Isanti's Fiscal Future Part 1

“Perhaps the sentiments contained in the following pages, are not YET sufficiently fashionable to procure them general favour; a long habit of not thinking a thing WRONG, gives it a superficial appearance of being RIGHT, and raises at first a formidable outcry in defense of custom. But the tumult soon subsides. Time makes more converts than reason.” from Common Sense by Thomas Paine.

Thomas Paine’s words of February 1776 seem quite appropriate to Isanti of July 2007. The past decisions to subsidize residential development at the cost of the Taxpayer must end. The rapid residential growth has brought crippling debt to our City. The rusty blunt sword of eminent domain that the Council used in 2005 has inflicted a wound that continues to fester to this day. We have a clear path in front of us that will bring a bright future. We only need to understand the current situation, make the tough choices and be disciplined enough to follow our course.

We are faced with 3 troubling facts:
· Disastrous Debt
· Excessive City Spending
· Low Residential Developer Fees

The $4,540,000 in bonded debt assumed by the City in 2005 for the East 65 expansion was based on 104 residential units being built per year. We have obviously built far fewer than that in the last two years and are on pace for roughly half the number needed. The use of eminent domain, which I voted against, has added hundreds of thousands of dollars in added cost to this project. Isanti will have to bond at least another $1,073,500 to cover the eminent domain and other added cost to the east 65 expansion. The original $4,540,000 bond and its roughly $500,000 yearly debt payment will have to be refinanced. This however will come with a greater long term cost but will allow for a lower yearly payment. The refinancing will be meaningless however if the development fees are not set to cover the debt.

Now let us turn to the excessive City spending of the past few years. The 40% plus in new spending contained in the last two budgets, I voted against both, has set a false pretense. I fear as the budget process goes forward the idea will be firmly set in a number of minds that the current amount being spent is a floor we cannot go under.

We have received only 27% of the expected building fees. This is an important number because it pays several city employees complete salary and portions of many others. We did take action and eliminated one position. I do believe we must look at cutting other cost. There are only three options left if the anticipated fees are not generated---raise property taxes, raise fees or reduce cost. I will be presenting my budget cuts and offsets in August.

Isanti’s property taxes are already too high. This leaves fees and cost reduction. The city has already reduced one position in building inspections to lower ongoing cost. I will continue to work to lower all city cost. There are however a number of developer fees that are considerably low compared to the cost of operations and comparable cities in the area. Several examples of losing money are final platting -$22,844, prelim platting -$4,388 and site plan reviews losing -$3,269. Site plan reviews are a good example—Cambridge charges $500 and Isanti only half that at $250. Isanti’s final plat fees are significantly lower than North Branch, Wyoming, Princeton and Zimmerman. These numbers are based on the Independent Audit of City Fees by Abdo Eick & Meyers LLP. The audit further states that the majority of the costs under the planning department are not covered by fees. This means you and I the taxpayers are subsidizing development through our property taxes. This is flatly wrong.

One of the fees that is often derided by developers is the Park and Recreation fee. Isanti’s current fee is $1,320 for residential and $1,375 for commercial. Again this is a developer fee. Cambridge’s residential is $1,600 and commercial is $2,940 and Princeton is $2,400 residential and $1,000 per acre of commercial. Again Isanti is lashed by developers saying our fees are high and yet the facts show we are low and in some cases the lowest.

I applaud developers for wanting to maximize their profits. The Council however must maximize what is best for the City. We cannot protect the City if we place developer profits ahead of good planning and proper financial stewardship. If developers do not pay the proper fee amount then the current taxpayers are in essence writing a check to the developer on each development.

Now we get to my favorite Trojan Horse of an argument for low fees. The people who are going to be buying these new homes will have higher cost because of higher fees. I would find this plausible if we were all getting rebate checks from the last 7 years when houses were selling for a premium and profits were flying in on each new home sold. Where was the concern for the poor home buyer when prices were seeing double digit increases do to market conditions. Everyone’s home valuations are much higher because of the housing boom. We are all paying higher property taxes because of high valuations even when tax rates decrease. How can I ask our Taxpayers who already pay inflated property taxes to subsidize residential development?

I am asking that the true cost be paid for in the developer fees--- nothing less and nothing more. This is why the council ordered an independent audit of our fees. To simply ignore the facts when presented would be folly. The other boogey man argument being raised is well this could slow or stop residential development. There already is a tremendous slow down because of the housing bubble. We need residential building to slow so the city can catch up to the growth. Also I think everyone should be aware that there are hundreds of existing homes and sites already available. Isanti has a good decade of housing stock in the pipeline already. There is no reason to artificially prime the housing pump.

We must be ready to make the hard decisions. We must cut cost where necessary and make development pay for itself. If we do not do this we are only setting ourselves up for failure. I predicted this moment when I first ran for council 2004. If we simply stick our heads in the sand again this year the repercussions will reverberate for generations to come.

I see that bright future when our financial house is in order. I have been working for Long Term Financial Planning (LTFP) the past few years and we are almost there. My Development Impact List will hopefully be completed this year as well. I was pleased at the beginning of the year when the LTFP was embraced as a City Council goal. With these tools in place and proper discipline we will thrive. We must continue to move forward. Leave the poor decisions of the past in the dust of time.

This is the first of what will be three installments about Isanti's Fiscal Future.