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Looking back to 2009, forward to 2010

Jan 08, 2010

Not even the best debater could successfully argue that 2009 was a good year for the economy. It started with the fear of slipping into a situation not seen since the great depression. Home property values unrelentingly slid downwards, the foreclosure mess of the housing industry continued and we started to see foreclosure problems with commercial property. The year ended with some of the banks that received government bailouts recording huge profits and awarding their CEO’s unconscionable bonuses while the unemployment rate remains in double digits.

The state didn’t balance the books with any stable means and the Governor took an unprecedented step to use unallotment to get us by for the short-term. Despite this, the state still faces a 1.8 billion dollar deficit this year and now the constitutionality of his action is under scrutiny in the court system. In 2011 the state is looking at another 5-8 billion dollar deficit for the next biennium and no hope for long-range improvement.

Ham Lake faced some unprecedented challenges of our own in 2009. The trend really began in 2008 when property values began to decline. Since 2008 nearly $400,000 of the city’s Market Value Homestead Credit (MVHC) has been cut from our budget. Ham Lake had previously lost all of our LGA in 2003. However, we did see this coming and made adjustments in 2008 and 2009 to accommodate for the loss of revenue. Most of the cuts were reductions in staff hours, capital outlay and transfers to other funds.

The goal of the council was to keep the tax capacity rate the same as last year. The tax capacity rate is the most reliable index to measure how the tax levy is spent. Given the decrease in property values, we had to make significant cuts to the budget. The 2010 tax levy was roughly 4.6 million dollars - about $270,000 less than the 2009 levy or a 5.59% reduction. The levy included about 4.5 million for the general operating fund and $110,000 to make the last payment for the fire station in the northern part of the city. Most of the revenue (87%) the city has to work with comes in the form of property tax levy.

Cuts in the budget for 2010 included:  $215,000 in personnel, $100,000 in pavement management transfers, $30,000 in street maintenance and about $21,000 in utility savings (let’s hope it warms up soon and is not a hot summer). Here’s a breakdown of the city’s expenditures:  public safety 32%, general government 24%, public works 16%, pavement management 15%, parks 7%, transfers to other accounts 5% and the senior center 1%.

When it was all said and done the tax capacity rate actually dropped about .4% from 23.75% in 2009 to 23.34% for 2010. This is the second lowest tax capacity rate in Anoka County, second only to the newly formed city of Nowthen. Many factors are used by the county assessor to determine the value of each individual home and the median home in Ham Lake has a market value of $280,300 in 2010 which is down from $297,000 in 2009 and $317,000 in 2008. This means that even though property values are going down, the typical home in Ham Lake will see a reduction in the city’s portion of their property taxes.
The frugal nature of this and past councils have placed us in better situations than some cities. While it is good to keep taxes down, low taxes do come with a future price tag. Sooner or later there are some big expenditures the city will have to bond for to finance. And to bond for them is just like using credit cards, you pay for the purchase and the interest charges that accompany them. Nevertheless, it may be the best option.

This whole economic mess that we collectively face together has hopefully caused us to look at things differently (although Wall Street doesn’t seem to get this). It is important we all live within our means and get away from the lure of credit and government assistance to solve our issues. I firmly believe that we need to pay as you go and anticipate costs that are in the horizon. Ultimately, we have to figure out how to make our city self-reliant.

In my opinion, it is a better option to expand the tax base to find ways to pay for big ticket items versus passing the cost onto home owners and future residents by putting them on the credit card. No one wants higher taxes, yet I believe that people expect their city government to provide basic services and have the infrastructure necessary to carry them out. How do we do that? Let’s use this economic reset as a means to find new ways to fund what is essential for good government.

Paul Meunier

Anoka County Union