Council passes levy increase, budget

Red Wing City Council passed its 2011 levy and budget Monday, which included a 2 percent levy hike and two new franchise fees. But the ultimate fate of the budget and levy remains uncertain, as Mayor John Howe said he will veto both measures.

A veto would put the city in a time crunch to get its budget done by Dec. 30.

The city needs to pass a balanced budget by the end of the year, City Council Administrator Kay Kuhlmann said, and there is only one regular meeting left this calendar year: Dec. 27.

The council had come to a shaky consensus with regard to its budget during a recent budget workshop. Only a slim majority of council members, four on each vote, favored the proposed levy hike and two new franchise fees, one for gas and one for electric.

Council member Dan Bender, the only council member to support both the fees and levy increase, said the proposed budget would spread the pain evenly.

“This is part of a balanced approach to provide the necessary revenue,” to balance the budget, Bender said, adding the levy hike and new fees were needed to offset losses in state aid dollars.

At least one council member, however, has changed her mind regarding fees.

Fees lose favor, yet still in the budget

Council member Carol Duff said she did a lot of thinking since the budget workshop and she concluded that the proposed fees are too regressive, noting they would be most burdensome on the poor.

The gas fee would add 75 cents to residents’ utility bills, while the electric fee would add $1, it stated, according to a city memorandum.

With Duff’s change of heart, a majority of council members now oppose the fees — sort of.

The council still voted to approve the budget with the fees included. Council members couldn’t determine how to make up for the $210,000 in revenue the fees would raised.

Duff suggested using some of the city’s cash reserves. Council member Lisa Bayley, who also opposes fees, argued against that tack.

“Do we want to use one-time revenue to fund on-going expenses?” Bayley said. “We need to use that money wisely. Once it’s gone it’s gone.”

Kuhlmann said the fees won’t be implemented in the beginning of the year and the council will have a chance to nix them in 2011 before they go into effect.

Bayley said the council should use that time to figure out something to cut.

“If you don’t take it out, you’ll have an opportunity to revisit again,” Howe said, reiterating he intends to veto the fees.

Howe said Tuesday he will line item veto the fees out of the overall budget, letting the rest of the budget pass.

That could force council members to use reserve money to plug that whole if they cannot come up with the five necessary votes to overcome a mayoral veto.

Speaking in favor of fees, City Council President Mike Schultz said many other Minnesota cities have similar franchise fees. He also said city officials have too often gone to the levy when they needed to raise revenue.

Council member Ralph Rauterkus said city officials must make sure they have the proposed fee structure completely figured out before implementing them. He noted the city has had to revise its storm water fee.

Levy increase

Duff, Schultz and Council member Dean Hove have opposed any increase in the levy since budgets talks began months ago.

Monday, Duff and Schultz both voted against the levy increase, while Hove was absent.

Other council members said raising the levy was the prudent thing to do to avoid steeper hikes in the future. Speaking in favor of the levy increase, Rauterkus said the city should not continue to push off needed maintenance projects. He also said the city has made a lot of cuts.

“The story that’s going to go into the paper is that we raised the levy. The other story is we cut costs so significantly as well,” Rauterkus said.

Howe, meanwhile, quickly renewed his argument that a levy hike isn’t necessary this year.

“It’s a marginal amount. I think the reserve funds can handle it and I’m not going to support it,” Howe said. He also proposed delaying a City Hall renovation project.

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