FARGO - City leaders approved what Mayor Tim Mahoney called the tightest budget he's seen in a preliminary vote Wednesday, Aug. 8, offering no cuts in the property tax rate and some higher fees in 2019.

"This is tight as we have been, and you want to make it tighter -- we're going to fire people," the mayor said.

WDAY logo
listen live
watch live

It's not just tight on the revenue side.

When City Commissioner John Strand suggested the city spend into reserves to offer property owners a 1 to 2 mill tax cut, Mahoney explained that the city's financial reserves are so low they threaten the city's credit rating.

Finance Director Kent Costin confirmed that Moody's Investors Service, one of the top credit rating agencies, has maintained the city's Aa1 credit rating but has changed the outlook from "stable" to "negative." If the city's credit rating were downgraded, financing streets and sewers would be more expensive, he said.

Moody's said in July that it gave a negative outlook because the local economy is not growing as fast as it used to and may not keep pace with the city's plans for additional borrowing given its "already elevated debt burden."

State deadline

Commissioners voted 5-0 on the budget, with the expectation that they'll be able to make cuts later. A preliminary vote, which North Dakota law requires to be done by Friday, Aug. 10, sets the ceiling on spending. A final vote, scheduled for Sept. 10, would set the budget for the year.

The mayor briefed his colleagues on the commission a week ago, and they held a special session Wednesday to beat the state deadline.

Fargo's total budget calls for $298.8 million in spending, an increase of 4.1 percent, and $283.1 million in revenues, a 2 percent increase. That's actually a deficit budget but made that way because of deficit spending in the city's utility funds. The governmental funds that Costin spoke of show a slight surplus.

Despite keeping the property tax levy at 51 mills, the same as it is this year, the city expects to collect $31.9 million in property taxes, a 4.7 percent increase. That reflects the rising value of existing properties and new construction.

Sales tax boost

With the state's oil industry showing strength and a recent U.S. Supreme Court decision requiring online firms to pay local and state sales taxes, the city expects to collect $12.4 million in sales taxes, a 2.5 percent increase. This year's budget showed only a 1.5 percent increase.

Because of the greater sales tax revenue, state aid is expected to improve. The amount of funding the city gets from state and local governments would total $28.6 million, a 7.6 percent increase.

Utility fee increases are expected to raise more money as well, including higher street light, forestry and storm sewer fees. Commissioners voted to increase street light fees by $1 to $3.50 instead of the $4.50 recommended by the mayor for residential properties. Prior to that change, the city had expected utility fees to bring in $64.2 million, a 13.5 percent increase.

Special assessment revenue

Revenue from special assessments, a form of property tax used to pay for streets and sewers, is expected to total $38.5 million, a 12 percent increase. Specials have long proven controversial with homeowners because they can be shockingly large, forcing the city to change its funding formula recently.

Commissioner Tony Gehrig noted storm sewer funding is going up, with not only fee increases but also more revenue from specials, which seems to be the opposite direction homeowners want.

Mahoney said revenue from specials is only going up because the city plans more projects, not because individual homeowners would pay more.

The budget will provide for a 2 percent pay hike for employees, to remain competitive; the equivalent of five full-time workers, including a police officer and a firefighter; expansion of the sewage plant; and a new fire truck, among other things.

Firefighters ask for a raise

Firefighters attended the commission meeting Wednesday to request an additional pay hike because their union's wage studies show that, on average, they're paid 19 percent less than firefighters in peer cities.

This makes it harder to keep firefighters the city has trained and leaves those that remain demoralized, union President and fire Capt. Eric Eisenlohr said.

The mayor said the city's compensation study shows firefighters aren't below the market average by that much. Though, he agreed the city ought to discuss increasing their pay over time, but not next year because the city can't afford another $500,000.