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Word games local politicians play to avoid responsibility for raising taxes

We’re entering budget season for counties and cities.  In the next three weeks, these local governmental entities will be setting their preliminary property tax levies for 2013.  The preliminary levy is the highest amount of taxes that the city or county can collect for 2013 — they do have the option of collecting less than that amount when they approve the final levy in early December.

Local units of government take great pride in announcing that they aren’t raising your taxes — they pretty much seem to make that announcement every year, in fact.  How is this possible?  Can it be true?  As you might suspect, the answer here is “not exactly”.  Let’s take a step back and see how this works.

The basic tax calculation for an individual property is pretty simple:  the value of the property multiplied by the tax rate (also called a mill rate). Since the local unit of government has to levy a specific dollar amount for their entire community, though, there’s two ways they can go about the process of determining that final number — they can either go based on the total levy amount and work back into the mill rate or they can start with the mill rate and work up to the number they need.  In reality, local governments combine the two methods to get to a final answer.

Let’s take a look at what happens here.  Here’s a community of 10 houses.  We’ll call this community “Sampleville”.  The 10 homes in Sampleville have a collective value of $3 million, and pay a combined $6,000 in property taxes based on a mill rate of 0.2%. (For wonks out there:  this is going to be a really simplified example.)

What happens in Year 2?  Let’s look at an example of what many cities and counties are experiencing today — declines in property values.  Let’s assume a 10% reduction in property values, and let’s also say that an 11th home is built in the community.  Since times are hard, this home has a less than average value of $150,000.  If the mill rate stays the same, Sampleville generates $300 fewer property tax dollars, even with the addition of the new house.

The Sampleville City Council has some decisions to make at this point.  They can choose to keep the mill rate the same and cut their budget by 5%.  Or they can do what many local government units have done — keep their overall levy amount the same.  After all, Sampleville largely has to provide the same services in Year 2 as they did in Year 1.  They may even have to provide more of some services as there are now more people living in the community.  Under this scenario, Sampleville has to raise the mill rate to make up the difference.  They only have to raise the rate by 5.26%, because of the new house being added to tax base, though.

Even though the mill rate has increased, the Sampleville City Council goes back to its residents and says:  “No tax increase!”  Why? They will say it is because they left the overall tax levy the same — and all residents who were here in Year 1 will pay less in property taxes in Year 2 than they did in Year 1.  (Never mind that they are taking a larger percentage of your property value in Year 2 than they did in Year 1.)

But what if Year 2 is a good economic year?  If property values grow by 10% instead of shrink by 10%, we see a different story.

If no changes are made to the mill rate, tax collections go up by $900.  What does the Sampleville City Council (and most units of local government) do under these situations?  Go back to their residents and say:  “No tax increase!” (and  start planning things to do with the additional $900).  Why?  Because they left your mill rate alone.  The Council will tell you that the reason your taxes went up is a result of your property value increasing, not an active decision by government.

You may have realized at this point that the Sampleville City Council is changing the rules of the game midstream here.  You may also be realizing that many local units of government in Carver County (and across the state) operate the same way.  If you change the standard by which you declare a “tax increase”, it’s pretty easy to make it look like you’re not increasing taxes.

This isn’t meant as some sort of anti-tax screed.  In times like we are in today, decisions to keep local levies flat by raising the mill rate can frequently be justified.  But we have to be fair and call a spade a spade.  If keeping the mill rate flat during good times and collecting the additional revenue from increase property values isn’t a tax increase, then raising the mill rate during bad times to make up for declining property values is a tax increase.  Period.  We should expect our local government officials to not try to muddy the waters on this point.

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Chaska Herald column, April 5, 2012: City needs to stick to the plan

Below is the commentary I wrote for this week’s Chaska Herald:

There has been significant angst expressed in the Chaska Herald’s letters to the editor and in various online forums about some of the recent happenings in the city’s business environment.  Let’s put a little perspective around some of these events.

