MANKATO — The city of Mankato plans to spend nearly $156 million dollars in 2024, intends to collect more than $24 million from property owners and will boost utility fees for the fifth straight year.
But homeowners and business owners, who will see falling or stable real estate taxes next year, appear quite satisfied with the way their city is being run. Even owners of apartment buildings, who are going to get hammered by property tax hikes in 2024, don’t appear to be blaming city staff or elected officials.
Four different times during Monday’s annual budget hearing — when the City Council was about to decide whether to approve the tax levy, the budget, the schedule of municipal fees and the five-year construction plan — Mayor Najwa Massad offered citizens the opportunity to comment.
“Seeing no one,” Massad said each time, and then asked the council’s wishes. The council’s wish was to unanimously approve each of the elements of a budget that they had discussed and adjusted during a dozen meetings throughout the summer and fall.
“What you see tonight is the culmination of a lot of work from a lot of our team,” City Manager Susan Arntz said at the start of the hearing.
It was probably no surprise that owners of homes and businesses didn’t feel motivated to attend. An average-value home will pay an estimated $1,160 in city taxes next year under the 2024 budget — $21 less than in 2023.
Retail stores, manufacturing facilities and office buildings will pay virtually the same municipal taxes in 2024. The upcoming tax bill for the average commercial-industrial property valued at $918,000 is projected to be $6,670 — just $7 more than this year.
For an average-value apartment building, though, the increase is anticipated to be 44%. That typical apartment building with four or more units will see its taxable market value jump to more than $2.5 million, pushing its city taxes up by $3,646 to $11,923.
The apartment owners — and quite possibly tenants through higher rents — will face similar hits from the Blue Earth County and the Mankato Area Public Schools portions of their tax bills.
The disparity in the impacts between homes, businesses and apartments is almost entirely due to markedly different changes in the assessed values of the three types of properties, which state law requires to be based on what comparable properties are selling for in the real estate market. Buyers have been paying much more for apartment buildings in Mankato, which forces the assessed values higher, while the sales prices of homes and businesses have stabilized.
That typical $315,000 Mankato home, for instance, saw its valuation rise just $20,000 from this year’s level — 6%. The taxable value of the average apartment building rose nearly 60%.
The soaring values of Mankato’s numerous apartment buildings plus new construction were the major factors in pushing the city’s tax base up by 15.9% for next year, which allows the city to take in more money from property taxes even while lowering its tax rate somewhat. Apartment buildings alone will be responsible for 44% of that increased tax base, said Parker Skophammer, Mankato’s director of administrative services.
During Skophammer’s budget presentation, Mankato’s tax rate was compared to other outstate Minnesota regional centers, along with neighboring North Mankato. St. Cloud has the highest tax rate on the list, followed by Moorhead, Rochester, North Mankato and Mankato. Duluth, which receives more than twice as much state aid as any of the other five cities, had the lowest property tax rate.
Most cities will see a big bump in state aid in 2024, including Mankato, thanks to a decision by the Minnesota Legislature to allocate a portion of the state budget surplus to cities, counties and schools. A significant portion of Mankato’s additional aid will boost reserve funds and pay off early the cost of energy-efficiency projects, which will reduce pressure to raise taxes or reduce services in the future, according to Skophammer.
Property taxes and Local Government Aid make up most of the revenue going to Mankato’s general fund, which will rise by just over 7% in 2024 and includes prominent municipal services such as public safety, parks, streets and administration.
The services provided are people-dependent — police officers, firefighters, plow drivers, park and street maintenance crews and workers in city hall.
“In the general fund, 60% of the expenditures represent salary and benefits,” Skophammer said.
The budget resolution includes a 4% salary adjustment for all city employees, but the total increase in spending for salaries and benefits is 7.2% when new positions are included. New full-time employees will include a firefighter, a patrol officer, a building permit technician, an IT training coordinator, an administrative assistant for Arntz and two new Public Works Department employees.
Other general fund spending increases include $100,000 for additional seal-coating of streets and $145,000 for management of the Tourtellotte Pool, an expense that didn’t exist in 2023 because the municipal pool was closed for renovations.
Nearly half of Mankato’s overall budget of $155.8 million is made up of “enterprise funds” — primarily large utilities like the municipal water and sewer services — where ratepayers or other users are expected to foot the bill.
In 2024, Mankatoans will be paying 3% more each month for their basic cost-of-service charge for water and sewer — the amount paid regardless of how much water is used. The “unit rates,” which are charged based on the volume of water used, will rise 3.5%.
For an average household, the increased annual cost will be $21.60. The utility rates have been rising steadily in recent years, however, so the average household will be paying $1,102 in 2024 — $144 more than was paid five years ago.
Garbage, stormwater and street-lighting fees will be unchanged.