The city of Marshall has recently presented to Council a draft budget and a preliminary property tax levy amount. All cities are required to prepare and adopt an annual levy and budget.

By law, in Minnesota, the fiscal year of a city and all its funds must be the calendar year. The budget sets out a council’s yearly plan to maintain, change, add or drop services and activities. For cities, a budget is one year of estimated money coming in (revenue) and money going out (expenditures). Property taxes are the largest source of revenue for cities. Thus, through this budgeting process and prior to the end of the year, the council adopts property tax levy to support the budget.

Although some of the basics of budgeting are routine due to the nature of revenues and expenditures being fairly predictable, budgeting overall for cities is becoming harder because it’s a complex balancing act with competing demands, limited resources, and can impact residents at a great level. Some city budgeting factors that contribute to a comprehensive process are as follows:

Limited revenue, unlimited needs

Cities have finite revenue sources — mostly taxes (property), fees, and state/federal funding. But the demands are many: public safety, streets, wastewater treatment, quality of life factors like investing in our park and recreation facilities. Often the needs outpace the resources and cities need to make decisions on what needs will be funded and which ones will need to be considered at a later time. One large source of revenue that assists cities with reducing the property tax levy is local government aid (LGA), provided by the State of MN.

However, the city of Marshall’s local government aid has not kept up with inflation and overall, the per capita funding of LGA across the state is far below levels seen decades ago.

Unpredictable Costs

Cities face unforeseen events such as increasing cost of goods and services purchased, weather or other natural disasters, and labor costs. However, the city of Marshall’s main driver of expenses has been consist with the city’s budget goals:

• Continued infrastructure improvements and maintenance

• Emphasis on repairs and improvements for streets, sidewalks, facilities

• Meeting required regulations – wastewater, surface water

• Retaining market competitive salaries and benefits

• Recruitment and retention – and to meet public expectations

• Enrich and enhance quality of life – investments in parks, trails and facilities

• Public safety – employee recruitment/retention, investment in equipment

While expenses are often looked at for the solutions to reducing the budget, the city also has the goal of increasing revenue through economic efficiency in equipment life cycle planning — vehicles, other equipment as well as a continued look at outside revenue — grants, state bonding.

Structural Constraints

Some funds are restricted such as revenue received through state or federal grants or those funds which are governed by Minnesota statutes. Some personnel costs are unavoidable such as required contributions to employee benefits like social security and meeting required pay equity requirements of the State by ensuring pay structures are consistent with state law. There are also a significant number of state and federal mandates that legally require cities to provide certain services but do not provide funding for them.

Public Process

Budgeting is a public process. City Council wants to ensure we are meeting the expectations of the public in providing good public service while balancing available money between competing needs. The demands for more and better services usually exceed government’s ability to pay for them. This is why public involvement can help residents understand the hard choices in the budgeting process and assist the city in understanding the programs and services residents value most.

The city of Marshall, through multiple public meetings, has reviewed the budget and levy. On Dec. 9, a Truth in Taxation meeting will be held where the public has an opportunity to voice their opinions on the proposed budget and property tax levies of their local government entities. The meeting provides transparency and accountability in the property tax system by connecting budget decisions to their property tax impact. 

In summary, city budgeting can be challenging because of limited resources that need to be balanced with the needs of the community. However, the budget reflects the goals, objectives, and priorities that the city has identified, based on input from City Council, the residents and taxpayers.

— Sharon Hanson is the city administrator for the city of Marshall