TOWER— The city council here, on Monday, voted to keep the city’s levy the same for 2021. The council, following a budget presentation by clerk-treasurer Victoria Ranua, approved a preliminary levy of $394,791 for next year. That’s unchanged from 2020.
And council members plan to hold a number of budget working sessions in the coming weeks in hopes of finding budget cuts that would allow them to possibly reduce the city’s levy when they finalize it in December. If so, that would be the first actual levy reduction in the city in many years.
The decision comes despite the fact that the city has faced considerable financial difficulty in recent years. But Ranua told the council that some of the city’s financial problems stemmed from a chaotic structure to the city’s budgeting and finance, which she is currently working to fix.
“The way the city has structured its budget is not aligned with the state auditor’s guidelines for how a city should be set up,” Ranua told the council during her presentation. Ranua said it has taken considerable time to unwind the tangled budget and rebuild it on a firmer foundation.
Among the changes, she said, is to convert several city accounts to enterprise funds. She noted that Hoodoo Point and the airport are two portions of the city’s budget that should be converted to enterprise funds and managed like for-profit businesses.
“Because we haven’t been operating these as an enterprise fund, we haven’t had the mindset to generate profit,” she said. “If you were operating as an enterprise fund, then you wouldn’t have to levy property taxes to fund those operations,” she said.
The city’s water and sewer account has been run as an enterprise fund for years, but taxpayers have continued to subsidize the operation because fees charged to customers don’t cover all of the expenses associated with the service. The council has taken steps to at least partially address that shortfall in recent months by increasing the user fees for water and sewer.
Ranua also noted that expenses for major capital projects should be handled through capital funds, rather than city operations. “Capital projects were simply buried in operating budgets,” Ranua noted. “So, they weren’t clearly delineated.”
Mayor Orlyn Kringstad noted that Ranua has complained about the city’s budget structure since assuming the clerk-treasurer job 11 months ago. “What would it take to get from the tangled spaghetti we’ve been in, to the system recommended by the state auditor?” he asked.
Ranua said some progress has been made, but it will take more time to get the budget where it needs to be. “In the meantime, we have to set the levy,” she said. At the same time, she said she feels confident she can manage the city’s financial affairs within the existing levy while she continues to rebuild the structure of the city’s budget.
Ranua said she’s now working on a kind of translation template that will allow the council and the public to understand how money that used to be tracked in a mishmash of accounts is now being accounted for in newly-designated accounts.
“So, you’re talking about a cross reference table, like a list of the old codes along with the new codes?” asked council member Kevin Norby. “It will make the budgeting easier,” said Ranua.
“Sounds like it will be more transparent as well,” said Norby. “That’s been my goal all along,” said Kringstad.
Ranua said she will also be budgeting revenue on a monthly basis to better understand the city’s cash flow needs. In the past, she said most revenue was simply entered in a lump sum which made it difficult to recognize when the city might face cash flow shortages. The city experienced just such a shortage in late 2019, just before Ranua was hired, which forced the city to take out an emergency loan from the League of Minnesota Cities. The city is currently in the midst of a five-year payback on that loan.
Ranua noted that the city will face budget pressures in 2021, including the impact of a union contract that provides pay and benefit increases for city workers. She is also budgeting more for legal services. She said the city has suffered by consistently seeking legal advice on a number of issues, which has left the city to clean up issues that might have otherwise been resolved, sometimes at considerable expense. At the same time, Ranua said she has found ways to save the city money. For example, she said she is now tracking the Gunderson Trust in the city’s financial software, which should save the city the cost of a separate audit.
“I’m confident if we keep it [the levy] the same, we can work through some of those things,” said Ranua.
Council member Mary Shedd made the motion to set the preliminary levy at the same level as last year, and the rest of the council, minus the absent Sheldon Majerle, supported the motion.
Hoodoo Point Campground
In the only other business of the night, the council approved an amendment to the Hoodoo Point Campground management contract that will allow managers
Randy and Julie Pratt to leave the campground earlier than Oct. 15 and to arrive later than April 15. The current contract specifies those dates for departure and arrival, but the managers have traditionally arrived about a week after April 15 and left prior to Oct. 15. Randy Pratt noted that there is typically still snow on the ground on April 15 and water and sewer lines are still frozen, making it difficult for them to reside at the campground until closer to the opening.
The campground actually operates from May 1-Oct. 1.