Property tax deferral would be a Catch-22

By Per Peterson

If Lyon County commissioners vote Tuesday on a proposal to waive the late penalty on property taxes — essentially pushing back the due date on May 15 payments — it would mean some temporary relief for taxpayers looking for a financial break during the COVID-19 pandemic.

But there’s a catch.

Such an act could also mean less money flowing into the City of Tracy’s coffers, which would result in a negative ripple effect for Tracy taxpayers and the City in general.

During a relatively short Tracy City Council meeting Monday, Tracy City Administrator Erik Hansen said a letter about the issue was sent to county commissioners to express concerns on a local level about what could happen in area cities like Tracy if taxpayers opt to delay their payments.

A version of the letter, which had been previously been sent to district representatives in St. Paul, asked commissioners to find other areas for relief for citizens and outlined the City’s concerns if the majority of residents opt to wait to pay their taxes. The letter states that property taxes amount to close to 40% of the City’s general fund revenue and that the City currently does not have the resources to plan ahead for a sudden hole in the budget, because it plans its cash flow with the annual budget, anticipating property tax payees in June and December of each year.

Hansen told the council that he was told by the county auditor/treasurer that commissioners were considering an action next week to remove the late fees for payments. The letter to commissioners stated that a disruption of property tax payments would endanger the City’s ability to provide services when they are most needed. It states that pushing back the tax deadline could result in more people seeking unemployment and more needing relief.

“We’re a small staff and a small community, and most of our people are essential workers,” Hansen said Monday. “Our fire department, our public works department and our police department are the majority of our staff and it puts us in serious economic jeopardy if we don’t get all of the property taxes we expected for our budget.”

Hansen asked the council if they could provide comment to the county board, so the City of Tracy can have their say on the issue.

Mayor Tony Peterson agreed a letter should be sent and asked council members to contact the county, in specific, commissioner Rick Anderson, who represents the Tracy area.

“The bottom line is, it’s a cash flow issue,” said Peterson. “If we don’t get our payments we can’t pay our bills, without dipping into reserves, and we don’t want to do that.”

As far as the repercussions of a major cash flow disruption to the City’s budget, Hansen said they could be substantial. Besides the chance of the City having to dip into reserves, other options to save money could include the delay of significant projects in town and forgoing capital expenditures.

“I know we have a couple pieces of equipment that we were looking at buying for public works that haven’t been replaced in a long time,” said Hansen. “We would probably have to cut back on some street maintenance and other maintenance on buildings.”

Hansen said this would not affect the current Phase 3A-2 project because it has already been funded.

“We don’t know what the impact would be yet,” Hansen said. “It’s difficult. My hope would be that the commissioners would take a look at options to help people that need the help; I think the council’s not in favor of giving everybody the ability to just delay it. I would strongly encourage people who are in the position to pay their taxes — just like they do every year at this time — to just go ahead and do that and not take advantage of this.”

In other business Monday …

• George Landuyt was sworn in as a temporary council member. Landuyt fills the seat left vacant by Peterson, who moved to the mayor’s seat to replace Anthony Dimmers. Later in the meeting, Landuyt said because of his joining the council, he was willing to step down from his position on the EDA board, with no objection from the council. Hansen said city by-laws specifies that two council members can serve on the EDA board; with Landuyt joining the council, that would make three on the EDA board (Dave Tiegs and Kou Thao also serve on the EDA board). The EDA is made up of seven members.

Tiegs made a motion to suspend the by-laws until a replacement is found. Thao offered a second to the motion. Tiegs made a second motion (seconded by Thao) to advertise for the vacant seat.

Landuyt said he has no problem with staying on the board until his replacement is found. That position will be advertised for.

• Peterson expressed his desire to remove the conflict of interest item from the council agenda because of its redundancy.

“I think (the council) should be involved in discussions, and then when it comes time to vote declare if you have a conflict or not so you don’t vote on the issue,” he said. “If that’s alright with everybody, that’s what I’d like to see.”

“That makes a lot of sense to me,” Landuyt said. “It’s a good idea.”

Tiegs agreed: “If you have a conflict, you should just voice it and go from there,” he said.

Council member Jeri Schons also didn’t have a problem with removing the line item from the agenda, as long as it’s addressed at the appropriate time. Thao was also on board with the change.

Tiegs made a motion to remove the conflict of interest item from the agenda, and Thao seconded it.