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Official proposes $36M fiscal year 2011 budget

DULUTH -- Duluth City Administrator Phil McLemore presented a proposed $36 million fiscal year 2011 budget during a public hearing before the city council Monday that includes a city staff recommendation for a .75 mill tax increase.

This would increase the current city tax millage rate of 5.191 mills to 5.941. McLemore said the .75 mill tax increase would mean a $45 tax increase per year on a $150,000 home and $90 on a $300,000 home. Duluth has not raised its tax millage rate for 25 years, he said.

The FY11 budget amount represents an increase of $287,772 in operating expenses from fiscal year 2010, McLemore said.

The budget was developed with input from a Citizens Budget Committee that recommended raising taxes up to 1.5 mills to offset a nearly $2 million revenue shortfall and using reserve funds to help balance the budget as long as the city keeps at least four-months in reserve funds on hand.

The continuing economic slow down and subsequent reduction in property values caused the revenue decline, according to McLemore.

Funds that are budgeted but not spent at the end of the budget year are put in a reserve fund. The use of more than $850,000 in reserve funds and the .75 mill tax increase would allow the city to maintain the four-month reserve the committee recommended, McLemore said.

The city council also has implemented several revenue-generating measures recommended by the citizens panel. The fiscal year 2011 budget contains no raises for city employees and continues a hiring freeze.

Due to financial challenges the city faces in the future, city staff feared taxpayers could face a larger tax millage increase next year if the city dips too much into its reserve funds this year, McLemore said.

"This moderate .75 mill tax increase would provide the city with an additional $800,000 per year. While this still will not allow our revenues to meet expenses, it will give us the ability to continue to weather the economic downturn for several more years to provide additional time for an economic rebound and eventual increase in property assessments," he said.

The council is expected to consider adopting the budget at its June 14 meeting and to set the tax millage rate after it receives the city tax digest from Gwinnett County. The city's budget year runs from July 1 through June 30.

The fiscal year 2011 budget includes operating expenses of $16,096,865, debt service of $1,851,067, capital expenditures of $17,369,632, and other expenditures of $720,944.

Several residents commented on the proposed tax increase during the public hearing.

Maxine Garner, who chaired the Citizens Budget Committee, said that as a taxpayer she would be hurt by the increase. She suggested reducing expenses further by eliminating the city's New Year's Eve party and cutting city council salaries.

Dick Valduga urged the city "to look at a lot of things a lot harder. You're stewards of my money," he said. "Think about it. Take care of it."

Alana Moss said living in Duluth was "a bargain. We don't pay much for what we get. Taxes haven't been raised in 25 years."