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Monday, December 10, 2007

Saint Paul/ 10 Things You May Not Know About the City Budget

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Blogger Bob said...

10 Things You May Not Know About the City Budget

Op-ed by Saint Paul Finance Director Matt Smith


Saint Paul’s City budget—and the taxes and other revenues necessary to pay for it---have been in the news a lot lately. A budget—and the public discussion that goes into setting it -- is more than just a series of competing sound bites. It’s a months-long process in which the community reaffirms (and sometimes readjusts) its priorities and willingness to support them. Facts are the foundation of a good budget process; here are some things that you may not know:

1.

Saint Paul spends less per resident than many other cities. We are the state capitol and a central city with all of the extra demands for service that come along with those, but our overall spending is not high compared to many other cities around the state. The only real ‘apples to apples’ comparison of spending among Minnesota cities comes from the State Auditor. In 2005 (the most recent year reported), Saint Paul’s total spending per capita ranked 42nd out of 218 larger cities-- despite having the 5th highest police and ambulance spending and the 3rd highest fire department spending, and supporting extensive City-operated park and library systems.

2.

Inflation is by far the single biggest reason for spending growth from one year to the next. The budget has to grow each year even if we provide exactly the same level of service to the public—because most of the things we provide simply cost more. The total energy bill for the City (including electricity for the streetlight system at over $1 million a year) increased 30 percent between 2003 and 2006. Even though we contract for bulk purchases to get the best price possible, gasoline is up a dollar a gallon since 2003—and we buy over 670,000 gallons a year. And simply paying City employees a cost-of-living wage increase adds up to a lot of new dollars each year. In the 2008 budget, a projected 2.5 percent cost of living increase in the police and fire departments alone adds over $3 million to wage costs next year.

3.

Most spending growth has been—and will be—in public safety. Two-thirds of the City’s general fund budget is spent in the police and fire departments, and 80 percent of that budget is attributable to personnel costs (wages, payroll taxes, and employee benefits). Since 2004, budgeted spending for police, fire, and criminal prosecution has grown at more than 5 percent annually. All other spending grew less than 1 percent per year. In the proposed 2008 budget, combined police and fire spending will increase $8.4 million. Aside from inflation, the major reason why the budget will go up next year is to add 13 additional police officers and replace patrol cars, some of which are 6 years old.

4.

The tax levy is the total amount of tax we budget to collect in a year---and there’s no automatic inflation built into it. The property tax levy is set each year as a part of the overall City budget, and is the only part of the property tax over which the City has any direct control. It is simply the total amount of property taxes required to help pay for the City budget in the next year. The County then uses that figure---along with the total property taxes to be ‘levied’ by Ramsey County, the Saint Paul Public Schools, other entities like the Met Council and local watershed districts, and even the State itself—to come up with a total property tax rate for homeowners and businesses in the city. A growing tax base due to rising property values or new construction in the city (and there’s been a lot of both) does nothing to change total property tax collections—it only pushes down the tax rate. Tax base growth can be captured to help the budget only if the City increases its tax levy.

5.

The City’s total tax collections have increased only slightly since 1994, and both our tax rate and tax ranking among metro cities have continued to drop. Between 1994 and 2005, the City of Saint Paul actually had a decline in its total levy (i.e., the total amount of property taxes collected to help pay for the City budget actually was lower in 2005 than it was in 1994). In the past two years total City tax collections have increased, but today they are only 7.5 percent higher than they were back in 1994 in ‘nominal’ (ignoring inflation) dollars. Even with levy increases in 2006 and 2007, and an increase proposed for 2008, Saint Paul’s city tax rate has continued to decline because of strong tax base growth. In the most recent Citizens’ League ranking, Saint Paul City taxes ranked 73rd among metro area cities.

6.

The total City property tax collections for a year don’t even pay for the police department. This year’s total budget for the Saint Paul police department is about $81 million. The total property tax levy for City operations this year is $70 million. Even if we spent every nickel of property taxes on police, it would only be enough to operate the department through mid-October. Everything else we do---the fire department, the parks, the libraries, inspections, code enforcement---would have to rely on fees and other charges and whatever financial assistance we get from the state and federal governments.

7.

