Preliminary budgets for Rochester and Olmsted County call for an added $10.5 million in property tax revenue for 2020.
Early budgets approved this week would collect an additional $4.9 million in property taxes for Rochester and $4.6 million for Olmsted County, while the Olmsted County Housing and Redevelopment Authority’s property tax levy would be raised by $1 million, to the state-allowed cap.
“Don’t equate the levy number with (individual) tax increases, because that is not technically correct,” Rochester City Council Member Michael Wojcik said as the council considered the city’s proposed 2020 budget.
City and county decisions this week established the maximum amount of property taxes allowed to be collected for 2020.
Rochester’s overall preliminary tax levy is a 6.5 percent increase, compared to 2019, while Olmsted County’s potential increase is a 4.5 percent jump.
“It doesn’t mean (individual) taxes are going up by 6.5 percent,” Rochester City Council Member Michael Wojcik said of the city’s potential 6.5 percent levy increase. “It just doesn’t work that way.”
Wilfredo Roman-Catala, the county's chief financial officer, has noted the same can be said for the potential 4.5 percent county increase.
Growing tax base
The proposed levy increases represent the total potential property taxes the city, county and HRA can collect next year.
Last year, the city collected $74.6 million in property taxes, and the county collected $103.2 million. The new proposed levies would provide $79.5 million for the city and $107.8 million for the county.
With a growing tax base, the increase will be spread across more properties and distributed differently in 2020. The most recent estimates indicate the city’s total market value will increase by 9.12 percent next year, with more than a quarter of the increase attributed to new construction.
Several other factors, including property type and value changes, can also affect property owners’ final tax bill.
Taxes for housing projects
While property taxes are a portion of the current proposed local government budgets — approximately 20 percent of the city’s potential $388 million budget and 54 percent of the county’s potential $199 million budget — the HRA budget is largely defined by its levy.
The current plan calls for increasing the HRA levy, which funds a variety of housing projects, from $2.5 million collected this year to $3.5 million in 2020.
The increase, which will collect 0.0185 percent of a property’s taxable value, would increase the HRA tax on a home valued at $250,000 by $11.42 to nearly $39 a year.
“This will allow us to enhance our efforts,” Dunn said, noting the added levy funds will also allow the HRA to leverage other funding sources to address homelessness, housing rehabilitation and the creation of new housing options.
Topics for budget talks
City and county officials plan to spend the upcoming months honing the proposed budgets, which could lower the overall levies for 2020.
In the city’s case, the proposed $79.5 million tax levy for the overall $388 million budget leaves the council some wiggle room beyond the budget initially proposed by city staff.
Items that could be funded with the extra tax dollars include a requested $150,000 for a Rochester Downtown Alliance program to enhance the downtown image and safety, as well as $50,000 for signs to reduce speed limits to 25 mph in residential neighborhoods.
While the council has discussed using the added levy funds to start paying back $3.7 million in overspent funds related to a variety of street, bridge, and traffic signal projects, city staff suggested making a $1.5 million payment from an existing bituminous project fund.
City Administrator Steve Rymer said the payment would not affect planned 2020 projects.
In addition to the proposed transfer from an existing fund, staff is proposing using an additional $200,000 from the property tax funds, which would bring the combined deficit to $200,000.
Rymer has said the identified shortfall might be reduced further by federal and state funds due to the city.
For county commissioners, many details for the 2020 budget require additional review and discussion, including new staff positions, proposed equipment replacement and building and infrastructure projects. Roman-Catala said nearly $6.7 million is available for those items in the current budget proposal.
Final budgets will be approved in December, following public hearings. The city’s public hearing is set for Dec. 2, with the county’s hearing planned for Dec. 5.