Council will consider 2 percent tax increase for 2013

Hastings City Council members are getting ready to set the preliminary budget for 2013. At a special workshop-style meeting Monday evening, the council asked staff to start assembling a preliminary budget proposal that would include a 2 percent property tax increase. The council will vote on the preliminary budget Sept. 4.

Declining property valuations in the city means that Hastings will see about $600,000 less than this year in property tax income, creating an instant shortfall. That’s before considering the proposed department budgets.

Monday’s meeting focused primarily on the council’s tolerance for increasing taxes and if there was tolerance, by how much should they be increased.

Council members disagreed on what next year’s tax situation should look like. Mayor Paul Hicks noted that last year, changes to the Market Value Homestead Credit created a tax bump for homeowners. He encouraged the council to be sensitive and give residents a budget that would be “easier to swallow.”

Hicks initially suggested a 1 to 1 1/2 percent increase. On the other end of the spectrum, Joe Balsanek said he was more inclined to the higher 4 percent increase. The city needs to recognize what it needs and how much it has saved, he said.

“I don’t like kicking the can down the road,” he said.

Unforeseen circumstances were a concern to councilmember Tony Nelson. Due to past years’ budgets shrinking, the city has some equipment that is aging, he said. A major repair or replacement bill could cause problems if the city isn’t prepared.

“We don’t have a lot of extra stuff here in Hastings,” Nelson said. “And big ticket items can break down.”

It’s easier, he added, to have smaller tax increases over a period of time than a big increase later on.

Those present at the meeting compromised and settled on 2 percent, recognizing that even with that figure there will have to be some considerable trimming of the proposed budget. With a 2 percent levy increase, the city would get another $235,000. Meanwhile, if everything on the proposed budget were to be approved, the levy would have to increase by almost $1 million.

A home valued at $172,000 in 2012 pays $1,140 to the city under the current tax rate. In 2013, the same home’s value would drop to $165,000. A 2 percent tax increase would put that home’s taxes at $1,173 in 2013.

The impact on businesses would be a bit heavier, increasing taxes for a downtown business by about $100 and a large ($1.5 million value) business by about $900.

Staff and the council’s finance committee will bring their official preliminary budget and levy proposal to the council Sept. 4. Once the preliminary budget and levy are set, staff and the committee will continue to work on the budget. Changes can be made after the preliminary levy is set, but the final budget cannot be higher than the preliminary budget. The final levy and budget will be set on Dec. 3.

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