By Lori Carlson, Editor
Simply slashing spending or raising taxes isn’t enough of a budgetary solution for Prior Lake Mayor Jack Haugen, who on Monday urged fellow councilmen and city staffers to consider creative ways to solve a $900,000 budget crunch.

“I don’t think it takes any skill or leadership to cut,” Haugen said during a workshop on the 2010 budget. “What takes skill and leadership is creating solutions that continue to enhance people’s quality of life.”

One way or the other, though, the city will have to make up for a loss of $900,000 in its budget for 2010. Council members already have approved $700,000 in cuts to the current year’s budget, and many of those cuts will continue in 2010, said Finance Director Jerilyn Erickson.

“If we cannot either raise taxes or find new nontax revenue, it’s going to be a continual struggle of trying to cut from the budget,” Erickson said.

“We’re going to be chasing our tail in 2011, with levy limit caps,” City Manager Frank Boyles added.

Erickson and Boyles suggested a potential 1.75-percent increase in the property-tax levy for capital purposes and a 1.25-percent increase in the operating levy for 2010, but the city’s leaders could decide to go higher. The maximum increase allowed by levy limits is 7 percent.

Increasing taxes now would help the city to maintain its flexibility in dealing with levy limits down the road, Erickson said.

A 2-percent increase on city property tax bills would amount to a $22-per-year increase for the owner of a $300,000 home, Boyles said. If the city raised taxes by 2 percent, the increase would bring in about $200,000, still leaving the city with $700,000 to cut.

To make up for that $700,000, Erickson has proposed:

* $150,000 in reductions by department (those continued from 2009’s cuts);
* $165,000 in personnel cost savings (zero-percent cost-of-living, or COLA, increase and no steps or equivalents);
* $50,000 in deferred funding for the city’s compensated leave fund;
* $30,000 decrease in the city’s contribution to the Fire Relief Association, which provides pensions to firefighters;
* $100,000 in overhead-related reductions (continued from 2009 cuts); and
* $105,000 in revenue increases and spending reductions for city services.

Haugen pointed out that the budget gap is not all attributable to spending increases but rather includes “demands on property taxes” such as about $200,000 in declining building-permit revenue.

“Nobody’s moving into town, and no buildings are being built. That’s the crunch we’re in. More tax capacity would open up room to expand our operating budget,” Councilman Ken Hedberg added.

Another $350,000 is due to personnel costs; $160,000 comes from increased debt-service costs; $130,000 is for allocations to the Fire Relief Association; and $50,000 is for the city’s compensation leave fund.

In addition to considering cuts and tax increases, city leaders are looking for ways to bring in new revenue. Among the proposed actions: Expanding rentals of boat slips and park shelters; selling property; increasing lease amounts; and selling ads in city publications. The city also could start selling ad banners at athletic fields; currently, nonprofit groups sell the ads to area businesses for banners on outfield fences.

The city also will look to contain personnel costs by talking to employee union representatives about their contracts and meeting with nonunion employees.

Contracts with service providers – for items like maintenance uniforms, mechanical repair, attorney services, waste hauling and supplies – also will be revisited, Boyles said.

In addition, the city is taking a look at costs associated with providing services such as field maintenance at ballparks and setup for the annual Lakefront Days celebration. Haugen also suggested running figures on buses operated by the city’s summer Local Laker Link, which he says are “97- or 98-percent empty” on most days.

Haugen said he doesn’t think the public is aware of the impact of Gov. Tim Pawlenty’s budget unallotment.

Taxpayers need to know that 2.3 percent of the city’s budget losses in 2009 “are directly attributable to the governor’s unallotment,” Haugen said.

“The public is not aware of it because we haven’t made any service adjustments,” Erickson responded. “The public’s not going to feel the pain unless services are changed. I don’t know how we’re going to get by if we don’t make some changes to services. We can’t hit employees with a zero COLA increase for five years in a row.

“We can’t just look at 2010,” Erickson continued. “We need to be looking five years down the road.”

Lori Carlson can be reached at (952) 345-6378 or editor@plamerican.com.