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PEQUOT LAKES — The Pequot Lakes City Council voted 4-1 Tuesday, Sept. 6, to set the 2023 preliminary tax levy at $2,251,135, which is 50% of the projected 2023 net tax capacity of $4,502,269.
Council members agreed they’ll work to lower the tax levy number before final adoption in December. State statute allows municipalities to use only a portion of their tax capacity.
Mayor Tyler Gardner was opposed, only because he wanted a lower preliminary levy number of $2.1 million.
The 2022 net tax capacity was $3,582,254, and the tax levy was $1,853,757. The 2023 preliminary tax levy is nearly $400,000 more than this year’s levy.
The higher projected net tax capacity is due to the large jump in property values in the city.
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“Valuation numbers are not decided by the city,” City Administrator Rich Spiczka said in an email. “Basically, if our tax rate was flat and we never changed it, but the valuation of our properties increases - which creates a higher net tax capacity, like this year - the budget would increase solely on that.”
Counties determine residents' and businesses' property values.
The city tax rate in 2022 was 51.7483%.
Cities must set their preliminary tax levies by Sept. 30. Cities can lower the preliminary levy before final adoption in December, but cannot raise it. Cities won’t receive tax rate information from Crow Wing County until October or November, so preliminary tax statements residents receive will be based on a preliminary tax levy number that could be reduced.
“Our tax capacity is skyrocketing for 2023,” Gardner said, noting the adopted preliminary levy would mean a $166 per person increase in city property taxes, which he didn’t like.
Spiczka said the preliminary increase would be roughly a $450 hike on a $300,000 house.
Gardner preferred a preliminary levy of $2.1 million, which is roughly a $250,000 increase over this year’s tax levy and roughly 46% of the projected 2023 tax capacity.
The council had set a 50% net tax capacity goal, which satisfied other council members for now.
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The lower the council sets the numbers, the less options the city has, Spiczka said, noting it’s highly unlikely the preliminary levy number won’t be reduced before December.
The tax capacity growth over three years is aggressive, and it happened in one year, Spiczka said.
In two years the city has dropped its tax rate 5%, council member Scott Pederson said.
Spiczka said the original budget of $1.945 million contained no capital improvement projects, which isn’t reality because the city has capital improvements that must be done.
Specifically, the city needs approximately $15 million for projects in the next seven years, including for Main and Front streets; a force main; Ninth Avenue; park projects; Akerson, Nelson and Wild Acres roads; Brunes Street; Coleman Drive; equipment, etc.
Gardner suggested looking at amenities and services that perhaps aren’t necessary, and he asked for hard discussions.
“I think we should start at the 50 (percent of the projected 2023 tax capacity ) and whittle from there," council member Pete Clement said.
“This is where it starts,” Pederson said of the preliminary tax levy adoption, noting Minnesota is a weird state because cities have to set preliminary levies before counties let them know what their incomes are.
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The council will have its final levy meeting at 6 p.m. Monday, Dec. 5, its regular monthly meeting night.
Nancy Vogt, editor, may be reached at 218-855-5877 or nancy.vogt@pineandlakes.com . Follow her on Facebook and on Twitter at www.twitter.com/@PEJ_Nancy.
