MOORHEAD — Moorhead's City Council unanimously approved its preliminary budget and tax levy for 2022 on Monday night, Sept. 27, calling for a 5.5% tax increase in the city's portion of property taxes.

The increase is the largest in seven years, but comes after a more modest 0.15% increase approved by the council last year amid concerns about the pandemic's impact on city residents.

The tax levy to be shared by taxpayers will be $17 million.

With the increase, the city's share of property taxes on a median home value of $191,900 will be an additional $42.70 a year or $3.56 a month. For a $300,000 home, the increase will be $72 a year or $6 a month.

Commercial, utility and industrial properties will have a higher tax bill, but owners can get assistance from a tax credit offered through Minnesota's border cities legislation. The Disparity Reduction Credit caps their property tax obligation at 1.6% of taxable market value, and the state picks up the rest. With the proposed 5.5% increase, a commercial property valued at $500,000 will have a gross tax bill of $4,386 in 2022, but with the cap, the business would pay $2,720, with the state picking up the remaining $1,666.

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City Manager Dan Mahli said residents would have opportunities to comment on the budget and tax levy in October and November at City Council meetings with the final budget approval set for Dec. 13.

The council can lower but not raise the levy after preliminary approval.

The city's levy is just one part of a property owner's tax bill and currently sits at 33%. The county's share is at 38%, and the school district's at 27%. The Economic Development Authority and watershed district get small portions as well.

Wanda Wagner, the city's former finance director who is assisting with the budget because director Jenica Flanagan is new to the job, said the city's tax base grew by about 2.5% or $371,039 for 2022, a rather large boost from this year when the tax base increased $239,958. The tax base increases are due to new construction and higher market values.

But despite tax base growth, Wagner said in the proposed budget that the city would need to raise its levy to cover increased spending.

That levy will help fund an increase in city expenditures next year to $34.5 million, with about half going to public safety, including $11.6 million for the police department and $5.3 million for the fire department.

The next two highest expenditures are for the public works department at $5.3 million and administration at $4.5 million.

Employee wages and benefits account for about 70% of the general fund budget, Wagner said. With cost of living raises and employees moving up the pay scale, the city expects payroll expenses to grow by $1.1 million next year.

In the $34.5 million overall city budget, the property tax levy makes up 34% of revenues at $11.7 million, with transfers from utilities at $9 million or 26% of revenues.

About 21% of Moorhead's budget comes from $7.3 million in local government aid from the state, Wagner said. City fees and other charges account for $6.4 million, or 19%.

The overall $17 million property tax levy also includes $4.4 million to pay off the city's debt service and $913,000 for the library.