FARGO — As local units of government finalize their budgets before the October deadline, Fargo city commissioners voted 3-2 to eliminate a long-standing 2-mill levy for airport construction projects.

The move didn't sit well with the city's airport authority that oversees operations.

Meanwhile, Cass County commissioners this past week rejected a 2-mill decrease in the county levy suggested by County Board Chairman Chad Peterson.

The levies from the city, county, park board and school board determine property taxes that residents and businesses will pay in the coming year.

The airport levy decrease was the most controversial, as Commissioner Tony Gehrig said the airport could lose about $20 million in federal funds by eliminating the $1.2 million that the 2 mill levy raises.

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He said it would harm Hector International Airport and the city.

Airport Authority President Erik Lind said in a later interview that the Federal Aviation Administration provides 90% of costs for most airport improvements, with the state providing 5% and a local match of 5%.

Thus, Lind said, the airport is losing out on the extra funds from the FAA to help improve the airport which he said could total $20 million next year.

The move comes as the airport is planning an expensive major terminal expansion to provide more gates that could service more airlines and flights, as well as the replacement of a massive chunk of concrete near the terminal where planes maneuver that hasn't been replaced in more than 30 years.

"It's very frustrating," Lind said about the City Commission's decision. "The airport is one of the economic heartbeats of the city."

Even if people don't fly, he said, packages they may get on their porches likely come through the airport, and the airport benefits all residents.

If the airport wants to ask the city to reinstate the levy for future projects, City Commissioner John Strand said, they should outline the plans for the City Commission.

Strand, who opposed the airport levy for next year along with Commissioners Arlette Preston and Dave Piepkorn, said for the past few years they have been working hard to figure out how to best grant the airport authority's wish to be independent.

The levy elimination was one way to solidify that separation, he said.

"I think it will be a better future for them with their own independent authority," he said.

Also of concern to the commissioners was the airport's $35 million reserve fund which goes along with the almost $31 million the airport has received or will receive to cover operations through COVID-19 relief funds for the next few years.

As long as the city is providing levy funds, Preston said, "I'm not completely convinced that the vetting process (by the city) for the airport's capital improvement projects is as vigorous as it needs to be. I think it could be examined more closely."

She also said the reserve fund seemed "awfully large." Strand said it was larger than the city's reserves.

Gehrig and Lind, though, said the airport operates in a different way, as it pays for projects with cash up front and later receives reimbursements from the FAA. Its reserve fund acts more like a savings account that helps avoid interest payments, they said.

Lind also noted that about $15 million of the reserve fund was needed as backup which most units of government strive to keep on hand.

Additionally, he said, the COVID-19 relief funds can only be used for operations, not projects.

Mayor Tim Mahoney said he would prefer to wait another year before eliminating the levy to allow the airport to plan for the reduction in aid. He recognized the many projects the airport is planning and noted other recent projects to improve de-icing chemical collection and snowplow storage.

In a later interview, Mahoney said cutting the levy from 53 mills to 51 mills will result in "slightly lower" property taxes for the city's share of property taxes next year. The city's share of the property tax bill is about 10%.

As mayor, Mahoney is responsible for drawing up the budget and presenting it to the City Commission. In voting to support the airport levy, he actually voted against his own budget. He said in the later interview he wished he would have separated the airport question from the overall budget approval and agreed it was a bit confusing.

The motion was to approve the budget without the airport levy, and it passed in that 3-2 vote.

Before finalizing the budget, Gehrig suggested a levy cut of 3 mills. His proposal included cutting the arts and social services levy of 1 mill and reducing cost-of-living pay raises for employees form 3.5% to 3.2% with larger increases for workers on the lower end of the pay scale and smaller for those on the upper end. He didn't receive any support.

Meanwhile, the Cass County board this past week had a similar situation in rejecting Peterson's motion to cut 2 mills from its budget on a 4-1 vote.

Peterson said it could save taxpayers about $2 million that could easily come from the building fund as the county has about $35 million in COVID-19 relief funds that they are tentatively planning to use for building projects, including a new 911 dispatch center and a jail expansion.

"We don't need the money," Peterson said.

Commissioner Rick Steen said he would have liked to see more of a plan first for how the construction project financing would come about for needed projects and didn't favor the reduction. He added the county was already reducing the reserve in the general fund budget from $14 million this year to $11 million next year.

The county, which has an overall budget of about $126 million, reduced its levy by a small amount from 55.74 mills to 55.30 mills next year, according to senior county accountant Sarah Heinle.

Heinle said they are already reducing the building fund levy by a half mill and that the fund is at about $8.8 million to help with future projects.

She also suggested that she doesn't think residents like having big swings in the levy, but that a more steady levy is best as it can affect mortgage escrow accounts for homeowners and businesses.

As for the COVID-19 relief funds, she said, when the county receives its second payment next year, it will have $34 million in the fund. However, there are restrictions on how that money can be used.

There is another $7.3 million still in the county accounts from an earlier relief package that wasn't as restrictive and remains unspent.