Austin property owners could see their taxes increase by about $42 in 2012 under the city’s proposed tax levy increase.

City Council members discussed the 2012 budget and potential tax increases at Monday night’s work session. Although no formal action was taken, Finance Director Tom Dankert laid out the proposed budget adjustments for 2011 and the proposed budget for 2012.

The City Council faces a $2.4 million shortfall total in 2011 and 2012 due to a Local Government Aid (LGA) freeze and the elimination of market value credit that was implemented at the end of the Minnesota government shutdown in July. While Austin finally received its LGA check that was scheduled for arrival July 20, the city will still miss out on more than $687,000 of its certified LGA amount for 2011.

Last year, council members voted to increase Austin’s tax levy by 6 percent; the proposed increase for 2012 is 15 percent. However, taxes won’t necessarily increase by 15 percent.

Because market value credit was eliminated, a portion of the tax levy that used to be funded by the state will no longer be funded, placing the burden on taxpayers, according to Dankert. A taxpayer with a home value of $105,000 will have to pay about $45 more this year if the proposed tax levy passes.

However, a 15 percent tax levy increase is not enough to fix the two-year, $2.4 million wound the city is trying to heal. Council members reviewed a list of budgeted items for 2011 that will need to be cut or postponed until funding is available.

The city plans on saving nearly $1.1 million by postponing projects and funding projects through other sources of revenue. Some of the adjustments include postponing the filling of a street department vacancy for $75,000; postponing projects funded by the capital outlay fund, saving $250,000; saving $115,000 from a health care opt out program instead of using it on capital projects; and funding a Law Enforcement Center remodel with Police PERA funds, saving $425,000.

Council members weighed the pros and cons of raising the tax levy further than proposed, although Austin is ranked in the bottom three lowest cities in net levy tax per capita throughout the state, according to city officials.

“The general public doesn’t care that we’re the second lowest (property tax rate per capita) in the state,” council member Marian Clennon said. “They care about their pocketbooks.”

Council member Jeff Austin said the budget troubles are a “bitter pill to swallow,” but taxes may need to be increased if residents want the same quantity and quality of city services.

“For $171 and change a year, I get all these services Austin is providing,” Austin said. “I think I paid more for my cell phone last year than I did in taxes.

“The citizens of Austin have enjoyed many, many years of low taxes and we’ll still be low per capita.”

Council members indicated more people have been using city services like the library, swimming pool, public safety and parks. When more people are using services, it becomes harder to cut anything, council member-at-large Janet Anderson said.

Although the City Council voted to approve the $1.1 million in 2011 budget adjustments at the upcoming Aug. 15 City Council meeting, they have not taken any formal action for the 2012 budget or tax levy yet. The budget discussion is scheduled to continue at the Aug. 15 work session.