Staff at East Grand Forks City Hall are set to come up with scaled-back versions of the city’s preliminary 2022 budget.

After kicking around a budget that would have increased the city’s property tax levy by 8%, East Grand Forks City Council members on Tuesday asked administrators to come up with an alternate budget that would instead increase the levy by 5% and another that would increase it by 4%.

Council member Marc DeMers said he favors cutting the 8% levy figure in half, if not further, claiming the city’s cash reserves have swelled over the past few years and noting that it has routinely ended up with a substantial surplus at the end of each year despite setting more or less balanced annual budgets.

“At some point you have to realize your rate isn’t matching up with what it’s bringing in compared to your expenses,” he said. “I think we’re overbudgeted, and I think we have the space to get down (to) at least half of 8 percent, if not more.”

East Grand Forks administrators and officials have put together their last several budgets by including, in early stages, the majority of funding requests put forth by city staff, then gradually paring down those requests until council members are comfortable with the corresponding increase to the citywide property tax levy. That’s been about 5% for each of the past three years.

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The persistent end-of-year surpluses are the result of conservative budgeting, according to City Administrator David Murphy, and an unofficial city policy that means departments that spend less than they’re apportioned in a given year won’t necessarily have their budgets reduced by the difference in the year afterward.

The budget that relied on an 8% tax levy increase would have increased the city’s property tax revenue from a budgeted $5.71 million in 2021 to $6.17 million next year. The additional $457,000 that would bring in would pay for staff raises and projects that didn’t make it into budgets from prior years, such as maintenance on some park buildings and some new equipment for the city police and public works departments.

A smaller levy means, of course, less civic revenue -- the drop from an 8% increase to a 4% or a 5% one would produce between $150,000 to $200,000 less for the city government, Murphy estimated Tuesday. He told the Herald he isn’t sure which parts of the city’s proposed spending plan would be shrunk or removed under the smaller budget plans.

“We’re going to figure that out,” Murphy said. “We’re going to have to tear into it as department heads.”

Levy vs. rate

City staff presented DeMers and other council members with comparative tax rates for four sample Eastside homes and a commercial property. Under the 8% plan, city property taxes would rise from a combined $10,007.02 for all five properties in 2021 to $10,739.45 in 2022 -- an increase of 7.3%. But that figure isn’t a complete picture because properties in the city are also taxed by other governments, such as Polk County and East Grand Forks Public Schools. Total tax statements would rise from a combined $22,938 to $23,835.03 -- a 3.9% increase overall -- according to documents supplied to council members at their meeting.

City property taxes are routed through the county, and the figures presented to council members come from county administrators, who did a sort of property tax dry run when East Grand Forks officials set a preliminary property tax levy in September.

A property tax “levy” is the total amount of money the city hopes to collect via property taxes, and it's not the same thing as a property tax rate. County staff work backward from that levy figure, so to speak, to arrive at tax bills for specific properties. It’s why increasing a levy by a certain percent doesn’t necessarily mean city tax bills will increase by that same amount.

The city is required to host a "Truth in Taxation" hearing and set a final tax levy in December.

Development policy changes, ‘quiet zone’

In related news, council members:

  • Considered a change to the way the city and developers pay to have sewers, roads and other infrastructure built at the site of new developments. Currently, the city charges property owners for that work via fees called “special assessments,” but a plan floated by city staff would ask developers to put up some of that money themselves. Several developers showed up to Tuesday’s council meeting to protest the proposal, claiming it would put a damper on East Grand Forks’ already slow housing market.

  • Directed city staff to come up with plans for a railroad “Quiet Zone” near Sacred Heart School. Trains that pass through that area are required to sound their horns, and a quiet zone would remove that requirement in exchange for other safety features that could mean closing Third Street Northwest where it crosses the tracks.