County uses fund balance to cut levy

Rhonda Silence

A convoluted budget discussion at the county board meeting on Tuesday, December 21 ended favorably for taxpayers, with reductions in not only the proposed 2010 county levy, but also the Cook County North Shore Hospital levy.

County Auditor-Treasurer Braidy Powers reminded the county commissioners that the maximum levy allowed under the levy limit statute is $6,174,951, which would be a 4.89% increase over 2010. In September 2010, the county board agreed to levy that amount.

However, after listening to citizens at the December 14 Truth-in- Taxation meeting with concerns about levy increases by the school and hospital board, commissioners asked Powers to come up with options to ease the burden on taxpayers. Powers brought three alternatives to the board.

The first option, he said, would be to use the balance of the original 1% sales tax to lower the county levy. Powers said there is a balance of $376,000 in that sales tax fund. The 1993 law creating the local sales tax for North Shore Hospital states that any funds remaining after completion of the hospital improvements and payment of bonds may be placed in the county’s general fund. “Looking at the hospital’s current economic situation and its proposed levy increase, there is a rationale that these funds could be used to reduce the county levy, to offset the overall burden on taxpayers,” said Powers.

However, Powers added, the statute also allows the hospital to request use of the remaining sales tax. At the county board meeting was Hospital Administrator Kimber Wraalstad and Hospital Board Member Howard Abrahamson, to do just that. Wraalstad presented a list of capital purchase requests that the hospital would need in the coming years. She said that many of the items were things that were mandated—but not funded—by the federal government. Wraalstad said she had attended the county’s Truth-in-Taxation meeting. She empathized as the county bemoaned the fact that there are so many state and federally mandated services that were not fully funded. “I thought, ‘Unfunded mandates? Welcome to my world,’” she said.

However, Wraalstad said the hospital board too, had listened to the citizens at the Truth-in-Taxation meeting and had worked to find a way to lower its levy.

Abrahamson said, “We are doing something we haven’t done in the past. To lower the hospital levy, we will use $403,000 of our reserves, to achieve a levy reduction from $1.2 million to $800,000.”

Wraalstad said in light of the hospital’s proposed levy reduction, she hoped that the county would release the $376,000 surplus to the hospital to help it meet the need for items ranging from a pharmacy dispensing cabinet, new nurse call system, x-ray equipment and more.

Commissioner Bob Fenwick instead proposed transferring the money to the county’s general fund, as authorized by state statute, but then giving the funds to the hospital. After some discussion on how the money would be disbursed to the hospital, a unanimous motion passed to use the balance of the 1% sales tax fund toward capital purchases at North Shore Hospital—contingent on the hospital board reducing its 2011 levy as discussed.

BWCAW reserves used for reduction

Powers introduced a second option to reduce the levy, which would be to use part of the increase the county received in BWCAW funds this year. TheBWCAW money that the county receives in lieu of taxes on the federally-owned land in the Boundary Waters Canoe Area Wilderness was increased in 2010 when a new property tax appraisal was done. In 2010, the county received $2,025,000. Powers suggested using $287,799 of that money.

Using those reserve funds would bring the levy amount down to $5,887,152, which would be a 0% increase in the levy.

A third option, said Powers, would be to use even more of the BWCAW funds—$405,540—to actually reduce the levy to $5,887,152, a 2% reduction from 2010.

Commissioners recognized the need to keep a strong fund balance and agreed to use the lesser amount of the BWCA funds, bringing the levy to $5,887,152 and keeping the levy the same as 2010.

Powers said, “We’re in good shape. Construction is mostly paid for by gas tax and special federal funding, which skews things, but we are at 62% of non-construction expenditures. The state recommends 50% and we are a little better than that.

“But that could easily change, depending on what the state does in the future. A decade ago our fund balance was roughly 100% of our expenditures. That shows how state finances have already affected us,” said Powers.

Future levy increases likely

Outgoing Commissioner Fenwick said. “As I’m departing, I encourage you to keep a few things in mind.”

He said keeping the levy from increasing was going to be much more difficult next year. He noted that there had been no increase in health insurance in 2011 and that negotiations start next year for all three unions. “We’ve gone through two negotiations with no cost of living increase,” said Fenwick. “It’s going to be tougher next year.”

Board Chair Sobanja agreed that using the fund balance was the best option this year, noting that even with a zero increase in the county levy many people’s property taxes are going up. “But I agree with Bob. We need to be careful about using our reserves and we have to be really careful next year.”

So how do the changes affect the average Cook County taxpayer?

County Auditor-Treasurer Braidy Powers said it is very difficultto give one answer, as every property is different. However, he gave an example for a homesteaded property outside of the City of Grand Marais with a value of $211,000.

Taxes on that property, including the school referendum, the proposed 4.89% county levy increase and the hospital $1.2 million levy would mean a tax bill of $674.

That same property, with the new county levy figures and the hospital levy reduced to $800,000, would see a tax bill of $596.

That is an 11.5% reduction or $78 less.

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