Truth in taxation

Waseca finance director Alicia Fischer summarized the city’s 2023 budget during a legally required “truth in taxation” meeting held the evening of Monday, December 6, 2022.

Fischer used a PowerPoint presentation to present an overview and numerous details regarding city taxes, the 2023 budget, tax levies, and impact on property owners. 

Work on the 2023 budget began in Nov. of 2021 with staff work on the capital improvement plan. In spring of 2022, city staff began budget paperwork and started reviewing city services with council members. In July, city departments began preparing preliminary budgets. A month later the council began holding work sessions and meetings between the city manager, finance staff and department directors. During a September meeting of the city council, a preliminary levy of $5,732,593 was approved, an 11.2% increase, with an effective rate of 4.5% due to the ConAgra development project. Since that time, there has been one more work session, concluding with the Truth In Taxation meeting Dec. 6. In that time, the levy increase was lowered to 7.6%, with the effective rate at 1.6%. The final budget is expected to be approved at the Dec. 20 city council meeting.

This year’s final levy expects to total $5.5 million, up about $400,000 from last year's. Compared with similar sized cities, Waseca rates relatively low on total amount of taxes levied, with the city of Baxter, population 8,800 levying more than $8 million. 

The estimated tax rate capacity is down nearly 10%. Tax capacity is calculated as 1% of a home's median tax value: Depending on a homeowner’s tax classification, that number can shift either up or down. The City of Waseca’s tax levy comes in at 78% of that “tax capacity.” For comparison, last year the tax rate capacity was 88%, 91% in 2020, and 92.6% in 2019. New Richland and Waldorf, also for comparison’s sake, have preliminary tax rates at 107.5% and 141.5% respectively. 

Factors that impact property taxes the most this year will be the assessed value. The impact of rising home values will result in a roughly 20% overall increase in taxes for City of Waseca homeowners. For comparison, if home values had not increased, the amount paid by Waseca homeowners would have gone down 11.5%. In dollars, that 20% increase translates to about $200 for a homeowner with a property valued at $159,000. These tax amounts include only the city’s taxes, not the county, school board, and/or other special tax districts. 

Finance director Fischer explained where taxpayer dollars go per $100 collected. 

In the model provided, $54.40 of every $100 in taxes collected from Waseca homeowners goes to general fund taxes: the police department ($19.26), administration ($8.87), streets ($7.43), recreation ($7.75), fire department ($3.82), engineering ($3.50), community development ($3.23), and $0.55 for other expenses. 

The rest of that $100 goes for: capital levy ($29.48), debt services ($10.07), tax abatement ($4.15), and waterpark debt ($1.90). 

The revenue collected by the city largely comes from the state in the form of local government aid ($3.1 million, 42.8%) and the rest from taxes and utility transfers. 

The 2023 levy factors in 4 new residential tax abatements along with 1 commercial property: ConAgra will be levied for $300,000 in taxes not previously collected by the city. This is where the majority of the $400,000 increase over last year’s levy is coming from. When the city describes the effective tax rate at 1.5%, that effective rate, that other $100,000, is where homeowners’ additional taxes are going. 

A couple residents asked questions and made statements during a public comment portion of the meeting. In response to one question, it was clarified that although the tax abatement project comes in as a special revenue expense for the city, it is not an expense because taxes collected from new homeowners are money the city was not previously collecting. 

Director Fischer encouraged homeowners to contact Waseca County Assessor Brock Nelson with any questions about home value. She encouraged anyone with budget/levy questions to contact her or interim city manager Carl Sonnenberg. 

Brock Nelson, Waseca County office: 507-835-0640; email brock.nelson@co.waseca.mn.us

Alicia Fischer: 507-835-9746; email:financedirector@ci.waseca.mn.us

Carl Sonnenberg: 507-835-9713; email: CarlS@ci.waseca.mn.us