STURGIS — For the first time in at least six years the city of Sturgis has proposed increasing property taxes to pay for revenue shortfalls that will happen if the 2020 Sturgis Motorcycle Rally is cancelled.
A recent information sheet that outlines how the city will make up for a $1.7 million shortfall calls for a 5.3% property tax increase, as well as a 7% increase in sanitation fees. The proposal also calls for reduced city services.
That translates into a property tax levy of 6.575 for Sturgis property owners, payable in 2021. For those who own a $150,000 house, that is an increase of $47 per year.
According to county records, the increase would be the first time the city has raised property taxes in at least six years. In 2019 the property tax levy in Sturgis was at 6.262, and in 2018 it was at 6.309. That compares to a levy of 6.703 in 2017, 7.167 in 2016, and a levy of 7.262 in 2015. Sturgis City Manager Daniel Ainslie said the city has steadily decreased its property tax levies by 22% since 2014.
The 7% increase in sanitation fees, Ainslie said, will make up for a major revenue shortage that will happen in the sanitation department if the city is unable to collect those fees from vendors. The extra vendor fee pays for increased demand on the sanitation department, but also normally provides extra money for vehicles and other needs. For the average household in Sturgis, he said the increase could be approximately 81 cents per month.
If the Rally is cancelled, more than half of the money the city will lose includes funds that have already been secured with contracts for temporary vendor space, city property leases, sponsorships, advertising revenue, and miscellaneous fees, Ainslie said. Other variable revenue for the city includes sales tax and vendor fees.
The projected shortfall is based on very conservative numbers.
“We never really budget for a large Rally,” he said. “Even when it was the 75th, and the same with this one being the 80th Rally. We never budget for a massive increase because you don’t know.”
Ainslie said the information plan that was released on social media and on the city’s website was compiled at the behest of city council members who are in the process of gathering information in order to make an informed decision about Rally cancellation. In addition to the tax and fees increases, it calls for furloughing city employees; cancelling other community events; adjusting snow removal protocols to reduce overtime; reducing pool hours at the community center; eliminating enhancements to the community center weight room and cardio room; reducing mowing for sports fields and parks; eliminating weed spraying and other landscaping services; reducing funding to the Sturgis Economic Development Corporation and the Chamber of Commerce; reducing library and police department equipment purchases; significantly decreasing charitable contributions; and dipping into the city’s general fund reserves by 32%.
The decreased city services will make up $480,000, and the increased property taxes will provide $150,000. Dipping into the city’s reserves will provide $736,000, raising about $1.4 million toward the shortfall. Increased sanitation fees will take care of the remaining $300,000.
“All of this is potential and they are just trying to explain to residents what could be done to address shortfalls,” Ainslie explained. He added that the council would make its official decision about cancelling the Rally on June 15, after it has consulted with interested parties including local businesses, Monument Health, the Department of Health, vendors and others.
“We are asking Monument Health, as well as the Department of Health … what is their capacity is if there is a large outbreak, and if they would be able to care for our residents if something would occur, and how widespread that would be,” he said. “They’re continuing to do some modeling for us. No decision has been made yet and we’re still trying to gather as much input as possible, so the council can make as wise of a choice as it possibly can.”
Rally revenue, Ainslie said has allowed the city to increase its general fund reserves so that it is able to handle crises such as this pandemic. In 2011, Ainslie said the city of Sturgis had $677,000 in reserve funds, and by 2019 that number jumped to $2.3 million. It would be more, he said, but the city dipped into its reserves to pay for flood rehabilitation last year — money that is expected to be replenished with federal emergency relief funds.
But Ainslie said the city wants to be careful about how it spends its reserves.
“By the city saying that we are anticipating losing $1.7 million, that’s before we also look at additional revenue loss that we have because the entire country is in a recession right now,” he said. “We likely are going to have other revenue shortfalls besides just the Rally, so we need to make sure we’re prepared for that. No one knows how quickly we are going to bounce back out of this. So it really isn’t prudent to use all of your reserves at once.”
A recent announcement that the state will receive $1.2 billion from the federal government in emergency relief is not something the city of Sturgis has factored into this proposal.
“It’s in the state’s purview to decide how much of that they want to pass on to local governments, including counties and cities,” he said. “So far we haven’t heard anything. Right now we’re proceeding as though we are not going to receive anything. I hope we do. If we do there will definitely be changes to this.”
With all of the planning and information gathering, Ainslie said, the city is also consulting with state, county and other agencies to determine what assistance could be available if the city cancels the Rally, but the bikers come anyway.
“That is one of our biggest concerns is that if the city cancels it, but every other entity continues to promote it or allow it, then at that point we know there are still going to be hundreds of thousands of people who are coming,” Ainslie said. “If, as the city, we’re not prepared for it that’s when you have those horror stories like what you hear occurred in the city in the 80s, when the city was not prepared for the amount of people who came. When we say a $1.7 million loss, that assumes that we don’t have any extra overtime, or police officers or sanitation workers or anything else. If we do have those people who come, we won’t have the individuals but we will still have the cost because we will have to pull everyone in on mass overtime, which is even more expensive. So the cost would actually be higher. So instead of being proactively prepared, we would be reactionary, which usually means that there is going to be worse outcomes.”
To view the full text of the city’s information sheet, please visit the city of Sturgis Web site at https://www.sturgis-sd.gov/.
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