The Fridley City Council unanimously approved a 2011 budget Monday night smaller than was planned even a week before.

That's because, in the days since a Dec. 6 public hearing on the city budget, the state Department of Revenue disallowed a planned city tax levy meant to make up for $1.2 million in Local Government Aid (LGA) that Fridley lost to budget cuts at the state level. 

The revenue department's ruling means less money in city coffers—and less money coming out of taxpayers' pockets.

Councilmember-at-Large Robert Barnette observed that Fridley property taxpayers will be happy to learn they won't be paying quite as much next year.

"[They] really shouldn't be," responded Ward 3 Councilmember Ann Bolkcom, "Because we are using up our fund balances."

Fridley will levy taxes to raise $10,509,317 in 2011. The total city budget for next year is $15,872,445.

The state has slated $1.9 million for Fridley in LGA funding next year, but the city budget doesn't rely on that money. "We really don't think we're going to get any [LGA funds]," said City Manager William Burns. "If we get it, we'll be pleasantly surprised."

The last-minute budget reduction, due to the state Revenue Department ruling, won't require Fridley to reduce what it spends on basic city services. Fridley's budget has "enough comfort zone [of reserves] to get us through 2016," Burns said.

But preserving those reserves has meant taking a step into debt that's unprecedented for Fridley. "We've started bonding for equipment [expenditures] to preserve our cash-flow balances," said Mayor Scott Lund. "That's something unique and new to Fridley, and that's troublesome."

At last week's public hearing, Burns detailed cost-saving steps the city is taking—from freezing employee salaries to eliminating mowing along University Avenue— but Mayor Lund cautioned that many of those steps could not be imposed indefinitely for future budget-balancing.

Water, Sewer, Stormwater Rates
At last night's meeting, the council also set the rates that property owners will pay for water, sewer and storm-water service next year. Breaking even on those services would require rate increases of as much as 15 percent, said Finance Director Darin Nelson.

But following a recommendation from city staff, the council voted to raise rates by only 5 percent—in consideration, council members said, of tough economic times ratepayers are experiencing. 

"Oftentimes we're criticized for not running enterprise funds like a business," said Ward 1 Council Member Jim Saefke, acknowledging that setting rates below costs was an example of that: "No business would run intentionally in the red."

But the council was loathe to charge ratepayers enough to cover the city's full cost in the midst of a recession. "We shouldn't increase [rates] past people's means," Saefke said.