The Stealth Tax: The City of Albert Lea Quietly Raises Taxes by over 60%

Would you be surprised to learn that the City of Albert Lea is increasing the amount of money paid by local property owners by over 60% in 2005? The City has quietly increased its property tax levy by over $500,000.00 and is proposing to impose new user fees of $840,000.00.

All Albert Lea residents and businesses recently received a flyer to notify them of the new Storm Water and Public Lighting Utility. As explained by the city, these "user fees" are designed to "provide a continuous, dedicated source of revenue." On December 27th, the city will be holding a public hearing to input regarding the actual rate that will be charged against each parcel of land within the city.

It is possible that if you own farmland or a vacant parcel in city limits that you did not receive the notice, as they were mailed with the water bills.

The proposal is for each parcel of land within city limits to be charged a user fee for storm water run-off and public lighting. Each residential parcel that does not exceed one acre will pay $2.95 per month or $35.40 per year for the storm water utility. Each business will pay $5.90 to 7.38 per month -- or $70.80 to $88.56 per year. If any of these parcels exceed one acre in size, the rate increases times the number of acres.

For the public lighting utility, each parcel outside of the Central Business District (regardless of size of the lot) will pay $3.85 per month or $46.20 per year. If you own property inside the Central Business District, your proposed rate is $7.70 per month or $92.40 per year.

Overall, a standard (one acre or less) residential lot will pay an additional $81.60 in annual user fees. Businesses (one acre or less) will pay anywhere from $117.00 to $134.76 per year. If you happen to have business property in the Central Business District, you will be paying user fees of $163.20 per year. This figure can be substantial if you own large tracts of land in city limits, or if you are holding vacant property for development.

The City projects that the Storm Water Utility will generate revenue of $470,000 the first year and the Public Lighting Utility will generate $370,000, for a total new revenue stream of $840,000.

As always, there is a story behind the story. Please consider the following information in determining what input, if any, you feel appropriate to give to your city council representative(s). On September 13, 2004, the City Council approved the creation of the two new public utilities. These utilities were created with Councilors Warren Amundson, Randy Erdman, Jeff Fjeslstad and Mary Kron voting yes; and Councilors Al Brooks, George Marin and Mayor Jean Eaton voting no. There was considerable discussion regarding the purpose and need for these new fees. The Watershed Board, the School District and the local Chamber of Commerce all opposed the creation of these new utilities.

Numerous citizens requested that the Council either continue to fund these projects through the property tax formula, as they had always done previously; or to delay the decision so that a thoughtful review could be conducted. No one from the public spoke in favor of the new utilities.
In regards to the storm water utility, the City Staff explained that the driving need for this utility was the possibility that the state pollution control agency would require compliance with increased maintenance efforts. If this mandate were to be placed against the City, they apparently would have 18 months to comply. As for the need for the lighting utility, it was explained that this was necessary initially to fund the new lighting to the Wal-Mart side of town.

Currently, the pollution requirements are not projected to take effect until March of 2007. If the 18-month grace period still applies, the city will have until September of 2008 before these new requirements are mandated.

The City indicated that they initially came up with the idea of the new utilities because they were under the mistaken impression that they had a "levy limit" in place. In previous years, the state legislature had imposed a limit on how much a city could increase its property tax levy. Since the legislature did not put this limit in place during last year's session, the City of Albert Lea did not have a limit to the amount it could increase its property tax levy to cover any extraordinary expenses.

Not to be deterred, and perhaps seeing a political opportunity, a split City Council voted to move forward on the creation of the new utilities. Most beneficial to the City from a public perception standpoint was that the new utilities allowed for a creative accounting shift to occur. They were able to shift $400,000 from their general fund obligation to be funded instead by the new utilities. This allowed for the City to have the friendly headline, "Levy remains about the same as 2000", in the Albert Lea Tribune. This headline itself is deceptive as the levy actually increased 25% from last year: even with the $400,000 shift of spending out of the general fund.

If you undo the accounting shift and add back the $400,000 to the general fund, the city would have increased its property tax levy by $ 945,940 or 42%. Under the new system, their actual total local revenue collection is even higher. The local increased payments from the property tax levy increase and the new utilities are an additional $1,385,940; or a whopping 61% increase from last year. The headline should have read, "City of Albert Lea increases local taxes by 61%."