In January, the abrupt closing of the Chaska Rex movie theater again raised concerns about the viability of businesses in downtown Chaska.  Letter writers in the March 15 and March 22 editions of the Herald called for more attention from the City Council, media outlets, and residents to the situation.

The challenges that downtown Chaska faces didn’t just develop in the last couple of years; it’s been an ongoing process for a long time.  I haven’t lived here as long as many of you (nine years and counting now), but one letter writer pointed out significant business closings downtown going back to the late 1980s.  People can and will go back and dissect things the City Council did or didn’t do, ways society has changed, and ways our community has changed to determine why things developed the way they did.

But what we need to focus on as a community is: how do we go forward from here?  Many of the critics point the finger at the City Council.  I’ll certainly agree that the Council has at times seemed slow to recognize or react to the problems downtown.

The Downtown Master Plan should change that equation, though.  The final chapter of the document sets out a number of guidelines for implementation of the Plan.  It is critical that the Council and city staff follows the prescriptions in that Plan and start addressing some of the “low-hanging fruit” that can provide immediate benefits to the downtown community.

I’m hopeful this can occur.  A few years ago, questions about parking downtown would be answered by references to statistical studies that showed that their formulas said there was more than enough parking downtown – ignoring the real facts that people don’t park their cars based on statistical studies.  Now, the city seems to understand that if people think there’s a parking problem, then there’s a parking problem.  Perception is – in cases like this – reality.

The Plan calls for annual action plans to be created and published, so the public can be aware of how progress is being made on these objectives.  Key things that can be done now include:  improving signage in and around downtown and across Chaska to funnel people to the downtown region, continue work with key partners (like Southwest Metro Transit) to improve parking options downtown, and develop marketing strategies and collateral for attracting businesses, customers, and tourists to downtown.

A great deal of time, effort, and taxpayer expense has gone into the creation of this Plan.  It is up to us as citizens to hold city officials accountable for carrying through and making the changes prescribed in the Plan, however.  It is also up to us as citizens to recognize that the city can’t do everything on its own.  The city can do much to make Chaska an attractive place to own and operate a business, but it is ultimately up to those business owners to elect to invest in Chaska.

This point brings us to the second event that concerned some in our community:  the approval of the building of a second McDonald’s location in the city.

Everybody has got their own personal favorite restaurant or retail store that they’d love to see in Chaska.  From Taco Bell to Whole Foods, from IHOP to Trader Joe’s, just about every name has been bandied about by someone.

In the end, though, what we would like has to bump up against the reality of who wants to make the investment in our community.  The Hazeltine Plaza development was platted in 2006 to have up to three small- to medium-box sized retail stores next to Kohl’s, plus two small Chaska Commons style strip malls that could each hold up to nine businesses each, plus two fast-food restaurant pads.

Yet, Kohl’s has sat up there alone since September 2008.

It would be nice to turn up our noses at a second McDonald’s because there’s a long line of other companies willing to snap up that spot and build there instead.  But, unfortunately, that isn’t the case right now.  And yes, there’s concern about whether or not this area can support two McDonald’s.  On the other hand, no company has a better record of picking sites across the globe than they do.

So, let’s welcome McDonald’s investment in Chaska and hope that their example inspires others to follow.  With hard work and cooperation across our city, we can build thriving business communities in downtown and on top of the hill.

Radio silence, Truth in Taxation edition [UPDATED]

The City of Chaska Truth in Taxation hearing is on Monday, December 5.  As was noted before the setting of the preliminary levy in September, the City has been slow to post final budget information online.  Certainly, one would think this information is put together and available by now.  So, get it out there for people to see and read!

UPDATE 12/4, 9:00 p.m.:  Still nothing posted on the city’s website.  Just not acceptable.

Surly passes on Chaska

The staff report for the October 17 City Council meeting includes an update from City Administrator Matt Podhradsky on the wooing of Surly Brewing Company to build on the former Chaska Building Center site.

