Laserfiche WebLink
Minutes for Midyear Budget Review on September 30, 2023 <br />Page 3 of 3 <br /> <br /> <br />It was understood by Council they could set the preliminary tax rate higher and could back down <br />from it, but not increase it. The budget had been prepared at the lower tax rate, and if it was <br />going to return to the higher rate, it was agreed by Council there needed to be an explanation for <br />it. It was agreed to set the budget at the higher rate for approval at the next Council meeting, <br />hold the workshop and decide to continue to deviate from the flat tax rate policy or go back to <br />following the policy for the 2025 levy. <br /> <br />Discussion on Urban and Rural Tax Rates <br /> <br />City Administrator Bryan Bear introduced the new Community Development Intern Phoebe <br />Brown. <br /> <br />Phoebe explained that the MN Statute that allowed for Hugo to establish different rural and <br />urban service districts with different municipal tax rates. When the Village of Hugo and Oneka <br />Township consolidated in 1971, these two districts were created due to the separate services <br />received in each district. To be in the Rural District, three requirements needed to be met: <br />unplatted; not developed commercial, industrial, or urban residential; and not benefiting from <br />City services. One exception was, since 1987, the County moved any rural parcel that had been <br />platted into the Urban Service District. <br /> <br />Statute also allowed for establishment of a benefit ratio, which is the percentage of the tax <br />capacity rate, currently set at 90%. The Urban rate was 36.7% with 6,134 parcels. The Rural <br />rate was 33.06% and under 1,400 parcels. It was also noted that many parcels in the Rural <br />District were enrolled in the Green Acres and Rural Preservation Program, which provided <br />property tax relief for qualifying farmland. <br /> <br />Abolishing the two separate tax districts had been discussed in 1978 and in 1986 arguing they <br />both benefitted equally from general fund services. Rural residents argued they did not receive <br />the same services; it took longer for emergency services to reach them, and it would harm <br />agriculture, destroying the rural character. It was also argued that rural areas received services <br />such as dust control and ditching projects. <br /> <br />Options were discussed such as amending the policy to equalize the districts, change the benefit <br />ratio, or reclassify certain parcels. It was agreed a workshop should be held at a later date. <br /> <br />The meeting adjourned at 7:57 p.m. <br /> <br />Respectfully Submitted, <br /> <br />Michele Lindau, <br />City Clerk <br />