Uncertainty lingers as council considers Rochester's 2021 budget

Steve Rymer made it clear the recommended 2021 Rochester city budget will need some adjustments.

“We continue to have high levels of uncertainty,” the city administrator told the Rochester City Council on Monday.

As he ran through highlights of the recommended $476 million budget, he said city staff has confidence in its assessment of current financial conditions, but the ongoing impact of the COVID-19 pandemic continues to spur questions.

Among those questions is whether transit and parking services will bounce back to anticipated levels, how long it will take the city’s lodging tax to rebound, and whether long-term concerns will reduce property values in the upcoming years.

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Rymer said the recommended budget anticipates a $1.7 million reduction in lodging taxes collected through local hotel stays, resulting from few rooms being rented and lower rates being changed.
“It’s going to be a multiple-year rebound in that area,” he said.

At the same time, Dale Martinson, the city’s finance director, said it will likely take at least two years for the city to see any property-tax impact related to the potential for reduced values in the wake of the pandemic.

“By the time we actually levy, we’re a year and a half behind when they did the valuation,” he said, pointing to the lag in market value used to assess property values for tax purposes.

He said commercial property values appear to be holding steady, but uncertainty continues to linger.

The recommended city budget proposes to operate on the same level of property taxes collected in 2020 — $79.5 million — while also keeping Rochester Public Utilities electric and water rates flat.

Residents will see a 5% adjustment in wastewater rates next year under the proposal, but parking ramp and transit fees are expected to remain flat.

The lack of tax and fee increases comes with an anticipated $97.8 million reduction to the overall city budget, with approximately $18.7 million cut from city operations and the capital improvement plan reduced by $79.1 million compared to this year.

Rymer said several of the budget cuts come from belt-tightening seen as the impact of COVID-19 emerged locally, but department heads also were asked to look for additional cuts.

At the same time, some city revenue and related services are anticipated to return in 2021, including park and recreation programs.

Still, Rymer, who has announced plans to leave the city’s top administrative post, said the city will need to stay vigilant.

RELATED: Rochester city administrator ready for change City council starts discussion of plan to replace city's top administrator as he looks to relocate.

The recommended budget anticipates parking ramp occupancy will return to approximately 70% of pre-COVID numbers and transit use will continue to increase with the potential need for route changes to address safety concerns.

“These are things we’ll be monitoring this year, as well as throughout 2021,” he said.

Some elements of the budget continue to remain uncertain, such as funding for nonprofit organizations typically supported by the city.

While some organizations are represented in the budget document with a proposed 10% cut to funding, others are listed without funds assigned.

Rymer said the funding is available, but the City Council will need to discuss how they should be allocated. The discussion is expected to start next week during a council study session at 3:30 p.m. Monday.

Another issue council members also said they want to discuss further is the potential closing of the swimming pool in Silver Lake Park, which is expected to save $40,000 in the 2021 city budget.

The council must establish a preliminary levy by the end of the month, setting the maximum property tax amount it can collect. The decision is expected to be made during Monday’s council meeting following the study session.

While the decision will cap the potential property tax collected in 2021, the city budget can continue to be changed and the property tax levy can be lowered. A final budget and levy are expected to be approved in December.