The City’s property tax levy is only a minor part of property taxes paid in Saint Paul. Less than 1 in 4 dollars paid by Saint Paul property tax payers goes to the City budget. The total combined amount of property taxes levied by the City, County, and School District on properties located in Saint Paul during 2007 is about $282 million. The City’s share is $77 million. If the City increases its tax collections by $5 million in 2008, this will represent less than a 2 percent increase in the total amount of taxes collected in Saint Paul next year. A $10 million increase would be less than 4 percent. For comparison, the total increase in local taxes levied on Saint Paul taxpayers was $30.5 million in 2007 (the City got $5.9 million) and $24.2 million in 2006 (the City received $1.9 million).

8.

Our financial management gets good grades. Outside reviewers tell us we’re managing carefully and well. In recent years we’ve maintained our AAA credit rating and received a ‘strong’ financial management rating from Standard and Poors—putting us among the top 15 percent of cities nationally. Closer to home, we are reviewed each year by the State Auditor, and for the past 30 years they’ve reported an ‘unqualified’ opinion on our financial statements—the affirmation of accuracy.

9.

All money isn’t really the same. The simplest way to balance a budget in any single year is just to find enough money somewhere, somehow to pay the bills for that year. The problem comes when the money used to pay ongoing expenses—like salaries and utility bills---comes from a one-time source like a reserve fund or postponing a major purchase. It will work for one year, or maybe two, but then the money runs out and the expense is still there. The City did a lot of that over the past few years—first to keep the tax levy from growing at all, and then to cope with State cuts. So the ‘structural’ gap in the budget continued to mount. Mayor Coleman’s 2007 budget helped us take a big step toward restoring a ‘structural’ balance to the budget—where inflows are equal to outflows each year. It cut the use of one-time budget fixes in half, moving us toward a goal of balanced revenue and spending growth by 2010. Until we get there, permanent revenues will have to grow faster, and spending will have to grow slower. This means tougher budget choices in the short run, but is the only way to get us out of annual budget crises in the long run.

10.

The property tax levy is our only major source of reliable revenue—unless the State steps back up to the plate. The vast majority (63 percent this year) of our general fund revenue comes from a combination of State Local Government aid (LGA) and property taxes. Before 2003, LGA was dependable and grew with inflation, helping keep the City’s tax levy low. Since 2003, LGA has been cut by 25 percent, costing us $108 million through the 2008 budget year. Over the long run, the reliable revenue to fund the City’s budget has to come from either the local property tax levy being increased by the City, or by LGA being restored as a dependable and growing revenue source by the State. (Or, if the revenue isn’t there, then spending has to be cut—but recall points 3 and 6 above.) Mayor Coleman’s 2008 budget plan lays out the alternatives plainly: If the State helps by passing LGA at least at the level envisioned by last spring’s vetoed tax bill, then property taxes will grow more slowly and more services can be maintained and improved here next year. If the State doesn’t help, then property taxes will be higher and spending (and services) will be diminished. The arithmetic of the budget isn’t any more complicated than that.

7:08 PM  
Anonymous Anonymous said...

We the tax payer just don't make the same money as city workers.
The city council and the mayor keep giving themselves a pay raise and think that is ok with the tax payers. The rest of the city people has to scrounge to just pay their bill's, but the 7 council people can shot our toe's off just
so they can but their new cars and fix up their homes with new this and new that to keep up to the Jones'.
We need to protest and shut down city hall 4 weeks a year without pay to these people that can dictate that they need more money.
Then stop the code enforcement people from driving around all day setting on their butts and picking on the poor and elderly of this fine town to make more of them homeless.
The city has contracts with the Dorothy Day Center to put people up for the night, they could put these people in a motel for about the me cost.
At the Dorothy Day Center the people sleep on the floor on mats.
The over spending by the city is getting out of hand.

5:05 AM  
Blogger John Krenik said...

Hi All,

I attended the Truth in Taxation meeting at Arlington High School last night. The auditorium was filled with people concerned about their taxes going up so high, so fast.

We heard from Ramsey County, mayor Chris Coleman and city council member Kathy Lantry as to why our taxes need to go up 14.9% in St. Paul and 5% for Ramsey County.

