WILLMAR -- Mayor Les Heitke is cautioning Willmar City Council members to consider how the state's budget deficit may affect funding for local programs.
"What we do locally and how to pay for it always has to be looked at in terms of what we might be burdened with from the state,'' says Heitke.
The mayor offered his comment Monday evening to the council's Finance Committee as the committee began preliminary discussion of ideas to raise additional revenue to finance and accelerate the city's street reconstruction program.
No decisions were reached.
One of those ideas might be issuance of a larger bond.
The idea is supported by council member Doug Reese as a way to speed up street reconstruction. Reese and the Public Works/Safety Committee, which he chairs, asked the Finance Committee and Finance Department to investigate the feasibility of issuing bonds for street repairs.
City Administrator Michael Schmit told the Finance Committee that the city bonds every year for street improvements. Some years those bonds are relatively small and in other years the bonds are larger.
"A lot depends on what other resources are available and how we can tie it all together to come up with a reasonable program,'' said Schmit. Those resources include interest earnings from the community investment fund, state aid and assessments against owners of property located on rebuilt streets.
"Clearly, we can sell more bonds to rebuild more streets, but we have to pay that money back,'' said Schmit. "You are borrowing money and you have to pay it back and the only way to pay back these increased bonds is by raising property taxes.''
Heitke said Willmar "dodged a bullet'' in December when Gov. Tim Pawlenty did not unallot any more Local Government Aid to cities, as he did in late 2008 with a cut of $316,537 and a reduction of $269,043 in mid-2009 to help balance the state's budget.
Unallotment is the executive branch power to reduce expenditures to prevent an anticipated budget deficit.
"We have no idea what they're going to do in 2010 in June or December or June and November of 2011,'' Heitke told the committee. "They could easily cut into LGA or unallot. We just don't know. We always have to be ready to understand what the state's going to do to us before we start raising property taxes locally. We may have to raise property taxes if we lose the funding from the state.''
Schmit said the Engineering Department is nearly finished with an analysis of street conditions and future street reconstruction needs. After council members see the analysis, they will better understand what is needed and then can discuss specific amounts.
Finance Committee Chairman Denis Anderson said he hoped other funding alternatives might be available. He said the committee is "in a holding pattern'' until the analysis is completed.
"What's killing us is lack of interest earnings'' on the community investment fund, said Schmit.
To keep a program going, the city should give serious consideration to finding a way to implement another local option sales tax, said Schmit. The tax was first used to expand the library and the second tax is funding a variety of projects.
Schmit said the first tax ended after the library project was completed and he said the second tax will also "sunset.''
"I think people have some confidence in the city's ability to keep its word and sunset these taxes when the need is met,'' he said. "I think they would be much more receptive to considering that now, and to us that's the only way -- with no interest earnings -- to accelerate and sustain a good program.''
Committee member Ron Christianson said a local option sales tax "is an ideal way for sustainability'' and he said improved construction standards mean streets will last longer.