Hefty property tax increase on horizon

HUMBOLDT — Property taxes will rise for Humboldt residents in 2015, and water and sewer rates aren’t far behind.
Humboldt City Council members, gathering for a special meeting Monday, approved for publication the city’s 2015 spending plan, which includes a planned 8-mill increase.
The proposed budget — including $3,550,806 in spending authority — utilizes an ad valorem tax levy of about 83.555 mills, compared to the 2014 levy of 75.471 mills.
That means the owner of a $100,000 home will spend about $93 more in property taxes to support Humboldt’s budget compared to this year ($960 versus $867).
The increases were necessary, City Administrator Cole Herder and Mayor Nobby Davis agreed, because of a reluctance by previous councils to pump additional revenue into the budget, even though costs have risen annually. As a result, several funds are in dire straits.
The mill levy increase is a bit larger than it otherwise would have, Herder noted, for a pair of reasons.
A 2.5 percent drop in Humboldt’s assessed valuation means more than 2 additional mills were necessary just to make up lost funding, Herder said. In addition, the council members previously agreed to use proceeds from another mill to help fund a local building project. The other 5 mills will replenish funds that were depleted through year-end transfers for such things as the city’s water and sewer funds, which have been operating at a loss for years.
The other shoe to drop Monday was the utility rate discussion. Herder is prepared to recommend a 20-percent increase in water rates and a 13 percent increase in sewer rates to help those utility funds become self-sustaining.
Earlier this summer, the city’s auditors warned Humboldt its fund balances in some areas were precariously low. For example, the general fund had $240 left at the end of 2013. The gas fund had $6.18, the water fund $155 and the sewer fund $1,826.
That didn’t mean the city was near bankruptcy, but it did mean Humboldt was in danger of violating the state’s cash-basis law.
Those numbers have improved slightly for 2014, Mayor Nobby Davis noted, through penny pinching. The general fund is expected to have about $45,000 left in reserves by the end of this year.
“I’d Like to see that number increase so we can then start building (utility) reserves,” Davis said.
“We could trim somewhere, but it would put us in the same position we’ve been for several years,” Herder said.
The same is true for the water and wastewater rates.
“Our reserves have gone down significantly the past several years,” Herder said. “The water and sewer funds not funding themselves. With the regulations we have — the big-dollar items — we don’t have a choice.”
Humboldt’s water and sewer funds have yet to become self-sustaining — the city’s goal, Herder said — and relied upon transfers from the general fund or other utilities in order to stay afloat.
A 20 percent increase in water rates would cost a customer $6.86 a month (rising from $34.30 to $41.16) if he used about two units of water, a typical amount for an average family. A rural customer would spend about $8.11 more monthly (from 40.55 to $48.66) while a local commercial customer’s rates will go up $8.91 ($44.55 to $53.76).
A 13 percent sewer rate hike would mean local residential customers would spend $3.77 more monthly. A local commercial customer would spend $4.54 more a month.
“That means for an average family, it’s going to cost about $100 extra a year,” Davis said.
Herder noted the city’s water rates have not changed in the past eight years.
In addition to his proposed rate hikes, Herder recommended the city put in a long-term plan to incorporate inflation when devising utility rates.
“If the rates had gone up 2 or 3 percent each year, we wouldn’t be looking at a 20 percent increase this year,” Herder said.
Herder noted Humboldt, like other communities, was in the midst of a recession, which likely played a role in previous councils declining to raise rates.
“Without being here, there’s no way to judge,” Herder said. “But it helps explain why we’re here. Now, the economy is coming back, so we need to pick that up.”
Ideally, Herder said, the city will be able to avoid using all of its budget authority. For example, the city budgeted spending $1.125 million from its general fund for 2014, but was able to pare about $85,000. He hopes to repeat that in 2015.
Council members scheduled a budget hearing for 6 p.m. Aug. 18 at City Hall for the public to discuss Humboldt’s 2015 spending plan before the document is adopted.