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A discussion on the 2021 budget began Monday evening with Mayor Tom Stiehm telling the Austin City Council that he would veto any proposed tax levy that exceeded a four percent increase.

The announcement came after Stiehm and councilmembers received calls and emails from citizens concerned about a possible 16 percent increase in the tax levy to fully implement the city’s Compensation and Classification Study.

“I stand behind the raises we have negotiated to our employees via the Comp and Class Study,” Stiehm said. “Yes, the timing is poor, but it’s fair. What I’m going to propose to council is to get to a levy increase of zero to four percent. To get to four percent or lower, we will have to reduce our workforce. There are several ways to do this and we need to explore them all. Many people don’t realize the mayor has a veto. I don’t think it’s ever been used, but I will veto any proposed increase over four percent for 2021. Yes, a majority can override a veto – good luck.”

The city’s revenue for 2020 consists of $7,150,000 from the tax levy, which is assessed to private and commercial property based on the property’s valuation, $8,500,584 from Local Government Aid (LGA) and $4,268,954 from miscellaneous. About 63 percent of the city’s budget goes toward paying salaries and benefits for city employees.

The implementation of the study, which the council approved in a 6-1 vote earlier this year, prior to the COVID-19 pandemic, would cost the city about $1,150,000 in 2021, according to preliminary numbers. These numbers also indicate an increase of $1,125,000 in 2022 and $850,000 in 2023.

The city conducted the study as a means to figure out how city employee salaries compared to other cities of comparable size to Austin. City leaders were looking to offer competitive wages as a means to keep qualified employees from leaving for better pay elsewhere.

City Administrator Craig Clark and Administrative Services Director Tom Dankert said a 16 percent tax levy increase would be a “worst case scenario,” adding that city department heads were asked what it would take to cut 2.5 percent, 5 percent and 10 percent from their costs. They did note, however, that such cuts would also limit the amount of services the city provides to Austin citizens.

Stiehm said he wanted to hear from citizens what they wanted the council to cut from the budget, adding that the last thing he wanted was to put someone out of work.

Some have criticized the council for prior double-digit tax levy increases, noting that the tax levy has increased by 60 percent since 2015. City leaders have countered that by stating Austin ranks 223rd in net tax levy per capita out of 233 Minnesota cities with populations exceeding 2,500.

“We may have raised the tax levy by 60 percent, but that doesn’t mean everyone’s taxes went up 60 percent,” said Councilman Jeff Austin (At-Large), who noted that several factors affect the amount paid.

“A 15 percent increase sounds like a lot, but I paid $400 in city taxes last year after a 12 percent valuation increase on my house,” said Councilwoman Laura Helle. “That means that a 15 percent increase is a $5 a month increase for me.”

Commercial properties, however, pay more in property taxes than private residences. With the COVID-19 pandemic having severe effects on local businesses, Austin Area Chamber of Commerce President Elaine Hansen, along with other local business leaders, is keeping a close eye on any possible tax levy increases.

“We don’t know how long our economy could be devastated by COVID-19,” she told the council. “That’s why we want to come forward so you can hear the business community.”

Chamber Board Member Israel Gonzalez, owner of 1910 Fresh Mexican Kitchen and Mixto Fresh in Austin, gave a local business perspective to the council regarding his concerns.

“We’re kind of in limbo in the restaurant industry,” he said. “We’re having to work at 200 percent to make 50 percent of what we made before.”

Gonzalez said that because of the pandemic, the price of meat has gone up by 300 percent and that he has reduced his staff from 30 to less than 10.

“It’s not the 1,000 bricks you’re carrying that breaks you; it’s that one brick that gets added that breaks you,” he said.

Hansen expressed gratitude to the council for looking at options to reduce the tax levy.

“There’s not one simple cut to be made here,” she said. “Everyone is going to have to work together.”

Adding to the difficulty of budgeting for a lower tax levy increase is the uncertainty regarding LGA. Prior to the pandemic, Minnesota was looking at a surplus; however, Dankert pointed out that the state is now facing a $2.4 billion deficit. He added that while the state does have reserve funds that could possibly balance the budget, he is concerned about the amount of LGA Austin could receive next year.

Stiehm said that while a four percent tax levy is the target, it is contingent on LGA.

Clark recommended creating a working group of three councilmembers to discuss ideas and receive feedback from city department heads. Stiehm appointed Helle, Austin and Councilman Steve King (Second Ward) to the working group. King noted that it would be awkward for city department heads when it came to deciding on people to cut; Helle said it would be best to maintain confidentiality regarding specific names and positions.

The mayor and council said they would like to hear from Austin residents about what they would like cut and what they believe could be more efficient.

The council will have to pass a tax levy by Sept. 30, after which they may lower the levy, but not raise it.