No action was taken, but it was clear Tuesday, July 23, that not everyone will be happy when the Pequot Lakes City Council phases in city tax rate changes to make those taxes more equal among urban and rural residents.
There were two distinct sides at the public hearing at the Cole Memorial Building regarding the rural and urban tax rate phase-in. The council members and mayor listened to residents, shared their views and will vote on the issue at their regular meeting Tuesday, Aug. 6, at city hall.
The two taxing districts — urban and rural — were created in 2002 when the city of Pequot Lakes and Sibley Township merged. The result was a city levy tax ratio of $2 in the urban (city) district to $1 in the rural (township) district. The thought at the time was that urban district residents would benefit more from city sewer and water and, thus, should pay a higher city tax.
Questions eventually arose over the tax disparity. A separate sewer and water fund actually pays for those services, not the city tax levy. And not every resident in the former city limits has city sewer and water.
So the city council earlier this year instructed the Economic Development Commission (EDC) to look into the issue. Ultimately, the EDC recommended a one- to three-year phase-in period that, basically, will raise city taxes in the rural tax district (former township) and lower city taxes in the urban tax district (former city limits). The city council last month favored the three-year phase-in to equalize the property taxes residents pay.
A final vote is scheduled for Aug. 6, with the goal to have the phase-in start with 2014 property taxes.
The phase-in will only affect city taxes, not school district or county portions of taxes.
At the public hearing, residents were given three minutes each to speak one time. Some residents took issue with the time limit; some wanted to donate their time to speak to city resident Jack Schmidt. That was not allowed.
David Kennedy of Pequot Lakes, who owns parcels of land in both taxing districts, opposed the phase-in idea, saying a deal is a deal with the 2002 city-township merger. To not be subject to a higher tax rate would have been a good reason for the township not to merge with the city, he said.
While the council may be doing what in its heart it thinks is good for the city, Kennedy said government bodies tend to want to maximize the amount of revenue they can get, so the city levy would increase.
Curt Cogan also spoke against the tax phase-in. He said people make a conscious decision on where they want to live when they buy property. His family made a conscious decision to buy property in Sibley Township because they wanted to be out where there weren’t city restrictions.
He disagreed with the 2002 city-township merger, saying the township was forced into it, but it was made more palatable because of the agreement that taxes wouldn’t increase.
“Now you’re basically saying, ‘We gotcha now. That’s all going to be null and void. Too bad, so sad,’ sort of thing,” Cogan said.
If the township had been told taxes would increase by a third down the road, Cogan said he didn’t think the township would have agreed to the merger.
“We don’t need the same level of city services where I live,” he said, suggesting the city let the former township residents vote on leaving the city and becoming an unorganized territory.
Schmidt, an urban tax district resident, brought the issue to the city council several months ago.
“My point is, Sibley Township has been on this gravy train for 11 years,” Schmidt said.
“After 11 years, why doesn’t this council admit it’s been wrong to the people in Pequot Lakes? You’ve had plenty of time to move on this and you haven’t. The three-year deal is a sham. Do it at the end of this year,” he said. “Let them pay their fair share.”
He said urban tax residents should have their taxes lowered 25 percent and rural tax residents should have their taxes raised 25 percent to equalize property taxes.
Several other residents spoke, agreeing either with Schmidt or with Kennedy and Cogan.
Council members’ views
In answer to a question regarding where city council members live, four live in the former Sibley Township and one lives in the former city limits.
However, all council members promised that they aren’t considering that when voting.
“I’ve been mayor for five and a half years and I’ve worked hard to keep the levy and taxes down,” said Mayor Nancy Adams. “I have never, ever looked at this town as two parts. I’ve always looked at it as one part. It is one part. It is one city.”
Council member Tyler Gardner, who lives in the former city limits, said: “I agree with the mayor on the fact we are one city. That’s how I view it.”
He said to hit rural residents with a one-year property tax increase would be a burden.
“I’m trying to be fair to everybody in deciding which way to go about this,” Gardner said. “We need to move past this and be one city. There’s no more township and no more city. It was voted on 11 years ago and we are what we are and we need to move forward.”
Council member Scott Pederson also said the council works hard to keep taxes as low as possible. He lives in the former Sibley Township, but he knows what it feels like to have taxes increase. He said when the city and township merged, a lot of thought was given, people sat down and discussed the issue. Facts came out and decisions were made based on that.
“Pequot Lakes properties in the old city after the merger saw a decrease in city tax,” Pederson said. “Bearing the burden is everyone’s burden. We live in a former township and a former city. We are Pequot Lakes. Our decisions aren’t based on what’s in it for me. My decisions are based on what’s good for the whole city. That’s my guarantee to you.”
Council member Dave Sjoblad said there is no disagreement that city tax rates to be made more equal. The council is looking at how to do that in the most fair way.
Council member Jerry Akerson had no comment.
In concluding the public hearing, Adams said: “We are looking for the best way. There’s no doubt in anyone’s mind that this is something that happened, that needs to be corrected. What’s the fairest way?”