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Guest Commentary: Concerning the upcoming city budget discussions

By Craig Clark

Austin City Administrator

This is an open letter to the Austin Chamber of Commerce in response to the concerns expressed regarding the City’s upcoming budget discussions.

A Star Tribune article from Sept. 30, 2019, decries “Job Vacancies in Minnesota Rise Again” and recounts how Minnesota was at an all-time high for available jobs.  Highlighted were employer concerns over filling needed positions and notes the Minnesota Chamber would be holding a summit that week to discuss the labor shortage stating, “Our state is experiencing a serious workforce shortage in every industry in all parts of the state.”

This news came before the COVID-19 pandemic upended our economy. I would like to provide some background to recent concerns raised by Austin’s Chamber of Commerce about the City’s preliminary discussions of the 2021 budget.  I hope you will engage with me and look at the details as Council and staff have spent a great deal of time to ensure the City of Austin moves to a fair compensation system, which is the primary driver of the 2021 budget.  This pay system values our employees and provides sustainable, well-managed services to our community.

The city had been discussing a Compensation and Classification Study for many years to review all positions and assess their job duties and compensation with other comparable cities.  This is done in compliance with State Statutes requiring pay equity (equal pay between genders) and recognizing certain groups have the ability to force mandatory arbitration as essential workers because of their inability to strike.

After years of discussion, formal approval for this process was given in March 2018. We were losing positions to other jurisdictions, seeing a dramatic decline in applications and some positions went unfilled due to the inability to find candidates, which was exacerbated by our increasingly uncompetitive wages compared to our peers. A key element to delivering cost effective services to constituents is having fully competent employees and this plan will produce long-term sustainability and decrease costly turn-over.

We all have little affection for our tax bill and with the current novel coronavirus situation all local businesses have been impacted.  The City Council was the first to act on the Chamber’s request to delay the collection of property taxes in recognition of the hardship our businesses face and was an unprecedented step to take.  We have also expedited our budget considerations exactly because of the pandemic because any delay makes it harder to take action to respond to the pandemic’s financial consequences.  Our budgets have been set for 2020 but the goal of evaluating decisions today for eventual savings is to respond to the struggles our businesses are facing and those individuals who have found themselves unemployed through no fault of their own.

To provide some background, City government is a service sector operation and 63 percent of our budget goes towards payroll. With a levy of $7.15 million and Local Government Aid (LGA) at $8.5 million, these funds help provide for a $15 million payroll. (Additional funds come from other sources for our general fund budget.)  This money funds the library, personnel to maintain streets, offer parks and recreation services, and provide for police and fire services

Any resident might ask, “How do our taxes compare to other cities? Are we getting good value for our city services?”  An analysis by the State Auditor of the most recent information from communities with a population above 2,500 demonstrates Austin residents, on a per capita basis, are in the bottom 6 percent of all cities ranking Austin 223rd out of 233 cities in the amount of property taxes they pay. You can find only nine other cities in the state above 2,500 to pay a lower property tax bill.  Albert Lea, Faribault and Owatonna, as examples, pay more in taxes than we do in Austin.

Another question might be: “Ok, so Austin has a low tax rate but that doesn’t accommodate an analysis of overall spending.  With LGA, I bet Austin spends more than comparable cities, right?”  While our ranking does fall a bit to 191st out of 233, we actually are the lowest of Albert Lea, Faribault, Owatonna and Winona but still low overall on property taxes and spending combined.

The question for our businesses is: “Am I at a competitive disadvantage locating in Austin as opposed to being in Albert Lea?”  For example, if I were a restaurant owner in Austin and decided to set up shop in Albert Lea, would I be paying more in Austin for a comparably valued facility?   In Albert Lea your taxes would be $1,328 more for a business with a valuation of $323,100.  There are a lot of reasons for opening a business in a community but the tax consideration isn’t a negative factor by comparison for locating in Austin.

The timing of the implementation of the Compensation and Classification study with COVID-19 is clearly problematic.  We have internally gone through exercises of 2.5, 5 and 10 percent reduction options and reviewed these with Council. The measures being considered will require as much as $1.15 million in reductions to get to a 10 percent reduction from the proposed increase and would most assuredly result in staff reductions and impacts on services without getting to a flat levy increase.

Customarily, the Council reviews the budget in June but expedited this process by starting in April.  Council has already provided direction to review open positions carefully before they would be filled and many part-time positions are being held open.  We have asked for volunteers to maintain our downtown flowers and are exploring other ways to finance certain part-time tasks.

As is evidenced by our historically low tax rate, our budget discussions at the city always include thoughtful consideration of ways to be increasingly efficient while maintaining a high level of service. We understand the desire from the Chamber to reduce the budget impact but the reality is we need your help in not just raising concerns about costs but also to make recommendations on where reductions could be made.  We look forward to your feedback.