East Grand Forks leaders tentatively set a large piece of the city’s 2020 budget and tax plan.

After informally agreeing to it last week, City Council members on Tuesday, Sept. 17, voted quickly and unanimously to adopt a $5.4 million preliminary tax levy spread for next year’s budget.

It’s a figure that’s about 5 percent higher than the one they agreed to in December for taxes payable in 2019, but at least some of that increase, city leaders expect, will come from a more valuable tax base. That means the property taxes that East Grand Forks landowners pay to the city might not go up by 5 percent -- Polk County, through which city property taxes are routed, is waiting for other jurisdictions to set their preliminary levies and doesn’t plan to finalize its tax calculations until late November.

The county’s total valuation for all the properties in East Grand Forks went up by 2 percent for taxes payable in 2020, staff indicated. That, at least theoretically, means a 3 percent average property tax hike, citywide, but there are confounding variables there, such how much of that increase came from new properties and the classification of existing ones.

“It would be my really firm goal that individual homes, on average, if their property tax went up, it should be less than that 2 or 3 percent,” Mayor Steve Gander told the Herald on Thursday, Sept. 19, adding that his “top end comfort level” would be a 3 percent property tax hike.

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“If we get a word back from the county that ... these representative homes are going up a little higher, we would absolutely go back to the drawing board," he said.

That $5.4 million preliminary figure is about $259,000 higher than what city staff and officials budgeted for this year.

Tuesday’s vote created an important starting point in the city’s budget process because local tax levies account for not quite half of East Grand Forks’ annual revenue, and whatever levy amounts Council members finalize this December can only be equal to or lower than the preliminary amount they set earlier this week.

It’s also important because the agreed-upon levy amount could help dictate how much reserve cash the city spends next year. East Grand Forks spent $588,000 less than it originally planned to in 2018, and that means it has a little more than $6 million in reserve. Holding on to all of that money would put the city above the threshold set in a 2011 fund balance policy, and city leaders have been kicking around ways to spend those savings.

Capping the city’s tax income at $5.4 million puts city leaders on course to spend at least some of that 2018 surplus on a projected 2020 budget gap, which, at least for the moment, stands at $229,000 and is at least partly because the city's projected rise in expenses includes department heads’ larger scale budget requests. City administrators said they’re working to narrow that gap, and Gander said he’d be comfortable if it ultimately shrank to a number between $110,000 and $200,000.

That would leave $478,000 to $388,000 left for city leaders to spend of that 2018 surplus.

City staff estimated earlier this month that they’d have to shoot for a 10 percent approximate levy increase, rather than a 5 percent one, to eliminate that projected gap between revenue and expenses in 2020 via property taxes.

“This is people’s money that we collected in ‘18,” Gander said. “And it’s an appropriate use to help reduce their increase in taxes in the year 2020.”

East Grand Forks’ City Council is set to meet to discuss, and potentially adopt, a final budget at 6 p.m. Tuesday, Dec. 10. Council members are also set to conduct a public hearing then and could opt to hold a second one at the same time the following week.