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Paynesville Press - December 26, 2001

Area cities keep tax levies despite aid losses

By Linda Stelling and Michael Jacobson

The property tax reform enacted in the last legislative session will benefit two area cities while leave three others with less state aid in 2002 than they received in 2001.

The cities of Paynesville and Roscoe were among the fortunate minority that will see its state aid increase in 2002. Paynesville will get $93,000 extra, which leaves its city government in the enviable position to simultaneously reduce taxes and increase spending.

The city of Roscoe will also see an increase in state aid, but their increase is more modest, only $1,293. Roscoe will leave its tax levy the same at $15,000, according to Mayor Don Heinen. They also have increased their budget by $5,000 to help cover the costs of a sewer project that is expected to start in 2002.

The Roscoe City Council is exploring the availability of grant money to help keep the costs of the project down, said Heinen.

Depending on the final costs, Roscoe may find itself in the company of other small cities in the area who may have to raise tax levies in 2003. Lake Henry and Regal both have left their budget and levy the same in 2002 despite getting less in state aid. Both cities are taking a wait-and-see attitude to find if their actual revenue losses in 2002 match the current projections before raising their tax levies.

The city of Lake Henry is projected to lose $4,706 in state aid in 2002. Their state aid is expected to be cut in half in 2002. Lake Henry will keep its 2002 tax levy at $13,675, despite the aid losses. The city will use reserve funds to cover any shortfall in the next year, said Deanna Welle, Lake Henry clerk.

The city of Regal adopted the same budget and levy as last year, a $8,350 budget and a $4,800 tax levy, according to Jack Kotten, city treasurer. Regal's state aid went from $2,765 to $391, a decrease of $2,374.

"If it all works out, it will be close," Kotten said. "We'll get by as our budget isn't that big," he added.

The only city to increase its 2002 tax levy was St. Martin. The council raised the levy from $31,000 to $32,500 to cover cost of living increases, said city treasurer Duane Schmitt.

The city's budget increased $5,000, going from $75,000 to $80,000, to help cover its TIF payments. St. Martin's entire industrial park is a TIF district.

St. Martin lost $3,456 in local government aid for next year.

Cities will have a better idea of the impact of the tax reform (and the accuracy of the projections) after their first state aid check arrives in March, said Schmitt.

During the 2001 legislative session, $800 million in property tax relief was passed, which reduced the Local Government Aid (LGA) and Homestead Agriculture Credit Aid (HACA) by $93 million. The tax reform eliminated HACA and revised LGA for cities.

Area townships will also be affected by the loss of HACA in 2002, but their budgets and tax levies for 2002 will not be determined until their annual meetings in March.

State Aid Changes in 2002
  2001 aid*  2002 LGA*  Difference
City of Lake Henry $9,453 $4,748 -$4,705
City of Paynesville $484,000 $577,000 +$93,000
City of Regal $2,765 $391 -$2,374
City of Roscoe $12,890 $14,183 +$1,293
City of St. Martin $26,739 $23,280 -$3,459

*2001 aid includes both Local Government Aid (LGA)and Homestead Agriculture Credit Aid (HACA).

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