Big projects bear down on budget

NAWS, flood protection influence city budget numbers

The Northwest Area Water Supply and Mouse River Enhanced Flood Protection are two of the largest capital projects Minot has ever financially undertaken.

With both included in the city’s 2019 proposed budget, taxpayers are bound to feel the impact. But what would the budget look like if those projects did not exist?

Without NAWS, Minot property owners would be looking at less of an increase in their city taxes for the 2019 budget. The impact of flood protection on the budget is less direct, though, and harder to measure.

The city reports the use of sales tax dollars for NAWS removes $1.2 million from direct property-tax relief and $1.6 million in funds that would have gone to infrastructure projects, primarily street improvements. That’s $2.8 million being moved into property taxes, raising the total tax to $26.6 million.

The shift accounts for about 13.6 mills of the 22.8-mill increase proposed in the 2019 budget. If there were no NAWS expenses and that shift didn’t need to occur, the tax increase on a home at the median value of $178,000 would be about $53, rather than the estimated $162.

Total spending in the 2019 budget on NAWS is $34 million, which includes sales tax, state revenue, cash reserves and interest income. That’s more than $23 million above this year’s spending on NAWS and factors into the city’s $37 million overall budget increase.

The city estimates the remaining local cost to complete NAWS at about $50 million. The amount doesn’t include any contribution, should one be required, for construction of the biota treatment facility near Max. Remaining work includes completing Phase II of the Minot Water Treatment Plant expansion, design of the Snake Creek Pumping facility, design of the biota plant and design and construction of the northern pipeline into Renville and Bottineau counties.

Flood control affects property taxes less directly than NAWS because no costs are being shifted to property taxes.

The proposed 2019 budget would create debt for flood protection construction, which would be paid in coming years using a half penny of sales tax allocated for flood control. This year, the city also is using sales tax dollars originally allocated to the Community Facilities Fund and to the MAGIC Fund for flood control. If that practice continues into 2019 as proposed, those original uses would not be supported with other city financial resources.

Also, money for property acquisitions for flood control has been coming from state and federal dollars, not local tax dollars.

The proposed budget shows the city plans to spend $7.95 million on flood control.

Although there’s no property-tax impact associated with flood control spending, the proposed 2019 budget shows 5.24 mills to cover $1.08 million in flood control costs and 2.49 mills for $513,011 in flood control debt service.

David Lakefield, city finance director, said the levies listed for flood control are simply accounting functions.

Lakefield explained a Government Accounting Standards Board rule prohibits transferring sales tax directly into a capital account. Thus, certain sales tax dollars must be deposited in the general fund and passed through to pay for flood control. Meanwhile, flood control must be shown as a levy. It is not raising taxes, though, because the levy for the general fund – where the sales tax was transferred – has been reduced by a corresponding amount.

If the city didn’t have flood protection’s drain on its sales tax, there would be more sales tax for economic development reserves, community facilities and a half penny – about $5 million – for other uses.

Whether that would mean lower property taxes depends on how the city council determined to spend those extra sales tax dollars. For instance, direct property tax relief or picking up street maintenance costs would be felt immediately. Paying down debt or increasing street maintenance to catch up on the backlog wouldn’t decrease the 2019 property tax, although benefits to taxpayers might be seen down the road.

In the theoretical example, the city also might choose to retain a portion of sales tax to maintain existing flood protection infrastructure. Currently, local investments into levee repairs are paid from general revenue in the streets budget.