First off, I have to commend Superintendent Dr. Carstarphen and the St. Paul School Board for their hard work in controlling their budget. The school board is only increasing their budget by 3.7%. This 3% increase is at or near the rate our economy is growing. I talked to several school board members after the meeting and I was told that this figure could change and be lower. I was told that they were still working out the details. I find this news WONDERFUL as the school board is actually doing their job!

Just a note here, the budget for St. Paul Public Schools is $597.4 million. The budget for Ramsey County is $566.9 million and the city of St. Paul is $196 million. Of the three taxing bodies, the yearly salaries for St. Paul School Board, Ramsey County and St. Paul, the School Board members are at $10, 800.00, City Council Member, $49,000.00 and Ramsey County Commissioners make $63,948.00 (Note: Next year the Ramsey County Commissioners will make 25% more as they just voted themselves a raise). So this begs the question, what is St. Paul Public Schools doing right that the City of St. Paul and Ramsey County can learn from them? The school board members are the least paid, but they are the most frugal with taxpayer’s money with only a 3 to 4% increase in taxes.

Now, comments on the budget for the city of St. Paul. This maybe the first shot in the 2009 mayoral race.

The city of St. Paul is raising their 2008 budget by $17 million over the 2007 budget. The really troubling thing that is concerning me about this is the actions by our mayor, Chris Coleman. In crafting his budget for last year (2007), Coleman knew full well that LGA was being cut as part of the regularly scheduled implementation of the 2003 LGA reform (http://www.house.leg.state.mn.us/hrd/issinfo/histlga.htm). Mayor Coleman’s 2007 budget did not address the planned reduction in state LGA (2003 LGS reforms) in his 2007 budget. When there was a deficit last year, Coleman cites the governor as the problem, but the real problem is Coleman build a budget on something he knew was not going to be there in the first place (2003 planned LGA reforms). Instead of building a budget that reflected actual money coming into the city, his budget was build on something he and the city knew they were not going to get. Then Coleman blames the governor. It is like you or I developing our budget based on money we knew we are not going to get and then asking the government to help us out, for our budget was build on funny numbers. The new 2008 budget for St. Paul is a whole $17 million increase on top of a 2007 budget that was build on false pretences. This type of budgeting would not he tolerated in the business world as they do not have taxing authority like the city does. The mayor is responsible for the budget of his city and building a budget on income that he knew was not there is simply irresponsible.

At the meeting last night Chris Coleman and Kathy Lantry attacked us with their verbal terrorism rhetoric line, closing libraries and recreation centers. The audience in attendance was clearly not buying their scare tactics. The citizens told real stories of how these high taxes are effecting their lives. Several business owners talked about the high taxes and their effect on their businesses. These were real people who presented real concerns. The public has had enough with the progressive tax increases and now these tax increases are taking away food from their table.

The people in attendance at the Truth in Taxation meeting were angry, hopefully today when the St. Paul City Council votes on their budget they will take to heart the comments that the citizens made last night.

As a side note, only one city council member, Jay Bennanav was absent from the Truth in Taxation meeting. How ironic this was, one of the most progressive members of the city council was absent from this important meeting. I think it would have been good for Mr. Bennanav to hear these citizens’ comments before he votes today to raise our property taxes by 14.9%.

Have a nice day.

John Krenik

12:15 PM  
Blogger Sharon Anderson said...

This comment has been removed by the author.

2:09 PM  
Blogger Bob said...

Click here for more on the meeting John spoke of

4:49 AM  
Blogger John Krenik said...

News Flash: St. Paul City Council increased your property tax by 15.1%.

In the past, some of these same city council members have complained that taxes had not been raised for over several years and this was fiscally irresponsible. Some of the loudest critics of this 0% tax increase policy were sitting on the city council at the time they approved this 0% tax increase. At the time they were hailed as holding the line on spending, but now when one of them becomes Mayor (Chris Coleman) he changes his tune and say it was the worst thing ever. If it was so bad then why did mayor Coleman vote for it?

I hold mayor Coleman and the five members of the city council who voted for this tax increase responsible for taking the food off the tables of many St. Paul residents. I am not sure how the mayor and these five city council members can sleep at night after what they have just done to the citizens of St. Paul.

8:04 AM  

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