Litchfield City Council approved a preliminary 2021 levy Sept. 8 that calls for a 5 percent increase over the current levy amount.
The total levy would equate to $2,974,000 in property taxes collected, funding a general budget of $5,963,358.
“These local tax dollars usually provide about one-third of all revenues and are by far the largest revenue source within our control,” City Administrator Dave Cziok wrote in a memo to the council. “As always, our goal is to provide the council with a budget that is ‘business as usual’ and doesn’t contain any operational changes.”
The council’s passage of a 5 percent levy increase might have surprised some, given that Cziok recommended a levy increase of less than 1 percent in his memo. However, council members took a more aggressive approach to revenue after hearing Cziok speak about the levy versus the city tax capacity.
Some also stressed the “preliminary” in preliminary levy, given that the levy amount can be reduced, but not increased, any time before the budget public hearing in December at which the levy will be finalized.
“I am not saying I want a 5 percent increase,” Council member Darlene Kotelnicki said prior to voting along with all other council members to approve the preliminary levy. “I’m just saying I want to have that ability.”
With many uncertainties caused by the coronavirus pandemic and its impact on the national and local economy, setting a higher levy now allows more flexibility before setting the final levy, most agreed.
Cziok shared a chart showing the city’s levy in relation to its net tax capacity. While the levy has maintained a fairly gradual increase since 2002, the tax capacity has shown more volatility, with a rapid, $1 million increase between 2006 and 2010, along with an approximate $500,000 dip between 2011 and 2014. The tax capacity has been spiking again in the past three years.
“When we look at this crystal ball … right now, the real estate market continues to do well,” Cziok said. “We’re going to see an increase in net tax capacity next year as well.”
Though he was ready to tell the council that his proposed “as is” minimum levy of less than 1 percent — increasing the 2021 total levy by $18,500 — would be workable, Cziok said, he changed his mind after reviewing the city’s tax capacity.
“Administration can stand up here and tell you, $18,500 gets us to where, you know, staff can operate underneath that budget, and we’ll be fine,” Cziok said. “We were ready to present that option. I thought that was the most viable option for us until we really started to dig into where the net tax capacity was.”
Without some levy increase, the gap between tax capacity and service expectations could grow and at some point force a significant increase.
Council member Vern Loch Jr. supported the higher levy amount, he said, because it is more in line with the city’s tax capacity and could help prevent that scenario.
Mayor Keith Johnson wondered how a 5 percent increase in the levy might affect individual homeowners whose property value has not increased. Cziok said he couldn’t answer that question Tuesday because there still are too many variables.
“I don’t know the relationship right now between what happened on the commercial side and what happened on the residential side,” Cziok said. “I hate this time of year, because we’re in here trying to talk to you guys about what the impact on the homeowner is when a lot of this is way outside of our hands and is done to make sure that everyone in our community is paying their fair share, and their paying their share in relation to the house that they own.”