2012 Budget and Tax Levy

The City of Grand Rapids, like all cities in Minnesota, has been faced with unique challenges in the past few years. The commitment by the State to offer local government aid and the homestead credit as property tax relief mechanisms has been dramatically reduced. Because of this, by the end of 2009 the City of Grand Rapids had lost over $1,000,000 in annual revenues since 2008.

The City could have taken three distinct courses of action in dealing with the budget crisis we were faced with. We could have made marginal cuts to the budget that would have been more temporary in nature and had no real impact on our long term operating budgets (for example, deferring capital purchases and making marginal changes to employee salaries). Conversely, we could have simply increased taxes to replace the lost revenue from the State.

To the City Council it was clear that a longer term approach was necessary. Our focus needed to be significant, long-term expenditure reductions. By retooling our departments with new technology we were able to reduce our total workforce by more than 10%. The result was a reduction to the base budget by more than $1,100,000. Let me reiterate, we are spending $1,100,000 less per year than we would have been if we had not changed how we do things. This was made possible by the extraordinary effort of the City Council and the City employees.

We have sustained this lower operating budget for two years and our preliminary 2012 budget continues to maintain this lower base. The preliminary levy mandated to set in September is higher than last year. This is typically done on purpose to allow for some unforeseen emergency during our budget planning process, and the levy is then lowered prior to final approval in December. This year’s proposed increase to the debt levy goes toward the street projects currently under construction and for capital equipment purchases. These capital equipment purchases are part of an ongoing plan to upgrade the technology we use so we can keep ongoing costs lower. In essence we use short term capital funds to drive down long term expenses. We are working on finalizing the operating budgets with the goal of offsetting the increase in the debt levy with further decreases in the operating levy.

One of most impressive stories to come out of this situation is in Public Works. The Public Works Department spent nearly $300,000 less this year than it did four years ago. In those four years some of the largest areas of the former Grand Rapids Township were annexed into the city. In inflation adjusted dollars, the Public Works Department is spending the same amount as in 2001. In this ten-year period the population increased by 40% and the geographic area of the City has increased by nearly 100%. Public Works Director Jeff Davies and the staff in the Public Works Department have managed to provide service to over 3000 more people and over 40 more miles of streets with less money and fewer employees.

Another example of doing more with less comes from our police department. This department has left two patrol officer positions and one administrative position vacant and yet they continue to find ways to provide police coverage to a city that is now larger and has more people.

The fire department has made changes to allow for a reduction in administrative costs. Our three core services Police, Fire and Public Works account for about 80% of our operating budget and Police Chief Jim Denny; Fire Chief Steve Flaherty; and Public Works Director Jeff Davies understand the unique times we are in and have stepped up to find ways to significantly reduce costs without a noticeable reduction in service.

The City received notice from our health insurance carrier a few weeks ago that our premiums will go down by 2.8% in 2012. Prior to the implementation of the high deductible plan and the employee wellness program, we were experiencing average annual premium increases of 11%. Because these premium adjustments are based on utilization, we attribute a large part of this reduced cost to a wellness program that helps our employees get healthy and stay healthy.

Between 2002 and 2011 the tax rate for the city of Grand Rapids has decreased by 18.98%. It is the goal of this City Council to keep the tax rate on a downward trend and decrease it by at least another 10% in five years. However, the recent Minnesota State budget passed by the Legislature in special session removed $260,000,000 of property tax relief from the statewide system by changing the Homestead Credit to the Homestead Exclusion. The result for Grand Rapids will be a 4.7% tax rate on top of whatever tax rate the City sets.

We are working with our neighboring communities for opportunities to collaborate and lower our overhead costs. We will continue to work toward more collaboration with other government organizations like the Public Utilities to reduce duplication and cost. The City Council has directed me to find any and all ways to reduce duplication and increase efficiency in all City departments, agencies and affiliated operations. This means that there are no sacred cows. We are wiping the slate clean and rethinking how we deliver service to the citizens of Grand Rapids. These are unprecedented economic times which call for unprecedented innovation from your local government. That is exactly what we are doing.