Metro area counties feel stretched to balance needs with income

As an ailing economy pushes more needy residents to turn to the county for help, many others who pay taxes that help cover such programs are themselves struggling. That was the dilemma facing Dakota County commissioners Tuesday, when they set the lowest levy limit since 1993.

At 3.9 percent, it's the upper limit on tax revenues to finance the 2009 budget, which will be set in December.

Because of the economy and state-imposed restrictions, county officials said, they are forced to set a maximum tax levy that isn't keeping up with inflation and population growth. That will mean curtailed county services, they said, including:

• postponing all major building projects until at least 2012;

• a freeze on permanently filling up to 40 positions;

• no additional money for nonprofit organizations that deliver human services programs for the county.

"These are the worst economic conditions I have seen during my 17 years as county administrator," said Brandt Richardson. "It is a challenging time for our residents and taxpayers, but especially for those relying on safety-net programs underfunded by the state and assigned to counties."

Decreasing home values helped offset any tax increases for homes. But businesses whose valuations rose could see increases.

With the 2009 levy, a median-price home valued at $240,500 will see no increases in county taxes and perhaps even a slight decrease, said Matt Smith, county financial services director.

The Legislature and Gov. Tim Pawlenty had restricted counties' decision-making authority with a formula that set revenue caps. This week, counties are certifying levy limits, which the state requires be set by Sept. 15.

Minnesota's counties, stressed by earlier state cuts, now anticipate a shortfall of $2 billion or more in state coffers, and uncertain state and federal funding.

In Scott County, commissioners agreed to set as the maximum a 5.8-percent increase in the levy. It won't raise taxes for the owner of an average-valued home -- in this case, worth $295,100.

It will, however, require budget cuts of nearly $3 million, not to mention abandoning commissioners' hopes of plowing more money into road construction.

Inflation outpaces levy In Dakota County, Smith said the 3.9 percent levy is about half the amount needed to keep up with inflation and population growth. Because of that, county services can't expand, though the caseload demands are higher for public assistance.

Since 2004, the number of people who applied to the county for food services, formerly called food stamps, has jumped by 65 percent. Demand for public medical assistance rose by 32 percent, Smith said.

"That's the number of people who are coming in asking for help," he said.

Smith said energy costs are pressuring county governments. Gasoline costs are projected to increase by 25 percent in 2009, diesel by 35 percent. Electricity is expected to rise 10 percent and natural gas by 13 percent.

Construction and asphalt costs also are rising.

Compounding the strain are shrinking state and federal revenues, unfunded mandates, rising health insurance costs, and drops in home values.

Meanwhile, in July the metro area unemployment rate exceeded 5 percent for the first time since 2004, Smith said.

Even with five new positions added this year, demand on Dakota County employees, such as determining people's eligibility for a program, is tough to keep up with, said Ruth Krueger, director of employment and economic assistance.

"The number of employees isn't growing anywhere near the rate that the caseload is growing," she said.

"When people are struggling, the board has a really tough decision," she said. "They don't want to raise taxes on homeowners who are having a hard time. At the same time, more people are coming in, asking for help."

Marilynn Loving, assistant director of community services, said more people on the edge of middle class are falling into the poverty level because of the difficulty of finding, or even keeping, a job.

But with the levy limits, and the difficulty some taxpayers have with giving more, Dakota and other counties "are going to be more and more stretched," she said.

"It just makes it more difficult for the county to be able to provide services to people who now are more and more desperate, and in need," Loving said.

Dakota County's levy increase will bring in about $4.8 million.

Smith said the 3.9 percent levy increase will put Dakota County among those counties with the lowest rate of growth in the tax levy.

Joy Powell • 952-882-9017

Staff writer David Peterson contributed to this story.