state relationship and at times, we all forget it is about all of us," he adds. "Not state vs. local. Not people or taxpayers against the government at any or all levels. It really is about how do we want to pay for the service, infrastructure, amenities that we want within our collective community."

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