Wanamingo council calls for 39 percent tax hikeResidents here could face a hefty increase in their city levy next year -- up to 39 percent over current rates, if city officials have their way.
Residents here could face a hefty increase in their city levy next year -- up to 39 percent over current rates, if city officials have their way.
The City Council mulled options to curb Wanamingo's growing debt at a workshop meeting Monday, settling on a significant levy increase in a plan they say will likely put the city back in good financial standing within three years.
"When the reserves are dry, you have to do something," said City Administrator Michael Boulton.
The city is confronting a virtual perfect storm of financial problems as it heads into 2011. The troubled sale of its senior living center, coupled with a loss of state aid dollars and under-budgeting for 2010 have raised the need to dramatically increase income over the next two to three years, according to Boulton.
"We just have no other way of doing this over the next two years," he said.
Boulton, who took over as administrator in December, said the city's budget woes have come to a head this year after its reserve funds were steadily drained over the past decade. That was largely the result of the city's backing of its Heritage Hill senior living center, he said, which lost money since the city purchased the facility in 1998.
The city transferred the facility and bonds to the Southeastern Minnesota Multi-County Housing and Redevelopment Authority in November, but is still on the hook for a portion of its losses. Next year, that share will likely amount to around $43,000, according to Boulton.
That, coupled with thousands of dollars in legal fees and other expenses from the sale, is a major contributor to the dire state of the city's general fund, which is in the negative by around $150,000.
The proposed levy increase would peak next year and likely fall off within two to three years as the city's finances are brought into order, according to Boulton.
He said the initial increase will likely be a shock to Wanamingo residents, many of whom are aware of the city's financial problems, but not necessarily of how significant they are.
"I don't think they know the full weight of the situation," he said.
The city's 2010 levy of $431,120 would be increased to just under $600,000 next year as part of the city's plan.
For the owner of a $100,000 home, that would translate roughly to a $160 annual increase, according to Goodhue County assessor Peggy Trebil.
City residents have already felt the effects of the budget problems in the form of a nearly $50,000 cut to city services this year.
Heat to the city pool has been turned off, snow removal services on downtown sidewalks have been cut, and an hour has been shaved off of the city's contract with Goodhue County for regular police patrol.
Wanamingo Mayor John Simonson said the large tax hike would be necessary to ensure those services come back sooner rather than later.
"We'd be running real lean over the next few years if we didn't do this," he said.
The Wanamingo City Council will vote on its preliminary levy during its next regular meeting on Aug. 9, beginning at 7 p.m. at the Wanamingo City Hall, 401 Main Street. If approved, the levy will head to the council's December meeting for final approval.