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Hubbard County sets 19% levy increase, capturing 10% from Line 3 tax capacity

Ten percent of that levy increase – roughly $1.6 million – is a capture of new construction tax capacity from Enbridge’s Line 3 project

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On Tuesday, the Hubbard County Board approved a preliminary 2023 levy of $19,100,00 at their Sept. 20 meeting.

That’s a $3.1 million, or 19 percent, increase over the 2022 final levy of $16,050,00.

Ten percent of that levy increase – roughly $1.6 million – is a capture of new construction tax capacity from Enbridge’s Line 3 project, explained County Administrator Jeff Cadwell. The county will reserve these funds for future capital improvement projects, economic development or any other unfunded initiatives at the board’s desire.

In a news release, Cadwell wrote, “Enbridge Line 3 construction provided many benefits to Hubbard County. The project created thousands of jobs during the construction period and 20 permanent new jobs in the state.”

Based upon estimates from the Minnesota Department of Revenue, Enbridge’s total investment in the project in Hubbard County was $289 million.

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“That new tax capacity in the county will more than pay for that $1.6 million to set aside for future use,” Cadwell said on Tuesday, estimating their tax capacity at $5.5 million. “Their tax bill will be more than $1.6 million with this change.”

New tax capacity has to be captured in the year that it’s earned, he continued. “If we capture it next year, it would just be a tax increase across all of the taxpayers.”

Typically, there is $50 million worth of new construction each year. Cadwell said, “That would be about a 1% or 1.5% increase in our tax capacity, so we can capture that 1.5% increase without affecting other people’s taxes. In this case, this tax capacity increases 12%, so we can capture 10% without affecting other people’s taxes.”

Cadwell noted that county commissioners haven’t decided if they will authorize the capital projects requested in the 2023 budget, such as replacing radios and a computer record system upgrade for the sheriff’s office or developing Deep Lake Park. The figures are reflected in the capital reserves budget, where levy dollars captured from Enbridge’s new pipeline will offset county costs.

Impact of jail costs

The remaining balance of the proposed levy increase – 9% – is for covering the county’s operational costs.

And most of that is attributed to the Hubbard County Jail’s rising expenses.

Earlier this month, Cadwell projected a $600,000 to $700,000 operational deficit in 2022 “because of the change in operations at the jail.”

According to the news release, “With more effective DUI enforcement, Hubbard County has made our roads safer; however, this has resulted in increased populations in custody.”

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With the jail full, Cadwell reminded commissioners on Tuesday that they hired four more jailers in Feb. 2022. “That was just shy of $300,000 added to the operating budget,” he said.

When the county houses its own inmates, it’s unable to board prisoners from other agencies. Cadwell said this year’s estimated revenues of $300,000 are, in actuality, only at $80,000. The diminished revenue must be accounted for in the 2023 budget.

Anticipated cost of living and wage increases for the 70 employees at the sheriff’s office account for the remainder of the levy increase, or $300,000.

On Tuesday, Cadwell said, “We’re still looking at a sizable increase in public safety in the levy of $1 million. We’re going to have additional conversations in October about the public safety budget.”

Declining tax rate

The news release said, while the “levy increase is significant,” the county tax rate will “decline significantly” due to the overall increased tax capacity. The 2022 county tax rate was 39.2%. The anticipated 2023 county tax rate is 32.7%.

“This means that the county tax collected on $100,000 of residential value will drop from $392 to $327, a decrease of 17%,” it went on. “Actual county property taxes will vary depending on several factors, including homestead market exclusion, veterans’ property tax relief and other programs. Significant property value increases will also affect individual taxes.”

Cadwell provided three examples showing the shift of taxes from lower-valued homes to higher-valued on the county portion of the tax.

“Approximately 70% to 75% of our net tax capacity comes from homes. The majority of that is in seasonal/recreational. Those are the higher-valued homes in the county,” he said.

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Heritage and the budget

Initially, the proposed preliminary levy increase was 20%, but county commissioner Tom Kreuger was adamant about reducing it to 19% “to force cutting in the next two months.”

Cadwell said 1% is equivalent to $170,000.

After some debate, the board agreed, even though labor negotiations are still underway for 2023, so those figures are uncertain.

County commissioner Char Christenson noted that while the Heritage Living Campus is not part of the county’s levy, it does have an impact on the budget.

Cadwell said Heritage’s proposed 2023 budget is $7,047,824 in expenditures, $7,847,176 in revenue and debt service of $728,307, resulting in a positive operating balance of $71,000.

At last report, Cadwell said Heritage has had a negative cash flow of $100,000 per month in 2022. That was after the county gave $2 million in American Rescue Plan Act funds to the facility, he added.

The county’s truth-in-taxation hearing will be held at 6 p.m. Thursday, Dec. 8, where the final levy and 2023 budget will be adopted.

In other business, the board did as follows:

  • Rejected bids for bridge replacement on Fairwood Dr. to the island on Belle Taine Lake, contingent upon Nevis Township’s decision. Hubbard County Public Works Coordinator Jed Nordin reported that the lowest bid exceeded the engineer’s estimate by 130% and the township would be forced to pay for the overage.
  • Approved the three-year contract with Strategic Technologies Inc. for the Minnesota County Attorney Practice System from Jan. 1, 2023 through Dec. 31, 2025. It will cost $14,000 in 2023, with a potential increase to $15,000 for subsequent years.
  • Established a market price of $32.80 per ton for solid waste management in 2023. This rate is used to calculate how much tax the county pays to the state for its material solid waste disposal.
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Shannon Geisen is editor of the Park Rapids Enterprise.
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