Duluth mayor proposes 8.9% property tax levy increase for 2023

DULUTH - Duluth Mayor Emily Larson is proposing an 8.9% property tax levy increase in 2023, a figure lower than expected thanks to one-time COVID-19 pandemic relief aid.

The 2023 budget is a result of using "every lever we have to provide tax relief," said Larson, who spoke Thursday night to the City Council. The proposed levy amounts to $41.7 million.

The mayor said incomplete legislative work this year, inflation and new St. Louis County property tax assessments played into the proposed tax hike. If the city didn't use pandemic aid, she said, "an undue and disproportionate tax levy burden would be placed upon residents."

"To be clear, all this does is pad the budget in a way that artificially drives down the overall levy," Larson said. "But it's a tool we currently have and one that feels to be in the best interest of everyone to use."

Commitments to paying higher police wages and costs for a crisis response team last year were part of an expected 15% levy increase. Instead, about $3 million in American Rescue Plan Act money would offset that by paying for one-time purchases.

Larson also presented a list of city needs that includes plow and dump trucks, fire engines, broadband and renovations to Enger Park Golf Course.

If voters in November approve a change to the parks levy, that would amount to another 4% increase. This summer, the city laid out a proposal that would change the current voter-approved fixed amount of $2.6 million sent to a parks fund each year to one generated from a percentage of property values.

Driving the city's increases are police wages — which were raised to align with what's paid in similar markets elsewhere — along with financial forecasts and rising health care costs, Larson said. But the biggest factor is health care.

"Escalating and unchecked costs, driven exclusively by insurance companies, is bringing deep financial risk," she said.

Finance Director Jennifer Carlson told the council that the use of one-time funds was "kind of kicking the can," and that the 2024 levy increase could be as high as 17% because of health care expenses and wages.

In an interview, Carlson said it wasn't clear how the city's proposed levy increase will affect individual property owners because of new 2022 county assessments that vary among neighborhoods.

The proposed budget and levy now go to the City Council for review and possible changes. The council is expected to approve a maximum levy increase by the end of the month and finalize the budget in December.