According to Podhradsky, Tegra Group (which is handling the firm handling the site search for Surly) notified the city earlier this week that Chaska was not selected to be a finalist for the new brewery.  Tegra Group felt the site was “nice”, but did not have the central location that Surly is looking for.

Radio silence, 2012 budget edition

The City of Chaska City Council will be voting on the preliminary budget levy on Monday, September 12.  Despite multiple work sessions on the topic, the city still hasn’t posted any documentation online about the proposed budget.  As a point of comparison, Chanhassen posted their budget information for their September 12 City Council meeting a week ago.

Catching up

Back at it after a refreshing week away.  Let’s catch up on some of the issues out there:

  • District 112 prepares technology levy for November ballot:  The Eastern Carver County School District will vote in Thursday’s meeting on whether to put a technology levy question to voters this November.  The levy would represent a return to funding technology improvements via levy as opposed to the operating budget (which has been done for the last several years since the previous technology levy expired).   Two scenarios — one that would raise $1.37 million annually, and one that would raise $1.9 million annually — are under consideration.  The tax impact on a $240,000 home would be $60 per year for the smaller levy and $84 per year on the larger levy.
  • Proposed city budget holds levy steady, includes 2% pay increases:  Work continues on setting the preliminary levy for the city of Chaska, with the initial plan holding the total levy steady for the third year in a row (which means for the third year in a row, the tax rate will increase against decreasing property values).  Projections show a total increase in expenses of 1%, including raises for city employees of 2% in 2012 (escalating to 2.25% in 2013, and 2.5% for the remainder of the five-year planning period).  Additional deferrals of equipment purchases and decreased spending on road reconstruction also help to fill the proposed $400,000 deficit.
  • County plans to lower levy by $1 million in response to GOP state budget:  As part of the budget agreement that ended the state government shutdown, the Market Value Homestead Credit was eliminated, which provided about $1 million in property tax savings to Carver County residents.  In response to this change, Carver County is moving forward by reducing their budget by a corresponding amount to prevent adverse impact on taxpayers.  Savings will be achieved by transferring funds out of the County Program Aid received from the state.  As such, the county portion of the average resident’s property taxes will decrease slightly in 2012 compared to 2011.  The County Program Aid was originally targeted towards capital purchases in the 2012 budget.  This savings is on top of $1.3 million in cuts identified before ratification of the state budget.
  • Carver County GOP auction update:  The Carver County sporting clays event has been rescheduled for September 29.  Under pressure from various sources, the auction part of the event has been removed from their website, and disclaimers about Rep. Paulsen and Rep. Kline’s appearances at the event have been added.

Chaska facing $400,000 deficit in 2012

The Chaska Herald reported on Monday’s City Council Work Session, at which City Administrator Matt Podhradsky unveiled the updated five-year financial forecast.

The forecast projects a deficit of over $400,ooo for 2012, and higher deficits in the remaining years of the forecast.   On the good news side of the ledger, the projected 2012 deficit is smaller than the 2011 deficit of $650,000 which was closed using a tax rate increase and deferrals of equipment purchases.  Also, TIF District No. 4 closes in 2014-15, which will free up funding for the Street Reconstruction Program.

While the 2012 deficit should be relatively easy to resolve, the City is going to have to get serious about addressing the long-term structural issues in the budget, as I pointed out when the 2011 budget was finalized.  You can’t put off equipment purchases forever, and there is substantial activity ahead — whether it’s the Downtown Master Plan, renovation of Athletic Park, and the maintenance required at the Chaska Community Center (such as the planned replacement of the ice making systems). 

While the City has been quite successful in obtaining grant money to supplement critical projects, we can’t assume such funding is going to remain available — especially given the fact that the federal and state budgets are going to be crimped for the forseeable future.  And while there are signs that development activity may be beginning to come back to life, we can’t expect a building boom comparable to what we saw in the last decade.

