News Column

As recession fades, Blue Earth County looks to boost levy, staff

July 12, 2014

By Mark Fischenich, The Free Press, Mankato, Minn.

July 12--MANKATO -- As Blue Earth County takes the first steps in a months-long process of setting its 2015 budget, some things have stayed the same.

The tax burden, like last year, will continue to shift toward farms. An improving local economy means rapid growth in new construction, which will continue to expand the tax base. And supervisors across county departments say they need more workers to handle a growing population.

But there are a couple of major changes from a year ago that are likely to impact county residents. Unlike a year ago, County Administrator Bob Meyer and the County Board are planning to increase the property tax levy and are open -- after several years of trying to hold the line on spending -- to adding a substantial number of new employees.

"We can't take care of 75,000 people the way we took care of 55,000 people," said Commissioner Vance Stuehrenberg of Mankato, anticipating continued growth in the current county population of roughly 66,000.

Meyer's initial budget proposal includes a 4 percent increase in the property tax levy. In 2013, the administration was under the impression that legislation boosting state aid to the county required that the levy be frozen. With that budget constraint in mind, the board added few new positions and used reserve funds for some one-time expenses.

This week, Meyer showed the board 19 positions that he considered warranted by growing case loads and demands for services. And he presented the proposed 3.99 percent levy increase, which would generate just less than $1.2 million in new revenue.

Building boom

About a third of the increase would be offset by the new construction that is adding to the county's tax base. More than $88 million in businesses, homes and other building projects are expected in the county in 2014, mostly in Mankato, which has shown a stronger than average recovery from the Great Recession.

"That's certainly reflected in what we're seeing in the community," Meyer said.

There was $74 million in new construction in 2013, $54 million in 2012, $50 million in 2011 and $48 million in 2010.

Although construction is up substantially from the depths of the Great Recession, it's still well below the levels seen during the housing boom that preceded the recession. In three consecutive years starting in 2005, for instance, new construction in Blue Earth County was above $130 million each year, topping out at $146 million in 2007.

Farm shift continues

With new construction covering a third of the proposed levy hike, existing property owners would be left to finance about $770,000 of the $1.158 million in new taxes that would be collected by the county in 2015. It wouldn't, however, be spread evenly across property classes.

For the past several years, surging farmland values have driven up the share of county taxes that farm owners pay. While farm sales have shown that the inflation in ag land values is slowing, there's a lag between the sales and the assessments that determine tax burden for individual farms.

Ag land assessments will rise about 15 percent again for taxes payable in 2015, Meyer said.

"We're still going to see a shift in the burden on to the ag classification," he said.

Commissioners got one round of solid ammunition to use if people complain about rising county taxes. The county ranks 72nd in per capita county property taxes in Minnesota this year.

"Only 15 of 87 counties would have a lower per capita levy," Meyer said. "... So we have operated in a conservative manner."

A rising county payroll

Even the most conservative members of the board were showing no signs this week of insisting on a flat levy for 2015, nor were any arguing that the county should have a hiring freeze in the coming budget.

In fact, when Meyer asked how many of the 19 proposed new employees he should include in his next round of budget documents, the board ultimately instructed him to include them all with the intent to consider reductions in the number as the fiscal discussions proceed through the summer and fall.

The overall cost to property tax payers of the new positions could be a wash in the short term, Meyer said, because of grants from the state and federal government for some and because department heads have agreed to drop or delay other planned spending in return for the added workers -- who would receive a combined $1.2 million in salary and benefits each year.

Commissioner Mark Piepho of Skyline was nervous about hiring people that would be paid in part by state and federal funds.

"I always worry if you're getting money from somewhere else, how long will that last?" Piepho said.

As for the delayed purchases of equipment and other items to offset the employee costs, Commissioner Drew Campbell of Mankato noted that it only covers the salary and benefits for one year while the employees would presumably be permanent.

"As long as you're willing to do that every budget year ...," Campbell said of the reduced departmental spending.

19 proposed positions

Campbell suggested half of the 19 positions should be included in the next round of budget discussions. Piepho was willing to accept the top 12 in the priority list created by Meyer.

Those 12 include a deputy sheriff (who would focus on water, snowmobile and ATV patrol and serve as a school safety officer in the St. Clair school system), an information technology worker (to provide support for an increasing number of county data systems), two probation officers (to handle a growing criminal caseload in the county), an assistant county assessor (to supervise property assessments and handle assessments of more complex properties) and a human resources technician (to deal with a variety of employment issues.)

There are also six new positions in the Human Services Department among the 12 priority hirings, ranging from a psychiatric nurse to financial assistance specialists to handle the growing caseloads related to the Affordable Care Act.

"We would struggle to provide quality services (without the top 12 additional positions)," Meyer said.

Commissioner Kip Bruender of Eagle Lake wondered if all 19 new positions should be included for now in the budget. Bruender said department heads have striven to limit their requests for new workers for several years, knowing that the board was attempting to restrain increases in the levy.

He also noted that the county was all but forced to previously add five Human Services workers because of decisions made in Washington, D.C. -- the passage of the Affordable Care Act prompted an influx of applications for health care coverage through the county.

The county now has the equivalent of 414.5 employees, down from a pre-recession peak of 426.

"I'm not excited about 19 positions either," Bruender said. "But we have to provide the services."

Decisions looming

Campbell cautioned that the county is in the midst of a legal battle with its assistant county attorneys over salary levels and could be forced to boost those salary levels if the board, which lost at the District Court level, suffers the same fate before the Minnesota Court of Appeals. A decision by the appellate court is expected in the next two months.

"We still have a pending lawsuit with possibly much higher expenditures ... plus some back pay," Campbell said.

Board Chairman Will Purvis of Vernon Center said there's still a lot of work to do before the preliminary levy is set in September and final numbers are adopted in December. Even if the 19 new county positions are included in the next round of budget talks, they won't necessarily be there at the end.

"As we move forward, we may find some we can eliminate," Purvis said.


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