No tax increase in City of Minot’s 2021 preliminary budget
Preliminary budget reduces infrastructure spending
David Lakefield, finance director and interim city manager, presented a budget to the Minot City Council Monday that calls for nearly $130 million less in spending due to a decline in large capital projects and a change in the way expenses are budgeted.
“We face some revenue challenges. Our goal was to present a budget that was balanced and had a zero rate increase on the mill levy, and what we are presenting today has accomplished that,” Lakefield told the council.
Lakefield said the budget includes no increases to utilities or other fees. The only change might occur if properties experienced a valuation change up or down. The city’s overall valuation is up 2%.
The preliminary budget’s infrastructure spending is down $18.1 million. The only large new project in the 2021 budget is about $2 million for Broadway watermain upsizing. Spending on the Northwest Area Water Supply Project and flood protection continues, although, at the recommendation of auditors, state money paid on those projects is no longer included in the city budget. The city might never see that money, which often goes directly to pay contractors.
The proposed budget also bolsters the street department budget by about $1 million.
The council had delayed construction of a northwest fire station and City Hall retaining wall when revenues looked bleak at the beginning of the COVID-19 pandemic. The 2021 budget adds back partial funding for both.
“The anticipation would be that we would fund the remainder in 2022 or subsequent years, depending on how finances look,” Lakefield said Tuesday. No construction would start until all funds are in place.
The city has $13 million in reserves that would be spent in 2021, with most of that money on hand for NAWS and flood control. The budget also includes $657,000 from cash reserves for a new city hall.
The 2020 budget includes $6.75 million for a new city hall, much of which has yet to be spent. The city had allocated $3.75 million from National Disaster Resilience program dollars before deciding to shift another $4 million to city hall from the abandoned gathering space project. The 2021 budget anticipates $6.1 million in spending from NDR money, reserves and other sources.
The preliminary budget increases employee pay plan spending by 1.9% and adds three new positions. An intelligence analyst would be added to the police department.
“The need for this position was demonstrated when the riots were taking place and we had some of that activity taking place in North Dakota. The disadvantage that we are at here in the city of Minot is some of these other large cities in North Dakota have people dedicated to mining for information and seeing what’s out there and who’s coming to town and what type of activity is to be expected. And we didn’t have that resource,” Lakefield told the council.
Another new position is a project manager in the public works department for $89,292. In the fire department, a part-time fire marshal would become a full-time fire inspector at an additional cost of $21,551.
Helping to hold the line in the 2021 taxes are the increase in property values and a drop in sales tax collections that hasn’t been as steep as originally feared.
May saw the lowest sales tax collections for that month in five years. However, June saw the highest collections for that month in five years.
“The good news is we’re trending right now at less than 3% behind where we were at this time last year, and less than 3% behind where we had budgeted for the entire year. So, at least at this point in time, it looks like we’re on track to be very close to our estimates and above where our revised forecast was,” Lakefield said.
For 2021, the city is projecting each penny of sales tax will collect $8.5 million, rather than the $10 million of the past.
Flood control consumes 68% of a penny of sales tax. The impact of lower tax collections could affect how much debt the city can service or how much the city can pay out of pocket for flood protection in years ahead, Lakefield said. It also could mean extending the tax collection period for NAWS to fully pay off the project.
Lakefield added the state Emergency Commission has approved the governor’s proposal to use federal COVID-19 relief dollars to reimburse local governments for certain law enforcement payroll costs from March through September. It would mean $3 million to $4 million for Minot.
Because the legislative Budget Section still must act and final calculations must be made, Lakefield said the city might not know definitively how much money it is eligible to receive for some time. Any funds not spent in 2020 would carry over to 2021, but that amount is unlikely to be known before the 2021 budget must be finalized, he said.
The preliminary budget anticipates ongoing COVID-19-related expenses, such as personal protective equipment, but those are less significant than the impact the pandemic might continue to have on revenues, Lakefield said.
“The biggest impacts for the COVID are more of the unknown on the revenue side of things. If we have another shutdown here late in the fall, that impacts our sales tax collections quite a bit,” he said.
The city is expecting some decline in revenues from the state, which comes in a variety of forms, from grants and cost-sharing to sales tax and Hub City dollars.
The council plans a public hearing on the preliminary budget on Sept. 8. A budget must be finalized by Oct. 10. The council will hold a question-and-answer session with department heads Aug. 17.