Luverne City Council members agreed to scale back the city’s levy for taxes payable in 2021.
The council approved the measure at the Dec. 8 meeting after some residents pushed back on the city’s proposed 9.67 percent levy increase.
“Publicly, it’s the right thing to do,” said Luverne Mayor Pat Baustian. “With Covid and people losing jobs and being laid off …”
The 2021 tax levy was proposed at $2,298,720, which is $202,596 more than the current levy.
Tuesday’s resolution decreased that proposed amount by $35,000.
“I think this means more than the actual dollar amount; this shows we’re listening,” Baustian said. “It’s the right thing to do.”
The action results in the total tax rate for taxes payable in 2021 being close to the total tax rate for taxes payable 2020.
Considering Luverne’s growing tax capacity and market value of properties, taxes on a $150,000 home would likely not increase at all. Property taxes on an average $250,000 home may increase by only $5.
Lessons in tax capacity
The levy and its effect on property taxes presents an opportunity for lessons in tax capacity.
The total estimated market value of property in Luverne increased 3.78 percent this year, from $323 million to $335.3 million.
Of that increase, $5.47 million was new construction, which didn’t include Premium Minnesota Pork’s $30 million investment in their facility.
If one-quarter to one-third of that investment is for the structure, that’s a $7.5 million to $10 million addition to market value, according to City Finance Director Barb Berghorst
“If part of that is going to be included in the market value for tax capacity, we know that we’re going to have a much bigger tax base to spread our levy,” Berghorst said at the Sept. 22 meeting about the pool and fitness center project.
She said she’s projecting the 2021 levy for taxes payable 2022 will increase 11.5 percent; however, she said PMP’s building investments would impact tax capacity in a way that property tax statements would reflect less than half that increase.
“I feel confident that our increase for the city part of the levy and affected taxes will be under 5 percent for taxes payable 2021, and I think it will also be under 5 percent for 2022,” she said.
Levy increases don’t proportionately affect property tax increases, thanks to a number of factors.
“We’re setting our levy a little bit higher, and as our tax capacity grows, we keep our rate somewhat stable,” City Administrator John Call said during the September budget meeting.
“We are growing, and our market values are increasing and that’s good for our fiscal health.”
A $150,000 home for example, saw an actual property tax increase of 1.3 percent in 2020, despite the levy increase of 9.41 percent.
“We have a low tax rate — among the lowest in southwest Minnesota with comparable communities,” Call said.
“And I want to thank the school district and county for the role they play in watching their budgets and keeping spending low. That keeps the total levy low for all of our taxpayers.”
Spending philosophy
Baustian defended the city’s spending decisions, like the $5 million pool and fitness center expansion, even though they have resulted in budget increases.
“There have been city councils whose objective is to cut, cut, cut,” Baustian said.
“I say the object of the game is economic development, good housing stock, jobs and good quality of living. These all cost money, but I’m willing to do things that put our community over others.”
He said amenities like spring junk cleanup, fall leaf pickup, trimming boulevard trees and picking up residents’ Christmas trees aren’t standard in many communities.
The Luverne City Council has long advocated slow and steady levy and fee increases, rather than drops and spikes dictated by budget cycles.
“People have criticized city purchases, but if you don’t fund depreciation, you’re just pushing those expenses down the road,” Baustian said.
The Dec. 8 meeting included the city’s truth in taxation hearing, which no member of the public attended.