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Pequot Lakes opts for three-year phase-in to equalize property taxes

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When the city of Pequot Lakes and Sibley Township merged in 2002, two taxing districts resulted with one district paying about half the city portion of property tax as the other.

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By 2016, all Pequot Lakes taxpayers will pay a fair share of city property taxes for equal properties.

The Pequot Lakes City Council voted 3-2 Tuesday, Aug. 6, to phase in city tax rate changes over three years, starting in 2014, to make property taxes more equal among urban and rural residents.

(See accompanying information on page 6 on how the decision is projected to affect the city portion of Pequot Lakes residents’ property taxes or go to the city’s website at www.pequotlakes-mn.gov.)

Council members Scott Pederson and Jerry Akerson favored a six-year phase-in to equalize property taxes. A vote on that length of time failed 3-2, with council members Dave Sjoblad and Tyler Gardner along with mayor Nancy Adams opposed.

Adams, the last to vote, said “no” after hesitating.

“I was going for three (years). I would compromise because I want this accomplished,” she said before the vote for the six-year phase-in. “I think it’s important for all of us to stand and say this is important for the people of our city. I would go either way. We need a decision.”

Pederson thought the six-year phase-in would be better received by former township residents who opposed the tax increase. City residents received a tax savings after the merger because their property values increased, and an increase in taxes was less than in years before the merger, he said.

The commercial district had a six-year phase-in of city property taxes after the merger. A six-year tax phase-in was the original intent of the merger, Pederson said.

Sjoblad stood by the three-year agreement.

“I’m not against what Scott says, but I think it needs to happen faster,” he said.

Gardner agreed.

“We can’t change history, but it has been 11 years,” he said. “The six years have come and gone. I think three years is fair for the pocketbook.

“No matter which way we go, I think the majority of people will be upset one way or another,” Gardner said.

Before any votes were taken, each council member shared thoughts on the controversial issue.

Gardner, the only council member who lives in the former city limits, said he’d kicked the issue around in every direction.

“Well, I put myself in everybody’s shoes and I’m sticking with I don’t want to do it in any less than three years, so we don’t burden anyone,” he said.

Sjoblad agreed.

“People from the old city have been paying and people from Sibley Township have benefited from that,” he said.

Akerson raised another question: What if reverse annexation occurred and the former township split from the city?

“If we lose 50 percent of Sibley Township, what have we gained?” he asked, saying he didn’t want to cast a vote until this was considered.

Pederson, saying his comments were based on fact and not emotion, said the decision to merge the city and township was very calculated.

“There were savings to the residents of Pequot Lakes on their properties after the merger. And that’s a fact,” he said.

Looking at the big picture, when the costs to run and maintain the city are spread out over more residential and commercial properties, it helps ensure lower property taxes to all in the future, Pederson said. And lower taxes may encourage development, which would provide a larger base, which in turn helps keep everyone’s taxes lower.

“We’re one city and I’m really, really disheartened when I hear people call one side of the city ‘the real Pequot Lakes,’” Pederson said. “We can really and truly only benefit by working together.”

The original merger agreement specified a six-year transition in the commercial district, so that’s what he supported with the urban and rural tax districts.

Adams said the city council’s job is to balance the needs and wants of the community to ensure a fair and equal outcome as much as possible. All residents benefit to different degrees from different city services, so it was necessary to equalize taxes.

“It won’t double rural taxes. That’s flat out wrong,” she said, urging people to study the Springsted report on the effect on city taxes. “It won’t bring more money to the city, either. Nor will it change the rural atmosphere. It’s just equalizing the taxes. So how we do it in a manner reasonable to everyone?”

People have budgets and need time to plan for changes in that budget, Adams added, so the struggle is in the timing.

“Residents are pushing for instant change,” she said. “How would it affect you if it was the other way around?

“For those saying this should have been looked at earlier, history can’t be changed or updated. We can only deal with the issue in front of us today and decide what is best for the city going forward.”

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