2022 Proposed Budget & Tax Levy
How does the budget process work?
By the end of September each year, Minnesota cities must adopt a preliminary tax levy for the following year’s budget. Counties use these preliminary levies when calculating the property tax estimates that are mailed to residents in mid to late November. The notice property owners receive reflects the impacts of the preliminary levies of the city, county, school district and other special taxing districts combined. This process allows residents an opportunity to provide feedback to their elected and appointed representatives on the upcoming year’s budget and tax levy before they are finalized.
Elected and appointed city officials have continued to refine the city’s 2022 budget and tax levy since the preliminary levy was adopted, so for Inver Grove Heights the actual property taxes for 2022 will be less than projected in the notices recently mailed. Scroll down for information about what services are funded by your property taxes, how the preliminary 2022 levy will be reduced and how to share your input with elected and appointed officials.
How was the 2022 proposed budget developed?
The city budget was developed by the finance director and presentations to City Council in a series of meetings this year. Click the 2021 meeting links below for meeting agenda and materials:
How can I participate in the process now?
Each taxing jurisdiction (city, county, school) sets a specific meeting where more formal public input on the budget and tax levy can be received. The date, time and locations of these meetings are included on your property tax notice.
The City of Inver Grove Heights will host its public 2022 budget meeting on December 13, 2021, at 6:00 p.m. in Council Chambers, in conjunction with the regularly scheduled City Council meeting.
Residents are invited to attend this public meeting or send questions or comments via email to Finance Director Amy Hove at email@example.com.
Preliminary Tax Levy - September
The preliminary tax levy, adopted in September, sets the maximum amount a city can collect from property taxes in the following year. Cities have an opportunity to reduce this amount between September and December when the final tax levy is adopted, and that is what Inver Grove Heights is planning to do.
- At the September 13, 2021 meeting, City Council set a preliminary tax levy of $28,667,876 for 2022. This reflects a $2.5 million increase (9.7%) over the previous year’s levy and includes increases to the General Fund budget and the Pavement Management Program. Under this levy, the city’s rate was estimated to increase by 3.98% and, therefore, city taxes on a median residential property (with an estimated value of $257,500 in 2021 and $275,000 in 2022) would increase by approximately $140 for 2022:
Reductions Since the Prelimary Levy - November
Since September, the city has been working to identify opportunities to reduce the 2022 budget and corresponding tax levy. A final budget work session took place December 6, 2021. At present, the levy increase has been lowered to just over $2 million, which represents an 8% increase over the previous year’s levy, instead of the 9.7% increase proposed in September. Under this levy, the city’s tax rate is estimated to increase by 2.11% and, therefore, city taxes on a median residential property (with an estimated value of $257,500 in 2021 and $275,000 in 2022) would increase by approximately $116 for 2022.
Proposed Tax Levy for Consideration at December 13 Council Meeting
At the December 6 work session, City Council considered additional reductions to the 2022 budget and tax levy. In total, the city has made $682,490 in reductions since setting the preliminary levy back in September. The revised levy of $27,985,386 represents an increase of $1,862,028, or 7.1% over last year’s levy.
The following is a historical representation of the city’s tax rate in recent years. Between 2018 and 2021, the city tax rate has averaged 51.569%. Based on the proposed latest draft of the budget, the city’s tax rate is estimated at 51.661% for 2022:
Council will be asked to adopt a final levy at the December 13, 2021 Council Meeting following any public testimony.
What is included in the 2022 proposed tax levy?
(1) GENERAL FUND LEVY
The city’s General Fund covers a wide range of city activities including Police, Fire, Public Works, Community Development, Parks, Communications, Technology, Finance, and Administration. The following chart shows the percentage of general fund spending devoted to each category:
Property tax revenues are the primary source of general fund revenue for the City of Inver Grove Heights (and most other Minnesota cities), making up approximately 80% of our general fund revenue. Other sources of revenue include permits, fees, fines, and intergovernmental grants.
Several of the city’s other services and programs are operated outside of the general fund and paid for with user fees or other non-tax revenue sources. These include the water and sewer utilities, golf courses and community center.
Personnel costs make up the primary increases to the 2022 General Fund budget. Approximately 66% of the city’s general fund budget is devoted to wages and benefits paid to the people who provide our essential government services. As an employer, the city must address the same labor market conditions and rising health insurance costs that other employers experience. In 2022, the increase to personnel costs is higher than average due to the addition of new positions previously deferred in past year budgets. To meet the needs of our growing city, the 2022 budget includes funding for three new police officers plus one of each of the following positions: Building Inspector, Mechanic, Deputy City Clerk, Assistant Finance Director and Building Maintenance Technician.
The SAFER Grant: The General Fund preliminary levy adopted in September also included funding for additional full-time staff in the Fire Department to support and enhance response times. However, in October, the city was fortunate to receive a $3.4 million Staffing for Adequate Fire and Emergency Response (SAFER) grant award from FEMA. This grant covers all personnel costs, both wages and benefits, for three years to allow the city to hire 9 new firefighters. The 2022 budget and preliminary tax levy had included $359,400 towards the hiring of three new fire department staff, but with the grant award there is no longer an immediate need for this funding in 2022. However, the city recognizes the need to plan for how it will pay for these positions in 2025 when the grant dollars end.
At both its October and November work sessions, the City Council considered “SAFER Savings Plan” options that would allow the city to gradually save dollars in each of the next three years to help bridge budget/tax levy needs once the grant expires and the city needs to pick up the full cost of these new personnel. The selected option will allow the city to set aside money now, during the time period of the grant, to avoid a dramatic impact on the levy down the road when the grant expires.
(2) PAVEMENT MANAGEMENT LEVY
In recent years, the City Council has made a dedicated effort to enhance funding for the city’s Pavement Management Program (PMP). In addition to the approval of a citywide franchise tax in 2018 (collected through electric and gas providers), the city has steadily been increasing the tax levy funding for this program each year.
(3) DEBT LEVY
The third and final component of the city’s property tax levy is the debt service levy. These funds are used to make the annual payments (principal and interest) on money the city borrowed to fund infrastructure investments and city facilities. In 2022, the city will need to collect approximately $2.7 million to make debt service payments. Of this approximately $925,000 is devoted to the principal and interest payments on the new Fire Station #2 and the remainder is for street projects completed in recent years.