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Fairmont council talks budget
FAIRMONT -- The Fairmont City Council delved into its 2021 budget during a work session on Monday. To reduce the existing 7.3 percent preliminary levy increase approved in September, the council focused on funds from the local option sales tax, the liquor store, construction of a new public works building, new automated utility meters, and closure of the lime ponds resulting from dredging deposits.
For the past three years, Fairmont has been collecting an extra half-cent sales tax, with more than $2 million currently in the coffers. A previous council committed $600,000 annually of the voter-approved tax, earmarked for recreational amenities, to the construction of a community center. As part of the deal, the city agreed to contribute $14 million for the center if the center committee raised $6 million for the project from private sources.
The budget discussion centered around use of the estimated $265,000 in excess of the $600,000 that would be collected in 2021. Council members weighed the possibility of using the excess tax money to fund repairs at the swimming pool, Amber Lake boat landing, mini-golf course expansion, or Sylvania Park trail to the band shell, all qualified projects that were set to be paid for with liquor store profits. This would free up the liquor store funds for use in other areas, such as street improvements, which could reduce the levy impact on property taxes.
Council members noted that projects financed by liquor store profits traditionally have been one-time capital improvements so any changes in this practice should not be planned for subsequent years.
The local option sales tax was imposed for 25 years or until $15 million in revenue has been generated.
Paul Hoye, city finance director, reminded the council that if the entire amount of the sales tax for its duration is designated for a community center, it would cover the city’s entire commitment. If the pledge of $600,000 annually is the limit, only $9 million would be raised, leaving the city to find another way of raising the remaining $5 million of its $14 million commitment.
Councilor Bruce Peters lobbied to use the excess tax funds in an effort to reduce the levy.
“We don’t know that they (community center committee) are going to raise any money. What’s the timeline?” he asked.
Councilor Wayne Hasek said that COVID has resulted in businesses closing or unable to sustain any additional tax burden.
“Now is not the time for a community center,” he said.
Councilor Tom Hawkins said he could only support using the excess sales tax funds in lieu of liquor store funds if the end result was increasing street improvements, not lowering the levy.
Peters and Hasek concurred with expanding street projects, and Councilor Ruth Cyphers agreed.
City Administrator Cathy Reynolds said she and Hoye would refigure the budget substituting sales tax funds for liquor store projects and using liquor store proceeds to fund additional street improvements.
In another in-depth discussion, the council wrestled with the proposed $10 million public works building.
Councilor Randy Lubenow called the project “too expensive right now,” and Hawkins wanted to vote on a resolution at the council’s Dec. 14 meeting “on what the architect would do if he only had $4.5 or $5 million.” Calling the project “a bitter pill to swallow,” Peters conceded that remodeling the existing building was not feasible.
The need for a new public works building was brought to the forefront after an unscheduled OSHA inspection in 2015 discovered numerous health and safety violations and deficiencies in the existing structure, portions of which are more than 60 years old.
Anticipating the need for a new building, the city has increased the levy the past two years to cover repayment on 15-year general obligation bonds at an estimated 3 percent interest rate, a method it would normally use to finance the public works building, and $2.4 million already has been set aside for the project. However, the city’s financial advisors indicated that 30-year bonds at 1.5 percent would be the way to go. By stretching out the payments at a lower interest rate, no additional levy increases would be needed to pay off the building bonds.
“The money is there,” Reynolds said. “Any way we look at it, we need to be putting money toward a facility. It has to keep moving forward.”
Troy Nemmers, city engineer/public works director, said the city has studied the space requirements needed for the street and park departments to operate efficiently and cost of new construction versus utilizing the existing site and remodeling.
“We’ve been evaluating the facility since 2015,” he said. “We’ve been through that process.”
The existing building, in addition to the many health and safety issues, does not serve the departments’ needs now, let alone in the future, he said. The architect for the new building, with a 60- to 70-year life span, continues to rework the design to produce the most economical building that will meet the city’s needs.
“I understand, $10 million is a big number,” he said.
“We’re going to have to do something,” Peters said. “If we’re going to do it, don’t do it half-baked.”
Turning to the public utilities budget, council members questioned the need for replacing water meters, raising the possibility of delaying the $1.6 million project.
Aging infrastructure is the driving force behind the project, Hoye said. Meters are slowing down as they get older, which results in a decline in revenue, and the batteries are starting to die in the radio-read system.
Reynolds added that the software used by the finance department to process the water bills is going out of service so a temporary patch system will need to be developed if a new automated metering system and software are not installed.
“All those pieces go together. We’ll have cost no matter what we do,” she said.
Lubenow wondered if capping the lime ponds, which resulted from sludge deposits from lake dredging, could be delayed a few years or if there were any state or federal grant funds available to help with the $4.8 million project.
Grants are not available, Nemmers said, because there are no hazardous materials at the site. The entire project, which involves hauling in up to 80,000 yards of dirt to cover the lime ponds, operates under a five-year Minnesota Pollution Control Agency permit, and he just renewed the permit.
“We’ve been working on it that long. The longer we wait, the more expensive it gets,” he said.
Fairmont residents will have a chance to voice their opinions about the budget at the truth in taxation hearing at 6 p.m. Monday in council chambers at City Hall.