The Prior Lake City Council discussed a proposed preliminary tax levy of $14.4 million — a 5.67% or roughly $771,000 increase compared to last year — at its Sept. 8 work session.
The levy would bring the city’s annual budget to about $34.9 million.
City staff proposed a 5.12% levy and the Prior Lake Economic Development Authority requested an increase of $75,000 in its tax levy, leading to an additional 0.55% increase in the overall levy.
City Finance Director Cathy Erickson explained to the council that the change in the 2021 tax levy can be attributed to the EDA’s requested levy increase; an increase to support the Capital Improvement Program; and costs related to personnel and staffing.
The average change in the annual tax levy since 2011 has been about 3.83%, according to Erickson.
Measures were taken by city staff to minimize the impact of the 2021 tax levy such as evaluating the city’s use of IT staff; going to market for the city’s annual health insurance renewal; and using reserve funds to cover some of the one-time revenue reductions such as the Shakopee Mdewakanton Sioux Community police aid budget reduction.
While the city incurred costs for personal protective equipment, retrofits to the city building, cleaning costs and more due to COVID-19, CARES Act funding covered these expenses leaving really no impact on the upcoming year’s tax levy, City Manager Jason Wedel said.
“As a city COVID hasn’t really had an impact on our budget negatively and for 2021 we’re not anticipating any additional new expenses that I would say are COVID related,” he said. “It’s more continuing operations of our day-to-day business.”
For residents, the 5.67% levy does not mean they will see a significant raise in their property taxes. The levy increases the city budget, but the city tax rate, or rate at which taxes are applied against a property, will go down and has decreased over the past several years.
“We’ve added 140-something homes this year, commercial businesses, so that budget is now being spread out over more properties,” Wedel said. “The actual tax rate is going down.”
Erickson presented a chart during the meeting which showed the impact of the tax levy on residents based on the market value of their home.
If a $366,000 home — the average value of a home in Prior Lake — doesn’t increase more than 5% in value during the year, the individual will see a decrease in their property taxes of about $16.
“Based on information we received from the county, 37% of our residents are going to fall in that category and then we have another 41% of our residents who are going to fall in the 5% to 10% increase in market value, so for those folks they will see a very minimal increase in their property taxes,” Wedel said. “That means 78% of our residents are going to see a decrease or a very minimal increase.”
Councilmember Annette Thompson said her only concern with the budget would be its effect on those who are financially struggling due to the pandemic.
“I think it’s really tight, I think it’s super good, I think it’s super reasonable. You’re not asking for anything that we don’t need,” Thompson said. “But my concern would be the current high level of unemployment in our community and how that affects people’s pocketbooks and there are struggling small businesses that are struggling and collapsing. It’s been a really tough year for income and expenditures and businesses and the unemployment rate. Hopefully we’ll see that improve sooner rather than later but that’s my concern in a year like this.”
The council will vote on the preliminary levy at its Sept. 21 meeting. Two motions will be brought before the council — one for the 5.12% levy and one for the EDA’s 0.55% levy.