Residents of the City would be well served if the Mayor and Council would make moves to eliminate some of the structural issues in the budget starting in 2012 instead of waiting for more severe measures down the road.

Radio silence continues

Updated below (3/22).

Despite now having a full-time employee devoted to city communications, the City of Chaska continues to underwhelm with its ability to get information out of City Hall and to its residents.  Let’s look at a couple of examples:

  • Downtown Master Plan:  For weeks before the February 16 Open House, the city was claiming it was going to get information on its website regarding the plan and in particular, the three Catalyst Sites.  We’re now nearly five weeks after the Open House, and nothing is posted as of yet.
  • Facebook:  The city heralded its Facebook account when it opened a year ago.  The page now hasn’t been updated in six months.
  • Agendas and Minutes:  Getting agendas and minutes for the City Council and Commissions on to the webpage continues to somehow be a difficult challenge in 2011.  Council agendas are routinely posted very late in the day on the Friday before the meeting.  This is a very poor way to allow people to know what is coming up in front of the Council.  There’s no reason that a preliminary agenda can’t be posted a week in advance, and then updated to a final agenda on Friday.  As for the Commissions, only the Planning Commission has its documents regularly posted to the site.  None of the other Commissions show any activity on the website in 2011, and the Heritage Preservation and Parks Commissions show little activity in the second half of 2010.  The names of the Commissioners haven’t been updated to reflect the new appointments.  This is basic stuff that just isn’t happening.

Who at City Hall is going to begin to take this seriously?  Compare what Chaska is doing to what Chanhassen is doing on the web and on Facebook.  They have a webpage that is clean with a list of recent updates on the right side of the page and has a repository of agendas and minutes that goes back over a decade.  Their Facebook page is updated 2-3 times per week with community links and important updates.

It’s not difficult or expensive to have a clean, easy-to-navigate, and easy-to-update web site today.  (This blog, for instance is built on software that is free.)  It wouldn’t be difficult for the City of Chaska to have a web presence that reflects that — it just takes a little effort.

The city is approaching a major event in the next few days — serious flooding of the Minnesota River that will precipitate the closure of MN-41 and MN-101 between our area and Shakopee.  How is the city going to keep residents informed?  Last year, they used Facebook reasonably effectively to do so.  This year?  Well, we know there’s nothing on Facebook and there’s no current river status on the Chaska city website, either.

Again, compare how Chaska is communicating here versus what is happening in Carver.  Carver’s Mayor, Greg Osterdyk, is providing frequent updates on his blog.  The city website has updates on the front page and a whole special section as well.

The City of Chaska does so many things well — if only they could get it together on their communications.

[UPDATE, 3/22]:  The city is now reposting the Carver County Flood Updates on the front page of the website.  Also, a link to the Athletic Park Webcam has been posted.

Different kinds of plans

There are plans, and then there are plans.

What was presented at the Downtown Master Plan Open House last week was a plan.  A good plan, as far as it goes, anyway.  There were a number of very good concepts and ideas there, on the 15 or so charts that filled the room.  From plans for a revitalized Firemans Park corner to notions of expanded housing on the riverfront, to the out-of-the-box ideas for plowing under the decidedly not historic strip mall in the heart of downtown, there was a lot to chew on.

So, why, then did the Chaska Herald report so much skepticism from the attendees?

It’s because there wasn’t any plan to take what was on the charts and turn them into reality.  For some attendees, the exercise appeared to be one of pure fantasy.

It’s a little overwhelming – a lot of long-view stuff that probably won’t happen — Tom Hayden, Chaska Farm & Garden

That’s an attitude that the City Council will need to work quickly to overcome.  The way it does so it to clearly establish a real implementation plan — setting priorities, goals, and measures for the short-, medium-, and long-term planning horizons.  It’s critical that the plan be specific, so that the Council and city staff can be held  accountable for progress towards the objectives.  If we don’t see a specific plan and objectives from the Council, that’s a signal we’re in for real trouble.

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