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Minot City Council begins budget talks with sales tax discussion

Council considers sales tax spending in early budget talks

Jill Schramm/MDN Council members meet for preliminary budget discussions Thursday in Minot Municipal Auditorium. Shown from left are Stephan Podrygula, Josh Wolsky, Shannon Straight, Mayor Shaun Sipma and Paul Pitner. Also present were Mark Jantzer and Lisa Olson.

Deciding how much money to allocate to flood control at the expense of other city needs is the dilemma facing Minot City Council members as they consider a budget for 2020.

At a budget meeting Thursday, City Manager Tom Barry told council members that projected city revenue is enough to meet expected expenses in 2020 but that’s not the case going forward as flood control costs rise.

“We have a huge lift ahead of us still as far as the flood control project,” Barry said.

He presented information showing the city’s inability to meet payments under conventional bonding. He said defeated legislation that would have created a low-interest state loan fund for infrastructure could have solved that problem.

The city has more than $412 million in capital improvements on its plate over the next five years. The bulk is flood protection, $187.7 million, and the Northwest Area Water Supply Project, $118.3 million.

Submitted Graphic This graphic from the City of Minot shows the current allocation of Minot’s first and second pennies of sales tax. Some economic development money was transferred to sales tax from the first penny, while the second penny shows money going to flood control that once went to community facilities.

If Minot weren’t building the two major projects, the $106.7 million for capital projects over five years would be tenable, Barry said.

“We wouldn’t needing the money we are talking about needing,” he said. “But because we are adding two enormous projects, we have to create additional revenues or talk about other things in order to accommodate those projects.”

Minot has allocated 50% of the first penny of sales tax and 18% of the second penny that normally would go to community facilities to flood control. This year, the council also shifted some additional money from economic development to flood control.

Mayor Shaun Sipma supported restoring the diverted money to economic development because of needs in that area, including base retention. He explained the Legislature zeroed out funding for base retention, which had started at $200,000 for Minot in the governor’s budget. Locally, Minot budgeted $45,000 this year for base retention, which is half of what it had been budgeting.

Council member Paul Pitner favored restricting sales tax spending to 50% of one penny for flood control.

“There’s just too many in-house needs for us to keep stretching ourselves above and behind that 50% mark,” he said.

Council member Josh Wolsky said his priority is to keep the flood protection project moving.

“Every spring is the introduction of rolling the dice again. I want to get it done as quick as possible,” he said.

Pitner warned about paying for the project too fast and going above the city’s 50% obligation to the Souris River Joint Board to pay for it.

“We are not the credit card. Eventually we are going to hit our credit limit and there’s no more money,” he said. “Slow it down. Get back to our contractual obligation.”

Council member Shannon Straight said slowing down sends a mixed message after all the city has done working with the U.S. Army Corps of Engineers and congressional offices to advance the project.

“Unless we have a better message and a better plan moving forward, the east side of Minot is going to see this as a real slap in the face,” Straight said. He said the city needs to have a plan related to sales tax that doesn’t involve debating the percentage level every year.

Finance Director David Lakefield said changing the percentage every year can negatively affect how bond underwriters view the project. Holding the percentage to 55% or less also doesn’t provide enough money to pay the costs through 2021. Without money available, the joint board can’t proceed with the necessary bonding, he said.

Once bonding starts, the city will be locked into payments and will not be able to re-allocate sales tax dollars, Barry added.

“I don’t see us being able to fund this independently no matter what we do,” Stephan Podrygula said. He and other council members supported seeking outside help from Minot’s neighbors on flood control and NAWS, which benefit the region.

“Both are regional projects, and I think they need to be paid for equitably regionally. I don’t think the city should be spending any more money. I think we should be cutting back,” Podrygula said. “I understand the water – NAWS – is reasonably meeting costs. I want to be sure that stays that way. I think in terms of flood control, if they want it, they gotta pay for it.”

The council plans to continue the budget conversation in coming months, including at a retreat planned this summer.

City officials will be discussing flood protection and actions of the 2019 Legislature as well as taking the public’s questions at a townhall meeting Wednesday at 6 p.m. in Perkett Elementary School.

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