Council approves preliminary levy

The Red Wing City Council unanimously approved a preliminary tax levy amount of $14.15 million Monday.

Last year’s final levy was just more than $13 million. But council members were quick to say residents shouldn’t get sticker shock just yet.

There are a few reasons for that. First, improvements to Xcel Energy’s Prairie Island nuclear plant will increase its share of the property tax burden while homeowners’ tax capacities are relatively the same.

Because of the increase in tax capacity at Xcel, an increase in the city’s levy will have a minor impact on the tax rate for homeowners and other taxpayers, Council Administrator Kay Kuhlmann said. It will have the same effect as about a 1.85 percent increase in the tax rate.

But that extra money can give the city a chance to catch up on projects, especially infrastructure repairs and maintenance, that have been piling up, staff said.

“The fact that our major property taxpayer in this city is increasing their valuation so much over the next couple years gives us an opportunity we just have to grab,” Council member Lisa Bayley said.

“We have a great opportunity here to look at those things and get them fixed so we’re not passing those problems on to the next generation,” Council President Ralph Rauterkus said.

The council, mayor and staff also plan to look at lowering the levy amount before finalizing it.

The preliminary levy set Monday is the cap; it can go down between now and final approval in December, but cannot increase.

“We normally do come back with a lower amount,” Kuhlmann said. “That will be our goal.”

The council plans to adopt its final budget and levy Dec. 3.

Approving the higher amount allows for room to finalize details.

“We can start with that flexibility, work our way down and get some more answers in the interim,” Finance Director Marshall Hallock said at a budget workshop Thursday.

By December, the council will know more about the impact of the improvements at the Prairie Island nuclear plant, the incinerator, the outcome of school referendum and local option sales tax votes and other issues that affect the budget.

“I think there’s a lot more information that’s going to be coming before us,” Rauterkus said. “This gives us the flexibility to analyze those and move forward.”

Mayor Dennis Egan said he understood the need for flexibility and would approve Monday’s vote.

“But I think we need to continue to work and be diligent on where we’re going as a community and any ongoing expenses,” he said.

Council members have been discussing two different budget options. The first keeps most operations the same as they are currently while implementing some of the strategic plan initiatives that don’t cost money but involve staff time.

The other sinks some funds into initiatives with price tags attached. Two of the biggest items in that plan are hiring a new police officer and allotting funds for a book budget at the library.

“The strategic plan … made it really easy for us to put together priorities based on what you told us,” Kuhlmann said.

But the details of the budget are still being worked out. The council plans to have a few more budget workshops and members and staff will continue discussions, they said.

The focus on the tax rate discussion will help keep the average property tax payer’s amount relatively stable while bringing in more money from Xcel, Hallock said.

But that change will require education and explanation. Kuhlmann said a team plans to speak with civic clubs, organizations and other groups to explain what the tax rate means and the effect of Xcel’s capacity change.

The city will hold a public meeting at 7 p.m. Dec. 3 in the City Hall council chambers to discuss the levy and budget before a special meeting to finalize them.

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